-----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, COOrJ5+IClSa6WcH9eT+adx57rw2k5rOBeDJOvFrLSeBCsqqiXjiJ9IIhEJv7tYU VNJlxIz4+OsyIqjFl9Agag== 0000950149-01-500712.txt : 20010516 0000950149-01-500712.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950149-01-500712 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1634441 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 f72618e10-q.txt THE ROBERT MONDAVI CORPORATION FORM 10-Q 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, 2001 --------------------------- 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, 2001, there were issued and outstanding 8,932,453 shares of the issuer's Class A Common Stock and 7,056,217 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
MARCH 31, JUNE 30, 2001 2000 --------- --------- UNAUDITED Current assets: Cash and cash equivalents $ -- $ 3,002 Accounts receivable--trade, net 88,225 77,662 Inventories 386,719 298,487 Prepaid expenses and other current assets 16,950 4,331 --------- --------- Total current assets 491,894 383,482 Property, plant and equipment, net 336,222 312,065 Investments in joint ventures 33,790 32,720 Other assets 11,482 6,676 --------- --------- Total assets $ 873,388 $ 734,943 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Book overdraft $ 3,586 $ -- Notes payable to banks 52,500 19,700 Accounts payable--trade 19,043 24,540 Employee compensation and related costs 18,803 13,725 Other accrued expenses 10,288 7,250 Current portion of long-term debt 15,935 10,102 Deferred income taxes -- 93 --------- --------- Total current liabilities 120,155 75,410 Long-term debt, less current portion 323,089 280,790 Deferred income taxes 29,899 21,850 Deferred executive compensation 4,789 8,575 Other liabilities 4,207 150 --------- --------- Total liabilities 482,139 386,775 --------- --------- 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--8,932,453 and 8,274,235 shares 89,742 83,161 Class B Common Stock, without par value: Authorized--12,000,000 shares; issued and outstanding--7,056,217 and 7,306,012 shares 11,333 11,732 Paid-in capital 10,122 5,780 Retained earnings 281,986 249,105 Accumulated other comprehensive income: Cumulative translation adjustment (1,934) (1,610) --------- --------- 391,249 348,168 --------- --------- Total liabilities and shareholders' equity $ 873,388 $ 734,943 ========= =========
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 NINE MONTHS ENDED MARCH 31, MARCH 31, ----------------------- ------------------------ 2001 2000 2001 2000 -------- -------- -------- --------- Gross revenues $123,573 $104,297 $380,705 $316,863 Less excise taxes 5,584 4,888 17,056 14,392 -------- -------- -------- -------- Net revenues 117,989 99,409 363,649 302,471 Cost of goods sold 60,571 53,391 193,417 161,896 -------- -------- -------- -------- Gross profit 57,418 46,018 170,232 140,575 Selling, general and administrative expenses 37,074 28,701 107,822 85,600 -------- -------- -------- -------- Operating income 20,344 17,317 62,410 54,975 Other income (expense): Interest (6,187) (4,577) (15,425) (11,248) Equity income from joint ventures 244 814 7,343 6,269 Other 56 (44) (863) 2,357 -------- -------- -------- -------- Income before income taxes 14,457 13,510 53,465 52,353 Provision for income taxes 5,566 5,201 20,584 20,156 -------- -------- -------- -------- Net income $ 8,891 $ 8,309 $ 32,881 $ 32,197 ======== ======== ======== ======== Earnings per share-Basic $ .56 $ .53 $ 2.08 $ 2.08 ======== ======== ======== ======== Earnings per share-Diluted $ .54 $ .52 $ 2.02 $ 2.01 ======== ======== ======== ======== Weighted average number of shares outstanding-Basic 15,970 15,556 15,792 15,506 ======== ======== ======== ======== Weighted average number of shares outstanding-Diluted 16,428 16,039 16,288 15,998 ======== ======== ======== =======
See Notes to Consolidated Financial Statements. 3 4 THE ROBERT MONDAVI CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
NINE MONTHS ENDED MARCH 31, ----------------------- 2001 2000 -------- -------- Cash flows from operating activities: Net income $ 32,881 $ 32,197 Adjustments to reconcile net income to net cash used in operating activities: Deferred income taxes 2,413 1,519 Depreciation and amortization 15,844 13,973 Equity income from joint ventures (7,343) (6,269) Other (25) (2,400) Changes in assets and liabilities Accounts receivable--trade (9,906) 13,688 Inventories (68,889) (59,070) Other assets (7,233) (16,541) Accounts payable--trade and accrued expenses 1,755 (7,858) Deferred executive compensation (3,786) 945 Other liabilities 57 (81) -------- -------- Net cash used in operating activities (44,232) (29,897) -------- -------- Cash flows from investing activities: Acquisitions of property, plant and equipment (40,372) (54,116) Proceeds from sale of assets 2,425 4,830 Business acquisition (14,191) -- Distributions from joint ventures 5,232 4,463 Contributions to joint ventures (589) (12,592) -------- -------- Net cash used in investing activities (47,495) (57,415) -------- -------- Cash flows from financing activities: Book overdraft 3,586 4,826 Net additions under notes payable to banks 32,672 37,500 Proceeds from issuance of long-term debt 55,000 50,000 Principal repayments of long-term debt (7,684) (9,820) Proceeds from issuance of Class A Common Stock 255 276 Exercise of Class A Common Stock options 5,927 873 Other (1,031) (887) -------- -------- Net cash provided by financing activities 88,725 82,768 -------- -------- 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 $ -- $ -- ======== ========
4 5 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 March 31, 2001, its results of operations for the three and nine month periods ended March 31, 2001 and 2000 and its cash flows for the nine month periods ended March 31, 2001 and 2000. 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 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:
MARCH 31, JUNE 30, 2001 2000 ---------- -------- UNAUDITED Wine in production $267,362 $186,609 Bottled wine 104,868 92,162 Crop costs and supplies 14,489 19,716 -------- -------- $386,719 $298,487 ======== ========
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 March 31, 2001, was $11,861 of inventory cost step-up remaining from applying purchase accounting to the acquisition of Arrowood. 5 6 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 and nine months ended March 31, 2001 and 2000 was as follows:
UNAUDITED ----------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, ----------------------- ----------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net income $ 8,891 $ 8,309 $ 32,881 $ 32,197 Foreign currency translation adjustment, net of tax 173 (135) (324) 12 -------- -------- -------- -------- Comprehensive income $ 9,064 $ 8,174 $ 32,557 $ 32,209 ======== ======== ======== ========
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 inventory step-up charges, as well as a net gain primarily related to the sale of vineyards in fiscal 2000. THIRD QUARTER OF FISCAL 2001 COMPARED TO THIRD QUARTER OF FISCAL 2000 NET REVENUES Net revenues increased by 18.7%, reflecting a 9.7% increase in sales volume that was driven by the Woodbridge and Robert Mondavi Coastal brands. Net revenues per case increased by 8.2% to $51.86, reflecting price increases, higher retail revenues and revenues from the Golden Vine Winery, which opened during the quarter. COST OF GOODS SOLD Cost of goods sold as reported increased by 13.4%. Adjusted cost of goods sold increased by 11.9%, reflecting increased sales volume combined with a shift in sales mix to wines with higher average costs per case. GROSS PROFIT As a result of the above factors, the reported gross profit percentage was 48.7% compared to 46.3% reported last year. The adjusted gross profit percentage increased to 49.3% from 46.3% last year. OPERATING EXPENSES Operating expenses increased by 29.2% and the ratio of operating expenses to net revenues increased to 31.4% from 28.9% a year ago. These increases were primarily due to increased promotional spending, start-up costs related to the Golden Vine Winery and the addition of operating expenses from recent business acquisitions. 6 7 INTEREST Interest expense increased by 35.2% due to increased average borrowings outstanding associated with facility expansion, business acquisitions and the To-Kalon and Golden Vine Winery projects. EQUITY INCOME FROM JOINT VENTURES Equity income from joint ventures as reported decreased by 70.0% to $0.2 million due mainly to inventory step-up charges related to the Company's investment in Ornellaia and a decrease in equity income from the Company's other foreign joint ventures during the period. Adjusted equity income from joint ventures increased by 8.8% to $1.3 million, reflecting adjusted equity income from Ornellaia that was partially offset by a decrease in equity income from the Company's other foreign joint ventures during the period. 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 $8.9 million, or $0.54 per diluted share, compared to $8.3 million, or $0.52 per diluted share, a year ago. Adjusted net income totaled $10.0 million, or $0.61 per diluted share, compared to $8.5 million, or $0.53 per diluted share, a year ago. FIRST NINE MONTHS OF FISCAL 2001 COMPARED TO FIRST NINE MONTHS OF FISCAL 2000 NET REVENUES Net revenues increased by 20.2%, reflecting a 16.2% increase in sales volume that was driven by the Woodbridge and Robert Mondavi Coastal brands. Net revenues per case increased by 3.4% to $50.53, reflecting price increases, higher retail revenues and revenues from the Golden Vine Winery, which opened during the third quarter of fiscal 2001. COST OF GOODS SOLD Cost of goods sold as reported increased by 19.5%. Adjusted cost of goods sold increased 17.4%, reflecting increased sales volume combined with a shift in sales mix to wines with higher average costs per case. GROSS PROFIT As a result of the above factors, the reported gross profit percentage was 46.8% compared to 46.5% reported last year. The adjusted gross profit percentage increased to 47.7% from 46.5% last year. OPERATING EXPENSES Operating expenses increased by 26.0% and the ratio of operating expenses to net revenues increased to 29.7% from 28.3% a year ago. These increases were primarily due to increased promotional spending, start-up costs related to the Golden Vine Winery and the addition of operating expenses from recent business acquisitions. INTEREST Interest expense increased by 37.1% due to increased average borrowings outstanding associated with facility expansion, business acquisitions and the To-Kalon and Golden Vine Winery projects. EQUITY INCOME FROM JOINT VENTURES Equity income from joint ventures as reported increased by 17.1% to $7.3 million due mainly to improved profitability from the Opus One joint venture that was partially offset by inventory step-up charges related to the Company's investment in Ornellaia. Adjusted equity income from joint ventures increased by 51.6% to $10.0 million, reflecting the Opus One improvement and adjusted equity income from Ornellaia. OTHER "Other" primarily consists of miscellaneous non-operating income and expense items. "Other" as reported includes a $2.5 million net gain primarily related to the sale of vineyards in fiscal 2000. Adjusted "other" expenses totaled $0.9 million compared to $0.2 million last year. 7 8 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 $32.9 million, or $2.02 per diluted share, compared to $32.2 million, or $2.01 per diluted share, a year ago. Adjusted net income totaled $36.6 million, or $2.24 per diluted share, compared to $30.9 million, or $1.93 per diluted share, a year ago. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased by $3.0 million during the first nine months of fiscal 2001 as cash used in investing and operating activities exceeded cash provided by financing activities. Cash used in operations totaled $44.2 million, reflecting an increase in inventories required to support expected future sales volume growth that was 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 $47.5 million, reflecting the Arrowood acquisition, vineyard development and facility expansion and renovation. Cash provided by financing activities totaled $88.7 million, reflecting an increase in borrowings, net of cash, and stock option exercises. 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 $148.0 million. The combined facilities enable the Company to lease certain real property to be constructed or acquired. At March 31, 2001, $76.3 million of the combined facilities had been utilized. 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 20, 2001 and $36.5 million expires on December 22, 2001. The long-term credit lines expire on December 31, 2003. On January 30, 2001, the Company entered into unsecured term loans totaling $55.0 million. The proceeds from these loans were used to pay down credit line borrowings. On April 5, 2001, the Company entered into a $30.0 million unsecured term loan. The proceeds from this loan were used to pay down credit line borrowings. 8 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 6. EXHIBITS AND REPORTS ON FORM 8-K. 1) Exhibits: None. 2) Form 8-K: No reports on Form 8-K were filed during the quarter ended March 31, 2001. 9 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: May 15, 2001 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. 10 -----END PRIVACY-ENHANCED MESSAGE-----