CENTRAL GARDEN & PET COCENT
CENTRAL GARDEN & PET CO Income Taxes Disclosure
Income Taxes
The provision for income tax expense (benefit) consists of the following:
| Fiscal Year Ended | |||||||||||||||||
| September 27, 2025 | September 28, 2024 | September 30, 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 48,853 | $ | 42,400 | $ | 41,375 | |||||||||||
| State | 6,261 | 4,107 | 6,229 | ||||||||||||||
| Foreign | (226) | 1,087 | 997 | ||||||||||||||
| Total | 54,888 | 47,594 | 48,601 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (2,272) | (14,495) | (10,339) | ||||||||||||||
| State | 101 | 757 | (2,547) | ||||||||||||||
| Foreign | 70 | (744) | 633 | ||||||||||||||
| Total | (2,101) | (14,482) | (12,253) | ||||||||||||||
| Total | $ | 52,787 | $ | 33,112 | $ | 36,348 | |||||||||||
A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:
| Fiscal Year Ended | |||||||||||||||||
| September 27, 2025 | September 28, 2024 | September 30, 2023 | |||||||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State income taxes, net of federal benefit | 2.3 | 2.8 | 1.5 | ||||||||||||||
| Other permanent differences | (0.1) | (0.1) | (0.2) | ||||||||||||||
| Non-Deductible Officers Compensation | 0.2 | 1.4 | 0.7 | ||||||||||||||
| Adjustment of prior year accruals | 0.3 | (0.3) | (0.2) | ||||||||||||||
| Credits | (0.4) | (0.7) | (0.7) | ||||||||||||||
| Stock based compensation | (0.3) | (1.5) | (0.3) | ||||||||||||||
| Other | 1.4 | 0.6 | 0.6 | ||||||||||||||
| Effective income tax rate | 24.4 | % | 23.2 | % | 22.4 | % | |||||||||||
The tax effect of temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:
| September 27, 2025 | September 28, 2024 | ||||||||||||||||||||||
| Deferred Tax Assets | Deferred Tax Liabilities | Deferred Tax Assets | Deferred Tax Liabilities | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 5,077 | $ | — | $ | 5,005 | $ | — | |||||||||||||||
| Inventory write-downs | 20,763 | — | 23,570 | — | |||||||||||||||||||
| Prepaid expenses | 2,102 | 1,928 | |||||||||||||||||||||
| Nondeductible reserves | 9,183 | — | 10,958 | — | |||||||||||||||||||
| State taxes | — | 92 | — | 220 | |||||||||||||||||||
| Employee benefits | 14,830 | — | 12,232 | — | |||||||||||||||||||
| Depreciation and amortization | 179,151 | 185,560 | |||||||||||||||||||||
| Equity earnings | 722 | 1,067 | |||||||||||||||||||||
| State net operating loss carryforward | 18,982 | — | 16,505 | — | |||||||||||||||||||
| Stock based compensation | 5,698 | — | 6,939 | — | |||||||||||||||||||
| State credits | 2,646 | — | 3,007 | — | |||||||||||||||||||
| Other | 15,880 | — | 15,342 | — | |||||||||||||||||||
| Valuation allowance | (13,280) | — | (9,900) | — | |||||||||||||||||||
| Total | $ | 79,779 | $ | 182,067 | $ | 83,658 | $ | 188,775 | |||||||||||||||
The Company has state net operating loss carryforwards of $82.2 million, which expire at various times between 2025 and 2043, and foreign net operating loss carryforwards of $26 million, which do not expire.
The Company also has state income tax credits of $3 million, which expire at various times beginning in 2026 through 2044. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including past operating results, future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against any deferred tax assets for the parent company and foreign subsidiaries. The Company has determined that insufficient future separate-company state and foreign taxable income is expected to be available to realize the deferred tax assets. Therefore, valuation allowances of $13.3 million and $9.9 million (net of federal impact) at September 27, 2025 and September 28, 2024, respectively, have been provided to reduce state deferred tax assets to amounts considered recoverable.
The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The interest and/or penalties related to income tax matters are recognized as a component of pretax income. As of September 27, 2025 and September 28, 2024, accrued interest was less than $0.1 million and no penalties were accrued related to uncertain tax positions.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for fiscal years ended September 27, 2025 and September 28, 2024:
| (in thousands) | |||||
| Balance as of September 30, 2023 | $ | 391 | |||
| Increases related to prior year tax positions | 1 | ||||
| Increases related to current year tax positions | — | ||||
| Decreases related to prior year tax positions | (12) | ||||
| Settlements | (1) | ||||
| Decreases related to lapse of statute of limitations | (84) | ||||
| Balance as of September 28, 2024 | $ | 295 | |||
| Increases related to prior year tax positions | 208 | ||||
| Increases related to current year tax positions | 366 | ||||
| Decreases related to prior year tax positions | — | ||||
| Settlements | (208) | ||||
| Decreases related to lapse of statute of limitations | (107) | ||||
| Balance as of September 27, 2025 | $ | 554 | |||
As of September 27, 2025, unrecognized income tax benefits totaled approximately $0.6 million and all of the unrecognized tax benefits would, if recognized, impact the Company’s effective income tax rate.
The Company is principally subject to taxation by the United States and various states within the United States. The Company’s tax filings in major jurisdictions are open to examination by tax authorities by the Internal Revenue Service from fiscal year ended 2022 forward and in various state taxing authorities generally from fiscal year ended 2021 forward.
The Company believes there is a reasonable chance that its unrecognized tax benefits will decrease by less than $0.1 million within the next twelve months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 26, 2025 | Showing above |
| 2024 | Nov 27, 2024 | |
| 2023 | Nov 28, 2023 | |
| 2022 | Nov 22, 2022 | |
| 2021 | Nov 23, 2021 | |
| 2020 | Nov 24, 2020 | |
| 2019 | Nov 27, 2019 | |
| 2018 | Nov 28, 2018 | |
| 2017 | Nov 29, 2017 | |
| 2016 | Dec 2, 2016 | |
| 2015 | Dec 10, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.