Combined Financial Statements of Concord Beverage Company and Vintage Beverage Segments (1998–2000)
Summary
This document presents the audited combined financial statements of Concord Beverage Company and the Vintage Beverage segments of its affiliates for the fiscal years ending January 1, 2000, January 2, 1999, and January 3, 1998. It includes balance sheets, income statements, statements of stockholders' equity, and cash flows, along with the independent accountants' report. The statements detail the companies' financial positions, results of operations, and changes in equity, providing a comprehensive overview of their financial health during the specified periods.
EX-2.3 2 b37710ccex2-3.txt COMBINED BALANCE SHEETS 1 Exhibit 2.3 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES COMBINED FINANCIAL STATEMENTS YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998 2 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES CONTENTS
3 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Concord Beverage Company and the Vintage Beverage Segments of its Affiliates Concordville, Pennsylvania We have audited the accompanying combined balance sheets of Concord Beverage Company and the Vintage Beverage segments of its affiliates as of January 1, 2000 and January 2, 1999, and the related combined statements of income and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended January 1, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Concord Beverage Company and the Vintage Beverage segments of its affiliates as of January 1, 2000 and January 2, 1999, and the combined results of their operations and their cash flows for each of the three years in the period ended January 1, 2000, in conformity with generally accepted accounting principles. /s/ Margolin, Winer & Evens LLP December 11, 2000 4 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES (NOTE 1) COMBINED BALANCE SHEETS
The accompanying notes are an integral part of these statements. 2 5 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES (NOTE 1) COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
The accompanying notes are an integral part of these statements. 3 6 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES (NOTE 1) COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of these statements. 4 7 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES (NOTE 1) COMBINED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these statements. 5 8 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS 1. DESCRIPTION OF DESCRIPTION OF BUSINESS - Concord Beverage BUSINESS AND BASIS OF Company (Concord) bottles and distributes soft PRESENTATION drinks from its two locations in Concordville, Pennsylvania and Elizabeth, New Jersey. Concord distributes various house and private label products to supermarket chains and other retail outlets located in the eastern part of the United States. In addition, certain of Concord's affiliates (as defined below) bottle and distribute the Vintage Beverage brand to similar type customers. The Company grants credit to substantially all of its customers. BASIS OF PRESENTATION - The accompanying combined financial statements include the accounts of Concord, Vintage Beverage Corporation and the Vintage Beverage brand segments of Concord's affiliates, Beverage Capital Corporation ("Beverage Capital") and Canada Dry Bottling Company of New York ("Canada Dry") (the "Affiliates"), all of which are under common control. As Beverage Capital and Canada Dry do not prepare stand-alone financial statements for their Vintage Beverage segments, the financial statements of the segments were derived from the books and records of the respective entities and include the revenue earned from the sale of Vintage Brand products and direct expenses incurred by the segments and an allocation of expenses, which benefited the segments but were not directly charged to the segments. These financial statements do not purport to represent the combined financial position, results of operations and cash flows that would have resulted if the segments operated on a stand-alone basis or if they were owned by Concord. Concord together with the above noted affiliates are referred to as the "Company". All significant intercompany accounts and transactions have been eliminated. Distributions to affiliates represent the difference between the net income earned by Vintage Beverage Corporation, and the Vintage Beverage brand segments of Beverage Capital and Canada Dry and the net assets retained in each of the segments as of the end of each of the respective reporting periods. 2. SUMMARY OF INVENTORIES - Inventories are stated at the SIGNIFICANT lower of cost (determined by the first-in, ACCOUNTING POLICIES first-out method) or market. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost. Depreciation is provided by use of straight-line and accelerated methods over the estimated useful lives of the assets which 6 9 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS range from three years to thirty-nine and a half years. DEFERRED CHARGES AND AMORTIZATION - Deferred charges include license fees which are being amortized based on cases sold pursuant to the terms of the license agreements. INCOME TAXES - Concord and its stockholders have elected to have Concord taxed as an S corporation for Federal and Pennsylvania income tax reporting purposes. Accordingly, there is no provision for Federal and Pennsylvania income taxes since income earned as an S corporation will be taxed at the individual stockholder level. Concord is subject to New Jersey corporate taxes. One of the affiliates is subject to New York corporate taxes. The state and local income tax (benefit) is included in the tax expense related to the income (loss) from this segment. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents for purposes of the statements of cash flows. The Company maintains cash balances with financial institutions in amounts that exceed the Federal Government's deposit insurance. ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers the allocation of expenses related to sales of the Vintage Beverage brand by certain of its affiliates to be a significant estimate used in the preparation of these combined financial statements (See Note 1.) FISCAL YEAR END - The Company's fiscal year ends on the Saturday nearest December 31. The years ended January 1, 2000 and January 2, 1999 contained fifty-two weeks, respectively, and the year ended January 3, 1998 contained fifty-three weeks. PENSION PLAN - The Company accounts for its defined benefit pension plan in accordance with the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." 7 10 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS COMPREHENSIVE INCOME - During 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," issued in June 1997 by the Financial Accounting Standards Board. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income includes net income and other comprehensive income. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The 1997 financial statements have been restated to reflect the adoption of this accounting standard. 3. MARKETABLE SECURITIES The Company accounts for its marketable securities in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with the provisions of SFAS No. 115, the Company's marketable securities (consisting solely of equity securities) were classified as available for sale and are reported at their approximate fair value. For 1999, 1998 and 1997, there were no sales of investments classified as available for sale. As of January 1, 2000 and January 2, 1999, unrealized gains were $744,739 and $609,699, respectively. There were no unrealized losses as of January 1, 2000 and January 2, 1999. 4. INVENTORIES Inventories consist of the following:
8 11 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS 5. PROPERTY, PLANT AND Property, plant and equipment consist of the EQUIPMENT following:
Depreciation expense for 1999, 1998 and 1997 amounted to $1,872,826, $2,140,495 and $2,137,801, respectively. 6. DEFERRED CHARGES During 1998, the Company paid $500,000 to a AND OTHER COSTS customer to manufacture and supply beverages to that customer. The agreement with the customer expires the later of September 30, 2002 or the date on which the customer purchases and pays for 6,000,000 cases. The Company is not required to make any additional payments for purchases in excess of 6,000,000 cases. During 1997, the Company paid $2,000,000 ("1997 Agreement") to a second customer to extend a license that the Company has to manufacture and supply beverages for the customer. The 1997 Agreement expires on the later of September 1, 2001 or the date by which the second customer purchases and pays for 24,000,000 cases. During 1997, the Company paid $950,000 for a license to manufacture and supply beverages to a third customer. The agreement with the third customer, which expires on December 31, 2000, requires that the Company make a $950,000 annual payment at the beginning of each year. In accordance with this agreement, the Company is required to annually supply the lesser of all of the third customer's requirement or 4,000,000 cases. If the third customer has not purchased 16,000,000 9 12 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS cases at the end of the contract, the third customer can either extend the agreement until 16,000,000 cases are purchased or pay the Company for the difference based on a price specified in the agreement. The 1999 and 1998 payments were made in December 1998 and December 1997, respectively. In addition, the Company is required to pay a specified amount per case for the cases purchased annually by the third customer in excess of 4,000,000 cases. The 1999 and 1998 cases purchased did not exceed this amount. In addition, during 1997, the Company paid $500,000 for a license to manufacture and supply beverages to a fourth customer. The agreement with the fourth customer expires on the later of July 31, 2001 or the date on which the customer purchases and pays for 2,200,000 cases. At the end of the agreement, the Company is required to pay the fourth customer a specified amount per case for any cases purchased in excess of 2,200,000 cases. During 1996, the Company paid $300,000 to a fifth customer to manufacture and supply beverages. The agreement with the fifth customer expires on the later of October 2001 or the date by which the fifth customer purchases and pays for 3,375,000 cases. During the agreement term, the fifth customer is obligated to purchase 3,375,000 cases, including a minimum of 675,000 cases each year. 7. NOTES PAYABLE During 1995, the Company entered into a note payable to an affiliated company. The note was payable in monthly installments of $205,320, including interest at 7% per annum through 1999. The Company made additional principal payments of $1,921,764 during 1998. The remaining balance of $2,125,231 was repaid during 1999. During 1996, the Company entered into a second note payable for $3,000,000 with the affiliated company. The second note bore interest at 7% per annum and was paid in full during 1998. 8. COMMITMENTS LEASES - The Company leases warehouse and office space under long-term operating leases. The minimum annual rentals under the leases are as follows:
10 13 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS Total rental expense for warehouse and office space, trucks, trailers, forklifts and office equipment was approximately $1,889,000, $2,097,000 and $2,230,000 for 1999, 1998 and 1997, respectively. Rent expense includes short-term leases. OTHER - In connection with the sale of certain assets by an affiliate to a non-related third party, the Company agreed to purchase all of its plastic bottles from the third party for a five-year period effective July 1997. 9. BENEFIT PLANS The Company maintains a defined benefit pension plan covering those employees who are included in a collective bargaining agreement. The benefits are based on a fixed monthly benefit for each year of service. The amount charged to expense for the union defined benefit pension plan was approximately $155,000, $192,000 and $289,000 for 1999, 1998 and 1997, respectively. The following sets forth the Plan's funded status and related amounts recognized in the Company's financial statements as of January 1, 2000 and January 2, 1999:
The benefit cost charged to operations as well as employer contributions and benefits paid for each of the three years included in the period ended January 1, 2000 are as follows: 11 14 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS
The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.50%, 6.75% and 7.25% in 1999, 1998 and 1997, respectively. The expected long-term rate of return on assets was 9% in all three years. The Company maintains a noncontributory profit-sharing plan covering those employees not included in a collective bargaining agreement. The Company also maintains a 401(k) Plan covering all eligible employees. Contributions under both plans are at the discretion of the Board of Directors. Contributions under both plans were $315,887, $341,975 and $257,319 for 1999, 1998 and 1997, respectively. 10. TRANSACTIONS WITH The Company's purchases from related parties, RELATED PARTIES primarily for raw materials, were approximately $2,768,000, $3,742,000 and $18,445,000 in 1999, 1998 and 1997, respectively. Net sales and cost reimbursements (which reimbursements are accounted for as reductions of cost of sales) to related parties were approximately $13,773,060, $13,482,000 and $11,139,000 for 1999, 1998 and 1997, respectively. Concord and one of its affiliates have a contractual obligation with its stockholders to pay directly to taxing authorities an amount equal to the income tax liability resulting from Taxable Income. The income tax liability is computed by applying the stockholders' marginal tax rate to Taxable Income. Payments are made on dates coincidental with the estimated tax requirements of the Internal Revenue Service. Payments in lieu of corporate income taxes relating to Concord's Taxable Income reported for 1998 do not include the payments of stockholders' fourth quarter estimated tax requirements of approximately $1,144,000, which were paid in 1999. The stockholders agreed to defer the State payments of approximately $168,000 in lieu of corporate income taxes for 1997 until April 1998. The Company has determined that it has no federal liability under the agreement at December 31, 1997 inasmuch as the income tax benefit to 12 15 CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS the stockholders from the loss incurred by the Company in prior years substantially eliminates the stockholders' income tax liability attributable to the Company's 1997 Taxable Income. 11. MAJOR CUSTOMERS Approximately 67%, 71% and 65%, respectively, of the Company's 1999, 1998 and 1997 net sales were to four major customers. Net trade accounts receivable as of January 1, 2000 and January 2, 1999 from these major customers were approximately $3,939,000, and $3,496,000, respectively. 12. OTHER INCOME, NET Other income, net, consists of the following for 1999, 1998 and 1997:
13. ACCOUNTS RECEIVABLE - ACCOUNTS RECEIVABLE - Trade are net of an TRADE, NET allowance for uncollectible accounts of $135,800 and $70,780 at January 1, 2000 and January 2, 1999, respectively. 14. SUBSEQUENT EVENT On October 18, 2000, substantially all of the assets subject to certain liabilities and the business of Concord as well as the Vintage Beverage brand segments of certain of its affiliates were sold to a third party. The Company received $53,747,823 in cash plus two promissory notes in the principal amounts of $7,166,376 and $10,749,564. The promissory notes are due in one year. 13
