Central Garden & Pet Co: Form 10-Q for the period ended Dec 27, 2025

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

Recent Developments

Fiscal 2026 First Quarter Financial Performance:

• Net sales decreased $39.0 million, or 6.0%, from the prior year quarter to $617 million, with Pet net sales decreasing 2.7% and Garden net sales decreasing 12.0%.
• Gross profit decreased $5.1 million from the prior year quarter, while gross margin increased 110 basis points to 30.9%.
• Selling, general and administrative expense increased $6.4 million from the prior year quarter to $174.1 million and increased as a percentage of net sales to 28.2%.
• Operating income declined $11.5 million from the prior year quarter to $16.5 million in the first quarter of fiscal 2026. On a non-GAAP basis, operating income decreased $3.7 million from the prior year quarter.
• Net income in the first quarter of fiscal 2026 was $6.8 million, or $0.11 per diluted share, compared to $14.0 million, or $0.21 per diluted share, in the first quarter of fiscal 2025. On a non-GAAP basis, net income was $12.8 million, or $0.21 per diluted share, in the first quarter of fiscal 2026 compared to $14.0 million, or $0.21 per diluted share, in the first quarter of fiscal 2025.

Acquisitions

In December 2025, we acquired the U.S. assets of Champion USA LLC, for approximately $57 million. The addition of Champion, which serves the livestock industry with EPA-approved feed-through fly control solutions, strengthens our position in one of the fastest growing segments in animal health and enhances our ability to deliver effective, high-quality solutions for cattle producers nationwide.

Facility Closures

In the first quarter of fiscal 2026, we incurred approximately $7.7 million in charges as part of our Cost and Simplicity program, reflecting our ongoing network optimization initiative to achieve a simpler, more efficient manufacturing and logistics network. In our Garden segment, we incurred approximately $7.2 million in additional charges, primarily lease and severance costs, related to facility closures in fiscals 2023 through 2025. In our Pet segment, we incurred approximately $0.5 million in charges related to the closure of a sales and logistics facility in the first quarter of fiscal 2026.

Results of Operations

Three Months Ended December 27, 2025

Compared with Three Months Ended December 28, 2024

Net Sales

Net sales for the three months ended December 27, 2025, decreased $39.0 million, or 6.0%, to $617.4 million from $656.4 million for the three months ended December 28, 2024. Net sales decreased in both segments and was volume-based. The decrease was due primarily to the timing of shipments, with certain volumes shifting into our second fiscal quarter, compared with the prior year quarter where certain volumes shifted into the first quarter from the second quarter, and the impact of portfolio optimization actions. Our branded product sales decreased $29.9 million, and sales of other manufacturers’ products decreased $9.1 million.

Pet net sales decreased $11.7 million, or 2.7%, to $415.8 million for the three months ended December 27, 2025, from $427.5 million for the three months ended December 28, 2024. The decline in net sales was primarily related to portfolio optimization actions, including the closure of our operations in the United Kingdom in fiscal 2025, and the timing of shipments, mainly impacting our outdoor cushion and pet bed business. This decline was partially offset by increased sales in our rawhide, professional and equine businesses. Pet branded product sales decreased $9.2 million, and sales of other manufacturers' products decreased $2.5 million.

Garden net sales decreased $27.3 million, or 12.0%, to $201.6 million for the three months ended December 27, 2025, from $229.0 million for the three months ended December 28, 2024. The decline in Garden net sales was due primarily to the adverse impact of the timing of shipments, affecting the sales of both our controls and grass seed businesses, the loss of distribution of two product lines, and our planned exit of lower-margin categories in our live plant business. The declines were partially offset by increased sales in our wild bird feed business. Garden branded product sales decreased $20.7 million, and sales of other manufacturers' products decreased $6.6 million.

Gross Profit

Gross profit for the three months ended December 27, 2025 decreased $5.1 million, or 2.6%, to $190.6 million from $195.7 million for the three months ended December 28, 2024. Gross margin increased 110 basis points to 30.9% for the three months ended December 27, 2025 from 29.8% for the three months ended December 28, 2024. The decrease in gross profit was due to the $39.1 million decrease in net sales. The increase in gross margin was driven primarily by productivity gains resulting from our Cost and Simplicity agenda and, secondarily, to a mix shift in sales. Reduced sales from lower margin products due to portfolio optimization actions in both Pet and Garden were replaced by increased sales of higher margin product lines, particularly within Pet.

Gross margin increased while gross profit decreased in both segments. Pet and Garden had similar gross margin increases and both benefited from productivity and efficiency gains although the mix change in net sales was concentrated within Pet.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $6.4 million, or 3.8%, to $174.1 million for the three months ended December 27, 2025. As a percentage of net sales, selling, general and administrative expenses increased to 28.2% for the three months ended December 27, 2025, compared to 25.5% in the comparable prior year quarter due primarily to $8.3 million in facility closure costs. On a non-GAAP basis, selling, general and administrative expenses decreased $2.0 million to $165.7 million for the three months ended December 27, 2025, and was 26.8% of net sales.

Selling and delivery expense increased $1.1 million to $73.8 million for the three months ended December 27, 2025 as compared to $72.7 million in the prior year quarter. The increased expense was in the Garden segment due primarily to incremental wild bird marketing expenses.

Warehouse and administrative expense increased $5.2 million, to $100.2 million for the three months ended December 27, 2025 from $95.0 million for the three months ended December 28, 2024. The increase in warehouse and administrative expense was primarily in Garden and due to $7.8 million in facility closure costs, partially offset by a decrease in corporate expense. On a non-GAAP basis, warehouse and administrative expense decreased $3.1 million for the quarter ended December 27, 2025, as compared to the prior-year quarter. Corporate expense decreased $2.1 million due primarily to lower third-party provider expense and lower variable compensation expense. 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 decreased $11.5 million, or 40.9%, to $16.5 million for the three months ended December 27, 2025 from $28.0 million for the three months ended December 28, 2024. Our operating margin decreased from 4.3% in the prior year quarter to 2.7% in the current year quarter. The decrease in operating income was due to a $39.1 million decrease in net sales and a $6.4 million increase in selling, general and administrative expense partially offset by a 110 basis point increase in gross margin. On a non-GAAP basis, operating income decreased $3.7 million to $24.3 million and operating margin was 3.9%.

Pet operating income decreased $1.5 million, or 2.8%, to $49.8 million for the three months ended December 27, 2025 from $51.3 million for the three months ended December 28, 2024. Pet operating income decreased due to a $11.7 million decline in net sales and a $0.3 million increase in selling, general and administrative expense partially offset by a 70 basis point improvement in gross margin.

Garden operating income decreased $12.1 million to a loss of $9.7 million for the three months ended December 27, 2025 from income of $2.4 million for the three months ended December 28, 2024. Garden operating income decreased due to a decline in net sales of $27.4 million and a $8.1 million increase in selling, general and administrative expense partially offset by an 80 basis point increase in gross margin. On a non-GAAP basis, the garden operating loss was $2.4 million for the three months ended December 27, 2025, after adjusting for the impact of the facility closure charges incurred in the quarter.

Corporate operating expense decreased $2.1 million, or 8.2%, to $23.6 million for the three months ended December 27, 2025 from $25.7 million for the three months ended December 28, 2024, due primarily to lower third-party provider expense and lower variable compensation expense.

Net Interest Expense

Net interest expense for the three months ended December 27, 2025 was $7.8 million, fairly consistent with $7.7 million for the three months ended December 28, 2024. Debt outstanding on December 27, 2025 was $1,192.2 million compared to $1,190.4 million at December 28, 2024.

Other Income

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 increased $1.9 million to $0.2 million for the three months ended December 27, 2025 as compared to an expense of $1.7 million in the prior quarter. The increase in other income (expense) was due primarily to foreign currency gains in the current year quarter as compared to foreign currency losses in the prior year quarter.

Income Taxes

Our effective income tax rate was 23.3% for the quarter ended December 27, 2025 relatively consistent with 23.5% for the quarter ended December 28, 2024.

Net Income and Earnings Per Share

Net income in the first quarter of fiscal 2026 was $6.8 million, or $0.11 per diluted share, compared to $14.0 million, or $0.21 per diluted share, in the first quarter of fiscal 2025. On a non-GAAP basis, net income in the first quarter of fiscal 2026 was $12.8 million, or $0.21 per diluted share, compared to $14.0 million, or $0.21 per diluted share, in the first quarter of fiscal 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, $7.2 million in our Garden segment related to the closure of three distribution centers in fiscal 2025 and 2024, and an incremental $0.5 million in our Pet segment related to the closure of a sales and logistics facility in Pennsylvania.

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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 quarter 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 $1.4 million, from $68.8 million for the three months ended December 28, 2024, to $70.2 million for the three months ended December 27, 2025. The minor increase in cash used by operating activities was due primarily to changes in our working capital accounts for the three-month period ended December 27, 2025, primarily an increase in inventory, partially offset by a decrease in accounts receivable and the net of changes in other working capital accounts.

Investing Activities

Net cash used in investing activities increased $58.4 million, from $9.4 million for the three months ended December 28, 2024 to $67.8 million during the three months ended December 27, 2025. 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 $32 million, from $55.4 million for the three months ended December 28, 2024, to $23.5 million for the three months ended December 27, 2025. 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 three months ended December 27, 2025, we repurchased approximately 0.7 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $18.5 million, or approximately $28.01 per share. 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.

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 $11 million through December 27, 2025.

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 27, 2025, our total debt outstanding was $1,192.2 million, as compared with $1,190.4 million at December 28, 2024.

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 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 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 December 27, 2025.

$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 December 27, 2025.

$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 December 27, 2025.

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 $545 million as of December 27, 2025. 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 December 27, 2025, 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 27, 2025.

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 December 27, 2025, and the applicable margin for Base Rate borrowings fluctuates between 0.00%-0.50% and was 0.00% as of December 27, 2025. 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 December 27, 2025, 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 December 27, 2025.

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.

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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.

There has been no material change in our exposure to market risk from that discussed in our Annual Report on Form 10-K for the fiscal year ended September 27, 2025.

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 27, 2025.

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 2026. There were no changes in our internal control over financial reporting during the quarter ended December 27, 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 27, 2025.