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Central Garden & Pet(CENTA) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The company's unaudited financial statements show a significant decrease in net income and EPS for the quarter, driven by lower margins and higher expenses Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Item | Dec 29, 2018 | Dec 30, 2017 | Sep 29, 2018 | | :--- | :--- | :--- | :--- | | Total Current Assets | $1,272,024 | $993,900 | $1,217,298 | | Total Assets | $1,950,846 | $1,617,352 | $1,907,209 | | Total Current Liabilities | $249,548 | $224,959 | $212,964 | | Long-term Debt | $692,332 | $690,964 | $692,031 | | Total Equity | $956,484 | $661,951 | $952,834 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Net Sales | $461,990 | $442,011 | | Gross Profit | $130,182 | $131,837 | | Operating Income | $10,181 | $22,521 | | Income Before Income Taxes | $1,912 | $12,214 | | Net Income Attributable to Central Garden & Pet Company | $1,803 | $26,247 | | Basic EPS | $0.03 | $0.52 | | Diluted EPS | $0.03 | $0.50 | Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Income Including Noncontrolling Interest | $1,639 | $26,450 | | Foreign Currency Translation | $(274) | $44 | | Total Comprehensive Income | $1,365 | $26,494 | | Comprehensive Income Attributable to Central Garden & Pet Company | $1,529 | $26,291 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Net Cash Provided (Used) by Operating Activities | $6,800 | $(24,213) | | Net Cash Used in Investing Activities | $(9,387) | $(15,941) | | Net Cash (Used) Provided by Financing Activities | $(635) | $290,977 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $(3,347) | $250,843 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $489,658 | $295,885 | Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation The company adopted several new accounting standards in fiscal 2019, with the new lease standard expected to materially impact the balance sheet - The Company adopted ASC Topic 606 for revenue recognition on September 30, 2018, using the modified retrospective method, with no adjustment required to opening retained earnings4546 - The adoption of ASU 2016-18 on restricted cash resulted in an increase in beginning and end of period cash, cash equivalents, and restricted cash by $12.6 million and $12.4 million, respectively, for the three months ended December 30, 201750 - The Company will adopt ASU 2016-02 (Leases) on September 29, 2019, and expects to record material long-term operating lease liabilities and right-of-use assets56 2. Fair Value Measurements The company's recurring fair value measurements primarily involve Level 3 contingent consideration liabilities, with senior notes' fair values below carrying values Liability for Contingent Consideration (Level 3, in thousands) | Date | Amount | | :--- | :--- | | Dec 29, 2018 | $7,616 | | Dec 30, 2017 | $9,058 | | Sep 29, 2018 | $8,224 | Fair Value vs. Carrying Value of Senior Notes (in millions) | Notes | Date | Estimated Fair Value | Carrying Value | | :--- | :--- | :--- | :--- | | 5.125% Senior Notes due 2028 | Dec 29, 2018 | $273.6 | $295.7 | | | Dec 30, 2017 | $300.8 | $295.5 | | | Sep 29, 2018 | $285.5 | $295.6 | | 6.125% Senior Notes due 2023 | Dec 29, 2018 | $402.0 | $396.2 | | | Dec 30, 2017 | $424.2 | $395.4 | | | Sep 29, 2018 | $414.4 | $396.0 | 3. Inventories, net Total net inventories increased to $493.7 million at December 29, 2018, driven by growth in all categories, particularly finished goods and raw materials Inventories, net (in thousands) | Category | Dec 29, 2018 | Dec 30, 2017 | Sep 29, 2018 | | :--- | :--- | :--- | :--- | | Raw materials | $134,955 | $120,710 | $117,539 | | Work in progress | $34,553 | $13,778 | $35,691 | | Finished goods | $306,181 | $291,812 | $263,845 | | Supplies | $18,056 | $14,121 | $10,748 | | Total inventories, net | $493,745 | $440,421 | $427,823 | 4. Goodwill The company performed its annual goodwill impairment test and recorded no impairment charges for the recent quarter or the prior year period - No goodwill impairment was recorded for the three months ended December 29, 2018, and December 30, 201772 5. Other Intangible Assets The net carrying value of other intangible assets increased to $148.8 million, with annual amortization expense estimated at $10 million through fiscal 2023 Other Intangible Assets (Net Carrying Value, in millions) | Category | Dec 29, 2018 | Dec 30, 2017 | Sep 29, 2018 | | :--- | :--- | :--- | :--- | | Marketing-related intangible assets – amortizable | $4.0 | $3.8 | $4.4 | | Marketing-related intangible assets – nonamortizable | $44.6 | $36.7 | $44.6 | | Customer-related intangible assets – amortizable | $83.2 | $57.7 | $85.8 | | Other acquired intangible assets – amortizable | $10.4 | $8.9 | $10.9 | | Other acquired intangible assets – nonamortizable | $6.6 | $6.6 | $6.6 | | Total other intangible assets | $148.8 | $113.7 | $152.3 | - Amortization expense for intangibles was approximately $3.5 million for the three months ended December 29, 2018, compared to $2.3 million in the prior year, classified within selling, general and administrative expenses77 - Estimated annual amortization expense related to acquired intangible assets is approximately $10 million per year from fiscal 2019 through fiscal 202377 6. Long-Term Debt The company's long-term debt remained stable at $692.3 million, with no outstanding borrowings under its $400 million revolving credit facility Long-Term Debt (in thousands) | Item | Dec 29, 2018 | Dec 30, 2017 | Sep 29, 2018 | | :--- | :--- | :--- | :--- | | Senior notes, 6.125%, due Nov 2023 | $400,000 | $400,000 | $400,000 | | Senior notes, 5.125%, due Feb 2028 | $300,000 | $300,000 | $300,000 | | Unamortized debt issuance costs | $(8,108) | $(9,161) | $(8,425) | | Net carrying value | $691,892 | $690,839 | $691,575 | | Other notes payable | $557 | $497 | $578 | | Total | $692,449 | $691,336 | $692,153 | | Less current portion | $(117) | $(372) | $(122) | | Long-term portion | $692,332 | $690,964 | $692,031 | - The Company has a $400 million senior secured asset-based revolving credit facility, maturing April 22, 202188 As of December 29, 2018, there were no borrowings outstanding and the borrowing base and remaining availability was $356.6 million89 - The Company was in compliance with all financial covenants for its senior notes and credit facility as of December 29, 2018808791 7. Supplemental Equity Information Total equity attributable to the company increased slightly during the quarter, primarily due to comprehensive income and share-based award amortization Changes in Equity Attributable to Central Garden & Pet Company (in thousands) | Item | Sep 29, 2018 | Dec 29, 2018 | | :--- | :--- | :--- | | Balance | $952,449 | $956,263 | | Comprehensive income | $1,529 | $1,529 | | Amortization of share-based awards | $2,261 | $2,261 | | Restricted share activity, including net share settlement | $(385) | $(385) | | Issuance of common stock, including net share settlement of stock options | $409 | $409 | 8. Stock-Based Compensation Share-based compensation expense and the associated tax benefit remained relatively consistent with the prior year period - Share-based compensation expense was $2.8 million for the three months ended December 29, 2018, compared to $2.7 million for the prior year period95 - The tax benefit associated with share-based compensation expense was $0.7 million for both the three months ended December 29, 2018, and December 30, 201795 9. Earnings Per Share Basic and diluted earnings per share plummeted to $0.03 from approximately $0.50 in the prior year, reflecting a sharp decline in net income Earnings Per Share (in thousands, except per share amounts) | Item | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Net income available to common shareholders | $1,803 | $26,247 | | Basic EPS | $0.03 | $0.52 | | Diluted EPS | $0.03 | $0.50 | | Weighted average shares used in diluted EPS | 58,001 | 52,695 | - For the three months ended December 29, 2018, 1.1 million options were excluded from diluted EPS computation as their exercise prices exceeded the average market price, making them antidilutive100 10. Segment Information Both Pet and Garden segments saw increased net sales, but operating income declined significantly, with the Garden segment reporting an operating loss Segment Net Sales (in thousands) | Segment | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Pet segment | $340,416 | $325,084 | | Garden segment | $121,574 | $116,927 | | Total net sales | $461,990 | $442,011 | Segment Operating Income (Loss) (in thousands) | Segment | Three Months Ended Dec 29, 2018 | Three Months Ended Dec 30, 2017 | | :--- | :--- | :--- | | Pet segment | $29,755 | $36,176 | | Garden segment | $(4,637) | $2,300 | | Corporate | $(14,937) | $(15,955) | | Total operating income | $10,181 | $22,521 | Segment Assets (in thousands) | Segment | Dec 29, 2018 | Dec 30, 2017 | Sep 29, 2018 | | :--- | :--- | :--- | :--- | | Pet segment | $677,647 | $620,681 | $683,938 | | Garden segment | $453,331 | $356,821 | $407,483 | | Corporate | $819,868 | $639,850 | $815,788 | | Total assets | $1,950,846 | $1,617,352 | $1,907,209 | 11. Consolidating Condensed Financial Information of Guarantor Subsidiaries This section provides consolidating financial statements for the entities that guarantee the company's senior notes - Certain 100% wholly-owned subsidiaries (Guarantor Subsidiaries) fully and unconditionally guarantee the Company's 2023 Notes and 2028 Notes106 - The consolidating condensed financial statements are provided in lieu of separate audited financial statements for Guarantor Subsidiaries, in accordance with SEC Regulation S-X Rule 3-10106 12. Contingencies The company faces a $12.6 million jury award for patent infringement but intends to appeal and believes the outcome will not be materially adverse - A jury awarded Nite Glow Industries, Inc. approximately $12.6 million in damages against the Company for patent infringement, breach of contract, and misappropriation of confidential information on June 27, 2018125 - The Company intends to vigorously pursue its rights on appeal and believes it will prevail on the merits, expecting the ultimate resolution not to have a material impact on its consolidated financial statements125 - The Company is subject to state unclaimed property law examinations and potential product liability, recalls, or regulatory actions, but currently does not anticipate a material effect on its financial position or results of operations from recent issues127128 13. Subsequent Events The company acquired the remaining 55% of Arden Companies for $13.4 million post-quarter end to leverage synergies with its dog bed business - In February 2019, the Company purchased the remaining 55% interest in Arden Companies for approximately $13.4 million129 - Approximately $40 million was used to eliminate most of Arden Companies' acquired debt subsequent to the acquisition129 - The Company anticipates leveraging synergies between Arden Companies' outdoor cushion and pillow business and its existing dog bed business129 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 4.5% sales increase from acquisitions offset by a 1.7% organic decline, leading to significantly lower gross profit and operating income Our Company Central Garden & Pet is a leading producer and distributor in the U.S. lawn & garden and pet supplies markets with $2.2 billion in fiscal 2018 sales - Central Garden & Pet Company is a leading innovator, producer, and distributor of branded and private label products for the U.S. lawn & garden and pet supplies markets131 Fiscal 2018 Consolidated Net Sales and Operating Income (in millions) | Segment | Net Sales | Operating Income | | :--- | :--- | :--- | | Pet segment | $1,341 | $140 | | Garden segment | $874 | $96 | | Corporate expenses | - | $(69) | | Consolidated Total | $2,215 | $167 | Recent Developments First-quarter net sales rose 4.5% due to acquisitions, but organic sales, gross profit, operating income, and net income all declined significantly Fiscal 2019 First Quarter Financial Performance Highlights | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | Net sales | $462.0 million | $442.0 million | +4.5% (+$20.0 million) | | Organic net sales | - | - | -1.7% | | Gross profit | $130.2 million | $131.8 million | -$1.6 million | | Gross margin | 28.2% | 29.8% | -160 bps | | Selling, general & administrative expense | $120.0 million | $109.3 million | +$10.7 million | | Operating income | $10.2 million | $22.5 million | -$12.3 million | | Net income attributable to Central Garden & Pet Company | $1.8 million | $26.2 million | -$24.4 million | | Diluted EPS | $0.03 | $0.50 | -$0.47 | | Adjusted diluted EPS (non-GAAP) | $0.03 | $0.19 | -$0.16 | - In February 2019, the Company acquired the remaining 55% interest in Arden Companies for approximately $13.4 million, and used $40 million to eliminate most of the acquired debt138 Results of Operations Acquisition-driven sales growth was offset by an organic decline, lower margins, and higher costs, leading to a 54.7% drop in operating income Net Sales Net sales increased 4.5% to $462.0 million due to acquisitions, but organic sales fell 1.7% from declines in both Pet and Garden segments Net Sales Performance (in millions) | Segment | Q1 FY2019 Net Sales | Q1 FY2018 Net Sales | YoY Change | Organic Net Sales Change | | :--- | :--- | :--- | :--- | :--- | | Consolidated | $462.0 | $442.0 | +4.5% (+$20.0) | -1.7% (-$7.3) | | Pet segment | $340.4 | $325.1 | +4.7% (+$15.3) | -0.6% (-$1.9) | | Garden segment | $121.6 | $116.9 | +4.0% (+$4.7) | -4.6% (-$5.4) | - Pet segment organic sales declined due to lower sales in animal health, partially offset by increased wild bird feed sales142 - Garden segment organic sales declined primarily due to lower sales in controls and fertilizer products, attributed to timing of orders from a large customer143 Gross Profit Gross profit decreased by 1.3%, with gross margin contracting 160 basis points due to acquisitions, unfavorable mix, and higher input costs Gross Profit and Margin | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $130.2 million | $131.8 million | -$1.6 million (-1.3%) | | Gross Margin | 28.2% | 29.8% | -160 bps | | Impacting Factors | Acquisitions, unfavorable sales mix, higher raw material, labor, and transportation costs | | | - The Pet segment's gross margin was impacted by the acquisition of a lower-margin distribution business, while the Garden segment was impacted by a live plant business which typically incurs losses in Q1144 - Pricing actions to offset increased costs are being implemented during the second fiscal quarter, with expected year-over-year improvement in gross and operating margins by the third quarter140144 Selling, General and Administrative Expenses SG&A expenses rose 9.8% to $120.0 million, driven by recent acquisitions and higher transportation costs Selling, General and Administrative Expenses (in millions) | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | SG&A Expenses | $120.0 | $109.3 | +$10.7 (+9.8%) | | SG&A as % of Net Sales | 26.0% | 24.7% | +130 bps | | Selling and delivery expense | $60.7 | $53.9 | +$6.8 (+12.6%) | | Warehouse and administrative expense | $59.3 | $55.4 | +$3.9 (+7.0%) | - The increase in SG&A was primarily driven by businesses acquired in the last 12 months and higher transportation costs146147 - Corporate expenses decreased due to lower variable performance-based compensation expense148152 Operating Income Operating income fell by $12.3 million to $10.2 million, as profitability declined in both the Pet and Garden segments Operating Income and Margin (in millions) | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | Operating Income | $10.2 | $22.5 | -$12.3 | | Operating Margin | 2.2% | 5.1% | -290 bps | | Pet operating income | $29.8 | $36.2 | -$6.4 (-17.7%) | | Garden operating income (loss) | $(4.6) | $2.3 | -$6.9 | - Pet operating margin decreased to 8.7% from 11.1% due to the General Pet Supply acquisition (lower margins), less favorable organic sales mix, and higher costs150 - Garden operating income shifted to a loss primarily due to the highly seasonal Bell Nursery acquisition, which typically incurs losses in Q1151 Net Interest Expense Net interest expense increased 11.9% to $8.1 million due to higher average debt outstanding from a prior year senior notes issuance Net Interest Expense (in millions) | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | Net Interest Expense | $8.1 | $7.2 | +$0.9 (+11.9%) | | Debt outstanding | $692.4 (Dec 29, 2018) | $691.3 (Dec 30, 2017) | +$1.1 | - The increase in interest expense was due to higher average debt outstanding from the December 2017 issuance of $300 million 5.125% senior notes153 Other Expense Other expense decreased to $0.2 million from $3.1 million, primarily due to lower losses from a start-up business investment Other Expense (in millions) | Metric | Q1 FY2019 | Q1 FY2018 | Change | | :--- | :--- | :--- | :--- | | Other Expense | $0.2 | $3.1 | -$2.9 | | Primary Driver | Lower losses from start-up business investments | | | Income Taxes The effective tax rate was 14.3%, compared to a tax benefit in the prior year which included a $16.3 million benefit from the Tax Reform Act Income Tax Rates | Metric | Q1 FY2019 | Q1 FY2018 | | :--- | :--- | :--- | | Effective Income Tax Rate | 14.3% | Tax Benefit (due to $16.3M provisional benefit) | | Adjusted Effective Income Tax Rate (excluding provisional benefit) | 14.3% | 17.3% | | Expected Full FY2019 Effective Tax Rate | ~24.5% (statutory rate) | | Net Income and Earnings Per Share Net income was $1.8 million, or $0.03 per diluted share, a sharp decline from the prior year's GAAP and adjusted results Net Income and Diluted EPS (in millions, except per share amounts) | Metric | Q1 FY2019 | Q1 FY2018 (GAAP) | Q1 FY2018 (Adjusted) | | :--- | :--- | :--- | :--- | | Net Income | $1.8 | $26.2 | $9.9 | | Diluted EPS | $0.03 | $0.50 | $0.19 | Use of Non-GAAP Financial Measures The company utilizes non-GAAP measures like organic net sales and EBITDA to provide better insight into ongoing operational performance - Non-GAAP financial measures are used to supplement GAAP results, providing additional meaningful comparisons between current and prior operating periods159 - EBITDA is defined as income before income tax, net other expense, net interest expense, and depreciation and amortization, used to evaluate cash flows and business performance159 - Organic net sales, a non-GAAP measure, excludes the impact of businesses purchased or exited in the prior 12 months to better understand historical business performance159163 Inflation Rising costs for raw materials, freight, and labor negatively impacted fiscal 2018 margins, prompting price increases effective January 2019 - Revenues and margins are dependent on economic factors including inflation, energy costs, and consumer spending167 - During fiscal 2018, rising input costs (raw materials, freight, labor) adversely impacted margins168 - Price increases were implemented, generally taking effect in January 2019, to offset inflationary pressures168 Weather and Seasonality The company's business, particularly the Garden segment, is highly seasonal, with most sales and all operating income typically generated in Q2 and Q3 - Sales of lawn and garden products are influenced by weather and climate conditions169 - The Garden segment's business is highly seasonal, with approximately 68% of its net sales and 57% of total net sales occurring during the second and third fiscal quarters in fiscal 2018169 - Substantially all of the Garden segment's operating income is typically generated in Q2 and Q3, offsetting operating losses incurred during Q1169 Liquidity and Capital Resources The company relies on operating cash flow and its $400 million credit facility to manage seasonal working capital needs and fund growth - The Company's business is seasonal, with working capital requirements tracking this pattern; inventory, accounts payable, and short-term borrowings increase in Q1 and Q2172173 - Principal sources of funds are cash generated from operations and borrowings under the $400 million asset-backed revolving credit facility177 - Anticipated capital expenditures for fiscal 2019 are approximately $45 million, primarily for plant and equipment replacements/upgrades and information technology platform implementation178 Operating Activities Net cash from operating activities improved by $31.0 million year-over-year, shifting from a $24.2 million use to a $6.8 million provision of cash Net Cash Provided (Used) by Operating Activities (in millions) | Period | Amount | | :--- | :--- | | Three Months Ended Dec 29, 2018 | $6.8 (provided) | | Three Months Ended Dec 30, 2017 | $(24.2) (used) | | Change | +$31.0 | Investing Activities Net cash used in investing activities decreased by $6.5 million to $9.4 million, reflecting lower investment and capital expenditure levels Net Cash Used in Investing Activities (in millions) | Period | Amount | | :--- | :--- | | Three Months Ended Dec 29, 2018 | $(9.4) | | Three Months Ended Dec 30, 2017 | $(15.9) | | Change | -$6.5 | Financing Activities Financing activities shifted from a $291.0 million cash source to a $0.6 million use, due to a $300 million notes issuance in the prior year Net Cash Provided (Used) by Financing Activities (in millions) | Period | Amount | | :--- | :--- | | Three Months Ended Dec 29, 2018 | $(0.6) (used) | | Three Months Ended Dec 30, 2017 | $291.0 (provided) | | Change | -$291.6 | - The decrease in cash provided by financing activities was primarily due to the December 2017 issuance of $300 million senior notes in the prior year, partially offset by $4.8 million in deferred financing costs176 Senior Notes The company has $700 million in outstanding senior notes due 2023 and 2028, guaranteed by domestic subsidiaries and subject to customary covenants - The Company issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 in December 2017, incurring approximately $4.8 million in debt issuance costs182183 - The Company issued $400 million aggregate principal amount of 6.125% senior notes due November 2023 in November 2015, incurring approximately $6.3 million in debt issuance costs184 - Both series of senior notes are unconditionally guaranteed by existing and future domestic restricted subsidiaries and contain customary high yield covenants, with the Company in compliance as of December 29, 2018183184 Asset-Based Loan Facility Amendment The company maintains a $400 million asset-based revolving credit facility with $356.6 million available and no outstanding borrowings as of quarter-end - The Company has a $400 million senior secured asset-based revolving credit facility, maturing April 22, 2021, with an accordion feature for an additional $200 million185 - As of December 29, 2018, there were no borrowings outstanding under the Credit Facility, and the borrowing base and remaining availability was $356.6 million185186 - The Credit Facility is secured by substantially all of the Company's assets and includes financial covenants, with which the Company was in compliance during the period ended December 29, 2018189 Off-Balance Sheet Arrangements There have been no material changes to the company's off-balance sheet arrangements since its last annual report - No material changes to off-balance sheet arrangements since the fiscal year ended September 29, 2018190 Contractual Obligations There have been no material changes to the company's contractual obligations since its last annual report - No material changes to contractual obligations outside the ordinary course of business since the fiscal year ended September 29, 2018191 New Accounting Pronouncements Information regarding new accounting pronouncements is available in Footnote 1 of the financial statements - Information on new accounting pronouncements is detailed in Footnote 1 of the condensed consolidated financial statements192 Critical Accounting Policies, Estimates and Judgments There have been no material changes to the company's critical accounting policies since its last annual report - No material changes to critical accounting policies, estimates, and judgments since the fiscal year ended September 29, 2018193 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risk has not materially changed since its last annual report - No material change in exposure to market risk since the Annual Report on Form 10-K for the fiscal year ended September 29, 2018194 Item 4. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of the quarter-end - The Chief Executive Officer and principal financial officer concluded that disclosure controls and procedures were effective as of December 29, 2018195 - Management concluded that there has been no material change in internal control over financial reporting during the first quarter of fiscal 2019196 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is appealing a $12.6 million jury verdict against it and does not expect the final outcome to have a material financial impact - A jury returned a verdict in favor of Nite Glow Industries, Inc., awarding approximately $12.6 million in damages against the Company on June 27, 2018199 - The Company intends to vigorously pursue its rights on appeal and believes it will prevail on the merits, expecting the ultimate resolution not to have a material impact on its consolidated financial statements199 Item 1A. Risk Factors There have been no material changes to the company's risk factors since its last annual report - No material changes to risk factors previously disclosed in the Form 10-K for the fiscal year ended September 29, 2018200 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 12,669 shares during the quarter, primarily to cover taxes related to vested restricted stock Equity Securities Repurchased (Fiscal Quarter Ended Dec 29, 2018) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Sep 30, 2018 - Nov 3, 2018 | — | — | | Nov 4, 2018 - Dec 1, 2018 | 10,081 | $30.67 | | Dec 2, 2018 - Dec 29, 2018 | 2,588 | $29.42 | | Total | 12,669 | $30.41 | - Shares purchased represent withholding of a portion of shares to cover taxes in connection with the vesting of restricted stock202 - As of December 29, 2018, approximately 34,968,000 shares (or approximate dollar value) may yet be purchased under the $100 million share repurchase program, which has no expiration date202 Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable203 Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable203 Item 5. Other Information This item is not applicable for the reporting period - Not applicable204 Item 6. Exhibits This section lists exhibits filed with the report, including officer certifications and XBRL data files - Includes Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2)204 - Includes Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (Exhibits 32.1, 32.2)204 - Includes various XBRL Taxonomy Extension Documents (Instance, Schema, Calculation, Definition, Label, Presentation)204