CENTRAL GARDEN & PET CO

Previous wording

•Gross profit increased $7.1 million from the prior year quarter, and gross margin increased 80 basis points to 28.2%.

Current wording

•Gross profit increased $19.2 million from the prior year quarter, and gross margin increased 240 basis points to 31.0%.

Previous wording

•Selling, general and administrative expense declined $0.9 million from the prior year quarter to $170.4 million and as a percentage of net sales decreased 40 basis points to 26.9%.

Current wording

•Selling, general and administrative expense increased $3.8 million from the prior year quarter to $185.4 million and as a percentage of net sales increased 60 basis points to 20.6%.

Previous wording

In December 2023, our Board of Directors approved a stock dividend to increase liquidity in our Class A shares. The stock dividend is in the form of one share of our Class A Common Stock for every four outstanding shares of our Common Stock, Class A Common Stock and Class B Stock. Dividend shares of Class A Common Stock will be distributed on February 8, 2024, to stockholders of record on January 8, 2024. We believe the increased liquidity will benefit stockholders and provide us with more flexibility to pursue our growth objectives.

Current wording

In December 2023, our Board of Directors approved a stock dividend in the form of one share of the Company's Class A Common Stock for every four outstanding shares of its Common Stock, Class A Common Stock and Class B Stock. Dividend shares of Class A Common Stock were distributed on February 8, 2024, to stockholders of record January 8, 2024. The Company believes the stock dividend will increase liquidity, which should benefit stockholders and provide the Company with more flexibility to pursue its growth objectives.

Previous wording

Net sales for the three months ended December 30, 2023 increased $6.8 million, or 1.1%, to $634.5 million from $627.7 million for the three months ended December 24, 2022. Organic net sales, which excludes the impact of our acquisition of TDBBS in November 2023 and the sale of our independent garden channel distribution business in July 2023, increased 0.5%. Our branded product sales increased $9.3 million, and sales of other manufacturers’ products decreased $2.5 million.

Current wording

Net sales for the three months ended March 30, 2024 decreased $8.9 million, or 1.0%, to $900.1 million from $909.0 million for the three months ended March 25, 2023. Organic net sales, which excludes the impact of our acquisition of TDBBS in November 2023 and the sale of our independent garden channel distribution business in July 2023, decreased 0.7%. Our branded product sales decreased $3.8 million, and sales of other manufacturers’ products decreased $5.1 million.

Previous wording

Pet net sales decreased $6.6 million, or 1.6%, to $409.2 million for the three months ended December 30, 2023 from $415.8 million for the three months ended December 24, 2022. Pet organic net sales, which excludes the impact of our acquisition of TDBBS in November 2023, declined 4.8%. The decline in net sales was due primarily to lower sales of durable items in our outdoor cushion business and our pet distribution business. Pet branded product sales declined $3.6 million, and sales of other manufacturers' products declined $3.0 million.

Current wording

Pet net sales increased $5.0 million, or 1.1%, to $480.2 million for the three months ended March 30, 2024 from $475.2 million for the three months ended March 25, 2023. Pet organic net sales, which excludes the impact of our acquisition of TDBBS in November 2023, declined 3.0%. The decline in Pet organic net sales was due primarily to lower demand for durable pet products, particularly in our outdoor cushion business, and lower sales of in our pet bird and small animal business, partially offset by increased sales in our dog and cat category. Pet branded product sales increased $0.1 million, and sales of other manufacturers' products increased $4.9 million.

Previous wording

Garden net sales increased $13.4 million, or 6.3%, to $225.3 million for the three months ended December 30, 2023 from $211.9 million for the three months ended December 24, 2022. Garden organic net sales, which excludes the impact of the sale of our independent garden channel distribution business in July 2023, increased 11.3%. The increase in Garden net sales was due primarily to increased sales in our control and fertilizer, grass seed and packet seed businesses which benefited from the current quarter ending December 30, as opposed to the prior year fiscal quarter which ended Christmas eve, and early season shipments by select retailers. Garden branded sales increased $12.9 million, and sales of other manufacturers' products increased $0.5 million.

Current wording

Garden net sales decreased $13.9 million, or 3%, to $419.9 million for the three months ended March 30, 2024 from $433.8 million for the three months ended March 25, 2023. Garden organic net sales, which excludes the impact of the sale of our independent garden channel distribution business in July 2023, increased 1.9%. The increase in Garden organic net sales was due primarily to increased sales in our live plant and grass seed businesses which were aided by favorable weather at the end of March and benefited from the current quarter ending on March 30 and excluding the last week of December, as compared to the prior year quarter. These increases were partially offset by lower sales in Wild Bird. Garden branded sales decreased $3.9 million, and sales of other manufacturers' products decreased $10.0 million.

Previous wording

Selling, general and administrative expenses decreased $0.9 million, or 0.5%, to $170.4 million for the three months ended December 30, 2023. As a percentage of net sales, selling, general and administrative expenses decreased to 26.9% for the three months ended December 30, 2023, compared to 27.3% in the comparable prior year quarter. Decreased expense in both the Pet segment and corporate were partially offset by increased expense in the Garden segment.

Current wording

Selling, general and administrative expenses increased $3.8 million, or 2.1%, to $185.4 million for the three months ended March 30, 2024. As a percentage of net sales, selling, general and administrative expenses increased to 20.6% for the three months ended March 30, 2024, compared to 20.0% in the comparable prior year quarter. Increased expense in the Pet segment was partially offset by small decreases in expense in Garden and Corporate.

Previous wording

Operating income increased $8.0 million to $8.4 million for the three months ended December 30, 2023. Our operating margin increased from 0.1% in the prior year quarter to 1.3% in the current year quarter. The increase in operating income was due to a $6.9 million increase in net sales, an 80 basis point increase in gross margin and a $0.9 million decline in selling, general and administrative expense.

Current wording

Operating income increased $15.4 million, or 19.7%, to $93.4 million for the three months ended March 30, 2024 from $78.0 million for the three months ended March 25, 2023. Our operating margin increased from 8.6% in the prior year quarter to 10.4% in the current year quarter. The increase in operating income was due to a $19.2 million increase in gross profit due to a 240 basis point increase in gross margin partially offset by reduced net sales and a $3.8 million increase in selling, general and administrative expense.

Previous wording

Corporate operating expense decreased $2.2 million, or 7.9%, to $26.1 million for the three months ended December 30, 2023 from $28.3 million for the three months ended December 24, 2022. Corporate expense decreased due primarily to lower payroll related costs, including equity compensation, due to reduced corporate headcount.

Current wording

Corporate operating expense decreased $0.5 million, or 2.1%, to $26.3 million for the three months ended March 30, 2024 from $26.8 million for the three months ended March 25, 2023. Corporate expense decreased due primarily to lower equity compensation amounts due to forfeitures resulting from employee terminations, partially offset by increased third party expenses, primarily legal costs.

Previous wording

Net interest expense for the three months ended December 30, 2023 decreased $4.1 million, or 29.5%, to $9.7 million from $13.8 million for the three months ended December 24, 2022. The decrease in net interest expense was due to increased interest income resulting from both higher rates of interest earned on our higher cash balance during the current quarter. Debt outstanding on December 30, 2023 was $1,189.6 million compared to $1,186.9 million at December 24, 2022.

Current wording

Net interest expense for the three months ended March 30, 2024 decreased $3.2 million, or 21.9%, to $11.5 million from $14.7 million for the three months ended March 25, 2023. The decrease in net interest expense was due to increased interest income resulting from both higher rates of interest earned and a higher cash balance during the current quarter. Debt outstanding on March 30, 2024 was $1,189.3 million compared to $1,212.3 million at March 25, 2023.

Previous wording

Other income is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income decreased $0.7 million to $1.0 million for the quarter ended December 30, 2023 from $1.7 million for the quarter ended December 24, 2022. The decrease in other income was due primarily to lower foreign currency gains in the current year quarter as compared to the prior year quarter.

Current wording

Other income (expense) is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income (expense) decreased $0.8 million to $0.2 million of expense for the three months ended March 30, 2024 from $0.6 million of income for the three months ended March 25, 2023. The decrease in other income (expense)

Previous wording

Net income in the first quarter of fiscal 2024 was $0.4 million, or $0.01 per diluted share, compared to a net loss of $8.4 million, or $0.16 per diluted share, in the first quarter of fiscal 2023. The increase in net income and earnings per share was due to an $8.0 million increase in operating income, decreased net interest expense and the tax benefit from a discrete item in the current year quarter.

Current wording

Net income in the second quarter of fiscal 2024 was $62.0 million, or $0.93 per diluted share, compared to $48.1 million, or $0.72 per diluted share, in the second quarter of fiscal 2023. The increase in net income and earnings per share was due to an $15.4 million increase in operating income and decreased net interest expense in the current year quarter. On a non-GAAP basis, net income in the second quarter of fiscal 2024 was $66.0 million, or $0.99 per diluted share.

Previous wording

Warehouse and administrative expense increased $4.8 million, or 5.0%, to $101.1 million for the three months ended December 30, 2023 from $96.3 million for the three months ended December 24, 2022. The increase in warehouse and administrative expense was due primarily to increased expense from the TDBBS acquisition and higher facility expense in our Pet segment. Corporate expense decreased $2.2 million due primarily to lower payroll related costs, including equity compensation, resulting from lower corporate headcount. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.

Current wording

Warehouse and administrative expense increased $9.8 million, or 5.0%, to $204.2 million for the six months ended March 30, 2024 from $194.4 million for the six months ended March 25, 2023. The increase in warehouse and administration expense was due primarily to the expense incurred from our recent acquisition, TDBBS, in the Pet segment and the increased expense associated with the closure of a manufacturing facility and the consolidation of our southeast distribution network in our Garden segment. Corporate expense decreased $2.8 million due primarily to lower payroll related costs, including equity compensation, resulting from lower corporate executive headcount, partially offset by higher third-party expenses. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.

Previous wording

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 and organic sales. Management uses these non-GAAP financial measures that exclude the impact of specific items (described below) in making financial, operating and planning decisions and in evaluating our performance. Also, Management believes that these non-GAAP financial measures 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. While Management believes that non-GAAP measures 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.

Current wording

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 non-GAAP net income and diluted net income per share, non-GAAP operating income, adjusted EBITDA and organic net sales. Management uses these non-GAAP financial measures that exclude the impact of specific items (described below) in making financial, operating and planning decisions and in evaluating our performance. Also, Management believes that these non-GAAP financial measures 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. While Management believes that non-GAAP measures 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.

Previous wording

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). 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.

Current wording

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. 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.

Previous wording

In fiscal 2022, we experienced notable inflationary pressure which continued in fiscal 2023, although at a reduced rate in the latter months of fiscal 2023. The rate of inflationary pressure for key commodities, labor and freight, is moderating as we enter calendar 2024.

Current wording

In fiscal 2022, we experienced notable inflationary pressure which continued in fiscal 2023, although at a reduced rate in the latter months of fiscal 2023. The rate of inflationary pressure for key commodities, labor and freight, has begun to moderate in calendar 2024.

Previous wording

We have financed our growth through a combination of cash generated from operations, bank borrowings, supplier credit, and sales of equity and debt securities.

Current wording

We finance our growth through a combination of cash generated from operations, bank borrowings, supplier credit, and sales of equity and debt securities.

Previous wording

Net cash used by operating activities increased by $6.5 million, from $63.3 million for the three months ended December 24, 2022, to $69.8 million for the three months ended December 30, 2023. The increase in cash used by operating activities was due primarily to changes in our working capital accounts for the period ended December 30, 2023, as compared to the prior year period, primarily increased accounts receivable partially offset by increased payables and accrued expenses.

Current wording

Net cash used by operating activities decreased by $2.8 million, from $97.1 million for the six months ended March 25, 2023, to $94.3 million for the six months ended March 30, 2024. The decrease in cash used by operating activities was due primarily to changes in our working capital accounts for the period ended March 30, 2024, as compared to the prior year period, primarily decreased accrued expenses and accounts payable partially offset by increased accounts receivables.

Previous wording

Net cash used in investing activities increased $52.5 million, from $17.9 million for the three months ended December 24, 2022 to $70.5 million during the three months ended December 30, 2023. The increase in cash used in investing activities was due primarily to acquisition activity in the current year partially offset by decreased capital expenditures in the current year.

Current wording

Net cash used in investing activities increased $49.5 million, from $30.8 million for the six months ended March 25, 2023 to $80.3 million during the six months ended March 30, 2024. The increase in cash used in investing activities was due primarily to acquisition activity partially offset by decreased capital expenditures in the current year.

Previous wording

Net cash used by financing activities decreased $1.7 million, from $9.4 million for the three months ended December 24, 2022, to $7.8 million for the three months ended December 30, 2023. The decrease in cash used by financing activities during the current year was due primarily to decreased open market purchases of our common stock during the current year as compared to the prior year. During the three months ended December 30, 2023, we repurchased approximately 40,000 shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $1.4 million, or approximately $35.94 per share. During the three months ended December 24, 2022, we repurchased approximately 0.1 million shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $2.0 million, or approximately $37.26 per share, and approximately 0.2 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $6.9 million, or approximately $35.29 per share.

Current wording

Net cash used by financing activities decreased $21.8 million, from $8.6 million of cash provided for the six months ended March 25, 2023, to $13.2 million of cash used for the six months ended March 30, 2024. The decrease in cash used by financing activities during the current year was due primarily to line of credit borrowings and repayments in the prior year six month period, partially offset by decreased open market purchases of our common stock during the current year as compared to the prior year. During the six months ended March 30, 2024, we repurchased approximately 0.1 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $1.4 million, or approximately $28.75 per share. During the six months ended March 25, 2023, we repurchased approximately 0.1 million shares of our voting common stock (CENT) on the open market at an aggregate cost of approximately $2.6 million, and approximately 0.3 million shares of our non-voting Class A common stock (CENTA) on the open market at an aggregate cost of approximately $9.1 million.

Previous wording

We believe that cash flows from operating activities, funds available under our Credit Facility, and arrangements with suppliers will be adequate to fund our presently anticipated working capital and capital expenditure requirements for the foreseeable future. We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $70 million in fiscal 2024, of which we have invested approximately $10 million through December 30, 2023.

Current wording

We believe that cash flows from operating activities, funds available under our Credit Facility, and arrangements with suppliers will be adequate to fund our presently anticipated working capital and capital expenditure requirements for the foreseeable future. We anticipate that our capital expenditures, which are related primarily to replacements and expansion of and upgrades to plant and equipment and also investment in our continued implementation of a scalable enterprise-wide information technology platform, will be approximately $70 million in fiscal 2024, of which we have invested approximately $19 million through March 30, 2024.

Previous wording

At December 30, 2023, our total debt outstanding was $1,189.6 million, as compared with $1,186.9 million at December 24, 2022.

Current wording

At March 30, 2024, our total debt outstanding was $1,189.3 million, as compared with $1,212.3 million at March 25, 2023.

Previous wording

The 2031 Notes require semi-annual interest payments on April 30 and October 30. The 2031 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Amended Credit Facility. The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.

Current wording

The 2031 Notes require semi-annual interest payments on April 30 and October 30. The 2031 Notes are unconditionally guaranteed on a senior basis by each of our existing and future domestic restricted subsidiaries which are borrowers under or guarantors of our Credit Facility. The 2031 Notes were issued in a private placement under Rule 144A and will not be registered under the Securities Act of 1933.

Previous wording

We may redeem some or all of the 2031 Notes at any time, at our option, prior to April 30, 2026 at the principal amount plus a "make whole" premium. At any time prior to April 30, 2024, we may also redeem, at our option, up to 40% of the notes with the proceeds of certain equity offerings at a redemption price of 104.125% of the principal amount of the notes. We may redeem some or all of the 2031 Notes at our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.

Current wording

We may redeem some or all of the 2031 Notes at any time, at our option, prior to April 30, 2026 at the principal amount plus a "make whole" premium. We may redeem some or all of the 2031 Notes at our option, at any time on or after April 30, 2026 for 102.063%, on or after April 30, 2027 for 101.375%, on or after April 30, 2028 for 100.688% and on or after April 30, 2029 for 100.0%, plus accrued and unpaid interest.

Previous wording

The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.

Current wording

The holders of the 2028 Notes have the right to require us to repurchase all or a portion of the 2028 Notes at a purchase price equal to 101.0% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the occurrence of a change of control.

Previous wording

The Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves. Proceeds of the Credit Facility will be used for general corporate purposes. Net availability under the Credit Facility was approximately $568 million as of December 30, 2023. The Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for swing Loan borrowings. As of December 30, 2023, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. Outside of the Credit Facility, there were other standby and commercial letters of credit of $1.3 million outstanding as of December 30, 2023.

Current wording

The Credit Facility is subject to a borrowing base that is calculated using a formula based upon eligible receivables and inventory, and at our election, eligible real property, minus certain reserves. Proceeds of the Credit Facility will be used for general corporate purposes. Net availability under the Credit Facility was approximately $685 million as of March 30, 2024. The Credit Facility includes a $50 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for swing Loan borrowings. As of March 30, 2024, there were no borrowings outstanding and no letters of credit outstanding under the Credit Facility. Outside of the Credit Facility, there were other standby and commercial letters of credit of $1.2 million outstanding as of March 30, 2024.