Central Garden & Pet Company · NASDAQ:CENT
Central Garden & Pet — Shareholder Meeting (February 2017)
25 slides from Central Garden & Pet's shareholder meeting presentation, Feb 14, 2017
Slide 1: 2017 Annual Meeting
2017 Annual Meeting George Roeth President & CEO February 14, 2017
Slide 2: Safe Harbor
Safe Harbor "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this presentation which are not historical facts, including expectations for improved efficiency and profitability are forward-looking statements that are subject to risks and
Slide 3: Agenda
Agenda 2016 Results Performance Track Record Strategy Investment Thesis 3
Slide 4: Strong 2016 Results
Strong 2016 Results $ in millions except EPS GAAP 2015 2016 Change Net Sales $1,650.7 $1,829.0 10.8% Gross Margin % 29.6% 30.2% 60 bp Operating Income $ 91.4 $129.4 41.5% Operating Margin % 5.5% 7.1% 160 bp Net Income $ 32.0 $ 44.5 39.0% Diluted EPS $ 0.64 $ 0.87 35.9% 4
Slide 5: Strong 2016 Results
Strong 2016 Results $ in millions except EPS GAAP Non-GAAP1 2015 2016 Change Change Net Sales/Organic Net Sales $1,650.7 $1,829.0 10.8% 4.2% Gross Margin % 29.6% 30.2% 60 bp Operating Income $ 91.4 $129.4 41.5% Operating Margin % 5.5% 7.1% 160 bp Net Income $ 32.0 $ 44.5 39.0% Diluted EPS $ 0.64 $ 0
Slide 6: P&L Metrics Accelerating Over the Last Three Years
P&L Metrics Accelerating Over the Last Three Years Net Sales (in billions) SG&A as a % of Sales $1.9 26% 25.9% $1.83 $1.8 25.1% 25.2% $1.70 25% 24.8% $1.7 $1.63 $1.65 $1.65 $1.60 $1.6 24% 23.6% $1.5 23.1% 23% $1.4 $1.3 22% $1.2 21% $1.1 $1.0 20% FY11 FY12 FY13 FY14 FY15 FY16 FY11 FY12 FY13 FY14 FY15
Slide 7: Strong Cash Flow for Additional Growth Investments & Acquisitions
Strong Cash Flow for Additional Growth Investments & Acquisitions EBITDA* Cash Provided by Operations (in millions) (in millions) $175 $169 $160 $151 $140 $126 $150 $125 $120 $125 $114 $105 $100 $89 $87 $100 $92 $80 $73 $60 $51 $75 $40 $50 $20 $25 $- -$20 FY11 FY12 FY13 FY14 FY15 FY16 $- FY11 FY12 F
Slide 8: Central Garden & Pet Strategy
Central Garden & Pet Strategy Accelerate the Growth Momentum of Our Portfolio Build on Strong Customer Relationships Increase Innovation Output and Success Rates Drive Cost Savings and Productivity Improvements to Fuel Growth Attract, Retain and Develop Exceptional Employees 8
Slide 9: Accelerate the Growth Momentum of Our Portfolio
Accelerate the Growth Momentum of Our Portfolio • Manage each business differentially based on role and strategy • Seek to acquire businesses that are accretive to our growth • Exit businesses if we cannot find a path to consistent profitability 9
Slide 10: Build on Strong Customer Relationships
Build on Strong Customer Relationships • Operate with a Customer First mindset • Expand our category management capabilities Lowes Private Label 10
Slide 11: Increase Innovation Output and Success Rates
Increase Innovation Output and Success Rates • Increase overall investment in innovation, consumer insights and demand creation to an appropriate level for each business • Expand our retail partners’ categories • Develop more differentiated and more defensible new products 11
Slide 12: Drive Cost Savings and Productivity Improvements to Fuel Growth
Drive Cost Savings and Productivity Improvements to Fuel Growth • Improve our operating efficiency with a continuous improvement mindset • Improve coordination by sharing best practices and aligning for scale • Optimize our supply chain footprint Current Logistics Flow 12
Slide 13: Drive Cost Savings and Productivity Improvements to Fuel Growth
Drive Cost Savings and Productivity Improvements to Fuel Growth • Improve our operating efficiency with a continuous improvement mindset • Improve coordination by sharing best practices and aligning for scale • Optimize our supply chain footprint Future Logistics Flow 13
Slide 14: Central Garden & Pet Strategy
Central Garden & Pet Strategy Accelerate the Growth Momentum of Our Portfolio Build on Strong Customer Relationships Increase Innovation Output and Success Rates Drive Cost Savings and Productivity Improvements to Fuel Growth Attract, Retain and Develop Exceptional Employees 14
Slide 15: Central is Led by a Seasoned Management Team
Central is Led by a Seasoned Management Team Glen Axelrod Dan Pennington SVP, Dog & Cat Brands SVP & COO Manufacturing/Pennington Jim Heim Mike Reed President of Pet Industry & Customer EVP, Strategy and M&A Development Niko Lahanas Kay Schwichtenberg SVP, Finance Ops, & Reporting EVP, Animal & Publ
Slide 16: Q1 2017 Results - Off to a Strong Start
Q1 2017 Results - Off to a Strong Start $ in millions except EPS GAAP Q1’16 Q1’17 Change Net Sales $359.8 $419.5 16.6% Gross Margin % 27.7% 28.8% 110 bp Operating Income $8.8 $19.9 126.1% Operating Margin % 2.4% 4.8% 240 bp Net Income ($8.6) $7.6 $16.2 Diluted EPS ($0.18) $0.15 $0.33 16
Slide 17: Investment Thesis
Investment Thesis 1) Underlying trends in both garden and pet categories are favorable. 2) The company is operating with a continuous improvement mindset – and has ample opportunities to take 1% to 2% out of costs per year. 3) Cost savings expected to fund growth levers, e.g. R&D, selling, marketing
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Slide 19: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 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-
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Non-GAAP financial measures reflect adjustments based on the following items: • Gains or losses on disposals of significant plant assets: • Fiscal 2016, we recorded a $2.4 million gain in our Pet segment from the sale of a manufacturing plant resulting from rationaliz
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Non-GAAP Adjustments FY 2016 GAAP to Non-GAAP Reconciliation (in thousands) For the Year Ended 2016 2015 Impairments of intangible assets $ 1,828 $ 7,272 (Gain)/loss on disposal of plant assets (2,363) - Incremental expenses from note redemption and issuance 14,339 -
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation SG&A Expense Reconciliation FY 2016 GAAP to Non-GAAP Reconciliation (in thousands) For the Year Ended 2016 2015 2014 2013 2012 2011 GAAP SG&A expense $423,692 $396,617 $397,811 $423,747 $439,737 $408,744 SG&A expense impact from non- GAAP adjustments 535 (7,272) 4,875
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Consolidated Operating Income Reconciliation FY 2016 GAAP to Non-GAAP Reconciliation (in thousands) For the Year Ended 2016 2015 2014 2013 2012 2011 GAAP operating income $129,358 $91,435 $56,213 $40,155 $74,421 $85,175 Total operating income impact (535) 7,272 12,033
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Net Income & Diluted Net Income Per Share Reconciliation FY 2016 GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) For the Year Ended September 2016 2015 2014 2013 2012 2011 GAAP net income attributable to Central $44,514 $31,971 $8,804 $(1,929)
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 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
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