Central Garden & Pet Announces Q3 2020 Results
Central Garden & Pet Company (“Central Garden & Pet” and the “Company”), a leading innovator, producer and distributor of branded and private label products for the lawn & garden and pet supplies markets, announced record financial results for its fiscal 2020 third quarter ended June 27, 2020.
“Thanks to the hard work and dedication of our employees and our relentless focus on meeting the needs of our customers and consumers, we are proud to report that Central Garden & Pet delivered the strongest quarter in the Company’s history. I am very pleased with how we continue to navigate the challenging external landscape, while prioritizing the health and safety of our people and executing against our evolving strategy and goals” said Tim Cofer, CEO of Central Garden & Pet.
Cofer continued, “We will be holding a virtual Investor Day in conjunction with the announcement of our year end and fourth quarter results. Attendees can expect to hear more about our Vision2025 strategy, engage with our top leaders and learn about how Central Garden & Pet is poised for growth in the future.”
Fiscal 2020 Third Quarter Financial Results
Total net sales increased 18.0% to $833.5 million compared to $706.6 million in the third quarter a year ago, principally driven by organic strength in both the Garden and Pet segments as well as the inorganic contribution of the Company’s C&S acquisition. Total Company organic sales increased 16.5% for the quarter.
Third quarter gross margin increased 40 basis points to 31.4%, due to a favorable mix of product sales and pricing. Operating income increased to $104.6 million from $68.9 million in the third quarter a year ago. Operating margin increased 290 basis points to 12.6% compared to 9.7%, due to gross margin gains, improved overhead leverage, as well as pandemic-related reductions in promotional activity.
Other expense was $3.5 million compared to other income of $0.2 million in the third quarter a year ago. The difference was primarily due to a non-cash impairment charge of $3.6 million related to the Company’s investment in two joint ventures impacted by the COVID-19 global pandemic.
The Company’s net income was $68.8 million for the quarter compared to $46.2 million in the third quarter a year ago. Diluted earnings per share for the quarter was $1.27 compared to $0.80 in the prior year quarter. EBITDA for the quarter was $117.9 million versus $82.0 million in the third quarter a year ago.
Garden Segment Fiscal 2020 Third Quarter Results
Third quarter net sales for the Garden segment rose 17.9% to $420.2 million, driven by broad-based strength across the portfolio, including gains in garden distribution, controls and fertilizers, wild bird feed, and grass seed. Organic sales also rose 17.9% over the prior year period.
The Garden segment’s operating income increased to $77.8 million in the quarter from $53.1 million in the third quarter of fiscal 2019, and operating margin rose 360 basis points to 18.5%. Garden EBITDA of $81.3 million was up from $56.6 million in the third quarter of fiscal 2019, primarily due to stronger sales volume coupled with reduced administrative spending.
Pet Segment Fiscal 2020 Third Quarter Results
Third quarter net sales for the Pet segment rose 18.0% to $413.3 million compared to the same period a year ago, aided by the Company’s C&S acquisition. Organic Pet sales increased by 15.0%, with notable strength in pet distribution, dog treats and chews, animal health, and small animal food and supplies. These gains were partially offset by a decline in live fish sales due to a major retailer exiting the category during fiscal 2019 and COVID-19 related live animal shipment and supply limitations.
The Pet segment’s operating income increased to $50.8 million, up 44.8% compared to the third quarter of fiscal 2019, and operating margin rose 230 basis points to 12.3%. Pet’s organic operating margin improved 220 basis points to 12.2%. Pet EBITDA of $59.1 million increased from $43.1 million in the third quarter a year ago, primarily driven by volume strength, favorable mix, and overhead efficiencies.
Fiscal Year-to-date 2020 Financial Results
Year-to-date net sales of $2,019.5 million increased 9.6% compared to $1,842.3 million a year ago. Organic sales increased 6.4%, driven by strength in both segments with the most significant contributions coming from distribution, dog treats and chews, wild bird feed, and controls and fertilizers. These gains were partially offset by lower year-to-date sales of pet beds, live fish, and grass seed as well as the impact of our exit of the fashion decor pottery product line. Gross margin decreased 50 basis points to 29.7% compared to 30.2% in the first nine months of fiscal 2019, principally due to unfavorable mix of product sales and the impact of lower volumes in certain businesses.
For the nine months ended June 27, 2020, the Company reported operating income of $172.8 million, an increase of 22.4% from $141.2 million in the first nine months of 2019. Operating margin of 8.6% increased 90 basis points from 7.7% driven by efficiencies in selling, general and administrative expense partially offset by gross margin pressure.
Net income increased 18.5% to $107.1 million from $90.3 million a year ago and diluted earnings per share of $1.95 increased 25.0% from $1.56 per share a year ago. Year-to-date EBITDA was $212.4 million versus $178.5 million a year ago.
Non-GAAP results for fiscal 2020 exclude a non-cash impairment of $3.6 million for two private company investments. The non-GAAP results for the 2019 fiscal year-to-date period exclude the non-cash impairment of $2.5 million of intangible value associated with the Company’s live fish business, and a $3.2 million gain from the write-up of the Company’s Arden acquisition, both of which occurred in the second fiscal quarter of the prior year.
The Company’s cash balance at the end of the quarter increased to $495.3 million compared to $445.6 million in the third quarter a year ago. Cash provided by operations during the quarter was $181.6 million compared to $172.1 million a year ago due primarily to increased EBITDA partially offset by changes in working capital largely related to strong demand trends in the current year quarter (receivables, payables and liabilities were up while inventory was down). Total debt at June 27, 2020 was $694.0 million compared to $693.1 million at June 29, 2019. Net interest expense of $11.5 million for the third quarter increased $3.0 from $8.5 million in the prior-year period, mainly due to lower interest income resulting from lower market interest rates. The Company’s leverage ratio at the end of the third quarter, as defined in the Company’s credit agreement, was 2.4x compared to 3.0x at the end of the prior year quarter.
The Company’s effective tax rate for the third quarter of 2020 was 22.6%, compared with 23.5% for the third quarter of 2019.
During the third quarter, the Company repurchased approximately 194,000 shares, or $5.1 million, of its common stock. As of the end of the quarter, the Company had $100 million available under the Board’s previously authorized share repurchase program and an additional 600,000 shares available under the Board’s equity dilution authorization.
For the full third quarter results, click here.
About Central Garden & Pet
Central Garden & Pet Company is a leading innovator, producer and distributor of branded and private label products for the lawn & garden and pet supplies markets. Committed to new product innovation, our products are sold to specialty independent and mass retailers. Participating categories in Lawn & Garden include: Grass seed and the brands PENNINGTON®, and THE REBELS®; wild bird feed and the brand PENNINGTON®; weed and insect control and the brands AMDRO®, SEVIN®, and OVER-N-OUT®; fertilizer and the brands PENNINGTON® and IRONITE®; live plants from BELL NURSERY; outdoor cushions and pillows from ARDEN COMPANIES; and decorative outdoor patio products under the PENNINGTON® brand. We also provide a host of other regional and application-specific garden brands and supplies. Participating categories in Pet include: Animal health and the brands ADAMS™, COMFORT ZONE®, FARNAM®, HORSE HEALTH™ and VITAFLEX®; aquatics and reptile and the brands AQUEON®, CORALIFE®, SEGREST™ and ZILLA®; bird & small animal and the brands KAYTEE®, Forti-Diet® and CRITTER TRAIL®; and dog & cat and the brands TFH™, NYLABONE®, FOUR PAWS®, IMS®, CADET®, DMC™, K&H Pet Products™, PINNACLE® and AVODERM®. We also provide a host of other application-specific pet brands and supplies. Central Garden & Pet Company is based in Walnut Creek, California, and has over 6,000 employees, primarily in North America. For additional information on Central Garden & Pet Company, including access to the Company’s SEC filings, please visit the Company’s website at www.central.com.
Denise Hooper – Media Contact – (925) 948-3671
Source: Central Garden & Pet Company