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 and 2028 Notes. Certain subsidiaries and operating divisions are not guarantors of the 2023 Notes and 2028 Notes. Those subsidiaries that are guarantors and co-obligors of the 2023 Notes and 2028 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., NEXGEN Turf Research, LLC 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, Aquatica Tropicals, Inc., Quality Pets, LLC and Midwest Tropicals, LLC) T.F.H. Publications, Inc. Wellmark International (including B2E Corporation, B2E Microbials, LLC, B2E Manufacturing, LLC, Four Star Microbial Products, LLC 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 March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 195,464 $ 32,433 $ 412,348 $ (27,151 ) $ 613,094 Cost of goods sold and occupancy 151,868 24,192 268,072 (25,495 ) 418,637 Gross profit 43,596 8,241 144,276 (1,656 ) 194,457 Selling, general and administrative expenses 41,677 6,532 82,118 (1,656 ) 128,671 Operating income (loss) 1,919 1,709 62,158 — 65,786 Interest expense (10,510 ) (62 ) (3 ) (10,575 ) Interest income 692 1 — 693 Other (expense) income 1,108 200 197 1,505 Income (loss) before taxes and equity in earnings (losses) of affiliates (6,791 ) 1,848 62,352 — 57,409 Income tax expense (benefit) (13,753 ) (1,549 ) 26,945 11,643 Equity in earnings (losses) of affiliates 38,272 — 3,841 (42,113 ) — Net income (loss) including noncontrolling interest 45,234 3,397 39,248 (42,113 ) 45,766 Net income attributable to noncontrolling interest — 532 — — 532 Net income (loss) attributable to Central Garden & Pet Company $ 45,234 $ 2,865 $ 39,248 $ (42,113 ) $ 45,234 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Three Months Ended March 25, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 190,791 $ 26,092 $ 378,673 $ (25,632 ) $ 569,924 Cost of goods sold and occupancy 145,593 20,128 244,680 (24,006 ) 386,395 Gross profit 45,198 5,964 133,993 (1,626 ) 183,529 Selling, general and administrative expenses 39,347 4,874 77,074 (1,626 ) 119,669 Operating income (loss) 5,851 1,090 56,919 — 63,860 Interest expense (6,759 ) (65 ) (6 ) — (6,830 ) Interest income 7 1 — — 8 Other expense (737 ) (194 ) (34 ) — (965 ) Income (loss) before taxes and equity in earnings (losses) of affiliates (1,638 ) 832 56,879 — 56,073 Income tax expense (benefit) (718 ) 448 21,094 — 20,824 Equity in earnings (losses) of affiliates 35,604 — 384 (35,988 ) — Net income (loss) including noncontrolling interest 34,684 384 36,169 (35,988 ) 35,249 Net income attributable to noncontrolling interest — 565 — — 565 Net income (loss) attributable to Central Garden & Pet Company $ 34,684 $ (181 ) $ 36,169 $ (35,988 ) $ 34,684 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Six Months Ended March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 354,525 $ 46,176 $ 698,772 $ (44,368 ) $ 1,055,105 Cost of goods sold and occupancy 277,347 36,008 457,123 (41,667 ) 728,811 Gross profit 77,178 10,168 241,649 (2,701 ) 326,294 Selling, general and administrative expenses 78,316 10,437 151,935 (2,701 ) 237,987 Operating income (1,138 ) (269 ) 89,714 — 88,307 Interest expense (17,895 ) (78 ) (7 ) — (17,980 ) Interest income 878 2 — — 880 Other income (expense) (1,810 ) 254 (28 ) — (1,584 ) Income (loss) before taxes and equity in earnings of affiliates (19,965 ) (91 ) 89,679 — 69,623 Income tax expense (benefit) 672 (267 ) (2,998 ) — (2,593 ) Equity in earnings of affiliates 92,118 — 941 (93,059 ) — Net income including noncontrolling interest 71,481 176 93,618 (93,059 ) 72,216 Net income attributable to noncontrolling interest — 735 — — 735 Net income (loss) attributable to Central Garden & Pet Company $ 71,481 $ (559 ) $ 93,618 $ (93,059 ) $ 71,481 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Six Months Ended March 25, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 346,309 $ 40,116 $ 645,111 $ (42,114 ) $ 989,422 Cost of goods sold and occupancy 266,729 31,806 426,120 (39,440 ) 685,215 Gross profit 79,580 8,310 218,991 (2,674 ) 304,207 Selling, general and administrative expenses 75,312 8,538 139,233 (2,674 ) 220,409 Operating income (loss) 4,268 (228 ) 79,758 — 83,798 Interest expense (13,610 ) (82 ) (11 ) — (13,703 ) Interest income 45 1 — — 46 Other income (expense) (1,340 ) (387 ) (205 ) — (1,932 ) Income (loss) before taxes and equity in earnings of affiliates (10,637 ) (696 ) 79,542 — 68,209 Income tax expense (benefit) (3,910 ) 37 29,044 — 25,171 Equity in earnings of affiliates 49,048 — (427 ) (48,621 ) — Net income including noncontrolling interest 42,321 (733 ) 50,071 (48,621 ) 43,038 Net income attributable to noncontrolling interest — 717 — — 717 Net income attributable to Central Garden & Pet Company $ 42,321 $ (1,450 ) $ 50,071 $ (48,621 ) $ 42,321 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 45,234 $ 3,397 $ 39,248 $ (42,113 ) $ 45,766 Other comprehensive income (loss): Foreign currency translation 234 206 (48 ) (158 ) 234 Total comprehensive income (loss) 45,468 3,603 39,200 (42,271 ) 46,000 Comprehensive income attributable to noncontrolling interests — 532 — — 532 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 45,468 $ 3,071 $ 39,200 $ (42,271 ) $ 45,468 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended March 25, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 34,684 $ 384 $ 36,169 $ (35,988 ) $ 35,249 Other comprehensive loss: Foreign currency translation 144 95 20 (115 ) 144 Total comprehensive income (loss) 34,828 479 36,189 (36,103 ) 35,393 Comprehensive income attributable to noncontrolling interests — 565 — — 565 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 34,828 $ (86 ) $ 36,189 $ (36,103 ) $ 34,828 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Six Months Ended March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 71,481 $ 176 $ 93,618 $ (93,059 ) $ 72,216 Other comprehensive loss: — — — — Foreign currency translation 278 249 (64 ) (185 ) 278 Total comprehensive income (loss) 71,759 425 93,554 (93,244 ) 72,494 Comprehensive income attributable to noncontrolling interests — 735 — — 735 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 71,759 $ (310 ) $ 93,554 $ (93,244 ) $ 71,759 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Six Months Ended March 25, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 42,321 $ (733 ) $ 50,071 $ (48,621 ) $ 43,038 Other comprehensive income (loss): Foreign currency translation (364 ) (260 ) (30 ) 290 (364 ) Total comprehensive income (loss) 41,957 (993 ) 50,041 (48,331 ) 42,674 Comprehensive income attributable to noncontrolling interests — 717 — — 717 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 41,957 $ (1,710 ) $ 50,041 $ (48,331 ) $ 41,957 CONSOLIDATING CONDENSED BALANCE SHEET March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 123,840 $ 7,170 $ 1,255 $ — $ 132,265 Restricted cash 13,948 — — — 13,948 Accounts receivable, net 132,218 19,938 242,995 — 395,151 Inventories 137,108 43,438 284,976 — 465,522 Prepaid expenses and other 6,157 2,086 18,434 — 26,677 Total current assets 413,271 72,632 547,660 — 1,033,563 Land, buildings, improvements and equipment, net 35,314 34,632 140,617 210,563 Goodwill 15,058 — 253,185 268,243 Other long-term assets 56,612 14,642 132,916 (12,576 ) 191,594 Intercompany receivable 54,117 — 610,760 (664,877 ) — Investment in subsidiaries 1,539,309 — — (1,539,309 ) — Total $ 2,113,681 $ 121,906 $ 1,685,138 $ (2,216,762 ) $ 1,703,963 LIABILITIES AND EQUITY Accounts payable $ 48,659 $ 19,752 $ 82,564 $ — $ 150,975 Accrued expenses 63,951 5,303 47,160 — 116,414 Current portion of long-term debt — — 20 — 20 Total current liabilities 112,610 25,055 129,744 — 267,409 Long-term debt 690,947 — 137 691,084 Intercompany payable 597,619 67,258 — (664,877 ) — Losses in excess of investment in subsidiaries — — 25,228 (25,228 ) — Other long-term obligations 7,997 — 44,947 (12,576 ) 40,368 Total Central Garden & Pet shareholders’ equity (deficit) 704,508 28,999 1,485,082 (1,514,081 ) 704,508 Noncontrolling interest — 594 — — 594 Total equity (deficit) 704,508 29,593 1,485,082 (1,514,081 ) 705,102 Total $ 2,113,681 $ 121,906 $ 1,685,138 $ (2,216,762 ) $ 1,703,963 CONSOLIDATING CONDENSED BALANCE SHEET March 25, 2017 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 492 $ 4,764 $ 913 $ — $ 6,169 Restricted cash 10,988 — — — 10,988 Accounts receivable, net 113,600 14,366 215,236 — 343,202 Inventories 138,493 16,901 270,991 — 426,385 Prepaid expenses and other 7,701 813 15,096 — 23,610 Total current assets 271,274 36,844 502,236 — 810,354 Land, buildings, improvements and equipment, net 38,932 4,045 132,963 — 175,940 Goodwill 15,058 — 215,327 — 230,385 Other long-term assets 40,704 3,381 127,924 (20,224 ) 151,785 Intercompany receivable 44,957 — 511,319 (556,276 ) — Investment in subsidiaries 1,287,126 — — (1,287,126 ) — Total $ 1,698,051 $ 44,270 $ 1,489,769 $ (1,863,626 ) $ 1,368,464 LIABILITIES AND EQUITY Accounts payable $ 51,357 $ 11,199 $ 79,235 $ — $ 141,791 Accrued expenses 53,301 2,131 45,989 — 101,421 Current portion of long-term debt — — 374 — 374 Total current liabilities 104,658 13,330 125,598 — 243,586 Long-term debt 495,762 — 108 — 495,870 Intercompany payable 501,993 54,283 — (556,276 ) — Losses in excess of investment in subsidiaries — — 20,629 (20,629 ) — Other long-term obligations 2,418 — 52,323 (20,224 ) 34,517 Total Central Garden & Pet shareholders’ equity (deficit) 593,220 (24,614 ) 1,291,111 (1,266,497 ) 593,220 Noncontrolling interest — 1,271 — — 1,271 Total equity (deficit) 593,220 (23,343 ) 1,291,111 (1,266,497 ) 594,491 Total $ 1,698,051 $ 44,270 $ 1,489,769 $ (1,863,626 ) $ 1,368,464 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 Total Central Garden & Pet shareholders’ equity (deficit) 635,686 (24,073 ) 1,387,924 (1,363,851 ) 635,686 Noncontrolling interest — 1,456 — — 1,456 Total equity (deficit) 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 STATEMENT OF CASH FLOWS Six Months Ended March 31, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash provided (used) by operating activities $ (36,868 ) $ (11,840 ) $ (38,863 ) $ (6,387 ) $ (93,958 ) Additions to property and equipment (4,923 ) (494 ) (12,149 ) (17,566 ) Payments to acquire companies, net of cash acquired (63,372 ) (63,372 ) Change in restricted cash and cash equivalents (1,303 ) (1,303 ) Investments (6,555 ) (6,555 ) Other investing activities (2,180 ) — — — (2,180 ) Intercompany investing activities (17,512 ) 51,377 (33,865 ) — Net cash used by investing activities (95,845 ) (494 ) 39,228 (33,865 ) (90,976 ) Repayments on revolving line of credit (23,000 ) (23,000 ) Borrowings under revolving line of credit 23,000 23,000 Issuance of long-term debt 300,000 300,000 Repayments under long-term debt (360 ) (360 ) Payment of financing costs (4,765 ) (4,765 ) Repurchase of common stock (8,473 ) (8,473 ) Distribution to parent (6,387 ) 6,387 — Distribution to noncontrolling interest (1,597 ) (1,597 ) Payment of contingent consideration liability — (123 ) — (123 ) Intercompany financing activities (49,789 ) 15,924 33,865 — Net cash provided (used) by financing activities 236,973 7,940 (483 ) 40,252 284,682 Effect of exchange rate changes on cash and cash equivalents 342 (129 ) (93 ) 120 Net increase (decrease) in cash and cash equivalents 104,602 (4,523 ) (211 ) — 99,868 Cash and cash equivalents at beginning of period 19,238 11,693 1,466 — 32,397 Cash and cash equivalents at end of period $ 123,840 $ 7,170 $ 1,255 $ — $ 132,265 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Six Months Ended March 25, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided by operating activities $ (43,383 ) $ (7,352 ) $ (41,431 ) $ (4,076 ) $ (96,242 ) Additions to property, plant and equipment (4,357 ) (413 ) (22,024 ) — (26,794 ) Payments to acquire companies, net of cash acquired (60,042 ) — — (60,042 ) Change in restricted cash and cash equivalents (78 ) — — — (78 ) Proceeds from sale of plant assets 2 8,266 8,268 Investments (2,000 ) (2,000 ) Other investing activities (1,395 ) (1,395 ) Intercompany investing activities (14,089 ) — 50,108 (36,019 ) — Net cash used by investing activities (81,959 ) (413 ) 36,350 (36,019 ) (82,041 ) Repayments under revolving line of credit (115,000 ) — — (115,000 ) Borrowings under revolving line of credit 216,000 — — — 216,000 Repayments under long-term debt (88 ) — (361 ) — (449 ) Issuance of long-term debt — — — — — Excess tax benefits from stock-based awards 13,166 — — — 13,166 Repurchase of common stock (20,172 ) — (20,172 ) Distribution to parent — (4,076 ) — 4,076 — Distribution to noncontrolling interest — (1,019 ) — — (1,019 ) Payment of contingent consideration — — (894 ) — (894 ) Intercompany financing activities (49,895 ) 7,830 6,046 36,019 — Net cash provided (used) by financing activities 44,011 2,735 4,791 40,095 91,632 Effect of exchange rates on cash (335 ) 99 74 — (162 ) Net decrease in cash and cash equivalents (81,666 ) (4,931 ) (216 ) — (86,813 ) Cash and cash equivalents at beginning of year 82,158 9,695 1,129 — 92,982 Cash and cash equivalents at end of year $ 492 $ 4,764 $ 913 $ — $ 6,169 |