<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, 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 January 31, 2000, there were issued and outstanding 8,248,849 shares of
the issuer's Class A Common Stock and 7,306,012 shares of the issuer's Class B
Common Stock.
================================================================================
<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,
1999 1999
--------- ---------
UNAUDITED
Current assets:
<S> <C> <C>
Cash and cash equivalents $ -- $ 4,544
Accounts receivable--trade, net 71,303 82,037
Inventories 335,316 262,377
Prepaid expenses and other current assets 17,081 4,893
--------- ---------
Total current assets 423,700 353,851
Property, plant and equipment, net 277,107 249,572
Investments in joint ventures 35,220 20,124
Other assets 5,774 5,718
--------- ---------
Total assets $ 741,801 $ 629,265
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 3,401 $ --
Notes payable to banks 60,600 --
Accounts payable--trade 55,809 19,416
Employee compensation and related costs 10,676 11,605
Other accrued expenses 10,158 10,986
Current portion of long-term debt 10,038 10,252
Deferred income taxes 3,166 3,827
--------- ---------
Total current liabilities 153,848 56,086
Long-term debt, less current portion 229,360 243,758
Deferred income taxes 19,264 17,355
Deferred executive compensation 8,265 7,425
Other liabilities 179 235
--------- ---------
Total liabilities 410,916 324,859
--------- ---------
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--8,242,249 and 8,151,664 shares 82,580 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 5,613 5,266
Retained earnings 231,408 207,520
Accumulated other comprehensive income:
Cumulative translation adjustment (448) (595)
--------- ---------
330,885 304,406
--------- ---------
Total liabilities and shareholders' equity $ 741,801 $ 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 SIX MONTHS ENDED
--------------------------- ---------------------------
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross revenues $ 127,990 $ 109,734 $ 212,566 $ 184,516
Less excise taxes 5,824 4,863 9,504 8,284
--------- --------- --------- ---------
Net revenues 122,166 104,871 203,062 176,232
Cost of goods sold 66,029 62,119 108,505 101,007
--------- --------- --------- ---------
Gross profit 56,137 42,752 94,557 75,225
Selling, general and administrative expenses 33,886 29,143 56,899 49,170
--------- --------- --------- ---------
Operating income 22,251 13,609 37,658 26,055
Other income (expense):
Interest (3,484) (3,584) (6,671) (6,889)
Equity in net income of joint ventures 2,582 891 5,455 4,826
Other 2,433 (418) 2,401 (493)
--------- --------- --------- ---------
Income before income taxes 23,782 10,498 38,843 23,499
Provision for income taxes 9,157 4,043 14,955 9,048
--------- --------- --------- ---------
Net income $ 14,625 $ 6,455 $ 23,888 $ 14,451
========= ========= ========= =========
Earnings per share-Basic $ .94 $ .42 $ 1.54 $ .94
========= ========= ========= =========
Earnings per share-Diluted $ .92 $ .41 $ 1.50 $ .92
========= ========= ========= =========
Weighted average number of shares
outstanding -- Basic 15,490 15,414 15,480 15,387
========= ========= ========= =========
Weighted average number of shares
outstanding -- Diluted 15,978 15,882 15,978 15,785
========= ========= ========= =========
</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,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,888 $ 14,451
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes 1,126 682
Depreciation and amortization 9,126 7,420
Equity in net income of joint ventures (5,455) (4,826)
Other (2,411) 712
Changes in assets and liabilities
Accounts receivable--trade 10,734 (3,916)
Inventories (73,022) (48,886)
Other assets (12,188) 1,896
Accounts payable--trade and accrued expenses 34,411 24,467
Deferred executive compensation 840 510
Other liabilities (309) 53
-------- --------
Net cash used in operating activities (13,260) (7,437)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (38,144) (23,999)
Proceeds from sale of assets 4,830 --
Distributions from joint ventures 4,425 2,251
Contributions to joint ventures (12,586) (18)
-------- --------
Net cash used in investing activities (41,475) (21,766)
-------- --------
Cash flows from financing activities:
Book overdraft 3,401 1,415
Net additions under notes payable to banks 60,600 --
Proceeds from issuance of long-term debt -- 30,850
Principal repayments of long-term debt (14,612) (6,662)
Proceeds from issuance of Class A Common Stock 275 293
Exercise of Class A Common Stock options 743 717
Other (216) (93)
-------- --------
Net cash provided by financing activities 50,191 26,520
-------- --------
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
December 31, 1999, its results of operations for the three and six month periods
ended December 31, 1999 and 1998 and its cash flows for the six month periods
ended December 31, 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
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>
DECEMBER 31, JUNE 30,
------------ --------
1999 1999
-------- --------
UNAUDITED
--------- --------
<S> <C> <C>
Wine in production $247,134 $183,825
Bottled wine 79,531 66,682
Crop costs and supplies 8,651 11,870
-------- --------
$335,316 $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 and six months ended December 31,
1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
UNAUDITED
---------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- --------------------------
DECEMBER 31, DECEMBER 31,
------------------------- --------------------------
1999 1998 1999 1998
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net income $14,625 $6,455 $23,888 $14,451
Foreign currency translation adjustment,
net of tax 277 12 147 91
------- ------ ------- -------
Comprehensive income $14,902 $6,467 $24,035 $14,542
======= ====== ======= =======
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
During the second quarter of fiscal 2000, the Company recorded a net gain of
$2.5 million, or $0.10 per diluted share, primarily related to the sale of
vineyard land. During the second quarter of fiscal 1999, the Company recorded a
total of $6.0 million, or $0.23 per diluted share, of reorganization and other
one-time charges. 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. Adjusted net income, referred to
below, excludes the items discussed above in fiscal 2000 and 1999.
SECOND QUARTER OF FISCAL 2000 COMPARED TO SECOND QUARTER OF FISCAL 1999
NET REVENUES Net revenues increased by 16.5%, reflecting a 16.6% increase in
sales volume.
COST OF GOODS SOLD Cost of goods sold as reported increased by 6.3%. Excluding
the fiscal 1999 asset impairment charges, cost of goods sold increased by 14.6%,
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 Company's gross profit
percentage was 46.0% compared to 40.8% reported last year. Excluding the asset
impairment charges, the gross profit percentage was 45.1% in fiscal 1999.
OPERATING EXPENSES Operating expenses as reported increased by 16.3%. Excluding
the fiscal 1999 employee separation expenses, operating expenses increased by
22.6% and the ratio of operating expenses to net revenues increased to 27.7%
from 26.4% a year ago. These increases were primarily due to higher promotional
spending per case, including advertising.
INTEREST Interest expense decreased by 2.8%, despite an increase in average
borrowings outstanding, due to a decrease in the Company's average interest rate
and an increase in capitalized interest. The increase in capitalized interest
was due to increased vineyard development and winery expansion and renovation
projects.
EQUITY IN NET INCOME OF JOINT VENTURES The increase in equity in net income of
joint ventures was due mainly to the timing of the Opus One fall release, which
resulted in higher equity income in the second quarter of fiscal 2000 and lower
equity income in the first quarter of fiscal 2000 as compared to the prior year.
OTHER "Other" primarily consists of miscellaneous non-operating income and
expense items. "Other" includes the gain on sale of vineyard land in fiscal 2000
discussed above.
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 $14.6 million, or $0.92 per diluted share, compared to $6.5
million, or $0.41 per diluted share, a year ago. Adjusted net income totaled
$13.1 million, or $0.82 per diluted share, compared to $10.1 million, or $0.64
per diluted share, a year ago.
6
<PAGE> 7
FIRST SIX MONTHS OF FISCAL 2000 COMPARED TO FIRST SIX MONTHS OF FISCAL 1999
NET REVENUES Net revenues increased by 15.2%, reflecting a 13.3% 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 as reported increased by 7.4%. Excluding
the fiscal 1999 asset impairment charges, cost of goods sold increased by 12.4%,
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 Company's gross profit
percentage was 46.6% compared to 42.7% reported last year. Excluding the asset
impairment charges, the gross profit percentage was 45.2% in fiscal 1999.
OPERATING EXPENSES Operating expenses as reported increased by 15.7%. Excluding
the fiscal 1999 employee separation expenses, operating expenses increased by
19.4% and the ratio of operating expenses to net revenues increased to 28.0%
from 27.0% a year ago. These increases were primarily due to higher promotional
spending per case, including advertising, that were partially offset by a
decrease in general and administrative expenses.
INTEREST Interest expense decreased by 3.2%, despite an increase in average
borrowings outstanding, due to a decrease in the Company's average interest rate
and an increase in capitalized interest. The increase in capitalized interest
was due to increased vineyard development and winery expansion and renovation
projects.
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.
OTHER "Other" primarily consists of miscellaneous non-operating income and
expense items. "Other" includes the gain on sale of vineyard land in fiscal 2000
discussed above.
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 $23.9 million, or $1.50 per diluted share, compared to $14.5
million, or $0.92 per diluted share, a year ago. Adjusted net income totaled
$22.3 million, or $1.40 per diluted share, compared to $18.1 million, or $1.15
per diluted share, a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $4.5 million during the first six months
of fiscal 2000 as cash used in investing and operating activities exceeded cash
provided by financing activities. Cash used in operations totaled $13.3 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 $41.5 million, reflecting vineyard development,
purchases of production equipment for the 1999 harvest, renovation of the Robert
Mondavi Winery facility and contributions to joint ventures. Cash provided by
financing activities totaled $50.2 million, reflecting a net increase in credit
line borrowings and repayments of term debt.
7
<PAGE> 8
The Company has unsecured short-term and long-term credit lines that have a
maximum credit availability of $121.5 million and $60.0 million, respectively.
The short-term credit lines expire as follows: $30.0 million expires on March
31, 2000; $55.0 million expires on December 21, 2000; and $36.5 million expires
on December 23, 2000. The long-term credit lines expire on December 31, 2002.
YEAR 2000
The Year 2000 issue relates to the inability of computer systems to properly
recognize and process date sensitive information with respect to dates in the
Year 2000 and thereafter. The Company has conducted a comprehensive review of
its internal information technology (IT) to identify systems that could be
affected by the Year 2000 issue. The Company also evaluated 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. As of January 1, 2000 all systems rolled over to the Year 2000 without
significant problems. The Company also evaluated system interfaces with
third-party systems, such as those with key suppliers, distributors and
financial institutions, for Year 2000 functionality and did not experience any
material problems.
The cost to the Company of evaluating and modifying its own system was not
material, nor does the Company expect to expend any material amount for the Year
2000 issue as there are not any significant operational problems for its
computer, non-IT, and third-party systems at this point.
The Company's efforts and ongoing expectations relating to Year 2000 compliance
include some forward-looking statements, and the Company cannot be certain that
it will not incur additional, unanticipated costs, losses or liabilities related
to internal or third-party Year 2000 problems not yet known to the Company. Such
costs, losses and liabilities could have a material adverse effect on the
Company's business, financial condition and operating results.
8
<PAGE> 9
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 5, 1999, at
the Woodbridge Winery, Acampo, 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, 2000.
Philip Greer, Frank Farella and James Barksdale were nominated as Class A
directors. 6,797,458 Class A shares were voted for Mr. Greer and 51,882 shares
were withheld. 6,738,529 Class A shares were voted for Mr. Farella and 110,811
shares were withheld. 6,792,904 Class A shares were voted for Mr. Barksdale and
56,436 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. 7,286,592 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.
6,773,370 Class A shares were voted in favor of the ratification of
PricewaterhouseCoopers LLP, 69,882 Class A shares were voted against and 6,088
Class A shares abstained. 72,865,920 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,
1999.
9
<PAGE> 10
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 14, 2000 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.
10
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 71,303
<ALLOWANCES> 0
<INVENTORY> 335,316
<CURRENT-ASSETS> 423,700
<PP&E> 377,729
<DEPRECIATION> 100,622
<TOTAL-ASSETS> 741,801
<CURRENT-LIABILITIES> 153,848
<BONDS> 229,360
0
0
<COMMON> 94,312
<OTHER-SE> 236,573
<TOTAL-LIABILITY-AND-EQUITY> 741,801
<SALES> 203,062
<TOTAL-REVENUES> 203,062
<CGS> 108,505
<TOTAL-COSTS> 108,505
<OTHER-EXPENSES> 56,899
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,671
<INCOME-PRETAX> 38,843
<INCOME-TAX> 14,955
<INCOME-CONTINUING> 23,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,888
<EPS-BASIC> 1.54<F1>
<EPS-DILUTED> 1.50<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>
