Consolidating Condensed Financial Information of Guarantor Subsidiaries | 20. Consolidating Condensed Financial Information of Guarantor Subsidiaries Certain 100% wholly-owned subsidiaries of the Company (as listed below, collectively the “Guarantor Subsidiaries”) have guaranteed fully and unconditionally, on a joint and several basis, the obligation to pay principal and interest on the Company’s 2018 Notes. Certain subsidiaries and operating divisions are not guarantors of the Notes. Those subsidiaries that are guarantors and co-obligors of the Notes are as follows: Farnam Companies, Inc. Four Paws Products Ltd. Gulfstream Home & Garden, Inc. Kaytee Products, Inc. Matson, LLC New England Pottery, LLC Pennington Seed, Inc. (including Gro Tec, Inc. and All-Glass Aquarium Co., Inc.) Pets International, Ltd. T.F.H. Publications, Inc. Wellmark International (including B2E Corporation and B2E Biotech LLC) In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying consolidating condensed financial statements based on the Company’s understanding of the Securities and Exchange Commission’s interpretation and application of Rule 3-10 of the Securities and Exchange Commission’s Regulation S-X. CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net sales $ 494,143 $ 100,127 $ 1,136,958 $ (80,491 ) $ 1,650,737 Cost of goods sold and occupancy 387,632 76,597 773,369 (74,913 ) 1,162,685 Gross profit 106,511 23,530 363,589 (5,578 ) 488,052 Selling, general and administrative expenses 126,223 18,329 257,643 (5,578 ) 396,617 Income (loss) from operations (19,712 ) 5,201 105,946 0 91,435 Interest expense (39,893 ) (268 ) 134 0 (40,027 ) Interest income 126 3 0 0 129 Other income (expense) (372 ) 407 (22 ) 0 13 Income (loss) before taxes and equity in earnings of affiliates (59,851 ) 5,343 106,058 0 51,550 Income tax expense (benefit) (21,562 ) 2,089 38,008 0 18,535 Equity in earnings of affiliates 70,260 0 2,445 (72,705 ) 0 Net income including noncontrolling interest 31,971 3,254 70,495 (72,705 ) 33,015 Noncontrolling interest 0 1,044 0 0 1,044 Net income attributable to Central Garden & Pet Company $ 31,971 $ 2,210 $ 70,495 $ (72,705 ) $ 31,971 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 27, 2014 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net sales $ 460,781 $ 109,453 $ 1,103,926 $ (69,803 ) $ 1,604,357 Cost of goods sold and occupancy 370,492 87,028 757,217 (64,404 ) 1,150,333 Gross profit 90,289 22,425 346,709 (5,399 ) 454,024 Selling, general and administrative expenses 117,240 18,230 267,740 (5,399 ) 397,811 Income (loss) from operations (26,951 ) 4,195 78,969 0 56,213 Interest expense (42,742 ) (218 ) 116 0 42,844 Interest income 92 2 0 0 94 Other income (expense) 186 583 (366 ) 0 403 Income (loss) before taxes and equity in earnings of affiliates (69,415 ) 4,562 78,719 0 13,866 Income tax expense (benefit) (26,962 ) 756 30,251 0 4,045 Equity in earnings of affiliates 51,257 0 1,506 (52,763 ) 0 Net income loss including noncontrolling interest 8,804 3,806 49,974 (52,763 ) 9,821 Noncontrolling interest 0 1,017 0 0 1,017 Net income attributable to Central Garden & Pet Company $ 8,804 $ 2,789 $ 49,974 $ (52,763 ) $ 8,804 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 28, 2013 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net sales $ 453,001 $ 88,822 $ 1,186,328 $ (74,518 ) $ 1,653,633 Cost of goods sold and occupancy 364,120 73,068 821,524 (68,981 ) 1,189,731 Gross profit 88,881 15,754 364,804 (5,537 ) 463,902 Selling, general and administrative expenses 127,644 19,340 282,300 (5,537 ) 423,747 Income (loss) from operations (38,763 ) (3,586 ) 82,504 0 40,155 Interest expense (42,925 ) (263 ) 76 0 43,112 Interest income 140 2 0 0 142 Other income (expense) (250 ) 398 (825 ) 0 (677 ) Income (loss) before taxes and equity in earnings of affiliates (81,798 ) (3,449 ) 81,755 0 (3,492 ) Income tax expense (benefit) (46,789 ) (2,567 ) 46,764 0 (2,592 ) Equity in earnings of affiliates 33,080 0 (2,561 ) (30,519 ) 0 Net income (loss) including noncontrolling interest (1,929 ) (882 ) 32,430 (30,519 ) (900 ) Noncontrolling interest 0 1,029 0 0 1,029 Net income (loss) attributable to Central Garden & Pet Company $ (1,929 ) $ (1,911 ) $ 32,430 $ (30,519 ) $ (1,929 ) CONSOLIDATING CONDENSED STATEMENTS OF Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net income $ 31,971 $ 3,254 $ 70,495 $ (72,705 ) $ 33,015 Other comprehensive loss: Unrealized loss on securities (10 ) 0 (10 ) Reclassification of realized loss on securities included in net income 20 0 0 0 20 Foreign currency translation (1,078 ) (537 ) (380 ) 917 (1,078 ) Total comprehensive income 30,903 2,717 70,115 (71,788 ) 31,947 Comprehensive income attributable to noncontrolling interests 0 1,044 0 0 1,044 Comprehensive income attributable to Central Garden & Pet Company $ 30,903 $ 1,673 $ 70,115 $ (71,788 ) $ 30,903 CONSOLIDATING CONDENSED STATEMENTS OF Fiscal Year Ended September 27, 2014 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net income $ 8,804 $ 3,806 $ 49,974 $ (52,763 ) $ 9,821 Other comprehensive loss: Foreign currency translation 0 (200 ) 0 0 (200 ) Unrealized loss on securities (10 ) 0 0 0 (10 ) Total comprehensive income 8,794 3,606 49,974 (52,763 ) 9,611 Comprehensive income attributable to noncontrolling interests 0 1,017 0 0 1,017 Comprehensive income attributable to Central Garden & Pet Company $ 8,794 $ 2,589 $ 49,974 $ (52,763 ) $ 8,594 CONSOLIDATING CONDENSED STATEMENTS OF Fiscal Year Ended September 28, 2013 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ (1,929 ) $ (882 ) $ 32,430 $ (30,519 ) $ (900 ) Other comprehensive loss: Foreign currency translation 0 (97 ) 0 0 (97 ) Total comprehensive income (loss) (1,929 ) (979 ) 32,430 (30,519 ) (997 ) Comprehensive income attributable to noncontrolling interests 0 1,029 0 0 1,029 Comprehensive loss attributable to Central Garden & Pet Company $ (1,929 ) $ (2,008 ) $ 32,430 $ (30,519 ) $ (2,026 ) CONSOLIDATING CONDENSED BALANCE SHEET September 26, 2015 (in thousands) Parent Non-Guarantor Guarantor Eliminations Consolidated ASSETS Cash and cash equivalents $ 37,131 $ 10,022 $ 431 $ 0 $ 47,584 Restricted cash 13,157 0 0 0 13,157 Accounts receivable, net 51,376 6,775 149,251 0 207,402 Inventories 101,952 11,690 222,304 0 335,946 Prepaid expenses and other assets 23,807 848 25,076 0 49,731 Total current assets 227,423 29,335 397,062 0 653,820 Land, buildings, improvements and equipment, net 53,044 3,663 106,102 0 162,809 Goodwill 0 0 209,089 0 209,089 Other long term assets 33,988 3,662 77,519 (6,133 ) 109,036 Intercompany receivable 10,311 0 440,327 (450,638 ) 0 Investment in subsidiaries 1,052,755 0 0 (1,052,755 ) 0 Total $ 1,377,521 $ 36,660 $ 1,230,099 $ (1,509,526 ) $ 1,134,754 LIABILITIES AND EQUITY Accounts payable $ 23,544 $ 2,543 $ 62,802 $ 0 $ 88,889 Accrued expenses and other liabilities 39,680 1,789 46,255 0 87,724 Current portion of long term debt 261 0 30 0 291 Total current liabilities 63,485 4,332 109,087 0 176,904 Long-term debt 399,783 0 65 0 399,848 Intercompany payable 407,197 43,441 0 (450,638 ) 0 Losses in excess of investment in subsidiaries 0 0 11,867 (11,867 ) 0 Other long-term obligations 1,770 0 55,985 (6,133 ) 51,622 Shareholders’ equity attributable to Central Garden & Pet 505,286 (12,207 ) 1,053,095 (1,040,888 ) 505,286 Noncontrolling interest 0 1,094 0 0 1,094 Total equity 505,286 (11,113 ) 1,053,095 (1,040,888 ) 506,380 Total $ 1,377,521 $ 36,660 $ 1,230,099 $ (1,509,526 ) $ 1,134,754 CONSOLIDATING CONDENSED BALANCE SHEET September 27, 2014 (in thousands) Parent Non-Guarantor Guarantor Eliminations Consolidated ASSETS Cash and cash equivalents $ 63,471 $ 12,806 $ 2,399 $ 0 $ 78,676 Restricted cash 14,283 0 0 0 14,283 Short term investments 9,990 0 0 0 9,990 Accounts receivable, net 41,235 8,268 144,226 0 193,729 Inventories 79,199 15,210 231,977 0 326,386 Prepaid expenses and other assets 26,092 816 21,580 0 48,488 Total current assets 234,270 37,100 400,182 0 671,552 Land, buildings, improvements and equipment, net 63,059 3,649 100,141 0 166,849 Goodwill 0 0 208,233 0 208,233 Other long term assets 25,230 4,244 83,713 (11,094 ) 102,093 Intercompany receivable 16,906 0 351,423 (368,329 ) 0 Investment in subsidiaries 983,413 0 0 (983,413 ) 0 Total $ 1,322,878 $ 44,993 $ 1,143,692 $ (1,362,836 ) $ 1,148,727 LIABILITIES AND EQUITY Accounts payable $ 28,937 $ 3,542 $ 55,949 $ 0 $ 88,428 Accrued expenses and other liabilities 34,412 1,868 48,390 0 84,670 Total current liabilities 63,349 5,410 104,339 0 173,098 Long-term debt 449,855 0 93 0 449,948 Intercompany payable 323,315 45,014 0 (368,329 ) 0 Losses in excess of investment in subsidiaries 0 0 7,594 (7,594 ) 0 Other long-term obligations 1,636 0 48,686 (11,094 ) 39,228 Shareholders’ equity attributable to Central Garden & Pet 484,723 (7,161 ) 982,980 (975,819 ) 484,723 Noncontrolling interest 0 1,730 0 0 1,730 Total equity 484,723 (5,431 ) 982,980 (975,819 ) 486,453 Total $ 1,322,878 $ 44,993 $ 1,143,692 $ (1,362,836 ) $ 1,148,727 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ (18,948 ) $ 7,372 $ 105,744 $ (6,719 ) $ 87,449 Additions to property, plant and equipment (2,687 ) (405 ) (18,938 ) 0 (22,030 ) Payments to acquire companies, net of expenses (38,384 ) 0 0 0 (38,384 ) Change in restricted cash and cash equivalents 1,126 0 0 0 1,126 Maturities of short term investments 9,997 0 0 0 9,997 Investment in short term investments (17 ) 0 0 0 (17 ) Other investing activities (546 ) 0 0 0 (546 ) Intercompany investing activities 6,595 0 (88,905 ) 82,310 0 Net cash (used) provided by investing activities (23,916 ) (405 ) (107,843 ) 82,310 (49,854 ) Repayments on revolving line of credit (312,000 ) 0 0 0 (312,000 ) Borrowings on revolving line of credit 312,000 0 0 0 312,000 Repayments of long-term debt (50,262 ) 0 (27 ) 0 (50,289 ) Proceeds from issuance of common stock 200 0 0 0 200 Excess tax benefits from stock-based awards 2,154 0 0 0 2,154 Repurchase of common stock (18,497 ) 0 0 0 (18,497 ) Payment of deferred financing costs (258 ) 0 0 0 (258 ) Distribution to parent 0 (6,719 ) 0 6,719 0 Distribution to noncontrolling interest 0 (1,680 ) 0 0 (1,680 ) Intercompany financing activities 83,884 (1,574 ) 0 (82,310 ) 0 Net cash provided (used) by financing activities 17,221 (9,973 ) (27 ) (75,591 ) (68,370 ) Effect of exchange rates on cash (697 ) 222 158 0 (317 ) Net increase (decrease) in cash and cash equivalents (26,340 ) (2,784 ) (1,968 ) 0 (31,092 ) Cash and cash equivalents at beginning of year 63,471 12,806 2,399 0 78,676 Cash and cash equivalents at end of year $ 37,131 $ 10,022 $ 431 $ 0 $ 47,584 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 27, 2014 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ (4,139 ) $ 7,420 $ 125,720 $ (2,534 ) $ 126,467 Additions to property, plant and equipment (6,721 ) (1,027 ) (9,425 ) 0 (17,173 ) Businesses acquired, net of cash acquired 0 0 (20,282 ) 0 (20,282 ) Proceeds from disposal of plant and equipment 0 0 8,737 0 8,737 Change in restricted cash and cash equivalents (14,283 ) 0 0 0 (14,283 ) Maturities of short term investments 17,820 0 0 0 17,820 Investment in short term investments (10,000 ) 0 0 0 (10,000 ) Intercompany investing activities (6,726 ) 0 (104,926 ) 111,652 0 Net cash (used) provided by investing activities (19,910 ) (1,027 ) (125,896 ) 111,652 (35,181 ) Repayments on revolving line of credit (301,000 ) 0 0 0 (301,000 ) Borrowings on revolving line of credit 278,000 0 0 0 278,000 Repayments of long-term debt (243 ) 0 (124 ) 0 (367 ) Proceeds from issuance of common stock 1,165 0 0 0 1,165 Excess tax benefits from stock-based awards 498 0 0 0 498 Repurchase of common stock (2,332 ) 0 0 0 (2,332 ) Payment of deferred financing costs (3,090 ) 0 0 0 (3,090 ) Distribution to parent 0 (2,534 ) 0 2,534 0 Distribution to noncontrolling interest 0 (633 ) 0 0 (633 ) Intercompany financing activities 109,057 2,595 0 (111,652 ) 0 Net cash provided (used) by financing activities 82,055 (572 ) (124 ) (109,118 ) (27,759 ) Effect of exchange rates on cash 27 (18 ) (16 ) 0 (7 ) Net increase (decrease) in cash and cash equivalents 58,033 5,803 (316 ) 0 63,520 Cash and cash equivalents at beginning of year 5,438 7,003 2,715 0 15,156 Cash and cash equivalents at end of year $ 63,471 $ 12,806 $ 2,399 $ 0 $ 78,676 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 28, 2013 (in thousands) Parent Non-Guarantor Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ (31,250 ) $ (11,632 ) $ 17,116 $ (2,516 ) $ (28,282 ) Additions to property, plant and equipment (8,656 ) (337 ) (16,179 ) 0 (25,172 ) Businesses acquired, net of cash acquired 0 0 (4,835 ) 0 (4,835 ) Sale of short term investments 4,885 0 0 0 4,885 Intercompany investing activities 8,986 0 2,923 (11,909 ) 0 Net cash (used) provided by investing activities 5,215 (337 ) (18,091 ) (11,909 ) (25,122 ) Repayments on revolving line of credit (368,000 ) 0 0 0 (368,000 ) Borrowings on revolving line of credit 391,000 0 0 0 391,000 Repayments of long-term debt (206 ) 0 (126 ) 0 (332 ) Proceeds from issuance of common stock 613 0 0 0 613 Excess tax benefits from stock-based awards 388 0 0 0 388 Repurchase of common stock (2,731 ) 0 0 0 (2,731 ) Distribution to parent 0 (2,516 ) 0 2,516 0 Distribution to noncontrolling interest 0 (629 ) 0 0 (629 ) Intercompany financing activities (28,896 ) 16,987 0 11,909 0 Net cash provided (used) by financing activities (7,832 ) 13,842 (126 ) 14,425 20,309 Effect of exchange rates on cash 36 (263 ) 3 0 (224 ) Net increase (decrease) in cash and cash equivalents (33,831 ) 1,610 (1,098 ) 0 (33,319 ) Cash and cash equivalents at beginning of year 39,269 5,393 3,813 0 48,475 Cash and cash equivalents at end of year $ 5,438 $ 7,003 $ 2,715 $ 0 $ 15,156 |