Exhibit 99.1
Robert Mondavi Corporation Announces Strategy to Focus on Lifestyle Wine
Segment; Company Explores Divestiture of its Luxury Assets; Fiscal 2005 Guidance
Revised
NAPA, Calif.--(BUSINESS WIRE)--Sept. 14, 2004--The Robert Mondavi
Corporation (Nasdaq:MOND) announced today, following its Board of
Directors meeting, that after careful consideration of strategic
alternatives it plans to focus entirely on the premium and
super-premium lifestyle wine segments. Under this plan, the company
will be anchored by its Woodbridge and Robert Mondavi Private
Selection brands and will pursue the establishment of new wine brands,
such as Papio. As a result, the company said it will explore the
divestiture of its luxury wine assets and investments and pursue the
sale of other assets identified as non-strategic.
"We believe that a lifestyle focused company creates a new and
unique business model with compelling future earnings growth, strong
cash flow generating capabilities, and relatively high financial
returns which provides an excellent profile for the investing public,"
said Gregory M. Evans, President and CEO. "By contrast, because our
luxury wine brands and assets are fundamentally agricultural in
nature, with long-term investment horizons and lower financial returns
over the next several years, they are better suited for a private
entity that has different investment criteria. A divestiture of the
luxury wine assets and redeployment of the cash from those
divestitures into our lifestyle brands would make great sense for the
company, its shareholders and, importantly, for the luxury brands and
assets themselves."
The luxury brand assets and investments intended for divestiture
include Robert Mondavi Winery and its vineyards; the company's 50%
interests in Opus One, Ornellaia, Luce della Vite, and Vina Sena; the
Byron Winery and Vineyards; and the Arrowood Winery and Vineyards.
"The Board has undertaken a careful process to maximize the long-term
value of these unique agricultural assets," said Ted Hall, Chairman of
the Board. Citigroup Global Markets is serving as financial advisor to
the company.
Both Robert Mondavi Corporation and the potential future owners of
Robert Mondavi Winery will establish and co-own an entity that would
own the Robert Mondavi trademark and other related trademarks. The
entity will license these trademarks back to each of the co-owners for
a royalty fee.
As part of this restructuring, the company expects to incur up to
$200 million in pre-tax charges to be detailed when the company
reports its first quarter earnings. In addition to these restructuring
charges, the company announced that it is reducing its previously
announced fiscal 2005 GAAP earnings guidance of $1.80 to $2.00 per
fully diluted share by approximately $0.50 per share primarily due to
increased spending in advertising and consumer and trade promotion
behind its lifestyle brands.
"We have an opportunity to become a leading wine company focused
on premium lifestyle wine consumers around the world. We will offer
top quality wines from the consumers' point of view in each of the
segments we compete in, and we will bring these wines to market in a
highly effective way," said Mr. Evans. "Assuming successful
implementation of our new plan, we believe that we will be able to
generate, from the revised fiscal 2005 base, earnings before interest
and tax(1) ratios of approximately 20% and financial returns in excess
of 12% within five years."
The company also announced that following a seven-month
sabbatical, R. Michael Mondavi will continue to serve on the Board,
but will no longer serve as an officer of the company.
FREQUENTLY ASKED QUESTIONS (FAQ)
Lifestyle/Luxury
Why does the company believe that focusing on the lifestyle wine
business provides the best return for Robert Mondavi Corporation
shareholders?
Robert Mondavi Corporation has a unique opportunity to become a
leader in providing top quality premium and super-premium lifestyle
wines to consumers around the world. By focusing our efforts and
resources exclusively on this dynamic lifestyle wine segment, we will
bring lifestyle wines to market in a highly effective and efficient
way. Assuming we are successful, we believe that we will generate,
from the revised fiscal 2005 base, earnings before interest and tax
ratios of approximately 20% and financial return ratios in excess of
12% within five years.
The combination of our strong brands, wine-making skills,
go-to-market capability, makes our lifestyle wine business uniquely
attractive from both an economic and business standpoint. From an
investor's perspective, the lifestyle wine category is attractive
because of its potential for future earnings growth, cash flow
generation and financial returns.
Which brands will remain with the Lifestyle Company? Which brands
will you pursue for potential divestiture?
Lifestyle brands that we will continue to develop: Woodbridge,
Robert Mondavi Private Selection, La Famiglia, Papio, Arianna,
Kirralaa, Hangtime, Oberon, and new brands
Luxury brands for potential divestiture: Robert Mondavi Winery and
its vineyards, the Byron Winery and Vineyards; The Arrowood Winery and
Vineyards
Joint Venture interests for potential divestiture: Opus One, Luce
della Vite, Ornellaia, and Vina Sena
Brands that we import and do not own: Marchesi de' Frescobaldi,
and Caliterra will be placed at other importers.
What does divestiture of assets and business mean?
Divestiture could mean any one of several strategic alternatives a
company could pursue to change the ownership of certain of its assets
or businesses.
How long does the company anticipate it will take to divest the
luxury assets?
While we plan to proceed as quickly and orderly as possible to
study the strategic options for divesting the luxury assets, it is
still too soon to say when the divestiture of any of the assets will
take place.
What are the plans for the Robert Mondavi brands?
We intend to establish a jointly-owned entity together with any
potential future owners of Robert Mondavi Winery. This new entity will
own the Robert Mondavi trademark and other related trademarks, and
will license these trademarks back to each of the co-owners for a
royalty fee.
Why did the company decide to form a jointly owned entity to own
the brands?
The jointly owned entity structure is often employed when a common
brand is licensed by two or more non-related entities. The jointly
owned entity provides an efficient structure for common governance,
shared economics and brand defense, and the use of the brand in a
responsible and value creating manner.
Is the company still looking for a leader for the luxury business?
Specifically, we are actively searching to fill the position of
Managing Director for Robert Mondavi Winery. The candidate we are
looking for is an executive committed to a long-term role with the
Robert Mondavi Winery business.
Why is the company identifying a Managing Director for Robert
Mondavi Winery, rather than for all of your luxury wines as previously
reported?
The steps we are taking for Robert Mondavi Winery are to ensure
that it will continue to endure as one of the world's greatest wine
estates. We are reconfiguring Robert Mondavi Winery to maximize the
value, regardless of whether we continue to manage it or another owner
steps in.
How will the company be managed during the divestiture process of
the luxury brands?
Greg Evans will continue to lead the company, as President and
CEO. As previously reported, our lifestyle business will be led by
Dennis Joyce, Chief Operating Officer. The luxury brands will be
managed by Greg Brady our Senior Vice President for Business
Development.
Has the company received interest from potential buyers for the
luxury assets?
It would be inappropriate to provide that level of detail at this
time. The strategic review process is underway, and we will not
publicly disclose the names of any potential buyers.
Will the company sell wineries back to their original owner or to
their joint venture partners?
Again, it is not appropriate to speculate. The strategic review
process is still underway. Under the terms of our agreements, our
joint venture partners have certain rights, including first rights of
refusal which apply under specific conditions.
What does today's announcement indicate about the Robert Mondavi
family members and their interest in purchasing the Robert Mondavi
Winery?
It is not appropriate to speculate on what business actions family
members may or may not be interested in taking.
Will the company continue to be called the Robert Mondavi
Corporation after the divestment of the Robert Mondavi Winery?
For the time being, we will continue to use the name Robert
Mondavi Corporation. Additionally, we will continue to be traded on
NASDAQ under the MOND ticker.
Why does the company feel that it will maximize the value of its
luxury assets by placing them with a private investor? Will the
company consider other buyers?
We believe that long-lived, agricultural wine assets are best
managed in non-public entities where investors have a longer term
horizon and are better able to understand the inherent value in
holding vineyard assets in prime locations.
We also believe the economic characteristics of our luxury wine
brands and assets, which are fundamentally agricultural in nature --
with long-term investment horizons and lower financial returns in the
short-term -- are better matched with a non-public entity that has
different investment criteria. Thus, marketing the luxury wine assets
to this type of investors should enable us to generate the highest
values for the company.
Having said that, we have a fiduciary obligation to our
shareholders to realize the most value from our assets, and we will
consider offers from other types of buyers.
Fiscal 2005 Questions
The company has outlined a number of write downs. Can you provide
detail?
Not at this time. The charge includes a number of components,
which will be disclosed and discussed when we report our first quarter
earnings in October.
How will the luxury business be operated and managed during the
divestiture process?
We intend to manage these valuable brands and business as we
always have: to maximize their value whether we sell or hold.
Will the company report the luxury and lifestyle businesses
separately?
We will report as required by appropriate SEC regulations.
Employee Questions
Does the company anticipate layoffs?
We are taking a number of steps to reorganize our corporation and
that includes layoffs in both our lifestyle and luxury businesses.
How many people will be affected and when?
We aren't able to provide specifics at this time. We will have
more information when we detail our write downs in our first quarter
earnings call in October.
How will luxury employees report during this time?
Until the luxury assets are sold and a Managing Director for
Robert Mondavi Winery is identified, Greg Brady, Senior Vice President
of Business Development will oversee the following groups: Arrowood
Winery, Byron Winery, Robert Mondavi Imports, Robert Mondavi Winery,
all joint ventures.
Do employees continue to work through the sale process?
Absolutely. We have a commitment to produce and sell the highest
quality wine. Our partners, consumers and shareholders expect this
from us.
Sales and Marketing Questions
Will previously committed marketing and sales programs continue?
Yes, we will continue with our marketing and promotional schedule
as it was outlined in our annual plan. With regards to our lifestyle
wines, we expect to increase spending as announced in our revised
Fiscal 2005 guidance.
How does this announcement affect distributors?
We believe that our new business strategy provides tremendous
growth opportunity for our distributors. Our goal is to lead the
premium lifestyle wine segment in delivering high quality wines,
innovative packaging and exciting new products to market.
We will continue to provide our current distributors with our
broad portfolio of wine, and we ask them to continue selling all of
our wines. Many buyers would value the strength of our current
distribution system; however, if a transition is required, as luxury
brands and assets are divested, we will work with distributors to
ensure it goes smoothly. It is important to remember that a change of
ownership of a brand does not necessarily mean distribution of that
brand would change.
How does this announcement affect growers?
We expect that this announcement will affect certain growers. We
are working with them on an individual basis to address the impact
that it may have on their business. In general, our plan will rely
even more heavily on outside growers.
Will Robert Mondavi Corporation lease back grapes from vineyards
that it is selling? If so, for how long?
This will be determined based upon the needs of our business. We
will not disclose the terms of those agreements.
What should distributors do with current luxury inventory?
Distributors should keep selling our wines. We have arguably the
most desirable collection of luxury wine brands in the industry. The
current vintages have received strong accolades and are in high demand
by consumers. In fact, Ornellaia's soon to be released 2001 Masseto
received an unparalleled 100 point rating from The Wine Spectator.
Will the Robert Mondavi name come off of Robert Mondavi Winery
wines, Robert Mondavi Private Selection and Woodbridge?
This announcement does not affect the use of the Robert Mondavi
name with respect to its use on these brands.
Robert Mondavi Family Questions
Why is Michael Mondavi leaving the company?
It was his personal decision. He is leaving to pursue other
interests.
It was recently reported that Michael and his wife trademarked a
wine brand called IM. Is that a brand that he will launch separately
from RMC? Do you have further detail on this initiative?
We do not have information about this brand name other than to say
that the company is not involved.
Will Tim Mondavi stay with the company?
Tim remains in his current role with the company. He is
Vice-Chairman and Winegrower for Robert Mondavi Corporation.
Will Tim Mondavi stay with the company after you sell Robert
Mondavi Winery?
It is inappropriate to speculate on Tim's future plans.
Will Michael Mondavi continue to sit on the Board?
Yes.
Will Robert Mondavi family members put a bid in on the luxury side
of the business? Is that why Michael is stepping down?
Again, we won't speculate on any individual family member's
decisions.
What roles will the third generation (Robert Mondavi family) have?
Currently, the third generation family members who are involved in
the business work in a number of roles. Our policy is to discuss
employment status of specific individuals only if required by
disclosure rules.
Will any of the Robert Mondavi family members stay after the
Robert Mondavi Winery is sold to work for this new Lifestyle Company?
Again, our policy is to discuss the employment status of a
specific individual only if required by disclosure rules.
Important Information For Investors and Shareholders
In connection with the proposed recapitalization plan, The Robert
Mondavi Corporation will file a combined proxy statement/prospectus
and other relevant documents with the Securities and Exchange
Commission (the "SEC"). INVESTORS AND SHAREHOLDERS ARE URGED TO READ
THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AS IT WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE RECAPITALIZATION PLAN AND
RELATED MATTERS. INVESTORS AND SHAREHOLDERS WILL HAVE ACCESS TO FREE
COPIES OF THE PROXY STATEMENT/PROSPECTUS (WHEN AVAILABLE) AND OTHER
DOCUMENTS FILED WITH THE SEC BY THE COMPANY THROUGH THE SEC WEB SITE
AT WWW.SEC.GOV. THE PROXY STATEMENT/PROSPECTUS AND RELATED MATERIALS
MAY ALSO BE OBTAINED FOR FREE (WHEN AVAILABLE) FROM THE COMPANY BY
DIRECTING A REQUEST TO THE COMPANY'S INVESTOR RELATIONS DEPARTMENT AT
841 LATOUR COURT, NAPA, CA 94558; TELEPHONE (707) 251-4850; E-MAIL
MOND@ROBERTMONDAVI.COM.
The company and its directors, executive officers, certain members
of management and employees may be deemed to be participants in the
solicitation of proxies in connection with the proposed merger.
Information regarding the persons who may, under the rules of the SEC,
be considered to be participants in the solicitation of the company's
shareholders in connection with the proposed recapitalization plan is
set forth in the company's annual report on Form 10-K for the fiscal
year ended June 30, 2003 filed with the SEC on September 26, 2003 and
proxy statement for its 2003 annual meeting of shareholders filed with
the SEC on October 28, 2003. Additional information regarding such
persons and a description of their direct and indirect interests in
the recapitalization plan will be set forth in the proxy
statement/prospectus when it is filed with the SEC.
Forward-looking Statements
This announcement 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 in
general. 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, risk associated with continued
conflict in the Middle East, reduced consumer spending, or changes in
consumer preferences could reduce demand for the company's wines.
Similarly, increased competition or changes in tourism to the
company's 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, is beyond the company's control. A
shortage of grapes might constrict the supply of wine available for
sale and cause higher grape costs, putting 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. The separation of
the company into two operating units may impair management's ability
to focus on other needed areas of business execution. There are also
significant risks associated with separating the company's sizeable
sales force into two operating units. Some of the company's strategic
alternatives would involve lay offs and significant restructuring
changes which could materially impair future earnings. 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, 2004, on file with the Securities and Exchange Commission. For
these and other reasons, no forward-looking statement by the company
can or should be taken as a guarantee of what will happen in the
future.
(1) The company calculates earnings before interest & taxes (EBIT)
by adding back its provision for income taxes and interest expense to
net income, in effect adding to operating income the results of its
joint ventures. The company's joint venture interests are accounted
for as investments under the equity method of accounting. Accordingly,
the company's share of its joint ventures results are reflected in
"equity income from joint ventures," below the operating income line,
in the Consolidated Statements of Income. The company has presented
EBIT and EBIT as a percentage of net revenues because management and
certain investors find it useful when comparing the company's
operating results to operating results of companies that do not use
the equity method of accounting or do not employ joint ventures as
part of their business strategy. EBIT is not a measure of operating
performance computed in accordance with generally accepted accounting
principles (GAAP) and should not be considered a substitute for
operating income, net income or cash flows compared in conformity with
GAAP. In addition, EBIT may not be comparable to similarly titled
financial measures used by other entities.
CONTACT: Robert Mondavi Corporation
Robert Philipps, 707-251-4850 (VP, Treasury & IR)
Hilary Martin, 707-251-4487 (VP Corporate Communications)