<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1034
For the quarterly period ended March 28, 1998
----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT OF SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------- ---------------------
Commission File Number: 0 - 20242
--------------------------------------------------------
CENTRAL GARDEN & PET COMPANY
- --------------------------------------------------------------------------------
Delaware 68-0275553
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3697 Mt. Diablo Blvd., Suite 310, Lafayette, California 94549
- --------------------------------------------------------------------------------
(Address of principle executive offices)
- --------------------------------------------------------------------------------
(510) 283-4573
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding as of March 28, 1998 29,498,647
Class B Stock Outstanding as of March 28, 1998 1,662,967
<PAGE>
CENTRAL GARDEN & PET COMPANY FORM 10-Q
Part 1- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
Central Garden & Pet Company
Consolidated Statements of Income
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
MARCH 29, MARCH 28, MARCH 29, MARCH 28,
1997 1998 1997 1998
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 336,485 $ 494,983 $ 236,341 $ 356,156
Cost of Goods Sold and Occupancy 285,315 385,863 202,625 280,358
--------------- -------------- ------------ ------------
Gross profit 51,170 109,120 33,716 75,798
Selling, General and
Administrative Expenses 42,844 86,085 23,211 52,796
--------------- -------------- ------------ ------------
Income from operations 8,326 23,035 10,505 23,002
Interest Expense - Net (2,747) (2,623) (1,810) (1,696)
--------------- -------------- ------------ ------------
Income before income taxes 5,579 20,412 8,695 21,306
Income Taxes 2,348 8,572 3,657 8,947
--------------- -------------- ------------ ------------
Net Income $ 3,231 $ 11,840 $ 5,038 $ 12,359
=============== ============== ============ ============
Net Income per Common
Share Outstanding
Basic $ 0.22 $ 0.46 $ 0.34 $ 0.41
=============== ============== ============= ============
Diluted $ 0.21 $ 0.45 $ 0.31 $ 0.39
=============== ============== ============= ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
CENTRAL GARDEN & PET COMPANY
-------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 29, MARCH 28,
1997 1998
------------------------ ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,231 $ 11,840
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 1,703 5,166
Change in assets and liabilities:
Receivables (61,026) (77,459)
Inventories (89,534) (92,128)
Prepaid expenses and other assets (3,421) (5,478)
Accounts payable 142,803 114,524
Accrued expenses 858 (5,744)
------------------------ -----------------------
Net cash used in operating activities (5,386) (49,279)
CASH FLOWS FROM INVESTING ACTIVITES:
Additions to land, buildings, improvements and equipment (2,280) (5,617)
Payments to acquire companies, net of cash acquired (53,232) (217,163)
------------------------ -----------------------
Net cash used in investing activities (55,512) (222,780)
CASH FLOWS FROM FINANCING ACTIVITES
Repayments of notes payable - net (27,304) (5,624)
Repayments of long-term debt (10,662) (3,705)
Proceeds from issuance of long-term debt 111,836 0
Proceeds from issuance of stock - net 599 204,364
------------------------ -----------------------
Net cash provided by financing activities 74,469 195,035
NET INCREASE (DECREASE) IN CASH 13,571 (77,024)
CASH AT BEGINNING OF PERIOD 1,272 100,125
------------------------ -----------------------
CASH AT END OF PERIOD $ 14,843 $ 23,101
======================== =======================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 2,633 $ 4,556
Cash paid for income taxes 229 7,113
Assets (excluding cash) acquired through purchase of subsidiaries 22,589 220,217
Liabilities assumed through purchase of subsidiaries 5,531 165,840
</TABLE>
See notes to consolidated financial statements
<PAGE>
CENTRAL GARDEN & PET COMPANY
----------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 27, MARCH 28,
1997 1998
----------------------- -------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 100,125 $ 23,101
Accounts receivable (less allowance for doubtful
accounts of $4,705 and $4,545) 85,028 224,031
Inventories 218,796 403,036
Prepaid expenses and other assets 10,470 18,130
---------------------- -------------------
Total current assets 414,419 668,298
LAND, BUILDINGS, IMPROVEMENTS AND EQUIPMENT - NET 22,688 78,773
GOODWILL 113,018 344,073
OTHER ASSETS 8,918 27,712
---------------------- -------------------
TOTAL $ 559,043 $ 1,118,856
====================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 72 $ 66,590
Accounts payable 136,220 300,035
Accrued expenses 24,201 40,732
Current portion of long-term debt 0 501
----------------------- --------------------
Total current liabilities 160,493 407,858
LONG-TERM DEBT 115,200 132,680
DEFERRED INCOME TAXES AND OTHER LONG-TERM
OBLIGATIONS 1,543 14,906
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value: 100 shares outstanding September 27, 1997 and
March 28, 1998 ---- ----
Class B stock, $.01 par value: 1,663,167 shares outstanding September 27, 1997,
1,662,967 shares outstanding March 28, 1998 16 16
Common stock, $.01 par value: 19,143,325 shares outstanding September 27, 1997,
29,524,647 shares issued and 29,498,647 shares outstanding March 28, 1998 191 298
Additional paid-in capital 245,783 515,406
Retained earnings 36,291 48,131
Treasury stock (364) (364)
Restricted stock deferred compensation (110) (75)
----------------------- ---------------------
Total shareholders' equity 281,807 563,412
----------------------- ---------------------
TOTAL $ 559,043 $ 1,118,856
======================= =====================
</TABLE>
See notes to consolidated financial statements
<PAGE>
CENTRAL GARDEN & PET COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months and Six Months Ended March 28, 1998
(Unaudited)
1. Basis of Presentation
---------------------
The condensed consolidated balance sheet as of March 28, 1998, the
consolidated statements of income for both the three months and six months ended
March 28, 1998 and March 29, 1997, and consolidated statements of cash flows for
the six months ended March 28, 1998 and March 29, 1997 have been prepared by the
Company, without audit. The condensed consolidated balance sheet as of
September 27, 1997 has been derived from the audited financial statements of the
Company for the year ended September 27, 1997. In the opinion of management,
all adjustments (which include only normal recurring adjustments) considered
necessary to present fairly the financial position, results of operations and
cash flows of the Company for the periods mentioned above, have been made.
Due to the seasonal nature of the Company's business, the results of
operations for the three months ended March 28, 1998 are not indicative of the
operating results that may be expected for the year ending September 26, 1998.
It is suggested that these interim financial statements be read in conjunction
with the annual audited financial statements, accounting policies and financial
notes thereto, included in the Company's 1997 Annual Report which has previously
been filed with the Securities and Exchange Commission.
2. Common Stock Offering
---------------------
On January 15, 1998, the Company completed an offering of 8,050,000 shares of
its Common stock at $26.25 per share before deduction for underwriting
commission and expenses related to the offering. The net proceeds were used to
finance recent acquisitions and for general corporate purposes.
3. Recent Acquisition
------------------
In February 1998, the Company acquired Pennington Seed, Inc. ("Pennington"),
a manufacturer of proprietary branded grass and wild bird seed, and a
manufacturer and distributor of lawn and garden products. Based in Madison,
Georgia, Pennington had annual sales of approximately $300 million for its
year ended June 30, 1997, and has approximately 750 employees. Under the terms
of the agreement, the Company paid approximately $83 million in cash and
2,178,866 shares of common stock. The purchase price exceeded the fair market
value of net assets acquired by approximately $105 million, which was recorded
as goodwill and is being amortized on a straight line basis over 40 years. The
fair value of net assets acquired is based on preliminary estimates which are
subject to change.
<PAGE>
The following table summarizes on a pro forma basis the combined results of
operations of the Company as if the Kaytee Products, TFH Publications and
Pennington acquisitions made during the first six months of 1998 had occurred at
the beginning of the periods presented. The pro forma results of operations also
reflects pro forma adjustments for cash paid and stock issued to facilitate the
acquisitions and for the amortization of goodwill. Although this pro forma
combined information includes the results of operations of the acquisitions, it
does not necessarily reflect the results of operations that would have occurred
had the acquisitions been managed by the Company prior to their acquisitions.
<TABLE>
<CAPTION>
Six Months Ended
March 29, March 28,
1997 1998
---- ----
(Unaudited)
(In thousands, except
per share amounts)
<S> <C> <C>
Net Sales $532,183 $595,357
Gross profit 117,727 139,410
Income from operations 26,624 21,793
Income before income taxes 14,519 17,589
Net Income 8,970 10,198
Net income per Common
Share Outstanding:
Basic $ .53 $ .38
Diluted $ .51 $ .37
</TABLE>
<PAGE>
4. Earnings Per Share
------------------
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" in the first quarter of the current fiscal year. All
per share amounts have been restated in accordance with the provisions of SFAS
No. 128.
The following is a reconciliation of the numerators and denominators of the
basic and diluted per-share computations for income from continuing operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 28, 1998 March 28, 1998
Per Per
Income Shares Share Income Shares Share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $12,359 30,151 $ .41 $11,840 25,734 $.46
Effect of Dilutive Securities
Options to purchase
common stock 464 420
Convertible notes 1,079 4,107 --- ---
Series A Convertible
Preferred stock 100 100
Diluted EPS
Net Income attributed to
Common shareholders $13,438 34,822 $ .39 $11,840 26,254 $.45
Three Months Ended Six Months Ended
March 29, 1997 March 29, 1997
Per Per
Income Shares Share Income Shares Share
Basic EPS
Net Income $ 5,038 14,950 $ .34 $ 3,231 14,712 $ .22
Effect of Dilutive Securities
Options to purchase
common stock 465 472
Convertible notes 1,069 4,107 --- ---
Series A Convertible
Preferred stock 100 100
Diluted EPS
Net Income attributed to
Common shareholders $ 6,107 19,622 $ .31 $ 3,231 15,284 $ .21
</TABLE>
<PAGE>
Shares of common stock from the assumed conversion of the Company's convertible
notes were not included in the computation of diluted EPS for the six month
periods ended March 28, 1998 and March 29, 1997 because the assumed conversion
would have been anti-dilutive.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company entered into an agreement, effective October 1, 1995, with Solaris,
its largest supplier, whereby the Company serves as master agent and master
distributor for sales of Solaris products within the United States. The
agreement also provides for the Company to perform a wide range of value added
services including logistics, order processing and fulfillment, inventory
management and merchandising, principally for Solaris' direct sales accounts.
As a result of the Solaris Agreement, a majority of the Company's sales of
Solaris products are now derived from servicing Solaris direct accounts, whereas
historically, a majority of such sales were made by the Company as a traditional
distributor.
A substantial portion of these sales now consist of large shipments to customer
distribution centers. This type of sale is characterized by lower gross margins
as a percent of sales and lower associated operating costs. The collective
impact of these factors has served to substantially increase the Company's sales
of Solaris products, increase gross profit and lower gross margins as a percent
of sales.
The Solaris Agreement provides for the Company to be reimbursed for costs
incurred in connection with the services provided to Solaris' direct sales
accounts and to receive payments based on the sales growth of Solaris
products. The Company will also share with Solaris in the economic benefits of
certain cost reductions, to the extent realized. As a result, management
believes that the Company's profitability has become more directly
attributable to the success of Solaris than it was in the past.
On January 8, 1998, Monsanto Company issued a press release stating it was
considering alternatives for several of its businesses, including Solaris. The
alternatives included partnerships, restructurings, divestitures or joint
ventures. While the Company's Master Agent and Distributor Agreement provides
it with substantial protection, any significant change in the Company's
relationship with Solaris as the result of any actions contemplated by the
Monsanto announcement could have a significant impact on the Company's future
performance. The Master Agent and Distributor Agreement runs through September
30, 1999, and provides for automatic renewal for an additional two-year period
unless either Solaris or the Company gives notice of non-renewal prior to June
30, 1998. Solaris and the Company are discussing possible modifications to the
Agreement to build on their experience over the last several years. The
Agreement may be allowed to renew automatically in its current form or be
modified or either party may elect to allow the Agreement to expire on
September 30, 1999.
THREE MONTHS ENDED MARCH 28, 1998
COMPARED WITH THREE MONTHS ENDED MARCH 29, 1997
Net sales for the three months ended March 28, 1998 increased by 50.7% or $119.9
million from $236.3 million for the comparable 1997 period. The $119.9 million
increase reflects approximately $119.7 million attributable to newly acquired
companies and approximately $6.9 million related to sales of lawn and garden
products offset by a decrease of approximately $6.7 million related to sales of
<PAGE>
pet supplies. Sales of lawn and garden products in the California and
Southeastern markets were adversely impacted by unfavorable weather conditions.
The decrease in sales of pet supplies is attributable principally to the loss of
certain large customers in the Northeast and California markets which were
acquired during 1997 by a major pet retail chain.
Gross profit increased by 124.8% or $42.1 million from $33.7 million during the
three months ended March 29, 1997 to $75.8 million for the quarter ended March
28, 1998. The increase in gross profit relates principally to the increase in
sales of lawn and garden products offset by a decrease in the sales of pet
products coupled with the gross profit attributable to the newly acquired
operations. Gross profit as a percentage of net sales increased from 14.3% in
the quarter ended March 29, 1997 to 21.3% for the comparable period in fiscal
1998. While both pet supplies and lawn and garden products experienced higher
gross profit margins in the current quarter, the overall increase in the gross
margin percentage was largely attributable to the newly acquired proprietary
branded products businesses which produce a significantly higher gross margin
percent than is the case in garden and pet distribution.
Selling, general and administrative expenses increased during the quarter ended
March 28, 1998 by $29.6 million from $23.2 million for the similar 1997 period.
As a percentage of net sales, these expenses increased from 9.8% during the
three months ended March 29, 1997 to 14.8% for the comparable 1998 period. Of
the $29.6 million increase in selling, general and administrative expenses,
approximately $2.6 million relates to (1) the increase in sales of lawn and
garden products; (2) costs associated with the consolidation of pet facilities
in California and the Northeast; and (3) increased seasonal promotional programs
associated with the Company's existing branded products group. The balance of
the increase is attributable to the newly acquired operations. Proprietary
branded products businesses, such as the recently acquired TFH and Kaytee
businesses, typically generate higher levels of selling, general and
administrative expenses as a percent of sales than is the case in garden and pet
distribution.
Net interest expense for the quarter ended March 28, 1998 decreased by $0.1
million from $1.8 million for the comparable 1997 period. Net interest expense
is related to the Company's $115.0 million 6% subordinated notes offset in part
by interest income generated from the proceeds received from the Company's
common stock offerings completed in December, 1997 and January 1998 and income
related to certain supplier advances, the balance of interest expense relates to
the newly acquired businesses. Average short-term borrowings for the three
months ended March 28, 1998 were $54.9 million compared with $2.5 million for
the similar fiscal 1997 period. Average interest rates on short-term borrowings
were 8.6% and 7.1%, respectively.
The Company's effective income tax rate was 42.0% for both periods.
The Company is currently in the process of modifying its existing software to
conform to requirements of Year 2000. The Company believes that all software
required to effectively operate its business will be replaced, modified or
upgraded by the Year 2000, and that any associated costs will not have a
material impact on the operations, cash flows or financial conditions of future
periods. However, if such replacements, modifications or upgrades are
unsuccessful or if the computer systems of the Company's major suppliers and
customers are not successfully upgraded to minimize the Year 2000 problem, the
Company's results of operations could suffer.
SIX MONTHS ENDED MARCH 28, 1998
COMPARED WITH SIX MONTHS ENDED MARCH 29, 1997
Net sales for the six months ended March 28, 1998 increased by 47.1% or $158.5
million from $336.5 million for the comparable 1997 period. Of the sales
increase for the six months ended March 28, 1998 approximately $162.3 million
was attributable to newly acquired companies and approximately
<PAGE>
$9.0 million to sales of lawn and garden products offset by a decrease of $12.8
million in sales of pet products. Net sales of pet products have declined
principally due to the loss of certain large retail customers, principally in
the Northeast and California markets, which were acquired during 1997 by a major
pet retain chain.
Gross profit increased by 113.2% or $57.9 million from $51.2 million during the
six months ended March 29, 1997 to $109.1 million for the comparable 1998
period. The increase in the gross profit is largely attributable to the newly
acquired businesses. Gross profit as a percentage of net sales increased from
15.2% in the six months ended March 29, 1997 to 22.0% for the similar 1998
period. While both lawn and garden and pet products experienced higher gross
profit margins during the current six months, the overall increase in gross
margin percentage was principally related to the newly acquired proprietary
branded product businesses which generally produce a significantly higher gross
margin percentage than garden and pet distribution.
For the six months ended March 28, 1998, selling, general and administrative
expenses increased by $43.2 million from $42.8 million for the comparable 1997
period. As a percentage of net sales, these expenses increased from 12.7% during
the six months ended March 29, 1997 to 17.4% for the comparable 1998 period.
Substantially all of the increase in selling, general and administrative
expenses is related to the newly acquired operations.
Net interest expense for the six months ended March 28, 1998 decreased by $0.1
million from $2.7 million for the six months ended March 29, 1997. Interest
related to the Company's $115.0 million 6% subordinated notes issued November
15, 1996 increased during the six months ended March 28, 1998 compared to the
comparable fiscal 1997 period as a result of being outstanding for the entire
six month period. Interest expense associated with newly acquired operations,
principally in the second quarter of fiscal 1998 was approximately $1.4 million.
These increases were offset in part by interest income resulting from the
proceeds received from the Company's common stock offerings completed in August
and December 1997, and interest income related to certain advances to suppliers.
Interest expense related to the Company's revolving credit line was lower during
the six months ended March 28, 1998 when compared with the comparable fiscal
1997 period due to a lower average outstanding loan balance and a lower
borrowing rate. Average short-term borrowings for the six months ended March
28, 1998 were $33.2 million compared with $7.5 million for the like fiscal 1997
period. Average interest rates on short-term borrowings were 8.8% and 7.5%,
respectively.
The Company's effective income tax rate was 42% for both periods.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this report which are not historical facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements, including the possibility of
unanticipated costs and difficulties related to the integration of acquisitions,
the Company's dependence on sales of Solaris products, the possible expiration
or renegotiation of the Company's Master Agent and Distribution Agreement with
Solaris, the Company's dependence on sales to Wal*Mart, Home Depot and other
large retailers, the impact on the Company's results of operations of
seasonality and weather, and other risks disclosed in the Company's SEC filings.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its growth through a combination of bank
borrowings, supplier credit and internally generated funds. In addition, the
Company received net proceeds (after offering expenses) of approximately $227.0
million from its four public offerings of common stock in July 1993, November
1995, July 1996 and August 1997, and in November 1996, the Company completed the
sale of $115 million 6% subordinated convertible notes generating approximately
$112 million net of underwriting commissions. Further, the Company recently
completed its fifth public offering in January 1998, generating approximately
$204 million net of underwriting commissions.
The Company's business is highly seasonal and its working capital requirements
and capital resources track closely to this seasonal pattern. During the first
fiscal quarter accounts receivable reach their lowest level while inventory,
accounts payable, and short-term borrowings begin to increase. Since the
Company's short-term credit line fluctuates based upon a specified asset
borrowing base, this quarter is typically the period when the asset borrowing
base is at its lowest and consequently the Company's ability to borrow is at its
lowest. During the second quarter, receivables, accounts payable and short-term
borrowings begin to increase, reflecting the build-up of inventory and related
payables in anticipation of the peak-selling season. During the third quarter,
principally due to the Solaris Agreement, inventory levels remain relatively
constant while accounts receivable peak and short-term borrowings start to
decline as cash collections are received during the peak-selling season. During
the fourth quarter, inventory levels are at their lowest, and accounts
receivable and payables are substantially reduced through conversion of
receivables to cash.
For the six months ended March 28, 1998, the Company used cash in operating
activities of $49.3 million principally relating to $56.0 million of early
payments for purchases of inventory under various promotional programs offered
by certain suppliers and the normal cycle of inventory and receivables build up.
Net cash used from investing activities of $222.8 million resulted from
acquisitions during the period and the acquisition of office and warehouse
equipment. Cash generated from financing activities of $195.0 million consisted
principally of net proceeds from the sale of 8,050,000 shares of the Company's
stock in December 1997 and January 1998.
The Company has a $100.0 million line of credit with Congress Financial
Corporation (Western). The available amount under the line of credit fluctuates
based upon a specific asset-borrowing base. The line of credit, bears interest
at a rate equal to the prime rate per annum, is secured by substantially all of
the Company's assets. At March 28, 1998, the Company had no outstanding
borrowings and had $100.0 million of available borrowing capacity under this
line. The Company's line of credit contains certain financial covenants such as
minimum net worth and minimum working capital requirements. The line also
requires the lender's prior written consent to any acquisition of a business.
In connection with the acquisition of three companies in 1998, their combined
lines of credit were $86.7 million of which $20.7 was available. Interest rates
related to these lines averaged approximately 7.3% at March 28, 1998.
The Company believes that cash flow from operations, funds available under its
lines of credit, proceeds from its sale of convertible notes, common stock sales
and arrangements with suppliers will be adequate to fund its presently
anticipated working capital requirements for the foreseeable future. The
Company anticipates that its capital expenditures will not exceed $7.0 million
for the next 12 months.
<PAGE>
As part of its growth strategy, the Company has engaged in acquisition
discussions with a number of companies in the past and it anticipates it will
continue to evaluate potential acquisition candidates. If one or more potential
acquisition opportunities, including those that would be material, become
available in the near future, the Company after first using the funds received
from the sale of 8,050,000 shares of stock completed in January 1998, may
require additional external capital. In addition, such acquisitions would
subject the Company to the general risks associated with acquiring companies,
particularly if the acquisitions are relatively large.
<PAGE>
CENTRAL GARDEN & PET COMPANY FORM 10-Q
II. OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of shareholders was held on February 23,
1998.
(b) The following directors were elected at the meeting:
William E. Brown
Glenn W. Novotny
Lee D. Hines, Jr.
Daniel P. Hogan, Jr.
The foregoing constituted all members of the Board of Directors
of the Company.
(c) At the annual meeting, the shareholders voted to approve the
amendment to the Company's Certificate of Incorporation to
increase (i) the number of shares of Common Stock authorized
for issuance by 40,000,000 and (ii) the number of shares of
Preferred Stock authorized for issuance by 999,000 and to
approve the amendment of the 1993 Omnibus Equity Incentive Plan
to increase the number of shares authorized for issuance
thereunder by 2,000,000.
Set forth below is a tabulation with respect to the matters
voted on at the meeting:
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTENTIONS BROKER NON-VOTES
Proposal to Amend the
Company's Certificate of
Incorporation
<S> <C> <C> <C> <C>
Common Stock 13,729,182 7,530,012 15,503 2,031,880
Class B Stock 1,651,907 - 0 - - 0 - - 0 -
Preferred - 0 - - 0 - - 0 - - 0 -
Proposal to Amend the
1993 Omnibus Equity
Incentive Plan
Common Stock 17,823,314 3,426,693 24,448 2,032,122
Class B Stock 1,651,907 - 0 - - 0 - - 0 -
Preferred - 0 - - 0 - - 0 - - 0 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTENTIONS BROKER NON-VOTES
ELECTION OF DIRECTORS
William E. Brown
<S> <C> <C> <C> <C>
Common 23,274,194 32,383
Class B 1,651,907 - 0 -
Preferred - 0 - - 0 -
Glenn W. Novotny
Common 23,273,982 32,595
Class B 1,651,907 - 0 -
Preferred - 0 - - 0 -
Lee D. Hines, Jr.
Common 23,274,150 32,427
Class B 1,651,907 - 0 -
Preferred - 0 - - 0 -
Daniel P. Hogan, Jr.
Common 23,267,543 39,034
Class B 1,651,907 - 0 -
Preferred - 0 - - 0 -
</TABLE>
(d) Inapplicable.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following reports on Form 8-K were filed during the
quarter ended March 28, 1998.
(1) On December 29, 1997, the Company filed a report on
Form 8-K dated December 17, 1997, disclosing that the
Company issued a press release announcing that it had
acquired Kaytee Products Incorporated.
(2) On December 30, 1997, the Company filed a report on
Form 8-K dated December 19, 1997, disclosing that the
Company issued a press release announcing that it had
acquired TFH Publications, Inc.
(3) On January 16, 1998, the Company filed a report on
Form 8-K/A amending Item 7 of the form 8K, which was
filed on December 30, 1997, to include the Stock
Purchase Agreement for TFH Publications, Inc.
(4) On February 27, 1998, the Company filed a report on
Form 8-K dated February 17, 1998, disclosing that the
Company issued a press release announcing that it had
signed a definitive agreement to acquire Pennington
Seed, Inc.
(5) On March 11, 1998, the Company filed a report on Form
8-K dated February 27, 1998, disclosing that the
Company issued a press release announcing that it had
acquired Pennington Seed, Inc.
<PAGE>
CENTRAL GARDEN & PET COMPANY FORM 10-Q
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunder
duly authorized.
CENTRAL GARDEN & PET COMPANY
-------------------------------------
Registrant
Dated: May 11, 1998
--------------------------------------------
William E. Brown, Chairman of the Board and
Chief Executive Officer
/ s / Robert B. Jones
--------------------------------------------
Robert B. Jones, Vice President-Finance and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- -------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-28-1998
<CASH> 23,101
<SECURITIES> 0
<RECEIVABLES> 224,031
<ALLOWANCES> 4,545
<INVENTORY> 403,036
<CURRENT-ASSETS> 668,298
<PP&E> 139,837
<DEPRECIATION> 61,064
<TOTAL-ASSETS> 1,118,856
<CURRENT-LIABILITIES> 407,858
<BONDS> 115,000
0
0
<COMMON> 298
<OTHER-SE> 16
<TOTAL-LIABILITY-AND-EQUITY> 1,118,856
<SALES> 356,156
<TOTAL-REVENUES> 356,156
<CGS> 280,358
<TOTAL-COSTS> 52,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,696
<INCOME-PRETAX> 21,306
<INCOME-TAX> 8,947
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,359
<EPS-PRIMARY> .41
<EPS-DILUTED> .39
</TABLE>
