Central Garden & Pet Company (NASDAQ:CENT.A) Q1 2018 Earnings Conference Call - Final Transcript

Feb 07, 2018 • 04:30 pm ET


Central Garden & Pet Company (NASDAQ:CENT.A) Q1 2018 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to Central Garden & Pet's First Quarter Fiscal Year 2018 Financial Results Conference Call. My name is Darren, and I will be your conference operator for today. [Operator Instructions]

I would now like to turn the call over to Steven Zenker, Vice President of Investor Relations, FP&A and Communications. Please go ahead.

Steven Zenker

Thank you, Darren. Good afternoon, everyone. Thank you for joining us. With me on the call today are George Roeth, Central's President and Chief Executive Officer; Niko Lahanas, Chief Financial Officer; Howard Machek, SVP, Finance and Chief Accounting Officer; J.D. Walker, President, Garden Branded Business; and Rodolfo Spielmann, President, Pet Consumer Products. A press release providing results for our first quarter ended December 30, 2017 is available on our website at www.central.com, and contains the GAAP to non-GAAP reconciliation for the non-GAAP measures discussed on this call.

Before I turn the call over to George, I would like to remind you that statements made during this conference call, which are not historical facts including adjusted EPS guidance for 2018, expectations for new product introductions, future acquisitions, and future revenue and profitability as well as the expected impact of the recent tax reform are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those implied by forward-looking statements. These risks and others are described in Central's Securities and Exchange Commission filings, including our Annual Report on Form 10-K filed on November 29, 2017. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise.

Now I will turn the call over to our CEO, George Roeth. George?

George C. Roeth

Thank you, Steve. Good afternoon, everybody. The bottom line is that we are on track for the fiscal year and our long-term plans. Additionally, we expect to benefit from continued M&A related activity and changes to our tax situation. These catalysts give us even greater optimism going forward. Both of Central's Garden & Pet segments continued to perform in line with expectations in the first quarter and are executing well against their growth objectives.

Together our Garden & Pet segments grew revenues by 5% in the first quarter with organic growth at 1%, despite difficult year ago comps and an unfavorable shipping calendar. Acquisitions, K&H and one month of Segrest, added another 4 percentage points of growth. As you may recall in the first quarter of last year, we grew 7% organically. And the way the calendar fell was more favorable for the first quarter last year than it was this year. So we continue to grow organically despite those challenging comps. And we certainly wouldn't expect the 1% growth rate to be normative for the year. Additionally, our growth investments were funded by our aggressive cost reduction program, which contributed to a 100 basis point increase in gross margin in Q1.

Our Pet segment during the quarter was led by strong growth in several of our businesses, including dog