Financial Position - Cullen/Frost had consolidated total assets of $53.0 billion as of December 31, 2025, making it one of the largest independent bank holding companies in Texas [16]. - Frost Bank, the principal operating subsidiary, reported total assets of $53.1 billion and total deposits of $43.3 billion as of December 31, 2025 [22]. - The estimated fair value of trust assets managed by Frost Bank was $51.0 billion, including managed assets of $26.7 billion and custody assets of $24.3 billion [32]. - Cullen/Frost could pay aggregate dividends of approximately $977.4 million to Cullen/Frost without obtaining affirmative governmental approvals at December 31, 2025 [48]. - As of December 31, 2025, approximately 52% of the company's deposits were uninsured, which poses a liquidity risk if a large number of depositors withdraw their accounts [130]. - The company has experienced significant unrealized losses in its available-for-sale securities portfolio due to elevated market interest rates, which could impact liquidity if securities must be sold at a loss [131]. Regulatory Compliance - Cullen/Frost is subject to extensive regulation under federal and state laws, impacting its operational strategies and financial condition [35]. - Cullen/Frost and Frost Bank must maintain a minimum Common Equity Tier 1 (CET1) ratio of at least 4.5%, plus a 2.5% capital conservation buffer, resulting in a minimum CET1 ratio of 7.0% [58]. - The Basel III Capital Rules require a minimum Tier 1 capital ratio of 6.0%, plus the capital conservation buffer, resulting in a minimum Tier 1 capital ratio of 8.5% [58]. - Cullen/Frost and Frost Bank are required to comply with applicable capital adequacy standards under the Basel III Capital Rules, which include specific risk-based capital ratios [55]. - The Federal Reserve Board requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks [54]. - Cullen/Frost and Frost Bank are subject to limitations on capital distributions, including dividends and share repurchases, if they fail to meet effective minimum capital ratios [56]. - The Federal Reserve Board has the authority to impose limitations on a financial holding company's activities if it ceases to meet capital and management requirements [43]. - The Federal Reserve requires bank holding companies with consolidated assets over $50 billion, including Frost Bank, to maintain a risk committee to oversee risk-management policies [80]. - Frost Bank is required to submit periodic resolution plans to the FDIC due to its total consolidated assets exceeding $50 billion, with the initial filing due on April 1, 2026 [81]. - The Federal Reserve requires prior approval for the acquisition of more than 5.0% of the voting shares of a commercial bank by a bank holding company [46]. Operational Strategy - Cullen/Frost's operating objectives include growth of fee-based income and expansion through acquisitions, although the current focus is on organic growth [19]. - The company evaluates merger and acquisition opportunities, which may involve dilution of tangible book value and net income per common share [19]. - Cullen/Frost's repurchases of common stock may be subject to prior approval or notice requirements under Federal Reserve regulations [50]. - Potential acquisitions may disrupt business operations and dilute shareholder value, with risks including exposure to unknown liabilities and potential asset quality issues [173]. - Regulatory approvals for acquisitions could be delayed or denied, impacting the company's ability to pursue strategic opportunities [176]. Community Engagement and Corporate Culture - In 2025, employees performed over 27,000 hours of community service, reflecting the company's commitment to community engagement [115]. - The company emphasizes a corporate culture of integrity, caring, and excellence, aiming to attract and retain top talent while promoting a safe and supportive workplace [114]. - The board of directors is focused on overseeing corporate culture as a critical element of risk management, holding senior management accountable for maintaining this culture [113]. - Frost Bank received a "satisfactory" rating in its most recent Community Reinvestment Act performance evaluation, which is crucial for regulatory approvals of new activities [94]. Risk Management - The company has a structured approach to risk management, particularly concerning lending risks and the potential impact of economic conditions on borrowers' repayment abilities [123]. - The company maintains allowances for credit losses, which are subject to significant estimates and could impact net income if actual losses exceed these allowances [125]. - A significant portion of the loan portfolio is secured by real property, exposing the company to environmental liability risks that could materially affect its financial condition and results of operations [128]. - The company is subject to interest rate risk, which could adversely affect net interest income and overall earnings if interest rates on deposits rise faster than those on loans [122]. - The company is exposed to risks from the soundness of other financial institutions and counterparties, which could lead to credit risk and financial losses [157]. Technology and Cybersecurity - The financial services industry is undergoing rapid technological change, and the company's future success depends on its ability to effectively implement new technology-driven products and services [135]. - The SEC requires banking organizations to disclose material cybersecurity incidents within four business days, emphasizing the importance of cybersecurity risk management [103]. - The company faces risks from potential failures or breaches in its information systems, which could disrupt operations and compromise sensitive data [143]. - The rapid development of quantum computing poses a material risk to encryption standards, potentially leading to unauthorized decryption of sensitive data and financial losses [146]. - The company relies on external vendors for essential products and services, which introduces operational and cybersecurity risks [150]. Economic and Market Conditions - The company's operations are significantly affected by economic conditions in Texas, with local economic downturns potentially leading to adverse effects on business performance [156]. - Changes in customer behavior due to external economic factors could materially affect the company's ability to meet regulatory requirements and anticipate business needs [141]. - The competitive landscape includes substantial competition from larger financial institutions and fintechs, which may lead to pricing pressures and loss of market share [158]. - The emergence of new technologies and disintermediation could significantly affect competition for financial services, potentially leading to loss of fee income and customer deposits [162]. - A prolonged U.S. federal government shutdown could disrupt operations, delay loan originations, and increase credit risk exposure due to impaired financial capacity of borrowers [170]. Environmental and Climate Risks - Climate-related risks may negatively impact both the company and its customers in the short and long term [194]. - Climate change may lead to more frequent extreme weather events, affecting the value and productivity of the company's assets and increasing operational disruptions [195]. - The company is at risk of conflicting legal or regulatory requirements regarding climate change, which may increase compliance costs and operational risks [196]. - Negative public opinion related to climate-related actions or inactions could harm the company's brand and its ability to attract and retain employees [196]. Financial Performance and Capital Needs - The company may need to raise additional capital in the future, which may not be available on acceptable terms, adversely affecting liquidity [187]. - Stock price volatility may complicate the resale of common stock, influenced by various market factors and economic conditions [189]. - The company may not continue to pay dividends on its common stock in the future, which could adversely affect stock market prices [178]. - Changes in federal, state, or local tax laws could negatively impact financial performance and lead to challenges from tax authorities [186].

Workforce and Employment - The company has approximately 44,000 employees, making it the largest industrial employer in Virginia and the largest private employer in Mississippi[59] - In 2025, the company hired approximately 8,000 new employees to meet increasing talent demand[64] - The company operates two apprentice schools that have graduated over 15,500 individuals since their inception, critical for training its workforce[65] - Approximately 45% of employees are covered by 13 collective bargaining agreements, with no work stoppages in over 26 years at Newport News and over 18 years at Ingalls[61][62] - The company has a robust succession planning process, filling approximately 80% of newly created vice president positions with internal hires[67] - The company emphasizes the importance of attracting, retaining, and training a qualified workforce to maintain competitive advantage[10] Competitive Position and Operations - The company is one of only two capable of designing and building nuclear-powered submarines for the U.S. Navy, indicating a strong competitive position in the defense sector[54] - The performance of subcontractors and suppliers, along with the availability and pricing of raw materials, is critical to the company's operational success[10] Financial Position and Risks - The company has a $1.7 billion revolving credit facility and a $1.7 billion commercial paper program, with no outstanding indebtedness as of December 31, 2025, resulting in no interest rate risk for these instruments[335] - Macroeconomic factors are contributing to increasing cost inflation for raw materials, components, and supplies, which may adversely impact the company's financial position and cash flows if persistent over the long term[336] - The company mitigates cost inflation risk by negotiating long-term agreements with certain suppliers and incorporating price escalation provisions in customer contracts[336] - Significant delays or reductions in appropriations for programs may affect the company's ability to perform contracts effectively and recover costs[10] - Adverse economic conditions in the U.S. and globally could negatively affect the company's performance and market position[10] Compliance and Regulatory Environment - The company is subject to various laws and regulations, including cybersecurity and data privacy, which may increase costs and compliance risks[46] - The company faces risks related to changes in business practices, procurement processes, and government regulations, which may impact compliance and operational effectiveness[10] - Legal proceedings and investigations may pose risks to the company's reputation and ability to conduct business effectively[10] Environmental and Safety Practices - The company has made investments to comply with environmental laws, expecting future capital and operating costs but does not anticipate a material effect on financial position[51] - The company prioritizes environmental, health, and safety (EH&S) practices, integrating them into operational metrics and employee training programs[69] - The company maintains limited insurance coverage for losses in excess of the coverage of nuclear facility operators, indicating risk management strategies in nuclear operations[48] Security Risks - The company is exposed to security threats, including cybersecurity risks, which could disrupt operations and impact reputation[10]

Financial Performance - For the year ended December 31, 2025, net sales were $21.7 billion, with an operating profit of $2.2 billion, and international operations accounted for approximately 52% of net sales[19] - New equipment sales comprised 72% of total net sales, while parts and service accounted for 28%[19] Strategic Initiatives - In 2023, the company initiated a portfolio transformation to establish itself as a pure-play leader in intelligent climate and energy solutions, focusing on electrification and energy-efficient solutions[25] - The acquisition of the Viessmann Group's climate solutions business in January 2024 expanded the company's portfolio in sustainable building and energy management solutions[26] - A purchase agreement was signed to sell the Riello business for expected gross proceeds of approximately $430 million, with the transaction anticipated to close in the first half of 2026[27] - The company plans to enhance its product offerings with digitally-enabled lifecycle solutions, including the Abound cloud-based platform and the Lynx digital platform developed with AWS[30] - The company plans to invest over $4 billion to develop intelligent climate and energy solutions aimed at reducing environmental impacts by 2030[41] - The company aims to avoid more than 1 gigaton of customer greenhouse gas emissions and achieve carbon-neutral operations by 2030[41] Innovation and Intellectual Property - The company holds approximately 11,000 active patents and pending patent applications worldwide, protecting its research and development investments[36] Operations and Workforce - As of December 31, 2025, the company had approximately 47,000 employees worldwide, with 34% in the Americas, 36% in Europe, and 30% in Asia Pacific, Middle East & Africa[44] - The company promotes learning and development through various programs, including technical training and leadership development reviews[46] - The company measures employee engagement through three annual Pulse surveys to assess sentiment related to company priorities and leadership practices[50] Safety and Health - The total recordable incident rate (TRIR) for 2025 was 0.35, and the lost time incident rate (LTIR) was 0.13, indicating a focus on employee health and safety[48] Financial Risks - The company is exposed to fluctuations in foreign currency exchange rates, interest rates, and commodity prices, which could impact financial results[253] - Substantially all of the company's long-term debt has fixed interest rates, minimizing the impact of market interest rate fluctuations on operations[257] - The company actively manages material currency exposures associated with purchases and sales at the legal entity level[254] - The company has no commodity hedge contracts in place as of December 31, 2025, exposing it to volatility in commodity prices[256] Market Demand - Demand for HVAC products is seasonal, with higher sales typically occurring in the second and third quarters due to increased air conditioning needs[39] Joint Ventures - The company operates 58 joint ventures, with 52% related to Climate Solutions Americas and 38% to Climate Solutions Asia Pacific, Middle East & Africa, which are integral to its growth strategy[38]

Geopolitical and Economic Risks - The company is exposed to significant risks from geopolitical conflicts, including the military conflict between Russia and Ukraine, which may adversely impact operations and financial performance [84]. - The company faces risks related to currency exchange rate fluctuations, which can affect reported results and the cost of raw materials [79]. - The company has operations in various international markets, making it vulnerable to changes in foreign trade policies and tariffs, which could disrupt supply chains and increase product costs [83]. - The company has experienced supply chain delays and higher material costs due to the COVID-19 pandemic, impacting revenues and operational capabilities [87]. Legal and Regulatory Risks - The company is involved in ongoing Chapter 11 bankruptcy cases for subsidiaries Aldrich and Murray, which may have material effects on financial condition and future obligations [89]. - The outcome of the Chapter 11 cases remains uncertain, with potential liabilities that could impact the company's financial results [93]. - Legal and regulatory proceedings may adversely affect the company's operations and financial condition, with potential significant expenses related to litigation [88]. - The company is subject to risks from tax audits and changes in tax laws, which could impact financial results and obligations [15]. - Regulatory compliance is a significant concern, with potential penalties for violations impacting financial performance and operational capabilities [102]. Cybersecurity and Data Privacy Risks - The company relies on information technology systems for operations, which are subject to risks from cyber attacks and other disruptions that could impair business management [94]. - The company is at risk of cyber attacks and unauthorized access, which could negatively impact business operations and financial results [96]. - Despite implementing security policies and controls, the evolving nature of cyber threats requires continuous evaluation and adaptation of systems [97]. - Compliance with data privacy regulations, such as GDPR, increases operational costs and exposes the company to potential fines and penalties [98]. Environmental and Sustainability Risks - Climate change regulations may necessitate costly changes to products, affecting competitiveness and operational costs [103]. - The company has committed to reducing one billion metric tons of carbon emissions by 2030, but achieving these sustainability goals involves risks and uncertainties [104]. Business Strategy and Operational Risks - The business strategy includes acquisitions and joint ventures, which may not yield expected results and could adversely affect financial performance [106]. - Catastrophic events, including natural disasters and pandemics, pose risks to operations and supply chains, potentially leading to financial losses [110]. - Attracting and retaining qualified talent is critical for operational success, with a competitive market for skilled employees impacting business performance [111]. - The company may face adverse effects from temporary work stoppages, union negotiations, and labor disputes, which could significantly increase labor costs and impact productivity [112]. Taxation and Shareholder Implications - Changes in tax laws and regulations, including the introduction of a global minimum tax rate of 15% by the EU, could materially increase the company's tax burden and effective tax rate [114]. - The company is monitoring ongoing tax changes and legislative proposals that could adversely impact its financial condition and results of operations [116]. - The company is subject to Irish dividend withholding tax at a rate of 25% on dividends paid to shareholders, which may affect share prices [122]. - Shareholders may not be subject to Irish withholding tax if they complete certain forms, but some may still face withholding tax implications [122]. - The company’s ability to issue shares or raise capital could be adversely affected if it cannot obtain necessary shareholder authorizations under Irish law [120]. - Quarterly cash dividends are a key part of the company's capital allocation strategy, but they are not guaranteed and may be modified or discontinued [121]. - The company is governed by Irish law, which differs from U.S. laws and may afford less protection to shareholders [118]. - Tax authorities periodically review the company's tax returns, which could result in additional taxes or penalties if discrepancies are found [117]. - The company continues to monitor the impact of international tax rules, including those from the OECD, on its operations and tax obligations [114].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 27, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 001-40840 RBC BEARINGS INCORPORATED (Exact name of registrant as specified in its charter) | Delaware | 95-4372080 | | --- | --- | | (State ...

Financial Performance - Total revenues for the three months ended December 31, 2025, were $822.465 million, an increase from $766.489 million in 2024[86]. - Basic net income per share increased to $3.12 for the three months ended December 31, 2025, compared to $2.85 for the same period in 2024[82]. - Systems revenue rose to $218.356 million in the three months ended December 31, 2025, compared to $159.708 million in 2024, while software revenue decreased to $191.927 million from $208.789 million[86]. - The Americas region generated $439.788 million in revenue for the three months ended December 31, 2025, up from $431.973 million in 2024[86]. Revenue Recognition and Deferred Revenue - As of December 31, 2025, the total non-cancelable remaining performance obligations under the Company's contracts with customers was $2.1 billion, with an expectation to recognize revenues on 60.8% of these obligations over the next 12 months[34]. - The balance of deferred revenue increased to $2.1 billion as of December 31, 2025, up from $1.8 billion at the beginning of the period, reflecting an addition of $493.8 million during the quarter[33]. Acquisitions and Goodwill - The acquisition of CalypsoAI Corp. was completed for $145.2 million in cash, enhancing the Company's capabilities in enterprise AI security[43]. - The goodwill related to the CalypsoAI acquisition was primarily due to expected synergies and was not deductible for tax purposes[44]. - The Company completed three additional acquisitions during fiscal 2025, resulting in $17.4 million of goodwill, although these acquisitions did not materially impact operating results[47]. Cash and Investments - Cash and cash equivalents decreased to $1.2 billion as of December 31, 2025, from $1.3 billion at the end of September 2025[48]. - The Company recognized interest income of $8.9 million for the three months ended December 31, 2025, compared to $10.3 million for the same period in 2024[39]. Inventory and Assets - Finished goods inventory increased to $35,302,000 from $26,933,000, while raw materials decreased to $44,593,000 from $50,296,000, resulting in total inventories of $79,895,000 compared to $77,229,000[49]. - Unbilled receivables rose to $512,595,000 from $498,288,000, and prepaid expenses increased to $145,388,000 from $86,346,000, leading to total other current assets of $742,163,000, up from $682,766,000[50]. - Total other assets decreased to $509,782,000 from $552,280,000, primarily due to a decline in intangible assets from $96,266,000 to $84,206,000[51]. Liabilities and Commitments - Accrued liabilities decreased to $305,188,000 from $315,383,000, with payroll and benefits liabilities dropping from $189,337,000 to $167,096,000[52]. - The Company’s total operating lease liabilities increased to $267,718,000 from $261,791,000, with a weighted average remaining lease term of 7.8 years and a discount rate of 3.33%[58]. - The Company has a commitment to purchase $10.0 million of component inventory annually under a four-year agreement, totaling $40.0 million, with no remaining commitments as of December 31, 2025[63]. Legal and Regulatory Matters - The Company is engaged in ongoing legal proceedings, including a putative class action complaint alleging false statements regarding cybersecurity capabilities[69]. - The Company is currently evaluating the impact of new accounting standards on its disclosures, including ASU 2023-09 and ASU 2024-03, which will affect future financial reporting[28][29]. Taxation - The effective tax rate for the three months ended December 31, 2025, was 19.2%, down from 20.4% for the same period in 2024, primarily due to changes in unrecognized tax benefits[9]. - As of December 31, 2025, the company had $80.9 million in unrecognized tax benefits, which may change within the next twelve months due to audit settlements[76]. Share Repurchase - The company repurchased 1,203 thousand shares at an average price of $249.33 per share, totaling $300.024 million during the three months ended December 31, 2025[80]. - The company has $622.4 million remaining authorized for share repurchases under its program as of December 31, 2025[80]. Cybersecurity Incident - The Company incurred $17.5 million in costs related to a Cyber Incident for the three months ended December 31, 2025[74].

Revenue and Growth - For YTD 2026, the company's revenue was generated approximately 52% from outside the United States, compared to 50% in YTD 2025[102]. - Thermon reported sales of $147.3 million for the three months ended December 31, 2025, a 10% increase from $134.4 million in the same period of 2024[119]. - For the nine months ended December 31, 2025, sales totaled $387.9 million, a 7% increase from $364.1 million in the same period of 2024[133]. - Revenue from the EMEA region grew significantly by 36.5% to $18.9 million, driven by increased project activity and the acquisition of F.A.T.I.[121]. - The company experienced a 21% compound annual growth rate in the liquid load bank market, projected to grow from $84 million in 2024 to $386 million by 2032[115]. Revenue Recognition - Revenue recognized at a point-in-time accounted for 69% of total revenue for the three months ended December 31, 2025, down from 74% in the same period of 2024[109]. - Over time revenue represented 31% of total revenue for the three months ended December 31, 2025, compared to 26% in the same period of 2024[109]. - Approximately 69% of total revenue in Q1 2026 was recognized at a point in time, indicating a shift towards more project-related activity compared to 74% in the prior year[120]. Financial Performance - Gross profit for the same period increased to $68.7 million, reflecting an 11% rise from $62.1 million, resulting in a gross margin of 46.6%, up 40 basis points year-over-year[119][123]. - Thermon’s net income for the three months ended December 31, 2025, was $18.3 million, a slight decrease of 1% from $18.5 million in the same period of 2024[119]. - The company’s effective tax rate was 25.7% for Q1 2026, a marginal decrease from 25.9% in Q1 2025[130]. - In YTD 2026, the effective tax rate was 24.8%, a decrease from 25.5% in YTD 2025, influenced by discrete tax items[145]. - Interest expense decreased to $131 million in YTD 2026 from $163 million in YTD 2025, with an average interest rate decline from 6.1% to 5.4%[143]. Cash Flow and Investments - Free Cash Flow for YTD 2026 was $25.7 million, up from $23.9 million in YTD 2025, driven by higher operating cash flows[159]. - Operating cash flows increased to $36.1 million in YTD 2026 compared to $31.1 million in YTD 2025, primarily due to higher net income[152]. - Cash used in investing activities decreased to $(9.9) million in YTD 2026 from $(11.3) million in YTD 2025, reflecting fewer acquisitions[154]. - As of December 31, 2025, the company had $46.9 million in cash and cash equivalents and $94.3 million in available borrowing capacity[148]. - The company expects capital expenditures to be approximately 2.5% to 3.0% of revenue in fiscal 2026[151]. Risk Factors - The company is exposed to commodity price risks due to reliance on market prices for raw materials without long-term purchase commitments or hedging instruments[171]. - Recent periods have seen shortages in certain raw materials, leading to increased costs attributed to tariffs, alternate suppliers, higher freight costs, and increased lead times[172]. - The company cannot guarantee the ability to mitigate temporary raw material shortages or pass cost increases to customers, which may adversely affect operational results[172]. - A 10% appreciation of the U.S. dollar relative to the Canadian dollar would decrease net income by $2.3 million for YTD 2026[166]. Strategic Initiatives - The company aims to secure more new facility project bids and generate more revenue from facility maintenance and upgrades[96]. - The company has implemented price adjustments and optimized its global manufacturing footprint to manage tariff-related costs[114]. - The company has a diversified product offering with over 250 products, software, and services across multiple brands[100]. - The company is focused on developing strategic alliances with major customers and suppliers to enhance its market position[96]. - The company’s acquisition strategy focuses on businesses in the process heating solutions industry, contributing to growth and diversification[117]. Foreign Exchange Impact - Foreign exchange rates positively impacted revenues by approximately $1.5 million in Q1 2026 due to a weaker U.S. dollar[122]. - The unrealized effects of foreign currency translations resulted in gains of $15.5 million in YTD 2026 compared to losses of $18.3 million in YTD 2025[169]. Backlog - The backlog at December 31, 2025, was $259.4 million, an increase from $240.3 million at March 31, 2025[104].

Financial Performance - In fiscal 2025, consolidated net sales were $3.1 billion, with the Pet segment contributing approximately $1.8 billion and the Garden segment approximately $1.3 billion[106]. - For the first quarter of fiscal 2026, net sales decreased by $39.0 million, or 6.0%, to $617 million, with Pet net sales down 2.7% and Garden net sales down 12.0%[108]. - Gross profit for the first quarter of fiscal 2026 decreased by $5.1 million, or 2.6%, to $190.6 million, while gross margin increased by 110 basis points to 30.9%[115]. - Operating income for the first quarter of fiscal 2026 declined by $11.5 million, or 40.9%, to $16.5 million, with an operating margin decrease from 4.3% to 2.7%[121]. - Net income for the first quarter of fiscal 2026 was $6.8 million, or $0.11 per diluted share, compared to $14.0 million, or $0.21 per diluted share, in the prior year[128]. - The Garden segment reported an operating loss of $9.7 million for the first quarter of fiscal 2026, down from an income of $2.4 million in the prior year[123]. - GAAP net income attributable to Central Garden & Pet Company for the three months ended December 27, 2025, was $6.841 million, a decrease from $14.009 million for the same period in 2024[132]. - Non-GAAP net income attributable to Central Garden & Pet Company for the three months ended December 27, 2025, was $12.779 million, unchanged from the previous year[132]. - Total net sales for the three months ended December 27, 2025, were $617.373 million, with a gross profit of $190.608 million, resulting in a gross margin of 30.9%[135]. - The Pet segment reported a GAAP operating income of $49.800 million, while the Garden segment reported a GAAP operating loss of $9.679 million for the three months ended December 27, 2025[136][137]. - Adjusted EBITDA for the three months ended December 27, 2025, was $49.763 million, compared to $55.436 million for the same period in 2024[139][140]. Expenses and Cash Flow - Selling, general and administrative expenses increased by $6.4 million, or 3.8%, to $174.1 million, representing 28.2% of net sales for the first quarter of fiscal 2026[117]. - Net cash used by operating activities increased by $1.4 million to $70.2 million for the three months ended December 27, 2025[147]. - Net cash used in investing activities increased by $58.4 million to $67.8 million during the three months ended December 27, 2025, primarily due to increased acquisition activity[148]. Debt and Financing - Total debt outstanding as of December 27, 2025, was $1,192.2 million, slightly up from $1,190.4 million at December 28, 2024[153]. - The company has a $600 million senior secured asset-based revolving credit facility, with an additional $400 million available through an accordion feature, maturing on November 7, 2030[171]. - Net availability under the credit facility was approximately $545 million as of December 27, 2025, with no outstanding borrowings or letters of credit[172]. - The applicable margin for SOFR-based borrowings was 1.00% as of December 27, 2025, with an interest rate of 4.7% for one-month SOFR-based borrowings[173]. - The company issued $300 million of 5.125% senior notes due February 2028, with proceeds used for acquisitions and general corporate purposes[166]. - The 2030 Notes can be redeemed at various percentages starting from 102.063% on October 15, 2025, decreasing to 100.0% on October 15, 2028[163]. - The company was in compliance with all financial covenants as of December 27, 2025, including a minimum fixed charge coverage ratio of 1:1 under the credit facility[175]. - The company incurred approximately $4.8 million in debt issuance costs related to the 2028 Notes, amortized over the term of the notes[167]. - The holders of the 2030 and 2028 Notes have the right to require repurchase at 101.0% of the principal amount upon a change of control[164][169]. Acquisitions and Growth Strategy - In December 2025, the company acquired the U.S. assets of Champion USA LLC for approximately $57 million, enhancing its position in the livestock industry[110]. - The company plans to continue evaluating potential acquisition candidates as part of its growth strategy[152]. - Capital expenditures are anticipated to be approximately $50 million in fiscal 2026, with $11 million already invested through December 27, 2025[151]. Assets and Liabilities - As of December 27, 2025, total assets amounted to $5.2 billion, while total liabilities were $3.6 billion, leading to a net asset position of $1.6 billion[182].

Financial Performance - In fiscal 2025, consolidated net sales were $3.1 billion, with the Pet segment contributing approximately $1.8 billion and the Garden segment approximately $1.3 billion[106]. - For the first quarter of fiscal 2026, net sales decreased by $39.0 million, or 6.0%, to $617 million, with Pet net sales down 2.7% and Garden net sales down 12.0%[108]. - Gross profit for the first quarter of fiscal 2026 decreased by $5.1 million, or 2.6%, to $190.6 million, while gross margin increased by 110 basis points to 30.9%[115]. - Operating income for the first quarter of fiscal 2026 declined by $11.5 million, or 40.9%, to $16.5 million, with an operating margin decrease from 4.3% to 2.7%[121]. - Net income for the first quarter of fiscal 2026 was $6.8 million, or $0.11 per diluted share, compared to $14.0 million, or $0.21 per diluted share, in the prior year[128]. - GAAP net income attributable to Central Garden & Pet Company for the three months ended December 27, 2025, was $6.841 million, down from $14.009 million for the same period in 2024[132]. - Non-GAAP net income attributable to Central Garden & Pet Company for the three months ended December 27, 2025, was $12.779 million, unchanged from the same period in 2024[132]. - Net sales for the three months ended December 27, 2025, were $617.373 million, with a gross profit of $190.608 million, resulting in a gross margin of 30.9%[135]. - The Pet segment's GAAP operating income was $49.800 million, while the Garden segment reported a GAAP operating loss of $9.679 million for the three months ended December 27, 2025[136][137]. - Adjusted EBITDA for the three months ended December 27, 2025, was $49.763 million, compared to $55.436 million for the same period in 2024[139][140]. Expenses and Income - Selling, general and administrative expenses increased by $6.4 million, or 3.8%, to $174.1 million, representing 28.2% of net sales for the first quarter of fiscal 2026[117]. - Pet operating income decreased by $1.5 million, or 2.8%, to $49.8 million, while Garden operating income turned to a loss of $9.7 million, down from a profit of $2.4 million[122][123]. - Net interest expense for the first quarter of fiscal 2026 was $7.8 million, consistent with $7.7 million in the prior year[125]. - The effective income tax rate for the quarter ended December 27, 2025, was 23.3%, relatively consistent with 23.5% for the prior year[127]. Cash Flow and Investments - Net cash used by operating activities increased by $1.4 million, from $68.8 million for the three months ended December 28, 2024, to $70.2 million for the three months ended December 27, 2025[147]. - Net cash used in investing activities increased by $58.4 million, from $9.4 million for the three months ended December 28, 2024, to $67.8 million for the three months ended December 27, 2025, primarily due to increased acquisition activity[148]. - Capital expenditures are anticipated to be approximately $50 million in fiscal 2026, with $11 million already invested through December 27, 2025[151]. Debt and Financing - Total debt outstanding as of December 27, 2025, was $1,192.2 million, compared to $1,190.4 million at December 28, 2024[153]. - The Credit Facility provides for a $600 million principal amount senior secured asset-based revolving credit facility, with an additional $400 million available[171]. - As of December 27, 2025, net availability under the Credit Facility was approximately $545 million, with no borrowings outstanding[172]. - The applicable margin for SOFR-based borrowings was 1.00% as of December 27, 2025[173]. - The company incurred approximately $4.8 million of debt issuance costs related to the 2028 Notes, amortized over the term of the notes[167]. - The 2030 Notes can be redeemed at 102.063% on or after October 15, 2025, with accrued and unpaid interest[163]. - The 2028 Notes require semiannual interest payments and can be redeemed at 100.0% on or after January 1, 2026[168]. Acquisitions - The company acquired the U.S. assets of Champion USA LLC for approximately $57 million in December 2025, enhancing its position in the livestock industry[110]. - The company expects to continue evaluating potential acquisition candidates, which may require additional external capital[152]. Parent/Issuer Guarantors - As of December 27, 2025, net sales for the Parent/Issuer Guarantors were $162.8 million for the three months ended and $456.65 million for the fiscal year ended[182]. - Gross profit for the Parent/Issuer Guarantors was $38.145 million for the three months ended and $152.319 million for the fiscal year ended[182]. - The net income (loss) for the Parent/Issuer Guarantors was $(15.363) million for the three months ended and $(45.373) million for the fiscal year ended[182]. - The total assets for the Parent/Issuer as of December 27, 2025, were $5.219 billion, while total liabilities were $3.615 billion[182].

Acquisition and Business Performance - The Company acquired Advanced Power Solutions (APS) on May 2, 2025, contributing $64.6 million in net sales and $5.3 million in segment profit for the Batteries and Lights segment during the three months ended December 31, 2025[147]. - Batteries & Lights segment net sales increased by 8.3% to $685.2 million, driven by the APS acquisition, while organic sales declined by 3.8%[177]. - Energizer reported a net loss of $3.4 million, or a loss of $0.05 per common share, for the first fiscal quarter, compared to net earnings of $22.3 million, or $0.30 per common share, in the prior year[158]. - Adjusted diluted net earnings per common share were $0.31 for the first fiscal quarter, down from $0.67 in the prior year quarter[160]. - Net sales for the first fiscal quarter of 2026 were $778.9 million, an increase of $47.2 million, or 6.5%, compared to the prior year quarter[164]. - Organic net sales declined by 4.3%, primarily due to decreased volumes from softer consumer demand in the U.S.[164]. Cost Management and Restructuring - The Company achieved approximately $206 million in savings from the Project Momentum program as of September 30, 2025, primarily within COGS and SG&A[152]. - The Company incurred $20.3 million in pre-tax costs related to Project Momentum during the quarter ended December 31, 2024, primarily consisting of severance, accelerated depreciation, and consulting costs[152]. - The total estimated restructuring and related pre-tax costs for the fourth year of the program are expected to be between $35.0 million and $40.0 million, with additional costs of $25.0 million to $30.0 million related to U.S. manufacturing efficiency initiatives[155]. - The company incurred $30.9 million in pre-tax restructuring and related costs during the quarter, primarily for severance and other benefits[156]. Financial Outlook and Tax Credits - The Company expects future production tax credits from the Inflation Reduction Act to be approximately $55 to $65 million based on current regulations prior to the phase-out period[146]. - The Company recognized a credit of $9.7 million for production credits during the first fiscal quarter of 2026, following the achievement of reasonable assurance over the ability to claim these credits[145]. - The effective tax rate for adjusted net earnings was 22.5%, down from 24.8% in the prior year, attributed to production tax credits[173]. Macroeconomic and Operational Challenges - The Company anticipates continued macroeconomic pressures and geopolitical instability, which may negatively impact financial results and operations in fiscal 2026[149]. - The Company is subject to risks related to international operations, including tariffs and currency fluctuations, which could adversely affect results of operations[133]. - The Company extended Project Momentum into fiscal 2026 to help neutralize the impact of tariffs and optimize manufacturing and supply chain networks[150]. Segment Performance and Profitability - Global reported segment profit declined 17.9%, with an organic profit decline of $35.1 million, or 25.1%, due to decreased organic net sales and increased input costs[180]. - Batteries & Lights segment profit decreased by 11.4%, with an organic segment profit decline of $23.0 million, or 19.3%, impacted by tariffs and increased input costs[181]. - Auto Care reported a net sales decrease of 5.6% compared to the prior year, driven by an organic net sales decline of $6.9 million, or 6.9%[178]. - Auto Care segment profit decreased by 55.6%, with an organic segment profit decline of $12.1 million, or 59.0%, due to increased input costs from tariffs[182]. Cash Flow and Investments - Cash flow from operating activities was $149.5 million for the three months ended December 31, 2025, compared to $77.0 million in the prior year, driven by working capital changes[188]. - Net cash used by investing activities was $25.3 million for the three months ended December 31, 2025, primarily related to capital expenditures[189]. - Total investing cash outflows of approximately $75 to $85 million are anticipated in fiscal 2026 for capital expenditures, including investments from Project Momentum[190]. Debt and Financial Instruments - The Company had $214.8 million in cash and cash equivalents as of December 31, 2025, with approximately 90% held outside the U.S.[185]. - The Company has a Senior Secured Term Loan of $765.7 million due in 2032 and a $500 million Revolving Credit Facility due in 2030[186]. - As of December 31, 2025, Energizer had variable rate debt outstanding of $766.2 million under the Term Loan and international borrowings[209]. - The company recorded an unrealized pre-tax gain of $21.0 million on the interest rate swap as of December 31, 2025[211]. - The company has an interest rate swap that fixes the variable benchmark component (SOFR) at an interest rate of 1.042% on variable rate debt of $500.0 million[210]. - The weighted average interest rate on variable rate debt, inclusive of the interest rate swap, was 4.02% for the quarter ended December 31, 2025[211]. Currency and Inflation Accounting - The change in estimated fair value of foreign currency derivative contracts resulted in a loss of $0.9 million for the quarter ended December 31, 2025[206]. - The Egypt subsidiary's financial statements were consolidated under highly inflationary accounting effective October 1, 2024, due to a cumulative inflation rate exceeding 100 percent[213]. - The Argentina subsidiary's financial statements have been consolidated under highly inflationary accounting since July 1, 2018, also due to a cumulative inflation rate exceeding 100 percent[214]. - The financial impact of using highly inflationary accounting for Egypt and Argentina is difficult to determine and depends on exchange rate movements and monetary assets and liabilities[215]. - The company uses hedging instruments to reduce exposure to price volatility of raw materials[207]. - The company recorded an unrealized pre-tax gain of $2.6 million as of December 31, 2025, on the interest rate swap related to future zinc purchases[208].