-----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, KRFaQWWzoPdvsEWxwxm1ZMdQ8bt31ORZl7XehXgAfASIZ9voED5USa0h63tUunCI 6C1nkN352lsaWbD+ZCxPQQ== 0001157523-03-000371.txt : 20030214 0001157523-03-000371.hdr.sgml : 20030214 20030214131859 ACCESSION NUMBER: 0001157523-03-000371 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030214 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: 1934 Act SEC FILE NUMBER: 000-21624 FILM NUMBER: 03565390 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 a4338953.txt ROBERT MONDAVI 10-Q - -------------------------------------------------------------------------------- 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, 2002 ------------------------------------------------- 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, 2003, there were issued and outstanding 9,618,152 shares of the issuer's Class A Common Stock and 6,646,734 shares of the issuer's Class B Common Stock. 1
PART I Item 1. Financial Statements. THE ROBERT MONDAVI CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS December 31, June 30, 2002 2002 ---- ---- Unaudited Current assets: Accounts receivable--trade, net $ 94,914 $ 92,555 Inventories 441,949 388,574 Prepaid expenses and other current assets 14,360 12,179 ---------- --------- Total current assets 551,223 493,308 Property, plant and equipment, net 311,464 323,582 Assets held for sale 7,748 - - Investments in joint ventures 28,901 27,220 Other assets 11,062 11,455 ---------- --------- Total assets $ 910,398 $855,565 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Book overdraft $ 3,423 $ 2,734 Notes payable to banks 9,900 4,400 Accounts payable--trade 62,726 23,012 Employee compensation and related costs 13,790 11,044 Other accrued expenses 26,450 21,126 Current portion of long-term debt 9,145 12,568 ---------- --------- Total current liabilities 125,434 74,884 Long-term debt, less current portion 298,810 316,169 Deferred income taxes 26,169 24,039 Deferred executive compensation 6,328 5,657 Other liabilities 3,351 3,537 ---------- --------- Total liabilities 460,092 424,286 ---------- --------- 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--9,615,902 and 9,566,102 shares 94,550 93,827 Class B Common Stock, without par value: Authorized--12,000,000 shares; issued and outstanding--6,646,734 and 6,647,647 shares 10,676 10,677 Paid-in capital 11,302 11,025 Retained earnings 335,907 317,915 Accumulated other comprehensive income (loss): Cumulative translation adjustment (1,812) (1,716) Forward contracts (317) (449) ---------- --------- Total shareholders' equity 450,306 431,279 ---------- --------- Total liabilities and shareholders' equity $ 910,398 $ 855,565 ========== ========= See Notes to Consolidated Financial Statements.
2
THE ROBERT MONDAVI CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share data) Three Months Ended Six Months Ended December 31, December 31, 2002 2001 2002 2001 ---- ---- ---- ---- Revenues $148,288 $137,822 $ 251,748 $ 222,601 Less excise taxes 7,194 6,711 12,048 10,587 --------- --------- --------- --------- Net revenues 141,094 131,111 239,700 212,014 Cost of goods sold 81,047 72,914 138,320 120,319 --------- --------- --------- --------- Gross profit 60,047 58,197 101,380 91,695 Selling, general and administrative expenses 36,716 34,873 66,622 63,614 Special charges 3,110 1,040 3,110 12,240 --------- --------- --------- --------- Operating income 20,221 22,284 31,648 15,841 Other income (expense): Interest (5,377) (5,415) (10,512) (10,563) Equity income from joint ventures 1,074 15 8,395 7,799 Other (304) (482) (972) (636) --------- --------- --------- --------- Income before income taxes 15,614 16,402 28,559 12,441 Provision for income taxes 5,777 6,150 10,567 4,665 --------- --------- --------- --------- Net income $ 9,837 $ 10,252 $ 17,992 $ 7,776 ========= ========= ======== ========= Earnings per share-Basic $ .61 $ .64 $ 1.11 $ .48 ======== ========= ========= ========= Earnings per share-Diluted $ .60 $ .63 $ 1.10 $ .48 ======== ========= ========= ========= Weighted average number of shares outstanding-Basic 16,235 16,040 16,225 16,038 ========= ========= ========= ========= Weighted average number of shares outstanding-Diluted 16,383 16,305 16,372 16,354 ========= ========= ========= =========
See Notes to Consolidated Financial Statements. 3
THE ROBERT MONDAVI CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Six Months Ended December 31, 2002 2001 ---- ---- Cash flows from operating activities: Net income $ 17,992 $ 7,776 Adjustments to reconcile net income to net cash flows from operating activities: Deferred income taxes 188 (1,542) Depreciation and amortization 11,907 11,313 Equity income from joint ventures (8,395) (7,799) Distributions from joint ventures 7,619 7,092 Special charges and asset write-downs 3,110 14,070 Other 1,102 448 Changes in assets and liabilities: Accounts receivable--trade (2,359) 21,992 Inventories (52,457) (82,426) Other assets (651) 3,301 Accounts payable--trade and accrued expenses 48,605 22,325 Deferred executive compensation 671 1,054 Other liabilities (318) (91) ---------- --------- Net cash flows from operating activities 27,014 (2,487) ---------- --------- Cash flows from investing activities: Acquisitions of property, plant and equipment (11,343) (20,142) Proceeds from sale of assets - - 12,327 Contributions to joint ventures (1,468) (1,018) ---------- --------- Net cash flows from investing activities (12,811) (8,833) ---------- --------- Cash flows from financing activities: Book overdraft 689 5,304 Net additions (repayments) under credit lines (6,500) 10,000 Principal repayments of long-term debt (8,782) (10,926) Proceeds from issuance of Class A Common Stock 260 296 Exercise of Class A Common Stock options 462 113 Other (332) (656) ---------- --------- Net cash flows from financing activities (14,203) 4,131 ---------- --------- Net change in cash and cash equivalents - - (7,189) Cash and cash equivalents at the beginning of the period - - 7,189 ---------- --------- Cash and cash equivalents at the end of the period $ - - $ - - ========== =========
See Notes to Consolidated Financial Statements. 4 THE ROBERT MONDAVI CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) NOTE 1 SIGNIFICANT ACCOUNTING POLICIES 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, 2002, its results of operations for the three and six month periods ended December 31, 2002 and 2001 and its cash flows for the six month periods ended December 31, 2002 and 2001. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 for the fiscal year ended June 30, 2002, on file at the Securities and Exchange Commission. Earnings per share Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of Class A and Class B common shares outstanding plus the dilutive effect, if any, of common share equivalents for stock option awards. In computing basic earnings per share for all periods presented, no adjustments have been made to net income (numerator) or weighted-average shares outstanding (denominator). The computation of diluted earnings per share for all periods is identical to the computation of basic earnings per share except that the weighted-average shares outstanding (denominator) has been increased by 148,000 and 265,000, respectively, for the three months ended December 31, 2002 and 2001, and by 147,000 and 316,000, respectively, for the six months ended December 31, 2002 and 2001 to include the dilutive effect of stock options outstanding. Derivative instruments and hedging activities The Company has only a limited involvement with derivative instruments and does not use them for trading purposes. Forward exchange contracts, generally with average maturities of less than one year, are used as protection against the risk that the eventual U.S. dollar cash flows resulting from certain unrecognized firm purchase commitments and forecasted transactions denominated in foreign currencies will be adversely affected by changes in exchange rates. The derivative financial instruments associated with unrecognized firm purchase commitments are designated as fair-value hedges. The derivative financial instruments associated with forecasted transactions are designated as cash-flow hedges. At December 31, 2002, the Company had outstanding forward exchange contracts, hedging primarily Australian purchases of software and forecasted receipts of Canadian dollars and European euros, with notional amounts totaling $12,909. Using exchange rates outstanding as of December 31, 2002, the U.S. dollar equivalent of the contracts totaled $13,430. New accounting pronouncements During January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." Under this new Interpretation, the Company will be required to include in its consolidated financial statements the majority of the $151,392 of assets leased under its master lease facilities during the first quarter of fiscal 2004. The Company is currently evaluating the accounting and financing implications of this new Interpretation. 5 THE ROBERT MONDAVI CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) During December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based Compensation--Transition and Disclosure." SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 requires disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company uses the intrinsic value based method of accounting for stock-based employee compensation in accordance with Accounting Principles Board Opinion No. 25 and its related Interpretations. The Company plans to adopt the new disclosure requirements of SFAS 148 as required during the third quarter of fiscal 2003. During November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This new Interpretation clarifies the accounting and disclosure requirements for certain types of guarantees. The Company plans to complete the adoption of this Interpretation as required during the third quarter of fiscal 2003. The adoption of this Interpretation is not expected to have a material impact on the Company's consolidated financial statements. NOTE 2 INVENTORIES
Inventories consist of the following: December 31, June 30, 2002 2002 ---- ---- Unaudited Wine in production $ 299,668 $ 237,934 Bottled wine 133,736 130,831 Crop costs and supplies 8,545 19,809 ---------- --------- $ 441,949 $ 388,574 ========== =========
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 December 31, 2002 and June 30, 2002, respectively, was $4,324 and $6,234 of inventory cost step-up remaining from applying purchase accounting to the fiscal year 2001 acquisition of Arrowood. NOTE 3 ASSETS HELD FOR SALE During the second quarter of fiscal 2003, the Company completed a strategic business review of its brands and determined that certain of the Company's vineyard assets were no longer expected to fit its long-term grape sourcing needs or meet its long-term financial objectives. Vineyard assets with a combined book value of $47,042 have been identified for potential future sale. These assets are expected to be held and used while the Company develops a plan to sell the assets. The Company believes that the carrying value of these assets is recoverable and it does not exceed fair value, with one exception. As of December 31, 2002, the Company had agreed to sell one of its vineyard properties for an amount lower than its book value, less costs required to sell the property. As a result, the Company recorded an asset impairment charge of $3,110 during the second quarter of fiscal 2003, which was included in special charges in the consolidated statements of income. The sale of this property is expected to be completed by the end of fiscal 2003. 6 THE ROBERT MONDAVI CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) NOTE 4 INVESTMENTS IN JOINT VENTURES Investments in joint ventures are summarized below. The Company's interest in income and losses for each joint venture is stated within parentheses.
December 31, June 30, 2002 2002 ---- ---- Unaudited Opus One (50%) $ 12,240 $ 12,680 Chile (50%) 6,268 5,564 Italy (50%) 5,894 4,918 Ornellaia (50%) 2,447 2,844 Australia (50%) 2,051 823 Other 1 391 -------- --------- $ 28,901 $ 27,220 ========= =========
NOTE 5 OPERATIONAL CHANGES During the first quarter of fiscal 2002, the Company implemented a number of operational changes aimed at improving its competitiveness in the slowing economy. These included changes in the Company's Disney California Adventure project and the write-down of certain inventories and fixed assets due to lowered volume growth expectations. The Company changed from an operator to a sponsor role at Disney's California Adventure. With this change, the Company eliminated any further operational risk associated with the project while it continues a business relationship with Disney and maintains a presence at the theme park. As a result of this change, the Company recorded special charges totaling $12,240 during the first six months of fiscal 2002, primarily reflecting fixed asset write-offs, employee separation expenses and lease cancellation fees. During the first quarter of fiscal 2002, the Company also revised its volume growth expectations for the fiscal year to reflect the continued economic slowdown and a significant decrease in on-premise (i.e., hotel and restaurant) sales. As a result of these lowered volume growth expectations, the Company recorded $3,750 in inventory and fixed asset write-downs during the first quarter of fiscal 2002 that were classified as cost of goods sold. NOTE 6 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 derivative financial instruments designated as cash-flow hedges. Comprehensive income for the three and six months ended December 31, 2002 and 2001 was as follows:
Unaudited Three Months Ended Six Months Ended December 31, December 31, 2002 2001 2002 2001 ---- ---- ---- ---- Net income $ 9,837 $ 10,252 $ 17,992 $ 7,776 Foreign currency translation adjustment, net of tax 355 (193) (96) (321) Forward contracts, net of tax (19) (58) 132 (58) --------- -------- -------- --------- Comprehensive income $ 10,173 $ 10,001 $ 18,028 $ 7,397 ========= ======== ======== =========
7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. INTRODUCTION During the second quarter of fiscal 2003, the Company recorded $3.1 million in special charges related to the impairment of certain vineyards assets held for sale. During fiscal 2002, the Company recorded $12.2 million in special charges related to operational changes in its Disney California Adventure project and $3.8 million of inventory and fixed asset write-downs as a result of lowering its sales volume growth projections for the fiscal year. The adjusted figures discussed throughout this report exclude the special charges and asset write-downs, as well as inventory step-up charges associated with business acquisitions for all periods presented. The Company has included these adjusted figures in its discussion and analysis of financial condition and results of operations to provide a clearer picture of its ongoing operating performance as compared to its reported results. The adjusted figures should not be considered an alternative to financial statements prepared under accounting principles generally accepted in the United States of America. FINANCIAL HIGHLIGHTS (In thousands, except per share data)
Three Months Ended December 31, Reported Adjusted ------------------------------------- ------------------------------------- 2002 2001 2002 2001 ----------------- ----------------- ---------------- ----------------- Cases sold 3,031 2,823 3,031 2,823 Net revenues $ 141,094 $ 131,111 $ 141,094 $ 131,111 Cost of goods sold 81,047 72,914 79,847 71,974 Gross profit 60,047 58,197 61,247 59,137 Gross profit % 42.6% 44.4% 43.4% 45.1% Selling, general & administrative exp. 36,716 34,873 36,716 34,873 Special charges 3,110 1,040 - - - - Operating income 20,221 22,284 24,531 24,264 Other income (expense): Interest (5,377) (5,415) (5,377) (5,415) Equity income from joint ventures 1,074 15 1,296 210 Other (304) (482) (304) (482) Income before income taxes 15,614 16,402 20,146 18,577 Provision for income taxes 5,777 6,150 7,454 6,966 Net income 9,837 10,252 12,692 11,611 Earnings per share - Diluted $ .60 $ .63 $ .77 $ .71 Six Months Ended December 31, Reported Adjusted ------------------------------------- ------------------------------------ 2002 2001 2002 2001 ----------------- ----------------- ---------------- ----------------- Cases sold 5,120 4,492 5,120 4,492 Net revenues $ 239,700 $ 212,014 $ 239,700 $ 212,014 Cost of goods sold 138,320 120,319 136,410 114,790 Gross profit 101,380 91,695 103,290 97,224 Gross profit % 42.3% 43.2% 43.1% 45.9% Selling, general & administrative exp. 66,622 63,614 66,622 63,614 Special charges 3,110 12,240 - - - - Operating income 31,648 15,841 36,668 33,610 Other income (expense): Interest (10,512) (10,563) (10,512) (10,563) Equity income from joint ventures 8,395 7,799 10,007 9,297 Other (972) (636) (972) (636) Income before income taxes 28,559 12,441 35,191 31,708 Provision for income taxes 10,567 4,665 13,021 11,891 Net income 17,992 7,776 22,170 19,817 Earnings per share - Diluted $ 1.10 $ .48 $ 1.35 $ 1.21
8 RESULTS OF OPERATIONS Second Quarter of Fiscal 2003 Compared to Second Quarter of Fiscal 2002 Net Revenues Net revenues increased by 7.6%, reflecting a 7.4% increase in sales volume. The sales volume increase was primarily driven by the Company's popular and super premium wines, as luxury wine sales continue to improve at a slower rate than the other categories. Sales volume of the Company's wines grew at a slower rate than last quarter due to price reductions taken by competing brands and due to the introduction of significantly lower priced wines sourced from the depressed bulk wine market. Cost of Goods Sold Cost of goods sold as reported increased by 11.2%, including inventory step-up charges associated with the Arrowood acquisition of $1.2 million and $0.9 million, respectively, for the second quarter of fiscal 2003 and 2002. Adjusted cost of goods sold increased by 11.0%. The increase in both reported and adjusted cost of goods sold reflects increased sales volume and the negative impact of balancing inventories through bulk wine sales and by utilizing higher cost surplus wines in the Company's popular and super premium brands. Gross Profit As a result of the above factors, the reported gross profit percentage was 42.6% compared to 44.4% reported last year. The adjusted gross profit percentage was 43.4% compared to 45.1% last year. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by 5.3%, reflecting increased advertising expenses and higher costs associated with changes in the Company's sales organization. The ratio of selling, general and administrative expenses to net revenues decreased to 26.0% from 26.6% a year ago, reflecting the favorable impact of sales volume leverage and cost cutting efforts. Special Charges During the second quarter of fiscal 2003, the Company recorded $3.1 million in special charges related to the impairment of certain vineyard assets as a result of its decision to sell one of its vineyard properties that was no longer expected to meet its long-term financial objectives, nor fit its long-term grape sourcing requirements. During the second quarter of fiscal 2002, the Company recorded $1.0 million in special charges related primarily to employee separation expenses associated with operational changes made in the Disney California Adventure project at the end of the first quarter of fiscal 2002. Interest Interest expense was essentially unchanged from the prior year, despite a decrease in average borrowings outstanding, due to a decrease in capitalized interest resulting from the completion of certain capital and vineyard development projects. Equity Income from Joint Ventures Equity income from joint ventures as reported included $0.2 million of inventory step-up associated with the Ornellaia acquisition for both the second quarter of fiscal 2003 and 2002. The increase in both reported and adjusted equity income from joint ventures was primarily due to improved income from Opus One and the Chilean joint venture during the period. The improvement in income from Opus One was mainly due to a difference in the timing of wine shipments. The improvement in income from Chile was mainly due to cost reductions implemented at the joint venture level. Provision for Income Taxes The Company's effective tax rate was 37.0% compared to 37.5% last year. The lower effective tax rate was primarily the result of an increase in certain manufacturing tax credits. Net Income and Earnings Per Share As a result of the above factors, reported net income totaled $9.8 million, or $0.60 per diluted share, compared to $10.3 million, or $0.63 per diluted share, a year ago. Adjusted net income totaled $12.7 million, or $0.77 per diluted share, compared to $11.6 million, or $0.71 per diluted share, a year ago. 9 First Six Months of Fiscal 2003 Compared to the First Six Months of Fiscal 2002 Net Revenues Net revenues increased by 13.1%, reflecting a 14.0% increase in sales volume that was partially offset by a 0.8% decrease in net revenues per case. Prior year net revenues and sales volume reflected the negative impact of a sharp decline in the travel and entertainment sectors that began during September 2001. The sales volume increase was primarily driven by the Company's popular and super premium wines, as luxury wine sales continue to improve at a slower rate than the other categories. The shift in sales mix combined with higher promotional spending per case contributed to the decrease in net revenues per case. Cost of Goods Sold Cost of goods sold as reported increased by 15.0%, including inventory step-up charges associated with the Arrowood acquisition of $1.9 million and $1.8 million, respectively, for the first six months of fiscal 2003 and 2002, as well as inventory and fixed asset write-downs totaling $3.8 million during the first six months of fiscal 2002. Adjusted cost of goods sold increased by 18.8%. The increase in both reported and adjusted cost of goods sold reflects increased sales volume and the negative impact of balancing inventories through bulk wine sales and by utilizing higher cost surplus wines in the Company's popular and super premium brands. Gross Profit As a result of the above factors, the reported gross profit percentage was 42.3% compared to 43.2% reported last year. The adjusted gross profit percentage was 43.1% compared to 45.9% last year. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by 4.7%, reflecting increased advertising expenses and higher costs associated with changes in the Company's sales organization that were partially offset by the elimination of operating expenses associated with the Disney California Adventure project. The ratio of selling, general and administrative expenses to net revenues decreased to 27.8% from 30.0% a year ago, reflecting the favorable impact of sales volume leverage and cost cutting efforts. Special Charges As discussed earlier, the Company recorded $3.1 million in special charges related to the impairment of certain vineyard assets held for sale during the second quarter of fiscal 2003. During the first quarter of fiscal 2002, the Company changed from an operator to a sponsor role at Disney's California Adventure. With this change, the Company eliminated any further operational risk associated with the project while it continues a business relationship with Disney and maintains a presence at the theme park. As a result of this change, the Company recorded special charges totaling $12.2 million during the first six months of fiscal 2002, primarily reflecting fixed asset write-offs, employee separation expenses and lease cancellation fees. Interest Interest expense was essentially unchanged from the prior year, despite decreases in the Company's average interest rate and average borrowings outstanding, due to a decrease in capitalized interest resulting from the completion of certain capital and vineyard development projects. Equity Income from Joint Ventures Equity income from joint ventures as reported included $1.6 million and $1.5 million, respectively, of inventory step-up associated with the Ornellaia acquisition for the first six months of fiscal 2003 and 2002. The increase in both reported and adjusted equity income from joint ventures was primarily due to improved income from Ornellaia and the Chilean joint venture during the period. The improvement in income from Ornellaia was mainly due to a difference in the timing of wine shipments. The improvement in income from Chile was mainly due to cost reductions implemented at the joint venture level. Provision for Income Taxes The Company's effective tax rate was 37.0% compared to 37.5% last year. The lower effective tax rate was primarily the result of an increase in certain manufacturing tax credits. Net Income and Earnings Per Share As a result of the above factors, reported net income totaled $18.0 million, or $1.10 per diluted share, compared to $7.8 million, or $0.48 per diluted share, a year ago. Adjusted net income totaled $22.2 million, or $1.35 per diluted share, compared to $19.8 million, or $1.21 per diluted share, a year ago. 10 Liquidity and Capital Resources The Company had a book overdraft, representing the float on outstanding checks, of $3.4 million at December 31, 2002, compared to a book overdraft of $2.7 million at June 30, 2002. Cash provided by operations totaled $27.0 million, reflecting net income of $33.0 million (before depreciation, amortization, special charges and asset write-downs) and seasonal increases in inventories and accounts payable to growers. Cash used in investing activities totaled $12.8 million, reflecting purchases of production equipment and vineyard development costs. Cash used in financing activities totaled $14.2 million, primarily reflecting net repayments of debt. The Company maintains master lease facilities that provide the capacity to fund up to $186.7 million, of which $151.4 million had been utilized as of December 31, 2002. The facilities enable the Company to lease certain real property and equipment to be constructed or acquired. The leases are classified as operating leases and they have initial terms of three to seven years, after a construction period, with options to renew. The Company may, at its option, purchase the property under lease during or at the end of the lease term. If the Company does not exercise the purchase option, the Company will guarantee a residual value of the property under lease, which was approximately $130.0 million as of December 31, 2002. The assets leased under these facilities have historically been included in the financial covenants of the Company's debt agreements and in the evaluation of the Company's creditworthiness by its banks. The Company has unsecured long-term credit lines that have maximum credit availability of $150.0 million and expire on December 14, 2004. The Company had $25.0 million outstanding under its long-term credit lines as of December 31, 2002. The Company also has the ability to borrow up to $35.0 million under an uncommitted credit facility with a bank. The Company may request advances under this credit facility, and if approved by the bank, the advance must be repaid in no more than 180 days from the date of the advance. The Company had $9.9 million outstanding under this credit facility as of December 31, 2002. NEW ACCOUNTING PRONOUNCEMENTS During January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." Under this new Interpretation, the Company will be required to include in its consolidated financial statements the majority of the $151.4 million of assets leased under its master lease facilities during the first quarter of fiscal 2004. The Company is currently evaluating the accounting and financing implications of this new Interpretation. During December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based Compensation--Transition and Disclosure." SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 requires disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company uses the intrinsic value based method of accounting for stock-based employee compensation in accordance with Accounting Principles Board Opinion No. 25 and its related Interpretations. The Company plans to adopt the new disclosure requirements of SFAS 148 as required during the third quarter of fiscal 2003. During November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This new Interpretation clarifies the accounting and disclosure requirements for certain types of guarantees. The Company plans to complete the adoption of this Interpretation as required during the third quarter of fiscal 2003. The adoption of this Interpretation is not expected to have a material impact on the Company's consolidated financial statements. 11 Item 4. Controls and Procedures. Included below in this report are the Certifications by the Chief Executive Officer and Chief Financial Officer required by the instructions to SEC Form 10-Q. In order to provide their certifications the CEO and the CFO have reviewed, as of January 22, 2003, the effectiveness of the Company's disclosure controls and procedures. These are the controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits to the SEC under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. They include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, as appropriate to allow timely disclosure decisions regarding required disclosure. Based on their review, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective for the foregoing purposes. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation. 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, the results of its operations or its cash flows. Item 4. Submission of Matters to a Vote of Security Holders. The Company's Annual Meeting of Shareholders was held on November 8, 2002, at the Napa Valley Marriott, Napa, California. Three matters were submitted to a vote of shareholders: election of directors; ratification of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending June 30, 2003; and an amendment of the 1993 Equity Incentive Plan to extend the term of the plan by ten years to February 25, 2013. Philip Greer, Anthony Greener and Bartlett Rhoades were nominated as Class A directors. 7,913,321 Class A shares were voted for Mr. Greer and 305,306 shares were withheld. 7,822,284 Class A shares were voted for Mr. Greener and 396,343 shares were withheld. 7,821,284 Class A shares were voted for Mr. Rhoades and 397,343 shares were withheld. Accordingly, Mssrs. Greer, Greener and Rhoades were re-elected as Class A directors. Robert G. Mondavi, R. Michael Mondavi, Marcia Mondavi Borger, Timothy J. Mondavi, Frank E. Farella, Gregory M. Evans, John M. Thompson and Adrian Bellamy were nominated as Class B directors. 6,647,647 Class B shares were voted for each of them. Accordingly, each of the Class B nominees was re-elected to the Board. 74,358,087 votes were cast in favor of the ratification of PricewaterhouseCoopers LLP, 330,865 votes were cast against and 6,144 votes abstained. Accordingly, the selection of PricewaterhouseCoopers LLP as independent auditors was ratified. 68,913,302 votes were cast in favor of the ratification of the amendment to the 1993 Equity Incentive Plan, 3,984,108 votes were cast against and 18,101 votes abstained. Accordingly, the amendment of the plan was adopted as proposed. Item 6. Exhibits and Reports on Form 8-K. 1) Exhibits: 10.55 Amended and Restated 1993 Equity Incentive Plan 2) Form 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 2002. 12 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, 2003 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, anticipated future investment in vineyards and other capital projects, the premium wine grape market and the premium wine industry generally. Actual results may differ materially from the Company's present expectations. Among other things, a soft economy, a downturn in the travel and entertainment sector, reduced consumer spending, or changes in consumer preferences could reduce demand for the Company's wines. Similarly, increased competition or changes in tourism to our California properties could affect the Company's volume and revenue growth outlook. The supply and price of grapes, the Company's most important raw material, are beyond the Company's control. A shortage of grapes might constrict the supply of wine available for sale and cause higher grape costs that put more pressure on gross profit margins. A surplus of grapes might allow for greater sales and lower grape costs, but it might also result in more competition and pressure on selling prices or marketing spending. 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, 2002, 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. 13 CERTIFICATION I, GREGORY M. EVANS, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Robert Mondavi Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 ----------------------- /s/ GREGORY M. EVANS ------------------------------------ Gregory M. Evans President / CEO 14 CERTIFICATION I, HENRY J. SALVO, JR., certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Robert Mondavi Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 ------------------------- /s/ HENRY J. SALVO, JR. ------------------------------------ Henry J. Salvo, Jr. Executive Vice President / CFO 15 EX-10.55 3 a4338953_exhibita.txt EXHIBIT 10.55 ROBERT MONDAVI EXHIBIT A EXHIBIT A THE ROBERT MONDAVI CORPORATION AMENDED AND RESTATED 1993 EQUITY INCENTIVE PLAN 1. PURPOSE. (a) The purpose of this Plan is to provide a means by which selected key Employees of and Consultants to the Company and its Affiliates may be given an opportunity to benefit from increases in value of the stock of the Company through the granting of Stock Awards including (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Performance Grants, (iv) Stock Bonuses and (v) Restricted Stock or Restricted Stock Units, all as defined below. (b) The Company, by means of the Plan, seeks to retain the services of persons who are now Employees of or Consultants to the Company or its Affiliates, to secure and retain the services of new Employees and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. (c) In the discretion of the Committee to which responsibility for administration of the Plan is delegated pursuant to Section 3, an Employee or Consultant may be granted any Stock Award permitted under the provisions of the Plan, and more than one Stock Award may be granted to a participant. Stock Awards may be granted as alternatives to or replacements of Stock Awards outstanding under the Plan or any other awards outstanding under another plan or arrangement of the Company or an Affiliate. All Stock Awards which are granted as Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. 2. DEFINITIONS. (a) "Affiliate" means any parent corporation, subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code or a partnership, joint venture or other entity in which the Company owns a substantial equity interest. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means the Compensation Committee of the Board of Directors or another committee appointed by the Board in accordance with subsection 3(c) of the Plan. (e) "Company" means The Robert Mondavi Corporation, a California corporation. (f) "Consultant" means any person, including an advisor, engaged by the Company or an Affiliate to render services and who is compensated for such services, provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors. (g) "Continuous Status as an Employee or Consultant" the employment or the relationship as a Consultant is not interrupted or terminated. The Committee, in its sole discretion, may determine whether Continuous Status as an Employee or Consultant shall be considered interrupted in the case of (i) any approved leave of absence, including sick leave, military leave, or any other personal leave, or (ii) transfers between locations of the Company or between the Company and its Affiliates or their successors. (h) "Director" means a member of the Board. (i) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code. (j) "Employee" means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (k) "Exchange Act" means the Securities and Exchange Act of 1934, as amended from time to time. (l) "Fair Market Value" means, as of any date, the value of the Company's Class A Common Stock determined as follows: (1) Where there exists a public market for the Class A Common Stock, the Fair Market Value shall be (A) the closing price for a share of Class A Common Stock on the date of the determination (or, if no closing price was reported on that date, on the last trading date on which a closing price was reported) on the stock exchange determined by the Committee to be the primary market for the Class A Common Stock or the Nasdaq National Market, whichever is applicable or (B) if the Class A Common Stock is not traded on any such exchange or national market system, the average of the closing bid and asked prices of a share of Class A Common Stock on the Nasdaq Small Cap Market on the date of the determination (or, if no such prices were reported on that date, on the last date on which such prices were reported), in each case, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or (2) In the absence of an established market for the Class A Common Stock of the type described in (1), above, the Fair Market Value thereof shall be determined by the Committee in good faith. (m) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (n) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. (o) "Officer" means a person who is an "executive officer" of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (p) "Option" means a stock option granted pursuant to the Plan. (q) "Option Agreement" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (r) "Optioned Shares" means that number of shares of Class A. Common Stock of the Company subject to an Option. (s) "Optionee" means an Employee or Consultant who holds an outstanding Option. (t) "Performance Criteria" means the various business criteria set forth in Section 8(b). (u) "Performance Grant" means a grant of shares of Class A Common Stock or of a right to receive shares of Class A Common Stock (or their cash equivalent or a combination of both) based on such performance goals, factors or other conditions, restrictions or contingencies as may be fixed by the Committee and as set forth herein. (v) "Plan" means this 1993 Equity Incentive Plan. (w) "Restricted Stock" and "Restricted Stock Units" means Optioned Shares awarded and held subject to the restrictions set forth in Section 9, and rights to receive Restricted Stock, respectively. In lieu of Restricted Stock, the Company may grant Restricted Stock Units. (x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3 as in effect when discretion is being exercised with respect to the Plan. (y) "Stock Appreciation Right" or "SAR" means the right of a participant to receive, in cash, Class A Common Stock or Optioned Shares, the excess of (A) the Fair Market Value of a specified number of shares of Class A Common Stock at the time of exercise, over (B) an exercise price established by the Committee. (z) "Stock Award" means any right granted under the Plan, including any Option, Stock Appreciation Right, Performance Grant, any Stock Bonus, an award of Restricted Stock or Restricted Stock Units, and any other incentive-based awards adopted pursuant to Section 15 of this Plan. (aa) "Stock Award Agreement" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. (bb) "Stock Bonus" means current or deferred Optioned Shares granted pursuant to Section 9. 3. ADMINISTRATION. (a) The Plan shall be administered by a Committee, unless the Board, in its discretion, assumes administration of the Plan, whereupon the Board shall have all powers herein conferred on the Committee. (b) The Committee shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (1) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; the provisions of each such Stock Award (which need not be identical); and the number of shares with respect to which Stock Awards shall be granted to each such person. The maximum number of Optioned Shares that may be covered by Options, Stock Appreciation Rights, Performance Grants, Stock Bonuses and Restricted Stock granted to any one individual shall be 100,000 shares during any single calendar year. (2) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (3) Generally, to exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company. (c) The Committee shall consist of not fewer than two (2) members of the Board. The Committee's powers enumerated above shall be subject to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. (d) All judgments, determinations, and actions of every kind and nature with respect to the Plan and its administration undertaken by the Committee or the Board shall be made in the sole discretion of the Committee or Board as the case may be. 4. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of Section 14 below, the maximum number of Optioned Shares that may be issued to participants and their beneficiaries under the Plan shall not exceed in the aggregate two million five hundred eighty five thousand two hundred ninety four (2,585,294). If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the Optioned Shares not acquired shall revert to and again become available for issuance under the Plan. In the event of an exercise of an SAR for cash, or payment of cash for Restricted Stock Units, no Optioned Shares shall be deemed to have been utilized. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5. ELIGIBILITY. (a) Incentive Stock Options may be granted only to key Employees. Stock Awards other than Incentive Stock Options may be granted only to key Employees or Consultants. (b) No person shall be eligible for the grant of an Incentive Stock Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates, unless the exercise price of such Incentive Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of such stock at the date of grant and the Incentive Stock Option is not exercisable after the expiration of five (5) years from the date of grant 6. OPTION PROVISIONS. An Option represents the right to purchase a specified number of shares during a specified period at a price per share that is no less than that required by Section 6(b). Each Option shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions: (a) No Option shall be exercisable after the expiration of ten (10) years from the date it was granted. (b) The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. The exercise price of each Nonstatutory Stock Option shall be not less than fifty percent (50%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. The foregoing not withstanding, the Committee may provide that the date of grant of any Nonstatutory Stock Option is the date on which the Optionee was hired or promoted (or similar event) if the grant of the Option occurs not more than 90 days after the date of such hiring, promotion or other event. The exercise price of each Option shall be specified in the Option Agreement. (c) The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) as determined by the Committee (and, in the case of an Incentive Stock Option, determined at the time of grant), (A) by delivery to the Company (including by attestation) of other Class A Common Stock of the Company (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the shares of Class A Common Stock used to pay the exercise price unless otherwise determined by the Committee), (B) according to a deferred payment or other arrangement with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d) (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the payment of the exercise price unless otherwise determined by the Committee), (C) by cashless exercise methods which are permitted by law, including, without limitation, methods whereby a broker sells the Optioned Shares to which the exercise relates or holds them as collateral for a margin loan, delivers the Option Price to the Company, and delivers the remaining proceeds to the Optionee (and in connection therewith, the Company may establish a cashless exercise program including a program where the commissions on the sale of Optioned Shares to which the exercise relates are paid by the Company), or (D) in any other form of legal consideration that may be acceptable to the Committee. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid (i) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (ii) an accounting compensation charge to the Company. (d) Except as may be permitted by the Committee in any particular Option Agreement, an Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person. (e) The total number of Optioned Shares may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. During the remainder of the term of the Option (if its term extends beyond the end of the installment periods), the Option may be exercised from time to time with respect to any Optioned Shares then remaining subject to the Option. The provisions of this subsection 6(e) are subject to any Option provisions in the Option Agreement governing the minimum number of shares as to which an Option may be exercised. (f) In the event an Optionee's Continuous Status as an Employee or Consultant terminates (other than upon Disability or death), the Optionee may exercise his or her Option, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). (g) In the event an Optionee's Continuous Status as an Employee or Consultant terminates as a result of Disability, the Optionee may exercise his or her Option, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). (h) In the event an Optionee's Continuous Status as an Employee or Consultant terminates as a result of death, the Option may be exercised, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Options by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the time of death. (i) The Option Agreement may, but need not, include a provision whereby the Optionee may elect at any time while an Employee or Consultant to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Any unvested shares so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Committee determines to be appropriate. 7. STOCK APPRECIATION RIGHTS ( "SARs"). (a) A Stock Appreciation Right or SAR is a right to receive a payment, in cash, Class A Common Stock, Optioned Shares or a combination of the foregoing, equal to the excess of the Fair Market Value at time of exercise of a specified number of shares over the aggregate exercise price of the SARs being exercised. The aggregate exercise price of SARs shall not be less than fifty percent (50%) of the Fair Market Value of the specified number of shares subject to the SARs. Subject to the other applicable provisions of the Plan, the Committee shall have the authority to grant SARs to a Plan participant either separately or in tandem with other Stock Awards. The exercise of a tandem Stock Award shall result in an immediate cancellation of its corresponding SAR, and the exercise of a tandem SAR shall cause an immediate cancellation of its corresponding Stock Award. SARs shall be subject to such other terms and conditions as the Committee may specify. (b) Upon the exercise of an SAR, the participant shall be entitled to receive an amount equal to the difference between the Fair Market Value of a share of Class A Common Stock of the Company on the date of exercise and the exercise price of the SAR. The Committee shall decide whether such payment shall be in cash, Class A Common Stock, Optioned Shares or in a combination thereof. 8. PERFORMANCE GRANTS. (a) A Performance Grant is a grant, subject to the attainment of the Performance Criteria, of shares of stock or of the right to receive shares of stock (or their cash equivalent or a combination of both) in the future. Subject to the other applicable provisions of the Plan, Performance Grants may be awarded to Employees or Consultants at any time and from time to time as determined by the Committee. The Committee shall have complete discretion in determining the size and composition of Performance Grants so issued to a participant and the appropriate period over which performance is to be measured ("performance cycle"). (b) The value of each Performance Grant may be fixed or it may be permitted to fluctuate based on the Performance Criteria selected by the Committee. The Committee shall establish Performance Criteria that, depending on the extent to which they are met, will determine the ultimate value of the Performance Grant or the portion of such Performance Grant earned by participants, or both. The Committee shall establish performance goals and objectives for each performance cycle and shall identify one or more of the following business criteria or objectives that is to be monitored during the performance cycle in determining the Performance Grant: return on assets, operating ratios, cash flow, shareholder return, revenue growth, net income, earnings per share, debt reduction, return on investment, revenue and attainment of budgets. (c) The Committee shall determine the portion of each Performance Grant that is earned by a participant on the basis of the achievement of the Performance Criteria during the performance cycle in relation to the performance goals for such cycle. The earned portion of a Performance Grant may be paid out in restricted or non-restricted shares, cash or a combination of both as the Committee may determine. (d) A participant must be an Employee or Consultant of the Company at the end of the performance cycle in order to be entitled to payment of a Performance Grant issued in respect of such cycle; provided, however, that, except as otherwise determined by the Committee, if a participant ceases to be an Employee or Consultant of the Company upon the occurrence of his or her death, retirement, Disability or other reasons determined by the Committee prior to the end of the performance cycle, the participant shall earn a proportionate portion of the Performance Grant based upon the elapsed portion of the performance cycle and the Company's performance over that portion of such cycle. 9. STOCK BONUSES AND RESTRICTED STOCK. The Committee may at any time and from time to time award a Stock Bonus, Restricted Stock or Restricted Stock Units to such participants and in such amounts as it determines. An award of Restricted Stock or Restricted Stock Units may specify, in the Stock Award Agreement, the applicable restrictions, if any, on the shares subject thereto, the duration of such restrictions, and the time or times at which the restrictions shall lapse with respect to all or part of the shares that are part of the award. Each Stock Bonus or Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. The terms and conditions of Stock Bonuses or grants of Restricted Stock or Restricted Stock Units may change from time to time, and the terms and conditions of separate agreements need not be identical, but each Stock Bonus or Stock Award Agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate: (a) The Committee may determine that eligible participants in the Plan may be awarded Optioned Stock pursuant to a Stock Bonus in consideration for past services actually rendered to the Company or for its benefit. (b) Except as permitted by the Committee in any particular Stock Award Agreement, no rights under a Stock Bonus or Stock Award Agreement shall be transferable except by will or by the laws of descent and distribution so long as Optioned Shares awarded under such agreement remain subject to the terms of the agreement. (c) The purchase price of Optioned Shares acquired pursuant to a Stock Award Agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Committee, according to a deferred payment or other arrangement with the person to whom the stock is sold; or (iii) in any other form of legal consideration that may be acceptable to the Committee in its discretion. 10. CANCELLATION AND RE-GRANT OF OPTIONS. The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected holders of Options (i) the repricing of any outstanding Options under the Plan and/or (ii) the cancellation of any outstanding Options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of stock but having an exercise price per share of not less than fifty percent (50%) of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in the case of an Incentive Stock Option or, in the case of a 10% stockholder (as described in subsection 5(c)), not less than one hundred ten percent (110%) of the Fair Market Value) per share of stock on the new grant date. 11. COVENANTS OF THE COMPANY. (a) During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act of 1933 (the "Securities Act") either the Plan, any Stock Awards or any stock issued or issuable pursuant to any such Stock Awards. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of Stock Awards unless and until such authority is obtained. 12. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company. 13. MISCELLANEOUS. (a) The Committee shall have the power to accelerate the time at which a Stock Award may first be exercised, or the time during which a Stock Award or any part thereof will vest, notwithstanding the vesting conditions of the original grant. (b) Neither a Plan participant nor any person to whom a Stock Award may be transferred under the applicable restrictions of the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Option pursuant to its terms or the reservations, conditions and contingencies applicable to each other form of Stock Award shall have been satisfied. (c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant hereto shall confer upon any Employee, Consultant, Optionee or other holder of Stock Awards any right to continue in the employ or service of the Company or any Affiliate or shall affect the right of the Company or any Affiliate to terminate the employment or relationship as a Consultant of any Employee, Consultant, Optionee or other holder of Stock Awards with or without cause. (d) To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options granted after 1986 are exercisable for the first time by any Optionee during any calendar year under all plans of the Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. (e) The Company may require any recipient of a Stock Award, or any person to whom a Stock Award is transferred in accordance with the applicable terms of the Plan, as a condition of exercising any such Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award, and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of or acquisition of stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. (f) To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise of or acquisition of stock under a Stock Award by any of the following means or by a combination of such means as determined by the Committee in its discretion: (1) withholding from compensation; (2) tendering a cash payment; (3) authorizing the Company to withhold shares from the shares of Class A Common Stock otherwise issuable to the participant as a result of the exercise of or acquisition of stock under the Stock Award (but only the number of shares sufficient to satisfy the minimum tax withholding obligation of the Company); or (4) delivering to the Company owned and unencumbered shares of the Class A Common Stock of the Company owned by such person. 14. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan or subject to any Stock Award (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Stock Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding Stock Awards. (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the company is the surviving corporation but the shares of the Company's Class A Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then at the sole discretion of the Committee and to the extent permitted by applicable law: (i) any surviving corporation shall assume any Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, (ii) the time during which such Stock Award may be exercised shall be accelerated and the Stock Awards terminated if not exercised prior to such event, or (iii) such Stock Awards shall continue in full force and effect. 15. AMENDMENT OF THE PLAN. (a) The Board at any time, and from time to time, may amend the Plan in any manner. However, except as provided in Section 14 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the shareholders of the Company within twelve (12) months before or after the adoption of the amendment where the amendment will: (1) Increase the number of shares reserved for Stock Awards under the Plan; (2) Modify the requirements as to eligibility for participation in the Plan (to the extent such modification requires shareholder approval in order for the Plan to satisfy the requirements of Section 162(m) or Section 422 of the Code); or (3) Modify the Plan in any other way if such modification requires shareholder approval in order for the Plan to satisfy the requirements of Section 162(m) or Section 422 of the Code, of Rule 16b-3 under the Exchange Act, or of the Nasdaq National Market or any exchange on which the Company's shares may be listed. (b) It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees or Consultants with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith; provided, however, shares covered by any Stock Awards in excess of the maximum number of Optioned Shares provided for in Section 4(a) above shall be deemed awarded on the date of the Initial Stock Award if shareholders approve the increase pursuant to this Section 15. (c) Rights and obligations under any Stock Award granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 16. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated the Plan shall terminate on February 25, 2013. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. EX-99 4 a4338953_ex99.txt ROBERT MONDAVI EXHIBIT 99 Exhibit 99 February 14, 2003 Securities and Exchange Commission 450 Fifth Street, N.W Washington, D.C. 20549 Ladies and Gentlemen: The certification set forth below is being submitted to the Securities and Exchange Commission solely for the purpose of complying with Section 1350 of Chapter 63 of Title 18 of the United States Code. This certification is not to be deemed filed pursuant to the Securities Exchange Act of 1934 and does not constitute a part of the Quarterly Report on Form 10-Q (the "Report) accompanying this letter. Gregory M. Evans, the Chief Executive Officer and Henry J. Salvo, Jr., the Chief Financial Officer of The Robert Mondavi Corporation, each certifies that, to the best of his knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Robert Mondavi Corporation. /s/ GREGORY M. EVANS ------------------------------------ Gregory M. Evans Chief Executive Officer /s/ HENRY J. SALVO, JR. ------------------------------------ Henry J. Salvo, Jr. Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----