UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________________________________________________ 
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 201927, 2020
or
☐TRANSITION REPORT PURSUANT OF SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-33268
cent-20200627_g1.jpg
Delaware 68-0275553
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1340 Treat Blvd., Suite 600,, Walnut Creek,, California94597
(Address of principal executive offices)
(925) (925) 948-4000
(Registrant’s telephone number, including area code)
_______________________________________________________________________ 
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer¨
Non-accelerated filer¨Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes    ý  No
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockCENTThe NASDAQ Stock Market LLC
Class A Common StockCENTAThe NASDAQ Stock Market LLC
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of July 26, 201931, 202012,145,13511,300,810 
Class A Common Stock Outstanding as of July 26, 201931, 202043,960,18241,748,750 
Class B Stock Outstanding as of July 26, 201931, 20201,652,2621,647,922 





Table of Contents

PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
Item 1.
4
5
6
7
8
Item 2.
3227
Item 3.
4542
Item 4.
4542
PART II. OTHER INFORMATION
Item 1.
4542
Item 1A.
4642
Item 2.
4643
Item 3.
4644
Item 4.
4644
Item 5.
4644
Item 6.
4745
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This Form 10-Q includes “forward-looking statements.” Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries 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, 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 29, 2018,28, 2019, 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:
 
•the impact of the COVID-19 pandemic on our business, including but not limited to, the impact on our workforce, operations, supply chain, demand for our products and services, and our financial results and condition; our ability to successfully manage the challenges associated with the COVID-19 pandemic;
•seasonality and fluctuations in our operating results and cash flow;
2
Table of Contents
•fluctuations in market prices for seeds and grains and other raw materials;
•our inability to pass through cost increases in a timely manner;

the impending retirement of our CEO, the transition to a successor, •our dependence upon our key executives and the ability to execute on our succession plan;executives;
•risks associated with new product introductions, including the risk that our new products will not produce sufficient sales to recoup our investment;
•fluctuations in energy prices, fuel and related petrochemical costs;
•declines in consumer spending during economic downturns;
•inflation, deflation and other adverse macro-economic conditions;
•supply shortages in pet birds, small animals and fish;
•adverse weather conditions;
•risks associated with our acquisition strategy;
•access to and cost of additional capital;
•dependence on a small number of customers for a significant portion of our business;
•potential impacts of tariffs or a trade war;
•consolidation trends in the retail industry;
•competition in our industries;
•potential goodwill or intangible asset impairment;
•continuing implementation of an enterprise resource planning information technology system;
•our inability to protect our trademarks and other proprietary rights;
•potential environmental liabilities;
•risk associated with international sourcing;
•litigation and product liability claims;
•regulatory issues;
•the impact of product recalls;
•potential costs and risks associated with actual or potential cyber attacks;
•the impact of new accounting regulations and the U.S. Tax Cuts and Jobs Act on the Company's tax rate;
•our ability to recover asset and business interruption losses caused by the recent fires at our DMC facility in Texas;
•the voting power associated with our Class B stock; and
•potential dilution from issuance of authorized shares.


3
Table of Contents
PART I. FINANCIAL INFORMATION
 
Item 1.
Item 1. Financial Statements

CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
(Unaudited)
June 29,
2019		 June 30,
2018		 September 29,
2018		June 27, 2020June 29, 2019September 28, 2019
ASSETS     ASSETS
Current assets:     Current assets:
Cash and cash equivalents$445,632
 $204,388
 $482,106
Cash and cash equivalents$495,339  $445,632  $497,749  
Restricted cash10,924
 13,978
 10,899
Restricted cash13,536  10,924  12,952  
Short term investments119
 —
 —
Short term investments—  119  —  
Accounts receivable (less allowance for doubtful accounts of $15,875, $22,021 and $24,125)
395,581
 348,781
 275,908
Accounts receivable (less allowance for doubtful accounts of $24,034, $15,875 and $21,128)Accounts receivable (less allowance for doubtful accounts of $24,034, $15,875 and $21,128)503,288  395,581  300,135  
Inventories, net464,917
 428,007
 427,823
Inventories, net425,919  464,917  466,197  
Prepaid expenses and other32,453
 26,735
 20,562
Prepaid expenses and other29,211  32,453  30,160  
Total current assets1,349,626
 1,021,889
 1,217,298
Total current assets1,467,293  1,349,626  1,307,193  
Land, buildings, improvements and equipment—net238,948
 211,817
 217,647
Plant, property and equipment, netPlant, property and equipment, net239,240  238,948  245,405  
Goodwill281,177
 268,243
 281,177
Goodwill289,854  281,177  286,077  
Other intangible assets—net139,406
 138,610
 152,265
Other intangible assets, netOther intangible assets, net138,305  139,406  146,137  
Operating lease right-of-use assetsOperating lease right-of-use assets99,111  —  —  
Other assets55,761
 67,846
 38,822
Other assets30,166  55,761  40,208  
Total$2,064,918
 $1,708,405
 $1,907,209
Total$2,263,969  $2,064,918  $2,025,020  
LIABILITIES AND EQUITY     LIABILITIES AND EQUITY
Current liabilities:     Current liabilities:
Accounts payable$137,668
 $108,129
 $110,259
Accounts payable$178,728  $137,668  $149,246  
Accrued expenses141,029
 122,897
 102,583
Accrued expenses174,776  141,029  129,166  
Current lease liabilitiesCurrent lease liabilities31,648  —  —  
Current portion of long-term debt116
 119
 122
Current portion of long-term debt98  116  113  
Total current liabilities278,813
 231,145
 212,964
Total current liabilities385,250  278,813  278,525  
Long-term debt692,948
 691,741
 692,031
Long-term debt693,915  692,948  693,037  
Deferred taxes and other long-term obligations58,834
 40,798
 49,380
Long-term lease liabilitiesLong-term lease liabilities71,458  —  —  
Deferred income taxes and other long-term obligationsDeferred income taxes and other long-term obligations52,994  58,834  57,281  
Equity:     Equity:
Common stock, $0.01 par value: 12,145,135 shares outstanding at June 29, 2019, June 30, 2018 and September 29, 2018121
 121
 121
Class A common stock, $0.01 par value: 44,081,467, 38,373,324 and 43,953,265 shares outstanding at June 29, 2019, June 30, 2018 and September 29, 2018440
 384
 439
Class B stock, $0.01 par value: 1,652,262 shares outstanding16
 16
 16
Common stock, $0.01 par value: 11,300,810, 12,145,135 and 11,543,969 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 2019Common stock, $0.01 par value: 11,300,810, 12,145,135 and 11,543,969 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 2019113  121  115  
Class A common stock, $0.01 par value: 41,747,928, 44,081,467 and 42,968,493 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 2019Class A common stock, $0.01 par value: 41,747,928, 44,081,467 and 42,968,493 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 2019417  440  430  
Class B stock, $0.01 par value: 1,647,922, 1,652,262 and 1,652,262 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 2019Class B stock, $0.01 par value: 1,647,922, 1,652,262 and 1,652,262 shares outstanding at June 27, 2020, June 29, 2019 and September 28, 201916  16  16  
Additional paid-in capital589,849
 392,412
 590,168
Additional paid-in capital563,371  589,849  575,380  
Accumulated earnings444,645
 352,355
 362,923
Retained earningsRetained earnings497,192  444,645  421,742  
Accumulated other comprehensive loss(1,426) (1,153) (1,218)Accumulated other comprehensive loss(1,684) (1,426) (1,676) 
Total Central Garden & Pet Company shareholders’ equity1,033,645
 744,135
 952,449
Total Central Garden & Pet Company shareholders’ equity1,059,425  1,033,645  996,007  
Noncontrolling interest678
 586
 385
Noncontrolling interest927  678  170  
Total equity1,034,323
 744,721
 952,834
Total equity1,060,352  1,034,323  996,177  
Total$2,064,918
 $1,708,405
 $1,907,209
Total$2,263,969  $2,064,918  $2,025,020  
See notes to condensed consolidated financial statements.

4
Table of Contents
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended Three Months EndedNine Months Ended
June 29,
2019
June 30,
2018		 June 29,
2019		 June 30,
2018		 June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Net sales$706,575
 $657,943
 $1,842,266
 $1,713,048
Net sales$833,483  $706,575  $2,019,540  $1,842,266  
Cost of goods sold and occupancy487,291
 455,879
 1,286,749
 1,184,690
Cost of goods sold and occupancy571,423  487,291  1,419,097  1,286,749  
Gross profit219,284
 202,064
 555,517
 528,358
Gross profit262,060  219,284  600,443  555,517  
Selling, general and administrative expenses150,413
 141,245
 414,312
 379,232
Selling, general and administrative expenses157,420  150,413  427,633  414,312  
Operating income68,871
 60,819
 141,205
 149,126
Operating income104,640  68,871  172,810  141,205  
Interest expense(10,676) (10,597) (31,930) (28,577)Interest expense(11,829) (10,676) (33,223) (31,930) 
Interest income2,178
 584
 6,970
 1,464
Interest income358  2,178  3,779  6,970  
Other income180
 2,126
 488
 542
Other income (expense)Other income (expense)(3,541) 180  (4,215) 488  
Income before income taxes and noncontrolling interest60,553
 52,932
 116,733
 122,555
Income before income taxes and noncontrolling interest89,628  60,553  139,151  116,733  
Income tax expense14,212
 11,395
 26,031
 8,802
Income tax expense20,291  14,212  31,211  26,031  
Income including noncontrolling interest46,341
 41,537
 90,702
 113,753
Income including noncontrolling interest69,337  46,341  107,940  90,702  
Net income (loss) attributable to noncontrolling interest189
 (8) 356
 727
Net income attributable to noncontrolling interestNet income attributable to noncontrolling interest537  189  853  356  
Net income attributable to Central Garden & Pet Company$46,152
 $41,545
 $90,346
 $113,026
Net income attributable to Central Garden & Pet Company$68,800  $46,152  $107,087  $90,346  
Net income per share attributable to Central Garden & Pet Company:       Net income per share attributable to Central Garden & Pet Company:
Basic$0.81
 $0.81
 $1.58
 $2.22
Basic$1.29  $0.81  $1.97  $1.58  
Diluted$0.80
 $0.79
 $1.56
 $2.15
Diluted$1.27  $0.80  $1.95  $1.56  
Weighted average shares used in the computation of net income per share:       Weighted average shares used in the computation of net income per share:
Basic57,319
 51,134
 57,021
 50,938
Basic53,441  57,319  54,261  57,021  
Diluted57,985
 52,575
 57,937
 52,670
Diluted54,168  57,985  54,984  57,937  
See notes to condensed consolidated financial statements.


5



CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 
Three Months EndedNine Months Ended Three Months EndedNine Months Ended
June 29,
2019
June 30,
2018		June 29,
2019		 June 30,
2018		 June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Income including noncontrolling interest$46,341
 $41,537
$90,702
 $113,753
Income including noncontrolling interest$69,337  $46,341  $107,940  $90,702  
Other comprehensive income (loss):     
Other comprehensive loss:Other comprehensive loss:
Foreign currency translation(146) (480)(208) (202)Foreign currency translation(39) (146) (8) (208) 
Total comprehensive income46,195
 41,057
90,494
 113,551
Total comprehensive income69,298  46,195  107,932  90,494  
Comprehensive income attributable to noncontrolling interest189
 (8)356
 727
Comprehensive income attributable to noncontrolling interest537  189  853  356  
Comprehensive income attributable to Central Garden & Pet Company$46,006
 $41,065
$90,138
 $112,824
Comprehensive income attributable to Central Garden & Pet Company$68,761  $46,006  $107,079  $90,138  
See notes to condensed consolidated financial statements.


6
Table of Contents
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 Nine Months Ended
June 27, 2020June 29, 2019
Cash flows from operating activities:
Net income$107,940  $90,702  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization39,598  37,311  
Amortization of deferred financing costs1,397  1,374  
Non-cash lease expense25,893  —  
Stock-based compensation14,042  10,444  
Deferred income taxes5,447  9,875  
(Gain) loss on sale of property and equipment(5) 58  
Write-downs of investments3,566  —  
Other3,666  (281) 
Change in assets and liabilities (excluding businesses acquired):
Accounts receivable(203,140) (93,775) 
Inventories40,750  (3,850) 
Prepaid expenses and other assets1,007  (239) 
Accounts payable29,879  19,728  
Accrued expenses45,572  23,268  
Other long-term obligations117  (1,811) 
Operating lease liabilities(26,809) —  
Net cash provided by operating activities88,920  92,804  
Cash flows from investing activities:
Additions to plant, property and equipment(26,796) (20,888) 
Payments to acquire companies, net of cash acquired—  (41,158) 
Investments(4,439) (1,758) 
Other investing activities(562) (1,203) 
Net cash used in investing activities(31,797) (65,007) 
Cash flows from financing activities:
Repayments of long-term debt(88) (46,162) 
Borrowings under revolving line of credit200,000  —  
Repayments under revolving line of credit(200,000) —  
Repurchase of common stock, including shares surrendered for tax withholding(57,703) (17,796) 
Payment of contingent consideration liability(154) (104) 
Distribution to noncontrolling interest(96) (64) 
Payment of financing costs(948) —  
Net cash used by financing activities(58,989) (64,126) 
Effect of exchange rate changes on cash and cash equivalents40  (120) 
Net decrease in cash, cash equivalents and restricted cash(1,826) (36,449) 
Cash, cash equivalents and restricted cash at beginning of period510,701  493,005  
Cash, cash equivalents and restricted cash at end of period$508,875  $456,556  
Supplemental information:
Cash paid for interest$35,330  $34,277  
Cash paid for income taxes$15,714  $12,277  
 Nine Months Ended
 June 29,
2019		 June 30,
2018
Cash flows from operating activities:   
Net income$90,702
 $113,753
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization37,311
 34,872
Amortization of deferred financing costs1,374
 1,290
Stock-based compensation10,444
 8,567
Deferred income taxes9,875
 (13,447)
Loss (gain) on sale of property and equipment58
 (18)
Other(281) 2,732
Change in assets and liabilities (excluding businesses acquired):   
Accounts receivable(93,775) (101,608)
Inventories(3,850) (14,856)
Prepaid expenses and other assets(239) (14,290)
Accounts payable19,728
 (1,113)
Accrued expenses23,268
 216
Other long-term obligations(1,811) 1,664
Net cash provided by operating activities92,804
 17,762
Cash flows from investing activities:   
Additions to property and equipment(20,888) (27,003)
Payments to acquire companies, net of cash acquired(41,158) (86,777)
Investments(1,758) (8,048)
Other investing activities(1,203) (2,655)
Net cash used in investing activities(65,007) (124,483)
Cash flows from financing activities:   
Repayments of long-term debt(46,162) (395)
Proceeds from issuance of long-term debt—
 300,000
Borrowings under revolving line of credit—
 23,000
Repayments under revolving line of credit—
 (23,000)
Repurchase of common stock, including shares surrendered for tax withholding(17,796) (12,942)
Payment of contingent consideration liability(104) (204)
Distribution to noncontrolling interest(64) (1,597)
Payment of financing costs—
 (4,770)
Net cash (used) provided by financing activities(64,126) 280,092
Effect of exchange rate changes on cash and cash equivalents(120) (47)
Net increase (decrease) in cash, cash equivalents and restricted cash(36,449) 173,324
Cash, cash equivalents and restricted cash at beginning of period493,005
 45,042
Cash, cash equivalents and restricted cash at end of period$456,556
 $218,366
Supplemental information:   
Cash paid for interest$34,277
 $26,297
Cash paid for income taxes$12,277

$18,474
See notes to condensed consolidated financial statements.

7



CENTRAL GARDEN & PET COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended June 29, 201927, 2020
(Unaudited)
1.Basis of Presentation
1.  Basis of Presentation
The condensed consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the “Company” or “Central”) as of June 29, 201927, 2020 and June 30, 2018,29, 2019, the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended June 29, 201927, 2020 and June 30, 201829, 2019 and the condensed consolidated statements of cash flows for the nine months ended June 29, 201927, 2020 and June 30, 201829, 2019 have been prepared by the Company, without audit. In the opinion of management, the interim financial statements include all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented.
For the Company’s foreign business in the UK, the local currency is the functional currency. Assets and liabilities are translated using the exchange rate in effect at the balance sheet date. Income and expenses are translated at the average exchange rate for the period. Deferred taxes are not provided on translation gains and losses because the Company expects earnings of its foreign subsidiary to be permanently reinvested. Transaction gains and losses are included in results of operations.
Due to the seasonal nature of the Company’s garden business, the results of operations for the three and nine months ended June 29, 201927, 2020 are not 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 20182019 Annual Report on Form 10-K, which has previously been filed with the Securities and Exchange Commission. The September 29, 201828, 2019 balance sheet presented herein was derived from the audited financial statements.
Noncontrolling Interest
Noncontrolling interest in the Company’s condensed consolidated financial statements represents the 20% interest not owned by Central in a consolidated subsidiary. Since the Company controls this subsidiary, its financial statements are consolidated with those of the Company, and the noncontrolling owner’s 20% share of the subsidiary’s net assets and results of operations is deducted and reported as noncontrolling interest on the consolidated balance sheets and as net income (loss) attributable to noncontrolling interest in the consolidated statements of operations. See Note 8,9, Supplemental Equity Information, for additional information.
Cash, Cash Equivalents and Restricted Cash
The Company considers cash and all highly liquid investments with an original maturity of three months or less at date of purchase to be cash and cash equivalents. Restricted cash includes cash and highly liquid instruments that are used as collateral for stand-alone letter of credit agreements related to normal business transactions. These agreements require the Company to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash the Company has available for other uses. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the condensed consolidated statements of cash flows as of June 27, 2020, June 29, 2019 June 30, 2018 and September 29, 2018,28, 2019, respectively (in thousands).
June 27, 2020June 29, 2019September 28, 2019
Cash and cash equivalents$495,339  $445,632  $497,749  
Restricted cash13,536  10,924  12,952  
Total cash, cash equivalents and restricted cash$508,875  $456,556  $510,701  
  June 29, 2019

June 30, 2018

September 29, 2018
Cash and cash equivalents $445,632

$204,388

$482,106
Restricted cash 10,924

13,978

10,899
Total cash, cash equivalents and restricted cash $456,556

$218,366

$493,005
       

Allowance for Doubtful Accounts

Trade accounts receivable are regularly evaluated for collectability based on past credit history with customers, their current financial condition and their expected deductions.

Revenue Recognition

Revenue Recognition and Nature of Products and Services

The Company manufactures, markets and distributes a wide variety of branded, private label and third-party pet and garden products to wholesalers, distributors and retailers, primarily in the United States. The majority of the Company’s revenue is generated from the sale of finished pet and garden products. The Company also recognizes a minor amount of non-product revenue (less than one percent of consolidated net sales) comprising third-party logistics services, merchandising services and royalty income from sales-based licensing
8
Table of Contents
arrangements. Product and non-product revenue is recognized when performance obligations under the terms of the contracts with customers are satisfied. The Company recognizes product revenue when control over the finished goods transfers to its customers, which

generally occurs upon shipment to, or receipt at, customers’ locations, as determined by the specific terms of the contract. These revenue arrangements generally have single performance obligations. Non-product revenue is recognized as the services are provided to the customer in the case of third-party logistics services and merchandising services, or as third-party licensee sales occur for royalty income. Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to our customers, including applicable discounts, returns, allowances, trade promotion, unsaleable product, consumer coupon redemption and rebates. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs.
Key sales terms are established on a frequent basis such that most customer arrangements and related incentives have a one year or shorter duration. As such, the Company does not capitalize contract inception costs. Product fulfillment costs are capitalized as a part of inventoriable costs in accordance with our inventory policies. The Company generally does not have unbilled receivables at the end of a period. Deferred revenues are not material and primarily include advance payments for services that have yet to be rendered. The Company does not receive noncash consideration for the sale of goods. Amounts billed and due from our customers are classified as receivables and require payment on a short-term basis; therefore, the Company does not have any significant financing components.

Sales Incentives and Other Promotional Programs

The Company routinely offers sales incentives and discounts through various regional and national programs to our customers and consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses, and the value of inventory associated with reserves for sales returns is included within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Practical Expedients

Leases
The
Effective September 29, 2019, the Company elected the following practical expedients upon its adoption ofadopted Accounting Standards Update ("ASU") No. 2014-09,Codification 842, Revenue from Contracts with CustomersLeases (ASC Topic 606)("ASC 842"). Under this guidance, the Company determines whether an arrangement contains a lease at inception by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration and other facts and circumstances. On September 29, 2019, the Company began to record operating leases on its condensed consolidated balance sheet. As of December 28, 2019, long-term operating lease right-of-use ("ROU") assets and current and long-term operating lease liabilities were presented separately in the condensed consolidated balance sheets. Finance lease ROU assets continue to be presented in property, plant and equipment, net, and the related finance liabilities have been presented with current and long-term debt in the condensed consolidated balance sheets.

•Significant financing component - The Company elected notLease ROU assets represent the Company's right to adjust the promised amount of considerationuse an underlying asset for the effectslease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets are calculated based on the lease liability adjusted for any lease payments paid to the lessor at or before the commencement date and excludes any lease incentives received from the lessor. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As the Company's leases typically do not contain a significant financingreadily determinable implicit rate, the Company determines the present value of the lease liability using its incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis. Variable lease payments are expensed as incurred and include certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease, as applicable. Non-lease components and the lease components to which they relate are accounted for as a single lease component, as the Company expects, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
•Shipping and handling costs- The Company elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities rather than as a promised service.
•Measurement of transaction price - The Company has elected to exclude fromcombine lease and non-lease components for all classes of underlying assets.

Amortization of ROU lease assets is calculated on a straight-line basis over the measurementlease term with the expense recorded in cost of transaction price all taxes assessed by a governmental authority that are both imposedsales or selling, general and administrative expenses, depending on and concurrent with, a specific revenue-producing transaction and collected by the Company from a customer for sales taxes.
Income Taxes
On December 22, 2017, the U.S. Government enacted the 2017 Tax Act, which was comprehensive new tax legislation. The SEC Staff issued guidance on income tax accounting for the 2017 Tax Act on December 22, 2017, which allows companies to record provisional amounts during a measurement period not to extend beyond one yearnature of the enactment date. The Company's accountingleased item. Interest expense is recorded over the lease term and is recorded in interest expense (based on a front-loaded interest expense pattern) for finance leases and is recorded in cost of sales or selling, general and administrative expenses (on a straight-line basis) for operating leases. All operating lease cash payments and interest on finance leases are recorded within cash flows from operating activities and all finance lease principal payments are recorded within cash flows from financing activities in the impactcondensed consolidated statements of the 2017 Tax Act was completed ascash flows.

9
Table of the period ending December 29, 2018.Contents
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") ASC Topic 606, which replaces numerous requirements in U.S. Generally Accepted Accounting Principles ("GAAP"), including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. On September 30, 2018, the beginning of the Company’s fiscal

year 2019, the Company adopted the requirements of ASC Topic 606 using the modified retrospective method. Upon completing its implementation assessment of ASC Topic 606, the Company concluded that no adjustment was required to the opening balance of retained earnings at the date of initial application. The comparative information has also not been restated and continues to be reported under the accounting standards in effect for those periods. Additional disclosures required by ASC Topic 606 are presented within the Revenue Recognition policy disclosure and in Note 11 Segment Information.
On the Company’s condensed consolidated balance sheets, reserves for customer product returns and return allowances are now included as part of accrued expenses, rather than accounts receivable, net, and the value of inventory associated with reserves for sales returns is included within prepaid and other current assets.
Had the Company not adopted the provisions under this ASU, its condensed consolidated balance sheet as of June 29, 2019 would have been presented as follows (in thousands):


As Reported June 29, 2019
Adjustments
Balances without Adoption of ASC Topic 606 June 29, 2019
Current assets




Receivables, less allowance for doubtful accounts$395,581

$(8,407)
$387,174
Prepaid expenses and other$32,453

$(5,117)
$27,336
Total current assets$1,349,626

$(13,524)
$1,336,102






Current liabilities




Accrued expenses$141,029

$(13,524)
$127,505
Total current liabilities$278,813

$(13,524)
$265,289
      

Statement of Cash Flows
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The ASU provides additional clarification guidance on the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the provisions of this guidance as of September 30, 2018 on a retrospective basis. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) (ASU 2016-18). This ASU clarifies the presentation of restricted cash on the statement of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending cash balances on the statement of cash flows. The Company adopted the provisions under this ASU on September 30, 2018, on a retrospective basis. This resulted in an increase in beginning of period and end of period cash, cash equivalents and restricted cash of $12.6 million and $14.0 million, respectively, and a decrease of $1.3 million of cash used in investing activities to the condensed consolidated statement of cash flows for the nine months ended June 30, 2018.
Business Combinations
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business (ASU 2017-01), which requires an evaluation of whether substantially all of the fair value of assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transaction does not qualify as a business. The guidance also requires an acquired business to include at least one substantive process and narrows the definition of outputs. The Company adopted the provisions of this guidance as of September 30, 2018 and has accounted for subsequent acquisitions in accordance with this guidance.

Income Taxes

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory (Topic 740).  ASU 2016-16 amends accounting guidance for intra-entity transfers of assets other than inventory to require the recognition of taxes when the transfer occurs.  The amendment was effective for us September 30, 2018.  A modified retrospective approach is required for transition to the new guidance, with a cumulative-effect adjustment consisting of the net impact from (1) the write-off of any unamortized expense previously deferred and (2) recognition of any previously unrecognized deferred tax assets, net of any valuation

allowance.  The new guidance does not include any specific new disclosure requirements.  Adoption of this guidance in the first quarter of fiscal 2019 did not have an impact on the Company’s condensed consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The guidance requires equity investments, excluding equity method investments or investees that are consolidated, to be measured at fair value with changes in fair value recognized in net income and enhanced disclosures about those investments. The guidance also simplifies the impairment assessments of equity investments without readily determinable fair value. The Company adopted the ASU in the first quarter of fiscal 2019, and the adoption of the new guidance did not have a material impact on the Company’s condensed consolidated financial statements.
Accounting Standards Not Yet Adopted
Leases
In February 2016, the FASB issued ASU 2016-02 (ASU 2016-02),Leases (Topic 842). ASU 2016-02 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. assets and disclose key information about leasing information. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The Company will adopt ASU 2016-02adopted the new standard in the first quarter of fiscal year 2020, on September 29, 2019 and expects to elect certain practical expedients permitted under the transition guidance. The Company will electa modified retrospective basis using the optional transition method, that allowsand accordingly, has not restated comparative periods. Fiscal year 2019 balances and related disclosures supporting those comparative period balances continue to be presented under ASC 840, "Leases." The new standard provides a number of optional practical expedients in transition. The Company elected the 'package of practical expedients,' which permit it to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company elected not to recognize ROU assets and lease liabilities for a cumulative-effect adjustmentshort-term operating leases with terms of 12 months or less. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable. Upon adoption, the Company recorded operating lease right-of-use assets and lease liabilities of approximately $111 million and $115 million, respectively, in the periodcondensed consolidated balance sheet, which included the reclassifications of adoption and will not restate prior periods.amounts presented in comparative periods as deferred rent as a reduction of the ROU assets. The Company is implementing a new lease system in connectiondid not record an adjustment to beginning retained earnings associated with the adoption of this standardstandard. See Note 7. Leases for more information.

Guarantor Financial Information

In March 2020, the Securities Exchange Commission (SEC) amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements. The guidance is effective for filings on or after January 4, 2021, with early adoption permitted. The Company early adopted these amendments for the quarter ended June 27, 2020, which included replacing guarantor condensed consolidating financial information with summarized financial information for the Parent Issuer subsidiaries and Guarantor subsidiaries, as well as no longer requiring guarantor cash flow information, financial information for non-guarantor subsidiaries, and a reconciliation to the consolidated results. Accordingly, summarized financial information has been presented for the Parent/Issuer subsidiaries and Guarantors on our senior notes for the most recent fiscal year and the year-to-date interim period, and the location of the required disclosures has been removed from the Notes to the Condensed Consolidated Financial Statements and moved to Part 1. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Accounting Standards Not Yet Adopted
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held. The guidance is effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or the Company's first quarter of fiscal 2021. The Company is currently inevaluating the implementation phase. The Company currently expectseffect that mostASU 2016-13 will have on its condensed consolidated financial statements and related disclosures.
10
Table of its operating lease commitments will be subject to the new standard, and the Company will record significant long-term operating lease liabilities and long-term right-of-use assets upon the adoption of ASU 2016-02.Contents
Goodwill and Intangible Assets
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or the Company's first quarter of fiscal 2021. The amendment should be applied on a prospective basis. Based on the Company's most recent annual goodwill impairment test performed as of July 1, 2018,2019, there were no reporting units for which the carrying amount of the reporting unit exceeded its fair value; therefore, this ASU would not currently have an impact on the Company's condensed consolidated financial statements and related disclosures. However, if upon adoption the carrying amount of a reporting unit exceeds its fair value, the Company would be impacted by the amount of impairment recognized.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted, and is effective for the Company in fiscal 2021. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the effect that ASU 2018-15 will have on its condensed consolidated financial statements and related disclosures.

Fair Value Disclosures
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. ASU 2018-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted and is effective for the Company in fiscal 2021. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company is currently evaluating the effect that ASU 2018-13 will have on its condensed consolidated financial statements and related disclosures.

Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes, enacts changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for the Company in its first quarter of fiscal 2022 and would require the Company to recognize a cumulative effect adjustment to the opening balance of retained earnings, if applicable. The Company is currently evaluating the impact that ASU 2019-12 may have on its consolidated financial statements.
2.Fair Value Measurements

2.  Fair Value Measurements
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.
11

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of June 29, 201927, 2020 (in thousands): 
Level 1Level 2Level 3Total
Liabilities:
Liability for contingent consideration (a)$—  $—  $1,246  $1,246  
Total liabilities$—  $—  $1,246  $1,246  
  Level 1 Level 2 Level 3 Total
Assets:        
Short term investments (a) $119

$—

$—

$119
Total assets $119

$—

$—

$119
Liabilities:        
Liability for contingent consideration (b) $—
 $—
 $7,824
 $7,824
Total liabilities $—
 $—
 $7,824
 $7,824

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of June 30, 201829, 2019 (in thousands): 
Level 1Level 2Level 3Total
 Level 1 Level 2 Level 3 Total
Assets:Assets:
Short term investments (b)Short term investments (b)$119  $—  $—  $119  
Total assetsTotal assets$119  $—  $—  $119  
Liabilities:        Liabilities:
Liability for contingent consideration (b) $—
 $—
 $7,645
 $7,645
Liability for contingent consideration (a)Liability for contingent consideration (a)$—  $—  $7,824  $7,824  
Total liabilities $—
 $—
 $7,645
 $7,645
Total liabilities$—  $—  $7,824  $7,824  
The following table presents our financial assets and liabilities at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of September 29, 2018:28, 2019 (in thousands): 
Level 1Level 2Level 3Total
Liabilities:
Liability for contingent consideration (a)$—  $—  $7,369  $7,369  
Total liabilities$—  $—  $7,369  $7,369  
  Level 1 Level 2 Level 3 Total
Liabilities:        
Liability for contingent consideration (b) $—
 $—
 $8,224
 $8,224
Total liabilities $—
 $—
 $8,224
 $8,224
(a)The liability for contingent consideration relates to an earn-out for B2E, acquired in December 2012, future performance-based contingent payments for Hydro-Organics Wholesale, Inc., acquired in October 2015 and future performance-based contingent payments for Segrest, Inc., acquired in October 2016. In December 2019, performance-based criteria associated with the $6 million contingent consideration liability related to Segrest, Inc. were met and accordingly, the entire amount was released out of an independent escrow account to the former owners as of December 28, 2019. The fair value of the estimated contingent consideration arrangement is determined based on the Company’s evaluation as to the probability and amount of any earn-out that will be achieved based on expected future performance by the acquired entity. This is presented as part of long-term liabilities in the Company's consolidated balance sheets.
(a)
(b) The fair value of short-term investments are based on quoted prices in active markets for identical assets.
(b)The liability for contingent consideration relates to an earn-out for B2E, acquired in December 2012, future performance-based contingent payments for Hydro-Organics Wholesale, Inc., acquired in October 2015, future performance-based contingent payment for Segrest, Inc., acquired in October 2016, and future performance-based contingent payments for Bell Nursery, acquired in March 2018. The contingent period for Bell Nursery expired in December 2018. Performance thresholds that would have necessitated payment were not met, and accordingly, no payment was made. The fair value of the estimated contingent consideration arrangement is determined based on the Company’s evaluation as to the probability and amount of any earn-out that will be achieved based on expected future performance by the acquired entity. This is presented as part of long-term liabilities in the Company's consolidated balance sheets.


The following table provides a summary of the changes in fair value of the Company's Level 3 financial instruments for the periods ended June 29, 201927, 2020 and June 30, 201829, 2019 (in thousands):
 Amount
Balance September 29, 2018$8,224
Estimated contingent performance-based consideration established at the time of acquisition—
Changes in the fair value of contingent performance-based payments established at the time of acquisition(296)
Performance-based payments(104)
Balance June 29, 2019$7,824
  
 Amount
Balance September 30, 2017$9,343
Estimated contingent performance-based consideration established at the time of acquisition—
Changes in the fair value of contingent performance-based payments established at the time of acquisition(1,494)
Performance-based payments(204)
Balance June 30, 2018$7,645
12

Amount
Balance September 28, 2019$7,369 
Estimated contingent performance-based consideration established at the time of acquisition— 
Changes in the fair value of contingent performance-based payments established at the time of acquisition31 
Performance-based payments(6,154)
Balance June 27, 2020$1,246 
Amount
Balance September 29, 2018$8,224 
Estimated contingent performance-based consideration established at the time of acquisition— 
Changes in the fair value of contingent performance-based payments established at the time of acquisition(296)
Performance-based payments(104)
Balance June 29, 2019$7,824 
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company measures certain non-financial assets and liabilities, including long-lived assets, goodwill and intangible assets, at fair value on a non-recurring basis. Fair value measurements of non-assetsnon-financial assets and non-financial liabilities are used primarily in the impairment analyses of long-lived assets, goodwill and other intangible assets. During the periodperiods ended June 30, 2018,27, 2020 and June 29, 2019, the Company was not required to measure any significant non-financial assets and liabilities at fair value. As a result of one of our retail customers exiting the live fish business, the carrying value of $2.5 million of amortizable intangible assets were written down to their estimated fair value, resulting in impairment charges of $2.5 million, which were included in selling, general and administrative expenses during the nine-month period ended June 29, 2019.
Fair Value of Other Financial Instruments
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 June 27, 2020, June 29, 2019 June 30, 2018 and September 29, 201828, 2019 was $310.9 million, $295.0 million $278.7 million and $285.5$307.1 million, respectively, compared to a carrying value of $296.5 million, $296 million $295.5 million and $295.6$296.1 million, respectively.
In November 2015, the Company issued $400 million aggregate principal amount of 6.125% senior notes due November 2023 (the “2023 Notes”). The estimated fair value of the Company’s 2023 Notes as of June 27, 2020, June 29, 2019 June 30, 2018 and September 29, 201828, 2019 was $409.5 million, $415.8 million $414.5 million and $414.4$414.6 million, respectively, compared to a carrying value of $397.3 million, $396.5 million $395.8 million and $396.0$396.7 million, respectively.


13

3.  Acquisitions

3.Acquisitions

C&S Products
In May 2019, the Company purchased C&S Products, a manufacturer of suet and other wild bird feed products, to complement our existing wild bird feed business for approximately $30.0 million. Subsequent to the acquisition, approximately $4.7 million of cash was used to eliminate the acquired long-term debt. The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $3.2 million, which is included in other assets on the Company's condensed consolidated balance sheet as of June 29, 2019. The Company has not yet finalized the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired. The financial results of C&S Products have been included in the results of operations within the Pet segment since the date of acquisition. The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments.

Arden Companies
In thousandsAmounts Previously Recognized as of Acquisition Date (1)Measurement Period AdjustmentsAmounts Recognized as of Acquisition Date (as Adjusted)
Current assets, net of cash and cash equivalents acquired$9,794  $441  $10,235  
Fixed assets23,743  (3,786) 19,957  
Goodwill—  3,777  3,777  
Other assets5,081  (3,242) 1,839  
Other intangible assets, net—  2,810  2,810  
Current liabilities(2,137) —  (2,137) 
Long-term obligations(6,457) $—  (6,457) 
Net assets acquired, less cash and cash equivalents$30,024  $—  $30,024  
In February 2019, the Company purchased the remaining 55% interest in Arden Companies, a manufacturer of outdoor cushions and pillows, for $13.4 million. Accordingly, the Company remeasured its(1) As previously held investment at its acquisition-date fair value and recorded a provisional gain of approximately $3 million as part of selling, general and administrative expensesreported in the Company's condensed consolidated statements of operations. Form 10-K for the period ended September 28, 2019.
The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $19 million, which is included in other assets on the Company's condensed consolidated balance sheet as of June 29, 2019. Subsequentimpact to the acquisition, approximately $36 millionconsolidated statement of cash was used to eliminate mostoperations associated with the finalization of the acquired long-term debt. The Company has not yet finalized the allocationpurchase accounting and true-up of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired. Oncefor C&S Products during the purchase price valuation work is complete, the provisional gain on the Company's previously held interest will be finalized. Financial results of Arden have been included in the results of operations within the Garden segment since the date of acquisition of the remaining 55% interest.quarter ended December 28, 2019 was immaterial.

4.Inventories, net
4.  Inventories, net
Inventories, net of allowance for obsolescence, consist of the following (in thousands):
 
  June 29, 2019 June 30, 2018 September 29, 2018
Raw materials $138,073
 $118,826
 $117,539
Work in progress 36,355
 33,306
 35,691
Finished goods 275,286
 263,416
 263,845
Supplies 15,203
 12,459
 10,748
Total inventories, net $464,917
 $428,007
 $427,823

June 27, 2020June 29, 2019September 28, 2019
Raw materials$151,412  $138,073  $145,331  
Work in progress42,185  36,355  51,154  
Finished goods218,542  275,286  255,870  
Supplies13,780  15,203  13,842  
Total inventories, net$425,919  $464,917  $466,197  
 
14
5.Goodwill

5. Goodwill
The Company tests goodwill for impairment annually (as of the first day of the fourth fiscal quarter), or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, by first assessing qualitative factors to determine whether it is more likely than not the fair value of the reporting unit is less than its carrying amount. 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-step 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-step 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-step goodwill impairment test, which compares the fair value of the Company’s reporting units to their related carrying values, including goodwill. If the fair value of the reporting unit is less than its carrying value, 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. The Company’s goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of its two2 reporting units to the Company’s total market capitalization. NoNaN impairment of goodwill was recorded for the three and nine months ended June 29, 201927, 2020 and June 30, 2018.


29, 2019. The Company recorded approximately $3.8 million of goodwill in its Pet segment during the three months ended December 28, 2019 as part of its finalization of the purchase price allocation of C&S Products.
14
15

6. Other Intangible Assets

6.Other Intangible Assets

The following table summarizes the components of gross and net acquired intangible assets:
GrossAccumulated
Amortization		Accumulated
Impairment		Net
Carrying
Value
 (in millions)
June 27, 2020
Marketing-related intangible assets – amortizable$20.6  $(17.3) $—  $3.3  
Marketing-related intangible assets – nonamortizable70.6  —  (26.0) 44.6  
Total91.2  (17.3) (26.0) 47.9  
Customer-related intangible assets – amortizable140.3  (61.4) (2.5) 76.3  
Other acquired intangible assets – amortizable26.0  (17.8) —  8.2  
Other acquired intangible assets – nonamortizable7.1  —  (1.2) 5.9  
Total33.0  (17.8) (1.2) 14.1  
Total other intangible assets$264.6  $(96.5) $(29.7) $138.3  
 GrossAccumulated
Amortization		Accumulated
Impairment		Net
Carrying
Value
 (in millions)
June 29, 2019
Marketing-related intangible assets – amortizable$18.6  $(15.7) $—  $2.9  
Marketing-related intangible assets – nonamortizable70.6  —  (26.0) 44.6  
Total89.2  (15.7) (26.0) 47.5  
Customer-related intangible assets – amortizable128.3  (50.0) (2.5) 75.8  
Other acquired intangible assets – amortizable26.0  (15.9) —  10.1  
Other acquired intangible assets – nonamortizable7.2  —  (1.2) 6.0  
Total33.2  (15.9) (1.2) 16.1  
Total other intangible assets$250.7  $(81.6) $(29.7) $139.4  
 GrossAccumulated
Amortization		Accumulated
Impairment		Net
Carrying
Value
 (in millions)
September 28, 2019
Marketing-related intangible assets – amortizable$19.7  $(16.3) $—  $3.4  
Marketing-related intangible assets – nonamortizable70.6  —  (26.0) 44.6  
Total90.3  (16.3) (26.0) 48.0  
Customer-related intangible assets – amortizable138.4  (53.3) (2.5) 82.6  
Other acquired intangible assets – amortizable26.0  (16.4) —  9.6  
Other acquired intangible assets – nonamortizable7.1  —  (1.2) 5.9  
Total33.1  (16.4) (1.2) 15.5  
Total other intangible assets$261.8  $(86.0) $(29.7) $146.1  
  Gross 
Accumulated
Amortization
 
Accumulated
Impairment
 
Net
Carrying
Value
  (in millions)
June 29, 2019        
Marketing-related intangible assets – amortizable $18.6
 $(15.7) $—
 $2.9
Marketing-related intangible assets – nonamortizable 70.6
 —
 (26.0) 44.6
Total 89.2
 (15.7) (26.0) 47.5
Customer-related intangible assets – amortizable 128.3
 (50.0) (2.5) 75.8
Other acquired intangible assets – amortizable 26.0
 (15.9) —
 10.1
Other acquired intangible assets – nonamortizable 7.2
 —
 (1.2) 6.0
Total 33.2
 (15.9) (1.2) 16.1
Total other intangible assets $250.7
 $(81.6) $(29.7) $139.4
  Gross 
Accumulated
Amortization
 
Accumulated
Impairment
 
Net
Carrying
Value
  (in millions)
June 30, 2018        
Marketing-related intangible assets – amortizable $16.9
 $(13.8) $—
 $3.1
Marketing-related intangible assets – nonamortizable 70.6
 —
 (26.0) 44.6
Total 87.5
 (13.8) (26.0) 47.7
Customer-related intangible assets – amortizable 115.7
 (39.7) —
 76.0
Other acquired intangible assets – amortizable 22.1
 (13.8) —
 8.3
Other acquired intangible assets – nonamortizable 7.8
 —
 (1.2) 6.6
Total 29.9
 (13.8) (1.2) 14.9
Total other intangible assets $233.1
 $(67.3) $(27.2) $138.6
  Gross 
Accumulated
Amortization
 
Accumulated
Impairment
 
Net
Carrying
Value
  (in millions)
September 29, 2018        
Marketing-related intangible assets – amortizable $18.6
 $(14.2) $—
 $4.4
Marketing-related intangible assets – nonamortizable 70.6
 —
 (26.0) 44.6
Total 89.2
 (14.2) (26.0) 49.0
Customer-related intangible assets – amortizable 128.3
 (42.5) —
 85.8
Other acquired intangible assets – amortizable 25.4
 (14.5) —
 10.9
Other acquired intangible assets – nonamortizable 7.8
 —
 (1.2) 6.6
Total 33.2
 (14.5) (1.2) 17.5
Total other intangible assets $250.7
 $(71.2) $(27.2) $152.3
16



Other acquired intangible assets include contract-based and technology-based intangible assets.
As part of its acquisition of C&S Products in the third quarter of fiscal 2019, the Company acquired approximately $0.9 million of amortizable marketing-related intangible assets and approximately $1.9 million of customer-related intangible assets.
The Company evaluates long-lived assets, including amortizable and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company evaluates indefinite-lived intangible assets on an annual basis. Factors indicating the carrying value of the Company’s amortizable intangible assets may not be recoverable were not present in fiscal 2018,the three or nine months ended June 27, 2020, and accordingly, no impairment testing was performed on these assets. As a result of one of our retail customers exiting the live fish business, factors indicating the carrying value of certain amortizable intangible assets may not be recoverable were present during the quarter ended March 30, 2019. The Company performed impairment testing on these assets, found the carrying value was not recoverable and accordingly, recorded an impairment charge in its Pet segment of approximately $2.5 million as part of selling, general and administrative expenses in the condensed consolidated statements of operations for the nine-month period ended June 29, 2019.
The Company amortizes its acquired intangible assets with definite lives over periods ranging from 3 years to 25 years; over weighted average remaining lives of 4 years for marketing-related intangibles, 109 years for customer-related intangibles and 1110 years for other acquired intangibles. Amortization expense for intangibles subject to amortization was approximately $3.4 million and $2.9$3.4 million for the three months ended June 27, 2020 and June 29, 2019, and June 30, 2018, respectively, and $10.3$10.6 million and $8.7$10.3 million for the nine months ended June 29, 201927, 2020 and June 30, 2018,29, 2019, respectively, and is classified within selling, general and administrative expenses in the condensed consolidated statements of operations. Estimated annual amortization expense related to acquired intangible assets in each of the succeeding five years is estimated to be approximately $10$12 million per year from fiscal 20192020 through fiscal 2023.2024 and thereafter.
.
7. Leases

The Company has operating and finance leases for manufacturing and distribution facilities, vehicles, equipment and office space. The Company's leases have remaining lease terms of one to 10 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise. The Company does not include significant restrictions or covenants in its lease agreements, and residual value guarantees are not included within its operating leases. Some of the Company's leasing arrangements require variable payments that are dependent on usage or output or may vary for other reasons, such as product costs, insurance and tax payments. These variable payments are not included in the Company's recorded lease assets and liabilities and are expensed as incurred. Certain leases are tied to a variable index or rate and are included in lease assets and liabilities based on the indices or rates as of lease commencement. See Note 1. Basis of Presentation, Leases, for more information about the Company's lease accounting policies.

Supplemental balance sheet information related to the Company's leases was as follows:


7.Long-Term DebtBalance Sheet ClassificationAs of
June 27, 2020
(in millions)
Operating leases
Right-of-use assetsOperating lease right-of-use assets$99.1 
Current lease liabilitiesCurrent operating lease liabilities$31.6 
Non-current lease liabilitiesLong-term operating lease liabilities71.5 
Total operating lease liabilities$103.1 
Finance leases
Right-of-use assetsProperty, plant and equipment, net$0.3 
Current lease liabilitiesCurrent portion of long-term debt$0.1 
Non-current lease liabilitiesLong-term debt0.1 
Total finance lease liabilities$0.2 


17


Components of lease cost were as follows:

Three months ended
June 27, 2020
(in millions)		Nine Months Ended
June 27, 2020
(in millions)
Operating lease cost$9.7  $29.0  
Finance lease cost:
     Amortization of right-of-use assets$—  $0.1  
     Interest on lease liabilities—  —  
Total finance lease cost$—  $0.1  
Short-term lease cost$1.0  $2.7  
Variable lease cost$1.6  $5.1  
Total lease cost$12.3  $36.9  

Supplemental cash flow information and non-cash activity related to the Company's leases was as follows:

Nine Months Ended
June 27, 2020
(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$26.8 
     Operating cash flows from finance leases$— 
     Financing cash flows from finance leases$0.1 
Right-of-use assets obtained in exchange for lease obligations:
     Operating leases$13.7 
     Finance leases$— 

Weighted-average remaining lease term and discount rate for the Company's leases were as follows:

As of June 27, 2020
Weighted-average remaining lease term (in years):
     Operating leases4.8
     Finance leases2.2
Weighted-average discount rate:
     Operating leases3.84 %
     Finance leases4.84 %



18

Future non-cancelable lease payments under prior lease accounting rules (ASC 840) and under the new lease accounting rules (ASC 842) that went into effect September 29, 2019 were as follows (in millions):

As of June 27, 2020As of September 28, 2019
ASC 842ASC 840
Operating LeasesFinance LeasesOperating Leases
Fiscal Year
2020 (excluding the nine months ended June 27, 2020)$9.6  $—  
2020$38.0  
202132.4  0.1  29.3  
202225.1  0.1  21.8  
202314.7  —  11.3  
202410.0  —  7.9  
Thereafter21.9  —  20.7  
Total future undiscounted lease payments$113.7  $0.2  $129.0  
Less imputed interest(10.6) —  
Total reported lease liability$103.1  $0.2  


8. Long-Term Debt
Long-term debt consists of the following:
  June 29, 2019 June 30, 2018 September 29, 2018
  (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
 300,000
 300,000
Unamortized debt issuance costs (7,475) (8,741) (8,425)
Net carrying value 692,525
 691,259
 691,575
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 539
 601
 578
Total 693,064
 691,860
 692,153
Less current portion (116) (119) (122)
Long-term portion $692,948
 $691,741
 $692,031

June 27, 2020June 29, 2019September 28, 2019
 (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 2028300,000  300,000  300,000  
Unamortized debt issuance costs(6,207) (7,475) (7,158) 
Net carrying value693,793  692,525  692,842  
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 September 2024.—  —  —  
Other notes payable220  539  308  
Total694,013  693,064  693,150  
Less current portion(98) (116) (113) 
Long-term portion$693,915  $692,948  $693,037  
Senior Notes
$300 million 5.125% Senior Notes
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 use the net proceeds from the offering to finance future acquisitions and for general corporate purposes.
The Company incurred approximately $4.8 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028 Notes.
19

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 who are borrowers under or guarantors of Central's senior secured revolving credit facility, or who guarantee the 2023 Notes.


The Company may redeem some or all of the 2028 Notes at any time, at its option, prior to January 1, 2023 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 the 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 June 29, 2019.27, 2020.
$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, at any time on or after November 15, 2018 for 104.594%, at any time 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 financial covenants as of June 29, 2019.27, 2020.
Asset-Based Loan Facility Amendment
On April 22, 2016,September 27, 2019, the Company entered into ana Second Amended and Restated Credit Agreement (“Amended Credit Agreement”). The Amended Credit Agreement amended and restated the previous credit agreement which providesdated April 22, 2016 and continues to provide up to a $400$400.0 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200$200.0 million principal amount available with the consent of the Lenders, as defined, if the Company exercises the accordion feature set forth therein (collectively, the “Credit“Amended Credit Facility”). The Amended Credit Facility matures on April 22, 2021.September 27, 2024. 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.

20

The Amended Credit Facility is subject to a borrowing base, reduced capacity due to reserves and certain other restrictions. The borrowing base is calculated using a formula initially based upon eligible receivables and inventory minus certain reserves, and was $400.0 million as of June 27, 2020. The Amended Credit Facility also allows the Company to add real property to the borrowing base so long as the real property is subject to a first priority lien in favor of the Administrative Agent for the benefit of the Lenders. The Company did not draw down any commitments under the Amended Credit Facility upon closing. Proceeds of the Amended Credit Facility will be used for general corporate purposes. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and an increased $40 million sublimit for short-notice borrowings. As of June 29, 2019,27, 2020, there were no0 borrowings outstanding and no0 letters of credit outstanding under the Credit Facility. There were other letters of credit of $3.2 million outstanding as of June 29, 2019.27, 2020.
The Credit Facility is subject to a borrowing base, calculated using a formula based upon eligible receivables and inventory, minus certain reserves and subject to restrictions. As of June 29, 2019, the borrowing base and remaining borrowing availability was $400.0 million.
Borrowings under the Amended Credit Facility will bear interest at an index based on LIBOR 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% and0.50%, (c) one-month LIBOR plus 1.00%), plus, in either case, an applicable margin based on the Company’s consolidated senior leverage ratio.ratio and (d) 0.00%. Such applicable margin for LIBOR-based borrowings fluctuates between 1.25% - 1.50%1.00%-1.50%, and was 1.25%1.00% as of June 29, 2019,27, 2020, and such applicable margin for Base Rate borrowings fluctuates


between 0.25%-0.25%0.00%-0.50%, and was 0.25%0% as of June 29, 2019.27, 2020. An unused line fee shall be payable monthly 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 shall be payable monthly and a facing fee of 0.125% shall be paid on demand 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. As of June 29, 2019,27, 2020, the applicable interest rate related to Base Rate borrowings was 5.8%3.3%, and the applicable interest rate related to LIBOR-based borrowings was 3.7%1.2%.

The Company incurred approximately $1.2$1.6 million of debt issuance costs in conjunction with this transaction, which included underwriter fees legal and accountinglegal expenses. The unamortized debt issuance costs are included in other assets in the condensed consolidated balance sheets and are being amortized over the term of the Amended Credit Facility.

The Amended Credit Facility containscontinues to contain customary covenants, including financial covenants which require the Company to maintain a minimum fixed charge coverage ratio of 1.00:1.00 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. The Company was in compliance with all financial covenants under the Amended Credit Facility during the quarterperiod ended June 29, 2019.27, 2020.


18
21


9. Supplemental Equity Information
8.Supplemental Equity Information
The following table provides a summary of the changes in the carrying amounts of equity attributable to controlling interest and noncontrolling interest through the nine months ended June 29, 201927, 2020 and June 30, 2018.29, 2019.


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
September 29, 2018
$121

$439

$16

$590,168

$362,923

$(1,218)
$952,449

$385

$952,834
Comprehensive income
—

—

—

—

1,803

(274)
1,529

(164)
1,365
Amortization of share-based awards
—

—

—

2,261

—

—

2,261

—

2,261
Restricted share activity, including net share settlement
—

1

—

(386)
—

—

(385)
—

(385)
Issuance of common stock, including net share settlement of stock options
—

1

—

408

—

—

409

—

409
Balance December 29, 2018
$121

$441

$16

$592,451

$364,726

$(1,492)
$956,263

$221

$956,484
Comprehensive income
—

—

—

—

42,391

212

42,603

331

42,934
Amortization of share-based awards
—

—

—

2,473

—

—

2,473

—

2,473
Restricted share activity, including net share settlement
—

2

—

(1,773)
—

—

(1,771)
—

(1,771)
Issuance of common stock, including net share settlement of stock options
—

1

—

(820)
—

—

(819)
—

(819)
Other —
 —
 —
 —
 —
 —
 —
 1
 1
Balance March 30, 2019
$121

$444

$16

$592,331

$407,117

$(1,280)
$998,749

$553

$999,302
Comprehensive income
—

—

—

—

46,152

(146)
46,006

189

46,195
Amortization of share-based awards
—

—

—

2,965

—

—

2,965

—

2,965
Restricted share activity, including net share settlement
—

1

—

(641)
—

—

(640)
—

(640)
Issuance of common stock, including net share settlement of stock options
—

1

—

870

—

—

871

—

871
Repurchase of common stock
$—

(6)
$—

(5,676)
(8,624)
$—

(14,306)
—

(14,306)
Distribution to Noncontrolling interest
$—

$—

$—

$—

$—

$—

—

(64)
(64)
Balance June 29, 2019
$121

$440

$16

$589,849

$444,645

$(1,426)
$1,033,645

$678

$1,034,323
Controlling Interest
(in thousands)Common
Stock		Class A
Common
Stock		Class
B
Stock		Additional
Paid In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		TotalNoncontrolling
Interest		Total
Balance September 28, 2019$115  $430  $16  $575,380  $421,742  $(1,676) $996,007  $170  $996,177  
Comprehensive income—  —  —  —  (4,417) 436  (3,981) (122) (4,103) 
Amortization of share-based awards—  —  —  2,804  —  —  2,804  —  2,804  
Restricted share activity, including net share settlement—  —  —  (318) —  —  (318) —  (318) 
Repurchase of stock—  (8) —  (8,488) (13,632) —  (22,128) —  (22,128) 
Issuance of common stock, including net share settlement of stock options—  1  —  739  —  —  740  —  740  
Balance December 28, 2019$115  $423  $16  $570,117  $403,693  $(1,240) $973,124  $48  $973,172  
Comprehensive income—  —  —  —  42,704  (405) 42,299  438  42,737  
Amortization of share-based awards—  —  —  2,923  —  —  2,923  —  2,923  
Restricted share activity, including net share settlement—  3  —  (807) —  —  (804) —  (804) 
Repurchase of stock(2) (8) —  (10,121) (14,911) —  (25,042) —  (25,042) 
Issuance of common stock, including net share settlement of stock options—  —  —  513  —  —  513  —  513  
Distribution to Noncontrolling interest—  —  —  —  —  —  —  (57) (57) 
Balance March 28, 2020$113  $418  $16  $562,625  $431,486  $(1,645) $993,013  $429  $993,442  
Comprehensive income—  —  —  —  68,800  (39) 68,761  537  69,298  
Amortization of share-based awards—  —  —  3,754  —  —  3,754  —  3,754  
Restricted share activity, including net share settlement—  —  —  (1,425) —  —  (1,425) —  (1,425) 
Issuance of common stock, including net share settlement of stock options—  1  —  405  —  —  406  —  406  
Repurchase of common stock—  (2) —  (1,988) (3,094) —  (5,084) —  (5,084) 
Distribution to Noncontrolling interest—  —  —  —  —  —  —  (39) (39) 
Other—  —  —  —  —  —  —  —  
Balance June 27, 2020$113  $417  $16  $563,371  $497,192  $(1,684) $1,059,425  $927  $1,060,352  




 
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 30, 2017
$122

$380

$16

$396,790

$239,329

$(951)
$635,686

$1,456

$637,142
Comprehensive income
—

—

—

—

26,247

44

26,291

203

26,494
Amortization of share-based awards
—

—

—

2,143

—

—

2,143

—

2,143
Restricted share activity, including net share settlement
—

—

—

(2,397)
—

—

(2,397)
—

(2,397)
Issuance of common stock, including net share settlement of stock options
—

—

—

166

—

—

166

—

166
Distribution to Noncontrolling interest
—

—

—

—

—

—

—

(1,597)
(1,597)
Balance December 30, 2017
$122

$380

$16

$396,702

$265,576

$(907)
$661,889

$62

$661,951
Comprehensive income
$—

$—

$—

$—

45,234

234

45,468

532

46,000
Amortization of share-based awards
—

—

—

2,321

—

—

2,321

—

2,321
Restricted share activity, including net share settlement
(1)
—

—

(3,873)
—

—

(3,874)
—

(3,874)
Issuance of common stock, including net share settlement of stock options
—

2

—

(1,298)
—

—

(1,296)
—

(1,296)
Balance March 31, 2018
$121

$382

$16

$393,852

$310,810

$(673)
$704,508

$594

$705,102
Comprehensive income
—

—

—

—

41,545

(480)
41,065

(8)
41,057
Amortization of share-based awards
—

—

—

2,402

—

—

2,402

—

2,402
Restricted share activity, including net share settlement
—

—

—

(866)
—

—

(866)
—

(866)
Issuance of common stock, including net share settlement of stock options
—

2

—

(2,976)
—

—

(2,974)
—

(2,974)
Balance June 30, 2018
$121

$384

$16

$392,412

$352,355

$(1,153)
$744,135

$586

$744,721


22

 Controlling Interest  
(in thousands)Common StockClass A Common StockClass B StockAdditional Paid In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)TotalNoncontrolling InterestTotal
Balance September 29, 2018$121  $439  $16  $590,168  $362,923  $(1,218) $952,449  $385  $952,834  
Comprehensive income—  —  —  —  1,803  (274) 1,529  (164) 1,365  
Amortization of share-based awards—  —  —  2,261  —  —  2,261  —  2,261  
Restricted share activity, including net share settlement—  1  —  (386) —  —  (385) —  (385) 
Issuance of common stock, including net share settlement of stock options—  1  —  408  —  —  409  —  409  
Balance December 29, 2018$121  $441  $16  $592,451  $364,726  $(1,492) $956,263  $221  $956,484  
Comprehensive income—  —  —  —  42,391  212  42,603  331  42,934  
Amortization of share-based awards—  —  —  2,473  —  —  2,473  —  2,473  
Restricted share activity, including net share settlement—  2  —  (1,773) —  —  (1,771) —  (1,771) 
Issuance of common stock, including net share settlement of stock options—  1  —  (820) —  —  (819) —  (819) 
Other—  —  —  —  —  —  —  1  1  
Balance March 28, 2020$121  $444  $16  $592,331  $407,117  $(1,280) $998,749  $553  $999,302  
Comprehensive income$—  $—  $—  $—  $46,152  $(146) $46,006  $189  $46,195  
Amortization of share-based awards$—  $—  $—  $2,965  $—  $—  $2,965  $—  $2,965  
Restricted share activity, including net share settlement$—  $1  $—  $(641) $—  $—  $(640) $—  $(640) 
Issuance of common stock, including net share settlement of stock options$—  $1  $—  $870  $—  $—  $871  $—  $871  
Repurchase of common stock$(6) $(5,676) $(8,624) $(14,306) $(14,306) 
Distribution to Noncontrolling interest$—  $—  $—  $—  $—  $—  $—  $(64) $(64) 
Balance June 29, 2019$121  $440  $16  $589,849  $444,645  $(1,426) $1,033,645  $678  $1,034,323  

 
9.Stock-Based Compensation
10. Stock-Based Compensation
The Company recognized share-based compensation expense of $10.4$14.0 million and $8.6$10.4 million for the nine months ended June 29, 201927, 2020 and June 30, 2018,29, 2019, respectively, as a component of selling, general and administrative expenses. The tax benefit associated with share-based compensation expense for the nine months ended June 27, 2020 and June 29, 2019 and June 30, 2018 was $2.5$3.4 million and $2.4$2.5 million, respectively.
 

23
20



11. Earnings Per Share
10.Earnings Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted per share computations for income from continuing operations (in thousands except share and per share amounts).
Three Months EndedNine Months Ended
June 27, 2020June 27, 2020
IncomeSharesPer ShareIncomeSharesPer Share
Basic EPS:
     Net income available to common shareholders$68,800  53,441  $1.29  $107,087  54,261  $1.97  
Effect of dilutive securities (1):
     Options to purchase common stock—  278  (0.01) —  339  (0.01) 
     Restricted shares—  449  (0.01) —  384  (0.01) 
Diluted EPS:
     Net income available to common shareholders$68,800  54,168  $1.27  $107,087  54,984  $1.95  
  Three Months Ended Nine Months Ended
  June 29, 2019 June 29, 2019
  Income Shares Per Share Income
Shares
Per Share
Basic EPS:       




Net income available to common shareholders $46,152
 57,319
 $0.81
 $90,346

57,021

$1.58
Effect of dilutive securities:       




     Options to purchase common stock —
 412
 (0.01) —

559

(0.01)
     Restricted shares —
 254
 —
 —

357

(0.01)
Diluted EPS: 
 
 
 




     Net income available to common shareholders $46,152
 57,985
 $0.80
 $90,346

57,937

$1.56
             
(1) The potential effects of stock awards were excluded from the diluted earnings per share calculation for the three months ended December 28, 2019, because their inclusion in a net loss period would be anti-dilutive to the earnings per share calculation.
Three Months EndedNine Months Ended
June 29, 2019June 29, 2019
IncomeSharesPer ShareIncomeSharesPer Share
Basic EPS:
     Net income available to common shareholders$46,152  57,319  $0.81  $90,346  57,021  $1.58  
Effect of dilutive securities:
     Options to purchase common stock—  412  (0.01) —  559  (0.01) 
     Restricted shares—  254  —  —  357  (0.01) 
Diluted EPS:
     Net income available to common shareholders$46,152  57,985  $0.80  $90,346  57,937  $1.56  
  Three Months Ended Nine Months Ended
  June 30, 2018 June 30, 2018
  Income
Shares
Per Share Income
Shares
Per Share
Basic EPS:





 




     Net income available to common shareholders
$41,545

51,134

$0.81
 $113,026

50,938

$2.22
Effect of dilutive securities:





 




     Options to purchase common stock
—

932

(0.01) —

1,058

(0.05)
     Restricted shares
—

509

(0.01) —

674

(0.02)
Diluted EPS:





  



     Net income available to common shareholders
$41,545

52,575

$0.79
 $113,026

52,670

$2.15
             


Options to purchase 3.1 million shares of common stock at prices ranging from $10.63 to $38.10 per share were outstanding at June 27, 2020, and options to purchase 2.6 million shares of common stock at prices ranging from $8.56 to $38.10 per share were outstanding at June 29, 2019, and options to purchase 2.4 million shares of common stock at prices ranging from $6.43 to $38.10 per share were outstanding at June 30, 2018.2019.

For the three months ended June 27, 2020 and June 29, 2019, and June 30, 2018, 1.80.5 million and 0.61.8 million options outstanding 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.

For the nine months ended June 27, 2020 and June 29, 2019, and June 30, 2018, 1.11.0 million and 0.61.1 million options outstanding 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.

24

21

12. Segment Information

11.Segment Information

Management has determined that the Company has two2 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 Pet segment and Garden segment and are presented in the table below (in thousands).
 
 Three Months EndedNine Months Ended Three Months EndedNine Months Ended
 June 29,
2019		 June 30,
2018		June 29,
2019		 June 30,
2018		 June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Net sales:      Net sales:
Pet segment $350,155
 $354,760
$1,028,754
 $1,001,497
Pet segment$413,260  $350,155  $1,128,073  $1,028,754  
Garden segment 356,420
 303,183
813,512
 711,551
Garden segment420,223  356,420  891,467  813,512  
Total net sales $706,575
 $657,943
$1,842,266
 $1,713,048
Total net sales$833,483  $706,575  $2,019,540  $1,842,266  
Operating Income      
Operating Income (loss)Operating Income (loss)
Pet segment 35,066
 39,242
91,805
 108,202
Pet segment50,760  35,066  114,599  91,805  
Garden segment 53,103
 40,929
101,821
 93,975
Garden segment77,787  53,103  122,439  101,821  
Corporate (19,298) (19,352)(52,421) (53,051)Corporate(23,907) (19,298) (64,228) (52,421) 
Total operating income 68,871
 60,819
141,205
 149,126
Total operating income104,640  68,871  172,810  141,205  
Interest expense - net (8,498) (10,013)(24,960) (27,113)Interest expense - net(11,471) (8,498) (29,444) (24,960) 
Other income 180
 2,126
488
 542
Other income (expense)Other income (expense)(3,541) 180  (4,215) 488  
Income tax expense 14,212
 11,395
26,031
 8,802
Income tax expense20,291  14,212  31,211  26,031  
Income including noncontrolling interest 46,341
 41,537
90,702
 113,753
Income including noncontrolling interest69,337  46,341  107,940  90,702  
Net income (loss) attributable to noncontrolling interest 189
 (8)356
 727
Net income attributable to noncontrolling interestNet income attributable to noncontrolling interest537  189  853  356  
Net income attributable to Central Garden & Pet Company $46,152
 $41,545
$90,346
 $113,026
Net income attributable to Central Garden & Pet Company$68,800  $46,152  $107,087  $90,346  
Depreciation and amortization:      Depreciation and amortization:
Pet segment $8,083
 $7,626
$24,178
 $21,715
Pet segment$8,374  $8,083  $25,305  $24,178  
Garden segment 3,497
 2,789
8,635
 6,065
Garden segment3,538  3,497  10,157  8,635  
Corporate 1,502
 2,172
4,498
 7,092
Corporate1,371  1,502  4,136  4,498  
Total depreciation and amortization $13,082
 $12,587
$37,311
 $34,872
Total depreciation and amortization$13,283  $13,082  $39,598  $37,311  
 
June 27, 2020June 29, 2019September 28, 2019
Assets:
Pet segment$810,524  $742,938  $734,380  
Garden segment635,671  558,260  463,889  
Corporate817,774  763,720  826,751  
Total assets$2,263,969  $2,064,918  $2,025,020  
Goodwill (included in corporate assets above):
Pet segment$272,066  $268,289  $268,289  
Garden segment17,788  12,888  17,788  
Total goodwill$289,854  $281,177  $286,077  
  June 29,
2019		 June 30,
2018		 September 29,
2018
Assets:      
Pet segment $742,938
 $687,561
 $683,938
Garden segment 558,260
 486,603
 407,483
Corporate 763,720
 534,241
 815,788
Total assets $2,064,918
 $1,708,405
 $1,907,209
Goodwill (included in corporate assets above):      
Pet segment $268,289
 $262,770
 $268,289
Garden segment 12,888
 5,473
 12,888
Total goodwill $281,177
 $268,243
 $281,177

25



The tables below presentpresents the Company's disaggregated revenues by segment (in thousands)millions):


 Three Months Ended June 29, 2019 Nine Months Ended June 29, 2019

 Pet Segment Garden Segment Total Pet Segment Garden Segment Total

 
 
 
 
 
 
Other pet products $250.3
 $—
 $250.3
 $692.6
 $—
 $692.6
Dog and cat products 99.9
 —
 99.9
 336.2
 —
 336.2
Garden controls and fertilizer products —
 80.9
 80.9
 —
 219.0
 219.0
Other garden supplies —
 275.5
 275.5
 —
 594.5
 594.5
     Total $350.2
 $356.4
 $706.6
 $1,028.8
 $813.5
 $1,842.3
             

  Three Months Ended June 30, 2018 Nine Months Ended June 30, 2018
  Pet Segment Garden Segment Total Pet Segment Garden Segment Total
        
 
 
Other pet products $254.8
 $—
 $254.8
 $668.7
 $—
 $668.7
Dog and cat products 100.0
 —
 100.0
 332.8
 —
 332.8
Garden controls and fertilizer products —
 86.6
 86.6
 —
 229.1
 229.1
Other garden supplies —
 216.6
 216.6
 —
 482.5
 482.5
     Total $354.8
 $303.2
 $657.9
 $1,001.5
 $711.6
 $1,713.0
             


Three Months Ended June 27, 2020Nine Months Ended June 27, 2020
Pet SegmentGarden SegmentTotalPet SegmentGarden SegmentTotal
Other pet products$206.3  $—  $206.3  $508.3  $—  $508.3  
Dog and cat products117.0  —  117.0  358.8  —  358.8  
Other manufacturers' products90.0  90.1  180.1  261.0  182.2  443.2  
Garden controls and fertilizer products—  100.3  100.3  —  234.2  234.2  
Other garden supplies—  229.8  229.8  —  475.0  475.0  
     Total$413.3  $420.2  $833.5  $1,128.1  $891.5  $2,019.5  
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:

Arden Companies, LLC
C&S Products Co., Inc.
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 June 29, 2019
  (in thousands)
 
Parent
Non- Guarantor Subsidiaries
Guarantor Subsidiaries
Eliminations
Consolidated
Net sales
$199,470

$102,869

$423,268

$(19,032)
$706,575
Cost of goods sold and occupancy
153,637

69,232

281,734

(17,312)
487,291
Gross profit
45,833

33,637

141,534

(1,720)
219,284
Selling, general and administrative expenses
45,219

14,595

92,319

(1,720)
150,413
Operating income
614

19,042

49,215

—

68,871
Interest expense
(10,500)
(133)
(43)
—

(10,676)
Interest income
2,173

5

—

—

2,178
Other (expense) income
(86)
(273)
539

—

180
Income (loss) before taxes and equity in earnings (losses) of affiliates
(7,799)
18,641

49,711

—

60,553
Income tax expense (benefit)
(1,985)
438

15,759

—

14,212
Equity in earnings of affiliates
51,966

—

1,301

(53,267)
—
Net income including noncontrolling interest
46,152

18,203

35,253

(53,267)
46,341
Net income attributable to noncontrolling interest
—

189

—

—

189
Net income attributable to Central Garden & Pet Company
$46,152

$18,014

$35,253

$(53,267)
$46,152
  CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
  Three Months Ended June 30, 2018
  (in thousands)
  Parent Non- Guarantor Subsidiaries Guarantor Subsidiaries Eliminations Consolidated
Net sales
$208,095

$93,122

$379,059

$(22,333)
$657,943
Cost of goods sold and occupancy
161,192

67,308

247,559

(20,180)
455,879
Gross profit
46,903

25,814

131,500

(2,153)
202,064
Selling, general and administrative expenses
45,974

14,837

82,587

(2,153)
141,245
Operating income
929

10,977

48,913

—

60,819
Interest expense
(10,470)
(125)
(2)
—

(10,597)
Interest income
583

1

—

—

584
Other income (loss)
1,965

(394)
555

—

2,126
Income (loss) before taxes and equity in earnings of affiliates
(6,993)
10,459

49,466

—

52,932
Income tax expense (benefit)
(2,633)
236

13,792



11,395
Equity in earnings of affiliates
45,905

—

261

(46,166)
—
Net income including noncontrolling interest
41,545

10,223

35,935

(46,166)
41,537
Net loss attributable to noncontrolling interest
—

(8)
—

—

(8)
Net income attributable to Central Garden & Pet Company
$41,545

$10,231

$35,935

$(46,166)
$41,545




  CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
  Nine Months Ended June 29, 2019
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net sales
$586,918

$161,689

$1,152,912

$(59,253)
$1,842,266
Cost of goods sold and occupancy
452,783

121,578

767,281

(54,893)
1,286,749
Gross profit
134,135

40,111

385,631

(4,360)
555,517
Selling, general and administrative expenses
136,019

32,431

250,222

(4,360)
414,312
Operating income (loss)
(1,884)
7,680

135,409

—

141,205
Interest expense
(31,479)
(388)
(63)
—

(31,930)
Interest income
6,956

14

—

—

6,970
Other income (expense)
256

(246)
478

—

488
Income (loss) before taxes and equity in earnings of affiliates
(26,151)
7,060

135,824

—

116,733
Income tax expense (benefit)
(5,821)
127

31,725

—

26,031
Equity in earnings of affiliates
110,676

—

88

(110,764)
—
Net income including noncontrolling interest
90,346

6,933

104,187

(110,764)
90,702
Net income attributable to noncontrolling interest
—

356

—

—

356
Net income attributable to Central Garden & Pet Company
$90,346

$6,577

$104,187

$(110,764)
$90,346

  CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
  Nine Months Ended June 30, 2018
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net sales
$562,620

$139,298

$1,077,831

$(66,701)
$1,713,048
Cost of goods sold and occupancy
438,539

103,316

704,682

(61,847)
1,184,690
Gross profit
124,081

35,982

373,149

(4,854)
528,358
Selling, general and administrative expenses
124,290

25,274

234,522

(4,854)
379,232
Operating income (loss)
(209)
10,708

138,627

—

149,126
Interest expense
(28,365)
(203)
(9)
—

(28,577)
Interest income
1,461

3

—

—

1,464
Other income (expense)
155

(140)
527

—

542
Income (loss) before taxes and equity in earnings of affiliates
(26,958)
10,368

139,145

—

122,555
Income tax expense (benefit)
(1,961)
(31)
10,794

—

8,802
Equity in earnings of affiliates
138,023

—

1,202

(139,225)
—
Net income including noncontrolling interest
113,026

10,399

129,553

(139,225)
113,753
Net income attributable to noncontrolling interest
—

727

—

—

727
Net income attributable to Central Garden & Pet Company
$113,026

$9,672

$129,553

$(139,225)
$113,026


Three Months Ended June 29, 2019Nine Months Ended June 29, 2019
Pet SegmentGarden SegmentTotalPet SegmentGarden SegmentTotal
Other pet products$171.1  $—  $171.1  $457.0  $—  $457.0  
Dog and cat products99.9  —  99.9  336.2  —  336.2  
Other manufacturers' products79.2  61.8  141.0  235.6  143.3  378.9  
Garden controls and fertilizer products—  80.9  80.9  —  219.0  219.0  
Other garden supplies—  213.7  213.7  —  451.2  451.2  
     Total$350.2  $356.4  $706.6  $1,028.8  $813.5  $1,842.3  



  CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Three Months Ended June 29, 2019
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net income $46,152
 $18,203
 $35,253
 $(53,267) $46,341
Other comprehensive income (loss):          
Foreign currency translation (146) (132) 37
 95
 (146)
Total comprehensive income 46,006
 18,071
 35,290
 (53,172) 46,195
Comprehensive income attributable to noncontrolling interests —
 189
 —
 —
 189
Comprehensive income attributable to Central Garden & Pet Company $46,006
 $17,882
 $35,290
 $(53,172) $46,006
  CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Three Months Ended June 30, 2018
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net income $41,545
 $10,223
 $35,935
 $(46,166) $41,537
Other comprehensive loss:          
Foreign currency translation
(480)
(323)
(35)
358

(480)
Total comprehensive income 41,065
 9,900
 35,900
 (45,808) 41,057
Comprehensive loss attributable to noncontrolling interests —
 (8) —
 —
 (8)
Comprehensive income attributable to Central Garden & Pet Company $41,065
 $9,908
 $35,900
 $(45,808) $41,065

  CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Nine Months Ended June 29, 2019
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net income
$90,346

$6,933

$104,187

$(110,764)
$90,702
Other comprehensive loss:
—

—

—

—



Foreign currency translation
(208)
(134)
(23)
157

(208)
Total comprehensive income
90,138

6,799

104,164

(110,607)
90,494
Comprehensive income attributable to noncontrolling interests
—

356

—

—

356
Comprehensive income attributable to Central Garden & Pet Company
$90,138

$6,443

$104,164

$(110,607)
$90,138



  CONSOLIDATING CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Nine Months Ended June 30, 2018
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net income
$113,026

$10,399

$129,553

$(139,225)
$113,753
Other comprehensive loss:










Foreign currency translation
(202)
(74)
(99)
173

(202)
Total comprehensive income
112,824

10,325

129,454

(139,052)
113,551
Comprehensive income attributable to noncontrolling interests
—

727

—

—

727
Comprehensive income attributable to Central Garden & Pet Company
$112,824

$9,598

$129,454

$(139,052)
$112,824

  CONSOLIDATING CONDENSED BALANCE SHEET
  June 29, 2019
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS          
Cash and cash equivalents $421,542
 $3,761
 $20,329
 $—
 $445,632
Restricted cash 10,924
 —
 —
 —
 10,924
Short term investments
—

—

119

—

119
Accounts receivable, net 114,610
 19,979
 260,992
 —
 395,581
Inventories 124,224
 37,705
 302,988
 —
 464,917
Prepaid expenses and other 8,154
 1,914
 22,385
 —
 32,453
Total current assets 679,454
 63,359
 606,813
 —
 1,349,626
Land, buildings, improvements and equipment, net 28,181
 35,674
 175,093
 —
 238,948
Goodwill 20,578
 7,414
 253,185
 —
 281,177
Other long-term assets 44,637
 6,235
 147,937
 (3,642) 195,167
Intercompany receivable 32,503
 —
 764,826
 (797,329) —
Investment in subsidiaries 1,770,053
 —
 —
 (1,770,053) —
Total $2,575,406
 $112,682
 $1,947,854
 $(2,571,024) $2,064,918
LIABILITIES AND EQUITY          
Accounts payable $40,953
 $15,456
 $81,259
 $—
 $137,668
Accrued expenses 54,442
 7,581
 79,006
 —
 141,029
Current portion of long-term debt 116
 —
 —
 —
 116
Total current liabilities 95,511
 23,037
 160,265
 —
 278,813
Long-term debt 692,748
 —
 200
 —
 692,948
Intercompany payable 746,732
 50,597
 —
 (797,329) —
Losses in excess of investment in subsidiaries —
 —
 25,199
 (25,199) —
Other long-term obligations 6,770
 —
 55,706
 (3,642) 58,834
Total Central Garden & Pet shareholders’ equity 1,033,645
 38,370
 1,706,484
 (1,744,854) 1,033,645
Noncontrolling interest —
 678
 —
 


 678
Total equity 1,033,645
 39,048
 1,706,484
 (1,744,854) 1,034,323
Total $2,575,406
 $112,682
 $1,947,854
 $(2,571,024) $2,064,918



13. Contingencies
  CONSOLIDATING CONDENSED BALANCE SHEET
  June 30, 2018
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS          
Cash and cash equivalents $196,051
 $5,060
 $3,277
 $—
 $204,388
Restricted cash 13,978
 —
 —
 —
 13,978
Accounts receivable, net 122,534
 20,612
 205,635
 —
 348,781
Inventories 124,029
 36,841
 267,137
 —
 428,007
Prepaid expenses and other 6,032
 2,065
 18,638
 —
 26,735
Total current assets 462,624
 64,578
 494,687
 —
 1,021,889
Land, buildings, improvements and equipment, net 35,000
 34,024
 142,793
 —
 211,817
Goodwill 15,058
 —
 253,185
 —
 268,243
Other long-term assets 72,697
 14,009
 131,010
 (11,260) 206,456
Intercompany receivable 40,342
 —
 684,808
 (725,150) —
Investment in subsidiaries 1,583,729
 —
 —
 (1,583,729) —
Total $2,209,450
 $112,611
 $1,706,483
 $(2,320,139) $1,708,405
LIABILITIES AND EQUITY          
Accounts payable $32,330
 $13,242
 $62,557
 $—
 $108,129
Accrued expenses 61,367
 7,256
 54,274
 —
 122,897
Current portion of long-term debt 106
 —
 13
 —
 119
Total current liabilities 93,803
 20,498
 116,844
 —
 231,145
Long-term debt 691,591
 —
 150
 —
 691,741
Intercompany payable 671,405
 53,745
 —
 (725,150) —
Losses in excess of investment in subsidiaries —
 —
 24,967
 (24,967) —
Other long-term obligations 8,516
 —
 43,542
 (11,260) 40,798
Total Central Garden & Pet shareholders’ equity (deficit) 744,135
 37,782
 1,520,980
 (1,558,762) 744,135
Noncontrolling interest —
 586
 —
 —
 586
Total equity 744,135
 38,368
 1,520,980
 (1,558,762) 744,721
Total $2,209,450
 $112,611
 $1,706,483
 $(2,320,139) $1,708,405


  CONSOLIDATING CONDENSED BALANCE SHEET
  September 29, 2018
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS          
Cash and cash equivalents $474,210
 $6,005
 $1,891
 $—
 $482,106
Restricted cash 10,899
 —
 —
 —
 10,899
Accounts receivable, net 94,657
 9,647
 171,604
 —
 275,908
Inventories 123,178
 32,556
 272,089
 —
 427,823
Prepaid expenses and other assets 6,304
 1,455
 12,803
 —
 20,562
Total current assets 709,248
 49,663
 458,387
 —
 1,217,298
Land, buildings, improvements and equipment, net 33,484
 33,840
 150,323
 —
 217,647
Goodwill 20,578
 7,414
 253,185
 —
 281,177
Other long-term assets 62,199
 7,469
 133,145
 (11,726) 191,087
Intercompany receivable 40,365
 —
 769,886
 (810,251) —
Investment in subsidiaries 1,618,378
 —
 —
 (1,618,378) —
Total $2,484,252
 $98,386
 $1,764,926
 $(2,440,355) $1,907,209
LIABILITIES AND EQUITY          
Accounts payable $33,122
 $4,759
 $72,378
 $—
 $110,259
Accrued expenses and other liabilities 44,142
 4,746
 53,695
 —
 102,583
Current portion of long term debt 116
 —
 6
 —
 122
Total current liabilities 77,380
 9,505
 126,079
 —
 212,964
Long-term debt 691,869
 —
 162
 —
 692,031
Intercompany payable 753,933
 56,318
 —
 (810,251) —
Losses in excess of investment in subsidiaries —
 —
 25,036
 (25,036) —
Other long-term obligations 8,621
 —
 52,485
 (11,726) 49,380
Total Central Garden & Pet shareholders’ equity (deficit) 952,449
 32,178
 1,561,164
 (1,593,342) 952,449
Noncontrolling interest —
 385
 —
 —
 385
Total equity 952,449
 32,563
 1,561,164
 (1,593,342) 952,834
Total $2,484,252
 $98,386
 $1,764,926
 $(2,440,355) $1,907,209



  CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
  Nine Months Ended June 29, 2019
  (in thousands)
  Parent 
Non-
Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net cash provided by operating activities $10,831
 $7,468
 $74,755
 $(250) $92,804
Additions to property and equipment (2,705) (3,691) (14,492) —
 (20,888)
Payments to acquire companies, net of cash acquired (41,158) —
 —
 —
 (41,158)
Investments (1,749) —
 (9) —
 (1,758)
Other investing activities (453) —
 (750) —
 (1,203)
Intercompany investing activities 7,861
 —
 5,060
 (12,921) —
Net cash used by investing activities (38,204) (3,691) (10,191) (12,921) (65,007)
Repayments of long-term debt (90) —
 (46,072) —
 (46,162)
Repurchase of common stock (17,796) —
 —
 —
 (17,796)
Distribution to parent —
 (250) —
 250
 —
Distribution to noncontrolling interest —
 (64) —
 —
 (64)
Payment of contingent consideration liability —
 —
 (104) —
 (104)
Intercompany financing activities (7,199) (5,722) —
 12,921
 —
Net cash used by financing activities (25,085) (6,036) (46,176) 13,171
 (64,126)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (185) 15
 50
 —
 (120)
Net increase (decrease) in cash, cash equivalents and restricted cash (52,643) (2,244) 18,438
 —
 (36,449)
Cash, cash equivalents and restricted cash at beginning of period 485,109
 6,005
 1,891
 —
 493,005
Cash, cash equivalents and restricted cash at end of period $432,466
 $3,761
 $20,329
 $—
 $456,556


  CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
  Nine Months Ended June 30, 2018
  (in thousands)
  Parent 
Non-Guarantor
Subsidiaries
 
Guarantor
Subsidiaries
 Eliminations Consolidated
Net cash (used) provided by operating activities $(20,284) $(101) $44,534
 $(6,387) $17,762
Additions to property, plant and equipment (6,508) (986) (19,509) —
 (27,003)
Payments to acquire companies, net of cash acquired (86,777) —
 —
 —
 (86,777)
Investments
(8,048)
—

—

—

(8,048)
Other investing activities (2,655) —
 —
 —
 (2,655)
Intercompany investing activities (3,737) —
 (22,671) 26,408
 —
Net cash used by investing activities (107,725) (986) (42,180) 26,408
 (124,483)
Repayments under revolving line of credit (23,000) —
 —
 —
 (23,000)
Borrowings under revolving line of credit 23,000
 —
 —
 —
 23,000
Repayments of long-term debt (27) —
 (368) —
 (395)
Issuance of long-term debt 300,000
 —
 —
 —
 300,000
Payment of financing costs
(4,770)
—

—

—

(4,770)
Repurchase of common stock (12,942) —
 —
 —
 (12,942)
Distribution to parent —
 (6,387) —
 6,387
 —
Distribution to noncontrolling interest —
 (1,597) —
 —
 (1,597)
Payment of contingent consideration
—

—

(204)
—

(204)
Intercompany financing activities 23,997
 2,411
 —
 (26,408) —
Net cash provided (used) by financing activities 306,258
 (5,573) (572) (20,021) 280,092
Effect of exchange rates on cash, cash equivalents and restricted cash (103) 27
 29
 —
 (47)
Net increase (decrease) in cash, cash equivalents and restricted cash 178,146
 (6,633) 1,811
 —
 173,324
Cash, cash equivalents and restricted cash at beginning of period 31,883
 11,693
 1,466
 —
 45,042
Cash, cash equivalents and restricted cash at end of period $210,029
 $5,060
 $3,277
 $—
 $218,366

13.Contingencies

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 that management believes wouldare likely to 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 United States 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 case is currentlycourt ruled on post-trial motions in early June 2020, reducing the post-trial motion phasejudgment amount to $12.4 million and denying the plaintiff's request for attorneys' fees. The Company has filed its notice of proceedingsappeal and is expected to proceed to appeal once all such motionsthe plaintiffs have been resolved.  Unless the verdicts are over-turned in the post-trial proceedings, thecross-appealed. The Company intends to vigorously pursue its rights on appeal and believes that it will prevail on the merits. 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 at an early stage and, as such, management is unable to determine the impact, if any, on the Company’s financial position or results of operations.
In November 2019, the DMC business unit in the Company's Pet Segment experienced a fire in one of its leased properties located in Athens, Texas, which resulted in inventory, property-related and business interruption losses in the estimated range of $35 - $40 million. In April 2020, DMC experienced an additional fire in the same leased property in Athens, Texas, which resulted in inventory and property-related losses estimated to be approximately $11 million.
As of June 27, 2020, the Company had approximately $18 million of cost in excess of insurance proceeds related to these losses recorded on its balance sheet. Subsequent to June 27, 2020, the Company received insurance proceeds of approximately $9 million related
26

to these losses. The Company currently believes its insurance coverage is sufficient to cover the remaining asset-related losses as well as the business interruption loss associated with this event.
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.


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 for the lawn & garden and pet supplies markets in the United States. The total annual retail sales of the pet food, treats & chews, supplies and live animal industry in 20172018 was estimated by Packaged Facts and the pet industry to have been approximately $58.3$51.9 billion. We estimate the annual retail sales of the pet supplies, live animal, and treats & chews and natural pet food markets in the categories in which we participate to be approximately $27.3$27.4 billion. The total lawn and garden consumables, decorative products, and live plant and outdoor cushions and pillows industry in the United States is estimated by Packaged Facts, The Freedonia Group and IBISWorldTechNavio to behave been approximately $33.2$23.3 billion in annual retail sales in 2017,2018, including fertilizer, pesticides, growing media, seeds, mulch, other consumables, decorative products, live plants and live plants.outdoor cushions and pillows. We estimate the annual retail sales of the lawn and garden consumables, decorative products and live plant markets in the categories in which we participate to be approximately $19.7$16.3 billion.
Our pet supplies products include products for dogs and cats, including edible bones, premium healthy edible and non-edible chews, natural dog and cat food and treats, toys, pet carriers, grooming supplies and other accessories; products for birds, small animals and specialty pets, including food, cages and habitats, toys, chews and related accessories; 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. These products are sold under the brands Adams™including Adams™, Aqueon®Aqueon®, Avoderm®Avoderm®, Cadet®C&S Products®, Farnam®Cadet®, Farnam®, Four Paws®Paws®, Kaytee®Kaytee®, K&H Pet Products®Products®, Nylabone®Nylabone®, Pinnacle®Pinnacle®, TFH™TFH™, Zilla®Zilla® as well as a number of other brands including Altosid®Altosid®, Comfort Zone®Zone®, Coralife®Coralife®, Interpet®, Kent Marine®Interpet®, Pet Select® Select® and Zodiac®Zodiac®.
Our lawn and garden supplies products include proprietary and non-proprietary grass seed; wild bird feed, bird feeders, bird houses and other birding accessories; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers; and decorative outdoor lifestyle products including pottery, and wood products as well as live plants and outdoor cushions and pillows. These products are sold under the brands AMDRO®AMDRO®, Ironite®Arden Companies™, Pennington®Ironite®, Pennington®, and Sevin®Sevin®, as well as a number of other brand names including Lilly Miller®Miller®, Over-N-Out®Over-N-Out®, Smart Seed®Seed® and The Rebels®Rebels®.
In fiscal 2018,2019, our consolidated net sales were $2,215$2,383 million, of which our Pet segment, or Pet, accounted for approximately $1,341$1,385 million and our Garden segment, or Garden, accounted for approximately $874$998 million. In fiscal 2018,2019, our operating income was $167$152 million consisting of income from our Pet segment of $140$123 million, income from our Garden segment of $96$102 million lessand corporate expenses of $69$73 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. The information on our website is not incorporated by reference in this annualquarterly report.


Recent Developments
Fiscal 20192020 Third Quarter Financial Performance:
•Net sales increased $48.7$126.9 million, or 7.4%18.0%, from the prior year quarter to $706.6$833.5 million due primarily to the inclusion of two acquisitions that were not part of the third quarter fiscal 2018 results.an increase in organic sales. Pet segment sales decreased $4.5increased $63.1 million, and Garden segment sales increased $53.2$63.8 million.
•
•Organic net sales increased 16.5%. Organic net sales increased 15.0% in our Pet segment and 17.9% in our Garden segment.
•0.6%. Organic net sales declined 2.3% in our Pet segment and increased 4.1% in our Garden segment.


Gross profit increased $17.2$42.8 million from the prior year quarter, and gross margin increased 3040 basis points to 31.0%, due primarily to improvement in the Garden segment.31.4%.
•Selling, general & administrative expense increased $9.2$7.0 million from the prior year quarter to $150.4$157.4 million, but declined as a percentage of net sales 240 basis points to 21.3%18.9%.
27

•Operating income improved $8.1increased $35.8 million from the prior year quarter, to $68.9 million in the third quarter of fiscal 2019, and operating margin improved 50 basis points to 9.7%.$104.6 million.
Our net•Net income in the third quarter of fiscal 20192020 was $46.2$68.8 million, or $0.80$1.27 per diluted share, compared to $41.5net income of $46.2 million, or $0.79$0.80 per diluted share, in the third quarter of fiscal 2018.2019.

C&S ProductsDMC Business Unit
In November 2019, the DMC business unit in our Pet Segment experienced a fire in one of its leased properties located in Athens, Texas, which resulted in inventory, property-related and business interruption losses in the estimated range of $35 - $40 million. In April 2020, DMC experienced an additional fire in the same leased property in Athens, Texas, which resulted in inventory and property-related losses estimated to be approximately $11 million.
As of June 27, 2020, we had approximately $18 million of cost in excess of insurance proceeds related to these losses recorded on our balance sheet. Subsequent to June 27, 2020, we received insurance proceeds of approximately $9 million related to these losses. We currently believe our insurance coverage is sufficient to cover the remaining asset-related losses as well as the business interruption loss associated with this event.
COVID-19 Impact
We have seen the effects COVID-19 is having globally on human health, the economy and society at large. The impact of COVID-19 and measures to prevent its spread are affecting our business in a number of ways. Central is considered an essential business in most jurisdictions and almost all of our employees continue to work to meet essential needs. We have been actively addressing the COVID-19 situation and its impact on our employees and business.
From the beginning, our priority has been the safety of our employees, customers and consumers. We are proud of all that our employees have done to prioritize the health and safety of fellow team members while collaborating across the business to ensure we operate as safely and seamlessly as possible in order to provide a steady supply of product to our customers. To that end, we mobilized a cross-functional task force focused on understanding and communicating the critical issues related to the COVID-19 pandemic to mitigate the potential impacts to our people and business. Thankfully, the Central team has had a relatively small number of COVID-19 cases, and our facility maintenance of health and safety standards remains paramount.
Our teams have worked hard to do the following:
•Ensure constant communication and regularly share pertinent information around health, safety and benefits;
•Take extra precautions in our manufacturing facilities, distribution centers and offices with guidance from health authorities including social distancing, staggering shifts, procuring necessary personal protection equipment, partitions, sanitation supplies and investing in regular deep cleanings of our facilities;
•Implement travel restrictions and work-from-home policies for employees who have the ability to work from home in accordance with shelter-in-place orders; and
•Adhere to all local, state and federal requirements.
Central is experiencing varying impacts to our Garden and Pet businesses due to COVID-19. In March and April, we experienced increased demand in pet consumables due to consumers stocking up on products as the COVID-19 shelter-in-place mandates were implemented. We also saw reduced consumption on other items, such as live fish and live plants, due to in-store curtailments of foot traffic and limited access to outdoor garden departments. In May, 2019,many state and county governments began phased reopenings of their local economies. Access to outdoor garden departments resulted in increased demand for our products in May and June. Additionally, during shelter-in-place requirement periods, pet ownership significantly increased and sales continued to increase in May and June across our Pet segment portfolio. We also continue to see a rapid increase in demand in the e-commerce channel.
Our facilities have largely been exempt or partially exempt from government closure orders. We have experienced temporary closures of certain facilities, though there has not been a material impact from a plant closure to date. At some of our facilities, we purchased C&S Products,have experienced reduced productivity and increased employee absences, which we expect to continue during the current pandemic. All of our manufacturing facilities and distribution centers are currently open and fully operational. We have incurred and will continue to incur additional costs including personal protective equipment and sanitation costs. The pandemic and near-term increase in demand have created operational challenges for our distribution network and impacted our ability to meet our normal fill rate standards. Our supply chain has been impacted by the rapid increase in demand and it is possible we will experience increased operational and logistics costs, although these did not have a manufacturermaterial impact on our third fiscal quarter results. We may also experience additional disruptions in our supply chain as the pandemic continues, although we cannot reasonably estimate the potential impact or timing of suetthose events, and we may not be able to mitigate such impact.
28

We believe we are financially strong and expect to be able to maintain adequate liquidity as we manage through the current economic and health environment. As of June 27, 2020, we had approximately $500 million in cash. We also have a revolving credit facility that provides up to a $400 million principal amount with an additional $200 million available with the consent of the lenders. In April 2020, we borrowed $200 million under our revolving credit facility to increase financial flexibility during the early stages of the COVID-19 pandemic. In June 2020, we repaid the $200 million. As of June 27, 2020, there were no borrowings outstanding under the Credit Facility.
We anticipate many small customers may permanently close, and we may experience collection delinquencies as customers seek to preserve liquidity. Additionally, we have small company equity method investments, intangible assets and other wild bird productslong-lived assets whose value is dependent on cashflows. These investments and other assets could be impacted by the COVID-19 pandemic and, therefore, may be more susceptible to complementimpairment. Management's assessment of possible asset impairment involves numerous assumptions that involve significant judgment. As a result of the uncertainties associated with the COVID-19 pandemic, the shelter-in-place orders and the post-COVID-19 economic recovery, these factors will be even more difficult to estimate. We recorded an impairment charge of $3.6 million in our existing wild bird feed business, for approximately $30.0 million. Subsequentthird fiscal quarter and may be required to write off certain assets that could be material in future periods.
As a result of the acquisition, approximately $4.7 million was usedCOVID-19 pandemic and its current impact on society and the global economic environment, our work on developing our Vision 2025 strategy has been slowed, and we now expect to eliminate acquired long-term debt.communicate that strategy in late 2020.
Decor Business
DuringWhile the quarter, we exited two piecesunfavorable impact of COVID-19 began to adversely affect the performance in certain portions of our decor business, namely glazed potteryportfolio in March and wood products. We made this decision due to the complexityApril, in May and cost of operating the businesses which, while having made up over halfJune we saw a large increase in demand in most areas of our decor revenues, were not profitable for us. Our decorportfolio which resulted in a 16.5% increase in organic net sales in our third fiscal quarter. A few of our businesses continue to experience demand or profitability headwinds. These businesses include our live animal, live plant, pet bedding and aquatics businesses. The volatility in demand, changing consumer consumption patterns and uncertainty regarding the duration of shelter-in-place requirements make it difficult to predict when more normal order patterns may return. Forecasting and planning remain challenging in the current environment. In the current uncertain environment, our employees, customers and consumers will continue to be our priority as we manage our business still contains, and we remain committed to our terra cotta pottery business.deliver long-term growth.


Results of Operations
Three Months Ended June 29, 201927, 2020
Compared with Three Months Ended June 30, 201829, 2019

Net Sales
Net sales for the three months ended June 29, 201927, 2020 increased $48.7$126.9 million, or 7.4%18.0%, to $706.6$833.5 million from $657.9$706.6 million for the three months ended June 30, 2018.29, 2019. Organic net sales, which excludes the impact of acquisitions and divestitures in the last 12 months, increased $4.1$116.5 million, or 0.6%16.5%, as compared to the fiscal 20182019 quarter. Our branded product sales increased $48.8$87.8 million, and sales of other manufacturers’ products decreased $0.1increased $39.1 million.
Pet net sales decreased $4.5increased $63.1 million, or 1.3%18.0%, to $413.3 million for the three months ended June 27, 2020 from $350.2 million for the three months ended June 29, 2019. The increase in net sales was due to an organic sales increase of $52.7 million and an inorganic sales increase of $10.4 million from our May 2019 from $354.7acquisition of C&S Products. The increase was broad-based across our pet portfolio with the exception of our live fish business, which was impacted by the initial implementation of shelter-in-place restrictions on retail outlets and a large retailer's decision in 2019 to exit the life fish business. Increased sales in our Pet segment were aided by COVID-19 shelter-in-place restrictions which has led to increased pet ownership in dog, cat, small animals and reptiles. Also noteworthy was the acceleration of sales in the e-commerce channel. Organic sales gains were primarily in our dog and cat business, third-party products, our animal health business and in wild bird feed. Pet branded product sales increased $52.3 million, and sales of other manufacturers' products increased $10.8 million.
Garden net sales increased $63.8 million, or 17.9%, to $420.2 million for the three months ended June 30, 2018. The decrease in net sales was due primarily to lower sales in our animal health businesses and pet distribution, partially offset by increased sales in our aquatics business and sales27, 2020 from C&S Products, which we acquired in May 2019. Our animal health business was impacted by unfavorable weather as well as a difficult agricultural economic environment, and our pet distribution business by the impact of the loss of two customers which was partially offset by price increases. Pet branded product sales increased $3.1 million, and sales of other manufacturers' products decreased $7.6 million.
Garden net sales increased $53.2 million, or 17.5%, to $356.4 million for the three months ended June 29, 20192019. The increase in net sales, which was all organic, in the Garden segment was driven by increased consumer home gardening related to COVID-19 shelter-in-place restrictions, listing gains and favorable garden season weather. Net sales increased in the e-commerce channel for garden products as consumers migrated from $303.2 million for the three months ended June 30, 2018.traditional brick and mortar outlets. The increase in net sales was due tobroad-based across our portfolio including volume-based sales from Arden, whose remaining equity interest we acquired in February 2019, of $40.9 million and higher organic sales, which increased $12.3 million, or 4.1%. The increase in organic sales was due primarily to increased sales in our live plant business, aided by expanded distribution and entry into related categories, and sales of other manufacturers' products, partially offset by lower sales of control products. The increased sales were primarily volume-based but were also positively impacted by price increases in 2019.third-party products, controls and fertilizers, wild bird feed and grass seed. Garden branded sales increased $45.7$35.5 million, due to acquisitions and organic growth, and sales of other manufacturers' products increased $7.5$28.3 million.
29

Gross Profit
Gross profit for the three months ended June 29, 201927, 2020 increased $17.2$42.8 million, or 8.5%19.5%, to $219.3$262.1 million from $202.1$219.3 million for the three months ended June 30, 2018.29, 2019. Gross margin improved 30increased 40 basis points to 31.4% for the three months ended June 27, 2020 from 31.0% for the three months ended June 29, 2019 from 30.7% for the three months ended June 30, 2018. The gross profit increase was due to the Garden segment while both the Pet and Garden2019. Both segments contributed to the improved gross margin.profit increase and gross margin improvement.
In the Pet segment, both gross profit was relatively flatand gross margin improved. Gross profit increased due to the decrease in net sales.increased sales and margin improvement. Gross margin improved due primarily to thevolume-related efficiencies and a favorable impact of price increases, which were partially offset by a less favorable product mix.


sales mix with increased sales in both our dog and cat business and in our animal health business.
In the Garden segment, both gross profit and gross margin increased. Gross profit improved in the quarter ended June 29, 2019 as compareddue to the prior year quarter. Both improvements were due primarily to our acquisition of Arden and the increased sales and favorable productgross margin gains. The Garden gross margin improved due primarily to increased sales and the improved margin from our controls and fertilizer business partially offset by an unfavorable business unit sales mix and a lower margin in our live plant business.grass seed hindered by an unfavorable customer mix and lower pricing.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $9.2$7.0 million, or 6.5%4.7%, to $157.4 million for the three months ended June 27, 2020 from $150.4 million for the three months ended June 29, 2019 from $141.2 million for the three months ended June 30, 2018.2019. Selling, general and administrative expensesexpense increased in both operating segments, whilethe Pet segment and in corporate, expenses remained flat.partially offset by a decrease in the Garden segment. As a percentage of net sales, selling, general and administrative expenses decreased to 21.3%18.9% for the three months ended June 29, 2019,27, 2020, compared to 21.5%21.3% in the comparable prior year quarter.quarter impacted by improved operating leverage and reduced travel and entertainment expense.
Selling and delivery expense increased $3.1 million, or 4.1%,declined to $78.4$77.4 million for the three months ended June 29, 2019 from $75.327, 2020 as compared to $78.4 million in the prior year quarter.The decrease was due primarily to improved overhead absorption, reduced travel and entertainment expense and reduced labor related to COVID-19 prohibitions reducing our merchandising in-store presence.
Warehouse and administrative expense increased $8.0 million, or 11.1%, to $80.0 million for the three months ended June 30, 2018. Selling and delivery expense increased due primarily to our two recent acquisitions partially offset by reduced marketing spend in our Garden segment.
Warehouse and administrative expense increased $6.1 million, or 9.3%, to27, 2020 from $72.0 million for the three months ended June 29, 2019 from $65.9 million for2019. In our operating segments, the three months ended June 30, 2018increase was due primarily dueto increased labor expense in our warehouses and to a thank you bonus to our two recent acquisitions. front-line workers across manufacturing, logistics and merchandising.Corporate expenses remained flat as increased expenses related$4.6 million due primarily to an unanticipated resolution of a legal matter, our search for a new CEO and the implementation of the new GAAP lease accounting standard were offset by lowerincreased variable compensation expense resulting from improved results, increased third-party expense and personal protection (PPE) costs. 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 $8.1$35.8 million to $68.9$104.6 million for the three months ended June 29, 2019 from $60.8 million for the three months ended June 30, 2018.27, 2020. The increase in operating income was attributable to an increase in netincreased sales and an improved gross profitmargin partially offset by increased selling, general and administrative costs.expense. Our operating margin increased from 9.2%9.7% in the prior year quarter to 9.7%12.6% in the current year quarter due to a 3040 basis point improvement in gross margin, andimproved overhead leverage, a 20240 basis point reductiondecline in selling, general and administrative expense as a percentage of net sales.sales, as well as COVID-19 pandemic-related reductions in promotional activity.
Pet operating income decreased $4.1increased $15.7 million, or 10.6%44.8%, to $50.8 million for the three months ended June 27, 2020 from $35.1 million for the three months ended June 29, 2019 from $39.2 million for the three months ended June 30, 2018. A decrease in sales of $4.5 million, due primarily to lower sales in our animal health and pet distribution businesses, and increased selling, general and administrative expense were partially offset by an improved gross margin. The decline in sales of our animal health business, impacted by the difficult agricultural economic environment and unfavorable weather for livestock and grain protection, had an out-sized impact on operating income as our animal health business generally has higher margins.
Garden operating income increased $12.2 million, or 29.7%, to $53.1 million for the three months ended June 29, 2019 from income of $40.9 million for the three months ended June 30, 2018. Garden2019. Pet operating income increased due to increased sales, due primarily to our acquisition of Arden, increasedprincipally organic, sales, primarily from our live plant business, and increased gross profit partially offset by increasedhigher selling, general and administrative expense. Gardencosts. Pet operating margin improved 140230 basis points to 14.9% in the current quarter due to increased sales, an improved gross margin and lower selling, general and administrative expensesexpense as a percentage of net sales.
Garden operating income increased $24.7 million, or 46.5%, to $77.8 million for the three months ended June 27, 2020 from $53.1 million for the three months ended June 29, 2019. Garden operating income increased due to increased sales and gross profit and lower selling, general and administrative expense. Garden operating margin improved 360 basis points to 18.5% due to increased sales, an improved gross margin and lower selling, general and administrative expense as a percentage of sales..
Corporate operating expense remained flat inincreased $4.6 million, or 23.9%, to $23.9 million for the current quarter atthree months ended June 27, 2020 from $19.3 million as comparedfor the three months ended June 29, 2019. Corporate expense increased due primarily to the prior year quarter, as increased costs associated with an unanticipated resolution of a legal matter, our CEO search and lease accounting adoption costs were offset by reduced variable compensation costs.accruals due to improved results and higher third-party expense.
Net Interest Expense
Net interest expense for the three months ended June 29, 2019 decreased $1.527, 2020 increased $3.0 million, or 15.1%35.0%, to $8.5$11.5 million from $10.0$8.5 million for the three months ended June 30, 2018.29, 2019. The decreaseincrease in net interest expense was due to increasedreduced interest income resulting from earningsa lower rate of interest earned on excess cash due to our higher average cash balance during the quarter and interest expense from a temporary draw on our revolver during the quarter.
30

Debt outstanding on June 29, 201927, 2020 was $693.1$694.0 million compared to $691.9$693.1 million at June 30, 2018.29, 2019.
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 expense was $3.5 million for the quarter ended June 27, 2020 compared to income decreased $1.9 million toof $0.2 million for the quarter ended June 29, 2019, from $2.1 million fordue primarily to the impairment of two investments in private companies impacted by the COVID-19 pandemic during the quarter ended June 30, 2018. The decrease in other income was due primarily to our purchase of the remaining 55%


ownership interest in Arden in February 2019. Consequently, the third quarter of fiscal 2019 does not include equity method earnings for Arden compared to three months included in the fiscal 2018 quarter. This decrease was partially offset by lower losses in the fiscal 2019 quarter from an investment in a start-up business.27, 2020.
Income Taxes
Our effective income tax rate was 22.6% for the quarter ended June 27, 2020 compared to 23.5% for the quarter ended June 29, 2019 compared to 21.5% for the quarter ended June 30, 2018.2019. The higherlower effective income tax rate in the current year quarter was due primarily to lower excess tax benefits froma higher stock compensation benefit in the current year quarter. We believe this will continue for the remainder of fiscal 2019 resulting in a higher effective income tax rate for the fiscal year 2019 asquarter compared to the prior year excluding the impact of the Tax Reform Act on our deferred tax accounts in fiscal 2018.quarter.
Net Income and Earnings Per Share
Our net income in the third quarter of fiscal 20192020 was $46.2$68.8 million, or $0.80$1.27 per diluted share, compared to $41.5net income of $46.2 million, or $0.79$0.80 per diluted share, in the third quarter of fiscal 2018. While our net income increased more than 11.1%, our earnings per share did not increase as a result of a higher diluted share count in fiscal 2019 due to our issuance of 5.5 million shares near the end of fiscal 2018.

2019.

Nine Months Ended June 29, 201927, 2020
Compared with Nine Months Ended June 30, 201829, 2019
Net Sales
Net sales for the nine months ended June 29, 201927, 2020 increased $129.3$177.2 million, or 7.5%9.6%, to $1,842.3$2,019.5 million from $1,713.0$1,842.3 million for the nine months ended June 30, 2018.29, 2019. Organic net sales increased $9.8$118.8 million, or 0.6%6.4%, as compared to the prior year nine month period. Our branded product sales increased $99.2$110.0 million, and sales of other manufacturers’ products increased $30.1$67.2 million.
Pet net sales increased $27.3$99.3 million, or 2.7%9.7%, to $1,128.1 million for the nine months ended June 27, 2020 from $1,028.8 million for the nine months ended June 29, 2019 from $1,001.5 million for the nine months ended June 30, 2018.2019. The increase in net sales was due to both organic growth and sales from our acquisition of General Pet Supply in fiscal 2018 and C&S Products, which we acquired in May 2019. Organic net sales declined $9.9increased $69.7 million, or 1.0%, primarily as a result of lower sales in6.8%. The increase was relatively broad-based across our animal health business due to a difficult agricultural economic environment and unfavorable weather for livestock and grain protection impacting our professional business, lower sales of pet behavior modification products, impacted by a new market entrant and product performance issues, and a soft flea and tick season. Our pet distribution business also had lower sales due primarily to the loss of two customers, partially offset by price increases. The decrease in animal health and pet distribution was partially offsetPet segment portfolio led by increased sales in aquaticsour dog and cat and animal health businesses and sales of third-party products. These increases were partially offset by lower pet bed sales, negatively impacted in the prior quarter by a fire in one of our pet bedding facilities, and lower sales of live fish, businesses. due to a major retailer's decision in 2019 to exit the live fish business and the negative retail impact of reduced foot traffic associated with COVID-19. Pet branded sales increased $5.0$73.9 million, and sales of other manufacturer's products increased $22.3$25.4 million.
Garden net sales increased $102.0$77.9 million, or 14.3%9.6%, to $891.4 million for the nine months ended June 27, 2020 from $813.5 million for the nine months ended June 29, 2019 from $711.5 million for the nine months ended June 30, 2018.2019. The increase in net sales was due to both organic growth and sales from Arden, which became 100% owned due to our acquisition of the remaining equity interest in February 2019. Organic sales increased $49.1 million, or 6.0%, due primarily to a 17.9% sales increase in the current fiscal quarter. The organic sales increase was relatively broad-based across our Garden segment portfolio, driven by increased sales of $82.3 millionthird-party products and of our control and fertilizer products. Both benefited from our recent acquisitions, Bell Nursery in fiscal 2018new listings and Arden in fiscal 2019,increased home gardening due to COVID-19 restrictions and a $19.7 million increase in organic net sales.favorable garden weather. The increase in organic sales was due primarily to increased sales in our garden distribution business, and volume-based increases in wild bird feed sales. These increases were partially offset by decreasedlower grass seed sales, negatively impacted by competitive pressures and reduced promotions in our controlsfirst two fiscal quarters, and fertilizer products due to unfavorable weather that impacted insect control demand.our exit of the fashion decor pottery product line in mid-2019. Garden branded sales increased $94.2$36.1 million, and sales of other manufacturers’ products increased $7.8$41.8 million.
Gross Profit
Gross profit for the nine months ended June 29, 201927, 2020 increased $27.1$44.9 million, or 5.1%8.1%, to $555.5$600.4 million from $528.4$555.5 million for the nine months ended June 30, 2018.29, 2019. Gross margin decreased 6050 basis points to 29.7% for the nine months ended June 27, 2020 from 30.2% for the nine months ended June 29, 2019 from 30.8% for the nine months ended June 30, 2018. The Garden segment was the primary driver of2019. Both operating segments contributed to the gross profit increase and the decline in gross margin. The 30 basis point improvement in gross margin for the three months ended June 29, 2019 reduced the 130 basis point gross margin decline through the first six months of our fiscal year. Through the first six months of our fiscal year, we were impacted by a rising cost environment including increased commodity and transportation costs. As such, we were negatively impacted by a lack of price increases in our fiscal first quarter as price increases predominately did not go into effect until our second fiscal quarter.decline.
In the Pet segment, gross profit increased but gross margin remained relatively flat fordue primarily to the nine month period ended June 29, 2019. Gross marginacquisition of C&S Products and increased sales in most of the businesses in our Pet segment increased primarily due to price increases taken across most of the portfolio. These increases weredog treats and chews, partially offset by the acquisition of General Pet Supply, which positively impacted Pet’s gross profit due to the increase in net sales but negatively impacted Pet’s gross margin as General Pet Supply is a distribution business and operates with lower margins.


Additionally, the decline in our animal health sales also had an adverse impact on Pet’s gross margin not only as a result of the lower sales volume but also itsin our live fish business. The decline in gross margin was due primarily to the impact onof the Pet segment'slower sales mix.volume in our live fish business, an unfavorable product mix in sales of dog treats and chews and increased sales of third-party products partially offset by the contribution from our acquisition of C&S Products.
In the Garden segment, both gross profit increased due to increasedand gross margin were negatively impacted by reduced grass seed sales and our exit from the fashion décor pottery product line, which was partially offset by a lower gross margin. The gross profit increase was due to the increase in sales, both organic and from acquisitions. The lower gross margin in Garden was due primarily to increased costs, including commodity and transportation costs which especially impacted our grass seed and wild bird feed business units andpositive impact of the lack of price increases earlier in the fiscal year. In addition, the GardenArden acquisition. Additionally, gross margin was negatively impacted by the acquisitions of Bell Nursery and Arden.increased third-party sales.
31

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $35.1$13.3 million, or 9.3%3.2%, to $427.6 million for the nine months ended June 27, 2020 from $414.3 million for the nine months ended June 29, 2019 from $379.2 million for the nine months ended June 30, 2018.due primarily to increased corporate expense. As a percentage of net sales, selling, general and administrative expenses increaseddecreased to 22.5%21.2% for the nine months ended June 29, 2019,27, 2020, from 22.1%22.5% for the comparable prior year nine month period. Bothperiod; both operating segments reflected increased selling, general and administrative expenses in the current year nine month period as comparedcontributed to the prior year nine month period.improvement.
Selling and delivery expense increased $12.2$0.8 million, or 6.1%0.4%, to $211.8 million for the nine months ended June 27, 2020 from $211.0 million for the nine months ended June 29, 20192019. The increase was due primarily to increased payroll related costs and delivery expense partially offset by cost saving initiatives enacted in response to a retailer's exit from $198.8the live fish business and our exit from the fashion decor pottery product line in 2019.
Warehouse and administrative expense increased $12.5 million, or 6.1%, to $215.8 million for the nine months ended June 30, 2018. The increase was due primarily to recent acquisitions and secondarily to increased delivery expenses resulting27, 2020 from increased freight costs.
Warehouse and administrative expense increased $22.9 million, or 12.7%, to $203.3 million for the nine months ended June 29, 2019 from $180.4 million for the nine months ended June 30, 2018.2019. Increased expense from our two recent acquisitions, a bonus to our front-line workers and at corporate was partially offset by cost reduction initiatives enacted in both operating segments wasresponse to a retailer’s exit from the live fish business and our exit from the fashion décor pottery product line in 2019. Corporate expense increased due primarily to our recent acquisitions. Two unusual items are included within warehouse and administrative expense that substantially offset each other. During the second quarter of fiscal 2019, we recorded a non-cash impairment charge of $2.5 million in our Pet segmentincreased third-party expenses, which includes costs related to the impairmentdevelopment of intangible assets caused by a retail customer exiting the live fish business. During the same quarter, we recorded a preliminary non-cash gain of $3.2 million in our Garden segment related to our acquisition of the remaining 55% interest in Arden. Corporate expense decreased $0.6 million in the current nine-month period as compared to the nine-month prior year period. The decrease at Corporate was due primarily to lower depreciation and amortization expense, medical insurance costs, andVision 2025 plan, increased variable compensation expense partially offset by increased expenses incurred for the unanticipated resolution of a legal matter, our CEO searchdue to improved results, and implementation of the new GAAP lease standard we will adopt beginning in fiscal 2020.equity compensation expense. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resource, and information technology functions.
Operating Income
Operating income decreased $7.9increased $31.6 million to $172.8 million for the nine months ended June 27, 2020 from $141.2 million for the nine months ended June 29, 2019 from $149.1 million2019. Our operating margin increased to 8.6% for the nine months ended June 30, 2018. Our operating margin declined to27, 2020 from 7.7% for the nine months ended June 29, 2019 from 8.7% for the nine months ended June 30, 2018.2019. Increased sales of $129.3$177.2 million were more than offset byand a 60130 basis point decline in gross margin and a 40 basis point increaseimprovement in selling, general and administrative expense as a percentage of net sales.sales were partially offset by a 50 basis point decline in gross margin.
Pet operating income increased $22.8 million, or 24.8%, to $114.6 million for the nine months ended June 27, 2020 from $91.8 million for the nine months ended June 29, 2019. Adjusting for the $2.5 million intangible asset impairment in fiscal 2019, operating income increased $20.3 million. The increase in operating income was due to increased net sales of $99.3 million partially offset by a decline in gross margin and an increase in selling, general and administrative expense.
Garden operating income increased $20.6 million, or 20.2%, to $122.4 million for the nine months ended June 27, 2020 from $101.8 million in the nine months ended June 29, 2019. Adjusting for the non-cash gain from the fair value remeasurement of our previously held investment interest upon our acquisition of the remaining 55% interest inof Arden in our Garden segment and for the non-cash charge for the intangible asset impairment in our Pet segment, our non-GAAP operating income decreased $8.6 million to $140.5 million for the nine months ended June 29, 2019 from $149.1 million for the nine months ended June 30, 2018.
Pet operating income declined $16.4 million, or 15.2%, to $91.8 million for the nine months ended June 29, 2019 from $108.2 million for the nine months ended June 30, 2018. Adjusting for the $2.5 million intangible asset impairment in fiscal 2019, operating income decreased $13.9 million and the operating margin was 9.2% for the nine months ended June 29, 2019. The decrease was due to a lower gross margin and higher selling, general and administrative expense due primarily to our acquisition of General Pet Supply and the decreased sales and its related impact on margin and mix in our animal health business.
Gardenprior six month period, garden operating income increased $7.8 million, or 8.3%, to $101.8 million for the nine months ended June 29, 2019 from $94.0 million in the nine months ended June 30, 2018. Adjusting for the non-cash gain from the fair value remeasurement of our previously held investment interest upon our acquisition of the remaining 55% interest in Arden, operating income increased $4.6 million to $98.6 million in the nine month period ended June 29, 2019 compared to $94.0 million in the nine month period ended June 30, 2018.$23.8 million. The increase in operating income was due primarily to our Arden acquisition.increased net sales of $77.9 million and lower selling, general and administrative expense partially offset by a lower gross margin.
Corporate operating expenses decreased $0.6expense increased $11.8 million to $52.4$64.2 million in the current nine monthnine-month period from $53.0$52.4 million in the comparable fiscal 20182019 period due primarily to decreased depreciation and amortization expense, medical insurance costs andincreased third-party expenses, increased variable compensation expense partially offset by increased costs related to the unanticipated resolution of a legal matter, our CEO search and to our implementation of the new GAAP lease accounting standard.


equity compensation expense.
Net Interest Expense
Net interest expense for the nine months ended June 29, 2019 decreased $2.127, 2020 increased $4.4 million, or 7.9%18.0%, to $25.0$29.4 million from $27.1 million for the nine months ended June 30, 2018. Increased interest expense incurred in our fiscal 2019 first quarter, due to higher average debt outstanding, was more than offset by increased interest income in our fiscal 2019 second and third quarters. In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028.
Debt outstanding on June 29, 2019 was $693.1 million compared to $691.9 million as of June 30, 2018. Our average borrowing rate was 5.8% for the current nine month period and for the prior year nine month period.
Other Income
Other income was flat at income of $0.5$25.0 million for the nine months ended June 29, 2019, and2019. The increase in net interest expense was due to lower interest income from earnings on cash due to the lower rates available on our cash balance during the current year nine-month period.
Debt outstanding on June 27, 2020 was $694.0 million compared to $693.1 million as of June 29, 2019. Our average borrowing rate for the nine monthscurrent nine-month period was 5.5% compared to the prior nine-month period of 5.8%.
32

Other Income
Other income (expense) was an expense of $4.2 million for the nine-month period ended June 30, 2018. Lower losses from one27, 2020 compared to income of our start-up business$0.5 million for the nine-month period ended June 29, 2019, due primarily to a $3.6 million impairment of two investments were partially offsetin private companies impacted by lower income from Arden due to our purchase of the remaining 55% ownership interest in February 2019. Other expense is comprised of income or losses from investments accounted for underCOVID-19 pandemic during the equity method of accounting and foreign currency exchange gains and losses.quarter ended June 27, 2020.
Income Taxes

Our effective income tax rate was 22.3%22.4% for the nine month period ended June 29, 2019,27, 2020 compared to 7.2% in22.3% for the nine monthnine-month period ended June 30, 2018. The prior year nine month period included a provisional tax benefit of $16.3 million, due to the remeasurement of our deferred tax accounts upon the enactment of the Tax Reform Act.
In the prior year nine month period, after adjusting for the provisional tax benefit of $16.3 million, our effective income tax rate was 20.5% compared to our effective income tax rate of 22.3% in the current year nine month period. The higher effective income tax rate in the current year quarter was due primarily to lower excess tax benefits from stock compensation in the current year quarter.29, 2019.
Net Income and Earnings Per Share
Our net income for the nine months ended June 29, 201927, 2020 was $90.3$107.1 million, or $1.56$1.95 per diluted share, compared to $113.0$90.3 million, or $2.15$1.56 per diluted share, for the nine months ended June 30, 2018.29, 2019.
In the prior year nine month period, the provisional impact of the Tax Reform Act on our deferred tax accounts was significant. Adjusting the nine month period ended June 29, 2019 for the non-cash gain from the fair value remeasurement of our previously held investment interest upon our acquisition of the remaining 55% interest in Arden and for the non-cash charge for the intangible asset impairment in our Pet segment and the nine month period ended June 30, 2018 for the provisional impact of the Tax Reform Act on our deferred tax accounts, non-GAAP net income for the fiscal 2019 nine month period was $89.8 million, or $1.55 per diluted share, compared to $96.7 million, or $1.84 per diluted share in the fiscal 2018 nine month period. The decline in the nine month period in net income and earnings per share were due primarily to the reduced operating income in our Pet segment, and increased shares outstanding due to our prior year equity offering.

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 net salesEBITDA and operating income on a consolidated and segment basis, and non-GAAP net income and diluted net income per share.organic sales. 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.
EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization (or operating income plus depreciation and amortization expense). We present EBITDA because we believe that 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. EBITDA is used by our management to perform such evaluation. EBITDA should not be considered in isolation or as substitutesa substitute for cash flow from operations, income from operations or other income statement measures prepared in accordance with GAAP. We believe that EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present EBITDA when reporting their results. Other companies may calculate EBITDA differently and it may not be comparable.


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.
The reconciliations of these non-GAAP measures 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 measures in making financial, operating and planning decisions and in evaluating our performance, and we believe these measures similarly 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.

Non-GAAP financial measures reflect adjustments based on the following items:
•
Gains from the fair value remeasurement of previously held investment interests: we have excluded the impact of the fair value remeasurement of a previously held investment interest as it represents an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods. We believe the adjustment of these gains supplements the GAAP information with a measure that may be used to assess the sustainability of our operating performance.
•
Asset impairment charges: we have excluded the impact of asset impairments on intangible assets as such non-cash amounts are inconsistent in amount and frequency. We believe that the adjustment of these charges supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•
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 or future year earnings.

•Gains from the fair value remeasurement of previously held investment interests: we have excluded the impact of the fair value remeasurement of a previously held investment interest as it represents an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods. We believe the adjustment of these gains supplements the GAAP information with a measure that may be used to assess the sustainability of our operating performance.
•Asset impairment charges: we have excluded the impact of asset impairments on intangible assets as such non-cash amounts are inconsistent in amount and frequency. We believe that the adjustment of these charges supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

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:
(1)During the second quarter of fiscal 2019, we recorded a preliminary, pending the finalization of the related purchase accounting, non-cash $3.2 million gain in our Garden segment from the fair value remeasurement of our previously held 45% interest in Arden
(1)
During the second quarter of fiscal 2019, we recorded a preliminary, pending the finalization of the related purchase accounting, non-cash $3.2 million gain in our Garden segment from the fair value remeasurement of our previously held 45% interest in Arden upon our acquisition of the remaining 55% interest. The gain was recorded as part of selling, general and administrative costs in the condensed consolidated statements of operations.
(2)
During the second quarter of fiscal 2019, we recognized a non-cash impairment charge in our Pet segment of $2.5 million related to the impairment of intangible assets caused by a retail customer exiting the live fish business. The adjustment was recorded as part of selling, general and administrative costs.
(3)
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 in the first quarter of fiscal 2018, 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 or future year earnings.

33

Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended


Consolidated


June 29, 2019
June 30, 2018
GAAP operating income
$141,205

$149,126
Previously held investment interest fair value remeasurement
(1) 
(3,215)
—
Intangible asset impairment
(2) 
2,540

—
Non-GAAP operating income
$140,530

$149,126
upon our acquisition of the remaining 55% interest. The gain was recorded as part of selling, general and administrative costs in the condensed consolidated statements of operations.

(2)During the second quarter of fiscal 2019, we recognized a non-cash impairment charge in our Pet segment of $2.5 million related to the impairment of intangible assets caused by a retail customer exiting the live fish business. The adjustment was recorded as part of selling, general and administrative costs.

(3)During the third quarter of fiscal 2020, we recorded a non-cash impairment charge for two private company investments. The impairment was recorded as part of other income (expense).


Operating Income ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended
Consolidated
June 27, 2020June 29, 2019
GAAP operating income$172,810  $141,205  
Previously held investment interest fair value remeasurement(1)—  (3,215) 
Intangible asset impairment(2)—  2,540  
Non-GAAP operating income$172,810  $140,530  


Pet Segment Operating Income ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended
Pet
June 27, 2020June 29, 2019
GAAP operating income$114,599  $91,805  
Intangible asset impairment(2)—  2,540  
Non-GAAP operating income$114,599  $94,345  


Garden Segment Operating Income ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended
Garden
June 27, 2020June 29, 2019
GAAP operating income$122,439  $101,821  
Previously held investment interest fair value remeasurement(1)—  (3,215) 
Non-GAAP operating income$122,439  $98,606  


34

Pet Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended


Pet


June 29, 2019
June 30, 2018
GAAP operating income
$91,805

$108,202
Intangible asset impairment
(2) 
2,540

—
Non-GAAP operating income
$94,345

$108,202


Garden Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands)
For the Nine Months Ended


Garden


June 29, 2019
June 30, 2018
GAAP operating income
$101,821

$93,975
Previously held investment interest fair value remeasurement
(1) 
(3,215)
—
Non-GAAP operating income
$98,606

$93,975



GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended
Net Income and Diluted Net Income Per Share Reconciliation
June 29, 2019
June 30, 2018
GAAP net income attributable to Central Garden & Pet
$90,346

$113,026
Previously held investment interest fair value remeasurement
(1) 
(3,215)
—
Intangible asset impairment
(2) 
2,540

—
Tax effect of remeasurement and impairment
151

—
Tax effect of revaluation of deferred tax amounts
(3) 
—

16,343
Non-GAAP net income attributable to Central Garden & Pet
$89,822

$96,683
GAAP diluted net income per share
$1.56

$2.15
Non-GAAP diluted net income per share
$1.55

$1.84
Shares used in GAAP and non-GAAP diluted net earnings per share calculation
57,937

52,670

GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Three Months Ended		GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended
Net Income and Diluted Net Income Per Share ReconciliationJune 27, 2020June 29, 2019June 27, 2020June 29, 2019
GAAP net income attributable to Central Garden & Pet$68,800  $46,152  $107,087  $90,346  
Previously held investment interest fair value remeasurement(1)—  —  (1)—  (3,215) 
Intangible asset impairment(2)—  —  (2)—  2,540  
Investment impairments(3)3,566  —  (3)3,566  —  
Tax effect of remeasurement and impairment(807) —  (800) 151  
Non-GAAP net income attributable to Central Garden & Pet$71,559  $46,152  $109,853  $89,822  
GAAP diluted net income per share$1.27  $0.80  $1.95  $1.56  
Non-GAAP diluted net income per share$1.32  $0.80  $2.00  $1.55  
Shares used in GAAP and non-GAAP diluted net earnings per share calculation54,168  57,985  54,984  57,937  

Organic Net Sales Reconciliation


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.
GAAP to Non-GAAP Reconciliation
(in millions)
For the Three Months Ended June 27, 2020
ConsolidatedPet SegmentGarden Segment
Percent changePercent changePercent change
Reported net sales - Q3 FY20 (GAAP)$833.5  $413.3  $420.2  
Reported net sales - Q3 FY19 (GAAP)706.6  350.2  356.4  
Increase in net sales126.9  18.0 %63.1  18.0 %63.8  17.9 %
Effect of acquisition and divestitures on increase in net sales10.4  10.4  —  
Increase in organic net sales - Q3 FY20$116.5  16.5 %$52.7  15.0 %$63.8  17.9 %


GAAP to Non-GAAP Reconciliation
(in millions)
For the Nine Months Ended June 27, 2020
ConsolidatedPet SegmentGarden Segment
Percent changePercent changePercent change
Reported net sales - Q3 FY20 YTD (GAAP)$2,019.5  $1,128.1  $891.4  
Reported net sales - Q3 FY19 YTD (GAAP)1,842.3  1,028.8  813.5  
Increase in net sales177.2  9.6 %99.3  9.7 %77.9  9.6 %
Effect of acquisition and divestitures on increase in net sales58.4  29.6  28.8  
Increase in organic net sales - Q3 FY20 YTD$118.8  6.4 %$69.7  6.8 %$49.1  6.0 %

35



GAAP to Non-GAAP Reconciliation
(in millions)
For the Three Months Ended June 29, 2019


Consolidated
Pet Segment Garden Segment




Percent change


Percent change 

Percent change









 


Reported net sales - Q3 FY19 (GAAP)
$706.6



$350.2


 $356.4


Reported net sales - Q3 FY18 (GAAP)
657.9



354.7


 303.2


Increase in net sales
48.7

7.4%
(4.5)
(1.3)% 53.2

17.5%
Effect of acquisition and divestitures on increase in net sales
44.6



3.7


 40.9


Increase in organic net sales - Q3 2019
$4.1

0.6%
$(8.2)
(2.3)% $12.3

4.1%
EBITDA ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Three Months Ended June 27, 2020
GardenPetCorpTotal
Net income attributable to Central Garden & Pet—  —  —  $68,800  
     Interest expense, net—  —  —  11,471  
     Other expense—  —  —  3,541  
     Income tax expense—  —  —  20,291  
     Net income attributable to noncontrolling interest—  —  —  537  
          Sum of items below operating income—  —  —  35,840  
Income (loss) from operations$77,787  $50,760  $(23,907) $104,640  
Depreciation & amortization3,538  8,374  1,371  13,283  
EBITDA$81,325  $59,134  $(22,536) $117,923  

EBITDA ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Three Months Ended June 29, 2019
GardenPetCorpTotal
Net income attributable to Central Garden & Pet———$46,152  
     Interest expense, net———8,498  
     Other income———(180) 
     Income tax expense———14,212  
     Net income attributable to noncontrolling interest———189  
          Sum of items below operating income———22,719  
Income (loss) from operations$53,103  $35,066  $(19,298) $68,871  
Depreciation & amortization3,497  8,083  1,502  13,082  
EBITDA$56,600  $43,149  $(17,796) $81,953  

EBITDA ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended June 27, 2020
GardenPetCorpTotal
Net income attributable to Central Garden & Pet—  —  —  $107,087  
     Interest expense, net—  —  —  29,444  
     Other expense—  —  —  4,215  
     Income tax expense—  —  —  31,211  
     Net income attributable to noncontrolling interest—  —  —�� 853  
          Sum of items below operating income—  —  —  65,723  
Income (loss) from operations$122,439  $114,599  $(64,228) $172,810  
Depreciation & amortization10,157  25,305  4,136  39,598  
EBITDA$132,596  $139,904  $(60,092) $212,408  

36



GAAP to Non-GAAP Reconciliation
(in millions)
For the Nine Months Ended June 29, 2019


Consolidated
Pet Segment
Garden Segment




Percent change


Percent change


Percent change
Reported net sales - Q3 FY19 YTD (GAAP)
$1,842.3



$1,028.8



$813.5


Reported net sales - Q3 FY18 YTD (GAAP)
1,713.0



1,001.5



711.5


Increase in net sales
129.3

7.5%
27.3

2.7 %
102.0

14.3%
Effect of acquisition and divestitures on increase in net sales
119.5



37.2



82.3


Increase (decrease) in organic net sales - Q3 2019 YTD
$9.8

0.6%
$(9.9)
(1.0)%
$19.7

2.8%
EBITDA ReconciliationGAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended June 29, 2019
GardenPetCorpTotal
Net income attributable to Central Garden & Pet—  —  —  $90,346  
     Interest expense, net—  —  —  24,960  
     Other income—  —  —  (488) 
     Income tax expense—  —  —  26,031  
     Net income attributable to noncontrolling interest—  —  —  356  
          Sum of items below operating income—  —  —  50,859  
Income (loss) from operations$101,821  $91,805  $(52,421) $141,205  
Depreciation & amortization8,635  24,178  4,498  37,311  
EBITDA$110,456  $115,983  $(47,923) $178,516  




EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Three Months Ended June 29, 2019


Garden
Pet
Corp
Total
Net income attributable to Central Garden & Pet
—

—

—

$46,152
     Interest expense, net
—

—

—

8,498
     Other income
—

—

—

(180)
     Income tax expense
—

—

—

14,212
     Net income attributable to noncontrolling interest
—

—

—

189
          Sum of items below operating income
—

—

—

22,719
Income (loss) from operations
$53,103

$35,066

$(19,298)
$68,871
Depreciation & amortization
3,497

8,083

1,502

13,082
EBITDA
$56,600

$43,149

$(17,796)
$81,953
EBITDA Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Three Months Ended June 30, 2018


Garden
Pet
Corp
Total
Net income attributable to Central Garden & Pet
—

—

—

$41,545
     Interest expense, net
—

—

—

10,013
     Other income
—

—

—

(2,126)
     Income tax expense
—

—

—

11,395
     Net income attributable to noncontrolling interest
—

—

—

(8)
          Sum of items below operating income
—

—

—

19,274
Income (loss) from operations
$40,929

$39,242

$(19,352)
$60,819
Depreciation & amortization
2,789

7,626

2,172

12,587
EBITDA
$43,718

$46,868

$(17,180)
$73,406

EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended June 29, 2019


Garden
Pet
Corp
Total
Net income attributable to Central Garden & Pet
—

—

—

$90,346
     Interest expense, net
—

—

—

24,960
     Other income
—

—

—

(488)
     Income tax benefit
—

—

—

26,031
     Net income attributable to noncontrolling interest
—

—

—

356
          Sum of items below operating income
—

—

—

50,859
Income (loss) from operations
$101,821

$91,805

$(52,421)
$141,205
Depreciation & amortization
8,635

24,178

4,498

37,311
EBITDA
$110,456

$115,983

$(47,923)
$178,516


EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
(in thousands, except per share amounts)
For the Nine Months Ended June 30, 2018


Garden
Pet
Corp
Total
Net income attributable to Central Garden & Pet
—

—

—

$113,026
     Interest expense, net
—

—

—

27,113
     Other income (expense)
—

—

—

(542)
     Income tax benefit
—

—

—

8,802
     Net income attributable to noncontrolling interest
—

—

—

727
          Sum of items below operating income
—

—

—

36,100
Income (loss) from operations
$93,975

$108,202

$(53,051)
$149,126
Depreciation & amortization
6,065

21,715

7,092

34,872
EBITDA
$100,040

$129,917

$(45,959)
$183,998


Inflation
Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending. In certain 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. 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.
During fiscal 2018, costs increased in a number of areas, including raw materials, freight and labor. We took certain pricing actions, which generally became effective in January 2019, to offset the impact of these inflationary pressures and plan to do so in the year ahead as well.
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 2018,2019, approximately 68%69% of our Garden segment’s net sales and 57%58% 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, 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 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 68%69% 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.

37

Operating Activities
Net cash provided by operating activities increaseddecreased by $75.0$3.9 million, from $17.8 million for the nine months ended June 30, 2018, to $92.8 million for the nine months ended June 29, 2019.2019, to $88.9 million for the nine months ended June 27, 2020. The increasedecrease in cash provided was due primarily to changes in our working capital accounts for the period ended June 29, 2019,27, 2020, as compared to the prior year period.period, primarily an increase in accounts receivable, due to the large increase in sales in the latter half of the third quarter, compared to the prior year.
Investing Activities
Net cash used in investing activities decreased $59.5$33.2 million, from $124.5$65.0 million for the nine months ended June 30, 201829, 2019 to $65.0$31.8 million during the nine months ended June 29, 2019.27, 2020. The decrease in cash used in investing activities was due primarily to decreased investment and acquisition activity as well as lowerin the prior year, partially offset by increased capital expenditures in the current year compared to the prior year. During the second quarter of fiscal 2019, we acquired the remaining 55% interest in Arden Companies for approximately $11$11.0 million, and during the third quarter of fiscal 2019 we acquired C&S Products for approximately $30.0 million. During the second quarter of fiscal 2018, we acquired Bell Nurseries
Financing Activities
Net cash used by financing activities decreased $5.1 million, from $64.1 million for approximately $62 million, and during the third quarter of fiscal 2018 we acquired General Pet Supply for approximately $24.5 million. Furthermore, during the nine months ended June 29, 2019, we made fewer investments and capital expenditures than in the comparable prior year period.
Financing Activities
Net cash provided by financing activities decreased $344.2to $59.0 million from $280.1 million of cash provided for the nine months ended June 30, 2018, to $64.1 million of cash used for the nine months ended June 29, 2019.27, 2020. The decrease in cash providedused by financing activities during the current year was due primarily to our December 2017 issuance of $300 million aggregate principal amount 5.125% senior notes due February 2028, partially offset by deferred financing costsrepayment of approximately $4.8 million associated with this issuance. Additionally, we repaid approximately $46$36 million of acquired long-term debt subsequent to our acquisitionsacquisition of Arden Companies and C&S Productsin the prior year period, partially offset by increased open market purchases of our common stock during the nine months ended June 29, 2019.current year period. During the nine months ended June 29, 2019,27, 2020, we also repurchased approximately 0.60.2 million shares of our voting common stock (CENT) at an aggregate cost of approximately $6.6 million, or approximately $26.63 per share, and 1.8 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $14.3$45.7 million, or approximately $25.76$25.90 per share, in addition to $5.1 million used for minimum statutory tax withholdings related to the net share settlement of our stock.share.
We expect that our principal sources of funds will be cash generated from our operations and, if necessary, borrowings under our $400 million asset backed revolving credit facility. Based on our anticipated cash needs, availability under our asset backed revolving 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, and arrangements with suppliers will be adequate to fund our presently anticipated working capital and capital expenditure requirements for the foreseeable future. We anticipate thatpreviously estimated 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, willwould be $35$40 million to $40$45 million in fiscal 2019.2020, of which we have invested approximately $27 million year to date. As a result of the uncertainties associated with the COVID-19 pandemic, we are reevaluating the appropriate amount of our fiscal 2020 capital expenditures.
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 June 29, 2019,27, 2020, our total debt outstanding was $693.1$694.0 million, as compared with $691.9$693.1 million at June 30, 2018.29, 2019.
Senior Notes
$300 Million 5.125% Senior Notes
On December 14, 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). We expect to use the net proceeds from the offering to finance future acquisitions and for general corporate purposes.
We incurred approximately $4.8 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028 Notes.


The 2028 Notes require semiannual interest payments on February 1 and August 1, 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.
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
38

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 June 29, 2019.27, 2020.
$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, 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 financial covenants as of June 29, 2019.27, 2020.
Asset-Based Loan Facility Amendment
In April 2016,On September 27, 2019, we entered into ana Second Amended and Restated Credit Agreement (“Amended Credit Agreement”). The Amended Credit Agreement amended and restated the previous credit agreement which providesdated April 22, 2016 and continues to provide up to a $400$400.0 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200 million principal amount available with the consent of the Lenders, as defined, if we exercise the accordion feature set forth therein (collectively, the “Credit“Amended Credit Facility”). The Amended Credit Facility now matures on April 22, 2021.September 27, 2024. We may borrow, repay and reborrow amounts under the Amended Credit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility must be repaid in full.
The Amended Credit Facility is subject to a borrowing base, reduced capacity due to reserves and certain other restrictions. The borrowing base is calculated using a formula initially based upon eligible receivables and inventory minus certain reserves, and was $400 million as of June 27, 2020. The Amended Credit Facility also allows us to add real property to the borrowing base so long as the real property is subject to a first priority lien in favor of the Administrative Agent for the benefit of the Lenders. Proceeds of the Amended Credit Facility will be used for general corporate purposes. The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and an increased $40 million sublimit for short-notice borrowings. We incurred approximately $1.6 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal expenses. The debt issuance costs are being amortized over the term of the Amended Credit Facility. As of June 29, 2019,27, 2020, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. There were other letters of credit of $3.2 million outstanding as of June 29, 2019.27, 2020. Subsequent to our quarter ended March 28, 2020, we borrowed $200 million under our revolving credit facility to increase financial flexibility while we navigate an uncertain COVID-19 economic environment. We repaid $200 million under our revolving credit facility prior to our quarter ended June 27, 2020.
The Credit Facility is subject to a borrowing base, calculated using a formula based upon eligible receivables and inventory, minus certain reserves and subject to restrictions. As of June 29, 2019, the borrowing base and remaining borrowing availability was $400.0 million. Borrowings under the Amended Credit Facility bear interest at an index based on LIBOR 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% and0.50%, (c) one-month LIBOR plus 1.00%), plus, in either case, an applicable margin based on our consolidated senior leverage ratio.ratio and (d) 0.00%. Such applicable margin for LIBOR-based borrowings fluctuates between 1.00%-1.50% (previously between 1.25% - 1.5%,and 1.50%) and was 1.25%1.00% as of June 29, 2019,27, 2020, and such applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50% (previously 0.25% - 0.5%-0.50%), and was 0.25%0.00% as of June 29, 2019.27, 2020. An unused line fee shall be payable monthly 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 shall be payable monthly and a facing fee of 0.125% shall be paid on demand for the stated amount of each letter of credit. We are also
39

required to pay certain fees to the administrative agent under the Amended Credit Facility. As of June 29, 2019,27, 2020, the applicable interest rate related to Base Rate borrowings was 5.8%3.3%, and the applicable interest rate related to LIBOR-based borrowings was 3.7%1.2%. Banks currently reporting information used to set LIBOR will stop doing so after 2021. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. We are monitoring their efforts, and we will likely amend contracts to accommodate any replacement rate where it is not already provided.
The administering regulatory authority announced it intends to phase out London Interbank Offered Rate (LIBOR) by the end of 2021. We incurred approximately $1.2 million of debt issuance costs in conjunction with this transaction, which included underwriter fees, legalhave both LIBOR-denominated and accounting expenses. The debt issuance costsEuro Interbank Offer Rate (EURIBOR)-denominated indebtedness. Once LIBOR is phased out it will be amortized overreplaced by an alternative method equivalent to LIBOR. Any legal or regulatory changes made in response to LIBOR’s future discontinuance may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the termpublication of LIBOR, or changes in the Credit Facility.


rules or methodologies in LIBOR. In addition, alternative methods to LIBOR may be impossible or impracticable to determine. The transition to alternatives to LIBOR could be modestly disruptive to the credit markets, and while we do not expect that the transition from LIBOR and risks related thereto will have a material adverse effect on our financing costs, it is still uncertain at this time.
The Amended Credit Facility containscontinues to contain customary covenants, including financial covenants which require us to maintain a minimum fixed charge coverage ratio of 1.00:1.00 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. We were in compliance with all financial covenants under the Credit Facility during the period ended June 29, 2019.27, 2020.
Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities
In November 2015, Central (the "Parent/Issuer") issued $400 million aggregate principal amount of 6.125% senior notes due November 2023 (the "2023 Notes") and on December 14, 2017, Central issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). The 2023 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 borrowers under or guarantors of our senior secured revolving credit facility ("Credit Facility"). The 2023 Notes and 2028 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. 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 2023 or 2028 Notes and are referred to as the Non-Guarantors.
The Guarantors jointly and severally, and fully and unconditionally, guarantee the payment of the principal and premium, if any, and interest on the 2023 and 2028 Notes when due, whether at stated maturity of the 2023 and 2028 Notes, by acceleration, call for redemption or otherwise, and all other obligations of the Company to the holders of the 2023 and 2028 Notes and to the trustee under the indenture governing the 2023 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 will, 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 eliminated. 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 excludes financial information of the Non-Guarantors, including earnings from and investments in these entities.


40

Summarized Statements of Operations
(in thousands)Nine Months EndedFiscal Year Ended
June 27, 2020September 28, 2019
Parent/IssuerGuarantorsParent/IssuerGuarantors
Net sales$622,610  $1,288,951  $764,991  $1,496,962  
Gross profit$144,963  $419,114  $172,075  $495,968  
Income (loss) from operations$7,836  $155,629  $(9,819) $162,725  
Equity in earnings of Guarantor subsidiaries$120,159  $—  $127,439  $—  
Net income (loss)$(20,152) $120,159  $(32,775) $127,439  



Summarized Balance Sheet Information
(in thousands)As ofAs of
June 27, 2020September 28, 2019
Parent/IssuerGuarantorsParent/IssuerGuarantors
Current assets$761,853  $632,834  $732,597  $523,670  
Intercompany receivable from Non-guarantor subsidiaries31,666  61,346  37,544  61,333  
Other assets1,990,988  1,488,968  $1,833,445  $1,397,277  
Total assets$2,784,507  $2,183,148  $2,603,586  $1,982,280  
Current liabilities$142,785  $209,882  $102,242  $164,574  
Long-term debt693,915  —  693,037  —  
Other liabilities947,697  97,715  867,268  62,656  
Total liabilities$1,784,397  $307,597  $1,662,547  $227,230  

Off-Balance Sheet Arrangements
There have been no material changes to the information provided in our Annual Report on Form 10-K for the fiscal year ended September 29, 201828, 2019 regarding off-balance sheet arrangements.
Contractual Obligations
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 29, 2018.28, 2019, except as set forth below.
In December 2019, performance-based criteria associated with the $6 million contingent consideration liability related to our fiscal 2017 acquisition of Segrest, Inc. were met and accordingly, the entire amount was released out of an independent escrow account to the former owners as of December 28, 2019.
New Accounting Pronouncements
Refer to Footnote 1 in the notes to the condensed consolidated financial statements for new accounting pronouncements.
41

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 29, 2018.28, 2019.
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 29, 2018.28, 2019.


Item 4.Controls and Procedures
Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and 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 June 29, 2019.27, 2020.
(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 third quarter of fiscal 2019. Based on that evaluation, management concluded that there has been2020. We implemented controls and a new lease accounting system related to the adoption of ASC 842 and the related financial statement reporting. There were no changeother changes in our internal control over financial reporting during the third quarter of fiscal 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
 
Item 1.Legal Proceedings
Item 1. Legal Proceedings

In 2012, Nite Glow Industries, Inc and its owner, Marni Markell, (“Nite Glow”) filed suit in the United States 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 case is currentlycourt ruled on post-trial motions in early June 2020, reducing the post-trial motion phasejudgment amount to $12.4 million and denying the plaintiff's request for attorneys' fees. The Company has filed its notice of proceedingsappeal and is expected to proceed to appeal once all such motionsthe plaintiffs have been resolved.  Unless the verdicts are over-turned in the post-trial


proceedings, thecross-appealed. The Company intends to vigorously pursue its rights on appeal and believes that it will prevail on the merits. 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. 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.
Item 1A. Risk Factors

There
Except as set forth below, 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 29, 2018, except as set forth below.28, 2019.
Our success depends upon
The COVID-19 pandemic has impacted how we are operating our retainingbusiness, and recruiting key personnel.the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
Our performance is substantially dependent upon
42

The outbreak of the continued servicesCOVID-19 virus in Wuhan, China in late 2019 and subsequent spread of the virus throughout the world has impacted our day-to-day operations and the operations of the vast majority of our senior management team.customers, suppliers, and consumers. The lossWorld Health Organization’s March 2020 declaration of the servicesCOVID-19 outbreak as a global pandemic has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, border closures, quarantines, shelter-in-place orders, and business limitations and shutdowns. COVID-19 has adversely affected and may continue to adversely affect how we and our customers are operating our businesses and overall demand for our products.
We have experienced varying impacts to our Garden and Pet businesses due to COVID-19. In March and April, we experienced increased demand in pet consumables due to consumers stocking up on products as the COVID-19 shelter-in-place mandates were implemented. We also saw reduced consumption on other items, such as live fish and live plants, due to in-store curtailments of these persons couldfoot traffic and limited access to outdoor garden departments. In May, state and county governments began phased reopenings of their local economies. Access to outdoor garden departments resulted in increased demand for our products in May and June. Additionally, as a result of shelter-in-place requirement periods, pet ownership significantly increased and we saw increased sales continue in May and June across our Pet segment portfolio. We also continued to see rapid increase in demand in the e-commerce channel.
Although our facilities have largely been exempt or partially exempt from government closure orders as essential businesses, to support the health and well-being of our employees, customers and communities, we are requiring a significant portion of our workforce to work remotely, and local and state governments in the United States and in the United Kingdom have imposed shelter-in-place requirements and certain travel restrictions, all of which have changed how we operate our business. For our employees who are not working remotely, we have taken several actions to ensure their safety, including instituting workplace safety measures and ensuring the availability of personal protective equipment. While we believe that such actions will help to ensure the safety of our employees, there is no guarantee that such actions will ultimately be successful.
We have experienced temporary closures of certain production facilities and distribution centers, though there has not been a material adverse effect onimpact from a plant closure to date. At some of our business. In February 2019, George C. Roeth,facilities, we have experienced reduced productivity and increased employee absences, which we expect to continue during the current pandemic. The pandemic and near-term increase in demand for pet consumables have created operational challenges for our Presidentdistribution network and Chief Executive Officer, announced his intent to retire in September 2019. Our future performance depends onimpacted our ability to attractmeet our normal fill rate standards. Our supply chain has been impacted by the rapid increase in demand and retain skilled employees, including a new Chief Executive Officer.it is possible we will experience increased operational and logistics costs. We may experience additional disruptions in our supply chain as the pandemic continues, though we cannot assure you thatreasonably estimate the potential impact or timing of those events, and we willmay not be able to retainmitigate such impact.
We anticipate many small customers may permanently close, and we may experience collection delinquencies as customers seek to preserve liquidity. Additionally, we have small company equity method investments, intangible assets and other long-lived assets whose value is dependent on cashflows. These investments and other assets could be impacted by the COVID-19 pandemic and, therefore, may be more susceptible to impairment. Our assessment of possible asset impairment involves numerous assumptions that involve significant judgment. As a result of the uncertainties associated with the COVID-19 pandemic, the shelter-in-place orders and the post COVID-19 economic recovery, these factors will be even more difficult to estimate. We recorded an impairment charge of $3.6 million in our existing personnel or attract additional qualifiedthird fiscal quarter and may be required to write off certain assets that could be material in future periods.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, inindependent contractors and customers and consumers. If we are not able to respond to and manage the future.impact of such events effectively, our business will be harmed.

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 June 29, 201927, 2020 and the dollar amount of authorized share repurchases remaining under our stock repurchase program.

43

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)
March 31, 2019 - May 4, 2019 667
 
(2) 
 $25.07
 —
 $34,968,000
May 5, 2019 - June 1, 2019 240,653
 
(3) 
 $26.49
 216,823
 $29,216,000
June 2, 2019 - June 29, 2019 338,603
   $25.26
 338,603
 $20,662,000
Total 579,923
    $25.77
 555,426
 $20,662,000
PeriodTotal Number of Shares (or Units) PurchasedAverage
Price Paid
per Share
(or Units)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)(2)
March 29, 2020 - May 2, 2020194,160  (2) (3)$26.21  194,021  $100,000,000  
May 3, 2020 - May 30, 202020,851  
(3)
$32.63  —  $100,000,000  
May 31, 2020 - June 27, 202022,693  
(3)
$32.64  —  $100,000,000  
Total237,704  $27.38  194,021  $100,000,000  (4)
(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.
(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)Includes 23,830 shares purchased during the period indicated that represent withholding of a portion of shares to cover taxes in connection with the vesting of restricted stock.

(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 June 27, 2020, we had $100 million of authorization remaining under our 2019 Repurchase Authorization.
(2)In February 2019, our Board of Directors authorized us to make supplemental stock purchases to minimize dilution resulting from issuances under our equity compensation plans (the "Equity Dilution Authorization"). 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 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.
(3)Shares purchased during the period indicated represent 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 0.6 million shares remaining under our Equity Dilution Authorization as of June 27, 2020.

Item 3.Defaults Upon Senior Securities
Item 3. Defaults Upon Senior Securities
Not applicable

Item 4.Mine Safety Disclosures
Item 4. Mine Safety Disclosures
Not applicable

Item 5.
Item 5. Other Information


Not applicable

44


Item 6.Exhibits
4.122
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

47
45



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.
 
CENTRAL GARDEN & PET COMPANY
Registrant
CENTRAL GARDEN & PET COMPANYDated: August 6, 2020
Registrant
/s/ TIMOTHY P. COFER
Dated: August 2, 2019Timothy P. Cofer
/s/ GEORGE C. ROETH
George C. Roeth
President and Chief Executive Officer
(Principal Executive Officer)
/s/ NICHOLAS LAHANAS
Nicholas Lahanas
Chief Financial Officer
(Principal Financial Officer)

48
46