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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.19 | 0.41% | 46.69 | 43.89 | 47.64 | 46.85 | 45.5094 | 46.22 | 141,275 | 00:56:26 |
Fiscal 2023 Q3 net sales of $1,023 million Fiscal 2023 Q3 EPS of $1.56; Non-GAAP EPS of $1.75 Raises outlook for fiscal 2023 Non-GAAP EPS to $2.55 or better
Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) (“Central”), a market leader in the Pet and Garden industries, today announced its third quarter fiscal 2023 financial results for the period ended June 24, 2023.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230802323771/en/
“We delivered record operating income and earnings per share in the third quarter while expanding gross margin, growing market share and significantly improving our cash position. We are also pleased with the progress we are making on our cost and simplicity program,” said Tim Cofer, CEO of Central Garden & Pet. “Given our record Q3 performance, coupled with the early visibility we have into the fourth quarter, we are raising our outlook for the full year.”
Fiscal 2023 Third Quarter Financial Results
Net sales increased 1% to $1,023 million from $1,015 million a year ago.
Gross margin expanded by 80 basis points to 31.1% from 30.3% a year ago, and by 160 basis points to 31.9% on a non-GAAP basis. The gross margin expansion was driven by improved pricing, cost management and favorable product mix.
Operating income increased 8% to $123 million from $114 million a year ago, and 20% to $137 million on a non-GAAP basis. Operating margin expanded by 80 basis points to 12.0% from 11.2% in the prior year, and by 220 basis points to 13.4% on a non-GAAP basis. The operating margin expansion was driven by improved gross profit and reduced commercial spend to align with demand.
Net interest expense was $13 million compared to $14 million in the prior year quarter.
The Company's net income increased 10% to $83 million from $75 million a year ago, and 24% to $94 million on a non-GAAP basis. Earnings per share increased $0.17 to $1.56 from $1.39 in the prior year, and $0.36 to $1.75 on a non-GAAP basis. Adjusted EBITDA increased 17.3% to $166 million from $141 million in the prior year.
The Company’s effective tax rate was 24.4% compared to 23.7% in the prior year quarter.
Pet Segment Fiscal 2023 Third Quarter Results
Net sales for the Pet segment of $503 million were essentially flat compared to $505 million in the prior year. Strength in Dog & Cat Treats & Toys as well as Bird was offset by lower sales in Outdoor Cushions and lower demand for durable pet products.
Pet segment operating income was $60 million compared to $63 million a year ago and increased 18% to $74 million on a non-GAAP basis. Operating margin was 11.9% compared to 12.4% in the prior year. On a non-GAAP basis, operating margin increased by 230 basis points to 14.7% driven by improved pricing and cost management. Pet segment adjusted EBITDA was $84 million compared to $72 million a year ago.
Garden Segment Fiscal 2023 Third Quarter Results
Net sales for the Garden segment increased 2% to $520 million from $511 million a year ago. Strength in Live Goods, Packet Seed and Wild Bird was partly offset by lower sales in Distribution and Grass Seed.
Garden segment operating income increased 17% to $88 million from $76 million a year ago, and operating margin increased by 210 basis points to 16.9% from 14.8% in the prior year. The increase in operating margin was mainly driven by improved pricing, favorable product mix and cost management. Garden segment adjusted EBITDA increased 17% to $99 million from $85 million in the prior year quarter.
Additional Information
The Company's cash balance at the end of the quarter was $333 million compared to $196 million a year ago. Cash provided by operations during the quarter was $325 million compared to $190 million a year ago. The increase in cash provided by operations was driven by a reduction in inventory as the Company converted inventory to cash.
Total debt as of June 24, 2023 and June 25, 2022 was $1.2 billion. The Company's leverage ratio, as defined in the Company's credit agreement, at the end of the third quarter was 3.1x compared to 2.9x at the end of the prior year quarter. The Company repurchased approximately 466,011 shares or $16.7 million of its stock during the quarter.
Cost and Simplicity Program
The Company continues to progress its multi-year cost and simplicity program consisting of a pipeline of projects across a number of key areas including procurement, manufacturing, logistics, portfolio management and administrative costs to simplify its business and improve efficiency across the organization. In the third quarter fiscal 2023, as expected, the Company incurred $14 million of one-time charges related to the closure of its pet bedding facility in Texas, the majority of which were non-cash.
Earlier this week, the Company completed the sale of its independent garden center distribution business to reduce complexity and improve margins. The Company will retain its third-party distribution business with its largest three retail partners and select other national accounts. The Company will share more details on its earnings call.
Fiscal 2023 Guidance
Taking the record Q3 performance into account, coupled with the early visibility into the fourth quarter, the Company now expects fiscal 2023 non-GAAP EPS of $2.55 or better. This outlook reflects the macroeconomic uncertainty, cost inflation, evolving consumer behavior and unfavorable retailer inventory dynamics, as well as pricing actions and productivity initiatives across the Company's portfolio. The Company anticipates capital spending significantly below fiscal 2022 levels. Fiscal 2023 will have 53 weeks compared to 52 weeks in fiscal 2022. This outlook excludes the impact of any acquisitions, divestitures or restructuring activities that may occur during fiscal 2023, including any projects under the cost and simplicity program.
Conference Call
The Company'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 third quarter fiscal 2023 financial 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 #13738720.
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 2022 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 over 7,000 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, evolving consumer behavior and unfavorable retailer inventory dynamics, pricing actions, productivity initiatives and reduced capital spending, and earnings guidance for fiscal 2023, 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:
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 June 24, 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
June 24, 2023
June 25, 2022
September 24, 2022
Current assets:
Cash and cash equivalents
$
333,139
$
195,791
$
177,442
Restricted cash
13,542
12,676
14,742
Accounts receivable (less allowances of $29,245, $28,106 and $26,246)
492,850
505,896
376,787
Inventories, net
865,496
882,522
938,000
Prepaid expenses and other
36,655
36,359
46,883
Total current assets
1,741,682
1,633,244
1,553,854
Plant, property and equipment, net
392,332
390,326
396,979
Goodwill
546,436
511,973
546,436
Other intangible assets, net
512,175
490,959
543,210
Operating lease right-of-use assets
172,379
193,627
186,344
Other assets
54,943
125,797
55,179
Total
$
3,419,947
$
3,345,926
$
3,282,002
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
198,406
$
241,093
$
215,681
Accrued expenses
247,517
228,882
201,783
Current lease liabilities
50,209
45,860
48,111
Current portion of long-term debt
255
352
317
Total current liabilities
496,387
516,187
465,892
Long-term debt
1,187,498
1,185,842
1,186,245
Long-term lease liabilities
132,419
155,002
147,724
Deferred income taxes and other long-term obligations
156,537
136,490
147,429
Equity:
Common stock, $0.01 par value: 11,098,584, 11,322,012 and 11,296,351 shares outstanding at June 24, 2023, June 25, 2022 and September 24, 2022
111
113
113
Class A common stock, $0.01 par value: 40,986,336, 41,745,551 and 41,336,223 shares outstanding at June 24, 2023, June 25, 2022 and September 24, 2022
410
417
413
Class B stock, $0.01 par value: 1,602,374, 1,612,374 and 1,612,374 at June 24, 2023, June 25, 2022 and September 24, 2022
16
16
16
Additional paid-in capital
588,731
581,060
582,056
Retained earnings
858,217
771,341
755,253
Accumulated other comprehensive loss
(1,955
)
(1,924
)
(4,145
)
Total Central Garden & Pet Company shareholders’ equity
1,445,530
1,351,023
1,333,706
Noncontrolling interest
1,576
1,382
1,006
Total equity
1,447,106
1,352,405
1,334,712
Total
$
3,419,947
$
3,345,926
$
3,282,002
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
Three Months Ended
Nine Months Ended
June 24, 2023
June 25, 2022
June 24, 2023
June 25, 2022
Net sales
$
1,023,269
$
1,015,378
$
2,559,936
$
2,631,146
Cost of goods sold
705,217
707,752
1,810,547
1,838,532
Gross profit
318,052
307,626
749,389
792,614
Selling, general and administrative expenses
195,222
193,547
548,112
545,476
Operating income
122,830
114,079
201,277
247,138
Interest expense
(14,542
)
(14,422
)
(43,887
)
(43,633
)
Interest income
1,408
87
2,287
188
Other income (expense)
853
(759
)
3,147
(1,337
)
Income before income taxes and noncontrolling interest
110,549
98,985
162,824
202,356
Income tax expense
27,000
23,430
39,446
47,319
Income including noncontrolling interest
83,549
75,555
123,378
155,037
Net income attributable to noncontrolling interest
423
135
570
895
Net income attributable to Central Garden & Pet Company
$
83,126
$
75,420
$
122,808
$
154,142
Net income per share attributable to Central Garden & Pet Company:
Basic
$
1.58
$
1.42
$
2.34
$
2.89
Diluted
$
1.56
$
1.39
$
2.30
$
2.82
Weighted average shares used in the computation of net income per share:
Basic
52,464
53,237
52,462
53,392
Diluted
53,380
54,329
53,466
54,658
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Nine Months Ended
June 24, 2023
June 25, 2022
Cash flows from operating activities:
Net income
$
123,378
$
155,037
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization
65,504
58,333
Amortization of deferred financing costs
2,023
1,982
Non-cash lease expense
38,180
36,042
Stock-based compensation
20,632
18,879
Debt extinguishment costs
—
169
Deferred income taxes
9,125
8,199
Facility closure
13,921
—
Loss (gain) on sale of property and equipment
(557
)
(53
)
Other operating activities
107
7
Change in assets and liabilities:
Accounts receivable
(115,358
)
(121,392
)
Inventories
69,610
(198,360
)
Prepaid expenses and other assets
6,530
1,383
Accounts payable
(12,248
)
(1,679
)
Accrued expenses
44,221
(7,072
)
Other long-term obligations
(55
)
236
Operating lease liabilities
(37,449
)
(34,108
)
Net cash provided (used) by operating activities
227,566
(82,397
)
Cash flows from investing activities:
Additions to plant, property and equipment
(40,850
)
(98,553
)
Investments
(500
)
(2,318
)
Other investing activities
(100
)
40
Net cash used in investing activities
(41,450
)
(100,831
)
Cash flows from financing activities:
Repayments of long-term debt
(223
)
(992
)
Borrowings under revolving line of credit
48,000
—
Repayments under revolving line of credit
(48,000
)
—
Repurchase of common stock, including shares surrendered for tax withholding
(33,409
)
(41,834
)
Payment of contingent consideration liability
(33
)
(196
)
Distribution to noncontrolling interest
—
(806
)
Payment of financing costs
—
(2,410
)
Net cash used by financing activities
(33,665
)
(46,238
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
2,046
(1,589
)
Net increase in cash, cash equivalents and restricted cash
154,497
(231,055
)
Cash, cash equivalents and restricted cash at beginning of period
192,184
439,522
Cash, cash equivalents and restricted cash at end of period
$
346,681
$
208,467
Supplemental information:
Cash paid for interest
$
49,419
$
48,902
Cash paid for taxes
$
5,363
$
31,406
New operating lease right of use assets
$
25,424
$
64,504
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 non-GAAP net income and diluted net income per share, non-GAAP operating income and adjusted EBITDA. Management believes 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.
Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense, depreciation and amortization and stock-based compensation (or operating income plus depreciation and amortization 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 evaluation. 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. 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 variability and limited visibility of 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 measures in making financial, operating and planning decisions and in evaluating our performance, and we believe it 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.
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.
Net Income and Diluted Net Income Per Share Reconciliation
GAAP to Non-GAAP Reconciliation
For the Three Months Ended
GAAP to Non-GAAP Reconciliation
For the Nine Months Ended
June 24, 2023
June 25, 2022
June 24, 2023
June 25, 2022
(in thousands, except per share amounts)
GAAP net income attributable to Central Garden & Pet Company
$
83,126
$
75,420
$
122,808
$
154,142
Facility closure
(1
)
13,921
—
13,921
—
Tax effect of facility closure
(3,373
)
—
(3,373
)
—
Non-GAAP net income attributable to Central Garden & Pet Company
$
93,674
$
75,420
$
133,356
$
154,142
GAAP diluted net income per share
$
1.56
$
1.39
$
2.30
$
2.82
Non-GAAP diluted net income per share
$
1.75
$
1.39
$
2.49
$
2.82
Shares used in GAAP and non-GAAP diluted net income per share calculation
53,380
54,329
53,466
54,658
Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
For Three Months Ended June 24, 2023
For the Nine Months Ended June 24, 2023
GAAP
Facility Closure (1)
Non-GAAP
GAAP
Facility Closure (1)
Non-GAAP
(in thousands)
Net sales
$
1,023,269
$
—
$
1,023,269
$
2,559,936
$
—
$
2,559,936
Cost of goods sold and occupancy
705,217
8,010
697,207
1,810,547
8,010
1,802,537
Gross profit
$
318,052
$
(8,010
)
$
326,062
$
749,389
$
(8,010
)
$
757,399
Selling, general and administrative expenses
195,222
5,911
189,311
548,112
5,911
542,201
Income from operations
$
122,830
$
(13,921
)
$
136,751
$
201,277
$
(13,921
)
$
215,198
Pet Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
For the Three Months Ended
GAAP to Non-GAAP Reconciliation
For the Nine Months Ended
Pet
Pet
June 24, 2023
June 25, 2022
June 24, 2023
June 25, 2022
(in thousands)
GAAP operating income
$
59,969
$
62,616
$
154,779
$
168,512
Facility closure
(1
)
13,921
—
13,921
—
Non-GAAP operating income
$
73,890
$
62,616
$
168,700
$
168,512
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
For the Three Months Ended June 24, 2023
Pet
Garden
Corp
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
83,126
Interest expense, net
—
—
—
13,134
Other income
—
—
—
(853
)
Income tax expense
—
—
—
27,000
Net income attributable to noncontrolling interest
—
—
—
423
Income (loss) from operations
59,969
88,088
(25,227
)
122,830
Depreciation & amortization
10,060
10,823
818
21,701
Noncash stock-based compensation
—
—
7,305
7,305
Facility closure
(1
)
13,921
—
—
13,921
Adjusted EBITDA
$
83,950
$
98,911
$
(17,104
)
$
165,757
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
For the Three Months Ended June 25, 2022
Pet
Garden
Corp
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
75,420
Interest expense, net
—
—
—
14,335
Other expense
—
—
—
759
Income tax expense
—
—
—
23,430
Net income attributable to noncontrolling interest
—
—
—
135
Income (loss) from operations
62,616
75,564
(24,101
)
114,079
Depreciation & amortization
9,791
9,118
975
19,884
Noncash stock-based compensation
—
—
7,400
7,400
Adjusted EBITDA
$
72,407
$
84,682
$
(15,726
)
$
141,363
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
For the Nine Months Ended June 24, 2023
Pet
Garden
Corp
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
122,808
Interest expense, net
—
—
—
41,600
Other income
—
—
—
(3,147
)
Income tax expense
—
—
—
39,446
Net income attributable to noncontrolling interest
—
—
—
570
Income (loss) from operations
154,779
126,887
(80,389
)
201,277
Depreciation & amortization
30,647
32,483
2,374
65,504
Noncash stock-based compensation
—
—
20,632
20,632
Facility closure
(1
)
13,921
—
—
13,921
Adjusted EBITDA
$
199,347
$
159,370
$
(57,383
)
$
301,334
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
For the Nine Months Ended June 25, 2022
Pet
Garden
Corp
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
154,142
Interest expense, net
—
—
—
43,445
Other expense
—
—
—
1,337
Income tax expense
—
—
—
47,319
Net income attributable to noncontrolling interest
—
—
—
895
Income (loss) from operations
168,512
152,132
(73,506
)
247,138
Depreciation & amortization
28,879
26,457
2,997
58,333
Noncash stock-based compensation
—
—
18,879
18,879
Adjusted EBITDA
$
197,391
$
178,589
$
(51,630
)
$
324,350
View source version on businesswire.com: https://www.businesswire.com/news/home/20230802323771/en/
Investor Relations Contact Friederike Edelmann VP, Investor Relations (925) 412-6726 fedelmann@central.com
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