SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 1996
ATLANTIC BEVERAGE COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-22614 36-3761400
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
(Address of principal executive offices)
60062
(Zip Code)
(847) 480-4000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
ARTHUR ANDERSEN LLP
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
COMBINED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants F-2
Combined Balance Sheet - as of September 30, 1996 F-3
Combined Statement of Operations - for the twelve months ended
September 30, 1996 F-4
Combined Statement of Changes in Stockholders' Equity for the
twelve months ended September 30, 1996 F-5
Combined Statement of Cash Flows - for the twelve months ended
September 30, 1996 F-6
Notes to Combined Financial Statements F-7
Pro Forma Consolidated Financial Data F-12
F-1
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owner of
Grogan's Farm, Inc. and Grogan's Sausage, Inc.:
We have audited the accompanying combined balance sheet of Grogan's Farm, Inc.
(a Kentucky company), Grogan's Sausage, Inc. (a Kentucky company) and certain
assets of the stockholders as of September 30, 1996, and the related combined
statement of operations, changes in stockholders' equity and cash flows for the
twelve months ended September 30, 1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Grogan's Farm, Inc.
and Grogan's Sausage, Inc. as of September 30, 1996, and the results of its
operations and its cash flows for the twelve months ended September 30, 1996, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
October 10, 1996
F-2
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
ASSETS
CURRENT ASSETS:
Cash $ 1,092
Accounts receivable, net of allowance for doubtful
accounts of $18,000 281,795
Inventory (Notes 1 and 2) 271,719
------------
Total current assets 554,606
PROPERTY, PLANT AND EQUIPMENT, net (Notes 1 and 3) 680,085
------------
Total assets $ 1,234,691
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 23,438
Accrued expenses 48,000
Income taxes payable 172,900
Deferred tax liability (Notes 1 and 4) 116,700
Note payable to related parties (Note 5) 241,000
------------
Total current liabilities 602,038
DEFERRED TAX LIABILITY, net of current portion (Notes 1 and 4) 28,700
------------
Total liabilities 630,738
COMMITMENTS (Notes 6, 8 and 9)
STOCKHOLDERS' EQUITY 603,953
------------
Total liabilities and stockholders' equity $ 1,234,691
============
The accompanying notes are an integral part of this combined balance sheet.
F-3
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
NET SALES (Note 1) $ 4,760,191
COST OF GOODS SOLD, exclusive of depreciation shown below 3,808,881
-----------
Gross profit 951,310
-----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and benefits 551,836
Other operating expenses 264,571
Depreciation and amortization (Notes 1 and 3) 142,435
-----------
Total selling, general and administrative expenses 958,842
-----------
Loss from operations (7,532)
INTEREST INCOME 12,656
OTHER INCOME 4,581
-----------
Income before provision for income taxes 9,705
PROVISION FOR INCOME TAXES 163,900
-----------
Net loss $ (154,195)
===========
The accompanying notes are an integral part of this combined statement.
F-4
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Common Stock
----------------------------------------
Number of No-Par
Shares,
Authorized,
Issued and Retained
Outstanding Amount Capital Earnings Total
------------------ ------------ ------------ -------------- -------------
<S> <C>
BALANCE, September 30,
1995 2,000 $ - $ 321,174 $ 855,417 $ 1,176,591
Net loss - - - (154,195) (154,195)
Contributed capital - - 77,197 - 77,197
Distributions to owners - - - (495,640) (495,640)
-------------- -------------- -------------- -------------- --------------
BALANCE, September 30,
1996 2,000 $ - $ 398,371 $ 205,582 $ 603,953
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-5
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (154,195)
Adjustments to reconcile net income to cash flows provided
by operating activities-
Depreciation and amortization 142,435
Decrease in accounts receivable, net 34,991
Increase in inventory (80,572)
Decrease in prepaid expenses 1,297
Decrease in accounts payable (77,887)
Increase in accrued expenses 36,000
Decrease in deferred tax liability (31,100)
Increase in income tax payable 172,900
-----------
Net cash flows provided by operating activities 43,869
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (93,228)
------------
Net cash flows used in investing activities (93,228)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to owners (495,640)
Contributed capital 77,197
Decrease in notes receivable 362,000
Increase in note payable to related parties, net 98,321
-----------
Net cash provided by financing activities 41,878
-----------
NET DECREASE IN CASH (7,481)
CASH, beginning of period 8,573
-----------
CASH, end of period $ 1,092
===========
CASH PAID DURING THE YEAR FOR:
Interest $ 12,870
===========
Income taxes $ 22,070
===========
The accompanying notes are an integral part of this combined statement.
F-6
<PAGE>
GROGAN'S FARM, INC. AND GROGAN'S SAUSAGE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying financial statements present the accounts of Grogan's Farm,
Inc. (Grogan's Farm), Grogan's Sausage, Inc. (Grogan's Sausage) and certain
assets owned by the stockholders ("the stockholders"), (collectively "the
Company"), which operate a hog slaughtering and meat processing facility and a
distribution operation, primarily serving Western Kentucky and the surrounding
area. Grogan's Farm operates on a calendar year basis, while Grogan's Sausage
operates under a fiscal year ending September 30. The accompanying balance sheet
reflects the combined financial position as of September 30, 1996. The
accompanying statements of operations, stockholders' equity and cash flows
reflect the combined results of operations for the twelve months ended September
30, 1996. All significant intercompany transactions have been eliminated in
combination.
Revenue Recognition
The Company records sales when product is delivered to the customers.
Inventory
Inventory is stated at the lower of cost or market and is comprised primarily of
livestock, packaged meat products, raw materials and packaging supplies. Cost is
determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment consists of land, buildings and building
improvements, office and warehouse equipment and delivery vehicles and is stated
at cost. Depreciation on buildings and building improvements is provided for on
the straight-line method over 7 to 25 years. Depreciation on office and
warehouse equipment and delivery vehicles is provided for on the straight-line
method over five-year to eight-year estimated useful lives of the assets.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues, expenses, gains
and losses during the reporting periods. While actual results could differ from
these estimates, management believes that these estimates are reasonable.
F-7
<PAGE>
Income Taxes
Grogan's Farm is a subchapter S corporation for income tax purposes and, as
such, taxable income or loss from Grogan's Farm for the periods was included in
the individual income tax returns of its owners for federal and state income tax
purposes. As a result, no provision for income taxes has been included in the
accompanying combined statements of operations for Grogan's Farm.
Grogan's Sausage is a cash-basis C corporation for income tax purposes and, as a
result, accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes."
2. INVENTORY:
Inventories consisted of the following as of September 30, 1996:
Livestock $ 23,760
Raw materials 5,731
Finished products 182,168
Packaging and supplies 60,060
------------
Total $ 271,719
============
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following as of September 30,
1996:
Land $ 4,795
Buildings and improvements 332,027
Machinery and equipment 490,867
Vehicles 515,608
------------
1,343,297
Less - Accumulated depreciation 663,212
------------
Property, plant and equipment, net $ 680,085
============
Depreciation expense recorded for the twelve months ended September 30, 1996,
was $142,435.
F-8
<PAGE>
4. INCOME TAXES:
The provision (benefit) for income taxes in the accompanying combined statement
of operations were comprised of the following:
Current:
Federal $ 155,300
State 39,700
------------
195,000
------------
Deferred:
Federal (25,600)
State (5,500)
------------
(31,100)
------------
Total $ 163,900
============
Deferred tax assets (liabilities) were comprised of the following as of
September 30, 1996:
Accounts receivable $ (110,700)
Inventories (73,500)
Property, plant and equipment (28,700)
Accounts payable 54,900
Other 12,600
------------
Total $ (145,400)
============
Statutory federal income taxes, reconciled to the effective income tax provision
as recorded in the accompanying combined financial statements is as follows:
Statutory Federal income taxes $ 3,300
Adjustments:
Income from S-corporation and real estate operations,
not subject to corporate income taxes 141,800
State income taxes, net of federal benefit 22,600
Other (3,800)
-----------
$ 163,900
===========
5. NOTE PAYABLE TO RELATED PARTIES:
On October 1, 1988, the Company borrowed $40,000 from the stockholders. Interest
on the unsecured notes accrued at an annual rate of 10% and was payable monthly.
The outstanding principal, plus accrued interest was repaid on September 30,
1996.
On January 1, 1989, the Company borrowed $37,760 from the stockholders. Interest
on the unsecured notes accrued at an annual rate of 10% and was payable monthly.
The outstanding principal, plus accrued interest was repaid on September 30,
1996.
F-9
<PAGE>
On September 30, 1996, the Company borrowed $241,000 from the stockholders.
Interest on the unsecured note accrues at an annual rate of 8% and is payable
monthly on demand.
Management believes that the carrying value of the unsecured notes payable
approximates fair value as of September 30, 1996.
6. LETTER OF CREDIT:
Grogan's maintains a standby letter of credit as collateral for inventory
purchases in the amount of $15,000. No amounts were drawn on this letter during
the twelve months ended September 30, 1996.
7. COMMITMENTS:
Grogan's Farm and Grogan's Sausage have entered into operating leases for the
rental of facilities and equipment. Lease expense for the twelve months ended
September 30, 1996, was $60,000. Future minimum lease payments are as follows:
Year Ending September 30,
1997 $ 60,000
1998 15,000
1999 -
2000 -
2001 and thereafter -
8. SUMMARIZED FINANCIAL INFORMATION:
Summarized financial information by entity (before eliminations):
Grogan's Grogan's Stockholders'
Farm Sausage Assets
Current assets $ 227,922 $ 702,398 $ -
Noncurrent assets 320,700 192,700 166,685
Current liabilities 37,321 485,847 -
Noncurrent liabilities - 28,700 -
----------- ----------- ----------
Equity $ 585,943 $ 1,409,645 $ 166,685
=========== =========== ===========
Net sales $ 3,968,310 $ 4,579,044 $ -
=========== =========== ==========
(Loss) income from operations $ (601,827) $ 428,455 $ (21,599)
=========== =========== ===========
Net (loss) income $ (395,590) $ 262,994 $ (21,599)
=========== =========== ===========
F-10
<PAGE>
9. RETIREMENT PLAN:
The Companies maintain a 401(k) retirement plan which covers substantially all
full-time employees who meet certain age and service requirements. The Companies
may make discretionary contributions into the plan; however, employees are not
permitted to contribute due to the fact that certain participation requirements
have not been met. Contributions made to this plan for fiscal year 1996 were
$16,000, while expenses charged were $32,000.
10. SUBSEQUENT EVENT:
Effective October 1, 1996, substantially all of the assets and liabilities of
Grogan's Farm, the outstanding common stock of Grogan's Sausage and certain real
property used in these businesses previously held by the owners of these
Companies, were acquired by a wholly-owned subsidiary of Atlantic Beverage
Company, Inc. As a result, a new basis of accounting was established in
accordance with purchase method accounting.
F-11
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Pro Forma Consolidated Financial Data includes the
unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1995, the unaudited Pro Forma Consolidated Statement of Operations
for the nine months ended September 30, 1996, and the unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 1996. The unaudited Pro Forma
Consolidated Statement of Operations for the year ended December 31, 1995 and
the nine months ended September 30, 1996 and the unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 1996 are adjusted to give effect
to (i)the consummation of the acquisition of the assets of Grogan's Sausage,
Inc. (ii) the consummation of the acquisition of the equity of Grogan's Farm,
Inc. (iii) the consummation of the acquisition of certain real property owned by
the Grogan family (iv) the issuance of additional shares of Atlantic Beverage
common stock to the sellers of Grogan's (v) the incurrence of revolver and term
debt in amounts sufficient to complete the transactions described in (i) - (iii)
above, as if such transaction had occurred on January 1, 1995 for the unaudited
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1995, and January 1, 1996 for the unaudited Pro Forma Consolidated Statement of
Operations for the nine months ended September 30, 1996 and the unaudited Pro
Forma Consolidated Balance Sheet as of September 30, 1996.
The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The Pro Forma
Consolidated Financial Data should be read in conjunction with the Company's
Financial Statements and related notes thereto and the financial statements and
related notes of Grogan's Farm, Inc. and Grogan's Sausage, Inc. The unaudited
Pro Forma Consolidated Financial Data do not purport to represent what the
Company's results of operations or financial position would have been had any of
the above events occurred on January 1, 1995 or January 1, 1996 or to project
the Company's results of operations or financial position for or at any future
period or date.
F-12
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
CONSOLIDATING PRO FORMA BALANCE SHEETS
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
The Company Grogan's Pro Forma Pro Forma
(Historical) (Historical) Adjustments Consolidated
------------- ------------- ------------ ------------
<S> <C>
Cash $ 1,141,787 1,092 $ 1,142,879
Short Term Invesments - - -
Accounts Receivable 6,136,979 281,795 6,418,774
Inventory 3,845,080 271,719 4,116,799
Prepaid expenses and other 662,420 - 662,420
------------- ------------ ------------- -------------
Total Current Assets 11,786,266 554,606 - 12,340,872
Property, Plant and Equipment, net 3,154,944 680,085 833,121 (a) 4,668,150
Noncompete Agreement, net 86,000 - 86,000
Deferred tax asset, net 365,000 - 365,000
Goodwill, net 11,063,869 - 2,193,456 (b) 13,257,325
Cash surrender value of life insurance - - -
Other assets, net 430,540 - 430,540
------------- ------------ ------------- -------------
Total Assets 26,886,619 1,234,691 3,026,577 31,147,887
============= ============ ============= =============
Bank overdraft 2,034,230 - 2,034,230
Line of credit 5,071,891 - 350,000 (c) 5,421,891
Current portion of notes payable 1,761,606 - 1,761,606
Accounts payable 5,238,175 23,438 250,000 (d) 5,511,613
Accrued expenses 1,006,696 48,000 1,054,696
Income taxes payable - 172,900 (172,900) (e) -
Deferred tax liability - 116,700 (27,000) (f) 89,700
Notes payable to related parties - 241,000 (241,000) (e) -
Net current liabilities of discontinued operations 203,492 - 203,492
Current portion of obligations under capital lease 30,342 - 30,342
------------- ------------ ------------- -------------
Total Current Liabilites 15,346,432 602,038 159,100 16,107,570
Obligations under capital lease, net of current portion 86,795 - 86,795
Long-term debt, net of current portion 6,286,510 - 1,750,000 (g) 8,036,510
Deferred tax liability 167,000 28,700 195,700
------------- ------------ ------------- -------------
Total liabilities 21,886,737 630,738 1,909,100 24,426,575
Stockholders' Equity:
Preferred stock - - -
Series A nonvoting preferred stock - - -
Common stock 61,490 - 5,738 (h) 67,228
Additional paid-in-capital 8,772,702 - 1,715,692 (h) 10,488,394
Owner's Capital - 603,953 (603,953) (i) -
Retained earnings (Accumulated -
deficit) (3,407,240) - (3,407,240)
Treasury stock (427,070) - (427,070)
------------- ------------ ------------- -------------
Total Equity 4,999,882 603,953 1,117,477 6,721,312
Total Liabilities and Stockholders' Equity $ 26,886,619 $ 1,234,691 $ 3,026,577 $ 31,147,887
============= ============ ============= =============
</TABLE>
F-13
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
9/30/96
(a) To reflect adjustment to record property, plant and equipment at estimated
fair value.
(b) To record goodwill related to the acquisitions of Grogan's Sausage, Inc.
and Grogan's Farm, Inc. calculated as follows:
Total Purchase Price $2,821,430
Transaction cost related to purchase 250,000
Net assets acquired (877,974)
----------
Goodwill $2,193,456
(c) To reflect line of credit utilization to fund acquisitions.
(d) To record payable associated with Grogan's transaction cost.
(e) To back-out liabilities not assumed by Atlantic Beverage Company, Inc.
(f) To reflect difference of pre- and post- acquisition deferred taxes.
(g) To record debt borrowed in connection with Grogan's acquisitions
calculated as follows:
New term debt $1,550,000
Note payable to seller of Grogan's 200,000
----------
$1,750,000
(h) To record the issuance of additional shares of Atlantic Beverage Company,
Inc. common stock to the seller of Grogan's.
(i) Adjustment to owner's equity in connection with the Grogan's acquisitions.
F-14
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Richard's
The Company 7 months ended Grogan's Pro Forma Pro Forma
(Historical) 7/31/96 (Historical) Adjustments Consolidated
------------- -------------- ------------ ------------- -----------------
<S> <C>
Net Sales $ 110,929,668 $2,129,749 $3,586,391 - $ 116,645,808
Cost of goods sold 98,805,071 1,157,233 1,946,792 - 101,909,096
-------------- ----------- ------------ ------------- -----------------
Gross Profit 12,124,597 972,516 1,639,599 - 14,736,712
Selling, general and administrative:
Salaries and benefits 4,975,230 372,821 712,920 (220,500) (a) 5,840,471
Other operating expense 5,472,137 182,627 585,894 6,240,658
Depreciation and amortization 650,029 23,100 134,933 89,256 (b)
41,127 (c) 938,445
Management and consulting fees - - - 37,500 (d) 37,500
-------------- ----------- ------------ ------------- -----------------
Total selling, general and administrative 11,097,396 578,548 1,433,747 (52,617) 13,057,074
Income(loss) from operations 1,027,201 393,968 205,852 52,617 1,679,638
Other Income (Expenses):
Interest expense (814,255) - (8,907) (131,343) (e) (954,505)
Interest income 18,318 5,264 23,791 - 47,373
Other 440,608 1,451 55,308 - 497,367
-------------- ----------- ------------ ------------- -----------------
Income (loss) before income tax provision 671,872 400,683 276,044 (78,726) 1,269,873
Income tax provision - - 175,093 64,107 (f) 239,200
-------------- ----------- ------------ ------------- -----------------
Net (loss) income from continuing
operations $ 671,872 $ 400,683 $ 100,951 $ (142,833) $ 1,030,673
============== =========== ============ ============= =================
</TABLE>
F-15
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
9/30/96
(a) To reflect difference of pre- and post- acquisition salaries and benefits of
the former owner of Grogan's in accordance with an employment agreement.
(b) To reflect impact of the different bases of acquired property, plant and
equipment as calculated below:
Depreciation expense on acquired assets $223,981
Less: Depreciation expense recorded
recorded by acquired company 134,725
-------
$ 89,256
(c) To record adjusted amortization to reflect the Grogan's acquisitions as
calculated below:
Total goodwill $2,193,456
Amortized over 40 years 40
--------
Annual amortization $ 54,836
9 month amortization $ 41,127
(d) To record management fees to be paid to Sterling Capital in accordance with
a management agreement.
(e) To record interest expense on acquisition financing as follows:
Interest expense on new debt - 9 months $140,250
Less: Interest expense recorded
by acquired company 8,907
-------
$131,343
(f) To reflect difference of pre- and post- acquisition income tax provision.
F-16
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Combined as
Previously Grogan's Pro Forma Pro Forma
Reported (Historical) Adjustments Consolidated
--------------- ------------ ------------ -------------
<S> <C>
Net Sales $ 139,801,137 $ 5,053,458 $144,854,595
Cost of goods sold 121,725,092 2,849,706 124,574,798
--------------- ------------ ------------ -------------
Gross Profit 18,076,045 2,203,752 - 20,279,797
Selling, general and administrative:
Salaries and benefits 8,005,822 763,729 44,800 (a) 8,814,351
Other operating expense 7,313,270 867,556 8,180,826
Depreciation and amortization 1,139,789 135,263 163,557 (b)
54,836 (c) 1,493,445
Management and consulting fees 389,173 - 50,000 (d) 439,173
--------------- ------------ ------------ -------------
Total selling, general and administrative 16,848,054 1,766,548 313,193 18,927,795
Income(loss) from operations 1,227,991 437,204 (313,193) 1,352,002
Other Income (Expenses):
Interest expense (1,168,932) (14,987) (172,013) (e) (1,355,932)
Interest income 22,116 13,737 35,853
Other 54,928 56,462 111,390
--------------- ------------ ------------ -------------
Income (loss) before income tax provision 136,103 492,416 (485,206) 143,313
Income tax provision 75,628 (72,744) (f) 2,884
--------------- ------------ ------------ -------------
Net (loss) income from continuing
operations $ 136,103 $ 416,788 $ (412,462) $ 140,429
=============== ============ ============ =============
</TABLE>
F-17
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
12/31/95
(a) To reflect difference of pre- and post- acquisition salaries and benefits of
the former owner of Grogan's in accordance with an employment agreement.
(b) To reflect impact of the different bases of acquired property, plant and
equipment as calculated below:
Depreciation expense on acquired assets $298,641
Less: Depreciation expense recorded
recorded by acquired company 135,084
--------
Adjustment $163,557
(c) To record adjusted amortization to reflect the Grogan's acquisitions as
calculated below:
Total goodwill $2,193,456
Amortized over 40 years 40
----------
Annual amortization $ 54,836
(d) To record management fees to be paid to Sterling Capital in accordance with
a management agreement.
(e) To record interest expense on acquisition financing as follows:
Interest expense on new debt $187,000
Less: Interest expense recorded 14,987
--------
Adjustment $172,013
(f) To reflect difference of pre- and post- acquisition income tax provision.
F-18
<PAGE>
ATLANTIC BEVERAGE COMPANY, INC.
PURCHASE PRICE ALLOCATION - GROGAN'S
AS OF OCTOBER 1, 1996
<TABLE>
<CAPTION>
Grogan's Grogan's Grogan's
Farm Sausage Real Estate Combined
-------------- ------------ ------------- ---------------
<S> <C>
Purchase Price:
Cash $ 391,000 $ 509,000 $ 1,000,000 $ 1,900,000
Common Stock (573,810 X $3.00)* 1,721,430 - - 1,721,430
Note to Shareholder (3 yrs. @ 8%) 200,000 - - 200,000
-------------- ------------ ------------- ---------------
Total Purchase Price 2,312,430 509,000 1,000,000 3,821,430
Transaction Costs 250,000
-------------- ------------ ------------- ---------------
Adjusted Purchase Price 2,312,430 509,000 1,000,000 4,071,430
Assets Obtained:
Cash 720 372 - 1,092
Accounts Receivable, net - 281,795 - 281,795
Inventory 89,551 182,168 - 271,719
Property, Plant and Equipment 320,700 192,506 1,000,000 1,513,206
-------------- ------------ ------------- ---------------
Total Assets Obtained 410,971 656,841 1,000,000 2,067,812
Liabilities Assumed:
Transaction cost payable -
Accounts Payable 21,321 2,117 - 23,438
Accrued Expenses 16,000 32,000 - 48,000
Deferred Tax Liability 118,400 - - 118,400
-------------- ------------ ------------- ---------------
Total Liabilities Assumed 155,721 34,117 - 189,838
Net Assets Obtained 255,250 622,724 1,000,000 1,877,974
-------------- ------------ ------------- ---------------
Goodwill $ 2,057,180 $ (113,724) $ - $ 2,193,456
*ABEV stock price at 10/1/96 $ 3.00
</TABLE>
Per APB 16, Paragraph 74, the value of marketable equity securities issued to
effect a purchase business combination should be determined based on the market
price of the securities over a reasonable period of time before and after the
two companies have reached an agreement on the purchase price and the proposed
transaction is announced. Since the market price stayed fairly constant around
the agreement date and when the agreement was announced, ABEV will use the stock
price at the effective date (Oct. 1)
F-19
<PAGE>
(b) Exhibits
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ATLANTIC BEVERAGE COMPANY, INC.
Dated: December 31, 1996 By: /s/ Merrick M. Elfman
---------------------
Merrick M. Elfman
Chairman of the Board
