Basis of Presentation

3 Months Ended

Dec. 28, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The condensed consolidated balance sheets of Central Garden & Pet Company and subsidiaries (the “Company” or “Central”) as of

December 28, 2024 and December 30, 2023, the condensed consolidated statements of operations, the condensed consolidated statements

of comprehensive income and the condensed consolidated statements of cash flows for the three months ended December 28, 2024 and

December 30, 2023 have been prepared by the Company, without audit. In the opinion of management, the interim financial statements

include all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented.

For the Company’s foreign businesses in the United Kingdom and Canada, the local currency is the functional currency. Assets and

liabilities are translated using the exchange rate in effect at the balance sheet date. Income and expenses are translated at the average

exchange rate for the period. Deferred taxes are not provided on translation gains and losses because the Company expects earnings of its

foreign subsidiaries to be permanently reinvested. Transaction gains and losses are included in results of operations.

Due to the seasonal nature of the Company’s garden business, the results of operations for the three months ended December 28,

2024 are not necessarily indicative of the operating results that may be expected for the entire fiscal year. These interim financial statements

should be read in conjunction with the annual audited financial statements, accounting policies and financial notes thereto, included in the

Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024, which has previously been filed with the Securities

and Exchange Commission. The September 28, 2024 balance sheet presented herein was derived from the audited financial statements.

Stock Dividend

In December 2023, the Board of Directors approved a stock dividend in the form of one share of the Company's Class A Common

Stock for every four outstanding shares of its Common Stock, Class A Common Stock and Class B Stock. Dividend shares of Class A

Common Stock were distributed on February 8, 2024, to stockholders of record as of January 8, 2024.

The stock dividend did not affect the number of the Company's authorized shares, and the par value of each share of stock remained

unchanged. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or

vesting of all stock options, restricted stock and performance share units outstanding at January 8, 2024, which resulted in a proportional

increase in the number of vesting stock options, restricted stock and performance share units, and, in the case of stock options, a

proportional decrease in the exercise price of all such stock options.

Unless noted, all Class A Common Stock share and per share amounts contained in the condensed consolidated financial statements

and management's discussion and analysis have been retroactively adjusted to reflect the one-for-four stock dividend. The legal form of the

stock dividend was accounted for as a stock split as the Company concluded that shareholders were not receiving a distribution of earnings.

Noncontrolling Interest

Noncontrolling interest in the Company’s condensed consolidated financial statements represents the 20% interest not owned by

Central in a consolidated subsidiary. Since the Company controls this subsidiary, its financial statements are consolidated with those of the

Company, and the noncontrolling owner’s 20% share of the subsidiary’s net assets and results of operations is deducted and reported as

noncontrolling interest on the condensed consolidated balance sheets and as net income attributable to noncontrolling interest in the

condensed consolidated statements of operations. See Note 7, Supplemental Equity Information, for additional information.

Cash, Cash Equivalents and Restricted Cash

The Company considers cash and all highly liquid investments with an original maturity of three months or less at date of purchase to

be cash and cash equivalents. Restricted cash includes cash and highly liquid instruments that are used as collateral for stand-alone letter of

credit agreements related to normal business transactions. These agreements require the Company to maintain specified amounts of cash as

collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash the Company has

available for other uses.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash

equivalents. The Company manages the credit risk associated with cash equivalents by investing with high-quality institutions. The

Company maintains cash accounts that exceed federally insured limits. The Company has not experienced any losses from maintaining

cash accounts in excess of such limits. Management believes that it is not exposed to any significant risks on its cash and cash equivalent

accounts.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated

balance sheets to the condensed consolidated statements of cash flows as of December 28, 2024, December 30, 2023 and September 28,

2024, respectively.


	December 28, 2024	December 30, 2023	September 28, 2024
	(in thousands)
Cash and cash equivalents	$618,020	$341,419	$753,550
Restricted cash	14,649	14,200	14,853
Total cash, cash equivalents and restricted cash	$632,669	$355,619	$768,403

Allowance for Credit Losses and Customer Allowances

The Company’s trade accounts receivable are recorded at net realizable value, which includes an allowance for estimated credit

losses, as well as allowances for contractual customer deductions accounted for as variable consideration. The Company maintains an

allowance for credit losses related to its trade accounts receivable associated with future expected credit losses resulting from the inability of

its customers to make required payments. The Company estimates the allowance based upon historical bad debts, current customer

receivable balances and the customer’s financial condition. The allowance is adjusted to reflect changes in current and forecasted

macroeconomic conditions. The Company’s estimate of credit losses includes expected current and future economic and market conditions.

Revenue Recognition

Revenue Recognition and Nature of Products and Services

The Company manufactures, markets and distributes a wide variety of pet and garden products to wholesalers, distributors and

retailers, primarily in the United States. The majority of the Company’s revenue is generated from the sale of finished pet and garden

products. The Company also recognizes a minor amount of non-product revenue (approximately one percent of consolidated net sales)

comprising third-party logistics services, merchandising services and royalty income from sales-based licensing arrangements. Product and

non-product revenue is recognized when performance obligations under the terms of the contracts with customers are satisfied. The

Company recognizes product revenue when control over the finished goods transfers to its customers, which generally occurs upon shipment

to, or receipt at, customers’ locations, as determined by the specific terms of the contract, and when control over the finished goods transfers

to retail consumers in consignment arrangements. These revenue arrangements generally have single performance obligations. Non-product

revenue is recognized as the services are provided to the customer in the case of third-party logistics services and merchandising services,

or as third-party licensee sales occur for royalty income. Revenue, which includes shipping and handling charges billed to the customer, is

reported net of variable consideration and consideration payable to our customers, including applicable discounts, returns, allowances, trade

promotion, unsaleable product, consumer coupon redemption and rebates. Shipping and handling costs that occur before the customer

obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs.

Key sales terms are established on a frequent basis such that most customer arrangements and related incentives have a one year or

shorter duration. As such, the Company does not capitalize contract inception costs. The Company generally does not have unbilled

receivables at the end of a period. Deferred revenues are not material and primarily include advance payments for services that have yet to

be rendered. The Company does not receive noncash consideration for the sale of goods. Amounts billed and due from our customers are

classified as receivables and require payment on a short-term basis; therefore, the Company does not have any significant financing

components.

Sales Incentives and Other Promotional Programs

The Company routinely offers sales incentives and discounts through various regional and national programs to its customers and

consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion

programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such

programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and

are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical

trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of

trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the

estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not

material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and

promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses, and the value of inventory

associated with reserves for sales returns is included within prepaid expenses and other current assets on the condensed consolidated

balance sheets.

Leases

The Company determines whether an arrangement contains a lease at inception by determining if the contract conveys the right to

control the use of identified property, plant or equipment for a period of time in exchange for consideration and other facts and circumstances.

Long-term operating lease right-of-use ("ROU") assets and current and long-term operating lease liabilities are presented separately in the

condensed consolidated balance sheets. Finance lease ROU assets are presented in property, plant and equipment, net, and the related

finance liabilities are presented with current and long-term debt in the condensed consolidated balance sheets.

Lease ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the

Company's obligation to make lease payments arising from the lease. ROU assets are calculated based on the lease liability adjusted for any

lease payments paid to the lessor at or before the commencement date and excludes any lease incentives received from the lessor. Lease

liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The lease term may include

options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As the Company's leases

typically do not contain a readily determinable implicit rate, the Company determines the present value of the lease liability using its

incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis. Variable lease payments are

expensed as incurred and include certain non-lease components, such as maintenance and other services provided by the lessor, and other

charges included in the lease, as applicable. Non-lease components and the lease components to which they relate are accounted for as a

single lease component, as the Company has elected to combine lease and non-lease components for all classes of underlying assets.

Amortization of ROU lease assets is calculated on a straight-line basis over the lease term with the expense recorded in cost of sales

or selling, general and administrative expenses, depending on the nature of the leased item. Interest expense is recorded over the lease term

and is recorded in interest expense (based on a front-loaded interest expense pattern) for finance leases and is recorded in cost of sales or

selling, general and administrative expenses (on a straight-line basis) for operating leases. All operating lease cash payments and interest on

finance leases are recorded within cash flows from operating activities and all finance lease principal payments are recorded within cash

flows from financing activities in the condensed consolidated statements of cash flows.

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Updates

There were no recently adopted accounting pronouncements that had a material impact on the Company's condensed consolidated

financial statements.

Accounting Standards Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment

Disclosures. This ASU requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision

maker that are included within each reported measure of segment profit or loss, and also requires all annual disclosures currently required by

Topic 280 to be included in interim periods. ASU No. 2023-07 is to be applied retrospectively for all periods presented in the financial

statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after

December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will

have on the Company’s disclosures.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This

ASU primarily requires enhanced disclosures and disaggregation of income tax information by jurisdiction in the annual income tax

reconciliation and quantitative and qualitative disclosures regarding income taxes paid. ASU No. 2023-09 is to be applied prospectively, with

the option to apply the standard retrospectively, effective for fiscal years beginning after December 15, 2024. The Company is currently

evaluating the impact that the adoption of this guidance will have on the Company’s disclosures.