Central Garden & Pet Announces Q1 Fiscal 2025 Financial Results

WALNUT CREEK, Calif.--(BUSINESS WIRE)--Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) (“Central”), a market leader in the pet and garden industries, today announced results for its fiscal 2025 first quarter ended December 28, 2024. “The fiscal year is off to a strong start, driven by increased first quarter shipments, productivity gains and easing inflation, all contributing to growth in both our top and bottom line,” said Niko Lahanas, CEO of Central Garden & Pet. “We are encouraged by our first quarter performance, but recognize this period is typically our smallest quarter and benefited from the favorable timing of shipments and promotional activities. We remain confident in our fiscal year outlook and committed to executing our Central to Home strategy with excellence.” Fiscal 2025 First Quarter Financial Results Net sales increased 3% to $656 million from $635 million a year ago. Gross profit was $196 million compared to $179 million in the prior year quarter. Gross margin improved by 160 basis points to 29.8% driven by productivity gains and moderating inflation. SG&A expense was $168 million compared to $170 million in the prior year. SG&A as a percentage of net sales decreased by 140 basis points to 25.5% reflecting cost discipline across the organization. Operating income grew to $28 million from $8 million a year ago. Operating margin expanded by 300 basis points to 4.3%. Net interest expense was $8 million compared to $10 million a year ago driven by higher interest income. Net income was $14 million compared $0.4 million in the prior year. Earnings per share were $0.21 compared to $0.01. Adjusted EBITDA rose to $55 million from $37 million a year ago. The effective tax rate was 23.5%. Pet Segment Fiscal 2025 First Quarter Results Net sales for the Pet segment increased 4% to $427 million from $409 million in the prior year quarter driven primarily by customers shifting orders into the first quarter and the timing of promotional activities. Pet segment operating income grew to $51 million from $43 million a year ago. Operating margin expanded by 140 basis points to 12.0% from 10.6% in the prior year quarter driven by productivity efforts and moderating inflation. Pet segment adjusted EBITDA rose to $61 million from $54 million a year ago. Garden Segment Fiscal 2025 First Quarter Results Net sales for the Garden segment increased 2% to $229 million from $225 million a year ago driven primarily by customers shifting orders into the first quarter, supported by favorable weather. Garden segment operating income was $2 million compared to an operating loss of $9 million in the prior year quarter. Operating margin improved by 500 basis points to 1.1% from negative 3.9% a year ago, driven by moderating inflation, productivity gains and exiting the low-margin pottery business. Garden segment adjusted EBITDA was $14 million compared to $2 million in the prior year quarter. Liquidity and Debt The cash balance at the end of the quarter was $618 million compared to $341 million a year ago. Cash used by operations during the quarter was $69 million compared to $70 million a year ago. Total debt as of December 28, 2024 and December 30, 2023 was $1.2 billion. The gross leverage ratio, calculated using the definitions for Indebtedness and EBITDA in Central's credit agreement, at the end of the first quarter was 2.9x compared to 3.0x at the end of the prior year quarter. Central repurchased 1.68 million shares or $52 million of its stock during the quarter. As of the end of the fiscal first quarter, $131 million remains available for future stock repurchases. Cost and Simplicity Program Central continues to make significant progress in its multi-year Cost and Simplicity program, which encompasses a comprehensive pipeline of initiatives across procurement, manufacturing, logistics, portfolio management, and administrative costs. These efforts aim to streamline operations, enhance efficiency, and simplify the business across the organization. Fiscal 2025 Guidance Central continues to expect fiscal 2025 non-GAAP EPS to be $2.20 or better. This outlook reflects the expected impact of the recently announced tariffs, deflationary pressure in certain commodity businesses, shifting consumer behavior amid macroeconomic and geopolitical uncertainty, and challenges within the brick-and-mortar retail landscape. This outlook excludes the potential impact of acquisitions, divestitures, or restructuring activities that may occur during fiscal 2025, including initiatives associated with the Cost and Simplicity program. Central anticipates fiscal 2025 capital expenditures to range between $60 million and $70 million. Conference Call Central's senior management will host a conference call today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to review the fiscal 2025 first quarter results and provide a general business update. The call, along with 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) entering confirmation #13750497. 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 45 years. With fiscal 2024 net sales of $3.2 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®, C&S®, Farnam®, Ferry-Morse®, Four Paws®, Kaytee®, Nylabone® and Pennington®, strong manufacturing and distribution capabilities, and a passionate, entrepreneurial growth culture. Central is based in Walnut Creek, California, with 6,450 employees primarily across North America. Visit www.central.com to learn more. “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 productivity initiatives and earnings guidance for fiscal 2025, 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 actual results to differ materially from the forward-looking statements contained in this release including, but not limited to, the following factors: economic uncertainty and other adverse macroeconomic conditions; impacts of tariffs or a trade war; risks associated with international sourcing, including from China; fluctuations in energy prices, fuel and related petrochemical costs; declines in consumer spending and the associated increased inventory risk; seasonality and fluctuations in our operating results and cash flow; adverse weather conditions and climate change; the success of our Central to Home strategy and our Cost and Simplicity program; fluctuations in market prices for seeds and grains and other raw materials, including the impact of significant declines in grass seed market prices on our inventory valuation; risks associated with new product introductions, including the risk that our new products will not produce sufficient sales to recoup our investment; dependence on a small number of customers for a significant portion of our business; consolidation trends in the retail industry; supply shortages in pet birds, small animals and fish; reductions in demand for our product categories; competition in our industries; continuing implementation of an enterprise resource planning information technology system; regulatory issues; potential environmental liabilities; access to and cost of additional capital; the impact of product recalls; risks associated with our acquisition strategy, including our ability to successfully integrate acquisitions and the impact of purchase accounting on our financial results; potential goodwill or intangible asset impairment; the potential for significant deficiencies or material weaknesses in internal control over financial reporting, particularly of acquired companies; our dependence upon our key executives; our ability to recruit and retain members of our management team and employees to support our businesses; potential costs and risks associated with actual or potential cyberattacks; our ability to protect our trademarks and other proprietary rights; litigation and product liability claims; 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; potential dilution from issuance of authorized shares; and the voting power associated with our Class B stock. These risks and others are described in more detail in Central’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024, filed with the Securities and Exchange Commission on November 27, 2024. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise. CENTRAL GARDEN & PET COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts, unaudited) ASSETS December 28, 2024 December 30, 2023 September 28, 2024 Current assets: Cash and cash equivalents $ 618,020 $ 341,419 $ 753,550 Restricted cash 14,649 14,200 14,853 Accounts receivable (less allowances of $22,264, $24,973 and $21,035) 399,443 370,996 326,220 Inventories, net 815,782 948,398 757,943 Prepaid expenses and other 39,919 39,047 34,240 Total current assets 1,887,813 1,714,060 1,886,806 Plant, property and equipment, net 370,673 389,440 379,166 Goodwill 551,361 546,436 551,361 Other intangible assets, net 465,914 489,058 473,280 Operating lease right-of-use assets 195,775 177,499 205,137 Other assets 64,319 105,841 57,689 Total $ 3,535,855 $ 3,422,334 $ 3,553,439 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 221,903 $ 212,193 $ 212,606 Accrued expenses 262,952 230,477 245,226 Current lease liabilities 58,623 51,035 57,313 Current portion of long-term debt 173 466 239 Total current liabilities 543,651 494,171 515,384 Long-term debt 1,190,271 1,189,093 1,189,809 Long-term lease liabilities 163,271 136,708 173,086 Deferred income taxes and other long-term obligations 118,831 149,776 117,615 Equity: Common stock, $0.01 par value: 10,718,231, 11,077,612 and 11,074,620 shares outstanding at December 28, 2024, December 30, 2023 and September 28, 2024 107 111 111 Class A common stock, $0.01 par value: 53,128,604, 54,515,853 and 54,446,194 shares outstanding at December 28, 2024, December 30, 2023 and September 28, 2024 531 545 544 Class B stock, $0.01 par value: 1,602,374 shares outstanding at December 28, 2024, December 30, 2023 and September 28, 2024 16 16 16 Additional paid-in capital 586,777 594,512 598,098 Retained earnings 936,344 858,817 959,511 Accumulated other comprehensive loss (4,661 ) (2,112 ) (2,626 ) Total Central Garden & Pet Company shareholders’ equity 1,519,114 1,451,889 1,555,654 Noncontrolling interest 717 697 1,891 Total equity 1,519,831 1,452,586 1,557,545 Total $ 3,535,855 $ 3,422,334 $ 3,553,439 CENTRAL GARDEN & PET COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts, unaudited) Three Months Ended December 28, 2024 December 30, 2023 Net sales $ 656,436 $ 634,533 Cost of goods sold 460,737 455,688 Gross profit 195,699 178,845 Selling, general and administrative expenses 167,707 170,433 Operating income 27,992 8,412 Interest expense (14,470 ) (14,316 ) Interest income 6,740 4,609 Other income (expense) (1,717 ) 993 Income (Loss) before income taxes and noncontrolling interest 18,545 (302 ) Income tax expense (benefit) 4,364 (869 ) Income including noncontrolling interest 14,181 567 Net income attributable to noncontrolling interest 172 137 Net income attributable to Central Garden & Pet Company $ 14,009 $ 430 Net income per share attributable to Central Garden & Pet Company: Basic $ 0.22 $ 0.01 Diluted $ 0.21 $ 0.01 Weighted average shares used in the computation of net income per share: Basic 64,552 65,415 Diluted 65,449 66,785 CENTRAL GARDEN & PET COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) Three Months Ended December 28, 2024 December 30, 2023 Cash flows from operating activities: Net income $ 14,181 $ 567 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 21,934 22,545 Amortization of deferred financing costs 673 666 Non-cash lease expense 15,131 12,772 Stock-based compensation 5,510 6,021 Deferred income taxes 1,276 1,498 Other operating activities (600 ) (727 ) Change in assets and liabilities (excluding businesses acquired): Accounts receivable (73,439 ) (32,952 ) Inventories (59,356 ) (92,808 ) Prepaid expenses and other assets (7,522 ) (5,275 ) Accounts payable 10,342 19,145 Accrued expenses 17,450 9,533 Other long-term obligations (73 ) 3,310 Operating lease liabilities (14,339 ) (14,079 ) Net cash used by operating activities (68,832 ) (69,784 ) Cash flows from investing activities: Additions to plant, property and equipment (6,100 ) (10,127 ) Payments to acquire companies, net of cash acquired (3,318 ) (59,498 ) Investments — (850 ) Net cash used in investing activities (9,418 ) (70,475 ) Cash flows from financing activities: Repayments of long-term debt (78 ) (85 ) Repurchase of common stock, including shares surrendered for tax withholding (54,022 ) (6,775 ) Payment of contingent consideration liability — (25 ) Distribution to noncontrolling interest (1,346 ) (900 ) Net cash used by financing activities (55,446 ) (7,785 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (2,038 ) 790 Net decrease in cash, cash equivalents and restricted cash (135,734 ) (147,254 ) Cash, cash equivalents and restricted cash at beginning of period 768,403 502,873 Cash, cash equivalents and restricted cash at end of period $ 632,669 $ 355,619 Supplemental information: Cash paid for interest $ 19,903 $ 19,756 Lease liabilities arising from obtaining right-of-use assets $ 4,789 $ 13,170 Use of Non-GAAP Financial Measures We report our financial results in accordance with generally accepted accounting principles ("GAAP"). However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA. Management uses adjusted EBITDA in making financial, operating and planning decisions and in evaluating our performance. Management believes this non-GAAP financial measure 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 this non-GAAP measure is 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). 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 adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. Adjusted EBITDA Reconciliation GAAP to Non-GAAP Reconciliation Three Months Ended December 28, 2024 Pet Garden Corporate Total (in thousands) Net income attributable to Central Garden & Pet Company $ — $ — $ — $ 14,009 Interest expense, net — — — 7,730 Other expense — — — 1,717 Income tax expense — — — 4,364 Net income attributable to noncontrolling interest — — — 172 Income (loss) from operations 51,257 2,423 (25,688 ) 27,992 Depreciation & amortization 10,080 11,131 723 21,934 Noncash stock-based compensation — — 5,510 5,510 Adjusted EBITDA $ 61,337 $ 13,554 $ (19,455 ) $ 55,436 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 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

Central Garden & Pet Announces Q1 Fiscal 2025 Financial Results

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