Exhibit 99.1
Unaudited Pro Forma Combined Financial Information |
The following tables show unaudited combined financial information for The Robert Mondavi Corporation, a Delaware Corporation, referred herein as Mondavi Delaware, on a pro forma basis, giving effect to (1) the plan and agreement of merger, and the merger contemplated thereby, in which, subject to shareholder approval, each share of Class A common stock of the Company will be converted into one share of Mondavi Delaware, the Company’s newly formed wholly-owned subsidiary, each share of Class B common stock of the Company will be converted into 1.165 shares of Mondavi Delaware and the state of incorporation of the Company will be changed from California to Delaware and (2) the Company’s plan to divest its luxury brands and investments and certain non-strategic assets, as approved by the board of directors on September 14, 2004, referred to herein as the September 14, 2004 restructuring, together as if the transactions had occurred on July 1, 2003 for the income statement information and as if the transactions had occurred on June 30, 2004 for the balance sheet information. The pro forma income statement information does not include gains or losses relating to the divestiture because such gains and losses are considered to be non-recurring.
In evaluating the divestiture of the Company’s luxury brand assets and investments and certain non-strategic assets, the Company determined that the carrying value of certain inventories relating primarily to discontinued brands was greater than the sale price expected to be received through the plan of disposal approved by the board of directors. The Company also determined that the carrying value of certain vineyards and vineyard assets exceeded the expected sale price. Accordingly the pro forma financial statements include adjustments to reduce these inventories, vineyards and vineyard assets to their expected sale price. Additional costs relating to the September 14, 2004 restructuring reflected in the pro forma financial statements include costs associated with the exit of grape contracts where the supply of grapes is no longer required, severance costs related to the separation of luxury business employees and costs associated with the corporate shutdown of properties primarily used for the luxury business. Costs related to the restructuring of the on-going lifestyle business reflected in the pro forma financial statements include costs associated with the exit of grape contracts following the Company’s decision to change the sourcing, costs associated with the renegotiation of existing grape contract terms including price, length of contract, and variety of grapes, and costs associated with corporate downsizing following the restructuring. The pro forma financial statements do not reflect any gains that might be made from the foregoing transactions as the company has no sale agreement in place with respect to any of these transactions.
The unaudited pro forma combined financial information is based on the Company’s historical consolidated financial statements for the respective periods. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the transactions described above, (2) factually supportable and (3) with respect to the income statement information, expected to have a continuing impact on the combined results. You should read this information in conjunction with the Company’s separate historical consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2004.
The unaudited pro forma combined financial information is presented for informational purposes only and does not purport to represent what Mondavi Delaware’s financial position or operating results actually would have been had the merger and the September 14, 2004 restructuring been completed at the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project Mondavi Delaware’s future operating results or financial position.
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The Robert Mondavi Corporation
The Robert | |||||||||||||||||
Mondavi | September 14, 2004 | ||||||||||||||||
Corporation | Merger | Restructuring | |||||||||||||||
(California) | Adjustments | Adjustments | As of | ||||||||||||||
As of | (Footnotes A-D) | (Footnotes E-G) | June 30, 2004 | ||||||||||||||
June 30, 2004 | Increase/(Decrease) | Increase/(Decrease) | Pro Forma | ||||||||||||||
ASSETS | |||||||||||||||||
Current Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 48,960 | $ | $ | $ | 48,960 | |||||||||||
Accounts receivable, net | 94,549 | (18,149 | )(E) | 76,400 | |||||||||||||
Inventories | 387,940 | (118,806 | )(E) | 264,134 | |||||||||||||
(5,000 | )(G) | ||||||||||||||||
Prepaid expenses and other current assets | 7,025 | 42,280 | (F) | 71,305 | |||||||||||||
22,000 | (G) | ||||||||||||||||
Assets held for sale | — | 136,955 | (E) | 102,755 | |||||||||||||
(34,200 | )(F) | ||||||||||||||||
Total current assets | 538,474 | 25,080 | 563,554 | ||||||||||||||
Property, plant and equipment, net | 397,699 | (180,968 | )(E) | 216,731 | |||||||||||||
Investments in joint ventures | 29,607 | (29,268 | )(E) | 339 | |||||||||||||
Restricted cash | 6,184 | 6,184 | |||||||||||||||
Other assets | 6,206 | (3,038 | )(E) | 3,168 | |||||||||||||
Assets held for sale | — | 213,294 | (E) | 141,774 | |||||||||||||
(71,500 | )(F) | ||||||||||||||||
Total assets | $ | 978,170 | $ | $ | (46,420 | ) | $ | 931,750 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
Current Liabilities: | |||||||||||||||||
Accounts payable | $ | 26,037 | $ | 3,500 | (C) | $ | $ | 79,537 | |||||||||
50,000 | (G) | ||||||||||||||||
Employee compensation and related costs | 15,905 | 15,905 | |||||||||||||||
Accrued interest | 6,967 | 6,967 | |||||||||||||||
Other accrued expenses | 14,693 | 14,693 | |||||||||||||||
Current portion of long-term debt | 18,910 | 18,910 | |||||||||||||||
Total current liabilities | 82,512 | 3,500 | 50,000 | 136,012 | |||||||||||||
Long-term debt, less current portion | 363,289 | 363,289 | |||||||||||||||
Deferred income taxes | 42,773 | 42,773 | |||||||||||||||
Deferred executive compensation | 7,484 | 7,484 | |||||||||||||||
Other liabilities | 2,312 | 2,312 | |||||||||||||||
Total liabilities | 498,370 | 3,500 | 50,000 | 551,870 | |||||||||||||
Commitments and contingencies | — | — |
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The Robert | ||||||||||||||||||
Mondavi | September 14, 2004 | |||||||||||||||||
Corporation | Merger | Restructuring | ||||||||||||||||
(California) | Adjustments | Adjustments | As of | |||||||||||||||
As of | (Footnotes A-D) | (Footnotes E-G) | June 30, 2004 | |||||||||||||||
June 30, 2004 | Increase/(Decrease) | Increase/(Decrease) | Pro Forma | |||||||||||||||
Shareholders’ equity: | ||||||||||||||||||
Preferred stock: authorized — 5,000,000 shares; issued and outstanding — no shares | — | (D) | — | |||||||||||||||
Common stock, par value $0.001; issued and outstanding — 100 shares (at date of formation); 17,399,285 converted shares per pro forma | 16 | (A) | 17 | �� | ||||||||||||||
1 | (B) | — | ||||||||||||||||
Class A common stock, without par value: authorized — 25,000,000 shares; issued and outstanding — 10,676,399 | 99,268 | (99,268 | )(A) | — | ||||||||||||||
Class B common stock, without par value: authorized — 12,000,000 shares; issued and outstanding — 5,770,718 | 9,256 | (9,256 | )(A) | — | ||||||||||||||
Paid-in capital | 13,347 | 108,508 | (A) | 157,103 | ||||||||||||||
35,248 | (B) | |||||||||||||||||
Retained earnings | 359,436 | (35,249 | )(B) | 224,267 | ||||||||||||||
(3,500 | )(C) | |||||||||||||||||
(63,420 | )(F) | |||||||||||||||||
(33,000 | )(G) | |||||||||||||||||
Deferred compensation stock plans | (534 | ) | (534 | ) | ||||||||||||||
Accumulated other comprehensive income (loss): | ||||||||||||||||||
Cumulative translation adjustment | (1,011 | ) | (1,011 | ) | ||||||||||||||
Forward contracts | 38 | 38 | ||||||||||||||||
Total shareholders’ equity | 479,800 | (3,500 | ) | (96,420 | ) | 379,880 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 978,170 | $ | — | $ | (46,420 | ) | $ | 931,750 | |||||||||
Notes to Unaudited Pro Forma Combined Balance Sheet
(A) | To reflect the issuance of one share of common stock of The Robert Mondavi Corporation (Delaware) in exchange for each outstanding share of Class A and Class B common stock of The Robert Mondavi Corporation (California). This adjustment has been recorded based on the par value of The Robert Mondavi Corporation (Delaware) shares issued with the difference between the par value of The Robert Mondavi Corporation (Delaware) shares issued and the book value of The Robert Mondavi Company (California) Class A and Class B shares exchanged recorded as an increase in paid-in capital. | |
(B) | To reflect the issuance of an additional .165 shares of common stock of The Robert Mondavi Corporation (Delaware) for each outstanding share of Class B common stock of The Robert Mondavi Corporation (California). This adjustment has been recorded using fair value of The Robert Mondavi Corporation (California) Class A common stock as of June 30, 2004 which results in a charge to retained earnings and an increase in paid-in capital for the difference between the aggregate par value of The Robert |
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Mondavi Corporation (Delaware) common stock issued and the aggregate fair market value of The Robert Mondavi Corporation (California) common stock exchanged. | ||
(C) | To record estimated expenses of $3,500 associated with the recapitalization transaction. These expenses are not deductible for federal or state income tax purposes. As a result the company’s effective tax rate for its quarter ended September 30, 2004 may be as high as 40%. | |
(D) | To reflect preferred stock of The Robert Mondavi Corporation (Delaware) that has been authorized but not issued. | |
(E) | In connection with the Company’s plan to divest its luxury brand assets and investments and certain non-strategic assets, as approved by the board of directors on September 14, 2004, adjustment to reflect the reclassification of these assets to be held for sale as follows: |
Luxury | Non-strategic | |||||||||||
Current Assets: | Brands | Assets | Adjustment Total | |||||||||
Inventories | $ | 118,806 | $ | — | $ | 118,806 | ||||||
Accounts Receivable | 18,149 | — | 18,149 | |||||||||
136,955 | — | 136,955 | ||||||||||
Long-term assets: | ||||||||||||
Property, plant & equipment | 103,468 | 77,500 | 180,968 | |||||||||
Investments in joint ventures | 29,268 | — | 29,268 | |||||||||
Other assets | 3,038 | — | 3,038 | |||||||||
135,774 | 77,500 | 213,274 | ||||||||||
Total | $ | 272,729 | $ | 77,500 | $ | 350,229 | ||||||
(F) | To reflect the impairment of luxury brand assets and non-strategic assets held for sale, tax effected at 40%, as follows: |
Assets held for sale | Impairment | |||
Current: | ||||
Inventories(1) | $ | 34,200 | ||
Long term: | ||||
Property, plan & equipment(2) | 71,500 | |||
105,700 | ||||
Less tax at 40% | (42,280 | ) | ||
Impact on retained earnings | $ | 63,420 | ||
(1) | Represents a write-down to estimated market prices for the luxury brand’s wine based on current market activity and the write-off of inventory costs relating to discontinued luxury brands. | |
(2) | Represents estimated losses on the sale of vineyards and related vineyard assets of the luxury business based on contracts and third party valuations. Also represents estimated losses on the sale of non-strategic vineyards and vineyard assets based on previous third party offers, previous comparable transactions and valuations and preliminary current offers. |
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(G) | In connection with the Company’s plan to divest its luxury brand assets and investments and certain non-strategic assets, as approved by the board of directors on September 14, 2004, adjustment to reflect additional expenses associated with this decision, tax effected at 40%, as follows: |
Luxury | Non-strategic | |||||||||||
Current assets: | Brands | Assets | Adjustment Total | |||||||||
Inventory impairment(1) | $ | — | $ | 5,000 | $ | 5,000 | ||||||
Current liabilities: | ||||||||||||
Grape contract buy out(2) | 2,000 | 12,000 | 14,000 | |||||||||
Severance(3) | 8,500 | 7,000 | 15,500 | |||||||||
Other corporate leases/shutdowns(4) | 4,750 | 4,750 | 9,500 | |||||||||
Transaction fees(5) | 8,000 | 3,000 | 11,000 | |||||||||
Accounts payable | 23,250 | 26,750 | 50,000 | |||||||||
23,250 | 31,750 | 55,000 | ||||||||||
Less tax at 40% | 9,300 | 12,700 | 22,000 | |||||||||
Impact on retained earnings | $ | 13,950 | $ | 19,050 | $ | 33,000 | ||||||
(1) | Represents primarily a write-down to estimated market prices of inventory relating to discontinued lifestyle brands based on current market activity. |
(2) | Represents the cost to buy out a number of grape purchase contracts for luxury brands and for certain other brands in accordance with the terms of the purchase contract and estimated costs to exit further contracts based on negotiated rates and terms. | |
(3) | Represents severance costs of employees in the luxury business and the laying off of other employees following the strategic changes occurring in the remaining business, based on identified employees and their related severance costs. | |
(4) | Represents the costs of exiting certain leases relating to the luxury business based on the terms of the lease and restructuring the remaining business to fit the new strategic plan, based on management estimates. | |
(5) | Represents estimated costs to sell the luxury assets and investments, based on fee schedules and quotes. |
Note: The Company has reflected total pretax charges of approximately $161 million associated with the September 14, 2004 restructuring in footnotes F and G above. In accordance with generally accepted accounting principles, the amounts are based on the low end of a range of possible outcomes, when no amount in the range is more probable than any other. However, the Company could incur additional costs of approximately $39 million, which represents the difference between this low end and the upper end of management’s estimated range. In addition to these charges are fees of up to $28 million the Company may incur as a result of the early retirement of $262 million in private placement debt following the September 14, 2004 restructuring. These fees have not been reflected in the pro forma statements above because they are dependent upon a number of unknown factors and variables as well as the outcome of ongoing negotiations.
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The Robert Mondavi Corporation
The Robert | ||||||||||||||
Mondavi | ||||||||||||||
Corporation | ||||||||||||||
(California) | As of | |||||||||||||
As of | Adjustments | June 30, 2004 | ||||||||||||
June 30, 2004 | Increase/(Decrease) | Pro Forma | ||||||||||||
Net revenues | $ | 468,047 | (89,776 | )(B) | $ | 378,271 | ||||||||
Cost of goods sold | 283,849 | (56,195 | )(B) | 227,654 | ||||||||||
Gross profit | 184,198 | (33,581 | ) | 150,617 | ||||||||||
Selling, general and administrative expenses | 132,259 | (37,040 | )(B) | 95,219 | ||||||||||
Gain on sale of assets, net | (1,531 | ) | (1,531 | ) | ||||||||||
Operating income | 53,470 | 3,459 | 56,929 | |||||||||||
Other (income) expense: | ||||||||||||||
Interest, net | 21,382 | 21,382 | ||||||||||||
Equity income from joint ventures | (6,685 | ) | 6,685 | (B) | — | |||||||||
Other | (1,580 | ) | (1,580 | ) | ||||||||||
Income before income taxes | 40,353 | (3,226 | ) | 37,127 | ||||||||||
Provision for income taxes | 14,769 | 1,290 | (C) | 13,479 | ||||||||||
Net income | $ | 25,584 | (1,936 | ) | $ | 23,648 | ||||||||
Earnings per share — basic | $ | 1.56 | $ | 1.36 | ||||||||||
Earnings per share — diluted | $ | 1.55 | $ | 1.35 | ||||||||||
Weighted average number of shares outstanding — basic | 16,401 | 952 | (A) | 17,353 | ||||||||||
Weighted average number of shares outstanding — diluted | 16,542 | 952 | (A) | 17,494 |
Notes to Unaudited Pro Forma Income Statement
(A) | To record the exchange of 6,722,050 common shares of The Robert Mondavi Corporation (Delaware) for 5,770,000 shares of Class B common stock of The Robert Mondavi Corporation (California). The 952,167 incremental shares issued have been recorded as pro forma adjustment. | |
(B) | The company has approved the plan to explore the divestiture of its luxury wine assets and investments. This adjustment removes the revenues and expenses related to the assets and investments that are subject to the plan of divestiture. The pro forma income statement does not include gains or losses relating to the divestiture because such gains and losses are considered to be non-recurring. | |
(C) | To record the estimated tax at 40% on the revenues and expenses associated with the assets and investments being divested. |
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