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: Arden Companies, LLC 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 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 214,042 $ 35,191 $ 449,810 $ (25,342 ) $ 673,701 Cost of goods sold and occupancy 163,133 30,343 297,864 (23,690 ) 467,650 Gross profit 50,909 4,848 151,946 (1,652 ) 206,051 Selling, general and administrative expenses 47,135 10,485 87,930 (1,652 ) 143,898 Operating income (loss) 3,774 (5,637 ) 64,016 — 62,153 Interest expense (10,482 ) (141 ) (17 ) — (10,640 ) Interest income 2,250 5 — — 2,255 Other (expense) income 305 243 (48 ) — 500 Income (loss) before taxes and equity in earnings (losses) of affiliates (4,153 ) (5,530 ) 63,951 — 54,268 Income tax expense (benefit) (1,748 ) (55 ) 13,349 — 11,546 Equity in earnings (losses) of affiliates 44,796 — (101 ) (44,695 ) — Net income (loss) including noncontrolling interest 42,391 (5,475 ) 50,501 (44,695 ) 42,722 Net loss attributable to noncontrolling interest — 331 — — 331 Net income (loss) attributable to Central Garden & Pet Company $ 42,391 $ (5,806 ) $ 50,501 $ (44,695 ) $ 42,391 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 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 of affiliates 38,272 — 3,841 (42,113 ) — Net income including noncontrolling interest 45,234 3,397 39,248 (42,113 ) 45,766 Net income attributable to noncontrolling interest — 532 — — 532 Net income attributable to Central Garden & Pet Company $ 45,234 $ 2,865 $ 39,248 $ (42,113 ) $ 45,234 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Six Months Ended March 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 387,448 $ 58,820 $ 729,644 $ (40,221 ) $ 1,135,691 Cost of goods sold and occupancy 299,146 52,346 485,547 (37,581 ) 799,458 Gross profit 88,302 6,474 244,097 (2,640 ) 336,233 Selling, general and administrative expenses 90,800 17,836 157,903 (2,640 ) 263,899 Operating income (loss) (2,498 ) (11,362 ) 86,194 — 72,334 Interest expense (20,979 ) (255 ) (20 ) — (21,254 ) Interest income 4,783 9 — — 4,792 Other income (expense) 342 27 (61 ) — 308 Income (loss) before taxes and equity in earnings of affiliates (18,352 ) (11,581 ) 86,113 — 56,180 Income tax expense (benefit) (3,836 ) (311 ) 15,966 — 11,819 Equity in earnings (losses) of affiliates 58,710 — (1,213 ) (57,497 ) — Net income (loss) including noncontrolling interest 44,194 (11,270 ) 68,934 (57,497 ) 44,361 Net income attributable to noncontrolling interest — 167 — — 167 Net income (loss) attributable to Central Garden & Pet Company $ 44,194 $ (11,437 ) $ 68,934 $ (57,497 ) $ 44,194 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 (loss) (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 STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended March 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 42,391 $ (5,475 ) $ 50,501 $ (44,695 ) $ 42,722 Other comprehensive loss: Foreign currency translation 212 127 35 (162 ) 212 Total comprehensive income (loss) 42,603 (5,348 ) 50,536 (44,857 ) 42,934 Comprehensive loss attributable to noncontrolling interests — 331 — — 331 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 42,603 $ (5,679 ) $ 50,536 $ (44,857 ) $ 42,603 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 $ 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) Six Months Ended March 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 44,194 $ (11,270 ) $ 68,934 $ (57,497 ) $ 44,361 Other comprehensive loss: — — — — Foreign currency translation (62 ) (2 ) (60 ) 62 (62 ) Total comprehensive income (loss) 44,132 (11,272 ) 68,874 (57,435 ) 44,299 Comprehensive income attributable to noncontrolling interests — 167 — — 167 Comprehensive income (loss) attributable to Central Garden & Pet Company $ 44,132 $ (11,439 ) $ 68,874 $ (57,435 ) $ 44,132 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 $ 71,481 $ 176 $ 93,618 $ (93,059 ) $ 72,216 Other comprehensive loss: Foreign currency translation 278 249 (64 ) (185 ) 278 Total comprehensive income 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 BALANCE SHEET March 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 322,149 $ 6,354 $ 1,221 $ — $ 329,724 Restricted cash 10,888 — 5,227 — 16,115 Accounts receivable, net 134,251 22,844 299,034 — 456,129 Inventories 138,778 46,035 332,345 — 517,158 Prepaid expenses and other 8,355 1,386 23,420 — 33,161 Total current assets 614,421 76,619 661,247 — 1,352,287 Land, buildings, improvements and equipment, net 29,701 36,180 151,657 — 217,538 Goodwill 20,578 7,414 253,185 — 281,177 Other long-term assets 47,512 6,273 147,035 (5,682 ) 195,138 Intercompany receivable 59,152 — 680,937 (740,089 ) — Investment in subsidiaries 1,688,163 — — (1,688,163 ) — Total $ 2,459,527 $ 126,486 $ 1,894,061 $ (2,433,934 ) $ 2,046,140 LIABILITIES AND EQUITY Accounts payable $ 41,488 $ 21,833 $ 94,275 $ — $ 157,596 Accrued expenses 55,181 6,200 75,032 — 136,413 Current portion of long-term debt 119 — 5,000 — 5,119 Total current liabilities 96,788 28,033 174,307 — 299,128 Long-term debt 692,459 — 187 — 692,646 Intercompany payable 662,927 77,163 — (740,090 ) — Losses in excess of investment in subsidiaries — — 26,248 (26,248 ) — Other long-term obligations 8,604 — 52,142 (5,682 ) 55,064 Total Central Garden & Pet shareholders’ equity 998,749 20,737 1,641,177 (1,661,914 ) 998,749 Noncontrolling interest 553 — 553 Total equity 998,749 21,290 1,641,177 (1,661,914 ) 999,302 Total $ 2,459,527 $ 126,486 $ 1,894,061 $ (2,433,934 ) $ 2,046,140 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 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 September 29, 2018 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 474,210 $ 6,005 $ 1,891 $ — $ 482,106 Restricted cash 10,899 — — — 10,899 Accounts receivable, net 94,657 9,647 171,604 — 275,908 Inventories 123,178 32,556 272,089 — 427,823 Prepaid expenses and other assets 6,304 1,455 12,803 — 20,562 Total current assets 709,248 49,663 458,387 — 1,217,298 Land, buildings, improvements and equipment, net 33,484 33,840 150,323 — 217,647 Goodwill 20,578 7,414 253,185 — 281,177 Other long-term assets 62,199 7,469 133,145 (11,726 ) 191,087 Intercompany receivable 40,365 — 769,886 (810,251 ) — Investment in subsidiaries 1,618,378 — — (1,618,378 ) — Total $ 2,484,252 $ 98,386 $ 1,764,926 $ (2,440,355 ) $ 1,907,209 LIABILITIES AND EQUITY Accounts payable $ 33,122 $ 4,759 $ 72,378 $ — $ 110,259 Accrued expenses and other liabilities 44,142 4,746 53,695 — 102,583 Current portion of long term debt 116 — 6 — 122 Total current liabilities 77,380 9,505 126,079 — 212,964 Long-term debt 691,869 — 162 — 692,031 Intercompany payable 753,933 56,318 — (810,251 ) — Losses in excess of investment in subsidiaries — — 25,036 (25,036 ) — Other long-term obligations 8,621 — 52,485 (11,726 ) 49,380 Total Central Garden & Pet shareholders’ equity (deficit) 952,449 32,178 1,561,164 (1,593,342 ) 952,449 Noncontrolling interest — 385 — — 385 Total equity 952,449 32,563 1,561,164 (1,593,342 ) 952,834 Total $ 2,484,252 $ 98,386 $ 1,764,926 $ (2,440,355 ) $ 1,907,209 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Six Months Ended March 30, 2019 (in thousands) Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash used by operating activities $ (23,565 ) $ (17,128 ) $ (38,626 ) $ — $ (79,319 ) Additions to property and equipment (1,716 ) (3,350 ) (9,236 ) — (14,302 ) Payments to acquire companies, net of cash acquired (11,137 ) — — — (11,137 ) Investments (1,749 ) — — — (1,749 ) Other investing activities (368 ) — — — (368 ) Intercompany investing activities (18,788 ) — 88,949 (70,161 ) — Net cash (used) provided by investing activities (33,758 ) (3,350 ) 79,713 (70,161 ) (27,556 ) Repayments of long-term debt (3 ) — (36,463 ) — (36,466 ) Repurchase of common stock (3,739 ) — — — (3,739 ) Payment of contingent consideration liability — — (66 ) — (66 ) Intercompany financing activities (91,005 ) 20,844 — 70,161 — Net cash provided (used) by financing activities (94,747 ) 20,844 (36,529 ) 70,161 (40,271 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (2 ) (17 ) (1 ) — (20 ) Net increase (decrease) in cash, cash equivalents and restricted cash (152,072 ) 349 4,557 — (147,166 ) Cash, cash equivalents and restricted cash at beginning of period 485,109 6,005 1,891 — 493,005 Cash, cash equivalents and restricted cash at end of period $ 333,037 $ 6,354 $ 6,448 $ — $ 345,839 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Six Months Ended March 31, 2018 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash used by operating activities $ (36,868 ) $ (11,840 ) $ (38,863 ) $ (6,387 ) $ (93,958 ) Additions to property, plant and equipment (4,923 ) (494 ) (12,149 ) — (17,566 ) Payments to acquire companies, net of cash acquired (63,372 ) — — — (63,372 ) Investments (6,555 ) — — — (6,555 ) Other investing activities (2,180 ) — — — (2,180 ) Intercompany investing activities (17,512 ) — 51,377 (33,865 ) — Net cash (used) provided by investing activities (94,542 ) (494 ) 39,228 (33,865 ) (89,673 ) Repayments under revolving line of credit (23,000 ) — — — (23,000 ) Borrowings under revolving line of credit 23,000 — — — 23,000 Repayments of long-term debt — — (360 ) — (360 ) Issuance of long-term debt 300,000 — — — 300,000 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 — — (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 rates on cash, cash equivalents and restricted cash 342 (129 ) (93 ) — 120 Net increase (decrease) in cash, cash equivalents and restricted cash 105,905 (4,523 ) (211 ) — 101,171 Cash, cash equivalents and restricted cash at beginning of period 31,883 11,693 1,466 — 45,042 Cash, cash equivalents and restricted cash at end of period $ 137,788 $ 7,170 $ 1,255 $ — $ 146,213 |