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 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. 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 Fiscal Year Ended September 30, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 685,998 $ 79,681 $ 1,370,335 $ (81,536 ) $ 2,054,478 Cost of goods sold and occupancy 534,682 60,788 901,959 (75,759 ) 1,421,670 Gross profit 151,316 18,893 468,376 (5,777 ) 632,808 Selling, general and administrative expenses 154,267 18,416 309,790 (5,777 ) 476,696 Operating income (loss) (2,951 ) 477 158,586 — 156,112 Interest expense (28,051 ) (294 ) 136 — (28,209 ) Interest income 146 1 — — 147 Other income (expense) (2,379 ) 844 (86 ) — (1,621 ) Income (loss) before taxes and equity in earnings of affiliates (33,235 ) 1,028 158,636 — 126,429 Income tax expense (benefit) (11,981 ) 1,466 57,214 — 46,699 Equity in earnings of affiliates 100,082 — 420 (100,502 ) — Net income (loss) including noncontrolling interest 78,828 (438 ) 101,842 (100,502 ) 79,730 Noncontrolling interest — 902 — — 902 Net income (loss) attributable to Central Garden & Pet Company $ 78,828 $ (1,340 ) $ 101,842 $ (100,502 ) $ 78,828 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 24, 2016 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 587,579 $ 82,567 $ 1,238,339 $ (79,468 ) $ 1,829,017 Cost of goods sold and occupancy 466,543 62,727 820,573 (73,876 ) 1,275,967 Gross profit 121,036 19,840 417,766 (5,592 ) 553,050 Selling, general and administrative expenses 138,556 18,077 272,651 (5,592 ) 423,692 Operating income (loss) (17,520 ) 1,763 145,115 — 129,358 Interest expense (42,700 ) (266 ) 119 — (42,847 ) Interest income 136 4 — — 140 Other income (expense) (16,925 ) (113 ) 25 — (17,013 ) Income (loss) before taxes and equity in earnings of affiliates (77,009 ) 1,388 145,259 — 69,638 Income tax expense (benefit) (26,422 ) 923 49,552 — 24,053 Equity in earnings of affiliates 95,101 — 624 (95,725 ) — Net income including noncontrolling interest 44,514 465 96,331 (95,725 ) 45,585 Noncontrolling interest — 1,071 — — 1,071 Net income (loss) attributable to Central Garden & Pet Company $ 44,514 $ (606 ) $ 96,331 $ (95,725 ) $ 44,514 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 484,310 $ 100,127 $ 1,146,821 $ (80,521 ) $ 1,650,737 Cost of goods sold and occupancy 379,235 76,597 781,797 (74,944 ) 1,162,685 Gross profit 105,075 23,530 365,024 (5,577 ) 488,052 Selling, general and administrative expenses 124,613 18,329 259,252 (5,577 ) 396,617 Operating income (loss) (19,538 ) 5,201 105,772 — 91,435 Interest expense (39,893 ) (268 ) 134 — (40,027 ) Interest income 126 3 — — 129 Other income (expense) (372 ) 407 (22 ) — 13 Income (loss) before taxes and equity in earnings of affiliates (59,677 ) 5,343 105,884 — 51,550 Income tax expense (benefit) (21,500 ) 2,089 37,946 — 18,535 Equity in earnings of affiliates 70,148 — 2,445 (72,593 ) — Net income including noncontrolling interest 31,971 3,254 70,383 (72,593 ) 33,015 Noncontrolling interest — 1,044 — — 1,044 Net income attributable to Central Garden & Pet Company $ 31,971 $ 2,210 $ 70,383 $ (72,593 ) $ 31,971 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended September 30, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 78,828 $ (438 ) $ 101,842 $ (100,502 ) $ 79,730 Other comprehensive income (loss): Foreign currency translation 343 169 108 (277 ) 343 Total comprehensive income (loss) 79,171 (269 ) 101,950 (100,779 ) 80,073 Comprehensive income attributable to noncontrolling interests — 902 — — 902 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 79,171 $ (1,171 ) $ 101,950 $ (100,779 ) $ 79,171 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended September 24, 2016 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income $ 44,514 $ 465 $ 96,331 $ (95,725 ) $ 45,585 Other comprehensive income (loss): Foreign currency translation (1,458 ) (1,132 ) 8 1,124 (1,458 ) Total comprehensive income (loss) 43,056 (667 ) 96,339 (94,601 ) 44,127 Comprehensive income attributable to noncontrolling interests — 1,071 — — 1,071 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 43,056 $ (1,738 ) $ 96,339 $ (94,601 ) $ 43,056 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income $ 31,971 $ 3,254 $ 70,383 $ (72,593 ) $ 33,015 Other comprehensive loss: Unrealized loss on securities (10 ) — (10 ) Reclassification of realized loss on securities included in net income 20 — — — 20 Foreign currency translation (1,078 ) (537 ) (380 ) 917 (1,078 ) Total comprehensive income 30,903 2,717 70,003 (71,676 ) 31,947 Comprehensive income attributable to noncontrolling interests — 1,044 — — 1,044 Comprehensive income attributable to Central Garden & Pet Company $ 30,903 $ 1,673 $ 70,003 $ (71,676 ) $ 30,903 CONSOLIDATING CONDENSED BALANCE SHEET September 30, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 19,238 $ 11,693 $ 1,466 $ — $ 32,397 Restricted cash 12,645 — — — 12,645 Accounts receivable, net 78,692 5,586 153,590 — 237,868 Inventories 125,797 9,493 246,811 — 382,101 Prepaid expenses and other assets 6,059 811 11,175 — 18,045 Total current assets 242,431 27,583 413,042 — 683,056 Land, buildings, improvements and equipment, net 38,170 4,225 138,518 — 180,913 Goodwill 15,058 — 241,217 — 256,275 Other long term assets 61,715 2,376 146,372 (23,801 ) 186,662 Intercompany receivable 36,606 — 662,137 (698,743 ) — Investment in subsidiaries 1,383,633 — — (1,383,633 ) — Total $ 1,777,613 $ 34,184 $ 1,601,286 $ (2,106,177 ) $ 1,306,906 LIABILITIES AND EQUITY Accounts payable $ 36,760 $ 3,076 $ 63,447 $ — $ 103,283 Accrued expenses and other liabilities 54,909 2,391 59,249 — 116,549 Current portion of long term debt — — 375 — 375 Total current liabilities 91,669 5,467 123,071 — 220,207 Long-term debt 395,160 — 118 — 395,278 Intercompany payable 647,409 51,334 — (698,743 ) — Losses in excess of investment in subsidiaries — — 19,782 (19,782 ) — Other long-term obligations 7,689 — 70,391 (23,801 ) 54,279 Shareholders’ equity attributable to Central Garden & Pet 635,686 (24,073 ) 1,387,924 (1,363,851 ) 635,686 Noncontrolling interest — 1,456 — — 1,456 Total equity 635,686 (22,617 ) 1,387,924 (1,363,851 ) 637,142 Total $ 1,777,613 $ 34,184 $ 1,601,286 $ (2,106,177 ) $ 1,306,906 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 5,700 800 9,749 — 16,249 Total current assets 271,702 27,403 384,191 — 683,296 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 45,832 2,998 85,701 (26,753 ) 107,778 Intercompany receivable 32,778 — 567,374 (600,152 ) — Investment in subsidiaries 1,176,990 — — (1,176,990 ) — Total $ 1,583,443 $ 34,298 $ 1,366,837 $ (1,803,895 ) $ 1,180,683 LIABILITIES AND EQUITY Accounts payable $ 34,096 $ 3,953 $ 64,364 $ — $ 102,413 Accrued expenses and other liabilities 47,861 1,411 50,071 — 99,343 Current portion of long term debt 88 — 375 — 463 Total current liabilities 82,045 5,364 114,810 — 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 — 55,768 (26,753 ) 29,071 Shareholders’ equity attributable to Central Garden & Pet 553,014 (18,827 ) 1,179,691 (1,160,864 ) 553,014 Noncontrolling interest — 1,573 — — 1,573 Total equity 553,014 (17,254 ) 1,179,691 (1,160,864 ) 554,587 Total $ 1,583,443 $ 34,298 $ 1,366,837 $ (1,803,895 ) $ 1,180,683 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 30, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash provided (used) by operating activities $ (7,418 ) $ 2,846 $ 122,957 $ (4,076 ) $ 114,309 Additions to property, plant and equipment (9,419 ) (805 ) (34,435 ) — (44,659 ) Businesses acquired, net of cash acquired, and investments in joint ventures (103,880 ) — — — (103,880 ) Proceeds from asset sales 229 — 8,318 — 8,547 Escrow deposit for acquisition-related contingent consideration (6,000 ) (6,000 ) Change in restricted cash and cash equivalents (1,735 ) — — — (1,735 ) Investment in equity method investee (12,495 ) (12,495 ) Other investing activities (4,355 ) — — — (4,355 ) Intercompany investing activities (3,828 ) — (94,763 ) 98,591 — Net cash used by investing activities (141,483 ) (805 ) (120,880 ) 98,591 (164,577 ) Repayments on revolving line of credit (552,000 ) — — — (552,000 ) Borrowings on revolving line of credit 552,000 — — — 552,000 Repayments of long-term debt (89 ) — (374 ) — (463 ) Excess tax benefits from stock-based awards 19,946 — — — 19,946 Repurchase of common stock (27,556 ) — — — (27,556 ) Payments of contingent consideration — — (1,300 ) — (1,300 ) Distribution to parent — (4,076 ) — 4,076 — Distribution to noncontrolling interest — (1,019 ) — — (1,019 ) Intercompany financing activities 93,445 5,146 — (98,591 ) — Net cash provided (used) by financing activities 85,746 51 (1,674 ) (94,515 ) (10,392 ) Effect of exchange rates on cash 235 (94 ) (66 ) — 75 Net increase (decrease) in cash and cash equivalents (62,920 ) 1,998 337 — (60,585 ) Cash and cash equivalents at beginning of year 82,158 9,695 1,129 — 92,982 Cash and cash equivalents at end of year $ 19,238 $ 11,693 $ 1,466 $ — $ 32,397 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 24, 2016 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ 3,906 $ 2,654 $ 149,749 $ (4,883 ) $ 151,426 Additions to property, plant and equipment (4,513 ) (717 ) (22,392 ) — (27,622 ) Payments to acquire companies, net of expenses (69,001 ) — — — (69,001 ) Proceeds from asset sales — — 3,911 — 3,911 Change in restricted cash and cash equivalents 2,247 — — — 2,247 Other investing activities (730 ) — — — (730 ) Intercompany investing activities (83 ) — (129,708 ) 129,791 — Net cash used by investing activities (72,080 ) (717 ) (148,189 ) 129,791 (91,195 ) Repayments on revolving line of credit (419,000 ) — — — (419,000 ) Borrowings on revolving line of credit 419,000 — — — 419,000 Repayments of long-term debt (400,286 ) — (21 ) — (400,307 ) Issuance of long-term debt 400,000 400,000 Proceeds from issuance of common stock 324 — — — 324 Excess tax benefits from stock-based awards 6,869 — — — 6,869 Repurchase of common stock (10,873 ) — — — (10,873 ) Payments of contingent consideration (2,026 ) (2,026 ) Payment of deferred financing costs (7,560 ) — — — (7,560 ) Distribution to parent — (4,883 ) — 4,883 — Distribution to noncontrolling interest — (592 ) — — (592 ) Intercompany financing activities 127,044 2,747 — (129,791 ) — Net cash provided (used) by financing activities 115,518 (2,728 ) (2,047 ) (124,908 ) (14,165 ) Effect of exchange rates on cash (1,466 ) 464 334 — (668 ) Net increase (decrease) in cash and cash equivalents 45,878 (327 ) (153 ) — 45,398 Cash and cash equivalents at beginning of year 36,280 10,022 1,282 — 47,584 Cash and cash equivalents at end of year $ 82,158 $ 9,695 $ 1,129 $ — $ 92,982 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 26, 2015 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ (16,823 ) $ 7,372 $ 103,619 $ (6,719 ) $ 87,449 Additions to property, plant and equipment (2,721 ) (405 ) (18,904 ) — (22,030 ) Businesses acquired, net of cash acquired (38,384 ) — — — (38,384 ) Change in restricted cash and cash equivalents 1,126 — — — 1,126 Maturities of short term investments 9,997 — — — 9,997 Investment in short term investments (17 ) — — — (17 ) Other investing activities (546 ) — — — (546 ) Intercompany investing activities (15,789 ) — (85,963 ) 101,752 — Net cash used by investing activities (46,334 ) (405 ) (104,867 ) 101,752 (49,854 ) Repayments on revolving line of credit (312,000 ) — — — (312,000 ) Borrowings on revolving line of credit 312,000 — — — 312,000 Repayments of long-term debt (50,262 ) — (27 ) — (50,289 ) Proceeds from issuance of common stock 200 — — — 200 Excess tax benefits from stock-based awards 2,154 — — — 2,154 Repurchase of common stock (18,497 ) — — — (18,497 ) Payment of deferred financing costs (258 ) — — — (258 ) Distribution to parent — (6,719 ) — 6,719 — Distribution to noncontrolling interest — (1,680 ) — — (1,680 ) Intercompany financing activities 103,326 (1,574 ) — (101,752 ) — Net cash provided (used) by financing activities 36,663 (9,973 ) (27 ) (95,033 ) (68,370 ) Effect of exchange rates on cash (697 ) 222 158 — (317 ) Net increase (decrease) in cash and cash equivalents (27,191 ) (2,784 ) (1,117 ) — (31,092 ) Cash and cash equivalents at beginning of year 63,471 12,806 2,399 — 78,676 Cash and cash equivalents at end of year $ 36,280 $ 10,022 $ 1,282 $ — $ 47,584 |