<PAGE> 1
================================================================================
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 September 30, 1999
----------------------
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 October 31, 1999 there were issued and outstanding 8,172,414 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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<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, JUNE 30,
1999 1999
------------- ---------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 4,544
Accounts receivable--trade, net 62,993 82,037
Inventories 295,270 262,377
Prepaid expenses and other current assets 6,318 4,893
--------- ---------
Total current assets 364,581 353,851
Property, plant and equipment, net 268,845 249,572
Investments in joint ventures 21,552 20,124
Other assets 5,684 5,718
--------- ---------
Total assets $ 660,662 $ 629,265
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 9,102 --
Accounts payable--trade 46,617 19,416
Employee compensation and related costs 9,695 11,605
Other accrued expenses 12,223 10,986
Current portion of long-term debt 10,111 10,252
Deferred income taxes 1,929 3,827
--------- ---------
Total current liabilities 89,677 56,086
Long-term debt, less current portion 230,645 243,758
Deferred income taxes 18,311 17,355
Deferred executive compensation 7,944 7,425
Other liabilities 209 235
--------- ---------
Total liabilities 346,786 324,859
--------- ---------
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--8,172,414 and 8,152,664 shares 80,704 80,483
Class B Common Stock, without par value:
Authorized--12,000,000 shares
Issued and outstanding--7,306,012 shares 11,732 11,732
Paid-in Capital 5,382 5,266
Retained earnings 216,783 207,520
Accumulated other comprehensive income:
Cumulative translation adjustment (725) (595)
--------- ---------
313,876 304,406
--------- ---------
Total liabilities and shareholders' equity $ 660,662 $ 629,265
========= =========
</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
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Gross revenues $ 84,576 $ 74,781
Less excise taxes 3,680 3,420
-------- --------
Net revenues 80,896 71,361
Cost of goods sold 42,476 38,888
-------- --------
Gross profit 38,420 32,473
Selling, general and administrative expenses 23,013 20,027
-------- --------
Operating income 15,407 12,446
Other income (expense):
Interest (3,187) (3,305)
Equity in net income of joint ventures 2,873 3,935
Other (32) (75)
-------- --------
Income before income taxes 15,061 13,001
Provision for income taxes 5,798 5,005
-------- --------
Net income $ 9,263 $ 7,996
======== ========
Earnings per share--Basic $ .60 $ .52
======== ========
Earnings per share--Diluted $ .58 $ .51
======== ========
Weighted average number of shares outstanding--Basic 15,469 15,361
======== ========
Weighted average number of shares outstanding--Diluted 15,978 15,709
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,263 $ 7,996
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes (859) 377
Depreciation and amortization 4,437 3,586
Equity in net income of joint ventures (2,873) (3,935)
Other (5) --
Changes in assets and liabilities:
Accounts receivable--trade 19,044 11,741
Inventories (32,902) (10,146)
Other assets (1,459) 1,795
Accounts payable--trade and accrued expenses 26,644 9,184
Deferred executive compensation 519 200
Other liabilities (26) (7)
-------- --------
Net cash provided by operating activities 21,783 20,791
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (23,637) (14,673)
Distributions from joint ventures 1,250 --
Contributions to joint ventures (9) (9)
-------- --------
Net cash used in investing activities (22,396) (14,682)
-------- --------
Cash flows from financing activities:
Book overdraft 9,102 3,846
Net repayments under credit lines (9,500) (9,250)
Principal repayments of long-term debt (3,754) (3,943)
Exercise of Class A Common Stock options 221 555
-------- --------
Net cash used in financing activities (3,931) (8,792)
-------- --------
Net decrease in cash and cash equivalents (4,544) (2,683)
Cash and cash equivalents at the beginning of the period 4,544 2,683
-------- --------
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 September 30, 1999 and its results of operations and its cash flows
for the three month periods ended September 30, 1999 and 1998. 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, 1999, on file at the
Securities and Exchange Commission. Certain fiscal 1999 balances have been
reclassified to conform with the current year presentation.
NOTE 2--INVENTORIES:
Inventories are valued at the lower of cost or market and inventory
costs are determined using the first-in, first-out (FIFO) method. Costs
associated with growing crops are recorded as inventory and are recognized as
wine inventory costs in the year in which the related crop is harvested.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------- --------
1999 1999
--------- --------
UNAUDITED
<S> <C> <C>
Wine in production $192,582 $183,825
Bottled wine 88,342 66,682
Crop costs and supplies 14,346 11,870
-------- --------
$295,270 $262,377
======== ========
</TABLE>
NOTE 3--COMPREHENSIVE INCOME:
Comprehensive income includes revenues, expenses, gains and losses that
are excluded from net income, including foreign currency translation adjustments
and unrealized gains and losses on certain investments in debt and equity
securities. Comprehensive income for the three months ended September 30, 1999
and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
UNAUDITED UNAUDITED
--------- ---------
<S> <C> <C>
Net income $ 9,263 $ 7,996
Foreign currency translation adjustment, net of tax (130) 79
------- -------
Comprehensive income $ 9,133 $ 8,075
======= =======
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2000 COMPARED TO FIRST QUARTER OF FISCAL 1999
NET REVENUES Net revenues increased by 13.4%, reflecting an 8.6% increase in
sales volume and a shift in sales mix to wines with higher net revenues per
case.
COST OF GOODS SOLD Cost of goods sold increased by 9.2%, reflecting the increase
in sales volume and a shift in sales mix to wines with higher average costs per
case.
GROSS PROFIT As a result of the above factors, the Company's gross profit
percentage increased to 47.5% compared to 45.5% a year ago.
OPERATING EXPENSES Operating expenses increased by 14.9% due primarily to the
increase in sales volume and increased promotional spending per case that were
partially offset by a decrease in general and administrative expenses. The ratio
of operating expenses to net revenues was 28.4%, compared to 28.1% a year ago.
INTEREST Interest expense decreased by 3.6% due mainly to an increase in the
Company's average borrowings that was offset by an increase in capitalized
interest and a decrease in the Company's average interest rate. The increase in
capitalized interest was due to increased vineyard development and winery
expansion and renovation projects.
EQUITY IN NET INCOME OF JOINT VENTURES Equity in net income of joint ventures
decreased by 3.6% due mainly to the timing of the Opus One fall release. As a
result, equity in net income of joint ventures is expected to be higher during
the second quarter of fiscal 2000 compared to the same period last year.
PROVISION FOR INCOME TAXES The Company's effective tax rate remained unchanged
from prior year at 38.5%.
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
totaled $9.3 million, or $.58 per diluted share, compared to $8.0 million, or
$.51 per diluted share, a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $4.5 million during the quarter
as cash used in investing and financing activities exceeded cash provided by
operations. Cash provided by operations totaled $21.8 million, reflecting net
income, as well as the non-cash impact on pre-tax income of depreciation and
amortization and seasonal changes in accounts receivable and accounts payable.
Cash of $22.4 million was used in investing activities for vineyard development,
purchases of barrels and production equipment for the 1999 harvest and
renovation of the Robert Mondavi Winery. Cash used in financing activities of
$3.9 million primarily reflects repayments of term debt.
The Company's short-term credit lines expire on December 24, 1999. The
Company expects to renew the short-term credit lines for at least their current
availability of $71.5 million.
6
<PAGE> 7
YEAR 2000
The Year 2000 issue, which is common to most companies, relates
to the inability of computer systems, including information technology (IT) and
non-IT systems, to properly recognize and process date sensitive information
with respect to dates in the Year 2000 and thereafter. The Company believes that
it will be able to achieve Year 2000 compliance by the end of 1999 and it does
not expect any material disruption of its operations as a result of any failure
by the Company to achieve Year 2000 compliance. However, to the extent the
Company is not able to resolve any Year 2000 issues, the Company's business and
results of operations could be materially affected. This could result from
computer related failures in the Company's financial systems, manufacturing and
warehouse management systems, phone systems and electrical supply.
The Company has assessed its internal computer systems and
software and has completed the necessary modifications or replacements so that
its operating systems will function properly with respect to dates in the Year
2000 and thereafter. The Company has also evaluated and updated its non-IT
systems with respect to the Year 2000 issue. The Company's non-IT systems
include phones, voicemail, electricity, heating and air conditioning and
security systems. The cost to the Company of evaluating and modifying its own
systems was not material, nor does the Company believe that, with these
modifications, the Year 2000 issue will pose significant operational problems
for its computer and non-IT systems. However, as testing of Year 2000
functionality of the Company's systems must occur in a simulated environment,
the Company will not be able to test full system Year 2000 interfaces and
capabilities prior to the Year 2000. To the extent the Company is not able to
address any of its Year 2000 issues, the Company believes that it could revert
to manual processes previously employed or outsource work with minimal
incremental cost.
The Company is also in the process of evaluating system
interfaces with third-party systems, such as those with key suppliers,
distributors and financial institutions, for Year 2000 functionality. If the
systems of other companies with which the Company does business do not address
any Year 2000 issues on a timely basis, the Company may experience a variety of
problems which may have a material adverse effect on the Company. These problems
may include, but are not limited to, loss of electronic data interchange
capability with the Company's customers and vendors, and failure of the
Company's vendors to deliver and bill for materials and products ordered by the
Company. As a result, the Company may experience inventory shortages or
surpluses. Should these problems arise, the Company expects to utilize voice,
facsimile and/or mail communication to place orders with vendors, receive
customer orders and process customer billings. In addition, the Company could
utilize alternate sources of supply should its vendors not resolve their Year
2000 issues on a timely basis.
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
September 30, 1999
7
<PAGE> 8
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: November 12, 1999 By /s/ STEPHEN A. MCCARTHY
------------------------------------
Stephen A. McCarthy,
Chief Financial Officer
FORWARD-LOOKING STATEMENTS
The above Form 10-Q and other information provided from time to time by
the Company contains 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 and possible costs and operational risks
associated with the Year 2000 issue. 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, 1999, 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.
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 62,993
<ALLOWANCES> 0
<INVENTORY> 295,270
<CURRENT-ASSETS> 364,581
<PP&E> 369,893
<DEPRECIATION> 101,048
<TOTAL-ASSETS> 660,662
<CURRENT-LIABILITIES> 89,677
<BONDS> 230,645
92,436
0
<COMMON> 0
<OTHER-SE> 221,440
<TOTAL-LIABILITY-AND-EQUITY> 660,662
<SALES> 80,896
<TOTAL-REVENUES> 80,896
<CGS> 42,476
<TOTAL-COSTS> 42,476
<OTHER-EXPENSES> 23,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,187
<INCOME-PRETAX> 15,061
<INCOME-TAX> 5,798
<INCOME-CONTINUING> 9,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,263
<EPS-BASIC> .60<F1>
<EPS-DILUTED> .58<F2>
<FN>
<F1>REPRESENTS BASIC EPS, CALCULATED IN ACCORDANCE WITH SFAS NO. 128.
<F2>REPRESENTS DILUTED EPS, CALCULATED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
