<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 December 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 January 31, 1999, there were issued and outstanding 8,131,085 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)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1998
--------- ---------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 2,683
Accounts receivable--trade, net 72,572 68,656
Inventories 304,954 256,770
Prepaid expenses and other current assets 6,343 8,239
--------- ---------
Total current assets 383,869 336,348
Property, plant and equipment, net 231,304 215,301
Investments in joint ventures 22,040 18,666
Other assets 5,481 5,512
--------- ---------
Total assets $ 642,694 $ 575,827
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 1,415 $ --
Accounts payable--trade 43,455 18,888
Employee compensation and related costs 10,680 9,881
Other accrued expenses 6,649 7,800
Current portion of long-term debt 10,603 10,984
Deferred taxes 9,800 10,200
Deferred revenue 2,458 2,618
--------- ---------
Total current liabilities 85,060 60,371
Long-term debt, less current portion 247,126 222,557
Deferred income taxes 15,327 14,245
Deferred executive compensation 7,223 6,713
Other liabilities 553 339
--------- ---------
Total liabilities 355,289 304,225
--------- ---------
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--8,123,919 and 8,058,869 shares 80,050 79,040
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 5,027 4,776
Retained earnings 191,188 176,737
Accumulated other comprehensive income:
Cumulative translation adjustment (592) (683)
--------- ---------
287,405 271,602
--------- ---------
Total liabilities and shareholders' equity $ 642,694 $ 575,827
========= =========
</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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross revenues $ 109,734 $ 97,567 $ 184,516 $ 166,403
Less excise taxes 4,863 4,565 8,284 7,851
--------- --------- --------- ---------
Net revenues 104,871 93,002 176,232 158,552
Cost of goods sold 62,119 49,253 101,007 83,271
--------- --------- --------- ---------
Gross profit 42,752 43,749 75,225 75,281
Selling, general and administrative expenses 29,143 22,491 49,170 41,218
--------- --------- --------- ---------
Operating income 13,609 21,258 26,055 34,063
Other income (expense):
Interest (3,584) (2,866) (6,889) (5,393)
Equity in net income of joint ventures 891 652 4,826 3,198
Other (418) (461) (493) (738)
--------- --------- --------- ---------
Income before income taxes 10,498 18,583 23,499 31,130
Provision for income taxes 4,043 7,247 9,048 12,140
--------- --------- --------- ---------
Net income $ 6,455 $ 11,336 $ 14,451 $ 18,990
========= ========= ========= =========
Earnings per share-Basic $ .42 $ .74 $ .94 $ 1.25
========= ========= ========= =========
Earnings per share-Diluted $ .41 $ .71 $ .92 $ 1.20
========= ========= ========= =========
Weighted average number of shares outstanding-Basic 15,414 15,250 15,387 15,220
========= ========= ========= =========
Weighted average number of shares outstanding-Diluted 15,882 15,880 15,785 15,862
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,451 $ 18,990
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes 682 1,840
Depreciation and amortization 7,420 6,708
Equity in net income of joint ventures (4,826) (3,198)
Other 712 (314)
Changes in assets and liabilities
Accounts receivable--trade (3,916) 1,221
Inventories (48,886) (76,967)
Other assets 1,896 125
Accounts payable--trade and accrued expenses 24,467 40,162
Deferred revenue (161) (20)
Deferred executive compensation 510 228
Other liabilities 214 1,946
-------- --------
Net cash used in operating activities (7,437) (9,279)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (23,999) (27,247)
Proceeds from sale of assets -- 6,420
Distributions from joint ventures 2,251 1,247
Contributions to joint ventures (18) (209)
-------- --------
Net cash used in investing activities (21,766) (19,789)
-------- --------
Cash flows from financing activities:
Book overdraft 1,415 2,078
Net additions under notes payable to banks -- 12,950
Proceeds from issuance of long-term debt 30,850 13,548
Principal repayments of long-term debt (6,662) --
Proceeds from issuance of Class A Common Stock 293 200
Exercise of Class A Common Stock options 717 974
Other (93) (832)
-------- --------
Net cash provided by financing activities 26,520 28,918
-------- --------
Net decrease in cash and cash equivalents (2,683) (150)
Cash and cash equivalents at the beginning of the period 2,683 150
-------- --------
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 December 31, 1998, its results of operations for the three and six
month periods ended December 31, 1998 and 1997 and its cash flows for the six
month periods ended December 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, 1998, on file at the Securities and
Exchange Commission. Certain fiscal 1998 balances have been reclassified to
conform with current year presentation.
Effective July 1, 1998, the Company changed its wine inventory costing
method from the last-in, first-out (LIFO) method to the first-in, first-out
(FIFO) method. The primary reasons for the change in accounting method are:
management's belief that the FIFO method of accounting better matches revenues
and expenses of the Company's wines sold, and therefore provides a better method
of reporting the Company's results of operations; the FIFO method of accounting
will reduce intra-year cost of sales volatility; and the FIFO method of
accounting will provide improved financial comparability to other
publicly-traded companies in the industry. The accounting change has been
applied to prior years by retroactively restating the financial statements. The
effect of this restatement increased current assets, current liabilities and
retained earnings by $28.5 million, $10.2 million and $18.3 million,
respectively, as of July 1, 1998. The restatement increased net income for the
three months ended December 31, 1997, by $0.8 million, or $0.05 per share, and
for the six months ended December 31, 1997, by $2.6 million, or $0.17 per share.
Effective July 1, 1998, the Company also adopted Statement of Financial
Accounting Standards No. 130 (FAS 130), "Reporting Comprehensive Income." The
adoption of FAS 130 did not have a material impact on the Company's consolidated
financial statements. Comprehensive income for the three and six months ended
December 31, 1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
UNAUDITED
---------
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 6,455 $ 11,336 $ 14,451 $ 18,990
Foreign currency translation adjustment, net of tax 12 (312) 91 (414)
-------- -------- -------- --------
Comprehensive income $ 6,467 $ 11,024 $ 14,542 $ 18,576
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
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>
DECEMBER 31, JUNE 30,
1998 1998
-------- --------
UNAUDITED
<S> <C> <C>
Wine in production $230,666 $170,708
Bottled wine 69,261 70,572
Crop costs and supplies 5,027 15,490
-------- --------
$304,954 $256,770
======== ========
</TABLE>
NOTE 3--REORGANIZATION AND OTHER ONE-TIME CHARGES:
During the second quarter of fiscal 1999, the Company implemented a
series of operational and organizational changes aimed at improving its
competitiveness and resources for investing in vineyards and wineries and
providing stronger marketing support for its wines. These changes included the
reduction of approximately 4% of the Company's workforce; the centralization of
various support functions; the write-down of excess imported wine inventory; and
the write-off of certain vineyard assets.
The Company eliminated 36 positions, primarily in Napa Valley winery
operations and in the administrative areas. These job eliminations, combined
with the centralization of finance, logistics, purchasing and customer service,
are intended to make the Company more efficient without affecting wine quality
or service levels. As a result of these organizational changes, the Company
recorded $1.5 million of employee separation expenses, which were included in
operating expenses for the period ended December 31, 1998.
During the second quarter of fiscal 1999, the Company also completed a
strategic review of its product portfolio and decided to focus more of its
resources on the Company's core brands: Robert Mondavi Winery, Robert Mondavi
Coastal and Woodbridge by Robert Mondavi. As a result, the Company lowered its
sales growth expectations for its Vichon Mediterranean brand. Based on revised
sales forecasts, the Company determined it had approximately 475,000 gallons of
excess imported wine inventory. Accordingly, the Company wrote-down the excess
inventory to its fair market value based on current market prices and recent
sales of similar bulk wine inventory. The resulting $4.0 million write-down was
included in cost of goods sold for the period ended December 31, 1998. The
Company expects to dispose of this excess inventory over the course of the next
6 to 18 months.
The Company also decided to prioritize the replanting of its internal
vineyards. As a result, the Company accelerated the removal of certain vineyards
for replant. The net book value of the vineyards removed totaled $0.5 million,
which was included in cost of goods sold for the period ended December 31, 1998.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
SECOND QUARTER OF FISCAL 1999 COMPARED TO SECOND QUARTER OF FISCAL 1998
REORGANIZATION AND OTHER ONE-TIME CHARGES During the second quarter of fiscal
1999, the Company implemented a series of operational and organizational changes
aimed at improving its competitiveness and resources for investing in vineyards
and wineries and providing stronger marketing support for its wines. As a result
of these changes, the Company recorded one-time charges totaling $6.0 million,
or $0.23 per diluted share, during the quarter. Of this total, $4.5 million, or
$0.17 per diluted share, related to asset impairment charges and $1.5 million,
or $0.06 per diluted share, related to employee separation expenses. For a
further discussion of these operational and organizational changes, see Note 3
of Notes to Consolidated Financial Statements.
NET REVENUES Net revenues increased by 12.8%, reflecting a 13.0% increase in
sales volume.
COST OF GOODS SOLD Cost of goods sold increased by 26.1%, reflecting the
increase in sales volume, a shift in sales mix to wines with a higher average
cost per case and the $4.5 million in asset impairment charges discussed above.
Excluding these one-time charges, cost of goods sold increased by 17.0%.
Effective July 1, 1998, the Company changed its wine inventory costing method
from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO)
method. The change has been applied to prior periods by retroactively restating
the financial statements. For a further discussion of the impact of this
accounting change, see Note 1 of Notes to Consolidated Financial Statements.
GROSS PROFIT As a result of the above factors, the Company's gross profit
percentage was 40.8% compared to 47.0% a year ago. Excluding the one-time asset
impairment charges, the gross profit percentage was 45.1%.
OPERATING EXPENSES Operating expenses increased by 29.6%, reflecting increased
sales volume and an increase in the ratio of operating expenses to net revenues
to 27.8% from 24.2% a year ago. The increase in the operating expense ratio was
mainly due to increased promotional spending per case, primarily in advertising,
and the $1.5 million in employee separation expenses discussed above. Excluding
the one-time employee separation charges, operating expenses increased by 22.9%
and the ratio of operating expenses to net revenues was 26.4%.
INTEREST Interest expense increased by 25.1% due mainly to an increase in the
Company's average borrowings that was partially offset by an increase in
interest capitalized.
EQUITY IN NET INCOME OF JOINT VENTURES The increase in equity in net income of
joint ventures was due mainly to improved income from the Opus One joint venture
during the period.
PROVISION FOR INCOME TAXES The Company's effective tax rate was 38.5% compared
to 39.0% a year ago. The lower effective rate is primarily the result of an
increase in the benefit derived from manufacturing tax credits.
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
totaled $6.5 million, or $0.41 per diluted share, compared to $11.3 million, or
$0.71 per diluted share, a year ago. Excluding the reorganization and other
one-time charges discussed above, net income was $10.1 million, or $0.64 per
diluted share.
7
<PAGE> 8
FIRST SIX MONTHS OF FISCAL 1999 COMPARED TO FIRST SIX MONTHS OF FISCAL 1998
NET REVENUES Net revenues increased by 11.2%, reflecting a 9.8% increase in
sales volume and a shift in sales mix to Robert Mondavi Winery and Robert
Mondavi Coastal wines, which have higher net revenues per case.
COST OF GOODS SOLD Cost of goods sold increased by 21.3%, reflecting the
increase in sales volume, a shift in sales mix to wines with a higher average
cost per case and the $4.5 million in asset impairment charges discussed above.
Excluding these one-time charges, cost of goods sold increased by 15.9%.
GROSS PROFIT As a result of the above factors, the Company's gross profit
percentage was 42.7% compared to 47.5% a year ago. Excluding the one-time asset
impairment charges, the gross profit percentage was 45.2%.
OPERATING EXPENSES Operating expenses increased by 19.3%, reflecting increased
sales volume and an increase in the ratio of operating expenses to net revenues
to 27.9% from 26.0% a year ago. The increase in the operating expense ratio was
mainly due to increased promotional spending per case, primarily in advertising,
and the $1.5 million in employee separation expenses discussed above. Excluding
the one-time employee separation charges, operating expenses increased by 15.7%
and the ratio of operating expenses to net revenues was 27.0%.
INTEREST Interest expense increased by 27.7% due mainly to an increase in the
Company's average borrowings that was partially offset by an increase in
interest capitalized. The incremental borrowings were primarily used for
vineyard development, Woodbridge facility expansion and working capital
requirements.
EQUITY IN NET INCOME OF JOINT VENTURES The increase in equity in net income of
joint ventures was due mainly to improved income from the Opus One joint venture
during the period.
PROVISION FOR INCOME TAXES The Company's effective tax rate was 38.5% compared
to 39.0% a year ago. The lower effective rate is primarily the result of an
increase in the benefit derived from manufacturing tax credits.
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
totaled $14.5 million, or $0.92 per diluted share, compared to $19.0 million, or
$1.20 per diluted share, a year ago. Excluding the reorganization and other
one-time charges discussed above, net income was $18.1 million, or $1.15 per
diluted share.
LIQUIDITY AND CAPITAL RESOURCES
During the second quarter of fiscal 1999, the Company completed its
1998 harvest. The completion of harvest had a significant impact on the
Company's balance sheet, including increases in inventories and amounts payable
to growers. Working capital as of December 31, 1998 was $298.8 million compared
to $276.0 million at June 30, 1998. The $22.8 million increase in working
capital was primarily attributable to a $48.9 million increase in inventories
that was partially offset by a $24.5 million increase in accounts payable. The
Company had a book overdraft of $1.4 million at December 31, 1998, compared to a
cash balance of $2.7 million at June 30, 1998.
8
<PAGE> 9
Cash and cash equivalents decreased by $2.7 million during the first
six months of fiscal 1999 as cash used in investing and operating activities
exceeded cash provided by financing activities. Cash used in operations totaled
$7.4 million, reflecting a seasonal increase in inventories that was partially
offset by net income, as well as the non-cash impact on pre-tax income of
depreciation and amortization and a seasonal increase in accounts payable. Cash
used in investing activities totaled $21.8 million, which reflects vineyard
development costs and purchases of barrels and production equipment for the 1998
harvest. Cash provided by financing activities of $26.5 million reflects a net
increase in long-term credit line borrowings.
The change to the FIFO method of accounting discussed above will result
in incremental taxes of approximately $17.2 million to be paid over four years
beginning in fiscal 1999. Payment of these incremental taxes will not change the
Company's effective tax rate.
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 December 31, 1998. The short-term credit lines expire on
December 24, 1999. The long-term credit lines expire on December 31, 2001.
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
is in the process of modifying or replacing portions of its software so that its
operating systems will function properly with respect to dates in the Year 2000
and thereafter. The Company is also evaluating 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 is not expected to be
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.
9
<PAGE> 10
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on November 2,
1998, at the Robert Mondavi Winery, Oakville, California. Two matters were
submitted to a vote of shareholders: election of directors and ratification of
PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal
year ending June 30, 1999.
Philip Greer, Frank Farella and James Barksdale were nominated as Class
A directors. 7,029,967 Class A shares were voted for Mr. Greer and 153,310
shares were withheld. 7,027,987 Class A shares were voted for Mr. Farella and
155,290 shares were withheld. 7,021,391 Class A shares were voted for Mr.
Barksdale and 161,886 shares were withheld. Accordingly, Mssrs. Greer, Farella
and Barksdale were re-elected as Class A directors.
Robert G. Mondavi, R. Michael Mondavi, Marcia Mondavi Borger, Timothy
J. Mondavi and Bartlett R. Rhoades were nominated as Class B directors.
7,306,012 Class B shares were voted for Robert G. Mondavi, R. Michael Mondavi,
Marcia Mondavi Borger, Timothy J. Mondavi and Bartlett R. Rhoades. Accordingly,
each of the Class B nominees was re-elected to the Board. There is one vacancy
on the Board, entitled to be filled by the Class B shareholders or the incumbent
Class B directors.
7,161,438 Class A shares were voted in favor of the ratification of
PricewaterhouseCoopers LLP, 16,400 Class A shares were voted against and 5,439
Class A shares abstained. 73,060,120 Class B votes were cast in favor of the
ratification of PricewaterhouseCoopers LLP. Accordingly, the selection of
PricewaterhouseCoopers LLP as independent auditors was ratified.
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
December 31, 1998.
10
<PAGE> 11
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: February 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, 1998, 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.
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 72,572
<ALLOWANCES> 0
<INVENTORY> 304,954
<CURRENT-ASSETS> 383,869
<PP&E> 326,484
<DEPRECIATION> 95,180
<TOTAL-ASSETS> 642,694
<CURRENT-LIABILITIES> 85,060
<BONDS> 247,126
0
0
<COMMON> 91,782
<OTHER-SE> 195,623
<TOTAL-LIABILITY-AND-EQUITY> 624,694
<SALES> 176,232
<TOTAL-REVENUES> 176,232
<CGS> 101,007
<TOTAL-COSTS> 101,007
<OTHER-EXPENSES> 49,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,889
<INCOME-PRETAX> 23,499
<INCOME-TAX> 9,048
<INCOME-CONTINUING> 14,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,451
<EPS-PRIMARY> .94<F1>
<EPS-DILUTED> .92<F2>
<FN>
<F1>F1 Represents Basic EPS, calculated in accordance with SFAS No. 128.
<F2>F2 Represents Diluted EPS, calculated in accordance with SFAS No. 128.
</FN>
</TABLE>
