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What changed in CENTRAL GARDEN & PET CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CENTRAL GARDEN & PET CO's 2022 and 2023 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 2023 report.

+333 added−345 removedSource: 10-K (2023-11-28) vs 10-K (2022-11-22)

Top changes in CENTRAL GARDEN & PET CO's 2023 10-K

333 paragraphs added · 345 removed · 250 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

100 edited+20 added−25 removed53 unchanged
Biggest changeThe pet supplies segment includes: products for dogs and cats including edible bones, premium healthy edible and non-edible chews, rawhide, toys, pet beds, pet containment, grooming supplies and other accessories; products for birds, small animals and specialty pets including cages and habitats, toys, food and chews and related accessories; animal and household health and insect control products; products for fish, reptiles and other aquarium-based pets including aquariums, terrariums, stands and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources; as well as products for equine and livestock.
Biggest changeThe 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.
Item 1. Business Our Company Central Garden & Pet Company (“Central”) is a market leader in the garden and pet industries in the United States. For over 40 years, Central has proudly nurtured happy and healthy homes by bringing innovative and trusted solutions to consumers and customers. We manage our operations through two reportable segments: Pet and Garden.
Item 1. Business Our Company Central Garden & Pet Company (“Central”) is a market leader in the pet and garden industries in the United States. For over 40 years, Central has proudly nurtured happy and healthy homes by bringing innovative and trusted solutions to consumers and customers. We manage our operations through two reportable segments: Pet and Garden.
Our Pet segment includes dog and cat supplies such as dog treats and chews, toys, pet beds and grooming products, waste management and training pads, pet containment; 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 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.
We are a patient and disciplined value buyer, typically focused on opportunities that build scale in our core garden and pet categories or in priority adjacencies, with a recent emphasis on those that enhance key capabilities, for example in digital and eCommerce.
We are a patient and disciplined value buyer, typically focused on opportunities that build scale in our core pet and garden categories or in priority adjacencies, with a recent emphasis on those that enhance key capabilities, for example in digital and eCommerce.
For example, in the United States, all pesticides must be registered with the United States Environmental Protection Agency (the “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.
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.
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; • 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 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.
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 specialty retail stores, serving traditional brick & 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 omnichannel and pure-play retailers selling only through the internet. In addition, we operate facilities in China, Canada, the United Kingdom and Mexico.
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. 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 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.
Pet Sales and Distribution Network Our domestic sales and distribution network exists to promote both our proprietary brands and third-party partner 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 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.
Our Central Impact Strategy - focused on protecting our planet, cultivating our communities and empowering our employees - is our commitment and approach to sustainability. 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.
Our Central Impact strategy - focused on protecting our planet, cultivating our communities and empowering our employees - is our commitment and approach to corporate sustainability. 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.
In order to ensure an adequate supply of grains and seed to satisfy expected production volume, we enter into contracts to purchase a portion of our expected grain and seed requirements at future dates by fixing the quantity, and often the price, at the commitment date.
In order to ensure an adequate supply of grains and seeds to satisfy expected production volume, we enter into contracts to purchase a portion of our expected grain and seed requirements at future dates by fixing the quantity, and often the price, at the commitment date.
Walker became our President of Garden Consumer Products in 2017 and has responsibility for Central's branded garden business including sales, marketing operations, the controls and fertilizer, grass seed and vendor partner business units, as well as the retail sales & service team and garden distribution.
Walker became our President of Garden Consumer Products in 2017 and has responsibility for Central's branded garden business including sales, marketing operations, the controls and fertilizer, grass seed and vendor partner business units, as well as the retail sales & service team.
We believe this gives us a competitive advantage over other suppliers as this network provides us with key access to independent pet specialty retail stores and retail lawn and garden customers that require two-step distribution, facilitating acquisition and maintenance of shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products and immediate exposure for new internally developed and acquired brands.
We believe this gives us a competitive advantage over other suppliers, as this network provides us with key access to independent pet specialty retail stores and select national retail lawn and garden customers that require two-step distribution, facilitating acquisition and maintenance of shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products and immediate exposure for new internally developed and acquired brands.
We recognize financial stability is a critical component to our employees’ well-being. Our competitive compensation programs include base salary or hourly compensation for all employees.
We recognize that financial stability is a critical component to our employees’ well-being. Our competitive compensation programs include base salary or hourly compensation for all employees.
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 the lawn and garden consumables market.
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.
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 ® , Comfort Zone ® , Farnam ® , Four Paws ® , K&H Pet Products ® ( “ K&H ” ), Kaytee ® , Nylabone ® and Zilla ® .
We estimate the annual retail sales of the lawn and garden consumables market in the categories in which we participate to be approximately $31 billion. The lawn and garden consumables market is highly concentrated with most products sold to consumers through a number of distribution channels, including home centers, mass merchants, independent nurseries and hardware stores.
We estimate the annual retail sales of the lawn and garden consumables market in the categories in which we participate to be approximately $30 billion. The lawn and garden consumables market is highly concentrated with most products sold to consumers through a number of distribution channels, including home centers, mass merchants, independent nurseries and hardware stores.
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 subsidizing college and advanced degrees for eligible employees.
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 plan to continue to utilize our team of dedicated salespeople and our sales and logistics networks to expand sales of our branded products. Strong and Experienced Leadership Team Our leadership team is committed to delivering value for all our stakeholders and is comprised of highly tenured professionals, combining both deep Central and consumer products industry expertise.
We plan to continue to utilize our team of dedicated salespeople and our sales and logistics networks to expand sales of our branded pet and garden products. Strong and Experienced Leadership Team Our leadership team is committed to delivering value for all our stakeholders and is comprised of highly tenured professionals, combining both deep Central and consumer products industry expertise.
In addition, we operate our Arden Companies ® outdoor cushion business in the Pet segment due to synergies in sourcing, manufacturing and innovation with our pet bedding business. We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.
In addition, we operate our Arden Companies ® outdoor cushion business in the Pet segment due to synergies in sourcing, manufacturing and innovation with our pet bed business. We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.
Our objective is to partner with leading entrepreneurs and innovators in the garden and pet industries and leverage our experience and capabilities to accelerate growth. The fund is primarily focused on three emerging growth areas across the pet and garden industries: sustainability, health and wellness, and digitally connected products and services.
Our objective is to partner with leading entrepreneurs and innovators in the pet and garden industries and leverage our experience and capabilities to accelerate growth. The fund is primarily focused on three emerging growth areas in our two industries: sustainability, health and wellness, and digitally connected products and services.
Human Capital Management We believe Central employees are part of our organization because they are passionate about the pet and garden industries. Every Central Team member and every job is important to our success and helping us to achieve our purpose.
Human Capital Management We believe one of the reasons Central employees are part of our organization is because they are passionate about the pet and garden industries. Every Central Team member and every job is important to our success and helping us to achieve our purpose.
We encourage and drive high standards in our safety performance by recording, reporting and investigating all incidents to root cause. In the ongoing push for progress, we set new annual safety targets and invest in our operational capabilities.
We encourage and drive high standards in our occupational health and safety performance by recording, reporting and investigating all incidents to root cause. In the ongoing push for progress, we set new annual safety targets and invest in our operational capabilities.
We demonstrated our commitment to sustainability by publishing our first Central Impact Report in fiscal 2022.
We demonstrated our commitment to corporate sustainability by publishing our first Central Impact report in fiscal 2022.
To address the changing consumer landscape, we are building out our digital and eCommerce capabilities while also ensuring we have the right policies, products and programs to allow all channels to compete effectively. Concurrently, we are optimizing our supply chain for high-demand eCommerce items to ensure customer and consumer availability requirements are met at optimal cost.
To address the changing consumer landscape, we continue to build out our digital and eCommerce capabilities while also ensuring we have the right policies, products and programs to allow all channels to compete effectively. Concurrently, we are optimizing our supply chain for high-demand eCommerce items to ensure customer and consumer availability requirements are met at optimal cost.
We are the only domestic producer of (S)-Methoprene, which is an active ingredient used to control mosquitoes, flies, fleas, beetles and ants in many professional and consumer insect control applications.
We are the only domestic provider of (S)-Methoprene, which is an active ingredient used to control mosquitoes, flies, fleas, beetles and ants in many professional and consumer insect control applications.
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, Superthrive ® and Pro Care ® brand names and other private and controlled labels. 7 Live Plants.
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.
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 2022.
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.
Grass and other seed 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, 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.
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, mass merchants, grocery and drug stores, as well as the eCommerce channel.
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 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 11% of our Pet segment's net sales in both fiscal 2022 and 2021. 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 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.
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 $32 billion in annual retail sales in 2022, 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 2023, including grass and other seeds, fertilizer, controls, live goods, wild bird products as well as soil and mulch.
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 our employees work at Central 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.” 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.
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 10.2% 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 8.4% annually over the last five years, driven by acquisitions and organic growth.
Finally, we are also investing in sales planning, net revenue management and price pack architecture. Central: Fortify the Central Portfolio We are managing each business differentially, based on clearly articulated strategies that define the role of each business within our portfolio. We have assessed the profitability and growth potential of each of our businesses.
Finally, we are also investing in sales planning, net revenue management and price pack architecture. Central: Fortify the Central Portfolio We are managing each business differentially, based on clearly articulated strategies that define the role of each business within our portfolio. We regularly assess the profitability and growth potential of each of our businesses.
Many of our branded wild bird mixes are treated with a proprietary blend of vitamins and minerals. For example, our Pennington brand 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. Fertilizers.
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.
In fiscal 2022, Field + Forest by Kaytee Hay Bale was selected as an Editor’s Choice Winner by Pet Product News, Nylabone again won Chew Toy Product of the Year award, Kaytee NutriSoft™ was selected as winner of the Bird Food Product of the Year award and Vetrolin® Bath was selected as winner of the Shampoo Product of the Year award in the 2022 Pet Independent Innovation Awards.
In fiscal 2022, Field + Forest™ by Kaytee Hay Bale was selected as an Editor’s Choice Winner by Pet Product News, Nylabone won Chew Toy Product of the Year award, Kaytee NutriSoft™ was selected as winner of the Bird Food Product of the Year award, and Vetrolin ® Ba th was selected as winner of the Shampoo Product of the Year award in the 2022 Pet Independent Innovation Awards.
Our 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. Aquatics and Reptile Supplies.
Our 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.
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 don’t grow, such as orchids and indoor plants.
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.
Lowe's, Costco and Petco are also significant customers, and together with Walmart and Home Depot, accounted for approximately 51% of our net sales in both fiscal 2022 and 2021. 3 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.
Lowe's, Costco and Petco are also significant customers, and together with Walmart and Home Depot, they accounted for approximately 52% of our net sales in fiscal 2023 and and 51% in fiscal 2022. 3 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.
We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Walmart and Petco and among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s, and the club and mass merchandise channels, as well as a leading supplier to independent pet and lawn and garden retailers in the United States.
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 continuously strive to get a deeper understanding of our consumers, including what products and features they desire and how they make their purchasing decisions. We are investing in consumer insights, data analytics and research and development to achieve our innovation goals with a strong pipeline of new products.
We continuously strive to get a deeper understanding of our consumers, the products and features they desire and how they make their purchasing decisions. We are investing in consumer insights, data analytics as well as research and development to achieve our innovation goals with a strong pipeline of new products.
Based on Packaged Facts estimates for 2022, we estimate the annual retail sales of the pet supplies, live animal and treats and chews markets in the categories in which we participate to be approximately $30 billion.
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.
In addition, we provide an annual 401k profit-sharing bonus program 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 through annual and individual grants.
We supply calming products under the Comfort Zone brand, dog supplements under our GoodGood brand as well as flea and tick controls under the Adams ® brand. We also offer innovative products for horses in the fly control, supplements, grooming, deworming, wound care, leather care and rodenticides categories.
We supply calming products under the Comfort Zone brand, and flea and tick controls under the Adams ® brand. We also offer innovative products for horses in the fly control, supplements, grooming, deworming, wound care, leather care and rodenticides categories.
Operating income grew slightly faster over the same period, 10.8% on a GAAP basis annually. 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 4.7% 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.
Our products are sold primarily under the Starbar ® and Zoëcon ® family of brands, as well as standalone brands such as Altosid ® , Centynal ™ , ClariFly ® IGR, Diacon ® , Essentria ® and Extinguish ® . We also sell (S)-Methoprene to manufacturers of other insect control products, including Frontline Plus. Live Fish and Small Animals .
Our products are sold primarily under the Starbar ® and Zoëcon ® family of brands, as well as standalone brands such as Altosid ® , Centynal™, ClariFly ® IGR, Diacon ® , Essentria ® and Extinguish ® . We also sell (S)-Methoprene to manufacturers of other insect control products, including Frontline Plus. Aquatics and Reptile Supplies.
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. Small Animal and Bird Supplies.
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 .
The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2022 was estimated by Packaged Facts to have been approximately $131 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 2023 was estimated by Packaged Facts to be approximately $145 billion. We expect the industry to continue to grow from that foundation.
From 1972 to 1977, he was with McKesson Corporation where he was responsible for its 200-site data processing organization. Prior to joining McKesson Corporation, Mr. Brown spent the first 10 years of his business career at McCormick, Inc. in manufacturing, engineering and data processing. 10 Timothy P. Cofer . Mr. Cofer became our Chief Executive Officer in October 2019.
From 1972 to 1977, he was with McKesson Corporation where he was responsible for its 200-site data processing organization. Prior to joining McKesson Corporation, Mr. Brown spent the first 10 years of his business career at McCormick, Inc. in manufacturing, engineering and data processing. Mary Beth Springer. Ms. Springer became our Interim Chief Executive Officer in October 2020.
We make available free of charge, on or through our website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing or furnishing such reports with the Securities and Exchange Commission. Information contained on our web site is not part of this report. 11
Available Information Our web site is www.central.com. We make available free of charge, on or through our website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing or furnishing such reports with the Securities and Exchange Commission.
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 Garden and Pet Segments We are one of the leaders in the U.S. pet supplies market and the lawn and garden consumables market.
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.
Walmart, our largest customer, represented approximately 17% of our total company net sales in fiscal 2022 and 16% in fiscal 2021. Home Depot, our second largest customer, represented approximately 16%, and 15% of our total company net sales in fiscal 2022 and 2021, 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.
As of September 24, 2022, we had approximately 7,000 employees, of whom approximately 6,400 were full-time employees and 600 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 experienced during the spring and summer months.
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.
The majority of our temporary employees are paid on an hourly basis. Except for approximately 50 employees at a facility in Puebla, Mexico, none of our employees are represented by a labor union. The attrition rate of our non-seasonal full-time and part-time workforce was 36% in fiscal 2022.
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.
Our Senior Vice President 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.
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.
The pet food and supplies industry retail channel is composed of a wide range of retailers, from national chains like Petco and PetSmart to approximately 14,000 independent pet specialty stores in addition to mass-market, online and other retailers.
The pet food and supplies industry retail channel is composed of a wide range of retailers, from national chains like Petco and PetSmart to approximately 5,900 independent/non-chain pet stores in addition to mass-market, farm & feed stores, online and other retailers.
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 seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.
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.
Garden Sales and Distribution Network Our sales and distribution network exists primarily to promote our proprietary brands and provides us with key access to retail stores 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, immediate exposure for acquired brands and comprehensive and strategic information.
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.
The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling over 4,400 customers and over 38,000 stores to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.
The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling select national retail chains to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.
We are also committed to divesting businesses where we cannot find a path to profitability and have done so in the past, for example the disposal of our dog and cat food business in 2020. Central Ventures, our venture fund which we established in 2020, further supports our M&A strategy.
We are also committed to divesting businesses where we cannot find a path to profitability and have done so in the past. For example, we sold our distribution business into the independent garden channel in 2023. Central Ventures, our venture fund which we established in 2020, further supports our M&A strategy.
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 the Vivitar Corporation with responsibility for Finance, Operations and Research & Development.
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.
Women serve in several senior leadership roles, holding 39% of leadership positions (defined as Managers, Directors and Senior leaders (Vice President and above), including Senior Vice President Human Resources, General Counsel and Secretary, Chief of Staff, Senior Vice President Pet Consumer Marketing, Vice President Accounting Operations, Vice President Investor Relations, Vice President Corporate Development, Vice President Real Estate, President Segrest, General Manager Health & Wellness and Vice President Pet Specialty Sales.
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.
Pet Supplies Plus acknowledged one of our leaders with the prestigious Lifetime Achievement Award at their annual Suppliers Awards meeting and our pet distribution business was awarded the 2022 Distributor of the Year Award by Petsense by Tractor Supply. In fiscal 2021, Bell Nursery was awarded Home Depot's Supplier Partner of the Year.
In fiscal 2022, Petco recognized Central as the Companion Animal Vendor of the Year, and Pet Supplies Plus acknowledged one of our leaders with the prestigious Lifetime Achievement Award at their annual Suppliers Awards meeting. Our pet distribution business was awarded the 2022 Distributor of the Year Award by Petsense by Tractor Supply.
In addition, our Garden segment operates a manufacturing, sales and distribution network that strategically supports our brands. 6 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 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.
We are seeing promising early marketing campaign results driving accelerated growth and share gains across several brands, including our Pennington "Smart from The Start" and Kaytee "All for the Small" 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 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.
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. We acquired D&D Commodities Ltd.
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.
We believe the depth and breadth of their perspectives and experiences create an optimal foundation for our entrepreneurial business-unit led growth culture and facilitates innovation, which is critical to capturing and maintaining market share. Pet Segment Pet Overview We are one of the leading producers and marketers of pet supplies in the United States.
We believe the depth and breadth of their perspectives and experiences create an optimal foundation for our entrepreneurial business-unit led growth culture and facilitates innovation, which is critical to capturing and maintaining market share. In 2023, our Chairman and founder, William E.
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 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 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 when necessary.
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. Grass Seed.
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.
In addition to patents, we have numerous active ingredient registrations, end-use product registrations and trade secrets. 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 but some are not.
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.
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. 8 The principal raw materials required for our bird feed are bulk commodity grains, including millet, milo and sunflower seeds, which are generally purchased from large national commodity companies and local grain cooperatives.
The principal raw materials required for our bird feed are bulk commodity grains, including millet, milo and sunflower seeds, which are generally purchased from large national commodity companies and local grain cooperatives.
Patents, Trademarks and Other Proprietary Rights We hold numerous patents in the United States and in other countries and have several patent applications pending. We consider the development of patents through creative research and the maintenance of an active patent program to be advantageous to our business, but do not regard any particular patent as essential to our operations.
We consider the development of patents through creative research and the maintenance of an active patent program to be advantageous to our business, but do not regard any particular patent as essential to our operations. In addition to patents, we have numerous active ingredient registrations, end-use product registrations and trade secrets.
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.
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.
We sell these products under the American Seed ® , Ferry-Morse, Livingston ® , McKenzie ® Seed, Jiffy and other brand names. 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, Wild Delight ® and 3-D ® Pet Products 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, 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.
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 we participate in are Mars, Inc., Spectrum Brands and the J.M. Smucker Co.
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.
Prior to his promotion, he served as Executive Vice President and General Manager - Garden Branded Business from 2014 to 2017 and began with Central as Senior Vice President - Garden Sales in 2011. Prior to joining Central, Mr.
He served as Executive Vice President and General Manager - Garden Branded Business from 2014 to 2017 and began with Central as Senior Vice President - Garden Sales in 2011. Prior to joining Central, Mr. Walker held increasingly senior positions for 13 years with Spectrum Brands and for 17 years with The Gillette Company's Duracell North American Group.
We are open to businesses that, on top of traditional operating synergies, can leverage our expertise and capabilities and allow us to add value through our low-cost manufacturing and distribution competencies.
We are open to businesses that, on top of traditional operating synergies, can leverage our expertise and capabilities and allow us to add value through our low-cost manufacturing and distribution competencies. We generally prefer to acquire brand-focused businesses with growth and margin rates above Central’s rates, with proven, seasoned management teams, who are committed to stay with the acquired business.
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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDeterioration 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 24, 2022, we had total indebtedness of approximately $1.2 billion.
Biggest changeBecause 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.
There can be no assurance that future litigation will not be necessary to enforce our trademarks or proprietary rights or to defend ourselves against claimed infringement or the rights of others. Any future litigation of this type could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations.
There can be no assurance that future litigation will not be necessary to enforce our trademarks or proprietary rights or to defend ourselves against claimed infringement of the rights of others. Any future litigation of this type could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations.
This level of indebtedness and our future borrowing needs could have material adverse consequences for our business, including: • make it more difficult for us to satisfy our obligations with respect to the terms of our indebtedness; • require us to dedicate a large portion of our cash flow to pay principal and interest on our indebtedness, which would reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other business activities; • increase our vulnerability to adverse industry conditions, including unfavorable weather conditions or commodity price increases; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • restrict us from making strategic acquisitions or exploiting business opportunities; 17 • place us at a competitive disadvantage compared to competitors that have less debt; and • limit our ability to borrow additional funds at reasonable rates, if at all.
This level of indebtedness and our future borrowing needs could have material adverse consequences for our business, including: • make it more difficult for us to satisfy our obligations with respect to the terms of our indebtedness; • require us to dedicate a large portion of our cash flow to pay principal and interest on our indebtedness, which would reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other business activities; • increase our vulnerability to adverse industry conditions, including unfavorable weather conditions or commodity price increases; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • restrict us from making strategic acquisitions or exploiting business opportunities; • place us at a competitive disadvantage compared to competitors that have less debt; and • limit our ability to borrow additional funds at reasonable rates, if at all.
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.
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.
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 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. 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.
Despite these efforts, a bankruptcy filing or liquidation by a key customer could have a material adverse effect on our business, results of operations and financial condition in the future. 15 If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our results of operations and financial condition could be negatively impacted.
Despite these efforts, a bankruptcy filing or liquidation by a key customer could have a material adverse effect on our business, results of operations and financial condition in the future. If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our results of operations and financial condition could be negatively impacted.
To mitigate our exposure to changes in market prices, we enter into purchase contracts for grains, bird feed and grass seed to cover a limited portion of our purchase requirements for a selling season. Since these contracts cover only a portion of our purchase requirements, as 13 market prices for such products increase, our cost of production increases as well.
To mitigate our exposure to changes in market prices, we enter into purchase contracts for grains, bird feed and grass seed to cover a limited portion of our purchase requirements for a selling season. Since these contracts cover only a portion of our purchase requirements, as market prices for such products increase, our cost of production increases as well.
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.
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.
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.
In connection with our annual goodwill impairment testing performed during fiscal years 2022, 2021 and 2020, 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 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.
If cash on hand and borrowings under our credit facility are ever insufficient to meet our seasonal needs or if cash flow 14 generated during the spring and summer is insufficient to repay our borrowings on a timely basis, this seasonality could have a material adverse effect on our business.
If cash on hand and borrowings under our credit facility are ever insufficient to meet our seasonal needs or if cash flow generated during the spring and summer is insufficient to repay our borrowings on a timely basis, this seasonality could have a material adverse effect on our business.
During fiscal 2022, 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.
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.
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.
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.
Our founder, through his holdings of our Class B common stock, exercises effective control of the Company, which may discourage potential acquisitions of our business and could have an adverse effect on the market price of our stock.
Our Chairman and founder, through his holdings of our Class B common stock, exercises effective control of the Company, which may discourage potential acquisitions of our business and could have an adverse effect on the market price of our stock.
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 who are more capable of resisting price increases and who can demand lower pricing.
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.
If 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 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.
In both fiscal 2021 and fiscal 2022, 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 with our retailers, it is possible that price increases may not fully offset continued high costs in the future, resulting in margin erosion.
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.
Continued high energy prices in the future 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 during economic downturns could reduce our sales and harm our business.
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 has had, and could have, a negative impact on us.
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.
In addition, the disproportionate voting rights of our Class B common stock, and the ability of the board to issue stock to persons friendly to current management, may make us a less attractive target for a takeover than we otherwise might 20 be or render more difficult or discourage a merger proposal, tender offer or proxy contest, even if such actions were favored by our common stockholders, which could thereby deprive holders of common stock of an opportunity to sell their shares for a “take-over” premium.
In addition, the disproportionate voting rights of our Class B common stock, and the ability of the board to issue stock to persons aligned with current management, may make us a less attractive target for a takeover than we otherwise might be or render more difficult or discourage a merger proposal, tender offer or proxy contest, even if such actions were favored by our common stockholders, which could thereby deprive holders of common stock of an opportunity to sell their shares for a “take-over” premium.
Factors 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 rising interest rates and a potential recession, and the impact either could have on consumer discretionary spending; • seasonality and adverse weather conditions; • fluctuations in prices of commodity grains and other input costs; • supply chain and sourcing disruptions, including due to the COVID-19 pandemic and 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.
Factors 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.
Competition could lead to lower sales volumes, price reductions, reduced profits, losses, or loss of market share. Our inability to compete effectively could have a material adverse effect on our business, results of operations and financial condition. 16 We continue to implement enterprise resource planning information technology systems.
Our inability to compete effectively could lead to lower sales volumes, price reductions, reduced profits, losses, or loss of market share which could have a material adverse effect on our business, results of operations and financial condition. We continue to implement enterprise resource planning information technology systems.
Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including the current inflationary environment, rising interest rates, the potential for an upcoming 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 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 largest competitors in the Pet segment are Spectrum Brands, Hartz Mountain, Mars, Inc. and the J.M Smucker Co., and our largest competitors in the Garden segment are Scotts Miracle-Gro, Spectrum Brands and S.C. Johnson.
Our largest competitors in the Pet segment are Spectrum Brands, Mars, Inc. and the J.M Smucker Co., and our largest competitors in the Garden segment are Scotts Miracle-Gro, Spectrum Brands and S.C. Johnson.
Walmart, our largest customer, represented approximately 17% of our total company net sales in fiscal 2022, 16% in fiscal 2021 and 17% in fiscal 2020. Home Depot, our second largest customer, represented approximately 16%, 15% and 13% of our total company net sales in fiscal 2022, 2021 and 2020, respectively.
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.
Lowe's, our third largest customer, represented approximately 8%, 9% and 10% of our total company net sales in fiscal 2022, 2021 and 2020, respectively. Costco and Amazon are also significant customers, and together with Walmart, Home Depot and Lowe's accounted for approximately 51% of our net sales in fiscal 2022.
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.
These two systems are expected to replace 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 12.
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.
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 2022, approximately 66% of our Garden segment’s net sales and 59% of our total net sales occurred during our second and third fiscal quarters.
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.
Holders of our Class A common stock have no voting rights, except as required by Delaware law. As of September 24, 2022, William E. Brown, our 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 30, 2023, William E. Brown, our Chairman and founder, beneficially controlled approximately 55% of the voting power of our capital stock.
A significant outbreak in the United States would reduce demand for our pet and wild bird food and negatively impact our financial results. Our Segrest subsidiary is the largest supplier of aquarium fish in the United States and also supplies pet birds and small animals.
In addition, some countries have experienced outbreaks of avian flu. A significant outbreak in the United States would reduce demand for our pet and wild bird food and negatively impact our financial results. Our Segrest subsidiary is the largest supplier of aquarium fish in the United States and also supplies pet birds and small animals.
To mitigate the adverse impact of supply chain disruptions on our fill rates, we increased our inventory levels significantly during fiscal 2022.
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.
Our revenues and margins are dependent on various economic factors, including rates of inflation, interest rates, the potential of an upcoming economic recession, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact consumer spending.
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.
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. General Risks Our success depends upon our retaining and recruiting key personnel.
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.
As a result of such circumstances, we may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets or other long-term assets is determined.
As a result of such circumstances, we may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets or other long-term assets is determined. Any such impairment charges could have a material adverse effect on our results of operations and financial condition.
Capital expenditures for our enterprise resource planning software systems for fiscal 2023 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.
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.
After we embarked on a company-wide strategic review led by our Chief Executive Officer, we developed our Central to Home strategy, which consists of a comprehensive series of organizational and operational initiatives intended to build and grow our consumer brands, create a leading eCommerce platform and strengthen our relationships with key customers, drive a strong portfolio strategy, reduce costs to improve margins and fuel growth and strengthen our entrepreneurial, business unit-led growth culture.
Our Central to Home strategy consists of a comprehensive series of organizational and operational initiatives intended to build and grow our consumer brands, create a leading eCommerce platform and strengthen our relationships with key customers, drive a strong portfolio strategy, reduce costs to improve margins and fuel growth and strengthen our entrepreneurial, business unit-led growth culture.
Our performance is substantially dependent upon the continued services of Timothy P. Cofer, our Chief Executive Officer, and our senior management team. The loss of the services of these persons 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, including the recent departure of our former Chief Executive Officer in October 2023, could have a material adverse effect on our business.
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. Supply disruptions in pet birds, small animals and fish may negatively impact our sales.
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.
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 in the event that key retailers replace our branded products with private label product manufactured by others.
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, such as Walmart's decision to exit the live fish business in 2019, can also have a significant impact on our business.
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.
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 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.
During fiscal 2021 and fiscal 2022, energy prices increased substantially and have remained elevated, which resulted in increased fuel costs for our businesses and increased raw materials costs for many of our products, and may continue to rise during fiscal 2023.
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.
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.
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.
Any such impairment charges could have a material adverse effect on our results of operations and financial condition. 18 During fiscal 2022, 2021 and 2020, 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.
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.
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. 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.
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.
Risks Relating to our Capital Stock We do not expect to pay dividends in the foreseeable future. We have never paid any cash dividends on our common stock or Class A common stock and currently do not intend to do so.
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.
If these restrictions become more severe, or similar restrictions become applicable to pet fish, our future sales of these products would likely suffer, which would negatively impact our profitability. In addition, some countries have experienced outbreaks of avian flu.
These restrictions have resulted in reduced availability of new pet birds and small animals and thus reduced demand for pet bird and small animal food and supplies. If these restrictions become more severe, or similar restrictions become applicable to pet fish, our future sales of these products would likely suffer, which would negatively impact our profitability.
Our future performance depends on our ability to attract and retain skilled employees in all facets of our business, including management and manufacturing and distribution. We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees in the future.
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.
During both fiscal 2021 and fiscal 2022, we experienced high levels of inflation resulting in significant cost increases in many parts of our business, including input costs, labor costs, and fuel costs. We expect the inflationary environment to continue during fiscal 2023 and some economist predict that the U.S. economy may enter an economic recession.
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.
The federal government and many state governments have increased restrictions on the importation of pet birds and the supply of small animals. These restrictions have resulted in reduced availability of new pet birds and small animals and thus reduced demand for pet bird and small animal food and supplies.
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.
If we are unable to pass through rising input costs and raise the price of our products, or consumer confidence and purchasing weakens, we may experience organic sales declines and gross margin and operating income declines. High energy prices could adversely affect our operating results.
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.
Removed
Risks Affecting our Business Inflation, rising interest rates, economic uncertainty, including a potential recession, and other adverse macro-economic conditions may harm our business.
Added
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.
Removed
The COVID-19 pandemic has impacted how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. The outbreak of the global COVID-19 pandemic in fiscal 2020 has impacted our day-to-day operations and the operations of the vast majority of our customers, suppliers, and consumers.
Added
We have, and we will continue to have, significant indebtedness. As of September 30, 2023, we had total indebtedness of approximately $1.2 billion.
Removed
While the availability and accessibility of vaccines and boosters in the U.S. reduced the impact of COVID-19 in fiscal 2022, COVID-19 and its new variants may continue to affect how we and our customers are operating our businesses and overall demand for our products. 12 We have experienced varying impacts to our Garden and Pet businesses due to COVID-19.
Added
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.
Removed
Many of our product categories in both Pet and Garden benefited from increased pet adoption during the pandemic and stay at home orders and remote working that positively impacted demand for our products. We have also seen an increase in demand in the eCommerce channel.
Added
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.
Removed
The pandemic and increase in demand for our products created operational challenges for our distribution network and impacted our ability to meet our normal fill rate standards. Our supply chain was also impacted by the rapid increase in demand, and we experienced increased operational and logistics costs.
Added
"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.
Removed
During fiscal 2022, we increased inventories to mitigate the impact of supply chain shortages and improve fill rates, which increased carrying costs. We may experience additional disruptions in our supply chain if the pandemic worsens, though we cannot reasonably estimate the potential impact or timing of those events.
Added
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Removed
As fiscal 2022 progressed, the impact of the pandemic lessened and high inflation continued, negatively impacting consumer purchasing behavior and resulting in higher levels of inventory at our customers and at Central. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.
Added
As a result of its evaluation, management identified two material weaknesses: (1) in information technology general computer controls ("ITGCs") relating to access and program change management controls and (2) controls relating to an outsourced service provider at two acquired businesses whose IT systems had not yet been fully integrated with our corporate IT control structure.
Removed
Supply chain delays and interruptions may result in lost sales, reduced fill rates and service levels and delays in expanding capacity and automating processes. The COVID-19 pandemic and the rapid increase in demand for our products created operational challenges for our distribution network which impacted our service and fill rates and resulted in lost sales.
Added
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.
Removed
In fiscal 2020 and fiscal 2021, the increased demand for our products challenged our supply chain and our ability to procure and manufacture enough product to meet the high levels of demand.
Added
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.
Removed
As fiscal 2022 progressed, demand for our products stabilized as did the availability of materials and labor, while inflation rose at unprecedented levels, resulting in increased costs for key commodities, materials, labor and freight.
Added
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.
Removed
We may experience additional disruptions in our supply chain, whether due to the ongoing COVID-19 pandemic or the volatile geopolitical environment, which would impact our ability to procure the materials needed for manufacture or our ability to ship our products to our customers.
Added
The occurrence of, or failure to remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect the accuracy and reliability and timeliness of our financial statements and have other consequences that could materially and adversely affect our business. General Risks Our success depends upon our retaining and recruiting key personnel.
Removed
We cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact. 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.
Added
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.
Removed
Additionally, some retailers are increasing their emphasis on private label products. These retailers may also in the future use more of their shelf space, currently used for our products, for their store brand products.
Added
We rely extensively on information technology (IT) systems, networks and services, including internet and intranet sites, data hosting and processing facilities and technologies, physical security systems and other hardware, software and technical applications and platforms, many of which are managed, hosted, provided and/or used by third parties or their vendors, to assist in conducting our business.
Removed
There were no impairment losses recorded in fiscal years 2020, 2021 and 2022.
Added
Numerous and evolving information security threats, including advanced persistent cybersecurity threats, pose a risk to the security of our services, systems, networks and supply chain, as well as to the confidentiality, availability and integrity of our data and of our critical business operations.
Removed
We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks. Our business employs systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, suppliers and others, including personally identifiable information.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We currently operate 45 manufacturing facilities totaling approximately 6.7 million square feet and 66 sales and distribution facilities totaling approximately 6.0 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 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.
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.
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.
In addition to the manufacturing and sales and distribution facilities, the Garden segment leases approximately 270 acres of land in Oregon, New Jersey and Virginia used in its grass seed and live plant operations and owns approximately 574 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 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.
We lease 21 of our manufacturing facilities and 52 of our sales and logistics facilities. These leases generally expire between fiscal years 2023 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 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−2 removed5 unchanged
Biggest changeOur 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.
Biggest changeOur 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.
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 30, 2017 to September 24, 2022 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 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.
As of September 24, 2022, we had $100 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 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”).
Period 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 26, 2022 – July 30, 2022 304,405 (2) $ 40.35 304,405 $ 100,000,000 July 31, 2022 – August 27, 2022 73,001 (2) (3) 41.05 69,350 100,000,000 August 28, 2022 – September 24, 2022 121,614 (2) 36.42 121,614 100,000,000 Total 499,020 $ 39.50 495,369 $ 100,000,000 (4) (1) In August 2019, our Board of Directors authorized a new share repurchase program to purchase up to $100 million of our common stock (the "2019 Repurchase Authorization”).
Period 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”).
Total Return Analysis 9/30/2017 9/29/2018 9/28/2019 9/26/2020 9/25/2021 9/24/2022 Central Garden & Pet Company $ 100.00 $ 92.79 $ 76.18 $ 97.32 $ 120.16 $ 96.91 NASDAQ Composite $ 100.00 $ 125.17 $ 124.88 $ 173.31 $ 240.72 $ 175.22 Dow Jones US Nondurable Household Products $ 100.00 $ 97.66 $ 143.21 $ 164.90 $ 171.41 $ 164.41 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 24, 2022 and the dollar amount of authorized share repurchases remaining under our stock repurchase programs.
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.
Removed
As of November 11, 2022, there were approximately 72 holders of record of our common stock, approximately 385 holders of record of our Class A nonvoting common stock and 3 holders of record of our Class B stock.
Added
(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
Removed
(4) Excludes 0.1 million shares remaining under our Equity Dilution Authorization as of September 24, 2022. 24

Item 7. Management's Discussion & Analysis

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

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Biggest changeCONSOLIDATED GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended September 24, 2022 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2022 $ 3,338.6 $ 146.9 $ 3,191.7 Reported net sales FY 2021 3,303.7 3.9 3,299.8 $ increase (decrease) $ 34.9 $ 143.0 $ (108.1) % increase (decrease) 1.1 % (3.3) % PET GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended September 24, 2022 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2022 $ 1,878.1 $ — $ 1,878.1 Reported net sales FY 2021 1,894.9 3.9 1,891.0 $ decrease $ (16.8) $ (3.9) $ (12.9) % decrease (0.9) % (0.7) % GARDEN GAAP to Non-GAAP Reconciliation For the Fiscal Year Ended September 24, 2022 Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic (in millions) Reported net sales FY 2022 $ 1,460.5 $ 146.9 $ 1,313.6 Reported net sales FY 2021 1,408.8 — 1,408.8 $ increase (decrease) $ 51.7 $ 146.9 $ (95.2) % increase (decrease) 3.7 % (6.8) % 32 GAAP to non-GAAP Reconciliation Fiscal Year Ended September 24, 2022 (in thousands) Adjusted EBITDA Reconciliation Garden Pet Corp Total 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 153,956 208,924 (102,844) 260,036 Depreciation & amortization 36,583 38,960 5,405 80,948 Noncash stock-based compensation $ 25,817 $ 25,817 Adjusted EBITDA $ 190,539 $ 247,884 $ (71,622) $ 366,801 GAAP to non-GAAP Reconciliation Fiscal Year Ended September 25, 2021 (in thousands) Adjusted EBITDA Reconciliation Garden Pet Corp Total Net income attributable to Central Garden & Pet — — — $ 151,746 Interest expense, net — — — 58,182 Other expense — — — 1,506 Income tax expense — — — 42,035 Net income attributable to noncontrolling interest — — — 1,027 Sum of items below operating income — — — 102,750 Income (loss) from operations 138,755 208,201 (92,460) 254,496 Depreciation & amortization 33,050 36,952 4,725 74,727 Noncash stock-based compensation $ 23,127 $ 23,127 Adjusted EBITDA $ 171,805 $ 245,153 $ (64,608) $ 352,350 Inflation Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending.
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.
Investing Activities Net cash used in investing activities decreased $756.4 million from $899.4 million in fiscal 2021 to $143.0 million in fiscal 2022. The decrease in cash used in investing activities was due primarily to acquisition activity in the prior year.
Net cash used in investing activities decreased $756.4 million from $899.4 million in fiscal 2021 to $143.0 million in fiscal 2022. The decrease in cash used in investing activities was due primarily to acquisition activity in the prior year.
The Guarantee of a Guarantor will be released: (1) upon any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation), in accordance with the governing indentures, to any person other than the Company; (2) if such Guarantor merges with and into the Company, with the Company surviving such merger; (3) if the Guarantor is designated as an Unrestricted Subsidiary; or (4) if the Company exercises its legal defeasance option or covenant defeasance option or the discharge of the Company's obligations under the indentures in accordance with the terms of the indentures.
The Guarantee of a Guarantor will be released: (1) upon any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation), in accordance with the governing indentures, to any person other than the Company; (2) if such Guarantor merges with and into the Company, with the Company surviving such merger; (3) if such Guarantor is designated as an Unrestricted Subsidiary; or (4) if the Company exercises its legal defeasance option or covenant defeasance option or the discharge of the Company's obligations under the indentures in accordance with the terms of the indentures.
The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount, after giving effect to all other contingent and fixed liabilities of such Guarantor and to any collections from or payments made by or on behalf of any other Guarantor in 37 respect of the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law.
The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount, after giving effect to all other contingent and fixed liabilities of such Guarantor and to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law.
We may redeem some or all of the 2031 Notes at 35 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.
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.
In August 2019, our Board of Directors authorized a new share repurchase program to purchase up to $100 million of our common stock (the "2019 Repurchase Authorization"). The 2019 Repurchase Authorization has no fixed expiration date and expires when the amount authorized has been used or the Board withdraws its authorization.
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"). The 2019 Repurchase Authorization has no fixed expiration date and expires when the amount authorized has been used or the Board withdraws its authorization.
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 2022, 2021 and 2020, 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 2023, 2022 and 2021, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks.
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 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.
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.
We incurred approximately $4.6 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028 notes. The 2028 Notes require semiannual interest payments on February 1 and August 1.
We incurred approximately $4.8 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028 Notes. The 2028 Notes require semiannual interest payments on February 1 and August 1.
Substantially all of the Garden segment’s operating income is typically generated in this period. 33 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.
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.
We present adjusted EBITDA because we believe that adjusted EBITDA is a useful supplemental measure in evaluating the cash flows and performance of our business and provides greater transparency into our results of operations. Adjusted EBITDA is used by our management to perform such evaluation.
We present adjusted EBITDA because we believe that adjusted EBITDA is a useful supplemental measure in evaluating the cash flows and performance of our business and provides greater transparency into our results of operations. Adjusted EBITDA is used by our management to perform such evaluations.
Borrowings under the Amended Credit Facility will bear interest at an index based on LIBOR (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 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.
The increase in cash used by financing activities during the current year was due primarily to our prior year issuance of $500 million of our 2030 Notes in October 2020 and $400 million of our 2031 Notes in April 2021, partially offset by the prior year repayment of our 2023 Notes and the corresponding premium paid on extinguishment as well as debt issuance costs incurred on the issuances of the 2030 Notes and 2031 Notes.
The increase in cash used in financing activities during the fiscal 2022 was due primarily to our prior year issuance of $500 million of our 2030 Notes in October 2020 and $400 million of our 2031 Notes in April 2021, partially offset by the prior year repayment of our 2023 Notes and the corresponding premium paid on extinguishment as well as debt issuance costs incurred on the issuances of the 2030 Notes and 2031 Notes.
In connection with our annual goodwill impairment testing performed during fiscal 2022, 2021 and 2020, 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 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 fiscal 2022, 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 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.
We were in compliance with all financial covenants as of September 24, 2022. $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 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 under the Amended Credit Facility as of September 24, 2022. 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 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 incurred approximately $2.4 million of debt issuance costs in conjunction with this transaction, which included lender fees and legal expenses. The debt issuance costs are being amortized over the term of the Amended Credit Facility.
We incurred approximately $2.4 million of debt issuance costs in conjunction with the Amended Credit Agreement, which included lender fees and legal expenses. The debt issuance costs are being amortized over the term of the Amended Credit Facility.
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 24, 2022. 36 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 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”).
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.
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.
Base Rate is defined as the highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month LIBOR plus 1.00% and (d) 0.00%.
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%.
Letter of credit fees at the applicable margin on the average undrawn and unreimbursed amount of letters of credit shall be payable quarterly and a facing fee of 0.125% shall be 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 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.
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 senior secured revolving credit facility or who guarantee the 2023 Notes.
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.
Debt repayments do not reflect the unamortized portion of deferred financing costs associated with the 2028 Notes, 2030 Notes and 2031 Notes of approximately $14.1 million as of September 24, 2022, of which, $2.5 million is amortizable until February 2028, $6.4 million is amortizable until October 2030 and $5.2 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 $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.
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 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.
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.
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 senior secured revolving credit facility or guarantee our other debt.
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 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. We did not draw down any commitments under the Amended Credit Facility upon closing. Proceeds of the Amended Credit Facility will be used for general corporate purposes.
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.
During fiscal 2021, inflation was broad-based and we saw significant increases across commodity and material costs, freight and labor. During fiscal 2020, we saw more moderate increases to commodity, labor and freight costs. Weather and Seasonality Our sales of lawn and garden products are influenced by weather and climate conditions in the different markets we serve.
During fiscal 2021, inflation was broad-based and we saw significant increases across commodity and material costs, freight and labor. Weather and Seasonality Our sales of lawn and garden products are influenced by weather and climate conditions in the different markets we serve. Our Garden segment’s business is highly seasonal.
We incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2030 Notes.
We incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2030 Notes. The 2030 Notes require semiannual interest payments on October 15 and April 15.
We believe that adjusted EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present adjusted EBITDA when reporting their results.
We believe that adjusted EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present adjusted EBITDA when reporting their results. Other companies may calculate adjusted EBITDA differently and it may not be comparable.
As of September 24, 2022, there were no borrowings outstanding and no letters of credit outstanding under the Amended Credit Facility. Outside of the Amended Credit Facility, there were other letters of credit of $1.3 million outstanding as of September 24, 2022.
As of September 30, 2023, there were no borrowings outstanding and no letters of credit outstanding under the Amended Credit Facility. Outside of the Amended Credit Facility, there were other standby and commercial letters of credit of $1.3 million outstanding as of September 30, 2023.
In fiscal years 2020 through 2022, we have been adversely impacted by rising input costs related to inflation, particularly relating to grain and seed prices, fuel prices and the ingredients used in our garden controls and fertilizer business as well as heightened import costs such as shipping container costs and tariffs.
In fiscal years 2021 through 2023, we were adversely impacted by high input costs due to inflation, particularly relating to prices for grain and seed, fuel and the ingredients used in our garden controls and fertilizer business as well as heightened import costs such as shipping container costs and tariffs.
Other expense was $3.6 million for fiscal 2022 compared to $1.5 million for fiscal 2021, due primarily to foreign currency losses in fiscal 2022. Income Tax Our effective income tax rate was 23.2% for fiscal 2022 compared to 21.6% for fiscal 2021.
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.
Fiscal 2021 Compared to Fiscal 2020 For a discussion of our results of operations in fiscal 2021 compared to fiscal 2020, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 25, 2021 filed with the SEC.
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.
The Equity Dilution Authorization has no fixed expiration date and expires when the Board withdraws its authorization. As of September 25, 2022, we had authorization remaining to repurchase up to 0.1 million shares under our Equity Dilution Authorization. Total Debt At September 24, 2022, our total debt outstanding was $1,186.6 million versus $1,185.8 million at September 25, 2021.
The Equity Dilution Authorization has no fixed expiration date and expires when the Board withdraws its authorization. As of September 30, 2023, we did not have any shares remaining to repurchase under our Equity Dilution Authorization. Total Debt At September 30, 2023, our total debt outstanding was $1,188.2 million versus $1,186.6 million at September 24, 2022.
Net availability under the Amended Credit Facility was approximately $517 million as of September 24, 2022. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for short-notice borrowings.
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.
We believe the adjustment of these expenses supplements the GAAP information with a measure that may be used to assess the sustainability of our operating performance. • Loss on sale of business: we have excluded the impact of the loss 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 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.
As of September 24, 2022, no repurchases had been made under the $100 million 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 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").
We expect that our principal sources of funds will be cash generated from our operations, proceeds from our debt and equity offerings, and, if necessary, borrowings under our $750 million asset backed loan facility.
We also increased open market purchases of our common stock during fiscal 2022 as compared to fiscal 2021. We expect that our principal sources of funds will be cash generated from our operations, proceeds from our debt and equity offerings, and, if necessary, borrowings under our $750 million asset backed loan facility.
Use of Non-GAAP Financial Measures We report our financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA, organic sales, 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 adjusted EBITDA, non-GAAP operating income, and non-GAAP net income and diluted net income per share.
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 2022 2021 2020 (in millions) Other garden products $ 865.3 $ 876.6 $ 491.7 Other pet products 765.9 767.0 821.1 Other manufacturers' products 730.2 749.1 600.7 Dog & cat products 542.9 570.9 502.1 Wild bird 434.3 340.1 — (1) Controls & fertilizer products — (1) — (1) 279.9 Total $ 3,338.6 $ 3,303.7 $ 2,695.5 (1) The product category was less than 10% of our consolidated net sales in the period.
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.
Stock Repurchases During fiscal 2022, we repurchased approximately 1.4 million shares of our non-voting common stock (CENTA) on the open market at an aggregate cost of approximately $56.2 million, or $40.79 per share, and approximately 39,000 shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $1.6 million, or $39.72 per share.
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.
In presenting the summarized financial statements, the equity method of accounting has been applied to the Parent/Issuer's interests in the Guarantor Subsidiaries. The summarized information excludes financial information of the Non-Guarantors, including earnings from and investments in these entities.
In presenting the summarized financial statements, the equity method of accounting has been applied to the Parent/Issuer's interests in the Guarantor Subsidiaries.
The 2031 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 24, 2022.
The 2031 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions.
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 anytime, at our option, prior to April 30, 2026, at the principal amount plus a "make whole" premium.
Our Garden segment’s business is highly seasonal. In fiscal 2022, approximately 66% of our Garden segment’s net sales and 59% of our total net sales occurred during our second and third fiscal quarters.
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.
Financing Activities Net cash used by 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 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.
(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.
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.
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 - $80 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. 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.
Although not all inclusive, we believe that the following represent the more critical accounting policies, which are subject to estimates and assumptions used in the preparation of our consolidated financial statements. 39 Goodwill Goodwill represents the excess of cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.
Although not all inclusive, we believe that the following represent the more critical accounting policies, which are subject to estimates and assumptions used in the preparation of our consolidated financial statements.
In the current uncertain environment, our employees, customers and consumers will continue to be our priority as we manage our business to deliver long-term growth. 27 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 24, 2022 September 25, 2021 September 26, 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold and occupancy 70.3 70.6 70.4 Gross profit 29.7 29.4 29.6 Selling, general and administrative 21.9 21.7 22.2 Operating income 7.8 7.7 7.4 Interest expense, net (1.7) (1.8) (1.5) Other expense, net (0.1) — (0.2) Income taxes 1.4 1.3 1.2 Net income 4.6 % 4.6 % 4.5 % Fiscal 2022 Compared to Fiscal 2021 Net Sales Net sales for fiscal 2022 increased $34.9 million, or 1.1%, to $3,338.6 million from $3,303.7 million in fiscal 2021, due primarily to the impact of recent acquisitions in our Garden segment.
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.
Selling, General and Administrative Selling, general and administrative expenses increased $15.9 million, or 2.2%, from $716.4 million in fiscal 2021 to $732.3 million in fiscal 2022. As a percentage of net sales, selling, general and administrative expenses increased from 21.7% in fiscal 2021 to 21.9% in fiscal 2022; both the Garden segment and corporate contributed to the increased percentage.
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.
Issuance of $500 million 4.125% Senior Notes due 2030 and Redemption of $400 million 6.125% Senior Notes due 2023 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 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").
In fiscal 2022, our operating income was $260 million 26 consisting of income from our Pet segment of $209 million, income from our Garden segment of $154 million and corporate expenses of $103 million . Fiscal 2022 Financial Highlights Financial summary: • Net sales for fiscal 2022 increased $34.9 million, or 1.1%, to $3,339 million.
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.
Recent Accounting Pronouncements Refer to the discussion under Part II, Item 8, Notes to Consolidated Financial Statements, Note 1 – Organization and Significant Accounting Policies for a summary of recent accounting pronouncements.
Potential performance-based periods extend through fiscal 2025 for Hydro-Organics Wholesale, Inc. and the payments are capped at $1.0 million per year. Recent Accounting Pronouncements Refer to the discussion under Part II, Item 8, Notes to Consolidated Financial Statements, Note 1 – Organization and Significant Accounting Policies for a summary of recent accounting pronouncements.
During fiscal 2021, we acquired DoMyOwn for approximately $81 million, Hopewell Nursery for approximately $81 million, Green Garden Products for approximately $571 million and D&D Commodities for approximately $88 million. Net cash used in investing activities increased $851.3 million from $48.1 million in fiscal 2020 to $899.4 million in fiscal 2021.
During fiscal 2021, we acquired DoMyOwn for approximately $81 million, Hopewell Nursery for approximately $81 million, Green Garden Products for approximately $571 million and D&D Commodities for approximately $88 million. Financing Activities Net cash used by 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.
Identifiable intangible assets acquired in business combinations are recorded based on their fair values at the date of acquisition. Goodwill and identifiable intangible assets with indefinite lives are not subject to amortization but must be evaluated for impairment.
Goodwill and identifiable intangible assets with indefinite lives are not subject to amortization but must be evaluated for impairment.
Pet operating income increased $0.7 million, or 0.3%, to $208.9 million in fiscal 2022 from $208.2 million in fiscal 2021. Pet operating income increased due to lower selling, general and administrative expense partially offset by a decrease in net sales.
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.
Non-GAAP financial measures reflect adjustments based on the following items: • Incremental expenses from note redemption and issuance: we have excluded the impact of the incremental expenses incurred from the note redemption and issuance as they represent an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods.
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.
Considerable judgment and estimates are required to determine such amounts, particularly as they relate to identifiable intangible assets, and the applicable useful lives related thereto. Under different assumptions, the resulting valuations could be materially different, which could materially impact the operating results we report. 40 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. Our contractual commitments are presented under the caption Liquidity and Capital Resources.
Net cash provided by financing activities increased $481.0 million from $60.6 million of cash used in fiscal 2020 to $420.5 million cash provided in fiscal 2021.
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.
An unused line fee shall be payable quarterly in respect of the total amount of the unutilized Lenders’ commitments and short-notice borrowings under the Amended Credit Facility.
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.
Summarized Statements of Operations (in thousands) Fiscal Year Ended Fiscal Year Ended September 24, 2022 September 25, 2021 (in thousands) Parent/Issuer Guarantors Parent/Issuer Guarantors Net sales $ 819,213 $ 2,198,460 $ 908,599 $ 2,142,925 Gross profit $ 183,090 $ 709,635 $ 205,837 $ 686,332 Income (loss) from operations $ (12,305) $ 243,293 $ 4,382 $ 229,961 Equity in earnings of Guarantor subsidiaries $ 189,228 $ — $ 183,122 $ — Net income (loss) $ (53,968) $ 189,228 $ (45,596) $ 183,122 Summarized Balance Sheet Information (in thousands) As of As of September 24, 2022 September 25, 2021 (in thousands) Parent/Issuer Guarantors Parent/Issuer Guarantors Current assets $ 455,381 $ 904,090 $ 670,030 $ 733,132 Intercompany receivable from Non-guarantor subsidiaries 309,238 61,794 229,795 61,633 Other assets 3,124,526 2,458,823 2,896,162 2,399,165 Total assets $ 3,889,145 $ 3,424,707 $ 3,795,987 $ 3,193,930 Current liabilities $ 162,793 $ 267,872 $ 185,996 $ 298,039 Long-term debt 1,185,891 — 1,184,024 — Other liabilities 1,450,702 220,990 1,272,798 151,011 Total liabilities $ 2,799,386 $ 488,862 $ 2,642,818 $ 449,050 38 Contractual Obligations The table below presents our significant contractual cash obligations by fiscal year: Contractual Obligations Fiscal 2023 Fiscal 2024 Fiscal 2025 Fiscal 2026 Fiscal 2027 Thereafter Total (in millions) Long-term debt, including current maturities (1) $ 0.3 $ 0.2 $ 0.1 $ — $ — $ 1,200.0 $ 1,200.6 Interest payment obligations (2) 52.5 52.5 52.5 52.5 52.5 137.6 400.1 Operating leases 52.6 46.3 37.3 24.9 15.4 38.3 214.8 Purchase commitments (3) 184.8 47.1 26.0 16.1 9.0 2.2 285.2 Performance-based payments (4) — — — — — — — Total $ 290.2 $ 146.1 $ 115.9 $ 93.5 $ 76.9 $ 1,378.1 $ 2,100.7 (1) Excludes $1.3 million of outstanding letters of credit related to normal business transactions.
The summarized information excludes financial information of the Non-Guarantors, including earnings from and investments in these entities. 35 Summarized Statements of Operations (in thousands) Fiscal Year Ended Fiscal Year Ended September 30, 2023 September 24, 2022 (in thousands) Parent/Issuer Guarantors Parent/Issuer Guarantors Net sales $ 768,207 $ 2,531,503 $ 819,213 $ 2,198,460 Gross profit $ 166,370 $ 767,480 $ 183,090 $ 709,635 Income (loss) from operations $ (32,001) $ 244,164 $ (12,305) $ 243,293 Equity in earnings of Guarantor subsidiaries $ 191,793 $ — $ 189,228 $ — Net income (loss) $ (63,840) $ 191,793 $ (53,968) $ 189,228 Summarized Balance Sheet Information (in thousands) As of As of September 30, 2023 September 24, 2022 (in thousands) Parent/Issuer Guarantors Parent/Issuer Guarantors Current assets $ 661,660 $ 999,218 $ 455,381 $ 904,090 Intercompany receivable from Non-guarantor subsidiaries 69,404 — 309,238 61,794 Other assets 3,402,000 2,762,797 3,124,526 2,458,823 Total assets $ 4,133,064 $ 3,762,015 $ 3,889,145 $ 3,424,707 Current liabilities $ 155,793 $ 294,686 $ 162,793 $ 267,872 Intercompany payable from Non-guarantor subsidiaries — 766 Long-term debt 1,187,771 186 1,185,891 — Other liabilities 1,308,736 60,611 1,450,702 220,990 Total liabilities $ 2,652,300 $ 356,249 $ 2,799,386 $ 488,862 Contractual Obligations The table below presents our significant contractual cash obligations by fiscal year: Contractual Obligations Fiscal 2024 Fiscal 2025 Fiscal 2026 Fiscal 2027 Fiscal 2028 Thereafter Total (in millions) Long-term debt, including current maturities (1) $ 0.2 $ 0.2 $ 0.1 $ — $ — $ 1,200.0 $ 1,200.5 Interest payment obligations (2) 52.5 52.5 52.5 52.5 52.5 92.8 355.3 Operating leases 54.9 47.1 33.0 22.8 14.7 34.8 207.3 Purchase commitments (3) 138.9 36.4 21.4 13.0 5.9 2.4 218.0 Performance-based payments (4) — — — — — — — Total $ 246.5 $ 136.2 $ 107.0 $ 88.3 $ 73.1 $ 1,330.0 $ 1,981.1 (1) Excludes $1.3 million of outstanding letters of credit related to normal business transactions.
The valuations employ present value techniques to measure fair value and consider market factors. Our goodwill is associated with our Pet segment and our Garden segment.
The valuations employ present value techniques to measure fair value and consider market factors. Our goodwill is associated with our Pet segment and our Garden segment. In connection with our annual goodwill impairment testing performed during fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill 37 impairment test.
Warehouse and administrative expense increased $21.5 million, or 6.1%, to $374.2 million in fiscal 2022 and increased as a percentage of net sales to 11.2% in fiscal 2022 from 10.7% in fiscal 2021. The increased expense was driven by the addition of our four fiscal 2021 acquisitions in the Garden segment and increased rent expense at several facilities.
Warehouse and administrative expense increased $24.5 million, or 6.6%, to $398.7 million in fiscal 2023 and increased as a percentage of net sales to 12.0% in fiscal 2023 from 11.2% in fiscal 2022. The increase in warehouse and administrative expense was primarily in the Pet segment and secondarily in Corporate.
The Amended Credit Facility provides for the transition from LIBOR to Secured Overnight Financing Rate ("SOFR") and does not require an amendment in connection with such transition. As of September 24, 2022, the applicable interest rate related to Base Rate borrowings was 6.3%, and the applicable interest rate related to one-month LIBOR-based borrowings was 4.1%.
The Amended Credit Facility was amended on May 15, 2023 to transition from LIBOR to SOFR. As of September 30, 2023, the applicable interest rate related to Base Rate borrowings was 8.5%, and the applicable interest rate related to one-month SOFR-based borrowings was 6.3%.
The 2031 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 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.
The debt issuance costs are being amortized over the term of the 2031 Notes. The 2031 Notes require semi-annual interest payments on April 30 and October 30. The 2031 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.
For certain agreements, management estimates are used to develop the quantities and pricing for anticipated purchases, and future purchases could vary significantly from such estimates. (4) Possible performance-based payments associated with prior acquisitions of businesses are not included in the above table, because they are based on future performance of the businesses acquired, which is not yet known.
(4) Possible performance-based payments associated with prior acquisitions of businesses are not included in the above table, because they are based on future performance of the businesses acquired, which is not yet known. Performance-based payments of approximately $0.1 million were made in fiscal 2023 related to Hydro-Organics Wholesale, Inc.
Debt outstanding on September 24, 2022 was $1,186.6 million compared to $1,185.8 million as of September 25, 2021. Our average borrowing rate for fiscal 2022 was 4.5% compared to 4.4% for fiscal 2021. Other Expense Other expense is comprised of income or loss from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses.
Other Income (Expense) Other income (expense) is comprised of income or loss from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses.
Although our gross and operating margins increased in fiscal 2022, rising costs are making it difficult for us to further increase prices to our customers at a pace sufficient for us to maintain our margins. In fiscal 2022, we continued to experience increasing inflationary pressure, including notable increases in costs for key commodities, materials, labor and freight.
In fiscal 2023, we continued to experience inflationary pressures, although at a reduced rate in the latter months of the fiscal year. In fiscal 2022, we continued to experience increasing inflationary pressure, including notable increases in costs for key commodities, materials, labor and freight.
We believe the adjustment of this loss supplements the GAAP information with a measure that may be used to assess the sustainability of our operating performance.
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.
Senior Notes Issuance of $400 million 4.125% Senior Notes due 2031 In April 2021, we issued $400 million aggregate principal amount of 4.125% senior notes due April 2031 (the "2031 Notes"). We used the net proceeds from the offering to repay all outstanding borrowings under our Amended Credit Facility, with the remainder used for general corporate purposes.
We used a portion of the net proceeds from the offering to repay all outstanding borrowings under our Amended Credit Facility, with the remainder used for general corporate purposes. We incurred approximately $6 million of debt issuance costs in conjunction with this issuance, which included underwriter fees and legal, accounting and rating agency expenses.
Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, increased $53.8 million to $2.6 billion, and sales of other manufacturers’ products decreased $18.9 million to $730 million. Sales of branded products represented 78% of our net sales in fiscal 2022 compared with 77% in fiscal 2021.
Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, decreased $33.2 million, and sales of other manufacturers’ products increased $4.7 million. The decline in branded sales was due primarily to lower sales of private label products we produce under third-party brands in both the Garden and Pet segments.
The increase in cash used in investing activities was due primarily to acquisition activity and an increase in capital expenditures of approximately $37 million in fiscal 2021 compared to fiscal 2020, partially offset by proceeds received from the sale of our Breeder's Choice business during the first quarter of fiscal 2021 and decreased investments in fiscal 2021 compared to fiscal 2020.
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.
Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resource, and information technology functions. Selling and delivery expense decreased $5.6 million, or 1.5%, to $358.1 million in fiscal 2022 and decreased as a percentage of net sales from 11.0% in fiscal 2021 to 10.7% in fiscal 2022.
Selling and delivery expense decreased $20.6 million, or 5.8%, to $337.5 million in fiscal 2023 and decreased as a percentage of net sales from 10.7% in fiscal 2022 to 10.2% in fiscal 2023.
Gross margin improved 30 basis points in fiscal 2022 to 29.7%, from 29.4% in fiscal 2021. • Our operating income increased $5.5 million, or 2.2%, to $260.0 million in fiscal 2022, and as a percentage of net sales improved to 7.8% from 7.7% in fiscal 2021. • Net income for fiscal 2022 was $152.2 million, or $2.80 per share on a diluted basis, compared to net income in fiscal 2021 of $151.7 million, or $2.75 per share on a diluted basis.
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.
Our Pet segment sales decreased 0.9%, and our Garden segment sales increased 3.7%. • Organic net sales declined 3.3%, due primarily to a 6.8% decline in our Garden segment. • Gross profit for fiscal 2022 increased $21.4 million, or 2.2%, to $992.3 million.
The decline in sales was primarily in our Garden segment, the sales of which decreased $27.6 million, or 1.9%. • Gross profit for fiscal 2023 decreased $45.5 million, or 4.6%, to $946.8 million. Gross margin declined 110 basis points in fiscal 2023 to 28.6%, from 29.7% in fiscal 2022.
Our expected revenues were based on our future operating plan and market growth or decline estimates for future years. No impairment was indicated during our fiscal 2022, 2021 and 2020 analyses of our indefinite-lived trade names and trademarks. Acquisitions In connection with businesses we acquire, management must determine the fair values of assets acquired and liabilities assumed.
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.
Pet branded sales decreased $25.9 million, and sales of other manufacturers' products increased $9.1 million. 28 Garden net sales increased $51.7 million, or 3.7%, to $1,460.5 million in fiscal 2022 from $1,408.8 million in fiscal 2021.
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.
Sales of other manufacturers' products represented the balance of our net sales.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed3 unchanged
Biggest changeAs of September 24, 2022, we had entered into fixed purchase commitments for commodities totaling approximately $285.2 million. A 10% change in the market price for these commodities would result in an additional pretax gain or loss of $28.5 million as the related inventory containing those inputs is sold. Foreign Currency Risks.
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.
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. 41 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. 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.
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.
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.
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 24, 2022 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 30, 2023 under our Amended Credit Facility.

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