Exhibit 1.5
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
Central Garden & Pet Company's (the "Company") acquisition of Pennington Seed,
Inc. and Subsidiaries ("Pennington") 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 Pennington 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 Pennington as if it occurred on December 27, 1997,
and the unaudited pro forma consolidated condensed statements of income give
effect to the acquisition as if it occurred on September 29, 1996, 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 acquisitions 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
27, 1997, and the Company's Quarterly Report on Form 10-Q, for the three months
ended December 27, 1997, and the historical financial statements of Pennington,
and the related notes thereto, presented elsewhere in this Current Report on
Form 8-K. See Exhibit 1.4 attached hereto.
The Unaudited Pro forma Financial Information has been prepared using the
Pennington Consolidated Statement of Operations for the year ended June 30, 1997
and Consolidated Balance Sheet and Statement of Operations as of and for the
three months ended December 31, 1997. Such Unaudited Pro Forma Financial
Information excludes the results of operations of Pennington for the three
months ended September 30, 1997, in which Pennington recorded net sales of
$70,286,000 and net income of $4,213,000. The unaudited pro forma consolidated
statement of income for the year ended September 27, 1997 also gives effect to
the acquisitions of the Sandoz Flea and Tick Protection Business ("Wellmark")
and Four Paws Products, Ltd. ("Four Paws") during fiscal 1997 as if they
occurred on September 29, 1996, and includes adjustments directly attributable
to the acquisitions and expected to have a continuing impact on the combined
company. The acquisitions of Wellmark and Four Paws were accounted for under the
"purchase" method of accounting and the results of operations of Wellmark and
Four Paws have been included in the Company's operating results since the date
of the acquisitions.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 27, 1997
(in thousands, except share amounts)
HISTORICAL PRO FORMA
---------- ---------
CENTRAL PENNINGTON ADJUSTMENTS COMBINED
------- ---------- ----------- --------
ASSETS
Current Assets:
Cash & Cash Equivalents 77,856 620 (77,856)(c) 620
Account Receivable, net 104,865 22,311 (1,275)(a)(g) 125,901
Inventories 308,014 73,625 640 (g) 381,139
Other Current Assets 11,977 2,229 400 (h) 14,606
------- --------- --------- -------
Total Current Assets 502,712 98,785 (78,091) 522,266
Property & Equipment - net 45,530 25,639 2,207 (e) 73,376
Other Assets 268,357 1,656 104,493 (b) 375,646
------- --------- --------- -------
TOTAL ASSETS 816,599 126,080 28,609 971,288
======= ========= ========= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable 21,543 4,183 4,606 (c) 30,332
Accounts Payable 162,931 26,703 (775)(a) 188,859
Other Current Liabilities 32,254 3,674 1,000 (f) 36,928
------- --------- --------- -------
Total Current Liabilities 216,728 34,560 4,831 256,119
Long-Term Liabilities 127,843 44,431 172,274
Other Long-Term Obligations 15,380 2,330 883 (h) 18,593
Shareholders' equity 456,648 44,759 22,895 (d) 524,302
------- --------- --------- -------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 816,599 126,080 28,609 971,288
======= ========= ========= =======
Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet
(a) To eliminate trade account balances between the Company and Pennington.
(b) Adjustment to record the excess of purchase price over the fair value of
identifiable net assets acquired.
(c) To record the disbursement of cash and the line of credit borrowings to
finance the acquisition of Pennington.
(d) To reflect the issuance of 2,179,000 shares of common stock of the Company
and the elimination of Pennington equity.
(e) To adjust property and equipment to estimated fair value and reflect the
property exchange between Pennington and its shareholders immediately prior
to the purchase.
(f) Represents an accrual for estimated costs related to the acquisition of
Pennington.
(g) Adjustment to record acquired inventories, $640, and accounts receivable,
($500), at estimated fair value.
(h) Represents deferred taxes for differences between book and tax basis of
certain pro forma adjustments.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FISCAL YEAR ENDED SEPTEMBER 27, 1997
(IN THOUSANDS, EXCEPT PER SHARES DATA)
Historical
--------------------------------------- Pro Forma Historical Pro Forma Pro Forma
Central Four Paws Wellmark Adjustments Combined Pennington Adjustments Combined
---------- ---------- ------------ ------------ ---------- ---------- ------------ -----------
Net sales 841,007 6,880 25,107 (2,083)(a) 870,911 297,774 (3,930)(a) 1,164,755
Cost of goods sold
and occupancy 694,925 3,561 17,803 (2,668)(a)(b) 713,621 213,863 (3,930)(a) 923,554
Gross profit 146,082 3,319 7,304 585 157,290 83,911 0 241,201
SG&A 109,160 3,067 11,797 (280)(c)(d) 123,744 59,898 2,587(c) 186,229
R&D 1,711 1,711 1,711
Write-off of goodwill 1,402 1,402 1,402
Income from operations 36,922 (1,150) (6,204) 865 30,433 24,013 (2,587) 51,859
Interest and other 6,554 (54) 1,620(e) 8,120 2,902 4,206(g) 15,228
Income (loss)
before taxes 30,368 (1,096) (6,204) (755) 22,313 21,111 (6,793) 36,631
Income taxes 12,765 164 (3,182)(f) 9,747 8,444 770(f) 18,962
Net income (loss) 17,603 (1,260) (6,204) 2,427 12,566 12,667 (7,563) 17,669
EPS-Diluted 1.07 0.80 0.95
EPS-Basic 1.11 0.78 0.96
Shares used-Diluted 19,958 282(h) 20,240 2,179(h) 22,419
Shares used-Basic 15,831 282(h) 16,113 2,179(h) 18,292
Notes to Unaudited Pro Forma Consolidated Condensed Statements of Income.
(a) Adjustment to eliminate historical sales from Wellmark ($715), Four Paws
($1,368) and Pennington to Central.
(b) 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 Wellmark ($585).
(c) Adjustment to reflect the amortization of the excess of purchase price
over the fair value of identifiable net assets acquired for Wellmark
($367) and Four Paws ($217) and Pennington. The excess of the purchase
price over the fair value of identifiable net assets acquired is being
amortized over 40 years.
(d) 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)
Reduction in operating lease costs 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)
Elimination of foregiveness of loans to Four Paws shareholder
and family in connection with the asset purchase agreement
between the Company and Four Paws. (526)
------
Net Adjustment $ (864)
======
(e) To reduce interest income on proceeds of 6% convertible notes
used to finance a portion of the acquisitions of Wellmark
($110) and Four Paws ($265). $ 375
Interest expense for line of credit borrowings to finance
the acquisition of Wellmark. 900
To increase interest expense associated with the issuance
of 6% convertible subordinated notes 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)
------
Net Adjustment $ 1,620
======
(f) 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 Wellmark.
(g) To adjust net interest for the reduction in cash and the additional
line of credit borrowings at an assumed rate of 5.1% to finance the
acquisition of Pennington.
(h) To record the issuance of shares of the Company's common stock to
acquire Four Paws and Pennington.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 27, 1997
(IN THOUSANDS, EXCEPT PER SHARES DATA)
Historical
--------------------------- Pro Forma Pro Forma
Central Pennington Adjustments Combined
---------- ----------- ------------ ------------
Net sales 138,827 45,352 (780)(a) 183,399
Cost of goods sold
and occupancy 105,505 31,019 (780)(a) 135,744
Gross profit 33,322 14,333 0 47,655
SG&A 33,289 14,712 647(b) 48,648
Income (loss) from operations 33 (379) (647) (993)
Interest and other 927 318 1,051(c) 2,296
Loss before tax benefit (894) (697) (1,698) (3,289)
Income tax benefit (375) (284) (441)(d) (1,100)
Net loss (519) (413) (1,257) (2,189)
EPS-Basic & Diluted (0.02) (0.09)
Shares used-Basic & Diluted 21,318 2,132(e) 23,450
Notes to Unaudited Pro Forma Consolidated Condensed Statements of Income
(a) Adjustment to eliminate historical sales from Pennington to Central.
(b) 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 nets assets
acquired is amortized over 40 years.
(c) To adjust net interest for the reduction in cash and the additional
line of credit borrowings at an assumed rate of 5.1% to finance the
acquisition of Pennington.
(d) Adjustment to the historical provision for income taxes to give effect
to the pro forma adjustments discussed above.
(e) The Company's common shares issued to acquire Pennington.