-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AMZ3MYf4IH2qytHc03+omaCEjBlM59DDg/WzjTkz6/rzggp24l21SW/c2W2sZXnP PysQ2JVl/IQQzpgAUU4fvg== 0000950149-98-001879.txt : 19981116 0000950149-98-001879.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950149-98-001879 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONDAVI ROBERT CORP CENTRAL INDEX KEY: 0000902276 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 942765451 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21624 FILM NUMBER: 98749007 BUSINESS ADDRESS: STREET 1: 7801 ST HELENA HWY STREET 2: PO BOX 106 CITY: OAKVILLE STATE: CA ZIP: 94562 BUSINESS PHONE: 7072599463 MAIL ADDRESS: STREET 1: 7801 ST HELENA HWY CITY: OAKVILLE STATE: CA ZIP: 94562 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998. 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, 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 October 31, 1998 there were issued and outstanding 8,107,757 shares of the issuer's Class A Common Stock and 7,306,012 shares of the issuer's Class B Common Stock. ================================================================================ 2 PART I ITEM 1. FINANCIAL STATEMENTS. THE ROBERT MONDAVI CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS SEPTEMBER 30, JUNE 30, 1998 1998 ------------- ------------- UNAUDITED Current assets: Cash and cash equivalents $ -- $ 2,683 Accounts receivable--trade, net 56,915 68,656 Inventories 266,456 256,770 Prepaid expenses and other current assets 6,444 8,239 ------------- ------------- Total current assets 329,815 336,348 Property, plant and equipment, net 226,457 215,301 Investments in joint ventures 23,149 18,666 Other assets 5,443 5,512 ------------- ------------- Total assets $ 584,864 $ 575,827 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Book overdraft $ 3,846 -- Accounts payable--trade 28,684 18,888 Employee compensation and related costs 8,861 9,881 Other accrued expenses 8,229 7,800 Current portion of long-term debt 10,792 10,984 Deferred taxes 9,979 10,200 Deferred revenue 2,539 2,618 ------------- ------------- Total current liabilities 72,930 60,371 Long-term debt, less current portion 209,556 222,557 Deferred income taxes 14,843 14,245 Deferred executive compensation 6,913 6,713 Other liabilities 332 339 ------------- ------------- Total liabilities 304,574 304,225 ------------- ------------- 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 -- 8,097,301 and 8,050,126 shares 79,595 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 4,834 4,776 Retained earnings 184,733 176,737 Accumulated other comprehensive income: Cumulative translation adjustment (604) (683) ------------- ------------- 280,290 271,602 ------------- ------------- Total liabilities and shareholders' equity $ 584,864 $ 575,827 ============= =============
See Notes to Consolidated Financial Statements. 2 3 THE ROBERT MONDAVI CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1998 1997 ---------- ---------- Gross revenues $ 74,781 $ 68,836 Less excise taxes 3,420 3,286 ---------- ---------- Net revenues 71,361 65,550 Cost of goods sold 38,888 34,018 ---------- ---------- Gross profit 32,473 31,532 Selling, general and administrative expenses 20,027 18,727 ---------- ---------- Operating income 12,446 12,805 Other income (expense): Interest (3,305) (2,527) Equity in net income of joint ventures 3,935 2,546 Other (75) (277) ---------- ---------- Income before income taxes 13,001 12,547 Provision for income taxes 5,005 4,893 ---------- ---------- Net income $ 7,996 $ 7,654 ========== ========== Earnings per share-Basic $ .52 $ .50 ========== ========== Earnings per share-Diluted $ .51 $ .48 ========== ========== Weighted average number of shares outstanding-Basic 15,361 15,190 ========== ========== Weighted average number of shares outstanding-Diluted 15,709 15,843 ========== ==========
See Notes to Consolidated Financial Statements. 3 4 THE ROBERT MONDAVI CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1998 1997 ---------- ---------- Cash flows from operating activities: Net income $ 7,996 $ 7,654 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 377 1,207 Depreciation and amortization 3,586 3,357 Equity in net income of joint ventures (3,935) (2,546) Other -- (355) Changes in assets and liabilities: Accounts receivable--trade 11,741 14,052 Inventories (10,146) (65,874) Other assets 1,795 (1,274) Accounts payable--trade and accrued expenses 9,263 58,262 Deferred revenue (79) 53 Deferred executive compensation 200 114 Other liabilities (7) 1,512 ---------- ---------- Net cash provided by operating activities 20,791 16,162 ---------- ---------- Cash flows from investing activities: Acquisitions of property, plant and equipment (14,673) (15,967) Proceeds from sale of assets -- 6,390 Contributions to joint ventures (9) (3) ---------- ---------- Net cash used in investing activities (14,682) (9,580) ---------- ---------- Cash flows from financing activities: Book overdraft 3,846 13,322 Net repayments under notes payable to banks -- (8,750) Principal repayments of long-term debt (13,193) (11,283) Exercise of Class A Common Stock options 555 537 Other -- (558) ---------- ---------- Net cash used in financing activities (8,792) (6,732) ---------- ---------- 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 $ -- $ -- ========== ==========
See Notes to Consolidated Financial Statements. 4 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, 1998 and its results of operations and its cash flows for the three month periods ended September 30, 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 September 30, 1997, by $1.8 million, or $0.11 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 months ended September 30, 1998 and 1997 was as follows (in thousands):
1998 1997 UNAUDITED UNAUDITED ---------- ---------- Net income $ 7,996 $ 7,654 Foreign currency translation adjustment, net of tax 79 (102) ---------- ---------- Comprehensive income $ 8,075 $ 7,552 ========== ==========
NOTE 2--INVENTORIES: Inventories are valued at the lower of cost or market and inventory costs are determined using the 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):
SEPTEMBER 30, JUNE 30, 1998 1998 ------------- ------------- UNAUDITED Wine in production $ 171,732 $ 170,708 Bottled wine 78,870 70,572 Crop costs and supplies 15,854 15,490 ------------- ------------- $ 266,456 $ 256,770 ============= =============
5 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS FIRST QUARTER OF FISCAL 1999 COMPARED TO FIRST QUARTER OF FISCAL 1998 NET REVENUES Net revenues increased by 8.9%, reflecting a 5.5% increase in sales volume and a shift in sales mix to the Robert Mondavi Winery and Robert Mondavi Coastal brands, which have higher net revenues per case. COST OF GOODS SOLD Cost of goods sold increased by 14.3%, reflecting the increase in sales volume and a shift in sales mix to wines with higher average costs per case. 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 45.5% compared to 48.1% a year ago. The gross profit percentage is expected to improve during the remainder of the fiscal year, compared to the first quarter of fiscal 1999, due to an anticipated shift in sales mix to wines with lower average costs per case. OPERATING EXPENSES Operating expenses increased by 6.9% due primarily to the increase in sales volume. The ratio of operating expenses to net revenues was 28.1% compared to 28.6% a year ago. INTEREST Interest expense increased by 30.8% 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 the timing of Opus One's fall release, which resulted in a higher percentage of Opus One's case shipments during the first quarter of fiscal 1999 when compared to the corresponding period of fiscal 1998. 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. 6 7 LIQUIDITY AND CAPITAL RESOURCES The 1998 harvest began later than the previous year's harvest and as a result, increases in inventories and amounts payable to growers during the quarter were less significant than during the same period of the prior year. Cash and cash equivalents decreased by $2.7 million during the quarter as cash used in investing and financing activities exceeded cash provided by operations. Cash provided from operations totaled $20.8 million, reflecting net income, as well as the non-cash impact on pre-tax income of depreciation and amortization and a seasonal decrease in accounts receivable. Cash of $14.7 million was used in investing activities for vineyard development and purchases of barrels and production equipment for the 1998 harvest. Cash used in financing activities of $8.8 million reflects repayments of long-term debt and a book overdraft. 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's short-term credit lines expire on December 25, 1998. The Company expects to renew the short-term credit lines for at least their current availability of $71.5 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 18 Letter re Change in Accounting Principle. Exhibit 27 Financial Data Schedule (not considered to be filed) 2) Form 8-K: No reports on Form 8-K were filed during the quarter ended September 30, 1998 7 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 13, 1998 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. 8 EX-18 2 LETTER RE CHANGE IN ACCOUNTING PRINCIPLE. 1 EXHIBIT 18 LETTER RE CHANGE IN ACCOUNTING PRINCIPLE To the Board of Directors of The Robert Mondavi Corporation We have been furnished with a copy of the Corporation's Form 10-Q for the quarter ended September 30, 1998. Note 1 therein describes a change in the method of determining the cost of inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. It should be understood that the preferability of one acceptable method of inventory accounting over another has not been addressed in any authoritative accounting literature and in arriving at our opinion expressed below, we have relied on management's business planning and judgement. Based upon our discussions with management and the stated reasons for the change, we believe that such change represents, in your circumstances, the adoption of a preferable alternative accounting principle for inventories in conformity with Accounting Principles Board Opinion No. 20. We have not made an audit in accordance with generally accepted auditing standards of the financial statements of The Robert Mondavi Corporation for the three-month periods ended September 30, 1998 or 1997 and, accordingly, we express no opinion thereon or on the financial information filed as part of the Form 10-Q of which this letter is to be an exhibit. Yours very truly, /s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------- PricewaterhouseCoopers LLP San Francisco, CA October 19, 1998 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 0 0 56,915 0 266,456 329,815 318,179 91,722 584,864 72,930 209,556 0 0 91,327 188,963 584,864 71,361 71,361 38,888 38,888 20,027 0 3,305 13,001 5,005 7,996 0 0 0 7,996 .52 .51 Represents Basic EPS, calculated in accordance with SFAS No. 128. Represents Diluted EPS, calculated in accordance with SFAS No. 128.
-----END PRIVACY-ENHANCED MESSAGE-----