Financial Performance - Fiscal 2025 Q1 net sales increased by 3% to $656 million compared to $635 million in the prior year[1] - Fiscal 2025 Q1 EPS rose to $0.21 from $0.01 a year ago, reflecting significant improvement in profitability[1] - Gross profit for Q1 was $196 million, with a gross margin improvement of 160 basis points to 29.8% due to productivity gains and moderating inflation[3] - Operating income grew to $28 million from $8 million in the prior year, with an operating margin expansion of 300 basis points to 4.3%[4] - Pet segment net sales increased by 4% to $427 million, while operating income grew to $51 million from $43 million, with an operating margin of 12.0%[5][6] - Garden segment net sales rose by 2% to $229 million, with operating income improving to $2 million from a loss of $9 million, achieving an operating margin of 1.1%[7][8] - Net income for the three months ended December 28, 2024, was $14,181,000, a significant increase from $567,000 in the same period last year[27] - Adjusted EBITDA for the three months ended December 28, 2024, was $55,436,000, compared to $36,978,000 for the same period last year, reflecting a year-over-year increase of approximately 50%[32] Cash and Debt Management - Cash balance at the end of Q1 was $618 million, up from $341 million a year ago, indicating strong liquidity[9] - Total debt remained stable at $1.2 billion, with a gross leverage ratio of 2.9x, down from 3.0x in the prior year[9] - Cash, cash equivalents, and restricted cash at the end of the period totaled $632,669,000, down from $768,403,000 at the beginning of the period[27] - Cash flows from operating activities resulted in a net cash outflow of $68,832,000 for the three months ended December 28, 2024, slightly improved from $69,784,000 in the prior year[27] - The company reported a net cash used in investing activities of $9,418,000, a decrease from $70,475,000 in the same period last year, indicating reduced investment expenditures[27] Shareholder Returns - Central repurchased 1.68 million shares for $52 million during the quarter, with $131 million remaining for future repurchases[10] - The company repurchased common stock totaling $54,022,000 during the three months ended December 28, 2024, compared to $6,775,000 in the prior year[27] Other Financial Metrics - The company maintains its fiscal 2025 non-GAAP EPS outlook of $2.20 or better, despite macroeconomic challenges[12][13] - The company incurred stock-based compensation expenses of $5,510,000 for the three months ended December 28, 2024, compared to $6,021,000 in the prior year[27] - Accounts receivable increased significantly, with a change of $(73,439,000) for the three months ended December 28, 2024, compared to $(32,952,000) in the same period last year[27] - The effect of exchange rate changes resulted in a cash decrease of $(2,038,000) for the three months ended December 28, 2024, contrasting with a cash increase of $790,000 in the same period last year[27] - The company reported a net income attributable to noncontrolling interest of $172,000 for the three months ended December 28, 2024, compared to $137,000 in the prior year[32]

Core Viewpoint - Three stocks have been added to the Zacks Rank 5 (Strong Sell) List, indicating a negative outlook for these companies based on recent earnings estimate revisions. Company Summaries - Industria de Diseño Textil, S.A. (IDEXY) has seen its current year earnings estimate revised downward by 6.5% over the last 60 days [1] - Central Garden & Pet Company (CENTA) has experienced a 7.5% downward revision in its current year earnings estimate over the past 60 days [3] - Lonza Group AG (LZAGY) has had its current year earnings estimate revised down by 6% in the last 60 days [4]

Financial Performance - Consolidated net sales for fiscal 2024 were $3.2 billion, a decrease of $109.6 million, or 3.3%, compared to fiscal 2023[150] - Operating income declined by $25.3 million, or 12.0%, to $185.4 million in fiscal 2024[152] - Net income for fiscal 2024 was $108.0 million, or $1.62 per diluted share, down from $125.6 million, or $1.88 per diluted share in fiscal 2023[153] - Gross profit decreased by $3.1 million, or 0.3%, to $943.7 million, while gross margin improved by 90 basis points to 29.5%[165] - Organic net sales decreased by 3.9%, with Pet organic sales down 5.9% and Garden organic sales down 1.2%[151] - Net income for fiscal 2024 was $108.0 million, or $1.62 per diluted share, compared to $125.6 million, or $1.88 per diluted share, for fiscal 2023[173] - GAAP net income for the year ended September 28, 2024, was $107,983 thousand, compared to $125,643 thousand for the year ended September 30, 2023, reflecting a decrease of 14.1%[184] - Non-GAAP net income for fiscal 2024 was $142.4 million, or $2.13 per diluted share, compared to $138.5 million, or $2.07 per diluted share, for fiscal 2023[173] Segment Performance - The Pet segment accounted for approximately $1.8 billion in sales, while the Garden segment accounted for approximately $1.4 billion[150] - Pet operating income increased by $5.4 million, or 2.7%, to $203.4 million in fiscal 2024, with an operating margin improvement from 10.5% to 11.1%[167] - Garden operating income decreased by $41.6 million, or 33.7%, to $81.9 million in fiscal 2024, with a non-GAAP operating margin decline to 7.5%[167] - Organic net sales for the Pet Segment decreased by 2.4% in FY 2024, with reported sales of $1,832.8 million compared to $1,877.2 million in FY 2023[186] - The Garden Segment reported a GAAP operating income of $81,893 thousand for FY 2024, down from $123,455 thousand in FY 2023, a decline of 33.7%[186] Expenses and Costs - Selling, general and administrative expenses increased by $22.1 million, or 3.0%, to $758.3 million, representing 23.7% of net sales[166] - The company incurred approximately $7.5 million in one-time costs related to facility closures in the Pet segment[154] - Other income (expense) was an expense of $5.1 million in fiscal 2024, compared to income of $1.5 million in fiscal 2023, mainly due to a $7.5 million impairment for private company investments[171] - Corporate expenses decreased by $10.9 million, primarily due to lower equity compensation and a gain from a litigation settlement[168] Debt and Financing - Debt outstanding was $1,190.0 million as of September 28, 2024, with an average borrowing rate of 4.5%[170] - The company issued $500 million of 4.125% senior notes due October 2030, using proceeds to redeem $300 million of 6.125% senior notes due November 2023 at a redemption price of 101.531%[206] - The company has a $750 million senior secured asset-based revolving credit facility, with net availability of approximately $481 million as of September 28, 2024[208] - Total debt outstanding as of September 28, 2024, was $1,190.0 million, slightly up from $1,188.2 million at September 30, 2023[202] Cash Flow and Investments - Net cash provided by operating activities increased by $13.3 million, from $381.6 million in fiscal 2023 to $394.9 million in fiscal 2024[193] - Net cash used in investing activities increased by $70.6 million, from $34.6 million in fiscal 2023 to $105.2 million in fiscal 2024, primarily due to the acquisition of TDBBS, LLC[194] - Capital expenditures are anticipated to be approximately $70 million over the next 12 months, focusing on plant and equipment upgrades[200] Acquisitions and Growth Strategy - In November 2023, the company acquired TDBBS, LLC for approximately $60 million, enhancing its portfolio in the pet supplies market[159] - The company anticipates continued focus on market expansion and new product development to drive future growth[186] - The company plans to continue evaluating potential acquisition candidates as part of its growth strategy[200] Tax and Interest - Effective income tax rate increased to 23.2% in fiscal 2024 from 22.4% in fiscal 2023, primarily due to a higher blended state income tax rate[172] - Net interest expense decreased by $11.8 million, or 23.7%, to $37.9 million in fiscal 2024 due to increased interest income from higher cash balances[170] Market and Economic Factors - Inflationary pressures impacted gross and operating margins in fiscal 2023, but moderation was noted in fiscal 2024, leading to improved margins[189] - Approximately 66% of the Garden segment's net sales occurred during the second and third fiscal quarters, highlighting the seasonality of the business[191] Compliance and Obligations - The company was in compliance with all financial covenants as of September 28, 2024, under both the 2030 and 2028 Notes[207][212] - Total contractual obligations amount to $1,891.2 million, with $1,200.5 million due thereafter[215] - Estimated interest payments on long-term debt for fiscal years 2025 to 2029 total approximately $282.7 million[215] Impairments and Goodwill - Impairment losses on indefinite-lived intangible assets were recognized at $12.8 million and $11.5 million for fiscal years 2024 and 2023, respectively[224] - The company completed its qualitative assessment of goodwill impairment and determined that fair values of reporting segments were greater than their carrying amounts in fiscal year 2024[221] - The company’s goodwill is associated with its Pet and Garden segments, with no impairment testing required in fiscal 2024[221]

Core Viewpoint - Central Garden (CENTA) reported a quarterly loss of $0.18 per share, which was better than the Zacks Consensus Estimate of a loss of $0.20, indicating a 10% earnings surprise [1] - The company has shown a trend of surpassing consensus EPS estimates over the last four quarters [2] Financial Performance - For the quarter ended September 2024, Central Garden posted revenues of $669.49 million, missing the Zacks Consensus Estimate by 7.51%, and down from $750.15 million year-over-year [2] - The company has exceeded consensus revenue estimates two times in the last four quarters [2] Stock Performance - Central Garden shares have declined approximately 5.8% since the beginning of the year, contrasting with the S&P 500's gain of 25.2% [4] - The current Zacks Rank for Central Garden is 4 (Sell), indicating expectations of underperformance in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $640.69 million, and for the current fiscal year, it is $2.40 on revenues of $3.31 billion [8] - The trend of estimate revisions for Central Garden has been unfavorable ahead of the earnings release [7] Industry Context - The Consumer Products - Discretionary industry, to which Central Garden belongs, is currently ranked in the bottom 12% of over 250 Zacks industries, suggesting potential challenges for stock performance [9]

Exhibit 99.1 CENTRAL GARDEN & PET ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2024 FINANCIAL RESULTS Fiscal 2024 net sales of $3.2 billion vs. $3.3 billion in the prior year Fiscal 2024 GAAP EPS of $1.62 vs. $1.88 a year ago, non-GAAP EPS of $2.13 vs. $2.07 a year ago Expects fiscal 2025 non-GAAP EPS to be $2.20 or better WALNUT CREEK, Calif., – Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) ("Central"), a market leader in the pet and garden industries, today announced results for its fourth quart ...

Wall Street expects a year-over-year decline in earnings on lower revenues when Central Garden (CENTA) reports results for the quarter ended September 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report. On the other hand, if they miss, the stock ...

In late 2023, many analysts called for 2024 to be the year of a small-cap stock renaissance. These stocks were battered as the Federal Reserve aggressively raised interest rates. Many of these companies rely on borrowing to fund their growth and struggled as the cost of borrowing increased. The Russell 2000 index, which tracks many small-cap stocks, is up 20% in 2024. But not all small-cap stocks participated in that rally. However, with the Federal Reserve suggesting that its 50-basis point cut in Septembe ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201%2E%20Financial%20Statements) The company's financial statements for Q3 2024 show a 2.6% net sales decrease to $996.3 million and a net income of $79.7 million, with total assets reaching $3.61 billion Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $570,398 | $488,730 | | Inventories, net | $784,775 | $838,188 | | Total current assets | $1,910,170 | $1,707,123 | | Total assets | $3,607,878 | $3,378,648 | | **Liabilities & Equity** | | | | Total current liabilities | $521,445 | $457,987 | | Long-term debt | $1,189,366 | $1,187,956 | | Total liabilities | $2,012,098 | $1,925,835 | | Total equity | $1,595,780 | $1,452,813 | Condensed Consolidated Statements of Operations Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $996,348 | $1,023,269 | $2,530,971 | $2,559,936 | | Gross profit | $317,058 | $318,052 | $774,783 | $749,389 | | Operating income | $115,936 | $122,830 | $217,795 | $201,277 | | Net income | $79,724 | $83,126 | $142,141 | $122,808 | | Diluted EPS | $1.19 | $1.25 | $2.13 | $1.84 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary - Nine Months Ended (in thousands) | Activity | June 29, 2024 | June 24, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $191,804 | $227,566 | | Net cash used in investing activities | ($94,589) | ($41,450) | | Net cash used by financing activities | ($16,007) | ($33,665) | | Net increase in cash | $81,505 | $154,497 | Key Notes to Financial Statements - On November 3, 2023, the Company acquired TDBBS, LLC, a provider of premium natural dog chews and treats, for approximately **$60 million**. This acquisition expands Central's portfolio and enhances its eCommerce capabilities[39](index=39&type=chunk) - In December 2023, the Board approved a stock dividend of one Class A Common Stock share for every four outstanding shares, distributed on February 8, 2024. All share and per-share amounts have been retroactively adjusted[21](index=21&type=chunk) Segment Net Sales (in thousands) | Segment | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Pet | $508,002 | $503,329 | $1,397,454 | $1,394,352 | | Garden | $488,346 | $519,940 | $1,133,517 | $1,165,584 | Segment Operating Income (in thousands) | Segment | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Pet | $83,068 | $59,969 | $189,115 | $154,779 | | Garden | $62,519 | $88,088 | $110,699 | $126,887 | - The company is involved in a legal proceeding with Nite Glow. A retrial on damages for a misappropriation of confidential information claim concluded in March 2024, but no decision has been issued by the court. Management does not expect the outcome to have a material impact[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights a 2.6% Q3 2024 net sales decrease, driven by the Garden segment, while nine-month operating income grew 8.2% due to margin improvements, with a $15-20 million Q4 inventory write-down anticipated Overall Financial Performance Q3 2024 vs. Q3 2023 Performance (in millions) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $996.3 | $1,023.3 | -2.6% | | Organic Net Sales | - | - | -2.9% | | Gross Profit | $317.1 | $318.1 | -0.3% | | Gross Margin | 31.8% | 31.1% | +70 bps | | Operating Income | $115.9 | $122.8 | -5.6% | | Diluted EPS | $1.19 | $1.25 | -4.8% | Nine Months 2024 vs. Nine Months 2023 Performance (in millions) | Metric | YTD 2024 | YTD 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,531 | $2,560 | -1.1% | | Gross Profit | $774.8 | $749.4 | +3.4% | | Operating Income | $217.8 | $201.3 | +8.2% | | Diluted EPS | $2.13 | $1.84 | +15.8% | - The company is implementing a 'Cost and Simplicity' program, which involved exiting the pottery business and closing several facilities, resulting in one-time costs of **$11.1 million** in Q3 2024[78](index=78&type=chunk) - A significant decrease in market prices for grass seed will necessitate an inventory write-down, with an anticipated charge of **$15-20 million** in the fourth quarter of fiscal 2024[79](index=79&type=chunk) Segment Performance Analysis - **Pet Segment:** Q3 net sales grew **0.9%** to **$508.0 million**, though organic sales declined **2.2%** due to lower demand for durable goods. Operating income surged **38.5%** to **$83.1 million**, driven by improved gross margin[82](index=82&type=chunk)[85](index=85&type=chunk) - **Garden Segment:** Q3 net sales fell **6.1%** to **$488.3 million**, with organic sales down **3.7%** primarily due to decreased sales in the live plant business. Operating income decreased **29.0%** to **$62.5 million**[82](index=82&type=chunk)[86](index=86&type=chunk) Liquidity and Capital Resources - Net cash provided by operating activities for the nine-month period was **$191.8 million**, a decrease from **$227.6 million** in the prior year, primarily due to changes in working capital[124](index=124&type=chunk) - Total debt outstanding was **$1,189.7 million** as of June 29, 2024, consisting primarily of three series of senior notes due in 2028, 2030, and 2031[127](index=127&type=chunk) - The company has a **$750 million** asset-based revolving credit facility, with approximately **$550 million** in net availability and no borrowings outstanding as of June 29, 2024[131](index=131&type=chunk) - Capital expenditures are anticipated to be approximately **$60 million** in fiscal 2024, with **$33 million** invested through the first nine months[126](index=126&type=chunk) Non-GAAP Financial Measures - The company uses non-GAAP measures to exclude infrequent items like facility closure and business exit costs to provide better comparability of ongoing operating performance[103](index=103&type=chunk)[104](index=104&type=chunk) GAAP vs. Non-GAAP Reconciliation Highlights (Q3 2024, in millions) | Metric | GAAP | Non-GAAP | Difference | | :--- | :--- | :--- | :--- | | Operating Income | $115.9 | $127.1 | +$11.2 | | Net Income | $79.7 | $88.2 | +$8.5 | | Diluted EPS | $1.19 | $1.32 | +$0.13 | [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to the company's market risk exposure have occurred since the fiscal year-end 2023 Form 10-K disclosures - There has been no material change in the company's exposure to market risk since the fiscal year-end 2023 Form 10-K report[141](index=141&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of June 29, 2024, due to material weaknesses in IT general controls, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 29, 2024[143](index=143&type=chunk) - The ineffectiveness is due to material weaknesses in IT general controls (ITGCs) and controls related to an outsourced service provider for the Live Plant business[144](index=144&type=chunk) - A remediation plan is underway, which includes enhancing control design, hiring additional experienced personnel, and expanding control procedures[145](index=145&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=55&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is involved in ongoing legal proceedings with Nite Glow Industries, with a retrial on damages concluded and a decision pending, not expected to materially impact financials - A retrial on damages in the Nite Glow litigation concluded in March 2024, with a court decision still pending. The company intends to vigorously defend its position[147](index=147&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to the company's risk factors have been reported since the fiscal year-end 2023 Form 10-K - No material changes from the risk factors disclosed in the Form 10-K for the fiscal year ended September 30, 2023 have been reported[148](index=148&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3, the company repurchased 46,849 shares for tax coverage on vested restricted stock, with **$82.0 million** remaining under the 2019 repurchase authorization - As of June 29, 2024, the company had **$82.0 million** of authorization remaining under its 2019 share repurchase program[150](index=150&type=chunk) - During the quarter, **46,849 shares** were repurchased, representing shares withheld to cover taxes on vested restricted stock awards[150](index=150&type=chunk)[151](index=151&type=chunk)

Central Garden (CENTA) came out with quarterly earnings of $1.32 per share, beating the Zacks Consensus Estimate of $1.25 per share. This compares to earnings of $1.40 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 5.60%. A quarter ago, it was expected that this pet and lawn products maker would post earnings of $0.83 per share when it actually produced earnings of $0.99, delivering a surprise of 19.28%. Over the last four q ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Central Garden & Pet Company for the three and six months ended March 30, 2024, and March 25, 2023, encompassing the Balance Sheets, Statements of Operations, Statements of Comprehensive Income, Statements of Cash Flows, and the accompanying Notes to the financial statements | Financial Statement | Period Ended | Total Assets ($ thousands) | Total Liabilities ($ thousands) | Total Equity ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | **Balance Sheet** | Mar 30, 2024 | 3,540,018 | 2,027,851 | 1,512,167 | | | Sep 30, 2023 | 3,378,648 | 1,925,835 | 1,452,813 | | Income Statement | Three Months Ended Mar 30, 2024 ($ thousands) | Three Months Ended Mar 25, 2023 ($ thousands) | Six Months Ended Mar 30, 2024 ($ thousands) | Six Months Ended Mar 25, 2023 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | 900,090 | 909,004 | 1,534,623 | 1,536,667 | | **Operating Income** | 93,447 | 78,041 | 101,859 | 78,447 | | **Net Income** | 61,987 | 48,115 | 62,417 | 39,682 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the financial statements, covering the basis of presentation, a recent stock dividend, revenue recognition policies, acquisitions, fair value measurements, goodwill and intangible assets, debt structure, segment information, and legal contingencies, with key events including the acquisition of TDBBS, LLC and a one-for-four stock dividend distributed in February 2024 - On November 3, 2023, the Company acquired TDBBS, LLC, a provider of premium natural dog chews and treats, for **approximately $60 million** to expand its portfolio and enhance e-commerce capabilities[167](index=167&type=chunk) - In December 2023, the Board approved a stock dividend of **one Class A Common Stock share for every four outstanding shares**, distributed on **February 8, 2024**; all share and per-share amounts have been retroactively adjusted[126](index=126&type=chunk)[151](index=151&type=chunk) | Debt Instrument | Principal Amount ($ millions) | Interest Rate | Maturity Date | | :--- | :--- | :--- | :--- | | Senior Notes | 400 | 4.125% | April 2031 | | Senior Notes | 500 | 4.125% | October 2030 | | Senior Notes | 300 | 5.125% | February 2028 | | Credit Facility | 750 (Capacity) | SOFR + 1.00%-1.50% | December 2026 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of fiscal 2024, highlighting a slight decrease in net sales driven by declines in durable pet products, offset by growth in Garden organic sales, while gross margin and operating income improved significantly due to the 'Cost and Simplicity' program, moderating input costs, and strategic exits from certain business lines, also covering liquidity, capital resources, debt structure, and the use of non-GAAP financial measures [Results of Operations](index=31&type=section&id=Results%20of%20Operations) For the second quarter of fiscal 2024, net sales decreased 1.0% to $900.1 million while organic sales decreased 0.7%, with gross margin improving by 240 basis points to 31.0% and operating income rising 19.7% to $93.4 million; for the six-month period, net sales were flat, but operating income increased 29.8% to $101.9 million, driven by cost-saving initiatives and favorable segment performance, particularly in Garden organic sales, despite softness in the Pet segment | Metric | Q2 FY2024 | Q2 FY2023 | Change | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $900.1M | $909.0M | ($8.9M) | (1.0)% | | Gross Profit | $278.9M | $259.6M | $19.3M | 7.4% | | Operating Income | $93.4M | $78.0M | $15.4M | 19.7% | | Net Income | $62.0M | $48.1M | $13.9M | 28.9% | | Diluted EPS | $0.93 | $0.72 | $0.21 | 29.2% | - Q2 organic sales performance varied by segment: Pet organic sales **decreased 3.0%** due to lower demand for durable products, while Garden organic sales **increased 1.9%**, aided by favorable weather and strong performance in live plants and grass seed[245](index=245&type=chunk) - Gross margin for Q2 **increased by 240 basis points**, benefiting from the 'Cost and Simplicity' program, the exit from the private-label pet bed business, and moderating input costs[246](index=246&type=chunk) | Metric | H1 FY2024 | H1 FY2023 | Change | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,535M | $1,537M | ($2M) | (0.1)% | | Gross Profit | $457.7M | $431.3M | $26.4M | 6.1% | | Operating Income | $101.9M | $78.5M | $23.4M | 29.8% | | Net Income | $62.4M | $39.7M | $22.7M | 57.2% | [Use of Non-GAAP Financial Measures](index=38&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income, adjusted EBITDA, and organic net sales, to supplement its GAAP results by excluding specific items like facility closure costs, thereby providing investors with a clearer view of ongoing operating performance, with reconciliations to comparable GAAP measures provided - Non-GAAP measures for Q2 FY2024 exclude **$5.3 million** in costs related to the closure of a manufacturing facility in Chico, California, and the consolidation of the Southeast distribution network[283](index=283&type=chunk)[221](index=221&type=chunk) | Metric | Q2 FY2024 | Q2 FY2023 | H1 FY2024 | H1 FY2023 | | :--- | :--- | :--- | :--- | :--- | | **GAAP Net Income** | $62.0M | $48.1M | $62.4M | $39.7M | | **Non-GAAP Net Income** | $66.0M | $48.1M | $66.5M | $39.7M | | Adjusted EBITDA Reconciliation ($ thousands) | Q2 FY2024 | Q2 FY2023 | H1 FY2024 | H1 FY2023 | | :--- | :--- | :--- | :--- | :--- | | **Income from operations (GAAP)** | 93,447 | 78,041 | 101,859 | 78,447 | | Depreciation & amortization | 22,812 | 22,109 | 45,357 | 43,801 | | Noncash stock-based compensation | 2,907 | 6,750 | 8,927 | 13,327 | | Facility closures | 5,270 | - | 5,270 | - | | **Adjusted EBITDA (Non-GAAP)** | 124,436 | 106,900 | 161,413 | 135,575 | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary sources of liquidity are cash from operations and its $750 million credit facility, with total debt at $1.2 billion as of March 30, 2024, and approximately $685 million available under the credit facility; net cash used by operating activities was $94.3 million for the six-month period, a slight improvement from the prior year, and the company believes its liquidity is adequate to meet its needs for at least the next 12 months, including planned capital expenditures of approximately $70 million for fiscal 2024 | Cash Flow Activity ($ millions) | Six Months Ended Mar 30, 2024 | Six Months Ended Mar 25, 2023 | | :--- | :--- | :--- | | Net cash used by operating activities | (94.3) | (97.1) | | Net cash used in investing activities | (80.3) | (30.8) | | Net cash (used) provided by financing activities | (13.2) | 8.6 | - Total debt outstanding was **$1,189.3 million** as of March 30, 2024; the company has a **$750 million** asset-based revolving credit facility with net availability of **approximately $685 million** and no outstanding borrowings as of the quarter's end[268](index=268&type=chunk)[43](index=43&type=chunk) - The company anticipates capital expenditures of **approximately $70 million** in fiscal 2024, primarily for plant and equipment upgrades and IT platform investments[267](index=267&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports that there has been no material change in its exposure to market risk from the information provided in its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 - There has been no material change in the company's exposure to market risk since its last annual report[89](index=89&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of March 30, 2024, the company's disclosure controls and procedures were not effective due to previously identified material weaknesses in internal control over financial reporting related to IT general controls and controls at an outsourced service provider, with the company actively engaged in a remediation plan to address these weaknesses - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that disclosure controls and procedures were **not effective** as of March 30, 2024[90](index=90&type=chunk) - The ineffectiveness is due to material weaknesses identified as of September 30, 2023, related to **IT general controls** at the Live Plant and Green Garden businesses and controls over an **outsourced revenue process service provider**[91](index=91&type=chunk) - An ongoing remediation plan includes enhancing control procedures, improving personnel training, hiring additional experienced staff, and expanding controls related to revenue processes for the Live Plants business[75](index=75&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a lawsuit with Nite Glow Industries, Inc., where a prior verdict was partially overturned on appeal, leaving a single claim for misappropriation of confidential information, and a retrial on damages concluded in March 2024 with a decision pending, though the company does not believe the final resolution will have a material impact on its financial statements - The ongoing legal proceeding involves a claim by Nite Glow Industries for **misappropriation of confidential information**; a retrial to determine damages concluded in **March 2024**, with a court decision pending[77](index=77&type=chunk)[217](index=217&type=chunk) - Management intends to vigorously defend its position and believes the ultimate outcome will **not materially affect** the company's consolidated financial statements, though litigation outcomes are inherently uncertain[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023 - No material changes from the risk factors disclosed in the Form 10-K for the fiscal year ended September 30, 2023, have been identified[80](index=80&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchase of its equity securities during the fiscal quarter ended March 30, 2024, with a total of 117,964 shares repurchased at an average price of $36.82 per share, primarily related to tax withholding for vested restricted stock, and as of the quarter's end, $82.0 million remained available under the 2019 share repurchase authorization | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Dec 31, 2023 - Feb 3, 2024 | 7,508 | $33.16 | | Feb 4, 2024 - Mar 2, 2024 | 99,225 | $37.14 | | Mar 3, 2024 - Mar 30, 2024 | 11,231 | $36.43 | | **Total** | **117,964** | **$36.82** | - As of March 30, 2024, the company had **$82.0 million** of authorization remaining under its 2019 Repurchase Authorization program[97](index=97&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, a list of guarantor subsidiaries, and financial statements formatted in Inline XBRL - Exhibits filed include **CEO and CFO certifications** pursuant to Section 302 of the Sarbanes-Oxley Act[83](index=83&type=chunk)[101](index=101&type=chunk) - The filing also includes financial data formatted in **Inline XBRL** as required by the SEC[102](index=102&type=chunk)