Financial Performance - Consolidated net sales for fiscal 2025 were $3.1 billion, with the Pet segment contributing approximately $1.8 billion and the Garden segment approximately $1.3 billion[220]. - Operating income increased by $64.7 million, or 34.9%, to $250 million in fiscal 2025, with an operating margin improvement to 8.0% from 5.8% in fiscal 2024[240]. - Gross profit rose by $53.6 million, or 5.7%, to $997.3 million, with gross margin improving 240 basis points to 31.9% in fiscal 2025[232]. - Net income for fiscal 2025 was $162.8 million, or $2.55 per diluted share, compared to $108.0 million, or $1.62 per diluted share for fiscal 2024, representing a 50.6% increase in net income[248]. - Non-GAAP net income for fiscal 2025 was $174.2 million, or $2.73 per diluted share, compared to $142.4 million, or $2.13 per diluted share for fiscal 2024, reflecting a 22.3% increase in non-GAAP net income[259]. - Total net sales for fiscal 2025 were $3,129.1 million, compared to $3,200.5 million for fiscal 2024, indicating a slight decrease of 2.2%[260]. Segment Performance - Pet net sales decreased by $30.8 million, or 1.7%, to $1.8 billion, primarily due to lower sales of durable items[230]. - Garden net sales decreased by $40.6 million, or 3.0%, to $1.3 billion, attributed to decreased sales of third-party products and the planned exit of the pottery business[231]. - The Garden segment's operating income for fiscal 2025 was $142.4 million, up from $81.9 million in fiscal 2024, showing a significant increase of 74.0%[262]. - The Pet segment's operating income for fiscal 2025 was $215.7 million, compared to $203.4 million in fiscal 2024, marking a 6.0% increase[261]. Expenses and Costs - Selling, general and administrative expenses decreased by $11.0 million, or 1.5%, to $747.3 million, but as a percentage of net sales, it increased to 23.9%[236]. - The effective income tax rate increased to 24.4% in fiscal 2025 from 23.2% in fiscal 2024, primarily due to non-deductible losses from the wind-down of U.K. operations[247]. - The company incurred approximately $10.0 million in one-time closure costs related to the wind-down of U.K. operations[222]. - Net interest expense decreased by $5.1 million, or 13.4%, to $32.8 million, due to increased interest income from higher cash balances[245]. Cash Flow and Financing - Net cash provided by operating activities decreased by $62.4 million, from $394.9 million in fiscal 2024 to $332.5 million in fiscal 2025[272]. - Net cash used in investing activities decreased by $60.3 million, from $105.2 million in fiscal 2024 to $44.9 million in fiscal 2025, primarily due to the acquisition of TDBBS, LLC in fiscal 2024[273]. - Net cash used in financing activities increased by $131.2 million, from $25.4 million in fiscal 2024 to $156.6 million in fiscal 2025, mainly due to higher stock repurchases[274]. - The company financed its growth through a combination of internally generated funds, bank borrowings, supplier credit, and sales of equity and debt securities[269]. Share Repurchase and Debt - During fiscal 2025, the company repurchased 3.2 million shares of non-voting common stock and 1.4 million shares of voting common stock at a total cost of $148.4 million[224]. - Total debt outstanding as of September 27, 2025, was $1,191.7 million, slightly up from $1,190.0 million at September 28, 2024[283]. - The company has a $600 million asset-backed loan facility, which is expected to be adequate for working capital and capital spending needs for at least the next 12 months[275]. - The company incurred approximately $6 million of debt issuance costs related to the issuance of $400 million 4.125% senior notes due 2031[285]. Assets and Liabilities - Total assets for the Parent/Issuer were $5.20 billion, while Guarantors had total assets of $4.46 billion as of September 27, 2025, compared to $4.81 billion and $4.23 billion respectively in the prior year[312]. - Long-term debt for the Parent/Issuer was $1.19 billion, with total liabilities amounting to $3.59 billion, while Guarantors had long-term debt of $100,000 and total liabilities of $580.9 million[312]. - The company has significant contractual cash obligations totaling $1.83 billion, with $204.8 million due in fiscal 2026[313]. Impairments and Risks - The company recognized a non-cash impairment charge of $12.8 million in the Pet segment during fiscal 2024 due to changing market conditions[256]. - The company recognized impairment losses on intangible assets of $1.0 million, $12.8 million, and $11.5 million in fiscal years 2025, 2024, and 2023 respectively[328]. - Interest expense could increase or decrease by approximately $1.9 million if interest rates changed by 25 basis points on the company's Amended Credit Facility[331]. Market and Operational Insights - Approximately 64% of the Garden segment's net sales occurred during the second and third fiscal quarters, highlighting the seasonality of the business[268]. - Inflation moderated in fiscal 2024 but increased in the second half of fiscal 2025, primarily due to tariffs, impacting margins and input costs[266]. - The company has minimal sales outside of the United States, indicating a strong domestic focus[333]. - Purchases by U.S. subsidiaries from foreign vendors are primarily made in U.S. dollars, reducing foreign currency risk exposure[333]. - The international subsidiary primarily transacts in British pounds and Canadian dollars, but overall foreign currency exchange risk is considered immaterial[333]. - The company does not hedge against foreign currency risks, reflecting confidence in current operations[333]. Growth Strategy - The company anticipates capital expenditures of approximately $50 to $60 million over the next 12 months for plant and equipment upgrades and IT platform implementation[276]. - The company is evaluating potential acquisition candidates as part of its growth strategy, which may require additional external capital[277].
Central Garden & Pet(CENTA) - 2025 Q4 - Annual Report