Central Garden & Pet Announces Strong Q1 2021 Results

Rhea-AI Summary

Central Garden & Pet Company (NASDAQ: CENT, CENTA) reported a strong fiscal 2021 Q1, with net sales rising 22.7% to $592.2 million. Gross margin grew 70 basis points to 27.9%, while operating income soared to $27.0 million from $2.1 million in the previous year. The Pet segment's sales increased 19.0%, and the Garden segment saw a significant 34.1% rise. Net income turned positive at $5.6 million, up from a loss of $4.4 million. Cash balance rose 36.4% to $608.3 million, although total debt increased to $789.0 million due to refinancing.

Positive

• Net sales increased 22.7% to $592.2 million.
• Operating income surged to $27.0 million, up from $2.1 million.
• Pet segment sales grew 19.0% to $436.4 million.
• Garden segment sales rose 34.1% to $155.8 million.
• Net income improved to $5.6 million from a loss of $4.4 million.
• Cash balance increased 36.4% to $608.3 million.

Negative

• Net interest expense increased to $20.8 million from $8.6 million.
• Total debt rose to $789.0 million from $693.4 million.

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 first quarter ended December 26, 2020.

“We delivered another quarter of strong financial results reflecting solid execution, robust consumer demand in Pet and Garden and the unwavering dedication of our employees,” said Tim Cofer, CEO of Central Garden & Pet. “I’m pleased with the continued progress against our Central to Home strategy and remain excited about the road ahead. Recent examples of our strategy in action include three acquisitions, which will build scale in our Garden segment, expand into attractive adjacencies and advance our omnichannel and digital capabilities.”

Fiscal 2021 First Quarter Financial Results

Total net sales increased 22.7% to $592.2 million compared to $482.8 million in the first quarter a year ago, driven by organic strength in both segments.

First quarter gross margin increased 70 basis points to 27.9%, driven by favorable mix of product sales and volume-related efficiencies partially offset by continued supply-chain constraints and inflationary pressures.

Operating income increased to $27.0 million from $2.1 million in the first quarter a year ago. Operating margin increased 420 basis points to 4.6% compared to 0.4% in the prior year quarter, driven by improved gross margin as well as operating efficiencies. EBITDA increased 162.8% to $40.0 million from $15.2 million in the first quarter a year ago.

Net interest expense increased to $20.8 million from $8.6 million in the first quarter a year ago, mainly due to incremental interest expense related to recognizing the impacts of the call premium, unamortized debt issuance cost and double interest on the debt retired during the quarter.

The Company's net income increased $10.0 million to $5.6 million from a net loss of $4.4 million in the first quarter a year ago. Diluted earnings per share for the quarter grew $0.18 to $0.10 from $(0.08) in the prior year quarter. This translates to non-GAAP diluted earnings per share of $0.29, up $0.37 from $(0.08) in the quarter a year ago, excluding the incremental interest expense related to debt refinancing and the loss on the sale of the Breeder's Choice business.

Garden Segment Fiscal 2021 First Quarter Results

First quarter net sales for the Garden segment increased 34.1% to $155.8 million, driven by strength across the portfolio, with particularly strong growth in distribution, wild bird feed, grass seed, controls and fertilizers and live plants.

Garden segment operating income increased $11.5 million to $4.7 million from an operating loss of $6.9 million in the prior year quarter, and operating margin rose 890 basis points to 3.0%. Garden segment EBITDA of $7.3 million was up from $(4.2) million in the prior year quarter, primarily driven by volume strength and gross margin improvement coupled with operating leverage.

Pet Segment Fiscal 2021 First Quarter Results

First quarter net sales for the Pet segment increased 19.0% to $436.4 million from $366.6 million in the first quarter a year ago, driven by strong growth across the segment, with notable contributions from dog and cat, distribution and small animal supplies.

Pet segment operating income increased to $43.5 million, up 51.5% compared to the first quarter a year ago, and operating margin rose 220 basis points to 10.0%. Pet segment EBITDA increased to $52.6 million from $37.8 million in the first quarter a year ago, primarily 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 increased 36.4% to $608.3 million compared to $445.8 million in the first quarter a year ago. The Company used approximately $83 million of its cash to pay for the acquisition of DoMyOwn. Cash used by operations during the quarter was $36.1 million compared to $18.0 million in the first quarter a year ago. The increase was driven primarily by an increase in inventory due to the seasonal build in preparation for the lawn and garden season and the overall demand for the Company's products.

Total debt as of December 26, 2020 was $789.0 million compared to $693.4 million at December 28, 2019. The Company successfully refinanced its 2023 senior notes, raising an additional $100 million of debt. The Company's leverage ratio at the end of th

FAQ

What were Central Garden & Pet's financial results for Q1 2021?

Central Garden & Pet reported net sales of $592.2 million for Q1 2021, an increase of 22.7% compared to the previous year.

How did the Garden segment perform in Q1 2021?

The Garden segment's net sales rose 34.1% to $155.8 million, driven by strong growth across various product categories.

What is the diluted earnings per share for Central Garden & Pet in Q1 2021?

The diluted earnings per share for Q1 2021 was $0.10, up from a loss of $(0.08) in the prior year.

How much did Central Garden & Pet's cash balance increase by in Q1 2021?

The cash balance at the end of Q1 2021 increased by 36.4% to $608.3 million.

What factors contributed to the increase in Central Garden & Pet's operating income?

The operating income increased due to improved gross margin and operating efficiencies.