EXHIBIT 1.4
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
Central Garden & Pet Company's (the "Company") acquisition of the Sandoz Flea
and Tick Protection Business ("Sandoz Flea and Tick") will be accounted for
under the "purchase" method of accounting which requires the purchase price to
be allocated to the acquired assets and liabilities assumed of Sandoz Flea and
Tick 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 Sandoz Flea and Tick as if it occurred on March 29,
1997 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 acquired 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 six months ended March
29, 1997, and the historical financial statements of Sandoz Flea and Tick, 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
MARCH 29, 1997
(In thousands)
Pro Forma for the Sandoz
Historical Flea and Tick Acquisition
-------------------------- -------------------------
Central Sandoz
Garden Flea and Tick Adjustments Combined
---------- ------------- ----------- ---------
ASSETS:
Cash $ 14,843 $ (6,000)(a) $ 8,843
Inventories 270,722 $ 10,051 4,092 (b) 284,865
Other current assets 135,598 515 (85)(c) 136,028
Land, buildings, improvements and equipment - net 15,950 10,439 (4,700)(d) 21,689
Other assets 86,643 23,735 (e) 110,378
--------- --------- --------- ---------
Total $ 523,756 $ 21,005 $ 17,042 $ 561,803
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $ 261,636 $ 5,222 $ 32,448 (f) $ 299,306
Long-term debt 117,025 117,025
Deferred items 1,670 377 (g) 2,047
Shareholders' equity 143,425 15,783 (15,783)(h) 143,425
--------- --------- --------- ---------
Total $ 523,756 $ 21,005 $ 17,042 $ 561,803
========= ========= ========= =========
Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet
- -----------------------------------------------------------------
(a) Adjustment to eliminate cash used to acquire Sandoz Flea and Tick.
(b) Includes $4.2 million of methoprene inventory held by Novartis Inc. to be
delivered at a later date and an adjustment to record acquired inventories
at estimated fair value.
(c) To eliminate trade account balances between the Company and Sandoz Flea and
Tick.
(d) Adjustment to record acquired property, plant and equipment at estimated
fair value.
(e) Adjustment to record the excess of purchase price over the estimated fair
value of identifiable net assets acquired as computed below:
Cash paid to Sandoz Agro $ 31,000
Total estimated direct fees and expenses in connection with acquisition 3,600
--------
Total purchase price $ 34,600
========
Preliminary allocation of purchase price:
Inventories $ 14,143
Other current assets 430
Property, plant and equipment 5,739
Current liabilities (14,727)
Postretirement benefit liability (377)
Excess of purchase price over the estimated fair value of identifiable net assets acquired 29,392
--------
Total purchase price $ 34,600
========
Excess of purchase price over the fair value of identifiable net assets acquired $ 29,392
Down payment made to Sandoz Agro in February 1997 (5,000)
Direct fees and expenses paid through March 29, 1997 in connection with acquisition (657)
--------
Net adjustment $ 23,735
========
(f) Adjustment to reflect the following:
To eliminate trade account balances between the Company and Sandoz Flea and Tick $ (85)
To accrue for severance costs associated with contractual obligations for former Sandoz Agro employees 5,100
To accrue for prior Sandoz Agro product registration and other commitments with no future benefit to the
Company 2,390
To accrue for costs associated with exiting certain activities of the acquired business 1,600
To adjust sales returns allowance to conform with the Company's policy 500
To accrue direct fees and expenses in connection with the acquisition of Sandoz Flea and Tick 2,943
To record line of credit borrowings to finance the acquisition of Sandoz Flea and Tick 20,000
--------
Net adjustment $ 32,448
========
(g) Adjustment to record the Sandoz Flea and Tick accumulated postretirement
benefit obligation.
(h) Adjustment to eliminate Sandoz's invested capital in Sandoz Flea and Tick.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
(In thousands, except per share data)
Pro Forma
Pro Forma for the Sandoz Adjustments
Historical Flea and Tick Acquisition for the
---------------------- ------------------------- Historical Four Paws and
Central Sandoz Four Paws Kenlin Pro Forma
Garden Flea and Tick Adjustments Combined and Kenlin Acquisitions Combined
-------- ------------- ----------- -------- ----------- -------------- --------
Net sales $619,622 $ 73,304 $ (3,149)(a) $689,777 $ 86,411 $ (6,005)(e) $770,183
Cost of goods sold and occupancy 535,189 28,222 (5,179)(b) 558,232 55,744 (4,133)(f) 609,843
-------- -------- -------- -------- -------- -------- --------
Gross profit 84,433 45,082 2,030 131,545 30,667 (1,872) 160,340
Selling, general and administrative expenses 66,945 29,021 422 (c) 96,388 20,159 (1,917)(g) 114,630
Research and development expenses 3,991 3,991 3,991
-------- -------- -------- -------- -------- -------- --------
Income from operations 17,488 12,070 1,608 31,166 10,508 45 41,719
Interest and other expenses 3,023 1,800 (d) 4,823 377 2,659 (h) 7,859
-------- -------- -------- -------- -------- -------- --------
Income before income taxes 14,465 12,070 (192) 26,343 10,131 (2,614) 33,860
Income taxes 6,017 4,941 (i) 10,958 4,235 (1,841)(i) 13,352
-------- -------- -------- -------- -------- -------- --------
Net income $ 8,448 $ 12,070 $ (5,133) $ 15,385 $ 5,896 $ (773) $ 20,508
======== ======== ======== ======== ======== ======== ========
Net income per common and common
equivalent share:
Primary $ 0.72 $ 1.31 $ 1.50
Fully diluted $ 0.71 $ 1.29 $ 1.48
Weighted average common and common equivalent
shares outstanding:
Primary 11,702 11,702 1,965 (j) 13,667
Fully diluted 11,904 11,904 1,965 (j) 13,869
Notes to Unaudited Pro Forma Consolidated Condensed Statement of Income
- -----------------------------------------------------------------------
(a) Adjustment to eliminate historical sales from Sandoz Flea and Tick to the Company.
(b) Adjustment to eliminate cost of sales for historical sales from Sandoz Flea and Tick to the Company. $(3,149)
To adjust for the reduced price of methoprene purchased from Novartis Inc. in connection with the
methoprene supply agreement entered into in connection with the acquisition of Sandoz Flea and Tick. (2,030)
-------
Net adjustment $(5,179)
=======
(c) Adjustment to reflect the amortization of the excess of purchase price over the fair value of identifiable
net assets acquired. The excess of the purchase price over the fair value of identifiable net assets
acquired is amortized over 40 years. $ 735
Adjustment to reduce building lease expense as a result of former Sandoz Agro administrative employees
being required to move out of the Sandoz Agro corporate headquarters to another leased facility. (313)
-------
Net adjustment $ 422
=======
(d) Interest expense for line of credit borrowings to finance the acquisition of Sandoz
Flea and Tick.
(e) Adjustment to eliminate historical sales from Four Paws to the Company.
(f) Adjustment to eliminate cost of sales for historical sales from Four Paws to the Company. $(6,005)
Adjustment to reclassify certain Kenlin costs to conform with the Company's policy. 1,872
-------
Net adjustment $(4,133)
=======
(g) 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 fair value of identifiable net assets of Four Paws
acquired. The excess of the purchase price over the fair value of the identifiable net assets of Four Paws
acquired is amortized over 40 years. 869
Amortization of the excess of purchase price over the fair value of identifiable net assets of Kenlin acquired.
The excess of the purchase price over the fair value of identifiable net assets of Kenlin acquired is
amortized over 40 years. 114
Adjustment to reclassify certain Kenlin costs to conform with the Company's policy. (1,862)
-------
Net adjustment $(1,917)
=======
(h) 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
=======
(i) Adjustment to the historical provision for income taxes to give effect to the pro forma adjustments discussed
above and to record a provision for income taxes for Sandoz Flea and Tick.
(j) To record issuance of common shares of the Company's common stock to acquire Four Paws and Kenlin.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED MARCH 29, 1997
(In thousands, except per share data)
Pro Forma for the Sandoz Pro Forma
Historical Flea and Tick Acquisition Adjustments
---------------------- ------------------------- for the
Central Sandoz Historical Four Paws Pro Forma
Garden Flea and Tick Adjustments Combined Four Paws Acquisitions Combined
-------- ------------- ----------- --------- ---------- ------------ --------
Net sales $336,485 $ 25,107 $ (715)(a) $ 360,877 $ 6,880 $ (1,368)(e) $366,389
Cost of goods sold and occupancy 285,315 17,803 (1,300)(b) 301,818 3,561 (1,368)(e) 304,011
-------- --------- --------- --------- --------- --------- ------
Gross profit 51,170 7,304 585 59,059 3,319 -- 62,378
Selling, general and administrative expenses 42,844 11,797 289 (c) 54,930 3,067 (569)(f) 57,428
Research and development expenses 1,711 1,711 1,711
Write-off of goodwill 1,402 1,402
-------- --------- --------- --------- --------- --------- ------
Income (loss) from operations 8,326 (6,204) 296 2,418 (1,150) 569 1,837
Interest and other expenses 2,747 1,010 (d) 3,757 (54) 610 (g) 4,313
-------- --------- --------- --------- --------- --------- ------
Income (loss) before income taxes 5,579 (6,204) (714) (1,339) (1,096) (41) (2,476)
Income taxes (benefit) 2,348 (2,913)(h) (565) 164 (269)(h) (670)
-------- --------- --------- --------- --------- --------- --------
Net income (loss) $ 3,231 $ (6,204) $ 2,199 $ (774) $ (1,260) $ 228 $ (1,806)
======== ========= ========= ========= ========= ========= ========
Net income per common and common
equivalent share:
Primary $ 0.21 $ (0.05) $ (0.12)
Fully diluted $ 0.21 $ (0.05) $ (0.12)
Weighted average common and common equivalent
shares outstanding:
Primary 15,200 15,200 282 (i) 15,482
Fully diluted 15,284 15,284 282 (i) 15,566
Notes to Unaudited Pro Forma Consolidated Condensed Statement of Income
- -----------------------------------------------------------------------
(a) Adjustment to eliminate historical sales from Sandoz Flea and Tick to the Company.
(b) Adjustment to eliminate cost of sales for historical sales from Sandoz Flea and Tick to the Company. $ (715)
To adjust for the reduced price of methoprene purchased from Novartis Inc. in connection with the
methoprene supply agreement entered into in connection with the acquisition of Sandoz Flea and Tick. (585)
-------
Net adjustment $(1,300)
=======
(c) Adjustment to reflect the amortization of the excess of purchase price over the fair value of identifiable
net assets acquired. The excess of the purchase price over the fair value of identifiable net assets
acquired is amortized over 40 years. $ 367
Adjustment to reduce building lease expense as a result of former Sandoz Agro administrative employees
being required to move out of the Sandoz Agro corporate headquarters to another leased facility. (78)
-------
Net adjustment $ 289
=======
(d) Interest expense for line of credit borrowings to finance the acquisition of Sandoz Flea $ 900
and Tick.
To reduce interest income on proceeds of 6% convertible subordinated notes used to finance a portion of the
acquistion of Sandoz Flea and Tick. 110
-------
Net adjustment $ 1,010
=======
(e) Adjustment to eliminate sales and cost of sales for historical sales from Four Paws to the Company.
(f) 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 fair value of identifiable net assets of Four Paws
acquired. The excess of the purchase price over the fair value of the identifiable net assets of Four Paws
acquired is amortized over 40 years. 217
Elimination of forgiveness of loans to Four Paws shareholder and family in connection with the asset purchase
agreement between the Company and Four Paws. (526)
-------
Net adjustment $ (569)
=======
(g) 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
=======
(h) Adjustment to the historical provision for income taxes to give effect to the pro forma adjustments discussed
above and to record a provision for income taxes for Sandoz Flea and Tick.
(i) To record issuance of common shares of the Company's common stock to acquire Four Paws.