Fiscal Q1 2020 sales increased 4.5% to
$482.8 million; Fiscal Q1 2020 loss per share of $0.08 vs. diluted
EPS of $0.03 in Fiscal Q1 2019, in line with Company
expectations
Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA),
a leading innovator, producer and distributor of branded and
private label products for the lawn & garden and pet supplies
markets, today announced financial results for its fiscal 2020
first quarter ended December 28, 2019.
“Our first quarter performance was in line with our
expectations, reflecting several headwinds we anticipated and
discussed on our last earnings call,” said Tim Cofer, CEO of
Central Garden & Pet. “Importantly, the first quarter is
historically the smallest of the year, and we continue to be
confident in our full year guidance.”
Cofer continued, “As we move through the balance of the year, we
will invest in numerous growth initiatives. We have identified
several opportunities that we believe will yield attractive returns
over time. While these investments may negatively impact our
results in the short term, we expect they will help pave the way
for sustainable profitable growth in the years ahead. We have also
been evaluating and fortifying our long-term strategy and look
forward to sharing details with investors this summer.”
Fiscal 2020 First Quarter Financial
Results
Total net sales increased 4.5% to $482.8 million compared to
$462.0 million in the first quarter a year ago, driven in large
part by recent acquisitions. Total Company organic sales were
relatively flat, negatively impacted by the timing of customer
purchases compared to the prior year's first quarter, the Company's
exit from the fashion decor pottery product line, a major
retailer's exit from the live fish category and the impact of a
fire at its pet bedding business.
First quarter gross margin declined 100 basis points to 27.2%,
due to an unfavorable mix of product sales and the impact of lower
volumes in certain businesses. Operating income decreased to $2.1
million from $10.2 million in the first quarter a year ago.
Operating margin decreased 180 basis points to 0.4% compared to
2.2%, due in part to the lower gross margin, higher corporate
expenses and increased third-party expenses.
The Company's net loss was $4.4 million for the quarter compared
to net income of $1.8 million in the first quarter a year ago. The
loss per share for the quarter was $0.08 compared to income of
$0.03 in the first quarter a year ago. EBITDA for the quarter was
$15.2 million versus $22.5 million in the first quarter a year
ago.
Garden Segment Fiscal 2020 First
Quarter Results
First quarter net sales for the Garden segment rose 5.9% to
$128.8 million, driven by the Arden acquisition. Organic sales
decreased 4.4% over the prior year period, negatively impacted by
the Company's exit from the fashion decor pottery product line.
Lower revenues in the Company's grass seed and controls businesses
were also factors in the decline.
The Garden segment's operating loss increased to $8.3 million in
the quarter from $4.6 million in the first quarter of fiscal 2019,
and operating margin declined 270 basis points to 6.5%. Both the
operating income and margin decreases were driven by the pottery
category, and the inclusion of the Arden business, which was not in
the Garden segment's results in the first quarter a year ago. These
businesses accounted for the majority of the operating margin
decline during the quarter. Garden EBITDA of $(5.1) million was
down from $(1.8) million in the first quarter a year ago.
Pet Segment Fiscal 2020 First Quarter
Results
First quarter net sales for the Pet segment increased 4.0% to
$354.0 million compared to the same period a year ago, aided by the
Company's C&S acquisition. Organic Pet sales also rose, by
1.3%, with notable strength in dog treats and chews, aquatics and
wild bird feed. These gains more than offset the negative impact of
lower bedding sales, in part due to a fire at one of the Company's
facilities during the quarter, as well as a decline in live fish
sales due to a major retailer exiting the category during fiscal
2019.
The Pet segment’s operating income increased 1.6% compared to
the first quarter a year ago to $30.2 million, aided by the C&S
acquisition. Pet operating margin decreased to 8.5%, a decline of
20 basis points, due to the lingering effects of supply constraints
in the aquatics business experienced in the fourth quarter of
fiscal 2019. Pet EBITDA of $38.7 million increased from $37.8
million in the first quarter a year ago.
Additional Information
The Company's cash balance at the end of the quarter decreased
to $445.8 compared to $478.7 million in the first quarter a year
ago. Cash used by operations during the quarter was $18.0 million
compared to cash generated of $6.8 million a year ago due primarily
to higher inventory levels. Total debt at December 28, 2019 was
$693.4 million compared to $692.4 million at December 29, 2018. Net
interest expense of $8.6 million for the first quarter increased
$0.5 million from $8.1 million in the prior-year period, mainly due
to lower interest earned on the Company's cash balances during the
quarter. The Company's leverage ratio at the end of the first
quarter, as defined in the Company's credit agreement, was 3.0x
compared to 3.2x at the end of the prior year quarter.
The Company’s effective tax rate for the first quarter of 2020
was 27.6%, compared with 14.3% for the first quarter of 2019.
During the quarter, the Company repurchased approximately 829
thousand shares, or $22.1 million, of its common stock. As of the
end of the quarter, the Company had $100 million available under
the Board’s previously authorized share repurchase program and an
additional 600,000 shares under the Board's equity dilution
authorization.
2020 Guidance
The Company continues to expect fiscal 2020 earnings per diluted
share to be at, or modestly above, the $1.61 earned in the prior
year. The guidance is inclusive of significant incremental
investment intended to support sustainable organic growth in the
years ahead.
Conference Call
The Company will host a conference call today at 4:30 p.m.
Eastern Time / 1:30 p.m. Pacific Time to discuss its first quarter
results. The conference call will be accessible via the internet
through Central’s website, http://ir.central.com.
Alternatively, to listen to the call by telephone, dial (201)
689-8345 (domestic and international) using confirmation #13698383.
A replay of the call will be available for three days by dialing
(201) 612-7415 and entering confirmation #13698383.
About Central Garden &
Pet
Central Garden & Pet Company is a leading innovator,
producer and distributor of branded and private label products for
the lawn & garden and pet supplies markets. Committed to new
product innovation, our products are sold to specialty independent
and mass retailers. Participating categories in Lawn & Garden
include: Grass seed and the brands PENNINGTON®, and THE REBELS®;
wild bird feed and the brand PENNINGTON®; weed and insect control
and the brands AMDRO®, SEVIN®, and OVER-N-OUT®; fertilizer and the
brands PENNINGTON® and IRONITE®; live plants from BELL NURSERY;
outdoor cushions and pillows from ARDEN COMPANIES; and decorative
outdoor patio products under the PENNINGTON® brand. We also provide
a host of other regional and application-specific garden brands and
supplies. Participating categories in Pet include: Animal health
and the brands ADAMS™, COMFORT ZONE®, FARNAM®, HORSE HEALTH™ and
VITAFLEX®; aquatics and reptile and the brands AQUEON®, CORALIFE®,
SEGREST™ and ZILLA®; bird & small animal and the brands
KAYTEE®, Forti-Diet® and CRITTER TRAIL®; and dog & cat and the
brands TFH™, NYLABONE®, FOUR PAWS®, IMS®, CADET®, DMC™, K&H Pet
Products™, PINNACLE® and AVODERM®. We also provide a host of other
application-specific pet brands and supplies. Central Garden &
Pet Company is based in Walnut Creek, California, and has
approximately 5,900 employees, primarily in North America. For
additional information on Central Garden & Pet Company,
including access to the Company's SEC filings, please visit the
Company’s website at www.central.com.
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995: The statements contained in this release which
are not historical facts, including expectations for future
financial results, earnings guidance for fiscal 2020 and new
product offerings, 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 the Company’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:
- seasonality and fluctuations in the Company’s operating results
and cash flow;
- fluctuations in market prices for seeds and grains and other
raw materials and the Company’s inability to pass through cost
increases in a timely manner;
- adverse weather conditions;
- our dependence upon our key executives;
- potential acquisitions;
- the impact of new accounting regulations and the U.S. Tax Cuts
and Jobs Act on the Company's tax rate;
- dependence on a small number of customers for a significant
portion of our business;
- the impacts of tariffs or a potential trade war;
- risk associated with litigation arising from our business;
- uncertainty about new product innovations and marketing
programs; and
- competition in our industries.
These risks and others are described in the Company’s Securities
and Exchange Commission filings. The Company undertakes no
obligation to publicly update these forward-looking statements to
reflect new information, subsequent events or otherwise. The
Company has not filed its Form 10-Q for the fiscal quarter ended
December 28, 2019, 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 28, 2019
December 29, 2018
September 28, 2019
Current assets:
Cash and cash equivalents
$
445,813
$
478,737
$
497,749
Restricted cash
12,990
10,921
12,952
Short term investments
—
—
—
Accounts receivable (less allowance for
doubtful accounts of $21,257, $18,030 and $21,127)
268,229
250,223
300,135
Inventories, net
556,479
493,745
466,197
Prepaid expenses and other
37,569
38,398
30,160
Total current assets
1,321,080
1,272,024
1,307,193
Plant, property and equipment, net
241,795
211,560
245,405
Goodwill
289,854
281,177
286,077
Other intangible assets, net
145,153
148,782
146,137
Operating lease right-of-use assets
105,277
—
—
Other assets
31,998
37,303
40,208
Total
$
2,135,157
$
1,950,846
$
2,025,020
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
184,659
$
141,186
$
149,246
Accrued expenses
124,774
108,245
129,166
Current lease liabilities
34,320
—
—
Current portion of long-term debt
107
117
113
Total current liabilities
343,860
249,548
278,525
Long-term debt
693,329
692,332
693,037
Long-term lease liabilities
75,283
—
—
Deferred income taxes and other long-term
obligations
49,513
52,482
57,281
Equity:
Common stock, $0.01 par value: 11,484,297,
12,145,135 and 11,543,969 shares outstanding at December 28, 2019,
December 29, 2018 and September 28, 2019
115
121
115
Class A common stock, $0.01 par value:
42,289,882, 44,059,803 and 42,968,493 shares outstanding at
December 28, 2019, December 29, 2018 and September 28, 2019
423
441
430
Class B stock, $0.01 par value: 1,647,922
shares outstanding at December 28, 2019 and 1,652,262 at December
29, 2018 and September 28, 2019
16
16
16
Additional paid-in capital
570,117
592,451
575,380
Retained earnings
403,693
364,726
421,742
Accumulated other comprehensive loss
(1,240
)
(1,492
)
(1,676
)
Total Central Garden & Pet Company
shareholders’ equity
973,124
956,263
996,007
Noncontrolling interest
48
221
170
Total equity
973,172
956,484
996,177
Total
$
2,135,157
$
1,950,846
$
2,025,020
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended
December 28, 2019
December 29, 2018
Net sales
$
482,828
$
461,990
Cost of goods sold and occupancy
351,562
331,808
Gross profit
131,266
130,182
Selling, general and administrative
expenses
129,201
120,001
Operating income
2,065
10,181
Interest expense
(10,641
)
(10,614
)
Interest income
2,004
2,537
Other income (expense)
305
(192
)
Income (loss) before income taxes and
noncontrolling interest
(6,267
)
1,912
Income tax expense (benefit)
(1,728
)
273
Income (loss) including noncontrolling
interest
(4,539
)
1,639
Net loss attributable to noncontrolling
interest
(122
)
(164
)
Net income (loss) attributable to
Central Garden & Pet Company
$
(4,417
)
$
1,803
Net income (loss) per share attributable
to Central Garden & Pet Company:
Basic
$
(0.08
)
$
0.03
Diluted
$
(0.08
)
$
0.03
Weighted average shares used in the
computation of net income (loss) per share:
Basic
54,755
56,903
Diluted
54,755
58,001
Use of Non-GAAP Financial Measures
We report our financial results in accordance with accounting
principles generally accepted in the United States (GAAP). However,
to supplement the financial results prepared in accordance with
GAAP, we use non-GAAP financial measures including 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.
EBITDA is defined by us as income before income tax, net other
expense, net interest expense and depreciation and amortization (or
operating income plus depreciation and amortization expense). We
present EBITDA because we believe that 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. EBITDA is used by our management to perform such
evaluation. 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 EBITDA is frequently used by investors, securities
analysts and other interested parties in their evaluation of
companies, many of which present EBITDA when reporting their
results. Other companies may calculate EBITDA differently and it
may not be comparable.
We have also provided organic net sales, a non-GAAP measure that
excludes the impact of businesses purchased or exited in the prior
12 months, because we believe it permits investors to better
understand the performance of our historical business without the
impact of recent acquisitions or dispositions.
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. We have not
provided a reconciliation of non-GAAP guidance measures to the
corresponding GAAP measures on a forward-looking basis due to the
potential significant variability and limited visibility of the
excluded items. We believe that the non-GAAP financial measures
provide useful information to investors and other users of our
financial statements by allowing for greater transparency in the
review of our financial and operating performance. Management also
uses these non-GAAP financial measures in making financial,
operating and planning decisions and in evaluating our performance,
and we believe these measures similarly may be useful to investors
in evaluating our financial and operating performance and the
trends in our business from management's point of view. While our
management believes that non-GAAP measurements 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.
Organic Net Sales Reconciliation
We have provided organic net sales, a non-GAAP measure that
excludes the impact of recent acquisitions and dispositions,
because we believe it permits investors to better understand the
performance of our historical business. We define organic net sales
as net sales from our historical business derived by excluding the
net sales from businesses acquired or exited in the preceding 12
months. After an acquired business has been part of our
consolidated results for 12 months, the change in net sales
thereafter is considered part of the increase or decrease in
organic net sales.
GAAP to Non-GAAP
Reconciliation (in millions) For the Three Months
Ended December 28, 2019
Consolidated
Pet Segment
Garden Segment
Percent change
Percent change
Percent change
Reported net sales - Q1 FY20 (GAAP)
$
482.8
$
354.0
$
128.8
Reported net sales - Q1 FY19 (GAAP)
462.0
340.4
121.6
Increase in net sales
20.8
4.5
%
13.6
4.0
%
7.2
5.9
%
Effect of acquisition and divestitures on
increase in net sales
21.7
9.1
12.6
Increase in organic net sales - Q1
2020
$
(0.9
)
(0.2
)%
$
4.5
1.3
%
$
(5.4
)
(4.4
)%
EBITDA Reconciliation
GAAP to Non-GAAP
Reconciliation (in thousands, except per share amounts)
For the Three Months Ended December 28, 2019
Garden
Pet
Corp
Total
Net income attributable to Central Garden
& Pet
—
—
—
$
(4,417
)
Interest expense, net
—
—
—
8,637
Other income
—
—
—
(305
)
Income tax expense
—
—
—
(1,728
)
Net income attributable to noncontrolling
interest
—
—
—
(122
)
Sum of items below operating income
—
—
—
6,482
Income (loss) from operations
$
(8,368
)
$
30,222
$
(19,789
)
$
2,065
Depreciation & amortization
3,295
8,490
1,355
13,140
EBITDA
$
(5,073
)
$
38,712
$
(18,434
)
$
15,205
EBITDA Reconciliation
GAAP to Non-GAAP
Reconciliation (in thousands, except per share amounts)
For the Three Months Ended December 29, 2018
Garden
Pet
Corp
Total
Net income attributable to Central Garden
& Pet
—
—
—
$
1,803
Interest expense, net
—
—
—
8,077
Other income
—
—
—
192
Income tax expense
—
—
—
273
Net income attributable to noncontrolling
interest
—
—
—
(164
)
Sum of items below operating income
—
—
—
8,378
Income (loss) from operations
$
(4,637
)
$
29,755
$
(14,937
)
$
10,181
Depreciation & amortization
2,826
8,056
1,470
12,352
EBITDA
$
(1,811
)
$
37,811
$
(13,467
)
$
22,533
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200205005750/en/
Denise Hooper Central Garden & Pet Company 925.948.3671
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