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Item 1. Business

2021-11-23 compared with 2020-11-24 · 249 added, 227 removed, 156 unchanged (75% of the section changed)

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.

Founded initially as a distribution company, we grew our business through a succession of over 50 acquisitions and created a broad portfolio which allows for economies of scale and market advantages.

Our pet supplies products for dogs and cats include premium edible chews and treats, dog chew toys, dog play toys, natural dog treats and chews, pet dental chews and solutions, premium dog and cat food, dog training pads, pet containment, 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 including Adams™, Aqueon®, Avoderm®, C&S Products®, Cadet®, Farnam®, Four Paws®, Kaytee®, K&H Pet Products®, Nylabone®, Pinnacle®, TFH™ Publiciations, and Zilla® as well as a number of other brands including Altosid®, Comfort Zone®, Coralife®, Interpet®, Pet Select® and 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;

and decorative outdoor lifestyle products including pottery, as well as live plants and outdoor cushions and pillows.

These products are sold under the brands AMDRO ® , Arden Companies ™ , Ironite ® , Pennington ® , and Sevin ® , as well as a number of other brand names including Lilly Miller ® , Over-N-Out ® , Smart Seed ® and The Rebels ® .

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 annual report.

Central Garden & Pet Company (“Central”) is a market leader in the garden and pet industries in the United States.

For over 40 years, Central has proudly nurtured happy and healthy homes by bringing innovative and trusted solutions to consumers and its customers.

We manage our operations through two reportable segments:

Pet and Garden.

Our pet segment includes dog and cat supplies such as dog treats and chews, toys, pet beds and grooming products, waste management and training pads, pet containment, supplies for aquatics, small animals, reptiles and pet birds including toys, cages and habitats, bedding, food and supplements, products for equine and livestock, animal and household health and insect control products, live fish and small animals as well as outdoor cushions.

These products are sold under brands such as Aqueon ® , Cadet ® , Comfort Zone ® , Farnam ® , Four Paws ® , K&H Pet Products ® ("K&H"), Kaytee ® , Nylabone ® and Zilla ® .

Our garden segment includes lawn and garden consumables such as grass, vegetable, flower and herb seed, wild bird feed, bird houses and other birding accessories, weed, grass, and other herbicides, insecticide and pesticide products, fertilizers and live plants.

These products are sold under brands such as Amdro ® , Ferry-Morse ® , Pennington ® and Sevin ® .

The following table indicates each class of similar products that represented approximately 10% or more of our consolidated net sales in the fiscal years presented (in millions) and the percentage of net sales represented by each class in fiscal 2021 .

Category 2021 2020 2019

Other pet products $ 767.0 $ 821.1 $ 688.3

Other garden products 876.6 491.7 485.9

Other manufacturers' products 749.1 600.7 504.5

Dog & cat products 570.9 502.1 452.1

Wild bird 340.1 — (1) — (1)

Controls & fertilizer products — (1) 279.9 252.2

Total $ 3,303.7 $ 2,695.5 $ 2,383.0

(1) The product category was less than 10% of our consolidated net sales in the period.

Competitive Strengths

We believe we have a number of competitive strengths, which serve as the foundation of our business strategy, including the following:

• Market Leadership Positions Built on a Strong Brand Portfolio .

Leading Brand Portfolio Across Key Garden and Pet Segments

We are one of the leaders in the U.S.

pet supplies market and in the U.S.

consumer lawn and garden supplies market.

We have a diversified portfolio of brands, many of which we believe are among the leading brands in their respective U.S.

market categories.

pet supplies market and the lawn and garden consumables market.

We have a diversified portfolio of brands in both segments, many of which are among the leading brands in their respective market categories, ranging from Kaytee in pet bird and small animal, Nylabone in dog toys, Pennington in wild bird, grass seed and fertilizer, Ferry-Morse in seeds and seed starter packages to controls with our Amdro and Sevin brands.

The majority of our brands have been marketed and sold for more than 40 years.

• History of Innovative New Products and Customer Service .

We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.

Over the last two years, we have received a number of awards for innovation, customer service and marketing.

• In fiscal 2020, Kaytee won an Editor's Choice Award from Pet Product News International for CritterTrail Super Habitat and a Pet Business Industry Recognition Award in the Small Animal Food category for Wild Kaytee Food from the Wild.

Zilla won an award at the Global Pet Expo for the Zilla Micro Habitats and two Pet Business Industry Recognition Awards for Herptile Habitats - Zilla Bow Front Opening Terrarium and Aquarium Water Treatments - Aqueon PURE.

• In fiscal 2019, Kaytee won the Pet Age Magazine Readers Top Choice Award for its Extreme Odor Control Bedding.

Kaytee also won the Pet Business Magazine Industry Recognition Award for its Premium Timothy Hay Treats.

Additionally, Zilla won second place at Global Pet Expo for the Zilla Bow Front Opening Terrarium.

Customer Service -

• Our Garden segment was named the Walmart 2020 Lawn and Garden Supplier of the Year.

We were also awarded Petco's Vendor Summit Award for Strategic Partnership in Aquatic Supplies.

Our C&S Products subsidiary has been a highly rated vendor for ACE Hardware for over 10 years and at Menards for over six years.

• In fiscal 2019, Kaytee was awarded the inaugural vendor of the year award for the total Farm/Pet category by Fleet Farm for operational excellence, best-in-class customer service and it's top-to-top partnership and collaboration in supporting Fleet Farm's initiatives.

• Central Life Sciences won two Silver Davey Awards, an international creative award focused exclusively on creative work, for Promotional:

Specialty Item - Vector Dealer Sales Kit and Print Campaign:

Business to Business - Zoecon Print Advertising Campaign.

Also, Kaytee won a Packaged Design Award for Kaytee Food from the Wild from Graphic Design USA.

• In fiscal 2019, Segrest won the Most Innovative Brick & Mortar Differentiator award at Global Pet Expo for its synergistic work with Petsense and Casco as well as a number of Central's brands to introduce live animals to their stores.

In fiscal 2019 and fiscal 2018, Central won numerous Equine media awards from American Horse Publications and National Animal Supplement Council’s Visibility Awards for advertising, marketing, multimedia ads, social media campaigns, print and education of customers and the industry.

Robust Financial Performance

We have demonstrated strength in our financial performance, in net sales, earnings and cash flow.

Our net sales grew on average 12.6% annually over the last five years, driven by acquisitions and organic growth.

Operating income grew slightly faster over the same period, 14.5% on a GAAP basis annually.

We have a strong cash and liquidity position driven by a combination of capital raises and cash flow from operations which puts us in a strong position to further grow through both acquisitions and organically.

Proven Track Record of M&A

Since 1992, we have completed over 60 acquisitions to create a company of approximately $3.3 billion in net sales.

These acquisitions have successfully expanded the breadth of our pet and garden portfolios.

We acquired D&D Commodities Ltd.

("D&D"), a leading provider of premium bird feed in June 2021, Green Garden Products, a leading provider of vegetable, herb and flower seed packets, seed starters and plant nutrients in February 2021 and Hopewell Nursery, a leading live goods grower in January 2021.

In December 2020, we acquired DoMyOwn ® , a leading and fast-growing online retailer of professional-grade control products.

We are a patient and disciplined value buyer, typically focused on opportunities in garden and pet areas that build scale in core categories or in priority adjacencies, with a recent emphasis on those that enhance key capabilities in digital and eCommerce.

We are open to businesses that, on top of traditional operating synergies, can leverage our capabilities and allow us to add value through our low-cost manufacturing and distribution competencies.

We generally prefer to acquire brand-focused businesses with growth and margin rates above Central’s rates, with proven, seasoned management teams, who are committed to stay with the acquired business after closing.

We have been successful in growing our acquisitions organically after acquiring them into our portfolio.

We continually review our businesses to ensure they meet expectations and have implemented strategies to reverse sub-par performance when necessary.

We are also committed to divesting businesses where we cannot find a path to profitability and have done so in the past, for example the disposal of our dog and cat food business in 2020.

Strong Relationships with Retailers

We have developed strong relationships with major and independent brick & mortar and eCommerce retailers providing them broad product offerings including new product innovation, premium brands, private label programs, proprietary sales and logistics capabilities and a high level of customer service.

We have developed strong relationships with major and independent brick & mortar and online retailers, providing them broad product offerings including new product innovation, premium brands, private label programs, proprietary sales and logistics capabilities and a high level of customer service.

Major retailers value the efficiency of dealing with suppliers with national scope and strong brands.

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Independent retailers value our high level of customer service and broad array of premium branded products.

We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to PetSmart, PETCO and Walmart and among the largest lawn and garden supplies vendors to Walmart, Home Depot and Lowe’s, and the club and mass merchandise channels, as well as a leading supplier to independent pet and lawn and garden supply retailers in the United States.

• Favorable Long-Term Industry Characteristics .

We believe the U.S.

pet supplies market will grow over the long term due to favorable demographic and leisure trends.

According to the Packaged Facts U.S.

Pet Market Outlook, 2020-2021, the pet ownership rate of U.S.

households is expected to grow 4% in 2020, with reptiles and small animals in aggregate growing the fastest with 7% and 6% growth, respectively.

A 2016 Nielsen entitled The Humanization of Pet Food found that about 95% of U.S.

pet owners view pets as family and are looking for humanized products for their pets.

A recently published Packaged Facts report stated that in the early stages of the COVID-19 pandemic, pet adoptions increased 5% for dogs and 4% for cats and other pets, increasing the number of pet-owning U.S.

households by about 2.7 million.

The pet supplies market has benefited from the pet adoption surge in 2020 and a COVID-19 related decline in usage of non-medical pet care services which has spurred a spike in sales of do-it-yourself retail pet care items including grooming products, flea/tick products, supplements, and other health products, as well as pet gates, leashes, collars and toys.

According to The Freedonia Group, lifestyle changes and shifts in demographics are creating new opportunities in gardening.

According to Numerator, household penetration grew from 67.2% in 2019 to 72.7% in 2020.

About 70% of homeowners are doing more home projects and about 7.1 million households picked up gardening as a hobby or leisure activity in 2020.

Among key outdoor living trends, younger generations are increasingly interested in gardening as a leisure pursuit;

nearly 75% of new buyers of lawn and garden products are Millennials or Gen Z.

Their interest in natural and organic products is particularly benefiting products with a positive environmental profile.

The Freedonia Group reports in its 2020 Outdoor Living Products study that 82% of gardeners believe that they have a responsibility to be environmentally friendly.

• Sales and Distribution Networks .

We are a leading supplier to independent specialty retailers for the pet and lawn and garden supplies markets through our sales and distribution networks.

We believe our sales and distribution networks give us a significant competitive advantage over other suppliers.

These networks provide us with key access to independent pet specialty retail stores and retail lawn and garden customers that require two-step distribution facilitating:

We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Walmart and Petco and among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s, and the club and mass merchandise channels, as well as a leading supplier to independent pet and lawn and garden retailers in the United States.

In fiscal 2021, Bell Nursery, was awarded Home Depot's Supplier Partner of the Year.

In fiscal 2020, our Garden segment was named the Walmart 2020 Lawn and Garden Supplier of the Year and Central was recognized with Petco's Vendor Summit Award for Strategic Partnership in Aquatic Supplies.

Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2021 and 17% in fiscal 2020.

Home Depot, our second largest customer, represented approximately 15%, and 13% of our total company net sales in fiscal 2021 and 2020, respectively.

Lowe's, Costco and Petco are also significant customers, and together with Walmart and Home Depot, accounted for approximately 51% of our net sales in fiscal 2021 and 52% in fiscal 2020.

Leading Manufacturing, Sales and Distribution Network

We manufacture the majority of our branded products in our network of manufacturing facilities, located primarily in the United States.

In addition, some of our proprietary branded products are manufactured by contract manufacturers.

This includes an exclusive arrangement with a third party to manufacture one of our registered active ingredients, (S)-Methoprene.

We are a leading supplier to independent specialty retailers for the pet and lawn and garden supplies markets.

Our sales and distribution facilities are strategically placed across the United States to allow us to service both our mass market customers as well as independent specialty retail stores.

In addition, we operate facilities in the United Kingdom, Canada and China.

This network also supports distribution of many other manufacturers’ brands and combines these products with our branded products into single shipments, enabling us to serve our customers in an effective and cost-efficient manner.

We believe this gives us a competitive advantage over other suppliers as this network provides us with key access to independent pet specialty retail stores and retail lawn and garden customers that require two-step distribution, facilitating:

• acquisition and maintenance of shelf placement;

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• immediate exposure for new internally developed and acquired brands.

We plan to continue to utilize our team of dedicated sales people and our sales and logistics networks to expand sales of our branded products.

Business Strategy

Our objective is to grow revenues, profits and cash flows by enhancing our position as one of the leading companies in the U.S.

pet supplies and lawn and garden supplies industries.

We seek to do so by developing new products, increasing market share, acquiring businesses and working in partnership with our customers to grow the categories in which we participate.

To achieve our objective, we plan to capitalize on our strengths and favorable industry trends by executing on the following key strategic pillars to drive our growth:

Accelerate the Growth Momentum of Our Portfolio

We plan to continue to utilize our team of dedicated salespeople and our sales and logistics networks to expand sales of our branded products.

Strong and Experienced Leadership Team

Our leadership team is committed to delivering value for all our stakeholders and is comprised of a collection of highly tenured industry professionals, combining deep Central and relevant consumer products industry expertise.

We believe this diversity of perspectives and experiences creates an optimal foundation for our entrepreneurial business-unit led growth culture.

Our Central to Home Strategy reinforces our unique purpose to nurture happy and healthy homes and our ambition to lead the future of the pet and garden industries.

Our objective is to grow net sales, operating income and cash flows by developing new products, increasing market share, acquiring businesses and working in partnership with our customers to grow the categories in which we participate.

We run our business with a long-term perspective, and we believe the successful delivery of our strategy will enable us to create long-term value for our shareholders.

To achieve our objective, we plan to capitalize on our strengths and favorable industry trends by executing on five key strategic pillars to drive growth:

Build and Grow Brands that Consumers Love

To grow, we are seeking to develop more differentiated and more defensible new products.

We are doing so by continuously striving to get a deeper understanding of our consumers, including what products and features they desire and how they make their purchasing decisions.

We are increasing our overall investment in consumer insights, data analytics and research and development to achieve our innovation goals with a strong pipeline of new products.

We recognize that consumers are increasingly researching, as well as buying products online, and hence we are advancing our digital capabilities to create one-to-one customer relationships via personalization.

One key area is in marketing communication where we are working to better reach consumers at key points in their path to purchase with advanced capabilities in precision marketing, search engine optimization and social listening, to name a few.

We reinvest some of our annual cost savings in demand creation to help us drive sustainable organic growth and build market share.

Win with Winning Customers and Channels

We are building on our strong customer relationships by developing and executing winning category growth strategies.

We produce both branded products and private label products for our customers as well as distribute third-party brands that give our retail partners a breadth of selection from premium to value products.

Recent trends have shown that eCommerce channels, including pure-play, omnichannel and direct-to-consumer, are the preferred solutions for today's convenience-oriented consumers.

To address the changing consumer landscape, we are building out our eCommerce capabilities, while also ensuring we have the right policies, products, and programs to allow all channels to compete effectively.

Concurrently, we are optimizing our supply chain for high-demand eCommerce items to ensure customer and consumer availability requirements are met at optimal cost.

Finally, we are also investing in sales planning, net revenue management and price pack architecture.

Fortify the Central Portfolio

We are managing each business differentially, based on clearly articulated strategies that define the role of each business within our portfolio.

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We are complementing our organic growth in the pet and garden markets with acquisitions and joint ventures.

We seek to acquire businesses that are accretive to our growth.

Our M&A model is one of our key strengths.

Since 1992, we have completed over 50 acquisitions to create a company of approximately $2.7 billion in sales.

We are patient and disciplined value buyers, typically focused on opportunities in the garden and pet areas to build scale in core categories and enter priority adjacencies.

In the last three years, we have acquired four new businesses including entering into the live plant and outdoor seat cushion businesses.

However, we are open to any business which can leverage our capabilities and allow us to add value through our low-cost manufacturing capabilities, operating synergies, or strong distribution network.

We generally prefer to acquire businesses with proven, seasoned management teams, who are committed to stay with the acquired business after closing.

We have been successful in growing our acquisitions organically after acquiring them into our portfolio.

We continually review our businesses to ensure they can meet our expectations and, in some cases, have implemented strategies to reverse sub-par performance.

We are also committed to exiting businesses where we cannot find a path to profitability and have done so in the past, for example the portion of the pottery business we exited in fiscal 2019.

Keep the Core Healthy

• We are building on our strong customer relationships by developing and executing winning category growth strategies.

We produce both branded products and private label products for our customers as well as distribute third-party brands that give our retail partners an unparalleled breadth of selection of premium and value products.

We reinvest some of our annual cost savings in demand creation to help us drive sustainable organic growth and build market share.

• To grow, we are also seeking to develop more differentiated and more defensible new products, improve our sales capacity and respond to channel shifts.

We are doing so by continuously striving to get a deeper understanding of our consumers, including what products and features they desire and how they make their purchase decisions.

We are increasing our overall investment in consumer insights and research and development in order to achieve our innovation goals with a strong pipeline of new products.

Build Digital Capabilities for Competitive Advantage and a Compelling Consumer Experience

• We are building our eCommerce capabilities by ensuring we have the right policies, products, and programs to allow all channels to compete effectively.

We recognize that consumers are increasingly researching, as well as buying products on-line, and hence we are advancing our digital capabilities to create one-to-one customer relationships via personalization.

One key area is in marketing communication where we are working to better reach consumers at key points in their path to purchase with advanced capabilities in search engine optimization, reputation management and social listening to name a few.

Concurrently, we are optimizing our supply chain for high-demand eCommerce items to ensure customer and consumer availability requirements are met at optimal cost.

Finally, we are also expanding our data analytics capability to improve and accelerate business insight and data-driven decision-making.

In a marketplace that is moving very quickly, fast decision-making is important to gaining a competitive advantage.

Drive Cost S a vings and Productivity Improvements to Fuel Growth

Our M&A priorities are to build scale in core categories, enter priority adjacencies and enhance key capabilities.

We generally seek growth and margin accretive, brand-focused companies with talented management teams.

In 2020, to further support our M&A strategy we established Central Ventures, a $20 million venture fund.

Our objective is to partner with leading entrepreneurs and innovators in the garden and pet industries and leverage our capabilities to accelerate growth.

The fund is primarily focused on three emerging growth areas across the pet and garden industries:

sustainability, health and wellness, and digitally connected products and services.

Reduce Cost to Improve Margins and Fuel Growth

Optimizing our supply chain footprint is a priority as we seek to become more efficient and cost-effective.

Having the right facilities in the right locations is critical to both lowering costs and enabling our businesses to meet the growth demands of our existing and new customers, from both our legacy and acquired businesses.

In addition, while we value being a decentralized company, we believe we have significant opportunities to improve our performance by driving processes and programs to allow us to align for scale and share best practices across our business units.

Attract, Retain and Develop Exceptional Employees

• We believe our approximately 6,300 employees work at Central because they love the categories in which we operate and that creates a passionate and effective group.

We also have a strong leadership team representing a mix of successful entrepreneurs and classically trained consumer products executives.

We strive to make Central a great place to work embracing diversity and inclusion.

We place an emphasis on helping our employees develop their skills and focus on succession planning to ensure we can grow sustainably year-after-year.

Products – General

The following table indicates each class of similar products which represented approximately 10% or more of our consolidated net sales in the fiscal years presented (in millions).

Category 2020 2019 2018

Other pet products $ 705.2 $ 613.4 $ 606.7

Other garden products 607.6 560.8 445.7

Other manufacturers' products 600.7 504.5

Dog & cat products 502.1 452.1 445.1

Controls & fertilizer products 279.9 252.2 263.6

Total $ 2,695.5 $ 2,383.0 $ 2,215.4

Having the right facilities in the right locations is critical to both lowering costs and enabling our businesses to meet the demands of our existing and new customers, from both our legacy and acquired businesses.

We have already consolidated some of our dog and cat treat and toy businesses as well as numerous garden manufacturing facilities.

In addition, while we value being a decentralized company, we believe we have significant opportunities to improve our performance by driving processes and programs that allow us to align for scale and share best practices across our business units.

Strengthen Our Entrepreneurial Business-Unit Led Growth Culture

We believe our employees work at Central because they love our categories and that creates a passionate and effective group.

We strive to make Central a great place to work that embraces diversity and inclusion.

To achieve this, we implemented a Diversity & Inclusion council and introduced our diversity and inclusion strategy, which reflects our dedication to making meaningful progress in the areas where we can have the most impact including mentorship, leadership development, recruiting and employee education.

We further refreshed our company values.

Created by leaders across the company, our values are the cornerstone of our culture, and they are at the root of every decision we make – we call them “The Central Way.” We believe having a strong set of values provides a foundation for employees and strengthens how we all work together.

They comprise six simple values:

“We do the right thing.” ”We strive to be the best.” “We are entrepreneurial.” “We win together.” “We grow every day.” and “We are passionate.”

We are one of the leading marketers and producers of pet supplies in the United States.

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We operate primarily in the pet supplies segment of the industry as well as in the live fish and live small animal categories.

This segment includes:

products for dogs and cats, including edible bones, premium healthy edible and non-edible chews, rawhide, toys, pet beds, pet carriers, grooming supplies and other accessories;

products for birds, small animals and specialty pets, including cages and habitats, toys, chews, and related accessories;

The pet supplies segment includes:

products for dogs and cats including edible bones, premium healthy edible and non-edible chews, rawhide, toys, pet beds, pet containment, grooming supplies and other accessories;

products for birds, small animals and specialty pets including cages and habitats, toys, food and chews and related accessories;

animal and household health and insect control products;

products for fish, reptiles and other aquarium-based pets, including aquariums, furniture and lighting fixtures, pumps, filters, water conditioners and supplements, and information and knowledge resources;

and products for horses and livestock.

The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2019 was estimated by Packaged Facts and the pet industry to have been approximately $101 billion.

According to Packaged Facts, the pet industry is expected to increase at approximately 4% per year through 2025.

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 $28 billion.

products for fish, reptiles and other aquarium-based pets

including aquariums, terrariums, furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources;

as well as products for equine and livestock.

The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2021 was estimated by Packaged Facts to have been approximately $117 billion.

We expect the industry to continue to grow from that foundation.

Based on Packaged Facts estimates for 2021, we estimate the annual retail sales of the pet supplies, live animal and treats and chews markets in the categories in which we participate to be approximately $33 billion.

According to Packaged Facts, the U.S.

pet supplies market is highly fragmented with approximately 2,500 manufacturers, consisting primarily of small companies with limited product lines.

The majority of these manufacturers do not have a captive sales and logistics network and must rely on us or other independent distributors to supply their products to regional pet specialty chains and independent retailers.

The pet food and supplies industry retail channel also remains fragmented with only two national pet specialty retailers, PetSmart and PETCO and over 14,000 independent pet supply stores and smaller pet chains as well as club and mass merchandise stores in the United States.

eCommerce has impacted multiple brick & mortar channels but none has slipped faster or further than pet specialty chains which slipped to 22% in 2019 from 24% in 2018.

eCommerce was a primary driver of the pet market totaling 22% of pet products in 2019.

However, due to the pandemic, Packaged Facts expects that total to increase further.

The pet specialty channel is feeling pressure from both eCommerce and mass merchandisers with mass-market retailers benefiting from "mass premiumization" which is the trend of formerly exclusive pet food brands in supermarkets and mass merchandisers, according to Packaged Facts.

These mass retailers are bolstering their pet business with prescription pet medications and pet specialty retailers are continuing to add veterinary and non-medical services to battle the eCommerce trends.

Proprietary Branded Pet Products

Our principal pet supplies categories are dog and cat, aquatics, bird and small animal, wild bird feed, live fish and small animal, and animal health products.

Our dog and cat category, featuring the brands Nylabone, Four Paws, Cadet, Dallas Manufacturing Company (DMC ™ ), K&H Pet Products, TFH Publications, AvoDerm, Pinnacle, Pet Select and Mikki ® , is an industry leader in manufacturing and marketing premium edible and non-edible chews, interactive toys, natural dog and cat food, grooming supplies and pet care print and digital content.

• Nylabone is primarily a U.S.

manufacturer of innovative, high-quality dog chew toys, Nubz ® and Healthy Edibles ® long-lasting edible dog chews and NutriDent ® dental chew treats designed to meet the chewing needs of any dog.

• IMS is a supplier of premium bull sticks, rawhide and other natural dog chews and treats for dogs under the Cadet brand.

• Four Paws is a leading supplier across several pet care categories including Magic Coat ® grooming products and Wee Wee ® training and waste management solutions.

• Pet Home Essentials combines our acquisition of DMC, the industry-leading dog and cat bed company and supplier to many of the largest retailers for private label and branded bedding, and our acquisition of K&H, a producer of premium pet supplies and the largest marketer of heated pet products in the country.

• TFH Publications is an authoritative source of the most comprehensive educational books and digital content for the care of companion animals.

• Breeder’s Choice, featuring the Pinnacle and AvoDerm brands, is a manufacturer of natural pet food for our own brands, other parties and private label.

Aquatics and Reptile.

We are a leading supplier of aquariums and related fixtures and furniture, water conditioners and supplements, sophisticated lighting systems and accessories featuring the brands Aqueon, Zilla, Interpet, Coralife and Blagdon ® .

Small Animal and Bird.

We are a leading marketer and producer of supplies and pet food for small animals, pet birds, and wild birds.

We offer a full range of products including species specific diets, treats, habitats, bedding, hay and toys under the Kaytee, Forti-Diet ® , Critter Trail ® and C&S Products ® brands.

The majority of these manufacturers do not have a captive sales and logistics network and rely on us or other independent distributors to supply their products to regional pet specialty chains and independent retailers.

The pet food and supplies industry retail channel also remains fragmented with only two national pet specialty retailers, Petco and PetSmart and approximately 14,000 independent pet supply stores and smaller pet chains as well as club and mass merchandise stores in the United States.

As a result of the pandemic-accelerated consumer race online, eCommerce surged to 30% of total pet food, treats and non-food pet supplies sales in 2020.

The pet specialty channel is feeling pressure from both online and mass merchandisers with mass-market retailers benefiting from "mass premiumization," the trend of formerly exclusive pet food brands in supermarkets and mass merchandisers.

As a result, pet specialty retailers are continuing to add veterinary and non-medical services to battle the eCommerce trends and mass retailers are bolstering their pet business with prescription pet medications.

Long-Term Pet Industry Characteristics

We believe the U.S.

pet supplies market will grow over the long term due to favorable demographic and leisure trends.

According to the Packaged Facts U.S.

Pet Market Outlook, 2021-2022, the pet ownership rate of U.S.

households is expected to grow over 4% in 2021 on the 2020 base.

A 2021 Packaged Facts survey found that over 95% of U.S.

dogs or cat owners and 84% of other pet owners view their pet as family.

A Packaged Facts survey of pet owners in February 2021 reported that 23% had acquired dogs, 19% had acquired cats and 11% had acquired other animals in the prior 12 month period.

Pet adoption and pet acquisition trends in 2021 have remained positive, and pet adoption has been higher among the younger generations, with 25% of Millennials and Gen Z increasing their pet ownership compared with 19% Gen X and only 9% of Baby Boomers.

The pet supplies market benefited from the addition of millions of pets, the heightened focus on health and wellness among pet owners, the rush of online shopping and adaptability of consumers, marketers, retailers and service providers to meet every pet's healthcare needs.

The pandemic has elevated concerns over human and pet health and wellness and over 80% of pet owners agree that their pet's health and well-being are important to them.

Branded Pet Products

Our principal pet supplies categories are dog and cat supplies, dog treats and chews;

aquatics and reptile supplies, small animal and pet bird supplies, animal health products as well as live fish and small animals.

Our Nylabone brand is one of the leading brands in dog toys, Katyee is a leader in pet birds and small animal, Aqueon is one of the leading brands in aquatics and Comfort Zone in cat calming.

In addition, we operate our Arden Companies ® outdoor cushion business in the pet segment due to synergies in sourcing, manufacturing and logistics with our pet bedding business.

We continuously seek to introduce new products, both as complementary extension of existing product lines and in new product categories.

In fiscal 2021, we launched our new Comfort Zone Opticalm ™ diffuser, helping cats feel safe and happy.

We also launched a patented aquarium kit with smart clean technology under our Aqueon brand.

It combines the easy to clean function fish keepers need with the styling and design they want.

We introduced Field+Forest by Kaytee premium small animal food, hay and hay rolls with wholesome ingredients, carefully curated from nature's fields and forests to support a healthy diet.

Over the last two years, many of our pet products have won industry awards.

In fiscal 2021, Nylabone won Chew Toy Product of the Year in the 2020 Pet Independent Innovation Awards.

At SuperZoo 2021, Farnam earned Top Honors in Equine for its Apple Elite electrolyte pellets.

Kaytee's Superfood Treat Stick won an Editors choice award from Pet Product News International.

Eight of our pet brands (Aqueon, Coralife ®, Four Paws, K&H, Kaytee, Magic Coat ® , Nylabone and Zilla) were recognized by Newsweek in August 2021 as America's Best Petcare Brands.

In fiscal 2020, Kaytee won an Editor's Choice Award from Pet Product News International for Kaytee CritterTrail ® Super Habitat and a Pet Business Industry Recognition Award in the Small Animal Food category for Kaytee Food from the Wild.

Our dog and cat category, featuring brands such as Cadet, DMC ™ , Four Paws, Healthy Edibles ® , K&H, Magic Coat, Nylabone, Nubz ® , NutriDent ® among others, is an industry leader in manufacturing and marketing premium edible and non-edible chews, interactive toys, grooming supplies and pet beds, pet containment, training and waste management solutions.

Aquatics and Reptile Supplies.

We are a leading supplier of aquariums and terrariums as well as related fixtures and furniture, water conditioners and supplements, water pumps and filters, sophisticated lighting systems and accessories featuring the brands Aqueon, Blagdon ® , Coralife, Interpet ® and Zilla.

Small Animal and Bird Supplies.

We are a leading manufacturer of supplies and pet food for small animals, pet birds and wild birds.

We offer a full range of products including species specific diets, treats, habitats, bedding, hay and toys under brands such as Kaytee, Critter Trail, C&S Products ® , and Field+Forest by Kaytee.

Many of our branded wild bird mixes are treated with a proprietary blend of vitamins and minerals.

Our brands are some of the most widely recognized and trusted brands for birds and small animals.

Animal Health.

We are a leading marketer and producer of mosquito and other insect control products produced by Wellmark International and sold primarily under the Adams, Altosid ® , Centynal ™ , ClariFly ® IGR, Comfort Zone, Diacon ® , Pre Strike and Extinguish ® brand names.

Wellmark is the only domestic producer of (S)-Methoprene, which is an active ingredient to control mosquitoes, fleas, ticks, ants and mites in many professional and consumer insect control applications.

Animal Health (Health & Wellness, Equine and Professional).

We supply calming products under the Comfort Zone brand as well as flea and tick controls under the Adams ® brand.

We further offer innovative products for horses in the fly control, supplements, grooming, deworming, wound care, leather care and rodenticides categories.

Our portfolio of brands for equine includes Farnam, Horse Health ™ Products, Vita Flex ® , Just One Bite ® and Rodentex ™ .

These brands, along with sub-brands including Bronco ® , Endure ® , IverCare ® , Horseshoer’s Secret ® , Red Cell ® , Sand Clear ™ , Super Mask ® II and Vetrolin ® position us as a leader in these categories.

Moreover, we are a leading supplier of insect control products sold into various markets.

We are the only domestic producer of (S)-Methoprene, which is an active ingredient used to control mosquitoes, flies, fleas, beetles and ants in many professional and consumer insect control applications.

Our products are sold primarily under the Starbar ® and Zoëcon ® family of brands, as well as standalone brands such as Altosid ® , Centynal ™ , ClariFly ® IGR, Diacon ® , Essentria ® and Extinguish ® .

We also sell (S)-Methoprene to manufacturers of other insect control products, including Frontline Plus.

In addition, we are a leading manufacturer and marketer of innovative products for horses in the fly control, supplements, grooming, deworming, wound care, leather care & rodenticides categories.

Our portfolio of brands includes Farnam, Horse Health ™ Products, Vita Flex ® , Just One Bite ® and Rodentex ™ .

These brands, along with a diverse stable of sub-brands (including IverCare ® , Bronco ® , Super Mask ® II, Endure ® , Red Cell ® , Horseshoer’s Secret ® and Vetrolin ® ), position us as a leader in these categories.

Live Fish and Small Animals .

Segrest is a leading wholesaler of aquarium fish and small animals to pet specialty and mass merchandiser stores in the U.S.

Segrest and SunPet are leading wholesalers of aquarium fish and plants, reptiles and small animals to pet specialty and mass merchandiser stores as well as public aquariums and research institutions.

Outdoor cushions .

We sell outdoor cushions as private label through the largest big box stores, as signature products through major retail stores and online, and as Arden branded outdoor fabrics.

Pet Sales and Distribution Network

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We also serve the professional market with insect control and health and wellness products for use by veterinarians, municipalities, farmers and equine product suppliers.

Costco Wholesale accounted for approximately 11% of our Pet segment's net sales in fiscal years 2020 and 2019.

PetSmart, PETCO, Walmart and Amazon are also significant customers.

Costco Wholesale accounted for approximately 11% of our Pet segment's net sales in fiscal year 2021 and 10% in fiscal year 2020.

Petco, Chewy, Walmart, PetSmart and Amazon are also significant customers.

To optimize our product placement and visibility in retail stores, our focused sales resources are segmented as follows:

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We collaborate closely with our customers to identify their needs, jointly develop strategies to meet those needs and deliver programs that include print, broadcast, direct mail and digital execution.

We continue to invest in talent, digital capabilities and eCommerce as these play a critical role in our ambition to lead in the pet segment.

Over the last two years, we have received a number of awards for customer service and marketing.

In fiscal 2021, the National Association of Container Distributors ("NACD") recognized Farnam's Vetrolin packaging with a bronze award.

In fiscal 2020, Central Life Sciences won two Silver Davey Awards, an international creative award focused exclusively on creative work, for Promotional:

Specialty Item - Vector Dealer Sales Kit and Print Campaign:

Business to Business - Zoëcon Print Advertising Campaign.

Also, Kaytee won a Packaged Design Award for Kaytee Food from the Wild from Graphic Design USA.

Pet Competition

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Garden Overview

We are a leading company in the consumer lawn and garden market in the United States and offer both premium and value-oriented branded products.

We market and produce a broad array of premium brands, including Pennington, The Rebels, AMDRO, Lilly Miller, Ironite, Sevin, and Over-N-Out.

We are a leader in the consumer lawn and garden consumables market in the United States and offer both premium and value-oriented branded products.

We also produce value brands at lower prices, including numerous private label brands.

In addition, our Garden segment operates a sales and distribution network that strategically supports its brands.

In addition, our Garden segment operates a manufacturing, sales and distribution network that strategically supports its brands.

Garden Industry Background

The garden industry includes consumables (fertilizer, pesticides, seed, growing media, mulch and products sold in bulk) as well as landscaping and decorative products such as pottery, outdoor cushions, wild bird and animal products, water features and lighting as well as arches/trellises.

The total lawn and garden consumables, decorative products, live plant and outdoor cushions and pillows industry in the United States is estimated by Packaged Facts, The Freedonia Group and TechNavio to have been approximately $33 billion in annual retail sales in 2018, including fertilizer, pesticides, growing media, seeds, mulch, other consumables, decorative products, live plants and 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 $30 billion.

The lawn and garden market is highly concentrated with most products sold to consumers through a number of distribution channels, including home centers, mass merchants, independent nurseries and hardware stores.

The garden industry includes consumables such as fertilizer, pesticides, growing media, seeds, mulch, wild bird products and live plants, and durables such as landscaping and decorative products including pottery, outdoor furniture, water features, lighting, arches and trellises.

The total lawn and garden consumables industry in the United States is estimated by Packaged Facts and The Freedonia Group to have been approximately $36 billion in annual retail sales in 2021, including fertilizer, pesticides, growing media, grass and other seeds, mulch and live plants.

We estimate the annual retail sales of the lawn and garden consumables market in the categories in which we participate to be approximately $33 billion.

The lawn and garden consumables market is highly concentrated with most products sold to consumers through a number of distribution channels, including home centers, mass merchants, independent nurseries and hardware stores.

Home and garden centers and mass merchants typically carry multiple premium and value brands.

According to the National Gardening Survey 2020, home centers are gaining share, estimated at 46%, and an increasing number of households are shopping online.

In 2019, about 6% of lawn and garden spending was conducted through the internet but internet spending, as a result of changes in response to the pandemic, at garden centers, home improvement and general brick and mortar retailers including buy online-pickup in store (BOPIS), is expected to increase.

Proprietary Branded Lawn and Garden Products

Our principal lawn and garden product lines are grass seed, wild bird feed, insect control products, lawn and garden care products, including fertilizers, decorative outdoor patio products, live plants and outdoor cushions and pillows.

Our Pennington brand is one of the largest in grass seed, pottery and wild bird feed, and our Amdro brand is a leading portfolio of control products.

Long-Term Garden Industry Characteristics

According to The Freedonia Group, lifestyle changes and shifts in demographics are creating new opportunities in gardening, and expects the industry to continue to grow.

The COVID-19 pandemic led to a spike in consumer interest in gardening as both a hobby and a food source.

A survey by Freedonia Group found that over the past 12 months through March 2021, 36% of consumers agree that they spent more time on outdoor projects while 26% of consumers planted a food garden because of the pandemic.

Among key outdoor living trends, millennials are increasingly interested in gardening as a leisure pursuit, with 70% of respondents indicating that they enjoy gardening.

They have become the nation's largest group of gardeners, representing 29% of all gardeners.

According to the National Association of Realtors, Millennials have become homeowners in large numbers;

a shift accelerated by COVID-19, remote work and a steady increase in income.

Their interest in natural and organic products is particularly benefiting products with a positive environmental profile.

The Freedonia Group reports that nearly three quarters of gardeners believe that they have a personal responsibility to be environmentally friendly .

Branded Lawn and Garden Products

Our principal lawn and garden consumables product lines are grass seed, vegetable, herb and flower seed, wild bird feed, insect control products, lawn and garden care products, including fertilizers, and live plants.

Our Pennington brand is one of the largest in grass seed, wild bird feed and birding accessories.

Ferry-Morse is a leader in vegetable, herb and flower seeds and seed starter packages, and our Amdro brand is a leading portfolio of control products.

We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.

In fiscal 2021, we relaunched Pennington Smart Seed ® lawn products with patent-pending fertilizer-enhanced seed coating to speed seed establishment and promote greener grass.

We also launched a variety of new bird feeders under our Pennington brand.

We expanded our live plants offering with small decorated holiday products and introduced plantlings delivered directly to the consumers.

We are a leading marketer, producer and distributor of lawn and garden weed, moss, insect and pest control products.

We sell these products under brands such as Amdro, Corry’s ® , Daconil ® , IMAGE, Knockout ™ , Lilly Miller ® , Moss Out ® , Over-N-Out ® , Rootboost ™ and Sevin as well as other private and controlled labels.

We are a leading marketer, producer and distributor of numerous varieties and mixtures of cool and warm season grass for both the residential and professional markets, as well as forage and wildlife seed mixtures.

We sell these products under the Pennington Seed, Pennington, Penkoted ® , Max-Q ® , ProSelect TM , Tournament Quality CM, MasterTurf ® , Rackmaster ® , The Rebels and Smart Seed ® brand names.

We sell these products under the Pennington brand along with several sub-brands including Lawn Booster, One Step Complete ® , Rackmaster ® , Slopemaster ® , Smart Seed, The Rebels ® and other brand names.

We also produce numerous private label brands of grass seed.

The Pennington grass seed manufacturing facilities are some of the largest and most modern seed coating and conditioning facilities in the industry.

We are the leading marketer, producer and distributor of wild bird feed, bird feeders, bird houses and other birding accessories in the United States.

These products are sold primarily under the Pennington brand name.

Many of our branded Pennington wild bird mixes are treated with a proprietary blend of vitamins and minerals.

An example is our Pennington brand mixes which are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds.

Fertilizers and Controls.

We are a leading marketer, producer and distributor of lawn and garden weed, moss, insect and pest control products and soil supplements and stimulants.

We sell these products under the AMDRO, Lilly Miller, Moss Out ® , Corry’s ® , IMAGE ® , Sevin, Over-N-Out, Rootboost ® , and Knockout ® brand names, as well as private label for Walmart and Lowe's.

We manufacture several lines of lawn and garden fertilizers and soil supplements, in granular and liquid form, under the Pennington, Alaska Fish Fertilizer ® , Pro Care, and Ironite brand names and other private and controlled labels.

We are a leading marketer and distributor of terra cotta pottery products in the United States sold under the Pennington name.

Additionally, Arden Companies ™ , which we fully acquired in February 2019, is a leading manufacturer and marketer of outdoor cushions and pillows in the United States.

These products are sold as private label through the largest big box stores, as signature products through major retail stores and online, and as branded outdoor fabrics.

We are the primary supplier of flowers and plants to Home Depot in the mid-Atlantic region.

These plants and flowers are sold by Bell Nursery, which we acquired in March 2018.

Vegetable, Herb and Flower Seed.

We are a leading provider of vegetable, herb and flower seeds and seed starter packages.

We sell these products under the American Seed ® , Ferry-Morse, Livingston ® , McKenzie ® Seed, Jiffy and other brand names.

We are the leading marketer, producer and distributor of wild bird feed, bird feeders, bird houses and other birding accessories.

These products are sold under the Pennington, Wild Delight ® and 3-D ® Pet Products brands.

Many of our branded wild bird mixes are treated with a proprietary blend of vitamins and minerals.

For example, our Pennington brand mixes are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds.

We are a leading marketer, producer and distributor of soil supplements and stimulants.

We manufacture several lines of lawn and garden fertilizers and soil supplements in granular and liquid form under the Alaska ® Fish Fertilizer, Ironite ® , Pennington, Dyna-Gro ® , Superthrive ® and Pro Care ® brand names and other private and controlled labels.

With Bell Nursery as well as Hopewell Nursery, which we acquired in January 2021, we are the primary supplier of superior quality flowers, shrubs and other plants to Home Depot in the Northeast and mid-Atlantic region, producing and shipping tens of millions of annuals and perennials each year.

In addition, we offer items we don’t grow, such as orchids and indoor plants.

Garden Sales and Distribution Network

Our sales and distribution network exists primarily to promote our proprietary brands and provides us with key access to retail stores for our branded products, acquisition and maintenance of premium shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products, immediate exposure for acquired brands and comprehensive and strategic information.

The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling over 4,000 customers to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.

The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling over 4,400 customers and over 38,000 stores to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.

Garden Sales and Marketing

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Our customers include retailers, such as mass merchants, home improvement centers, independent lawn and garden nurseries, drug and grocery stores, and professional end users.

Sales to Walmart represented approximately 28%, 28% and 29%, sales to Lowe’s represented approximately 24%, 22% and 21%, and sales to Home Depot represented approximately 31%, 29% and 27% of our Garden segment’s net sales in fiscal 2020, 2019 and 2018, respectively.

Sales to Home Depot represented approximately 33% and 32%, sales to Walmart represented approximately 26% and 27% and sales to Lowe’s represented approximately 18% and 23% of our Garden segment’s net sales in fiscal 2021 and 2020, respectively.

To maximize our product placement and visibility in retail stores, we market our products through the following four complementary strategies:

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• retail sales and logistics network, which provides in-store training and merchandising for our customers, especially during the prime spring and summer seasons;

• dedicated account-managers and sales teams located near and dedicated to serve several of our largest customers;

• dedicated account-managers and sales teams located near several of our largest customers;

• selected independent distributors who sell our brands.

We continue to invest in talent, digital capabilities and eCommerce as these play a critical role in our ambition to lead in the garden segment.

Garden Competition

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Our lawn and garden products compete against national and regional products and private label products produced by various suppliers.

Our turf and forage grass seed products, fertilizers, pesticides and combination products compete principally against products marketed by The Scotts Miracle-Gro Company (“Scotts”).

Our turf and forage grass seed products, fertilizers, pesticides and combination products compete principally against products marketed by The Scotts Miracle-Gro Company.

In addition, Spectrum Brands and S.C.

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are strong competitors in yard and household insecticides.

Our Garden segment competes primarily on the basis of its strong premium and value brands, quality, service, price and low-cost manufacturing.

Our Garden segment competes primarily based on its strong premium and value brands, quality, service, price and low-cost manufacturing.

Our Garden segment’s sales and distribution network also competes with a large number of distributors, with competition based on price and service.

While demand for our pet products is generally balanced over the year, our business in the lawn and garden business is highly seasonal with approximately 67% of net sales occurring in our second and third quarter combined.

While demand for our pet supplies products except for pest controls is generally balanced over the year, our lawn and garden consumables business is highly seasonal with approximately two thirds of net sales occurring in our second and third quarter combined.

We build inventory based on expected demand and typically fill customer orders within a few days of receipt, so the backlog of unfilled orders is not material.

Funding for working capital items, including inventory and receivables, is normally sourced from operating cash flows and short-term borrowings under our revolving credit facility.

For additional information on our liquidity, working capital management, cash flow and financing activities, see Liquidity and Capital Resources, and Note 11, Long-Term Debt, appearing later in this 10-K filing.

Manufacturing

We manufacture the majority of our branded products in 43 manufacturing facilities, located primarily in the United States.

In addition, certain of our proprietary branded products are manufactured by contract manufacturers.

This includes an exclusive arrangement with a third party to manufacture one of our registered active ingredients, (S)-Methoprene.

We purchase most of our raw materials from a number of different suppliers.

We purchase one of the raw materials used to manufacture (S)-Methoprene from a single source of supply.

Sources and Availability of Raw Materials

We purchase most of our raw materials from multiple suppliers.

We obtain one of the raw materials used to manufacture (S)-Methoprene from a single source of supply.

We maintain an inventory of this raw material (in addition to our (S)-Methoprene inventory) to reduce the possibility of interruption in the availability of (S)-Methoprene, since a prolonged delay in obtaining (S)-Methoprene or this raw material could result in a temporary delay in product shipments and have an adverse effect on our Pet segment’s financial results.

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Although we have never experienced a severe interruption of supply, we are exposed to price risk with respect to the portion of our supply which is not covered by contracts with a fixed price.

Sales and Distribution Network

Our distribution network consists of 55 facilities strategically placed across the United States, one facility in the United Kingdom, one facility in Canada and two facilities in China to allow us to service both our mass market customers as well as our independent specialty retail stores for our branded products.

Significant Customers

Walmart, our largest customer, represented approximately 17% of our total company net sales in each of the fiscal years 2020, 2019 and 2018.

Home Depot, our second largest customer, represented approximately 13%, 12% and 11% of our total company net sales in fiscal 2020, 2019 and 2018, respectively.

Lowe's, Costco and PetSmart are also significant customers, and together with Walmart and Home Depot, accounted for approximately 52% of our net sales in fiscal 2020, 49% in fiscal 2019 and 48% in fiscal 2018.

The COVID-19 pandemic has caused a significant increase in demand for pet supplies and garden consumables.

This has caused strain on our supply chain network and its ability to meet such demand.

For information regarding the impact of changes in commodity prices, see “Risk Factors – The COVID-19 pandemic has impacted how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain” and “Risk Factors – Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that has had, and could have, a negative impact on us” in Item 1.A.

Patents, Trademarks and Other Proprietary Rights

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The success of certain portions of our business, especially our animal health operations, partly depends on our ability to continue to maintain trade secret information which has been licensed to us, and to keep trade secret information confidential.

Along with patents, active ingredient registrations, end use product registrations and trade secrets, we own a number of trademarks, service marks, trade names and logotypes.

Along with patents, active ingredient registrations, end use product registrations and trade secrets, we own numerous trademarks, service marks, trade names and logotypes.

Many of our trademarks are registered but some are not.

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Except for approximately 60 employees at a facility in Puebla, Mexico, none of our employees are represented by a labor union.

Our non-seasonal full-time workforce is relatively stable with an attrition rate of 21% in fiscal 2020.

We believe that attracting, developing and retaining our employees is an important component to our continued success.

The attrition rate of our non-seasonal full-time and part-time workforce was 31% in fiscal 2021.

We believe that attracting, developing and retaining a diverse and inclusive workforce is an important component to our continued success.

We have taken several steps over the past 18 months to further enhance our diversity including the creation of a diversity and inclusion council.

We consider gender, nationality, ethnicity, age, educational and professional background, among other things, in our recruiting and internal promotion decisions.

Women serve in several key leadership roles including General Manager Central Health & Wellness, President Segrest, Senior Vice President Human Resources, Vice President FP&A, Vice President Accounting Operations, Vice President CSR & Sustainability, Vice President Consumer Insights & Analytics and Vice President Investor Relations.

It is our belief that our employees are part of our organization because, among other things, they embrace the business categories in which we operate.

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In addition, we provide an annual 401k profit-sharing bonus program and a separate bonus program for eligible employees which is based on the success of our businesses as measured by designated performance metrics and which also recognizes individual performance contributions.

Another component of our overall compensation program is long-term equity offered both through its annual equity incentive program for eligible employees and through individual grants.

Another component of our overall compensation program is long-term equity which is offered through annual grants and through individual grants.

We use such long-term equity grants as a means of attracting and retaining key employees to reward performance and to give these employees a vested interest in the success of the Company.

Developing our internal human resources so that they can assume key roles within the Company is an important strategic priority for the Company.

Developing our employees so that they can assume key roles within Central is an important strategic priority for us.

We offer a variety of programs and resources to train and enhance the skill set of our workforce, including the subsidizing pursuit of college and advanced degrees for eligible employees.

Towards this goal of encouraging internal development, we also engage in regular discussions around succession planning and talent development at all levels of our company.

Towards this goal of encouraging internal development, we also engage in regular discussions around succession planning and talent development at all levels of the Company.

Our Board has frequent contact with business leaders within the organization and participates actively in the succession planning process.

Our Senior Vice-President of Human Resources reports directly to the Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.

In evaluating potential acquisitions, an important consideration is the quality of management of the target company and our ability to obtain sufficient assurance that such management will remain with the Company as needed if and after we acquire the business.

Our Senior Vice President Human Resources reports directly to the Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.

In evaluating potential acquisitions, an important consideration is the quality of management of the target company and our ability to obtain sufficient assurance that such management will remain with Central as needed if and after we acquire the business.

We are dedicated to the safety of our workforce and conduct periodic safety audits as part of our ongoing safety program to ensure that all our facilities are safe and are operated in an appropriate manner.

We continually assess our incident reports to facilitate the implementation of preventive measures and to identify steps that should be taken to protect our employees and mitigate potential risks.

These efforts have contributed to improved safety performance whereby recordable incidents have decreased by approximately 15% in fiscal 2020 compared to fiscal 2019.

In fiscal 2021, despite the more challenging work environment due to COVID-19, we were able to improve our recordable incident rate by 7% compared to fiscal 2020.

In February 2021, for the first time in the Company's history, Central was named as one of Forbes 2021 America’s Best Midsize Employers.

Environmental and Regulatory Considerations

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Fertilizer products are also subject to state Department of Agriculture registration and foreign labeling regulations.

Grass seed is also subject to state, federal and foreign labeling regulations.

Grass and other seed are also subject to state, federal and foreign labeling regulations.

The Food Quality Protection Act ("FQPA") establishes a standard for food-use pesticides, which is a reasonable certainty that no harm will result from the cumulative effect of pesticide exposures.

Under this Act, the EPA is evaluating the cumulative risks from dietary and non-dietary exposures to pesticides.

The pesticides in our products, which are also used on foods, will be evaluated by the EPA as part of this non-dietary exposure risk assessment.

The pesticides in our products, which are also used on foods, are evaluated by the EPA as part of this non-dietary exposure risk assessment.

In addition, the use of certain pesticide and fertilizer products is regulated by various local, state, federal and foreign environmental and public health agencies.

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Various federal, state and local laws, including the federal Food Safety Modernization Act (“FSMA”), also regulate pet food products and give regulatory authorities the power to recall or require re-labeling of products.

Several new FSMA regulations became effective in recent years.

Several new FSMA regulations became effective in

recent years.

We believe we are in substantial compliance with all currently effective requirements and are taking steps to ensure that we are in compliance with all regulatory requirements going forward.

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Name Age Position

Brown 79 Chairman

Brown 80 Chairman of the Board

Cofer 53 Chief Executive Officer

Hanson 56 President, Pet Consumer Products

Nicholas Lahanas 52 Chief Financial Officer

Nicholas Lahanas 53 Senior Vice President, Chief Financial Officer

Walker 63 President, Garden Consumer Products

George Yuhas 69 General Counsel and Secretary

Brown has been our Chairman from 1980 to 2018 and since October 2019.

From 1980 to June 2003 and from October 2007 to February 2013, Mr.

Brown served as our Chief Executive Officer.

From 1980 to June 2003 and from October 2007 to February 2013, he served as our Chief Executive Officer.

From 1977 to 1980, Mr.

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Cofer became our Chief Executive Officer in October 2019.

Cofer is a 30-year veteran of the Consumer Products industry.

Most recently, from 2016 to 2019 Mr.

Cofer served as Executive Vice President and Chief Growth Officer of Mondelez International.

Previously Mr.

Cofer served as Executive Vice President and President of Asia Pacific, Eastern Europe, Middle East & Africa of Mondelez.

He is a 30-year veteran of the Consumer Products industry.

Most recently, from 2016 to 2019 he served as Executive Vice President and Chief Growth Officer of Mondelez International.

Previously he served as Executive Vice President and President of Asia Pacific, Eastern Europe, Middle East & Africa of Mondelez.

Prior to that, Mr.

Cofer served in senior-level operating roles at Kraft Foods, Inc., including Executive Vice President and President of European Region, President Oscar Mayer Foods and President Kraft Pizza Company.

Cofer served in senior-level operating roles at Kraft Foods, Inc., including Executive Vice President and President of European Region, President of Oscar Mayer Foods and President of Kraft Pizza Company.

Hanson became our President of Pet Consumer Products in August 2019 after serving as a board member since 2018.

From 2015 - 2017, Mr.

Hanson served as Chief Executive Officer of Oasis Brands, Inc.

From 2015 to 2017, he served as Chief Executive Officer of Oasis Brands, Inc.

Beginning in 2013, Mr.

Hanson consulted for consumer products companies in the areas of strategy, operations and mergers and acquisitions.

Prior to that, Mr.

Hanson had over 16 years at ConAgra, where he served in a variety of senior-level roles including President of its Frozen Foods Division from 2008 to 2012 and Senior Vice President in Sales from 2006 to 2008.

Prior to that, he had over 16 years at ConAgra, where he served in a variety of senior-level roles including President of its Frozen Foods Division from 2008 to 2012 and Senior Vice President in Sales from 2006 to 2008.

Nicholas "Niko" Lahanas .

Lahanas became our Chief Financial Officer in May 2017.

Lahanas served as Senior Vice President of Finance and Chief Financial Officer of our Pet segment from April 2014 to May 2017 and, Vice President of Corporate Financial Planning & Analysis from October 2011 to March 2014.

He served as Senior Vice President of Finance and Chief Financial Officer of our Pet segment from April 2014 to May 2017 and Vice President of Corporate Financial Planning & Analysis from October 2011 to March 2014.

Lahanas was the Director of Business Performance from March 2008 to October 2011, where his primary focus was on business unit profitability, and was a Finance Manager from October 2006 to March 2008 in our Garden segment.

Prior to joining Central, he worked in private equity and investment banking.

Walker became our President of Garden Consumer Products in 2017 and has responsibility for Central's branded garden business including sales, marketing operations, the controls and fertilizer, grass seed and vendor partner business units, as well as the retail sales & service team and garden distribution.

Prior to his promotion, he served as Executive Vice President and General Manager - Garden Branded Business from 2014 to 2017 and began with Central as Senior Vice President - Garden Sales in 2011.

Prior to joining Central, Mr.

Lahanas worked in private equity and investment banking.

Walker held increasingly senior positions for 13 years with Spectrum Brands and for 17 years with The Gillette Company's Duracell North American Group.

George Yuhas .

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business