# To our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_CENT_2019/NASDAQ_CENT_2019.mmd` · pages 2-8_

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To our Shareholders:

In October 2019, I had the privilege of joining Central as CEO. I've spent these first few months conducting in-depth business reviews, touring many of our facilities, meeting key customers and listening to a great deal of feedback from my Central colleagues. This engagement has not only deepened my understanding of the people and culture that have made Central what it is today but has also reinforced my belief in our platform and potential. Our people, our brands and our strong customer partnerships all provide significant opportunity for continued Central growth.

It is clear to me that Central embraces many of the attributes I believe are critical for a consumer products company to be successful. Thanks to our entrepreneurial culture and empowered business unit structure, our organization is agile and can move at the speed of our consumers and customers. We also deliver superior quality, drive excellence in customer service and maintain a mindset of continuous improvement, seeking efficiency in all that we do. While Central faced challenges in fiscal 2019, I have the utmost confidence in our people, our organization and the fundamentals of our underlying businesses.

## Fiscal 2019 Overview

In fiscal year 2019, sales increased 7.6%, due in large part to acquisitions. Our overall organic growth of 1.5% was attributable mainly to our Garden segment and occurred despite unfavorable weather which negatively impacted sales of our Garden controls products as well as our Pet animal health business. We also had product performance challenges in one of our animal health businesses that partially offset strong growth in many of our other Pet units including Dog & Cat, Wild Bird, and Small Animal.

Overall profitability for the year declined due to these challenges, the inclusion of two quarters of losses at our newly acquired, highly seasonal Bell Nursery business that were not in the previous year's results, and significant write-offs of receivables and inventory in the fourth quarter.

Nevertheless, we ended the year on very strong financial footing, generating operating cash flow of \(205 million, an 80% increase over the prior year, primarily due to improvements in working capital. With \)500 million of cash on our balance sheet, we are well-positioned to make accretive acquisitions in the years ahead that, along with our investments in demand creation initiatives to drive organic growth, should help us grow sustainably.

Speaking of acquisitions, we strengthened our company during the year by adding two businesses that are leaders in their categories. In February, we purchased the remaining 55% stake in Arden Companies, the leading manufacturer of outdoor cushions. In June, we acquired C&S Products, the leading player in the wild bird suit market. Both of these acquisitions contributed to sales and profits for the year. It's clear that our growth through acquisition model has created value for shareholders and meaningful scale advantages for Central, so we remain very active in evaluating opportunities. However, we will be disciplined and focused on finding attractively-priced acquisitions where we can add value, achieve synergies and generate an attractive return.

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Finally, we took steps to add more talent to our management team and Board. In August, John Hanson stepped off our Board to assume the position of President of Pet Consumer Products. John has 25 years of consumer products experience and we are pleased to see his leadership of this critical business. At the Board level, we appointed two new highly capable independent directors, Christopher Metz and Michael Griffith. Chris brings more than 25 years of experience leading high-performing companies and brands in the consumer and durable industries, and Mike has more than 35 years of experience in the consumer products industry, including 24 years with Procter & Gamble.

## Looking Ahead

Although it's too early to discuss our detailed priorities for 2020 and beyond, I anticipate the year will involve significant investment in demand creation activities and capital expenditures in order to take Central to the next level. We are looking forward to 2020 when we will celebrate 40 years since our Chairman, Bill Brown, founded Central. Building on this foundation, it is my goal to ensure we develop an evolved strategy that will position us well for the next chapter and deliver strong shareholder value. Sometime in the Spring, we look forward to sharing more details on this strategy and the implications for 2020 and beyond.

In closing, I am confident in the value of the platform and our ability to unlock its full potential. Central remains strong, well-capitalized and well-positioned to grow. We are focused on delivering for all of our stakeholders, and I could not be more excited about the opportunities ahead.

Respectfully,

![](images/3_0.jpg)

Tim Cofer

Chief Executive Officer