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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 September 30, 2000
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, 2000, there were issued and outstanding 8,373,260 shares of
the issuer's Class A Common Stock and 7,302,057 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>
SEPTEMBER 30, JUNE 30,
2000 2000
--------- ---------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 3,002
Accounts receivable--trade, net 66,582 77,662
Inventories 377,525 298,487
Prepaid expenses and other current assets 7,828 4,331
--------- ---------
Total current assets 451,935 383,482
Property, plant and equipment, net 323,041 312,065
Investments in joint ventures 35,984 32,720
Other assets 10,606 6,676
--------- ---------
Total assets $ 821,566 $ 734,943
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 11,587 $ --
Notes payable to banks 18,028 19,700
Accounts payable--trade 81,495 24,540
Employee compensation and related costs 12,493 13,725
Other accrued expenses 10,863 7,250
Current portion of long-term debt 10,143 10,102
Deferred taxes -- 93
--------- ---------
Total current liabilities 144,609 75,410
Long-term debt, less current portion 276,121 280,790
Deferred income taxes 28,277 21,850
Deferred executive compensation 9,342 8,575
Other liabilities 3,956 150
--------- ---------
Total liabilities 462,305 386,775
--------- ---------
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--8,366,069 and 8,274,235 shares 84,340 83,161
Class B Common Stock, without par value:
Authorized--12,000,000 shares;
issued and outstanding--7,302,057 and 7,306,012 shares 11,726 11,732
Paid-in capital 6,560 5,780
Retained earnings 258,954 249,105
Accumulated other comprehensive income:
Cumulative translation adjustment (2,319) (1,610)
--------- ---------
359,261 348,168
--------- ---------
Total liabilities and shareholders' equity $ 821,566 $ 734,943
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
Gross revenues $ 101,823 $ 84,576
Less excise taxes 4,545 3,680
--------- ---------
Net revenues 97,278 80,896
Cost of goods sold 52,857 42,476
--------- ---------
Gross profit 44,421 38,420
Selling, general and administrative expenses 29,007 23,013
--------- ---------
Operating income 15,414 15,407
Other income (expense):
Interest (4,251) (3,187)
Equity in net income of joint ventures 5,441 2,873
Other (589) (32)
--------- ---------
Income before income taxes 16,015 15,061
Provision for income taxes 6,166 5,798
--------- ---------
Net income $ 9,849 $ 9,263
========= =========
Earnings per share--Basic $ .63 $ .60
========= =========
Earnings per share--Diluted $ .61 $ .58
========= =========
Weighted average number of shares outstanding--Basic 15,617 15,469
========= =========
Weighted average number of shares outstanding--Diluted 16,084 15,978
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,849 $ 9,263
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 465 (859)
Depreciation and amortization 4,990 4,437
Equity in net income of joint ventures (5,441) (2,873)
Other 204 (5)
Changes in assets and liabilities:
Accounts receivable--trade 11,737 19,044
Inventories (58,855) (32,902)
Other assets (3,226) (1,459)
Accounts payable--trade and accrued expenses 59,730 26,644
Deferred executive compensation 767 519
Other liabilities (194) (26)
-------- --------
Net cash provided by operating activities 20,026 21,783
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (14,420) (23,637)
Business acquisition (14,191) --
Distributions from joint ventures -- 1,250
Contributions to joint ventures (27) (9)
-------- --------
Net cash used in investing activities (28,638) (22,396)
-------- --------
Cash flows from financing activities:
Book overdraft 11,587 9,102
Net repayments under credit lines (3,600) (9,500)
Principal repayments of long-term debt (3,644) (3,754)
Exercise of Class A Common Stock options 1,173 221
Other 94 --
-------- --------
Net cash provided by (used in) financing activities 5,610 (3,931)
-------- --------
Net decrease in cash and cash equivalents (3,002) (4,544)
Cash and cash equivalents at the beginning of the period 3,002 4,544
-------- --------
Cash and cash equivalents at the end of the period $ -- $ --
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE ROBERT MONDAVI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
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, 2000, its results of operations for the three month periods ended
September 30, 2000 and 1999 and its cash flows for the three month periods ended
September 30, 2000 and 1999. 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, 2000, on file at the Securities and Exchange
Commission. Certain fiscal 2000 balances have been reclassified to conform with
the current year presentation.
NOTE 2 ACQUISITION
On July 13, 2000, the Company acquired 100% of the outstanding shares of
Arrowood Vineyards & Winery (Arrowood). The acquisition has been accounted for
using the purchase method of accounting with the allocation of purchase price to
assets and liabilities acquired made using estimated fair values at the date of
acquisition. The Company also has the option to purchase certain tangible
assets, including vineyards and winery facilities, within the next five years
for $12,000. In addition, the Company entered into a long-term licensing
agreement for use of the Arrowood and Grand Archer brand names that includes an
option to purchase the brand names for approximately $15,000, which will be
adjusted for certain financial performance measures, in 2010.
NOTE 3 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER, JUNE 30,
2000 2000
-------- --------
UNAUDITED
<S> <C> <C>
Wine in production $254,501 $186,609
Bottled wine 111,522 92,162
Crop costs and supplies 11,502 19,716
-------- --------
$377,525 $298,487
======== ========
</TABLE>
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. Included in inventory
at September 30, 2000, was $14,061 of inventory cost step-up remaining from
applying purchase accounting to the acquisition of Arrowood.
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NOTE 4 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, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
2000 1999
------- -------
<S> <C> <C>
Net income $ 9,849 $ 9,263
Foreign currency translation adjustment, net of tax (709) (130)
------- -------
Comprehensive income $ 9,140 $ 9,133
======= =======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The Company recorded inventory step-up charges associated with business
acquisitions in fiscal 2001 and 2000. Under purchase accounting, the purchase
price is allocated to the assets and liabilities of the acquired company based
on their estimated fair market values at the time of the transaction. When the
inventory acquired is subsequently sold in the normal course of business, costs
of the inventory are charged to cost of goods sold, including the amount of the
inventory step-up (the difference between the original book value of the
inventory and the fair market value of the inventory upon acquisition). The
inventory step-up charges reduce the Company's reported net income. The adjusted
figures discussed throughout this report, which better reflect the results of
the Company's ongoing operations, exclude these inventory step-up charges.
FIRST QUARTER OF FISCAL 2001 COMPARED TO FIRST QUARTER OF FISCAL 2000
NET REVENUES Net revenues increased by 20.3%, reflecting a 22.7% increase in
sales volume that was driven by the Woodbridge and Robert Mondavi Coastal
brands. Net revenues per case decreased by 2.0% to $49.49 per case, reflecting
the shift in sales mix to Woodbridge and Robert Mondavi Coastal, which have
lower net revenues per case.
COST OF GOODS SOLD Cost of goods sold as reported increased by 24.4%. Adjusted
cost of goods sold increased by 21.8%, reflecting increased sales volume that
was partially offset by a shift in sales mix to wines with lower average costs
per case.
GROSS PROFIT As a result of the above factors, the reported gross profit
percentage was 45.7% compared to 47.5% last year. The adjusted gross profit
percentage was 46.8% compared to 47.5% last year.
OPERATING EXPENSES Operating expenses increased by 26.0% and the ratio of
operating expenses to net revenues increased to 29.8% from 28.4% a year ago.
These increases were primarily attributable to increased promotional spending,
start-up costs related to the Golden Vine Winery and To-Kalon projects and the
addition of operating expenses from recent business acquisitions.
INTEREST Interest expense increased by 33.4% due to increased average borrowings
outstanding associated with facility expansion, business acquisitions and the
To-Kalon and Golden Vine Winery projects.
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EQUITY IN NET INCOME OF JOINT VENTURES Equity in net income of joint ventures as
reported increased by 89.4% to $5.4 million due mainly to improved income from
Opus One during the period. A significant portion of the improvement during the
period related to an earlier Opus One fall release. Adjusted equity in net
income of joint ventures increased by 134.9% to $6.7 million, reflecting the
Opus One improvement and adjusted equity income from the Company's recent
investment in Ornellaia.
PROVISION FOR INCOME TAXES The Company's effective tax rate remained unchanged
from the prior year at 38.5%.
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
as reported totaled $9.8 million, or $0.61 per diluted share, compared to $9.3
million, or $0.58 per diluted share, a year ago. Adjusted net income totaled
$11.3 million, or $0.70 per diluted share, compared to $9.3 million, or $0.58
per diluted share, a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $3.0 million during the first three
months of fiscal 2001 as cash used in investing activities exceeded cash
provided by operating and financing activities. Cash provided by operations
totaled $20.0 million, reflecting net income, net of depreciation and
amortization; an increase in inventory required to support anticipated future
growth; and seasonal changes in accounts receivable and accounts payable. Cash
used in investing activities totaled $28.6 million, reflecting the Arrowood
acquisition, vineyard development and facility expansion and renovation. Cash
provided by financing activities totaled $5.6 million, reflecting an increase in
borrowings, net of cash.
On July 13, 2000, the Company acquired 100% of the outstanding shares of
Arrowood Vineyards & Winery. The acquisition was accounted for using the
purchase method of accounting.
The Company maintains master lease facilities that provide the capacity to fund
up to $132.0 million. The combined facilities enable the Company to lease
certain real property (the Property) to be constructed or acquired. At September
30, 2000, $41.7 million of the combined facilities had been utilized.
The Company's short-term credit lines expire in December 2000. The Company
expects to renew the short-term credit lines for at least their current
availability of $91.5 million.
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, 2000
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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 14, 2000 By /s/ HENRY J. SALVO, JR.
------------------------
Henry J. Salvo, Jr.,
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, the premium wine industry and the Company's anticipated future
investment in vineyards and other capital projects. Actual results may differ
materially from these 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 volume and revenue growth outlook, as could
attendance projections at Disney's California Adventure theme park. 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, 2000, 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.
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