What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-11-22 compared with 2021-11-23 · 157 added, 182 removed, 320 unchanged (51% of the section changed)

8 unchanged sentences

In fiscal 2022, our consolidated net sales were $3.3 billion, of which our Pet segment, or Pet, accounted for approximately $1.9 billion and our Garden segment, or Garden, accounted for approximately $1.4 billion.

In fiscal 2021, our operating income was $254 million consisting of income from our Pet segment of $208 million, income from our Garden segment of $139 million and corporate expenses of $93 million.

In fiscal 2022, our operating income was $260 million

consisting of income from our Pet segment of $209 million, income from our Garden segment of $154 million and corporate expenses of $103 million .

Fiscal 2022 Financial Highlights

Financial summary:

• Net sales for fiscal 2021 increased $608.2 million, or 22.6%, to $3,303.7 million, with organic net sales increasing $335.3 million and sales from our four recent acquisitions of $272.9 million.

Our Pet segment sales increased 12.9%, and our Garden segment sales increased 38.5%.

• Net sales for fiscal 2022 increased $34.9 million, or 1.1%, to $3,339 million.

Our Pet segment sales decreased 0.9%, and our Garden segment sales increased 3.7%.

• Organic net sales declined 3.3%, due primarily to a 6.8% decline in our Garden segment.

• Gross profit for fiscal 2022 increased $21.4 million, or 2.2%, to $992.3 million.

Gross margin declined 20 basis points in fiscal 2021 to 29.4%, from 29.6% in fiscal 2020.

Gross margin improved 30 basis points in fiscal 2022 to 29.7%, from 29.4% in fiscal 2021.

• Our operating income increased $5.5 million, or 2.2%, to $260.0 million in fiscal 2022, and as a percentage of net sales improved to 7.8% from 7.7% in fiscal 2021.

• Net income for fiscal 2022 was $152.2 million, or $2.80 per share on a diluted basis, compared to net income in fiscal 2021 of $151.7 million, or $2.75 per share on a diluted basis.

Recent Developments

Fiscal Year 2021 Acquisitions

D&D Commodities

On June 30, 2021, the Company purchased D&D Commodities, Ltd.

("D&D"), a provider of high-quality, premium bird feed, for approximately $88 million in cash and the assumption of approximately $30 million of long-term debt.

The addition of D&D expands Central's portfolio in the bird feed category and is expected to deepen the Company's relationship with major retailers.

Green Garden Products

On February 11, 2021, the Company acquired Flora Parent, Inc.

and its subsidiaries ("Green Garden Products"), a leading provider of vegetable, herb and flower seed packets, seed starters and plant nutrients in North America, for approximately $571 million.

The addition of Green Garden Products expands the Company's portfolio into an adjacent garden category.

Hopewell Nursery

On December 31, 2020, the Company purchased substantially all of the assets of Hopewell Nursery, a leading live goods wholesale grower serving retail nurseries, landscape contractors, wholesalers and garden centers across the Northeast, for approximately $81 million.

The addition of Hopewell Nursery to the Central portfolio strengthens the Company's position as a leading live goods provider in the garden category.

On December 18, 2020, the Company acquired DoMyOwn, a leading online retailer of professional-grade control products, for approximately $81 million.

The acquisition strengthens the Company's position in the control products category and adds a leading online platform for eCommerce fulfillment and digital capabilities.

Change in Segment Components

During the first quarter of fiscal year 2021, we began reporting the results of our outdoor cushion operations in the Pet segment as a result of a change in internal management reporting lines due to potential synergies in sourcing, manufacturing and innovation and to be consistent with the reporting of financial information used to assess performance and allocate resources.

These operations were previously reported in the Garden segment and are now managed and reported in the Pet segment.

All prior period segment disclosures have been recast to reflect this segment change.

COVID-19 Impact

The outbreak of COVID-19 has led to adverse impacts on human health, the global economy and society at large.

From the beginning, our priority has been the safety of our employees, customers and consumers.

Central has been impacted by COVID-19 in a number of ways, including increased demand evidenced by our organic net sales increase of 13% in fiscal year 2021.

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

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

Our manufacturing facilities and distribution centers are currently open and fully operational.

We have incurred and will continue to incur additional costs including personal protective equipment and sanitation costs.

We have hosted mobile vaccination clinics at some of our larger manufacturing and distribution sites, in order to make vaccines available to our employees.

The pandemic and related increase in demand have created operational challenges, which have impacted our service and fill rates.

In our supply chain, we may continue to experience increased operational and logistics costs.

We may also experience additional disruptions in our supply chain as the pandemic continues, although we cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.

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

Central has been impacted by COVID-19 in a number of ways, including increased demand and sales in fiscal 2020 and 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.

Our supply chain experienced disruptions and delays which resulted in increased operational and logistics costs.

At some of our facilities, we have experienced reduced productivity and increased employee absences.

The pandemic and related increase in demand created operational challenges which impacted our service and fill rates.

Our manufacturing facilities and distribution centers are currently open and operational.

To mitigate the impact of supply constraints of commodity, materials, freight and labor and extended inventory transit times and the resulting impact on our service and fill rates, we increased inventory levels in fiscal 2022 and our service and fill rates significantly improved in fiscal 2022.

We continue to face high inflation in commodities, materials, labor and freight and the limited availability of labor.

We have instituted significant pricing actions to mitigate the impact of the current inflationary environment although inflationary pressures continue to result in significant increases in costs for commodities, materials, labor and freight.

Recently, inflation and global economic conditions have impacted consumer purchasing behavior resulting in higher inventory levels at our retail customers and at Central.

We may experience additional disruptions in our supply chain as the pandemic continues, although we cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.

While vaccination efforts and the easing of government restrictions have signaled an improving public health environment, there remain concerns about COVID variants and the coming flu season, and the timing of a full recovery remains uncertain.

The ultimate effect of the COVID-19 pandemic and the current high inflation environment on consumer behavior is unclear.

Forecasting and planning remain challenging in the current environment and will continue to be challenging with public health concerns and inflationary cost pressures expected to continue into fiscal year 2023.

We believe we have sufficient liquidity to satisfy our cash needs with our cash and revolving credit facility as we manage through the current economic and health environment.

The volatility in demand, changing consumer consumption patterns, uncertainty regarding vaccination uptake and new variants of the virus make it difficult to predict when more normal order patterns may return.

Forecasting and planning remain challenging in the current environment and will continue to be challenging as the pandemic eases in the future.

In the current uncertain environment, our employees, customers and consumers will continue to be our priority as we manage our business to deliver long-term growth.

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Fiscal 2022 Compared to Fiscal 2021

Net sales for fiscal 2021 increased $608.2 million, or 22.6%, to $3,303.7 million from $2,695.5 million in fiscal 2020.

Organic net sales, which excludes the impact of acquisitions and divestitures in the last 12 months, increased $335.3 million, or 12.5% in fiscal 2021.

Branded product sales increased $459.8 million, and sales of other manufacturers’ products increased $148.4 million.

Branded product sales include products we produce under Central brand names and products we produce under third-party brands.

Sales of branded products represented 77% of our total sales in fiscal 2021 compared with 78% in fiscal 2020.

Private label sales represent approximately 10% to 15% of our consolidated net sales.

Net sales for fiscal 2022 increased $34.9 million, or 1.1%, to $3,338.6 million from $3,303.7 million in fiscal 2021, due primarily to the impact of recent acquisitions in our Garden segment.

Organic net sales, which excludes the impact of acquisitions and divestitures in the last 12 months, decreased $108.1 million, or 3.3% in fiscal 2022.

Generally, in both operating segments, volume declines were only partially offset by increased prices we implemented in response to high inflation.

Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, increased $53.8 million to $2.6 billion, and sales of other manufacturers’ products decreased $18.9 million to $730 million.

Sales of branded products represented 78% of our net sales in fiscal 2022 compared with 77% in fiscal 2021.

Sales of other manufacturers' products represented the balance of our net sales.

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:

1 unchanged sentence

(in millions)

Other pet products $ 767.0 $ 821.1 $ 688.3

Other garden products $ 865.3 $ 876.6 $ 491.7

Other pet products 765.9

Other manufacturers' products 730.2 749.1

4 unchanged sentences

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

Pet net sales increased $216.9 million, or 12.9%, to $1,894.9 million in fiscal 2021 from $1,678.0 million in fiscal 2020.

Net sales in the prior year include sales from the Breeder’s Choice business unit which we sold in December 2020.

Organic net sales increased $235.8 million, or 14.2%, as compared to the prior year.

The sales increase was broad-based across our entire Pet portfolio and we continue to see increased demand due, among other things, to increased pet ownership of dogs, cats, small animals and reptiles during the pandemic.

Organic sales gains were most significant in our dog and cat, sales of other manufacturers’ products, and outdoor cushion businesses.

The organic sales increase was primarily volume driven but price increases did have a more limited positive impact.

Pet branded sales increased $176.3 million and sales of other manufacturers' products increased $40.6 million.

Pet net sales decreased $16.8 million, or 0.9%, to $1,878.1 million in fiscal 2022 from $1,894.9 million in fiscal 2021.

Net sales in the prior year included $3.9 million of sales from the Breeder’s Choice business we sold in December 2020.

Organic net sales decreased $12.9 million, or 0.7%, as compared to the prior year.

The decline in organic sales was due primarily to a volume-based sales decrease in our private label pet bed business attributable primarily to SKU rationalization and listing losses as we exited some profit-challenged product lines.

Additionally, both aquatics and live fish had sales declines.

The declines were partially offset by price driven increases in our dog and cat treats and toy business, outdoor cushion business and animal health business.

Pet branded sales decreased $25.9 million, and sales of other manufacturers' products increased $9.1 million.

Garden net sales increased $51.7 million, or 3.7%, to $1,460.5 million in fiscal 2022 from $1,408.8 million in fiscal 2021.

Organic sales increased $99.5 million, or 9.8%, and sales from our recent acquisitions of DoMyOwn, Hopewell Nursery, Green Garden Products and D&D Commodities contributed $291.8 million.

The increased organic sales were broad-based across our entire Garden portfolio, including sales increases in sales of other manufacturers’ products, wild bird feed, live plants and controls and fertilizers.

We believe the sales increase across our Garden portfolio was driven in significant part by increased consumer home gardening related to the pandemic and retailer listing gains.

The organic sales increase was primarily volume driven but was also aided by price increases necessitated by the current inflationary cost environment, especially in our wild bird feed business.

Garden branded sales increased $283.5 million and sales of other manufacturers' products increased $107.8 million.

Gross profit for fiscal 2021 increased $174.3 million, or 21.9%, to $970.9 million from $796.6 million in fiscal 2020.

Both Garden and Pet contributed to the increase in gross profit.

The decline in gross margin was due to significant cost inflation and the impact of inventory-related purchase accounting which was largely offset by price increases and productivity gains.

Both segments are being impacted by the rapidly increasing cost environment where we are seeing widespread inflation across commodities (e.g., sunflower, milo, millet and foam), freight and labor.

We intend to seek price increases to offset continued inflationary pressures but do not anticipate we will be able to fully offset the cost pressures in fiscal 2022.

In the Pet segment, gross profit increased due to increased sales, favorable product mix and productivity gains, partially offset by significant inflationary headwinds.

In the Garden segment, gross profit increased due to increased sales, including the inorganic contribution of the four recent acquisitions and gross productivity efforts, partially offset by heightened costs across commodities, freight and labor.

The sales increase was due to our fiscal 2021 acquisitions of DoMyOwn, Hopewell Nursery, Green Garden Products and D&D Commodities, which contributed $146.9 million of non-organic sales partially offset by an organic sales decrease of $95.2 million, or 6.8%.

The organic sales decrease was due primarily to unfavorable weather and changing consumer and retailer buying patterns in response to high inflation and recessionary pressures.

Most of our garden businesses had decreased sales, most notably in our chemical and controls business and in our sales of other manufacturers’ products, with the exception of wild bird feed which benefited from price increases taken to offset significant commodity inflation.

Garden branded sales increased $79.7 million while sales of other manufacturers' products decreased $28.0 million.

Gross profit in fiscal 2022 increased $21.4 million, or 2.2%, to $992.3 million from $970.9 million in fiscal 2021.

Gross margin improved 30 basis points to 29.7% in fiscal 2022 from 29.4% in fiscal 2021.

Garden drove the increase in gross profit and gross margin but both segments were impacted by the rapidly increasing cost environment.

We have implemented significant price increases that positively impacted our fiscal 2022 results and intend to continue to seek further price increases to help offset the rising costs, but we do not anticipate we will be able to fully offset the expected cost pressures in fiscal 2023.

In the Pet segment, gross profit and margin were relatively flat due primarily to increased commodity, freight and labor costs and a volume decline in our pet bedding business, partially offset by price increases taken to combat inflation.

In the Garden segment, the improved gross profit and margin were due primarily to price increases and the favorable impact of our fiscal 2021 acquisitions, which included the impact of purchase accounting in fiscal 2021, partially offset by increased commodity, freight and labor costs, most notably in our chemical and controls business, which was also impacted by volume declines.

Selling, General and Administrative

Selling, general and administrative expenses increased $15.9 million, or 2.2%, from $716.4 million in fiscal 2021 to $732.3 million in fiscal 2022.

As a percentage of net sales, selling, general and administrative expenses decreased from 22.2% in fiscal 2020 to 21.7% in fiscal 2021;

both the Pet segment and corporate contributed to the improvement.

Selling, general and administrative expense as a percentage of net sales increased in the Garden segment due to the four fiscal 2021 acquisitions which include the amortization of the intangible assets resulting from purchase accounting.

As a percentage of net sales, selling, general and administrative expenses increased from 21.7% in fiscal 2021 to 21.9% in fiscal 2022;

both the Garden segment and corporate contributed to the increased percentage.

Selling, general and administrative expense increased due primarily to the four fiscal 2021 acquisitions in our Garden segment including the amortization of the intangible assets resulting from purchase accounting, which did not have a full 12 months of expense in the prior year, and increased corporate expenses.

Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resource, and information technology functions.

Selling and delivery expense increased $61.5 million, or 20.4%, to $363.7 million in fiscal 2021 but decreased as a percentage of net sales from 11.2% in fiscal 2020 to 11.0% in fiscal 2021.

The increase in selling and delivery expense was due primarily to the addition of our four fiscal 2021 acquisitions, increased delivery expense resulting from increased sales volumes and higher shipping costs, and increased headcount and marketing investments for market research, brand development and innovation.

The decline in selling and delivery expense as a percentage of net sales was due primarily to improved overhead absorption.

Warehouse and administrative expense increased $56.3 million, or 19.0%, to $352.7 million in fiscal 2021 and decreased as a percentage of net sales to 10.7% in fiscal 2021 from 11.0% in fiscal 2020.

The increased expense was driven by the addition of the four recent acquisitions in the Garden segment and a $2.6 million loss in our Pet segment resulting from the sale of the Breeder’s Choice business in our fiscal 2021 first quarter.

Additionally, both operating segments experienced increased labor and payroll-related expense from wage inflation.

Corporate expenses increased $3.6 million due primarily to increased variable compensation, payroll expense and increased non-cash equity compensation expense.

Selling and delivery expense decreased $5.6 million, or 1.5%, to $358.1 million in fiscal 2022 and decreased as a percentage of net sales from 11.0% in fiscal 2021 to 10.7% in fiscal 2022.

The decrease in selling and delivery expense was due primarily to a customer change from store delivery to warehouse pick-up, and a lower product volume delivered, partially offset by the increased expense related to the four fiscal 2021 acquisitions.

Warehouse and administrative expense increased $21.5 million, or 6.1%, to $374.2 million in fiscal 2022 and increased as a percentage of net sales to 11.2% in fiscal 2022 from 10.7% in fiscal 2021.

The increased expense was driven by the addition of our four fiscal 2021 acquisitions in the Garden segment and increased rent expense at several facilities.

Corporate expenses increased $10.3 million due primarily to growth in headcount, resulting in increased payroll costs, and increased third-party spend as we increased our investment in implementing our Central to Home strategy and to increased non-cash equity compensation.

These increases were partially offset by lower variable compensation expense.

Operating Income

1 unchanged sentence

Our operating margin was 7.8% in fiscal 2022, increasing from 7.7% in fiscal 2021.

Increased sales of $608.2 million and a 50 basis point decrease in selling, general and administrative expense as a percentage of net sales were partially offset by a 20 basis point decline in gross margin.

Both operating income and margin were favorably impacted by significant pandemic-related increases in demand for our products.

Pet operating income increased $36.8 million, or 21.5%, to $208.2 million in fiscal 2021 from $171.4 million for fiscal 2020.

Pet operating income increased due to higher sales and gross profit partially offset by higher selling, general and administrative expense.

Pet operating margin improved 80 basis points due to increased sales, an improved gross margin and lower selling, general and administrative expense as a percentage of net sales.

Garden operating income increased $23.3 million, or 20.2%, to $138.8 million for fiscal 2021.

Increased sales of $34.9 million and a 30 basis point increase in gross margin were partially offset by increased selling, general and administrative expense.

Both operating income and margin were favorably impacted by significant pricing actions taken in response to the current high inflationary environment.

The near-term economic environment remains volatile and likely to have an unfavorable impact on our results as we expect our margins and results to continue to be challenged in fiscal 2023.

Pet operating income increased $0.7 million, or 0.3%, to $208.9 million in fiscal 2022 from $208.2 million in fiscal 2021.

Pet operating income increased due to lower selling, general and administrative expense partially offset by a decrease in net sales.

Pet operating margin improved 10 basis points due to lower selling, general and administrative expense as a percentage of net sales.

Garden operating income increased $15.2 million, or 11.0%, to $154.0 million in fiscal 2022.

The increase was due to increased sales and higher gross profit partially offset by higher selling, general and administrative expenses.

Garden operating margin declined 150 basis points to 9.8% due primarily to higher selling, general and administrative expense as a percentage of net sales and the initial inventory-related impact of purchase accounting from our four recent acquisitions.

Corporate expenses increased $3.6 million due primarily to increased variable compensation, payroll expense and increased non-cash equity compensation expense.

Garden’s operating results were positively

impacted by a full year’s results from the acquisitions made in fiscal 2021, partially offset by poor weather conditions during the peak garden season.

Garden operating margin improved 70 basis points to 10.5% due primarily to increased sales and an improved gross margin partially offset by higher selling, general and administrative expense as a percentage of net sales and the initial inventory-related impact of purchase accounting from our four recent acquisitions.

These increases were partially offset by lower variable compensation expense.

Net Interest Expense

Net interest expense increased $18.2 million, or 45.5%, from $40.0 million in fiscal 2020 to $58.2 million in fiscal 2021.

In October 2020, we issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 and used the proceeds to redeem all of our outstanding aggregate principal amount 6.125% senior notes due 2023 with the remainder available for general corporate purposes.

As a result of our redemption of the 2023 Notes, we recognized incremental interest expense of approximately $10.0 million in the first quarter of fiscal 2021.

Also contributing to the increase in net interest expense was a higher debt balance during fiscal 2021.

In April 2021, we issued $400 million aggregate principal amount of 4.125% senior notes due April 2031.

We used a portion of the net proceeds to repay outstanding amounts under our senior secured revolving credit facility, with the remainder available for general corporate purposes.

Net interest expense decreased $0.7 million, or 1.1%, from $58.2 million in fiscal 2021 to $57.5 million in fiscal 2022.

As a result of our redemption of the 2023 Notes, we recognized incremental interest expense of approximately $10.0 million in fiscal 2021.

Partially offsetting the reduction from the prior year’s incremental interest expense was increased interest expense in the current year due primarily to higher average debt outstanding related to our issuance in April 2021 of $400 million aggregate principal amount of 4.125% senior notes due April 2031.

Debt outstanding on September 24, 2022 was $1,186.6 million compared to $1,185.8 million as of September 25, 2021.

Our average borrowing rate for fiscal 2021 was 4.4% and for fiscal 2020 was 5.6%.

Other Income (Expense)

Other income (expense) is comprised of income or loss from investments accounted for under the equity method of accounting, including any associated impairments of investments and foreign currency exchange gains and losses.

Other expense was $1.5 million for the fiscal year ended September 25, 2021 compared to $4.3 million for the fiscal year ended September 26, 2020, due primarily to a $3.6 million impairment in fiscal 2020 of two investments in private companies impacted by the COVID-19 pandemic.

Our average borrowing rate for fiscal 2022 was 4.5% compared to 4.4% for fiscal 2021.

Other Expense

Other expense is comprised of income or loss from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses.

Other expense was $3.6 million for fiscal 2022 compared to $1.5 million for fiscal 2021, due primarily to foreign currency losses in fiscal 2022.

Our effective income tax rate was 23.2% for fiscal 2022 compared to 21.6% for fiscal 2021.

The increased effective income tax rate in fiscal 2021 was due primarily to a decrease in benefit from income tax credits and an increase in taxable foreign earnings.

The increase in our effective income tax rate was due primarily to a reduced tax benefit from stock compensation compared to the prior year.

Net Income and Earnings Per Share

Our net income for fiscal 2022 was $152.2 million, or $2.80 per diluted share, compared to $151.7 million, or $2.75 per diluted share, for fiscal 2021.

The fiscal 2021 25.0% improvement in earnings per diluted share was due to strong revenue growth and operating margin improvement.

An improvement in operating income in fiscal 2022 was partially offset by increased other expense and income taxes.

Additionally, fiscal 2022 EPS was aided by a 1% decrease in diluted shares.

Fiscal 2021 Compared to Fiscal 2020

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We report our financial results in accordance with accounting principles generally accepted in the United States (GAAP).

However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA, organic sales;

and non-GAAP net income and diluted net income per share.

However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA, organic sales, and non-GAAP net income and diluted net income per share.

Management believes these non-GAAP financial measures that exclude the impact of specific items (described below) may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods.

Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization (or operating income plus depreciation and amortization expense).

Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization and stock-based compensation expense (or operating income plus depreciation and amortization expense and stock-based compensation expense).

We present adjusted EBITDA because we believe that adjusted EBITDA is a useful supplemental measure in evaluating the cash flows and performance of our business and provides greater transparency into our results of operations.

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As a result of our redemption of the 2023 Notes, we incurred incremental expenses of approximately $10.0 million, comprised of a call premium payment of $6.1 million, overlapping interest expense of approximately $1.4 million and a $2.5 million non-cash charge for the write-off of unamortized financing costs in interest expense.

These amounts are included in interest expense in the condensed consolidated statements of operations.

These amounts are included in interest expense in the consolidated statements of operations.

(2) During the first quarter of fiscal 2021, we recognized a loss of $2.6 million, included in selling, general and administrative expense in the consolidated statement of operations, from the sale of our Breeder's Choice business unit after concluding it was not a strategic business for our Pet segment.

(3) During the third quarter of fiscal 2020, we recorded a non-cash impairment charge for two private company investments.

The impairment was recorded as part of other (expense) income.

GAAP to Non-GAAP Reconciliation

6 unchanged sentences

Loss on sale of business (2)

Investment Impairments (3)

Tax effect of incremental expenses, loss on sale and impairment (2,711) (747)

Tax effect of incremental redemption expenses and loss on sale (2,711)

Non-GAAP net income attributable to Central Garden & Pet Company $ 152,152 $ 161,598

1 unchanged sentence

Non-GAAP diluted net income per share $ 2.80 $ 2.92

Shares used in GAAP and non-GAAP diluted net earnings per share calculation 55,248 54,738

Shares used in GAAP and non-GAAP diluted net income per share calculation 54,425 55,248

Organic Net Sales Reconciliation

4 unchanged sentences

For the Fiscal Year Ended September 24, 2022

Net sales (GAAP) Effect of acquisitions & divestiture on increase in net sales Net sales organic

Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic

(in millions)

1 unchanged sentence

Reported net sales FY 2021 3,303.7 3.9 3,299.8

$ increase $ 608.2 $ 272.9 $ 335.3

% increase 22.6 % 12.5 %

$ increase (decrease) $ 34.9 $ 143.0 $ (108.1)

% increase (decrease) 1.1 % (3.3) %

PET GAAP to Non-GAAP Reconciliation

For the Fiscal Year Ended September 24, 2022

Net sales (GAAP) Effect of acquisitions & divestitures on increase in net sales Net sales organic

Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic

(in millions)

1 unchanged sentence

Reported net sales FY 2021 1,894.9 3.9 1,891.0

$ increase $ 216.9 $ (18.9) $ 235.8

% increase 12.9 % 14.2 %

$ decrease $ (16.8) $ (3.9) $ (12.9)

% decrease (0.9) % (0.7) %

GARDEN GAAP to Non-GAAP Reconciliation

For the Fiscal Year Ended September 24, 2022

Net sales (GAAP) Effect of acquisitions & divestitures on increase in net sales Net sales organic

Net sales (GAAP) Effect of acquisitions & divestitures on net sales Net sales organic

(in millions)

1 unchanged sentence

Reported net sales FY 2021 1,408.8 — 1,408.8

$ increase $ 391.3 $ 291.8 $ 99.5

% increase 38.5 % 9.8 %

$ increase (decrease) $ 51.7 $ 146.9 $ (95.2)

% increase (decrease) 3.7 % (6.8) %

GAAP to non-GAAP Reconciliation

1 unchanged sentence

(in thousands)

Adjusted EBITDA Reconciliation Total Garden Pet Corp

Adjusted EBITDA Reconciliation Garden Pet Corp Total

Net income attributable to Central Garden & Pet — — — $ 152,152

6 unchanged sentences

Depreciation & amortization 36,583 38,960 5,405 80,948

Noncash stock-based compensation $ 25,817 $ 25,817

Adjusted EBITDA $ 190,539 $ 247,884 $ (71,622) $ 366,801

2 unchanged sentences

(in thousands)

Adjusted EBITDA Reconciliation Total Garden Pet Corp

Adjusted EBITDA Reconciliation Garden Pet Corp Total

Net income attributable to Central Garden & Pet — — — $ 151,746

Interest expense, net — — — 58,182

Other income 4,250 — — —

Other expense — — — 1,506

Income tax expense — — — 42,035

Net loss attributable to noncontrolling interest 844 — — —

Net income attributable to noncontrolling interest — — — 1,027

Sum of items below operating income — — — 102,750

1 unchanged sentence

Depreciation & amortization 33,050 36,952 4,725 74,727

Noncash stock-based compensation $ 23,127 $ 23,127

Adjusted EBITDA $ 171,805 $ 245,153 $ (64,608) $ 352,350

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

In certain fiscal periods, we have been adversely impacted by rising input costs related to domestic inflation, particularly relating to grain and seed prices, fuel prices and the ingredients used in our garden controls and fertilizer business as well as heightened import costs such as shipping container costs and tariffs.

Rising costs in those periods have made it difficult for us to increase prices to our retail customers at a pace sufficient to enable us to maintain margins.

In fiscal years 2020 through 2022, we have been adversely impacted by rising input costs related to inflation, particularly relating to grain and seed prices, fuel prices and the ingredients used in our garden controls and fertilizer business as well as heightened import costs such as shipping container costs and tariffs.

Although our gross and operating margins increased in fiscal 2022, rising costs are making it difficult for us to further increase prices to our customers at a pace sufficient for us to maintain our margins.

In fiscal 2022, we continued to experience increasing inflationary pressure, including notable increases in costs for key commodities, materials, labor and freight.

During fiscal 2021, inflation was broad-based and we saw significant increases across commodity and material costs, freight and labor.

During fiscal 2020, we saw more moderate increases to commodity, labor and freight costs.

During fiscal 2019, commodity costs increased

while freight costs moderated.

In fiscal 2020 and 2019, tariffs implemented during the year had a negative impact in instances where we were unable to pass through the incremental costs.

Weather and Seasonality

2 unchanged sentences

In fiscal 2022, approximately 66% of our Garden segment’s net sales and 59% of our total net sales occurred during our second and third fiscal quarters.

Substantially all of the Garden segment’s operating income is typically generated in this period, which has historically offset the operating loss incurred during the first fiscal quarter of the year.

Substantially all of the Garden segment’s operating income is typically generated in this period.

Liquidity and Capital Resources

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Operating Activities

Net cash used in operating activities increased $284.8 million, from $250.8 million of cash provided by operating activities in fiscal 2021 to $34.0 million of cash used in operating activities in fiscal 2022.

The increase in cash used was due primarily to changes in our working capital accounts, primarily an increase in inventory, driven in part by higher costs of inventory in this inflationary environment as well as management's decision to increase inventory levels to help improve fill rates and customer service adversely impacted by a challenged supply chain.

Net cash provided by operating activities decreased $13.5 million, from $264.3 million in fiscal 2020 to $250.8 million in fiscal 2021.

The decrease in cash provided was due primarily to changes in our working capital accounts, primarily an increase in inventory from an intentional build-up due to the overall increased demand for our products, as compared to the prior year.

Net cash provided by operating activities increased $59.3 million, from $205.0 million in fiscal 2019 to $264.3 million in fiscal 2020.

The increase in cash provided was due primarily to changes in our working capital accounts, predominately an increase in accounts receivable, due to the increase in sales during the latter half of the fourth quarter compared to the prior year, better working capital management and stronger operating performance during the current fiscal year.

Investing Activities

Net cash used in investing activities decreased $756.4 million from $899.4 million in fiscal 2021 to $143.0 million in fiscal 2022.

The decrease in cash used in investing activities was due primarily to acquisition activity in the prior year.

The decrease was partially offset by an increase in capital expenditures of approximately $35 million in the current year compared to the prior year and increased investments in the current year compared to the prior year.

During fiscal 2021, we acquired DoMyOwn for approximately $81 million, Hopewell Nursery for approximately $81 million, Green Garden Products for approximately $571 million and D&D Commodities for approximately $88 million.

Net cash used in investing activities increased $851.3 million from $48.1 million in fiscal 2020 to $899.4 million in fiscal 2021.

The increase in cash used in investing activities was due primarily to acquisition activity and an increase in capital expenditures of approximately $37 million in the current year compared to the prior year, partially offset by proceeds received from the sale of our Breeder's Choice business during the first quarter of fiscal 2021 and decreased investments in the current year compared to the prior year.

The increase in cash used in investing activities was due primarily to acquisition activity and an increase in capital expenditures of approximately $37 million in fiscal 2021 compared to fiscal 2020, partially offset by proceeds received from the sale of our Breeder's Choice business during the first quarter of fiscal 2021 and decreased investments in fiscal 2021 compared to fiscal 2020.

During the first quarter of fiscal 2021, we acquired DoMyOwn for approximately $81 million.

During the second quarter of fiscal 2021, we acquired Hopewell Nursery on December 31, 2020 for approximately $81 million and Green Garden Products on February 11, 2021 for approximately $571 million and in the fourth quarter of fiscal 2021, we acquired D&D Commodities for approximately $88 million.

Net cash used in investing activities decreased $28.2 million from $76.3 million in fiscal 2019 to $48.1 million in fiscal 2020.

The decrease in cash used in investing activities was due primarily to acquisition activity in the prior year, partially offset by an $11.5 million increase in capital expenditures in the current year compared to the prior year.

During the second quarter of fiscal 2019, we acquired the remaining 55% interest in Arden Companies for approximately $11 million, and during the third quarter of fiscal 2019 we acquired C&S Products for approximately $30 million.

During the second quarter of fiscal 2021, we acquired Hopewell Nursery for approximately $81 million and Green Garden Products for approximately $571 million and in the fourth quarter of fiscal 2021, we acquired D&D Commodities for approximately $88 million.

Financing Activities

Net cash provided by financing activities increased $481.0 million from $60.6 million of cash used in fiscal 2020 to $420.5 million of cash provided in fiscal 2021.

The increase in cash provided by financing activities during the current year was due primarily to the issuance of $500 million of our 2030 Notes in October 2020 and $400 million of our 2031 Notes in April 2021, partially offset by the repayment of our 2023 Notes and the corresponding premium paid on extinguishment as well as debt issuance costs incurred on the issuances of the 2030 Notes and 2031 Notes.

We also decreased open market purchases of our common stock during the current year period as compared to the prior year.

Net cash used by financing activities increased $487.3 million from $420.5 million of cash provided in fiscal 2021 to $66.8 million of cash used in fiscal 2022.

The increase in cash used by financing activities during the current year was due primarily to our prior year issuance of $500 million of our 2030 Notes in October 2020 and $400 million of our 2031 Notes in April 2021, partially offset by the prior year repayment of our 2023 Notes and the corresponding premium paid on extinguishment as well as debt issuance costs incurred on the issuances of the 2030 Notes and 2031 Notes.

We also increased open market purchases of our common stock during the current year period as compared to the prior year.

During fiscal 2022, we repurchased approximately 1.4 million shares of our non-voting common stock (CENTA) on the open market at an aggregate cost of approximately $56.2 million, or $40.79 per share, and approximately 39,000 shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $1.6 million, or $39.72 per share, in addition to $5.4 million used for minimum statutory tax withholdings related to the net share settlement of our stock.

Net cash provided by financing activities increased $481.0 million from $60.6 million of cash used in fiscal 2020 to $420.5 million cash provided in fiscal 2021.

The increase in cash provided by financing activities during fiscal 2021 was due primarily to the issuance of $500 million of our 2030 Notes in October 2020 and $400 million of our 2031 Notes in April 2021, partially offset by the repayment of our 2023

Notes and the corresponding premium paid on extinguishment as well as debt issuance costs incurred on the issuances of the 2030 Notes and 2031 Notes.

We also decreased open market purchases of our common stock during fiscal 2021 as compared to fiscal 2020.

During fiscal 2021, the Company repurchased approximately 0.5 million shares of its non-voting common stock (CENTA) on the open market at an aggregate cost of approximately $21.8 million, or $41.91 per share, in addition to $8.2 million used for minimum statutory tax withholdings related to the net share settlement of our stock.

Net cash used in financing activities decreased $50.2 million from $110.8 million of cash provided in fiscal 2019 to $60.6 million cash used in fiscal 2020.

The decrease in cash used in financing activities during the current year was due primarily to our repayment of approximately $46 million of acquired long-term debt subsequent to our acquisitions of Arden and C&S Products during fiscal 2019, as well as decreased open market purchases of our common stock during the current year.

During fiscal 2020, we repurchased approximately 0.2 million shares of our voting common stock (CENT) at an aggregate cost of approximately $6.6 million, or approximately $26.63 per share, and 1.8 million shares of our non-voting Class A common stock (CENTA) at an aggregate cost of approximately $45.7 million, or approximately $25.90 per share, in addition to $6.9 million used for minimum statutory tax withholdings related to the net share settlement of our stock.

We expect that our principal sources of funds will be cash generated from our operations, proceeds from our debt and equity offerings, and, if necessary, borrowings under our $750 million asset backed loan facility.

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However, we cannot assure you that these sources will continue to provide us with sufficient liquidity and, should we require it, that we will be able to obtain financing on terms satisfactory to us, or at all.

We believe that cash flows from operating activities, funds available under our asset backed loan facility, and arrangements with suppliers will be adequate to fund our presently anticipated working capital requirements for the foreseeable future.

We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $70 million - $80 million over the next 12 months.

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Stock Repurchases

In August 2019, our Board of Directors authorized a new share repurchase program to purchase up to $100 million of our common stock (the "2019 Repurchase Authorization").

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The Equity Dilution Authorization has no fixed expiration date and expires when the Board withdraws its authorization.

As of September 26, 2021, we had authorization remaining from the fiscal 2021 equity plan activity to repurchase up to 1.2 million shares under our Equity Dilution Authorization.

As of September 25, 2022, we had authorization remaining to repurchase up to 0.1 million shares under our Equity Dilution Authorization.

At September 24, 2022, our total debt outstanding was $1,186.6 million versus $1,185.8 million at September 25, 2021.

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In April 2021, we issued $400 million aggregate principal amount of 4.125% senior notes due April 2031 (the "2031 Notes").

We used the net proceeds from the offering to repay all outstanding borrowings under our Amended Credit Facility, with the remainder to be used for general corporate purposes.

We used the net proceeds from the offering to repay all outstanding borrowings under our Amended Credit Facility, with the remainder used for general corporate purposes.

We incurred approximately $6 million of debt issuance costs in conjunction with this issuance, which included underwriter fees and legal, accounting and rating agency expenses.

The debt issuance costs are being amortized over the term of the 2031 Notes.

The 2031 Notes require semi-annual interest payments on April 30 and October 30, which commenced October 30, 2021.

The 2031 Notes require semi-annual interest payments on April 30 and October 30.

The 2031 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Amended Credit Facility.

The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.

We may redeem some or all of the 2031 Notes at any time, at our option, prior to April 30, 2026 at the principal amount plus a "make whole" premium.

We may redeem some or all of the 2031 Notes at anytime, at our option, prior to April 30, 2026, at the principal amount plus a "make whole" premium.

At any time prior to April 30, 2024, we may also redeem, at our option, up to 40% of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes.

We may redeem some or all of the 2031 Notes at our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.

We may redeem some or all of the 2031 Notes at

our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.

The holders of the 2031 Notes have the right to require us to repurchase all or a portion of the 2031 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, upon the occurrence of specific kinds of changes of control.

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In October 2020, we issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 (the "2030 Notes").

In November 2020, we used a portion of the net proceeds to redeem all of our outstanding 6.125% senior notes due November 2023 (the "2023 Notes") at a redemption price of 101.531% plus accrued and unpaid interest, and to pay related fees and expenses, with the remainder for general corporate purposes.

We incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter fees and legal, accounting and rating agency expenses.

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As a result of our redemption of the 2023 Notes, we incurred a call premium payment of $6.1 million, overlapping interest expense for 30 days of approximately $1.4 million and a $2.5 million non-cash charge for the write-off of unamortized deferred financing costs related to the 2023 Notes.

These amounts are included in interest expense in the condensed consolidated statements of operations.

These amounts are included in interest expense in the consolidated statements of operations.

The 2030 Notes require semiannual interest payments on October 15 and April 15, which commenced April 15, 2021.

The 2030 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our senior secured revolving credit facility or guarantee our other debt.

We may redeem some or all of the 2030 Notes at any time, at our option, prior to October 15, 2025 at a price equal to 100% of the principal amount plus a “make-whole” premium.

We may redeem some or all of the 2030 Notes at anytime, at our option, prior to October 15, 2025, at a price equal to 100% of the principal amount plus a “make-whole” premium.

Prior to October 15, 2023, we may redeem up to 40% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes.

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On December 14, 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes").

We will use the net proceeds from the offering to finance future acquisitions and for general corporate purposes.

We used the net proceeds from the offering to finance acquisitions and for general corporate purposes.

We incurred approximately $4.6 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses.

The debt issuance costs are being amortized over the term of the 2028 notes.

The 2028 Notes require semiannual interest payments on February 1 and August 1, which commenced on August 1, 2018.

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

The 2028 Notes are unconditionally guaranteed on a senior basis by our existing and future domestic restricted subsidiaries who are borrowers under or guarantors of our senior secured revolving credit facility or who guarantee the 2023 Notes.

We may redeem some or all of the 2028 Notes at any time, at our option, prior to January 1, 2023 at the principal amount plus a "make whole" premium.

We may redeem some or all of the 2028 Notes at anytime, at our option, prior to January 1, 2023 at the principal amount plus a "make whole" premium.

We may redeem some or all of the 2028 Notes at our option, at any time on or after January 1, 2023 for 102.563% on or after January 1, 2024 for 101.708%, on or after January 1, 2025 for 100.854% and on or after January 1, 2026 for 100% plus accrued and unpaid interest.

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Asset-Based Loan Facility Amendment

On September 27, 2019, we entered into a Second Amended and Restated Credit Agreement (“Amended Credit Facility”).

The Amended Credit Facility amends and restates the previous credit agreement dated April 22, 2016 and continues to provide up to a $400.0 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200.0 million principal amount available with the consent of the Lenders, as defined, if we exercise the accordion feature set forth therein.

The Amended Credit Facility now matures on September 27, 2024.

On December 16, 2021, we entered into a Third Amended and Restated Credit Agreement (“Amended Credit Agreement”).

The Amended Credit Agreement amended and restated the previous credit agreement dated September 27, 2019 (the "Predecessor Credit Agreement"), and provides for a $750 million principal amount senior secured asset-based revolving credit facility, with up to an additional $400 million principal amount available with the consent of the Lenders, as defined, if we exercise the uncommitted accordion feature set forth therein (collectively, the “Amended Credit Facility”).

The Amended Credit Facility matures on December 16, 2026.

We may borrow, repay and reborrow amounts under the Amended Credit Facility until its maturity date, at which time all amounts outstanding under the Amended Credit Facility must be repaid in full.

The Amended Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory minus certain reserves and adjustments.

The Amended Credit Facility also allows the Company to add real property to the borrowing base so long as the real property is subject to a first priority lien in favor of the Administrative Agent for the benefit of the Lenders.

Net availability under the Amended Credit Facility was $400 million as of September 25, 2021.

The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and an increased $40 million sublimit for short-notice borrowings.

We incurred approximately $1.6 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal expenses.

The debt issuance costs are being amortized over the term of the Amended Credit Facility.

As of September 25, 2021, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility.

There were other letters of credit of $1.5 million outstanding as of September 25, 2021.

Borrowings under the Amended Credit Facility will bear interest at an index based on LIBOR or, at our option, the Base Rate (defined as the highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month LIBOR plus 1.00%), plus, in either case, an applicable margin based on our consolidated senior leverage ratio and (d) 0.00%.

Such applicable margin for LIBOR-based borrowings fluctuates between 1.00% and 1.50% and was 1.00% as of September 25, 2021, and such applicable margin for Base Rate borrowings fluctuates between 0.00% and 0.50% , and was 0.00% as of September 25, 2021.

An unused line fee shall be payable monthly in respect of the total amount of the unutilized Lenders’ commitments and short-notice borrowings under the Amended Credit Facility.

Letter of credit fees at the applicable margin on the average undrawn and unreimbursed amount of letters of credit shall be payable monthly and a facing fee of 0.125% shall be paid on demand for the stated amount of each letter of credit.

The Amended Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves.

We did not draw down any commitments under the Amended Credit Facility upon closing.

Proceeds of the Amended Credit Facility will be used for general corporate purposes.

Net availability under the Amended Credit Facility was approximately $517 million as of September 24, 2022.

The Amended Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for short-notice borrowings.

As of September 24, 2022, there were no borrowings outstanding and no letters of credit outstanding under the Amended Credit Facility.

Outside of the Amended Credit Facility, there were other letters of credit of $1.3 million outstanding as of September 24, 2022.

Borrowings under the Amended Credit Facility will bear interest at an index based on LIBOR (which will not be less than 0.00%) or, at our option, the Base Rate, plus, in either case, an applicable margin based on our usage under the credit facility.

Base Rate is defined as the highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month LIBOR plus 1.00% and (d) 0.00%.

The applicable margin for LIBOR-based borrowings fluctuates between 1.00%-1.50%, and was 1.0% as of September 24, 2022, and the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50%, and was 0.00% as of September 24, 2022.

An unused line fee shall be payable quarterly in respect of the total amount of the unutilized Lenders’ commitments and short-notice borrowings under the Amended Credit Facility.

Letter of credit fees at the applicable margin on the average undrawn and unreimbursed amount of letters of credit shall be payable quarterly and a facing fee of 0.125% shall be payable quarterly for the stated amount of each letter of credit.

We are also required to pay certain fees to the administrative agent under the Amended Credit Facility.

The Amended Credit Facility provides for the transition from LIBOR to Secured Overnight Financing Rate ("SOFR") and does not require an amendment in connection with such transition.

As of September 24, 2022, the applicable interest rate related to Base Rate borrowings was 6.3%, and the applicable interest rate related to one-month LIBOR-based borrowings was 4.1%.

Banks currently reporting information used to set LIBOR will stop doing so after 2021.

Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR.

We are monitoring their efforts, and we will likely amend contracts to accommodate any replacement rate where it is not already provided.

Our Amended Credit Facility already anticipates the potential loss of LIBOR and defines procedures for establishing a replacement rate.

We incurred approximately $2.4 million of debt issuance costs in conjunction with this transaction, which included lender fees and legal expenses.

The debt issuance costs are being amortized over the term of the Amended Credit Facility.

The Amended Credit Facility continues to contain customary covenants, including financial covenants which require us to maintain a minimum fixed charge coverage ratio of 1:1 upon triggered quarterly testing (e.g.

when availability falls below certain thresholds established in the agreement), reporting requirements and events of default.

The Amended Credit Facility is secured by substantially all assets of the borrowing parties.

We were in compliance with all financial covenants under the Amended Credit Facility during the period ended September 25, 2021.

The Amended Credit Facility is secured by substantially all assets of the borrowing parties, including (i) pledges of 100% of the stock or other equity interest of each domestic subsidiary that is directly owned by such entity and (ii) 65% of the stock or other equity interest of each foreign subsidiary that is directly owned by such entity, in each case subject to customary exceptions.

We were in compliance with all financial covenants under the Amended Credit Facility as of September 24, 2022.

Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities

In April 2021, Central (the "Parent/Issuer") issued $400 million of 2031 Notes.

In October 2020, Central issued $500 million of 2030 Notes.

In December 2017, Central issued $300 million of 2028 Notes.

The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors"), which are borrowers under or guarantors of our senior secured revolving credit facility ("Credit Facility").

The 2031 Notes, 2030 Notes and 2028 Notes are unsecured senior obligations and are subordinated to all of our existing and future secured debt, including our Credit Facility, to the extent of the value of the collateral securing such indebtedness.

Central (the "Parent/Issuer") issued $400 million of 2031 Notes in April 2021, $500 million of 2030 Notes in October 2020, and $300 million of 2028 Notes in December 2017.

The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors") which are guarantors of our senior secured revolving credit facility ("Credit Facility").

The 2031 Notes, 2030 Notes and 2028 Notes are unsecured senior obligations and are subordinated to all of our existing and future secured debt, including our Amended Credit Facility, to the extent of the value of the collateral securing such indebtedness.

There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent/Issuer.

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The Guarantees are senior unsecured obligations of each Guarantor and are of equal rank with all other existing and future senior indebtedness of the Guarantors.

The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount as well, after giving effect to all other contingent and fixed liabilities of such Guarantor and to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law.

The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount, after giving effect to all other contingent and fixed liabilities of such Guarantor and to any collections from or payments made by or on behalf of any other Guarantor in

respect of the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law.

The Guarantee of a Guarantor will be released:

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Payments are capped at $1.0 million per year related to Hydro-Organics Wholesale, Inc.

As of September 25, 2021, we had unrecognized tax benefits of $0.3 million.

These amounts have been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us.

Recent Accounting Pronouncements

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The valuations employ present value techniques to measure fair value and consider market factors.

Most of our goodwill is associated with our Pet segment.

Our goodwill is associated with our Pet segment and our Garden segment.

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

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.

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

Changes in the judgments and estimates underlying our analysis of goodwill for possible impairment, including expected future cash flows and discount rates, could result in a significantly different estimate of the fair value of the reporting units in the future and could result in additional impairment of goodwill.

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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 7. Management’s Discussion and Analysis