Consolidating Condensed Financial Information of Guarantor Subsidiaries | 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 2023 Notes. Certain subsidiaries and operating divisions are not guarantors of the 2023 Notes. Those subsidiaries that are guarantors and co-obligors of the 2023 Notes are as follows: Farnam Companies, Inc. Four Paws Products Ltd. Gulfstream Home & Garden, Inc. Hydro-Organics Wholesale, Inc. IMS Trading, LLC IMS Southern, LLC K&H Manufacturing, LLC 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. Segrest, Inc. (including Blue Springs Hatchery, Inc., Segrest Farms, Inc., Florida Tropical Distributors International, Inc., Sun Pet, Ltd and Aquatica Tropicals, Inc.) 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 Three Months Ended June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 184,719 $ 29,067 $ 387,333 $ (26,527 ) $ 574,592 Cost of goods sold and occupancy 142,533 20,636 252,678 (24,528 ) 391,319 Gross profit 42,186 8,431 134,655 (1,999 ) 183,273 Selling, general and administrative expenses 39,234 5,476 82,629 (1,999 ) 125,340 Operating income 2,952 2,955 52,026 — 57,933 Interest expense (7,213 ) (54 ) (6 ) — (7,273 ) Interest income 53 — — — 53 Other income 1,064 86 476 — 1,626 Income (loss) before taxes and equity in earnings of affiliates (3,144 ) 2,987 52,496 — 52,339 Income tax expense (benefit) (1,178 ) 1,096 19,532 — 19,450 Equity in earnings of affiliates 34,214 — 1,302 (35,516 ) — Net income including noncontrolling interest 32,248 1,891 34,266 (35,516 ) 32,889 Net income attributable to noncontrolling interest — 641 — — 641 Net income attributable to Central Garden & Pet Company $ 32,248 $ 1,250 $ 34,266 $ (35,516 ) $ 32,248 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Three Months Ended June 25, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 162,751 $ 28,052 $ 350,013 $ (26,272 ) $ 514,544 Cost of goods sold and occupancy 128,517 18,274 228,343 (24,335 ) 350,799 Gross profit 34,234 9,778 121,670 (1,937 ) 163,745 Selling, general and administrative expenses 36,826 5,380 75,291 (1,937 ) 115,560 Operating income (loss) (2,592 ) 4,398 46,379 — 48,185 Interest expense (6,904 ) (53 ) (7 ) — (6,964 ) Interest income 42 1 — — 43 Other income (expense) (108 ) (146 ) 572 — 318 Income (loss) before taxes and equity in earnings of affiliates (9,562 ) 4,200 46,944 — 41,582 Income tax expense (benefit) (3,517 ) 1,552 16,881 — 14,916 Equity in earnings of affiliates 32,075 — 2,148 (34,223 ) — Net income including noncontrolling interest 26,030 2,648 32,211 (34,223 ) 26,666 Net income attributable to noncontrolling interest — 636 — — 636 Net income attributable to Central Garden & Pet Company $ 26,030 $ 2,012 $ 32,211 $ (34,223 ) $ 26,030 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Nine Months Ended June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 531,028 $ 69,183 $ 1,032,444 $ (68,641 ) $ 1,564,014 Cost of goods sold and occupancy 409,262 52,442 678,798 (63,968 ) 1,076,534 Gross profit 121,766 16,741 353,646 (4,673 ) 487,480 Selling, general and administrative expenses 114,546 14,014 221,862 (4,673 ) 345,749 Operating income 7,220 2,727 131,784 — 141,731 Interest expense (20,823 ) (136 ) (17 ) — (20,976 ) Interest income 98 1 — — 99 Other income (expense) (276 ) (301 ) 271 — (306 ) Income (loss) before taxes and equity in earnings of affiliates (13,781 ) 2,291 132,038 — 120,548 Income tax expense (benefit) (5,088 ) 1,133 48,576 — 44,621 Equity in earnings of affiliates 83,262 — 875 (84,137 ) — Net income including noncontrolling interest 74,569 1,158 84,337 (84,137 ) 75,927 Net income attributable to noncontrolling interest — 1,358 — — 1,358 Net income (loss) attributable to Central Garden & Pet Company $ 74,569 $ (200 ) $ 84,337 $ (84,137 ) $ 74,569 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Nine Months Ended June 25, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 456,568 $ 73,324 $ 953,925 $ (68,212 ) $ 1,415,605 Cost of goods sold and occupancy 360,745 54,319 631,251 (63,580 ) 982,735 Gross profit 95,823 19,005 322,674 (4,632 ) 432,870 Selling, general and administrative expenses 102,990 14,283 203,868 (4,632 ) 316,509 Operating income (loss) (7,167 ) 4,722 118,806 — 116,361 Interest expense (36,065 ) (133 ) (7 ) — (36,205 ) Interest income 71 3 — — 74 Other income (expense) (286 ) (409 ) 452 — (243 ) Income (loss) before taxes and equity in earnings of affiliates (43,447 ) 4,183 119,251 — 79,987 Income tax expense (benefit) (15,437 ) 1,749 42,197 — 28,509 Equity in earnings of affiliates 78,135 — 1,971 (80,106 ) — Net income including noncontrolling interest 50,125 2,434 79,025 (80,106 ) 51,478 Net income attributable to noncontrolling interest — 1,353 — — 1,353 Net income attributable to Central Garden & Pet Company $ 50,125 $ 1,081 $ 79,025 $ (80,106 ) $ 50,125 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income $ 32,248 $ 1,891 $ 34,266 $ (35,516 ) $ 32,889 Other comprehensive income: Foreign currency translation 172 116 19 (135 ) 172 Total comprehensive income 32,420 2,007 34,285 (35,651 ) 33,061 Comprehensive income attributable to noncontrolling interests — 641 — — 641 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 32,420 $ 1,366 $ 34,285 $ (35,651 ) $ 32,420 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended June 25, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 26,030 $ 2,648 $ 32,211 $ (34,223 ) $ 26,666 Other comprehensive income (loss): Foreign currency translation (277 ) (233 ) 25 208 (277 ) Total comprehensive income 25,753 2,415 32,236 (34,015 ) 26,389 Comprehensive loss attributable to noncontrolling interests — 636 — — 636 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 25,753 $ 1,779 $ 32,236 $ (34,015 ) $ 25,753 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Nine Months Ended June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 74,569 $ 1,158 $ 84,337 $ (84,137 ) $ 75,927 Other comprehensive loss: Foreign currency translation (193 ) (144 ) (11 ) 155 (193 ) Total comprehensive income (loss) 74,376 1,014 84,326 (83,982 ) 75,734 Comprehensive income attributable to noncontrolling interests — 1,358 — — 1,358 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 74,376 $ (344 ) $ 84,326 $ (83,982 ) $ 74,376 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Nine Months Ended June 25, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 50,125 $ 2,434 $ 79,025 $ (80,106 ) $ 51,478 Other comprehensive income (loss): Foreign currency translation (969 ) (773 ) 32 741 (969 ) Total comprehensive income (loss) 49,156 1,661 79,057 (79,365 ) 50,509 Comprehensive income attributable to noncontrolling interests — 1,353 — — 1,353 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 49,156 $ 308 $ 79,057 $ (79,365 ) $ 49,156 CONSOLIDATING CONDENSED BALANCE SHEET June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 929 $ 10,118 $ 3,426 $ — $ 14,473 Restricted cash 10,999 — — — 10,999 Accounts receivable, net 92,703 9,842 176,959 — 279,504 Inventories 127,307 10,567 245,575 — 383,449 Prepaid expenses and other 19,670 1,059 31,235 — 51,964 Total current assets 251,608 31,586 457,195 — 740,389 Land, buildings, improvements and equipment, net 37,823 4,065 135,896 — 177,784 Goodwill 15,058 — 215,327 — 230,385 Other long-term assets 34,273 3,200 167,858 (2,142 ) 203,189 Intercompany receivable 36,783 — 601,317 (638,100 ) — Investment in subsidiaries 1,369,307 — — (1,369,307 ) — Total $ 1,744,852 $ 38,851 $ 1,577,593 $ (2,009,549 ) $ 1,351,747 LIABILITIES AND EQUITY Accounts payable $ 34,562 $ 7,832 $ 64,014 $ — $ 106,408 Accrued expenses 57,235 2,632 52,224 — 112,091 Current portion of long-term debt — — 375 — 375 Total current liabilities 91,797 10,464 116,613 — 218,874 Long-term debt 434,962 — 112 — 435,074 Intercompany payable 588,378 49,722 (638,100 ) — Losses in excess of investment in subsidiaries — — 19,327 (19,327 ) — Other long-term obligations 2,620 — 68,314 (2,142 ) 68,792 Total Central Garden & Pet shareholders’ equity (deficit) 627,095 (23,247 ) 1,373,227 (1,349,980 ) 627,095 Noncontrolling interest — 1,912 — — 1,912 Total equity (deficit) 627,095 (21,335 ) 1,373,227 (1,349,980 ) 629,007 Total $ 1,744,852 $ 38,851 $ 1,577,593 $ (2,009,549 ) $ 1,351,747 CONSOLIDATING CONDENSED BALANCE SHEET June 25, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 30,477 $ 8,675 $ 848 $ — $ 40,000 Restricted cash 12,029 — — — 12,029 Accounts receivable, net 74,162 9,395 158,397 — 241,954 Inventories 105,440 9,037 247,336 — 361,813 Prepaid expenses and other 20,543 1,039 23,493 — 45,075 Total current assets 242,651 28,146 430,074 — 700,871 Land, buildings, improvements and equipment, net 43,475 3,877 112,078 — 159,430 Goodwill 18,858 — 214,153 — 233,011 Other long-term assets 37,139 3,294 84,702 (1,540 ) 123,595 Intercompany receivable 31,005 — 478,780 (509,785 ) — Investment in subsidiaries 1,130,148 — — (1,130,148 ) — Total $ 1,503,276 $ 35,317 $ 1,319,787 $ (1,641,473 ) $ 1,216,907 LIABILITIES AND EQUITY Accounts payable $ 26,818 $ 6,210 $ 63,878 $ — $ 96,906 Accrued expenses 48,981 2,290 51,682 — 102,953 Current portion of long-term debt 154 — 376 — 530 Total current liabilities 75,953 8,500 115,936 — 200,389 Long-term debt 394,164 — 439 — 394,603 Intercompany payable 468,039 41,746 — (509,785 ) — Losses in excess of investment in subsidiaries — — 14,780 (14,780 ) — Other long-term obligations 9,036 — 56,479 (1,540 ) 63,975 Total Central Garden & Pet shareholders’ equity (deficit) 556,084 (16,785 ) 1,132,153 (1,115,368 ) 556,084 Noncontrolling interest — 1,856 — — 1,856 Total equity (deficit) 556,084 (14,929 ) 1,132,153 (1,115,368 ) 557,940 Total $ 1,503,276 $ 35,317 $ 1,319,787 $ (1,641,473 ) $ 1,216,907 CONSOLIDATING CONDENSED BALANCE SHEET September 24, 2016 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 82,158 $ 9,695 $ 1,129 $ — $ 92,982 Restricted cash 10,910 — — — 10,910 Accounts receivable, net 59,617 5,156 136,378 — 201,151 Inventories 113,317 11,752 236,935 — 362,004 Prepaid expenses and other assets 20,978 817 25,964 — 47,759 Total current assets 286,980 27,420 400,406 — 714,806 Land, buildings, improvements and equipment, net 41,083 3,897 113,244 — 158,224 Goodwill 15,058 — 216,327 — 231,385 Other long-term assets 30,555 2,980 85,701 (11,458 ) 107,778 Intercompany receivable 32,778 — 567,374 (600,152 ) — Investment in subsidiaries 1,176,990 — — (1,176,990 ) — Total $ 1,583,444 $ 34,297 $ 1,383,052 $ (1,788,600 ) $ 1,212,193 LIABILITIES AND EQUITY Accounts payable $ 34,096 $ 3,953 $ 64,364 $ — $ 102,413 Accrued expenses and other liabilities 47,862 1,410 50,071 — 99,343 Current portion of long term debt 88 — 375 — 463 Total current liabilities 82,046 5,363 114,810 — 202,219 Long-term debt 394,364 — 442 — 394,806 Intercompany payable 553,964 46,188 — (600,152 ) — Losses in excess of investment in subsidiaries — — 16,126 (16,126 ) — Other long-term obligations 56 — 71,983 (11,458 ) 60,581 Total Central Garden & Pet shareholders’ equity (deficit) 553,014 (18,827 ) 1,179,691 (1,160,864 ) 553,014 Noncontrolling interest — 1,573 — — 1,573 Total equity (deficit) 553,014 (17,254 ) 1,179,691 (1,160,864 ) 554,587 Total $ 1,583,444 $ 34,297 $ 1,383,052 $ (1,788,600 ) $ 1,212,193 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Nine Months Ended June 24, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash provided (used) by operating activities $ (14,968 ) $ 2,482 $ 59,210 $ (4,076 ) $ 42,648 Additions to property and equipment (6,811 ) (557 ) (29,719 ) (37,087 ) Payments to acquire companies, net of cash acquired (106,821 ) — — (106,821 ) Proceeds from sale of business, facility and other assets — — 8,301 — 8,301 Change in restricted cash and cash equivalents (89 ) — — (89 ) Investment in equity method investee (11,495 ) — — (11,495 ) Other investing activities (2,735 ) — — — (2,735 ) Intercompany investing activities (4,005 ) — (33,943 ) 37,948 — Net cash used by investing activities (131,956 ) (557 ) (55,361 ) 37,948 (149,926 ) Repayments on revolving line of credit (416,000 ) — — — (416,000 ) Borrowings under revolving line of credit 456,000 — — — 456,000 Repayments under long-term debt (88 ) — (368 ) — (456 ) Excess tax benefits from stock-based awards 17,205 — — — 17,205 Repurchase of common stock (25,654 ) — — — (25,654 ) Distribution to parent (4,076 ) — 4,076 — Distribution to noncontrolling interest (1,019 ) — — (1,019 ) Payment of contingent consideration liability — (1,222 ) — (1,222 ) Intercompany financing activities 34,414 3,534 (37,948 ) — Net cash provided (used) by financing activities 65,877 (1,561 ) (1,590 ) (33,872 ) 28,854 Effect of exchange rate changes on cash and cash equivalents (182 ) 59 38 — (85 ) Net decrease in cash and cash equivalents (81,229 ) 423 2,297 — (78,509 ) Cash and cash equivalents at beginning of period 82,158 9,695 1,129 — 92,982 Cash and cash equivalents at end of period $ 929 $ 10,118 $ 3,426 $ — $ 14,473 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Nine Months Ended June 25, 2016 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash used by operating activities $ 4,127 $ 6,082 $ 84,258 $ (4,884 ) $ 89,583 Additions to property, plant and equipment (1,876 ) (577 ) (17,033 ) — (19,486 ) Payments to acquire companies, net of cash acquired (60,916 ) — (7,985 ) — (68,901 ) Change in restricted cash and cash equivalents 1,129 — — — 1,129 Proceeds from sale of plant assets 3,899 3,899 Other investing activities (550 ) (550 ) Intercompany investing activities 1,689 — (63,778 ) 62,089 — Net cash provided (used) by investing activities (60,524 ) (577 ) (84,897 ) 62,089 (83,909 ) Repayments of long-term debt (400,208 ) — (22 ) — (400,230 ) Borrowings under revolving line of credit 419,000 — — — 419,000 Repayments under revolving line of credit (419,000 ) — — — (419,000 ) Issuance of long-term debt 400,000 — — — 400,000 Excess tax benefits from stock-based awards 4,726 — — — 4,726 Repurchase of common stock (9,429 ) — (9,429 ) Proceeds from issuance of common stock 280 — — — 280 Distribution to parent — (4,884 ) — 4,884 — Distribution to noncontrolling interest (592 ) (592 ) Payment of financing costs (7,560 ) — (7,560 ) Intercompany financing activities 63,786 (1,697 ) — (62,089 ) — Net cash provided (used) by financing activities 51,595 (7,173 ) (22 ) (57,205 ) (12,805 ) Effect of exchange rates on cash (1,001 ) 321 227 — (453 ) Net increase (decrease) in cash and cash equivalents (5,803 ) (1,347 ) (434 ) — (7,584 ) Cash and cash equivalents at beginning of year 36,280 10,022 1,282 — 47,584 Cash and cash equivalents at end of year $ 30,477 $ 8,675 $ 848 $ — $ 40,000 |