<PAGE> 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
<PAGE> 2
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS:
Combined Balance Sheets 2
Combined Statements of Income and Comprehensive Income 3
Combined Statements of Stockholders' Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6 - 13
</TABLE>
<PAGE> 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
<PAGE> 4
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
(NOTE 1)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 1, January 2,
2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 2,179,095 $ 1,862,901
Marketable securities (Note 3) 1,740,691 780,652
Accounts receivable (Notes 1, 10, 11 and 13):
Trade, net 6,130,038 5,831,649
Affiliates 3,645,137 2,090,182
Other 634,717 619,254
Inventories (Notes 2 and 4) 7,248,606 5,779,045
Prepaid expenses 453,640 474,281
----------- -----------
TOTAL CURRENT ASSETS 22,031,924 17,437,964
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET (NOTES 2 AND 5) 7,752,543 9,059,256
----------- -----------
OTHER ASSETS:
Deferred charges and other costs, net of accumulated
amortization of $8,788,043 for 1999 and
$7,275,644 for 1998 (Notes 2 and 6) 4,361,957 5,874,356
Construction-in-progress 16,201 16,334
Pallets 793,515 582,615
Security deposits and other assets 190,269 87,107
----------- -----------
TOTAL OTHER ASSETS 5,361,942 6,560,412
----------- -----------
TOTAL ASSETS $35,146,409 $33,057,632
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable (Note 7) $ -- $ 2,125,231
Accounts payable:
Trade 4,368,212 3,842,242
Affiliates (Note 10) 579,937 987,518
Accrued expenses and other current liabilities 3,700,961 3,398,994
Income taxes payable 90,197 127,346
----------- -----------
TOTAL CURRENT LIABILITIES 8,739,307 10,481,331
----------- -----------
COMMITMENTS (NOTES 6 AND 8) -- --
STOCKHOLDERS' EQUITY:
Common stock:
Class A, $10 par value, voting,
Authorized - 10,000 shares
Issued and outstanding - 5,759 shares 57,590 57,590
Class B, $10 par value, nonvoting,
Authorized - 10,000 shares
Issued - 4,701 shares 47,010 47,010
Additional paid-in capital 10,303,203 10,303,203
Retained earnings 18,640,186 14,745,129
Equity in affiliated Vintage Beverage segments of business 490,395 689,691
Accumulated other comprehensive income -
unrealized gains on securities 744,739 609,699
----------- -----------
30,283,123 26,452,322
Less treasury stock, at cost, 3,351.8 Class B shares 3,876,021 3,876,021
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 26,407,102 22,576,301
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,146,409 $33,057,632
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
(NOTE 1)
COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
JANUARY 1, January 2, January 3,
Years Ended 2000 1999 1998
------------------------------------------------------------------------------------------------------
(52 WEEKS) (52 Weeks) (53 Weeks)
<S> <C> <C> <C>
NET SALES (NOTES 10 AND 11) $84,915,848 $87,525,252 $99,061,871
COST OF SALES (NOTE 10) 60,980,849 62,740,573 71,063,899
----------- ----------- -----------
GROSS PROFIT 23,934,999 24,784,679 27,997,972
OPERATING EXPENSES, INCLUDING INTEREST
EXPENSE OF $65,629, $459,001 AND
$721,757 (NOTES 1 AND 7) 15,871,513 18,495,242 21,787,882
----------- ----------- -----------
INCOME FROM OPERATIONS 8,063,486 6,289,437 6,210,090
OTHER INCOME, NET (NOTE 12) 151,011 163,979 187,978
----------- ----------- -----------
INCOME BEFORE ITEMS BELOW 8,214,497 6,453,416 6,398,068
PAYMENTS IN LIEU OF CORPORATE INCOME TAXES
(NOTES 2 AND 10) 3,651,608 1,211,899 119,175
----------- ----------- -----------
INCOME BEFORE STATE AND LOCAL TAXES 4,562,889 5,241,517 6,278,893
STATE AND LOCAL INCOME TAXES (NOTE 2) 221,282 127,346 --
----------- ----------- -----------
NET INCOME 4,341,607 5,114,171 6,278,893
OTHER COMPREHENSIVE INCOME - UNREALIZED
GAINS ON SECURITIES (NOTES 2 AND 3) 135,040 332,469 137,853
----------- ----------- -----------
COMPREHENSIVE INCOME (NOTE 2) $ 4,476,647 $ 5,446,640 $ 6,416,746
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
(NOTE 1)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended January 1, 2000, January 2, 1999 and January 3, 1998
----------------------------------------------------------------------------------------
Common Common Additional
Stock - Stock - Paid-In
Class A Class B Capital
------- ------- -----------
<S> <C> <C> <C>
BALANCE - DECEMBER 29, 1996 $57,590 $47,010 $10,303,203
COMPREHENSIVE INCOME (53 WEEKS):
Net income -- -- --
Other comprehensive income -- -- --
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- -- --
------- ------- -----------
BALANCE - JANUARY 3, 1998 57,590 47,010 10,303,203
COMPREHENSIVE INCOME (52 WEEKS):
Net income -- -- --
Other comprehensive income -- -- --
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- -- --
------- ------- -----------
BALANCE - JANUARY 2, 1999 57,590 47,010 10,303,203
COMPREHENSIVE INCOME (52 WEEKS):
Net income -- -- --
Other comprehensive income -- -- --
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- -- --
------- ------- -----------
BALANCE - JANUARY 1, 2000 $57,590 $47,010 $10,303,203
======= ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Years Ended January 1, 2000, January 2, 1999 and January 3, 1998
-----------------------------------------------------------------------------------------------------------------------------------
Equity in Affiliated Accumulated
Vintage Beverage Other Total
Retained Segments of Comprehensive Treasury Stockholders'
Earnings Business Income Stock Equity
----------- -------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 29, 1996 $ 3,775,283 $ 797,545 $139,377 $(3,876,021) $ 11,243,987
COMPREHENSIVE INCOME (53 WEEKS):
Net income 6,097,121 181,772 -- -- 6,278,893
Other comprehensive income -- -- 137,853 -- 137,853
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- (251,516) -- -- (251,516)
----------- --------- -------- ----------- ------------
BALANCE - JANUARY 3, 1998 9,872,404 727,801 277,230 (3,876,021) 17,409,217
COMPREHENSIVE INCOME (52 WEEKS):
Net income 4,872,725 241,446 -- -- 5,114,171
Other comprehensive income -- -- 332,469 -- 332,469
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- (279,556) -- -- (279,556)
----------- --------- -------- ----------- ------------
BALANCE - JANUARY 2, 1999 14,745,129 689,691 609,699 (3,876,021) 22,576,301
COMPREHENSIVE INCOME (52 WEEKS):
Net income 3,895,057 446,550 -- -- 4,341,607
Other comprehensive income -- -- 135,040 -- 135,040
DISTRIBUTIONS TO AFFILIATES (NOTE 1) -- (645,846) -- -- (645,846)
----------- --------- -------- ----------- ------------
BALANCE - JANUARY 1, 2000 $18,640,186 $ 490,395 $744,739 $(3,876,021) $ 26,407,102
=========== ========= ======== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
(NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 1, January 2, January 3
Years Ended 2000 1999 1998
(52 WEEKS) (52 Weeks) (53 Weeks)
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,341,607 $ 5,114,171 $ 6,278,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,385,411 3,777,217 3,937,409
Gain on sale of property, plant and equipment (1,533) (5,221) (21,109)
Payment of license fees -- (1,450,000) (4,400,000)
Equity in undistributed earnings of affiliates -- -- (18,446)
Net change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (1,868,807) 1,731,558 7,374,909
Inventories (1,469,561) 53,407 1,443,300
Prepaid expenses 20,641 (160,347) (108,502)
Pallets (210,900) (111,508) 179,176
Security deposits and other assets (103,162) 1,821 950
Increase (decrease) in:
Accounts payable 118,389 (252,235) (11,313,913)
Accrued expenses and other current
liabilities 301,967 (1,005,100) 2,196,792
Income taxes payable (37,149) 127,346 --
----------- ----------- ------------
Net Cash Provided by Operating Activities 4,476,903 7,821,109 5,549,459
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (568,807) (1,367,219) (1,718,789)
Proceeds from sales of property, plant and
equipment 4,175 30,683 23,394
Proceeds from payments on notes receivable -- 180,954 22,620
Distribution from affiliates -- 385,414 156,097
Distributions to affiliates (Note 1) (645,846) (279,556) (251,516)
Purchase of marketable securities (825,000) -- --
----------- ----------- ------------
Net Cash Used in Investing Activities (2,035,478) (1,049,724) (1,768,194)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Repayments of notes payable - affiliates (2,125,231) (5,677,588) (3,302,733)
----------- ----------- ------------
Net Cash Used in Financing Activities (2,125,231) (5,677,588) (3,302,733)
----------- ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 316,194 $ 1,093,797 $ 478,532
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,862,901 769,104 290,572
----------- ----------- ------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,179,095 $ 1,862,901 $ 769,104
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 65,629 $ 459,001 $ 721,757
Cash paid for income taxes 266,800 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
---------- ----------
<S> <C> <C>
Finished goods $3,367,362 $2,824,313
Raw materials 3,881,244 2,954,732
---------- ----------
$7,248,606 $5,779,045
========== ==========
</TABLE>
8
<PAGE> 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:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
----------- ----------
<S> <C> <C>
Land $ 648,179 $ 648,179
Buildings and improvements 7,915,100 7,915,100
Machinery and equipment 20,557,913 20,144,068
Transportation equipment 1,289,115 1,239,267
Furniture and fixtures 1,479,732 1,389,775
----------- -----------
31,890,039 31,336,389
Less accumulated depreciation 24,137,496 22,277,133
----------- -----------
$ 7,752,543 $ 9,059,256
=========== ===========
</TABLE>
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
<PAGE> 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:
<TABLE>
<S> <C>
2000 $ 1,238,828
2001 527,476
2002 404,544
----------------
$ 2,170,848
================
</TABLE>
10
<PAGE> 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:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
----------- -----------
<S> <C> <C>
Benefit obligation $(4,756,032) $(4,637,367)
Fair value of plan assets 5,726,024 5,384,470
----------- -----------
Funded status $ 969,992 $ 747,103
=========== ===========
Prepaid (accrued) benefit cost
recognized in the balance
sheet $ (11,413) $ 143,291
</TABLE>
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
<PAGE> 14
CONCORD BEVERAGE COMPANY AND THE VINTAGE BEVERAGE SEGMENTS OF ITS AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Benefit cost $154,704 $192,432 $289,232
Employer contributions -- 456,812 229,674
Benefits paid 112,521 175,202 65,285
</TABLE>
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
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<PAGE> 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:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest and dividend
income $149,478 $158,758 $148,423
Gain on sale of property,
plant and equipment 1,533 5,221 21,109
Equity in undistributed
earnings of affiliates -- -- 18,446
-------- -------- --------
$151,011 $163,979 $187,978
======== ======== ========
</TABLE>
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.
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