<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
MAY 10, 2000
COMMISSION FILE NUMBER 0-27818
DOANE PET CARE COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 43-1350515
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
210 WESTWOOD PLACE SOUTH, SUITE 400
BRENTWOOD, TN 37027
(Address of Principal Executive Office, Including Zip Code)
(615) 373-7774
(Registrant's Telephone Number, Including Area Code)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 10, 2000, Doane Pet Care Company ("Doane"), a Delaware
corporation, acquired all of the issued and outstanding shares of A/S Arovit
Petfood ("Arovit"), a Danish corporation, whose headquarters are located in
Esbjerg, Denmark, pursuant to the terms of a Share Purchase Agreement (the
"Agreement") dated March 24, 2000 between Doane and the shareholders of Arovit.
Doane paid approximately DKK 1.2 billion (approximately U.S. $149 million, net
of foreign currency hedges) and assumed indebtedness, net of cash, of
approximately DKK 97 million. As a result of the transaction, Arovit became a
wholly-owned subsidiary of Doane.
The acquisition of Arovit was financed through borrowings under an
amendment to Doane's senior credit agreement with The Chase Manhattan Bank, Inc.
as Administrative Agent, DLJ Capital Funding, Inc. as Syndication Agent, Firstar
Bank, N.A. as Documentation Agent, Den Danske Bank Aktielselskab as European
Managing Agent, and Chase Securities Inc. and DLJ Capital Funding, Inc. as
Co-Lead Arrangers. The amendment to the credit agreement provides for $80
million of incremental Tranche B loans and new Euro Tranche A loans of Euro 82
million (approximately $73 million).
Filed herewith are financial statements of Arovit and pro forma
financial statements of Doane giving effect to the acquisition of Arovit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Index to Financial Statements of A/S Arovit Petfood
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants.................................................. 4
Group Income Statements for the nine months ended March 31, 2000 (unaudited),
the year ended June 30, 1999 and the nine months ended March 31, 1999 (unaudited)......... 5
Group Balance Sheets as of March 31, 2000 (unaudited) and June 30, 1999................... 6
Group Cash Flow Statements for the nine months ended March 31, 2000 (unaudited),
the year ended June 30, 1999 and the nine months ended March 31, 1999 (unaudited)......... 8
Notes to the Group Accounts............................................................... 9
</TABLE>
(b) PRO FORMA FINANCIAL INFORMATION.
Index to Unaudited Pro Forma Financial Information
<TABLE>
<CAPTION>
PAGE
<S> <C>
Unaudited Pro Forma Financial Statements Introduction..................................... 17
Unaudited Condensed Combined Pro Forma Statement of Operations for the
year ended January 1, 2000................................................................ 18
Unaudited Condensed Combined Pro Forma Statement of Operations for the
three months ended April 1, 2000.......................................................... 19
Notes to Unaudited Condensed Combined Pro Forma Statements of Operations.................. 20
Unaudited Condensed Combined Pro Forma Balance Sheet as of April 1, 2000.................. 22
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Notes to Unaudited Condensed Combined Pro Forma Balance Sheet............................. 23
A/S Arovit Petfood Unaudited Consolidated Pro Forma Statement of Operations
for the twelve months ended December 31, 1999............................................. 25
A/S Arovit Petfood Unaudited Consolidated Pro Forma Statement of Operations
for the three months ended March 31, 2000................................................. 26
A/S Arovit Petfood Notes to Unaudited Consolidated Pro Forma
of Operations............................................................................. 27
A/S Arovit Petfood Unaudited Consolidated Pro Forma Balance Sheet
as of March 31, 2000..................................................................... 28
A/S Arovit Petfood Notes to Unaudited Consolidated Pro Forma Balance Sheet................ 29
Exhibit No. Description
23.1 CONSENT OF KPMG C. JESPERSEN.
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
DOANE PET CARE COMPANY
Dated: July 11, 2000 By: /s/ Thomas R. Heidenthal
--------------------------------
Thomas R. Heidenthal
Senior Vice President and
Chief Financial Officer
3
<PAGE> 4
A/S AROVIT PETFOOD
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
The Board of Directors
A/S Arovit Petfood
We have audited the consolidated balance sheet of A/S Arovit Petfood (the
"Company") and subsidiaries (the Company, together with its consolidated
subsidiaries, the "Group") as of June 30, 1999, and the related consolidated
profit and loss account and, cash flows for the year ended June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Denmark, which standards are substantially equivalent to generally accepted
auditing standards in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Group, as of
June 30, 1999, and the results of their operations and their cash flows for the
year ended June 30, 1999, in conformity with generally accepted accounting
principles in Denmark.
/s/ KPMG C. Jespersen
Esbjerg, Denmark
September 17, 1999
4
<PAGE> 5
A/S AROVIT PETFOOD
GROUP INCOME STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES DKK (IN 000'S) 7/1/99-3/31/00 7/1/98-6/30/99 7/1/98-3/31/99
(UNAUDITED) (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
3 NET TURNOVER 903,622 1,055,490 776,562
Change in stocks of finished
and unfinished goods 6,923 11,536 6,400
-------- --------- --------
910,545 1,067,026 782,962
Raw materials and packing
materials (487,151) (618,105) (466,417)
Other external expenses (149,104) (159,480) (110,490)
4 Staff costs (165,418) (181,388) (124,416)
6 Depreciation (27,333) (36,386) (25,415)
-------- --------- --------
81,539 71,667 56,224
Financial income etc. 1,592 1,623 984
Financial costs etc. (7,346) (8,019) (5,499)
-------- --------- --------
PROFIT BEFORE TAX 75,785 65,271 51,709
5 Tax (24,251) (20,557) (16,547)
-------- --------- --------
PROFIT FOR THE YEAR 51,534 44,714 35,162
======== ========= ========
</TABLE>
5
<PAGE> 6
A/S AROVIT PETFOOD
GROUP BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES DKK (IN 000'S) 3/31/00 6/30/99
(UNAUDITED)
----------- -------
<S> <C> <C>
ASSETS
6 Land and buildings 149,664 150,259
6 Plant and machinery 122,888 125,044
6 Other fixtures, tools and equipment 13,957 12,792
6 Payments on account for future
investments in machinery 62,898 18,898
------- -------
349,407 306,993
FINANCIAL FIXED ASSETS
7 Deposits etc. 1,506 1,681
------- -------
1,506 1,681
------- -------
TOTAL FIXED ASSETS 350,913 308,674
STOCKS
Raw material and packing materials 33,513 32,800
Unfinished goods 11,713 9,043
Finished goods and trade products 71,420 67,240
------- -------
116,646 109,083
------- -------
DEBTORS
Trade debtors 207,411 188,524
Other debtors 5,342 2,312
Accruals 3,200 4,066
5 Company tax -- 1,130
------- -------
215,953 196,032
SECURITIES -- 21,704
------- -------
CASH FUNDS 29,005 59,799
------- -------
TOTAL CURRENT ASSETS 361,604 386,618
------- -------
TOTAL ASSETS 712,517 695,292
======= =======
</TABLE>
6
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A/S AROVIT PETFOOD
GROUP BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES DKK (IN 000'S) 3/31/00 6/30/99
(UNAUDITED)
----------- -------
<S> <C> <C>
LIABILITIES AND EQUITY CAPITAL
9 EQUITY CAPITAL
Share capital 13,778 13,778
Retained earnings reserve 389,483 337,890
------- -------
TOTAL EQUITY CAPITAL 403,261 351,668
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxes 10,740 2,489
11 Other provisions 22,625 27,719
------- -------
33,365 30,208
------- -------
CREDITORS
8 Other credit institutions 58,410 69,937
8 Mortgage loans 1,375 1,427
------- -------
59,785 71,364
------- -------
SHORT TERM CREDITORS
8 Payments on long term debts 12,000 12,368
Bank debt 48,577 60,065
Trade creditors 80,731 92,743
5 Company tax 7,390 --
Other creditors 67,408 61,876
Dividend for the year -- 15,000
------- -------
216,106 242,052
------- -------
TOTAL CREDITORS 275,891 313,416
------- -------
TOTAL LIABILITIES AND EQUITY CAPITAL 712,517 695,292
======= =======
</TABLE>
12 Contingent liabilities and charges
7
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A/S AROVIT PETFOOD
GROUP CASH FLOW STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES DKK (IN 000'S) 7/1/99-3/31/00 7/1/98-6/30/99 7/1/98-6/30/99
(UNAUDITED) (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Profit before tax 75,785 65,271 51,709
Adjustment for non cash items:
Depreciation 27,333 36,386 25,415
Adjustment subsidiaries 58 (492) (667)
Losses by selling of fixed assets -- 186 --
Increase in stock of finished/unfinished goods (6,850) (13,633) (8,868)
Change in stock of raw material and packing material (713) 3,416 4,698
Change in receivables (21,050) 39,010 (14,554)
Reduction in creditors and other debt (6,469) (82,529) (65,757)
Merger costs paid (5,094) (4,573) --
Company tax paid (7,480) (14,371) (13,910)
------- ------- -------
55,520 28,671 (21,934)
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Investments in tangible assets (69,759) (41,576) (20,224)
Investments in financial fixed assets 175 (897) 152
------- ------- -------
(69,584) (42,473) (20,072)
CASH FLOW FROM FINANCING ACTIVITIES
Shareholders:
-------------
Dividend paid (15,000) (3,486) (3,486)
Acquisition of own shares (16,999) --
External financing:
-------------------
Repayment of mortgage loans (91) (65)
Repayment of loans to other credit institutions (11,947) (13,450) (7,983)
------- ------- -------
(26,947) (34,026) (11,534)
------- ------- -------
NET CASH FLOW FROM OPERATING ACTIVITIES,
INVESTING ACTIVITIES AND FINANCING ACTIVITIES (41,011) (47,828) (53,540)
Cash and cash equivalents at beginning
of period 21,438 58,927 58,927
Liquid funds taken over in connection
with merger -- 10,339 --
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD (19,573) 21,438 5,387
======= ======= =======
</TABLE>
8
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS
--------------------------------------------------------------------------------
1 GROUP ACCOUNTING PRINCIPLES
The group accounts have been prepared in accordance with the Danish
Company Accounts Act and current Danish accounting guidelines. The accounts have
been presented using the same accounting principles throughout the period from
July 1, 1998 to March 31, 2000.
TURNOVER
Turnover from sale of goods and services is included in the profit and
loss account as invoiced.
TANGIBLE FIXED ASSETS
Assets are valued at purchase price less accumulated depreciation.
Depreciation is applied over the expected useful life of the individual asset.
For technical equipment and machinery the expected useful life is set
between 5-10 years, for other equipment the useful life is set between 3-5
years. Buildings are depreciated over 30 years.
Individual purchases of less than 20,000 DKK are charged to the profit
and loss account in the year of acquisition.
Grants related to tangible fixed assets are deducted in the purchase
price of the assets. The grants are recognized at the time of the acceptance or
the settlement of the grants.
PARTICIPATING INTEREST IN SUBSIDIARIES
Profits and book values of the subsidiaries are assessed according to
the accounting policies of the group.
The profit and loss accounts of foreign subsidiaries have been
converted into Danish krone using the exchange rates applying on the date of
transaction. The balance sheets have been converted at the rates applying at the
end of the year. Exchange-rate adjustments of the equity capital of foreign
subsidiaries at the start of the year, and exchange-rate adjustments of the
profit and loss account from the date of transaction to the rate at the end of
the year, have been transferred to the equity capital.
In connection with the purchase of shares in companies, goodwill is
calculated at the time of the purchase as the difference between purchase price
and the book value of the company. This goodwill is written off in the purchase
year over the capital and reserves.
OTHER FINANCIAL ASSETS
Other securities and deposits are valued at purchase prices.
STOCKS
Raw materials and packaging materials are valued at purchase price by
using the FIFO method.
Work in progress and finished goods are valued at the calculated cost
price consisting of calculated purchase price for raw materials and packaging
and processing costs plus direct costs and share in production overheads.
9
<PAGE> 10
A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS - (CONTINUED)
--------------------------------------------------------------------------------
Goods for resale are valued at purchase price.
If the net realizable value is lower than the cost price/purchase
price, stocks are written down to the lower of these values.
DEBTORS
Debtors are stated at nominal value less provision for anticipated
losses.
SECURITIES
Investments in listed securities, which are classified as current
assets, are valued at purchase price or the lower listed price at year end.
FOREIGN CURRENCY TRANSACTIONS
Debtors and creditors denominated in foreign currencies are translated
into Danish krone at exchange rates ruling at year-end; however, debtors are
valued to the insuranced exchange rate if this is lower than the exchange rates
at year-end. Unsettled forward transactions and foreign-currency options entered
into to hedge against the risks on future commercial payments relate to the cash
flow and are thus included in the profit and loss account or balance sheet at
the date of payment. Realized foreign-currency gains/losses are included in the
profit and loss account.
COMPANY TAX
Company tax charged to the profit and loss account comprises the
accumulated corporate tax, which is expected to be charged to the parent
company, the subsidiaries as well as adjustments in respect of deferred tax.
Deferred tax is not provided for participating interests in
subsidiaries, since the plan is that participating interests will be owned for
more than 3 years.
The parent company is jointly taxed with some subsidiaries.
Jointly taxed companies are included in the Danish tax on account
scheme. Supplements, deductions and refunds concerning tax payments are included
in financial items in the subsequent year.
Deferred tax has been provided at 32 percent of the difference between
the book value and tax value of tangible fixed assets, stocks and other
provisions.
CONSOLIDATED ACCOUNTS
The consolidated accounts comprise the parent company and 100% owned
subsidiaries.
The consolidated accounts are prepared on the basis of the annual
accounts of the parent company and the subsidiaries. Exchange of goods, interest
payment etc. between group companies as well as internal receivables and owings,
unrealized profits on stocks have been eliminated.
10
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS - (CONTINUED)
--------------------------------------------------------------------------------
CASH FLOW STATEMENT
The cash flow statement shows the company's inflows and outflows of
cash during the year as well as the financial position at the end of the year.
The cash flow is related to three major areas: operating activities, investing
activities and financing.
Cash includes cash at bank and in hand, short term securities stated
under current assets and short term credits.
Cash flow from investing activities comprise additions and disposals of
tangible assets including completion of machinery and buildings under
construction at the beginning of the year.
Additions are stated at cost prices. Obtained grants are deducted.
Cash flows relating to subsidiaries or business units acquired or
merged into the group in the course of the financial year are included from the
time of acquisition or merger when preparing the cash flow statement.
The effect of changes in the foreign currencies are included in the
respective value of tangible and financial assets.
2 MERGER
In the last quarter of the accounting year, A/S Arovit Petfood (the
continuing company) merged with Loven Petfood A/S (the ceasing company). The
merger has made A/S Arovit Petfood Europe's largest supplier of aluminum cups
for dogs and cats under private labels, and the company has now also become a
total supplier of petfood in general, as Loven Petfood A/S also produces dry
petfood.
3 NET TURNOVER
Sales to European markets have accounted for a considerable part of the
turnover during the periods.
4 STAFF
<TABLE>
<CAPTION>
DKK (IN 000'S) 7/1/99-3/31/00 7/1/98-6/30/99 7/1/98-3/31/99
(UNAUDITED) (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
Salaries and remunerations to:
------------------------------
-board of directors 1,073 1,075 408
-management incl. pensions 2,715 3,507 2,608
-other employees 152,411 166,917 115,312
Social security costs 4,016 5,513 3,018
Payments to pension schemes 5,203 4,376 3,070
------- ------- -------
165,418 181,388 124,416
======= ======= =======
Average number of employees 766 663 616
</TABLE>
11
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS - (CONTINUED)
--------------------------------------------------------------------------------
5 COMPANY TAX
<TABLE>
<CAPTION>
DKK (IN 000'S) 7/1/99-3/31/00 7/1/98-6/30/99
(UNAUDITED)
-------------- --------------
<S> <C> <C>
Outstanding at beginning of period (1,130) 2,319
Tax payment during the period (7,480) (14,371)
Computed tax for the period 24,251 20,557
Of which change in deferred taxation (8,251) (9,635)
------ -------
7,390 (1,130)
====== =======
</TABLE>
12
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6. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
DKK (IN 000'S) PAYMENTS ON
ACCOUNT FOR
FUTURE
INVESTMENTS AND
LAND AND PLANT AND OTHER IN PLANT AND
BUILDINGS MACHINERY EQUIPMENT MACHINES
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
GROUP 3/31/2000 (UNAUDITED)
Purchase price 7/1/99 183,367 337,682 27,524 18,898
Additions in 1999/2000 3,911 17,558 6,788 50,309
Sold in 1999/2000 -- (30) (4,424) (6,309)
----------- ----------- ---------- ------------
Purchase price at 3/31/00 187,278 355,210 29,888 62,898
----------- ----------- ---------- ------------
Depreciation 7/1/99 (33,109) (212,637) (14,736) --
Depreciation for the year (4,505) (19,686) (3,143) --
Depreciation on sold assets -- 1 1,948 --
----------- ----------- ---------- ------------
Depreciation at 3/31/00 (37,614) (232,322) (15,931) --
----------- ----------- ---------- ------------
NET BOOK VALUE AT 3/31/00 149,664 122,888 13,957 62,898
=========== =========== ========== ============
Depreciation method applied 30 years on 5-10 years 3-5 years
a straight on a straight on a straight --
line basis line basis line basis
GROUP 6/30/99
Purchase price 7/1/98 141,203 272,621 27,611 1,482
Exchange rate adjustment 7/1/98 (45) (60) 35 --
Net additions in connection with merger 38,673 42,603 752 6,822
Additions in 1998/1999 3,536 24,586 5,985 17,334
Sold in 1998/1999 -- (2,068) (6,859) (6,740)
----------- ----------- ---------- ------------
Purchase price at 6/30/99 183,367 337,682 27,524 18,898
----------- ----------- ---------- ------------
Depreciation at 7/1/98 (27,796) (187,072) (14,909) --
Exchange rate adjustment 7/1/98 15 14 (38) --
Depreciation for the year (5,327) (27,609) (3,450) --
Depreciation on sold assets -- 2,029 3,665 --
----------- ----------- ---------- ------------
Depreciation at 6/30/99 (33,108) (212,638) (14,732) --
----------- ----------- ---------- ------------
NET BOOK VALUE AT 6/30/99 150,259 125,044 12,792 18,898
=========== =========== ========== ============
Depreciation method applied 30 years on 5-10 years 3-5 years on
a straight on a straight a straight line --
line basis line basis basis
</TABLE>
13
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS
--------------------------------------------------------------------------------
7 FINANCIAL ASSETS
<TABLE>
<CAPTION>
DKK (in 000's) 3/31/00 6/30/99
(Unaudited)
----------- -----------
<S> <C> <C>
Value at beginning of period 1,681 779
Reclassification of securities
at the beginning of the year -- 180
Additions merger -- 5
Additions in period -- 756
Sold in period (175) (39)
----------- -----------
NET BOOK VALUE AT END OF PERIOD 1,506 1,681
=========== ===========
</TABLE>
8 LONG TERM CREDITORS
<TABLE>
<CAPTION>
DKK (in 000's) 3/31/00 6/30/99
(Unaudited)
----------- -----------
<S> <C> <C>
LONG TERM CREDITORS:
Other credit institutions 58,410 69,937
Mortgage loans 1,375 1,427
----------- -----------
59,785 71,364
=========== ===========
REPAYMENTS FALLING DUE IN A YEAR:
Other credit institutions 11,939 12,305
Mortgage loans 61 63
----------- -----------
12,000 12,368
=========== ===========
REPAYMENTS FALLING DUE AFTER 5 YEARS
Other credit institutions 15,562 23,611
Mortgage loans 1,067 1,132
----------- -----------
16,629 24,743
=========== ===========
</TABLE>
14
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS
--------------------------------------------------------------------------------
9 EQUITY CAPITAL
<TABLE>
<CAPTION>
DKK (in 000's) 3/31/00 6/30/99
(UNAUDITED)
----------- ----------
<S> <C> <C>
Share capital:
Share capital at the beginning of the period 13,778 10,000
Additions in connection with merger -- 3,778
----------- ----------
13,778 13,778
----------- ----------
Reserve at beginning of period 337,890 186,317
Profit for the period brought forward 51,534 29,714
Adjustments, subsidiaries 59 (492)
Write-off of acquisition of own shares -- (16,999)
Additions in connection with merger -- 139,350
----------- ----------
389,483 337,890
----------- ----------
TOTAL EQUITY CAPITAL 403,261 351,668
=========== ==========
</TABLE>
Share capital consists of:
1,377,800 shares of DKK 10 per share, which are not divided into various shares
categories.
The company owns shares with a nominal amount of DKK 315,560. Own shares are
entered at zero value.
15
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A/S AROVIT PETFOOD
NOTES TO THE GROUP ACCOUNTS
--------------------------------------------------------------------------------
10 DEFERRED TAXES
Deferred tax primarily applies to tangible fixed assets, stocks and
other provisions.
The period's development in provisions for deferred tax may be
specified as follows:
<TABLE>
<CAPTION>
7/1/99-3/31/00 7/1/98-6/30/99
(Unaudited)
-------------- --------------
<S> <C> <C>
Provisions beginning at period 2,489 18,454
Change in connection with merger -- (25,600)
Adjustment for the year 8,251 9,635
-------------- --------------
Provisions end at period 10,740 2,489
============== ==============
</TABLE>
11 OTHER PROVISIONS
These include provisions to meet costs in connection with merger.
11 CONTINGENT LIABILITIES, GUARANTEES AND SECURITIES
Mortgage deeds registered to the owner and a letter of indemnity in
land and buildings totaling DKK 35 million have been registered as
collateral for debt to other credit institutions. The book value of
land and building amounts to DKK 150 million at June 30, 1999 (DKK 150
million at March 31, 2000).
The company is currently entering into forward contracts and options to
hedge commercial payments to and from foreign customers and suppliers.
The total contractual amount of unsettled contracts at June 30, 1999
regarding purchase and sale of foreign currency amounts to DKK 217
million. (DKK 277 million at March 31, 2000.)
16
<PAGE> 17
UNAUDITED PRO FORMA FINANCIAL STATEMENTS INTRODUCTION
The unaudited pro forma financial data for Doane Pet Care Company
("Doane") set forth below gives effect to our acquisition of A/S Arovit Petfood
("Arovit") and the related financing thereof. The unaudited condensed combined
pro forma statements of operations data of Doane for the year ended January 1,
2000 and the three months ended April 1, 2000 give effect to our acquisition of
Arovit as if this transaction had occurred on January 1, 1999. The unaudited
consolidated pro forma statement of operations for Arovit for the twelve months
ended December 31, 1999 give effect to Arovit's acquisition of Loven Petfood A/S
("Loven") as if this transaction had occurred on January 1, 1999. The unaudited
condensed combined pro forma balance sheet as of April 1, 2000 gives effect to
our acquisition of Arovit as if it had occurred on such date. This acquisition
has been accounted for as a purchase with the purchase price and direct
acquisition costs allocated based on the fair value of assets acquired and
liabilities assumed. The allocation of the purchase price is preliminary because
estimates were made regarding the fair value of certain assets and liabilities
for which we are obtaining valuation information. The unaudited pro forma
financial data does not purport to be indicative of the combined financial
position or results of operations of future periods or indicative of results
that would have occurred had the transactions been consummated on the dates
indicated. The pro forma financial data and other adjustments, as described in
the accompanying notes to the unaudited condensed combined pro forma statements
of operations and balance sheet, are based on available information and certain
assumptions that management believes are reasonable.
The historical data of Doane for the fiscal year ended January 1, 2000
has been derived from Doane's audited consolidated financial statements as
reported on Form 10-K and the historical data for the three months ended April
1, 2000 has been derived from the unaudited interim financial statements of
Doane as reported on Form 10-Q. The historical data of Arovit has been derived
from its unaudited financial statements for the twelve months ended December 31,
1999 and as of and for the three months ended March 31, 2000.
17
<PAGE> 18
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro forma
Pro forma adjustments for Combined
Arovit (see Arovit Doane pro
Doane Table 1-A) acquisition forma
------------- -------------- ---------------- -----------
<S> <C> <C> <C> <C>
Net sales $ 770,591 $ 165,818 $ 18,291 (a) $ 954,700
Cost of goods sold 576,490 133,181 2,597 (b) 712,268
----------- ----------- --------------- -----------
Gross profit 194,101 32,637 15,694 242,432
Operating expenses:
Promotion and distribution 61,188 -- 18,291 (a) 79,479
Selling, general and administrative 40,912 18,377 -- 59,289
Amortization of intangibles 10,357 250 2,193 (c) 12,800
Non-recurring expenses 2,539 -- -- 2,539
----------- ----------- --------------- -----------
Income from operations 79,105 14,010 (4,790) 88,325
Interest expense, net 39,739 600 12,357 (d) 52,696
Other income, net (1,201) -- -- (1,201)
----------- ----------- --------------- -----------
Income before income taxes and cumulative
effect of a change in accounting principle 40,567 13,410 (17,147) 36,830
Income tax expense (benefit) 16,858 4,230 (4,807)(e) 16,281
----------- ----------- --------------- -----------
Income before cumulative effect of a change
in accounting principle $ 23,709 $ 9,180 $ (12,340) $ 20,549
=========== =========== =============== ===========
Basic and diluted earnings per common share $ 23,709 $ 20,549
Basic and diluted weighted-average common
shares outstanding 1,000 1,000
</TABLE>
See accompanying notes to the unaudited condensed combined pro forma
statements of operations.
18
<PAGE> 19
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS FOR COMBINED
AROVIT (SEE AROVIT DOANE PRO
DOANE TABLE 1-B ACQUISITION FORMA
--------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
Net sales $ 204,463 $ 36,356 $ 4,066(a) $ 244,885
Cost of goods sold 147,268 29,344 601(b) 177,213
--------- --------- --------- ---------
Gross profit 57,195 7,012 3,465 67,672
Operating expenses:
Promotion and distribution 16,705 -- 4,066(a) 20,771
Selling, general and administrative 10,895 3,635 -- 14,530
Amortization of intangibles 2,689 58 507(c) 3,254
--------- --------- --------- ---------
Income from operations 26,906 3,319 (1,108) 29,117
Interest expense, net 10,126 273 3,262(d) 13,661
Other income, net (136) -- (136)
--------- --------- --------- ---------
Income before income taxes 16,916 3,046 (4,370) 15,592
Income tax expense 6,880 993 (1,269)(e) 6,604
--------- --------- --------- ---------
Net income (loss) $ 10,036 $ 2,053 $ (3,101) $ 8,988
========= ========= ========= =========
Basic and diluted earnings per common share $ 10,036 $ 8,988
Basic and diluted weighted-average common
shares outstanding 1,000 1,000
</TABLE>
See accompanying notes to the unaudited condensed combined
pro forma statements of operations.
19
<PAGE> 20
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(a) Adjustments to reclassify $18,291 for the year ended January 1, 2000
and $4,066 for the three months ended April 1, 2000 of Arovit's
promotion and distribution expenses from net sales to conform the
accounting policies of Arovit to those of Doane.
(b) Adjustments to record depreciation of $2,597 for the year ended January
1, 2000 and $601 for the three months ended April 1, 2000 from the
write-up of property, plant and equipment related to the acquisition of
Arovit. The write-up of DKK 212,146 ($27,243 at the April 1, 2000
exchange rate) is being depreciated over a weighted average life of
11.7 years. Depreciation was converted to dollars using the average
exchange rates of 6.980 DKK/USD and 7.542 DKK/USD for the periods ended
January 1, 2000 and April 1, 2000, respectively.
(c) Adjustments to record additional amortization relating to the write-up
of the following items related to the acquisition of Arovit
(amortization was converted to dollars using the exchange rates noted
in (b):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
JANUARY 1, APRIL 1,
2000 2000
---------- ------------
<S> <C> <C>
Goodwill (DKK 434,808 ($55,935 at April 1, 2000 exchange rate)
amortized over 40 years) $ 1,557 $ 360
Other assets, consisting of non-compete agreements, customer lists
and customer contracts (DKK 76,202 ($9,785 at April 1, 2000
exchange rate) amortized over a weighted average life of 17.2 years) 636 147
---------- ----------
$ 2,193 $ 507
========== ==========
</TABLE>
20
<PAGE> 21
(d) Adjustments to record additional interest expense on debt incurred for
the acquisition of Arovit as follows (interest expense on Euro debt
converted to dollars using the average exchange rates of 0.938 EUR/USD
and 1.013 EUR/USD for the periods ended January 1, 2000 and April 1,
2000, respectively):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
JANUARY 1, APRIL 1,
2000 2000
------------ ------------
<S> <C> <C>
Interest on Tranche B borrowings ($80,000 at a weighted average
rate of 8.72% and 9.44% for the year ended January 1, 2000
and the three months ended April 1, respectively) $ 6,976 $ 1,888
Interest on Euro Tranche A borrowings (Euro 82,000 ($78,304 at
April 1, 2000 exchange rate) at a weighted average rate of 5.71%
and 6.3% for the year ended January 1, 2000 and for
the three months ended April 1, 2000, respectively) 4,988 1,276
Amortization of capitalized financing costs ($2,361 amortized
over 6 years) 393 98
------------ ------------
$ 12,357 $ 3,262
============ ============
</TABLE>
The effect of a 0.25% change in the annual interest rate of the Tranche
B borrowings and the Euro Tranche A borrowings would change pro forma
interest expense by $418 and $101 for the year ended January 1, 2000
and the three months ended April 2000, respectively.
(e) Adjustments to income tax expense at the statutory tax rate of 38.9%
for the year ended January 1, 2000 and for the three months ended April
1, 2000 based on Doane's statutory tax rate for such periods. In
calculating the tax adjustments, the additional depreciation and
goodwill and intangible amortization as discussed above in (b) and (c),
respectively, have not been tax effected as they are non-deductible for
tax purposes.
21
<PAGE> 22
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
APRIL 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS FOR COMBINED
AROVIT (SEE AROVIT DOANE
DOANE TABLE 1-C) ACQUISITION PRO FORMA
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,942 $ 3,725 $ (152)(a) $ 5,515
Accounts receivable, net 82,483 27,321 -- 109,804
Inventories, net 56,836 14,979 -- 71,815
Deferred tax asset 18,687 -- -- 18,687
Prepaid expenses and other current assets 3,134 411 -- 3,545
------------ ------------ ------------ ------------
Total current assets 163,082 46,436 (152) 209,366
Property, plant and equipment, net 217,125 45,049 27,243 (b) 289,417
Goodwill and other intangible assets, net 295,785 8,636 55,958 (c) 360,379
Other assets 31,615 193 12,146 (d) 43,954
------------ ------------ ------------ ------------
Total assets $ 707,607 $ 100,314 $ 95,195 $ 903,116
============ ============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 17,612 $ 1,541 $ 3,951 (e) $ 23,104
Accounts payable 60,521 16,605 -- 77,126
Accrued liabilities 33,364 9,058 -- 42,422
------------ ------------ ------------ ------------
Total current liabilities 111,497 27,204 3,951 142,652
Long-term debt, excluding current maturities 410,578 7,677 154,353 (e) 572,608
Other long-term liabilities 7,381 23 -- 7,404
Deferred tax liability 39,625 2,301 -- 41,926
------------ ------------ ------------ ------------
Total liabilities 569,081 37,205 158,304 764,590
------------ ------------ ------------ ------------
Senior Preferred Stock, 3,000,000 shares authorized,
1,200,000 shares issued and outstanding 48,169 -- -- 48,169
------------ ------------ ------------ ------------
Stockholder's equity:
Common stock, $0.01 par value; 1,000 shares
authorized, issued and outstanding -- 1,769 (1,769)(f) --
Additional paid-in-capital 106,786 20,447 (20,447)(f) 106,786
Accumulated other comprehensive loss (669) -- -- (669)
Accumulated deficit (15,760) 40,893 (40,893)(g) (15,760)
------------ ------------ ------------ ------------
Total stockholder's equity 90,357 63,109 (63,109) 90,357
------------ ------------ ------------ ------------
Total liabilities and stockholder's equity $ 707,607 $ 100,314 $ 95,195 $ 903,116
============ ============ ============ ============
</TABLE>
See accompanying notes to the unaudited condensed combined
pro forma balance sheet.
22
<PAGE> 23
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS)
(a) The net effect of the acquisition of Arovit on cash follows:
<TABLE>
<S> <C>
Proceeds from the senior credit facility $ 158,304
Cash consideration paid to Arovit shareholders (153,695)
Payment of estimated transaction fees and expenses (4,761)
---------
$ (152)
=========
</TABLE>
On May 10, 2000, Doane acquired all of the issued and outstanding
shares of Arovit for approximately DKK 1.2 billion and assumed
indebtedness, net of cash of approximately DKK 97.0 million. The
decline in the value of the DKK compared to the U.S. dollar between the
pro forma balance sheet date of April 1, 2000 and the actual closing
date of May 10, 2000 reduced the U.S. dollar price to approximately
$144.4 million from $153.7 million. Doane will not realize the full
impact of the DKK currency fluctuation because it hedged a portion of
the DKK purchase price to limit exposure to fluctuations in this
foreign currency in accordance with its risk management policy, and
will record a non-recurring charge of approximately $4.4 million to
reflect the hedged portion of the foreign currency fluctuation. Such
loss is excluded from the pro forma balance sheet because the loss
occurred after the assumed transaction date of April 1, 2000.
The purchase price was allocated to assets purchased and liabilities
assumed as follows:
<TABLE>
<S> <C>
Working capital: $ 19,232
Property, plant and equipment 72,292
Goodwill 64,594
Other assets 12,339
Long term debt (7,677)
Other liabilities (23)
Net deferred tax liability (2,301)
---------
$ 158,456
=========
</TABLE>
(b) Adjustment to record the excess of the fair value of property, plant
and equipment over the historical net book value. These assets are
depreciated over remaining useful lives ranging from five to thirty
years.
(c) Adjustment to record the excess of the purchase price over the fair
value of the assets acquired and liabilities assumed of Arovit.
Goodwill is amortized over its useful life of forty years.
(d) Adjustment to record the following:
<TABLE>
<S> <C>
Fair value of certain intangible assets such as non-compete
agreements, customer lists and customer contracts (amortized
over useful lives ranging from 10 to 30 years) $ 9,785
Capitalized financing costs (amortized over 6 years) 2,361
-------
$12,146
=======
</TABLE>
23
<PAGE> 24
CONSOLIDATED DOANE PET CARE COMPANY AND A/S AROVIT PETFOOD
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA
BALANCE SHEET - (CONTINUED)
(AMOUNTS IN THOUSANDS)
(e) Adjustment to record the borrowings to finance the Arovit acquisition:
<TABLE>
<S> <C>
Tranche B borrowings $ 80,000
Euro Tranche A borrowings (Euro 82,000 converted to dollars at the
April 1, 2000 exchange rate of 1.047 EUR/USD) 78,304
---------
Total borrowings $ 158,304
---------
Less current maturities:
Tranche B $ (800)
Euro Tranche A (Euro 3,300,000 converted to dollars at the April 1, 2000
exchange rate of 1.047 EUR/USD) (3,151)
---------
Total current maturities of long term debt $ (3,951)
---------
Total long-term portion of debt $ 154,353
=========
</TABLE>
(f) Adjustment to eliminate the equity accounts of Arovit.
(g) Adjustment to eliminate historical retained earnings of Arovit.
The adjustment to record the loss on foreign currency hedges entered
into in connection with the acquisition of Arovit has not been
reflected in the pro forma statements of operations and will be charged
to operations upon the consummation of the acquisition.
24
<PAGE> 25
TABLE 1-A
A/S AROVIT PETFOOD
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
LOVEN TOTAL U.S. GAAP
AROVIT HISTORICAL HISTORICAL(a) HISTORICAL ADJUSTMENTS PRO FORMA AROVIT (e)
----------------- ------------- ------------- ---------- ----------------------------
<S> <C> <C> <C> <C> <C>
Net sales DKK 1,060,638 DKK 96,751 DKK 1,157,389 DKK -- DKK 1,157,389 $ 165,818
Cost of goods sold 825,050 75,686 900,736 28,851(b) 929,587 133,181
------------- ---------- ------------- ---------- ------------- ---------
Gross profit 235,588 21,065 256,653 (28,851) 227,802 32,637
Operating expenses:
Selling, general and administrative 145,265 17,525 162,790 (34,523)(b) 128,267 18,377
Amortization of intangibles -- -- -- 1,743(c) 1,743 250
------------- ---------- ------------- ---------- ------------- ---------
Income from operations 90,323 3,540 93,863 3,929 97,792 14,010
Interest expense, net 3,008 1,182 4,190 -- 4,190 600
------------- ---------- ------------- ---------- ------------- ---------
Income before income taxes 87,315 2,358 89,673 3,929 93,602 13,410
Income tax expense 26,980 729 27,709 1,815(d) 29,524 4,230
------------- ---------- ------------- ---------- ------------- ---------
Net income DKK 60,335 DKK 1,629 DKK 61,964 DKK 2,114 DKK 64,078 $ 9,180
============= ========== ============= ========== ============= =========
</TABLE>
See accompanying notes to the unaudited consolidated pro forma statements of
operations.
25
<PAGE> 26
TABLE 1-B
A/S AROVIT PETFOOD
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
AROVIT
HISTORICAL U.S. GAAP ADJUSTMENTS PRO FORMA AROVIT(e)
------------------ --------------------- ------------------------------------
<S> <C> <C> <C> <C>
Net sales DKK 274,189 DKK -- DKK 274,189 $ 36,356
Cost of goods sold 212,893 8,412(b) 221,305 29,344
------------------ -------------- ----------------- -------------
Gross profit 61,296 (8,412) 52,884 7,012
Operating expenses:
Selling, general and administrative 35,828 (8,412)(b) 27,416 3,635
Amortization of intangibles -- 436(c) 436 58
------------------ -------------- ----------------- -------------
Income from operations 25,468 (436) 25,032 3,319
Interest expense, net 2,060 -- 2,060 273
------------------ -------------- ----------------- -------------
Income before income taxes 23,408 (436) 22,972 3,046
Income tax expense 7,491 --(d) 7,491 993
------------------ -------------- ----------------- -------------
Net income DKK 15,917 DKK (436) DKK 15,481 $ 2,053
================== ============== ================= =============
</TABLE>
See accompanying notes to the unaudited consolidated pro forma statements of
operations.
26
<PAGE> 27
A/S AROVIT PETFOOD
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(In thousands)
(a) Includes the results of Loven for the period from January 1, 1999 to April
1, 1999 (the date of acquisition).
(b) Adjustment to conform cost of goods sold to U.S. GAAP as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
--------------- --------------
<S> <C> <C>
Capitalization of certain fixed asset purchases expensed
under Danish GAAP DKK (1,400) DKK -
Elimination of excess inventory and accounts receivable reserves (4,272) -
Reclassification of depreciation on assets used in the
manufacturing process from operating expenses 34,523 8,412
--------------- --------------
DKK 28,851 DKK 8,412
=============== ==============
</TABLE>
(c) Adjustment to reflect amortization of goodwill on the following
acquisitions that were charged to equity but should be capitalized under
U.S. GAAP:
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
----------------- --------------
<S> <C> <C>
Carat GmbH (DKK 38,199 amortized over 40 years) DKK 955 DKK 239
Loven (DKK 31,508 amortized over 40 years) 788 197
----------------- --------------
DKK 1,743 DKK 436
================= ==============
</TABLE>
(d) Reflects an adjustment to income tax expense at the statutory tax rate of
32.0% for the twelve months ended December 31, 1999 and for the three
months ended March 31, 2000 based on Arovit's statutory tax rate for the
periods presented. In calculating the tax adjustment, goodwill amortization
as discussed in (c) above has not been tax effected as it is non-deductible
for tax purposes.
(e) The average exchange rates used to translate the statement of operations
from Danish krone to U.S. dollars is 6.980 DKK/USD for the twelve months
ended December 31,1999 and 7.542 DKK/USD for the three months ended March
31, 2000.
27
<PAGE> 28
TABLE 1-C
A/S AROVIT PETFOOD
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
AROVIT U.S. GAAP
HISTORICAL ADJUSTMENTS PRO FORMA AROVIT (g)
----------- ----------- ------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents DKK 29,005 DKK -- DKK 29,005 $ 3,725
Accounts receivable, net 212,753 -- 212,753 27,321
Inventories, net 116,646 -- 116,646 14,979
Prepaid expenses and other current assets 3,200 -- 3,200 411
----------- ---------- ------------- -----------
Total current assets 361,604 -- 361,604 46,436
Property, plant and equipment, net 349,407 1,400 (a) 350,807 45,049
Goodwill and other intangible assets, net -- 67,248 (b) 67,248 8,636
Other assets 1,506 -- 1,506 193
----------- ---------- ------------- -----------
Total assets DKK 712,517 DKK 68,648 DKK 781,165 $ 100,314
=========== ========== ============= ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt DKK 12,000 DKK -- DKK 12,000 $ 1,541
Accounts payable 129,308 -- 129,308 16,605
Accrued liabilities 74,798 (4,272)(c) 70,526 9,058
----------- ---------- ------------- -----------
Total current liabilities 216,106 (4,272) 211,834 27,204
Long-term debt, excluding current maturities 59,785 -- 59,785 7,677
Other long-term liabilities 22,625 (22,444)(d) 181 23
Deferred tax liability 10,740 7,182 (d) 17,922 2,301
----------- ---------- ------------- -----------
Total liabilities 309,256 (19,534) 289,722 37,205
----------- ---------- ------------- -----------
Stockholder's equity:
Common stock 13,778 -- 13,778 1,769
Additional paid-in capital -- 159,222 (e) 159,222 20,447
Retained earnings 389,483 (71,040)(f) 318,443 40,893
----------- ---------- ------------- -----------
Total stockholder's equity 403,261 88,182 491,443 63,109
----------- ---------- ------------- -----------
Total liabilities and stockholder's equity DKK 712,517 DKK 68,648 DKK 781,165 $ 100,314
=========== ========== ============= ===========
</TABLE>
See accompanying notes to the unaudited consolidated pro forma balance sheet.
28
<PAGE> 29
A/S AROVIT PET FOOD
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS)
On April 1, 1999, Arovit acquired all of the issued and outstanding
shares of Loven for 3,778 shares of Arovit common stock which represented
27.4% of the outstanding common stock following the acquisition.
The following represent pro forma adjustments to the historical Arovit
financial statements to conform to U.S. GAAP:
(a) Adjustment to reclassify certain fixed asset purchases expensed under
Danish GAAP that qualify as capital assets under U.S. GAAP.
(b) Adjustment to record goodwill in accordance with U.S. GAAP (goodwill is
amortized over its useful life of 40 years):
<TABLE>
<S> <C>
Reclass excess of acquisition costs over the net assets acquired of
Carat GmbH originally charged to retained earnings DKK 38,199
Record accumulated amortization associated with Carat goodwill (1,671)
Record excess of acquisition costs over the net assets acquired of Loven 16,770
Reclass restructuring charge associated with the Loven acquisition originally
charged to retained earnings and eliminate associated reserve 14,738
Record accumulated amortization associated with Loven goodwill (788)
-----------
DKK 67,248
===========
</TABLE>
(c) Adjustment to eliminate excess inventory and accounts receivable
reserves.
(d) Adjustment to eliminate the DKK 22,444 excess accrual and DKK 7,182 of
applicable deferred taxes for charges pertaining to the restructuring
associated with the Loven acquisition.
(e) Adjustments to additional paid-in capital follow:
<TABLE>
<S> <C>
Record excess of acquisition costs over the net assets acquired of Loven DKK 16,770
Reclass Loven acquisition costs originally charged to retained earnings
to reflect common stock issued in the Loven acquisition 142,452
-------------
DKK 159,222
=============
</TABLE>
29
<PAGE> 30
(f) Adjustments to retained earnings follow:
<TABLE>
<S> <C>
Capitalize certain assets originally expensed under Danish GAAP DKK 1,400
Reclass excess of acquisition costs over the net assets acquired of
Carat GmbH originally charged to retained earnings 38,199
Record accumulated amortization associated with Carat GmbH goodwill (1,671)
Reclass restructuring charge associated with the Loven acquisition 30,000
Record accumulated amortization associated with Loven goodwill (788)
Eliminate excess inventory and accounts receivable reserves 4,272
Reclass Loven acquisition costs originally charged to equity (142,452)
-------------
DKK (71,040)
=============
</TABLE>
(g) The exchange rate used to translate the balances from Danish krone to
U.S. dollars is 7.787 DKK/USD at March 31, 2000.
30
<PAGE> 31
EXHIBIT TO INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
23.1 Consent of KPMG C. Jespersen
</TABLE>
