UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _____________________________________________________________________________________________ 

FORM 10-Q

(Mark One)

For the quarterly period ended December 28, 2024

or

For the transition period from              to             

Commission File Number: 001-33268

Central Garden & Pet Company

1340 Treat Blvd., Suite 600, Walnut Creek, California 94597

(Address of principal executive offices)

(925) 948-4000

(Registrant’s telephone number, including area code)

_______________________________________________________________________ 

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing

requirements for the past 90 days.    ý  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such

files).    ý  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an

emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth

company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new

or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes    ý  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-Q includes “forward-looking statements.” Forward-looking statements include statements concerning our plans,

objectives, goals, strategies, future events, future revenues or performance, projected cost savings, capital expenditures, financing needs,

plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in

the industries and markets in which we operate and other information that is not historical information. When used in this Form 10-Q, the

words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are

intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical

operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed

in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, beliefs and projections will

be realized.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking

statements contained in this Form 10-Q. Important factors that could cause our actual results to differ materially from the forward-looking

statements we make in this Form 10-Q are set forth in the Form 10-K for the fiscal year ended September 28, 2024, including the factors

described in the section entitled “Item 1A – Risk Factors.” If any of these risks or uncertainties materializes, or if any of our underlying

assumptions are incorrect, our actual results may differ significantly from the results that we express in, or imply by, any of our forward-

looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances,

except as required by law. Presently known risk factors include, but are not limited to, the following factors:

 

•economic uncertainty and other adverse macroeconomic conditions;

•impacts of tariffs or a trade war;

•risks associated with international sourcing, including from China;

•fluctuations in energy prices, fuel and related petrochemical costs;

•declines in consumer spending and the associated increased inventory risk;

•seasonality and fluctuations in our operating results and cash flow;

•adverse weather conditions and climate change;

•the success of our Central to Home strategy and our Cost and Simplicity program;

•fluctuations in market prices for seeds and grains and other raw materials, including the impact of significant declines in

grass seed market prices on our inventory valuation;

•risks associated with new product introductions, including the risk that our new products will not produce sufficient sales

to recoup our investment;

•dependence on a small number of customers for a significant portion of our business;

•consolidation trends in the retail industry;

•supply shortages in pet birds, small animals and fish;

•reductions in demand for our product categories;

•competition in our industries;

•continuing implementation of an enterprise resource planning information technology system;

•regulatory issues;

•potential environmental liabilities;

•access to and cost of additional capital;

•the impact of product recalls;

•risks associated with our acquisition strategy, including our ability to successfully integrate acquisitions and the impact of

purchase accounting on our financial results;

•potential goodwill or intangible asset impairment;

•the potential for significant deficiencies or material weaknesses in internal control over financial reporting, particularly of

acquired companies;

•our dependence upon our key executives;

•our ability to recruit and retain members of our management team and employees to support our businesses;

•potential costs and risks associated with actual or potential cyberattacks;

•our ability to protect our trademarks and other proprietary rights;

•litigation and product liability claims;

•the impact of new accounting regulations and the possibility our effective tax rate will increase as a result of future

changes in the corporate tax rate or other tax law changes;

•potential dilution from issuance of authorized shares; and

•the voting power associated with our Class B stock.

PART I. FINANCIAL INFORMATION

 

Item 1.Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts, unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The condensed consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the “Company” or “Central”) as of

December 28, 2024 and December 30, 2023, the condensed consolidated statements of operations, the condensed consolidated statements

of comprehensive income and the condensed consolidated statements of cash flows for the three months ended December 28, 2024 and

December 30, 2023 have been prepared by the Company, without audit. In the opinion of management, the interim financial statements

include all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented.

For the Company’s foreign businesses in the United Kingdom and Canada, the local currency is the functional currency. Assets and

liabilities are translated using the exchange rate in effect at the balance sheet date. Income and expenses are translated at the average

exchange rate for the period. Deferred taxes are not provided on translation gains and losses because the Company expects earnings of its

foreign subsidiaries to be permanently reinvested. Transaction gains and losses are included in results of operations.

Due to the seasonal nature of the Company’s garden business, the results of operations for the three months ended December 28,

2024 are not necessarily indicative of the operating results that may be expected for the entire fiscal year. These interim financial statements

should be read in conjunction with the annual audited financial statements, accounting policies and financial notes thereto, included in the

Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024, which has previously been filed with the Securities

and Exchange Commission. The September 28, 2024 balance sheet presented herein was derived from the audited financial statements.

Stock Dividend

In December 2023, the Board of Directors approved a stock dividend in the form of one share of the Company's Class A Common

Stock for every four outstanding shares of its Common Stock, Class A Common Stock and Class B Stock. Dividend shares of Class A

Common Stock were distributed on February 8, 2024, to stockholders of record as of January 8, 2024.

The stock dividend did not affect the number of the Company's authorized shares, and the par value of each share of stock remained

unchanged. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or

vesting of all stock options, restricted stock and performance share units outstanding at January 8, 2024, which resulted in a proportional

increase in the number of vesting stock options, restricted stock and performance share units, and, in the case of stock options, a

proportional decrease in the exercise price of all such stock options.

Unless noted, all Class A Common Stock share and per share amounts contained in the condensed consolidated financial statements

and management's discussion and analysis have been retroactively adjusted to reflect the one-for-four stock dividend.  The legal form of the

stock dividend was accounted for as a stock split as the Company concluded that shareholders were not receiving a distribution of earnings.

Noncontrolling Interest

Noncontrolling interest in the Company’s condensed consolidated financial statements represents the 20% interest not owned by

Central in a consolidated subsidiary. Since the Company controls this subsidiary, its financial statements are consolidated with those of the

Company, and the noncontrolling owner’s 20% share of the subsidiary’s net assets and results of operations is deducted and reported as

noncontrolling interest on the condensed consolidated balance sheets and as net income attributable to noncontrolling interest in the

condensed consolidated statements of operations. See Note 7, Supplemental Equity Information, for additional information.

Cash, Cash Equivalents and Restricted Cash

The Company considers cash and all highly liquid investments with an original maturity of three months or less at date of purchase to

be cash and cash equivalents. Restricted cash includes cash and highly liquid instruments that are used as collateral for stand-alone letter of

credit agreements related to normal business transactions. These agreements require the Company to maintain specified amounts of cash as

collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash the Company has

available for other uses.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash

equivalents.  The Company manages the credit risk associated with cash equivalents by investing with high-quality institutions.  The

Company maintains cash accounts that exceed federally insured limits.  The Company has not experienced any losses from maintaining

cash accounts in excess of such limits.  Management believes that it is not exposed to any significant risks on its cash and cash equivalent

accounts.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated

balance sheets to the condensed consolidated statements of cash flows as of December 28, 2024, December 30, 2023 and September 28,

2024, respectively.

Allowance for Credit Losses and Customer Allowances  

The Company’s trade accounts receivable are recorded at net realizable value, which includes an allowance for estimated credit

losses, as well as allowances for contractual customer deductions accounted for as variable consideration.  The Company maintains an

allowance for credit losses related to its trade accounts receivable associated with future expected credit losses resulting from the inability of

its customers to make required payments. The Company estimates the allowance based upon historical bad debts, current customer

receivable balances and the customer’s financial condition. The allowance is adjusted to reflect changes in current and forecasted

macroeconomic conditions.  The Company’s estimate of credit losses includes expected current and future economic and market conditions.

Revenue Recognition

Revenue Recognition and Nature of Products and Services

The Company manufactures, markets and distributes a wide variety of pet and garden products to wholesalers, distributors and

retailers, primarily in the United States. The majority of the Company’s revenue is generated from the sale of finished pet and garden

products. The Company also recognizes a minor amount of non-product revenue (approximately one percent of consolidated net sales)

comprising third-party logistics services, merchandising services and royalty income from sales-based licensing arrangements. Product and

non-product revenue is recognized when performance obligations under the terms of the contracts with customers are satisfied. The

Company recognizes product revenue when control over the finished goods transfers to its customers, which generally occurs upon shipment

to, or receipt at, customers’ locations, as determined by the specific terms of the contract, and when control over the finished goods transfers

to retail consumers in consignment arrangements. These revenue arrangements generally have single performance obligations. Non-product

revenue is recognized as the services are provided to the customer in the case of third-party logistics services and merchandising services,

or as third-party licensee sales occur for royalty income. Revenue, which includes shipping and handling charges billed to the customer, is

reported net of variable consideration and consideration payable to our customers, including applicable discounts, returns, allowances, trade

promotion, unsaleable product, consumer coupon redemption and rebates. Shipping and handling costs that occur before the customer

obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs.

Key sales terms are established on a frequent basis such that most customer arrangements and related incentives have a one year or

shorter duration. As such, the Company does not capitalize contract inception costs. The Company generally does not have unbilled

receivables at the end of a period. Deferred revenues are not material and primarily include advance payments for services that have yet to

be rendered. The Company does not receive noncash consideration for the sale of goods. Amounts billed and due from our customers are

classified as receivables and require payment on a short-term basis; therefore, the Company does not have any significant financing

components.

Sales Incentives and Other Promotional Programs

The Company routinely offers sales incentives and discounts through various regional and national programs to its customers and

consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion

programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such

programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and

are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical

trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of

trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the

estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not

material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and

promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses, and the value of inventory

associated with reserves for sales returns is included within prepaid expenses and other current assets on the condensed consolidated

balance sheets.

Leases

The Company determines whether an arrangement contains a lease at inception by determining if the contract conveys the right to

control the use of identified property, plant or equipment for a period of time in exchange for consideration and other facts and circumstances.

Long-term operating lease right-of-use ("ROU") assets and current and long-term operating lease liabilities are presented separately in the

condensed consolidated balance sheets. Finance lease ROU assets are presented in property, plant and equipment, net, and the related

finance liabilities are presented with current and long-term debt in the condensed consolidated balance sheets.

Lease ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the

Company's obligation to make lease payments arising from the lease. ROU assets are calculated based on the lease liability adjusted for any

lease payments paid to the lessor at or before the commencement date and excludes any lease incentives received from the lessor. Lease

liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The lease term may include

options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As the Company's leases

typically do not contain a readily determinable implicit rate, the Company determines the present value of the lease liability using its

incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis. Variable lease payments are

expensed as incurred and include certain non-lease components, such as maintenance and other services provided by the lessor, and other

charges included in the lease, as applicable. Non-lease components and the lease components to which they relate are accounted for as a

single lease component, as the Company has elected to combine lease and non-lease components for all classes of underlying assets.

Amortization of ROU lease assets is calculated on a straight-line basis over the lease term with the expense recorded in cost of sales

or selling, general and administrative expenses, depending on the nature of the leased item. Interest expense is recorded over the lease term

and is recorded in interest expense (based on a front-loaded interest expense pattern) for finance leases and is recorded in cost of sales or

selling, general and administrative expenses (on a straight-line basis) for operating leases. All operating lease cash payments and interest on

finance leases are recorded within cash flows from operating activities and all finance lease principal payments are recorded within cash

flows from financing activities in the condensed consolidated statements of cash flows.

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Updates

There were no recently adopted accounting pronouncements that had a material impact on the Company's condensed consolidated

financial statements.

Accounting Standards Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment

Disclosures. This ASU requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision

maker that are included within each reported measure of segment profit or loss, and also requires all annual disclosures currently required by

Topic 280 to be included in interim periods. ASU No. 2023-07 is to be applied retrospectively for all periods presented in the financial

statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after

December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will

have on the Company’s disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This

ASU primarily requires enhanced disclosures and disaggregation of income tax information by jurisdiction in the annual income tax

reconciliation and quantitative and qualitative disclosures regarding income taxes paid. ASU No. 2023-09 is to be applied prospectively, with

the option to apply the standard retrospectively, effective for fiscal years beginning after December 15, 2024. The Company is currently

evaluating the impact that the adoption of this guidance will have on the Company’s disclosures.

2. Fair Value Measurements

Generally accepted accounting principles require financial assets and liabilities to be categorized based on the inputs used to calculate

their fair values as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability, which reflect the Company’s own assumptions about the assumptions that

market participants would use in pricing the asset or liability (including assumptions about risk).

The Company’s financial instruments include cash and equivalents, short-term investments, accounts receivable and payable, short-

term borrowings, and accrued liabilities. The carrying amount of these instruments approximates fair value because of their short-term nature.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In the prior year quarter, the Company's financial assets and liabilities measured at fair value on a recurring basis consisted of

contingent consideration within Level 3 of the fair value hierarchy.  Such amounts are not material.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company measures certain non-financial assets and liabilities, including long-lived assets, goodwill and intangible assets, at fair

value on a non-recurring basis. Fair value measurements of non-financial assets and non-financial liabilities are used primarily in the

impairment analyses of long-lived assets, goodwill and other intangible assets. During the periods ended December 28, 2024 and December

30, 2023, the Company was not required to measure any significant non-financial assets and liabilities at fair value.

Fair Value of Other Financial Instruments

The estimated fair value of the Company's 2031 Notes as of December 28, 2024, December 30, 2023 and September 28, 2024 was

$353.8 million, $354.7 million and $367.2 million, respectively, compared to a carrying value of $396.2 million, $395.6 million and

$396.0 million, respectively.

Notes"). The estimated fair value of the Company's 2030 Notes as of December 28, 2024, December 30, 2023 and September 28, 2024 was

$451.2 million, $454.7 million and $465.2 million, respectively, compared to a carrying value of $495.4 million, $494.6 million and $495.2

"2028 Notes"). The estimated fair value of the Company's 2028 Notes as of December 28, 2024, December 30, 2023 and September 28,

2024 was $291.9 million, $293.5 million and $299.2 million, respectively, compared to a carrying value of $298.6 million, $298.1 million and

$298.4 million, respectively.

The estimated fair value is based on quoted market prices for these notes, which are Level 2 inputs within the fair value hierarchy.

3. Acquisitions

On November 3, 2023, the Company acquired TDBBS, LLC (“TDBBS”), a provider of premium natural dog chews and treats for

approximately $60 million.  The addition of TDBBS expands the Company’s portfolio with bully and collagen sticks, bones and jerky, adds

scale to its dog and cat business and enhances the Company’s eCommerce and direct-to-consumer capabilities. The purchase price

exceeded the estimated fair value of the net tangible assets acquired by approximately $45 million, of which $23 million was allocated to

identified intangible assets and approximately $5 million to goodwill in the Company's condensed consolidated balance sheet as of December

28, 2024. Financial results of TDBBS have been included in the results of operations within the Pet segment since the date of acquisition.

The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the

acquisition date and subsequent adjustments.

(1)  As previously reported in the Company's Form 10-K for the period ended September 28, 2024.

4. Inventories, net

Inventories, net of allowance for obsolescence, consist of the following:

5.Goodwill

The Company tests goodwill for impairment annually (as of the first day of the fourth fiscal quarter), or whenever events occur or

circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, by first assessing

qualitative factors to determine whether it is more likely than not the fair value of the reporting unit is less than its carrying amount. The

qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal

and regulatory environments and historical performance. If it is determined that it is more likely than not that the fair value of the reporting unit

is greater than its carrying amount, it is unnecessary to perform the quantitative goodwill impairment test. If it is determined that it is more

likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative test is performed to identify potential

goodwill impairment. Based on certain circumstances, the Company may elect to bypass the qualitative assessment and proceed directly to

performing the quantitative goodwill impairment test, which compares the estimated fair value of our reporting units to their related carrying

values, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than its carrying value, and an

impairment charge is recognized for the differential. The Company’s goodwill impairment analysis also includes a comparison of the

aggregate estimated fair value of its two reporting units to the Company’s total market capitalization. No impairment of goodwill was recorded

for the three months ended December 28, 2024 and December 30, 2023.

6.Other Intangible Assets

The following table summarizes the components of gross and net acquired intangible assets:

Other acquired intangible assets include contract-based and technology-based intangible assets.

The Company evaluates long-lived assets, including amortizable and indefinite-lived intangible assets, for impairment whenever events

or changes in circumstances indicate the carrying value may not be recoverable. The Company evaluates indefinite-lived intangible assets on

an annual basis. Factors indicating the carrying value of the Company’s amortizable intangible assets may not be recoverable were not

present in the three months ended December 28, 2024, and accordingly, no impairment testing was performed on these assets.

The Company amortizes its acquired intangible assets with definite lives over periods ranging from four years to 25 years; over

weighted average remaining lives of nine years for marketing-related intangibles, ten years for customer-related intangibles and seven years

for other acquired intangibles. Amortization expense for intangibles subject to amortization was approximately $7.4 million and $8.2 million for

the three months ended December 28, 2024 and December 30, 2023, respectively, and is classified within selling, general and administrative

expenses in the condensed consolidated statements of operations. Estimated annual amortization expense related to acquired intangible

assets in each of the succeeding five years is estimated to be approximately $25 million per year from fiscal 2025 through fiscal 2027 and

$23 million per year from fiscal 2028 through fiscal 2029.

.

7.Long-Term Debt

Long-term debt consists of the following:

The Company used a portion of the net proceeds from the offering to repay all outstanding borrowings under its Credit Facility, with the

remainder used for general corporate purposes.

The Company incurred approximately $6 million of debt issuance costs in conjunction with this issuance, which included underwriter

fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2031 Notes.

Company's Credit Facility. The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the

Securities Act of 1933. 

The Company may redeem some or all of the 2031 Notes at any time, at its option, prior to April 30, 2026 at the principal amount plus a

"make whole" premium. The Company may redeem some or all of the 2031 Notes at the Company's option, at any time on or after April 30,

2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for

100.0%, plus accrued and unpaid interest.

The holders of the 2031 Notes have the right to require the Company to repurchase all or a portion of the 2031 Notes at a purchase

price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, upon the occurrence of a change of

control.

Notes"). The Company used a portion of the net proceeds to redeem all of its outstanding 6.125% senior notes due November 2023 (the

"2023 Notes") at a redemption price of 101.531% plus accrued and unpaid interest, and to pay related fees and expenses, with the remainder

used for general corporate purposes.

The Company incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter

fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2030 Notes.

The Company may redeem some or all of the 2030 Notes at any time, at its option, prior to October 15, 2025 at a price equal to 100%

of the principal amount plus a “make-whole” premium. The Company may redeem some or all of the 2030 Notes, at its option, in whole or in

part, at any time on or after October 15, 2025 for 102.063%, on or after October 15, 2026 for 101.375%, on or after October 15, 2027 for

100.688% and on or after October 15, 2028 for 100.0%, plus accrued and unpaid interest.

The holders of the 2030 Notes have the right to require the Company to repurchase all or a portion of the 2030 Notes at a purchase

control.

$300 million 5.125% Senior Notes due 2028

"2028 Notes"). The Company used the net proceeds from the offering to finance acquisitions and for general corporate purposes.

The Company incurred approximately $4.8 million of debt issuance costs in conjunction with this transaction, which included

underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028

Notes.

a senior basis by the Company's existing and future domestic restricted subsidiaries which are borrowers under or guarantors of the

The Company may redeem some or all of the 2028 Notes, at its option, through December 31, 2025 for 100.854%, and on or after

January 1, 2026 for 100.0%, plus accrued and unpaid interest.

The holders of the 2028 Notes have the right to require the Company to repurchase all or a portion of the 2028 Notes at a purchase

control.

On December 16, 2021, the Company entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”). The

Credit Agreement provides for a $750 million principal amount senior secured asset-based revolving credit facility, with up to an additional

$400 million principal amount available with the consent of the Lenders, as defined, if the Company exercises the uncommitted accordion

feature set forth therein (collectively, the “Credit Facility”). The Credit Facility matures on December 16, 2026. The Company may borrow,

repay and reborrow amounts under the Credit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility

must be repaid in full.

at the Company's election, eligible real property, minus certain reserves.  Proceeds of the Credit Facility will be used for general corporate

purposes.  Net availability under the Credit Facility was approximately $547 million as of December 28, 2024.  The Credit Facility includes a

$50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for swing loan borrowings. As of December 28,

2024, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. Outside of the Credit Facility, there

were other letters of credit of $3.0 million outstanding as of December 28, 2024.

Borrowings under the Credit Facility bear interest at a rate based on SOFR (which will not be less than 0.00%) or, at the option of the

Company, the Base Rate, plus, in either case, an applicable margin based on the Company's usage under the Credit Facility.  Base Rate is

defined as the highest of (a) the Truist Bank prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month SOFR plus 1.00% and (d)

0.00%. The applicable margin for SOFR-based borrowings fluctuates between 1.00%-1.50%, and was 1.00% as of December 28, 2024, and

the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50%, and was 0.00% as of December 28, 2024. An unused line

fee shall be payable quarterly in respect of the total amount of the unutilized Lenders’ commitments under the Credit Facility. Standby letter of

credit fees at the applicable margin on the average undrawn and unreimbursed amount of standby letters of credit are payable quarterly and

a facing fee of 0.125% is payable quarterly for the stated amount of each letter of credit. The Company is also required to pay certain fees to

the administrative agent under the Credit Facility. As of December 28, 2024, the interest rate applicable to Base Rate borrowings was 7.5%,

and the interest rate applicable to one-month SOFR-based borrowings was 5.4%.

The Company incurred approximately $2.4 million of debt issuance costs in conjunction with this transaction, which included lender

fees and legal expenses. The debt issuance costs are being amortized over the term of the Credit Facility.

The Credit Facility contains customary covenants, including financial covenants which require the Company to maintain a minimum

fixed charge coverage ratio of 1:1 upon triggered quarterly testing (e.g. when availability falls below certain thresholds established in the

agreement), reporting requirements and events of default. The Credit Facility is secured by substantially all assets of the borrowing parties,

including (i) pledges of 100% of the stock or other equity interest of each domestic subsidiary that is directly owned by such entity and (ii)

65% of the stock or other equity interest of each foreign subsidiary that is directly owned by such entity, in each case subject to customary

exceptions.  The Company was in compliance with all financial covenants under the Credit Facility as of December 28, 2024.

8.Supplemental Equity Information

The following table provides a summary of the changes in the carrying amounts of equity attributable to controlling interest and

noncontrolling interest through the three months ended December 28, 2024 and December 30, 2023.

 

9.Stock-Based Compensation

The Company recognized share-based compensation expense of $5.5 million and $6.0 million for the three months ended December

28, 2024 and December 30, 2023, respectively, as a component of selling, general and administrative expenses. The tax benefit associated

with share-based compensation expense for the three months ended December 28, 2024 and December 30, 2023 was $1.3 million and $1.4

 

10.Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted per share computations for income from

continuing operations.

Options to purchase 0.8 million shares of Class A common stock at prices ranging from $20.63 to $41.10 per share were outstanding

at December 28, 2024, and options to purchase 1.5 million shares of Class A common stock at prices ranging from $20.63 to $41.10 per

share were outstanding at December 30, 2023.

For the three months ended December 28, 2024, approximately 0.3 million options outstanding were not included in the computation

For the three months ended December 30, 2023, approximately 0.5 million options outstanding were not included in the computation

11.Segment Information

Management has determined that the Company has two operating segments, which are also reportable segments based on the level

at which the Chief Operating Decision Maker reviews the results of operations to make decisions regarding performance assessment and

resource allocation. These operating segments are the Pet segment and the Garden segment.  Substantially all of the Company's assets

and operations relate to its business in the United States.  Financial information relating to the Company's business segments is presented

in the table below.

 

 

The tables below present the Company's disaggregated revenues by segment: