Central Garden & Pet Announces Q1 Fiscal 2023 Financial Results
Central Garden & Pet Company (NASDAQ: CENTA) reported fiscal 2023 Q1 net sales of $628 million, a decline of 5% from $661 million year-over-year. The company incurred a net loss of $8 million or $0.16 per share, compared to a net income of $9 million last year. The Garden segment faced significant challenges, with a 6% drop in sales. Operating income was just $0.4 million, down from $26 million a year prior. Despite these issues, Central maintains its fiscal 2023 EPS guidance of $2.60 to $2.80, supported by anticipated pricing actions and productivity initiatives.
- Maintains fiscal 2023 EPS guidance of $2.60 to $2.80.
- Initiatives planned to mitigate inflation impact.
- Net sales declined by 5% year-over-year.
- Net loss of $8 million compared to $9 million income last year.
- Operating income fell to $0.4 million from $26 million last year.
- Garden segment operating loss of $11 million, down from income of $6 million.
Fiscal 2023 Q1 net sales of
Fiscal 2023 Q1 loss per share of
Maintains outlook for fiscal 2023 EPS of
“We delivered first quarter results in line with our guidance which anticipated near-term challenges including the residual impact from last year's poor garden season, higher retailer inventories, softer foot traffic at garden retailers, and broadly higher input costs,” said
Fiscal 2023 First Quarter Financial Results
Net sales were
Gross margin was
Operating income was
Net interest expense of
The Company's net loss was
The Company’s effective tax rate was
Pet Segment Fiscal 2023 First Quarter Results
Net sales for the Pet segment were
Pet segment operating income was
Garden Segment Fiscal 2023 First Quarter Results
Net sales for the Garden segment were
Garden segment operating loss was
Additional Information
The Company's cash balance at the end of the quarter was
Total debt as of
Fiscal 2023 Guidance
The Company continues to expect fiscal 2023 EPS to be
Conference Call
The Company's senior management will hold a conference call today at
Alternatively, to listen to the call by telephone, dial (201) 689-8345 (domestic and international) using confirmation #13734666.
About
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 further cost inflation, evolving consumer behavior and unfavorable retailer dynamics, anticipated 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:
-
high inflation, rising interest rates, a potential recession and other adverse macro-economic conditions, including any impact that could result if the
U.S. government were to default on its debt obligations; - fluctuations in market prices for seeds and grains and other raw materials;
- our inability to pass through cost increases in a timely manner;
- fluctuations in energy prices, fuel and related petrochemical costs;
- declines in consumer spending and increased inventory risk during economic downturns;
- our ability to successfully manage the continuing 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;
- the potential for future reductions in demand for product categories that benefited from the COVID-19 pandemic, including the potential for reduced orders as retailers work through excess inventory;
- adverse weather conditions;
- the success of our Central to Home strategy;
- risks associated with our acquisition strategy, including our ability to successfully integrate acquisitions and the impact of purchase accounting on our financial results;
- potential restructuring activities to improve long-term profitability;
- supply chain delays and disruptions resulting in lost sales, reduced fill rates and service levels and delays in expanding capacity and automating processes;
- seasonality and fluctuations in our operating results and cash flow;
- supply shortages in pet birds, small animals and fish;
- dependence on a small number of customers for a significant portion of our business;
- consolidation trends in the retail industry;
- 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;
- impacts of tariffs or a trade war;
- access to and cost of additional capital;
- potential goodwill or intangible asset impairment;
- our dependence upon our key executives;
- our ability to recruit and retain new members of our management team to support our growing businesses and to hire and retain employees;
- our inability to protect our trademarks and other proprietary rights;
- 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
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts, unaudited) |
||||||||||||
ASSETS |
|
|
|
|
|
|||||||
Current assets: |
|
|
|
|
|
|||||||
Cash and cash equivalents |
$ |
87,800 |
|
|
$ |
296,038 |
|
|
$ |
177,442 |
|
|
Restricted cash |
|
14,745 |
|
|
|
12,913 |
|
|
|
14,742 |
|
|
Accounts receivable (less allowances of |
|
329,129 |
|
|
|
343,659 |
|
|
|
376,787 |
|
|
Inventories, net |
|
1,024,359 |
|
|
|
844,899 |
|
|
|
938,000 |
|
|
Prepaid expenses and other |
|
56,590 |
|
|
|
34,213 |
|
|
|
46,883 |
|
|
Total current assets |
|
1,512,623 |
|
|
|
1,531,722 |
|
|
|
1,553,854 |
|
|
Plant, property and equipment, net |
|
396,675 |
|
|
|
340,133 |
|
|
|
396,979 |
|
|
|
|
546,436 |
|
|
|
369,391 |
|
|
|
546,436 |
|
|
Other intangible assets, net |
|
534,207 |
|
|
|
130,190 |
|
|
|
543,210 |
|
|
Operating lease right-of-use assets |
|
184,351 |
|
|
|
169,709 |
|
|
|
186,344 |
|
|
Other assets |
|
54,777 |
|
|
|
576,896 |
|
|
|
55,179 |
|
|
Total |
$ |
3,229,069 |
|
|
$ |
3,118,041 |
|
|
$ |
3,282,002 |
|
|
|
|
|
|
|
|
|||||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|||||||
Current liabilities: |
|
|
|
|
|
|||||||
Accounts payable |
$ |
194,159 |
|
|
$ |
244,826 |
|
|
$ |
215,681 |
|
|
Accrued expenses |
|
179,231 |
|
|
|
225,062 |
|
|
|
201,783 |
|
|
Current lease liabilities |
|
49,353 |
|
|
|
43,051 |
|
|
|
48,111 |
|
|
Current portion of long-term debt |
|
296 |
|
|
|
411 |
|
|
|
317 |
|
|
Total current liabilities |
|
423,039 |
|
|
|
513,350 |
|
|
|
465,892 |
|
|
|
|
|
|
|
|
|||||||
Long-term debt |
|
1,186,649 |
|
|
|
1,185,057 |
|
|
|
1,186,245 |
|
|
Long-term lease liabilities |
|
145,261 |
|
|
|
132,174 |
|
|
|
147,724 |
|
|
Deferred income taxes and other long-term obligations |
|
150,676 |
|
|
|
58,560 |
|
|
|
147,429 |
|
|
|
|
|
|
|
|
|||||||
Equity: |
|
|
|
|
|
|||||||
Common stock, |
|
113 |
|
|
|
113 |
|
|
|
113 |
|
|
Class A common stock, |
|
412 |
|
|
|
422 |
|
|
|
413 |
|
|
Class B stock, |
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
Additional paid-in capital |
|
585,127 |
|
|
|
578,917 |
|
|
|
582,056 |
|
|
Retained earnings |
|
740,549 |
|
|
|
650,032 |
|
|
|
755,253 |
|
|
Accumulated other comprehensive loss |
|
(3,363 |
) |
|
|
(1,273 |
) |
|
|
(4,145 |
) |
|
|
|
1,322,854 |
|
|
|
1,228,227 |
|
|
|
1,333,706 |
|
|
Noncontrolling interest |
|
590 |
|
|
|
673 |
|
|
|
1,006 |
|
|
Total equity |
|
1,323,444 |
|
|
|
1,228,900 |
|
|
|
1,334,712 |
|
|
Total |
$ |
3,229,069 |
|
|
$ |
3,118,041 |
|
|
$ |
3,282,002 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts, unaudited) |
||||||||
|
Three Months Ended |
|||||||
|
|
|
|
|||||
Net sales |
$ |
627,663 |
|
|
$ |
661,398 |
|
|
Cost of goods sold |
|
455,964 |
|
|
|
463,202 |
|
|
Gross profit |
|
171,699 |
|
|
|
198,196 |
|
|
Selling, general and administrative expenses |
|
171,293 |
|
|
|
171,982 |
|
|
Operating income |
|
406 |
|
|
|
26,214 |
|
|
Interest expense |
|
(14,469 |
) |
|
|
(14,484 |
) |
|
Interest income |
|
693 |
|
|
|
76 |
|
|
Other income (expense) |
|
1,699 |
|
|
|
(209 |
) |
|
Income (loss) before income taxes and noncontrolling interest |
|
(11,671 |
) |
|
|
11,597 |
|
|
Income tax (benefit) expense |
|
(2,822 |
) |
|
|
2,401 |
|
|
Income (loss) including noncontrolling interest |
|
(8,849 |
) |
|
|
9,196 |
|
|
Net income (loss) attributable to noncontrolling interest |
|
(416 |
) |
|
|
187 |
|
|
Net income (loss) attributable to |
$ |
(8,433 |
) |
|
$ |
9,009 |
|
|
Net income (loss) per share attributable to |
|
|
|
|||||
Basic |
$ |
(0.16 |
) |
|
$ |
0.17 |
|
|
Diluted |
$ |
(0.16 |
) |
|
$ |
0.16 |
|
|
Weighted average shares used in the computation of net income (loss) per share: |
|
|
|
|||||
Basic |
|
52,478 |
|
|
|
53,491 |
|
|
Diluted |
|
52,478 |
|
|
|
54,909 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) |
||||||||
|
Three Months Ended |
|||||||
|
|
|
|
|||||
Cash flows from operating activities: |
|
|
|
|||||
Net income (loss) |
$ |
(8,849 |
) |
|
$ |
9,196 |
|
|
Adjustments to reconcile net income (loss) to net cash used by operating activities: |
|
|
|
|||||
Depreciation and amortization |
|
21,692 |
|
|
|
20,202 |
|
|
Amortization of deferred financing costs |
|
675 |
|
|
|
640 |
|
|
Non-cash lease expense |
|
12,738 |
|
|
|
11,405 |
|
|
Stock-based compensation |
|
6,577 |
|
|
|
5,187 |
|
|
Debt extinguishment costs |
|
— |
|
|
|
169 |
|
|
Deferred income taxes |
|
3,260 |
|
|
|
2,737 |
|
|
Other operating activities |
|
(35 |
) |
|
|
(70 |
) |
|
Change in assets and liabilities (excluding businesses acquired): |
|
|
|
|||||
Accounts receivable |
|
48,062 |
|
|
|
41,508 |
|
|
Inventories |
|
(84,689 |
) |
|
|
(159,932 |
) |
|
Prepaid expenses and other assets |
|
(11,620 |
) |
|
|
(3,635 |
) |
|
Accounts payable |
|
(16,107 |
) |
|
|
1,150 |
|
|
Accrued expenses |
|
(23,049 |
) |
|
|
(9,790 |
) |
|
Other long-term obligations |
|
(5 |
) |
|
|
(53 |
) |
|
Operating lease liabilities |
|
(11,952 |
) |
|
|
(11,172 |
) |
|
Net cash used by operating activities |
|
(63,302 |
) |
|
|
(92,458 |
) |
|
Cash flows from investing activities: |
|
|
|
|||||
Additions to plant, property and equipment |
|
(17,698 |
) |
|
|
(24,210 |
) |
|
Investments |
|
(250 |
) |
|
|
(1,918 |
) |
|
Net cash used in investing activities |
|
(17,948 |
) |
|
|
(26,128 |
) |
|
Cash flows from financing activities: |
|
|
|
|||||
Repayments of long-term debt |
|
(88 |
) |
|
|
(767 |
) |
|
Repurchase of common stock, including shares surrendered for tax withholding |
|
(9,341 |
) |
|
|
(7,775 |
) |
|
Payment of contingent consideration liability |
|
(7 |
) |
|
|
(89 |
) |
|
Distribution to noncontrolling interest |
|
— |
|
|
|
(806 |
) |
|
Payment of financing costs |
|
— |
|
|
|
(2,153 |
) |
|
Net cash used by financing activities |
|
(9,436 |
) |
|
|
(11,590 |
) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
1,047 |
|
|
|
(395 |
) |
|
Net decrease in cash, cash equivalents and restricted cash |
|
(89,639 |
) |
|
|
(130,571 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
192,184 |
|
|
|
439,522 |
|
|
Cash, cash equivalents and restricted cash at end of period |
$ |
102,545 |
|
|
$ |
308,951 |
|
|
Supplemental information: |
|
|
|
|||||
Cash paid for interest |
$ |
19,907 |
|
|
$ |
19,750 |
|
|
New operating lease right of use assets |
$ |
11,022 |
|
|
$ |
15,616 |
|
Use of Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles generally accepted in
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). 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 adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. 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 adjusted EBITDA 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.
Adjusted EBITDA Reconciliation |
|
GAAP to Non-GAAP Reconciliation
For the Three Months Ended |
|||||||||||||
|
|
Pet |
|
Garden |
|
Corp |
|
Total |
|||||||
|
|
(in thousands) |
|||||||||||||
Net loss attributable to |
|
$ |
— |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(8,433 |
) |
Interest expense, net |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
13,776 |
|
Other income |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
(1,699 |
) |
Income tax benefit |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
(2,822 |
) |
Net loss attributable to noncontrolling interest |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
(416 |
) |
Sum of items below operating income |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
8,839 |
|
Income (loss) from operations |
|
|
39,555 |
|
|
(10,820 |
) |
|
|
(28,329 |
) |
|
|
406 |
|
Depreciation & amortization |
|
|
10,112 |
|
|
10,842 |
|
|
|
738 |
|
|
|
21,692 |
|
Noncash stock-based compensation |
|
|
— |
|
|
— |
|
|
|
6,577 |
|
|
|
6,577 |
|
Adjusted EBITDA |
|
$ |
49,667 |
|
$ |
22 |
|
|
$ |
(21,014 |
) |
|
$ |
28,675 |
|
Adjusted EBITDA Reconciliation |
|
GAAP to Non-GAAP Reconciliation
For the Three Months Ended |
|||||||||||
|
|
Pet |
|
Garden |
|
Corp |
|
Total |
|||||
|
|
(in thousands) |
|||||||||||
Net income attributable to |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
9,009 |
Interest expense, net |
|
|
— |
|
|
— |
|
|
— |
|
|
|
14,408 |
Other expense |
|
|
— |
|
|
— |
|
|
— |
|
|
|
209 |
Income tax expense |
|
|
— |
|
|
— |
|
|
— |
|
|
|
2,401 |
Net income attributable to noncontrolling interest |
|
|
— |
|
|
— |
|
|
— |
|
|
|
187 |
Sum of items below operating income |
|
|
— |
|
|
— |
|
|
— |
|
|
|
17,205 |
Income (loss) from operations |
|
|
45,251 |
|
|
6,057 |
|
|
(25,094 |
) |
|
|
26,214 |
Depreciation & amortization |
|
|
9,549 |
|
|
9,620 |
|
|
1,033 |
|
|
|
20,202 |
Noncash stock-based compensation |
|
|
|
|
|
|
5,187 |
|
|
|
5,187 |
||
Adjusted EBITDA |
|
$ |
54,800 |
|
$ |
15,677 |
|
$ |
(18,874 |
) |
|
$ |
51,603 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230131005457/en/
Investor Relations Contact
VP, Investor Relations
(925) 412-6726
fedelmann@central.com
Source:
FAQ
What were Central Garden & Pet's fiscal 2023 Q1 net sales?
What was the loss per share for CENTA in Q1 2023?
What is the fiscal 2023 EPS guidance for Central Garden & Pet?
How did the Garden segment perform in fiscal Q1 2023?