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What changed in CENTRAL GARDEN & PET CO's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CENTRAL GARDEN & PET CO's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+386 added−335 removedSource: 10-K (2024-11-27) vs 10-K (2023-11-28)

Top changes in CENTRAL GARDEN & PET CO's 2024 10-K

386 paragraphs added · 335 removed · 281 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

88 edited+30 added−25 removed60 unchanged
Biggest changeOur dog and cat category, featuring brands such as Cadet, Four Paws, Healthy Edibles ® , K&H, Mikki, Nylabone, Nubz ® , NutriDent ® among others, is an industry leader in manufacturing and marketing premium edible and non-edible chews, interactive toys, grooming supplies and pet beds, pet containment, training and waste management solutions. Small Animal and Bird Supplies.
Biggest changeWe are an industry leader in premium edible and non-edible chews, supplements, interactive toys, grooming supplies, beds and containment, training and waste management solutions featuring the brands Best Bully Sticks, Cadet, Four Paws, Healthy Edibles ® , K&H, Healthy Promise TM , Nylabone, Nubz ® , and Paw Love ® among others. Small Animal and Bird Supplies.
We have a diversified portfolio of brands in both segments, many of which are among the leading brands in their respective market categories, ranging from Kaytee in pet bird and small animal, Nylabone in dog toys, Cadet in dog treats and chews, Four Paws in waste management and grooming, K&H in heated pet products, Aqueon in aquatics and Farnam in equine to Pennington in wild bird products, grass seed and fertilizer, Ferry-Morse in packet seed and Amdro in controls.
We have a diversified portfolio of brands in both segments, many of which are among the leading brands in their respective market categories, ranging from Aqueon in aquatics, Cadet in dog treats and chews, Farnam in equine, Four Paws in waste management and grooming, K&H in heated pet products, Kaytee in pet bird and small animal, and Nylabone in dog toys and treats to Amdro in controls, Ferry-Morse in packet seed and Pennington in wild bird products, grass seed and fertilizer.
Environmental, Social and Governance The long-term profitability of our business requires us to do our part to protect the planet, care for the local areas we serve, and provide our Central employees a safe, healthy and rewarding workplace. Corporate sustainability is embedded throughout our long-term enterprise roadmap and brought to life through our Central Impact strategy.
Environmental, Social and Governance The long-term profitability of our business requires us to do our part to protect the planet, care for the local areas we serve, and provide our employees a safe, healthy and rewarding workplace. Corporate sustainability is embedded throughout our long-term enterprise roadmap and brought to life through our Central Impact strategy.
Our sales and distribution facilities are strategically placed across the United States to allow us to service both our mass market customers, as well as independent pet specialty retail stores, serving traditional brick-and-mortar but increasingly also omnichannel and pure-play retailers selling only through the internet. In addition, we operate facilities in China, Canada, the United Kingdom and Mexico.
Our sales and distribution facilities are strategically placed across the United States to allow us to service both our mass market customers, as well as independent pet specialty retail stores, serving traditional brick-and-mortar but increasingly also 3 omnichannel and pure-play retailers selling only through the internet. In addition, we operate facilities in China, Canada, the United Kingdom and Mexico.
With Bell Nursery and Hopewell Nursery, we are the primary supplier of superior quality flowers, trees, shrubs and other plants to Home Depot in the Northeast and mid-Atlantic regions, producing and shipping tens of millions of annuals and perennials each year, also offering items we do not grow, such as orchids and indoor plants. Packet Seed.
With Bell Nursery, we are the primary supplier of superior quality flowers, trees, shrubs and other plants to Home Depot in the Northeast and mid-Atlantic regions, producing and shipping tens of millions of annuals, perennials and indoor plants each year, also offering items we do not grow, such as orchids. Packet Seed.
In addition, we provide a discretionary annual 401k employer contribution and a bonus program for eligible employees, which is based on the success of our businesses as measured by designated performance metrics and individual performance contributions. Another component of our overall compensation program is long-term equity, which is offered through annual and individual grants.
In addition, we provide a discretionary annual 401k employer contribution and a bonus program for eligible employees, which is based on the success of our businesses as measured by designated performance metrics and individual performance contributions. Another component of our overall compensation program is long-term equity, which is offered to eligible employees through annual and individual grants.
Joyce McCarthy . Ms. McCarthy became our General Counsel & Secretary in April 2022. From 2018-2022, she served as General Counsel & Secretary for Ferrara Candy Company where she oversaw all legal and compliance matters for the company. From 2002 to 2018, Ms.
Joyce McCarthy . Ms. McCarthy became our General Counsel & Secretary in April 2022. From 2018-2022, she served as General Counsel & Secretary for Ferrara Candy Company where she oversaw all legal and compliance matters for the company. From 2002 to 2018, 10 Ms.
Segrest and SunPet are leading wholesalers of aquarium fish and plants, reptiles and small animals to pet specialty and mass merchandiser stores as well as public aquariums and research institutions. 5 Outdoor cushions.
Segrest and SunPet are leading wholesalers of aquarium fish and plants, reptiles and small animals to pet specialty and mass merchandiser stores as well as public aquariums and research institutions. Outdoor cushions.
Our Pet segment includes dog and cat supplies such as dog treats and chews, toys, pet beds and containment, grooming products, waste management and training pads; supplies for aquatics, small animals, reptiles and pet birds including toys, cages and habitats, bedding, food and supplements; products for equine and livestock, animal and household health and insect control products; live fish and small animals as well as outdoor cushions.
Our Pet segment includes dog and cat supplies such as treats and chews, toys, beds and containment, grooming products, waste management and training pads; supplies for aquatics, small animals, reptiles and pet birds including toys, enclosures and habitats, bedding, food and supplements; products for equine and livestock, animal and household health and insect control products; live fish and small animals as well as outdoor cushions.
The total lawn and garden consumables industry in the United States is estimated by Packaged Facts, the Freedonia Group, Numerator and internal estimates to be approximately $31 billion in annual retail sales in 2023, including grass and other seeds, fertilizer, controls, live goods, wild bird products as well as soil and mulch.
The total lawn and garden consumables industry in the United States is estimated by Packaged Facts, the Freedonia Group, Numerator and internal estimates to be approximately $31 billion in annual retail sales in 2024, including grass and other seeds, fertilizer, controls, live goods, wild bird products as well as soil and mulch.
Operating income grew on average 4.7% on a GAAP basis annually over the same period. We have a strong cash and liquidity position driven by a combination of capital raises and cash flow from operations which puts us in a strong position to grow further through both acquisitions and organically.
Operating income grew on average 4.0% on a GAAP basis annually over the same period. We have a strong cash and liquidity position driven by a combination of capital raises and cash flow from operations which puts us in a strong position to grow further through both acquisitions and organically.
We continue to invest in talent, digital capabilities and eCommerce as these play a critical role in our ambition to lead in the Garden segment. Garden Competition The lawn and garden consumables industry is highly competitive. Our lawn and garden products compete against national, regional and private label products produced by various suppliers.
We continue to invest in talent, digital capabilities and eCommerce as these play a critical role in our ambition to grow our business and lead in the Garden segment. Garden Competition The lawn and garden consumables industry is highly competitive. Our lawn and garden products compete against national, regional and private label products produced by various suppliers.
The pet supplies segment includes: dog and cat treats and chews, toys, pet beds and containment, grooming products, waste management and training pads; supplies for aquatics, small animals, reptiles and pet birds including toys, cages and habitats, bedding, food and supplements; products for equine and livestock, animal and household health and insect control products; live fish and small animals.
The pet supplies segment includes: dog and cat treats and chews, toys, beds and containment, grooming products, waste management and training pads; supplies for aquatics, small animals, reptiles and pet birds including toys, enclosures and habitats, bedding, food and supplements; products for equine and livestock, animal and household health and insect control products; live fish and small animals.
Many of our branded wild bird feed mixes are treated with a proprietary blend of vitamins and minerals. For example, our Pennington brand feed mixes are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds. Fertilizer and Controls.
Many of our branded wild bird feed mixes are treated with a proprietary blend of vitamins and minerals. For example, our Pennington brand feed mixes are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds.
Garden Industry Background The garden industry includes consumables such as grass and other seeds, fertilizer, controls, live goods, wild bird products as well as soil and mulch, and durables such as landscaping and decorative products including pottery, outdoor furniture, water features, lighting, arches and trellises.
Garden Industry Background The garden industry includes consumables such as grass and other seeds, fertilizer, controls, live plants, wild bird products as well as soil and mulch, and durables such as landscaping and decorative products including pottery, outdoor furniture, water features, lighting, arches and trellises.
Proven Track Record of M&A Since 1992, we have completed over 60 acquisitions to create a company of approximately $3.3 billion in net sales. These acquisitions have successfully expanded the breadth of our pet and garden portfolios. Most recently, in early November 2023, we acquired TDBBS, LLC, a provider of premium natural dog chews and treats.
Proven Track Record of M&A Since 1992, we have completed over 60 acquisitions to create a company of approximately $3.2 billion in net sales. These acquisitions have successfully expanded the breadth of our pet and garden portfolios. Most recently, in November 2023, we acquired TDBBS, a provider of premium natural dog chews and treats.
Based on Packaged Facts estimates for 2023, we estimate the annual retail sales of the pet supplies, treats and chews, and live animal markets in the categories in which we participate to be approximately $39 billion.
Based on Packaged Facts estimates for 2024, we estimate the annual retail sales of the pet supplies, treats and chews, and live animal markets in the categories in which we participate to be approximately $39 billion.
The following charts indicate each class of similar products that represented approximately 10% or more of our consolidated net sales and the percentage of net sales represented by each segment in fiscal 2023.
The following charts indicate each class of similar products that represented approximately 10% or more of our consolidated net sales and the percentage of net sales represented by each segment in fiscal 2024.
Garden Sales and Distribution Network Our sales and distribution network exists primarily to promote our proprietary brands and provides us with key access to select national retail chains for our branded products, acquisition and maintenance of premium shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products, market intelligence and potential acquisition targets.
Garden Sales and Distribution Network Our sales and distribution network promotes our proprietary brands and provides us with key access to select national retail chains for our branded products, acquisition and maintenance of premium shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products, market intelligence and potential acquisition targets.
Culture: Strengthen Our Entrepreneurial Business-Unit Led Growth Culture Our values, created by leaders across the Company, are the cornerstone of our culture, and they are at the root of every decision we make – we call them “The Central Way.” We believe having a strong set of values provides a foundation for employees and strengthens how we all work together.
Culture: Strengthen Our Entrepreneurial Business Unit-Led Growth Culture Our values, established by leaders across the organization, are the cornerstone of our culture, and they are at the root of every decision we make – we call them “The Central Way.” We believe having a strong set of values provides a foundation for employees and strengthens how we all work together.
The majority of our brands have been marketed and sold for more than 40 years. Robust Financial Performance We have demonstrated strength in our financial performance, in net sales, earnings and cash flow. Our net sales grew on average 8.4% annually over the last five years, driven by acquisitions and organic growth.
The majority of our brands have been marketed and sold for more than 40 years. Robust Financial Performance We have demonstrated strength in our financial performance, in net sales, earnings and cash flow. Our net sales grew on average 6.1% annually over the last five years, driven by acquisitions and organic growth.
He served as Senior Vice President of Finance and Chief Financial Officer of our Pet segment from April 2014 to May 2017 and Vice President of Corporate Financial Planning & Analysis from October 2011 to March 2014. Mr.
He served as Chief Financial officer from May 2017 until September 2024, Senior Vice President of Finance and Chief Financial Officer of our Pet segment from April 2014 to May 2017, and Vice President of Corporate Financial Planning & Analysis from October 2011 to March 2014. Mr.
The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2023 was estimated by Packaged Facts to be approximately $145 billion. We expect the industry to continue to grow from that foundation.
The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2024 was estimated by Packaged Facts to be approximately $151 billion. We expect the industry to continue to grow from that foundation.
To maximize our product placement and visibility in retail stores, we market our products through the following four complementary strategies: • dedicated sales forces represent our combined brand groups; • a retail sales and logistics network, which provides in-store training and merchandising for our customers, especially during the prime spring and summer seasons; • dedicated account-managers and sales teams located near several of our largest customers; and • selected independent distributors who sell our brands.
To maximize our product placement and visibility in retail stores, we market our products through • dedicated sales forces representing our combined brand groups; • a retail sales and logistics network, which provides in-store training and merchandising for our customers, especially during the prime spring and summer seasons; • dedicated account-managers and sales teams located near several of our largest customers; and • selected independent distributors who sell our brands.
We also serve the professional market with insect control and health and wellness products for use by veterinarians, municipalities, farmers and equine product suppliers. Costco Wholesale accounted for approximately 13% of our Pet segment's net sales in fiscal 2023, and 11% in fiscal 2022. Walmart, Petco, Amazon and Kroger are also significant customers.
We also serve the professional market with insect control and health and wellness products for use by veterinarians, municipalities, farmers and equine product suppliers. Costco accounted for approximately 14% of our Pet segment's net sales in fiscal 2024, and 13% in fiscal 2023. Amazon, Walmart, Petco and Kroger are also significant customers.
We are a leading supplier of aquariums and terrariums as well as related fixtures and stands, water conditioners and supplements, water pumps and filters, sophisticated lighting systems and accessories featuring the brands Aqueon, Blagdon ® , Coralife ® , Interpet ® and Zilla. Live Fish and Small Animals .
We are a leading manufacturer of aquariums and terrariums as well as related fixtures and stands, water conditioners and supplements, water pumps and filters, sophisticated lighting systems and accessories under the brands Aqueon, Blagdon ® , Coralife ® , Interpet ® and Zilla. Live Fish and Small Animals .
Long term, we believe the U.S. pet supplies market will continue to grow due to favorable trends tracking within the pet industry, including demographics, health and wellness, humanization and premiumization.
Long-Term Pet Industry Characteristics Long term, we believe the U.S. pet supplies market will continue to grow due to favorable trends tracking within the pet industry, including the demographics shift to younger shoppers, humanization and premiumization, and health and wellness.
For the first time, pet ownership is split equally between younger generations (Gen Z and Millennials) and older generations (Gen X and Baby Boomers), with the younger generations spending more on their pet in the past year.
Pet ownership is now split equally between younger generations (Gen Z and Millennials) and older generations (Gen X and Baby Boomers), with the younger generations spending more on their pet in the past year.
We have been successful in growing our acquisitions organically after acquiring them into our portfolio. We continually review our businesses to ensure they meet expectations and have implemented strategies to reverse sub-par performance when necessary.
We have been successful in growing our acquisitions organically after acquiring them into our portfolio. We continually review our businesses to ensure they meet expectations and have implemented strategies to reverse sub-par performance or take other appropriate action when necessary.
We are a leading marketer, producer and distributor of numerous varieties and mixtures of cool and warm season grass seed for both the residential and professional markets, as well as forage and wildlife seed mixtures.
We are a leading manufacturer of numerous varieties and mixtures of cool and warm season grass seed for both the residential and professional markets, as well as forage and wildlife seed mixtures.
For example, in the United States, all pesticides must be registered with the United States Environmental Protection Agency (“EPA”), in addition to individual state and/or foreign agency registrations before they can be sold. Fertilizer products are also subject to state Department of Agriculture registration and foreign labeling regulations.
Such regulations are often complex and are subject to change. For example, in the United States, all pesticides must be registered with the United States Environmental Protection Agency (“EPA”), in addition to individual state registrations before they can be sold. Fertilizer products are also subject to state Department of Agriculture registration regulations.
Pet Sales and Distribution Network Our domestic sales and distribution network exists to promote both our proprietary brands and third-party brands. It provides value-added service to over 9,800 retailers, many of which are independent specialty stores with fewer than 10 locations, and over 6,400 veterinary offices.
Pet Sales and Distribution Network Our domestic sales and distribution network promotes both our proprietary brands and third-party brands. It provides value-added service to over 10,000 retailers, many of which are independent specialty stores with fewer than 10 locations, and over 6,000 veterinary offices.
We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Walmart and Petco, among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s, in the food, drug and mass merchandise channels, and a leading supplier to independent pet retailers in the United States.
We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Amazon and Walmart, and a leading supplier to independent pet retailers in the United States and among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s.
The Pennington grass seed manufacturing facilities are some of the largest and most modern seed coating and conditioning facilities in the industry. Wild Bird. We are the leading producer, marketer and distributor of wild bird feed, bird feeders, bird houses and other birding accessories. These products are sold under the Pennington, 3-D ® Pet Products and Wild Delight ® brands.
The Pennington grass seed manufacturing facilities are some of the largest and most modern seed coating and conditioning facilities in the industry. Wild Bird. We are the leading producer of wild bird feed. These products are sold under the Pennington, 3-D ® Pet Products and Wild Delight ® brands.
The addition of TDBBS will expand our portfolio with bully and collagen sticks, bones and jerky, add scale to our dog and cat business and enhance our eCommerce and digital capabilities.
The addition of TDBBS expanded our portfolio with bully and collagen sticks, bones and jerky, added scale to our dog and cat business and enhance our eCommerce and digital capabilities.
We are supplementing our organic growth with acquisitions and joint ventures. Our M&A priorities are to build scale in our core pet and garden categories, enter priority adjacencies and enhance key capabilities, for example in digital and eCommerce. We generally seek growth and margin accretive, brand-focused companies with talented management teams.
We intend to strengthen our portfolio with organic growth and acquisitions. Our M&A priorities are to build scale in our core pet and garden categories, enter priority adjacencies and enhance key capabilities, including digital and eCommerce capabilities. We generally seek growth and margin accretive, brand-focused companies with talented management teams.
These key areas are mentorship, leadership development, retention & recruiting and employee education. 2 Competitive Strengths We believe we have a number of competitive strengths, which serve as the foundation of our Central to Home strategy, including the following: Broad Portfolio of Leading Brands Across Key Pet and Garden Segments We are one of the leaders in the U.S. pet supplies market and the lawn and garden consumables market.
Competitive Strengths We believe we have a number of competitive strengths, which serve as the foundation of our Central to Home strategy, including the following: Broad Portfolio of Leading Brands Across Key Pet and Garden Segments We are one of the leaders in the U.S. pet supplies market and the lawn and garden consumables market.
Prior to that, he had over 16 years of experience at ConAgra, where he served in a variety of senior-level roles including President of its Frozen Foods Division from 2008 to 2012 and Senior Vice President in Sales from 2006 to 2008. Nicholas "Niko" Lahanas . Mr. Lahanas became our Chief Financial Officer in May 2017.
Prior to that, he had over 16 years of experience at ConAgra, where he served in a variety of senior-level roles including President of its Frozen Foods Division from 2008 to 2012 and Senior Vice President in Sales from 2006 to 2008. Bradley "Brad" Smith . Mr. Smith became our Chief Financial Officer in September 2024.
Lahanas was the Director of Business Performance from March 2008 to October 2011, where his primary focus was on business unit profitability, and was a Finance Manager from October 2006 to March 2008 in our Garden segment. Prior to joining Central, he worked in private equity and investment banking. J.D. Walker. Mr.
Lahanas was the Director of Business Performance from March 2008 to October 2011, where his primary focus was on business unit profitability, and was a Finance Manager from October 2006 to March 2008 in our Garden segment. Prior to joining Central, he worked in private equity and investment banking for over eight years. John E. Hanson. Mr.
Our Chief People Officer reports directly to the Interim Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.
Our Interim Senior Vice President of Human Resources reports directly to the Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.
Various local, state, federal and foreign environmental laws also impose obligations on various entities to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination.
Several new FSMA regulations have become effective in recent years. 9 Various local, state, federal and foreign environmental laws also impose obligations on various entities to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination.
These products are sold under brands such as Aqueon ® , Cadet ® , Comfort Zone ® , Farnam ® , Four Paws ® , K&H Pet Products ® ( “ K&H ” ), Kaytee ® , Nylabone ® and Zilla ® .
These products are sold under brands such as Aqueon ® , Cadet ® , C&S ®, Comfort Zone ® , Farnam ® , Four Paws ® , Kaytee ® , Nylabone ® and Zilla ® .
Various federal, state and local laws, including the federal Food Safety Modernization Act (“FSMA”), also regulate pet food products and give regulatory authorities the power to recall or require re-labeling of products. Several new FSMA regulations became effective in recent years.
Various federal, state and local laws, including the federal Food Safety Modernization Act (“FSMA”), also regulate pet food products and give regulatory authorities the power to recall or require re-labeling of products.
A 2023 Packaged Facts survey found that across generations, the majority of pet owners depend on their pets intensely for companionship, affection, fun and mental and physical health benefits. The same survey found that approximately 96% of U.S. pet owners view their pet as family, and pets are interwoven into the lifestyles and daily routines of pet parents.
A 2024 Packaged Facts survey found that across generations, the majority of pet owners depend on their pets intensely for companionship, affection, fun and mental and physical health benefits. The same survey found that approximately 95% of U.S. pet owners view their pet as family.
Women serve in several senior leadership roles, holding 39% of leadership positions (defined as Managers, Directors and Senior leaders (Vice President and above), including Interim Chief Executive Officer, General Counsel and Secretary, Senior Vice President Supply Chain, Senior Vice President Pet Consumer Marketing, Vice President Digital Marketing & Commerce, Vice President Investor Relations & Corporate Sustainability, Vice President Real Estate, President & General Manager Segrest, General Manager Health & Wellness and Vice President Pet Sales.
Women serve in several senior leadership roles, holding 33% of leadership positions (defined as Managers, Directors and Senior leaders (Vice President and above), including our General Counsel & Secretary, Interim Senior Vice President of Human Resources, Senior Vice President Pet Consumer Marketing, Vice President Digital Marketing & Commerce, Vice President Investor Relations & Corporate Sustainability, Vice President Risk Management and Real Estate, Vice President Tax, Vice President eCommerce Sales, President Segrest, General Manager Health & Wellness and Vice President Pet Sales.
We have seen promising early marketing campaign results driving accelerated growth and share gains across several brands, including our Pennington “ FlipTheTurf ” and Zilla “ Rep Yourself ” campaigns. 1 Customer: Win with Winning Customers and Channels We are building on our strong customer relationships by developing and executing winning category growth strategies.
We have seen promising marketing campaign results driving accelerated growth and share gains across several brands, including our Farnam “Everything for the Ride” and Zilla “Rep Yourself” campaigns. 1 Customer: Win with Winning Customers and Channels We are building on our strong customer relationships by developing and executing winning category growth strategies.
Ferry-Morse is a leader in vegetable, herb and flower packet seed, and our Amdro brand is a leading portfolio of control products. We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.
Our Pennington brand is one of the largest in grass seed, wild bird feed and birding accessories. Ferry-Morse is a leader in vegetable, herb and flower packet seed, and our Amdro brand is a leading portfolio of control products. We continuously introduce new products, both as complementary extensions of existing product lines and in new product categories.
We also produce, market and distribute lawn and garden weed, moss, insect and pest control products. We sell these products under brands such as Amdro, Corry’s ® , Daconil ® , IMAGE ® , Knockout™, Lilly Miller ® , Moss Out ® , Over-N-Out ® , Rootboost™ and Sevin, as well as other private and controlled labels. 7 Live Plants.
We sell these products under brands such as Amdro, Corry’s ® , Daconil ® , IMAGE ® , Knockout™, Lilly Miller ® , Moss Out ® , Over-N-Out ® , Rootboost™ and Sevin, as well as other private and controlled labels. Live Plants.
The combination of brands in the network that are supplied in single shipments enables our independent customers to work with us on a cost-effective basis to meet their pet supplies requirements. We also operate a sales and logistics facility in the United Kingdom.
The combination of brands in the network that are supplied in single shipments enables our independent customers to collaborate with us on a cost-effective basis to meet their pet supplies requirements.
For additional information on our liquidity, working capital management, cash flow and financing activities, see Liquidity and Capital Resources, and Note 11, Long-Term Debt, appearing later in this Form 10-K. Sources and Availability of Raw Materials We purchase most of our raw materials from multiple suppliers.
For additional information on our liquidity, working capital management, cash flow and financing activities, see Liquidity and Capital Resources, and Note 11, Long-Term Debt, appearing later in this Form 10-K.
Along with patents, active ingredient registrations, end use product registrations and trade secrets, we own numerous trademarks, service marks, trade names and logotypes. Many of our trademarks are registered. For those that are not, we rely on our common law trademark rights.
Along with patents, active ingredient registrations, end use product registrations and trade secrets, we own numerous trademarks, service marks, trade names and logotypes. Many of our trademarks are registered.
Pet Sales and Marketing Our sales strategy is multi-tiered and designed to capture maximum market share with retailers. Our customers include retailers, such as club, regional and national specialty pet stores, independent pet retailers, food, drug and mass stores, as well as the eCommerce channel.
We also operate a sales and logistics facility in the United Kingdom. 5 Pet Sales and Marketing Our sales strategy is multi-tiered and designed to maximize market share with retailers. Our customers include retailers, such as club, regional and national specialty pet stores, independent pet retailers, food, drug and mass stores, as well as the eCommerce channel.
Grass and other seeds are also subject to state, federal and foreign labeling regulations. The Food Quality Protection Act (“FQPA”) establishes a standard for food-use pesticides, which is a reasonable certainty that no harm will result from the cumulative effect of pesticide exposures. Under this Act, the EPA is evaluating the cumulative risks from dietary and non-dietary exposures to pesticides.
Grass and other seeds are also subject to state and federal labeling regulations. Prior to any international sales, all foreign agency requirements for shipment and labeling must be met. The Food Quality Protection Act (“FQPA”) establishes a standard for food-use pesticides, which is a reasonable certainty that no harm will result from the cumulative effect of pesticide exposures.
From 2015 to 2017, he served as Chief Executive Officer of Oasis Brands, Inc. Beginning in 2013, Mr. Hanson consulted for consumer products companies in the areas of strategy, operations and mergers and acquisitions.
Hanson became our President of Pet Consumer Products in August 2019 after serving as a board member during portions of 2018 and 2019. From 2015 to 2017, he served as Chief Executive Officer of Oasis Brands, Inc. Beginning in 2013, Mr. Hanson consulted for consumer products companies in the areas of strategy, operations, mergers, and acquisitions.
Our Nylabone brand is one of the leading brands in dog toys and treats, Kaytee in pet birds and small animal, Farnam in equine, Aqueon in aquatics and Comfort Zone in cat calming.
Among our leading brands are: Nylabone in dog toys and treats, Kaytee in pet birds and small animal, Farnam in equine, C&S in suet, Aqueon in aquatics and Comfort Zone in cat calming.
The focus of our Cost and Simplicity program is on a number of key areas, including procurement, logistics, manufacturing, portfolio optimization and administrative costs. We expect to reduce complexity, which means fewer SKUs, fewer plants and fewer distribution centers.
Our Cost and Simplicity program spans procurement, logistics, manufacturing, portfolio optimization and administrative costs. We expect to reduce complexity, which means fewer SKUs, fewer plants and fewer distribution centers.
To achieve our objective, we plan to capitalize on our competitive strengths and favorable industry trends by executing on five key strategic pillars to drive long-term growth: Consumer: Build and Grow Brands that Consumers Love To grow, we are seeking to develop more differentiated new produ cts and reinvest some of our annual cost savings in brand building and demand creation to help us drive sustainable organic growth and build market share.
Consumer: Build and Grow Brands that Consumers Love To grow, we are seeking to develop more differentiated new produ cts and reinvest some of our annual cost savings in brand building and demand creation to help us drive sustainable organic growth and build market share.
We are a leading producer, marketer and distributor of soil supplements and stimulants. We manufacture several lines of lawn and garden fertilizers and soil supplements in granular and liquid form under the Alaska ® Fish Fertilizer, Ironite ® , Pennington, Pro Care ® and Superthrive ® brand names and other private and controlled labels.
We produce several lines of lawn and garden fertilizers and soil supplements in granular and liquid form under the Alaska ® Fish Fertilizer, Ironite ® , Pennington, Pro Care ® and Superthrive ® brand names and other private and controlled labels. We also manufacture lawn and garden weed, moss, insect and pest control products.
We maintain an inventory of this raw material (in addition to our (S)-Methoprene inventory) to reduce the possibility of interruption in the availability of (S)-Methoprene, since a prolonged delay in obtaining (S)-Methoprene or this raw material could result in a temporary delay in product shipments and have an adverse effect on our Pet segment’s financial results. 8 The key ingredients in our fertilizer and insect and weed control products are commodity and specialty chemicals, including urea, potash, phosphates, herbicides, insecticides and fungicides.
We maintain an inventory of this raw material (in addition to our (S)-Methoprene inventory) to reduce the possibility of interruption in the availability of (S)-Methoprene, since a prolonged delay in obtaining (S)-Methoprene or this raw material could result in a temporary delay in product shipments and have an adverse effect on our Pet segment’s financial results.
We obtain one of the raw materials used to manufacture (S)-Methoprene from a single source of supply.
Sources and Availability of Raw Materials We purchase most of our raw materials from multiple suppliers but obtain one of the raw materials used to manufacture (S)-Methoprene from a single source of supply.
In fiscal 2023, our Ferry-Morse brand introduced more than 40 different Plantlings™ Garden Starter Kits, curated bundles of Plantlings that complement each other and take the guesswork out of planning and buying. In fiscal 2022, we launched Pennington Smart Patch lawn products, ideal for patching bare lawn spots and thinning areas. Grass Seed.
In fiscal 2023,Ferry-Morse introduced more than 40 different Plantlings™ Garden Starter Kits, curated bundles of Plantlings that complement each other and take the guesswork out of planning and buying. Grass Seed.
Moreover, the majority of pet owners agree that they look for products to improve their pet's health and well-being. Branded Pet Products Our principal pet supplies categories are dog and cat supplies, dog treats and chews; aquatics and reptile supplies, small animal and pet bird supplies, animal health products as well as live fish and small animals.
Branded Pet Products Our principal pet supplies categories are dog and cat supplies, treats and chews; aquatics and reptile supplies, small animal and pet bird supplies, animal health products as well as live fish and small animals.
The majority of our temporary employees are paid on an hourly basis. Except for approximately 100 employees at our facilities in Puebla, Mexico and Brandon, Canada, none of our employees are represented by a labor union. The attrition rate of our non-seasonal full-time and part-time workforce was 39% in fiscal 2023.
Except for approximately 100 employees at our facilities in Puebla, Mexico and Brandon, Canada, none of our employees are represented by a labor union. The attrition rate of our non-seasonal full-time and part-time workforce was 30% in fiscal 2024. We believe that attracting, developing and retaining a diverse and inclusive workforce is important to our continued success.
We are a leading manufacturer of supplies and pet food for small animals, pet birds and wild birds. We offer a full range of products including species specific diets, treats, habitats, bedding, hay and toys under brands such as Kaytee, Critter Trail, C&S Products ® , and Field+Forest by Kaytee.
We are a leading manufacturer of supplies and food for small animals, pet birds and wild birds. We offer a full range of products including species specific diets, treats, habitats, bedding, hay and toys under the Kaytee brand. Our Kaytee small animal and pet bird food mixes are fortified with a proprietary blend of vitamins and minerals.
Our branded pet products compete against national and regional branded products and private label products produced by various suppliers. Our largest competitors in the product categories we participate in are Mars, Inc., Spectrum Brands and the J.M. Smucker Co. The Pet segment competes primarily on the basis of brand recognition, innovation, upscale packaging, quality and service.
Pet Competition The pet supplies industry is highly competitive and has experienced considerable consolidation. Our branded pet products compete against national and regional branded products and private label products produced by various suppliers. Our largest competitors in the product categories in which we participate are Mars, Inc., Spectrum Brands and the J.M. Smucker Co.
In addition, some of our proprietary branded products are manufactured by contract manufacturers, including one of our registered active ingredients, (S)-Methoprene, which is manufactured by a third party under an exclusive arrangement. We are a leading supplier to independent specialty retailers for the pet supplies market and to select national retailers for the lawn and garden consumables market.
Leading Manufacturing, Sales and Distribution Network We manufacture the majority of our branded products in our network of manufacturing facilities, located primarily in the United States. In addition, some of our proprietary branded products are manufactured by contract manufacturers, including one of our registered active ingredients, (S)-Methoprene, which is manufactured by a third party under an exclusive arrangement.
We run our business with a long-term perspective, and we believe the successful delivery of our strategy will enable us to create long-term value for all our stakeholders.
We run our business with a long-term perspective, and we believe the successful delivery of our strategy will enable us to create sustainable value for all our stakeholders. To achieve our objective, we plan to capitalize on our competitive strengths and favorable industry trends by executing on five key strategic pillars to drive long-term growth.
We have improved our recordable incident rate for four consecutive years and in fiscal 2023, we were able to improve it by 20% compared to fiscal 2022. 9 Regulatory Considerations Many of the products that we manufacture or distribute are subject to local, state, federal and foreign laws and regulations. Such regulations are often complex and are subject to change.
While we have improved our recordable incident rate by 10% on average over the last four years, the recordable incident rate was slightly higher in fiscal 2024 compared to the prior year. Regulatory Considerations Many of the products that we manufacture or distribute are subject to local, state, federal and foreign laws and regulations.
Our Pet segment’s sales and distribution network competes with Animal Supply Co., Phillips Pet Food & Supplies and a number of smaller local and regional distributors, with competition based on product selection, price, value-added services and personal relationships. 6 Garden Segment Garden Overview We are a leader in the consumer lawn and garden consumables market in the United States and offer both premium and value-oriented branded products.
The Pet segment competes primarily on the basis of brand recognition, innovation, upscale packaging, quality and service. Our Pet segment’s sales and distribution network competes with Animal Supply Co., Phillips Pet Food & Supplies and a number of smaller local and regional distributors, with competition based on product selection, price, value-added services and personal relationships.
Brown has been our Chairman since October 2019, having also served in this capacity from 1980 to 2018. From 1980 to June 2003 and from October 2007 to February 2013, he served as our Chief Executive Officer. From 1977 to 1980, Mr. Brown was Senior Vice President of Vivitar Corporation with responsibility for Finance, Operations and Research & Development.
Walker 66 President, Garden Consumer Products Joyce McCarthy 55 General Counsel & Secretary William E. Brown . Mr. Brown has been our Chairman since October 2019, having also served in this capacity from 1980 to 2018. From 1980 to June 2003 and from October 2007 to February 2013, he served as our Chief Executive Officer. From 1977 to 1980, Mr.
The pesticides in our products, which are also used on foods, are evaluated by the EPA as part of this non-dietary exposure risk assessment. In addition, the use of certain pesticide and fertilizer products is regulated by various local, state, federal and foreign environmental and public health agencies.
In addition, the use of certain pesticide and fertilizer products is regulated by various local, state, federal and foreign environmental and public health agencies.
They comprise six simple values: “We do the right thing.” “We strive to be the best.” “We are entrepreneurial.” “We win together.” “We grow every day.” and “We are passionate.” We believe one of the reasons our employees work at Central is because they love the pet and garden categories, and that creates a passionate and effective team.
They comprise six simple values: “We do the right thing.” “We strive to be the best.” “We are entrepreneurial.” “We win together.” “We grow every day.” and “We are passionate.” Employee well-being is a key part of creating a sustainable business and a passionate and effective team.
In fiscal 2023, our Nylabone brand was selected as a finalist in the 2022 Pet Product News Editors’ Choice Awards for its Gourmet Style chew toys. Aqueon won “Health Focused Product of the Year” and “Waste Innovation of the Year” in the 2023 Pet Innovation Awards in addition to “Runner Up” at the SuperZoo New Product Showcase .
In fiscal 2023, Nylabone was selected as a finalist in the 2022 Pet Product News Editors’ Choice Awards for its Gourmet Style chew toys. Dog and Cat.
As of September 30, 2023, we had approximately 6,700 employees, of whom approximately 6,300 were full-time employees and 400 were temporary or part-time employees. We also hire substantial numbers of additional temporary employees for the peak lawn and garden shipping season of February through June to meet the increased demand during the spring and summer months.
We also hire substantial numbers of additional temporary employees for the peak lawn and garden shipping season of February through June to meet the increased demand during the spring and summer months. The majority of our temporary employees are paid on an hourly basis.
Branded Lawn and Garden Products Our principal lawn and garden consumables product lines are grass seed, wild bird products, lawn and garden care products including fertilizers, insect control products, live plants and packet seed. Our Pennington brand is one of the largest in grass seed, wild bird feed and birding accessories.
Interest in outdoor living is particularly high among millennials, the nation's largest group of gardeners. Branded Lawn and Garden Products Our principal lawn and garden consumables product lines are grass seed, wild bird products, lawn and garden care products including fertilizers, insect control products, live plants and packet seed to help consumers grow their lawns greener and gardens bloom bigger.
Many of our branded wild bird mixes are treated with a proprietary blend of vitamins and minerals. Our brands are some of the most widely recognized and trusted brands for birds and small animals . Animal Health (Health & Wellness, Equine and Professional) .
We also offer a complete portfolio of Kaytee wild bird food and C&S suet products for backyard birding. Our brands are some of the most widely recognized and trusted brands for birds and small animals. Animal Health (Health & Wellness, Equine and Professional) .
Having the right facilities in the right locations is critical to lowering costs and enabling our businesses to meet the demands of our existing and new customers. We have already consolidated some of our dog and cat treat and toy businesses and numerous garden manufacturing facilities.
Cost: Reduce Cost to Improve Margins and Fuel Growth Optimizing our supply chain footprint is a priority as we seek to become more efficient and cost-effective while enabling our businesses to meet the demands of our existing and new customers. We have already consolidated some of our dog and cat treat and toy businesses and numerous garden manufacturing facilities.
Developing our employees so that they can assume key roles within Central is an important strategic priority for us. We offer a variety of programs and resources to train and enhance the skill set of our workforce, including a mentoring program and subsidizing college and advanced degrees for eligible employees.
We offer a variety of programs and resources to train and enhance the skill set of our workforce, including a robust online learning platform with a wide variety of course offerings, a mentoring program and a tuition reimbursement program that subsidizes college and advanced degrees for eligible employees.
Our customers include retailers, such as home improvement centers, food, drug and mass merchants, and professional end users. Sales to Home Depot represented approximately 35% and 33%, sales to Walmart represented approximately 24% and 28% and sales to Lowe’s represented approximately 14% and 16% of our Garden segment’s net sales in fiscal 2023 and 2022, respectively.
Sales to Home Depot represented approximately 38% and 35%, sales to Walmart represented approximately 27% and 24% and sales to Lowe’s represented approximately 15% and 14% of our Garden segment’s net sales in fiscal 2024 and 2023, respectively.
Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2023 and 17% in fiscal 2022. Home Depot, our second largest customer, represented approximately 16% of our total company net sales in both fiscal 2023 and 2022.
Walmart, our second largest customer, represented approximately 16% of our total net sales in fiscal 2024 and 16% in fiscal 2023. Costco, Lowe's and Amazon are also significant customers, and together with Home Depot and Walmart, they accounted for approximately 54% of our net sales in fiscal 2024 and 52% in fiscal 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFactors that may contribute to this variability include: • high inflation and the ability to take pricing actions to mitigate high input costs, including for commodities; • the uncertain macro-economic environment, including high interest rates and a potential recession, and the impact either could have on consumer discretionary spending; • seasonality and the impact of adverse weather conditions; • fluctuations in prices of commodity grains and other input costs; 12 • supply chain and sourcing disruptions, including the volatile geopolitical environment; • shifts in demand for lawn and garden and pet products; • changes in product mix, service levels, marketing and pricing by us and our competitors; • the effect of acquisitions; and • the strength of our relationships with key retailers and their buying patterns and economic stability.
Biggest changeFactors that may contribute to this variability include: • the uncertain macro-economic environment, including high interest rates and the potential imposition of trade tariffs, could lead to a recession, and the impact any of those could have on consumer discretionary spending; • seasonality and the impact of adverse weather conditions; • fluctuations in prices of commodity grains and other input costs; • supply chain and sourcing disruptions, including due to the volatile geopolitical environment and the potential imposition of trade tariffs on countries from which we import products; • a return to high inflation and the ability to take pricing actions to mitigate high input costs, including for commodities; • shifts in demand for lawn and garden and pet products; • changes in product mix, service levels, marketing and pricing by us and our competitors; • the effect of acquisitions; and • the strength of our relationships with key retailers and their buying patterns and economic stability.
To compete effectively, among other things, we must: • develop and grow brands with leading market positions; • maintain or grow market share; • maintain and expand our relationships with key retailers; 15 • effectively access the growing eCommerce channel; • continually develop innovative new products that appeal to consumers; • implement effective marketing and sales promotion programs; • maintain strict quality standards; • deliver products on a reliable basis at competitive prices; and • effectively integrate acquired businesses.
To compete effectively, among other things, we must: • develop and grow brands with leading market positions; • maintain or grow market share; • maintain and expand our relationships with key retailers; • effectively access the growing eCommerce channel; • continually develop innovative new products that appeal to consumers; • implement effective marketing and sales promotion programs; • maintain strict quality standards; • deliver products on a reliable basis at competitive prices; and • effectively integrate acquired businesses.
This shift to “just-in-time” can also cause retailers to delay purchase orders, which can cause a shift in sales from 14 quarter to quarter. Decisions to move in or out of a market category by leading retailers can also have a significant impact on our business. Additionally, some retailers are increasing their emphasis on private label products.
This shift to “just-in-time” can also cause retailers to delay purchase orders, which can cause a shift in sales from quarter to quarter. Decisions to move in or out of a market category by leading retailers can also have a significant impact on our business. Additionally, some retailers are increasing their emphasis on private label products.
We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived intangible assets might be impaired. If such 17 circumstances or conditions exist, further steps are required to determine whether the carrying value of each of the individual assets exceeds its fair value.
We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived intangible assets might be impaired. If such circumstances or conditions exist, further steps are required to determine whether the carrying value of each of the individual assets exceeds its fair value.
The issuance of preferred stock could, depending on the rights and privileges designated by the board with respect to any particular series, have a dilutive effect on the voting interests of the common stock and Class B common stock and the economic interests of our common stock, Class A 20 common stock and Class B common stock.
The issuance of preferred stock could, depending on the rights and privileges designated by the board with respect to any particular series, have a dilutive effect on the voting interests of the common stock and Class B common stock and the economic interests of our common stock, Class A common stock and Class B common stock.
Supply disruptions in pet birds, small animals and fish may negatively impact our sales. 13 The federal government and many state governments have increased restrictions on the importation of pet birds and the supply of small animals.
Supply disruptions in pet birds, small animals and fish may negatively impact our sales. The federal government and many state governments have increased restrictions on the importation of pet birds and the supply of small animals.
We intend to vigorously pursue our defenses in the future proceedings and believe that we will prevail on the merits as to the head start damages issue.
We intend to vigorously pursue our defenses in any future proceedings and believe that we will prevail on the merits as to the head start damages issue.
Capital expenditures for our enterprise resource planning software systems for fiscal 2024 and beyond will depend upon the pace of conversion for those remaining legacy systems. If the balance of the implementation is not executed successfully, we could experience business interruptions or material weaknesses relating to IT controls of acquired companies.
Capital expenditures for our enterprise resource planning software systems for fiscal 2025 and beyond will depend upon the pace of conversion for those remaining legacy systems. If the balance of the implementation is not executed successfully, we could experience business interruptions or material weaknesses relating to IT controls of acquired companies.
These retailers may also in the future use more of their shelf space, currently used for our products, for their store brand products. While we view private label as an opportunity and supply many private label products to retailers, we could lose sales in the event that key retailers replace our branded products with private label product manufactured by others.
These retailers may also in the future use more of their shelf space, currently used for our products, for their store brand products. While we view private label as an opportunity and supply many private label products to retailers, we could lose sales if key retailers replace our branded products with private label product manufactured by others.
These risks may be heightened by changes in the U.S. government's trade policies, including the continuation of tariffs on goods imported from China or the imposition of any new tariffs.
These risks may be heightened by threatened changes in the U.S. government's trade policies, including the continuation of tariffs on goods imported from China or the imposition of any new or increased tariffs.
Any material decline in consumer discretionary spending during the economic downturn could reduce our sales and harm our business. Unfavorable economic and market conditions may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.
Any material decline in consumer discretionary spending could reduce our sales and harm our business. Unfavorable economic and market conditions may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.
If analysis indicates that an individual asset’s carrying value does exceed its fair value, we would record a loss equal to the excess of the individual asset’s carrying value over its fair value. The steps required by Generally Accepted Accounting Principles ( “ GAAP ” ) entail significant amounts of judgment and subjectivity.
If analysis indicates that an individual asset’s carrying value does exceed its fair value, we would record a loss equal to the excess of the individual asset’s carrying value over its fair value. The steps required by Generally Accepted Accounting Principles (“GAAP”) entail significant amounts of judgment and subjectivity.
To the extent the United States continues the China tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products manufactured in China, or other countries, and imported into the United States could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.
To the extent the United States imposes new or additional tariffs on China or other countries, or if new or additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products manufactured in China or other countries, and imported into the United States could increase significantly, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.
A significant deterioration in the financial condition of one of our major customers could have a material adverse effect on our sales, profitability and cash flow. We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate.
A significant deterioration in the financial condition of one of our major customers or several smaller customers could have a material adverse effect on our sales, profitability and cash flow. We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate.
Continued high energy prices could adversely affect consumer spending and demand for our products and increase our operating costs, both of which would reduce our sales and operating income. A decline in consumers’ discretionary spending or a change in consumer preferences during economic downturns could reduce our sales and harm our business.
Continued high energy prices could adversely affect consumer spending and demand for our products and increase our operating costs, both of which would reduce our sales and operating income. A decline in consumers’ discretionary spending or a change in consumer preferences could reduce our sales and harm our business.
We have never paid any cash dividends on our common stock or Class A common stock and currently do not intend to do so. Provisions of our credit facility and the indenture governing our senior subordinated notes restrict our ability to pay cash dividends.
We have never paid any cash dividends on our common stock or Class A common stock and currently do not intend to do so. Provisions of our credit facility and the indentures governing our senior notes restrict our ability to pay cash dividends.
We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements. As described under Item 9A.
We identified material weaknesses in our internal control over financial reporting during fiscal 2023 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements. As described under Item 9A.
"Controls and Procedures" below, we have concluded that material weakness in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date.
"Controls and Procedures" below, we concluded that material weaknesses in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date.
Holders of our Class A common stock have no voting rights, except as required by Delaware law. As of September 30, 2023, William E. Brown, our Chairman and founder, beneficially controlled approximately 55% of the voting power of our capital stock.
Holders of our Class A common stock have no voting rights, except as required by Delaware law. As of September 28, 2024, William E. Brown, our Chairman and founder, beneficially controlled approximately 55% of the voting power of our capital stock.
These two systems are replacing numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions. To date, we have reduced the number of ERP systems from 43 to 9.
These two systems are replacing numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions. To date, we have reduced the number of ERP systems from 47 to 11.
Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including the current inflationary environment, high interest rates, the potential for an economic recession, other general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels.
Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including high interest rates, the potential for trade tariffs, a return to an inflationary environment or an economic recession, other general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels.
In connection with our annual goodwill impairment testing performed during fiscal years 2022 and 2021, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting units under the quantitative goodwill impairment test.
In connection with the our annual goodwill impairment testing performed during fiscal 2022, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test.
Lowe's, our third largest customer, represented approximately 8%, 8% and 9% of our total company net sales in fiscal 2023, 2022 and 2021, respectively. Costco and Amazon are also significant customers, and together with Walmart, Home Depot and Lowe's accounted for approximately 52% of our net sales in fiscal 2023.
Costco, our third largest customer, represented approximately 8%, 7% and 6% of our total company net sales in fiscal 2024, 2023 and 2022, respectively. Lowe's and Amazon are also significant customers, and together with Walmart, Home Depot and Costco accounted for approximately 54% of our net sales in fiscal 2024.
Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2023, 17% in fiscal 2022 and 16% in fiscal 2021. Home Depot, our second largest customer, represented approximately 16%, 16% and 15% of our total company net sales in fiscal 2023, 2022 and 2021, respectively.
Home Depot, our largest customer, represented approximately 17% of our total company net sales in fiscal year 2024 and 16% of our total company net sales in fiscal 2023 and 2022. Walmart, our second largest customer, represented approximately 16% of our total company net sales in fiscal 2024 and 2023, and 17% in fiscal 2022.
We may be adversely affected by trends in the retail industry. Our retailer customers have continued to consolidate, resulting in fewer customers on which we depend for business. These key retailers are increasingly large and sophisticated with increased buying power and negotiating strength. They are more capable of resisting price increases and can demand lower pricing.
Our retailer customers have continued to consolidate, resulting in fewer customers on which we depend for business. These key retailers are large and sophisticated with increased buying power and negotiating strength. They are more capable of resisting price increases and can demand lower pricing.
The loss of, or reduction in, orders from any significant customer, losses arising from customer disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable from any major customer could reduce our operating income and cash flow.
The loss of, or reduction in, orders from any significant customer, losses arising from customer disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable from any major customer could reduce our operating income and cash flow. We may be adversely affected by trends in the retail industry.
We completed our qualitative assessment of potential goodwill impairment and it was determined that it was more likely than not the fair values of our reporting units were greater than their carrying amounts, and accordingly, no quantitative testing of goodwill was required.
We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2024, and accordingly, no further testing of goodwill was required in fiscal 2024.
Risks Affecting our Business Inflation, high interest rates, economic uncertainty and other adverse macro-economic conditions may harm our business. Our revenues and margins are dependent on various economic factors, including rates of inflation, interest rates, the potential of an economic recession, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact consumer spending.
Our revenues and margins are dependent on various economic factors, including interest rates, the potential of an economic recession, trade tariffs, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, rates of inflation and other macro-economic factors which may impact consumer spending.
Our future performance depends on our ability to attract and retain a new Chief Executive Officer and other skilled employees in all facets of our business, including management and manufacturing and distribution.
Our future performance depends on the success of our recently promoted Chief Executive Officer and Chief Financial Officer and our ability to attract and retain skilled employees in all facets of our business, including management and manufacturing and distribution.
We believe that the period of time to gain consumer acceptance of major innovations is longer in the garden industry than in many industries, which compounds the risks generally associated with major new product innovations.
We believe that the period of time to gain consumer acceptance of major innovations is longer in the garden industry than in many industries, which compounds the risks generally associated with major new product innovations. We depend on a few customers for a significant portion of our business.
These risks can be magnified in companies that we have acquired until we fully integrate their critical IT systems into our internal controls. 19 In addition, if a ransomware attack or other cybersecurity incident occurs, either internally or at our third-party technology service providers, we could be prevented from accessing our data or systems, which may cause interruptions or delays in our business operations, cause us to incur remediation costs, subject us to demands to pay a ransom or damage our reputation.
In addition, if a ransomware attack or other cybersecurity incident occurs, either internally or at our third-party technology service providers, we could be prevented from accessing our data or systems, which may cause interruptions or delays in our business operations, cause us to incur remediation costs, subject us to demands to pay a ransom or damage our reputation.
Substantially all of the Garden segment’s operating income is generated in this period. Our working capital needs and our borrowings generally peak in our second fiscal quarter because we are generating lower revenues while incurring expenses in preparation for the spring selling season.
Our working capital needs and our borrowings generally peak in our second fiscal quarter because we are generating lower revenues while incurring expenses in preparation for the spring selling season.
Our performance is substantially dependent upon the continued services of our senior management team. The loss of the services of these persons, including the recent departure of our former Chief Executive Officer in October 2023, could have a material adverse effect on our business.
Our performance is substantially dependent upon the continued services of our senior management team. The loss of the services of these persons could have a material adverse effect on our business.
High energy prices could adversely affect our operating results. Beginning in 2021, energy prices increased substantially and have remained elevated, resulting in increased costs for fuel and raw materials for many of our products. Energy prices may continue to rise or remain elevated during fiscal 2024.
In fiscal 2024, energy prices remained elevated, resulting in increased costs for fuel and raw materials for many of our products. Energy prices may continue to rise or remain elevated during fiscal 2025.
We can provide no assurance as to the timing or extent of our ability to implement additional price adjustments in the event of continued high costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs. We also cannot predict to what extent price increases may negatively affect our sales volume.
We can provide no assurance as to the timing or extent of our ability to implement price increases in the event of high costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs.
The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information.
The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information. The retrial of the “head start” damages issue concluded in March 2024, but no decision has been issued by the Court.
During fiscal 2023, 2022 and 2021, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks. Our expected revenues were based on our future operating plan and estimates of market growth or decline for future years. In fiscal 2023, we recorded impairment charges of approximately $7.5 million and $3.9 million in our Pet and Garden segments.
During fiscal 2024, 2023 and 2022, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks. Our expected revenues were based on our future operating plan and estimates of market growth or decline for future years.
If our critical IT systems or back-up systems or those of our third-party vendors are damaged or cease to function properly, we may have to make a significant investment to repair or replace them.
If our critical IT systems or back-up systems or those of our third-party vendors are damaged or cease to function properly, we may have to make a significant investment to repair or replace them. These risks can be magnified in companies that we have acquired until we fully integrate their critical IT systems into our internal controls.
Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud.
However, we cannot provide assurance that additional material weaknesses in our internal controls will not be identified in the future. Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud.
We are subject to significant risks associated with innovation, including the risk that our new product innovations will not produce sufficient sales to recoup our investment. We believe that our future success will depend upon, in part, our ability to continue to improve our existing products through product innovation and to develop, market and produce new products.
We believe that our future success will depend upon, in part, our ability to continue to improve our existing products through product innovation and to develop, market and produce new products.
During fiscal 2022 and fiscal 2023, we experienced unfavorable weather during the peak garden season, which adversely impacted our Garden sales. Unfavorable weather in the future could have a significant adverse effect on the sales and profitability of our lawn and garden business. We depend on a few customers for a significant portion of our business.
From time to time, we have experienced unfavorable weather during the peak garden season, which adversely impacted our Garden sales. Unfavorable weather during the peak garden season in the future could have a significant adverse effect on the sales and profitability of our lawn and garden business. Climate change continues to receive increasing global attention.
Management is in the process of establishing a remediation plan and expects its remediation efforts will involve implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide.
Management established a remediation plan that involved implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide. The remediation plan was implemented and tested during fiscal 2024 and deemed effective.
In contrast, if market prices for such products decrease, we may end up purchasing grains and seeds pursuant to the purchase contracts at prices above market. Fiscal 2022 and 2023 brought historic levels of inflation and reduced supply of certain grains due to the war in Ukraine, which drove up costs for bird feed and grass seed.
In contrast, if market prices for such products decrease, we may end up purchasing grains and seeds pursuant to the purchase contracts at prices above market. In the past, periods of high inflation or supply constraints have resulted in higher costs for bird feed and grass seed.
These investments and transitional costs may adversely affect our operating results. Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that could have a negative impact on us.
Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that could have a negative impact on us. Our financial results are partially dependent upon the cost of raw materials and our ability to pass along increases in these costs to our customers.
A significant information security or operational technology incident, including a cyber attack or data breach, could disrupt our operations and adversely impact our operating results, cash flows and reputation.
We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees in the future. A significant information security or operational technology incident, including a cyber attack or data breach, could disrupt our operations and adversely impact our operating results, cash flows and reputation.
Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to future remediation liabilities that may be material. Our business is dependent upon our ability to continue to source products from China. We outsource a portion of our manufacturing requirements to third-party manufacturers located in China.
Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to future remediation liabilities that may be material.
For example, we recently identified two material weaknesses related to our Live Plants and Green Garden businesses whose IT systems have not been fully integrated into our corporate IT control structure.
For example, in fiscal 2023 we identified two material weaknesses related to our Live Plants and Green Garden businesses whose IT systems had not been fully integrated into our corporate IT control structure. The material weaknesses were resolved during fiscal 2024, but there is no assurance that we may not experience similar IT control issues in the future.
Because we rely on Chinese third-party manufacturers for a significant portion of our product needs, any disruption in our relationships with these manufacturers could adversely affect our operations. 16 Deterioration in operating results could prevent us from fulfilling our obligations under the terms of our indebtedness or impact our ability to refinance our debt on favorable terms as it matures.
Because we rely on Chinese third-party manufacturers for a significant portion of our product needs, any disruption in our relationships with these manufacturers or significant increase in import tariffs could adversely affect our results of operations. High energy prices could adversely affect our operating results.
Our financial results are partially dependent upon the cost of raw materials and our ability to pass along increases in these costs to our customers. In particular, our Pennington and Kaytee businesses are exposed to fluctuations in market prices for commodity seeds and grains used to produce bird feed.
In particular, our Pennington and Kaytee businesses are exposed to fluctuations in market prices for commodity seeds and grains used to produce bird feed and grass seed.
During the former presidential administration, the United States imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China. Less than 10% of the products that we sell are manufactured in China.
During the 2024 presidential campaign, the President-Elect stated his intention to impose significant tariffs on goods imported from China and other countries. During the President-Elect’s prior administration, the United States imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China.
Our lawn and garden sales are highly seasonal and subject to adverse weather. Because our lawn and garden products are used primarily in the spring and summer, the Garden business is seasonal. In fiscal 2023, approximately 67% of our Garden segment’s net sales and 58% of our total net sales occurred during our second and third fiscal quarters.
These fluctuations could negatively impact our business and the market price of our common stock. Our lawn and garden sales are highly seasonal and subject to adverse weather and climate change. Because our lawn and garden products are used primarily in the spring and summer, the Garden business is seasonal.
Tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
If we are unable to pass through higher input costs by raising the price of our products, we may experience organic sales declines and gross margin and operating income declines. Tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
As retailers pass along price increases, consumers may shift to our lower margin bird feed, switch to competing products or reduce purchases of wild bird feed products. The same shift in consumer behavior could adversely affect our business in other product categories which experience substantial price increases.
We also cannot predict to what extent price increases may negatively affect our sales volume or price decreases may result in further inventory write-downs. As retailers pass along price increases, consumers may shift to our lower margin bird feed, switch to competing products or reduce purchases of wild bird feed products.
The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows. Risks Relating to our Capital Stock We do not expect to pay dividends in the foreseeable future.
The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows. Our inability to protect our trademarks and any other proprietary rights may have a significant, negative impact on our business.
There were no impairment losses recorded in fiscal years 2021 and 2022. As part of our annual goodwill impairment testing, in fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test as part of annual goodwill impairment test. We completed our quantitative assessment and concluded there was no impairment of goodwill.
In connection with the our annual goodwill impairment testing performed during fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test. We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amounts.
These fluctuations could negatively impact our business and the market price of our common stock. We are in the process of implementing our Central to Home strategy, which could result in increased expenses over the next few years .
Our failure to adequately manage the political, legal, regulatory, consumer and retail impacts of climate change could have a material adverse effect on our financial condition, results of operations and cash flows. We are in the process of implementing our Central to Home strategy, which could result in increased expenses over the next few years .
We have, and we will continue to have, significant indebtedness. As of September 30, 2023, we had total indebtedness of approximately $1.2 billion.
Deterioration in operating results could prevent us from fulfilling our obligations under the terms of our indebtedness or impact our ability to refinance our debt on favorable terms as it matures. We have, and we will continue to have, significant indebtedness. As of September 28, 2024, we had total indebtedness of approximately $1.2 billion.
Removed
Beginning in fiscal 2021, we have experienced high levels of inflation resulting in significant cost increases in many parts of our business, including input costs, labor costs, and fuel costs.
Added
Risks Affecting our Business Economic uncertainty and other adverse macro-economic conditions, including high interest rates and potential tariffs, may harm our business.
Removed
While the rate of inflation has slowed during fiscal 2023, if the inflationary environment continues during fiscal 2024, we may be unable to pass through higher input costs by raising the price of our products, consumer confidence and purchasing may weaken and we may experience organic sales declines and gross margin and operating income declines.
Added
While the rate of inflation continued to slow during fiscal 2024, and a recession has not materialized, interest rates remain high and the imposition of tariffs on imports by the new presidential administration could result in higher input costs.
Removed
In both fiscal 2022 and fiscal 2023, we experienced increasing inflationary costs in key commodities (e.g., sunflower, milo and millet). Although we were able to negotiate further price increases in fiscal 2022 and in fiscal 2023 with our retailers, it is possible that price increases may not fully offset continued high costs in the future, resulting in margin erosion.
Added
Less than 15% of our cost of goods sold is from products or materials sourced from outside the United States, including less than 5% from China.
Removed
While we increased our inventory levels significantly during fiscal 2022 to mitigate the adverse impact of supply chain disruptions on our fill rates, we were able to decrease inventory levels during fiscal 2023.
Added
Our business is dependent upon our ability to continue to source products from China. We outsource a portion of our manufacturing requirements to third-party manufacturers located in China.
Removed
Until the remediation plan is implemented, tested and deemed effective, we cannot provide assurance that our actions will adequately remediate the material weaknesses or that additional material weaknesses in our internal controls will not be identified in the future.
Added
In fiscal 2024, approximately 66% of our Garden segment’s net sales and 59% of our total net sales occurred during our second and third fiscal quarters. Substantially all of the Garden segment’s operating income is generated in this period.
Removed
We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees in the future. 18 Our inability to protect our trademarks and any other proprietary rights may have a significant, negative impact on our business. We consider our trademarks to be of significant importance in our business.
Added
The effects of climate change could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels.
Removed
Item 1B. Unresolved Staff Comments None. Item 1C. Cybersecurity Not applicable.
Added
These changes could over time affect, for example, the availability and cost of raw materials, commodities and energy, which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.
Added
The increase in climate change attention has resulted in evolving policy, legal and regulatory changes which may impose substantial operational and compliance burdens. Collecting, measuring and analyzing information relating to such matters can be costly, time-consuming, dependent on third-party cooperation and unreliable.
Added
Furthermore, methodologies for measuring, tracking and reporting on such matters continue to change over time, which requires our processes and controls for such data to evolve as well.
Added
Compliance with any new or more stringent laws or regulations, customer reporting requirements, or stricter interpretations of existing laws could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase.
Added
Consumers and businesses may independently change their behavior because of concerns regarding the impact of climate change and public perceptions. For example, consumers may elect to garden less frequently than historic patterns due to the unpredictability of weather patterns.
Added
Those consumers who are less directly impacted by climate change may also engage in less gardening due to discomfort or concerns about perceptions stemming from the direct impact of climate change on others. Current or potential retail customers may pull back from all or parts of the lawn and garden category in response to softening consumer demand.
Added
These investments and transitional costs may adversely affect our operating results. If we are unable to execute on our Cost and Simplicity Program, our ability to maintain or grow margins may be negatively impacted. Our Cost and Simplicity program involves reducing costs, including procurement, logistics, manufacturing, portfolio optimization and administrative, and reducing complexity through fewer SKUs, plants and distribution centers.
Added
Optimizing our supply chain footprint and having the right facilities in the right locations is critical to lowering costs. We plan to simplify our business and improve our efficiency across the organization by rationalizing our footprint, streamlining our portfolio, and improving our cost structure.
Added
There can be no assurance that we will be able to successfully execute our Cost and Simplicity program or that we will be able to do so within the anticipated time period, which could adversely impact our ability to improve or maintain margins and enhance long-term profitability.
Added
Beginning in fiscal 2023, there has been a prolonged oversupply of grass seed, which has resulted in a significant decline in market prices. As a result of this decline, in fiscal 2024, we incurred an approximately $15-$20 million charge to write-down the value of our grass seed inventory.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We currently operate 43 manufacturing facilities totaling approximately 6.6 million square feet and 58 sales and distribution facilities totaling approximately 5.3 million square feet. Most sales and distribution centers consist of office and warehouse space, and several large bays for loading and unloading.
Biggest changeItem 2. Properties We currently operate 40 manufacturing facilities totaling approximately 6.4 million square feet and 57 sales and distribution facilities totaling approximately 5.9 million square feet. Most sales and distribution centers consist of office and warehouse space, and several large bays for loading and unloading.
The Pet segment leases approximately 8 acres of land in Florida to support its live fish operations. We continually review the number, location and size of our manufacturing and sales and logistics facilities and expect to make changes over time to optimize our manufacturing and distribution footprints.
The Pet segment leases approximately 80 acres of land in Florida to support its live fish operations. We continually review the number, location and size of our manufacturing and sales and logistics facilities and expect to make changes over time to optimize our manufacturing and distribution footprints.
In addition to the facilities that are owned, our fixed assets are comprised primarily of machinery and equipment, trucks and warehousing, transportation and computer equipment. 21
In addition to the facilities that are owned, our fixed assets are comprised primarily of machinery and equipment, trucks and warehousing, transportation and computer equipment. 13
We lease 20 of our manufacturing facilities and 46 of our sales and logistics facilities. These leases generally expire between fiscal years 2024 and 2034. Substantially all of the leases contain renewal provisions with automatic rent escalation clauses. The facilities we own are subject to major encumbrances under our principal credit facility.
We lease 17 of our manufacturing facilities and 45 of our sales and logistics facilities. These leases generally expire between fiscal years 2024 and 2034. Substantially all of the leases contain renewal provisions with automatic rent escalation clauses. The facilities we own are subject to major encumbrances under our principal credit facility.
In addition to the manufacturing and sales and distribution facilities, the Garden segment leases approximately 397 acres of land in Oregon, New Jersey and Virginia used in its grass seed and live plant operations and owns approximately 2,341 acres of land in Virginia, North Carolina, Maryland, Ohio, New Jersey and Kentucky used in its live plant operations.
In addition to the manufacturing and sales and distribution facilities, the Garden segment leases approximately 245 acres of land in Oregon, New Jersey and Virginia used in its grass seed and live plant operations and owns approximately 2,402 acres of land in Virginia, North Carolina, Maryland, Ohio, New Jersey and Kentucky used in its live plant operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information.
Biggest changeThe court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information. The retrial on the "head start" damages issue concluded in early March 2024, but no decision has been issued by the court.
The Company intends to vigorously pursue its defenses in the future proceedings and believes that it will prevail on the merits as to the head start damages issue.
The Company intends to vigorously pursue its defenses in any future proceedings and believes that it will prevail on the merits as to the head start damages issue.
From time to time, we are involved in certain legal proceedings in the ordinary course of business. Except as discussed above, we are not currently a party to any other legal proceedings that management believes could have a material effect on our financial position or results of operations. Item 4. Mine Safety Disclosures Not applicable. 22 PART II
From time to time, we are involved in certain legal proceedings in the ordinary course of business. Except as discussed above, we are not currently a party to any other legal proceedings that management believes could have a material effect on our financial position or results of operations. Item 4. Mine Safety Disclosures Not applicable. 14 PART II
Item 3. Legal Proceedings In 2012, Nite Glow Industries, Inc. and its owner, Marni Markel, ("Nite Glow") filed suit in the U.S.
Item 3. Legal Proceedings In 2012, Nite Glow Industries, Inc. and its owner, Marni Markell, ("Nite Glow") filed suit in the U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) (2) June 25, 2023 – July 29, 2023 65,268 (2) (3) $ 36.50 65,268 $ 83,235,000 July 30, 2023 – August 26, 2023 3,530 (3) 42.84 — 83,235,000 August 27, 2023 – September 30, 2023 527 (3) 41.98 — 83,235,000 Total 69,325 $ 36.87 65,268 $ 83,235,000 (4) (1) In August 2019, our Board of Directors authorized a share repurchase program to purchase up to $100 million of our common stock (the "2019 Repurchase Authorization”).
Biggest changePeriod Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) (2) June 30, 2024 – August 3, 2024 32,942 (2) (3) $ 31.85 29,019 $ 81,951,000 August 4, 2024 – August 31, 2024 9,758 (2) (3) $ 32.53 3,100 81,951,000 September 1, 2024 – September 28, 2024 258,293 (2) (3) $ 32.63 257,590 81,951,000 Total 300,993 $ 32.55 289,709 $ 81,951,000 (4) (1) In August 2019, our Board of Directors authorized a share repurchase program to purchase up to $100 million of our common stock (the "2019 Repurchase Authorization”).
Stock Performance Graph The following graph compares the percentage change of our cumulative total stockholder return on our Common Stock (“CENT”) for the period from September 29, 2018 to September 30, 2023 with the cumulative total return of the NASDAQ Composite (U.S.) Index and the Dow Jones Non-Durable Household Products Index, a peer group index consisting of approximately 30 manufacturers and distributors of household products.
Stock Performance Graph The following graph compares the percentage change of our cumulative total stockholder return on our Common Stock (“CENT”) for the period from September 29, 2018 to September 28, 2024 with the cumulative total return of the NASDAQ Composite (U.S.) Index and the Dow Jones Non-Durable Household Products Index, a peer group index consisting of approximately 30 manufacturers and distributors of household products.
Our Class B stock is not listed on any market and generally cannot be transferred unless converted to common stock on a one-for-one basis. As of November 15, 2023, there were 74 holders of record of our common stock, 368 holders of record of our Class A nonvoting common stock and three holders of record of our Class B stock.
Our Class B stock is not listed on any market and generally cannot be transferred unless converted to common stock on a one-for-one basis. As of November 15, 2024, there were 60 holders of record of our common stock, 367 holders of record of our Class A nonvoting common stock and three holders of record of our Class B stock.
As of September 30, 2023, we had $83.2 million of authorization remaining under our 2019 Repurchase Authorization. (2) In February 2019, our Board of Directors authorized us to make supplemental stock purchases to minimize dilution resulting from issuances under our equity compensation plans (the “Equity Dilution Authorization”).
As of November 21, 2024, we had $30.3 million remaining under our 2019 Repurchase Authorization. (2) In February 2019, our Board of Directors authorized us to make supplemental stock purchases to minimize dilution resulting from issuances under our equity compensation plans (the “Equity Dilution Authorization”).
Total Return Analysis 9/29/2018 9/28/2019 9/26/2020 9/25/2021 9/24/2022 9/30/2023 Central Garden & Pet Company $ 100.00 $ 82.10 $ 104.88 $ 129.50 $ 104.44 $ 122.48 NASDAQ Composite $ 100.00 $ 99.80 $ 138.59 $ 192.50 $ 140.19 $ 172.00 Dow Jones US Nondurable Household Products $ 100.00 $ 146.64 $ 168.86 $ 175.52 $ 168.35 $ 186.52 23 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth the repurchases of any equity securities during the fourth quarter of the fiscal year ended September 30, 2023 and the dollar amount of authorized share repurchases remaining under our stock repurchase programs.
Total Return Analysis 9/28/2019 9/26/2020 9/25/2021 9/24/2022 9/30/2023 9/28/2024 Central Garden & Pet Company $ 100.00 $ 127.75 $ 157.72 $ 127.21 $ 149.17 $ 158.25 NASDAQ Composite $ 100.00 $ 138.88 $ 192.89 $ 140.41 $ 172.35 $ 238.13 Dow Jones US Nondurable Household Products $ 100.00 $ 115.15 $ 119.69 $ 114.80 $ 127.19 $ 159.31 15 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth the repurchases of any equity securities during the fourth quarter of the fiscal year ended September 28, 2024 and the dollar amount of authorized share repurchases remaining under our stock repurchase programs.
Removed
(4) During the period June 25 through July 29, 2023, 65,268 shares were repurchased under the two plans, including 30,734 shares under the Equity Dilution Authorization and 34,534 shares under the 2019 Repurchase Authorization. 24 Item 6. Reserved
Added
As of September 28, 2024, we had $82.0 million of authorization remaining under our 2019 Repurchase Authorization. From September 29, 2024 through November 21, 2024, we repurchased 1.3 million shares of our non-voting common stock (CENTA) and 0.4 million shares of our voting common stock (CENT) on the open market at an aggregate cost of $51.7 million.
Added
(4) Excludes 38 thousand shares remaining under our Equity Dilution Authorization as of September 28, 2024. 16 Item 6. Reserved

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

115 edited+46 added−21 removed45 unchanged
Biggest changeOperating Income Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 30, 2023 GAAP Adjustments (1)(2)(3) Non-GAAP (in thousands) Net sales $ 3,310,083 $ — $ 3,310,083 Cost of goods sold and occupancy 2,363,241 9,761 2,353,480 Gross profit 946,842 (9,761) 956,603 Selling, general and administrative expenses 736,196 6,798 729,398 Income from operations $ 210,646 $ (16,559) $ 227,205 29 GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended Pet Segment Operating Income Reconciliation September 30, 2023 September 24, 2022 (in thousands) GAAP operating income $ 198,004 $ 208,924 Facility closure and intangible asset impairment (1)(3) 18,457 — Non-GAAP operating income $ 216,461 $ 208,924 GAAP operating margin 10.5 % 11.1 % Non-GAAP operating margin 11.5 % 11.1 % GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended Garden Segment Operating Income Reconciliation September 30, 2023 September 24, 2022 (in thousands) GAAP operating income $ 123,455 $ 153,956 Garden independent distribution sale and intangible asset impairment (2)(3) (1,898) — Non-GAAP operating income $ 121,557 $ 153,956 GAAP operating margin 8.6 % 10.5 % Non-GAAP operating margin 8.5 % 10.5 % GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended September 30, 2023 September 24, 2022 (in thousands, except per share amount) Net Income and Diluted Net Income Per Share Reconciliation GAAP net income attributable to Central Garden & Pet Company $ 125,643 $ 152,152 Pet facilities closures (1) 15,672 — Independent garden channel distribution sale and related facility closure (2) (5,844) — Intangible impairments (3) 6,731 — Tax effect of adjustments (3,705) — Non-GAAP net income attributable to Central Garden & Pet Company $ 138,497 $ 152,152 GAAP diluted net income per share $ 2.35 $ 2.80 Non-GAAP diluted net income per share $ 2.59 $ 2.80 Shares used in GAAP and non-GAAP diluted net income per share calculation 53,427 54,425 30 GAAP to non-GAAP Reconciliation Fiscal Year Ended September 30, 2023 Adjusted EBITDA Reconciliation Pet Garden Corp Total (in thousands) Net income attributable to Central Garden & Pet $ — $ — $ — $ 125,643 Interest expense, net — — — 49,663 Other income — — — (1,462) Income tax expense — — — 36,348 Net income attributable to noncontrolling interest — — — 454 Sum of items below operating income — — — 85,003 Income (loss) from operations 198,004 123,455 (110,813) 210,646 Depreciation & amortization 41,126 43,375 3,199 87,700 Noncash stock-based compensation — — 27,990 27,990 Non-GAAP adjustments (1)(2)(3) 18,457 (1,898) — 16,559 Adjusted EBITDA $ 257,587 $ 164,932 $ (79,624) $ 342,895 GAAP to non-GAAP Reconciliation Fiscal Year Ended September 24, 2022 Adjusted EBITDA Reconciliation Pet Garden Corp Total (in thousands) Net income attributable to Central Garden & Pet $ — $ — $ — $ 152,152 Interest expense, net — — — 57,534 Other expense — — — 3,596 Income tax expense — — — 46,234 Net income attributable to noncontrolling interest — — — 520 Sum of items below operating income — — — 107,884 Income (loss) from operations 208,924 153,956 (102,844) 260,036 Depreciation & amortization 38,960 36,583 5,405 80,948 Noncash stock-based compensation — — 25,817 25,817 Adjusted EBITDA $ 247,884 $ 190,539 $ (71,622) $ 366,801 Inflation Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, interest rates, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending.
Biggest changeAdditionally, we recognized a $7.5 million non-cash impairment charge for two related private company investments that is included within Other income (expense) in the consolidated statement of operations. 22 Net Income and Diluted Net Income Per Share Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 September 30, 2023 (in thousands, except per share amount) GAAP net income attributable to Central Garden & Pet Company $ 107,983 $ 125,643 Facility closures (1)(2)(3)(5) 27,842 15,672 Intangible impairments (6)(7) 12,790 6,731 Litigation settlement (8) (3,200) — Independent channel distribution business sale (4) — (5,844) Investment impairment (8) 7,461 — Tax effect of adjustments (10,437) (3,705) Non-GAAP net income attributable to Central Garden & Pet Company $ 142,439 $ 138,497 GAAP diluted net income per share $ 1.62 $ 1.88 Non-GAAP diluted net income per share $ 2.13 $ 2.07 Shares used in GAAP and non-GAAP diluted net income per share calculation 66,860 66,783 Operating Income Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 Fiscal Year Ended September 30, 2023 GAAP Adjustments (1)(2)(3)(6)(8) Non-GAAP GAAP Adjustments (4)(5)(7) Non-GAAP (in thousands) (in thousands) Net sales $ 3,200,460 $ — $ 3,200,460 $ 3,310,083 $ — $ 3,310,083 Cost of goods sold and occupancy 2,256,725 16,349 2,240,376 2,363,241 9,761 $ 2,353,480 Gross profit 943,735 (16,349) 960,084 946,842 (9,761) $ 956,603 Selling, general and administrative expenses 758,348 21,083 737,265 736,196 6,798 $ 729,398 Income from operations $ 185,387 $ (37,432) $ 222,819 $ 210,646 $ (16,559) $ 227,205 Gross margin 29.5 % 30.0% 28.6% 28.9 % Operating margin 5.8 % 7.0% 6.4% 6.9 % Pet Segment Operating Income Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 September 30, 2023 (in thousands) GAAP operating income $ 203,425 $ 198,004 Facility closures (1)(5) 7,549 15,672 Intangible impairments (6)(7) 12,790 2,785 Non-GAAP operating income $ 223,764 $ 216,461 GAAP operating margin 11.1 % 10.5 % Non-GAAP operating margin 12.2 % 11.5 % 23 Garden Segment Operating Income Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 September 30, 2023 (in thousands) GAAP operating income $ 81,893 $ 123,455 Facility closures (1)(2)(3) 20,293 — Independent channel distribution business sale (4) — (5,844) Intangible impairments (7) — 3,946 Non-GAAP operating income $ 102,186 $ 121,557 GAAP operating margin 6.0 % 8.6 % Non-GAAP operating margin 7.5 % 8.5 % Organic Net Sales Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2024 $ 3,200.5 $ 66.4 $ 3,134.1 Reported net sales FY 2023 3,310.1 48.1 3,262.0 $ decrease $ (109.6) $ 18.3 $ (127.9) % decrease (3.3) % (3.9) % Organic Pet Segment Net Sales Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2024 $ 1,832.8 $ 66.4 $ 1,766.4 Reported net sales FY 2023 1,877.2 — 1,877.2 $ decrease $ (44.4) $ 66.4 $ (110.8) % decrease (2.4) % (5.9) % Organic Garden Segment Net Sales Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2024 $ 1,367.7 $ — $ 1,367.7 Reported net sales FY 2023 1,432.9 48.1 1,384.8 $ decrease $ (65.2) $ (48.1) $ (17.1) % decrease (4.6) % (1.2) % 24 Adjusted EBITDA Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 28, 2024 Pet Garden Corp Total (in thousands) Net income attributable to Central Garden & Pet $ — $ — $ — $ 107,983 Interest expense, net — — — 37,872 Other expense — — — 5,090 Income tax expense — — — 33,112 Net income attributable to noncontrolling interest — — — 1,330 Sum of items below operating income — — — 77,404 Income (loss) from operations 203,425 81,893 (99,931) 185,387 Depreciation & amortization 43,642 44,403 2,762 90,807 Noncash stock-based compensation — — 20,583 20,583 Non-GAAP adjustments (1)(2)(3)(6)(8) 20,339 20,293 (3,200) 37,432 Adjusted EBITDA $ 267,406 $ 146,589 $ (79,786) $ 334,209 Adjusted EBITDA Reconciliation GAAP to Non-GAAP Reconciliation Fiscal Year Ended September 30, 2023 Pet Garden Corp Total (in thousands) Net income attributable to Central Garden & Pet $ — $ — $ — $ 125,643 Interest expense, net — — — 49,663 Other income — — — (1,462) Income tax expense — — — 36,348 Net income attributable to noncontrolling interest — — — 454 Sum of items below operating income — — — 85,003 Income (loss) from operations 198,004 123,455 (110,813) 210,646 Depreciation & amortization 41,126 43,375 3,199 87,700 Noncash stock-based compensation — — 27,990 27,990 Non-GAAP adjustments (4)(5)(7) 18,457 (1,898) — 16,559 Adjusted EBITDA $ 257,587 $ 164,932 $ (79,624) $ 342,895 Inflation Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, interest rates, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending.
The Amended 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 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.
Based on our anticipated cash needs, availability under our asset backed loan facility and the scheduled maturity of our debt, we believe that our sources of liquidity should be adequate to meet our working capital, capital spending and other cash needs for at least the next 12 months.
Based on our anticipated cash needs, availability under our asset backed loan facility and the scheduled maturity of our debt, we believe that our sources of liquidity should be adequate to meet our working capital, capital spending and other cash needs for at least the next 12 months and beyond.
Borrowings under the Amended Credit Facility will bear interest at an index based on SOFR (which will not be less than 0.00%) or, at our option, the Base Rate, plus, in either case, an applicable margin based on our usage under the credit facility.
Borrowings under the Credit Facility will bear interest at an index based on SOFR (which will not be less than 0.00%) or, at our option, the Base Rate, plus, in either case, an applicable margin based on our usage under the Credit Facility.
However, we cannot assure you that these sources will continue to provide us with sufficient liquidity and, should we require it, that we will be able to obtain financing on terms satisfactory to us, or at all. 32 We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $70 million over the next 12 months.
However, we cannot assure you that these sources will continue to provide us with sufficient liquidity and, should we require it, that we will be able to obtain financing on terms satisfactory to us, or at all. 26 We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $70 million over the next 12 months.
The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 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.
The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2030 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Amended Credit Facility.
The 2030 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Credit Facility.
The 2028 Notes are unconditionally guaranteed on a senior basis by our existing and future domestic restricted subsidiaries who are borrowers under or guarantors of our Amended Credit Facility.
The 2028 Notes are unconditionally guaranteed on a senior basis by our existing and future domestic restricted subsidiaries who are borrowers under or guarantors of our Credit Facility.
Future net sales and short-term growth rates are estimated for trade names based on management’s forecasted financial results which consider key business drivers such as specific revenue growth initiatives, market share changes and general economic factors such as consumer spending. During fiscal 2023, 2022 and 2021, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks.
Future net sales and short-term growth rates are estimated for trade names based on management’s forecasted financial results which consider key business drivers such as specific revenue growth initiatives, market share changes and general economic factors such as consumer spending. During fiscal 2024, 2023 and 2022, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks.
Base Rate is defined as the 34 highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month SOFR plus 1.00% and (d) 0.00%.
Base Rate is defined as the highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month SOFR plus 1.00% and (d) 0.00%.
In November 2020, we used a portion of the net proceeds to redeem all of our 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.
We used a portion of the net proceeds to redeem all of our 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.
Standby letter of credit fees accruing at the applicable margin on the average undrawn and unreimbursed amounts 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. We are also required to pay certain fees to the administrative agent under the Amended Credit Facility.
Standby letter of credit fees accruing at the 28 applicable margin on the average undrawn and unreimbursed amounts 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. We are also required to pay certain fees to the administrative agent under the Credit Facility.
The estimate of fair value of each of our reporting units is based on our projection of revenues, gross margin, operating costs and cash flows considering historical and estimated future results, general economic and market conditions as well as the impact of planned business and operational strategies.
The estimate of fair value of each of our reporting segments is based on our projection of revenues, gross margin, operating costs and cash flows considering historical and estimated future results, general economic and market conditions as well as the impact of planned business and operational strategies.
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. Our goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of our two reporting units to the Company’s total market capitalization.
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. Our goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of our two reporting segments to the Company’s total market capitalization.
The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors") which are guarantors of our senior secured revolving credit facility ("Credit Facility").
The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors") which are guarantors of our 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. We may redeem some or all of the 2031 Notes at anytime, at our option, prior to April 30, 2026, at the principal amount plus a "make whole" premium.
The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933. We may redeem some or all of the 2031 Notes at any time, at our option, prior to April 30, 2026, at the principal amount plus a "make whole" premium.
While our management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read in conjunction with those GAAP results.
While Management believes that non-GAAP measures are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read in conjunction with those GAAP results.
We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting units were greater than their carrying amounts.
We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amounts.
We may redeem some or all of the 2030 Notes, at our 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.
We may redeem some or all of the 2030 Notes, at our option 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.
See “Forward-Looking Statements” and “Item 1A – Risk Factors.” Business Overview Central Garden & Pet Company is a leading innovator, producer and distributor of branded and private label products for the lawn & garden and pet supplies markets in the United States.
See “Forward-Looking Statements” and “Item 1A – Risk Factors.” Business Overview Central Garden & Pet Company is a leading manufacturer and distributor of branded and private label products for the lawn & garden and pet supplies markets in the United States.
(2) During the fourth quarter of fiscal 2023, we recognized a gain of $5.8 million from the sale of our independent garden center distribution business, which includes the impact of associated facility closure costs. The gain is included in selling, general and administrative expense in the consolidated statements of operations.
(4) During the fourth quarter of fiscal 2023, we recognized a gain of $5.8 million from the sale of our independent garden center distribution business, which includes the impact of associated facility closure costs. The gain is included in selling, general and administrative expense in the consolidated statement of operations.
We may redeem some or all of the 2030 Notes at anytime, at our option, prior to October 15, 2025, at a price equal to 100% of the principal amount plus a “make-whole” premium.
We may redeem some or all of the 2030 Notes at any time, at our option, prior to October 15, 2025, at a price equal to 100% of the principal amount plus a “make-whole” premium.
See Note 11 - Long-Term Debt to the consolidated financial statements for further discussion of long-term debt. (2) Estimated interest payments to be made on our 2028 Notes, our 2030 Notes and our 2031 Notes.
See Note 11 - Long-Term Debt to the consolidated financial statements for further discussion of long-term debt. (2) Estimated interest payments to be made on our 2028 Notes, our 2030 Notes and our 2031 Notes. See Note 11 - Long-Term Debt to the consolidated financial statements for description of interest rate terms.
Fiscal 2022 Compared to Fiscal 2021 For a discussion of our results of operations in fiscal 2022 compared to fiscal 2021, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 24, 2022 filed with the SEC. Use of Non-GAAP Financial Measures We report our financial results in accordance with GAAP.
Fiscal 2023 Compared to Fiscal 2022 For a discussion of our results of operations in fiscal 2023 compared to fiscal 2022, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC. Use of Non-GAAP Financial Measures We report our financial results in accordance with GAAP.
Assumptions critical to our fair value estimates were: (i) discount rates used in determining the fair value of the reporting units; (ii) estimated future cash flows; and (iii) projected revenue and operating profit growth rates used in the reporting unit models. Actual results may differ from those estimates.
Assumptions critical to our fair value estimates were: (i) discount rates used in determining the fair value of the reporting segments; (ii) estimated future cash flows; and (iii) projected revenue and operating profit growth rates used in the reporting segment models. Actual results may differ from those estimates.
We may redeem some or all of the 2031 Notes at our 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 Company may redeem some or all of the 2031 Notes at its 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.
Also, during the fourth quarter of fiscal 2023, we recognized a non-cash impairment charge in our Garden segment of $3.9 million related to the impairment of intangible assets due to reduced demand for products we sold under an acquired trade name. The impairments were recorded as part of selling, general and administrative costs.
Also, we recognized a non-cash impairment charge in our Garden segment of $3.9 million related to the impairment of intangible assets due to reduced demand for products we sold under an acquired trade name. The impairments were recorded as part of selling, general and administrative costs.
We were in compliance with all financial covenants under the Amended Credit Facility as of September 30, 2023. Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities Central (the "Parent/Issuer") issued $400 million of 2031 Notes in April 2021, $500 million of 2030 Notes in October 2020, and $300 million of 2028 Notes in December 2017.
We were in compliance with all financial covenants under the Credit Facility as of September 28, 2024. Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities Central (the "Parent/Issuer") issued $400 million of 2031 Notes in April 2021, $500 million of 2030 Notes in October 2020, and $300 million of 2028 Notes in December 2017.
The applicable margin for SOFR-based borrowings fluctuates between1.00%-1.50%, and was 1.0% as of September 30, 2023, and the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50%, and was 0.00% as of September 30, 2023. An unused line fee shall be payable quarterly in respect of the total amount of the unutilized Lenders’ commitments under the Amended Credit Facility.
The applicable margin for SOFR-based borrowings fluctuates between1.00%-1.50%, and was 1.0% as of September 28, 2024, and the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50%, and was 0.00% as of September 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.
Our expected revenues were based on our future operating plan and market growth or decline estimates for future years. We recognized impairment losses on certain intangible assets of $11.5 million in fiscal year 2023, and there were no impairment losses recorded in fiscal years 2021 and 2022.
Our expected revenues were based on our future operating plan and market growth or decline estimates for future years. We recognized impairment losses on certain intangible assets of $12.8 million and $11.5 million in fiscal years 2024 and 2023, respectively, and there were no impairment losses recorded in fiscal year 2022.
We were in compliance with all financial covenants as of September 30, 2023. $300 Million, 5.125% Senior Notes due 2028 On December 14, 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). We used the net proceeds from the offering to finance acquisitions and for general corporate purposes.
We were in compliance with all financial covenants as of September 28, 2024. $300 Million 5.125% Senior Notes due 2028 In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). We used the net proceeds from the offering to finance acquisitions and for general corporate purposes.
In connection with our annual goodwill impairment testing performed during fiscal 2022, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the estimated fair values of our reporting units under the quantitative goodwill impairment test.
In connection with our annual goodwill impairment testing performed during fiscal year 2022, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.
Determining the fair value of a reporting segment involves the use of significant estimates and assumptions.
(3) During the fourth quarter of fiscal 2023, we recognized a non-cash impairment charge in our Pet segment of $2.8 million related to the impairment of intangible assets caused by the loss of a significant customer in our live fish business.
(7) In fiscal 2023, we recognized a non-cash impairment charge in our Pet segment of $2.8 million related to the impairment of intangible assets caused by the loss of a significant customer in our live fish business.
The 2028 Notes contain customary high-yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all covenants as of September 30, 2023. Asset-Based Loan Facility Amendment On December 16, 2021, we entered into a Third Amended and Restated Credit Agreement (“Amended Credit Agreement”).
The 2028 Notes contain customary high-yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all financial covenants as of September 28, 2024. Asset-Based Loan Facility On December 16, 2021, we entered into a Third Amended and Restated Credit Agreement (“Credit Agreement”).
We believe the adjustment of closure costs supplements the GAAP information with a measure that may be used to assess the performance of our ongoing operations. 28 • Gain on sale of a business or service line: we exclude the impact of the gain on the sale of a business as it represents an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods.
We believe that the exclusion of this gain supplements the GAAP information with a measure that can be used to assess the performance of our ongoing operations. • Gain on sale of a business or service line : we exclude the impact of the gain on the sale of a business as it represents an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods.
Sales of branded products represented 78% of our net sales in both fiscal 2023 and fiscal 2022. Sales of other manufacturers' products represented 22% of our net sales.
Sales of branded products represented approximately 78% of our net sales in both fiscal 2024 and fiscal 2023, and sales of other manufacturers' products represented 22% of our net sales.
We believe that the adjustment of these charges supplements the GAAP information with a measure that can be used to assess the performance of our ongoing operations. • Tax impact: adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income.
We believe the adjustment of this gain supplements the GAAP information with a measure that may be used to assess the performance of our ongoing operations. • Tax impact : adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income.
Estimates and assumptions are required for, but are not limited to, accounts receivable and inventory realizable values, fixed asset lives, long-lived asset valuation and impairments, intangible asset lives, stock-based compensation, deferred and current income taxes, self-insurance accruals and the impact of contingencies and litigation.
Estimates and assumptions are required for, among other items, accounts receivable and inventory realizable values, fixed asset lives, long-lived asset valuation and impairments, intangible asset lives, stock-based compensation, deferred and current income taxes, self-insurance accruals and the impact of contingencies and litigation.
The Amended Credit Facility continues to contain customary covenants, including financial covenants which require us 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 debt issuance costs are being amortized over the term of the Credit Facility. The Credit Facility continues to contain customary covenants, including financial covenants which require us 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.
We may redeem some or all of the 2028 Notes, at our option, at any time on or after January 1, 2023 for 102.563%, on or after January 1, 2024 for 101.708%, on or after January 1, 2025 for 100.854% and on or after January 1, 2026 for 100%, plus accrued and unpaid interest.
We may redeem some or all of the 2028 Notes, at our option, at any time before December 31, 2024 for 101.708%, on or after January 1, 2025 for 100.854% and on or after January 1, 2026 for 100.0%, plus accrued and unpaid interest.
Management believes these non-GAAP financial measures that exclude the impact of specific items (described below) may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods.
Management believes that these non-GAAP financial measures may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods.
As of September 30, 2023, we had $83.2 million remaining under our 2019 Repurchase Authorization. In February 2019, the Board of Directors authorized us to make supplemental purchases to minimize dilution resulting from issuances under our equity compensation plans (the "Equity Dilution Authorization").
As of September 28, 2024, we had $82 million remaining under our 2019 Repurchase Authorization. In February 2019, the Board of Directors authorized us to make supplemental purchases to minimize dilution resulting from issuances under our equity compensation plans (the "Equity Dilution Authorization").
In fiscal 2023, our consolidated net sales were $3.3 billion, of which our Pet segment, or Pet, accounted for approximately $1.9 billion and our Garden segment, or Garden, accounted for approximately $1.4 billion.
In fiscal 2024, our consolidated net sales were $3.2 billion, of which our Pet segment, or Pet, accounted for approximately $1.8 billion and our Garden segment, or Garden, accounted for approximately $1.4 billion.
The Amended Credit Facility matures on December 16, 2026. We may borrow, repay and reborrow amounts under the Amended Credit Facility until its maturity date, at which time all amounts outstanding under the Amended Credit Facility must be repaid in full.
We 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.
We were in compliance with all financial covenants as of September 30, 2023. 33 Issuance of $500 million 4.125% Senior Notes due 2030 In October 2020, we issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 (the "2030 Notes").
We were in compliance with all financial covenants as of September 28, 2024. 27 $500 million 4.125% Senior Notes due 2030 In October 2020, we issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 (the "2030 Notes").
To encourage retailers and distributors to stock large quantities of inventory, industry practice has been for manufacturers to give extended credit terms and/or promotional discounts. Operating Activities Net cash provided by operating activities increased $415.6 million, from $34.0 million of cash used in operating activities in fiscal 2022 to $381.6 million of cash provided by operating activities in fiscal 2023.
To encourage retailers and distributors to stock large quantities of inventory, industry practice has been for manufacturers to give extended credit terms and/or promotional discounts. Operating Activities Net cash provided by operating activities increased $13.3 million, from $381.6 million in fiscal 2023 to $394.9 million in fiscal 2024.
Investing Activities Net cash used in investing activities decreased $108.4 million from $143.0 million in fiscal 2022 to $34.6 million in fiscal 2023. The decrease in cash used in investing activities was due primarily to reduced capital expenditures, decreased investments in fiscal 2023 compared to fiscal 2022, and proceeds received from the sale of our independent garden center distribution business.
The decrease in cash used in investing activities was due primarily to reduced capital expenditures, decreased investments in fiscal 2023 compared to fiscal 2022, and proceeds received from the sale of our independent garden center distribution business. Financing Activities Net cash used in financing activities decreased $12.1 million from $37.6 million in fiscal 2023 to $25.4 million in fiscal 2024.
Debt repayments do not reflect the unamortized portion of deferred financing costs associated with the 2028 Notes, 2030 Notes and 2031 Notes of approximately $12.2 million as of September 30, 2023, of which $2.0 million is amortizable until February 2028, $5.6 million is amortizable until October 2030 and $4.6 million is amortizable until April 2031, and is included in the carrying value of the long-term debt.
Debt repayments do not reflect the unamortized portion of deferred financing costs associated with the 2028 Notes, 2030 Notes and 2031 Notes of approximately $10.3 million as of September 28, 2024, of which $1.6 million is amortizable until February 2028, $4.8 million is amortizable until October 2030 and $4.0 million is amortizable until April 2031, and is included in the carrying value of the long-term debt.
The following table indicates each class of similar products which represented approximately 10% or more of our consolidated net sales in the fiscal years presented: Category 2023 2022 2021 (in millions) Other garden products $ 832.2 $ 865.3 $ 876.6 Other pet products 699.4 765.9 767.0 Other manufacturers' products 734.9 730.2 749.1 Dog & cat products 568.6 542.9 570.9 Wild bird 475.0 434.3 340.1 Total $ 3,310.1 $ 3,338.6 $ 3,303.7 Pet net sales decreased $0.9 million, to $1,877.2 million in fiscal 2023 from $1,878.1 million in fiscal 2022.
The following table indicates each class of similar products which represented approximately 10% or more of our consolidated net sales in the fiscal years presented: Category 2024 2023 2022 (in millions) Other garden products $ 802.6 $ 832.2 $ 865.3 Other pet products 701.4 699.4 765.9 Other manufacturers' products 735.9 734.9 730.2 Dog & cat products 534.2 568.6 542.9 Wild bird 426.4 475.0 434.3 Total $ 3,200.5 $ 3,310.1 $ 3,338.6 Pet net sales decreased $44.4 million, or 2.4%, to $1,832.8 million in fiscal 2024 from $1,877.2 million in fiscal 2023.
The decrease in net interest expense was due to increased interest income resulting from both higher interest rates and higher cash balances during fiscal 2023. Debt outstanding on September 30, 2023 was $1,188.2 million compared to $1,186.6 million as of September 24, 2022. Our average borrowing rate was 4.5% in both fiscal 2023 and fiscal 2022.
The decrease in net interest expense was due to increased interest income due primarily to higher cash balances during fiscal 2024. Debt outstanding on September 28, 2024 was $1,190.0 million compared to $1,188.2 million as of September 30, 2023. Our average borrowing rate was 4.5% in both fiscal 2024 and fiscal 2023.
We completed our qualitative assessment of potential goodwill impairment and it was determined that it was more likely than not the fair values of our reporting units were greater than their carrying amounts, and accordingly, no quantitative testing of goodwill was required.
We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal year 2022, and accordingly, no further testing of goodwill was required in fiscal year 2022.
Results of Operations (GAAP) The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net sales: Fiscal Year Ended September 30, 2023 September 24, 2022 September 25, 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold and occupancy 71.4 70.3 70.6 Gross profit 28.6 29.7 29.4 Selling, general and administrative 22.2 21.9 21.7 Operating income 6.4 7.8 7.7 Interest expense, net (1.5) (1.7) (1.8) Other expense, net — (0.1) — Income taxes 1.1 1.4 1.3 Net income 3.8 % 4.6 % 4.6 % Fiscal 2023 Compared to Fiscal 2022 Net Sales Net sales for fiscal 2023 decreased $28.5 million, or 0.9%, to $3,310.1 million from $3,338.6 million in fiscal 2022, even with the benefit of an additional week in fiscal 2023 compared to fiscal 2022.
As of November 21, 2024, we had $30.3 million remaining under our 2019 Repurchase Authorization. 18 Results of Operations (GAAP) The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net sales: Fiscal Year Ended September 28, 2024 September 30, 2023 September 24, 2022 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold and occupancy 70.5 71.4 70.3 Gross profit 29.5 28.6 29.7 Selling, general and administrative 23.7 22.2 21.9 Operating income 5.8 6.4 7.8 Interest expense, net (1.2) (1.5) (1.7) Other expense, net (0.2) — (0.1) Income taxes 1.0 1.1 1.4 Net income 3.4 % 3.8 % 4.6 % Fiscal 2024 Compared to Fiscal 2023 Net Sales Net sales for fiscal 2024 decreased $109.6 million, or 3.3%, to $3,200.5 million from $3,310.1 million in fiscal 2023.
However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA, non-GAAP operating income, and non-GAAP net income and diluted net income per share.
However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including non-GAAP net income and diluted net income per share, non-GAAP operating income, non-GAAP gross profit and gross margin, non-GAAP selling, general and administrative expense, adjusted EBITDA and organic net sales.
During the fourth quarter of fiscal 2023, we recognized incremental expense of $1.8 million in our Pet segment in the consolidated statement of operations, from the closure of a leased manufacturing and distribution facility in Amarillo, Texas.
Additionally, we recognized incremental expense of $1.8 million in our Pet segment in the consolidated statement of operations, from the closure of a second manufacturing and distribution facility in Texas.
The Amended Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves. Proceeds of the Amended Credit Facility will be used for general corporate purposes.
The Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves. Proceeds of the Credit Facility may be used for general corporate purposes. Net availability under the Credit Facility was approximately $481 million as of September 28, 2024.
The Amended Credit Agreement amended and restated the previous credit agreement dated September 27, 2019 (the "Predecessor Credit Agreement"), and 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 we exercise the uncommitted accordion feature set forth therein (collectively, the “Amended Credit Facility”).
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 we exercise the uncommitted accordion feature set forth therein (collectively, the “Credit Facility”). The Credit Facility matures on December 16, 2026.
As a result, it is not necessary to maintain large quantities of inventory to meet peak demands. Our lawn and garden businesses are highly seasonal with approximately 67% of our Garden segment’s net sales occurring during the second and third fiscal quarters. This seasonality requires the shipment of large quantities of product well ahead of the peak consumer buying periods.
Our lawn and garden businesses are highly seasonal with approximately 66% of our Garden segment’s net sales occurring during the second and third fiscal quarters. This seasonality requires the shipment of large quantities of product well ahead of the peak consumer buying periods.
Selling, General and Administrative Selling, general and administrative expenses increased $3.9 million, or 0.5%, from $732.3 million in fiscal 2022 to $736.2 million in fiscal 2023. As a percentage of net sales, selling, general and administrative expenses increased from 21.9% in fiscal 2022 to 22.2% in fiscal 2023.
Selling, General and Administrative Selling, general and administrative expenses increased $22.1 million, or 3.0%, from $736.2 million in fiscal 2023 to $758.3 million in fiscal 2024. As a percentage of net sales, selling, general and administrative expenses increased from 22.2% in fiscal 2023 to 23.7% in fiscal 2024.
In fiscal 2022, our gross and operating margins increased as we were able to increase prices to offset higher input costs. Costs continued rise in fiscal 2023, however, and we were unable to continue to increase prices to our customers at a pace sufficient for us to maintain our margins.
In fiscal 2022, our gross and operating margins increased as we were able to sufficiently increase prices and volumes to offset higher input costs. Costs continued rise in fiscal 2023, however, and we were unable to continue to increase prices and our gross and operating margins were negatively impacted.
Stock Repurchases During fiscal 2023, we repurchased approximately 0.6 million shares of our non-voting common stock (CENTA) on the open market at an aggregate cost of approximately $22.2 million, or $35.31 per share, and approximately 0.2 million of our voting common stock (CENT) on the open market at an aggregate cost of approximately $8.5 million, or $37.31 per share.
During fiscal 2023, we repurchased approximately 0.8 million shares of our non-voting common stock (CENTA) on the open market at an aggregate cost of approximately $22.9 million and approximately 0.3 million shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $8.7 million.
Net cash used in operating activities increased $284.8 million, from $250.8 million of cash provided by operating activities in fiscal 2021 to $34.0 million of cash used in operating activities in fiscal 2022.
Net cash provided by operating activities increased $415.6 million, from $34.0 million of cash used in operating activities in fiscal 2022 to $381.6 million of cash provided by operating activities in fiscal 2023.
The non-GAAP adjustments made reflect the following: (1) During the third quarter of fiscal 2023, we recognized incremental expense of $13.9 million in our Pet segment in the consolidated statement of operations, from the closure of a leased manufacturing and distribution facility in Athens, Texas.
(5) In fiscal 2023, we recognized incremental expense of $13.9 million in our Pet segment in the consolidated statement of operations from the closure of a manufacturing and distribution facility in Texas.
The decrease in cash used by financing activities during the current year was due primarily to lower stock repurchase activity in fiscal 2023 compared to fiscal 2022. Net cash used in financing activities increased $487.3 million from $420.5 million of cash provided in fiscal 2021 to $66.8 million of cash used in fiscal 2022.
The decrease in cash used in financing activities during the current year was due primarily to lower stock repurchase activity in fiscal 2024 compared to fiscal 2023. Net cash used in financing activities decreased $29.2 million from $66.8 million of cash used in fiscal 2022 to $37.6 million of cash used in fiscal 2023.
We believe the adjustment of this gain supplements the GAAP information with a measure that may be used to assess the performance of our ongoing operations. • Asset impairment charges: we exclude the impact of asset impairments on intangible assets as such non-cash amounts are inconsistent in amount and frequency.
We believe these exclusions supplement the GAAP information with a measure that may be useful to investors in assessing the sustainability of our operating performance. 21 • Asset impairment charges : we exclude the impact of asset impairments on intangible assets and investments as such non-cash amounts are inconsistent in amount and frequency.
Substantially all of the Garden segment’s operating income is typically generated in this period. 31 Liquidity and Capital Resources We have financed our growth through a combination of internally generated funds, bank borrowings, supplier credit, and sales of equity and debt securities to the public.
Liquidity and Capital Resources We have financed our growth through a combination of internally generated funds, bank borrowings, supplier credit, and sales of equity and debt securities to the public. Our business is seasonal and our working capital requirements and capital resources track closely to this seasonal pattern.
Pet operating income decreased $10.9 million, or 5.2%, to $198.0 million in fiscal 2023 from $208.9 million in fiscal 2022. Pet operating income decreased due to slightly lower sales, a decrease in gross margin and increased selling, general and administrative expenses. Pet operating margin decreased from 11.1% in fiscal 2022 to 10.5% in fiscal 2023.
Pet operating income increased $5.4 million, or 2.7%, to $203.4 million in fiscal 2024 from $198.0 million in fiscal 2023, due to an improved gross margin partially offset by lower net sales and increased selling, general and administrative expenses. Pet operating margin increased from 10.5% in fiscal 2023 to 11.1% in fiscal 2024.
On a non-GAAP basis, operating income declined $32.8 million in fiscal 2023. • Net income for fiscal 2023 was $125.6 million, or $2.35 per share on a diluted basis compared to $152.2 million, or $2.80 per share on a diluted basis in fiscal 2022.
On a non-GAAP basis, operating income declined $4.4 million in fiscal 2024. • Net income for fiscal 2024 was $108.0 million, or $1.62 per share on a diluted basis compared to $125.6 million, or $1.88 per share on a diluted basis in fiscal 2023.
During the second fiscal quarter, receivables, accounts payable and short-term borrowings increase, reflecting the build-up of inventory and related payables in anticipation of the peak lawn and garden selling season. During the third fiscal quarter, inventory levels remain relatively constant while accounts receivable peak and short-term borrowings start to decline as cash collections are received during the peak selling season.
During the third fiscal quarter, inventory levels remain relatively constant while accounts receivable peak and short-term borrowings start to decline as cash collections are received during the peak selling season. During the fourth fiscal quarter, inventory levels are at their lowest, and accounts receivable and payables are substantially reduced through conversion of receivables to cash.
See Note 11 - Long-Term Debt to the consolidated financial statements for description of interest rate terms. 36 (3) Contracts for purchases of grains, grass seed and pet food ingredients, used primarily to mitigate risk associated with increases in market prices and commodity availability, may obligate us to make future purchases based on estimated yields.
(3) Contracts for purchases of grains, grass seed and pet food ingredients, used primarily to mitigate risk associated with increases in market prices and commodity availability, may obligate us to make future purchases based on estimated yields. The terms of these contracts vary; some having fixed prices or quantities, others having variable pricing and quantities.
Other income (expense) was $1.5 million of income in fiscal 2023 compared to an expense of $3.6 million for fiscal 2022, due primarily to foreign currency gains in fiscal 2023 as compared to foreign currency losses in fiscal 2022. Income Tax Our effective income tax rate was 22.4% for fiscal 2023 compared to 23.2% for fiscal 2022.
Other income (expense) was an expense of $5.1 million in fiscal 2024 compared to income of $1.5 million in fiscal 2023, due primarily to a $7.5 million impairment in fiscal 2024 for two private company investments. Income Tax Our effective income tax rate was 23.2% for fiscal 2024 compared to 22.4% for fiscal 2023.
Non-GAAP financial measures reflect adjustments based on the following items: • Facility closures: we exclude the impact of the closure of facilities as they represent infrequent transactions that occur in limited circumstances that impact the comparability between operating periods.
Non-GAAP financial measures reflect adjustments based on the following items: • Facility closures and business exit : we have excluded charges related to the closure of distribution and manufacturing facilities and our decision to exit the pottery business as they represent infrequent transactions that impact the comparability between operating periods.
As a result, in fiscal 2023 we incurred approximately $15.7 million of one-time costs, including $9.8 million in cost of goods sold and $5.9 million in selling, general and administrative expenses, composed of charges for facilities closure, severance, inventory liquidation and related intangibles, the majority of which was non-cash.
As a result, we incurred approximately $7.5 million of one-time costs, including $5.2 million in cost of goods sold and $2.3 million in selling, general and administrative costs, comprised of charges for facility closures, the impairment of inventory and severance, the majority of which were non-cash.
Under different assumptions, the resulting valuations could be materially different, which could materially impact the operating results we report. Our contractual commitments are presented under the caption Liquidity and Capital Resources.
Under different assumptions, the resulting valuations could be materially different, which could materially impact the operating results we report.
Net Income and Earnings Per Share Our net income for fiscal 2023 was $125.6 million, or $2.35 per diluted share, compared to $152.2 million, or $2.80 per diluted share, for fiscal 2022. On a non-GAAP basis, net income in fiscal 2023 was $138.5 million, or $2.59 per diluted share.
On a non-GAAP basis, net income in fiscal 2024 was $142.4 million, or $2.13 per diluted share, compared to $138.5 million, or $2.07 per diluted share, for fiscal 2023.
The increase in cash provided was due primarily to changes in our working capital accounts, primarily a decrease in inventory, due to our focus on converting inventory to cash, and in accounts receivable.
The increase in cash provided was due primarily to changes in our working capital accounts, primarily a decrease in inventory, due to our focus on converting inventory to cash, and in accounts receivable. Investing Activities Net cash used in investing activities increased $70.6 million from $34.6 million in fiscal 2023 to $105.2 million in fiscal 2024.
Net availability under the Amended Credit Facility was approximately $493 million as of September 30, 2023. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for Swing Loan borrowings.
The Credit Facility includes a $50 million sublimit for the issuance of commercial and standby letters of credit and a $75 million sublimit for Swing Loan borrowings. As of September 28, 2024, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility.
These declines were partially offset by 26 increased sales in our dog and cat treats and toys business and our wild bird feed business. Pet branded sales decreased $14.1 million, and sales of other manufacturers' products increased $13.2 million. Garden net sales decreased $27.6 million, or 1.9%, to $1,432.9 million in fiscal 2023 from $1,460.5 million in fiscal 2022.
These declines were partially offset by increased sales in our animal health business. Pet branded sales decreased $45.4 million, and sales of other manufacturers' products increased $1.0 million. Garden net sales decreased $65.2 million, or 4.5%, to $1,367.7 million in fiscal 2024 from $1,432.9 million in fiscal 2023.
In fiscal 2023, our operating income was $211 million, consisting of income from our Pet segment of $198 million, income from our Garden segment of $123 million and corporate expenses of $111 million. Fiscal 2023 Financial Highlights Financial summary: • Net sales for fiscal 2023 decreased $28.5 million, or 0.9%, to $3,310 million.
In fiscal 2024, our operating income was $185 million, consisting of income from our Pet segment of $203 million, income from our Garden segment of $82 million and corporate expenses of $100 million. Fiscal 2024 Financial Highlights Financial summary: • Net sales for fiscal 2024 decreased $109.6 million, or 3.3%, to $3.2 billion.
On a non-GAAP basis, gross margin declined 80 basis points in fiscal 2023. • Our operating income decreased $49.4 million, or 19.0%, to $210.6 million in fiscal 2023.
On a non-GAAP basis, gross margin increased 110 basis points in fiscal 2024. • Our operating income declined $25.3 million, or 12.0%, to $185.4 million in fiscal 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of September 30, 2023, we had entered into fixed purchase commitments for commodities totaling approximately $218.0 million. A 10% change in the market price for these commodities would have resulted in an additional pretax gain or loss of $21.8 million as the related inventory containing those inputs is sold. Foreign Currency Risks.
Biggest changeAs of September 28, 2024, we had entered into fixed purchase commitments for commodities totaling approximately $135.6 million. A 10% change in the market price for these commodities would have resulted in an additional pretax gain or loss of $13.6 million as the related inventory containing those inputs is sold. Foreign Currency Risks.
However, if our Amended Credit Facility were fully drawn and interest rates changed by 25 basis points compared to actual rates, interest expense would have increased or decreased by approximately $1.9 million. In addition, we have investments consisting of cash equivalents and short-term investments, which are also affected by changes in market interest rates. Commodity Prices.
However, if our Credit Facility were fully drawn and interest rates changed by 25 basis points compared to actual rates, interest expense would have increased or decreased by approximately $1.9 million. In addition, we have investments consisting of cash equivalents and short-term investments, which are also affected by changes in market interest rates. Commodity Prices.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are exposed to market risks, which include changes in U.S. interest rates and commodity prices and, to a lesser extent, foreign exchange rates. We do not engage in financial transactions for trading or speculative purposes. Interest Rate Risk .
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are exposed to market risks, which include changes in U.S. interest rates and commodity prices and, to a lesser extent, foreign exchange rates. We do not engage in financial transactions for trading or speculative purposes. 32 Interest Rate Risk .
Therefore, we have only minimal exposure to foreign currency exchange risk. We do not hedge against foreign currency risks and believe that foreign currency exchange risk is immaterial to our current business. 38 Item 8. Financial Statements and Supplementary Data See pages beginning at F-1. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.
Therefore, we have only minimal exposure to foreign currency exchange risk. We do not hedge against foreign currency risks and believe that foreign currency exchange risk is immaterial to our current business. 33 Item 8. Financial Statements and Supplementary Data See pages beginning at F-1. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.
Our market risk associated with foreign currency rates is not considered to be material . To date, we have had minimal sales outside of the United States. Purchases made by our U.S. subsidiaries from foreign vendors are primarily made in U.S. dollars. Our international subsidiary transacts most of its business in British pounds and Canadian dollars.
Our market risk associated with foreign currency rates is not material . To date, we have had minimal sales outside of the United States. Purchases made by our U.S. subsidiaries from foreign vendors are primarily made in U.S. dollars. Our international subsidiary transacts most of its business in British pounds and Canadian dollars.
We are exposed to fluctuations in market prices for grains, grass seed, chemicals, fertilizer ingredients and pet food ingredients. To mitigate risk associated with increases in market prices and commodity availability, we enter into contracts for purchases, primarily to ensure commodity availability to us in the future.
We are exposed to fluctuations in market prices for grains, grass seed, chemicals, fertilizer ingredients and pet treat ingredients. To mitigate risk associated with increases in market prices and commodity availability, we enter into contracts for purchases, primarily to ensure commodity availability to us in the future.
The interest payable on our Amended Credit Facility is based on variable interest rates and therefore affected by changes in market interest rates. We had no variable rate debt outstanding as of September 30, 2023 under our Amended Credit Facility.
The interest payable on our Amended Credit Facility is based on variable interest rates and therefore affected by changes in market interest rates. We had no variable rate debt outstanding as of September 28, 2024 under our Credit Facility.

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