What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-11-22 compared with 2021-11-23 · 96 added, 99 removed, 214 unchanged (48% of the section changed)

11 unchanged sentences

Risks Affecting our Business

Inflation, rising interest rates, economic uncertainty, including a potential recession, and other adverse macro-economic conditions may harm our business.

Our revenues and margins are dependent on various economic factors, including rates of inflation, interest rates, the potential of an upcoming economic recession, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact consumer spending.

During both fiscal 2021 and fiscal 2022, we experienced high levels of inflation resulting in significant cost increases in many parts of our business, including input costs, labor costs, and fuel costs.

We expect the inflationary environment to continue during fiscal 2023 and some economist predict that the U.S.

economy may enter an economic recession.

If we are unable to pass through rising input costs and raise the price of our products, or consumer confidence and purchasing weakens, we may experience organic sales declines and gross margin and operating income declines.

High energy prices could adversely affect our operating results.

During fiscal 2021 and fiscal 2022, energy prices increased substantially and have remained elevated, which resulted in increased fuel costs for our businesses and increased raw materials costs for many of our products, and may continue to rise during fiscal 2023.

Continued high energy prices in the future could adversely affect consumer spending and demand for our products and increase our operating costs, both of which would reduce our sales and operating income.

A decline in consumers’ discretionary spending or a change in consumer preferences during economic downturns could reduce our sales and harm our business.

Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including the current inflationary environment, rising interest rates, the potential for an upcoming economic recession, other general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels.

Any material decline in consumer discretionary spending during the economic downturn could reduce our sales and harm our business.

Unfavorable economic and market conditions may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.

The success of our business also depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences.

Our failure to timely identify or effectively respond to changing consumer tastes, preferences, spending patterns and lawn and garden and pet care needs could adversely affect the demand for our products and our profitability.

The COVID-19 pandemic has impacted how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The outbreak of the COVID-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 customers, suppliers, and consumers.

The World Health Organization’s March 2020 declaration of the COVID-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 affected and may continue to 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 but overall, we believe that the pandemic has driven consumer demand for our products and higher sales.

We have also seen a rapid increase in demand in the eCommerce 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 from time to time 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 impact from a plant closure to date.

At some of our facilities, we have experienced reduced productivity and increased employee absences, which we expect to continue during the current pandemic.

The pandemic and increase in demand for our products 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 we have experienced increased operational and logistics costs.

We may experience additional disruptions in our supply chain as the pandemic continues, though we cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate 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 for two private-company investments in our third fiscal quarter ended June 27, 2020, 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 and rates of vaccination, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, independent contractors and customers and consumers.

The outbreak of the global COVID-19 pandemic in fiscal 2020 has impacted our day-to-day operations and the operations of the vast majority of our customers, suppliers, and consumers.

While the availability and accessibility of vaccines and boosters in the U.S.

reduced the impact of COVID-19 in fiscal 2022, COVID-19 and its new variants may continue to affect how we and our customers are operating our businesses and overall demand for our products.

We have experienced varying impacts to our Garden and Pet businesses due to COVID-19.

Many of our product categories in both Pet and Garden benefited from increased pet adoption during the pandemic and stay at home orders and remote working that positively impacted demand for our products.

We have also seen an increase in demand in the eCommerce channel.

The pandemic and increase in demand for our products created operational challenges for our distribution network and impacted our ability to meet our normal fill rate standards.

Our supply chain was also impacted by the rapid increase in demand, and we experienced increased operational and logistics costs.

During fiscal 2022, we increased inventories to mitigate the impact of supply chain shortages and improve fill rates, which increased carrying costs.

We may experience additional disruptions in our supply chain if the pandemic worsens, though we cannot reasonably estimate the potential impact or timing of those events.

As fiscal 2022 progressed, the impact of the pandemic lessened and high inflation continued, negatively impacting consumer purchasing behavior and resulting in higher levels of inventory at our customers and at Central.

If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

As noted above, many of our product categories in both Pet and Garden have benefited from increased pet adoption during the pandemic and stay at home orders and remote working that positively impacted demand for lawn and garden products.

As the pandemic lessens and consumers return to more normal purchasing patterns, demand for product categories which benefited from the COVID-19 pandemic could be adversely impacted, which could negatively impact our financial results.

The COVID-19 pandemic may also have the effect of heightening many of the other risks identified elsewhere in this “Risk Factors” section.

We are in the process of implementing our Central to Home strategy, which could result in increased expenses over the next few years .

In fiscal 2020, we embarked upon a company-wide strategic review led by our Chief Executive Officer to develop our Central to Home strategy, which consists of a comprehensive series of organizational and operational initiatives intended to build and grow our consumer brands, create a leading eCommerce platform and strengthen our relationships with key customers, drive a strong portfolio strategy, reduce costs to improve margins and fuel growth and strengthen our entrepreneurial, business unit-led growth culture.

We expect to continue to implement these initiatives over the next several years.

We anticipate incurring substantial costs relating to this strategy in each of the next several years.

There can be no assurance that we will be able to successfully execute our Central to Home strategic initiatives or that we will be able to do so within the anticipated time period.

During the process of implementation, we will be making substantial investments in our business and will incur substantial transitional costs.

These investments and transitional costs may adversely affect our operating results.

Our operating results and cash flow are susceptible to fluctuations.

1 unchanged sentence

Factors that may contribute to this variability include:

• high inflation and the ability to take pricing actions to mitigate high input costs, including for commodities;

• the uncertain macro-economic environment, including rising interest rates and a potential recession, and the impact either could have on consumer discretionary spending;

• seasonality and adverse weather conditions;

• fluctuations in prices of commodity grains and other input costs;

• operational problems;

• supply chain and sourcing disruptions, including due to the COVID-19 pandemic and the volatile geopolitical environment;

• shifts in demand for lawn and garden and pet products;

1 unchanged sentence

• the effect of acquisitions;

• economic stability of and strength of our relationships with key retailers.

• the strength of our relationships with key retailers and their buying patterns and economic stability.

These fluctuations could negatively impact our business and the market price of our common stock.

We are in the process of implementing our Central to Home strategy, which could result in increased expenses over the next few years .

After we embarked on a company-wide strategic review led by our Chief Executive Officer, we developed our Central to Home strategy, which consists of a comprehensive series of organizational and operational initiatives intended to build and grow our consumer brands, create a leading eCommerce platform and strengthen our relationships with key customers, drive a strong portfolio strategy, reduce costs to improve margins and fuel growth and strengthen our entrepreneurial, business unit-led growth culture.

We expect to continue to implement these initiatives over the next several years.

We anticipate continuing to incur substantial costs relating to this strategy in each of the next several years.

There can be no assurance that we will be able to successfully execute our Central to Home strategic initiatives or that we will be able to do so within the anticipated time period.

During the process of implementation, we will be making substantial investments in our business and will incur substantial transitional costs.

These investments and transitional costs may adversely affect our operating results.

Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that has had, and could have, a negative impact on us.

1 unchanged sentence

In particular, our Pennington and Kaytee businesses are exposed to fluctuations in market prices for commodity seeds and grains used to produce bird feed.

Historically, market prices for commodity seeds and grains have fluctuated in response to a number of factors,

including changes in U.S.

Historically, market prices for commodity seeds and grains have fluctuated in response to a number of factors, including changes in U.S.

government farm support programs, changes in international agricultural and trading policies and weather conditions during the growing and harvesting seasons.

To mitigate our exposure to changes in market prices, we enter into purchase contracts for grains, bird feed and grass seed to cover a limited portion of our purchase requirements for a selling season.

Since these contracts cover only a portion of our purchase requirements, as market prices for such products increase, our cost of production increases as well.

Since these contracts cover only a portion of our purchase requirements, as

market prices for such products increase, our cost of production increases as well.

In contrast, if market prices for such products decrease, we may end up purchasing grains and seeds pursuant to the purchase contracts at prices above market.

In fiscal 2021, we experienced increasing inflationary costs in key commodities (e.g., sunflower, milo and millet).

In fiscal 2020, we also encountered higher key commodity prices.

Although we have been able to negotiate some price increases in the past with our retailers, it is possible that price increases may not fully offset rising costs in the future, resulting in margin erosion.

We can provide no assurance as to the timing or extent of our ability to implement additional price adjustments in the event of increased costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs.

Fiscal 2022 brought historic levels of inflation and reduced supply of certain grains due to the war in Ukraine, which drove up costs for bird feed and grass seed.

In both fiscal 2021 and fiscal 2022, we experienced increasing inflationary costs in key commodities (e.g., sunflower, milo and millet).

Although we were able to negotiate further price increases in fiscal 2022 with our retailers, it is possible that price increases may not fully offset continued high costs in the future, resulting in margin erosion.

We can provide no assurance as to the timing or extent of our ability to implement additional price adjustments in the event of continued high costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs.

We also cannot predict to what extent price increases may negatively affect our sales volume.

As retailers pass along price increases, consumers may shift to our lower margin bird feed, switch to competing products or reduce purchases of wild bird feed products.

The same shift in consumer behavior could adversely affect our business in other product categories which experience substantial price increases.

Supply chain delays and interruptions may result in lost sales, reduced fill rates and service levels and delays in expanding capacity and automating processes.

The COVID-19 pandemic and rapid increase in demand for our products have created operational challenges for our distribution network which have impacted our service and fill rates and resulted in lost sales.

The increased demand for our products also continues to challenge our supply chain and our ability to procure and manufacture enough product to meet the continued high levels of demand.

We continue to face supply constraints of commodities, material and freight and the limited availability of labor and freight and inflationary pressures stemming from the COVID-19 operating environment, including notable increases in costs for key commodities, material, labor and freight.

We may experience additional disruptions in our supply chain, whether it is our ability to procure the materials needed for manufacture or our ability to ship our products to our customers, as the pandemic continues.

The COVID-19 pandemic and the rapid increase in demand for our products created operational challenges for our distribution network which impacted our service and fill rates and resulted in lost sales.

In fiscal 2020 and fiscal 2021, the increased demand for our products challenged our supply chain and our ability to procure and manufacture enough product to meet the high levels of demand.

As fiscal 2022 progressed, demand for our products stabilized as did the availability of materials and labor, while inflation rose at unprecedented levels, resulting in increased costs for key commodities, materials, labor and freight.

We may experience additional disruptions in our supply chain, whether due to the ongoing COVID-19 pandemic or the volatile geopolitical environment, which would impact our ability to procure the materials needed for manufacture or our ability to ship our products to our customers.

We cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.

4 unchanged sentences

We believe that the period of time to gain consumer acceptance of major innovations is longer in the garden industry than in many industries, which compounds the risks generally associated with major new product innovations.

A decline in consumers’ discretionary spending or a change in consumer preferences could reduce our sales and harm our business.

Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels.

Any material decline in the amount of consumer discretionary spending could reduce our sales and harm our business.

These economic and market conditions, may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.

The success of our business also depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences.

Supply disruptions in pet birds, small animals and fish may negatively impact our sales.

The federal government and many state governments have increased restrictions on the importation of pet birds and the supply of small animals.

These restrictions have resulted in reduced availability of new pet birds and animals and thus reduced demand for pet bird and small animal food and supplies.

These restrictions have resulted in reduced availability of new pet birds and small animals and thus reduced demand for pet bird and small animal food and supplies.

If these restrictions become more severe, or similar restrictions become applicable to pet fish, our future sales of these products would likely suffer, which would negatively impact our profitability.

In addition, some countries have experienced outbreaks of avian flu.

While the number of cases worldwide has declined, a significant outbreak in the United States would reduce demand for our pet and wild bird food and negatively impact our financial results.

A significant outbreak in the United States would reduce demand for our pet and wild bird food and negatively impact our financial results.

Our Segrest subsidiary is the largest supplier of aquarium fish in the United States and also supplies pet birds and small animals.

5 unchanged sentences

Our working capital needs and our borrowings generally peak in our second fiscal quarter because we are generating lower revenues while incurring expenses in preparation for the spring selling season.

If cash on hand and borrowings under our credit facility are ever insufficient to meet our seasonal needs or if cash flow generated during the spring and summer is insufficient to repay our borrowings on a timely basis, this seasonality could have a material adverse effect on our business.

If cash on hand and borrowings under our credit facility are ever insufficient to meet our seasonal needs or if cash flow

generated during the spring and summer is insufficient to repay our borrowings on a timely basis, this seasonality could have a material adverse effect on our business.

Because demand for lawn and garden products is significantly influenced by weather, particularly weekend weather during the peak gardening season, our results of operations and cash flow could also be adversely affected by certain weather patterns such as unseasonably cool or warm temperatures, heavy rains, water shortages or floods.

During fiscal 2020, we experienced very favorable weather during the garden season while the fiscal 2021 season was not as favorable.

Less favorable weather in the future could have a significant adverse effect on the profitability of our lawn and garden business.

During fiscal 2022, we experienced unfavorable weather during the peak garden season, which adversely impacted our Garden sales.

Unfavorable weather in the future could have a significant adverse effect on the sales and profitability of our lawn and garden business.

We depend on a few customers for a significant portion of our business.

Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2021 and 17% of our total company net sales in fiscal 2020 and 16% in fiscal 2019.

Walmart, our largest customer, represented approximately 17% of our total company net sales in fiscal 2022, 16% in fiscal 2021 and 17% in fiscal 2020.

Home Depot, our second largest customer, represented approximately 16%, 15% and 13% of our total company net sales in fiscal 2022, 2021 and 2020, respectively.

Lowe's, our third largest customer, represented approximately 8%, 9% and 10% of our total company net sales in fiscal 2022, 2021 and 2020, respectively.

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

Costco and Amazon are also significant customers, and together with Walmart, Home Depot and Lowe's accounted for approximately 51% of our net sales in fiscal 2022.

The market shares of many of these key retailers have increased and may continue to increase in future years.

2 unchanged sentences

Tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.

Since July 2018, the United States has imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China.

During the former presidential administration, the United States imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China.

Less than 10% of the products that we sell are manufactured in China.

If the United States continues the China tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products manufactured in China, or other countries, and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.

If the United States continues the China tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products manufactured in China, or other countries, and imported into the United States could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.

We may be adversely affected by trends in the retail industry.

With the growing trend towards retail trade consolidation, we are increasingly dependent upon key retailers whose leverage is growing.

Our business may be negatively affected by changes in the policies of our key retailers, such as inventory destocking, limitations on access to shelf space, price demands and other conditions.

In addition, retailers continue to more closely manage inventory levels and make purchases on a “just-in-time” basis.

Our retailer customers have continued to consolidate, resulting in fewer customers on which we depend for business.

These key retailers are increasingly large and sophisticated with increased buying power and negotiating strength who are more capable of resisting price increases and who can demand lower pricing.

Our business may be negatively affected by changes in the policies of our key retailers, such as limitations on access to shelf space, price demands and other conditions.

In addition, large retailers have the scale to develop supply chains that permit them to operate with reduced inventories.

Consequently, our customers have been implementing inventory destocking and making purchases on a “just-in-time” basis.

This requires us to shorten our lead time for production in certain cases and to more closely anticipate demand, which could in the future require the carrying of additional inventories and an increase in our working capital and related financing requirements.

2 unchanged sentences

Additionally, some retailers are increasing their emphasis on private label products.

These retailers may also in the future use more of their shelf space, currently used for our products, for their store brand products.

While we view private label as an opportunity and supply many private label products to retailers, we could lose sales in the event that key retailers replace our branded products with private label product manufactured by others.

2 unchanged sentences

To the extent that the key retailers on which we depend lose share to the eCommerce channel, we could lose sales.

We continue to make additional investments to access this channel more effectively, and there can be no assurances that any such investments will be successful.

We continue to make additional investments to access this channel more effectively, but there can be no assurances that any such investments will be successful.

If we are not successful in developing and utilizing eCommerce channels that consumers may prefer, we may experience lower than expected revenues.

2 unchanged sentences

Despite these efforts, a bankruptcy filing or liquidation by a key customer could have a material adverse effect on our business, results of operations and financial condition in the future.

If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our results of operations and financial condition could be negatively impacted.

Our ability to manage our inventory levels to meet our customers’ demand for our products is important for our business.

Our production levels and inventory management goals for our products are based on estimates of demand, taking into account production capacity, timing of shipments, and inventory levels.

To mitigate the adverse impact of supply chain disruptions on our fill rates, we increased our inventory levels significantly during fiscal 2022.

If we overestimate or underestimate demand for any of our products during a given season, we may not maintain appropriate inventory levels, which could negatively impact our net sales, profit margins, net earnings, and/or working capital, hinder our ability to meet customer demand, result in loss of customers, or cause us to incur excess and obsolete inventory charges.

Issues with products may lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, regulatory actions by governmental authorities that could divert resources, affect business operations, decrease sales, increase costs, and put us at a competitive disadvantage, any of which could have a significant adverse effect on our results of operations and financial condition.

8 unchanged sentences

and the J.M Smucker Co., and our largest competitors in the Garden segment are Scotts Miracle-Gro, Spectrum Brands and S.C.

Johnson & Son.

To compete effectively, among other things, we must:

7 unchanged sentences

• deliver products on a reliable basis at competitive prices;

• effectively integrate acquired companies.

• effectively integrate acquired businesses.

Competition could lead to lower sales volumes, price reductions, reduced profits, losses, or loss of market share.

3 unchanged sentences

The choice of which is to be used for each business is dependent on the needs of the business unit.

These two systems are to replace numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions.

These two systems are expected to replace numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions.

To date, we have reduced the number of ERP systems from 43 to 12.

12 unchanged sentences

Accordingly, we may become liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not presently owned or operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property.

With our extensive acquisition history, we have acquired a number of manufacturing and distribution facilities.

With our extensive acquisition history, we have acquired a number of manufacturing and distribution facilities, and most of these facilities have not been subjected to Phase II environmental tests to determine whether they are contaminated.

Given the nature of the past operations conducted by us and others at these properties, there can be no assurance that all potential instances of soil or groundwater contamination have been identified, even for those properties where an environmental site assessment has been conducted.

1 unchanged sentence

Our business is dependent upon our ability to continue to source products from China.

We outsource a significant amount of our manufacturing requirements to third-party manufacturers located in China.

This international sourcing subjects us to a number of risks, including:

the impact on sourcing or manufacturing public health and contamination risks in China;

We outsource a portion of our manufacturing requirements to third-party manufacturers located in China.

This subjects us to a number of risks, including:

the impact of Chinese public health and contamination risks on manufacturing;

quality control issues;

3 unchanged sentences

and fluctuations in currency values.

These risks may be heightened by recent changes in the U.S.

government's trade policies, including the imposition of tariffs on goods imported from China.

These risks may be heightened by changes in the U.S.

government's trade policies, including the continuation of tariffs on goods imported from China or the imposition of any new tariffs.

Because we rely on Chinese third-party manufacturers for a significant portion of our product needs, any disruption in our relationships with these manufacturers could adversely affect our operations.

1 unchanged sentence

We have, and we will continue to have, significant indebtedness.

As of September 25, 2021, after giving effect to our debt refinancings in October 2020 and April 2021, we had total indebtedness of approximately $1.2 billion.

As of September 24, 2022, we had total indebtedness of approximately $1.2 billion.

This level of indebtedness and our future borrowing needs could have material adverse consequences for our business, including:

6 unchanged sentences

• limit our ability to borrow additional funds at reasonable rates, if at all.

In addition, since a portion of our debt commitments bear interest at variable rates, an increase in interest rates or interest rate margins as defined under our credit agreement will create higher debt service requirements, which would adversely affect our cash flow.

In addition, since our credit facility bears interest at variable rates, a further increase in interest rates or interest rate margins as defined under our credit agreement will create higher debt service requirements, which would adversely affect our cash flow.

Risks Relating to Acquisitions

1 unchanged sentence

We are regularly engaged in acquisition discussions with other companies and anticipate that one or more potential acquisition opportunities, including those that would be material or could involve businesses with operating characteristics that differ from our existing business operations, may become available in the near future.

If and when appropriate acquisition opportunities become available, we intend to pursue them actively.

If and when appropriate acquisition opportunities become available, we intend to actively pursue them.

Acquisitions involve a number of special risks, including:

10 unchanged sentences

We have faced, and expect to continue to face, intense competition for acquisition candidates, which may limit our ability to make acquisitions and may lead to higher acquisition prices.

We cannot assure you that we will be able to identify, acquire or manage profitably additional businesses or to integrate successfully any acquired businesses into our existing business without substantial costs, delays or

other operational or financial difficulties.

In future acquisitions, we also could incur additional indebtedness or pay consideration in excess of fair value, which could have a material adverse effect on our business, results of operations and financial condition.

17 unchanged sentences

During fiscal 2022, 2021 and 2020, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks.

Our expected revenues were based on our future operating plan and market growth or decline estimates for future years.

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 fiscal 2019.

We performed impairment testing on these assets, found the carrying value was not recoverable, and accordingly, recorded an impairment charge in our Pet segment of approximately $2.5 million as part of selling, general and administrative expenses in the consolidated statements of operations for the fiscal year ended September 28, 2019.

Our expected revenues were based on our future operating plan and estimates of market growth or decline for future years.

There were no impairment losses recorded in fiscal years 2020, 2021 and 2022.

Most of our goodwill is associated with our Pet segment.

In connection with our annual goodwill impairment testing performed during fiscal years 2022, 2021 and 2020, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting units under the quantitative goodwill impairment test.

We completed our qualitative assessment of potential goodwill impairment and it was determined that it was more likely than not the fair values of our reporting units were greater than their carrying amounts, and accordingly, no further testing of goodwill was required.

General Risks

5 unchanged sentences

We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees in the future.

Inflation, economic uncertainty and other adverse macro-economic conditions may harm our business.

Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact consumer spending.

During fiscal 2021, we experienced significant cost increases in many parts of our business, including input costs, labor costs, and fuel costs and we expect the inflationary environment to continue during fiscal 2022.

If we are unable to pass through rising input costs and raise the price of our products, or consumer confidence weakens, we are likely to experience gross margin and operating income declines.

Our inability to protect our trademarks and any other proprietary rights may have a significant, negative impact on our business.

We consider our trademarks to be of significant importance in our business.

Although we devote resources to the establishment and protection of our trademarks, we cannot assure you that the actions we have taken or will take in the future will be adequate to prevent violation of our trademarks and proprietary rights by others or prevent others from seeking to block sales of our products as an alleged violation of their trademarks and proprietary rights.

Although we devote resources to the prosecution, protection and enforcement of our trademarks, we cannot assure you that the actions we have taken or will take in the future will be adequate to prevent infringement of our trademarks and proprietary rights by others or prevent others from seeking to block sales of our products as an alleged infringement of their trademarks and proprietary rights.

There can be no assurance that future litigation will not be necessary to enforce our trademarks or proprietary rights or to defend ourselves against claimed infringement or the rights of others.

1 unchanged sentence

Our inability to use our trademarks and other proprietary rights could also harm our business and sales through reduced demand for our products and reduced revenues.

Rising energy prices could adversely affect our operating results.

During 2021, energy prices have increased substantially, which resulted in increased fuel costs for our businesses and increased raw materials costs for many of our branded products, and may continue to rise during fiscal 2022.

Rising energy prices in the future could adversely affect consumer spending and demand for our products and increase our operating costs, both of which would reduce our sales and operating income.

The products that we manufacture and distribute could expose us to product liability claims.

4 unchanged sentences

We are a party to litigation alleging that the applicator developed and used by us for certain of our branded topical flea and tick products infringes a patent held by Nite Glow Industries, Inc.

and claims for breach of contract and misappropriation of confidential information.

On June 27, 2018, a jury returned a verdict in favor of Nite Glow on each of the three claims and awarded damages of approximately $12.6 million.

The court ruled on post-trial motions in early June 2020, reducing the judgment amount to $12.4 million and denying the plaintiff's request for attorneys' fees.

and asserting claims for breach of contract and misappropriation of confidential information.

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, which was reduced to $12.4 million.

We filed our notice of appeal and the plaintiffs cross-appealed.

On July 14, 2021, the Federal Circuit Court of Appeals issued its decision on the appeal.

The Federal Circuit concluded that the Company did not infringe plaintiff's patent and determined that the breach of contract claim raised no non-duplicative damages and should be dismissed.

On July 14, 2021, the Federal Circuit Court of Appeals concluded that the Company did not infringe plaintiff's patent and determined that the breach of contract claim raised no non-duplicative damages and should be dismissed.

The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information.

2 unchanged sentences

We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.

Our business employs systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, suppliers and others, including personal identification information.

Security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability.

We may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber attacks.

Attacks may be targeted at us, our customers and suppliers, or others who have entrusted us with information.

Attacks may be targeted at us, our customers and suppliers, or

others who have entrusted us with information.

Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.

8 unchanged sentences

We may issue additional shares of our common stock or Class A common stock that could dilute the value and market price of our stock.

We may decide or be required to issue, including upon the exercise of any outstanding stock options, or in connection with any acquisition made by us, additional shares of our common stock or Class A common stock that could dilute the value of your common stock or Class A common stock and may adversely affect the market price of our common stock or Class A common stock.

We may decide or be required to issue, including upon the exercise of any outstanding stock options, or in connection with any acquisition made by us, additional shares of our common stock or Class A common stock that could dilute the value of our common stock or Class A common stock and may adversely affect the market price of our common stock or Class A common stock.

Our founder, through his holdings of our Class B common stock, exercises effective control of the Company, which may discourage potential acquisitions of our business and could have an adverse effect on the market price of our stock.

5 unchanged sentences

Accordingly, except to the extent that a class vote of the common stock is required by applicable law or our charter, he can effectively control all matters requiring stockholder approval, including the election of our directors, and can exert substantial control over our management and policies.

The disproportionate voting rights of our common stock and Class B common stock and Mr.

The disproportionate voting rights of our Class B common stock and Mr.

Brown’s substantial holdings of Class B common stock could have an adverse effect on the market price of our common stock and Class A common stock.

5 unchanged sentences

The issuance of preferred stock could, depending on the rights and privileges designated by the board with respect to any particular series, have a dilutive effect on the voting interests of the common stock and Class B common stock and the economic interests of our common stock, Class A common stock and Class B common stock.

In addition, the disproportionate voting rights of our common stock, Class B common stock and Class A common stock, and the ability of the board to issue stock to persons friendly to current management, may make us a less attractive target for a takeover than we otherwise might be or render more difficult or discourage a merger proposal, tender offer or proxy contest, even if such actions were favored by our common stockholders, which could thereby deprive holders of common stock of an opportunity to sell their shares for a “take-over” premium.

In addition, the disproportionate voting rights of our Class B common stock, and the ability of the board to issue stock to persons friendly to current management, may make us a less attractive target for a takeover than we otherwise might

be or render more difficult or discourage a merger proposal, tender offer or proxy contest, even if such actions were favored by our common stockholders, which could thereby deprive holders of common stock of an opportunity to sell their shares for a “take-over” premium.

Unresolved Staff Comments

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 1A. Risk Factors