Market Overview

Central Garden & Pet Company Announces Fiscal Second Quarter Revenues and Profits

Share:

Fiscal 2Q 2019 sales increased 9.9% to $673.7 million; Organic
sales up 2.1%

Fiscal 2Q 2019 GAAP diluted EPS decreased to $0.73 vs. $0.86 in
Fiscal 2Q 2018

Central Garden & Pet Company (NASDAQ:CENT) (NASDAQ:CENTA), a leading
innovator, producer and distributor of branded and private label
products for the lawn & garden and pet supplies markets, today announced
financial results for its fiscal 2019 second quarter ended March 30,
2019.

Fiscal 2019 Second Quarter Financial Results

Total net sales increased 9.9% to $673.7 million compared to $613.1
million in the second quarter a year ago, driven in large part by the
Company's three recent acquisitions, Arden Companies, Bell Nursery and
General Pet. Total Company organic sales increased 2.1%, due to strength
in the Garden segment. Branded product sales of $543.2 million increased
9.2%, and sales of other manufacturers' products of $130.5 million
increased 13.0%. Gross margin of 30.6% declined 110 basis points
compared to the second quarter a year ago, due to the inclusion of the
three recent acquisitions. Organic gross margin was relatively flat.

Second Quarter GAAP Operating Income, Net Earnings
and EPS

  • Operating income decreased to $62.2 million from $65.8 million in the
    second quarter a year ago and operating margin decreased 150 basis
    points to 9.2% compared to 10.7%, due to seasonal losses of Bell
    Nursery that were not part of the results in the prior year period.
  • Other income was $0.5 million compared to $1.5 million in the second
    quarter a year ago. The difference was primarily due to the absence of
    two months of income from the Company's minority interest in Arden
    Companies this quarter, compared to a full quarter of Arden income in
    the quarter a year ago. The Arden business is now consolidated in
    Central's Garden segment results, due to the Company's February 2019
    purchase of the remaining interest of 55% in Arden it did not already
    own.
  • Net income of $42.4 million decreased from $45.2 million in the second
    quarter a year ago.
  • Earnings per diluted share decreased to $0.73 in the quarter on a GAAP
    basis, compared to $0.86 on a GAAP basis in the second quarter a year
    ago. The decrease was attributed to the increase in the number of
    shares outstanding compared to a year ago, as well as seasonal losses
    from Bell Nursery that were not part of the results in the prior year
    period.
  • EBITDA for the quarter was $74.0 million versus $76.9 million in the
    second quarter a year ago.

Second Quarter Non-GAAP Operating Income, Net
Earnings and EPS

  • Non-GAAP results for the second quarter of 2019 exclude the non-cash
    impairment of $2.5 million of intangible value associated with the
    Company's live fish business, due to the exit of the category by a
    large retailer, as well as a preliminary non-cash $3.2 million gain
    from the write-up of the Company's previous 45% ownership of Arden
    Companies. Both the adjustments are reflected in operating income.
  • Operating income was $61.5 million, down 6.5% from the second quarter
    a year ago. Non-GAAP operating margin of 9.1% decreased 160 basis
    compared to 10.7% in the same quarter a year ago. Excluding the impact
    of the Company's three recent acquisitions, operating income and
    margin were up and flat respectively.
  • Net income was $41.9 million a decrease from $45.2 million in the
    second quarter a year ago, due in large part to the decline in other
    income.
  • Earnings per diluted share decreased to $0.72 in the quarter on a
    non-GAAP basis, compared to $0.86, in the second quarter a year ago,
    due primarily to an increase in shares outstanding as well as seasonal
    losses of Bell Nursery that were not part of the results in the prior
    year period.
  • EBITDA for the quarter was $73.4 million versus $76.9 million in the
    second quarter a year ago.

"Overall, we showed good progress in the quarter, and had a favorable
start to the Garden season. We knew coming into the quarter that it
would be a challenging one, as we were comparing against strong 6%
organic revenue growth in the second quarter a year ago, and were
impacted by the short-term earnings drag of the Company's recent
acquisitions," said George Roeth, President & CEO of Central Garden &
Pet. "While these acquisitions have negatively impacted our short-term
results due to timing and seasonality factors, as well as accounting
rules, we remain focused on acquiring companies with strong cash flows,
attractive margins and superior returns over the long term." Roeth
continued, "Importantly, this quarter we saw a return not only to
organic sales growth but also to growth in organic EBITDA, when
excluding the non-cash intangible asset impairment charge. We expect
margins to expand and profitability to significantly improve in the back
half of the year behind the full impact of price increases and more
favorable cost comparisons."

Pet Segment Fiscal 2019 Second Quarter Results

Second quarter net sales for the Pet segment increased 5.1% to $338.2
million, from the same period a year ago, driven by the acquisition of
General Pet. Organic Pet sales were up 0.1%, with strength in the dog
and cat, aquatics and live fish businesses, offset by a decline in
animal health sales, particularly the Professional business, due in part
to unfavorable weather and inventory challenges. The Pet segment's
second quarter branded product sales were $260.0 million, up 1.0%
compared to a year ago, and sales of other manufacturers' products were
$78.2 million, an increase of 21.6%, driven by the impact of General Pet.

The Pet segment's operating income decreased 17.7% compared to the
second quarter a year ago to $27.0 million; however, the decline was
9.9% to $29.5 million excluding the $2.5 million impairment charge for
the live fish business. Pet operating margin decreased to 8.0%, a
decline of 220 basis points compared to the second quarter a year ago,
due in part to the lower margins associated with the General Pet
acquisition and the live fish impairment charge. Pet's organic operating
margin, excluding the impairment charge, also declined, primarily due to
weakness in the Animal Health business, where lower volumes negatively
impacted margins and mix, more than offsetting the positive impact of
pricing actions across the Pet segment. Improved results are expected in
the back half of the year due to expectations of a more normal weather
environment, improved mix, and the full benefit of pricing. Pet EBITDA,
excluding the live fish impairment charge of $2.5 million, was $37.6
million down from $39.7 million in the second quarter a year ago.

Garden Segment Fiscal 2019 Second Quarter
Results

Second quarter net sales for the Garden segment rose 15.1% to $335.5
million, driven largely by the Bell and Arden acquisitions. Organic
growth increased 4.4% over the period, driven by strength in the grass
seed and wild bird feed categories as well as a shift in timing of
orders from a key customer. It is important to note that Garden
consumption at key customers was up mid-single-digits fiscal
year-to-date through March 30th, driven by more favorable weather, new
products and increased distribution of existing products. The Garden
segment's branded product sales were $283.2 million in the quarter, up
17.9% compared to the second quarter a year ago. Sales of other
manufacturers' products increased 2.1% to $52.3 million.

The Garden segment's operating income increased 5.1% to $53.4 million in
the quarter compared to an operating gain of $50.7 million in the second
quarter of fiscal 2018. Operating margin decreased 150 basis points to
15.9%, due to the inclusion of Bell Nursery and Arden Companies, which
were not in results a year ago. The second quarter is very unprofitable
for Bell, which is extremely seasonal and typically only earns a profit
in the Company's third fiscal quarter. Arden's operating margin, while
favorably impacted by a $3.2 million gain from the write-up of the
Company's previous 45% ownership of Arden Companies, was also negatively
impacted by purchase price accounting, which resulted in inventory
acquired being written up to fair market value at the time Central
acquired the business. Absent the impact of the two acquisitions, Garden
operating margin increased. Garden EBITDA, excluding the $3.2 million
gain from the Arden write-up, was $52.5 million compared to $52.5
million in the second quarter a year ago, and increased excluding the
two acquisitions.

Year-to-date 2019 Summary:

  • Year-to-date net sales of $1,135.7 million increased 7.6% compared
    with $1,055.1 million a year ago, due in large part to acquisitions.
    Organic sales increased 0.5%.
  • Gross margin decreased 130 basis points to 29.6% compared to 30.9% in
    the first six months of fiscal 2018, principally due to acquisitions
    and to the lack of price increases in the first fiscal quarter.

Year-to-date 2019 GAAP Operating Income, Net
Earnings and EPS

For the six months ended March 30, 2019, the Company reported:

  • Operating income of $72.3 million decreased 18.1% or $16.0 million
    from $88.3 million in the first six months of 2018, due in large part
    to the three recent acquisitions and lack of pricing increases in the
    first fiscal quarter.
  • Operating margin of 6.4% decreased 200 basis points from 8.4% in the
    first six months of fiscal 2018.
  • Net income decreased 38.2% to $44.2 million from $71.5 million a year
    ago.
  • Diluted earnings per share of $0.76 declined 44.1% from $1.36 per
    share a year ago, due largely to the impact of the acquisitions, a
    higher tax rate, and a greater number of shares outstanding.

Year-to-date 2019 Non-GAAP Operating Income, Net
Earnings and EPS

For the six months ended March 30, 2019, the Company reported:

  • 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 Company's second fiscal quarter this year.
  • Non-GAAP results for the fiscal 2018 year-to-date period exclude $16.3
    million for the tax impact of the revaluation of the Company's
    deferred tax accounts.
  • Operating income of $71.7 million decreased 18.8% or $16.6 million
    from $88.3 million in the first six months of 2018, due in large part
    to the three recent acquisitions and the lack of pricing increases in
    the first fiscal quarter.
  • Operating margin of 6.3% decreased 210 basis points from 8.4% in the
    first six months of fiscal 2018, primarily due to the impact of
    acquisitions.
  • Net income declined 20.8% to $43.7 million from $55.1 million a year
    ago.
  • Diluted earnings per share of $0.76 declined 44.1% from $1.36 per
    share a year ago, due largely to the impact of the acquisitions, and a
    greater number of shares outstanding. Non-GAAP earnings per diluted
    share decreased 28.6% to $0.75 from $1.05 in the first six months of
    2018.

Additional Information

The Company's cash balance at the end of the quarter increased to $329.7
million compared to $132.3 million in the second quarter a year ago,
reflecting the proceeds of the Company's equity offering in August 2018.
Total debt at March 30, 2019 was $697.8 million compared to $691.1
million at March 31, 2018. Net interest expense of $8.4 million for the
second quarter decreased $1.5 million from $9.9 million in the
prior-year period, mainly due to interest earned on the Company's higher
cash balance during the quarter. The Company's leverage ratio at the end
of the second quarter, as defined in the Company's credit agreement, was
3.2x compared to 3.2x at the end of the prior year quarter.

The Company's effective tax rate for the second quarter of 2019 was
21.3%, compared with 20.3% for the second quarter of 2018.

2019 Guidance

The Company is maintaining its fiscal 2019 guidance of earnings per
fully-diluted share of $1.80 or higher for the year.

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 results. The
conference call will be accessible via the internet through Central's
website, http://ir.central.com.

Alternatively, to listen to the call by telephone, dial (201) 689-8345
(domestic and international) using confirmation #13689204. A replay of
the call will be available for three days by dialing (201) 612-7415 and
entering confirmation #13689204.

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 approximately 5,400 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.

"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 future financial results,
earnings guidance for fiscal 2019 expected cost and mix improvements in
the second half of fiscal 2019 and new product offerings, 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:

  • seasonality and fluctuations in the Company's operating results and
    cash flow;
  • fluctuations in market prices for seeds and grains and other raw
    materials and the Company's inability to pass through cost increases
    in a timely manner;
  • adverse weather conditions;
  • our dependence upon our key executives, including our success in
    replacing our current CEO who has announced his intention to retire at
    the end of the current fiscal year;
  • potential acquisitions;
  • the impact of new accounting regulations and the U.S. Tax Cuts and
    Jobs Act on the Company's tax rate;
  • dependence on a small number of customers for a significant portion of
    our business;
  • the impacts of recent tariffs or a potential trade war;
  • risk associated with litigation arising from our business;
  • uncertainty about new product innovations and marketing programs; and
  • competition in our industries.

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.

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

     
ASSETS March 30, 2019 March 31, 2018 September 29, 2018
Current assets:
Cash and cash equivalents $ 329,724 $ 132,265 $ 482,106
Restricted cash 16,115 13,948 10,899
Accounts receivable (less allowance for doubtful accounts of
$16,818, $20,976 and $24,125)
456,129 395,151 275,908
Inventories, net 517,158 465,522 427,823
Prepaid expenses and other 33,161   26,677   20,562  
Total current assets 1,352,287 1,033,563 1,217,298
 
Land, buildings, improvements and equipment—net 217,538 210,563 217,647
Goodwill 281,177 268,243 281,177
Other intangible assets—net 142,798 141,530 152,265
Other assets 52,340   50,064   38,822  
Total $ 2,046,140   $ 1,703,963   $ 1,907,209  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 157,596 $ 150,975 $ 110,259
Accrued expenses 136,413 116,414 102,583
Current portion of long-term debt 5,119   20   122  
Total current liabilities 299,128 267,409 212,964
 
Long-term debt 692,646 691,084 692,031
Deferred taxes and other long-term obligations 55,064 40,368 49,380
 
Equity:
 
Common stock, $0.01 par value: 12,145,135 shares outstanding at
March 30, 2019, March 31, 2018 and September 29, 2018
121 121 121
 
Class A common stock, $0.01 par value: 44,386,792, 38,171,595 and
43,953,265 shares outstanding at March 30, 2019, March 31, 2018 and
September 29, 2018
444 382 439
 
Class B stock, $0.01 par value: 1,652,262 shares outstanding 16 16 16
Additional paid-in capital 592,331 393,852 590,168
Accumulated earnings 407,117 310,810 362,923
Accumulated other comprehensive loss (1,280 ) (673 ) (1,218 )
Total Central Garden & Pet Company shareholders' equity 998,749 704,508 952,449
Noncontrolling interest 553   594   385  
Total equity 999,302   705,102   952,834  
Total $ 2,046,140   $ 1,703,963   $ 1,907,209  

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

   
Three Months Ended Six Months Ended
March 30, 2019   March 31, 2018 March 30, 2019   March 31, 2018
Net sales $ 673,701 $ 613,094 $ 1,135,691 $ 1,055,105
Cost of goods sold and occupancy 467,650   418,637  

 

799,458  

 

728,811  
Gross profit 206,051 194,457

 

336,233

 

326,294
Selling, general and administrative expenses 143,898   128,671  

 

263,899  

 

237,987  
 
Operating income 62,153 65,786

 

72,334

 

88,307
Interest expense (10,640 ) (10,575 )

 

(21,254 )

 

(17,980 )
Interest income 2,255 693 4,792 880
Other income (expense) 500   1,505  

 

308  

 

(1,584 )
Income before income taxes and noncontrolling interest 54,268 57,409

 

56,180

 

69,623
Income tax expense (benefit) 11,546   11,643  

 

11,819  

 

(2,593 )
Income including noncontrolling interest 42,722 45,766

 

44,361

 

72,216
Net income attributable to noncontrolling interest 331   532  

 

167  

 

735  
 
Net income attributable to Central Garden & Pet Company $ 42,391   $ 45,234   $ 44,194   $ 71,481  
 
Net income per share attributable to Central Garden & Pet Company:
Basic $ 0.74   $ 0.89   $ 0.78   $ 1.41  
Diluted $ 0.73   $ 0.86   $ 0.76   $ 1.36  
 
Weighted average shares used in the computation of net income per
share:
Basic 57,050 50,871 56,976 50,816
Diluted 58,026 52,658 58,013 52,693

Use of Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally
accepted accounting principles (GAAP). However, to supplement the
financial results prepared in accordance with GAAP, we use non-GAAP
financial measures including non-GAAP net sales and operating income on
a consolidated and segment basis, and non-GAAP net income and diluted
net income per share. Management believes these non-GAAP financial
measures that exclude the impact of specific items (described below) 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.

EBITDA is defined by us as income before income tax, net other expense,
net interest expense and depreciation and amortization. We present
EBITDA because we believe that 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. EBITDA is
used by our management to perform such evaluation. EBITDA should not be
considered in isolation or as substitutes for cash flow from operations,
income from operations or other income statement measure prepared in
accordance with GAAP. We believe that EBITDA is frequently used by
investors, securities analysts and other interested parties in their
evaluation of companies, many of which present EBITDA when reporting
their results. Other companies may calculate EBITDA differently, it may
not be comparable.

We have also provided organic net sales, a non-GAAP measure that
excludes the impact of businesses purchased or exited in the prior 12
months, because we believe it permits investors to better understand the
performance of our historical business without the impact of recent
acquisitions or dispositions.

The reconciliations of these non-GAAP measures to the most directly
comparable financial measures calculated and presented in accordance
with GAAP are shown in the tables below. We have not provided a
reconciliation of non-GAAP guidance measures to the corresponding GAAP
measures on a forward-looking basis due to the potential significant
variability and limited visibility of the excluded items. 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 these non-GAAP financial measures in
making financial, operating and planning decisions and in evaluating our
performance, and we believe these measures similarly 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.

Non-GAAP financial measures reflect adjustments based on the following
items:

  • Gains from the fair value remeasurement of previously held investment
    interests: we have excluded the impact of the fair value remeasurement
    of a previously held investment interest as it represents an
    infrequent transaction that occurs in limited circumstances that
    impacts the comparability between operating periods. We believe the
    adjustment of these gains supplements the GAAP information with a
    measure that may be used to assess the sustainability of our operating
    performance.
  • Asset impairment charges: we have excluded the impact of asset
    impairments on intangible assets as such non-cash amounts are
    inconsistent in amount and frequency. We believe that the adjustment
    of these charges supplements the GAAP information with a measure that
    can be used to assess the sustainability of our operating performance.
  • The U.S. government enacted comprehensive tax legislation commonly
    referred to as the Tax Cuts and Job Act (the "Tax Reform Act") in
    December 2017. We have excluded the transitional impact of the Tax
    Reform Act as the remeasurement of our deferred tax assets and
    liabilities does not reflect the ongoing impact of the lower U.S.
    statutory rate on our current year or future year earnings.

From time to time in the future, there may be other items that we may
exclude if we believe that doing so is consistent with the goal of
providing useful information to investors and management.

The non-GAAP adjustments reflect the following:

(1)   During the second quarter of fiscal 2019, we recorded a preliminary,
pending the finalization of the related purchase accounting,
non-cash $3.2 million gain in our Garden segment from the fair value
remeasurement of our previously held 45% interest in Arden upon our
acquisition of the remaining 55% interest. The gain was recorded as
part of selling, general and administrative costs in the condensed
consolidated statements of operations.
(2) During the second quarter of fiscal 2019, we recognized a non-cash
impairment charge in our Pet segment of $2.5 million related to the
impairment of intangible assets caused by a retail customer exiting
the live fish business. The adjustment was recorded as part of
selling, general and administrative costs.
(3) Transitional impact of U.S. Tax Reform: As a result of the Tax
Reform Act, the Company recorded a provisional tax benefit of $16.3
million in the quarter ended December 30, 2017, due to the
remeasurement of its deferred tax assets and liabilities. We have
excluded only this transitional impact and have not included in the
adjustment the ongoing impact of the lower U.S. statutory rate on
our current or future year earnings.

Operating Income Reconciliation    

GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Three Months Ended

  GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Six Months Ended
Consolidated Consolidated
March 30, 2019   March 31, 2018 March 30, 2019   March 31, 2018
GAAP operating income $ 62,153 $ 65,786 $ 72,334 $ 88,307
Previously held investment interest fair value remeasurement

(1)

(3,215 ) (3,215 )
Intangible asset impairment

(2)

2,540     2,540  
Non-GAAP operating income $ 61,478   $ 65,786   $ 71,659   $ 88,307
 
Pet Segment Operating Income Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Three Months Ended
GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Six Months Ended
Pet Pet
March 30, 2019   March 31, 2018 March 30, 2019   March 31, 2018
GAAP operating income $ 26,984 $ 32,784 $ 56,739 $ 68,960
Intangible asset impairment

(2)

2,540       2,540    
Non-GAAP operating income $ 29,524     $ 32,784   $ 59,279     $ 68,960
 
Garden Segment Operating Income Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Three Months Ended
GAAP to Non-GAAP Reconciliation
(in thousands)
For
the Six Months Ended
Garden Garden
March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018
GAAP operating income $ 53,355 $ 50,746 $ 48,718 $ 53,046
Previously held investment interest fair value remeasurement

(1)

(3,215 )   (3,215 )
Non-GAAP operating income $ 50,140   $ 50,746   $ 45,503   $ 53,046

GAAP to Non-GAAP Reconciliation
(in thousands,
except per share amounts)

For the Three Months Ended

Net Income and Diluted Net Income Per Share Reconciliation March 30, 2019   March 31, 2018
GAAP net income attributable to Central Garden & Pet $ 42,391 $ 45,234
Previously held investment interest fair value remeasurement

(1)

(3,215 )
Intangible asset impairment

(2)

2,540
Tax effect of remeasurement and impairment $ 144   $
Non-GAAP net income attributable to Central Garden & Pet $ 41,860   $ 28,891
GAAP diluted net income per share $ 0.73 $ 0.86
Non-GAAP diluted net income per share $ 0.72 $ 0.86
 
Shares used in GAAP and non-GAAP diluted net earnings per share
calculation
58,026 52,658

  GAAP to Non-GAAP Reconciliation
(in thousands, except
per share amounts)

For the Six Months Ended
Net Income and Diluted Net Income Per Share Reconciliation March 30, 2019   March 31, 2018
GAAP net income attributable to Central Garden & Pet $ 44,194 $ 71,481
Previously held investment interest fair value remeasurement

(1)

(3,215 )
Intangible asset impairment

(2)

2,540
Tax effect of remeasurement and impairment 142
Tax effect of revaluation of deferred tax amounts

(3)

  16,343
Non-GAAP net income attributable to Central Garden & Pet $ 43,661   $ 55,138
GAAP diluted net income per share $ 0.76 $ 1.36
Non-GAAP diluted net income per share $ 0.75 $ 1.05
 
Shares used in GAAP and non-GAAP diluted net earnings per share
calculation
58,013 52,693

Organic Net Sales Reconciliation

We have provided organic net sales, a non-GAAP measure that excludes the
impact of recent acquisitions and dispositions, because we believe it
permits investors to better understand the performance of our historical
business. We define organic net sales as net sales from our historical
business derived by excluding the net sales from businesses acquired or
exited in the preceding 12 months. After an acquired business has been
part of our consolidated results for 12 months, the change in net sales
thereafter is considered part of the increase or decrease in organic net
sales.

 

GAAP to Non-GAAP Reconciliation
(in millions)
For
the Three Months Ended March 30, 2019

Consolidated  

Pet Segment

  Garden Segment
   

Percent
change

   

Percent
change

   

Percent
change

     
Reported net sales - Q2 FY19 (GAAP) $ 673.7 $ 338.2 $ 335.5
Reported net sales - Q2 FY18 (GAAP) 613.1   321.7   291.4  
Increase in net sales 60.6 9.9% 16.5 5.1% 44.1 15.1%
Effect of acquisition and divestitures on increase in net sales 47.6   16.3   31.3  
Increase in organic net sales - Q2 2019 $ 13.0   2.1% $ 0.2   0.1% $ 12.8   4.4%

  GAAP to Non-GAAP Reconciliation
(in millions)
For
the Six Months Ended March 30, 2019
Consolidated   Pet Segment   Garden Segment
   

Percent
change

   

Percent
change

   

Percent
change

Reported net sales - Q2 FY19 YTD (GAAP) $ 1,135.7   $ 678.6 $ 457.1    
Reported net sales - Q2 FY18 YTD (GAAP) 1,055.1   646.7   408.4  
Increase in net sales 80.6 7.6% 31.9 4.9% 48.7 11.9%
Effect of acquisition and divestitures on increase in net sales 74.9 33.5   41.4  
Increase (decrease) in organic net sales - Q2 2019 YTD $ 5.7   0.5% $ (1.6 ) (0.2)% $ 7.3   1.8%
EBITDA Reconciliation   GAAP to Non-GAAP Reconciliation
(in thousands, except
per share amounts)

For the Three Months Ended March 30,
2019
Garden   Pet   Corp   Total
Net income attributable to Central Garden & Pet $ 42,391
Interest expense, net 8,385
Other income (500 )
Income tax expense 11,546
Net income attributable to noncontrolling interest       331  
Sum of items below operating income       19,762  
Income (loss) from operations $ 53,355 $ 26,984 $ (18,186 ) $ 62,153
Depreciation & amortization 2,312   8,039   1,526   11,877  
EBITDA $ 55,667 $ 35,023 $ (16,660 ) $ 74,030
 
EBITDA Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands, except
per share amounts)

For the Three Months Ended March 31,
2018
Garden Pet Corp Total
Net income attributable to Central Garden & Pet $ 45,234
Interest expense, net 9,882
Other income (1,505 )
Income tax expense 11,643
Net income attributable to noncontrolling interest 532  
Sum of items below operating income 20,552  
Income (loss) from operations $ 50,746 $ 32,784 $ (17,744 ) $ 65,786
Depreciation & amortization 1,707   6,944   2,471   11,122  
EBITDA $ 52,453 $ 39,728 $ (15,273 ) $ 76,908

EBITDA Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands, except
per share amounts)

For the Six Months Ended March 30,
2019
Garden Pet Corp   Total
Net income attributable to Central Garden & Pet $ 44,194
Interest expense, net 16,462
Other income (308 )
Income tax benefit 11,819
Net income attributable to noncontrolling interest       167  
Sum of items below operating income       28,140  
Income (loss) from operations $ 48,718 $ 56,739 $ (33,123 ) $ 72,334
Depreciation & amortization 5,138   16,095   2,996   24,229  
EBITDA $ 53,856 $ 72,834 $ (30,127 ) $ 96,563
 
EBITDA Reconciliation GAAP to Non-GAAP Reconciliation
(in thousands, except
per share amounts)

For the Six Months Ended March 31,
2018
Garden Pet Corp Total
Net income attributable to Central Garden & Pet $ 71,481
Interest expense, net 17,100
Other income (expense) 1,584
Income tax benefit (2,593 )
Net income attributable to noncontrolling interest       735  
Sum of items below operating income       16,826  
Income (loss) from operations $ 53,046 $ 68,960 $ (33,699 ) $ 88,307
Depreciation & amortization 3,276   14,089   4,920   22,285  
EBITDA $ 56,322 $ 83,049 $ (28,779 ) $ 110,592

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