EXHIBIT 1.5
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The Company's acquisition of Kenlin ("Acquisition") will be accounted
for under the "purchase" method of accounting which requires the purchase price
to be allocated to the acquired assets and liabilities of Kenlin on the basis of
their estimated fair values as of the date of acquisition. The following pro
forma combined condensed balance sheet gives effect to the Acquisition of Kenlin
as if it occurred on March 30, 1996 and the pro forma combined condensed
statements of income give effect to the Acquisition as if it occurred on
December 26, 1994 and include adjustments directly attributable to the
Acquisition and expected to have a continuing impact on the combined company
(collectively, the "Pro Forma Financial Information"). As the Pro Forma
Financial Information has been prepared based on preliminary estimates of fair
values, amounts actually recorded may change upon determination of the total
purchase price and additional analysis of individual assets and liabilities
assumed.
The Pro Forma Financial Information and related notes are provided for
informational purposes only and are not necessarily indicative of the
consolidated financial position or results of operations of the Company as they
may be in the future or as they might have been had the Acquisition been
effected on the assumed dates. The Pro Forma Financial Information should be
read in conjunction with the historical consolidated financial statements of the
Company, and the related notes thereto, which are included in the Company's
Annual Report on Form 10-K for the nine-month period ended September 30, 1995,
and the historical financial statements of Kenlin, and the related notes
thereto, presented elsewhere in this Current Report on Form 8-K. See Exhibit 1.3
attached hereto.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
HISTORICAL PRO FORMA
------------------------- --------------------------
Central Garden Kenlin Adjustments Combined
----------------------- --------------------------
Net sales.................... $373,734 $46,957 $420,691
Costs of goods sold and
occupancy.................. 316,832 34,075 $1,976 (a) 352,883
----------------------- --------------------------
Gross profit................. 56,902 12,882 (1,976) 67,808
Selling, general and
administrative expenses.... 48,075 10,426 (2,088)(a),(b) 56,413
----------------------- --------------------------
Income from operations....... 8,827 2,456 112 11,395
Interest and other expenses.. 6,844 817 1,637 (c) 9,298
----------------------- --------------------------
Income before income taxes... 1,983 1,639 (1,525) 2,097
Income taxes................. 904 688 (561)(d) 1,031
----------------------- --------------------------
Net income................... $1,079 $951 ($964) $1,066
======================= ==========================
Net income per share......... $0.18 $0.18
======== ======
Weighted average common
and common equivalent
shares outstanding......... 5,943 5,943
Notes to Unaudited Pro Form Combined Condensed Statement of Income
- ------------------------------------------------------------------
The following adjustments represent those necessary to show how the purchase
might have affected the historical consolidated financial statements had it been
consummated at December 26, 1994.
a. Represents the reclassification of certain costs to conform with Central
Garden's policy.
b. Reflects an adjustment to goodwill amortization totaling $56,000 for the
excess of amortization recognized by Kenlin on a historical basis over the
goodwill resulting from the Kenlin acquisition. Goodwill is amortized on a
straight-line basis over forty years.
c. Represents interest expense on borrowings under the Company's line of
credit incurred in conjunction with the Acquisition and on estimated
average borrowings during the nine months. Interest expense was computed
at 9.61% (based on the prime rate plus 3/4% per annum).
d. Adjusts the historical provision for income taxes to give effect to the pro
forma adjustments discussed in a., b. and c. above.
2
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTH PERIOD ENDED MARCH 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
HISTORICAL PRO FORMA
------------------------- -------------------------
Central Garden Kenlin Adjustments Combined
------------------------- -------------------------
Net sales.................... $260,132 $37,826 $297,958
Costs of goods sold and
occupancy.................. 227,006 27,398 $1,575 (a) 255,979
------------------------- -------------------------
Gross profit................. 33,126 10,428 (1,575) 41,979
Selling, general and
administrative expenses.... 29,783 7,938 (1,617)(a),(b) 36,104
------------------------- -------------------------
Income from operations....... 3,343 2,490 42 5,875
Interest and other expenses.. 2,591 589 994(c) 4,174
------------------------- -------------------------
Income before income taxes... 752 1,901 (952) 1,701
Income taxes................. 324 778 (296)(d) 806
------------------------- -------------------------
Net income................... $428 $1,123 ($656) $895
========================= =========================
Net income per share......... $0.04 $0.09
========== =====
Weighted average common
and common equivalent
shares outstanding......... 10,381 10,381
Notes to Unaudited Pro Form Combined Condensed Statement of Income
- ------------------------------------------------------------------
The following adjustments represent those necessary to show how the purchase
might have affected the historical consolidated financial statements had it been
consummated at December 26, 1994.
a. Represents the reclassification of certain costs to conform with Central
Garden's policy.
b. Reflects an adjustment to goodwill amortization totaling $53,000 for the
excess of amortization recognized by Kenlin on a historical basis over the
goodwill resulting from the Kenlin acquisition. Goodwill is amortized on a
straight-line basis over forty years.
c. Represents interest expense on borrowings under the Company's line of
credit incurred in conjunction with the Acquisition and on estimated
average borrowings during the six months. Interest expense was computed at
9.15% (based on the prime rate plus 3/4% per annum).
d. Adjusts the historical provision for income taxes to give effect to the pro
forma adjustments discussed in a., b. and c. above.
3
PRO FORMA COMBINED CONDENSED BALANCE SHEET
March 30, 1996
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL PRO FORMA
------------------------- ---------------------------
Central Garden Kenlin Adjustments Combined
------------------------- ---------------------------
ASSETS:
Cash................... $139 $99 $238
Inventories............ 110,151 9,987 $(63)(a) 120,075
Other current assets... 95,978 5,817 1,011 (b) 102,806
Land, buildings,
improvements and
equipment-net........ 9,833 1,596 11,429
Other assets........... 13,675 4,325 15,180 (c),(d) 33,180
------------------------- ---------------------------
Total $229,776 $21,824 $16,128 $267,728
========================= ===========================
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities.... $144,730 $ 3,763 $34,189 (e),(f) $182,682
Long-term debt......... 8,635 11,080 (11,080)(g) 8,635
Deferred items......... 1,836 0 1,836
Shareholders' equity... 74,575 6,981 (6,981)(h) 74,575
------------------------- ---------------------------
Total.................. $229,776 $21,824 $16,128 $267,728
========================= ===========================
Notes to Unaudited Pro Form Combined Condensed Balance Sheet
- ------------------------------------------------------------
The following adjustments represent those necessary to allocate the purchase
price paid to acquire Kenlin, had the acquisition been consummated at March 30,
1996.
a. Includes adjustments of (i) $375,000 to reduce inventories to approximate
fair value as determined by the Company based on its analysis of the
individual inventory items, and (ii) $312,000 to capitalize additional
costs into inventory to conform with the Company's capitalization policy.
b. Represents the deferred tax impact of (i) certain pro forma adjustments for
reserves and accruals which are not deductible for tax purposes until
future periods, and (ii) tax basis in excess of the Company's book basis of
acquired intangibles.
c. Represents the $19,421,000 excess of purchase price over the fair value of
net assets acquired.
d. Eliminates Kenlin's previously recorded intangible assets of $4,241,000.
e. Consists of an accrual of $1,189,000 for estimated expenses incurred which
are directly related to the Acquisition.
f. Includes borrowings of $33,000,000 incurred in connection with the
Acquisition of Kenlin.
g. Reflects the repayment of Kenlin's long-term debt.
h. Reflects the elimination of Kenlin's shareholders' equity due to the
Acquisition.
4