<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 17, 1999
------------------
TODHUNTER INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13453 59-1284057
- ------------------------ ------------- ----------------
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
222 Lakeview Avenue, Suite 1500, West Palm Beach, Florida 33401
- --------------------------------------------------------------- -------------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (561) 655-8977
---------------
-----------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
TODHUNTER INTERNATIONAL, INC.
FORM 8-K/A
(AMENDMENT NO. 1)
Item 7 of the Form 8-K filed by Todhunter International, Inc. as of November 17,
1999, is amended to read in full as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
(1) Independent Auditors' Reports on the Financial
Statements; Financial Statements of Monarch Wine
Company as of December 31, 1998 and December 31,
1997 and for the years ended December 31, 1998
and 1997, and the Notes thereto.
(b) Pro Forma Financial Information
(1) Unaudited Pro Forma Financial Statements for
the Company as of September 30, 1999 and for
the year ended September 30, 1999, and the
Notes thereto.
(c) Exhibits
23.1 Consent of Babush, Neiman, Kornman & Johnson, LLP.
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.
TODHUNTER INTERNATIONAL, INC.
Date: January 31, 2000 By: /s/ A. Kenneth Pincourt, Jr.
---------------------------------------
A. Kenneth Pincourt, Jr.
Chairman and Chief Executive Officer
2
<PAGE>
ADAMS WINE COMPANY
D/B/A MONARCH WINE COMPANY
OF GEORGIA
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Adams Wine Company
d/b/a Monarch Wine Company of Georgia
Atlanta, Georgia
We have audited the accompanying balance sheet of Adams Wine Company, d/b/a
Monarch Wine Company of Georgia (an S corporation), as of December 31, 1998, and
the related statements of income and retained earnings, and cash flows for the
year then ended. 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 financial position of Adams Wine Company, d/b/a
Monarch Wine Company of Georgia, as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Babush, Neiman, Kornman & Johnson, LLP
February 12, 1999
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 2
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,286,209
Accounts receivable 1,233,554
Inventory 733,722
Prepaid expenses 91,882
---------------
TOTAL CURRENT ASSETS 3,345,367
---------------
NET PROPERTY AND EQUIPMENT 407,839
---------------
OTHER ASSETS
Prepaid pension cost 301,579
Deposits 2,894
---------------
TOTAL OTHER ASSETS 304,473
---------------
TOTAL ASSETS $ 4,057,679
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 720,591
Accrued expenses 404,862
---------------
TOTAL CURRENT LIABILITIES 1,125,453
---------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock:
Par value - $1
Authorized - 100,000 shares
Issued - 50,000 shares 50,000
Retained earnings 2,882,226
---------------
TOTAL STOCKHOLDERS' EQUITY 2,932,226
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,057,679
===============
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 3
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
SALES (less returns and allowances of $155,865) $ 16,035,940
COST OF SALES 11,401,969
-----------------
GROSS PROFIT 4,633,971
OPERATING EXPENSES (includes officers' compensation of $1,011,462) 2,045,861
-----------------
OPERATING INCOME 2,588,110
OTHER INCOME - net 59,888
-----------------
INCOME BEFORE INCOME TAXES 2,647,998
INCOME TAXES 15,889
-----------------
NET INCOME 2,632,109
RETAINED EARNINGS, JANUARY 1 3,250,117
DIVIDENDS ( 3,000,000)
----------------
RETAINED EARNINGS, DECEMBER 31 $ 2,882,226
=================
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 4
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,632,109
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 80,883
Loss on sale of property and equipment 3,918
Decrease in accounts receivable 573,129
Decrease in inventory 115,231
Increase in prepaid pension cost ( 37,375)
Decrease in prepaid expenses 17,269
Increase in accounts payable 117,021
Increase in accrued expenses 41,162
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,543,347
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 13,000
Purchase of property and equipment ( 175,306)
-----------
NET CASH USED BY INVESTING ACTIVITIES ( 162,306)
-----------
CASH FLOWS USED BY FINANCING ACTIVITIES
Dividends (3,000,000)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 381,041
CASH AND CASH EQUIVALENTS, JANUARY 1 905,168
-----------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $1,286,209
===========
SUPPLEMENTAL DISCLOSURES:
Operating activities include:
State income taxes paid $ 15,889
===========
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 5
NTOES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company specializes in the manufacture of wines, including custom
blended wines, cooking wines and base wines for vinegar and cordials.
The Company has elected, by unanimous consent of its stockholders, to be
taxed as an S Corporation under the Internal Revenue Code. Under these
provisions, the Company does not pay federal income taxes on its taxable
income. Instead, the stockholders are liable for federal income taxes on
their respective shares of the Company's taxable income. The Company is
required to pay state income taxes to certain states.
Inventory is valued at the lower of cost (last-in, first-out, 34%;
average, 66%) or market.
There is no allowance for doubtful accounts as management considers all
accounts receivable to be collectible.
Property and equipment are recorded at cost. Depreciation is provided by
the use of accelerated methods over the estimated useful lives of the
respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized. When items of
property or equipment are sold or retired, the related cost and
accumulated depreciation are removed from the accounts and any gain or
loss is included in the results of operations.
For purposes of the statement of cash flows, the Company considers demand
deposits at banks, bank overdrafts, money market funds, and highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions in
preparing financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses.
B. INVENTORY
The following table indicates what inventory and net income would have
been had the Company used the average cost method of inventory valuation.
This information is presented to enable a reader to make comparisons with
companies using the average cost method of inventory valuation.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 6
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Inventory $ 849,572
===============
Net Income $ 2,634,798
===============
</TABLE>
Inventory as of December 31, 1998, consists of the following:
<TABLE>
<S> <C>
Raw materials $ 388,309
Finished goods 242,154
Work in process 103,259
---------------
$ 733,722
===============
</TABLE>
C. NET PROPERTY AND EQUIPMENT
Major classifications of property and equipment and their respective
depreciable lives are summarized below:
<TABLE>
<CAPTION>
DEPRECIABLE
LIVES
-----------
<S> <C> <C>
Automobiles 5 years $ 231,684
Furniture and equipment 5 - 7 years 482,830
Leasehold improvements 31 - 39 years 95,164
-------------
809,678
Less accumulated depreciation 401,839
-------------
Total $ 407,839
=============
</TABLE>
D. MAJOR SUPPLIER
Purchases from one supplier comprised 26% of the Company's raw material
purchases. At December 31, 1998, the Company owed the vendor of $85,038.
E. LINE OF CREDIT
The Company has established a line of credit totaling $2,000,000, secured
by accounts receivable and inventory and guaranteed by the two major
stockholders. The line of credit renews automatically each year. Amounts
drawn on this line of credit bear interest at prime plus 2.75%. The prime
rate was 7.75% at December 31, 1998. At December 31, 1998, there were no
amounts outstanding. There was no interest expense for the year ended
December 31, 1998.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 7
NOTES TO FINANCIAL STATEMENTS
F. OPERATING LEASE
The Company leases an operating facility under an operating lease. The
operating lease includes an annual rental escalation clause based on the
Consumer Price Index. This lease expires in 2009. Rental expense for the
year ended December 31, 1998 was $135,806. The following is a schedule of
future minimum rental payments required under this lease as of December
31, 1998.
<TABLE>
<S> <C>
1999 $ 115,800
2000 115,800
2001 115,800
2002 115,800
2003 115,800
Thereafter 627,250
---------------
Total $ 1,206,250
===============
</TABLE>
G. PENSION PLAN
The Company sponsors a defined benefit pension plan that covers
substantially all employees. The plan calls for benefits to commence for
terminated and retired participants at the age of 65 and the completion
of five years of service or the actual attained age if older than 65.
Benefits may commence at an earlier date on an actuarially equivalent
basis. The Company has contributed each year the maximum deductible
contribution allowed by the Internal Revenue Code. Plan assets are
diversified among cash, government securities and corporate stock.
Pension expense for 1998 includes the following components:
<TABLE>
<S> <C>
Service cost of the current period $ 70,916
Interest cost on the projected benefit obligation 80,393
Amortization of loss ( 21,156)
Expected return on assets held in the plan ( 76,861)
Net amortization of the transition asset and deferral ( 1,059)
--------
Net periodic pension cost $ 52,233
========
</TABLE>
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 8
NOTES TO FINANCIAL STATEMENTS
The following sets forth the funded status of the plan and the amounts
shown in the accompanying balance sheet at December 31, 1998:
Actuarial present value of benefit obligations:
<TABLE>
<S> <C>
Vested benefits $ 993,758
Nonvested benefits 11,870
----------
Accumulated benefit obligation 1,005,628
Effect of anticipated future compensation levels and other events 149,872
----------
Projected benefit obligation 1,155,500
Fair value of assets held in the plan 1,346,158
----------
Excess of the fair value of plan assets over projected benefit obligation 190,658
Unrecognized net transition asset and deferral ( 15,733)
Unrecognized net loss 126,654
---------
Prepaid pension cost $ 301,579
=========
</TABLE>
The actuarial present value of the projected obligation was computed
using a weighted-average discount rate of 8% and a rate of increase in
future compensation levels of 4.5%. The expected long-term rate of return
on plan assets is 8%.
H. STOCK PURCHASE AGREEMENT
The Company has entered into a stock purchase agreement with a 50%
shareholder whereby the Company may be required to purchase the stock of
the shareholder upon his death. The methodology for determining the
purchase price is set forth in the agreement.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 9
NOTES TO FINANCIAL STATEMENTS
I. CONCENTRATION OF CREDIT RISK
TheCompany's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company
places its cash and temporary cash investments with high credit quality
institutions. At times such investments may be in excess of the FDIC
insurance limit. Management is of the opinion that there is no risk
because of the financial strength of these institutions.
<PAGE>
ADAMS WINE COMPANY
D/B/A MONARCH WINE COMPANY
OF GEORGIA
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Adams Wine Company
d/b/a Monarch Wine Company of Georgia
Atlanta, Georgia
We have audited the accompanying balance sheet of Adams Wine Company, d/b/a
Monarch Wine Company of Georgia (an S corporation), as of December 31, 1997, and
the related statements of income and retained earnings, and cash flows for the
year then ended. 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 financial position of Adams Wine Company, d/b/a
Monarch Wine Company of Georgia, as of December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Babush, Neiman, Kornman & Johnson, LLP
February 20, 1998
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 2
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 905,168
Accounts receivable 1,806,683
Inventory 848,953
Prepaid expenses 109,151
-------------
TOTAL CURRENT ASSETS 3,669,955
-------------
NET PROPERTY AND EQUIPMENT 330,334
-------------
OTHER ASSETS
Prepaid pension cost 264,204
Deposits 2,894
-------------
TOTAL OTHER ASSETS 267,098
-------------
TOTAL ASSETS $ 4,267,387
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 603,570
Accrued expenses 363,700
-------------
TOTAL CURRENT LIABILITIES 967,270
-------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock:
Par value - $1
Authorized - 100,000 shares
Issued - 50,000 shares 50,000
Retained earnings 3,250,117
--------------
TOTAL STOCKHOLDERS' EQUITY 3,300,117
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,267,387
=============
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 3
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
SALES (less returns and allowances of $104,610) $ 17,967,432
COST OF SALES 12,188,942
-------------
GROSS PROFIT 5,778,490
OPERATING EXPENSES (includes officers' compensation of
$1,018,714) 1,969,380
-------------
OPERATING INCOME 3,809,110
OTHER INCOME - net 40,240
-------------
INCOME BEFORE INCOME TAXES 3,849,350
INCOME TAXES 9,095
-------------
NET INCOME 3,840,255
RETAINED EARNINGS, JANUARY 1 2,559,862
DIVIDENDS ( 3,150,000)
-------------
RETAINED EARNINGS, DECEMBER 31 $ 3,250,117
=============
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 4
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,840,255
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 69,528
Loss on sale of property and equipment 18,040
Increase in accounts receivable ( 355,175)
Decrease in inventory 203,760
Increase in prepaid pension cost ( 136,497)
Increase in prepaid expenses ( 16,108)
Decrease in accounts payable ( 321,216)
Decrease in accrued expenses ( 36,452)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,266,135
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 26,386
Purchase of property and equipment ( 155,808)
Repayments of note receivable 73,024
-------------
NET CASH USED BY INVESTING ACTIVITIES ( 56,398)
-------------
CASH FLOWS USED BY FINANCING ACTIVITIES
Dividends ( 3,150,000)
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 59,737
CASH AND CASH EQUIVALENTS, JANUARY 1 845,431
--------------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 905,168
==============
SUPPLEMENTAL DISCLOSURES:
Operating activities include:
State income taxes paid $ 9,095
==============
</TABLE>
See notes to financial statements
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 5
NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company specializes in the manufacture of wines, including custom
blended wines, cooking wines and base wines for vinegar and cordials.
The Company has elected, by unanimous consent of its stockholders, to be
taxed as an S Corporation under the Internal Revenue Code. Under these
provisions, the Company does not pay federal income taxes on its taxable
income. Instead, the stockholders are liable for federal income taxes on
their respective shares of the Company's taxable income. The Company is
required to pay state income taxes to certain states.
Inventory is valued at the lower of cost (last-in, first-out, 23%;
average, 77%) or market.
There is no allowance for doubtful accounts as management considers all
accounts receivable to be collectible.
Property and equipment are recorded at cost. Depreciation is provided by
the use of accelerated methods over the estimated useful lives of the
respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized. When items of
property or equipment are sold or retired, the related cost and
accumulated depreciation are removed from the accounts and any gain or
loss is included in the results of operations.
For purposes of the statement of cash flows, the Company considers demand
deposits at banks, bank overdrafts, money market funds, and highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions in
preparing financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses.
B. INVENTORY
The following table indicates what inventory and net income would have
been had the Company used the average cost method of inventory valuation.
This information is presented to enable a reader to make comparisons with
companies using the average cost method of inventory valuation.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 6
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Inventory $ 962,144
===============
Net Income $ 3,840,526
===============
</TABLE>
Inventory as of December 31, 1997, consists of the following:
<TABLE>
<S> <C>
Raw materials $ 376,609
Finished goods 381,101
Work in process 91,243
---------------
$ 848,953
===============
</TABLE>
C. NET PROPERTY AND EQUIPMENT
Major classifications of property and equipment and their respective
depreciable lives are summarized below:
<TABLE>
<CAPTION>
DEPRECIABLE
LIVES
-------------
<S> <C> <C>
Automobiles 5 years $ 217,717
Furniture and equipment 5 - 7 years 352,806
Leasehold improvements 31.5 - 39 years 95,164
-----------
665,687
Less accumulated depreciation 335,353
-----------
Total $ 330,334
===========
</TABLE>
D. MAJOR SUPPLIER
Purchases from one supplier comprised 23% of the Company's raw material
purchases. For the year ended December 31, 1997, the Company had accounts
payable to the vendor of $57,620.
E. LINE OF CREDIT
The Company has established a line of credit totaling $2,000,000, secured
by accounts receivable and inventory and guaranteed by the two major
stockholders. The line of credit renews automatically each year. Amounts
drawn on this line of credit bear interest at prime plus 2.75%. The prime
rate was 8.5% at December 31, 1997. At December 31, 1997, there were no
amounts outstanding. There was no interest expense for the year ended
December 31, 1997.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 7
NOTES TO FINANCIAL STATEMENTS
F. OPERATING LEASES
The Company leases operating facilities under various operating leases.
One operating lease includes an annual rental escalation clause based on
the Consumer Price Index. These leases expire at various times from 1998
through 2009. Rental expense for the year ended December 31, 1997 was
$130,055. The following is a schedule of future minimum rental payments
required under these leases as of December 31, 1997.
<TABLE>
<S> <C>
1998 $ 129,072
1999 114,200
2000 114,200
2001 114,200
2002 114,200
Thereafter 732,783
---------------
Total $ 1,318,655
===============
</TABLE>
G. PENSION PLAN
The Company sponsors a defined benefit pension plan that covers
substantially all employees. The plan calls for benefits to commence for
terminated and retired participants at the age of 65 and the completion
of five years of service or the actual attained age if older than 65.
Benefits may commence at an earlier date on an actuarially equivalent
basis. The Company has contributed each year the maximum deductible
contribution allowed by the Internal Revenue Code. Plan assets are
diversified among cash, government securities and corporate stock.
Pension expense for 1997 includes the following components:
<TABLE>
<S> <C>
Service cost of the current period $ 64,753
Interest cost on the projected benefit obligation 70,514
Amortization of loss 3,158
Expected return on assets held in the plan ( 77,172)
Net amortization of the transition asset and deferral ( 1,059)
----------
Net periodic pension cost $ 60,194
===========
</TABLE>
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 8
NOTES TO FINANCIAL STATEMENTS
The following sets forth the funded status of the plan and the amounts
shown in the accompanying balance sheet at December 31, 1997:
Actuarial present value of benefit obligations:
<TABLE>
<S> <C>
Vested benefits $ 886,435
Nonvested benefits 6,592
-----------
Accumulated benefit obligation 893,027
Effect of anticipated future compensation levels and other events 112,060
-----------
Projected benefit obligation 1,005,087
Fair value of assets held in the plan 1,181,126
-----------
Excess of the fair value of plan assets over projected benefit obligation 176,039
Unrecognized net transition asset and deferral ( 16,792)
Unrecognized net loss 104,957
-----------
Prepaid pension cost $ 264,204
===========
</TABLE>
The actuarial present value of the projected obligation was computed
using a weighted-average discount rate of 8% and a rate of increase in
future compensation levels of 4.5%. The expected long-term rate of return
on plan assets is 8%.
H. STOCK PURCHASE AGREEMENT
The Company has entered into a stock purchase agreement with a 50%
shareholder whereby the Company may be required to purchase the stock of
the shareholder upon his death. The methodology for determining the
purchase price is set forth in the agreement.
<PAGE>
ADAMS WINE COMPANY D/B/A MONARCH WINE COMPANY OF GEORGIA --------------- PAGE 9
NOTES TO FINANCIAL STATEMENTS
I. CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company
places its cash and temporary cash investments with high credit quality
institutions. At times such investments may be in excess of the FDIC
insurance limit. Management is of the opinion that there is no risk
because of the financial strength of these institutions.
<PAGE>
TODHUNTER INTERNATIONAL, INC. AND MONARCH WINE COMPANY
PRO FORMA COMBINED FINANCIAL DATA
(UNAUDITED)
On November 17, 1999, Todhunter International, Inc. (the "Company") acquired
substantially all of the assets of Adams Wine Company d/b/a Monarch Wine Company
of Georgia ("Monarch") pursuant to an Asset Purchase Agreement between the
Company, Monarch and the principal stockholders of Monarch (the "Acquisition").
The assets acquired include the intellectual property associated with Monarch's
business, equipment and fixtures, receivables, inventories, cash and other
assets associated with Monarch's business. The Company also assumed certain
liabilities, including a facility lease and trade payables. The purchase price
was $23.5 million and was funded by a syndicated bank group led by SouthTrust
Bank, N.A. In connection with the Acquisition, the Company also entered into
5-year Non-Competition Agreements with the principal stockholders of Monarch and
an 18-month Employment Agreement with the president of Monarch.
The following pro forma financial data presented consists of (i) a pro forma
combined balance sheet as of September 30, 1999 (the "1999 Balance Sheet"), (ii)
a pro forma combined statement of income for the fiscal year ended September 30,
1999 (the "1999 Statement of Income"), and (iii) the accompanying notes to the
pro forma financial statements (the "Notes") (collectively, the "Pro Forma
Statements").
The 1999 Balance Sheet is presented as if the Acquisition were consummated on
September 30, 1999. The 1999 Balance Sheet reflects the combination of the
Company and Monarch as of September 30, 1999, as adjusted for the Acquisition.
The 1999 Statement of Income is presented as if the Acquisition were consummated
on October 1, 1998. The 1999 Statement of Income reflects the combination of the
statement of income of the Company and Monarch for the year ended September 30,
1999, as adjusted for the Acquisition.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of the Company and Monarch, including the notes thereto.
The Pro Forma Statements are based on currently available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The Pro Forma Statements do not purport to represent what the
Company's financial position or results of operations would actually have been
if the Acquisition had in fact occurred on such date or at the beginning of the
period indicated, nor do they project the Company's financial position or the
results of operations at any future date or for any future period.
<PAGE>
TODHUNTER INTERNATIONAL, INC.AND MONARCH WINE COMPANY
PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments
----------------------------------- For the Pro Forma
Company Monarch Acquisition Combined
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,265,318 $ 1,028,208 $ (2,983,556)(a) $ 3,309,970
Short-term investments 2,547,365 - - 2,547,365
Trade receivables 12,161,401 2,001,475 - 14,162,876
Other receivables 2,316,398 - - 2,316,398
Inventories 23,011,883 802,032 - 23,813,915
Notes receivable, current maturities 1,439,796 - - 1,439,796
Deferred income taxes 929,000 - - 929,000
Other current assets 1,899,672 129,990 - 2,029,662
---------------- --------------- --------------- ----------------
Total current assets 49,570,833 3,961,705 (2,983,556) 50,548,982
---------------- --------------- --------------- ----------------
Notes receivable, less current maturities 5,525,780 - - 5,525,780
---------------- --------------- --------------- ----------------
PROPERTY AND EQUIPMENT 75,872,791 830,910 (830,910)(b) 75,872,791
Less accumulated depreciation 36,098,763 474,042 (474,042)(b) 36,098,763
---------------- --------------- --------------- ----------------
39,774,028 356,868 (356,868) 39,774,028
---------------- --------------- --------------- ----------------
GOODWILL 356,678 - 22,650,956 (b) 23,007,634
---------------- --------------- --------------- ----------------
OTHER ASSETS 1,939,927 409,726 202,724 (c) 2,552,377
---------------- --------------- --------------- ----------------
$ 97,167,246 $ 4,728,299 $ 19,513,256 $ 121,408,801
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 6,000,000 $ - $ 3,142,857 (d) $ 9,142,857
Accounts payable 4,417,313 868,318 - 5,285,631
Accrued expenses 1,646,462 395,358 204,642 (e) 2,246,462
Accrued interest 1,261,542 - - 1,261,542
---------------- --------------- --------------- ----------------
Total current liabilities 13,325,317 1,263,676 3,347,499 17,936,492
---------------- --------------- --------------- ----------------
LONG-TERM DEBT, less current maturities 28,000,000 - 18,857,143 (d) 46,857,143
---------------- --------------- --------------- ----------------
DEFERRED INCOME TAXES 4,345,000 - - 4,345,000
---------------- --------------- --------------- ----------------
OTHER LIABILITIES 303,835 - 773,237 (f) 1,077,072
---------------- -------------- -------------- ---------------
45,974,152 1,263,676 22,977,879 70,215,707
---------------- --------------- --------------- ----------------
STOCKHOLDERS' EQUITY
Common stock 56,129 50,000 (50,000)(g) 56,129
Additional paid-in capital 18,326,014 - - 18,326,014
Retained earnings 33,548,731 3,414,623 (3,414,623)(g) 33,548,731
---------------- --------------- --------------- ----------------
51,930,874 3,464,623 (3,464,623) 51,930,874
Less cost of 99,200 shares of treasury stock (737,780) - - (737,780)
---------------- --------------- --------------- ----------------
51,193,094 3,464,623 (3,464,623) 51,193,094
---------------- --------------- --------------- ----------------
$ 97,167,246 $ 4,728,299 $ 19,513,256 $ 121,408,801
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
</TABLE>
<PAGE>
TODHUNTER INTERNATIONAL, INC.AND MONARCH WINE COMPANY
PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended September 30,1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments
------------------------------------ For the Pro Forma
Company Monarch Acquisition Combined
---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 114,196,882 $ 17,048,979 $ - $ 131,245,861
Less excise taxes 37,463,735 - - 37,463,735
---------------- ---------------- -------------- --------------
Net sales 76,733,147 17,048,979 - 93,782,126
Cost of goods sold 53,000,012 12,087,921 (1,598,609)(h) 63,489,324
---------------- ---------------- -------------- --------------
Gross profit 23,733,135 4,961,058 1,598,609 30,292,802
Selling, general and administrative 15,022,979 2,275,052 (398,673)(i) 16,899,358
---------------- ---------------- -------------- --------------
Operating income 8,710,156 2,686,006 1,997,282 13,393,444
---------------- ---------------- -------------- --------------
Other income (expense):
Interest income 715,055 50,621 - 765,676
Interest expense (3,607,706) (20) (1,736,429)(j) (5,344,155)
Equity in income (losses) of equity investees (357,145) - - (357,145)
Other, net 537,248 2,804 - 540,052
---------------- ---------------- -------------- --------------
(2,712,548) 53,405 (1,736,429) (4,395,572)
---------------- ---------------- -------------- --------------
Income before income taxes 5,997,608 2,739,411 260,854 8,997,873
---------------- ---------------- -------------- --------------
Income tax expense(benefit):
Current 1,715,672 4,155 1,180,950 (k) 2,900,777
Deferred (258,000) - - (258,000)
---------------- ---------------- -------------- --------------
1,457,672 4,155 1,180,950 2,642,777
---------------- ---------------- -------------- --------------
Net income $ 4,539,936 $ 2,735,256 $ (920,096) $ 6,355,096
---------------- ---------------- -------------- --------------
---------------- ---------------- -------------- --------------
Earnings per common share:
Basic $ 0.91 $ 0.55 $ (0.19) $ 1.28
---------------- ---------------- -------------- --------------
---------------- ---------------- -------------- --------------
Diluted $ 0.91 $ 0.55 $ (0.18) $ 1.28
---------------- ---------------- -------------- --------------
---------------- ---------------- -------------- --------------
Common shares and equivalents outstanding:
Basic 4,963,760 4,963,760 4,963,760 4,963,760
---------------- ---------------- -------------- --------------
---------------- ---------------- -------------- --------------
Diluted 4,981,579 4,981,579 4,981,579 4,981,579
---------------- ---------------- -------------- --------------
---------------- ---------------- -------------- --------------
</TABLE>
<PAGE>
TODHUNTER INTERNATIONAL, INC. AND MONARCH WINE COMPANY
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(a) Reflects cash used in the Acquisition and cash retained by Monarch's
stockholders.
(b) Reflects purchase accounting adjustments for the Acquisition based on an
estimate of the fair value of the assets acquired and liabilities assumed.
The estimated fair value of the assets and liabilities recorded are not
expected to differ materially from the final assigned values.
(c) Reflects capitalization of finance costs of $612,450, net of assets not
acquired in the transaction.
(d) Reflects bank borrowings of $22 million at 8.5%, principal of $785,714 due
quarterly through 2004.
(e) Reflects liability for employee severance costs of $600,000, net of
liabilities not assumed in the transaction.
(f) Reflects capitalization of operating lease to be abandoned.
(g) Reflects elimination of Monarch's stockholders' equity.
(h) Reflects estimated savings in direct labor and overhead by closing the
Monarch production facility and transferring production to the Company's
existing facilities.
(i) Reflects (i) estimated savings in selling, general and administrative
expenses of $1,653,711 by moving Monarch's selling and administrative
functions to the Company's existing facilities, and (ii) increased
amortization of $1,255,038 related to goodwill and financing costs.
Goodwill is being amortized over 20 years and financing costs are being
amortized over 5 years.
(j) Reflects additional interest expense on the debt used to finance the
Acquisition.
(k) Reflects incremental state and federal income taxes for Monarch's
operations under the Company's tax structure as a C corporation.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the December 16,
1993 Registration Statement on Form S-8 (Registration No. 33-73018) and in the
July 9, 1996 Registration Statement on Form S-8 (Registration No. 333-07827) of
our reports dated February 20, 1998, and February 12, 1999, relating to the
financial statements of Adams Wine Company d/b/a Monarch Wine Company of
Georgia, which appear on Form 8-K of Todhunter International, Inc.
/s/ Babush, Neiman, Kornman & Johnson, LLP
January 31, 2000
