What changed in this filing

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Item 1A. Risk Factors

2024-11-27 compared with 2023-11-28 · 135 added, 100 removed, 209 unchanged (53% of the section changed)

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Risks Affecting our Business

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

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

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

While the rate of inflation has slowed during fiscal 2023, if the inflationary environment continues during fiscal 2024, we may be unable to pass through higher input costs by raising the price of our products, consumer confidence and purchasing may weaken and we may experience organic sales declines and gross margin and operating income declines.

Economic uncertainty and other adverse macro-economic conditions, including high interest rates and potential tariffs, may harm our business.

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

While the rate of inflation continued to slow during fiscal 2024, and a recession has not materialized, interest rates remain high and the imposition of tariffs on imports by the new presidential administration could result in higher input costs.

If we are unable to pass through higher input costs by raising the price of our products, we may experience organic sales declines and gross margin and operating income declines.

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

During the 2024 presidential campaign, the President-Elect stated his intention to impose significant tariffs on goods imported from China and other countries.

During the President-Elect’s prior administration, the United States imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China.

Less than 15% of our cost of goods sold is from products or materials sourced from outside the United States, including less than 5% from China.

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

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

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

This subjects us to a number of risks, including:

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

quality control issues;

social and political disturbances and instability;

export duties, import controls, tariffs, quotas and other trade barriers;

shipping and transportation problems;

and fluctuations in currency values.

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

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

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

High energy prices could adversely affect our operating results.

Beginning in 2021, energy prices increased substantially and have remained elevated, resulting in increased costs for fuel and raw materials for many of our products.

In fiscal 2024, energy prices remained elevated, resulting in increased costs for fuel and raw materials for many of our products.

Energy prices may continue to rise or remain elevated during fiscal 2025.

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

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

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

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

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

Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including high interest rates, the potential for trade tariffs, a return to an inflationary environment or an economic recession, other general economic

conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels.

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

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

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Factors that may contribute to this variability include:

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

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

• the uncertain macro-economic environment, including high interest rates and the potential imposition of trade tariffs, could lead to a recession, and the impact any of those could have on consumer discretionary spending;

• seasonality and the impact of adverse weather conditions;

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

• supply chain and sourcing disruptions, including the volatile geopolitical environment;

• supply chain and sourcing disruptions, including due to the volatile geopolitical environment and the potential imposition of trade tariffs on countries from which we import products;

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

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

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

Our lawn and garden sales are highly seasonal and subject to adverse weather and climate change.

Because our lawn and garden products are used primarily in the spring and summer, the Garden business is seasonal.

In fiscal 2024, 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 generated in this period.

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

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

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

From time to time, we have experienced unfavorable weather during the peak garden season, which adversely impacted our Garden sales.

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

Climate change continues to receive increasing global attention.

The effects of climate change could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels.

These changes could over time affect, for example, the availability and cost of raw materials, commodities and energy, which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.

The increase in climate change attention has resulted in evolving policy, legal and regulatory changes which may impose substantial operational and compliance burdens.

Collecting, measuring and analyzing information relating to such matters can be costly, time-consuming, dependent on third-party cooperation and unreliable.

Furthermore, methodologies for measuring, tracking and reporting on such matters continue to change over time, which requires our processes and controls for such data to evolve as well.

Compliance with any new or more stringent laws or regulations, customer reporting requirements, or stricter interpretations of existing laws could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase.

Consumers and businesses may independently change their behavior because of concerns regarding the impact of climate change and public perceptions.

For example, consumers may elect to garden less frequently than historic patterns due to the unpredictability of

weather patterns.

Those consumers who are less directly impacted by climate change may also engage in less gardening due to discomfort or concerns about perceptions stemming from the direct impact of climate change on others.

Current or potential retail customers may pull back from all or parts of the lawn and garden category in response to softening consumer demand.

Our failure to adequately manage the political, legal, regulatory, consumer and retail impacts of climate change could have a material adverse effect on our financial condition, results of operations and cash flows.

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

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

If we are unable to execute on our Cost and Simplicity Program, our ability to maintain or grow margins may be negatively impacted.

Our Cost and Simplicity program involves reducing costs, including procurement, logistics, manufacturing, portfolio optimization and administrative, and reducing complexity through fewer SKUs, plants and distribution centers.

Optimizing our supply chain footprint and having the right facilities in the right locations is critical to lowering costs.

We plan to simplify our business and improve our efficiency across the organization by rationalizing our footprint, streamlining our portfolio, and improving our cost structure.

There can be no assurance that we will be able to successfully execute our Cost and Simplicity program or that we will be able to do so within the anticipated time period, which could adversely impact our ability to improve or maintain margins and enhance long-term profitability.

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

Our financial results are partially dependent upon the cost of raw materials and our ability to pass along increases in these costs to our customers.

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

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

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

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

Fiscal 2022 and 2023 brought historic levels of inflation and reduced supply of certain grains due to the war in Ukraine, which drove up costs for bird feed and grass seed.

In both fiscal 2022 and fiscal 2023, we experienced increasing inflationary costs in key commodities (e.g., sunflower, milo and millet).

Although we were able to negotiate further price increases in fiscal 2022 and in fiscal 2023 with our retailers, it is possible that price increases may not fully offset continued high costs in the future, resulting in margin erosion.

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

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

In the past, periods of high inflation or supply constraints have resulted in higher costs for bird feed and grass seed.

Beginning in fiscal 2023, there has been a prolonged oversupply of grass seed, which has resulted in a significant decline in market prices.

As a result of this decline, in fiscal 2024, we incurred an approximately $15-$20 million charge to write-down the value of our grass seed inventory.

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

We also cannot predict to what extent price increases may negatively affect our sales volume or price decreases may result in further inventory write-downs.

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

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We cannot assure you that we will be successful in the introduction, marketing and production of any new products or product innovations, or that we will develop and introduce in a timely manner, improvements to our existing products which satisfy customer needs or achieve market acceptance.

Our failure to develop new products or improved formulations and introduce them successfully and in a timely manner could harm our ability to grow our business and could have a material adverse effect on our business, results of operations and financial condition.

Our failure to develop new products or improved formulations

and introduce them successfully and in a timely manner could harm our ability to grow our business and could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

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

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

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

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

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

The sale of fish, pet birds and small animals subjects us to additional risk, including risks associated with sourcing, developing captive breeding programs, health of the fish, pet birds and small animals supplied by us and future governmental regulation of the sale of fish, pet birds and small animals.

Our lawn and garden sales are highly seasonal and subject to adverse weather.

Because our lawn and garden products are used primarily in the spring and summer, the Garden business is seasonal.

In fiscal 2023, approximately 67% of our Garden segment’s net sales and 58% of our total net sales occurred during our second and third fiscal quarters.

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

During fiscal 2022 and fiscal 2023, we experienced unfavorable weather during the peak garden season, which adversely impacted our Garden sales.

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

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

Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2023, 17% in fiscal 2022 and 16% in fiscal 2021.

Home Depot, our second largest customer, represented approximately 16%, 16% and 15% of our total company net sales in fiscal 2023, 2022 and 2021, respectively.

Lowe's, our third largest customer, represented approximately 8%, 8% and 9% of our total company net sales in fiscal 2023, 2022 and 2021, respectively.

Costco and Amazon are also significant customers, and together with Walmart, Home Depot and Lowe's accounted for approximately 52% of our net sales in fiscal 2023.

Home Depot, our largest customer, represented approximately 17% of our total company net sales in fiscal year 2024 and 16% of our total company net sales in fiscal 2023 and 2022.

Walmart, our second largest customer, represented approximately 16% of our total company net sales in fiscal 2024 and 2023, and 17% in fiscal 2022.

Costco, our third largest customer, represented approximately 8%, 7% and 6% of our total company net sales in fiscal 2024, 2023 and 2022, respectively.

Lowe's and Amazon are also significant customers, and together with Walmart, Home Depot and Costco accounted for approximately 54% of our net sales in fiscal 2024.

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

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The loss of, or reduction in, orders from any significant customer, losses arising from customer disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable from any major customer could reduce our operating income and cash flow.

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

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

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

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

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

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

These key retailers are increasingly large and sophisticated with increased buying power and negotiating strength.

These key retailers are large and sophisticated with increased buying power and negotiating strength.

They are more capable of resisting price increases and can demand lower pricing.

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

This shift to “just-in-time” can also cause retailers to delay purchase orders, which can cause a shift in sales from

quarter to quarter.

This shift to “just-in-time” can also cause retailers to delay purchase orders, which can cause a shift in sales from quarter to quarter.

Decisions to move in or out of a market category by leading retailers can also have a significant impact on our business.

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

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

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

We sell our products through a variety of trade channels with a significant portion dependent upon key retailers, through both traditional brick-and-mortar retail channels and eCommerce channels, including Amazon.

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

A significant deterioration in the financial condition of one of our major customers could have a material adverse effect on our sales, profitability and cash flow.

A significant deterioration in the financial condition of one of our major customers or several smaller customers could have a material adverse effect on our sales, profitability and cash flow.

We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate.

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

While we increased our inventory levels significantly during fiscal 2022 to mitigate the adverse impact of supply chain disruptions on our fill rates, we were able to decrease inventory levels during fiscal 2023.

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

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

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

These restrictions have resulted in reduced availability of new pet birds and small animals and thus reduced demand for pet

bird and small animal food and supplies.

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

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

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

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

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If the balance of the implementation is not executed successfully, we could experience business interruptions or material weaknesses relating to IT controls of acquired companies.

For example, we recently identified two material weaknesses related to our Live Plants and Green Garden businesses whose IT systems have not been fully integrated into our corporate IT control structure.

For example, in fiscal 2023 we identified two material weaknesses related to our Live Plants and Green Garden businesses whose IT systems had not been fully integrated into our corporate IT control structure.

The material weaknesses were resolved during fiscal 2024, but there is no assurance that we may not experience similar IT control issues in the future.

If we do not complete the implementation of the project timely and successfully, we may experience, among other things, additional costs associated with completing this project and a delay in our ability to improve existing operations, support future growth and take advantage of new applications and technologies.

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Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to future remediation liabilities that may be material.

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

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

This subjects us to a number of risks, including:

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

quality control issues;

social and political disturbances and instability;

export duties, import controls, tariffs, quotas and other trade barriers;

shipping and transportation problems;

and fluctuations in currency values.

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

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

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

Deterioration in operating results could prevent us from fulfilling our obligations under the terms of our indebtedness or impact our ability to refinance our debt on favorable terms as it matures.

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We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived intangible assets might be impaired.

circumstances or conditions exist, further steps are required to determine whether the carrying value of each of the individual assets exceeds its fair value.

If such circumstances or conditions exist, further steps are required to determine whether the carrying value of each of the individual assets exceeds its fair value.

If analysis indicates that an individual asset’s carrying value does exceed its fair value, we would record a loss equal to the excess of the individual asset’s carrying value over its fair value.

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

In fiscal 2023, we recorded impairment charges of approximately $7.5 million and $3.9 million in our Pet and Garden segments.

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

As part of our annual goodwill impairment testing, in fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test as part of annual goodwill impairment test.

We completed our quantitative assessment and concluded there was no impairment of goodwill.

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

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

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.

In fiscal 2024, we recorded a non-cash impairment charge in our Pet segment of $12.8 million, and in fiscal 2023, we recorded impairment charges of approximately $7.5 million and $3.9 million in our Pet and Garden segments.

There was no impairment loss recorded in fiscal 2022.

As part of our annual goodwill impairment testing, in fiscal 2024 we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test.

We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2024, and accordingly, no further testing of goodwill was required in fiscal 2024.

In connection with the our annual goodwill impairment testing performed during fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test.

We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amounts.

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

We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2022, and accordingly, no further testing of goodwill was required in fiscal 2022.

We identified material weaknesses in our internal control over financial reporting during fiscal 2023 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.

As described under Item 9A.

"Controls and Procedures" below, we have concluded that material weakness in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date.

"Controls and Procedures" below, we concluded that material weaknesses in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

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(1) in information technology general computer controls ("ITGCs") relating to access and program change management controls and (2) controls relating to an outsourced service provider at two acquired businesses whose IT systems had not yet been fully integrated with our corporate IT control structure.

Management is in the process of establishing a remediation plan and expects its remediation efforts will involve implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide.

Until the remediation plan is implemented, tested and deemed effective, we cannot provide assurance that our actions will adequately remediate the material weaknesses or that additional material weaknesses in our internal controls will not be identified in the future.

Management established a remediation plan that involved implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide.

The remediation plan was implemented and tested during fiscal 2024 and deemed effective.

However, we cannot provide assurance that additional material weaknesses in our internal controls will not be identified in the future.

Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud.

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Our performance is substantially dependent upon the continued services of our senior management team.

The loss of the services of these persons, including the recent departure of our former Chief Executive Officer in October 2023, could have a material adverse effect on our business.

Our future performance depends on our ability to attract and retain a new Chief Executive Officer and other skilled employees in all facets of our business, including management and manufacturing and distribution.

The loss of the services of these persons could have a material adverse effect on our business.

Our former Chief Executive Officer resigned in October 2023, and our Chief Financial Officer was promoted to Chief Executive Officer in September 2024 and the former chief financial officer of our Pet segment was promoted to our Chief Financial Officer.

Our future performance depends on the success of our recently promoted Chief Executive Officer and Chief Financial Officer and our ability to attract and retain skilled employees in all facets of our business, including management and manufacturing and distribution.

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

A significant information security or operational technology incident, including a cyber attack or data breach, could disrupt our operations and adversely impact our operating results, cash flows and reputation.

We rely extensively on information technology (IT) systems, networks and services, including internet and intranet sites, data hosting and processing facilities and technologies, physical security systems and other hardware, software and technical applications and platforms, many of which are managed, hosted, provided and/or used by third parties or their vendors, to assist in conducting our business.

Numerous and evolving information security threats, including advanced persistent cybersecurity threats, pose a risk to the security of our services, systems, networks and supply chain, as well as to the confidentiality, availability and integrity of our data and of our critical business operations.

In addition, because the techniques, tools and tactics used in cyber-attacks frequently change and may be difficult to

detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack.

Our and our third-party providers’ IT systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyberattacks.

We cannot guarantee that our security efforts or the security efforts of our third-party providers will prevent material breaches, operational incidents or other breakdowns to our or our third-party providers’ IT systems.

A breach of our data security systems or failure of our IT systems may have a material adverse impact on our business operations and financial results.

If the IT systems, networks or service providers we rely upon fail to function properly or cause operational outages or aberrations, or if we or one of our third-party providers suffer significant unavailability of key operations, or inadvertent disclosure of, lack of integrity of, or loss of our sensitive business or stakeholder information, including personally identifiable information, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and be exposed to reputational, competitive, operational, financial and business harm as well as litigation and regulatory action.

If our critical IT systems or back-up systems or those of our third-party vendors are damaged or cease to function properly, we may have to make a significant investment to repair or replace them.

These risks can be magnified in companies that we have acquired until we fully integrate their critical IT systems into our internal controls.

In addition, if a ransomware attack or other cybersecurity incident occurs, either internally or at our third-party technology service providers, we could be prevented from accessing our data or systems, which may cause interruptions or delays in our business operations, cause us to incur remediation costs, subject us to demands to pay a ransom or damage our reputation.

In addition, such events could result in unauthorized disclosure of confidential information or stakeholder information, including personally identifiable information, and we may suffer financial and reputational damage because of lost or misappropriated information belonging to us or to our partners, our employees, customers and suppliers.

Additionally, we could be exposed to potential liability, litigation, governmental inquiries, investigations or regulatory enforcement actions;

and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.

The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows.

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

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

We intend to vigorously pursue our defenses in the future proceedings and believe that we will prevail on the merits as to the head start damages issue.

While we believe that the ultimate resolution of this matter will not have a material impact on our consolidated financial statements, the outcome of litigation is inherently uncertain and the final resolution of this matter may result in expense to us in excess of management's expectations.

In addition, because the techniques, tools and tactics used in cyber-attacks frequently change and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack.

A breach of our data security systems or failure of our IT systems may have a material adverse impact on our business operations and financial results.

If our critical IT systems or back-up systems or those of our third-party vendors are damaged or cease to function properly, we may have to make a significant investment to repair or replace them.

These risks can be magnified in companies that we have acquired until we fully integrate their critical IT systems into our internal controls.

Additionally, we could be exposed to potential liability, litigation, governmental inquiries, investigations or regulatory enforcement actions;

and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.

The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows.

The retrial of the “head start” damages issue concluded in March 2024, but no decision has been issued by the Court.

We intend to vigorously pursue our defenses in any future proceedings and believe that we will prevail on the merits as to the head start damages issue.

While we believe that the ultimate resolution of this matter will not have a material impact on our

consolidated financial statements, the outcome of litigation is inherently uncertain and the final resolution of this matter may result in expense to us in excess of management's expectations.

The adoption of new tax legislation, unanticipated changes in our tax provisions, or exposure to additional tax liabilities could affect our profitability and cash flows.

We are subject to income and other taxes in the United States federal jurisdiction and various local, state and foreign jurisdictions.

Our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of business operations and earnings, changes in tax laws and statutory tax rates, and the discovery of new information in the course of our tax return preparation process.

From time to time, tax proposals are introduced or considered by the U.S.

Congress or the legislative bodies in local and state jurisdictions that could also affect our tax rate or our tax liabilities.

Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses, funding and other items in intercompany transactions.

We are subject to ongoing tax audits in various jurisdictions.

In connection with these audits (or future audits), tax authorities may disagree with our intercompany charges, inter-company transfer pricing methodology or other matters and assess additional taxes.

We regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision.

As a result, the ultimate resolution of our tax audits and changes in tax laws or tax rates could materially affect our tax provision, net income and cash flows in future periods.

Risks Relating to our Capital Stock

We do not expect to pay dividends in the foreseeable future.

We do not expect to pay cash dividends in the foreseeable future.

We have never paid any cash dividends on our common stock or Class A common stock and currently do not intend to do so.

Provisions of our credit facility and the indenture governing our senior subordinated notes restrict our ability to pay cash dividends.

Provisions of our credit facility and the indentures governing our senior notes restrict our ability to pay cash dividends.

Any future determination to pay cash dividends will be at the discretion of our Board of Directors, subject to limitations under applicable law and contractual restrictions, and will depend upon our results of operations, financial condition and other factors deemed relevant by our Board of Directors.

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Pursuant to our Fourth Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue up to 80,000,000 shares of our common stock, 100,000,000 shares of our nonvoting Class A common stock, 3,000,000 shares of our Class B common stock and up to 1,000,000 additional shares of preferred stock without seeking the approval or consent of our stockholders, unless required by the NASDAQ Global Market.

Although the issuance of the additional shares of nonvoting Class A common stock would not dilute the voting rights of the existing stockholders, it would have a dilutive effect on the economic interest of currently outstanding shares of common stock and Class B common stock similar to the dilutive effect of subsequent issuances of ordinary common stock.

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

common stock and Class B common stock.

Although the issuance of the additional shares of nonvoting Class A common stock would not dilute

the voting rights of the existing stockholders, it would have a dilutive effect on the economic interest of currently outstanding shares of common stock and Class B common stock similar to the dilutive effect of subsequent issuances of ordinary common stock.

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

Unresolved Staff Comments

Cybersecurity

Not applicable.

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

What changed 10-K

Item 1A. Risk Factors