# To our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_CENT_2018/NASDAQ_CENT_2018.mmd` · pages 2-8_

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To our Shareholders:

Central Garden & Pet continued its growth momentum in 2018, increasing our overall revenues by 8% and our GAAP and non-GAAP \( ^{1} \)  earnings up by 53% and 27%, respectively. While acquisitions played a part in the gains, we have a great team who continued to drive meaningful organic growth and take market share from our competitors. The year wasn't without its challenges, as unfavorable weather and cost inflation pressures for both the Garden and Pet segments negatively impacted our revenue growth and margins. We weren't alone in facing these challenges as our competitors also had impacts to their businesses from these factors. By focusing on what we could control, we offset these negative impacts by executing with excellence, by controlling our spending and by continuing to garner savings from our cost reduction initiatives. These actions enabled us to hold our operating margins flat in an environment where our major competitors faced lower margins and reduced profitability.

The year featured some notable successes, including some around our critical strategic initiatives that I would like to share with you in more detail:

- During the year, we acquired two new businesses which are strategically important to the organization. Bell Nursery, a grower of live plants, was acquired in March 2018. Bell Nursery is Central's initial entry into the live plant business, an attractive, fragmented garden category that is growing at a faster rate than the lawn & garden market in its entirety. Bell Nursery operates in the Mid-Atlantic region and has a reputation for growing high-quality plants. The second acquisition, General Pet, is a Midwestern-based pet distribution business that was acquired in April 2018 and gives Central a more complete national footprint for our Pet distribution business.

• We focused more resources on initiatives around the digital space and on gaining better insight about the consumer. With the changing retail landscape, where consumers are increasingly researching and purchasing products through digital means, Central is committed to reaching consumers through digital. For example, we formed Digital Pod Squads whose focus is to help drive consumer demand through digital avenues. We also have allocated additional resources to better understand our consumers and their needs. This knowledge is not only utilized by Central, but we also bring this insight to our customers.

• We produced meaningful innovation during the year, launching new and improved products that offered consumers significant benefits. Two such products centered around odor control, a key complaint from pet owners. In the waste management category, we launched a new Wee Wee pad product utilizing Febreze, under license from Proctor & Gamble. In our small animal business, we launched small animal bedding products with industry leading 14-day odor control. And in our Garden segment, we introduced a new line of mosquito control products under our Amdro Quick Kill brand. These products were developed in conjunction with our Pet segment's life sciences team, demonstrating the power of collaboration between our Garden and Pet segments.

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• Finally, we added additional resources to identify and evaluate acquisition opportunities while also raising almost $500 million through bond and equity offerings to fund these acquisitions. We continue to look at more numerous and larger opportunities and are expanding how we think about the Garden and Pet categories. We expect to continue to be a very disciplined buyer, as always, but will be appropriately aggressive if we see strong growth potential and tangible synergies.

As we look forward to next year, we are focused on continuing the substantial progress we have made over the last few years. With the additional capital raised in 2018, as well our ample cash flow and solid balance sheet, we are well-capitalized and well-positioned to grow organically and through acquisitions in the years ahead. We are very optimistic about the Central's long-term future and are grateful to our talented employees, who have been integral to our success, and to our shareholders for the trust they have placed in our organization.

Respectfully,

![](images/3_0.jpg)

George Roeth

CEO & President