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Aug. 5, 2021, 2:41 p.m. EDT


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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Company

furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, products for horses and livestock, as well as outdoor cushions and pillows. These products are sold under the brands including Aqueon(R), Cadet(R), Comfort Zone(R), Farnam(R), Four Paws(R), Kaytee(R), K&H Pet Products(R), Nylabone(R), and Zilla(R) as well as a number of other brands including Adams(TM), Altosid(R), Arden Companies(TM), Coralife(R), C&S Products(R), Interpet(R), Pet Select(R), TFH(TM), and Zodiac(R). Our lawn and garden supplies products include proprietary and non-proprietary grass seed; wild bird feed, bird feeders, bird houses and other birding accessories; seed packets and seed starter products; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers; and decorative outdoor lifestyle products including pottery, as well as live plants. These products are sold under the brands AMDRO(R), Pennington(R), and Sevin(R), as well as a number of other brand names including Bell Nursery, Ironite(R), Ferry-Morse(R), Lilly Miller(R) and Over-N-Out(R).

Recent Developments

may not be able to mitigate such impact. Additionally, we continue to face inflationary pressures stemming from the COVID-19 operating environment, including notable increases in costs for key commodities, labor and freight. We believe we have sufficient liquidity to satisfy our cash needs with our cash and revolving credit facility as we manage through the current economic and health environment.

Results of Operations

In the Garden segment, gross profit increased due to the three recent acquisitions, but the Garden gross margin declined due to the initial inventory-related purchase accounting adjustments related to the acquisitions. Additionally, the Garden organic gross margins declined due primarily to rising costs in commodities, labor and freight. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $49.6 million, or 31.5%, to $207.1 million for the three months ended June 26, 2021. The increase in selling, general and administrative expense was primarily in our Garden segment due to a large extent to the three recent acquisitions, although selling, general and administrative expense increased in both operating segments and in corporate. As a percentage of net sales, selling, general and administrative expenses increased to 20.0% for the three months ended June 26, 2021, compared to 18.9% in the comparable prior year quarter due primarily to increased sales volumes, wage and freight inflation and increased marketing investment for brand development and innovation.

Income Taxes

Nine Months Ended June 26, 2021 Compared with Nine Months Ended June 27, 2020 Net Sales

Warehouse and administrative expense increased $40.3 million, or 18.7%, to $256.1 million for the nine months ended June 26, 2021 from $215.8 million for the nine months ended June 27, 2020. The increased expense was driven by the addition of the three recent acquisitions in the Garden segment and a $2.6 million loss in our Pet segment resulting from the sale of the Breeder's Choice business in our fiscal first quarter. Additionally, both operating segments experienced increased labor and payroll-related expense. Corporate expenses increased $5.1 million due primarily to increased variable compensation, payroll expense and increased non-cash equity 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.

Use of Non-GAAP Financial Measures

Aug 05, 2021


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