Definitive Additional Materials

 

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CENTRAL GARDEN & PET COMPANY

 


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Notes:


September 2006
2006 Special Meeting of Shareholders


1
“Safe Harbor”
Statement under the Private Securities Litigation
Reform Act of 1995:  The statements contained in this release which
are not historical facts, including future earnings guidance, 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.
These risks are described in the Company’s Securities and
Exchange Commission filings.  Central undertakes no obligation to
publicly update these forward-looking statements to reflect new
information, subsequent events or otherwise.
Safe Harbor


2
Why We Are Here
Significantly increase Earnings per Share
Scale change in Company Size
More
Stable
Business
base
Stronger Competitive Leadership Position
PE
Multiple
Expansion
potential
Big Opportunities to Dramatically Increase Shareholder Value
Big Opportunities


3
Issue
Current Board of Directors and Management team have created the
company you have invested in
Big opportunities require equity and new players (sellers) could
gain control
Big Opportunities
How to Pursue Big Opportunities while Mitigating Risk to Existing
Shareholders


4
Solution
New Class A Common Stock: Same as current Common Stock, less
voting rights
Proposal
Rationale
Authorize
100,000,000
shares
of
a
new
class
of
common
stock,
par
value
$0.01
per
share,
to
be
designated
as
“Class
A
Common
Stock”
that
would
generally
have
no
voting
rights
Fix
and
establish
the
relative
rights,
powers
and
limitations
of
the
Company’s
proposed
Class A Common Stock
Flexibility
To provide Management / Board of Directors with maximum flexibility to
pursue a broader range of strategic growth opportunities
Alignment
To continue to ensure the long-term interests of Shareholders and  
Management / Board of Directors are aligned for future growth
Empowerment
To
continue
to
empower
existing
Shareholders
relating
to
company
performance and strategic direction
Big Opportunities


5
Through a combination of Organic Growth and Strategic Acquisitions, Central
Garden & Pet successfully transitioned to a leading Branded Products company
with a Strong Portfolio of #1 Brands
Pet  Products
Lawn & Garden Products
Corporate Strategy
Central Life
Central Life
Sciences
Sciences
Central
Central
Aquatics
Aquatics
Specialty Pet
Specialty Pet
Dog & Cat
Dog & Cat
Grass Seed
Grass Seed
Wild Bird
Wild Bird
Feed
Feed
Control
Control
Products
Products
Garden
Garden
Decor
Decor
Accomplishments to Date


6
Corporate Strategy
Stock Price Performance and Key Events since Initial Public Offering
$0
$10
$20
$30
$40
$50
$60
07/15/93
07/15/95
07/15/97
07/15/99
07/15/01
07/15/03
07/15/05
Timeline of Significant Events
CENT consolidates Lawn & Garden
and Pet distribution industries creating
the only national platform in both
categories
Management implements Branded
Products strategy to mitigate
distribution risk
Monsanto divests
Solaris lawn & garden
business to Scott’s. 
Management
restructures business
around highly
successful branded
products business
Transformed into a #1
brands product business,
CENT solidifies operations
and financial position;
accelerates ‘String of Pearls’
acquisition strategy


7
Corporate Strategy
$1.73
35
72
1,145
2003
$1.24
29
53
1,078
2002
23%
$2.85
$2.50
$1.99
EPS
23%
67
54
41
Net Income
26%
135
100
82
Operating Income
10%
1,580
1,381
1,267
Sales
CAGR
2006 F**
2005
2004
Shift to Branded Products focus has produced Strong Financial Results
** Assumes midpoint of company-issued guidance of $2.80-$2.90 per share.
Financial Performance
8.5%
7.2%
4.9%
6.5%
6.3%
81.2%
78.2%
75.8%
75.3%
74.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2002
2003
2004
2005
2006 F
60.0%
65.0%
70.0%
75.0%
80.0%
Operating Income %
% Sales from Brands


8
0
100
200
300
400
500
600
700
12/31/2001
12/31/2002
12/31/2003
12/31/2004
12/31/2005
CENT
S&P 500
Nasdaq
SMG
Emphasis on Branded Products has produced Superior Returns for
Shareholders
Corporate Strategy
Stock Performance
520% -
CENT
114%
111%
Current
224%


9
CENTRAL
PERFORMANCE
Quality
Organic Growth
Strategic
Acquisitions
Sales
Margins
Innovation
Service
Extend
Brands
Categories
Awareness
Expand
Channels
Markets
Enhance
Operating Leverage
Corporate Strategy
Framework for Growth


10
Potential to be # 1 or # 2 Brand in its Category
Organic Growth History and Potential
Strong Management and “Cultural Fit”
History of Innovation
Profitable Business
Ability to Complete Acquisitions at Reasonable Price
5 to 7 x LTM EBIT Target
Accretive Day One
Ability to Extend or Leverage the Brands into other Lines, Categories or Channels
Growth Through Acquisition
Acquisition Criteria
Acquisitions are a Core Competency of Management
-
A
rigorous,
disciplined
approach
to
each
target
-
Leverage knowledge from distribution business


11
$800
$900
$1,000
$1,100
$1,200
$1,300
2003
2004
2005
2006 F
Organic + Acquisitions
Growth Through Acquisition
$863
$960
$1,079
$1,273*
*
Represents
an
estimate
of
branded
products’
sales
based
on
the
midpoint
of
company-issued
sales
guidance
74
83
126
18%
12%
11%
Total Branded Products
3%
2004
12%
2005
15%
2006 F
Branded Products Organic
Sales Growth
Contribution from
Acquisitions
Branded Products’
Organic Sales
Growth
Branded Products’
Sales Performance Driven by a Combination of
Organic Growth and Contribution from Acquisitions


12
Organic
Sales
5%
Operating  Income  
10%
Acquisition
Sales
10%
Operating Income   
15%
Management consistently strives to Achieve / Surpass Objective
Corporate Strategy
Long-Term Growth Objective


13
Paths to Future Growth
String of Pearls:
Current proven acquisition model
Typically
$10-70
MM
in
Sales
CENT is often a Top 5 customer due
to distribution relationship
Sellers are often entrepreneur
founders
Complementary product offering
Ability to complete transaction at 5-7x
trailing EBIT
Many targets
Acquisition Considerations
Future Growth
‘Trophy’
Opportunities:
Typically $200 MM+ sales
CENT is frequently a distribution
partner
‘Trophies’
= carve out opportunities
and/or private equity portfolio
companies
Strategic expansion into adjacent
and/or new channels, markets, and
categories
Transaction prices 7+x trailing EBIT
due to strategic nature and scale of
potential target
Fewer targets


14
Summary
Management has a Strong Track Record
Successfully transitioned Central Garden & Pet into a Leading
Branded Products
company
Built portfolio of #1 Brands
in two highly desirable categories
Innovation
is core competency and competitive advantage
Effectively
completed and integrated over 40 Acquisitions
Numerous Organic Growth and Growth through Acquisition
opportunities remain
Management has created Significant Value for Shareholders


15
Conclusion
Vote “For”
Empower the Board and Management to Pursue Big Opportunities where
Rewards are High and Risks are Low