CENT Central Garden and Pet Co

Fiscal 2023 net sales of $3.3 billion

Fiscal 2023 GAAP EPS of $2.35, non-GAAP EPS of $2.59

Expects fiscal 2024 non-GAAP EPS of $2.50 or better

Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) ("Central"), a market leader in the Pet and Garden industries, today announced results for its fourth quarter and fiscal year ended September 30, 2023.

"We are proud of what Team Central was able to achieve in a challenging environment characterized by evolving consumer behavior, unfavorable retailer inventory dynamics, high inflation and extreme weather. Despite these headwinds, we delivered non-GAAP EPS within our revised fiscal 2023 guidance, successfully turned inventories into cash, generated record cash flow and continued to make progress on our Cost and Simplicity program," said Beth Springer, Interim CEO of Central Garden & Pet. "While the near-term external environment remains challenging, we are confident in the competitive strength of Central, our Team's execution and our Central to Home strategy."

Fiscal 2023 Results

Net sales of $3.3 billion were in line with the prior year. Fiscal 2023 benefited from an additional week compared to the prior year.

Net sales for the Pet segment of $1.9 billion were in line with the prior year. Net sales for the Garden segment were $1.4 billion compared to $1.5 billion a year ago.

Gross margin was 28.6% compared to 29.7% in the prior year. On a non-GAAP basis, gross margin was 28.9%. The decrease was due to inflation and lower volumes resulting in unfavorable overhead absorption, partially offset by improved pricing and productivity efforts.

Operating income was $211 million compared to $260 million a year ago. On a non-GAAP basis, operating income was $227 million. Operating margin was 6.4% compared to 7.8% in the prior year. On a non-GAAP basis, operating margin was 6.9%. The decrease was due to lower sales and inflation, partially offset by improved pricing and cost reductions.

Other income and expense was income of $1.5 million compared to expense of $3.6 million a year ago.

Net interest expense was $50 million compared to $58 million in the prior year driven by higher cash balances and interest rates.

Net income was $126 million compared to $152 million a year ago. On a non-GAAP basis, net income was $138 million. Earnings per share were $2.35 compared to $2.80 in the prior year. On a non-GAAP basis, earnings per share were $2.59, in line with Central's revised fiscal 2023 guidance.

Adjusted EBITDA was $343 million compared to $367 million a year ago.

The effective tax rate for the fiscal year was 22.4% compared to 23.2% in the prior year. The decrease was primarily due to the impact of a lower blended state tax rate.

Fourth Quarter Fiscal 2023 Results

Net sales increased 6% to $750 million. The fourth quarter benefited from an additional week compared to the prior year.

Gross margin was 26.3% compared to 28.2% a year ago. On a non-GAAP basis, gross margin was 26.6%. The decrease was due to inflation and lower volumes resulting in unfavorable overhead absorption, partially offset by improved pricing and productivity efforts.

Operating income was $9 million compared to $13 million in the prior year. On a non-GAAP basis, operating income was $12 million. Operating margin was 1.2% compared to 1.8% in the prior year. On a non-GAAP basis, operating margin was 1.6%.

Other expense was $1.7 million compared to $2.3 million in the prior year.

Net interest expense was $8 million compared to $14 million a year ago.

Net income was $2.8 million compared to a net loss of $2.0 million in the prior year quarter. On a non-GAAP basis, net income was $5.1 million. Earnings per share were $0.05 compared to a loss per share of $0.04 in the prior year. On a non-GAAP basis, earnings per share were $0.10.

Adjusted EBITDA was $42 million, in line with the prior year.

Pet Segment Fourth Quarter Fiscal 2023 Results

Net sales for the Pet segment increased 10% to $483 million, driven primarily by the additional week compared to the prior year.

The Pet segment’s operating income increased 7% to $43 million. On a non-GAAP basis, operating income was $48 million. Operating margin was 9.0% compared to 9.2% in the prior year. On a non-GAAP basis, operating margin was 9.9%. The increase was driven by productivity efforts and improved pricing, partially offset by unfavorable overhead absorption.

Pet segment adjusted EBITDA increased 15% to $58 million.

Garden Segment Fourth Quarter Fiscal 2023 Results

Net sales for the Garden segment of $267 million were in line with prior year, due to softness across most of the Garden portfolio, partially offset by strength in controls & fertilizer, live goods and grass seed.

The Garden segment’s operating loss was $3.4 million compared to operating income of $1.8 million in the prior year. On a non-GAAP basis, operating loss was $5.3 million. Operating margin was (1.3)% compared to 0.7% a year ago. On a non-GAAP basis, operating margin was (2.0)%. The decrease was due to inflation, partially offset by improved pricing and productivity efforts.

Garden segment adjusted EBITDA was $6 million compared to $12 million in the prior year quarter.

Liquidity and Debt

At September 30, 2023, cash and cash equivalents was $489 million, compared to $177 million a year ago. The increase in cash provided by operations was driven by the reduction in inventory due to converting inventory to cash and lower capital expenditures.

Cash provided by operations for fiscal 2023 was $382 million, compared to cash used by operations of $34 million in the prior year. The increase in cash provided by operations was primarily due to changes in working capital driven by the reduction in inventory.

Total debt at September 30, 2023 and September 24, 2022 was $1.2 billion. The gross leverage ratio, as defined in Central's credit agreement, at the end of the quarter was 3.1x compared to 2.9x in the prior year. Central repurchased approximately 65,268 shares or $2.4 million of its stock during the quarter.

Cost and Simplicity Program

Central continues to progress its multi-year Cost and Simplicity program consisting of a pipeline of projects across a number of areas including procurement, manufacturing, logistics, portfolio management and administrative costs to simplify its business and improve efficiency across the organization.

As part of the program, Central closed several facilities in fiscal 2023.

In the third quarter of fiscal 2023, Central closed a pet bedding facility in Athens, Texas. In the fourth quarter of fiscal year 2023, Central closed a leased manufacturing and distribution facility in Amarillo, Texas. As a result, in fiscal 2023, Central incurred $16 million of one-time costs, including $10 million in cost of goods sold and $6 million in selling, general and administrative expenses, the majority of which were non-cash.

In the fourth quarter of fiscal 2023, Central sold its independent garden center distribution business to simplify its garden business, optimize its customer footprint and improve margins while retaining its third-party distribution business with its largest three retail partners and select national accounts. As a result, Central recorded a gain of approximately $6 million which is net of the inventory sold, inventory transport costs and the associated facility closure costs, including severance. The gain was recorded as part of selling, general and administrative expenses.

Outlook for Fiscal 2024

Central currently expects fiscal 2024 non-GAAP EPS to be $2.50 or better. This outlook reflects deflationary pressure in some of its commodity businesses, evolving consumer behavior and unfavorable retailer inventory dynamics in an environment of macroeconomic and geopolitical uncertainty. The outlook includes productivity initiatives already under way and modest pricing actions to help mitigate inflationary headwinds. Central expects fiscal 2024 capital spending to be approximately $70 million. This outlook excludes the impact of any acquisitions, divestitures or restructuring activities that may occur during fiscal 2024, including any such project under the Cost and Simplicity program. It also excludes the impact from the recently announced pet consumables acquisition.

Conference Call

Central will hold a conference call today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time), hosted by Beth Springer, Interim CEO, and Niko Lahanas, CFO, to discuss these results and to provide a general business update. The conference call and related materials can be accessed at http://ir.central.com.

Alternatively, to listen to the call by telephone, dial (201) 689-8345 (domestic and international) using confirmation #13740549.

About Central Garden & Pet

Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) understands that home is central to life and has proudly nurtured happy and healthy homes for over 40 years. With fiscal 2023 net sales of $3.3 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 helping 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 Amdro®, Aqueon®, Cadet®, Farnam®, Ferry-Morse®, Four Paws®, Kaytee®, K&H®, Nylabone® and Pennington®, strong manufacturing and distribution capabilities and a passionate, entrepreneurial growth culture. Central is based in Walnut Creek, California and has 6,700 employees across North America and Europe. Visit www.central.com to learn more.

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 further cost inflation, evolving consumer behavior and unfavorable retailer dynamics, anticipated pricing actions, productivity initiatives and estimated capital spending, and earnings guidance for fiscal year 2024, 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 Central’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 and interest rates, and other adverse macro-economic conditions;
• fluctuations in market prices for seeds and grains and other raw materials;
• our inability to pass through cost increases in a timely manner;
• our ability to recruit and retain new members of our management team, including a Chief Executive Officer, to support our businesses and to hire and retain employees;
• fluctuations in energy prices, fuel and related petrochemical costs;
• declines in consumer spending and increased inventory risk during economic downturns;
• 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 continue to work through excess inventory;
• adverse weather conditions;
• the success of our Central to Home strategy and our Cost and Simplicity program;
• risks associated with our acquisition strategy, including our ability to successfully integrate acquisitions and the impact of purchase accounting on our financial results;
• 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 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 cyberattacks;
• 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 Central’s Securities and Exchange Commission filings. Central 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)

(unaudited)

 

ASSETS

 

September 30, 2023

 

September 24, 2022

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

488,730

 

 

$

177,442

 

Restricted cash

 

 

14,143

 

 

 

14,742

 

Accounts receivable, net

 

 

332,890

 

 

 

376,787

 

Inventories, net

 

 

838,188

 

 

 

938,000

 

Prepaid expenses and other

 

 

33,172

 

 

 

46,883

 

Total current assets

 

 

1,707,123

 

 

 

1,553,854

 

 

 

 

 

 

Plant, property and equipment, net

 

 

391,768

 

 

 

396,979

 

Goodwill

 

 

546,436

 

 

 

546,436

 

Other intangible assets, net

 

 

497,228

 

 

 

543,210

 

Operating lease right-of-use assets

 

 

173,540

 

 

 

186,344

 

Other assets

 

 

62,553

 

 

 

55,179

 

Total

 

$

3,378,648

 

 

$

3,282,002

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

190,902

 

 

$

215,681

 

Accrued expenses

 

 

216,241

 

 

 

201,783

 

Current lease liabilities

 

 

50,597

 

 

 

48,111

 

Current portion of long-term debt

 

 

247

 

 

 

317

 

Total current liabilities

 

 

457,987

 

 

 

465,892

 

 

 

 

 

 

Long-term debt

 

 

1,187,956

 

 

 

1,186,245

 

Long-term lease liabilities

 

 

135,621

 

 

 

147,724

 

Deferred income taxes and other long-term obligations

 

 

144,271

 

 

 

147,429

 

 

 

 

 

 

Equity:

 

 

 

 

Common stock

 

 

111

 

 

 

113

 

Class A common stock

 

 

410

 

 

 

413

 

Class B stock

 

 

16

 

 

 

16

 

Additional paid-in capital

 

 

594,416

 

 

 

582,056

 

Retained earnings

 

 

859,370

 

 

 

755,253

 

Accumulated other comprehensive loss

 

 

(2,970

)

 

 

(4,145

)

Total Central Garden & Pet shareholders’ equity

 

 

1,451,353

 

 

 

1,333,706

 

Noncontrolling interest

 

 

1,460

 

 

 

1,006

 

Total equity

 

 

1,452,813

 

 

 

1,334,712

 

Total

 

$

3,378,648

 

 

$

3,282,002

 

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

Three Months Ended

 

Fiscal Year Ended

 

September 30,

2023

 

September 24,

2022

 

September 30,

2023

 

September 24,

2022

Net sales

$

750,147

 

 

$

707,442

 

 

$

3,310,083

 

 

$

3,338,588

 

Cost of goods sold

 

552,694

 

 

 

507,751

 

 

 

2,363,241

 

 

 

2,346,283

 

Gross profit

 

197,453

 

 

 

199,691

 

 

 

946,842

 

 

 

992,305

 

Selling, general and administrative expenses

 

188,084

 

 

 

186,793

 

 

 

736,196

 

 

 

732,269

 

Operating income

 

9,369

 

 

 

12,898

 

 

 

210,646

 

 

 

260,036

 

Interest expense

 

(13,138

)

 

 

(14,620

)

 

 

(57,025

)

 

 

(58,253

)

Interest income

 

5,075

 

 

 

531

 

 

 

7,362

 

 

 

719

 

Other expense, net

 

(1,685

)

 

 

(2,259

)

 

 

1,462

 

 

 

(3,596

)

Income (loss) before income taxes and noncontrolling interest

 

(379

)

 

 

(3,450

)

 

 

162,445

 

 

 

198,906

 

Income tax (benefit) expense

 

(3,098

)

 

 

(1,085

)

 

 

36,348

 

 

 

46,234

 

Net income (loss) including noncontrolling interest

 

2,719

 

 

 

(2,365

)

 

 

126,097

 

 

 

152,672

 

Net income (loss) attributable to noncontrolling interest

 

(116

)

 

 

(375

)

 

 

454

 

 

 

520

 

Net income (loss) attributable to Central Garden & Pet Company

$

2,835

 

 

$

(1,990

)

 

$

125,643

 

 

$

152,152

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to Central Garden & Pet Company:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

(0.04

)

 

$

2.40

 

 

$

2.86

 

Diluted

$

0.05

 

 

$

(0.04

)

 

$

2.35

 

 

$

2.80

 

 

 

 

 

 

 

 

 

Weighted average shares used in the computation of net income per share:

 

 

 

 

 

 

 

Basic

 

52,212

 

 

 

52,718

 

 

 

52,395

 

 

 

53,220

 

Diluted

 

53,337

 

 

 

52,718

 

 

 

53,427

 

 

 

54,425

 

CENTRAL GARDEN & PET COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Fiscal Year Ended

 

September 30,

2023

 

September 24,

2022

 

September 25,

2021

 

(in thousands)

Cash flows from operating activities:

 

 

 

 

 

Net income

$

126,097

 

 

$

152,672

 

 

$

152,773

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

87,700

 

 

 

80,948

 

 

 

74,727

 

Amortization of deferred financing costs

 

2,698

 

 

 

2,657

 

 

 

2,208

 

Non-cash lease expense

 

51,868

 

 

 

48,656

 

 

 

41,044

 

Stock-based compensation

 

27,990

 

 

 

25,817

 

 

 

23,127

 

Debt extinguishment costs

 

—

 

 

 

169

 

 

 

8,577

 

(Gain) Loss on sale of business

 

(5,845

)

 

 

—

 

 

 

2,611

 

Deferred income taxes

 

(12,253

)

 

 

28,128

 

 

 

(14,744

)

Pet Segment Facility Closures

 

15,674

 

 

 

—

 

 

 

—

 

Loss (gain) on disposal of property, plant and equipment

 

(262

)

 

 

131

 

 

 

(256

)

Asset impairments

 

750

 

 

 

—

 

 

 

—

 

Other

 

(263

)

 

 

(779

)

 

 

4,716

 

Changes in assets and liabilities (excluding businesses acquired):

 

 

 

 

 

Receivables

 

43,980

 

 

 

7,004

 

 

 

69,135

 

Inventories

 

86,980

 

 

 

(256,443

)

 

 

(132,170

)

Prepaid expenses and other assets

 

8,813

 

 

 

(6,031

)

 

 

13,370

 

Accounts payable

 

(19,962

)

 

 

(31,209

)

 

 

24,583

 

Accrued expenses

 

6,766

 

 

 

(33,495

)

 

 

6,734

 

Other long-term obligations

 

9,595

 

 

 

(7,728

)

 

 

14,731

 

Operating lease liabilities

 

(48,692

)

 

 

(44,527

)

 

 

(40,322

)

Net cash (used in) provided by operating activities

 

381,634

 

 

 

(34,030

)

 

 

250,844

 

Cash flows from investing activities:

 

 

 

 

 

Additions to property, plant and equipment

 

(53,966

)

 

 

(115,205

)

 

 

(80,333

)

Businesses acquired, net of cash acquired

 

—

 

 

 

—

 

 

 

(820,453

)

Proceeds from sale of business

 

20,000

 

 

 

—

 

 

 

2,400

 

Payments for investments

 

(500

)

 

 

(27,818

)

 

 

(500

)

Other investing activities

 

(115

)

 

 

40

 

 

 

(473

)

Net cash used in investing activities

 

(34,581

)

 

 

(142,983

)

 

 

(899,359

)

Cash flows from financing activities:

 

 

 

 

 

Repayments on revolving line of credit

 

(48,000

)

 

 

—

 

 

 

(858,000

)

Borrowings on revolving line of credit

 

48,000

 

 

 

—

 

 

 

858,000

 

Premium paid on extinguishment of debt

 

—

 

 

 

—

 

 

 

(6,124

)

Repayments of long-term debt

 

(338

)

 

 

(1,096

)

 

 

(430,401

)

Issuance of long-term debt

 

—

 

 

 

—

 

 

 

900,000

 

Repurchase of common stock, including shares surrendered for tax withholding

 

(37,161

)

 

 

(62,287

)

 

 

(27,892

)

Payments of contingent consideration

 

(54

)

 

 

(216

)

 

 

(373

)

Distribution to noncontrolling interest

 

—

 

 

 

(806

)

 

 

(606

)

Payment of financing costs

 

—

 

 

 

(2,410

)

 

 

(14,129

)

Net cash (used in) provided by financing activities

 

(37,553

)

 

 

(66,815

)

 

 

420,475

 

Effect of exchange rate changes on cash and equivalents

 

1,188

 

 

 

(3,510

)

 

 

1,165

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

310,689

 

 

 

(247,338

)

 

 

(226,875

)

Cash, cash equivalents and restricted cash at beginning of year

 

192,184

 

 

 

439,522

 

 

 

666,397

 

Cash, cash equivalents and restricted cash at end of year

$

502,873

 

 

$

192,184

 

 

$

439,522

 

Supplemental information:

 

 

 

 

 

Cash paid for interest

$

57,143

 

 

$

57,928

 

 

$

42,762

 

Cash paid for income taxes – net of refunds

 

17,910

 

 

 

34,964

 

 

 

70,831

 

Non-cash investing and financing activities:

 

 

 

 

 

Capital expenditures incurred but not paid

 

2,243

 

 

 

8,016

 

 

 

6,150

 

Liability for contingent performance based payments

 

(374

)

 

 

(847

)

 

 

610

 

Shares of common stock repurchased but not settled

 

—

 

 

 

911

 

 

 

2,112

 

Operating lease right of use assets recognized after ASC 842 transition

 

42,777

 

 

 

70,794

 

 

 

90,799

 

Use of Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including adjusted EBITDA, non-GAAP operating income, 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.

Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization and stock-based compensation expense (or operating income plus depreciation and amortization expense and stock-based compensation expense). Adjusted EBITDA further excludes one-time charges related to facility closures, the gain from the sale of our independent garden center distribution business and intangible asset impairment charges. 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 evaluations. 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 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 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:

• Facility closures: we exclude the impact of the closure of facilities as they represent infrequent transactions that occur in limited circumstances that impact the comparability between operating periods. We believe the adjustment of closure costs supplements the GAAP information with a measure that may be used to assess the performance of our ongoing operations.
• Gain on sale of a business or service line: we exclude the impact of the gain on the sale of a business as it represents an infrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods. We believe the adjustment of this gain supplements the GAAP information with a measure that may be used to assess the performance of our ongoing operations.
• Asset impairment charges: we exclude 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 performance of our ongoing operations.
• Tax impact: adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income. The tax impact of the non-GAAP adjustments is calculated based on the consolidated effective tax rate on a GAAP basis, applied to the non-GAAP adjustments, unless the underlying item has a materially different tax treatment.

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 made reflect the following:

(1)

During the third quarter of fiscal 2023, we recognized incremental expense of $13.9 million in our Pet segment in the consolidated statement of operations, from the closure of a leased manufacturing and distribution facility in Athens, Texas. During the fourth quarter of fiscal 2023, we recognized incremental expense of $1.8 million in our Pet segment in the consolidated statement of operations, from the closure of a leased manufacturing and distribution facility in Amarillo, Texas.

(2)

During the fourth quarter of fiscal 2023, we recognized a gain of $5.8 million from the sale of our independent garden center distribution business, which includes the impact of associated facility closure costs. The gain is included in selling, general and administrative expense in the consolidated statements of operations.

(3)

During the fourth quarter of fiscal 2023, we recognized a non-cash impairment charge in our Pet segment of $2.8 million related to the impairment of intangible assets caused by the loss of a significant customer in our live fish business. Also, during the fourth quarter of fiscal 2023, we recognized a non-cash impairment charge in our Garden segment of $3.9 million related to the impairment of intangible assets due to reduced demand for products we sold under an acquired trade name. The impairments were recorded as part of selling, general and administrative costs.

Operating Income Reconciliation

 

GAAP to Non-GAAP Reconciliation

 

 

Three Months Ended September 30, 2023

 

Fiscal Year Ended September 30, 2023

 

 

GAAP

Adjustments(1)(2)(3)

Non-GAAP

 

GAAP

Adjustments(1)(2)(3)

Non-GAAP

 

 

(in thousands)

Net sales

 

$

750,147

$

—

 

$

750,147

 

$

3,310,083

$

—

 

$

3,310,083

Cost of goods sold and occupancy

 

 

552,694

 

 

1,751

 

 

550,943

 

 

 

2,363,241

 

 

9,761

 

 

2,353,480

 

Gross profit

 

 

197,453

 

 

(1,751

)

 

199,204

 

 

 

946,842

 

 

(9,761

)

 

956,603

 

Selling, general and administrative expenses

 

 

188,084

 

 

887

 

 

187,197

 

 

 

736,196

 

 

6,798

 

 

729,398

 

Income from operations

 

$

9,369

 

$

(2,638

)

$

12,007

 

 

$

210,646

 

$

(16,559

)

$

227,205

 

 

 

GAAP to Non-GAAP Reconciliation

For the Fiscal Year Ended

Pet Segment Operating Income Reconciliation

 

September 30, 2023

 

September 24, 2022

 

 

(in thousands)

GAAP operating income

 

$

198,004

 

 

$

208,924

 

Facility closure and intangible asset impairment

(1)(3)

 

18,457

 

 

 

—

 

Non-GAAP operating income

 

$

216,461

 

 

$

208,924

 

GAAP operating margin

 

 

10.5

%

 

 

11.1

%

Non-GAAP operating margin

 

 

11.5

%

 

 

11.1

%

 

 

GAAP to Non-GAAP Reconciliation

For the Fiscal Year Ended

Garden Segment Operating Income Reconciliation

 

September 30, 2023

 

September 24, 2022

 

 

(in thousands)

GAAP operating income

 

$

123,455

 

 

$

153,956

 

Garden independent distribution sale and intangible asset impairment

(2)(3)

 

(1,898

)

 

 

—

 

Non-GAAP operating income

 

$

121,557

 

 

$

153,956

 

GAAP operating margin

 

 

8.6

%

 

 

10.5

%

Non-GAAP operating margin

 

 

8.5

%

 

 

10.5

%

 

 

GAAP to Non-GAAP Reconciliation

For the Fiscal Year Ended

Net Income and Diluted Net Income Per Share Reconciliation

 

September 30, 2023

 

September 24, 2022

 

 

(in thousands, except per share amount)

GAAP net income attributable to Central Garden & Pet Company

 

$

125,643

 

 

$

152,152

Pet facilities closures

(1)

 

15,672

 

 

 

—

 

Independent garden channel distribution sale and related facility closure

(2)

 

(5,844

)

 

 

—

 

Intangible impairments

(3)

 

6,731

 

 

 

—

 

Tax effect of adjustments

 

 

(3,705

)

 

 

—

 

Non-GAAP net income attributable to Central Garden & Pet Company

 

$

138,497

 

 

$

152,152

 

GAAP diluted net income per share

 

$

2.35

 

 

$

2.80

 

Non-GAAP diluted net income per share

 

$

2.59

 

 

$

2.80

 

Shares used in GAAP and non-GAAP diluted net income per share calculation

 

 

53,427

 

 

 

54,425

 

 

GAAP to non-GAAP Reconciliation

Fiscal Year Ended September 30, 2023

Adjusted EBITDA Reconciliation

 

Pet

 

Garden

 

Corp

 

Total

 

 

(in thousands)

Net income attributable to Central Garden & Pet

 

$

—

 

$

—

 

 

$

—

 

 

$

125,643

 

Interest expense, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

49,663

 

Other income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,462

)

Income tax expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

36,348

 

Net income attributable to noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

454

 

Sum of items below operating income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

85,003

 

Income (loss) from operations

 

 

198,004

 

 

 

123,455

 

 

 

(110,813

)

 

 

210,646

 

Depreciation & amortization

 

 

41,126

 

 

 

43,375

 

 

 

3,199

 

 

 

87,700

 

Noncash stock-based compensation

 

 

—

 

 

 

—

 

 

 

27,990

 

 

 

27,990

 

Non-GAAP adjustments

(1)(2)(3)

 

18,457

 

 

 

(1,898

)

 

 

—

 

 

 

16,559

 

Adjusted EBITDA

 

$

257,587

 

 

$

164,932

 

 

$

(79,624

)

 

$

342,895

 

 

 

GAAP to non-GAAP Reconciliation

Fiscal Year Ended September 24, 2022

Adjusted EBITDA Reconciliation

 

Pet

 

Garden

 

Corp

 

Total

 

 

(in thousands)

Net income attributable to Central Garden & Pet

 

$

—

 

$

—

 

$

—

 

 

$

152,152

Interest expense, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

57,534

 

Other expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,596

 

Income tax expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

46,234

 

Net income attributable to noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

520

 

Sum of items below operating income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

107,884

 

Income (loss) from operations

 

 

208,924

 

 

 

153,956

 

 

 

(102,844

)

 

 

260,036

 

Depreciation & amortization

 

 

38,960

 

 

 

36,583

 

 

 

5,405

 

 

 

80,948

 

Noncash stock-based compensation

 

 

—

 

 

 

—

 

 

 

25,817

 

 

 

25,817

 

Adjusted EBITDA

 

$

247,884

 

 

$

190,539

 

 

$

(71,622

)

 

$

366,801

 

 

 

GAAP to non-GAAP Reconciliation

Quarter Ended September 30, 2023

Adjusted EBITDA Reconciliation

 

Pet

 

Garden

 

Corp

 

Total

 

 

(in thousands)

Net income attributable to Central Garden & Pet

 

$

—

 

$

—

 

 

$

—

 

 

$

2,835

 

Interest expense, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,063

 

Other expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,685

 

Income tax benefit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,098

)

Net loss attributable to noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(116

)

Sum of items below operating income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,534

 

Income (loss) from operations

 

 

43,225

 

 

 

(3,432

)

 

 

(30,424

)

 

 

9,369

 

Depreciation & amortization

 

 

10,479

 

 

 

10,892

 

 

 

825

 

 

 

22,196

 

Noncash stock-based compensation

 

 

—

 

 

 

—

 

 

 

7,358

 

 

 

7,358

 

Non-GAAP adjustments

(1)(2)(3)

 

4,536

 

 

 

(1,898

)

 

 

—

 

 

 

2,638

 

Adjusted EBITDA

 

$

58,240

 

 

$

5,562

 

 

$

(22,241

)

 

$

41,561

 

 

 

GAAP to non-GAAP Reconciliation

Quarter Ended September 24, 2022

Adjusted EBITDA Reconciliation

 

Pet

 

Garden

 

Corp

 

Total

 

 

(in thousands)

Net loss attributable to Central Garden & Pet

 

$

—

 

$

—

 

$

—

 

 

$

(1,990

)

Interest expense, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,089

 

Other expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,259

 

Income tax benefit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,085

)

Net loss attributable to noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(375

)

Sum of items below operating income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,888

 

Income (loss) from operations

 

 

40,412

 

 

 

1,824

 

 

 

(29,338

)

 

 

12,898

 

Depreciation & amortization

 

 

10,081

 

 

 

10,127

 

 

 

2,407

 

 

 

22,615

 

Noncash stock-based compensation

 

 

—

 

 

 

—

 

 

 

6,938

 

 

 

6,938

 

Adjusted EBITDA

 

$

50,493

 

 

$

11,951

 

 

$

(19,993

)

 

$

42,451

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231120934246/en/

Investor Relations Contact Friederike Edelmann VP of Investor Relations & Corporate Sustainability (925) 412 6726 fedelmann@central.com