FARNAM COMPANIES, INC UNAUDITED CONDENSED CONSOLIDATED FINANCIALS- 2/28/06
Published on May 16, 2006
Exhibit 99.3
Unaudited Condensed Consolidated Financial Statements
February 28, 2006
FARNAM COMPANIES, INC. AND SUBSIDIARY
FARNAM COMPANIES, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Balance Sheet
February 28, 2006
| ASSETS |
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| CURRENT ASSETS |
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| Cash and cash equivalents |
$ | 450,000 | |
| Trade receivables, net of allowance for doubtful accounts |
25,272,970 | ||
| Inventories |
30,871,542 | ||
| Prepaids and other current assets |
3,223,271 | ||
| Total current assets |
59,817,783 | ||
| PROPERTY AND EQUIPMENT, NET |
11,068,332 | ||
| INTANGIBLE ASSETS |
11,207,466 | ||
| OTHER ASSETS |
2,009,618 | ||
| $ | 84,103,199 | ||
| LIABILITIES AND STOCKHOLDERS EQUITY |
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| CURRENT LIABILITIES |
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| Accounts payable |
$ | 5,923,000 | |
| Outstanding checks in excess of bank balance |
5,916,217 | ||
| Accrued expenses and other current liabilities |
5,810,418 | ||
| Total current liabilities |
17,649,635 | ||
| LONG-TERM DEBT - RELATED PARTY |
207,694 | ||
| STOCKHOLDERS EQUITY |
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| Common stock, no par value per share |
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| Class A, voting 5,000,000 shares authorized; 1,923,077 shares issued and outstanding |
12,000 | ||
| Class B non-voting 10,000,000 shares authorized; 8,076,923 shares issued and outstanding |
50,400 | ||
| Retained earnings |
66,183,470 | ||
| 66,245,870 | |||
| $ | 84,103,199 | ||
See Notes to Unaudited Condensed Consolidated Financial Statements.
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FARNAM COMPANIES, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Statement of Income
For The Three Months Ended February 28, 2006
| SALES |
$ | 31,188,750 | ||
| COST OF GOODS SOLD |
14,841,205 | |||
| Gross profit |
16,347,545 | |||
| OPERATING COSTS AND EXPENSES |
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| Freight and warehousing |
1,347,780 | |||
| Selling, marketing and advertising |
8,710,371 | |||
| Research and development |
1,007,813 | |||
| General and administrative |
10,071,265 | |||
| Depreciation and amortization |
458,830 | |||
| 21,596,059 | ||||
| LOSS FROM OPERATIONS |
(5,248,514 | ) | ||
| OTHER INCOME (EXPENSE) |
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| Other income |
262,258 | |||
| Interest income |
245,812 | |||
| Interest expense |
(9,345 | ) | ||
| 498,725 | ||||
| LOSS BEFORE PROVISION FOR INCOME TAXES |
(4,749,789 | ) | ||
| PROVISION FOR INCOME TAXES |
| |||
| NET LOSS |
$ | (4,749,789 | ) | |
See Notes to Unaudited Condensed Consolidated Financial Statements.
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FARNAM COMPANIES, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Statement of Cash Flows
For The Three Months Ended February 28, 2006
| CASH FLOWS FROM OPERATING ACTIVITIES |
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| Net loss |
($4,749,789 | ) | ||
| Adjustments to reconcile net loss to cash used by operating activities |
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| Depreciation |
366,171 | |||
| Amortization |
286,576 | |||
| Write-down of intangible assets |
75,893 | |||
| Allowance for doubtful accounts |
25,000 | |||
| (Increase) decrease in |
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| Trade receivables |
(4,771,497 | ) | ||
| Inventories |
(8,202,185 | ) | ||
| Prepaid and other current assets |
(1,511,845 | ) | ||
| Increase (decrease) in |
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| Accounts payable |
(1,835,871 | ) | ||
| Outstanding checks in excess of bank balance |
5,916,217 | |||
| Accrued expenses and other current liabilities |
(6,403,128 | ) | ||
| Income tax payable |
(45,325 | ) | ||
| Total adjustments |
(16,099,994 | ) | ||
| Net cash used by operating activities |
(20,849,783 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES |
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| Sale of investments |
6,908,513 | |||
| Additions to property and equipment |
(412,799 | ) | ||
| Purchase of intangible assets |
(1,500,000 | ) | ||
| Cash surrender value life insurance |
2,204,653 | |||
| Net change in other assets and deposits |
5,750 | |||
| Net cash provided by investing activities |
7,206,117 | |||
| CASH FLOWS FROM FINANCING ACTIVITIES |
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| Distributions to shareholders |
(18,000,000 | ) | ||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(31,643,666 | ) | ||
| CASH AND CASH EQUIVALENTS, beginning of year |
32,093,666 | |||
| CASH AND CASH EQUIVALENTS, February 28, 2006 |
$ | 450,000 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION |
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| Cash paid during the year for: |
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| Interest |
$ | 9,345 | ||
| Income taxes |
$ | 52,040 | ||
See Notes to Unaudited Condensed Consolidated Financial Statements.
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FARNAM COMPANIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 2006
NOTE 1 BASIS OF PRESENTATION
The condensed consolidated balance sheet of Farnam Inc., and Subsidiary (the Company) as of February 28, 2006, the condensed consolidated statement of operations for the three months ended February 28, 2006 and the condensed consolidated statement of cash flows for the three months ended February 28, 2006 have been prepared by the Company, without audit. 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 Companys business, the results of operations of the three months ended February 28, 2006 are not indicative of the operating results that may be expected for the entire fiscal year. These interim financial statements should be read in conjunction with the Companys annual audited financial statements and related notes.
In addition, the condensed consolidated statement of operations for the three months ended February 28, 2006 includes approximately $7.3 million of costs associated with the sale of all of the Companys outstanding stock to Central Garden & Pet Company (Central) (NASDAQ: CENT). Centrals acquisition of the Company was completed effective as of February 28, 2006. During the three months ended February 28, 2006, and prior to the acquisition of the Company by Central, an $18 million distribution was made to shareholders.
NOTE 2 INVENTORIES
Inventories consisted of the following at February 28, 2006:
| Finished goods |
$ | 24,786,219 | ||
| Raw materials |
6,145,395 | |||
| 30,931,614 | ||||
| LIFO reserve |
(60,072 | ) | ||
| $ | 30,871,542 |
NOTE 3 INTANGIBLES
In January 2006, the Company purchased a product line and settled a lawsuit with a third party for $5,000,000. The actual costs associated with settlement were $3,500,000 and were reflected in the Companys fiscal 2005 earnings, as discussed in the notes to the Companys Consolidated Financial Statements for the Year Ended November 30, 2005. The value of the product line purchased was $1,500,000. The Company paid the $5,000,000 settlement in January 2006.
NOTE 4 RELATED PARTY
The Company purchases life insurance policies on stockholders and management, for which the Company is the beneficiary. The cash surrender value of the life insurance policies is included in Other Assets. In connection with the sale of the Company to Central, Farnams shareholders purchased the policies from Farnam for $2,204,652 in February 2006.
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NOTE 5 COMMITMENTS AND CONTINGENCIES
The Company is partially self-funded for benefits provided under its employee health insurance plan. Amounts reserved for these claims total approximately $ 170,000 at February 28, 2006 and are included in other current liabilities.
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