Central Garden & Pet Co: Form 10-Q for the period ended Dec 28, 2024

Our Company

Central Garden & Pet Company (“Central”) is a market leader in the pet and garden industries in the United States. For over 45 years,

Central has marketed innovative and trusted solutions helping lawns grow greener, gardens bloom bigger, pets live healthier, and

communities grow stronger. We manage our operations through two reportable segments: Pet and Garden.

Our Pet segment includes dog and cat supplies such as treats and chews, toys, beds and containment, grooming products, waste

management and training pads; supplies for aquatics, small animals, reptiles and pet birds including toys, enclosures and habitats, bedding,

food and supplements; products for equine and livestock, animal and household health and insect control products; live fish and small

animals as well as outdoor cushions. These products are sold under brands such as Aqueon®, Cadet®, C&S®, Comfort Zone®, Farnam®,

Four Paws®, Kaytee®, Nylabone® and Zilla®.

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. These products are sold under brands such as Amdro®, Ferry-Morse®, Pennington® and Sevin®.

In fiscal 2024, our consolidated net sales were $3.2 billion, of which our Pet segment, or Pet, accounted for approximately $1.8 billion

and our Garden segment, or Garden, accounted for approximately $1.4 billion. In fiscal 2024, our operating income was $185 million

consisting of income from our Pet segment of $203 million, income from our Garden segment of $82 million and Corporate expenses of $100

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 (http://www.central.com). The information on our website is not incorporated by reference in this quarterly report.

Recent Developments

Fiscal 2025 First Quarter Financial Performance:

• Net sales increased $21.9 million, or 3.5%, from the prior year quarter to $656.4 million. Pet segment sales increased

$18.3 million, and Garden segment sales increased $3.6 million.

• Gross profit increased $16.9 million from the prior year quarter, and gross margin increased 160 basis points to 29.8%.

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• Selling, general and administrative expense decreased $2.7 million from the prior year quarter to $167.7 million and as a

percentage of net sales decreased 140 basis points to 25.5%.

• Operating income increased $19.6 million from the prior year quarter to $28.0 million.
• Net Income in the first quarter of fiscal 2025 was $14.0 million, or $0.21 per diluted share, compared to $0.4 million, or

$0.01 per diluted share, in the first quarter of fiscal 2024.

Results of Operations

Three Months Ended December 28, 2024

Compared with Three Months Ended December 30, 2023

Net Sales

Net sales for the three months ended December 28, 2024, increased $21.9 million, or 3.5%, to $656.4 million from $634.5 million for

the three months ended December 30, 2023. Net sales increased in both segments and was volume-based, benefitting from the timing of

shipments, which was favorably impacted by a shift forward of sales previously expected in our second fiscal quarter and the timing of

promotional activities in our Pet business. Branded product sales increased $21.6 million, and sales of other manufacturers’ products

increased $0.3 million.

Pet net sales increased $18.3 million, or 4.5%, to $427.5 million for the three months December 28, 2024, from $409.2 million for the

three months ended December 30, 2023, due primarily to increased sales in our dog and cat treats and toys business. The increased sales

in Pet were volume-based and benefitted from the favorable timing of shipments. Sales of consumables increased while sales of durable

products declined, though the decline was at a lower rate than in previous quarters. Pet branded product sales increased $13.6 million, and

sales of other manufacturers' products increased $4.7 million.

Garden net sales increased $3.6 million, or 1.6%, to $228.9 million for the three months ended December 28, 2024, from $225.3 million

for the three months ended December 30, 2023, benefitting from the timing of shipments supported by favorable weather. The increase in

Garden net sales was due primarily to increased sales in our control and fertilizer businesses. Garden branded sales increased $8.0 million,

and sales of other manufacturers' products decreased $4.4 million.

Gross Profit

Gross profit for the three months ended December 28, 2024, increased $16.9 million, or 9.4%, to $195.7 million from $178.8 million for

the three months ended December 30, 2023. Gross margin increased 160 basis points to 29.8% for the three months ended December 28,

2024, from 28.2% for the three months ended December 30, 2023. Both segments contributed to the gross profit increase due to higher

sales and improved gross margins. The gross margin improvement in both segments was driven by productivity gains resulting from our cost

and simplicity program (e.g., prior year facility consolidations and the exit of lower margin businesses) and moderating inflation.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $2.7 million, or 1.6%, to $167.7 million for the three months ended December

28, 2024. As a percentage of net sales, selling, general and administrative expenses decreased to 25.5% for the three months ended

December 28, 2024, compared to 26.9% in the comparable prior year quarter. Decreased selling, general and administrative expenses in

both Garden and corporate was partially offset by increased expense in Pet.

Selling and delivery expense increased $3.4 million to $72.7 million for the three months ended December 28, 2024, as compared to

$69.3 million in the prior year quarter. The increase was in the Pet segment due primarily to higher media and digital marketing spend and

increased delivery costs related to the higher sales volume.

Warehouse and administrative expense declined $6.1 million, or 6.0%, to $95.0 million for the three months ended December 28, 2024,

from $101.1 million for the three months ended December 30, 2023. Both Pet and Garden warehouse and administrative expense

decreased due primarily to savings from the recent closure of several facilities and headcount reductions. Corporate expense decreased

$0.4 million, or 1.5%, to $25.7 million for the three months ended December 28, 2024, due primarily to lower insurance costs partially offset

by increased third-party spend. 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 $19.6 million to $28.0 million for the three months ended December 28, 2024. Our operating margin

increased to 4.3% in the current year quarter from 1.3% in the prior year quarter. The increase in operating income was due to a $21.9

million increase in net sales, a 160 basis point increase in gross margin and a $2.7 million decrease in selling, general and administrative

expenses.

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Pet operating income increased $7.9 million, or 18.1%, to $51.3 million for the three months ended December 28, 2024, from $43.4

million for the three months ended December 30, 2023, and Pet operating margin improved 140 basis points to 12.0%. Pet operating income

and margin increased due to higher net sales and an improved gross margin partially offset by higher selling, general and administrative

expenses.

Garden operating income improved $11.3 million to income of $2.4 million for the three months ended December 28, 2024, from an

operating loss of $8.9 million for the three months ended December 30, 2023, and Garden operating margin improved to 1.1%. Garden

operating income increased due to higher net sales, an improved gross margin and lower selling, general and administrative expense.

Corporate operating expense decreased $0.4 million, or 1.5%, from the prior year quarter due primarily to lower insurance costs

partially offset by increased third-party spend.

Net Interest Expense

Net interest expense for the three months ended December 28, 2024 decreased $2.0 million, or 20.4%, to $7.7 million from $9.7 million

for the three months ended December 30, 2023. The decrease in net interest expense was due to increased interest income resulting from

our higher cash balance during the current quarter. Debt outstanding on December 28, 2024 was $1,190.4 million compared to $1,189.6

million at December 30, 2023.

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 decreased $2.7 million to an expense of $1.7 million for the quarter ended December 28,

2024 from income of $1.0 million for the quarter ended December 30, 2023. The decrease in other income 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 the quarter ended December 28, 2024. Income tax expense was $4.4 million for the

quarter ended December 28, 2024, compared to an income tax benefit of $0.9 million for the quarter ended December 30, 2023. The

increase in income tax expense for the quarter ended December 28, 2024, compared to the prior year fiscal quarter was due to higher pre-tax

earnings.

Net Income and Earnings Per Share

Net income in the first quarter of fiscal 2025 was $14.0 million, or $0.21 per diluted share, compared to $0.4 million, or $0.01 per diluted

share, in the first quarter of fiscal 2024. The increase in net income and earnings per share was due to a $19.6 million increase in operating

income and lower net interest expense partially offset by a decrease in other income (expense).

Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles ("GAAP"). However, to supplement the

financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA. Management uses

adjusted EBITDA in making financial, operating and planning decisions and in evaluating our performance. Management believes this non-

GAAP financial measure 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 this non-GAAP

measure is 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). 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 adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance

with GAAP are shown in the tables below.

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(in thousands)

(in thousands)

Inflation

Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, interest rates,

consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of

consumer spending. Inflation moderated in fiscal 2024. This has continued into fiscal 2025, and and we have benefitted from lower cost

inventory and significant productivity gains resulting in improved margins.

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 2024, approximately 66% of our Garden segment’s net sales and 59% 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.

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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 66% 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 decreased by $1.0 million, from $69.8 million for the three months ended December 30, 2023, to

$68.8 million for the three months ended December 28, 2024. The decrease in cash used by operating activities was due primarily to

changes in our working capital accounts for the period ended December 28, 2024, as compared to the prior year period, primarily increased

accounts receivable partially offset by decreased inventories.

Investing Activities

Net cash used in investing activities decreased $61.1 million, from $70.5 million for the three months ended December 30, 2023 to $9.4

million during the three months ended December 28, 2024. The decrease in cash used in investing activities was due primarily to greater

acquisition activity in the prior year and decreased capital expenditures in the current year.

Financing Activities

Net cash used by financing activities increased $47.7 million, from $7.8 million for the three months ended December 30, 2023, to

$55.4 million for the three months ended December 28, 2024. The increase in cash used by financing activities during the current year was

due primarily to increased open market purchases of our common stock as compared to the prior year. During the three months ended

December 28, 2024, we repurchased approximately 1.3 million shares of our non-voting Class A common stock (CENTA) on the open market

at an aggregate cost of approximately $39.9 million and 0.4 million shares of our voting common stock (CENT) on the open market at an

aggregate cost of approximately $12.3 million. During the three months ended December 30, 2023, we repurchased approximately 49,000

shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $1.4 million.

We expect that our principal sources of funds will be cash generated from our operations and, if necessary, borrowings under our $750

million Credit Facility. Based on our anticipated cash needs, availability under our Credit Facility and the scheduled maturity 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 and beyond. 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 $70 million in

fiscal 2025, of which we have invested approximately $6 million through December 28, 2024.

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 December 28, 2024, our total debt outstanding was $1,190.4 million, as compared with $1,189.6 million at December 30, 2023.

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 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.

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The 2031 Notes require semi-annual 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 any time, at our option, prior to April 30, 2026 at the principal amount plus a "make

whole" premium. 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 specific kinds of changes

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 December 28, 2024.

$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 any time, at our option, prior to October 15, 2025 at a price equal to 100% of the

principal amount plus a “make-whole” premium. 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 December 28, 2024.

$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, through December 31, 2025 for 100.854% and 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 December 28, 2024.

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Asset-Based Loan Facility Amendment

On December 16, 2021, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit

Agreement provides for a $750 million principal amount senior secured asset-based revolving credit facility, with up to an additional $400

million principal amount available with the consent of the Lenders, as defined, if we exercise the uncommitted accordion feature set forth

therein (collectively, the “Credit Facility”). The Credit Facility matures on December 16, 2026. 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 will be used for general corporate purposes. Net

availability under the Credit Facility was approximately $547 million as of December 28, 2024. The Credit Facility includes a $50 million

sublimit for the issuance of standby letters of credit and a $75 million sublimit for swing loan borrowings. As of December 28, 2024, 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 $3.0 million outstanding as of December 28, 2024.

Borrowings under the Credit Facility bear interest at a rate based on SOFR (which will not be less than 0.00%) or, at our option, the

Base Rate, plus, in either case, an applicable margin based on our usage under the Credit Facility. Base Rate is defined as the highest of (a)

the Truist Bank 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 December 28, 2024, and the applicable margin for Base

Rate borrowings fluctuates between 0.00%-0.50%, and was 0.00% as of December 28, 2024. An unused line fee shall be payable quarterly

in respect of the total amount of the unutilized Lenders’ commitments under the Credit Facility. Standby letter of credit fees at the applicable

margin on the average undrawn and unreimbursed amount of standby letters of credit are payable quarterly and a facing fee of 0.125% is

payable quarterly for the stated amount of each letter of credit. We are also required to pay certain fees to the administrative agent under the

Credit Facility. As of December 28, 2024, the interest rate applicable to Base Rate borrowings was 7.5%, and the interest rate applicable to

one-month SOFR-based borrowings was 5.4%.

We incurred approximately $2.4 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 financial covenants which require us to maintain a minimum fixed charge

coverage ratio of 1:1 upon triggered quarterly testing (e.g. when availability falls below certain thresholds established in the agreement),

reporting requirements and events of default. The Credit Facility is secured by substantially all assets of the borrowing parties, 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 December 28, 2024.

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;

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(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.

(in thousands)

(in thousands)

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 as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 28, 2024.

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There has been no material change in our exposure to market risk from that disclosed in our Annual Report on Form 10-K for the fiscal

year ended September 28, 2024.

Evaluation of Disclosure Controls and Procedures

Our management, including our Principal Executive Officer and Principal Financial Officer, have reviewed, as of the end of the period

covered by this report, the “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and

15d-15(e)) that ensure that information relating to the Company required to be disclosed by us in the reports that we file or submit under the

Exchange Act is recorded, processed, summarized and reported in a timely and proper manner and that such information is accumulated and

communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely

decisions regarding required disclosure. Based upon this review, such officers concluded that our disclosure controls and procedures were

effective as of December 28, 2024.

Changes in Internal Control Over Financial Reporting

Our management, with the participation of our Principal Executive Officer and our Principal Financial Officer, have evaluated whether

any change in our internal control over financial reporting occurred during the first quarter of fiscal 2025. There have been no changes in our

internal control over financial reporting during the first quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

There have been no material changes from the risk factors previously disclosed in Item 1A to Part I of our Form 10-K for the fiscal year

ended September 28, 2024.

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