Central Garden & Pet Company · NASDAQ:CENT
Central Garden & Pet — Consumer Analyst Group of New York 2018
22 slides from Central Garden & Pet's conference presentation, Dec 13, 2018
Slide 1: Consumer Analyst Group of New York
Consumer Analyst Group of New York December 13, 2018
Slide 2: Presenters
Presenters • George Roeth • President & CEO • Niko Lahanas • Chief Financial Officer • Steve Zenker • Vice President, Investor Relations, FP&A & Communications 12/11/2018 2
Slide 3: 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 and FY19 guidance are forward- looking statements that are su
Slide 4: 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,
Slide 5: Central Garden & Pet (Nasdaq: CENT and CENTA)
Central Garden & Pet (Nasdaq: CENT and CENTA) • Leading manufacturer and supplier of branded and private label lawn & garden and pet products • Founded in 1980 as a distribution company. Approximately 21% of revenues today from distribution • 10% - 15% of revenue from private label products • In fis
Slide 6: Proven M&A capability
Proven M&A capability …Central Possesses Acquisition Momentum with Several Recent Deals… • Central is a preferred acquirer 2014 – 2018 Deals by Segment • Track record of successful M&A - over 50 acquisitions in the last 25 years Live Fish & Small Animals • Provides a national platform for smaller bu
Slide 7: The Garden Industry is Seasonal with a Concentrated Supplier Base
The Garden Industry is Seasonal with a Concentrated Supplier Base The Garden Industry Central’s Garden Business • Central participates in $22B of a $40B industry • Net sales of $874M in 2018 • Home centers & mass merchandisers represent • 19% of segment sales from 3rd party distribution approximatel
Slide 8: The Pet Segment is Fragmented with Attractive Growth Rates
The Pet Segment is Fragmented with Attractive Growth Rates The Pet Industry Central’s Pet Business • Central participates in $27B of a $58B industry • Net sales of $1.3B in 2018 • Fragmented customer base • Consumer and professional businesses • Less than 20% sales through major pet specialty retail
Slide 9: Central's Broad Product Portfolio is Unique
Central’s Broad Product Portfolio is Unique Commentary Company Garden Products Pet Products Dog & Cat Supplies • Participant in a Dog & Cat Food, Wild Bird Feed Treats & Chews Animal Health – Animal Health Bird & Small Fertilizers Grass Seed Aquatics & Professional number of categories Live Plants C
Slide 10: Our Markets
Our Markets* Market Opportunity $6B Dog & Cat Supplies $5B Live Garden $4B Plants Dog & Cat Pet Treats & Both Chews Natural = Size of Central’s 2018 sales $3B (Dog & Cat) Nutrition Fertilizer Source: Internal estimates – U.S. wholesale markets *Excludes third-party distribution sales Controls $2B An
Slide 11: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio • Manage businesses differentially based on clearly articulated strategies. growth momentum • Build out our portfolio in attractive broadly defined Pet & Garden markets. • Ensure sufficient demand creation investment to drive organic growth & bu
Slide 12: Strong 2018 Results
Strong 2018 Results GAAP $ in millions except EPS For the Fiscal Year Ended September Non-GAAP 1,2 2017 2018 Change Change Net Sales/Organic Net Sales $2,054 $2,215 7.8% 2.6% Gross Margin % 30.8% 30.5% (30 bps) - Operating Income $156.1 $167.3 7.2% 8.6% Operating Margin % 7.6% 7.6% - - Net Income $
Slide 13: Metrics Accelerating Over the Last Three Years
Metrics Accelerating Over the Last Three Years Net Sales Operating Margin (in billions) 10% $2.5 $2.2 9% $2.1 7.6% $2.0 $1.8 8% 7.6% $1.7 $1.7 7.1% $1.6 $1.7 7% $1.5 6% 5.5% 5% 4.4% $1.0 4% 3.5% 3% 2.4% $0.5 2% $- 1% FY12 FY13 FY14 FY15 FY16 FY17 FY18 0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 EBITDA & E
Slide 14: 2019 Guidance
2019 Guidance* • Company expects overall revenue growth in mid-single digits ▪ Organic revenue growth consistent with LT annual target of 2% - 3% • EBITDA** expected to grow in mid-single digits; Organic EBITDA* growth in upper-single digits • Company expects fully-diluted EPS of $1.80 or higher, a
Slide 15: Questions & Answers
Questions & Answers 15 12/11/2018
Slide 16: 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 orga
Slide 17: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Non-GAAP financial measures reflect adjustments based on the following items: • Asset impairment charges: We have excluded the impact of asset impairments on intangible assets and equity method investments as such non-cash amounts are inconsistent in amoun
Slide 18: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Non-GAAP Adjustments GAAP to Non-GAAP Reconciliation (in thousands) For the Fiscal Year Ended September, 2018 2017 (Gain)/loss on disposal of plant assets $ - $ (2,050) Total non-GAAP adjustments $ - $ (2,050) Tax effects of non-GAAP adjustments 757 Tax ef
Slide 19: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) 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 busines
Slide 20: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Consolidated Operating Income Reconciliation GAAP to Non-GAAP Reconciliation (in thousands) For the Fiscal Year Ended September, 2018 2017 2016 2015 2014 2013 2012 GAAP operating income $167,336 $156,112 $129,358 $91,435 $56,213 $40,155 $74,421 Total opera
Slide 21: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) EBITDA Reconciliation GAAP to Non-GAAP Reconciliation (in thousands) For the Fiscal Year Ended September, 2018 2017 2016 2015 2014 2013 2012 Net income (loss)attributable to Central Garden & Pet $123,594 $78,828 $44,514 $31,971 $8,804 $(1,929) $21,173 Inte
Slide 22: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Net Income & Diluted Net Income Per Share Reconciliation GAAP to Non-GAAP Reconciliation (in thousands, except per share amounts) For the Fiscal Year Ended September, 2018 2017 2016 2015 2014 2013 2012 GAAP net income attributable to Central Garden & Pet $
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