What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-11-22 compared with 2021-11-23 · 191 added, 275 removed, 1138 unchanged (29% of the section changed)

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance

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8-K 001-33268 2.1 2/17/2021

Incorporated by Reference

Number Exhibit Form File

Exhibit Filing

Herewith Filed, Not Furnished

Amendment No.

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10-K 001-33268 3.1 12/14/2006

Amended and Restated By-laws of Central Garden & Pet Company, effective February 4, 2020

Amended and Restated By-laws of Central Garden & Pet Company, dated as of March 31, 2022

8-K 001-33268 3.1 4/1/2022

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Herewith Filed, Not Furnished

Second Amended and Restated Credit Agreement dated September 27, 2019 among the Company, certain of the Company's domestic subsidiaries as borrowers and guarantors, a syndicate of financial institutions party thereto, Suntrust Bank, as issuing bank and administrative agent, Bank of America, N.A., U.S.

Bank National Association and Wells Fargo Bank, National Association as Co-Syndication Agents, Bank of the West, BMO Harris Bank, N.A., J.P.

Third Amended and Restated Credit Agreement dated December 16, 2021 among the Company, certain of the Company's subsidiaries as guarantors, a syndicate of financial institutions party thereto, Truist Bank, as issuing bank and administrative agent, Bank of America, N.A., Keybank National Association, U.S.

Bank National Association and Wells Fargo Bank, National Association as Co-Syndication Agents.

Bank of the West, Capital One National Association, J.P.

Morgan Chase Bank, N.A.

and Keybank National Association as Co-Documentation Agents, Suntrust Robinson Humphrey, Inc., Bank of America N.A., U.S.

and MUFG Bank LTD., as Co-Documentation Agents, Truist Securities, Inc., Bank of America N.A., Keybanc Capital Markets, Inc., U.S.

Bank National Association and Wells Fargo Bank, National Association as Joint Lead Arrangers and Joint Bookrunners.

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10-K 001-33268 10.4.3 11/19/2010

Form of Central Garden & Pet Company 2003 Omnibus Equity Incentive Plan Performance Unit Agreement

8-K 001-33268 10.1 2/9/2022

Nonemployee Director Equity Incentive Plan, as amended and restated effective October 7, 2020

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10-Q 001-33268 10.1 5/7/2020

Modification and Extension of Employment Agreement dated as of March 1, 2022, between the Company and Brooks M.

Pennington III.

10-Q 001-33268 10.2 5/5/2022

Form of Agreement to Protect Confidential Information, Intellectual Property and Business Relationships

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10-K 001-33268 10.24 12/10/2015

Amendment No.

1 dated June 6, 2022 to Employment Agreement dated March 1, 2011 between the Company and George Yuhas

8-K/A 001-33268 10.1 6/7/2022

Employment Agreement between the Company and Timothy Cofer, effective October 14, 2019

8-K 001-33268 10.1 9/19/2019

Employment Agreement Amendment effective September 29, 2022 between Central Garden & Pet Company and Timothy P.

8-K 001-33268 10.1 10/3/2022

List of Subsidiaries

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Certification of Principal Financial Officer Pursuant to 18 U.S.C.

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X

101.SCH XBRL Taxonomy Extension Schema Document X

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB XBRL Taxonomy Extension Label Linkbase Document X

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X

101 The following financial statements from the Company's Annual Report on Form 10-K for the year ended September 24, 2022, formatted in Inline XBRL:

(i) Consolidated Balance Sheet, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as block text and including detailed tags.

104 Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document.

Incorporated by Reference

Number Exhibit Form File

Exhibit Filing

Herewith Filed, Not Furnished

* Management contract or compensatory plan or arrangement

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/s/ Michael J.

Edwards Director November 23, 2021

/s/ Michael J.

Griffith Director November 22, 2022

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Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets, September 24, 2022 and September 25, 2021

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Consolidated Statements of Comprehensive Income for Fiscal Years Ended September 24, 2022, September 25, 2021 and September 26, 2020

Consolidated Statements of Equity for Fiscal Years Ended September 25, 2021, September 26, 2020 and September 28, 2019

Consolidated Statements of Cash Flows for Fiscal Years Ended September 25, 2021, September 26, 2020 and September 28, 2019

Consolidated Statements of Equity for Fiscal Years Ended September 24, 2022, September 25, 2021 a nd September 26, 2020

Consolidated Statements of Cash Flows for Fiscal Years Ended September 24, 2022, September 25, 2021 an d September 26, 2020

Notes to Consolidated Financial Statements for Fiscal Years Ended September 24, 2022, September 25, 2021 and September 26, 2020

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Management evaluated the effectiveness of Central’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

The scope of management's assessment of the effectiveness of our internal control over financial reporting included all of our consolidated operations except for the operations of DoMyOwn, which we acquired on December 18, 2020;

Hopewell Nursery, which we acquired on December 31, 2020;

Green Garden Products, which we acquired on February 11, 2021;

and D&D Commodities Limited, which we acquired on June 30, 2021.

This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.

DoMyOwn, Hopewell Nursery, Green Garden Products and D&D Commodities Limited, combined constituted approximately 28% of the total assets and approximately nine percent of total net sales of the consolidated financial statements of the Company as of and for the fiscal year ended September 25, 2021.

The scope of management's assessment of the effectiveness of our internal control over financial reporting included all of our consolidated operations.

Based on evaluation of the criteria set forth by COSO in Internal Control – Integrated Framework (2013) , management concluded that our internal control over financial reporting was effective as of September 24, 2022.

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the “Company”) as of September 25, 2021 and September 26, 2020, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the fiscal years ended September 25, 2021, September 26, 2020, and September 28, 2019, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the "Company") as of September 24, 2022 and September 25, 2021, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the fiscal years ended September 24, 2022, September 25, 2021, and September 26, 2020, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of September 24, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 25, 2021 and September 26, 2020, and the results of its operations and its cash flows for each of the fiscal years ended September 25, 2021, September 26, 2020, and September 28, 2019, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 24, 2022 and September 25, 2021, and the results of its operations and its cash flows for each of the fiscal years in ended September 24, 2022, September 25, 2021, and September 26, 2020, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 24, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at DoMyOwn, Hopewell Nursery, Green Garden Products, and D&D Commodities Limited, which were acquired during fiscal 2021.

The combined financial statements of these acquisitions constitute approximately 28% of total assets and approximately 9% of net sales of the consolidated financial statement amounts of the Company as of and for the year ended September 25, 2021.

Accordingly, our audit did not include the internal control over financial reporting at DoMyOwn, Hopewell Nursery, Green Garden Products, or D&D Commodities Limited.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases effective September 29, 2019, due to the adoption of Accounting Standards Codification 842, Leases (“ASC 842”), using the modified retrospective approach.

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matter Description

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

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.

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 $571 million.

The Company has not yet finalized the allocation of the purchase price to fair value of the tangible assets, intangible assets, and liabilities acquired.

D&D Commodities Limited—On June 30, 2021, the Company purchased D&D Commodities, Ltd., 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 Company has not yet finalized the allocation of the purchase price to fair value of the tangible assets, intangible assets, and liabilities acquired.

We identified the accounting for these acquisitions as a critical audit matter due to the complexity of the agreements and the significant judgments made by management in (1) evaluating the purchase and other agreements entered into on or around the acquisition dates to identify the accounting treatment for different elements contained in each agreement;

(2) determining the weighted-average cost of capital (WACC), including the discount rate to be used in the valuation;

and (3) evaluating the fair value of certain land and buildings acquired.

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 Company finalized the allocation of the purchase price during fiscal year 2022.

D&D Commodities Limited—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 Company finalized the allocation of the purchase price during fiscal year 2022.

Auditing these acquisitions required significant audit effort in the form of more experienced personnel reading the purchase and other agreements to identify, analyze, and conclude on the reasonableness of management's accounting treatment for the different elements, including the purchase price recorded.

In addition, we used our fair value specialists to (1) evaluate the reasonableness of the WACC and discount rate utilized in the valuation and (2) evaluate the reasonableness of key assumptions used in the sales comparison and cost approaches in determining the fair value of land and buildings acquired.

In addition, we used our fair value specialists to (1) evaluate the reasonableness of the WACC and discount rate utilized in the valuation and (2) evaluate the reasonableness of key assumptions used.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the acquisitions included the following, among others:

Our audit procedures related to acquisitions included the following, among others:

We tested the effectiveness of controls over the valuation methodology of acquired companies, including management’s controls over the selection of the WACC and discount rates as well as controls over the review of the purchase and other agreements for complex accounting matters and associated accounting analysis.

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- Developing a range of independent estimates and comparing those to the WACC and discount rates selected by management.

• With the assistance of real estate fair value specialists, we:

◦ Evaluated the reasonableness of the Company’s valuation methodologies;

◦ Independently obtained third-party evidence of comparable market sales transactions from industry sources, including information about the transaction prices and features of the comparable market sales transactions;

◦ Evaluated the reasonableness of the estimated replacement costs used in valuing the property;

◦ Tested the mathematical accuracy of the calculation.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

San Francisco, CA

November 22, 2022

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Net sales $ 3,338,588 $ 3,303,684 $ 2,695,509

Cost of goods sold and occupancy 2,332,783 1,898,951 1,678,969

Cost of goods sold 2,346,283 2,332,783 1,898,951

Gross profit 992,305 970,901 796,558

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Interest income 719 415 4,027

Other (expense) income, net ( 1,506 ) ( 4,250 ) 243

Other expense, net ( 3,596 ) ( 1,506 ) ( 4,250 )

Income before income taxes and noncontrolling interest 198,906 194,808 153,738

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Net income including noncontrolling interest 152,672 152,773 121,520

Net income (loss) attributable to noncontrolling interest 1,027 844 ( 139 )

Net income attributable to noncontrolling interest 520 1,027 844

Net income attributable to Central Garden & Pet Company $ 152,152 $ 151,746 $ 120,676

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Total comprehensive income 149,358 153,351 121,787

Comprehensive income (loss) attributable to noncontrolling interests 1,027 844 ( 139 )

Comprehensive income attributable to noncontrolling interests 520 1,027 844

Comprehensive income attributable to Central Garden & Pet Company $ 148,838 $ 152,324 $ 120,943

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Restricted share activity — — 242,436 2 — — ( 2,884 ) — — ( 2,882 ) — ( 2,882 )

Share conversion 39,888 — — — ( 39,888 ) — — — — — — —

Issuance of common stock — — 408,740 5 — — 2,365 — — 2,370 — 2,370

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Issuance of common stock — — 367,358 3 — — 1,099 — — 1,102 — 1,102

Share conversion 39,888 — — — ( 39,888 ) — — — — — — —

Distribution to noncontrolling interest — — — — — — — — — — ( 606 ) ( 606 )

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Deferred income taxes 28,128 ( 14,744 ) ( 6,615 )

(Gain) loss on disposal of property, plant and equipment ( 256 ) 1,171 730

Loss (gain) on disposal of property, plant and equipment 131 ( 256 ) 1,171

Asset impairments — — 3,566

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Operating lease liabilities ( 44,527 ) ( 40,322 ) ( 36,089 )

Net cash provided by operating activities 250,844 264,273 204,974

Net cash (used in) provided by operating activities ( 34,030 ) 250,844 264,273

Cash flows from investing activities:

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Payment of financing costs ( 2,410 ) ( 14,129 ) ( 948 )

Net cash provided by (used in) financing activities 420,475 ( 60,560 ) ( 110,765 )

Net cash (used in) provided by financing activities ( 66,815 ) 420,475 ( 60,560 )

Effect of exchange rate changes on cash and equivalents ( 3,510 ) 1,165 89

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Actual results could differ from those estimates.

Change in Segment Components - During the first quarter of fiscal year 2021, the Company began reporting the results of its 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 change.

Revenue Recognition and Nature of Products and Services

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Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

As a result of one of our retail customers exiting the live fish business, factors indicating the carrying value of certain amortizable intangible assets may not be recoverable were present during the quarter ended March 30, 2019.

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

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

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See Note 8 – Goodwill .

Investments – The Company owns membership interests ranging from 3 % to 50 % in twelve unconsolidated companies.

Investments – The Company owns membership interests ranging from 3 % to 50 % in thirteen unconsolidated companies.

The Company accounts for its interest in these entities using the equity method and in accordance with ASC 321 – Investments – Equity Securities.

Equity method losses of $ 1.4 million in fiscal 2021, and $ 3.9 million in fiscal 2020 and equity method income of $ 1.2 million in fiscal 2019 are included in other income (expense) in the consolidated statements of operations.

Equity method income of $ 0.8 million in fiscal 2022 and equity method losses of $ 1.4 million in fiscal 2021 and $ 3.9 million in fiscal 2020 are included in other income (expense) in the consolidated statements of operations.

The Company’s investment in these entities was $ 38.5 million at September 24, 2022 and $ 12.2 million at September 25, 2021 and is included in Other assets in the Company's consolidated balance sheets.

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Lease ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

ROU assets are calculated based on the lease liability adjusted for any

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

lease payments paid to the lessor at or before the commencement date and excludes any lease incentives received from the lessor.

ROU assets are calculated based on the lease liability adjusted for any lease payments paid to the lessor at or before the commencement date and excludes any lease incentives received from the lessor.

Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term.

The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

As the Company's leases typically do not contain a readily determinable implicit rate, the Company determines the present value of the lease liability using its incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis.

As the Company's leases typically do not contain a readily determinable implicit rate, the Company determines the present value of the lease liability using its

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis.

Variable lease payments are expensed as incurred and include certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease, as applicable.

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Recent Accounting Pronouncements

Accounting Standards Recently Adopted

Credit Losses

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments - Credit Losses (Topic 326) , which changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets measured at amortized cost, including trade receivables.

The model replaces the probable, incurred loss model for those assets and broadens the information an entity must consider when developing its expected credit loss estimate for assets measured at amortized cost.

The Company adopted the standard as of September 27, 2020, and the adoption did not have a material impact on the Company's consolidated financial statements and related disclosures.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Intangible Assets

In January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment.

The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test.

The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

The Company adopted this guidance as of September 27, 2020 on a prospective basis.

Based on the Company's annual goodwill impairment test performed as of July 1, 2020, there were no reporting units for which the carrying amount of the reporting unit exceeded its fair value;

therefore, the adoption of this ASU did not have an impact on the Company's consolidated financial statements and related disclosures.

Fair Value Disclosures

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Me asurement .

This ASU modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

The Company adopted this standard as of September 27, 2020, and the adoption did not have a material impact on its consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted

Accounting Pronouncements Recently Adopted

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) , Simplifying the Accounting for Income Taxes , which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) , Simplifying the Accounting for Income Taxes , which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences.

This guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 became effective for the Company in its first quarter of fiscal 2022 beginning September 26, 2021 and requires the Company to recognize a cumulative effect adjustment to the opening balance of retained earnings, if applicable.

The Company is currently evaluating the impact that ASU 2019-12 may have on its consolidated financial statements but does not expect the impact to be material.

ASU 2019-12 was effective for the Company as of September 26, 2021, and the adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Fair Value Measurements

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Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Level 3 – Unobservable inputs for the asset or liability, which reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

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Total liabilities $ — $ — $ 543 $ 543

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents our financial assets and liabilities at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of September 25, 2021:

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(a) The fair values of the Company's contingent consideration liabilities from previous business acquisitions are considered "Level 3" measurements because the Company uses various estimates in the valuation models to project timing and amount of future contingent payments.

The liability for contingent consideration relates to an earn-out for B2E, acquired in December 2012, future performance-based contingent payments for Hydro-Organics Wholesale, Inc., acquired in October 2015 and future performance-based contingent payments for Segrest, Inc., acquired in October 2016.

In December 2019, performance-based criteria associated with the $ 6 million contingent consideration liability related to Segrest, Inc.

were met and accordingly, the entire amount was released out of an independent escrow account to the former owners as of December 28, 2019.

The performance period related to B2E ended on December 31, 2020.

The liability for contingent consideration relates to future performance-based contingent payments for Hydro-Organics Wholesale, Inc., acquired in October 2015.

The performance period related to Hydro-Organics Wholesale extends through fiscal year 2025.

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Balance as of September 25, 2021 $ 1,606

Estimated contingent performance-based consideration established at the time of acquisition —

Changes in the fair value of contingent performance-based payments ( 847 )

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Fair value measurements of non-financial assets and non-financial liabilities are used primarily in the impairment analyses of long-lived assets, goodwill and other intangible assets.

There were no impairment losses recorded in fiscal 2022 or fiscal 2021.

In February 2019, the Company purchased the remaining 55 % interest in Arden Companies, a manufacturer of outdoor cushions and pillows, for $ 13.4 million.

Accordingly, the Company remeasured its previously held investment at its acquisition-date fair value and recorded a gain of approximately $ 3.2 million as part of selling, general and administrative expenses in the Company's consolidated statements of operations.

Fair Value of Other Financial Instruments

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

The estimated fair value of the Company's 2031 Notes as of September 25, 2021 was $ 408.5 million compared to a carrying value of $ 394.2 million.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Other Financial Instruments

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

The estimated fair value of the Company's 2031 Notes as of September 24, 2022 and September 25, 2021 was $ 327.6 million and $ 408.5 million compared to a carrying value of $ 394.8 million and $ 394.2 million, respectively.

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

The estimated fair value of the Company's 2030 Notes as of September 25, 2021 was $ 517.2 million, compared to a carrying value of $ 492.8 million.

The estimated fair value of the Company's 2030 Notes as of September 24, 2022 and September 25, 2021 was $ 407.6 million and $ 517.2 million compared to a carrying value of $ 493.6 million and $ 492.8 million, respectively.

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

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Acquisitions and Investments in Joint Ventures

The Company did not make any acquisitions in fiscal 2022.

During the second quarter and fourth quarter of fiscal 2022, the Company finalized the allocation of the purchase price to the fair values of the tangible assets, intangible assets and liabilities acquired for its acquisitions of Green Garden Products and D&D Commodities Limited, respectively.

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 Company borrowed approximately $ 180 million under its credit facility to partially finance the acquisition.

The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 487 million, of which $ 393 million was allocated to identified intangible assets and approximately $ 143 million was included in goodwill in the Company's consolidated balance sheet as of September 24, 2022.

The financial results of Green Garden Products have been included in the results of operations within the Garden segment since the date of acquisition.

The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments.

Amounts Previously Recognized as of Acquisition Date (1) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as Adjusted)

(in thousands)

Current assets, net of cash and cash equivalents acquired $ 118,421 $ 31,826 $ 150,247

Fixed assets 2,340 — 2,340

Goodwill — 142,582 142,582

Other intangible assets, net — 392,929 392,929

Other assets 487,420 ( 487,259 ) 161

Operating lease right-of-use assets 14,577 — 14,577

Current liabilities ( 26,507 ) — ( 26,507 )

Long-term lease liabilities ( 10,912 ) — ( 10,912 )

Deferred income taxes and other long-term obligations ( 14,829 ) ( 80,078 ) ( 94,907 )

Net assets acquired, less cash and cash equivalents $ 570,510 $ — $ 570,510

(1) As previously reported in the Company's Form 10-K for the fiscal year ended September 25, 2021.

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible asset amortization for Green Garden Products was immaterial.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

D&D Commodities Limited

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.

Subsequent to the acquisition, $ 30 million of cash was used to eliminate the acquired long-term debt.

The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 99 million, of which $ 64 million was allocated to identified intangible assets and approximately $ 34 million was included in goodwill in the Company's consolidated balance sheet as of September 24, 2022.

The financial results of D&D have been included in the results of operations within the Garden segment since the date of acquisition.

Amounts Previously Recognized as of Acquisition Date (1) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as Adjusted)

(in thousands)

Current assets, net of cash and cash equivalents acquired $ 17,183 $ 465 $ 17,648

Fixed assets 6,907 1,823 8,730

Goodwill — 34,463 34,463

Other assets 101,218 ( 101,051 ) 167

Other intangible assets, net — 64,300 64,300

Current liabilities ( 7,183 ) — ( 7,183 )

Long-term debt ( 30,000 ) — ( 30,000 )

Net assets acquired, less cash and cash equivalents $ 88,125 $ — $ 88,125

(1) As previously reported in the Company's Form 10-K for the fiscal year ended September 25, 2021.

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible asset amortization for D&D was immaterial.

The Company expects all the goodwill from its acquisition of D&D Commodities Limited to be deductible for tax purposes.

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.

The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 80.4 million, of which $ 11.9 million was allocated to identified intangible assets and approximately $ 68.5 million was included in goodwill in the Company’s consolidated balance sheet as of September 25, 2021.

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(1) As previously reported in the Company's Form 10-Q for the period ended June 26, 2021.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible assets for DoMyOwn was immaterial.

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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 purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 15 million, of which $ 4.1 million was allocated to identified intangible assets and $ 10.9 million was included in goodwill in the Company's consolidated balance sheet as of September 25, 2021.

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

The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 15 million, of which approximately $ 4.1 million was allocated to identified intangible assets and approximately $ 10.9 million was included in goodwill in the Company's consolidated balance sheet as of September 25, 2021.

Financial results of Hopewell Nursery have been included in the results of operations within the Garden segment since the date of acquisition.

The following table summarizes the purchase price and recording of fair values of the assets acquired

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and liabilities assumed as of the acquisition date and subsequent adjustments.

The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments.

Amounts Previously Recognized as of Acquisition Date (1) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as Adjusted)

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(1) As previously reported in the Company's Form 10-Q for the period ended June 26, 2021.

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible assets for Hopewell Nursery was immaterial.

The impact to the statement of operations associated with the finalization of purchase accounting and true-up of intangible assets for Hopewell Nursery was immaterial.

Proforma financial information has not been presented as the DoMyOwn and Hopewell Nursery acquisitions were not considered material to the Company's overall consolidated financial statements during the periods presented.

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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 Company borrowed approximately $ 180 million under its credit facility to partially finance the acquisition.

The Company has not yet finalized the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired.

Approximately $ 487 million of the purchase price remains unallocated.

Deferred taxes associated with the intangible assets acquired will be finalized upon completion of the purchase accounting.

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

The financial results of Green Garden have been included in the results of operations within the Garden segment since the date of acquisition.

The finalization of the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired was finalized in the second quarter of fiscal 2022.

For the fiscal year ended September 25, 2021, net sales and net income related to Green Garden Products were approximately $ 122.4 million and $ 1.6 million, respectively.

The following unaudited pro forma financial information summarizes the combined results of operations for Central and Green Garden Products as if the companies were combined as of the beginning of fiscal year 2020.

Fiscal Year Ended

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D&D Commodities Limited

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.

Subsequent to the acquisition, $ 30 million of cash was used to eliminate the acquired long-term debt.

The Company has not yet finalized the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired.

Approximately $ 101 million of the purchase price remains unallocated.

Deferred taxes associated with the intangible assets acquired will be finalized upon completion of the purchase accounting.

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

The financial results of D&D have been included in the results of operations within the Garden segment since the date of acquisition.

The finalization of the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired was finalized in the fourth quarter of fiscal 2022.

The Company includes the unallocated purchase price for acquisitions in other assets on its consolidated balance sheet.

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The Company did no t make any acquisitions in fiscal 2020.

The Company finalized the allocation of the purchase price to the fair value of the tangible assets, intangible assets and liabilities acquired in conjunction with its purchase of C&S Products in its first fiscal quarter of 2020.

See below for the purchase price allocation.

In May 2019, the Company purchased C&S Products, a manufacturer of suet and other wild bird feed products, to complement our existing wild bird feed business for approximately $ 30.0 million.

Subsequent to the acquisition, approximately $ 4.7 million of cash was used to eliminate the acquired long-term debt.

The financial results of C&S Products have been included in the results of operations within the Pet segment since the date of acquisition.

The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments.

Amounts Previously Recognized as of Acquisition Date (1) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as Adjusted)

(in thousands)

Current assets, net of cash and cash equivalents acquired $ 9,794 $ 441 $ 10,235

Fixed assets 23,743 ( 3,786 ) 19,957

Goodwill — 3,878 3,878

Other assets 5,081 ( 3,242 ) 1,839

Other intangible assets, net — 2,810 2,810

Current liabilities ( 2,137 ) — ( 2,137 )

Long-term obligations ( 6,457 ) ( 101 ) ( 6,558 )

Net assets acquired, less cash and cash equivalents $ 30,024 $ — $ 30,024

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) As previously reported in the Company's Form 10-Q for the period ended December 28, 2019.

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible assets for C&S Products during the quarter ended December 28, 2019 was immaterial.

Arden Companies

In February 2019, the Company purchased the remaining 55 % interest in Arden Companies, a manufacturer of outdoor cushions and pillows, for $ 13.4 million.

The purchase price exceeded the estimated fair value of the net tangible assets acquired by approximately $ 15.8 million, of which $ 10.9 million was allocated to identified intangible assets and approximately $ 4.9 million was included in goodwill in the Company's consolidated balance sheet as of September 28, 2019.

Subsequent to the acquisition, approximately $ 36 million of cash was used to eliminate most of the acquired long-term debt.

Financial results of Arden have been included in the results of operations within the Garden segment since the date of acquisition of the remaining 55 % interest.

The following table summarizes the purchase price and recording of fair values of the assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments.

Amounts Previously Recognized as of Acquisition Date (1) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as Adjusted)

(in thousands)

Current assets, net of cash and cash equivalents acquired $ 51,211 $ 1,540 $ 52,751

Fixed assets 6,311 5,376 11,687

Other Assets 14,868 ( 14,868 ) —

Goodwill — 4,900 4,900

Intangible assets — 10,930 10,930

Current liabilities ( 19,853 ) — ( 19,853 )

Short-term debt ( 22,000 ) — ( 22,000 )

Long-term debt ( 19,400 ) — ( 19,400 )

Fair value of the Company's initial investment — ( 7,878 ) ( 7,878 )

Net assets acquired, less cash and cash equivalents $ 11,137 $ — $ 11,137

(1) As previously reported in the Company's Form 10-Q for the periods ended March 30, 2019 and June 29, 2019.

The Company expects all the goodwill from the acquisition above to be deductible for tax purposes.

The impact to the consolidated statement of operations associated with the finalization of purchase accounting and true-up of intangible assets for Arden Companies was immaterial.

Proforma financial information has not been presented as the C&S Products and Arden Companies acquisitions were not considered material to the Company's overall consolidated financial statements during the periods presented.

During fiscal 2022, the Company made investments totaling $ 26.1 million, maintaining its 7 % interest in a venture and acquiring a 10 % interest in another venture, both of which are accounted for in accordance with ASC 321.

During fiscal 2021, the Company made an investment of $ 0.5 million for a 3 % ownership interest in one venture, which is accounted for in accordance with ASC 321 .

During fiscal 2020, the Company made investments ranging from an additional 3 % to 30 %, totaling $ 4.4 million, in two ventures, which are accounted for in accordance with ASC 321.

During fiscal 2019, the Company made investments up to 7 %, totaling $ 2.0 million, in two ventures, which are accounted for in accordance with ASC 321.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentration of Credit Risk and Significant Customers and Suppliers

Customer Concentration – Approximately 51 % of the Company’s net sales for fiscal 2022, 51 % for fiscal 2021 and 52 % for fiscal 2020 were derived from sales to the Company’s top five customers.

The Company’s largest customer accounted for approximately 16 % of the Company’s net sales in fiscal 2021 and approximately 17 % in 2020 and 16 % in 2019.

The Company’s largest customer accounted for approximately 17 % of the Company’s net sales in fiscal 2022, 16 % in 2021 and 17 % in 2020.

The Company’s second largest customer in 2022 accounted for approximately 16 % of the Company’s net sales in fiscal 2022, 15 % of the Company's net sales in fiscal 2021 and 13 % in fiscal 2020.

The Company’s third largest customer in 2021 accounted for approximately 9 % of the Company’s net sales in fiscal 2021, approximately 10 % in fiscal 2020 and approximately 9 % in fiscal 2019, respectively.

The Company’s third largest customer in 2022 accounted for approximately 8 % of the Company’s net sales in fiscal 2022, 9 % in fiscal 2021 and 10 % in fiscal 2020, respectively.

The loss of, or significant adverse change in, the relationship between the Company and any of these three customers could have a material adverse effect on the Company’s business and financial results.

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Supplier Concentration – While the Company purchases products from many different manufacturers and suppliers, approximately 7 %, 8 % and 7 % of the Company’s cost of goods sold in fiscal years 2022, 2021 and 2020, respectively, were derived from products purchased from the Company’s five largest suppliers.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Allowance for Credit Losses and Customer Allowances

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Expenses Asset

Recoveries Reclassification of Product Return Reserve Balances at

Recoveries Balances at

(in thousands)

2 unchanged sentences

Fiscal Year Ended September 24, 2022 29,219 1,264 ( 4,237 ) 26,246

The allowance for doubtful accounts includes reserves for expected returns of $ 6.5 million as of September 29, 2018.

The Company began recording reserves for expected returns as part of accrued expenses on the consolidated balance sheet upon its adoption of ASC Topic 606.

Accordingly, $ 6.5 million was reclassified out of the allowance for doubtful accounts at the beginning of the Company's first fiscal quarter of 2019.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inventories, net

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Total inventories, net $ 938,000 $ 685,237

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment, Net

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Depreciation and amortization expense, including the amortization of intangible assets, charged to operations was $ 80.9 million, $ 74.7 million and $ 55.4 million for fiscal 2022, 2021 and 2020, respectively.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in the carrying amount of goodwill for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020:

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The Company tests goodwill for impairment annually (as of the first day of the fourth fiscal quarter), or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, by first assessing qualitative factors to determine whether it is more likely than not the fair value of the reporting unit is less than its carrying amount.

The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments and historical performance.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments and historical performance.

If it is determined that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, it is unnecessary to perform the quantitative goodwill impairment test.

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

The Company completed its qualitative assessment of potential goodwill impairment in

The Company completed its qualitative assessment of potential goodwill impairment in each fiscal year, and it was determined that it was more likely than not the fair values of the Company's reporting units were greater than their carrying amounts in each fiscal year, and accordingly, no further testing of goodwill was required in fiscal 2022 and 2021.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

each fiscal year, and it was determined that it was more likely than not the fair values of the Company's reporting units were greater than their carrying amounts in each fiscal year, and accordingly, no further testing of goodwill was required in fiscal 2021 and 2020.

Other Intangible Assets

33 unchanged sentences

As part of its acquisition of DoMyOwn in the first quarter of fiscal 2021 and Hopewell Nursery in the second quarter of fiscal 2021, the Company acquired approximately $ 1.5 million of marketing related intangible assets, $ 3.3 million of customer related intangible assets and $ 11.2 million of other intangible assets.

See Note 3 – Acquisitions .

As part of its acquisition of the remaining 55 % interest in Arden Companies in the second quarter of fiscal 2019 and C&S Products in the third quarter of fiscal 2019, the Company acquired approximately $ 1.9 million of marketing related intangible assets and $ 11.8 million of customer related intangible assets.

As part of its acquisition of Green Garden Products in the second quarter of fiscal 2021 and D&D Commodities in the fourth quarter of fiscal 2021, the Company acquired $ 181.9 million of marketing related intangible assets, $ 272.8 million of customer related intangible assets and $ 2.5 million of other intangible assets.

The allocation of the purchase price to the acquired intangible assets of Green Garden Products and D&D Commodities was finalized during fiscal 2022.

See Note 3 – Acquisitions .

1 unchanged sentence

The Company evaluates indefinite-lived intangible assets on an annual basis.

As a result of one of our retail customers exiting the live fish business, factors indicating the carrying value of

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

certain amortizable intangible assets may not be recoverable were present during the quarter ended March 30, 2019.

Factors indicating the carrying value of the Company's amortizable intangible assets may not be recoverable were not present in fiscal 2020, 2021 or 2022, and accordingly, no impairment testing was performed on these assets.

The Company is currently amortizing its acquired intangible assets with definite lives over periods ranging from two years to 25 years;

over weighted-average remaining lives of two years for marketing-related intangibles, seven years for customer-related intangibles and six years for other acquired intangibles.

over weighted-average remaining lives of two years for marketing-related intangibles, twelve years for customer-related intangibles and six

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

years for other acquired intangibles.

Amortization expense for intangibles subject to amortization was approximately $ 35.1 million, $ 16.5 million and $ 14.0 million, for fiscal 2022, 2021 and 2020, respectively, and is classified within operating expenses in the consolidated statements of operations.

Estimated annual amortization expense related to acquired intangible assets in each of the succeeding five years is estimated to be approximately $ 14 million per year from fiscal 2022 through fiscal 2026.

Annual amortization expense related to acquired intangible assets in each of the succeeding five years is estimated to be approximately $ 35 million per year from fiscal 2023 through fiscal 2025, and $ 26 million per year from fiscal 2026 through fiscal 2027.

CENTRAL GARDEN & PET COMPANY

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

Balance Sheet Classification As of

September 25, 2021 As of September 26, 2020

Balance Sheet Classification September 24, 2022 September 25, 2021

(in millions)

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Fiscal Year Ended

September 25, 2021 Fiscal Year Ended

September 26, 2020

September 24, 2022 September 25, 2021

(in millions)

11 unchanged sentences

Fiscal Year Ended

September 25, 2021 Fiscal Year Ended

September 26, 2020

September 24, 2022 September 25, 2021

(in millions)

7 unchanged sentences

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

As of September 25, 2021 As of September 26, 2020

September 24, 2022 September 25, 2021

Weighted-average remaining lease term (in years):

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Lease liability maturities as of September 24, 2022 are as follows:

As of September 25, 2021

September 24, 2022

Operating Leases Finance Leases

5 unchanged sentences

Total reported lease liability $ 195.8 $ —

Rental expense associated with the Company's leases was $ 41.7 million for fiscal 2019 and is included in cost of goods sold and occupancy or selling, general and administrative expenses in the Company's consolidated statements of operations.

CENTRAL GARDEN & PET COMPANY

4 unchanged sentences

(in thousands)

Senior notes, interest at 6.125 %, payable semi-annually, principal due November 2023

$ — $ 400,000

Senior notes, interest at 5.125 %, payable semi-annually, principal due February 2028

1 unchanged sentence

Senior notes, interest at 4.125 %, payable semi-annually, principal due October 2030

500,000 500,000

Senior notes, interest at 4.125 %, payable semi-annually, principal due April 2031

400,000 400,000

Unamortized debt issuance costs ( 14,116 ) ( 15,994 )

Net carrying value 1,185,884 1,184,006

Asset-based revolving credit facility, interest at LIBOR plus a margin of 1.00 % to 1.50 % or Base Rate plus a margin of 0.0 % to 0.50 %, final maturity September 2024

Asset-based revolving credit facility, interest at LIBOR plus a margin of 1.00 % to 1.50 % or Base Rate plus a margin of 0.0 % to 0.50 %, final maturity December 2026

Other notes payable 678 1,758

4 unchanged sentences

On April 30, 2021, the Company issued $ 400 million aggregate principal amount of 4.125 % senior notes due April 2031 (the "2031 Notes").

The Company used a portion of the net proceeds from the offering to repay all outstanding borrowings under its Amended Credit Facility, with the remainder to be used for general corporate purposes.

The Company used a portion of the net proceeds from the offering to repay all outstanding borrowings under its Amended Credit Facility, with the remainder used for general corporate purposes.

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

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

The 2031 Notes require semi-annual interest payments on April 30 and October 30, commencing 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 the Company's existing and future domestic restricted subsidiaries which are borrowers under or guarantors of Central's Amended Credit Facility.

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

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

The Company may redeem some or all of the 2031 Notes at anytime, at its option, prior to April 26, 2026 at the principal amount plus a "make whole" premium.

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

5 unchanged sentences

On October 16, 2020, the Company issued $ 500 million aggregate principal amount of 4.125 % senior notes due October 2030 (the "2030 Notes").

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

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The debt issuance costs are being amortized over the term of the 2030 Notes.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a result of the Company's redemption of the 2023 Notes, the Company 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 consolidated statements of operations.

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

The 2030 Notes require semiannual interest payments on October 15 and April 15.

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

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

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

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

5 unchanged sentences

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

The Company used the net proceeds from the offering to finance future acquisitions and for general corporate purposes.

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

The Company incurred approximately $ 4.8 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses.

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

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 the Company's existing and future domestic restricted subsidiaries who are borrowers under or guarantors of Central's senior secured revolving credit facility or who guarantee the 2023 Notes.

The Company may redeem some or all of the 2028 Notes at any time, at its option, prior to January 1, 2023 at the principal amount plus a “make whole” premium.

The Company may redeem some or all of the 2028 Notes at anytime, at its option, prior to January 1, 2023 at the principal amount plus a “make whole” premium.

The Company may redeem some or all of the 2028 Notes, at its option, at any time on or after January 1, 2023 for 102.563 %, on or after January 1, 2024 for 101.708 %, on or after January 1, 2025 for 100.854 %, and on or after January 1, 2026 for 100.0 %, plus accrued and unpaid interest.

3 unchanged sentences

Asset-Based Loan Facility Amendment

On September 27, 2019, the Company 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 million principal amount senior secured asset-based revolving credit facility, with up to an additional $ 200 million principal amount available with the consent of the Lenders, as defined, if the Company exercises the accordion feature set forth therein (collectively, the “Amended Credit Facility”).

The Amended Credit Facility matures on September 27, 2024.

On December 16, 2021, the Company 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 the Company exercises the uncommitted accordion feature set forth therein (collectively, the “Amended Credit Facility”).

The Amended Credit Facility matures on December 16, 2026.

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

The Amended Credit Facility is subject to a borrowing base that is calculated using a formula initially 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

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

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

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

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.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 the option of the Company, 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 the Company’s 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.

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 the option of the Company, the Base Rate, plus, in either case, an applicable margin based on the Company's usage under the credit facility.

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

The applicable margin for LIBOR-based borrowings fluctuates between 1.00 %- 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.

The Company is also required to pay certain fees to the administrative agent under the Amended Credit Facility.

The Amended Credit Facility provides for the transition from LIBOR to Secured Overnight Financing Rate ("SOFR") 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.

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

The Company's Amended Credit Facility already anticipates the potential loss of LIBOR and defines procedures for establishing a replacement rate.

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

The Company 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.

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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.

The Company was 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.

The Company was in compliance with all financial covenants under the Amended Credit Facility as of September 24, 2022.

The scheduled principal repayments on long-term debt as of September 24, 2022 are as follows:

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The amount of cash collateral in these segregated accounts was $ 14.7 million and $ 13.1 million as of September 24, 2022 and September 25, 2021, respectively, and is reflected in “Restricted cash” on the Company's consolidated balance sheets.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchase commitments – Production and purchase agreements (primarily for grass seed and grains) entered into in the ordinary course of business may obligate the Company to make future purchases based on estimated yields.

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For certain agreements, management estimates are used to develop the quantities and pricing for anticipated purchases, and future purchases could vary significantly from such estimates.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingencies

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The examinations are continuing, and the ultimate resolution and impact on the Company's consolidated financial statements is uncertain.

In November 2019, the DMC business unit in the Company's Pet Segment experienced a fire in one of its leased properties located in Athens, Texas, which resulted in inventory, property-related and business interruption losses of approximately $ 35 million.

In April 2020, DMC experienced an additional fire in the same leased property in Athens, Texas, which resulted in inventory and property-related losses estimated to be approximately $ 10 million.

The Company's insurance coverage was sufficient to cover the asset-related losses associated with this event.

The Company has experienced, and may in the future experience, issues with products that may lead to product liability, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities.

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Depreciation and amortization — 194,225 — 104,829

Equity loss 179 — 2,047 —

Equity earnings — 564 179 —

State net operating loss carryforward 6,415 — 7,155 —

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Total $ 50,352 $ 196,855 $ 53,940 $ 106,757

The Company has a federal net operating loss of $ 22.1 million from its acquisition of Green Garden, all of which will be carried back for a refund.

The Company also has state tax net operating losses of $ 92 million, which expire at various times between 2022 and 2042, and foreign losses of $ 4.5 million, which do not expire.

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The Director Plan, as amended, provides for the granting to each independent director of options to purchase a number of shares equal to $ 200,000 divided by the fair market value of the Company’s common stock on the date of each annual meeting of stockholders and a number of shares of restricted stock equal to $ 70,000 divided by such fair market value.

In October 2020, the Director Plan was amended such that the number of shares of restricted stock granted to each independent director would be equal to $ 70,000 divided by the fair market value of the Company's common stock on the date of each annual meeting of shareholders.

As of September 24, 2022, there were approximately 3.9 million shares of Class A Common Stock and no shares of Common Stock and Preferred Stock reserved for outstanding equity awards, and there were approximately 4.6 million shares of Common Stock, 9.5 million shares of Class A Common Stock and 0.5 million shares of Preferred Stock remaining for future awards.

Stock Option Awards

The Company recognized stock-based compensation expense of $ 23.1 million, $ 19.0 million, and $ 14.7 million for the fiscal years ended September 25, 2021, September 26, 2020 and September 28, 2019, respectively, as a component of selling, general and

The Company recognized stock-based compensation expense of $ 25.8 million, $ 23.1 million, and $ 19 million for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020, respectively, as a component of selling, general and administrative expenses.

Share-based compensation expense in fiscal 2022, 2021 and 2020 consisted of $ 4.9 million, $ 5.6 million, and $ 5.1 million, respectively, for stock options, and $ 13.7 million, $ 10.7 million and $ 7.5 million, respectively, for stock awards.

CENTRAL GARDEN & PET COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

administrative expenses.

Share-based compensation expense in fiscal 2021, 2020 and 2019 consisted of $ 5.6 million, $ 5.1 million, and $ 4.5 million, respectively, for stock options, and $ 10.7 million, $ 7.5 million and $ 6.0 million, respectively, for stock awards.

Share-based compensation expense in fiscal 2021, 2020 and 2019 also includes $ 6.8 million, $ 6.4 million and $ 4.2 million, respectively, for the Company’s 401(k) matching contributions.

compensation expense in fiscal 2022, 2021 and 2020 also includes $ 7.2 million, $ 6.8 million and $ 6.4 million, respectively, for the Company’s 401(k) matching contributions.

During fiscal 2022, the Company granted time-based stock options with an exercise price based on the closing fair market value on the date of the grant.

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The total intrinsic value of options exercised during the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 was $ 6.1 million, $ 15.1 million, and $ 9.9 million, respectively.

As of September 25, 2021, there was $ 11.0 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a remaining weighted-average vesting period of three years .

As of September 24, 2022, there was $ 6.4 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a remaining weighted-average vesting period of two years .

Restricted Stock Awards

As of September 25, 2021 and September 26, 2020, there were approximately 1.7 million and 1.1 million, respectively, of restricted stock awards outstanding.

As of both September 24, 2022 and September 25, 2021, there were approximately 1.7 million shares of restricted stock awards outstanding.

Awards granted in fiscal 2022 and 2021 generally vest within four or five years from the date of grant.

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Nonvested at September 24, 2022 1,671 $ 35.06

As of September 25, 2021, there was $ 40.9 million of unrecognized compensation cost related to nonvested restricted stock awards, which is expected to be recognized over a weighted average period of four years .

As of September 24, 2022, there was $ 37.7 million of unrecognized compensation cost related to nonvested restricted stock awards, which is expected to be recognized over a weighted average period of three years .

In fiscal 2022, the Company granted a combination of performance stock units (PSU’s) and restricted stock awards under its long-term incentive program, which replaced the option or restricted stock awards historically granted annually under the Company’s long-term incentive plan.

The impact of granting PSU’s during fiscal year 2022 was not material to the Company’s Consolidated Financial Statements.

PSU’s provide the right to receive shares of the Company’s common stock based on the Company’s achievement of certain performance criteria at the end of a four-year measurement period (fiscal 2022-fiscal 2025) and continued employment through the vesting period.

The number of shares issued at the end of the performance period may range from 50 % to 225 % of the original target award amount ( 100 %).

Shareholders’ Equity

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As of September 24, 2022, the Company had $ 100 million remaining under its 2019 Repurchase Authorization.

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.

During fiscal 2022, the Company repurchased approximately 1.4 million shares of its 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 its voting common stock (CENT) on the open market at an aggregate cost of approximately $ 1.6 million, or $ 39.72 per share.

In February 2019, the Board of Directors authorized the Company to make supplemental purchases to minimize dilution resulting from issuances under its equity compensation plans (the "Equity Dilution Authorization").

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Tech Pac’s total purchases from CPI were approximately $ 41.0 million, $ 42.6 million and $ 31.3 million for fiscal years 2022, 2021 and 2020, respectively.

Amounts due to and from CPI as of September 25, 2021 and September 26, 2020 were $ 1.1 million and $ 0.9 million, respectively.

Amounts due to CPI as of September 24, 2022 and September 25, 2021 were $ 1.0 million and $ 1.1 million, respectively.

Business Segment Data

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the first quarter of fiscal year 2021, the Company began reporting the results of its 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.

The Pet segment consists of TFH Publications, IMS Trading, Four Paws Products, Central Specialty Pet (Avian and Small Animal, C&S Products and Aquatics), Segrest, K&H Pet Products, Arden, DMC, Life Sciences, Interpet, General Pet and Pet Distribution.

The Pet segment consists of Nylabone Products, IMS Trading, Four Paws Products, Central Specialty Pet (Avian and Small Animal, C&S Products and Aquatics), Segrest, K&H Pet Products, Arden, DMC, Life Sciences, Interpet, General Pet and Pet Distribution.

These businesses are engaged in the manufacture, purchase, sale and delivery of internally and externally produced pet supplies, animal health and insect controls, aquariums, books, dog treats and food, as well as live fish and small animals principally to independent pet distributors, big-box retailers, regional retailer chains, e-commerce retailers, grocery stores and mass merchants.

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(in millions)

Other pet products $ 767.0 $ 821.1 $ 688.3

Other garden products $ 865.3 $ 876.6 $ 491.7

Other pet products 765.9 767.0 821.1

Other manufacturers' products 730.2 749.1 600.7

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Interest income 719 415 4,027

Other income (expense), net ( 1,506 ) ( 4,250 ) 243

Other expense, net ( 3,596 ) ( 1,506 ) ( 4,250 )

Income before income taxes and noncontrolling interest 198,906 194,808 153,738

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Net income including noncontrolling interest 152,672 152,773 121,520

Net income (loss) attributable to noncontrolling interest 1,027 844 ( 139 )

Net income attributable to noncontrolling interest 520 1,027 844

Net income attributable to Central Garden & Pet Company $ 152,152 $ 151,746 $ 120,676

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Noncontrolling interest is associated with the Garden segment.

(1) Includes a $ 2.5 million impairment charge in fiscal 2019.

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 9A. Controls and Procedures