<PAGE> 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number: 33-61516
THE ROBERT MONDAVI CORPORATION
Incorporated under the laws I.R.S. Employer Identification:
of the State of California 94-2765451
Principal Executive Offices:
7801 St. Helena Highway
Oakville, CA 94562
Telephone: (707) 259-9463
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 1998 there were issued and outstanding 8,007,289 shares of the
issuer's Class A Common Stock and 7,306,012 shares of the issuer's Class B
Common Stock.
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PART I
ITEM 1. FINANCIAL STATEMENTS.
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
-------- --------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 150
Accounts receivable--trade, net 56,361 59,222
Inventories 232,984 167,695
Deferred income taxes 3,103 1,677
Prepaid expenses and other current assets 5,281 5,593
-------- --------
Total current assets 297,729 234,337
Property, plant and equipment, net 206,491 186,990
Investments in joint ventures 20,919 19,212
Other assets 5,621 4,386
-------- --------
Total assets $530,760 $444,925
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 8,180 $ --
Notes payable to banks -- 8,750
Accounts payable--trade 13,270 14,769
Employee compensation and related costs 9,127 10,608
Other accrued expenses 5,310 5,446
Current portion of long-term debt 10,274 6,790
Deferred revenue 2,855 2,064
-------- --------
Total current liabilities 49,016 48,427
Long-term debt, less current portion 216,287 158,067
Deferred income taxes 12,485 10,848
Deferred executive compensation 5,737 5,395
Other liabilities 373 1,017
-------- --------
Total liabilities 283,898 223,754
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred Stock:
Authorized--5,000,000 shares
Issued and outstanding--no shares -- --
Class A Common Stock, without par value:
Authorized--25,000,000 shares
Issued and outstanding--8,001,555 and 7,499,024 shares 78,292 76,138
Class B Common Stock, without par value:
Authorized--12,000,000 shares
Issued and outstanding--7,306,012 and 7,676,012 shares 11,731 12,324
Paid-in capital 4,546 3,289
Retained earnings 152,293 129,420
-------- --------
246,862 221,171
-------- --------
Total liabilities and shareholders' equity $530,760 $444,925
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 3
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross revenues $ 79,647 $ 74,399 $ 246,050 $ 228,262
Less excise taxes 3,638 3,510 11,489 11,192
--------- --------- --------- ---------
Net revenues 76,009 70,889 234,561 217,070
Cost of goods sold 40,049 38,964 127,653 121,489
--------- --------- --------- ---------
Gross profit 35,960 31,925 106,908 95,581
Selling, general and administrative expenses 21,469 18,936 62,687 56,341
--------- --------- --------- ---------
Operating income 14,491 12,989 44,221 39,240
Other income (expense):
Interest (3,493) (2,749) (8,886) (7,742)
Equity in net income of joint ventures (327) 200 2,871 3,284
Other 28 (57) (710) (566)
--------- --------- --------- ---------
Income before income taxes 10,699 10,383 37,496 34,216
Provision for income taxes 4,171 4,050 14,623 13,345
--------- --------- --------- ---------
Net income $ 6,528 $ 6,333 $ 22,873 $ 20,871
========= ========= ========= =========
Earnings per share - Basic $ .43 $ .42 $ 1.50 $ 1.39
========= ========= ========= =========
Earnings per share - Diluted $ .41 $ .40 $ 1.44 $ 1.34
========= ========= ========= =========
Weighted average number of
common shares outstanding - Basic 15,292 15,091 15,243 15,028
========= ========= ========= =========
Weighted average number of
common shares outstanding - Diluted 15,839 15,732 15,856 15,632
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,873 $ 20,871
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes 211 (611)
Depreciation and amortization 10,166 9,233
Equity in net income of joint ventures (2,871) (3,284)
Other 22 2
Changes in assets and liabilities:
Accounts receivable--trade 2,861 (10,285)
Inventories (65,278) (38,694)
Other assets 312 (1,288)
Accounts payable--trade and accrued expenses (3,006) 4,155
Income taxes payable 1,147 1,599
Deferred revenue 791 919
Deferred executive compensation 342 (982)
Other liabilities (644) (61)
-------- --------
Net cash used in operating activities (33,074) (18,426)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (36,889) (30,167)
Proceeds from sale of assets 7,396 --
Distributions from joint ventures 1,362 892
Contributions to joint ventures (209) (456)
-------- --------
Net cash used in investing activities (28,340) (29,731)
-------- --------
Cash flows from financing activities:
Book overdraft 8,180 7,556
Net additions (repayments) under notes payable to banks (8,750) 2,000
Proceeds from issuance of long-term debt 95,000 58,100
Principal repayments of long-term debt (33,296) (21,279)
Proceeds from issuance of Class A Common Stock 200 126
Exercise of Class A Common Stock options 1,361 1,979
Other (1,431) (325)
-------- --------
Net cash provided by financing activities 61,264 48,157
-------- --------
Net decrease in cash and cash equivalents (150) --
Cash and cash equivalents at the beginning of the period 150 --
-------- --------
Cash and cash equivalents at the end of the period $ -- $ --
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
THE ROBERT MONDAVI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position at March 31, 1998, its results of operations for the three and nine
month periods ended March 31, 1998 and 1997 and its cash flows for the nine
month periods ended March 31, 1998 and 1997. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from the accompanying consolidated financial statements. For further
information, reference should be made to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K (the
10-K) for the fiscal year ended June 30, 1997, on file at the Securities and
Exchange Commission.
NOTE 2--INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
--------- ---------
<S> <C> <C>
Wine in production $ 183,272 $ 127,922
Bottled wine 67,708 53,734
Supplies and crop costs 14,311 14,793
--------- ---------
Inventories stated at FIFO cost 265,291 196,449
Reserve for LIFO valuation method (32,307) (28,754)
--------- ---------
$ 232,984 $ 167,695
========= =========
</TABLE>
Information related to the FIFO method may be useful in comparing
operating results to those of companies not on LIFO. If inventories valued at
LIFO cost had been valued at FIFO cost, net income would have decreased by
approximately $0.4 million and increased by $2.4 million, respectively, for the
three months ended March 31, 1998 and 1997, and increased by approximately $2.2
million and $8.2 million, respectively, for the nine months ended March 31, 1998
and 1997.
NOTE 3 -- EARNINGS PER SHARE:
During February 1997, Statement of Financial Accounting Standards No.
128 (SFAS 128), Earnings per Share, was issued. This statement supersedes
Accounting Principles Board Opinion No. 15, Earnings per Share, and its related
Interpretations and establishes new accounting standards for the computation and
manner of presentation of the Company's earnings per share. The Company adopted
SFAS 128 for the quarter ending December 31, 1997 and as required under SFAS 128
the Company has restated previously reported earnings per share for all periods
presented.
In computing basic earnings per share for the three and nine month
periods ended March 31, 1998 and 1997, no adjustments have been made to net
income (numerator) or weighted-average shares outstanding (denominator). The
computation of diluted earnings per share for the same periods is identical to
the computation of basic earnings per share except that the number of
weighted-average shares outstanding (denominator) has been increased by 547,000
and 641,000, respectively, for the three months ended March 31, 1998 and 1997,
and by 613,000 and 604,000, respectively, for the nine months ended March 31,
1998 and 1997, to include the dilutive effect of stock options outstanding.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1998
GROSS REVENUES. Gross revenues increased by 7.1% to $79.6 million in the third
quarter of fiscal 1998 from $74.4 million in the third quarter of fiscal 1997.
The increase in gross revenues was primarily attributable to a 5.5% increase in
sales volume combined with a shift in sales mix to the Robert Mondavi Winery
brand. The overall rate of sales volume growth for the third quarter of fiscal
1998 was affected by a temporary shortage of Woodbridge Chardonnay that was
alleviated when the 1997 vintage of Woodbridge Chardonnay was released in March.
EXCISE TAXES. The Company's federal and state excise taxes increased by 3.6% to
$3.6 million in the third quarter of fiscal 1998 from $3.5 million in the third
quarter of fiscal 1997. The dollar increase in excise taxes generally correlates
to the increase in sales volume, since the excise tax is assessed on a per
gallon basis and the excise tax rate is unchanged from the prior year.
NET REVENUES. As a result of the above factors, net revenues increased by 7.2%
to $76.0 million in the third quarter of fiscal 1998 from $70.9 million in the
third quarter of fiscal 1997. Net revenues per case increased by 1.5% in the
third quarter of fiscal 1998 compared to the third quarter of fiscal 1997,
reflecting the shift in sales mix discussed above.
COST OF GOODS SOLD. Cost of goods sold increased by 2.8% to $40.0 million in the
third quarter of fiscal 1998 from $39.0 million in the third quarter of fiscal
1997, primarily due to increased sales volume that was partially offset by lower
wine costs resulting from the large 1997 harvest. If inventories valued at LIFO
cost had been valued at FIFO cost, then cost of goods sold would have been $0.8
million higher and $4.0 million lower, respectively, in the third quarter of
fiscal 1998 and 1997.
GROSS PROFIT. Gross profit increased by 12.6% to $36.0 million in the third
quarter of fiscal 1998 from $31.9 million in the third quarter of fiscal 1997.
The Company's gross profit percentages for the third quarter of fiscal 1998 and
1997 were 47.3% and 45.0%, respectively. The gross profit improvement reflects
the increase in net revenues per case and lower wine costs discussed above.
OPERATING EXPENSES. Operating expenses increased by 13.4% to $21.5 million in
the third quarter of fiscal 1998 from $18.9 million in the third quarter of
fiscal 1997. The ratio of operating expenses to net revenues increased to 28.2%
in the third quarter of fiscal 1998 from 26.7% in the third quarter of fiscal
1997, reflecting an increase in average selling and marketing dollars spent per
case.
INTEREST. Interest expense increased by 27.1% to $3.5 million for the third
quarter of fiscal 1998 from $2.7 million for the third quarter of fiscal 1997.
This increase was primarily attributable to an increase in the Company's average
borrowings that was partially offset by an increase in interest capitalized and
a decrease in the average interest rate.
EQUITY IN NET INCOME OF JOINT VENTURES. Equity in net income of joint ventures
was $(0.3) million in the third quarter of fiscal 1998 compared to $0.2 million
in the third quarter of fiscal 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes was $4.2 million in
the third quarter of fiscal 1998 compared to $4.1 million in the third quarter
of fiscal 1997. The Company's effective tax rate was 39.0% in the third quarter
of fiscal 1998 and 1997.
6
<PAGE> 7
NET INCOME AND EARNINGS PER SHARE. As a result of the above factors, net income
increased by 3.1% to $6.5 million in the third quarter of fiscal 1998 from $6.3
million in the third quarter of fiscal 1997. Diluted earnings per share
increased to $.41 in the third quarter of fiscal 1998 from $.40 in the third
quarter of fiscal 1997 (see Note 3 of the consolidated financial statements).
NINE MONTHS ENDED MARCH 31, 1998
GROSS REVENUES. Gross revenues increased by 7.8% to $246.1 million in the first
nine months of fiscal 1998 from $228.3 million in the first nine months of
fiscal 1997. The increase in gross revenues was primarily attributable to a 2.7%
increase in sales volume, price increases on certain of the Company's wines and
a shift in sales mix to the Robert Mondavi Coastal, Robert Mondavi Winery and
Vichon Mediterranean brands.
EXCISE TAXES. The Company's federal and state excise taxes increased by 2.7% to
$11.5 million in the first nine months of fiscal 1998 from $11.2 million in the
first nine months of fiscal 1997. The dollar increase in excise taxes generally
correlates to the increase in sales volume, since the excise tax is assessed on
a per gallon basis and the excise tax rate is unchanged from the prior year.
NET REVENUES. As a result of the above factors, net revenues increased by 8.1%
to $234.6 million in the first nine months of fiscal 1998 from $217.1 million in
the first nine months of fiscal 1997. Net revenues per case increased by 5.4% in
the first nine months of fiscal 1998 compared to the first nine months of fiscal
1997, reflecting the price increases and the shift in sales mix discussed above.
COST OF GOODS SOLD. Cost of goods sold increased by 5.1% to $127.7 million in
the first nine months of fiscal 1998 from $121.5 million in the first nine
months of fiscal 1997, primarily reflecting the increase in sales volume and a
shift in sales mix to wines with a higher average cost per case that were
partially offset by lower wine costs associated with the large 1997 harvest. If
inventories valued at LIFO cost had been valued at FIFO cost, then cost of goods
sold would have been $3.6 million and $13.5 million lower, respectively, in the
first nine months of fiscal 1998 and 1997.
GROSS PROFIT. Gross profit increased by 11.9% to $106.9 million in the first
nine months of fiscal 1998 from $95.6 million in the first nine months of fiscal
1997. The Company's gross profit percentages for the first nine months of fiscal
1998 and 1997 were 45.6% and 44.0%, respectively. The gross profit improvement
reflects the increase in net revenues per case and lower wine costs discussed
above.
OPERATING EXPENSES. Operating expenses increased by 11.3% to $62.7 million in
the first nine months of fiscal 1998 from $56.3 million in the first nine months
of fiscal 1997. The ratio of operating expenses to net revenues increased to
26.7% in the first nine months of fiscal 1998 from 26.0% in the first nine
months of fiscal 1997, reflecting an increase in average selling and marketing
dollars spent per case.
INTEREST. Interest expense increased by 14.8% to $8.9 million in the first nine
months of fiscal 1998 from $7.7 million in the first nine months of fiscal 1997.
This increase was primarily attributable to an increase in the Company's average
borrowings that was partially offset by an increase in interest capitalized and
a decrease in the Company's average interest rate.
EQUITY IN NET INCOME OF JOINT VENTURES. Equity in net income of joint ventures
was $2.9 million in the first nine months of fiscal 1998 compared to $3.3
million in the first nine months of fiscal 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes was $14.6 million in
the first nine months of fiscal 1998 and $13.3 million in the first nine months
of fiscal 1997. The Company's effective tax rate was 39.0% for the first nine
months of fiscal 1998 and 1997.
7
<PAGE> 8
NET INCOME AND EARNINGS PER SHARE. As a result of the above factors, net income
increased by 9.6% to $22.9 million in the first nine months of fiscal 1998 from
$20.9 million in the first nine months of fiscal 1997. Diluted earnings per
share increased to $1.44 in the first nine months of fiscal 1998 from $1.34 in
the first nine months of fiscal 1997 (see Note 3 of the consolidated financial
statements).
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1998 was $248.7 million compared to $185.9
million at June 30, 1997. The increase of $62.8 million was primarily
attributable to the increase in inventories resulting from the recent grape
harvest. The Company had a book overdraft of $8.2 million at March 31, 1998,
compared to a cash balance of $150,000 at June 30, 1997.
The Company has unsecured short-term and long-term credit lines that
have a maximum credit availability of $71.5 million and $80.0 million,
respectively, at March 31, 1998. The short-term credit lines expire during
December 1998. The long-term credit lines expire on December 31, 2000. During
January 1998, the Company obtained $95.0 million of unsecured long-term loans.
The proceeds from these loans were used to repay a portion of the Company's
unsecured credit lines.
The Company anticipates that current capital combined with cash from
operating activities and the availability of cash under its credit lines will be
sufficient to meet its liquidity and capital expenditure requirements at least
through the end of fiscal 1999.
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject to litigation in the ordinary course of its
business. In the opinion of management, the ultimate outcome of existing
litigation will not have a material adverse effect on the Company's consolidated
financial condition or the results of its operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1) Exhibits:
Exhibit 27 Financial Data Schedule
2) Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ROBERT MONDAVI CORPORATION
Dated: May 13, 1998 By /s/ GREGORY M. EVANS
------------------------------------
Gregory M. Evans,
Senior Vice President and
Chief Financial Officer
FORWARD-LOOKING STATEMENTS
The above form 10-Q and other information provided from time to time by
the Company contain historical information as well as forward-looking statements
about the Company, the premium wine industry and general business and economic
conditions. Such forward-looking statements include, for example, projections or
predictions about the Company's future growth, consumer demand for its wines,
including new brands and brand extensions, margin trends, the premium wine grape
market and the Company's anticipated future investment in vineyards and other
capital projects. Actual results may differ materially from the Company's
present expectations. Among other things, reduced consumer spending or a change
in consumer preferences could reduce demand for the Company's wines. Similarly,
competition from numerous domestic and foreign vintners could affect the
Company's ability to sustain volume and revenue growth. The price of grapes, the
Company's single largest product cost, is beyond the Company's control and
higher grape costs may put more pressure on the Company's gross profit margin
than is currently forecast. Interest rates and other business and economic
conditions could increase significantly the cost and risks of projected capital
spending. For additional cautionary statements identifying important factors
that could cause actual results to differ materially from such forward-looking
information, please refer to Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1997, on file with the
Securities and Exchange Commission. For these and other reasons, no
forward-looking statement by the Company can nor should be taken as a guarantee
of what will happen in the future.
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 56,361
<ALLOWANCES> 0
<INVENTORY> 232,984
<CURRENT-ASSETS> 297,729
<PP&E> 291,955
<DEPRECIATION> 85,464
<TOTAL-ASSETS> 530,760
<CURRENT-LIABILITIES> 49,016
<BONDS> 216,287
0
0
<COMMON> 90,023
<OTHER-SE> 156,839
<TOTAL-LIABILITY-AND-EQUITY> 530,760
<SALES> 234,561
<TOTAL-REVENUES> 234,561
<CGS> 127,653
<TOTAL-COSTS> 127,653
<OTHER-EXPENSES> 62,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,886
<INCOME-PRETAX> 37,496
<INCOME-TAX> 14,623
<INCOME-CONTINUING> 22,873
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,873
<EPS-PRIMARY> 1.50<F1>
<EPS-DILUTED> 1.44
<FN>
<F1>FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
