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Central Garden & Pet Announces Record Q2 Fiscal 2021 Results

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Central Garden & Pet Company (NASDAQ: CENT, CENTA) (“Central”), a market leader in the Garden and Pet industries, today announced financial results for its fiscal 2021 second quarter ended March 27, 2021.

“We delivered the fifth consecutive quarter of record financial results reflecting solid execution, continued strong demand in Pet and Garden and the tireless support of our employees,” said Tim Cofer, CEO of Central Garden & Pet. “We are making further strides against our Central to Home strategy and are pleased with our recent acquisitions. We remain confident about our future and given our strong organic performance in the first half; we are raising our outlook for fiscal 2021.”

Fiscal 2021 Second Quarter Financial Results

Total net sales increased 33% to $935 million compared to $703 million a year ago, driven largely by organic growth in both segments as well as by the recent acquisitions which contributed $76 million to the quarter. Organic sales increased 23%.

Gross margin decreased 40 basis points to 29.1% driven by the impact of initial purchase accounting adjustments related to recent acquisitions, as well as cost inflation in areas such as commodities, labor and freight.

Operating income increased 58% to $105 million from $66 million a year ago. Operating margin increased 180 basis points to 11.2% compared to 9.4% in the prior year quarter, primarily driven by operating efficiencies. EBITDA increased 56% to $123 million from $79 million a year ago.

Net interest expense was $10 million compared to $9 million a year ago, mainly due to higher debt outstanding.

The Company's net income increased 71% to $73 million from $43 million a year ago. Diluted earnings per share for the quarter grew 69% to $1.32 from $0.78 in the prior year quarter, driven by organic strength and $0.07 accretion from recent acquisitions.

Garden Segment Fiscal 2021 Second Quarter Results

Net sales for the Garden segment increased 49% to $443 million driven by organic growth of 23%, with notable strength in distribution, fertilizers and controls, wild bird feed, and grass seed, as well as $76 million contribution from acquisitions.

Garden segment operating income increased 53% to $66 million and operating margin rose 40 basis points to 14.9%. Garden segment EBITDA increased 63% to $75 million from $46 million in the prior year quarter, primarily driven by volume strength and operating leverage as well as contributions from recent acquisitions.

Pet Segment Fiscal 2021 Second Quarter Results

Net sales for the Pet segment increased 21% to $492 million driven by strong growth across the segment, with significant contributions from small animal supplies, distribution, dog and cat as well as outdoor pillows and cushions.

Pet segment operating income increased 43% to $62 million, and operating margin grew 190 basis points to 12.6%. Pet segment EBITDA increased 34.7% to $71 million from $53 million a year ago, largely driven by stronger sales volume and favorable product mix as well as overhead efficiencies.

Additional Information

The Company's cash balance at the end of the quarter was $40 million compared to $332 million a year ago. The Company used approximately $653 million of its cash and additional funds from its ABL to pay for the acquisition of Hopewell Nursery and Green Garden Products. Cash used by operations during the quarter was $84 million compared to cash used by operations of $75 million a year ago. The increase was driven primarily by working capital requirements.

Total debt as of March 27, 2021 was $979 million compared to $694 million at March 28, 2020. The Company's leverage ratio at the end of the second quarter, as defined in the Company's credit agreement, was 2.5x compared to 2.9x at the end of the prior year quarter.

The Company’s effective tax rate was 22.7%, in line with the prior year quarter.

2021 Guidance

Given strong year-to-date results, the Company has updated it's fiscal year outlook and now expects fiscal 2021 GAAP EPS to be at or above $2.25. This guidance compares to the Company's previous guidance of 2021 GAAP EPS of $1.90 or higher. The revised outlook includes the benefit of strong performance in the first half of fiscal 2021, the Company's anticipated investments in capacity expansion, brand building and eCommerce to drive sustainable growth, increasing costs for key commodities, labor and freight, resuming more normal levels of promotional activity, as well as second-half headwinds associated with lapping almost ideal weather for the gardening season and the COVID-19 tailwinds in fiscal 2020. The revised outlook does not include the impact of recent acquisitions, as purchase accounting has not yet been finalized. However, early estimates indicate that the net impact of the acquisitions will be accretive to fiscal 2021 EPS in the range of $0.11 to $0.16.

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 second quarter fiscal 2021 results. The conference call and related materials can be accessed on the Company's website at http://ir.central.com.

Alternatively, to listen to the call by telephone, dial (201) 689-8345 (domestic and international) using confirmation #13717534.

About Central Garden & Pet

Central Garden & Pet (NASDAQ: CENT, CENTA) understands that home is central to life and has proudly nurtured happy and healthy homes for over 40 years. With 2020 net sales of $2.7 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 help 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 Pennington, Nylabone, Kaytee, Amdro and Aqueon, strong manufacturing and distribution capabilities and a passionate, entrepreneurial growth culture. Central Garden & Pet is based in Walnut Creek, California and has over 6,900 employees across North America and Europe. For additional information about Central, please visit the Company’s website at www.central.com.

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 expectations for increased levels of investment to drive capacity expansion, brand building and eCommerce, increases in labor and freight cost as well as key commodities, the accretive expectations for recent acquisitions, in addition to resuming more normal levels of travel and promotional activity and their impact on future growth, and earnings guidance for fiscal 2021, 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:

  • our ability to successfully manage the impact of COVID-19 on our business, including but not limited to, the impact on our workforce, operations, fill rates, supply chain, demand for our products and services, and our financial results and condition;
  • risks associated with our acquisition strategy, including our ability to successfully integrate our recently announced acquisitions and the impact of purchase accounting on our financial results;
  • inflation and other adverse macro-economic conditions and our ability to pass on cost increases;
  • the potential for future reductions in demand for product categories, which benefited from the COVID-19 pandemic;
  • the success of our new Central to Home strategy;
  • seasonality and fluctuations in our operating results and cash flow;
  • fluctuations in market prices for seeds and grains and other raw materials;
  • our inability to pass through cost increases in a timely manner;
  • supply shortages in pet birds, small animals and fish;
  • adverse weather conditions;
  • dependence on a small number of customers for a significant portion of our business;
  • impacts of tariffs or a trade war;
  • consolidation trends in the retail industry;
  • declines in consumer spending during economic downturns;
  • 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;
  • risk associated with international sourcing;
  • access to and cost of additional capital;
  • potential goodwill or intangible asset impairment;
  • our dependence upon our key executives;
  • our inability to protect our trademarks and other proprietary rights;
  • fluctuations in energy prices, fuel and related petrochemical costs;
  • litigation and product liability claims;
  • regulatory issues;
  • the impact of product recalls;
  • potential costs and risks associated with actual or potential cyber attacks;
  • 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 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 March 27, 2021, so all financial results are preliminary and subject to change.

(Tables Follow)

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

March 27, 2021

 

March 28, 2020

 

September 26, 2020

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

39,869

 

 

 

$

331,555

 

 

 

$

652,712

 

 

Restricted cash

12,612

 

 

 

13,021

 

 

 

13,685

 

 

Accounts receivable (less allowances of $29,784, $22,103 and $27,661)

636,466

 

 

 

460,985

 

 

 

391,773

 

 

Inventories, net

672,901

 

 

 

517,207

 

 

 

439,615

 

 

Prepaid expenses and other

45,339

 

 

 

36,160

 

 

 

27,498

 

 

Total current assets

1,407,187

 

 

 

1,358,928

 

 

 

1,525,283

 

 

Plant, property and equipment, net

295,769

 

 

 

241,878

 

 

 

244,667

 

 

Goodwill

289,955

 

 

 

289,854

 

 

 

289,955

 

 

Other intangible assets, net

128,229

 

 

 

141,686

 

 

 

134,924

 

 

Operating lease right-of-use assets

135,552

 

 

 

99,098

 

 

 

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Central Garden and Pet Co

NASDAQ:CENT

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2.93B
57.89M
13.92%
102.07%
1.69%
Dog and Cat Food Manufacturing
Manufacturing
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United States of America
WALNUT CREEK

About CENT

central garden & pet company is a leading innovator, marketer and producer of quality branded products for consumer and professional use in the lawn and garden and pet supplies markets. for years, we have successfully helped consumers beautify their outdoor living spaces and promote healthy interaction with their pets. the foundation of our success is our dedication to innovation, quality and service.