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.