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THE ROBERT MONDAVI CORPORATION
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ROBERT MONDAVI CORPORATION
FREQUENTLY ASKED QUESTIONS
AUGUST 20, 2004
RECAPITALIZATION
WHAT WILL THE RECAPITALIZATION ACCOMPLISH?
Changing the Company's capital structure is another step we are taking to
conform to the best current practices in corporate governance. There are
currently two different classes of Mondavi stock - A shares and B shares - where
the owners of the B shares hold super-voting rights. Eliminating the dual class
stock structure and creating a unified common stock will ensure all owners of
Mondavi common stock have an equal say in the governance of the Company through
the principle of "one share, one vote."
WHEN WOULD THE RECAPITALIZATION OCCUR?
The plan to eliminate Class B shares is subject to approval by shareholders at
the Company's annual meeting scheduled for October 29th. Information will be
included in the Company's proxy, which is due to be mailed in September. It
would become effective once the plan is approved by a majority of the Class A
shareholders and receives certain consents from lenders and other contractual
parties. The requisite vote of the Class B shareholders to approve the plan has
already been secured through an agreement.
DELAWARE INCORPORATION
WHY CHANGE THE STATE OF INCORPORATION FROM CALIFORNIA TO DELAWARE?
Reincorporating in Delaware makes good business sense for our company. Many
publicly traded companies consider Delaware to be one of the best states in
which to incorporate because of the state's modern corporate laws and its
history of dealing with a range of corporate matters.
Our reincorporation won't result in a change to our Company's operations, the
location of our employees or the way the Company does business. The stock will
continue to trade on NASADQ under the symbol MOND.
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STOCK REPURCHASE PROGRAM
WHY WOULD THE COMPANY WANT TO BUY BACK STOCK?
Management believes that this may be an appropriate investment in the Company's
business plan based on prevailing business and market conditions at the time.
WHEN WILL THE STOCK REPURCHASE PROGRAM BEGIN?
The Board has authorized the Company to repurchase up to $30 million in common
stock. The program will not begin until after the annual shareholder meeting on
October 29th and is subject to specific SEC regulations.
WILL THE COMPANY BE BUYING BACK STOCK FROM THE MEMBERS OF THE ROBERT MONDAVI
FAMILY?
No. The purchases will be made in the open market or through negotiated offers
when the price is right.
WAS TODAY'S ANNOUNCEMENT INTENDED TO PREPARE THE COMPANY FOR A SALE?
Today's announcement is not directed at selling the Company. It includes four
pieces of news about steps we are taking to provide our Company with the best
corporate governance practices available today and create value for all
shareholders.
NEW ORGANIZATIONAL STRUCTURE
WHAT IS THE STRATEGIC RATIONALE FOR SEPARATING THE COMPANY INTO TWO LINES OF
BUSINESS?
We have concluded the most logical and effective way to address our market now
is to see that it has divided into two distinct segments with different consumer
behaviors, marketing and production imperatives, and goals.
As we see it, the "lifestyle" business - premium wines priced up to $15 per
bottle - has characteristics very similar to traditional consumer packaged
goods. A durable, well-regarded brand is a key competitive factor in this
category and results from a combination of product quality, successful consumer
marketing and sales execution. Purchase decisions by lifestyle wine consumers
definitely begin with a desire for great tasting wine, but without sophisticated
packaging, advertising and merchandising, no brand can survive, let alone
thrive.
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Successful producers competing in this segment are able to regularly introduce
innovative new products, brand extensions, and usage ideas for their product
lines. Pricing is also important in this category, meaning profitability is
dependent on achieving efficiency and economies of scale in production and
distribution.
The "luxury" category, comprised of wines retailing for more than $15 per
bottle, has somewhat different dynamics. Product quality is of paramount
importance, but brand reputation results less from marketing activity and almost
exclusively from product reviews, the opinions of industry thought-leaders, and
the intrinsic character ("terroir") of the vineyards from which the wines are
made. Selling in this category is more knowledge-based and "high-touch", and
value pricing is rarely a merchandising technique or competitive factor.
Because luxury wines are generally lower-volume, production and distribution
efficiency, while always important, are less critical factors in profitability.
At the same time, exemplary vineyard management, winemaking, and distribution
remain extremely important factors in revenue growth, because in this category
you must re-establish your quality credentials with consumers every vintage and
also ensure that you are effectively represented in the relatively small number
of retail channels serving the luxury category. This is doubly true for
producers selling high-end wines above $50 per bottle, a group that includes
Robert Mondavi with brands such as Robert Mondavi Winery Reserve, Opus One,
Ornellaia, Arrowood, Byron, Luce, and Sena.
HOW WILL FINANCIAL REPORTING BE HANDLED FOR THE LIFESTYLE AND LUXURY BRANDS?
Financial reporting will depend on work the Board of Directors has to approve at
upcoming meetings. We will address this when we have more information.
WHO WILL BE LEADING THE LIFESTYLE BUSINESS?
Dennis Joyce, Executive Vice President of Sales and Marketing, will lead the
Lifestyle business as Chief Operating Officer.
WHO WILL BE LEADING THE LUXURY BUSINESS?
We are conducting an executive search and will consider both internal and
external candidates who are qualified.
IS THERE ADDITIONAL INFORMATION ABOUT THE PROPOSED NEW ORGANIZATIONAL STRUCTURE
OF THE ROBERT MONDAVI CORPORATION?
It is important to note that details on how this transition will take place and
ultimately how the reorganization will be structured will be coming in the next
several weeks. For the time being, it is business as usual for us and this
announcement will not immediately affect employees, distributors, growers, or
other business partners. We look forward to providing you with more details and
believe that this change will bring recharged focus to our business.
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ROBERT MONDAVI FAMILY
WHAT DOES TODAY'S ANNOUNCEMENT INDICATE ABOUT THE INTENTIONS OF THE ROBERT
MONDAVI FAMILY?
The family is in full agreement with all of the components in the press release.
Today's announcement demonstrates RMC's commitment to adopting best practices in
the area of corporate governance. The Robert Mondavi family members, as members
of the Board along with the independent directors on the Board, are driving the
adoption of best practices in corporate governance and are focused on enhancing
the value of the company for all shareholders.
IS THE ROBERT MONDAVI FAMILY INTERESTED IN SELLING THE COMPANY?
The family members are far and away the largest shareholders of the Company, and
they remain committed to the business. It is inappropriate to speculate on what
business actions family members may or may not be interested in taking.
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.
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