Form: 8-K/A

Current report filing

April 3, 1997

Documents

PRO FORMA FINANCIAL INFORMATION

Published on April 3, 1997



EXHIBIT 1.4

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION


Central Garden & Pet Company's (the "Company") acquisition of Four Paws
Products, Ltd. and subsidiaries ("Four Paws") 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 Four Paws on the basis of
their estimated fair values as of the date of acquisition. The following
unaudited pro forma consolidated condensed balance sheet gives effect to the
acquisition of Four Paws as if it occurred on December 28, 1996 and the pro
forma consolidated condensed statements of income give effect to the acquisition
as if it occurred on October 1, 1995 and include adjustments directly
attributable to the acquisition and expected to have a continuing impact on the
combined company (collectively, the "Unaudited Pro Forma Financial
Information"). As the Unaudited 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 Unaudited 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 Unaudited 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 year ended September 28, 1996
and the Company's Quarterly Results on Form 10-Q, for the three months ended
December 28, 1996, and the historical financial statements of Four Paws, and the
related notes thereto, presented elsewhere in this Current Report on Form 8-K.
See Exhibit 1.3 attached hereto.




UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 28, 1996
(In thousands, except per share data)



Historical Pro Forma
-------------------------- -------------------------
Central Garden Four Paws Adjustments Combined
-------------- --------- ----------- --------

ASSETS:
Cash $ 73,826 $ 2,502 $ (45,500)(a) $ 30,828
Inventories 219,696 8,029 1,915 (b) 229,640
Other current assets 85,853 9,687 (455)(c) 95,085
Land, buildings, improvements
and equipment - net 11,721 2,821 14,542
Other assets 34,906 440 34,759 (d) 70,105
-------- ------- --------- --------
Total $426,002 $23,479 $ (9,281) $440,200
======== ======= ========= ========

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $181,554 $ 3,066 $ (455)(c) $184,165
Long-term debt 115,000 2,087 (500)(e) 116,587
Deferred items 1,670 1,670
Shareholders' equity 127,778 18,326 (8,326)(f) 137,778
-------- ------- --------- --------
Total $426,002 $23,479 $ (9,281) $440,200
======== ======= ========= ========


Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet
- -----------------------------------------------------------------

(a) Adjustment to reflect the following:




Elimination of cash used to acquire Four Paws. $(45,000)
Elimination of cash to repay note payable to former Four Paws shareholder
required to be repaid as a result of the Four Paws acquisition. (500)
--------
Net adjustment $(45,500)
========


(b) Adjustment to record acquired inventories at estimated fair value.

(c) To eliminate trade account balances between the Company and Four Paws.

(d) Adjustment to record the excess of purchase price over the fair value of
identifiable net assets acquired.

(e) To eliminate note payable to former Four Paws shareholder required to be
repaid as a result of the Four Paws acquisition.

(f) Adjustment to reflect the following:

Issuance of the Company's common stock to acquire Four Paws. $ 10,000
Elimination of Four Paws shareholder's equity. (18,326)
--------
Net adjustment $ (8,326)
========

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UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
(In thousands, except per share data)



Historical Pro Forma
-------------------------- -------------------------
Central Garden Four Paws Adjustments Combined
-------------- --------- ----------- --------

Net sales $619,622 $30,531 $(6,005)(a) $644,148
Cost of goods sold and occupancy 535,189 15,143 (3,303)(a) 547,029
-------- ------- ------- --------
Gross profit 84,433 15,388 (2,702) 97,119
Selling, general and administrative expenses 66,945 8,233 (695)(b) 74,483
-------- ------- ------- --------
Income from operations 17,488 7,155 (2,007) 22,636
Interest and other expenses (income) 3,023 (490) 2,659 (c) 5,192
-------- ------- ------- --------
Income before income taxes 14,465 7,645 (4,666) 17,444
Income taxes 6,017 3,211 (1,913)(d) 7,315
-------- ------- ------- --------
Net income $ 8,448 $ 4,434 $(2,753) $ 10,129
======== ======= ======= ========

Net income per common and common equivalent share:
Fully diluted $ 0.71 $ 0.82
Primary $ 0.72 $ 0.83

Weighted average common and common equivalent
shares outstanding:
Fully diluted 11,904 450 (e) 12,354
Primary 11,702 450 (e) 12,152


Notes to Unaudited Pro Forma Consolidated Condensed Statement of Income
- -----------------------------------------------------------------------

(a) Adjustment to eliminate sales and cost of sales for historical sales from
Four Paws to the Company.

(b) Adjustment to reflect the following:

Reduction in operating lease costs in connection with lease
agreement entered into with the former owner of Four Paws. $ (464)
Reduction in salary expense in connection with employment
agreement entered into with the former owner of Four Paws. (574)
Amortization of the excess of purchase price over the net
assets acquired. 869
Elimination of forgiveness of loans to Four Paws shareholder
and family in connection with December 1996 asset purchase
agreement between the Company and Four Paws (526)
-------
Net adjustment $ (695)
=======

(c) Adjustment to reflect the following:

To increase interest expense associated with the issuance of
6% convertible subordinated notes issued to finance the
acquisition of Four Paws. $ 2,700
To reduce interest expense on note payable to former shareholder
required to be repaid in connection with the acquisition
of Four Paws. (41)
-------
Net adjustment $ 2,659
=======

(d) Adjustment to the historical provision for income taxes to give effect to
the pro forma adjustments discussed in (a), (b) and (c) above.

(e) To record issuance of 450 shares of the Company's common stock to acquire
Four Paws.

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UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 28, 1996
(In thousands, except per share data)



Historical Pro Forma
-------------------------- -------------------------
Central Garden Four Paws Adjustments Combined
-------------- --------- ----------- --------

Net sales $100,144 $ 6,880 $(1,368)(a) $105,656
Cost of goods sold and occupancy 82,690 3,561 (752)(a) 85,499
-------- ------- ------- --------
Gross profit 17,454 3,319 (616) 20,157
Selling, general and administrative expenses 19,633 3,067 (569)(b) 22,131
Write-off of goodwill 1,402 1,402
-------- ------- ------- --------
Loss from operations (2,179) (1,150) (47) (3,376)
Interest and other expenses (income) 937 (54) 610 (c) 1,493
-------- ------- ------- --------
Loss before income taxes (3,116) (1,096) (657) (4,869)
Income taxes (1,309) 164 (269)(d) (1,414)
-------- ------- ------- --------
Net Loss $ (1,807) $(1,260) $ (388) $ (3,455)
======== ======= ======= ========

Net loss per common and common equivalent share:
Fully diluted $ (0.12) $ (0.23)
Primary $ (0.12) $ (0.23)

Weighted average common and common equivalent
shares outstanding:
Fully diluted 14,474 450 (e) 14,924
Primary 14,474 450 (e) 14,924


Notes to Unaudited Pro Forma Consolidated Condensed Statement of Income
- -----------------------------------------------------------------------

(a) Adjustment to eliminate sales and cost of sales for historical sales from
Four Paws to the Company.

(b) Adjustment to reflect the following:

Reduction in operating lease costs in connection with lease
agreement entered into with the former owner of Four Paws. $ (116)
Reduction in salary expense in connection with employment
agreement entered into with the former owner of Four Paws. (144)
Amortization of the excess of purchase price over the net
assets acquired. 217
Elimination of forgiveness of loans to Four Paws shareholder
and family in connection with December 1996 asset purchase
agreement between the Company and Four Paws. (526)
-------
Net adjustment $ (569)
=======

(c) Adjustment to reflect the following:

To increase interest expense associated with the issuance of
6% convertible subordinated notes issued to finance the
acquisition of Four Paws. $ 355
To reduce interest expense on note payable to former shareholder
required to be repaid in connection with the acquisition
of Four Paws. (10)
To reduce interest income on proceeds of 6% convertible
subordinated notes used to finance the acquisition of
Four Paws. 265
-------
Net adjustment $ 610
=======

(d) Adjustment to the historical provision for income taxes to give effect to
the pro forma adjustments discussed in (a), (b) and (c) above.

(e) To record issuance of 450 shares of the Company's common stock to acquire
Four Paws.

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