<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 March 31, 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 April 30, 2000, there were issued and outstanding 8,257,649 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>
MARCH 31, JUNE 30,
2000 1999
--------- ---------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 4,544
Accounts receivable--trade, net 68,349 82,037
Inventories 321,219 262,377
Prepaid expenses and other current assets 21,330 4,893
--------- ---------
Total current assets 410,898 353,851
Property, plant and equipment, net 288,289 249,572
Investments in joint ventures 35,552 20,124
Other assets 6,712 5,718
--------- ---------
Total assets $ 741,451 $ 629,265
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 4,826 $ --
Notes payable to banks 47,600 --
Accounts payable--trade 16,479 19,416
Employee compensation and related costs 10,429 11,605
Other accrued expenses 7,612 10,986
Current portion of long-term debt 10,063 10,252
Deferred income taxes 2,937 3,827
--------- ---------
Total current liabilities 99,946 56,086
Long-term debt, less current portion 274,027 243,758
Deferred income taxes 19,657 17,355
Deferred executive compensation 8,370 7,425
Other liabilities 154 235
--------- ---------
Total liabilities 402,154 324,859
--------- ---------
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--8,254,399 and 8,151,664 shares 82,711 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 5,720 5,266
Retained earnings 239,717 207,520
Accumulated other comprehensive income:
Cumulative translation adjustment (583) (595)
--------- ---------
339,297 304,406
Total liabilities and shareholders' equity $ 741,451 $ 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 NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------------------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross revenues $ 104,297 $ 93,454 $ 316,863 $ 277,970
Less excise taxes 4,888 4,293 14,392 12,577
--------- --------- --------- ---------
Net revenues 99,409 89,161 302,471 265,393
Cost of goods sold 53,391 48,345 161,896 149,352
--------- --------- --------- ---------
Gross profit 46,018 40,816 140,575 116,041
Selling, general and administrative expenses 28,701 24,328 85,600 73,498
--------- --------- --------- ---------
Operating income 17,317 16,488 54,975 42,543
Other income (expense):
Interest (4,577) (3,877) (11,248) (10,766)
Equity in net income of joint ventures 814 (245) 6,269 4,581
Other (44) (165) 2,357 (658)
--------- --------- --------- ---------
Income before income taxes 13,510 12,201 52,353 35,700
Provision for income taxes 5,201 4,696 20,156 13,744
--------- --------- --------- ---------
Net income $ 8,309 $ 7,505 $ 32,197 $ 21,956
========= ========= ========= =========
Earnings per share-Basic $ .53 $ .49 $ 2.08 $ 1.43
========= ========= ========= =========
Earnings per share-Diluted $ .52 $ .47 $ 2.01 $ 1.39
========= ========= ========= =========
Weighted average number of shares outstanding-Basic 15,556 15,437 15,506 15,404
========= ========= ========= =========
Weighted average number of shares outstanding-Diluted 16,039 15,954 15,998 15,840
========= ========= ========= =========
</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,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 32,197 $ 21,956
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes 1,519 1,035
Depreciation and amortization 13,973 11,242
Equity in net income of joint ventures (6,269) (4,581)
Other (2,400) 775
Changes in assets and liabilities
Accounts receivable--trade 13,688 (1,355)
Inventories (59,070) (31,456)
Other assets (16,541) 1,898
Accounts payable--trade and accrued expenses (7,858) (13,897)
Deferred executive compensation 945 637
Other liabilities (81) (80)
-------- --------
Net cash used in operating activities (29,897) (13,826)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (54,116) (35,233)
Proceeds from sale of assets 4,830 --
Distributions from joint ventures 4,463 2,251
Contributions to joint ventures (12,592) (27)
-------- --------
Net cash used in investing activities (57,415) (33,009)
-------- --------
Cash flows from financing activities:
Book overdraft 4,826 10,042
Net additions under credit lines 37,500 --
Proceeds from issuance of long-term debt 50,000 42,850
Principal repayments of long-term debt (9,820) (9,445)
Proceeds from issuance of Class A Common Stock 276 293
Exercise of Class A Common Stock options 873 820
Other (887) (408)
-------- --------
Net cash provided by financing activities 82,768 44,152
-------- --------
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
March 31, 2000, its results of operations for the three and nine month periods
ended March 31, 2000 and 1999 and its cash flows for the nine month periods
ended March 31, 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, 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>
MARCH 31,
2000 JUNE 30,
UNAUDITED 1999
-------- --------
<S> <C> <C>
Wine in production $222,083 $183,825
Bottled wine 85,837 66,682
Crop costs and supplies 13,299 11,870
-------- --------
$321,219 $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 nine months ended March 31,
2000 and 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 8,309 $ 7,505 $ 32,197 $ 21,956
Foreign currency translation adjustment, net of tax (135) (218) 12 (127)
-------- -------- -------- --------
Comprehensive income $ 8,174 $ 7,287 $ 32,209 $ 21,829
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
During fiscal 2000, the Company recorded a net gain, primarily related to the
sale of vineyard land, and inventory step-up charges(1) associated with the
purchase accounting resulting from the Company's minority investment in
Ornellaia. In fiscal 1999, the Company recorded certain reorganization and other
one-time charges related to asset impairment and employee separation expenses.
The adjusted figures, referred to below, exclude the items discussed above.
THIRD QUARTER OF FISCAL 2000 COMPARED TO THIRD QUARTER OF FISCAL 1999
NET REVENUES Net revenues increased by 11.5%, reflecting a 12.7% increase in
sales volume and a shift in sales mix to wines with lower net revenues per case.
COST OF GOODS SOLD Cost of goods sold increased by 10.4%, 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 46.3% compared to 45.8% last year.
OPERATING EXPENSES Operating expenses increased by 18.0% and the ratio of
operating expenses to net revenues increased to 28.9% from 27.3% a year ago.
These increases were primarily due to higher promotional spending per case,
including advertising.
INTEREST Interest expense increased by 18.1% due to increases in average
borrowings outstanding and in the Company's average interest rate. The increase
associated with higher borrowing levels was partially offset by an increase in
capitalized interest due to vineyard development, winery renovation and facility
expansion 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 and Caliterra
joint ventures during the period. Adjusted equity in net income of joint
ventures totaled $1.2 million compared to a loss of $0.2 million a year ago.
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 $8.3 million, or $0.52 per diluted share, compared to $7.5
million, or $0.47 per diluted share, a year ago. Adjusted net income totaled
$8.5 million, or $0.53 per diluted share, compared to $7.5 million, or $0.47 per
diluted share, a year ago.
(1) 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 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 adjustment reduces the
company's reported net income.
6
<PAGE> 7
FIRST NINE MONTHS OF FISCAL 2000 COMPARED TO FIRST NINE MONTHS OF FISCAL 1999
NET REVENUES Net revenues increased by 14.0%, reflecting a 13.1% 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 8.4%. Adjusted
cost of goods sold increased by 11.8%, 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 Company's gross profit
percentage was 46.5% compared to 43.7% reported last year. The adjusted gross
profit percentage in fiscal 1999 was 45.4%.
OPERATING EXPENSES Operating expenses as reported increased by 16.5%. Adjusted
operating expenses increased by 18.9% and the ratio of adjusted operating
expenses to net revenues increased to 28.3% from 27.1% a year ago. These
increases were primarily due to higher promotional spending per case, including
advertising.
INTEREST Interest expense increased by 4.5%, due primarily to an increase in
average borrowings outstanding. Interest associated with the higher borrowing
levels was partially offset by an increase in capitalized interest due to
vineyard development, winery renovation and facility expansion 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 and Caliterra
joint ventures. Adjusted equity in net income of joint ventures totaled $6.6
million compared to $4.6 million a year ago.
OTHER "Other" primarily consists of miscellaneous non-operating income and
expense items. "Other" includes a net gain primarily related to the sale of
vineyard land of $2.5 million in fiscal 2000.
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 $32.2 million, or $2.01 per diluted share, compared to $22.0
million, or $1.39 per diluted share, a year ago. Adjusted net income totaled
$30.9 million, or $1.93 per diluted share, compared to $25.6 million, or $1.62
per diluted share, a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $4.5 million during the first nine months
of fiscal 2000 as cash used in operating and investing activities exceeded cash
provided by financing activities. Cash used in operations totaled $29.9 million,
reflecting an increase in inventories required to support expected future sales
growth and an increase in other assets that were partially offset by net income,
as well as the non-cash impact on pre-tax income of depreciation and
amortization. Cash used in investing activities totaled $57.4 million,
reflecting vineyard development and land acquisitions; renovation of the Robert
Mondavi Winery facility; facility expansion and purchases of production
equipment; and contributions to joint ventures. Cash provided by financing
activities totaled $82.8 million, reflecting the addition of $50.0 million in
new term debt, a net increase in credit line borrowings and repayments of term
debt.
7
<PAGE> 8
During fiscal 2000, the Company increased its total acreage of controlled
vineyards in California to nearly 9,500 acres from approximately 5,000 acres at
the end of fiscal 1999. The increased acreage was primarily achieved through
long-term leases.
The Company has unsecured short-term and long-term credit lines that have a
maximum credit availability of $91.5 million and $60.0 million, respectively.
The short-term credit lines expire as follows: $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.
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, 2000.
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 15, 2000 By /s/ GREGORY M. EVANS
--------------------------------------
Gregory M. Evans,
Chief Operating 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. 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.
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 68,349
<ALLOWANCES> 0
<INVENTORY> 321,219
<CURRENT-ASSETS> 410,898
<PP&E> 392,959
<DEPRECIATION> 104,670
<TOTAL-ASSETS> 741,451
<CURRENT-LIABILITIES> 99,946
<BONDS> 274,027
0
0
<COMMON> 94,443
<OTHER-SE> 244,854
<TOTAL-LIABILITY-AND-EQUITY> 741,451
<SALES> 302,471
<TOTAL-REVENUES> 302,471
<CGS> 161,896
<TOTAL-COSTS> 161,896
<OTHER-EXPENSES> 85,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,248
<INCOME-PRETAX> 52,353
<INCOME-TAX> 20,156
<INCOME-CONTINUING> 32,197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,197
<EPS-BASIC> 2.08<F1>
<EPS-DILUTED> 2.01<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>
