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 and 2028 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: Arden Companies, LLC C&S Products Co., Inc. 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, 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 Fiscal Year Ended September 28, 2019 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 764,991 $ 191,442 $ 1,496,962 $ (70,385 ) $ 2,383,010 Cost of goods sold and occupancy 592,916 150,067 1,000,994 (65,008 ) 1,678,969 Gross profit 172,075 41,375 495,968 (5,377 ) 704,041 Selling, general and administrative expenses 181,894 42,213 333,243 (5,377 ) 551,973 Operating income (loss) (9,819 ) (838 ) 162,725 — 152,068 Interest expense (42,078 ) (802 ) 266 — (42,614 ) Interest income 9,608 19 (73 ) — 9,554 Other income (expense) 190 (575 ) 628 — 243 Income (loss) before taxes and equity in earnings of affiliates (42,099 ) (2,196 ) 163,546 — 119,251 Income tax expense (benefit) (9,324 ) (179 ) 36,107 — 26,604 Equity in earnings of affiliates 125,561 — (230 ) (125,331 ) — Net income including noncontrolling interest 92,786 (2,017 ) 127,209 (125,331 ) 92,647 Noncontrolling interest — (139 ) — — (139 ) Net income attributable to Central Garden & Pet Company $ 92,786 $ (1,878 ) $ 127,209 $ (125,331 ) $ 92,786 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 29, 2018 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net sales $ 730,439 $ 167,584 $ 1,397,688 $ (80,349 ) $ 2,215,362 Cost of goods sold and occupancy 568,145 128,944 917,276 (74,379 ) 1,539,986 Gross profit 162,294 38,640 480,412 (5,970 ) 675,376 Selling, general and administrative expenses 167,849 33,118 313,043 (5,970 ) 508,040 Operating income (loss) (5,555 ) 5,522 167,369 — 167,336 Interest expense (38,855 ) (547 ) 206 — (39,196 ) Interest income 3,138 6 1 — 3,145 Other income (expense) (4,269 ) (236 ) 645 — (3,860 ) Income (loss) before taxes and equity in earnings of affiliates (45,541 ) 4,745 168,221 — 127,425 Income tax expense (benefit) (1,138 ) 79 4,364 — 3,305 Equity in earnings of affiliates 167,997 — 1,133 (169,130 ) — Net income including noncontrolling interest 123,594 4,666 164,990 (169,130 ) 124,120 Noncontrolling interest — 526 — — 526 Net income (loss) attributable to Central Garden & Pet Company $ 123,594 $ 4,140 $ 164,990 $ (169,130 ) $ 123,594 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 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 STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Fiscal Year Ended September 28, 2019 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income (loss) $ 92,786 $ (2,017 ) $ 127,209 $ (125,331 ) $ 92,647 Other comprehensive loss: Foreign currency translation (458 ) (299 ) (48 ) 347 (458 ) Total comprehensive income (loss) 92,328 (2,316 ) 127,161 (124,984 ) 92,189 Comprehensive loss attributable to noncontrolling interests — (139 ) — — (139 ) Comprehensive income (loss) attributable to Central Garden & Pet Company $ 92,328 $ (2,177 ) $ 127,161 $ (124,984 ) $ 92,328 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended September 29, 2018 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net income $ 123,594 $ 4,666 $ 164,990 $ (169,130 ) $ 124,120 Other comprehensive loss: Foreign currency translation (267 ) (145 ) (67 ) 212 (267 ) Total comprehensive income 123,327 4,521 164,923 (168,918 ) 123,853 Comprehensive income attributable to noncontrolling interests — 526 — — 526 Comprehensive income attributable to Central Garden & Pet Company $ 123,327 $ 3,995 $ 164,923 $ (168,918 ) $ 123,327 CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 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: 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 BALANCE SHEET September 28, 2019 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 489,590 $ 7,308 $ 851 $ — $ 497,749 Restricted cash 12,952 — — — 12,952 Accounts receivable, net 99,372 11,551 189,212 — 300,135 Inventories, net 121,344 30,826 314,027 — 466,197 Prepaid expenses and other assets 9,339 1,241 19,580 — 30,160 Total current assets 732,597 50,926 523,670 — 1,307,193 Land, buildings, improvements and equipment, net 27,395 35,854 182,156 — 245,405 Goodwill 20,578 7,414 258,085 — 286,077 Other long term assets 55,690 5,487 139,138 (13,970 ) 186,345 Intercompany receivable 37,544 — 879,231 (916,775 ) — Investment in subsidiaries 1,784,750 — — (1,784,750 ) — Total $ 2,658,554 $ 99,681 $ 1,982,280 $ (2,715,495 ) $ 2,025,020 LIABILITIES AND EQUITY Accounts payable $ 47,506 $ 6,895 $ 94,845 $ — $ 149,246 Accrued expenses and other liabilities 54,623 4,814 69,729 — 129,166 Current portion of long term debt 113 — — — 113 Total current liabilities 102,242 11,709 164,574 — 278,525 Long-term debt 693,037 — — — 693,037 Intercompany payable 858,673 58,102 — (916,775 ) — Losses in excess of investment in subsidiaries — — 25,567 (25,567 ) — Other long-term obligations 8,595 — 62,656 (13,970 ) 57,281 Shareholders’ equity attributable to Central Garden & Pet 996,007 29,700 1,729,483 (1,759,183 ) 996,007 Noncontrolling interest — 170 — — 170 Total equity 996,007 29,870 1,729,483 (1,759,183 ) 996,177 Total $ 2,658,554 $ 99,681 $ 1,982,280 $ (2,715,495 ) $ 2,025,020 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, net 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 Shareholders’ equity attributable to Central Garden & Pet 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 Fiscal Year Ended September 28, 2019 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash provided by operating activities $ 22,344 $ 4,625 $ 178,305 $ (300 ) $ 204,974 Additions to property, plant and equipment (3,926 ) (4,779 ) (22,872 ) — (31,577 ) Businesses acquired, net of cash acquired (41,161 ) — — — (41,161 ) Investments (2,010 ) — — — (2,010 ) Other investing activities (518 ) — (997 ) — (1,515 ) Intercompany investing activities 2,820 — (109,345 ) 106,525 — Net cash used by investing activities (44,795 ) (4,779 ) (133,214 ) 106,525 (76,263 ) Repayments of long-term debt (121 ) — (46,072 ) — (46,193 ) Repurchase of common stock (62,974 ) — — — (62,974 ) Payment of deferred financing costs (1,352 ) — — — (1,352 ) Payments of contingent consideration — — (170 ) — (170 ) Distribution to parent — (300 ) — 300 — Distribution to noncontrolling interest — (76 ) — — (76 ) Intercompany financing activities 104,742 1,783 — (106,525 ) — Net cash provided (used) by financing activities 40,295 1,407 (46,242 ) (106,225 ) (110,765 ) Effect of exchange rates on cash (411 ) 50 111 — (250 ) Net increase (decrease) in cash, cash equivalents and restricted cash 17,433 1,303 (1,040 ) — 17,696 Cash, cash equivalents and restricted cash at beginning of year 485,109 6,005 1,891 — 493,005 Cash, cash equivalents and restricted cash at end of year $ 502,542 $ 7,308 $ 851 $ — $ 510,701 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 29, 2018 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash provided (used) by operating activities $ (16,676 ) $ (1,288 ) $ 138,463 $ (6,387 ) $ 114,112 Additions to property, plant and equipment (6,633 ) (1,495 ) (29,717 ) — (37,845 ) Businesses acquired, net of cash acquired (91,244 ) — — — (91,244 ) Investments (9,048 ) — — — (9,048 ) Other investing activities (2,745 ) — — — (2,745 ) Intercompany investing activities (3,760 ) — (107,749 ) 111,509 — Net cash used by investing activities (113,430 ) (1,495 ) (137,466 ) 111,509 (140,882 ) Repayments on revolving line of credit (23,000 ) — — — (23,000 ) Borrowings on revolving line of credit 23,000 — — — 23,000 Repayments of long-term debt (56 ) — (375 ) — (431 ) Issuance of long-term debt 300,000 — — — 300,000 Proceeds from issuance of common stock 195,631 — — — 195,631 Repurchase of common stock (13,797 ) — — — (13,797 ) Payments of contingent consideration — — (253 ) — (253 ) Payment of deferred financing costs (4,770 ) — — — (4,770 ) Distribution to parent — (6,387 ) — 6,387 — Distribution to noncontrolling interest — (1,597 ) — — (1,597 ) Intercompany financing activities 106,525 4,984 — (111,509 ) — Net cash provided (used) by financing activities 583,533 (3,000 ) (628 ) (105,122 ) 474,783 Effect of exchange rates on cash (201 ) 95 56 — (50 ) Net increase (decrease) in cash, cash equivalents and restricted cash 453,226 (5,688 ) 425 — 447,963 Cash, cash equivalents and restricted cash at beginning of year 31,883 11,693 1,466 — 45,042 Cash, cash equivalents and restricted cash at end of year $ 485,109 $ 6,005 $ 1,891 $ — $ 493,005 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Fiscal Year Ended September 30, 2017 (in thousands) Parent Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated Net cash (used) provided 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 (103,880 ) — — — (103,880 ) Proceeds from asset sales 229 — 8,318 — 8,547 Escrow deposit for acquisition related-contingent consideration (6,000 ) — — — (6,000 ) Investments (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 (139,748 ) (805 ) (120,880 ) 98,591 (162,842 ) 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, cash equivalents and restricted cash (61,185 ) 1,998 337 — (58,850 ) Cash, cash equivalents and restricted cash at beginning of year 93,068 9,695 1,129 — 103,892 Cash, cash equivalents and restricted cash at end of year 31,883 11,693 1,466 — 45,042 |