Central Garden & Pet Company · NASDAQ:CENT
Central Garden & Pet — Shareholder Meeting (February 2019)
33 slides from Central Garden & Pet's shareholder meeting presentation, Feb 12, 2019
Slide 1: Central Garden & Pet Annual Meeting
CENTRAL GARDEN & PET ANNUAL MEETING FEBRUARY 12, 2019
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 and FY19 guidance are forward-looking statements that are sub
Slide 3: Central Garden & Pet Company Overview
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 4: Central's Broad Product Portfolio Is Unique
CENTRAL’S BROAD PRODUCT PORTFOLIO IS UNIQUE Commentary Company Garden Products Pet Products • Participant in a Animal Health – Food, Treats & Animal Health Bird & Small Fertilizers Grass Seed Aquatics & Professional Dog & Cat Dog & Cat Wild Bird Live Plants Consumer number of categories Controls Sup
Slide 5: Business Model Drives Competitive Advantages
BUSINESS MODEL DRIVES COMPETITIVE ADVANTAGES Our Broad Product Portfolio and Distribution Footprint Differentiate Central • Broad product portfolio: premium brands through private label programs • Superior knowledge of consumer and marketplace trends as a Company Overview manufacturer & an owner of
Slide 6: 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% Performance Track Record Gross Margin % 30.8% 30.5% (30 bps) - Operating Income $156.1 $167.3 7.2% 8.6% Operating Margin % 7.
Slide 7: 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 8% 7.6% $1.7 $1.8 7.1% $1.7 $1.6 $1.7 7% $1.5 6% 5.5% 5% 4.4% $1.0 Performance Track Record 4% 3.5% 3% 2.4% $0.5 2% $- 1% FY12 FY13 FY14 FY15 FY16 FY17 FY18 0% FY12 FY13 FY14 FY15
Slide 8: 2019 Guidance
2019 GUIDANCE • Company expects overall revenue growth in mid-single digits • Organic revenue growth consistent with LT annual target of 2% - 3% Performance Track Record • Company expects fully-diluted EPS of $1.80 or higher, a decrease from FY 2018 due to: • Higher projected tax rate • Increased sh
Slide 9: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio growth momentum Keep the Core Healthy Strategy Build digital capabilities for competitive advantage and compelling consumer experiences Drive Cost Savings & Productivity to Fuel Growth Attract, Retain & Develop Exceptional Employees 9 9
Slide 10: Build Out Our Portfolio in Attractive Broadly Defined Pet & Garden Markets
BUILD OUT OUR PORTFOLIO IN ATTRACTIVE BROADLY DEFINED PET & GARDEN MARKETS Accelerate the Portfolio Growth Momentum • The largest commercial grower of flowers & plants in the mid-Atlantic U.S. • Live plants drive traffic to stores • Category growing faster than overall Garden industry • Dedicated on
Slide 11: Build Out Our Portfolio in Attractive Broadly Defined Pet & Garden Markets
BUILD OUT OUR PORTFOLIO IN ATTRACTIVE BROADLY DEFINED PET & GARDEN MARKETS Accelerate the Portfolio Growth Momentum • A leading supplier of pet food & supplies in the Midwest • Fills out company’s national footprint • Expands Central’s food distribution business • Provides access to the veterinary c
Slide 12: Building M&A Capacity
BUILDING M&A CAPACITY Accelerate the Portfolio Growth Momentum • Added people resources • $300M debt raise in December 2017 • $200M equity offering in August 2018
Slide 13: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio growth momentum Keep the Core Healthy Strategy Build digital capabilities for competitive advantage and compelling consumer experiences Drive Cost Savings & Productivity to Fuel Growth Attract, Retain & Develop Exceptional Employees 13 13
Slide 14: Historic Organic Growth
HISTORIC ORGANIC GROWTH Organic Growth 8.0% 7.6% 7.0% 7.0% 6.1% 6.0% 5.0% 5.0% 4.2% 4.0% 3.6%* 3.0% 2.7%* 2.0% 1.7% 1.1% 1.0% 0.0% Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 -1.0% -0.1% *Excludes 53rd week in Q4 2017 2/12/2019 14
Slide 15: Develop More Differentiated and Defensible New Products
DEVELOP MORE DIFFERENTIATED AND DEFENSIBLE NEW PRODUCTS • New brand for the Pet Specialty Channel and Independent Pet Retailers Keep the Core Healthy • Collection of single & limited ingredients • Minimally processed treats & chews Four Paws Wee Wee • Stain & Odor and pads • Wee-Wee Professional Str
Slide 16: Develop More Differentiated and Defensible New Products
DEVELOP MORE DIFFERENTIATED AND DEFENSIBLE NEW PRODUCTS Pennington Lawn Booster • Combination grass seed, fertilizer & soil enhancer • For quicker, thicker, greener grass • Feeds for up to 12 weeks • Corrects the pH and loosens the soil • Uses up to 30% less water year after year Pennington Smart Bl
Slide 17: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio growth momentum Keep the Core Healthy Strategy Build digital capabilities for competitive advantage and compelling consumer experiences Drive Cost Savings & Productivity to Fuel Growth Attract, Retain & Develop Exceptional Employees 17 17
Slide 18: Build Digital Capabilities for Competitive Advantage and Compelling Consumer Experience
BUILD DIGITAL CAPABILITIES FOR COMPETITIVE ADVANTAGE AND COMPELLING CONSUMER EXPERIENCE • Free up businesses to compete in ecommerce by ensuring we have the right policies, products and programs to allow all channels to compete effectively. • Optimize the supply chain for high-demand ecommerce items
Slide 19: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio growth momentum Keep the Core Healthy Strategy Build digital capabilities for competitive advantage and compelling consumer experiences Drive Cost Savings & Productivity to Fuel Growth Attract, Retain & Develop Exceptional Employees 19 19
Slide 20: Optimize Our Supply Chain Footprint
OPTIMIZE OUR SUPPLY CHAIN FOOTPRINT Colorado Springs, CO Surprise, AZ Athens, TX
Slide 21: Improve Coordination by Sharing Best Practices and Aligning for Scale
IMPROVE COORDINATION BY SHARING BEST PRACTICES AND ALIGNING FOR SCALE Drive Cost Savings & Productivity to Fuel Growth AMDRO Quick Kill® Mosquito Controls Only brand to offer full line of solutions aligned with CDC recommendation ▪ Cross-company collaboration ▪ Larvicide & Adulticide – control produ
Slide 22: Central Garden & Pet Strategy
CENTRAL GARDEN & PET STRATEGY Accelerate the portfolio growth momentum Keep the Core Healthy Strategy Build digital capabilities for competitive advantage and compelling consumer experiences Drive Cost Savings & Productivity to Fuel Growth Attract, Retain & Develop Exceptional Employees 22 22
Slide 23: A Dedicated Staff of Now Over 5,400 Employees
A DEDICATED STAFF OF NOW OVER 5,400 EMPLOYEES Working in 92 Locations Throughout the United States, Canada, Mexico, China and UK Attract, Retain & Develop Exceptional Employees 23 23
Slide 24: Investing in Our Team
INVESTING IN OUR TEAM • Expanded Garden leadership academy to Pet • Increased focus on succession planning and internal talent development • Enhanced 401(K) program • Increased company match • Simplified qualification requirements • Expanded bonus program
Slide 25: 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 26: Questions & Answers
QUESTIONS & ANSWERS Interpe’ TMDRI 1 FLEX S pono) GS = aie A = wie «=0 monrre «= ZODIAC. Reels Nutri Dent AQueEon. Bell @ «= NURSERY is) is) Comfort Zene -@® Segrest Inc. ADAMS = SS, rey ZQFCON. Altosid lover nu oF
Slide 27: 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 28: 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 29: 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 Appendix (Gain)/loss on disposal of plant assets $ $ (2,050) - Total non-GAAP adjustments $ - $ (2,050) Tax effects of non-GAAP adjustments 7
Slide 30: 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 31: 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 32: 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 Appe
Slide 33: 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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