Washington, D.C. 20549
(Former name, former address and former fiscal year, if changed since last report)
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
This Form 10-Q includes “forward-looking statements.” Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, projected cost savings, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries and markets in which we operate and other information that is not historical information. When used in this Form 10-Q, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our future earnings expectations,examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, beliefs and projections will be realized.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Form 10-Q are set forth in the Form 10-K for the fiscal year ended September 30, 2017,24, 2022, including the factors described in the section entitled “Item 1A – Risk Factors.” If any of these risks or uncertainties materializes, or if any of our underlying assumptions are incorrect, our actual results may differ significantly from the results that we express in, or imply by, any of our forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances, except as required by law. Presently known risk factors include, but are not limited to, the following factors:
PART I. FINANCIAL INFORMATION
See notes to condensed consolidated financial statements.
See notes to condensed consolidated financial statements.
See notes to condensed consolidated financial statements.
The condensed consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the “Company” or “Central”) as of December 30, 2017March 25, 2023 and December 24, 2016,March 26, 2022, the condensed consolidated statements of operations the condensed consolidated statements of cash flows and the condensed consolidated statements of comprehensive income for the three and six months ended December 30, 2017March 25, 2023 and December 24, 2016,March 26, 2022, and the condensed consolidated statements of cash flows for the six months ended March 25, 2023 and March 26, 2022 have been prepared by the Company, without audit. In the opinion of management, the interim financial statements include all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented.
Due to the seasonal nature of the Company’s garden business, the results of operations for the three and six months ended December 30, 2017March 25, 2023 are not necessarily indicative of the operating results that may be expected for the entire fiscal year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes thereto, included in the Company’s 2017 Annual Report on Form 10-K for the fiscal year ended September 24, 2022, which has previously been filed with the Securities and Exchange Commission. The September 30, 201724, 2022 balance sheet presented herein was derived from the audited financial statements.
Noncontrolling interest in the Company’s condensed consolidated financial statements represents the 20% interest not owned by Central in a consolidated subsidiary. Since the Company controls this subsidiary, its financial statements are consolidated with those of the Company, and the noncontrolling owner’s 20% share of the subsidiary’s net assets and results of operations is deducted and reported as noncontrolling interest on the consolidated balance sheets and as net income (loss) attributable to noncontrolling interest in the condensed consolidated statements of operations. See Note 8,7, Supplemental Equity Information, for additional information.
ASC 820 establishes a single authoritative definition of fair value, a framework for measuring fair value and expands disclosure of fair value measurements. ASC 820 requires financial assets and liabilities to be categorized based on the inputs used to calculate their fair values as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs for the asset or liability, which reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
The Company’s financial instruments include cash and equivalents, short term investments consisting of bank certificates of deposit, accounts receivable and payable, derivative instruments, short-term borrowings, and accrued liabilities. The carrying amount of these instruments approximates fair value because of their short-term nature.
The Company measures certain non-financial assets and liabilities, including long-lived assets, goodwill and intangible assets, at fair value on a non-recurring basis. Fair value measurements of non-financial assets and non-financial liabilities are used primarily in the impairment analyses of long-lived assets, goodwill and other intangible assets. During the three-month periods ended December 30, 2017March 25, 2023 and December 24, 2016,March 26, 2022, the Company was not required to measure any significant non-financial assets and liabilities at fair value.
In December 2017, the Company issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). The estimated fair value of the Company's 2028 Notes as of December 30, 2017 was $300.8 million compared to a carrying value of $295.5 million.
The Company tests goodwill for impairment annually (as of the first day of the fourth fiscal quarter), or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, by first assessing qualitative factors to determine whether it is more likely than not the fair value of the reporting unit is less than its carrying amount. The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments and historical performance. If it is determined that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, it is unnecessary to perform the two-stepquantitative goodwill impairment test. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the two-stepquantitative test is performed to identify potential goodwill impairment. Based on certain circumstances, the Company may elect to bypass the qualitative assessment and proceed directly to performing the first step of the two-stepquantitative goodwill impairment test, which compares the estimated fair value of the Company’sour reporting units to their related carrying values, including goodwill. IfImpairment is indicated if the estimated fair value of the reporting unit is less than its carrying value, and an impairment charge is recognized for the Company performs an additional step to determine the implied fair value of goodwill associated with that reporting unit. The implied fair value of goodwill is determined by first allocating the fair value of the reporting unit to all of its assets and liabilities and then computing the excess of the reporting unit’s fair value over the amounts assigned to the assets and liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, such excess represents the amount of goodwill impairment, and, accordingly, the Company recognizes such impairment.differential. The Company’s goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of its two reporting units to the Company’s total market capitalization. No impairment of goodwill was recorded for the six months ended March 25, 2023 and March 26, 2022.
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6. | Other Intangible Assets |
5. Other Intangible Assets
The following table summarizes the components of gross and net acquired intangible assets:
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| | | | | | | | | | | | | | | | |
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | | | | | (in millions) | | |
December 30, 2017 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 16.9 |
| | $ | (13.1 | ) | | $ | — |
| | $ | 3.8 |
|
Marketing-related intangible assets – nonamortizable | | 62.7 |
| | — |
| | (26.0 | ) | | 36.7 |
|
Total | | 79.6 |
| | (13.1 | ) | | (26.0 | ) | | 40.5 |
|
Customer-related intangible assets – amortizable | | 91.6 |
| | (33.9 | ) | | — |
| | 57.7 |
|
Other acquired intangible assets – amortizable | | 22.1 |
| | (13.2 | ) | | — |
| | 8.9 |
|
Other acquired intangible assets – nonamortizable | | 7.8 |
| | — |
| | (1.2 | ) | | 6.6 |
|
Total | | 29.9 |
| | (13.2 | ) | | (1.2 | ) | | 15.5 |
|
Total other intangible assets | | $ | 201.1 |
| | $ | (60.1 | ) | | $ | (27.2 | ) | | $ | 113.7 |
|
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | | | | | (in millions) | | |
December 24, 2016 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 14.9 |
| | $ | (11.5 | ) | | $ | — |
| | $ | 3.4 |
|
Marketing-related intangible assets – nonamortizable | | 62.8 |
| | — |
| | (26.0 | ) | | 36.8 |
|
Total | | 77.7 |
| | (11.5 | ) | | (26.0 | ) | | 40.2 |
|
Customer-related intangible assets – amortizable | | 64.3 |
| | (27.0 | ) | | — |
| | 37.3 |
|
Other acquired intangible assets – amortizable | | 20.8 |
| | (11.9 | ) | | — |
| | 8.9 |
|
Other acquired intangible assets – nonamortizable | | 7.7 |
| | — |
| | (1.2 | ) | | 6.5 |
|
Total | | 28.5 |
| | (11.9 | ) | | (1.2 | ) | | 15.4 |
|
Total other intangible assets | | $ | 170.5 |
| | $ | (50.4 | ) | | $ | (27.2 | ) | | $ | 92.9 |
|
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | | | | | (in millions) | | |
September 30, 2017 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 16.9 |
| | $ | (12.7 | ) | | $ | — |
| | $ | 4.2 |
|
Marketing-related intangible assets – nonamortizable | | 62.7 |
| | — |
| | (26.0 | ) | | 36.7 |
|
Total | | 79.6 |
| | (12.7 | ) | | (26.0 | ) | | 40.9 |
|
Customer-related intangible assets – amortizable | | 91.6 |
| | (32.2 | ) | | — |
| | 59.4 |
|
Other acquired intangible assets – amortizable | | 22.1 |
| | (12.9 | ) | | — |
| | 9.2 |
|
Other acquired intangible assets – nonamortizable | | 7.8 |
| | — |
| | (1.2 | ) | | 6.6 |
|
Total | | 29.9 |
| | (12.9 | ) | | (1.2 | ) | | 15.8 |
|
Total other intangible assets | | $ | 201.1 |
| | $ | (57.8 | ) | | $ | (27.2 | ) | | $ | 116.1 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | (in millions) |
March 25, 2023 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 22.1 | | | $ | (21.1) | | | $ | — | | | $ | 1.0 | |
Marketing-related intangible assets – nonamortizable | | 252.5 | | | — | | | (26.0) | | | 226.5 | |
Total | | 274.6 | | | (21.1) | | | (26.0) | | | 227.5 | |
Customer-related intangible assets – amortizable | | 416.4 | | | (133.1) | | | (2.5) | | | 280.8 | |
Other acquired intangible assets – amortizable | | 39.7 | | | (28.6) | | | — | | | 11.1 | |
Other acquired intangible assets – nonamortizable | | 7.1 | | | — | | | (1.2) | | | 5.9 | |
Total | | 46.8 | | | (28.6) | | | (1.2) | | | 17.1 | |
Total other intangible assets, net | | $ | 737.8 | | | $ | (182.8) | | | $ | (29.8) | | | $ | 525.3 | |
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | (in millions) |
March 26, 2022 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 22.1 | | | $ | (19.8) | | | $ | — | | | $ | 2.2 | |
Marketing-related intangible assets – nonamortizable | | 218.2 | | | — | | | (26.0) | | | 192.2 | |
Total | | 240.3 | | | (19.8) | | | (26.0) | | | 194.4 | |
Customer-related intangible assets – amortizable | | 386.4 | | | (100.2) | | | (2.5) | | | 283.7 | |
Other acquired intangible assets – amortizable | | 39.7 | | | (24.5) | | | — | | | 15.2 | |
Other acquired intangible assets – nonamortizable | | 7.1 | | | — | | | (1.2) | | | 5.9 | |
Total | | 46.8 | | | (24.5) | | | (1.2) | | | 21.1 | |
Total other intangible assets, net | | $ | 673.5 | | | $ | (144.5) | | | $ | (29.8) | | | $ | 499.3 | |
| | Gross | | Accumulated Amortization | | Accumulated Impairment | | Net Carrying Value |
| | (in millions) |
September 24, 2022 | | | | | | | | |
Marketing-related intangible assets – amortizable | | $ | 22.1 | | | $ | (20.5) | | | $ | — | | | $ | 1.5 | |
Marketing-related intangible assets – nonamortizable | | 252.5 | | | — | | | (26.0) | | | 226.5 | |
Total | | 274.6 | | | (20.5) | | | (26.0) | | | 228.0 | |
Customer-related intangible assets – amortizable | | 416.4 | | | (117.8) | | | (2.5) | | | 296.1 | |
Other acquired intangible assets – amortizable | | 39.7 | | | (26.6) | | | — | | | 13.2 | |
Other acquired intangible assets – nonamortizable | | 7.1 | | | — | | | (1.2) | | | 5.9 | |
Total | | 46.8 | | | (26.6) | | | (1.2) | | | 19.1 | |
Total other intangible assets, net | | $ | 737.8 | | | $ | (164.9) | | | $ | (29.8) | | | $ | 543.2 | |
Other acquired intangible assets include contract-based and technology-based intangible assets.
The Company evaluates long-lived assets, including amortizable and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company evaluates indefinite-lived intangible assets on an annual basis. Other factorsFactors indicating the carrying value of the Company’s amortizable intangible assets may not be recoverable were not present in fiscal 2017 or during the threesix months ended December 30, 2017,March 25, 2023, and accordingly, no impairment testing was performed on these assets.
The Company amortizes its acquired intangible assets with definite lives over periods ranging from 3two years to 25 years; over weighted average remaining lives of 4two years for marketing-related intangibles, 1012 years for customer-related intangibles and 11six years for
other acquired intangibles. Amortization expense for intangibles subject to amortization was approximately $2.3$8.9 million and $1.4$7.8 million for the three months ended December 30, 2017March 25, 2023 and December 24, 2016,March 26, 2022, respectively, and $17.9 million and $14.7 million for the six months ended March 25, 2023 and March 26, 2022, respectively, and is classified within operatingselling, general and administrative expenses in the condensed consolidated statements of operations. Estimated annual amortization expense related to acquired intangible assets in each of the succeeding five years is estimated to be approximately $8$35 million per year from fiscal 20182023 through fiscal 20222025 and $26 million per year from fiscal 2026 through fiscal 2027.
.
6. Long-Term Debt
Long-term debt consists of the following:
|
| | | | | | | | | | | | |
| | December 30, 2017 | | December 24, 2016 | | September 30, 2017 |
| | (in thousands) |
Senior notes, interest at 6.125%, payable semi-annually, principal due November 2023 | | $ | 400,000 |
| | $ | 400,000 |
| | $ | 400,000 |
|
Senior notes, interest at 5.125%, payable semi-annually, principal due February 2028 | | 300,000 |
| | — |
| | — |
|
Unamortized debt issuance costs | | (9,161 | ) | | (5,436 | ) | | (4,840 | ) |
Net carrying value | | 690,839 |
| | 394,564 |
| | 395,160 |
|
Asset-based revolving credit facility, interest at LIBOR plus a margin of 1.25% to 1.50% or Base Rate plus a margin of 0.25% to 0.50%, final maturity April 2021 | | — |
| | — |
| | — |
|
Other notes payable | | 497 |
| | 844 |
| | 493 |
|
Total | | 691,336 |
| | 395,408 |
| | 395,653 |
|
Less current portion | | (372 | ) | | (397 | ) | | (375 | ) |
Long-term portion | | $ | 690,964 |
| | $ | 395,011 |
| | $ | 395,278 |
|
| | | | | | | | | | | | | | | | | | | | |
| | March 25, 2023 | | March 26, 2022 | | September 24, 2022 |
| | (in thousands) |
Senior notes, interest at 5.125%, payable semi-annually, principal due February 2028 | | $ | 300,000 | | | $ | 300,000 | | | $ | 300,000 | |
Senior notes, interest at 4.125%, payable semi-annually, principal due October 2030 | | 500,000 | | | 500,000 | | | 500,000 | |
Senior notes, interest at 4.125%, payable semi-annually, principal due April 2031 | | 400,000 | | | 400,000 | | | 400,000 | |
Unamortized debt issuance costs | | (13,174) | | | (15,051) | | | (14,116) | |
Net carrying value | | 1,186,826 | | | 1,184,949 | | | 1,185,884 | |
Asset-based revolving credit facility, interest at LIBOR plus a margin of 1.00% to 1.50% or Base Rate plus a margin of 0.0% to 0.50%, final maturity December 2026. | | 25,000 | | | — | | | — | |
| | | | | | |
Other notes payable | | 497 | | | 885 | | | 678 | |
Total | | 1,212,323 | | | 1,185,834 | | | 1,186,562 | |
Less current portion | | (270) | | | (378) | | | (317) | |
Long-term portion | | $ | 1,212,053 | | | $ | 1,185,456 | | | $ | 1,186,245 | |
Senior Notes
Issuance of $400 million 4.125% Senior Notes due 2031
On April 30, 2021, the Company issued $400 million aggregate principal amount of 4.125% senior notes due April 2031 (the "2031 Notes"). The Company used a portion of the net proceeds from the offering to repay all outstanding borrowings under its Amended Credit Facility, with the remainder used for general corporate purposes.
The Company incurred approximately $6 million of debt issuance costs in conjunction with this issuance, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2031 Notes.
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 the Company's existing and future domestic restricted subsidiaries which are borrowers under or guarantors of Central's 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 Company may redeem some or all of the 2031 Notes at any time, at its option, prior to April 30, 2026 at the principal amount plus a "make whole" premium. At any time prior to April 30, 2024, the Company may also redeem, at its option, up to 40% of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes. The Company may redeem some or all of the 2031 Notes at the Company’s option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.
The holders of the 2031 Notes have the right to require the Company to repurchase all or a portion of the 2031 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, upon the occurrence of specific kinds of changes of control.
The 2031 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. The Company was in compliance with all financial covenants as of March 25, 2023.
Issuance of $500 million 4.125% Senior Notes due 2030
In October 2020, the Company issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 (the "2030 Notes"). In November 2020, the Company used a portion of the net proceeds to redeem all of its outstanding 6.125% senior notes due November 2023 (the "2023 Notes") at a redemption price of 101.531% plus accrued and unpaid interest, and to pay related fees and expenses, with the remainder used for general corporate purposes.
The Company incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2030 Notes.
The 2030 Notes require semiannual interest payments on October 15 and April 15. The 2030 Notes are unconditionally guaranteed on a senior basis by each of the Company's existing and future domestic restricted subsidiaries which are borrowers under or guarantors of the Company's senior secured revolving credit facility or guarantee the Company's other debt.
The Company may redeem some or all of the 2030 Notes at any time, at its option, prior to October 15, 2025 at a price equal to 100% of the principal amount plus a “make-whole” premium. Prior to October 15, 2023, the Company may redeem up to 40% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes. The Company may redeem some or all of the 2030 Notes, at its option, in whole or in part, at any time on or after October 15, 2025 for 102.063%, on or after October 15, 2026 for 101.375%, on or after October 15, 2027 for 100.688% and on or after October 15, 2028 for 100.0%, plus accrued and unpaid interest.
The holders of the 2030 Notes have the right to require the Company to repurchase all or a portion of the 2030 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2030 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. The Company was in compliance with all financial covenants as of March 25, 2023.
$300 Millionmillion 5.125% Senior Notes due 2028
On December 14, 2017, the Company issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). The Company will useused the net proceeds from the offering to finance future acquisitions and for general corporate purposes.
The Company incurred approximately $4.6$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, commencing August 1, 2018.1. The 2028 Notes are unconditionally guaranteed on a senior basis by the Company's existing and future domestic restricted subsidiaries whowhich are borrowers under or guarantors of Central'sthe Company's senior secured revolving credit facility, or whowhich guarantee the 2023 Notes.Company's other debt.
The Company may redeem some or all of the 2028 Notes at any time, at its option, prior to January 1, 20232024 at the principal amount plus a “make whole” premium. At any time prior to January 1, 2021, the Company may also redeem, at its option, up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 105.125% of the principal amount of the notes. The Company may redeem some or all of the 2028 Notes, at its option, at any time on or after January 1, 2023 for 102.563%, on or after January 1, 2024 for 101.708%, on or after January 1, 2025 for 100.854%, and on or after January 1, 2026 for 100.0%, plus accrued and unpaid interest.
The holders of the 2028 Notes have the right to require usthe Company to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101%101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2028 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. The Company was in compliance with all financial covenants as of December 30, 2017.March 25, 2023.
$400 Million 6.125% Senior Notes
On November 9, 2015, the Company issued $400 million aggregate principal amount of 6.125% senior notes due November 2023 (the "2023 Notes"). In December 2015, the Company used the net proceeds from the offering, together with available cash, to redeem its $400 million aggregate principal amount of 8.25% senior subordinated notes due March 1, 2018 ("2018 Notes") at a price of 102.063% of the principal amount and to pay fees and expenses related to the offering. The 2023 Notes are unsecured senior obligations and are subordinated to all of the Company’s existing and future secured debt, including the Company’s Credit Facility, to the extent of the value of the collateral securing such indebtedness.
The Company incurred approximately $6.3 million of debt issuance costs in conjunction with these transactions, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2023 Notes.
The 2023 Notes require semiannual interest payments on May 15 and November 15. The 2023 Notes are unconditionally guaranteed on a senior basis by each of the Company’s existing and future domestic restricted subsidiaries which are borrowers under or guarantors of Central’s senior secured revolving credit facility. The 2023 Notes are unsecured senior obligations and are subordinated to all of the Company’s existing and future secured debt, including the Company’s Credit Facility, to the extent of the value of the collateral securing such indebtedness.
The Company may redeem some or all of the 2023 Notes at any time, at its option, prior to November 15, 2018 at the principal amount plus a “make whole” premium. At any time prior to November 15, 2018, the Company may also redeem, at its option, up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 106.125% of the principal amount of the notes. The Company may redeem some or all of the 2023 Notes, at its option, at any time on or after November 15, 2018 for 104.594%, on or after November 15, 2019 for 103.063%, on or after November 15, 2020 for 101.531% and on or after November 15, 2021 for 100%, plus accrued and unpaid interest.
The holders of the 2023 Notes have the right to require the Company to repurchase all or a portion of the 2023 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2023 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. The Company was in compliance with all covenants as of December 30, 2017.
Asset-Based Loan Facility Amendment
On April 22, 2016,December 16, 2021, the Company entered into ana Third Amended and Restated Credit Agreement (“Amended Credit Agreement”). The Amended Credit Agreement amended and restated the previous credit agreement whichdated September 27, 2019 (the "Predecessor Credit Agreement"), and provides up tofor a $400$750 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200$400 million principal amount available with the consent of the Lenders, as defined, if the Company exercises the uncommitted accordion feature set forth therein (collectively, the “Credit“Amended Credit Facility”). The Amended Credit Facility matures on April 22, 2021.December 16, 2026. The Company may borrow, repay and reborrow amounts under the Amended Credit Facility until its maturity date, at which time all amounts outstanding under the Amended Credit Facility must be repaid in full. As of December 30, 2017, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. There were other letters of credit of $1.8 million outstanding as of December 30, 2017.
The Amended Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at the Company's election, eligible real property, minus certain reservesreserves. Proceeds of the Amended Credit Facility will be used for general corporate purposes. At March 25, 2023, the Company's applicable borrowing base calculation supported access to approximately $635 million under the Amended Credit Facility. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and subject to restrictions.a $75 million sublimit for short-notice borrowings. As of December 30, 2017,March 25, 2023, there were borrowings of $25 million outstanding and no letters of credit outstanding under the borrowing base and remaining borrowing availability was $330.2 million. Amended Credit Facility. Outside the Amended Credit Facility, there were other letters of credit of $1.3 million outstanding as of March 25, 2023.
Borrowings under the Amended Credit Facility bear interest at an index based on LIBOR (which will not be less than 0.00%) or, at the option of the Company, the Base Rate, (defined as the highest of (a) the SunTrust prime rate, (b) the Federal Funds Rate plus 0.5% and (c) one-month LIBOR plus 1.00%), plus, in either case, an applicable margin based on the Company’s consolidated senior leverage ratio. SuchCompany's usage under the credit facility. 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%. The applicable margin for LIBOR-based borrowings fluctuates between 1.25% - 1.50%1.00%-1.50%, and was 1.25%1.00% as of December 30, 2017,March 25, 2023, and suchthe applicable margin for Base Rate borrowings fluctuates between 0.25%-0.5%0.00%-0.50%, and was 0.25%0% as of December 30, 2017.March 25, 2023. An unused line fee is payable quarterly in respect of the total amount of the unutilized Lenders’ commitments and short-notice borrowings under the Amended Credit Facility. Letter of credit fees at the applicable margin on the average undrawn and unreimbursed amount of letters of credit are payable quarterly and a facing fee of 0.125% is payable quarterly for the stated amount of each letter of credit. The Company is also required to pay certain fees to the administrative agent under the Amended Credit Facility. The Amended Credit Facility provides for the transition from LIBOR to Secured Overnight Financing Rate ("SOFR"). As of December 30, 2017,March 25, 2023, the applicable interest rate related to Base Rate borrowings was 4.8%8.0%, and the applicable interest rate related to one-month LIBOR-based borrowings was 2.8%5.8%.
The Company incurred approximately $1.2$2.4 million of debt issuance costs in conjunction with this transaction, which included underwriterlender fees legal and accountinglegal expenses. The debt issuance costs are being amortized over the term of the Amended Credit Facility.
The Amended Credit Facility contains customary covenants, including financial covenants which require the Company to maintain a minimum fixed charge coverage ratio of 1.00:1.001:1 upon reachingtriggered quarterly testing (e.g. when availability falls below certain borrowing levels.thresholds established in the agreement), reporting requirements and events of default. The Amended Credit Facility is secured by substantially all assets of the Company.borrowing parties, including (i) pledges of 100% of the stock or other equity interest of each domestic subsidiary that is directly owned by such entity and (ii) 65% of the stock or other equity interest of each foreign subsidiary that is directly owned by such entity, in each case subject to customary exceptions. The Company was in compliance with all financial covenants under the Amended Credit Facility during the quarter ended December 30, 2017.
as of March 25, 2023.
| |
8. | Supplemental Equity Information |
7. Supplemental Equity Information
The following table provides a summary of the changes in the carrying amounts of equity attributable to controlling interest and noncontrolling interest forthrough the threesix months ended December 30, 2017March 25, 2023 and December 24, 2016.March 26, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Controlling Interest | | | | |
| | Common Stock | | Class A Common Stock | | Class B Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Noncontrolling Interest | | Total |
| | (in thousands) |
Balance September 24, 2022 | | $ | 113 | | | $ | 413 | | | $ | 16 | | | $ | 582,056 | | | $ | 755,253 | | | $ | (4,145) | | | $ | 1,333,706 | | | $ | 1,006 | | | $ | 1,334,712 | |
Comprehensive loss | | — | | | — | | | — | | | — | | | (8,433) | | | 782 | | | (7,651) | | | (416) | | | (8,067) | |
Amortization of share-based awards | | — | | | — | | | — | | | 4,647 | | | — | | | — | | | 4,647 | | | — | | | 4,647 | |
Restricted share activity, including net share settlement | | — | | | — | | | — | | | (590) | | | — | | | — | | | (590) | | | — | | | (590) | |
Issuance of common stock, including net share settlement of stock options | | — | | | 1 | | | — | | | 1,707 | | | — | | | — | | | 1,708 | | | — | | | 1,708 | |
Repurchase of stock | | — | | | (2) | | | — | | | (2,693) | | | (6,271) | | | — | | | (8,966) | | | — | | | (8,966) | |
| | | | | | | | | | | | | | | | | | |
Balance December 24, 2022 | | $ | 113 | | | $ | 412 | | | $ | 16 | | | $ | 585,127 | | | $ | 740,549 | | | $ | (3,363) | | | $ | 1,322,854 | | | $ | 590 | | | $ | 1,323,444 | |
Comprehensive income | | — | | | — | | | — | | | — | | | 48,115 | | | (238) | | | 47,877 | | | 563 | | | 48,440 | |
Amortization of share-based awards | | — | | | — | | | — | | | 5,015 | | | — | | | — | | | 5,015 | | | — | | | 5,015 | |
Restricted share activity, including net share settlement | | — | | | 1 | | | — | | | (3,115) | | | — | | | — | | | (3,114) | | | — | | | (3,114) | |
Repurchase of stock | | (1) | | | (1) | | | — | | | (807) | | | (1,888) | | | — | | | (2,697) | | | — | | | (2,697) | |
Issuance of common stock, including net share settlement of stock options | | — | | | 1 | | | — | | | 1,158 | | | — | | | — | | | 1,159 | | | — | | | 1,159 | |
| | | | | | | | | | | | | | | | | | |
Balance March 25, 2023 | | $ | 112 | | | $ | 413 | | | $ | 16 | | | $ | 587,378 | | | $ | 786,776 | | | $ | (3,601) | | | $ | 1,371,094 | | | $ | 1,153 | | | $ | 1,372,247 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | Controlling Interest | | | | |
| | Controlling Interest | | | | | | Common Stock | | Class A Common Stock | | Class B Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Noncontrolling Interest | | Total |
(in thousands) | | Common Stock | | Class A Common Stock | | Class B Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Noncontrolling Interest | | Total | |
Balance September 30, 2017 | | $ | 122 |
| | $ | 380 |
| | $ | 16 |
| | $ | 396,790 |
| | $ | 239,329 |
| | $ | (951 | ) | | $ | 635,686 |
| | $ | 1,456 |
| | $ | 637,142 |
| |
| | | (in thousands) |
Balance September 25, 2021 | | Balance September 25, 2021 | | $ | 113 | | | $ | 423 | | | $ | 16 | | | $ | 576,446 | | | $ | 646,082 | | | $ | (831) | | | $ | 1,222,249 | | | $ | 1,292 | | | $ | 1,223,541 | |
Comprehensive income | | | | | | | | | | 26,247 |
| | 44 |
| | 26,291 |
| | 203 |
| | 26,494 |
| Comprehensive income | | — | | | — | | | — | | | — | | | 9,009 | | | (442) | | | 8,567 | | | 187 | | | 8,754 | |
Amortization of share-based awards | | | | | | | | 2,143 |
| | | | | | 2,143 |
| | | | 2,143 |
| Amortization of share-based awards | | — | | | — | | | — | | | 3,886 | | | — | | | — | | | 3,886 | | | — | | | 3,886 | |
Restricted share activity, including net share settlement | | | |
| | | | (2,397 | ) | | | | | | (2,397 | ) | | | | (2,397 | ) | Restricted share activity, including net share settlement | | — | | | — | | | — | | | (705) | | | — | | | — | | | (705) | | | — | | | (705) | |
Repurchase of stock | | Repurchase of stock | | — | | | (1) | | | — | | | (1,600) | | | (5,059) | | | — | | | (6,660) | | | — | | | (6,660) | |
Issuance of common stock, including net share settlement of stock options | |
|
| |
|
| | | | 166 |
| | | | | | 166 |
| | | | 166 |
| Issuance of common stock, including net share settlement of stock options | | — | | | — | | | — | | | 890 | | | — | | | — | | | 890 | | | — | | | 890 | |
Distribution to Noncontrolling interest | | | | | | | | | | | | | | | | (1,597 | ) | | (1,597 | ) | Distribution to Noncontrolling interest | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (806) | | | (806) | |
Balance December 30, 2017 | | $ | 122 |
| | $ | 380 |
| | $ | 16 |
| | $ | 396,702 |
| | $ | 265,576 |
| | $ | (907 | ) | | $ | 661,889 |
| | $ | 62 |
| | $ | 661,951 |
| |
Balance December 25, 2021 | | Balance December 25, 2021 | | $ | 113 | | | $ | 422 | | | $ | 16 | | | $ | 578,917 | | | $ | 650,032 | | | $ | (1,273) | | | $ | 1,228,227 | | | $ | 673 | | | $ | 1,228,900 | |
Comprehensive income | | Comprehensive income | | — | | | — | | | — | | | — | | | 69,713 | | | 570 | | | 70,283 | | | 573 | | | 70,856 | |
Amortization of share-based awards | | Amortization of share-based awards | | — | | | — | | | — | | | 4,624 | | | — | | | — | | | 4,624 | | | — | | | 4,624 | |
Restricted share activity, including net share settlement | | Restricted share activity, including net share settlement | | — | | | 2 | | | — | | | (923) | | | — | | | — | | | (921) | | | — | | | (921) | |
Repurchase of stock | | Repurchase of stock | | — | | | (2) | | | (2,372) | | | (7,062) | | | — | | | (9,436) | | | (9,436) | |
Issuance of common stock, including net share settlement of stock options | | Issuance of common stock, including net share settlement of stock options | | — | | | — | | | — | | | 309 | | | — | | | — | | | 309 | | | — | | | 309 | |
| Other | | Other | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Balance March 26, 2022 | | Balance March 26, 2022 | | $ | 113 | | | $ | 422 | | | $ | 16 | | | $ | 580,555 | | | $ | 712,683 | | | $ | (703) | | | $ | 1,293,086 | | | $ | 1,247 | | | $ | 1,294,333 | |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Controlling Interest | | | | |
(in thousands) | | Common Stock | | Class A Common Stock | | Class B Stock | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Noncontrolling Interest | | Total |
Balance September 24, 2016 | | $ | 120 |
| | $ | 374 |
| | $ | 16 |
| | $ | 393,297 |
| | $ | 160,501 |
| | $ | (1,294 | ) | | $ | 553,014 |
| | $ | 1,573 |
| | $ | 554,587 |
|
Comprehensive income | | | | | | | | | | 7,637 |
| | (508 | ) | | 7,129 |
| | 152 |
| | 7,281 |
|
Amortization of share-based awards | | | | | | | | 2,118 |
| | | | | | 2,118 |
| | | | 2,118 |
|
Restricted share activity, including net share settlement | | | | (1 | ) | | | | (3,312 | ) | | | | | | (3,313 | ) | | | | (3,313 | ) |
Issuance of common stock, including net share settlement of stock options | |
| | 2 |
| | | | (4,033 | ) | | | | | | (4,031 | ) | | | | (4,031 | ) |
Tax benefit on stock option exercise, net of tax deficiency | | | | | | | | 4,332 |
| | | | | | 4,332 |
| | | | 4,332 |
|
Distribution to Noncontrolling interest | | | | | | | | | | | | | | | | (1,018 | ) | | (1,018 | ) |
Balance December 24, 2016 | | $ | 120 |
| | $ | 375 |
| | $ | 16 |
| | $ | 392,402 |
| | $ | 168,138 |
| | $ | (1,802 | ) | | $ | 559,249 |
| | $ | 707 |
| | $ | 559,956 |
|
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9. | Stock-Based Compensation |
8. Stock-Based Compensation
The Company recognized share-based compensation expense of $2.7$13.3 million and $2.7$11.5 million for the threesix months ended December 30, 2017March 25, 2023 and December 24, 2016,March 26, 2022, respectively, as a component of selling, general and administrative expenses. The tax benefit associated with share-based compensation expense for the threesix months ended December 30, 2017March 25, 2023 and December 24, 2016March 26, 2022 was $0.7$3.2 million and $1.0$2.7 million, respectively.
9. Earnings Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted per share computations for income from continuing operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | March 25, 2023 | | March 25, 2023 |
| | Income | | Shares | | Per Share | | Income | | Shares | | Per Share |
| | (in thousands, except per share amounts) |
Basic EPS: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 48,115 | | | 52,443 | | | $ | 0.92 | | | $ | 39,682 | | | 52,461 | | | $ | 0.76 | |
Effect of dilutive securities: | | | | | | | | | | | | |
Options to purchase common stock | | — | | | 310 | | | (0.01) | | | — | | | 300 | | | (0.01) | |
Restricted shares | | — | | | 690 | | | (0.01) | | | — | | | 687 | | | (0.01) | |
Performance stock units | | — | | | 91 | | | — | | | | | 72 | | | — | |
Diluted EPS: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 48,115 | | | 53,534 | | | $ | 0.90 | | | $ | 39,682 | | | 53,520 | | | $ | 0.74 | |
|
| | | | | | | | | | | |
| | Three Months Ended |
| | December 30, 2017 |
| | Income | | Shares | | Per Share |
Basic EPS: | | | | | | |
Net income available to common shareholders | | $ | 26,247 |
| | 50,730 |
| | $ | 0.52 |
|
Effect of dilutive securities: | | | | | | |
Options to purchase common stock | |
| | 1,147 |
| | (0.01 | ) |
Restricted shares | |
| | 818 |
| | (0.01 | ) |
Diluted EPS: | |
| |
| |
|
Net income available to common shareholders | | $ | 26,247 |
| | 52,695 |
| | $ | 0.50 |
|
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | March 26, 2022 | | March 26, 2022 |
| | Income | | Shares | | Per Share | | Income | | Shares | | Per Share |
| | (in thousands, except per share amounts) |
Basic EPS: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 69,713 | | | 53,458 | | | $ | 1.30 | | | $ | 78,722 | | | 53,475 | | | $ | 1.47 | |
Effect of dilutive securities: | | | | | | | | | | | | |
Options to purchase common stock | | — | | | 515 | | | (0.01) | | | — | | | 572 | | | (0.01) | |
Restricted shares | | — | | | 749 | | | (0.02) | | | — | | | 771 | | | (0.02) | |
Diluted EPS: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 69,713 | | | 54,722 | | | $ | 1.27 | | | $ | 78,722 | | | 54,818 | | | $ | 1.44 | |
|
| | | | | | | | | | | |
| | Three Months Ended |
| | December 24, 2016 |
| | Income |
| Shares |
| Per Share |
Basic EPS: |
|
|
|
|
|
|
Net income available to common shareholders |
| $ | 7,637 |
|
| 49,665 |
|
| $ | 0.15 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
Options to purchase common stock |
|
|
| 1,356 |
|
| — |
|
Restricted shares |
|
|
| 789 |
|
| — |
|
Diluted EPS: |
|
|
|
|
|
|
Net income available to common shareholders |
| $ | 7,637 |
|
| 51,810 |
|
| $ | 0.15 |
|
| | | | | | |
Options to purchase 2.0 million shares of Class A common stock at prices ranging from $21.37 to $51.37 per share were outstanding at March 25, 2023, and options to purchase 2.4 million shares of Class A common stock at prices ranging from $6.43$13.82 to $33.15$51.37 per share were outstanding at December 30, 2017, and options to purchase 2.9 million shares of common stock at prices ranging from $6.43 to $15.56 per share were outstanding at December 24, 2016.March 26, 2022.
For the three months ended December 30, 2017March 25, 2023 andDecember 24, 2016, all March 26, 2022, approximately 0.6 million and 0.4 million options outstanding, respectively, were not included in the computation of diluted earnings per share.share because the option exercise prices were greater than the average market price of the common shares and therefore, the effect of including these options would be antidilutive.
For the six months ended March 25, 2023 and March 26, 2022, approximately 0.6 million and 21 thousand options outstanding, respectively, were not included in the computation of diluted earnings per share because the option exercise prices were greater than the average market price of the common shares and therefore, the effect of including these options would be antidilutive.
10. Segment Information
Management has determined that the Company has two operating segments, which are also reportable segments based on the level at which the Chief Operating Decision Maker reviews the results of operations to make decisions regarding performance assessment and resource allocation. These operating segments are the Pet segment and the Garden segmentsegment. Substantially all of the Company's assets and areoperations relate to its business in the United States. Financial information relating to the Company's business segments is presented in the table below (in thousands).below.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | March 25, 2023 | | March 26, 2022 | | March 25, 2023 | | March 26, 2022 |
| | (in thousands) |
Net sales: | | | | | | | | |
Pet segment | | $ | 475,203 | | | $ | 497,640 | | | $ | 891,023 | | | $ | 933,642 | |
Garden segment | | 433,801 | | | 456,730 | | | $ | 645,644 | | | 682,126 | |
Total net sales | | $ | 909,004 | | | $ | 954,370 | | | $ | 1,536,667 | | | $ | 1,615,768 | |
Operating income (loss) | | | | | | | | |
Pet segment | | 55,255 | | | 60,645 | | | 94,810 | | | 105,896 | |
Garden segment | | 49,619 | | | 70,511 | | | 38,799 | | | 76,568 | |
Corporate | | (26,833) | | | (24,311) | | | (55,162) | | | (49,405) | |
Total operating income | | 78,041 | | | 106,845 | | | 78,447 | | | 133,059 | |
Interest expense - net | | (14,690) | | | (14,702) | | | (28,466) | | | (29,110) | |
Other income (expense) | | 595 | | | (369) | | | 2,294 | | | (578) | |
Income tax expense | | 15,268 | | | 21,488 | | | 12,446 | | | 23,889 | |
Income including noncontrolling interest | | 48,678 | | | 70,286 | | | 39,829 | | | 79,482 | |
Net income attributable to noncontrolling interest | | 563 | | | 573 | | | 147 | | | 760 | |
Net income attributable to Central Garden & Pet Company | | $ | 48,115 | | | $ | 69,713 | | | $ | 39,682 | | | $ | 78,722 | |
Depreciation and amortization: | | | | | | | | |
Pet segment | | $ | 10,474 | | | $ | 9,539 | | | $ | 20,586 | | | $ | 19,088 | |
Garden segment | | 10,818 | | | 7,719 | | | 21,660 | | | 17,339 | |
Corporate | | 817 | | | 989 | | | 1,555 | | | 2,022 | |
Total depreciation and amortization | | $ | 22,109 | | | $ | 18,247 | | | $ | 43,801 | | | $ | 38,449 | |
| | | | | | | | | | | | | | | | | | | | |
| | March 25, 2023 | | March 26, 2022 | | September 24, 2022 |
| | (in thousands) |
Assets: | | | | | | |
Pet segment | | $ | 1,058,549 | | | $ | 1,101,814 | | | $ | 1,069,167 | |
Garden segment | | 1,620,907 | | | 1,634,158 | | | 1,405,802 | |
Corporate | | 671,342 | | | 613,286 | | | 807,033 | |
Total assets | | $ | 3,350,798 | | | $ | 3,349,258 | | | $ | 3,282,002 | |
Goodwill (included in corporate assets above): | | | | | | |
Pet segment | | $ | 277,067 | | | $ | 277,067 | | | $ | 277,067 | |
Garden segment | | 269,369 | | | 234,906 | | | 269,369 | |
Total goodwill | | $ | 546,436 | | | $ | 511,973 | | | $ | 546,436 | |
|
| | | | | | | | |
| | Three Months Ended |
| | December 30, 2017 | | December 24, 2016 |
Net sales: | | | | |
Pet segment | | $ | 325,084 |
| | $ | 304,046 |
|
Garden segment | | 116,927 |
| | 115,452 |
|
Total net sales | | $ | 442,011 |
| | $ | 419,498 |
|
| | | | |
Pet segment | | 36,176 |
| | 33,406 |
|
Garden segment | | 2,300 |
| | 2,676 |
|
Corporate | | (15,955 | ) | | (16,144 | ) |
Total operating income | | 22,521 |
| | 19,938 |
|
Interest expense - net | | (7,218 | ) | | (6,835 | ) |
Other expense | | (3,089 | ) | | (967 | ) |
Income tax (benefit) expense | | (14,236 | ) | | 4,347 |
|
Income including noncontrolling interest | | 26,450 |
| | 7,789 |
|
Net income attributable to noncontrolling interest | | 203 |
| | 152 |
|
Net income attributable to Central Garden & Pet Company | | $ | 26,247 |
| | $ | 7,637 |
|
Depreciation and amortization: | | | | |
Pet segment | | $ | 7,145 |
| | 5,830 |
|
Garden segment | | 1,569 |
| | 1,507 |
|
Corporate | | 2,449 |
| | 2,672 |
|
Total depreciation and amortization | | $ | 11,163 |
| | $ | 10,009 |
|
The tables below present the Company's disaggregated revenues by segment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 25, 2023 | | Six Months Ended March 25, 2023 |
| | Pet Segment | | Garden Segment | | Total | | Pet Segment | | Garden Segment | | Total |
| | (in millions) | | (in millions) |
Other pet products | | $ | 194.1 | | | $ | — | | | $ | 194.1 | | | $ | 333.6 | | | $ | — | | | $ | 333.6 | |
Dog and cat products | | 126.7 | | | — | | | 126.7 | | | 260.8 | | | — | | | 260.8 | |
Other manufacturers' products | | 103.0 | | | 95.7 | | | 198.7 | | | 206.4 | | | 141.8 | | | 348.2 | |
Wild bird products | | 51.4 | | | 81.5 | | | 132.9 | | | 90.2 | | | 141.0 | | | 231.3 | |
| | | | | | | | | | | | |
Other garden supplies | | — | | | 256.6 | | | 256.6 | | | — | | | 362.8 | | | 362.8 | |
Total | | $ | 475.2 | | | $ | 433.8 | | | $ | 909.0 | | | $ | 891.0 | | | $ | 645.6 | | | $ | 1,536.7 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 26, 2022 | | Six Months Ended March 26, 2022 |
| | Pet Segment | | Garden Segment | | Total | | Pet Segment | | Garden Segment | | Total |
| | (in millions) | | (in millions) |
Other pet products | | $ | 223.7 | | | $ | — | | | $ | 223.7 | | | $ | 377.4 | | | $ | — | | | $ | 377.4 | |
Dog and cat products | | 129.3 | | | — | | | 129.3 | | | 274.2 | | | — | | | 274.2 | |
Other manufacturers' products | | 98.5 | | | 95.4 | | | 193.9 | | | 203.0 | | | 144.8 | | | 347.8 | |
Wild bird products | | 46.1 | | | 72.8 | | | 118.9 | | | 79.0 | | | 127.5 | | | 206.5 | |
| | | | | | | | | | | | |
Other garden supplies | | — | | | 288.5 | | | 288.5 | | | — | | | 409.8 | | | 409.8 | |
Total | | $ | 497.6 | | | $ | 456.7 | | | $ | 954.3 | | | $ | 933.6 | | | $ | 682.1 | | | $ | 1,615.7 | |
| | | | | | | | | | | | |
11. Contingencies
|
| | | | | | | | | | | | |
| | December 30, 2017 | | December 24, 2016 | | September 30, 2017 |
Assets: | | | | | | |
Pet segment | | $ | 620,681 |
| | $ | 575,192 |
| | $ | 612,337 |
|
Garden segment | | 356,821 |
| | 354,674 |
| | 311,026 |
|
Corporate | | 639,850 |
| | 286,888 |
| | 383,543 |
|
Total assets | | $ | 1,617,352 |
| | $ | 1,216,754 |
| | $ | 1,306,906 |
|
Goodwill (included in corporate assets above): | | | | | | |
Pet segment | | $ | 250,802 |
| | $ | 224,912 |
| | $ | 250,802 |
|
Garden segment | | 5,473 |
| | 5,473 |
| | 5,473 |
|
Total goodwill | | $ | 256,275 |
| | $ | 230,385 |
| | $ | 256,275 |
|
| |
12. | Consolidating Condensed Financial Information of Guarantor Subsidiaries |
Certain 100% wholly-owned subsidiaries of the Company (as listed below, collectively the “Guarantor Subsidiaries”) have guaranteed fully and unconditionally, on a joint and several basis, the obligation to pay principal and interest on the Company’s 2023 Notes and 2028 Notes. Certain subsidiaries and operating divisions are not guarantors of the 2023 Notes and 2028 Notes. Those subsidiaries that are guarantors and co-obligors of the 2023 Notes and 2028 Notes are as follows:
Farnam Companies, Inc.
Four Paws Products Ltd.
Gulfstream Home & Garden, Inc.
Hydro-Organics Wholesale, Inc.
IMS Trading, LLC
IMS Southern, LLC
K&H Manufacturing, LLC
Kaytee Products, Inc.
Matson, LLC
New England Pottery, LLC
Pennington Seed, Inc. (including Gro Tec, Inc., NEXGEN Turf Research, LLC and All-Glass Aquarium Co., Inc.)
Pets International, Ltd.
Segrest, Inc. (including Blue Springs Hatchery, Inc., Segrest Farms, Inc., Florida Tropical Distributors International, Inc., Sun Pet, Ltd, Aquatica Tropicals, Inc., Quality Pets, LLC and Midwest Tropicals, LLC)
T.F.H. Publications, Inc.
Wellmark International (including B2E Corporation, B2E Microbials, LLC, B2E Manufacturing, LLC, Four Star Microbial Products, LLC and B2E Biotech LLC)
In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying consolidating condensed financial statements based on the Company’s understanding of the Securities and Exchange Commission’s interpretation and application of Rule 3-10 of the Securities and Exchange Commission’s Regulation S-X.
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS |
| | Three Months Ended December 30, 2017 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net sales | | $ | 159,061 |
| | $ | 13,743 |
| | $ | 286,424 |
| | $ | (17,217 | ) | | $ | 442,011 |
|
Cost of goods sold and occupancy | | 125,479 |
| | 11,816 |
| | 189,051 |
| | (16,172 | ) | | 310,174 |
|
Gross profit | | 33,582 |
| | 1,927 |
| | 97,373 |
| | (1,045 | ) | | 131,837 |
|
Selling, general and administrative expenses | | 36,639 |
| | 3,905 |
| | 69,817 |
| | (1,045 | ) | | 109,316 |
|
Operating income (loss) | | (3,057 | ) | | (1,978 | ) | | 27,556 |
| | — |
| | 22,521 |
|
Interest expense | | (7,385 | ) | | (16 | ) | | (4 | ) | | — |
| | (7,405 | ) |
Interest income | | 186 |
| | 1 |
| | — |
| | — |
| | 187 |
|
Other (expense) income | | (2,918 | ) | | 54 |
| | (225 | ) | | — |
| | (3,089 | ) |
Income (loss) before taxes and equity in earnings (losses) of affiliates | | (13,174 | ) | | (1,939 | ) | | 27,327 |
| | — |
| | 12,214 |
|
Income tax expense (benefit) | | 14,425 |
| | 1,282 |
| | (29,943 | ) | | — |
| | (14,236 | ) |
Equity in earnings (losses) of affiliates | | 53,846 |
| | — |
| | (2,900 | ) | | (50,946 | ) | | — |
|
Net income (loss) including noncontrolling interest | | 26,247 |
| | (3,221 | ) | | 54,370 |
| | (50,946 | ) | | 26,450 |
|
Net income attributable to noncontrolling interest | | — |
| | 203 |
| | — |
| | — |
| | 203 |
|
Net income (loss) attributable to Central Garden & Pet Company | | $ | 26,247 |
| | $ | (3,424 | ) | | $ | 54,370 |
| | $ | (50,946 | ) | | $ | 26,247 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS |
| | Three Months Ended December 24, 2016 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net sales | | $ | 155,518 |
| | $ | 14,024 |
| | $ | 266,438 |
| | $ | (16,482 | ) | | $ | 419,498 |
|
Cost of goods sold and occupancy | | 121,136 |
| | 11,678 |
| | 181,440 |
| | (15,434 | ) | | 298,820 |
|
Gross profit | | 34,382 |
| | 2,346 |
| | 84,998 |
| | (1,048 | ) | | 120,678 |
|
Selling, general and administrative expenses | | 35,965 |
| | 3,664 |
| | 62,159 |
| | (1,048 | ) | | 100,740 |
|
Operating income (loss) | | (1,583 | ) | | (1,318 | ) | | 22,839 |
| | — |
| | 19,938 |
|
Interest expense | | (6,851 | ) | | (17 | ) | | (5 | ) | | — |
| | (6,873 | ) |
Interest income | | 38 |
| | — |
| | — |
| | — |
| | 38 |
|
Other expense | | (603 | ) | | (193 | ) | | (171 | ) | | — |
| | (967 | ) |
Income (loss) before taxes and equity in earnings (losses) of affiliates | | (8,999 | ) | | (1,528 | ) | | 22,663 |
| | — |
| | 12,136 |
|
Income tax expense (benefit) | | (3,192 | ) | | (411 | ) | | 7,950 |
| | — |
| | 4,347 |
|
Equity in earnings (losses) of affiliates | | 13,444 |
| | — |
| | (811 | ) | | (12,633 | ) | | — |
|
Net income (loss) including noncontrolling interest | | 7,637 |
| | (1,117 | ) | | 13,902 |
| | (12,633 | ) | | 7,789 |
|
Net income attributable to noncontrolling interest | | — |
| | 152 |
| | — |
| | — |
| | 152 |
|
Net income (loss) attributable to Central Garden & Pet Company | | $ | 7,637 |
| | $ | (1,269 | ) | | $ | 13,902 |
| | $ | (12,633 | ) | | $ | 7,637 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| | Three Months Ended December 30, 2017 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net income (loss) | | $ | 26,247 |
| | $ | (3,221 | ) | | $ | 54,370 |
| | $ | (50,946 | ) | | $ | 26,450 |
|
Other comprehensive income (loss): | | | | | | | | | | |
Foreign currency translation | | 44 |
| | 43 |
| | (16 | ) | | (27 | ) | | 44 |
|
Total comprehensive income (loss) | | 26,291 |
| | (3,178 | ) | | 54,354 |
| | (50,973 | ) | | 26,494 |
|
Comprehensive income attributable to noncontrolling interests | | — |
| | 203 |
| | — |
| | — |
| | 203 |
|
Comprehensive income (loss) attributable to Central Garden & Pet Company | | $ | 26,291 |
| | $ | (3,381 | ) | | $ | 54,354 |
| | $ | (50,973 | ) | | $ | 26,291 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| | Three Months Ended December 24, 2016 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net income (loss) | | $ | 7,637 |
| | $ | (1,117 | ) | | $ | 13,902 |
| | $ | (12,633 | ) | | $ | 7,789 |
|
Other comprehensive loss: | | | | | | | | | | |
Foreign currency translation |
| (508 | ) |
| (355 | ) |
| (50 | ) |
| 405 |
|
| (508 | ) |
Total comprehensive income (loss) | | 7,129 |
| | (1,472 | ) | | 13,852 |
| | (12,228 | ) | | 7,281 |
|
Comprehensive income attributable to noncontrolling interests | | — |
| | 152 |
| | — |
| | — |
| | 152 |
|
Comprehensive income (loss) attributable to Central Garden & Pet Company | | $ | 7,129 |
| | $ | (1,624 | ) | | $ | 13,852 |
| | $ | (12,228 | ) | | $ | 7,129 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED BALANCE SHEET |
| | December 30, 2017 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | | |
Cash and cash equivalents | | $ | 277,608 |
| | $ | 5,858 |
| | $ | — |
| | $ | — |
| | $ | 283,466 |
|
Restricted cash | | 12,419 |
| | — |
| | — |
| | — |
| | 12,419 |
|
Accounts receivable, net | | 89,039 |
| | 5,617 |
| | 140,419 |
| | — |
| | 235,075 |
|
Inventories | | 141,788 |
| | 12,723 |
| | 285,910 |
| | — |
| | 440,421 |
|
Prepaid expenses and other | | 6,645 |
| | 1,059 |
| | 14,815 |
| | — |
| | 22,519 |
|
Total current assets | | 527,499 |
| | 25,257 |
| | 441,144 |
| | — |
| | 993,900 |
|
Land, buildings, improvements and equipment, net | | 35,972 |
| | 4,180 |
| | 139,078 |
| | — |
| | 179,230 |
|
Goodwill | | 15,058 |
| | — |
| | 241,217 |
| | — |
| | 256,275 |
|
Other long-term assets | | 55,752 |
| | 2,032 |
| | 143,741 |
| | (13,578 | ) | | 187,947 |
|
Intercompany receivable | | 38,956 |
| | — |
| | 677,979 |
| | (716,935 | ) | | — |
|
Investment in subsidiaries | | 1,437,506 |
| | — |
| | — |
| | (1,437,506 | ) | | — |
|
Total | | $ | 2,110,743 |
| | $ | 31,469 |
| | $ | 1,643,159 |
| | $ | (2,168,019 | ) | | $ | 1,617,352 |
|
LIABILITIES AND EQUITY | | | | | | | | | | |
Accounts payable | | $ | 40,775 |
| | $ | 9,241 |
| | $ | 74,567 |
| | $ | — |
| | $ | 124,583 |
|
Accrued expenses | | 45,973 |
| | 2,313 |
| | 51,718 |
| | — |
| | 100,004 |
|
Current portion of long-term debt | | — |
| | — |
| | 372 |
| | — |
| | 372 |
|
Total current liabilities | | 86,748 |
| | 11,554 |
| | 126,657 |
| | — |
| | 224,959 |
|
Long-term debt | | 690,839 |
| | — |
| | 125 |
| | — |
| | 690,964 |
|
Intercompany payable | | 663,241 |
| | 53,694 |
| | — |
| | (716,935 | ) | | — |
|
Losses in excess of investment in subsidiaries | | — |
| | — |
| | 29,069 |
| | (29,069 | ) | | — |
|
Other long-term obligations | | 8,026 |
| | — |
| | 45,030 |
| | (13,578 | ) | | 39,478 |
|
Total Central Garden & Pet shareholders’ equity (deficit) | | 661,889 |
| | (33,841 | ) | | 1,442,278 |
| | (1,408,437 | ) | | 661,889 |
|
Noncontrolling interest | | — |
| | 62 |
| | — |
| | — |
| | 62 |
|
Total equity (deficit) | | 661,889 |
| | (33,779 | ) | | 1,442,278 |
| | (1,408,437 | ) | | 661,951 |
|
Total | | $ | 2,110,743 |
| | $ | 31,469 |
| | $ | 1,643,159 |
| | $ | (2,168,019 | ) | | $ | 1,617,352 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED BALANCE SHEET |
| | December 24, 2016 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,772 |
| | $ | 3,997 |
| | $ | 812 |
| | $ | — |
| | $ | 6,581 |
|
Restricted cash | | 10,981 |
| | — |
| | — |
| | — |
| | 10,981 |
|
Accounts receivable, net | | 72,850 |
| | 6,919 |
| | 112,455 |
| | — |
| | 192,224 |
|
Inventories | | 137,615 |
| | 15,435 |
| | 277,121 |
| | — |
| | 430,171 |
|
Prepaid expenses and other | | 7,972 |
| | 897 |
| | 13,530 |
| | — |
| | 22,399 |
|
Total current assets | | 231,190 |
| | 27,248 |
| | 403,918 |
| | — |
| | 662,356 |
|
Land, buildings, improvements and equipment, net | | 39,384 |
| | 3,858 |
| | 126,594 |
| | — |
| | 169,836 |
|
Goodwill | | 15,058 |
| | — |
| | 215,327 |
| | — |
| | 230,385 |
|
Other long-term assets | | 44,012 |
| | 3,542 |
| | 129,849 |
| | (23,226 | ) | | 154,177 |
|
Intercompany receivable | | 38,559 |
| | — |
| | 586,588 |
| | (625,147 | ) | | — |
|
Investment in subsidiaries | | 1,251,408 |
| | — |
| | — |
| | (1,251,408 | ) | | — |
|
Total | | $ | 1,619,611 |
| | $ | 34,648 |
| | $ | 1,462,276 |
| | $ | (1,899,781 | ) | | $ | 1,216,754 |
|
LIABILITIES AND EQUITY | | | | | | | | | | |
Accounts payable | | $ | 46,208 |
| | $ | 7,146 |
| | $ | 81,883 |
| | $ | — |
| | $ | 135,237 |
|
Accrued expenses | | 42,223 |
| | 1,362 |
| | 50,909 |
| | — |
| | 94,494 |
|
Current portion of long-term debt | | 22 |
| | — |
| | 375 |
| | — |
| | 397 |
|
Total current liabilities | | 88,453 |
| | 8,508 |
| | 133,167 |
| | — |
| | 230,128 |
|
Long-term debt | | 394,564 |
| | — |
| | 447 |
| | — |
| | 395,011 |
|
Intercompany payable | | 575,187 |
| | 49,960 |
| | — |
| | (625,147 | ) | | — |
|
Losses in excess of investment in subsidiaries | | — |
| | — |
| | 21,014 |
| | (21,014 | ) | | — |
|
Other long-term obligations | | 2,158 |
| | — |
| | 52,727 |
| | (23,226 | ) | | 31,659 |
|
Total Central Garden & Pet shareholders’ equity (deficit) | | 559,249 |
| | (24,527 | ) | | 1,254,921 |
| | (1,230,394 | ) | | 559,249 |
|
Noncontrolling interest | | — |
| | 707 |
| | — |
| | — |
| | 707 |
|
Total equity (deficit) | | 559,249 |
| | (23,820 | ) | | 1,254,921 |
| | (1,230,394 | ) | | 559,956 |
|
Total | | $ | 1,619,611 |
| | $ | 34,648 |
| | $ | 1,462,276 |
| | $ | (1,899,781 | ) | | $ | 1,216,754 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED BALANCE SHEET |
| | September 30, 2017 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | | |
Cash and cash equivalents | | $ | 19,238 |
| | $ | 11,693 |
| | $ | 1,466 |
| | $ | — |
| | $ | 32,397 |
|
Restricted cash | | 12,645 |
| | — |
| | — |
| | — |
| | 12,645 |
|
Accounts receivable, net | | 78,692 |
| | 5,586 |
| | 153,590 |
| | — |
| | 237,868 |
|
Inventories | | 125,797 |
| | 9,493 |
| | 246,811 |
| | — |
| | 382,101 |
|
Prepaid expenses and other assets | | 6,059 |
| | 811 |
| | 11,175 |
| | — |
| | 18,045 |
|
Total current assets | | 242,431 |
| | 27,583 |
| | 413,042 |
| | — |
| | 683,056 |
|
Land, buildings, improvements and equipment, net | | 38,170 |
| | 4,225 |
| | 138,518 |
| | — |
| | 180,913 |
|
Goodwill | | 15,058 |
| | — |
| | 241,217 |
| | — |
| | 256,275 |
|
Other long-term assets | | 61,715 |
| | 2,376 |
| | 146,372 |
| | (23,801 | ) | | 186,662 |
|
Intercompany receivable | | 36,606 |
| | — |
| | 662,137 |
| | (698,743 | ) | | — |
|
Investment in subsidiaries | | 1,383,633 |
| | — |
| | — |
| | (1,383,633 | ) | | — |
|
Total | | $ | 1,777,613 |
| | $ | 34,184 |
| | $ | 1,601,286 |
| | $ | (2,106,177 | ) | | $ | 1,306,906 |
|
LIABILITIES AND EQUITY | | | | | | | | | | |
Accounts payable | | $ | 36,760 |
| | $ | 3,076 |
| | $ | 63,447 |
| | $ | — |
| | $ | 103,283 |
|
Accrued expenses and other liabilities | | 54,909 |
| | 2,391 |
| | 59,249 |
| | — |
| | 116,549 |
|
Current portion of long term debt | | — |
| | — |
| | 375 |
| | — |
| | 375 |
|
Total current liabilities | | 91,669 |
| | 5,467 |
| | 123,071 |
| | — |
| | 220,207 |
|
Long-term debt | | 395,160 |
| | — |
| | 118 |
| | — |
| | 395,278 |
|
Intercompany payable | | 647,409 |
| | 51,334 |
| | — |
| | (698,743 | ) | | — |
|
Losses in excess of investment in subsidiaries | | — |
| | — |
| | 19,782 |
| | (19,782 | ) | | — |
|
Other long-term obligations | | 7,689 |
| | — |
| | 70,391 |
| | (23,801 | ) | | 54,279 |
|
Total Central Garden & Pet shareholders’ equity (deficit) | | 635,686 |
| | (24,073 | ) | | 1,387,924 |
| | (1,363,851 | ) | | 635,686 |
|
Noncontrolling interest | | — |
| | 1,456 |
| | — |
| | — |
| | 1,456 |
|
Total equity (deficit) | | 635,686 |
| | (22,617 | ) | | 1,387,924 |
| | (1,363,851 | ) | | 637,142 |
|
Total | | $ | 1,777,613 |
| | $ | 34,184 |
| | $ | 1,601,286 |
| | $ | (2,106,177 | ) | | $ | 1,306,906 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS |
| | Three Months Ended December 30, 2017 |
| | (in thousands) |
| | Parent | | Non- Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net cash provided (used) by operating activities | | $ | (38,709 | ) | | $ | (105 | ) | | $ | 20,988 |
| | $ | (6,387 | ) | | $ | (24,213 | ) |
Additions to property and equipment | | (1,608 | ) | | (83 | ) | | (6,495 | ) | |
|
| | (8,186 | ) |
Change in restricted cash and cash equivalents | | 226 |
| | — |
| |
|
| | — |
| | 226 |
|
Investments | | (6,555 | ) | | — |
| |
| | — |
| | (6,555 | ) |
Other investing activities | | (1,200 | ) | | — |
| | — |
| | — |
| | (1,200 | ) |
Intercompany investing activities | | (2,351 | ) | | — |
| | (15,842 | ) | | 18,193 |
| | — |
|
Net cash used by investing activities | | (11,488 | ) | | (83 | ) | | (22,337 | ) | | 18,193 |
| | (15,715 | ) |
Repayments on revolving line of credit | | (23,000 | ) | | — |
| | — |
| | — |
| | (23,000 | ) |
Borrowings under revolving line of credit | | 23,000 |
| | — |
| | — |
| | — |
| | 23,000 |
|
Issuance of long-term debt | | 300,000 |
| | — |
| | — |
| | — |
| | 300,000 |
|
Repayments under long-term debt | | — |
| | — |
| | (7 | ) | | — |
| | (7 | ) |
Payment of financing costs |
| (4,558 | ) |
| — |
|
| — |
|
| — |
|
| (4,558 | ) |
Repurchase of common stock | | (2,768 | ) | | — |
| | — |
| | — |
| | (2,768 | ) |
Distribution to parent | |
|
| | (6,387 | ) | | — |
| | 6,387 |
| | — |
|
Distribution to noncontrolling interest | |
|
| | (1,597 | ) | | — |
| | — |
| | (1,597 | ) |
Payment of contingent consideration liability | |
|
| | — |
| | (93 | ) | | — |
| | (93 | ) |
Intercompany financing activities | | 15,833 |
| | 2,360 |
| |
|
| | (18,193 | ) | | — |
|
Net cash provided (used) by financing activities | | 308,507 |
| | (5,624 | ) | | (100 | ) | | (11,806 | ) | | 290,977 |
|
Effect of exchange rate changes on cash and cash equivalents | | 60 |
| | (23 | ) | | (17 | ) | | — |
| | 20 |
|
Net increase (decrease) in cash and cash equivalents | | 258,370 |
| | (5,835 | ) | | (1,466 | ) | | — |
| | 251,069 |
|
Cash and cash equivalents at beginning of period | | 19,238 |
| | 11,693 |
| | 1,466 |
| | — |
| | 32,397 |
|
Cash and cash equivalents at end of period | | $ | 277,608 |
| | $ | 5,858 |
| | $ | — |
| | $ | — |
| | $ | 283,466 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS |
| | Three Months Ended December 24, 2016 |
| | (in thousands) |
| | Parent | | Non-Guarantor Subsidiaries | | Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net cash (used) provided by operating activities | | $ | (27,540 | ) | | $ | (4,428 | ) | | $ | 22,731 |
| | $ | (4,076 | ) | | $ | (13,313 | ) |
Additions to property, plant and equipment | | (1,831 | ) | | (110 | ) | | (11,027 | ) | | — |
| | (12,968 | ) |
Payments to acquire companies, net of cash acquired | | (60,042 | ) | | — |
| |
|
| | — |
| | (60,042 | ) |
Change in restricted cash and cash equivalents | | (71 | ) | | — |
| | — |
| | — |
| | (71 | ) |
Proceeds from sale of plant assets | | 2 |
| | | | 7,958 |
| | | | 7,960 |
|
Investments |
| (2,000 | ) |
|
|
|
|
|
|
|
|
|
| (2,000 | ) |
Other investing activities | | (265 | ) | |
|
| |
|
| |
|
| | (265 | ) |
Intercompany investing activities | | (5,781 | ) | | — |
| | (19,214 | ) | | 24,995 |
| | — |
|
Net cash used by investing activities | | (69,988 | ) | | (110 | ) | | (22,283 | ) | | 24,995 |
| | (67,386 | ) |
Repayments under revolving line of credit | | (1,000 | ) | | — |
| |
|
| | — |
| | (1,000 | ) |
Borrowings under revolving line of credit | | 1,000 |
| | — |
| | — |
| | — |
| | 1,000 |
|
Issuance of long-term debt | | (66 | ) | | — |
| | (8 | ) | | — |
| | (74 | ) |
Excess tax benefits from stock-based awards | | 4,356 |
| | — |
| | — |
| | — |
| | 4,356 |
|
Repurchase of common stock | | (7,913 | ) | |
|
| | — |
| |
|
| | (7,913 | ) |
Distribution to parent | | — |
| | (4,076 | ) | | — |
| | 4,076 |
| | — |
|
Distribution to noncontrolling interest | | — |
| | (1,018 | ) | | — |
| | — |
| | (1,018 | ) |
Payment of contingent consideration |
| — |
|
| — |
|
| (860 | ) |
| — |
|
| (860 | ) |
Intercompany financing activities | | 21,223 |
| | 3,772 |
| | — |
| | (24,995 | ) | | — |
|
Net cash provided (used) by financing activities | | 17,600 |
| | (1,322 | ) | | (868 | ) | | (20,919 | ) | | (5,509 | ) |
Effect of exchange rates on cash | | (458 | ) | | 162 |
| | 103 |
| | — |
| | (193 | ) |
Net decrease in cash and cash equivalents | | (80,386 | ) | | (5,698 | ) | | (317 | ) | | — |
| | (86,401 | ) |
Cash and cash equivalents at beginning of year | | 82,158 |
| | 9,695 |
| | 1,129 |
| | — |
| | 92,982 |
|
Cash and cash equivalents at end of year | | $ | 1,772 |
| | $ | 3,997 |
| | $ | 812 |
| | $ | — |
| | $ | 6,581 |
|
The Company may from time to time become involved in legal proceedings in the ordinary course of business. Currently, the Company is not a party to any legal proceedings the resolution of which management believes could have a material effect on the Company’s financial position or results of operations with the potential exception of the proceeding below.
In 2012, Nite Glow Industries, Inc and its owner, Marni Markell, (“Nite Glow”) filed suit in the U.S. District Court for New Jersey against the Company alleging that the applicator developed and used by the Company for certain of its branded topical flea and tick products infringes a patent held by Nite Glow and asserted related claims for breach of contract and misappropriation of confidential information based on the terms of a Non-Disclosure Agreement. On June 27, 2018, a jury returned a verdict in favor of Nite Glow on each of the three claims and awarded damages of approximately $12.6 million. The court ruled on post-trial motions in early June 2020, reducing the judgment amount to $12.4 million and denying the plaintiff's request for attorneys' fees. The Company filed its notice of appeal and the plaintiffs cross-appealed. On July 14, 2021, the Federal Circuit Court of Appeals issued its decision on the appeal. The Federal Circuit concluded that the Company did not infringe plaintiff's patent and determined that the breach of contract claim raised no non-duplicative damages and should be dismissed. The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information. The Company intends to vigorously pursue its defenses in the future proceedings and believes that it will prevail on the merits as to the head start damages issue. While the Company believes that the ultimate resolution of this matter will not have a material impact on the Company's consolidated financial statements, the outcome of litigation is inherently uncertain and the final resolution of this matter may result in expense to the Company in excess of management's expectations.
During fiscal 2013, the Company received notices from several states stating that they have appointed an agent to conduct an examination of the books and records of the Company to determine whether it has complied with state unclaimed property laws. In addition to seeking unclaimed property subject to escheat laws, the states may seek interest, penalties and other relief. The examinations are continuing; as a result, the ultimate resolution and impact on the Company’s consolidated financial statements is uncertain.
The Company has experienced, and may in the future experience, issues with products that may lead to product liability, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities. The Company has not experienced recent issues with products, the resolution of which, management believes would have a material effect on the Company’s financial position or results of operations.
12. Subsequent Event
In April 2023, the Company announced the closure of a leased manufacturing and distribution facility in Athens, Texas. This decision reflects the Company’s purposeful exit of low-margin private-label pet bed product lines and its efforts to achieve a simpler, more efficient manufacturing and distribution network leveraging the supply chain synergies of the Company’s cushion facilities.
This facility closure is expected to result in a one-time charge to earnings of approximately $15 million in the Company’s fiscal third quarter, composed of charges for facilities closure, severance, inventory liquidation and related intangibles, the majority of which will be non-cash.
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Company
Central Garden & Pet Company (“Central”) is a leading innovator, producer and distributor of branded and private label products formarket leader in the lawn & garden and pet supplies marketsindustries in the United States. The total pet food, treatsFor over 40 years, Central has proudly nurtured happy and supplies industry in 2016 was estimatedhealthy homes by Packaged Factsbringing innovative and the pet industrytrusted solutions to have been approximately $55.9 billion in annual retail sales.consumers and its customers. We estimate the annual retail sales of the pet supplies, live animal,manage our operations through two reportable segments: Pet and consumables and natural pet food markets in the categories in which we participate to be approximately $28.0 billion. The total lawn and garden consumables and decorative products industry in the United States is estimated to be approximately $27.6 billion in annual retail sales, including fertilizer, pesticides, growing media, seeds, mulch, other consumables and decorative products. We estimate the annual retail sales of the lawn and garden consumables and decorative products markets in the categories in which we participate to be approximately $18.9 billion.Garden.
Our pet supplies products include products for dogs and cats, including edible bones, premium healthy edible and non-edible chews, super premiumPet segment includes dog and cat foodsupplies such as dog treats and treats,chews, toys, pet carriers,beds and grooming products, waste management and training pads, pet containment; supplies and other accessories; products for birds,aquatics, small animals, reptiles and specialty pets,pet birds including food,toys, cages and habitats, toys, chewsbedding, food and related accessories;supplements; products for equine and livestock, animal and household health and insect control products; live fish and products for fish, reptiles and other aquarium-based pets, including aquariums, furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources; and products for horses and livestock.small animals as well as outdoor cushions. These products are sold under the brands including Adams™,such as Aqueon®, Avoderm®, Bio Spot Active Care™, Cadet®, Comfort Zone®, Farnam®, Four Paws®, Kaytee®, K&H Pet Products®("K&H"), Kaytee®, Nylabone®, Pinnacle®, TFH™, Zilla® as well as a number of other brands including Altosid®, Comfort Zone®, Coralife®, Interpet®, Kent Marine®, Pet Select®, Super Pet®, and ZodiacZilla®.
Our Garden segment includes lawn and garden supplies products include proprietaryconsumables such as grass seed, vegetable, flower and non-proprietary grassherb packet seed; wild bird feed, bird feeders, bird houses and other birding accessories; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers;fertilizers and decorative outdoor lifestyle products including pottery, trellises and other wood products.live plants. These products are sold under the brands AMDROsuch as Amdro®, IroniteFerry-Morse®, Pennington®, and Sevin®, as well as a number of other brand names including Lilly Miller®, Over-N-Out®, Smart Seed® and The Rebels®.
In fiscal 2017,2022, our consolidated net sales were $2,054 million,$3.3 billion, of which our Pet segment, or Pet, accounted for approximately $1,246 million$1.9 billion and our Garden segment, or Garden, accounted for approximately $808 million.$1.4 billion. In fiscal 2017,2022, our operating income was $156$260 million consisting of income from our Pet segment of $132$209 million, income from our Garden segment of $87$154 million and corporate expenses of $63$103 million.
We were incorporated in Delaware in May 1992 as the successor to a California corporation that was formed in 1955. Our executive offices are located at 1340 Treat Boulevard, Suite 600, Walnut Creek, California 94597, and our telephone number is (925) 948-4000. Our website is www.central.com.www.central.com. The information on our website is not incorporated by reference in this annualquarterly report.
Recent Developments
Fiscal 2018 First2023 Second Quarter Financial Performance:
•Net sales increased $22.5declined $45.4 million, or 5.4%4.8%, from the prior year quarter to $442.0 million .$909.0 million. Pet segment sales increased $21.1decreased $22.5 million, and Garden segment sales increased $1.4decreased $22.9 million.
Organic sales improved 1%.
•Gross profit declined $27.2 million from the prior year quarter, and gross margin increased 100decreased 150 basis points to 29.8%, and gross profit increased $11.2 million.28.6%.
•Selling, general &and administrative expense increased $8.6$1.7 million to $109.3 million.
Operating income improved $2.6 million, or 13.0%, from the prior year quarter to $181.6 million and as a percentage of net sales increased 110 basis points to 20.0%.
•Operating income decreased $28.8 million from the prior year quarter, to $78.0 million.
•Net income in the second quarter of fiscal 2023 was $48.1 million, or $0.90 per diluted share, compared to net income of $69.7 million, or $1.27 per diluted share, in the second quarter of fiscal 2022.
Facility Closure
In April 2023, we announced the closure of a leased manufacturing and distribution facility in Athens, Texas. This decision reflects our purposeful exit of low-margin private-label pet bed product lines and our efforts to achieve a simpler, more efficient manufacturing and distribution network leveraging the supply chain synergies of our cushion facilities.
This facility closure is expected to result in a one-time charge to earnings of approximately $15 million in our fiscal third quarter, composed of charges for facilities closure, severance, inventory liquidation and related intangibles, the majority of which will be non-cash.
Results of Operations
Three Months Ended March 25, 2023
Compared with Three Months Ended March 26, 2022
Net Sales
Net sales for the three months ended March 25, 2023 decreased $45.4 million, or 4.8%, to $909.0 million from $954.4 million for the three months ended March 26, 2022. Our branded product sales decreased $50.1 million, and sales of other manufacturers’ products increased $4.7 million. Both segments had volume related decreases in net sales that more than offset price increases taken to respond to rising input costs.
Pet net sales decreased $22.5 million, or 4.5%, to $475.2 million for the three months ended March 25, 2023 from $497.7 million for the three months ended March 26, 2022. The decline in net sales was due primarily to lower demand for durable pet products, particularly in our outdoor cushion business and aquatics business, and our exit of some profit-challenged product lines in our private label pet bed business. These declines were partially offset by increased sales in our dog and cat treats and toys business and our wild bird feed business. Pet branded product sales declined $26.9 million, and sales of other manufacturers' products increased $4.4 million.
Garden net sales decreased $22.9 million, or 5.0%, to $433.8 million for the three months ended March 25, 2023 from $456.7 million for the three months ended March 26, 2022. The decrease in garden net sales was due primarily to lower sales in controls and fertilizer and grass seed partially offset by increased sales of wild bird feed. The volume related sales decline was due primarily to adverse weather, unfavorable pre-season retailer ordering patterns and lighter retailer foot traffic. While the unfavorable weather pattern negatively impacted most of our garden segment, it positively impacted the sales of our wild bird feed business. Garden branded sales decreased $23.2 million, and sales of other manufacturers' products increased $0.3 million.
Gross Profit
Gross profit for the three months ended March 25, 2023 decreased $27.2 million, or 9.5%, to $259.6 million from $286.8 million for the three months ended March 26, 2022. Gross margin decreased 150 basis points to 28.6% for the three months ended March 25, 2023 from 30.1% for the three months ended March 26, 2022. The decrease in gross profit resulted from the declines in both net sales and gross margin.The decline in our consolidated gross margin was in the Garden segment, while the Pet segment gross margin was relatively flat as compared to the prior year. The decline in Garden gross margin was due primarily to lower sales and production volumes resulting in reduced overhead absorption, initial start-up costs associated with a live goods facility acquired in the prior year, and cost inflation; all of which were only partially offset by pricing actions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.7 million, or 0.9%, to $181.6 million for the three months ended March 25, 2023. As a percentage of net sales, selling, general and administrative expenses increased to 20.0% for the three months ended March 25, 2023, compared to 18.9% in the comparable prior year quarter. An increase in corporate expense and a smaller increase in Garden, were partially offset by a decrease in Pet.
Selling and delivery expense decreased $3.8 million to $83.5 million for the three months ended March 25, 2023 as compared to $87.3 million in the first quarterprior year quarter. The decreases, in both the Garden and Pet segments, were due primarily to lower product volume delivered and reduced discretionary spend (e.g. travel and entertainment expense).
Warehouse and administrative expense increased $5.5 million, or 5.9%, to $98.1 million for the three months ended March 25, 2023 from $92.6 million for the three months ended March 26, 2022. The increase in warehouse and administrative expense was due primarily to increased corporate expense. Corporate expenses increased $2.5 million due primarily to an increase in insurance expense and an increase in payroll expense due to headcount additions over the preceding twelve month period. Corporate expenses are included within administrative expense and relate to the costs of fiscal 2018. Excludingunallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating Income
Operating income decreased $28.8 million to $78.0 million for the gain on the sale of a facilitythree months ended March 25, 2023. Our operating margin decreased from 11.2% in the prior year quarter to 8.6% in the current year quarter. The decrease in operating income improved $4.6 million.was due to a $45.4 million decrease in net sales, a 150 basis point decrease in gross margin, and a $1.7 million increase in selling, general and administrative expense.
Pet operating income decreased $5.4 million, or 8.9%, to $55.3 million for the three months ended March 25, 2023 from $60.6 million for the three months ended March 26, 2022, and Pet operating margin declined 60 basis points to 11.6%. Pet operating income decreased due primarily to lower sales. Although Pet segment selling, general and administrative expense declined, it was higher as a percent of net sales and was the primary reason for the decline in the Pet operating margin.
Garden operating income decreased $20.9 million to $49.6 million for the three months ended March 25, 2023, from $70.5 million for the three months ended March 26, 2022. Garden operating income decreased due primarily to lower sales and a lower gross margin.
Corporate expense increased $2.5 million, or 10.4%, to $26.8 million for the three months ended March 25, 2023 from $24.3 million for the three months ended March 26, 2022. Corporate expense increased due primarily to increased insurance expense and an increase in payroll expense due headcount additions over the preceding twelve-month period.
Net Interest Expense
Net interest expense was $14.7 million for the three months ended March 25, 2023 and the three months ended March 26, 2022. Debt outstanding on March 25, 2023 was $1,212.3 million compared to $1,185.8 million at March 26, 2022.
Other Income (Expense)
Other income (expense) is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income (expense) was income of $0.6 million for the quarter ended March 25, 2023 compared to an expense of $0.4 million for the quarter ended March 26, 2022. The increase in other income was due primarily to foreign currency gains in the current year quarter, as compared to losses in the prior year quarter, and proceeds from a small investment interest that was sold.
Income Taxes
Our effective income tax rate was 23.9% for the quarter ended March 25, 2023 and 23.4% for the quarter ended March 26, 2022. The increase in our effective income tax rate was due primarily to a reduced tax benefit from stock compensation and an increased impact of nondeductible executive compensation compared to the prior year quarter.
Net Income and Earnings Per Share
Our net income in the firstsecond quarter of fiscal 20182023 was $26.2$48.1 million, or $0.50$0.90 per diluted share, compared to $7.6net income of $69.7 million, or $0.15$1.27 per diluted share, in the firstsecond quarter of fiscal 2017.2022.
Adjusting
Six Months Ended March 25, 2023
Compared with Six Months Ended March 26, 2022
Net Sales
Net sales for the six months ended March 25, 2023 decreased $79 million, or 4.9%, to $1,537 million from $1,616 million for the six months ended March 26, 2022. Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, decreased $79 million. The largest decline was in products we produce under third-party brands in both the Garden and Pet segments. Sales of other manufacturers’ products remained relatively flat.
Pet net sales decreased $42.7 million, or 4.6%, to $891.0 million for the six months ended March 25, 2023. The decline in net sales was volume-related and due primarily to lower demand for durable pet products, particularly in our outdoor cushion business and aquatics business, and our exit of profit-challenged product lines in our private label pet bed business. These declines were partially offset by increased sales in our dog and cat treats and toys business and our wild bird feed business. Pet branded sales decreased $45.9 million, and sales of other manufacturer's products increased $3.2 million.
Garden net sales decreased $36.4 million, or 5.3%, to $645.7 million for the six months ended March 25, 2023 from $682.1 million for the six months ended March 26, 2022. The decrease in garden net sales was due primarily to lower sales in our controls and fertilizer business and grass seed business partially offset by increased sales in our wild bird feed business. The volume related sales decline was due primarily to adverse weather, unfavorable pre-season retailer ordering patterns and lighter retailer foot traffic. While the unfavorable weather pattern negatively impacted most of our garden segment, it positively impacted the sales of our wild bird feed business. Garden branded sales decreased $33.4 million, and sales of other manufacturers’ products decreased $3.0 million.
Gross Profit
Gross profit for the six months ended March 25, 2023 decreased $53.7 million, or 11.1%, to $431.3 million from $485.0 million for the six months ended March 26, 2022. Gross margin decreased 190 basis points to 28.1% for the six months ended March 25, 2023 from 30.0% for the six months ended March 26, 2022. The decrease in gross profit resulted from the declines in both net sales and gross margin.The decline in our consolidated gross margin was in the Garden segment, while the Pet segment gross margin was relatively flat as compared to the prior year. The decline in Garden gross margin was due primarily to lower sales and production volumes resulting in reduced overhead absorption, initial start-up costs associated with a live goods facility acquired in the prior year, and cost inflation; all of which were only partially offset by pricing actions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.0 million, or 0.3%, to $353 million for the six months ended March 25, 2023 from $352 million for the six months ended March 26, 2022. As a percentage of net sales, selling, general and administrative expenses increased to 23.0% for the six months ended March 25, 2023 from 21.8% for the comparable prior year six-month period. Increased selling, general and administrative expense at corporate was partially offset by decreased expense in the Pet and Garden segments.
Selling and delivery expense decreased $7.9 million, or 4.7%, to $158.5 million for the six months ended March 25, 2023 from $166.4 million for the six months ended March 26, 2022. The decreases in the Garden and Pet segments were due primarily to lower product delivered due to the lower sales volume, and a customer change from store delivery to warehouse pick-up.
Warehouse and administrative expense increased $8.9 million, or 4.8%, to $194.4 million for the six months ended March 25, 2023 from $185.5 million for the six months ended March 26, 2022. Corporate expense increased $5.8 million and both segments contributed to the increase to a lesser extent. The increased expense was due primarily to increased insurance expense and increased payroll expense. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating Income
Operating income decreased $54.7 million to $78.4 million for the six months ended March 25, 2023 from $133.1 million for the six months ended March 26, 2022. Our operating margin decreased to 5.1% for the six months ended March 25, 2023 from 8.2% for the six months ended March 26, 2022. Both operating income and operating margin were negatively impacted by a sales decrease of $79.1 million, a 190 basis point decline in gross margin and an increase in selling, general and administrative expense as a percentage of net sales.
Pet operating income decreased $11.1 million, or 10.5%, to $94.8 million for the six months ended March 25, 2023 from $105.9 million for the six months ended March 26, 2022. Pet operating income decreased due to a net sales decrease of $42.7 million partially offset by lower selling, general and administrative expense. Pet operating margin declined 70 basis points to 10.6% for the six months ended March 25, 2023, as compared to the prior year six-month period due primarily to an increase in selling, general and administrative expense as a percentage of net sales.
Garden operating income decreased $37.8 million to $38.8 million for the six months ended March 25, 2023, from $76.6 million for the six months ended March 26, 2022. Garden operating income and operating margin were negatively impacted by a $36.4 million decrease in net sales, a decrease in gross margin and to a smaller extent, an increase in selling, general and administrative expense as a percentage of net sales.
Corporate operating expense increased $5.8 million to $55.2 million in the current six-month period from $49.4 million in the comparable fiscal 2022 period due primarily to increased medical and general insurance and payroll expense.
Net Interest Expense
Net interest expense for the six months ended March 25, 2023 decreased $0.6 million, or 2.2%, to $28.5 million from $29.1 million for the six months ended March 26, 2022. The decrease in net interest expense was due to increased interest income resulting from higher rates of interest earned on our cash balance during the current six-month period.
Debt outstanding on March 25, 2023 was $1,212.3 million compared to $1,185.8 million as of March 26, 2022. Our average borrowing rate was 4.5% for the six month periods ended March 25, 2023 and March 26, 2022.
Other Income
Other income (expense) was income of $2.3 million for the six-month period ended March 25, 2023 compared to an expense of $0.6 million for the six-month period ended March 26, 2022. The increase in other income was due primarily to foreign currency gains in the current fiscal six-month period as compared to losses in the prior year period.
Income Taxes
Our effective income tax rate was 23.8% for the six-month period ended March 25, 2023 compared to 23.1% for the six-month period ended March 26, 2022. The increase in our effective income tax rate was due primarily to a reduced tax benefit from stock compensation and an increased impact of the Tax Reform Act on our deferred tax accounts in the first quarter of fiscal 2018nondeductible executive compensation.
Net Income and Earnings Per Share
Our net income for the gain from the sale of a distribution facility in the first quarter of fiscal 2017, our net income in the first quarter of fiscal 2018six months ended March 25, 2023 was $9.9$39.7 million, or $0.19$0.74 per diluted share, compared to $6.3$78.7 million, or $0.12$1.44 per diluted share, infor the first quarter of fiscal 2017.six months ended March 26, 2022.
Issuance of 2028 Notes:
•In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028. We intend to use the net proceeds to finance acquisitions of suitable businesses and for general corporate purposes.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with U.S.accounting principles generally accepted accounting principlesin the United States (GAAP). However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including non-GAAP operating income on a consolidated and segment basis and non-GAAP net income and diluted net income per share.adjusted EBITDA. Management believes these non-GAAP financial measures that exclude the impact of specific items (described below) may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods.
Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense, depreciation and amortization and stock-based compensation (or operating income plus depreciation and amortization and stock-based compensation expense). 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. Adjusted EBITDA should not be considered in isolation or as a substitute for cash flow from operations, income from operations or other income statement measures prepared in accordance with GAAP. 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.
The reconciliations of these non-GAAP measuresadjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. We believe that the non-GAAP financial measures provide useful information to investors and other users of our financial statements by allowing for greater transparency in the review of our financial and operating performance. Management also uses these non-GAAP financial measuresadjusted EBITDA in making financial, operating and planning decisions and in evaluating our performance, and we believe these measures similarlyit may be useful to investors in evaluating our financial and operating performance and the trends in our business from management's point of view. While our management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read in conjunction with those GAAP results. We have not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis, because such reconciliation cannot be done without unreasonable efforts due to the potential significant variability and limited visibility of the excluded items discussed below.
Non-GAAP financial measures reflect adjustments based on the following items:
The U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Job Act (the "Tax Reform Act") in December 2017. We have excluded the transitional impact of the Tax Reform Act as the remeasurement of our deferred tax assets and liabilities does not reflect the ongoing impact of the lower U.S. statutory rate on our current year earnings.
Gains or losses on disposals of significant plant assets: we have excluded the impact of gains or losses on the disposal of facilities as these represent infrequent transactions that impact comparability between operating periods. We believe the adjustment of these gains or losses supplements the GAAP information with a measure that may be used to help assess the sustainability of our continuing operating performance.
Tax impact: the adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income. The tax impact of the non-GAAP adjustments is calculated based on the consolidated effective tax rate on a GAAP basis, applied to the non-GAAP adjustments, unless the underlying item has a materially different tax treatment.
We have also provided organic net sales, a non-GAAP measure that excludes the impact of businesses purchased or exited in the prior 12 months, because we believe it permits investors to better understand the performance of our historical business without the impact of recent acquisitions or dispositions.
From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.
The non-GAAP adjustments reflect the following:
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(1) | Transitional impact of U.S. Tax Reform: As a result of the Tax Reform Act, the Company recorded a provisional tax benefit of $16.3 million due to the remeasurement of its deferred tax assets and liabilities. We have excluded only this transitional impact and have not included in the adjustment the ongoing impact of the lower U.S. statutory rate on our current year earnings.
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(2) | During the first quarter of fiscal 2017, we recorded a $2.0 million gain in our Garden segment from the sale of a distribution facility resulting from rationalizing our facilities to reduce excess capacity. This adjustment was recorded as part of selling, general and administrative costs in the condensed consolidated statements of operations.
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Operating Income Reconciliation |
| GAAP to Non-GAAP Reconciliation (in thousands) For the Three Months Ended |
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| Consolidated |
| Garden |
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| December 30, 2017 |
| December 24, 2016 |
| December 30, 2017 |
| December 24, 2016 |
GAAP operating income |
| $ | 22,521 |
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| $ | 19,938 |
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| $ | 2,300 |
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| $ | 2,676 |
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Gain on sale of distribution facility | (2) | — |
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| (2,050 | ) |
| — |
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| (2,050 | ) |
Non-GAAP operating income |
| $ | 22,521 |
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| $ | 17,888 |
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| $ | 2,300 |
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| $ | 626 |
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GAAP operating margin |
| 5.1 | % |
| 4.8 | % |
| 2.0 | % |
| 2.3 | % |
Non-GAAP operating margin |
| 5.1 | % |
| 4.3 | % |
| 2.0 | % |
| 0.5 | % |
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Adjusted EBITDA Reconciliation | | GAAP to Non-GAAP Reconciliation For the Three Months Ended March 25, 2023 |
| | Pet | | Garden | | Corp | | Total |
| | (in thousands) |
Net income attributable to Central Garden & Pet Company | | $ | — | | | $ | — | | | $ | — | | | $ | 48,115 | |
Interest expense, net | | — | | | — | | | — | | | 14,690 | |
Other income | | — | | | — | | | — | | | (595) | |
Income tax expense | | — | | | — | | | — | | | 15,268 | |
Net income attributable to noncontrolling interest | | — | | | — | | | — | | | 563 | |
Income (loss) from operations | | 55,255 | | | 49,619 | | | (26,833) | | | 78,041 | |
Depreciation & amortization | | 10,474 | | | 10,818 | | | 817 | | | 22,109 | |
Noncash stock-based compensation | | — | | | — | | | 6,750 | | | 6,750 | |
Adjusted EBITDA | | $ | 65,729 | | | $ | 60,437 | | | $ | (19,266) | | | $ | 106,900 | |
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Adjusted EBITDA Reconciliation | | GAAP to Non-GAAP Reconciliation For the Three Months Ended March 26, 2022 |
| | Pet | | Garden | | Corp | | Total |
| | (in thousands) |
Net income attributable to Central Garden & Pet Company | | $ | — | | | $ | — | | | $ | — | | | $ | 69,713 | |
Interest expense, net | | — | | | — | | | — | | | 14,702 | |
Other expense | | — | | | — | | | — | | | 369 | |
Income tax expense | | — | | | — | | | — | | | 21,488 | |
Net income attributable to noncontrolling interest | | — | | | — | | | — | | | 573 | |
Income (loss) from operations | | 60,645 | | | 70,511 | | | (24,311) | | | 106,845 | |
Depreciation & amortization | | 9,539 | | | 7,719 | | | 989 | | | 18,247 | |
Noncash stock-based compensation | | — | | | — | | | 6,292 | | | 6,292 | |
Adjusted EBITDA | | $ | 70,184 | | | $ | 78,230 | | | $ | (17,030) | | | $ | 131,384 | |
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| GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) For the Three Months Ended |
Net Income and Diluted Net Income Per Share Reconciliation |
| December 30, 2017 | | December 24, 2016 |
GAAP net income attributable to Central Garden & Pet |
| $ | 26,247 |
| | $ | 7,637 |
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Gain on sale of distribution facility | (2) | — |
| | (2,050 | ) |
Tax effect of sale of distribution facility adjustment |
| — |
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| 734 |
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Tax effect of revaluation of deferred assets | (1) | 16,343 |
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Total impact on net income from non-GAAP adjustments |
| 16,343 |
| | (1,316 | ) |
Non-GAAP net income attributable to Central Garden & Pet |
| $ | 9,904 |
| | $ | 6,321 |
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GAAP diluted net income per share |
| $ | 0.50 |
| | $ | 0.15 |
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Non-GAAP diluted net income per share |
| $ | 0.19 |
| | $ | 0.12 |
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Shares used in GAAP and non-GAAP diluted net earnings per share calculation |
| 52,695 |
| | 51,810 |
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Adjusted EBITDA Reconciliation | | GAAP to Non-GAAP Reconciliation For the Six Months Ended March 25, 2023 |
| | Pet | | Garden | | Corp | | Total |
| | (in thousands) |
Net income attributable to Central Garden & Pet Company | | $ | — | | | $ | — | | | $ | — | | | $ | 39,682 | |
Interest expense, net | | — | | | — | | | — | | | 28,466 | |
Other income | | — | | | — | | | — | | | (2,294) | |
Income tax expense | | — | | | — | | | — | | | 12,446 | |
Net income attributable to noncontrolling interest | | — | | | — | | | — | | | 147 | |
Income (loss) from operations | | 94,810 | | | 38,799 | | | (55,162) | | | 78,447 | |
Depreciation & amortization | | 20,586 | | | 21,660 | | | 1,555 | | | 43,801 | |
Noncash stock-based compensation | | — | | | — | | | 13,327 | | | 13,327 | |
Adjusted EBITDA | | $ | 115,396 | | | $ | 60,459 | | | $ | (40,280) | | | $ | 135,575 | |
Organic Net Sales Reconciliation | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA Reconciliation | | GAAP to Non-GAAP Reconciliation For the Six Months Ended March 26, 2022 |
| | Pet | | Garden | | Corp | | Total |
| | (in thousands) |
Net income attributable to Central Garden & Pet Company | | $ | — | | | $ | — | | | $ | — | | | $ | 78,722 | |
Interest expense, net | | — | | | — | | | — | | | 29,110 | |
Other expense | | — | | | — | | | — | | | 578 | |
Income tax expense | | — | | | — | | | — | | | 23,889 | |
Net income attributable to noncontrolling interest | | — | | | — | | | — | | | 760 | |
Income (loss) from operations | | 105,896 | | | 76,568 | | | (49,405) | | | 133,059 | |
Depreciation & amortization | | 19,088 | | | 17,339 | | | 2,022 | | | 38,449 | |
Noncash stock-based compensation | | — | | | — | | | 11,479 | | | 11,479 | |
Adjusted EBITDA | | $ | 124,984 | | | $ | 93,907 | | | $ | (35,904) | | | $ | 182,987 | |
We have provided organic net sales, a non-GAAP measure that excludes the impact of recent acquisitions and dispositions, because we believe it permits investors to better understand the performance of our historical business. We define organic net sales as net sales from our historical business derived by excluding the net sales from businesses acquired or exited in the preceding 12 months. After an acquired business has been part of our consolidated results for 12 months, the change in net sales thereafter is considered part of the increase or decrease in organic net sales.
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| GAAP to Non-GAAP Reconciliation (in millions) For the Three Months Ended December 30, 2017 |
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| Consolidated |
| Pet Segment |
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| Percentage change |
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Reported net sales - Q1 FY18 (GAAP) |
| $ | 442.0 |
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| $ | 325.1 |
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Reported net sales - Q1 FY17 (GAAP) |
| 419.5 |
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| 304.0 |
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Increase in net sales |
| 22.5 |
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| 5.4 | % |
| 21.1 |
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| 6.9 | % |
Effect of acquisition and divestitures on increase in net sales |
| 17.7 |
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| 4.3 | % |
| 17.7 |
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| 5.8 | % |
Increase in organic net sales - Q1 2018 |
| $ | 4.8 |
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| 1.1 | % |
| $ | 3.4 |
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| 1.1 | % |
Results of Operations
Three Months Ended December 30, 2017
Compared with Three Months Ended December 24, 2016
Net Sales
Net sales for the three months ended December 30, 2017 increased $22.5 million, or 5.4%, to $442.0 million from $419.5 million for the three months ended December 24, 2016. Our branded product sales increased $17.1 million, and sales of other manufacturers’ products increased $5.4 million. Organic net sales, which excludes the impact of acquisitions and divestitures in the last 12 months, increased $4.8 million, or 1.1%, as compared to the fiscal 2016 quarter.
Pet net sales increased $21.1 million, or 6.9%, to $325.1 million for the three months ended December 30, 2017 from $304.0 million for the three months ended December 24, 2016. The increase in net sales was due primarily to sales from our acquisitions in fiscal 2017. Pet organic net sales increased 1.1%. Organic net sales growth was due primarily to increased sales in the e-commerce channel. Pet branded product sales increased $16.6 million due primarily to the two recent acquisitions and, to a lesser extent, organic net sales growth.
Garden net sales increased $1.4 million, or 1.3%, to $116.9 million for the three months ended December 30, 2017 from $115.5 million for the three months ended December 24, 2016. The net sales increase was all organic. Garden branded product sales increased $0.5 million, due primarily to increased sales in our control & fertilizer business partially offset by a decline in wild bird feed. Sales of other manufacturers’ products increased $0.9 million.
Gross Profit
Gross profit for the three months ended December 30, 2017 increased $11.2 million, or 9.2%, to $131.8 million from $120.6 million for the three months ended December 24, 2016. Gross margin increased 100 basis points to 29.8% for the three months ended December 30, 2017 from 28.8% for the three months ended December 24, 2016. Both operating segments contributed to the increase in gross profit and improved gross margin. The increase in gross margin in our Garden segment was due primarily to improved gross margins in most of our Garden segment businesses, which benefited from our cost savings initiatives, only partially offset by a decline in our wild bird feed business. The increase in our gross margin in our Pet segment was favorably impacted by our two fiscal 2017 acquisitions as their gross margins were above the Pet segment's as a whole and by improved margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $8.6 million, or 8.5%, to $109.3 million for the three months ended December 30, 2017 from $100.7 million for the three months ended December 24, 2016. Increased expense in both operating segments in the quarter was partially offset by a minor decrease at Corporate. As a percentage of net sales, selling, general and administrative expenses increased to 24.7% for the three months ended December 30, 2017, compared to 24.0% in the comparable prior year quarter.
Selling and delivery expense increased $3.4 million, or 6.9%, to $53.9 million for the three months ended December 30, 2017 from $50.5 million for the three months ended December 24, 2016. The increase in selling and delivery was primarily in our Pet segment due primarily to our two recent acquisitions. Secondarily, selling and delivery expenses increased in both Pet and Garden segments due primarily to increased investment in selling and marketing activities.
Warehouse and administrative expense increased $5.2 million, or 10.4%, to $55.4 million for the quarter ended December 30, 2017 from $50.2 million for the three months ended December 24, 2016. Increased expense in the Pet segment, due primarily to the two acquisitions made in fiscal 2017, and increased expense in the Garden segment, due primarily to a $2.0 million gain from the sale of a distribution facility in the prior year quarter, was offset by a slight decrease at Corporate. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating Income
Operating income increased $2.6 million to $22.5 million for the three months ended December 30, 2017 from $19.9 million for the three months ended December 24, 2016. Increased sales of $22.5 million and an improved gross margin were partially offset by a $8.6 million increase in selling, general and administrative costs. Operating margin improved to 5.1% for the three months ended December 30, 2017 from 4.8% for the three months ended December 24, 2016 due to a 100 basis point improvement in gross margin partially offset by a 70 basis point increase in selling, general and administrative expenses as a percentage of net sales. Adjusting for the gain from the sales of
a distribution facility in the prior year quarter, selling, general and administrative expenses increased 20 basis points for the quarter ended December 30, 2017 as compared to the prior year quarter.
Pet operating income increased $2.8 million, or 8.3%, to $36.2 million for the three months ended December 30, 2017 from $33.4 million for the three months ended December 24, 2016. The increase was due to increased sales of $21.1 million and an improved gross margin, partially offset by increased selling, general and administrative expenses. Pet operating margin increased to 11.1% for the three months ended December 30, 2017 from 11.0% for the three months ended December 24, 2016 due to an improved gross margin partially offset by increased selling, general and administrative expenses as a percentage of net sales.
Garden operating income decreased $0.4 million to $2.3 million for the three months ended December 30, 2017 from $2.7 million for the three months ended December 24, 2016. Garden operating margin decreased to 2.0% for the three months ended December 30, 2017 from 2.3% for the three months ended December 24, 2016. Adjusting for the $2.0 million gain in the prior year quarter for the sale of a distribution facility, both Garden operating income and operating margin reflected improvement over the prior year quarter.
Corporate operating expense decreased $0.2 million to $16.0 million in the current year quarter from $16.2 million in the fiscal 2017 quarter due primarily to lower third party service provider expenses and legal accruals, partially offset by insurance related expenses.
Net Interest Expense
Net interest expense for the three months ended December 30, 2017 increased $0.4 million, or 5.6%, to $7.2 million from $6.8 million for the three months ended December 24, 2016. The increase in interest expense was due to higher average debt outstanding during the current year quarter. In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028.
Debt outstanding on December 30, 2017 was $691.3 million compared to $395.4 million as of December 24, 2016.
Other Expense
Other expense is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other expense increased $2.1 million to $3.1 million for the quarter ended December 30, 2017, from $1.0 million for the quarter ended December 24, 2016 due to losses recorded from two investments made in fiscal 2017. One of these investments, our largest joint venture investment, is seasonal in nature. As such, we expect other expense (income) to be more favorable in our second and third fiscal quarters.
Income Taxes
For the quarter ended December 30, 2017, we had an income tax benefit of $14.2 million versus income tax expense of $4.3 million and an effective tax rate of 35.8% for the quarter ended December 24, 2016.
Three items impacted our income tax in the quarter ended December 30, 2017:
•The revaluation of net long-term deferred tax liabilities
•A lower expected corporate federal income tax rate for three of our four quarters of our 2018 fiscal year
•The adoption of ASU 2016-09, Stock Compensation
On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”). This guidance allows registrants a “measurement period,” not to exceed one year from the date of enactment, to complete their accounting for the tax effects of the Act. Registrants should reflect adjustments over subsequent periods as they are able to refine their estimates and complete their accounting for the tax effects of the Act. We have made reasonable estimates and recorded provisional amounts within the meaning of SAB 118. In subsequent periods, but within the measurement period, we will analyze that guidance and other necessary information to refine our estimates and complete our accounting for the tax effects of the Act.
Additionally, we adopted ASU 2016-09 during the quarter ended December 30, 2017. As a result, we now record excess tax benefits resulting from stock compensation in the provision for income taxes. For the current year quarter, this resulted in a further reduction of approximately one million dollars of income tax expense.
Our federal corporate tax rate for fiscal 2018 has declined to approximately 24.5% from 35% in fiscal 2017. The effective tax rate for the quarter ended December 30, 2017 is a blended rate that reflects the estimated benefit of three quarters of federal tax rate reductions for fiscal 2018. We expect our effective tax rate to be approximately 27% in fiscal 2018, excluding the impact of discrete items which includes the revaluation of our deferred tax accounts and the adoption of ASU 2016-09, stock compensation.
Our first quarter of fiscal 2018 results include the impact of the December 2017 enactment of the Tax Reform Act which, among numerous provisions, included the reduction of the corporate federal income tax rate from 35% to 21%, effective January 1, 2018. As a result, we recorded a provisional tax benefit of $16.3 million due to the remeasurement of our net long-term deferred tax liabilities.
Net Income and Earnings Per Share
Our net income in the first quarter of fiscal 2018 was $26.2 million, or $0.50 per diluted share, compared to $7.6 million, or $0.15 per diluted share, in the first quarter of fiscal 2017.
Adjusting for the provisional impact of the Tax Reform Act on our deferred tax accounts in the first quarter of fiscal 2018 and for the gain from the sale of a distribution facility in the first quarter of fiscal 2017, our net income in the first quarter of fiscal 2018 was $9.9 million, or $0.19 per diluted share, compared to $6.3 million or $0.12 per share in the first quarter of fiscal 2017.
We have adjusted for the provisional transitional impact on our deferred tax accounts of the Tax Reform Act. The adjustment does not include the ongoing impacts of the lower U.S. statutory rate on current year earnings.
The final impact of the Tax Reform Act may differ due to, among other things, changes in interpretations, assumptions made by the Company, the issuance of additional guidance, and actions the Company may take as a result of the Tax Reform Act.
Inflation
Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, consumer attitudes toward discretionary spending,behavior, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending. In certainrecent fiscal periods, we have been adversely impacted by rising input costs related to domestic inflation, particularly relating to grain and seed prices, fuel prices and the ingredients used in our garden controls and fertilizer.fertilizers. Rising costs in those periods have made it difficult for us to increase prices to our retail customers at a pace sufficient to enable us to maintain margins.
DuringThe inflationary pressure, including notable increases in costs for key commodities, labor and freight, that we experienced in fiscal years 2015 through 2017, commodity costs generally declined, but2022 is continuing in past years we have been impacted by volatility in a number of commodities, including grass seed and wild bird feed grains. We continue to monitor commodity prices in order to be in a position to take action to mitigate the impact of increasing raw material costs.fiscal 2023.
Weather and Seasonality
Our sales of lawn and garden products are influenced by weather and climate conditions in the different markets we serve. Additionally, ourOur Garden segment’s business is highly seasonal. In fiscal 2017,2022, approximately 66% of our Garden segment’s net sales and 56%59% of our total net sales occurred during our second and third fiscal quarters. Substantially all of the Garden segment’s operating income is typically generated in this period.period, which has historically offset the operating loss incurred during the first fiscal quarter of the year.
Liquidity and Capital Resources
We have financed our growth through a combination of internally generated funds, bank borrowings, supplier credit, and sales of equity and debt securities to the public.
Our business is seasonal and our working capital requirements and capital resources track closely to this seasonal pattern. Generally, during the first fiscal quarter, accounts receivable reach their lowest level while inventory, accounts payable and short-term borrowings begin to increase. During the second fiscal quarter, receivables, accounts payable and short-term borrowings increase, reflecting the build-up of
inventory and related payables in anticipation of the peak lawn and garden selling season. During the third fiscal quarter, inventory levels remain relatively constant while accounts receivable peak and short-term borrowings start to decline as cash collections are received during the peak selling season. During the fourth fiscal quarter, inventory levels are at their lowest, and accounts receivable and payables are substantially reduced through conversion of receivables to cash.
We service two broad markets: pet supplies and lawn and garden supplies. Our pet supplies businesses primarily involve products that have a year round selling cycle with a slight degree of seasonality. 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. 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 by operating activities increaseddecreased by $10.9$175.0 million, from $13.3$272.1 million for the threesix months ended December 24, 2016,March 26, 2022, to $24.2$97.1 million for the threesix months ended December 30, 2017.March 25, 2023. The increasedecrease in cash used by operating activities was due primarily to changes in our working capital accounts for the period ended December 30, 2017,March 25, 2023, as compared to the prior year period, as the increase in net income for the three months ended December 30, 2017 was offset by the non-cash effects of the impact of the Tax Reform Act as described in Note 1.predominantly related to inventory.
Investing Activities
Net cash used in investing activities decreased $51.7$46.4 million, from $67.4$77.2 million for the threesix months ended December 24, 2016March 26, 2022 to $15.7$30.8 million during the threesix months ended December 30, 2017.March 25, 2023. The decrease in cash used in investing activities was due primarily to decreased acquisition activitylower capital expenditures in the current year compared to the prior year and a decrease in capital expenditures during the current year. During the first fiscal quarter of 2017, we acquired Segrest Inc., a wholesaler of aquarium fish, for total aggregate consideration of $60 million. This acquisition activity was partially offset by an increase in proceeds from the sale of a small veterinary division and a distribution facility in our Garden segment during the first fiscal quarter of 2017. We also had a decrease in capital expenditures of approximately $4.8 million in the current year period compared to the prior year period.
Financing Activities
Net cash provided by financing activities increased $296.5$31.7 million, from $5.5$23.0 million of cash used by financing activities for the threesix months ended December 24, 2016,March 26, 2022, to $291.0$8.6 million of cash provided by financing activities for the threesix months ended December 30, 2017.March 25, 2023. The increase in cash provided by financing activities during the current year was due primarily to net borrowings of $25 million under our December 2017 issuance of $300 million aggregate principal amount 5.125% senior notes due February 2028,Amended Credit Facility during the current year period, partially offset by deferred financing costsdecreased open market purchases of our common stock during the current year as compared to the prior year. During the six months ended March 25, 2023, we repurchased approximately 0.1 million shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $4.6$2.6 million, associated with this issuance.or approximately $37.30 per share, and approximately 0.2 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $9.1 million, or approximately $35.33 per share. During the six months ended March 26, 2022, we repurchased approximately 0.4 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $16.1 million, or approximately $42.30 per share.
We expect that our principal sources of funds will be cash generated from our operations and, if necessary, borrowings under our $400$750 million asset backed loan facility.Amended Credit Facility. Based on our anticipated cash needs, availability under our asset backed loan facilityAmended Credit Facility and the scheduled maturity of our debt, we believe that our sources of liquidity should be adequate to meet our working capital, capital spending and other cash needs for at least the next 12 months. 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.
We believe that cash flows from operating activities, funds available under our asset backed loan facility,Amended Credit Facility, and arrangements with suppliers will be adequate to fund our presently anticipated working capital and capital expenditure requirements for the foreseeable future. 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 $40$70 million to $80 million in fiscal 2018.2023, of which we have invested approximately $30 million through March 25, 2023.
As part of our growth strategy, we have acquired a number of companies in the past, and we anticipate that we will continue to evaluate potential acquisition candidates in the future. If one or more potential acquisition opportunities, including those that would be material, become available in the near future, we may require additional external capital. In addition, such acquisitions would subject us to the general risks associated with acquiring companies, particularly if the acquisitions are relatively large.
Total Debt
At December 30, 2017,March 25, 2023, our total debt outstanding was $691.3$1,212.3 million, as compared with $395.4$1,185.8 million at December 24, 2016.March 26, 2022.
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 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. 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. The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.
We may redeem some or all of the 2031 Notes at any time, at our option, prior to April 30, 2026 at the principal amount plus a "make whole" premium. At any time prior to April 30, 2024, we may also redeem, at our option, up to 40% of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes. We may redeem some or all of the 2031 Notes at our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.
The holders of the 2031 Notes have the right to require us to repurchase all or a portion of the 2031 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, upon the occurrence of specific kinds of changes of control.
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 March 25, 2023.
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 November 2020, we used a portion of the net proceeds to redeem all of our outstanding 6.125% senior notes due November 2023 (the "2023 Notes") at a redemption price of 101.531% plus accrued and unpaid interest, and to pay related fees and expenses, with the remainder used for general corporate purposes.
We 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. 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.
We may redeem some or all of the 2030 Notes at any time, at our option, prior to October 15, 2025 at a price equal to 100% of the principal amount plus a “make-whole” premium. Prior to October 15, 2023, we may redeem up to 40% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes. We may redeem some or all of the 2030 Notes, at our option, in whole or in part, at any time on or after October 15, 2025 for 102.063%, on or after October 15, 2026 for 101.375%, on or after October 15, 2027 for 100.688% and on or after October 15, 2028 for 100.0%, plus accrued and unpaid interest.
The holders of the 2030 Notes have the right to require us to repurchase all or a portion of the 2030 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2030 Notes 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 March 25, 2023.
$300 Million 5.125% Senior Notes due 2028
OnIn December 14, 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). We will useused the net proceeds from the offering to finance future acquisitions and for general corporate purposes.
We incurred approximately $4.6$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, commencing August 1, 2018.1. 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.our other debt.
We may redeem some or all of the 2028 Notes at any time, at our option, prior to January 1, 2023 at the principal amount plus a “make whole” premium. At any time prior to January 1, 2021, we may also redeem, at our option, up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 105.125% of the principal amount of the notes. We may redeem some or all of the 2028 Notes, at our option, at any time on or after January 1, 2023 for 102.563%, on or after January 1, 2024 for 101.708%, on or after January 1, 2025 for 100.854% and on or after January 1, 2026 for 100.0%, plus accrued and unpaid interest.
The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2028 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all financial covenants as of December 30, 2017.
$400 Million 6.125% Senior Notes
In November 2015, we issued $400 million aggregate principal amount of 6.125% senior notes due November 2023 (the "2023 Notes"). In December 2015, we used the net proceeds from the offering, together with available cash, to redeem our $400 million aggregate principal amount of 8.25% senior subordinated notes due March 1, 2018 (the "2018 Notes") at a price of 102.063% of the principal amount and to pay fees and expenses related to the offering.
We incurred approximately $6.3 million of debt issuance costs in conjunction with these transactions, 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 2023 Notes require semiannual interest payments on May 15 and November 15. The 2023 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. The 2023 Notes are unsecured senior obligations and are subordinated to all of our existing and future secured debt, including our Credit Facility, to the extent of the value of the collateral securing such indebtedness.
We may redeem some or all of the 2023 Notes at any time, at our option, prior to November 15, 2018 at the principal amount plus a “make whole” premium. At any time prior to November 15, 2018, we may also redeem, at our option, up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 106.125% of the principal amount of the notes. We may redeem some or all of the 2023 Notes, at our option, at any time on or after November 15, 2018 for 104.594%, on or after November 15, 2019 for 103.063%, on or after November 15, 2020 for 101.531% and on or after November 15, 2021 for 100%, plus accrued and unpaid interest.
The holders of the 2023 Notes have the right to require us to repurchase all or a portion of the 2023 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2023 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 December 30, 2017.25, 2023.
Asset-Based Loan Facility Amendment
In April 2016,On December 16, 2021, we entered into ana Third Amended and Restated Credit Agreement (“Amended Credit Agreement”). The Amended Credit Agreement amended and restated the previous credit agreement whichdated September 27, 2019 (the "Predecessor Credit Agreement"), and provides up tofor a $400$750 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200$400 million principal amount available with the consent of the Lenders, as defined, if we exercise the uncommitted accordion feature set forth therein (collectively, the “Credit“Amended Credit Facility”). The Amended Credit Facility matures on April 22, 2021.December 16, 2026. We may borrow, repay and reborrow amounts under the Amended Credit Facility until its maturity date, at which time all amounts outstanding under the Amended Credit Facility must be repaid in full. As of December 30, 2017, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. There were other letters of credit of $1.8 million outstanding as of December 30, 2017.
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 reservesreserves. Proceeds of the Amended Credit Facility will be used for general corporate purposes. At March 25, 2023, the Company's applicable borrowing base calculation supported access to approximately $635 million under the Amended Credit Facility. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and subject to restrictions.a $75 million sublimit for short-notice borrowings. As of December 30, 2017,March 25, 2023, there were borrowings of $25 million outstanding and no letters of credit outstanding under the borrowing base and remaining borrowing availability was $330.2 million. Amended Credit Facility. Outside of the Amended Credit Facility, there were other letters of credit of $1.3 million outstanding as of March 25, 2023.
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 theour option, of the Company, the Base Rate, (defined as the highest of (a) the SunTrust prime rate, (b) the Federal Funds Rate plus 0.5% and (c) one-month LIBOR plus 1.00%), plus, in either case, an applicable margin based on our consolidated senior leverage ratio. Suchusage under the credit facility. 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%. The applicable margin for LIBOR-based borrowings fluctuates between 1.25% - 1.5%1.00%-1.50%, and was 1.25%1.00% as of December 30, 2017,March 25, 2023, and suchthe applicable margin for Base Rate borrowings fluctuates between 0.25% - 0.5%0.00%-0.50%, and was 0.25%0% as of December 30, 2017.March 25, 2023. An unused line fee is payable quarterly in respect of the total amount of the unutilized Lenders’ commitments and short-notice borrowings under the Amended Credit Facility. Letter of credit fees at the applicable margin on the average undrawn and unreimbursed amount of 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 Amended Credit Facility provides for the transition from LIBOR to SOFR. As of December 30, 2017,March 25, 2023, the applicable interest rate related to Base Rate borrowings was 4.8%8.0%, and the applicable interest rate related to one-month LIBOR-based borrowings was 2.8%5.8%.
We incurred approximately $1.2$2.4 million of debt issuance costs in conjunction with this transaction, which included underwriterlender fees legal and accountinglegal expenses. The debt issuance costs will beare being amortized over the term of the Amended Credit Facility.
The Amended Credit Facility contains customary covenants, including financial covenants which require us to maintain a minimum fixed charge coverage ratio of 1.00:1.001:1 upon reachingtriggered quarterly testing (e.g. when availability falls below certain borrowing levels.thresholds established in the agreement), reporting requirements and events of default. The Amended Credit Facility is secured by substantially all assets of our assets.the borrowing parties, including (i) pledges of 100% of the stock or other equity interest of each domestic subsidiary that is directly owned by such entity and (ii) 65% of the stock or other equity interest of each foreign subsidiary that is directly owned by such entity, in each case subject to customary exceptions. We were in compliance with all financial covenants under the Amended Credit Facility duringas of March 25, 2023.
Summarized Financial Information for Guarantors and the period endedIssuer 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 30, 2017. The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors") which are guarantors of our senior secured revolving credit facility ("Credit Facility"). The 2031 Notes, 2030 Notes and 2028 Notes are unsecured senior obligations and are subordinated to all of our existing and future secured debt, including our Amended Credit Facility, to the extent of the value of the
Off-Balance Sheet Arrangementscollateral securing such indebtedness. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent/Issuer. Certain subsidiaries and operating divisions of the Company do not guarantee the 2031, 2030 or 2028 Notes and are referred to as the Non-Guarantors.
ThereThe Guarantors jointly and severally, and fully and unconditionally, guarantee the payment of the principal and premium, if any, and interest on the 2031, 2030 and 2028 Notes when due, whether at stated maturity of the 2031, 2030 and 2028 Notes, by acceleration, call for redemption or otherwise, and all other obligations of the Company to the holders of the 2031, 2030 and 2028 Notes and to the trustee under the indenture governing the 2031, 2030 and 2028 Notes (the "Guarantee"). The Guarantees are senior unsecured obligations of each Guarantor and are of equal rank with all other existing and future senior indebtedness of the Guarantors.
The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount as well, 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.
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 following tables present summarized financial information of the Parent/Issuer subsidiaries and the Guarantor subsidiaries. All intercompany balances and transactions between subsidiaries under Parent/Issuer and subsidiaries under the Guarantor have been no material changeseliminated. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. 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 providedexcludes financial information of the Non-Guarantors, including earnings from and investments in our Annual Report on Form 10-Kthese entities.
During the second quarter of fiscal 2023, the Company added Bell Nursery Holdings, LLC, Bell Nursery USA, LLC and D&D Commodities Limited as guarantors of the 2031, 2030 and 2028 Notes. Fiscal year ended September 24, 2022 financial results previously reflected Bell Nursery Holdings, LLC, Bell Nursery USA, LLC and D&D Commodities Limited as Non-Guarantor subsidiaries. In accordance with Rule 3-10 of the Securities and Exchange Commissions Regulation S-X, summarized financial information presented herein for the fiscal year ended September 30, 2017 regarding off-balance sheet arrangements.24, 2022 has been adjusted to reflect the current Guarantor status.
Contractual Obligations | | | | | | | | | | | | | | | | | | | | | | | |
Summarized Statements of Operations | | | | | | | |
| Six Months Ended | | Fiscal Year Ended |
| March 25, 2023 | | September 24, 2022 |
| Parent/Issuer | | Guarantors | | Parent/Issuer | | Guarantors |
| (in thousands) |
Net sales | $ | 384,338 | | | $ | 1,158,695 | | | $ | 819,213 | | | $ | 2,519,631 | |
Gross profit | $ | 90,221 | | | $ | 337,723 | | | $ | 183,090 | | | $ | 793,829 | |
Income (loss) from operations | $ | (7,858) | | | $ | 89,805 | | | $ | (12,305) | | | $ | 273,144 | |
Equity in earnings of Guarantor subsidiaries | $ | 67,840 | | | $ | — | | | $ | 212,336 | | | $ | — | |
Net income (loss) | $ | (27,195) | | | $ | 67,840 | | | $ | (53,968) | | | $ | 212,336 | |
Except for the issuance of our 2028 Notes, there have been no material changes outside the ordinary course of business in our contractual obligations set forth in the Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.
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Summarized Balance Sheet Information |
| As of | | As of |
| March 25, 2023 | | September 24, 2022 |
| Parent/Issuer | | Guarantors | | Parent/Issuer | | Guarantors |
| (in thousands) |
Current assets | $ | 347,863 | | | $ | 1,252,989 | | | $ | 454,084 | | | $ | 1,054,446 | |
Intercompany receivable from Non-guarantor subsidiaries | 70,887 | | | — | | | 73,153 | | | — | |
Other assets | 3,649,710 | | | 2,771,047 | | | 3,470,188 | | | 2,770,323 | |
Total assets | $ | 4,068,460 | | | $ | 4,024,036 | | | $ | 3,997,425 | | | $ | 3,824,769 | |
| | | | | | | |
Current liabilities | $ | 156,456 | | | $ | 305,737 | | | $ | 161,660 | | | $ | 297,050 | |
Intercompany payable to Non-guarantor subsidiaries | — | | | 2,600 | | | — | | | 1,138 | |
Long-term debt | 1,211,831 | | | 222 | | | 1,185,891 | | | 354 | |
Other liabilities | 1,303,749 | | | 434,231 | | | 1,290,578 | | | 312,537 | |
Total liabilities | $ | 2,672,036 | | | $ | 742,790 | | | $ | 2,638,129 | | | $ | 611,079 | |
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New Accounting Pronouncements
Refer to Footnote 1 in the notes to the condensed consolidated financial statements for new accounting pronouncements.
Critical Accounting Policies, Estimates and Judgments
There have been no material changes to our critical accounting policies, estimates and assumptions or the judgments affecting the application of those accounting policies since our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.24, 2022.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our exposure to market risk from that discussed in our Annual Report on Form 10‑K10-K for the fiscal year ended September 30, 2017.24, 2022.
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Item 4. | Item 4. Controls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures. Procedures. Our Chief Executive Officer and principal financial officer have reviewed, as of the end of the period covered by this report, the “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) that ensure that information relating to the Company required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported in a timely and proper manner and that such information is accumulated and communicated to our management, including our Chief Executive Officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon this review, such officers concluded that our disclosure controls and procedures were effective as of December 30, 2017.March 25, 2023.
(b) Changes in Internal Control Over Financial Reporting. Our management, with the participation of our Chief Executive Officer and our principal financial officer, have evaluated whether any change in our internal control over financial reporting occurred during the firstsecond quarter of fiscal 2018. Based on that evaluation, management concluded that there has been2023. There were no changechanges in our internal control over financial reporting during the firstsecond quarter of fiscal 20182023 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 2012, Nite Glow Industries, Inc and its owner, Marni Markell, (“Nite Glow”) filed suit in the U.S. District Court for New Jersey against the Company alleging that the applicator developed and used by the Company for certain of its branded topical flea and tick products infringes a patent held by Nite Glow and asserted related claims for breach of contract and misappropriation of confidential information based on the terms of a Non-Disclosure Agreement. On June 27, 2018, a jury returned a verdict in favor of Nite Glow on each of the three claims and awarded damages of approximately $12.6 million. The court ruled on post-trial motions in early June 2020, reducing the judgment amount to $12.4 million and denying the plaintiff's request for attorneys' fees. The Company filed its notice of appeal and the plaintiffs cross-appealed. On July 14, 2021, the Federal Circuit Court of Appeals issued its decision on the appeal. The Federal Circuit concluded that the Company did not infringe plaintiff's patent and determined that the breach of contract claim raised no non-duplicative damages and should be dismissed. The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information. The Company intends to vigorously pursue its defenses in the future proceedings and believes that it will prevail on the merits as to the head start damages issue. While the Company believes that the ultimate resolution of this matter will not have a material impact on the Company's consolidated financial statements, the outcome of litigation is inherently uncertain and the final resolution of this matter may result in expense to the Company in excess of management's expectations.
From time to time, we are involved in certain legal proceedings in the ordinary course of business. Currently,Except as discussed above, we are not currently a party to any other legal proceedings that management believes would have a material effect on our financial position or results of operations.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in Item 1A to Part I of our Form 10-K for the fiscal year ended September 30, 2017.24, 2022.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth the repurchases of any equity securities during the fiscal quarter ended December 30, 2017March 25, 2023 and the dollar amount of authorized share repurchases remaining under our stock repurchase program.
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Period | | Total Number of Shares (or Units) Purchased | | | | Average Price Paid per Share (or Units) | | 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) | |
December 25, 2022 - January 28, 2023 | | 76,042 | | | (2) (3) | | $ | 35.83 | | | 74,792 | | | $ | 94,591,000 | | (4) |
January 29, 2023 - February 25, 2023 | | 38,883 | | | (3) | | $ | 40.64 | | | — | | | $ | 94,591,000 | | |
February 26, 2023 - March 25, 2023 | | 39,505 | | | (3) | | $ | 38.12 | | | 500 | | | $ | 94,591,000 | | |
Total | | 154,430 | | | | | $ | 37.63 | | | 75,292 | | | $ | 94,591,000 | | |
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(1)During the fourth quarter of fiscal 2019, our Board of Directors authorized a $100 million share repurchase program, (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. The repurchase of shares may be limited by certain financial covenants in our credit facility that restrict our ability to repurchase our stock. As of March 25, 2023, we had $94.6 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"). In addition to our regular share repurchase program, we are permitted to purchase annually a number of shares equal to the number of shares of restricted stock and stock
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Period | | Total Number of Shares (or Units) Purchased | | | | Average Price Paid per Share (or Units) | | 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) |
October 1, 2017 - November 4, 2017 | | — |
| | (2) | | $ | — |
| | — |
| | $ | 34,968,000 |
|
November 5, 2017 - December 2, 2017 | | 10,240 |
| | (2) | | $ | 37.89 |
| | — |
| | $ | 34,968,000 |
|
December 3, 2017 - December 30, 2017 | | 52,252 |
| | (2) | | $ | 38.46 |
| | — |
| | $ | 34,968,000 |
|
Total | | 62,492 |
| | | | $ | 38.36 |
| | — |
| | $ | 34,968,000 |
|
options granted in the prior fiscal year, to the extent not already repurchased, and the current fiscal year. The Equity Dilution Authorization has no fixed expiration date and expires when the Board withdraws its authorization. | |
(1) | During the third quarter of fiscal 2011, our Board of Directors authorized a $100 million share repurchase program. The program has no expiration date and expires when the amount authorized has been used or the Board withdraws its authorization. The repurchase of shares may be limited by certain financial covenants in our credit facility and indenture that restrict our ability to repurchase our stock. |
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(2) | Shares purchased during the period indicated represent withholding of a portion of shares to cover taxes in connection with the vesting of restricted stock. |
(3)Shares purchased during the period indicated include withholding of a portion of shares to cover taxes in connection with the vesting of restricted stock and do not reduce the dollar value of shares that may be purchased under our stock repurchase plan.
(4)Excludes 0.2 million shares remaining under our Equity Dilution Authorization as of March 25, 2023
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Item 3. | Defaults Upon Senior Securities |
Item 3. Defaults Upon Senior Securities
Not applicable
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Item 4. | Mine Safety Disclosures |
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Not applicable
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Item 6. | | Exhibits | | | | | | | | | | | |
| | | Incorporated by Reference | | | | |
Exhibit Number | | Exhibit | Form | | File No. | | Exhibit | | Filing Date | | Filed Herewith | | Filed, Not Furnished |
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4.1 | | SeventhFourteenth Supplemental Indenture, dated as of December 14, 2017,March 3, 2023, by and among the Company, certain guarantors named therein and Computershare Trust Company, N.A., as successor to Wells Fargo Bank National Association, as trustee, relating to the 5.125% Senior Notes due 2028. (Incorporated by reference to2028 and the Registrant's Form 8-K filed December 14, 2017)4.125% Senior Notes due 2030. | | | | | | | | | X | | |
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4.2 | | EighthFirst Supplemental Indenture, dated as of December 14, 2017, by andMarch 3, 2023 among the Company, certain guarantors named therein and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee, paying agent and registrar under such indenture, relating to the 6.125%4.125% Senior Notes due 2023. (Incorporated by reference to the Registrant's Form 8-K filed December 14, 2017)2031. | | | | | | | | | X | | |
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31.122 | | | | | | | | | | | X | | |
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31.1 | | | | | | | | | | | X | | |
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31.2 | | | | | | | | | | | X | | |
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32.1 | | | | | | | | | | | X | | |
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32.2 | | | | | | | | | | | X | | |
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101.INS101 | XBRL Instance Document | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 25, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Cash Flows, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Balance Sheets, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | | | | | | | | | X | | |
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101.SCH104 | | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 25, 2023, formatted in Inline XBRL Taxonomy Extension Schema Document(included as Exhibit 101) | | | | | | | | | | | |
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101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.
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| CENTRAL GARDEN & PET COMPANY |
| Registrant |
| |
| CENTRAL GARDEN & PET COMPANYDated: May 4, 2023 |
| Registrant |
| /s/ TIMOTHY P. COFER |
| Dated: February 8, 2018Timothy P. Cofer |
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| /s/ GEORGE C. ROETH |
| George C. Roeth |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
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| /s/ NICHOLAS LAHANAS |
| Nicholas Lahanas |
| Chief Financial Officer |
| (Principal Financial Officer) |