Fiscal 2024 Q1 net sales of $635
million
Fiscal 2024 Q1 earnings per share of
$0.01
Maintains outlook for fiscal 2024 non-GAAP
EPS of $2.50 or better
Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA)
(“Central”), a market leader in the Pet and Garden industries,
today announced financial results for its fiscal 2024 first quarter
ended December 30, 2023.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20240207515647/en/
“The fiscal year is off to a solid start as we successfully
navigated the challenging external environment. We delivered
earnings per share of $0.01 as a result of improved gross margin
and early season shipments,” said Beth Springer, Interim CEO of
Central Garden & Pet. “Our outlook for the fiscal year is
unchanged, and we are focused on executing our long-term Central to
Home strategy with excellence.”
Fiscal 2024 First Quarter Financial Results
Net sales were $635 million compared to $628 million a year ago,
an increase of 1%. Organic net sales increased 1%.
Gross profit was $179 million compared to $172 million in the
prior year. Gross margin improved 80 basis points to 28.2% compared
to 27.4% driven by cost management and moderating inflation.
Operating income was $8 million compared to $0.4 million a year
ago. Operating margin was 1.3% compared to 0.1%, an increase of 120
basis points driven by higher gross margin and cost management
resulting in lower SG&A as a percentage of net sales.
Net interest expense was $10 million compared to $14 million a
year ago driven by higher cash balances and interest rates.
Net income was $0.4 million compared to net loss of $8 million a
year ago. Earnings per share were $0.01 compared to loss per share
of $0.16, an increase of $0.17 cents. Adjusted EBITDA was $37
million compared to $29 million a year ago.
The effective tax rate was 287.7% compared to 24.2% in the prior
year due to a benefit from a discrete item related to stock
compensation in the current year quarter.
Pet Segment Fiscal 2024 First Quarter Results
Net sales for the Pet segment were $409 million compared to $416
million in the prior year, a decrease of 2% due to lower sales of
durable pet products. Organic net sales decreased 5% excluding the
impact of the recent acquisition of TDBBS.
Pet segment operating income was $43 million compared to $40
million a year ago, an increase of 10%. Operating margin was 10.6%
compared to 9.5%, an increase of 110 basis points driven by the
positive results of Central's Cost and Simplicity program and lower
commercial spend. Pet segment adjusted EBITDA was $54 million
compared to $50 million in the prior year.
Garden Segment Fiscal 2024 First Quarter Results
Net sales for the Garden segment were $225 million compared to
$212 million a year ago, an increase of 6% driven by early season
shipments in Controls & Fertilizer, Grass, and Packet Seeds.
Organic net sales increased 11% excluding the impact of the sale of
the independent garden channel distribution business.
Garden segment operating loss was $9 million compared to
operating loss of $11 million in the prior year, an improvement of
18%. Operating margin was (3.9)% compared to (5.1)%, an improvement
of 120 basis point driven by gross margin improvement and favorable
overhead absorption, partially offset by higher commercial spend.
Garden segment adjusted EBITDA was $2 million compared to $0.02
million a year ago.
Additional Information
The cash balance at the end of the quarter was $341 million
compared to $88 million a year ago, driven by a reduction in
inventory due to converting inventory to cash over the last 12
months. Cash used by operations during the quarter was $70 million
compared to $63 million a year ago.
Total debt as of December 30, 2023, and December 24, 2022 was
$1.2 billion. The leverage ratio, as defined in Central's credit
agreement, at the end of the first quarter was 3.0x compared to
3.1x at the end of the prior year quarter. Central repurchased
39,576 shares or $1.4 million of its stock during the quarter.
Fiscal 2024 Guidance
Central continues to expect fiscal 2024 non-GAAP EPS to be $2.50
or better before the impact of the stock dividend taking place on
February 8, 2024.
This outlook reflects an environment of macroeconomic and
geopolitical uncertainty with deflationary pressure in some of
Central's commodity businesses and uncertain consumer demand and
retailer dynamics. It includes modest pricing actions to help
mitigate inflationary headwinds. This outlook excludes the impact
of any acquisitions, divestitures or restructuring activities that
may occur during fiscal 2024, including any projects under the Cost
and Simplicity program. It also excludes the impact from the recent
TDBBS acquisition. Central expects fiscal 2024 capital spending to
be approximately $70 million.
Stock Dividend
On December 11, 2023, Central's board of directors declared a
stock dividend in the form of one share of Central’s Class A Common
Stock for every four outstanding shares of Central’s Common Stock,
Class A Common Stock and Class B Stock to enhance liquidity in its
Class A Common Stock. Dividend shares of Class A Common Stock will
be distributed on February 8, 2024 to stockholders of record on
January 8, 2024. The Class A Common Stock is listed on the NASDAQ
Global Select Market under the symbol “CENTA.”
Conference Call
Central's senior management will hold a conference call today at
4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its
fiscal 2024 first quarter results and provide a general business
update. The conference call and related materials can be accessed
at http://ir.central.com.
Alternatively, to listen to the call by telephone, dial (201)
689-8345 (domestic and international) using confirmation
#13742862.
About Central Garden & Pet
Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA)
understands that home is central to life and has proudly nurtured
happy and healthy homes for over 40 years. With fiscal 2023 net
sales of $3.3 billion, Central is on a mission to lead the future
of the Pet and Garden industries. The Company’s innovative and
trusted products are dedicated to helping lawns grow greener,
gardens bloom bigger, pets live healthier and communities grow
stronger. Central is home to a leading portfolio of more than 65
high-quality brands including Amdro®, Aqueon®, Cadet®, Farnam®,
Ferry-Morse®, Four Paws®, Kaytee®, K&H®, Nylabone® and
Pennington®, strong manufacturing and distribution capabilities and
a passionate, entrepreneurial growth culture. Central is based in
Walnut Creek, California and has 6,700 employees across North
America and Europe. Visit www.central.com to learn more.
Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995: The statements contained in this release which
are not historical facts, including statements concerning cost
inflation and deflation, evolving consumer demand and unfavorable
retailer dynamics, anticipated pricing actions, productivity
initiatives and estimated capital spending, and earnings guidance
for fiscal 2024, are forward-looking statements that are subject to
risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking
statements. All forward-looking statements are based upon Central's
current expectations and various assumptions. There are a number of
risks and uncertainties that could cause our actual results to
differ materially from the forward-looking statements contained in
this release including, but not limited to, the following
factors:
- high inflation and interest rates, and other adverse
macro-economic conditions;
- fluctuations in market prices for seeds and grains and other
raw materials;
- our inability to pass through cost increases in a timely
manner;
- our ability to recruit and retain new members of our management
team, including a Chief Executive Officer, to support our
businesses and to hire and retain employees;
- fluctuations in energy prices, fuel and related petrochemical
costs;
- declines in consumer spending and increased inventory risk
during economic downturns;
- reductions in demand for product categories that benefited from
the COVID-19 pandemic;
- adverse weather conditions;
- the success of our Central to Home strategy and our Cost and
Simplicity program;
- risks associated with our acquisition strategy, including our
ability to successfully integrate acquisitions and the impact of
purchase accounting on our financial results;
- material weaknesses relating to the internal controls of
recently acquired companies;
- seasonality and fluctuations in our operating results and cash
flow;
- supply shortages in pet birds, small animals and fish;
- dependence on a small number of customers for a significant
portion of our business;
- consolidation trends in the retail industry;
- risks associated with new product introductions, including the
risk that our new products will not produce sufficient sales to
recoup our investment;
- competition in our industries;
- continuing implementation of an enterprise resource planning
information technology system;
- potential environmental liabilities;
- risks associated with international sourcing;
- impacts of tariffs or a trade war;
- access to and cost of additional capital;
- potential goodwill or intangible asset impairment;
- our ability to remediate material weaknesses in our internal
control over financial reporting;
- our dependence upon our key executives;
- our ability to protect our trademarks and other proprietary
rights;
- litigation and product liability claims;
- regulatory issues;
- the impact of product recalls;
- potential costs and risks associated with actual or potential
cyberattacks;
- potential dilution from issuance of authorized shares;
- the voting power associated with our Class B stock; and
- the impact of new accounting regulations and the possibility
our effective tax rate will increase as a result of future changes
in the corporate tax rate or other tax law changes.
These risks and others are described in Central’s Securities and
Exchange Commission filings. Central undertakes no obligation to
publicly update these forward-looking statements to reflect new
information, subsequent events or otherwise. Central has not filed
its Form 10-Q for the fiscal quarter ended December 30, 2023, so
all financial results are preliminary and subject to change.
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
and per share amounts, unaudited)
ASSETS
December 30, 2023
December 24, 2022
September 30, 2023
Current assets:
Cash and cash equivalents
$
341,419
$
87,800
$
488,730
Restricted cash
14,200
14,745
14,143
Accounts receivable (less allowances of
$24,973, $26,115 and $25,797)
370,996
329,129
332,890
Inventories, net
948,398
1,024,359
838,188
Prepaid expenses and other
39,047
56,590
33,172
Total current assets
1,714,060
1,512,623
1,707,123
Plant, property and equipment, net
389,440
396,675
391,768
Goodwill
546,436
546,436
546,436
Other intangible assets, net
489,058
534,207
497,228
Operating lease right-of-use assets
177,499
184,351
173,540
Other assets
105,841
54,777
62,553
Total
$
3,422,334
$
3,229,069
$
3,378,648
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
212,193
$
194,159
$
190,902
Accrued expenses
230,477
179,231
216,241
Current lease liabilities
51,035
49,353
50,597
Current portion of long-term debt
466
296
247
Total current liabilities
494,171
423,039
457,987
Long-term debt
1,189,093
1,186,649
1,187,956
Long-term lease liabilities
136,708
145,261
135,621
Deferred income taxes and other long-term
obligations
149,776
150,676
144,271
Equity:
Common stock, $0.01 par value: 11,077,612,
11,250,162 and 11,077,612 shares outstanding at December 30, 2023,
December 24, 2022 and September 30, 2023
111
113
111
Class A common stock, $0.01 par value:
41,076,686, 41,175,036 and 41,042,325 shares outstanding at
December 30, 2023, December 24, 2022 and September 30, 2023
411
412
410
Class B stock, $0.01 par value: 1,602,374
shares outstanding at December 30, 2023, December 24, 2022 and
September 30, 2023
16
16
16
Additional paid-in capital
594,646
585,127
594,416
Retained earnings
858,817
740,549
859,370
Accumulated other comprehensive loss
(2,112
)
(3,363
)
(2,970
)
Total Central Garden & Pet Company
shareholders’ equity
1,451,889
1,322,854
1,451,353
Noncontrolling interest
697
590
1,460
Total equity
1,452,586
1,323,444
1,452,813
Total
$
3,422,334
$
3,229,069
$
3,378,648
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts, unaudited)
Three Months Ended
December 30, 2023
December 24, 2022
Net sales
$
634,533
$
627,663
Cost of goods sold
455,688
455,964
Gross profit
178,845
171,699
Selling, general and administrative
expenses
170,433
171,293
Operating income
8,412
406
Interest expense
(14,316
)
(14,469
)
Interest income
4,609
693
Other income
993
1,699
Loss before income taxes and
noncontrolling interest
(302
)
(11,671
)
Income tax benefit
(869
)
(2,822
)
Income (loss) including noncontrolling
interest
567
(8,849
)
Net income (loss) attributable to
noncontrolling interest
137
(416
)
Net income (loss) attributable to Central
Garden & Pet Company
$
430
$
(8,433
)
Net income (loss) per share attributable
to Central Garden & Pet Company:
Basic
$
0.01
$
(0.16
)
Diluted
$
0.01
$
(0.16
)
Weighted average shares used in the
computation of net income (loss) per share:
Basic
52,332
52,478
Diluted
53,428
52,478
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands,
unaudited)
Three Months Ended
December 30,
2023
December 24,
2022
Cash flows from operating activities:
Net income (loss)
$
567
$
(8,849
)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization
22,545
21,692
Amortization of deferred financing
costs
666
675
Non-cash lease expense
12,772
12,738
Stock-based compensation
6,021
6,577
Deferred income taxes
1,498
3,260
Other operating activities
(727
)
(35
)
Change in assets and liabilities
(excluding businesses acquired):
Accounts receivable
(32,952
)
48,062
Inventories
(92,808
)
(84,689
)
Prepaid expenses and other assets
(5,275
)
(11,620
)
Accounts payable
19,145
(16,107
)
Accrued expenses
9,533
(23,049
)
Other long-term obligations
3,310
(5
)
Operating lease liabilities
(14,079
)
(11,952
)
Net cash used by operating activities
(69,784
)
(63,302
)
Cash flows from investing activities:
Additions to plant, property and
equipment
(10,127
)
(17,698
)
Payments to acquire companies, net of cash
acquired
(59,498
)
—
Investments
(850
)
(250
)
Net cash used in investing activities
(70,475
)
(17,948
)
Cash flows from financing activities:
Repayments of long-term debt
(85
)
(88
)
Repurchase of common stock, including
shares surrendered for tax withholding
(6,775
)
(9,341
)
Payment of contingent consideration
liability
(25
)
(7
)
Distribution to noncontrolling
interest
(900
)
—
Net cash used by financing activities
(7,785
)
(9,436
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
790
1,047
Net decrease in cash, cash equivalents and
restricted cash
(147,254
)
(89,639
)
Cash, cash equivalents and restricted cash
at beginning of period
502,873
192,184
Cash, cash equivalents and restricted cash
at end of period
$
355,619
$
102,545
Supplemental information:
Cash paid for interest
$
19,756
$
19,907
Cash received from income taxes
$
17,784
$
—
New operating lease right of use
assets
$
13,170
$
11,022
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 adjusted
EBITDA and organic sales. Management believes these non-GAAP
financial measures that exclude the impact of specific items
(described below) 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.
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 these non-GAAP measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are shown in the tables below.
Organic Net Sales
Reconciliation
GAAP to Non-GAAP
Reconciliation
Three Months Ended December
30, 2023
Net sales (GAAP)
Effect of acquisitions &
divestitures on net sales
Net sales organic
(in millions)
Q1 FY 24
$
634.5
$
13.2
$
621.3
Q1 FY 23
627.7
9.5
618.2
$ increase
$
6.8
$
3.1
% increase
1.1
%
0.5
%
Organic Pet Segment Net Sales
Reconciliation
GAAP to Non-GAAP
Reconciliation
Three Months Ended December
30, 2023
Net sales (GAAP)
Effect of acquisitions &
divestitures on net sales
Net sales organic
(in millions)
Q1 FY 24
$
409.2
$
13.2
$
396.0
Q1 FY 23
415.8
—
415.8
$ decrease
$
(6.6
)
$
(19.8
)
% decrease
(1.6
) %
(4.8
) %
Organic Garden Segment Net Sales Reconciliation
GAAP to Non-GAAP
Reconciliation
Three Months Ended December
30, 2023
Net sales (GAAP)
Effect of acquisitions
& divestitures on net sales
Net sales organic
(in millions)
Q1 FY 24
$
225.3
$
—
$
225.3
Q1 FY 23
211.9
9.5
202.4
$ increase
$
13.4
$
22.9
% increase
6.3
%
11.3
%
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP
Reconciliation
Three Months Ended December
30, 2023
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden
& Pet Company
$
—
$
—
$
—
$
430
Interest expense, net
—
—
—
9,707
Other income
—
—
—
(993
)
Income tax benefit
—
—
—
(869
)
Net income attributable to noncontrolling
interest
—
—
—
137
Sum of items below operating income
—
—
—
7,982
Income (loss) from operations
43,388
(8,886
)
(26,090
)
8,412
Depreciation & amortization
10,798
11,006
741
22,545
Noncash stock-based compensation
—
—
6,021
6,021
Adjusted EBITDA
$
54,186
$
2,120
$
(19,328
)
$
36,978
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP
Reconciliation
Three Months Ended December
24, 2022
Pet
Garden
Corporate
Total
(in thousands)
Net loss attributable to Central Garden
& Pet Company
$
—
$
—
$
—
$
(8,433
)
Interest expense, net
—
—
—
13,776
Other income
—
—
—
(1,699
)
Income tax benefit
—
—
—
(2,822
)
Net loss attributable to noncontrolling
interest
—
—
—
(416
)
Sum of items below operating income
—
—
—
8,839
Income (loss) from operations
39,555
(10,820
)
(28,329
)
406
Depreciation & amortization
10,112
10,842
738
21,692
Noncash stock-based compensation
—
—
6,577
6,577
Adjusted EBITDA
$
49,667
$
22
$
(21,014
)
$
28,675
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240207515647/en/
Investor Relations Contact Friederike Edelmann VP,
Investor Relations & Corporate Sustainability (925) 412-6726
fedelmann@central.com
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