Central Garden & Pet(CENT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the periods ended March 29, 2025, and March 30, 2024 are presented Condensed Consolidated Balance Sheets Total assets reached $3.63 billion as of March 29, 2025, with a notable increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 29, 2025 | March 30, 2024 | September 28, 2024 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $516,675 | $301,332 | $753,550 | | Inventories, net | $824,281 | $914,352 | $757,943 | | Total current assets | $1,975,253 | $1,850,618 | $1,886,806 | | Total assets | $3,629,617 | $3,540,018 | $3,553,439 | | Liabilities & Equity | | | | | Total current liabilities | $597,651 | $556,490 | $515,384 | | Long-term debt | $1,190,724 | $1,188,955 | $1,189,809 | | Total liabilities | $2,186,213 | $2,027,851 | $2,000,000 (Calculated) | | Total equity | $1,543,404 | $1,512,167 | $1,557,545 | Condensed Consolidated Statements of Operations Quarterly net sales decreased to $833.5 million, while net income slightly increased to $63.6 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 (Three Months) | Q2 2024 (Three Months) | YTD 2025 (Six Months) | YTD 2024 (Six Months) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $833,537 | $900,090 | $1,489,973 | $1,534,623 | | Gross profit | $273,083 | $278,880 | $468,782 | $457,725 | | Operating income | $93,324 | $93,447 | $121,316 | $101,859 | | Net income attributable to Central | $63,633 | $61,987 | $77,642 | $62,417 | | Diluted EPS | $0.98 | $0.93 | $1.19 | $0.93 | Condensed Consolidated Statements of Cash Flows Net cash used by operating activities increased to $115.7 million for the six-month period ended March 29, 2025 Cash Flow Summary (Six Months Ended, in thousands) | Cash Flow Activity | March 29, 2025 | March 30, 2024 | | :--- | :--- | :--- | | Net cash used by operating activities | $(115,695) | $(94,302) | | Net cash used in investing activities | $(20,203) | $(80,286) | | Net cash used by financing activities | $(99,724) | $(13,171) | | Net decrease in cash | $(237,066) | $(187,344) | Notes to Condensed Consolidated Financial Statements Key disclosures include the TDBBS acquisition, debt structure, segment data, and an update on a legal contingency - On November 3, 2023, the Company acquired TDBBS, LLC for approximately $60 million to expand its dog and cat business[54] - The company's long-term debt primarily consists of three series of senior notes totaling $1.2 billion, with maturities in 2028, 2030, and 2031[63] - A legal proceeding with Nite Glow regarding a patent infringement claim is pending a court decision on damages[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 7.4% Q2 sales decline, improved gross margin, and the company's liquidity position Results of Operations Q2 2025 net sales fell 7.4% to $833.5 million, while gross margin improved by 180 basis points to 32.8% Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $833.5M | $900.1M | -7.4% | | Pet Net Sales | $453.7M | $480.2M | -5.5% | | Garden Net Sales | $379.8M | $419.9M | -9.5% | | Gross Profit | $273.1M | $278.9M | -2.1% | | Gross Margin | 32.8% | 31.0% | +180 bps | | Operating Income | $93.3M | $93.4M | -0.1% | Six Months 2025 vs Six Months 2024 Performance | Metric | YTD 2025 | YTD 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $1,490M | $1,535M | -2.9% | | Gross Profit | $468.8M | $457.7M | +2.4% | | Gross Margin | 31.5% | 29.8% | +170 bps | | Operating Income | $121.3M | $101.8M | +19.1% | - In March 2025, the company decided to wind-down its operations in the United Kingdom, incurring $5.3 million in one-time costs[103] Use of Non-GAAP Financial Measures The company uses non-GAAP measures like adjusted EBITDA to exclude one-time charges and supplement GAAP results Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands, except per share) | Metric | GAAP | Adjustments (Facility Closures) | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Income | $63,633 | $4,084 (net of tax) | $67,717 | | Diluted EPS | $0.98 | | $1.04 | | Operating Income | $93,324 | $5,339 | $98,663 | Adjusted EBITDA Reconciliation (Three Months Ended March 29, 2025, in thousands) | Segment | Adjusted EBITDA | | :--- | :--- | | Pet | $75,451 | | Garden | $69,174 | | Corporate | $(21,298) | | Total | $123,327 | Liquidity and Capital Resources Liquidity is supported by a $750 million credit facility, with total debt stable at approximately $1.2 billion - Net availability under the $750 million Credit Facility was approximately $706 million as of March 29, 2025[78][165] - During the first six months of fiscal 2025, the company repurchased approximately 3.0 million shares for $93.4 million[149] - Anticipated capital expenditures for fiscal 2025 are approximately $60 million, with $17 million invested year-to-date[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk exposure since the last annual report on Form 10-K - No material change in market risk exposure has occurred since the fiscal year-end 2024 Form 10-K filing[175] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the end of the fiscal quarter - Management concluded that disclosure controls and procedures were effective as of the end of the quarter[176] - No material changes to internal control over financial reporting were identified during the second quarter of fiscal 2025[177] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company provides an update on its litigation with Nite Glow Industries, with a court decision pending - The retrial of the damages issue in the Nite Glow lawsuit concluded in early March 2024, but no decision has been issued by the court[179] - Management believes the ultimate resolution of the Nite Glow matter will not have a material impact on the company's financial statements[180] Item 1A. Risk Factors No material changes from the risk factors previously disclosed in the company's annual report have been reported - No material changes to risk factors have been reported since the last Form 10-K filing[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.34 million shares this quarter, with $101.2 million remaining under its repurchase program Share Repurchases for Quarter Ended March 29, 2025 | Period | Total Shares Purchased | Average Price Paid | Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | Dec 29, 2024 - Feb 1, 2025 | 4,804 | $30.68 | $131,028,000 | | Feb 2, 2025 - Mar 1, 2025 | 181,824 | $32.62 | $131,028,000 | | Mar 2, 2025 - Mar 29, 2025 | 1,156,651 | $33.51 | $101,172,000 | | Total | 1,343,279 | $33.38 | $101,172,000 | - In December 2024, the Board of Directors authorized a $100 million increase to the share repurchase program[185] Item 5. Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter - No directors or officers reported changes to their Rule 10b5-1 trading arrangements during the quarter[185] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL financial data - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 1350[186] - The report includes financial data formatted in Inline XBRL as Exhibit 101[186]