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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Central Garden and Pet Co | NASDAQ:CENT | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.37 | -0.95% | 38.75 | 37.37 | 39.68 | 39.80 | 38.71 | 39.03 | 80,409 | 21:58:11 |
From Feb 2024 to Feb 2025
Fiscal 2024 Q2 net sales of $900 million compared to $909 million a year ago
Fiscal 2024 Q2 GAAP EPS of $0.93 vs. $0.72 a year ago, Non-GAAP EPS of $0.99
Maintains outlook for fiscal 2024 non-GAAP EPS of $2.00 or better ($2.50 or better before the February 2024 stock dividend)
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 second quarter ended March 30, 2024.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240508389740/en/
“We delivered a solid second quarter with earnings per share well ahead of prior year. We are particularly pleased with the progress on our Cost and Simplicity program,” said Beth Springer, Interim CEO of Central Garden & Pet. “With a large part of the garden season still in front of us and some continuing external challenges, we are maintaining our outlook for the fiscal year. Importantly, our teams remain focused on executing our long-term strategy.”
Fiscal 2024 Second Quarter Financial Results
Net sales were $900 million compared to $909 million a year ago, a decrease of 1%. Organic net sales also decreased 1%.
Gross profit was $279 million compared to $260 million in the prior year. Non-GAAP gross profit was $281 million. Gross margin increased 240 basis points to 31.0% compared to 28.6%. Non-GAAP gross margin was 31.3%. Both segments benefited from prior year projects made under Central's Cost and Simplicity program including the sale of the independent garden channel distribution business and exit of some private label pet bed product lines, as well as moderating inflation.
Operating income was $93 million compared to $78 million a year ago, an increase of 20%. On a non-GAAP basis, operating income was $99 million. Operating margin increased 180 basis points to 10.4% compared to 8.6%. On a non-GAAP basis, operating margin was 11.0%. The increase was driven by improved gross margin.
Net interest expense was $11 million compared to $15 million a year ago driven by higher interest income from higher cash balances and higher interest rates.
Net income was $62 million compared to $48 million a year ago, an increase of 29%. On a non-GAAP basis, net income was $66 million. Earnings per share were $0.93 compared to $0.72, an increase of $0.21. On a non-GAAP basis, earnings per share were $0.99. Adjusted EBITDA was $124 million compared to $107 million a year ago.
The effective tax rate was 23.4% compared to 23.9% in the prior year.
Pet Segment Fiscal 2024 Second Quarter Results
Net sales for the Pet segment were $480 million compared to $475 million in the prior year, an increase of 1% driven by growth in Consumables businesses and the recent TDBBS acquisition. Organic net sales decreased 3% excluding the impact of TDBBS.
Pet segment operating income was $63 million compared to $55 million a year ago, an increase of 13%. Operating margin increased 140 basis points to 13.0% compared to 11.6% driven by improved gross margin. Pet segment adjusted EBITDA was $74 million compared to $66 million in the prior year.
Garden Segment Fiscal 2024 Second Quarter Results
Net sales for the Garden segment were $420 million compared to $434 million a year ago, a decrease of 3%. Organic net sales increased 2% excluding the impact of the sale of the independent garden channel distribution business. Growth in Live Plants, Grass Seed and Controls & Fertilizer more than offset lower sales in Wild Bird.
Garden segment operating income was $57 million compared to $50 million in the prior year, an increase of 15%. On a non-GAAP basis, operating income was $62 million. Operating margin increased 220 basis point to 13.6% compared to 11.4%. On a non-GAAP basis, operating margin was 14.8%. The increase was driven by improved gross margin. Garden segment adjusted EBITDA was $73 million compared to $60 million a year ago.
Liquidity and Debt
The cash balance at the end of the quarter was $301 million compared to $61 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 $25 million compared to $34 million a year ago.
Total debt as of March 30, 2024, and March 25, 2023 was $1.2 billion. The leverage ratio, as defined in Central's credit agreement, at the end of the second quarter was 2.9x compared to 3.3x at the end of the prior year quarter.
Cost and Simplicity Program
Central continues to advance its multi-year Cost and Simplicity program consisting of a pipeline of projects across procurement, manufacturing, logistics, portfolio management and administrative costs to simplify its business and improve efficiency across the organization.
In the second quarter of fiscal 2024, Central initiated the closure of a manufacturing facility in Chico, CA, and began the Southeast consolidation of four distribution locations into one modern facility. As a result, Central incurred $5.3 million of one-time costs, including $2.5 million in cost of goods sold and $2.8 million in selling, general and administrative costs, the majority of which were non-cash.
Fiscal 2024 Guidance
Central continues to expect fiscal 2024 non-GAAP EPS to be $2.00 or better ($2.50 or better before the February 2024 stock dividend).
This outlook reflects uncertain consumer demand and retailer dynamics and an environment of macroeconomic and geopolitical volatility. It includes modest carryover 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 and the recent TDBBS acquisition. Central expects fiscal 2024 capital spending to be approximately $70 million.
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 second 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 #13744528.
About Central Garden & Pet
Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) understands 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, with 6,700 employees primarily across North America. 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 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:
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 March 30, 2024, 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)
March 30, 2024
March 25, 2023
September 30, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
301,332
$
60,607
$
488,730
Restricted cash
14,197
13,475
14,143
Accounts receivable (less allowance for credit losses and customer allowances of $27,677, $28,283 and $25,797)
578,237
564,874
332,890
Inventories, net
914,352
966,900
838,188
Prepaid expenses and other
42,501
48,019
33,172
Total current assets
1,850,619
1,653,875
1,707,123
Plant, property and equipment, net
387,203
395,788
391,768
Goodwill
546,436
546,436
546,436
Other intangible assets, net
480,910
525,301
497,228
Operating lease right-of-use assets
170,849
174,435
173,540
Other assets
104,002
54,963
62,553
Total
$
3,540,019
$
3,350,798
$
3,378,648
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
237,310
$
225,311
$
190,902
Accrued expenses
267,813
201,286
216,241
Current lease liabilities
51,045
49,082
50,597
Current portion of long-term debt
322
270
247
Total current liabilities
556,490
475,949
457,987
Long-term debt
1,188,955
1,212,053
1,187,956
Long-term lease liabilities
134,723
135,695
135,621
Deferred income taxes and other long-term obligations
147,683
154,854
144,271
Equity:
Common stock, $0.01 par value: 11,077,612, 11,236,635 and 11,077,612 shares outstanding at March 30, 2024, March 25, 2023 and September 30, 2023
111
112
111
Class A common stock, $0.01 par value: 54,659,683, 54,822,098 and 54,472,902 shares outstanding at March 30, 2024, March 25, 2023 and September 30, 2023
547
548
544
Class B stock, $0.01 par value: 1,602,374 shares outstanding at March 30, 2024, March 25, 2023 and September 30, 2023
16
16
16
Additional paid-in capital
592,136
587,243
594,282
Retained earnings
920,803
786,776
859,370
Accumulated other comprehensive loss
(2,825
)
(3,601
)
(2,970
)
Total Central Garden & Pet Company shareholders’ equity
1,510,788
1,371,094
1,451,353
Noncontrolling interest
1,379
1,153
1,460
Total equity
1,512,167
1,372,247
1,452,813
Total
$
3,540,018
$
3,350,798
$
3,378,648
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
Three Months Ended
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
Net sales
$
900,090
$
909,004
$
1,534,623
$
1,536,667
Cost of goods sold
621,210
649,366
1,076,898
1,105,330
Gross profit
278,880
259,638
457,725
431,337
Selling, general and administrative expenses
185,433
181,597
355,866
352,890
Operating income
93,447
78,041
101,859
78,447
Interest expense
(14,376
)
(14,876
)
(28,692
)
(29,345
)
Interest income
2,903
186
7,512
879
Other (expense) income
(171
)
595
822
2,294
Income before income taxes and noncontrolling interest
81,803
63,946
81,501
52,275
Income tax expense
19,134
15,268
18,265
12,446
Income including noncontrolling interest
62,669
48,678
63,236
39,829
Net income attributable to noncontrolling interest
682
563
819
147
Net income attributable to Central Garden & Pet Company
$
61,987
$
48,115
$
62,417
$
39,682
Net income per share attributable to Central Garden & Pet Company:
Basic
$
0.94
$
0.73
$
0.95
$
0.61
Diluted
$
0.93
$
0.72
$
0.93
$
0.59
Weighted average shares used in the computation of net income per share:
Basic
65,638
65,554
65,526
65,576
Diluted
66,831
66,918
66,815
66,900
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Six Months Ended
March 30, 2024
March 25, 2023
Cash flows from operating activities:
Net income
$
63,236
$
39,829
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization
45,357
43,801
Amortization of deferred financing costs
1,340
1,349
Non-cash lease expense
25,753
25,369
Stock-based compensation
8,927
13,327
Deferred income taxes
2,673
7,486
Other operating activities
1,811
136
Change in assets and liabilities (excluding businesses acquired):
Accounts receivable
(240,408
)
(187,745
)
Inventories
(59,263
)
(27,152
)
Prepaid expenses and other assets
(7,492
)
(3,868
)
Accounts payable
41,475
15,421
Accrued expenses
46,785
(462
)
Other long-term obligations
673
(21
)
Operating lease liabilities
(25,169
)
(24,542
)
Net cash used by operating activities
(94,302
)
(97,072
)
Cash flows from investing activities:
Additions to plant, property and equipment
(19,478
)
(30,228
)
Payments to acquire companies, net of cash acquired
(59,818
)
—
Investments
(850
)
(500
)
Other investing activities
(140
)
(100
)
Net cash used in investing activities
(80,286
)
(30,828
)
Cash flows from financing activities:
Repayments of long-term debt
(159
)
(182
)
Borrowings under revolving line of credit
—
48,000
Repayments under revolving line of credit
—
(23,000
)
Repurchase of common stock, including shares surrendered for tax withholding
(12,055
)
(16,165
)
Payment of contingent consideration liability
(57
)
(12
)
Distribution to noncontrolling interest
(900
)
—
Net cash (used) provided by financing activities
(13,171
)
8,641
Effect of exchange rate changes on cash, cash equivalents and restricted cash
415
1,157
Net decrease in cash, cash equivalents and restricted cash
(187,344
)
(118,102
)
Cash, cash equivalents and restricted cash at beginning of period
502,873
192,184
Cash, cash equivalents and restricted cash at end of period
$
315,529
$
74,082
Supplemental information:
Cash paid for interest
$
28,695
$
29,343
Cash paid for income taxes
$
13,775
$
1,889
New operating lease right of use assets
$
24,652
$
13,776
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, adjusted EBITDA and organic net sales. 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 one-time 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:
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 information to investors and management.
(1)
During the second quarter of fiscal 2024, we recognized incremental expense of $5.3 million in the consolidated statement of operations, from the closure of a manufacturing facility in Chico, California and the consolidation of our Southeast distribution network.
Net Income and Diluted Net Income Per Share Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended
GAAP to Non-GAAP Reconciliation
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
(in thousands, except per share amounts)
GAAP net income attributable to Central Garden & Pet Company
$
61,987
$
48,115
$
62,417
$
39,682
Facility closures
(1)
5,270
—
5,270
—
Tax effect of facility closures
(1,233
)
—
(1,233
)
—
Non-GAAP net income attributable to Central Garden & Pet Company
$
66,024
$
48,115
$
66,454
$
39,682
GAAP diluted net income per share
$
0.93
$
0.72
$
0.93
$
0.59
Non-GAAP diluted net income per share
$
0.99
$
0.72
$
0.99
$
0.59
Shares used in GAAP and non-GAAP diluted net earnings per share calculation
66,831
66,918
66,815
66,900
Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
GAAP
Facility closures (1)
Non-GAAP
GAAP
Facility closures (1)
Non-GAAP
(in thousands)
Net sales
$
900,090
$
—
$
900,090
$
1,534,623
$
—
$
1,534,623
Cost of goods sold and occupancy
621,210
2,527
618,683
1,076,898
2,527
1,074,371
Gross profit
$
278,880
$
(2,527
)
$
281,407
$
457,725
$
(2,527
)
$
460,252
Selling, general and administrative expenses
185,433
2,743
182,690
355,866
2,743
353,123
Income from operations
$
93,447
$
(5,270
)
$
98,717
$
101,859
$
(5,270
)
$
107,129
Garden Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended
GAAP to Non-GAAP Reconciliation
Six Months Ended
March 30, 2024
March 25, 2023
March 30, 2024
March 25, 2023
(in thousands)
(in thousands)
GAAP operating income
$
57,066
$
49,619
$
48,180
$
38,799
Facility closures
(1)
5,270
—
5,270
—
Non-GAAP operating income
$
62,336
$
49,619
$
53,450
$
38,799
GAAP operating margin
13.6
%
11.4
%
7.5
%
6.0
%
Non-GAAP operating margin
14.8
%
11.4
%
8.3
%
6.0
%
Organic Net Sales Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
(in millions)
Q2 FY 24
$
900.1
$
19.3
$
880.8
$
1,534.6
$
32.5
$
1,502.1
Q2 FY 23
909.0
21.9
887.1
1,536.7
31.5
1,505.2
$ decrease
$
(8.9
)
$
(6.3
)
$
(2.1
)
$
(3.1
)
% decrease
(1.0
)%
(0.7
)%
(0.1
)%
(0.2
)%
Organic Pet Segment Net Sales Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
(in millions)
Q2 FY 24
$
480.2
$
19.3
$
460.9
$
889.4
$
32.5
$
856.9
Q2 FY 23
475.2
—
475.2
891.0
—
891.0
$ increase (decrease)
$
5.0
$
(14.3
)
$
(1.6
)
$
(34.1
)
% increase (decrease)
1.1
%
(3.0
)%
(0.2
)%
(3.8
)%
Organic Garden Segment Net Sales Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
Net sales (GAAP)
Effect of acquisitions & divestitures on net sales
Net sales organic
(in millions)
Q2 FY 24
$
419.9
$
—
$
419.9
$
645.2
$
—
$
645.2
Q2 FY 23
433.8
21.9
411.9
645.7
31.5
614.2
$ increase (decrease)
$
(13.9
)
$
8.0
$
(0.5
)
$
31.0
% increase (decrease)
(3.2
)%
1.9
%
(0.1
)%
5.0
%
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
61,987
Interest expense, net
—
—
—
11,473
Other expense
—
—
—
171
Income tax expense
—
—
—
19,134
Net income attributable to noncontrolling interest
—
—
—
682
Income (loss) from operations
$
62,659
$
57,066
$
(26,278
)
$
93,447
Depreciation & amortization
11,124
11,014
674
22,812
Noncash stock-based compensation
—
—
2,907
2,907
Facility closures
(1)
—
5,270
—
5,270
Adjusted EBITDA
$
73,783
$
73,350
$
(22,697
)
$
124,436
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 25, 2023
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
48,115
Interest expense, net
—
—
—
14,690
Other income
—
—
—
(595
)
Income tax expense
—
—
—
15,268
Net income attributable to noncontrolling interest
—
—
—
563
Income (loss) from operations
$
55,255
$
49,619
$
(26,833
)
$
78,041
Depreciation & amortization
10,474
10,818
817
22,109
Noncash stock-based compensation
—
—
6,750
6,750
Adjusted EBITDA
$
65,729
$
60,437
$
(19,266
)
$
106,900
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Six Months Ended March 30, 2024
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
62,417
Interest expense, net
—
—
—
21,180
Other income
—
—
—
(822
)
Income tax expense
—
—
—
18,265
Net income attributable to noncontrolling interest
—
—
—
819
Income (loss) from operations
$
106,047
$
48,180
$
(52,368
)
$
101,859
Depreciation & amortization
21,922
22,020
1,415
45,357
Noncash stock-based compensation
—
—
8,927
8,927
Facility closures
(1)
—
5,270
—
5,270
Adjusted EBITDA
$
127,969
$
75,470
$
(42,026
)
$
161,413
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Six Months Ended March 25, 2023
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
39,682
Interest expense, net
—
—
—
28,466
Other income
—
—
—
(2,294
)
Income tax expense
—
—
—
12,446
Net income attributable to noncontrolling interest
—
—
—
147
Income (loss) from operations
$
94,810
$
38,799
$
(55,162
)
$
78,447
Depreciation & amortization
20,586
21,660
1,555
43,801
Noncash stock-based compensation
—
—
13,327
13,327
Adjusted EBITDA
$
115,396
$
60,459
$
(40,280
)
$
135,575
View source version on businesswire.com: https://www.businesswire.com/news/home/20240508389740/en/
Investor Relations Contact Friederike Edelmann VP, Investor Relations & Corporate Sustainability (925) 412-6726 fedelmann@central.com
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