Central Garden & Pet Company
05/07/2026 | Press release | Distributed by Public on 05/07/2026 12:27
Quarterly Report for Quarter Ending March 28, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Our Company
Central Garden & Pet Company ("Central") is a leading consumer goods company in the U.S. pet and garden industries. For more than 40 years, we have delivered innovative, trusted solutions that help lawns grow greener, gardens bloom bigger, pets live healthier, and communities grow stronger. We operate through two reportable segments: Pet and Garden.
Our Pet segment offers a broad range of products for dog and cat supplies, including treats and chews, toys, beds and containment, grooming items, waste management and training pads. We also provide supplies for aquatics, small animals, reptiles and pet birds, such as toys, enclosures, habitats, bedding, food and supplements, equine and livestock products, animal and household health solutions and insect control items. This segment also includes live fish and small animals as well as outdoor cushions. Products are sold under well-recognized brands including Aqueon®, Best Bully Sticks®, Cadet®, C&S®, Comfort Zone®, Farnam®, Four Paws®, Kaytee®, Nylabone®, Zilla® and Zoëcon®.
Our Garden segment includes lawn and garden consumables such as grass seed; vegetable, flower and herb packet seed; wild bird feed, bird houses and other birding accessories; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers and live plants. Brands in this segment include 3D®, Amdro®, Ferry-Morse®, Pennington® and Sevin®.
In fiscal 2025, our consolidated net sales were $3.1 billion, of which our Pet segment, or Pet, accounted for approximately $1.8 billion and our Garden segment, or Garden, accounted for approximately $1.3 billion. In fiscal 2025, our operating income was $250 million consisting of income from our Pet segment of $216 million, income from our Garden segment of $142 million and corporate expenses of $108 million.
We were incorporated in Delaware in May 1992 as the successor to a California corporation that was formed in 1955. Our executive offices are located at 1340 Treat Boulevard, Suite 600, Walnut Creek, California 94597, and our telephone number is (925) 948-4000. Our website is www.central.com. The information on our website is not incorporated by reference in this quarterly report.
Recent Developments
Fiscal 2026 Second Quarter Financial Performance:
•Net sales increased $73 million, or 9%, from the prior year quarter to $906 million, with Pet net sales increasing 5% and Garden net sales increasing 13%.
•Gross profit increased $26 million from the prior year quarter, while gross margin increased 30 basis points to 33.1%.
•Selling, general and administrative expense increased $6 million from the prior year quarter to $186 million and decreased as a percentage of net sales to 20.5%.
•Operating income increased $21 million from the prior year quarter to $114 million in the second quarter of fiscal 2026.
•Net income in the second quarter of fiscal 2026 was $79 million, or $1.28 per diluted share, compared to $64 million, or $0.98 per diluted share, or $68 million, or $1.04 per diluted share on a non-GAAP basis.
Pet Distribution Divestiture
On April 13, 2026, we entered into a strategic partnership with Phillips Pet Food & Supplies, a leading national distributor of pet products, to form a new pet distribution business.
Under the terms of the agreement, we contributed our pet distribution business into the newly formed entity and received cash proceeds and a 20% ownership stake in the entity. Phillips and its existing investors will hold the remaining 80%, with the new business operating as an independent entity focused on scaling a differentiated, high-performance nationwide distribution platform. The new business will operate under the Phillips brand.
The combination of the pet industry distribution businesses will allow for a more efficient distribution network with increased scale and a focused management team. At the same time, we will benefit from a more focused portfolio and reduced operational complexity.
Results of Operations
Three Months Ended March 28, 2026
Compared with Three Months Ended March 29, 2025
Net Sales
Net sales for the three months ended March 28, 2026, increased $72.6 million, or 8.7%, to $906.1 million from $833.5 million for the three months ended March 29, 2025. Net sales increased in both segments and was primarily volume-based. The increase was due primarily to the timing of shipments, with certain volumes shifting into our second fiscal quarter, from the first quarter, and the benefit of new listings and products. Our branded product sales increased $75.4 million, and sales of other manufacturers' products decreased $2.8 million.
Pet net sales increased $23.1 million, or 5.1%, to $476.8 million for the three months ended March 28, 2026, from $453.7 million for the three months ended March 29, 2025. The increase in Pet net sales was due primarily to increased sales in our Dog & Cat business, primarily treats & toys, and increased sales in our outdoor cushion business due to the timing of shipments, with certain volumes shifting into the second quarter from the first quarter. Pet branded product sales increased $29.1 million, and sales of other manufacturers' products decreased $6.0 million.
Garden net sales increased $49.5 million, or 13.0%, to $429.3 million for the three months ended March 28, 2026, from $379.8 million for the three months ended March 29, 2025. The increase in Garden net sales was due primarily to increased sales in our controls and grass seed businesses, both benefitting from a favorable timing of shipments that shifted from the first quarter into the second quarter, and to new private label business and new listings. These increases were partially offset by lower sales in our packet seed and live plants businesses. Garden branded product sales increased $46.3 million, and sales of other manufacturers' products increased $3.2 million.
Gross Profit
Gross profit for the three months ended March 28, 2026 increased $26.5 million, or 9.7%, to $299.6 million from $273.1 million for the three months ended March 29, 2025. Gross margin increased 30 basis points to 33.1% for the three months ended March 28, 2026 from 32.8% for the three months ended March 29, 2025. The increase in gross profit was driven by the increase in sales. The increase in gross margin was impacted by facility closure costs incurred in the prior year quarter. Excluding the impact of charges for facility closures in the second quarter of fiscal 2025, gross margin decreased 20 basis points from 33.3% for the three months ended March 29, 2025 to 33.1% for the three months ended March 28, 2026.
In Pet, both gross profit and gross margin improved, favorably impacted by the increase in net sales, an improved product mix and productivity improvements. In Garden, gross profit increased due the increase in net sales while gross margin declined due primarily to higher manufacturing costs and a mix shift to private label sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.9 million, or 3.3%, to $185.6 million for the three months ended March 28, 2026. As a percentage of net sales, selling, general and administrative expenses decreased to 20.5% for the three months ended March 28, 2026, compared to 21.6% in the comparable prior year quarter. Selling, general and administrative expenses increased in both corporate and Garden, while Pet was relatively flat as compared to the prior year quarter.
Selling and delivery expense increased $5.5 million to $87.2 million for the three months ended March 28, 2026 as compared to $81.7 million in the prior year quarter. The increased expense in both Pet and Garden was due primarily to incremental marketing expenses.
Warehouse and administrative expense increased $0.3 million, to $98.4 million for the three months ended March 28, 2026 from $98.1 million for the three months ended March 29, 2025. Increased corporate expense was partially offset by a decrease in Pet warehouse and administrative expense. Corporate expenses increased $3.8 million due primarily to higher third-party provider expense, driven by M&A activity expenditures. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating Income
Operating income increased $20.6 million, or 22.1%, to $113.9 million for the three months ended March 28, 2026 from $93.3 million for the three months ended March 29, 2025. Our operating margin improved from 11.2% in the prior year quarter to 12.6% in the current year quarter. The increase in operating income was due to a $72.6 million increase in net sales and a 30 basis point increase in gross margin, partially offset by a $5.9 million increase in selling, general and administrative expense.
Pet operating income increased $17.2 million, or 28.4%, to $77.8 million for the three months ended March 28, 2026 from $60.6 million for the three months ended March 29, 2025. Pet operating income increased due to a $23.1 million increase in net sales, an improved gross margin and relatively flat selling, general and administrative expenses.
Garden operating income increased $7.2 million to $66.0 million for the three months ended March 28, 2026 from $58.7 million for the three months ended March 29, 2025. Garden operating income increased due to an increase in net sales of $49.5 million partially offset by a lower gross margin and higher selling, general and administrative expense.
Corporate operating expense increased $3.8 million, or 14.7%, to $29.9 million for the three months ended March 28, 2026, due primarily to higher third party provider expenditures.
Net Interest Expense
Net interest expense decreased $0.3 million, or 2.9%, from $9.4 million for the quarter ended March 29, 2025, to $9.1 million for the quarter ended March 28, 2026. The decrease was due to lower interest expense partially offset by a minor decrease in interest income. Debt outstanding on March 28, 2026 and March 29, 2025 was $1.2 billion.
Other Income (Expense)
Other income is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income (expense) decreased $1.1 million to an expense of $0.4 million for the quarter ended March 28, 2026 as compared to income of $0.7 million in the prior quarter. The decrease in other income (expense) was due primarily to foreign currency losses in the current year quarter as compared to foreign currency gains in the prior year quarter.
Income Taxes
Our effective income tax rate was 23.5% for each of the quarters ended March 28, 2026, and March 29, 2025.
Net Income and Earnings Per Share
Net income in the second quarter of fiscal 2026 was $79.4 million, or $1.28 per diluted share, compared to $63.6 million, or $0.98 per diluted share, in the second quarter of fiscal 2025. On a non-GAAP basis, which excludes the impact of charges related to facility closures, net income in the second quarter of fiscal 2026 was $79.6 million, or $1.29 per diluted share, compared to $67.7 million, or $1.04 per diluted share, in the second quarter of fiscal 2025.
Six Months Ended March 28, 2026
Compared with Six Months Ended March 29, 2025
Net Sales
Net sales for the six months ended March 28, 2026 increased $33.5 million, or 2.3%, to $1,523.5 million from $1,490.0 million for the six months ended March 29, 2025. Our branded product sales increased $45.5 million, and sales of other manufacturers' products decreased $12.0 million.
Pet net sales increased $11.4 million, or 1.3%, to $892.6 million for the six months ended March 28, 2026. The increase in Pet net sales was due primarily to higher sales in our Dog & Cat and Animal Health businesses, partially offset by lower sales of other manufacturers products and the sales in the prior year period from our operations in the United Kingdom that we closed in fiscal 2025. Pet branded sales increased $19.9 million, and sales of other manufacturers' products decreased $8.5 million.
Garden net sales increased $22.1 million, or 3.6%, to $630.9 million for the six months ended March 28, 2026. The increase in Garden net sales was due primarily to increased sales in our controls and grass seed businesses benefitting from new private label business and new listings. These increases were partially offset by lower sales in our live plants and packet seed businesses. Garden branded sales increased $25.6 million, and sales of other manufacturers' products decreased $3.5 million.
Gross Profit
Gross profit for the six months ended March 28, 2026, increased $21.4 million, or 4.6%, to $490.2 million from $468.8 million for the six months ended March 29, 2025. Gross margin improved 70 basis points to 32.2% for the six months ended March 28, 2026, from 31.5% for the six months ended March 29, 2025.
Both the Pet and Garden segments contributed to the improved gross profit, with Pet being the larger contributor. Gross margin increased in Pet while the Garden gross margin was relatively flat as compared to the prior year six month period. The increase in the Pet gross margin was driven primarily by productivity gains resulting from our Cost and Simplicity agenda and a mix shift in sales.
On a non-GAAP basis, which excludes the impact of charges for facility closures in the six months ended March 28, 2026 and March 29, 2025, gross profit increased $16.5 million and gross margin improved 30 basis points. The increase in gross margin was due primarily to the pet gross margin increase noted above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $12.2 million, or 3.5%, to $359.7 million for the six months ended March 28, 2026 from $347.5 million for the six months ended March 29, 2025. The increase in selling, general and administrative expenses was due to higher expenses in both Garden and corporate. As a percentage of net sales, selling, general and administrative expenses increased to 23.6% for the six months ended March 28, 2026 from 23.3% for the prior year period.
Selling and delivery expense increased $6.7 million, or 4.3%, to $161.1 million for the six months ended March 28, 2026 from $154.4 million for the six months ended March 29, 2025. The increase in selling and delivery expense was due to higher marketing and advertising spend in both Pet and Garden.
Warehouse and administrative expense increased $5.5 million, or 2.8%, to $198.6 million for the six months ended March 28, 2026 from $193.1 million for the six months ended March 29, 2025. Increased expense in both Garden and corporate was partially offset by a decrease in Pet. The increase in Garden was due primarily to $7.8 million in facility closure costs incurred in the first quarter of fiscal 2026, while the decrease in Pet was due primarily to the benefits obtained from prior year facility closures. Corporate expenses increased $1.7 million due primarily to higher third-party provider expense driven by M&A activity expenditures. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating Income
Operating income increased $9.2 million, or 7.5%, to $130.5 million for the six months ended March 28, 2026 from $121.3 million for the six months ended March 29, 2025. Our operating margin increased to 8.6% for the six months ended March 28, 2026 from 8.1% for the six months ended March 29, 2025. Operating income increased due to a $33.5 million increase in net sales and a 70 basis point improvement in gross margin, partially offset by a $12.2 million increase in selling, general and administrative expense.
Pet operating income increased $15.8 million, or 14.1%, to $127.6 million for the six months ended March 28, 2026 from $111.9 million for the six months ended March 29, 2025. Pet operating income increased due to higher net sales and an improved gross margin.
Garden operating income decreased $4.9 million to $56.3 million for the six months ended March 28, 2026 from $61.2 million for the six months ended March 29, 2025. Garden operating income decreased due to increased selling, general and administrative expenses
partially offset by increased net sales and a relatively flat gross margin as compared to the prior year six-month period. On a non-GAAP basis, which excludes the facility charges incurred in the first quarter of fiscal 2026, Garden operating income increased $2.4 million.
Corporate operating expense increased $1.7 million to $53.4 million in the current six months ended from $51.7 million in the comparable fiscal 2025 period due primarily to higher third-party provider expense driven by M&A activity expenditures.
Net Interest Expense
Net interest expense for the six months ended March 28, 2026 decreased $0.2 million, or 1.4%, to $16.9 million from $17.1 million for the six months ended March 29, 2025. The decrease in net interest expense was due to lower interest expense partially offset by a minor decrease in interest income. Debt outstanding on March 28, 2026 and March 29, 2025 was $1.2 billion.
Other Income (Expense)
Other income (expense) improved $0.8 million to an expense of $0.2 million for the six-month period ended March 28, 2026 as compared to an expense of $1.0 million in the prior six-month period. The decrease in other expense was due primarily to lower foreign currency losses in the current six-month period as compared to the prior year six-month period.
Income Taxes
Our effective income tax rate was 23.5% for both six-month periods ended March 28, 2026 compared to 23.5% and March 29, 2025.
Net Income and Earnings Per Share
Our net income for the six months ended March 28, 2026 was $86.3 million, or $1.39 per diluted share, compared to $77.6 million, or $1.19 per diluted share, for the six months ended March 29, 2025.
On a non-GAAP basis, net income for the six-month period ended March 28, 2026 was $92.4 million or $1.49 per diluted share, compared to $81.7 million, or $1.25 per diluted share, for the six-month period ended March 29, 2025.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including non-GAAP net income and diluted net income per share, non-GAAP operating income, and adjusted EBITDA. Management uses these non-GAAP financial measures that exclude the impact of specific items (described below) in making financial, operating and planning decisions and in evaluating our performance. Also, management believes that these non-GAAP financial measures may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods. While management believes that non-GAAP measures are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read in conjunction with those GAAP results.
Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization and stock-based compensation expense (or operating income plus depreciation and amortization expense and stock-based compensation expense). Adjusted EBITDA further excludes charges related to facility closures. We present adjusted EBITDA because we believe that adjusted EBITDA is a useful supplemental measure in evaluating the cash flows and performance of our business and provides greater transparency into our results of operations. Adjusted EBITDA is used by our management to perform such evaluations. Adjusted EBITDA should not be considered in isolation or as a substitute for cash flow from operations, income from operations or other income statement measures prepared in accordance with GAAP. We believe that adjusted EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present adjusted EBITDA when reporting their results. Other companies may calculate adjusted EBITDA differently and it may not be comparable.
The reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below.
Non-GAAP financial measures reflect adjustments based on the following items:
•Facility closures and business exit: we have excluded charges related to the closure of distribution and manufacturing facilities and our decisions to exit businesses as they represent infrequent transactions that impact the comparability between operating periods. We believe these exclusions supplement the GAAP information with a measure that may be useful to investors in assessing the sustainability of our operating performance.
•Tax impact: adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income. The tax impact of the non-GAAP adjustments is calculated based on the consolidated effective tax rate on a GAAP basis, applied to the non-GAAP adjustments.
From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful supplemental information to investors and management.
1.During the first quarter of fiscal 2026, we recognized incremental expense of $7.7 million in the consolidated statement of operations, of which $7.2 million in our Garden segment related to the closure of three distribution centers in fiscal 2025 and 2024. During the first and second quarters of fiscal 2026, we recognized incremental expense of $0.5 million and $0.2 million, respectively, in our Pet segment related to the closure of a sales and logistics facility in Pennsylvania.
2.During the second quarter of fiscal 2025, we recognized incremental expense of $5.3 million in the consolidated statement of operations, related to the decision to wind-down our operations in the U.K. and the related facility there as we move to a direct-export model.
| Net Income and Diluted Net Income Per Share | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 28, 2026 | March 29, 2025 | |||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||||
| GAAP net income attributable to Central Garden & Pet Company | $ | 79,421 | $ | 63,633 | $ | 86,262 | $ | 77,642 | ||||||||||||||||||
| Facility closures | (1) (2) | 227 | 5,339 | 7,972 | 5,339 | |||||||||||||||||||||
| Tax effect of adjustments | (53) | (1,255) | (1,870) | (1,255) | ||||||||||||||||||||||
| Non-GAAP net income attributable to Central Garden & Pet Company | $ | 79,595 | $ | 67,717 | $ | 92,364 | $ | 81,726 | ||||||||||||||||||
| GAAP diluted net income per share | $ | 1.28 | $ | 0.98 | $ | 1.39 | $ | 1.19 | ||||||||||||||||||
| Non-GAAP diluted net income per share | $ | 1.29 | $ | 1.04 | $ | 1.49 | $ | 1.25 | ||||||||||||||||||
| Shares used in GAAP and non-GAAP diluted net earnings per share calculation | 61,869 | 64,879 | 61,937 | 65,171 | ||||||||||||||||||||||
| Operating Income | |||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended March 28, 2026 | Six Months Ended March 28, 2026 | |||||||||||||||||||||
| GAAP |
Non-GAAP adjustments(1)
|
Non-GAAP | GAAP |
Non-GAAP adjustments(1)
|
Non-GAAP | ||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales | $ | 906,152 | $ | - | $ | 906,152 | $ | 1,523,525 | $ | - | $ | 1,523,525 | |||||||||||
| Cost of goods sold | 606,588 | 85 | 606,503 | 1,033,353 | (517) | 1,033,870 | |||||||||||||||||
| Gross profit | $ | 299,564 | $ | (85) | $ | 299,649 | $ | 490,172 | $ | 517 | $ | 489,655 | |||||||||||
| Selling, general and administrative expenses | 185,628 | 142 | 185,486 | 359,703 | 8,489 | 351,214 | |||||||||||||||||
| Income from operations | $ | 113,936 | $ | (227) | $ | 114,163 | $ | 130,469 | $ | (7,972) | $ | 138,441 | |||||||||||
| Gross margin | 33.1 | % | 33.1% | 32.2 | % | 32.1% | |||||||||||||||||
| Operating margin | 12.6 | % | 12.6% | 8.6 | % | 9.1% | |||||||||||||||||
| Operating Income | |||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended March 29, 2025 | Six Months Ended March 29, 2025 | |||||||||||||||||||||
| GAAP |
Non-GAAP adjustments(2)
|
Non-GAAP | GAAP |
Non-GAAP adjustments(2)
|
Non-GAAP | ||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales | $ | 833,537 | $ | - | $ | 833,537 | $ | 1,489,973 | $ | - | $ | 1,489,973 | |||||||||||
| Cost of goods sold | 560,454 | 4,413 | 556,041 | 1,021,191 | 4,413 | 1,016,778 | |||||||||||||||||
| Gross profit | $ | 273,083 | $ | (4,413) | $ | 277,496 | $ | 468,782 | $ | (4,413) | $ | 473,195 | |||||||||||
| Selling, general and administrative expenses | 179,759 | 926 | 178,833 | 347,466 | 926 | 346,540 | |||||||||||||||||
| Income from operations | $ | 93,324 | $ | (5,339) | $ | 98,663 | $ | 121,316 | $ | (5,339) | $ | 126,655 | |||||||||||
| Gross margin | 32.8 | % | 33.3% | 31.5 | % | 31.8% | |||||||||||||||||
| Operating margin | 11.2 | % | 11.8% | 8.1 | % | 8.5% | |||||||||||||||||
| Pet Segment Operating Income | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 28, 2026 | March 29, 2025 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| GAAP operating income | $ | 77,822 | $ | 60,614 | $ | 127,622 | $ | 111,871 | ||||||||||||||||||
| Facility closures | (1) (2) | 227 | 5,339 | 732 | 5,339 | |||||||||||||||||||||
| Non-GAAP operating income | $ | 78,049 | $ | 65,953 | $ | 128,354 | $ | 117,210 | ||||||||||||||||||
| GAAP operating margin | 16.3% | 13.4% | 14.3% | 12.7% | ||||||||||||||||||||||
| Non-GAAP operating margin | 16.4% | 14.5% | 14.4% | 13.3% | ||||||||||||||||||||||
| Garden Segment Operating Income | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 28, 2026 | March 29, 2025 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| GAAP operating income | $ | 65,968 | $ | 58,731 | $ | 56,289 | $ | 61,154 | ||||||||||||||||||
| Facility closures | (1) | - | - | 7,240 | - | |||||||||||||||||||||
| Non-GAAP operating income | $ | 65,968 | $ | 58,731 | $ | 63,529 | $ | 61,154 | ||||||||||||||||||
| GAAP operating margin | 15.4% | 15.5% | 8.9% | 10.0% | ||||||||||||||||||||||
| Non-GAAP operating margin | 15.4% | 15.5% | 10.1% | 10.0% | ||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended March 28, 2026 | |||||||||||||||||||||||||
| Pet | Garden | Corporate | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | - | $ | - | $ | - | $ | 79,421 | ||||||||||||||||||
| Interest expense, net | - | - | - | 9,084 | ||||||||||||||||||||||
| Other expense | - | - | - | 351 | ||||||||||||||||||||||
| Income tax expense | - | - | - | 24,529 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | - | - | - | 551 | ||||||||||||||||||||||
| Income (loss) from operations | 77,822 | 65,968 | (29,854) | $ | 113,936 | |||||||||||||||||||||
| Depreciation & amortization | 10,462 | 9,991 | 231 | 20,684 | ||||||||||||||||||||||
| Noncash stock-based compensation | - | - | 4,629 | 4,629 | ||||||||||||||||||||||
| Facility closures | (1) | 227 | - | - | 227 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 88,511 | $ | 75,959 | $ | (24,994) | $ | 139,476 | ||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Three Months Ended March 29, 2025 | |||||||||||||||||||||||||
| Pet | Garden | Corporate | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | - | $ | - | $ | - | $ | 63,633 | ||||||||||||||||||
| Interest expense, net | - | - | - | 9,358 | ||||||||||||||||||||||
| Other income | - | - | - | (744) | ||||||||||||||||||||||
| Income tax expense | - | - | - | 19,903 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | - | - | - | 1,174 | ||||||||||||||||||||||
| Income (loss) from operations | 60,614 | 58,731 | (26,021) | $ | 93,324 | |||||||||||||||||||||
| Depreciation & amortization | 9,498 | 10,443 | 705 | 20,646 | ||||||||||||||||||||||
| Noncash stock-based compensation | - | - | 4,018 | 4,018 | ||||||||||||||||||||||
| Facility closures & business exit | (2) | 5,339 | - | - | 5,339 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 75,451 | $ | 69,174 | $ | (21,298) | $ | 123,327 | ||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Six Months Ended March 28, 2026 | |||||||||||||||||||||||||
| Pet | Garden | Corporate | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | - | $ | - | $ | - | $ | 86,262 | ||||||||||||||||||
| Interest expense, net | - | - | - | 16,851 | ||||||||||||||||||||||
| Other expense | - | - | - | 169 | ||||||||||||||||||||||
| Income tax expense | - | - | - | 26,618 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | - | - | - | 569 | ||||||||||||||||||||||
| Income (loss) from operations | 127,622 | 56,289 | (53,442) | $ | 130,469 | |||||||||||||||||||||
| Depreciation & amortization | 20,599 | 20,265 | 480 | 41,344 | ||||||||||||||||||||||
| Noncash stock-based compensation | - | - | 9,454 | 9,454 | ||||||||||||||||||||||
| Facility closures | (1) | 732 | 7,240 | - | 7,972 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 148,953 | $ | 83,794 | $ | (43,508) | $ | 189,239 | ||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | Six Months Ended March 29, 2025 | |||||||||||||||||||||||||
| Pet | Garden | Corporate | Total | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | - | $ | - | $ | - | $ | 77,642 | ||||||||||||||||||
| Interest expense, net | - | - | - | 17,088 | ||||||||||||||||||||||
| Other expense | - | - | - | 973 | ||||||||||||||||||||||
| Income tax expense | - | - | - | 24,267 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | - | - | - | 1,346 | ||||||||||||||||||||||
| Income (loss) from operations | 111,871 | 61,154 | (51,709) | $ | 121,316 | |||||||||||||||||||||
| Depreciation & amortization | 19,578 | 21,574 | 1,428 | 42,580 | ||||||||||||||||||||||
| Noncash stock-based compensation | - | - | 9,528 | 9,528 | ||||||||||||||||||||||
| Facility closures and business exit | (2) | 5,339 | - | - | 5,339 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 136,788 | $ | 82,728 | $ | (40,753) | $ | 178,763 | ||||||||||||||||||
Inflation
Our revenues and margins are dependent on various economic factors, including fluctuating rates of inflation on various input costs (e.g., commodities and energy), interest rates, tariffs, currencies and consumer attitudes toward discretionary spending. Inflation moderated in fiscal 2024 and into the first half of fiscal 2025 before increasing in the second half of fiscal 2025 and first half of fiscal 2026 due primarily to the increasing impact of tariffs. We have benefited from lower cost inventory and significant productivity gains resulting in improved margins. However, the continued imposition of tariffs and a global trade war could result in higher inflation as the year progresses.
Weather and Seasonality
Our sales of lawn and garden products are impacted by weather conditions in the different markets we serve. Our Garden segment's business is highly seasonal. In fiscal 2025, approximately 64% of our Garden segment's net sales and 57% of our total net sales occurred during our second and third fiscal quarters. Substantially all of the Garden segment's operating income is typically generated in this period.
Liquidity and Capital Resources
We have financed our growth through a combination of cash generated from operations, bank borrowings, supplier credit, and sales of equity and debt securities.
Our business is seasonal, and our working capital requirements and capital resources track closely to this seasonal pattern. Generally, during the first fiscal quarter, accounts receivable reach their lowest level while inventory, accounts payable and short-term borrowings begin to increase. During the second fiscal quarter, receivables, accounts payable and short-term borrowings increase, reflecting the build-up of inventory and related payables in anticipation of the peak lawn and garden selling season. During the third fiscal quarter, inventory levels remain relatively constant while accounts receivable peak and short-term borrowings start to decline as cash collections are received during the peak selling season. During the fourth fiscal quarter, inventory levels are at their lowest, and accounts receivable and payables are substantially reduced through conversion of receivables to cash.
We service two broad markets: pet supplies and lawn and garden supplies. Our pet supplies businesses have a year round selling cycle with a slight degree of seasonality. As a result, it is not necessary to maintain large quantities of inventory to meet peak demands. Our lawn and garden businesses are highly seasonal with approximately 64% of our Garden segment's net sales occurring during the second and third fiscal quarters. This seasonality requires the shipment of large quantities of product well ahead of the peak consumer buying periods. To encourage retailers and distributors to stock large quantities of inventory, industry practice has been for manufacturers to give extended credit terms and/or promotional discounts.
Operating Activities
Net cash used by operating activities increased by $4.2 million, from $115.7 million for the six months ended March 29, 2025, to $119.9 million for the six months ended March 28, 2026. The increase in cash used by operating activities was due primarily to changes in our working capital accounts for the six-month period ended March 28, 2026, primarily an increase in accounts receivable, partially offset by a decrease in prepaid expenses and other assets and the net of changes in other working capital accounts.
Investing Activities
Net cash used in investing activities increased $58.1 million, from $20.2 million for the six months ended March 29, 2025 to $78.3 million during the six months ended March 28, 2026. The increase in cash used in investing activities was due primarily to more significant acquisition activity in the current year as compared to the prior year.
Financing Activities
Net cash used in financing activities decreased $68.3 million, from $99.7 million for the six months ended March 29, 2025, to $31.4 million for the six months ended March 28, 2026. The decrease in cash used in financing activities during the current year was due primarily to decreased open market purchases of our common stock as compared to the prior year. During the six months ended March 28, 2026, we repurchased approximately 0.8 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $21.9 million, or approximately $28.45 per share. During the six months ended March 29, 2025, we repurchased approximately 2.1 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $63.2 million, or approximately $30.75 per share, and approximately 0.9 million shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $30.2 million, or approximately $35.28 per share. .
We expect that our principal sources of funds will be cash generated from our operations and, if necessary, borrowings under our $600 million Credit Facility. Based on our anticipated cash needs, availability under our Credit Facility and the scheduled maturities of our debt, we believe that our sources of liquidity should be adequate to meet our working capital, capital spending and other cash needs for at least the next 12 months. However, we cannot assure you that these sources will continue to provide us with sufficient liquidity and, should we require it, that we will be able to obtain financing on terms satisfactory to us, or at all.
We believe that cash flows from operating activities, funds available under our Credit Facility, and arrangements with suppliers will be adequate to fund our presently anticipated working capital and capital expenditure requirements for the foreseeable future. We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $50 million in fiscal 2026, of which we have invested approximately $21 million through March 28, 2026.
As part of our growth strategy, we have acquired a number of companies in the past, and we anticipate that we will continue to evaluate potential acquisition candidates in the future. If one or more potential acquisition opportunities, including those that would be material, become available in the near future, we may require additional external capital. In addition, such acquisitions would subject us to the general risks associated with acquiring companies, particularly if the acquisitions are relatively large.
Total Debt
At March 28, 2026, our total debt outstanding was $1,192.6 million, as compared with $1,190.8 million at March 29, 2025.
Senior Notes
$400 million 4.125% Senior Notes due 2031
In April 2021, we issued $400 million aggregate principal amount of 4.125% senior notes due April 2031 (the "2031 Notes"). We used a portion of the net proceeds from the offering to repay all outstanding borrowings under our Credit Facility, with the remainder used for general corporate purposes.
We incurred approximately $6.0 million of debt issuance costs in conjunction with this issuance, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2031 Notes.
The 2031 Notes require semiannual interest payments on April 30 and October 30. The 2031 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Credit Facility. The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.
We may redeem some or all of the 2031 Notes at our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.
The holders of the 2031 Notes have the right to require us to repurchase all or a portion of the 2031 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, upon the occurrence of a change of control.
The 2031 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all financial covenants as of March 28, 2026.
$500 million 4.125% Senior Notes due 2030
In October 2020, we issued $500 million aggregate principal amount of 4.125% senior notes due October 2030 (the "2030 Notes"). We used a portion of the net proceeds to redeem all of our outstanding 6.125% senior notes due November 2023 (the "2023 Notes") at a
redemption price of 101.531% plus accrued and unpaid interest, and to pay related fees and expenses, with the remainder used for general corporate purposes.
We incurred approximately $8.0 million of debt issuance costs associated with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2030 Notes.
The 2030 Notes require semiannual interest payments on October 15 and April 15. The 2030 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Credit Facility.
We may redeem some or all of the 2030 Notes, at our option, in whole or in part, at any time on or after October 15, 2025 for 102.063%, on or after October 15, 2026 for 101.375%, on or after October 15, 2027 for 100.688% and on or after October 15, 2028 for 100.0%, plus accrued and unpaid interest.
The holders of the 2030 Notes have the right to require us to repurchase all or a portion of the 2030 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2030 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all financial covenants as of March 28, 2026.
$300 Million 5.125% Senior Notes due 2028
In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028 (the "2028 Notes"). We used the net proceeds from the offering to finance acquisitions and for general corporate purposes.
We incurred approximately $4.8 million of debt issuance costs in conjunction with this transaction, which included underwriter fees and legal, accounting and rating agency expenses. The debt issuance costs are being amortized over the term of the 2028 Notes.
The 2028 Notes require semiannual interest payments on February 1 and August 1. The 2028 Notes are unconditionally guaranteed on a senior basis by our existing and future domestic restricted subsidiaries who are borrowers under or guarantors of our Credit Facility.
We may redeem some or all of the 2028 Notes at our option, on or after January 1, 2026 for 100.0%, plus accrued and unpaid interest.
The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.
The 2028 Notes contain customary high yield covenants, including covenants limiting debt incurrence and restricted payments, subject to certain baskets and exceptions. We were in compliance with all financial covenants as of March 28, 2026.
Asset-Based Loan Facility
On November 7, 2025, we entered into a Fourth Amended and Restated Credit Agreement (the "Credit Agreement"). The Credit Agreement provides for a $600 million principal amount senior secured asset-based revolving credit facility, with up to an additional $400 million principal amount available, as defined, if we exercise the uncommitted accordion feature set forth therein (collectively, the "Credit Facility"). The Credit Facility matures on November 7, 2030. We may borrow, repay and reborrow amounts under the Credit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility must be repaid in full.
The Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves. Proceeds of the Credit Facility may be used for general corporate purposes. Net availability under the Credit Facility was approximately $600 million as of March 28, 2026. The Credit Facility includes a $50 million sublimit for the issuance of standby and commercial letters of credit and a $75 million sublimit for swing loan borrowings. As of March 28, 2026, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. Outside of the Credit Facility, there were other standby and commercial letters of credit of $2.9 million outstanding as of March 28, 2026.
Borrowings under the Credit Facility will bear interest at an index based on SOFR (which will not be less than 0.00%) or, at the Company's option, the Base Rate, plus, in either case, an applicable margin based on the average availability level under the Credit Facility. Base Rate is defined as the highest of (a) the Truist prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month SOFR plus 1.00% and (d) 0.00%. The applicable margin for SOFR-based borrowings fluctuates between 1.00%-1.50%, and was 1.00% as of March 28, 2026, and the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50% and was 0.00% as of March 28, 2026. An unused line fee shall be payable quarterly in respect of the total amount of the unutilized commitments under the Credit Facility, and a letter of credit plus a facing fee to the issuing bank. We are also required to pay certain fees to the administrative agent under the Credit Facility. As of March 28, 2026, the interest rate applicable to Base Rate borrowings was 6.8%, and the interest rate applicable to one-month SOFR-based borrowings was 4.7%.
We incurred approximately $2.3 million of debt issuance costs in conjunction with this transaction, which included lender fees and legal expenses. The debt issuance costs are being amortized over the term of the Credit Facility.
The Credit Facility contains customary covenants, including a financial covenant which requires us to maintain a minimum fixed charge coverage ratio of 1:1 when availability falls below certain thresholds established in the Credit Agreement, reporting requirements and events of default. The Credit Facility is secured by substantially all of our assets and the assets of our subsidiaries guaranteeing the Credit Facility, including (i) pledges of 100% of the stock or other equity interest of each domestic subsidiary that is directly owned by such entity and (ii) 65% of the stock or other equity interest of each foreign subsidiary that is directly owned by such entity, in each case subject to customary exceptions. We were in compliance with all financial covenants under the Credit Facility as of March 28, 2026.
Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities
Central (the "Parent/Issuer") issued $400 million of 2031 Notes in April 2021, $500 million of 2030 Notes in October 2020, and $300 million of 2028 Notes in December 2017. The 2031 Notes, 2030 Notes and 2028 Notes are fully and unconditionally guaranteed on a joint and several senior basis by each of our existing and future domestic restricted subsidiaries (the "Guarantors") which are guarantors of our Credit Facility. The 2031 Notes, 2030 Notes and 2028 Notes are unsecured senior obligations and are subordinated to all of our existing and future secured debt, including our Credit Facility, to the extent of the value of the collateral securing such indebtedness. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent/Issuer. Certain subsidiaries and operating divisions of the Company do not guarantee the 2031, 2030 or 2028 Notes and are referred to as the Non-Guarantors.
The Guarantors jointly and severally, and fully and unconditionally, guarantee the payment of the principal and premium, if any, and interest on the 2031, 2030 and 2028 Notes when due, whether at stated maturity of the 2031, 2030 and 2028 Notes, by acceleration, call for redemption or otherwise, and all other obligations of the Company to the holders of the 2031, 2030 and 2028 Notes and to the trustee under the indenture governing the 2031, 2030 and 2028 Notes (the "Guarantee"). The Guarantees are senior unsecured obligations of each Guarantor and are of equal rank with all other existing and future senior indebtedness of the Guarantors.
The obligations of each Guarantor under its Guarantee shall be limited to the maximum amount as well, after giving effect to all other contingent and fixed liabilities of such Guarantor and to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law.
The Guarantee of a Guarantor will be released:
(1) upon any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation), in accordance with the governing indentures, to any person other than the Company;
(2) if such Guarantor merges with and into the Company, with the Company surviving such merger;
(3) if the Guarantor is designated as an Unrestricted Subsidiary; or
(4) if the Company exercises its legal defeasance option or covenant defeasance option or the discharge of the Company's obligations under the indentures in accordance with the terms of the indentures.
The following tables present summarized financial information of the Parent/Issuer subsidiaries and the Guarantor subsidiaries. All intercompany balances and transactions between subsidiaries under Parent/Issuer and subsidiaries under the Guarantor have been eliminated. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Parent/Issuer's interests in the Guarantor Subsidiaries. The summarized information excludes financial information of the Non-Guarantors, including earnings from and investments in these entities.
| Summarized Statements of Operations | Six Months Ended | Fiscal Year Ended | |||||||||||||||||||||
| March 28, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Parent/Issuer | Guarantors | Parent/Issuer | Guarantors | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales | $ | 392,246 | $ | 1,133,897 | $ | 770,812 | $ | 2,348,267 | |||||||||||||||
| Gross profit | $ | 98,775 | $ | 387,024 | $ | 181,997 | $ | 808,803 | |||||||||||||||
| Income (loss) from operations | $ | 6,399 | $ | 122,999 | $ | (5,724) | $ | 267,249 | |||||||||||||||
| Equity in earnings of Guarantor subsidiaries | $ | 98,941 | $ | - | $ | 223,637 | $ | - | |||||||||||||||
| Net income (loss) | $ | (12,261) | $ | 98,941 | $ | (45,373) | $ | 223,637 | |||||||||||||||
| Summarized Balance Sheet Information | As of | As of | |||||||||||||||||||||
| March 28, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Parent/Issuer | Guarantors | Parent/Issuer | Guarantors | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Current assets | $ | 923,848 | $ | 1,139,092 | $ | 1,065,394 | $ | 881,526 | |||||||||||||||
| Intercompany receivable from Non-guarantor subsidiaries | 65,746 | - | 71,716 | - | |||||||||||||||||||
| Other assets | 4,265,200 | 3,513,108 | 4,066,291 | 3,580,246 | |||||||||||||||||||
| Total assets | $ | 5,254,794 | $ | 4,652,200 | $ | 5,203,401 | $ | 4,461,772 | |||||||||||||||
| Current liabilities | $ | 188,355 | $ | 399,759 | $ | 165,447 | $ | 362,348 | |||||||||||||||
| Intercompany payable from Non-guarantor subsidiaries | - | 1,378 | - | 1,250 | |||||||||||||||||||
| Long-term debt | 1,192,477 | 68 | 1,191,541 | 100 | |||||||||||||||||||
| Other liabilities | 2,193,842 | 209,639 | 2,235,827 | 217,213 | |||||||||||||||||||
| Total liabilities | $ | 3,574,674 | $ | 610,844 | $ | 3,592,815 | $ | 580,911 | |||||||||||||||
New Accounting Pronouncements
Refer to Footnote 1 in the notes to the condensed consolidated financial statements for new accounting pronouncements.
Critical Accounting Policies, Estimates and Judgments
There have been no material changes to our critical accounting policies, estimates and assumptions or the judgments affecting the application of those accounting policies since our Annual Report on Form 10-K for the fiscal year ended September 27, 2025.
Central Garden & Pet Company published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 18:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]