2021 J.P. Morgan Global High Yield & Leveraged Finance .
2021 J.P. Morgan GlobalHigh Yield & LeveragedFinance ConferenceMarch 2021
DisclaimerCentral Garden & Pet Company (“we” or “Central”) emphasizes that certain statements about future results made inthis presentation constitute forward-looking statements within the meaning of the Private Securities Litigation ReformAct of 1995. Such forward-looking statements include projections. Forward-looking statements include statementsconcerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures,plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and thetrends we anticipate in the industries in which we operate and other information that is not historical information.There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward looking statements contained in this presentation, which are described in Central’s filings with the Securities andExchange Commission. Central undertakes no obligation to publicly update these forward -looking statements to reflectnew information, subsequent events or otherwise, except as required by law.We report our financial results in accordance with accounting principles generally accepted in the United States(GAAP). However, to supplement the financial results prepared in accordance with GAAP, we use non -GAAP financialmeasures including EBITDA, Adjusted EBITDA, organic sales and non-GAAP operating income. Management believesthese non-GAAP financial measures that exclude the impact of specific items (described in this presentation) may beuseful to investors in their assessment of our ongoing operating performance and provide additional meaningfulcomparisons between current and historical results. For a reconciliation of GAAP to non -GAAP financial measures,please see the Appendix in this presentation.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference2
Today’s PresentersTim CoferNiko LahanasCEOCFO2021 J.P. Morgan Global High Yield & Leveraged Finance Conference
AgendaCompany OverviewInvestment HighlightsFY21 OutlookQ&AAppendix2021 J.P. Morgan Global High Yield & Leveraged Finance Conference4
Company Overview2021 J.P. Morgan Global High Yield & Leveraged Finance Conference5
Central Garden & Petat a GlanceMarket leader in the lawn & garden andpet industriesFY20 Sales by SegmentGarden42%Pet58%Leading portfolio of more than 65 highquality brandsNationwide PresenceNet sales of 2.7B in FY20, of whichapprox. 95% generated in the U.S.Sales & DistributionManufacturingAcquired over 50 companies in the last25 years2021 J.P. Morgan Global High Yield & Leveraged Finance ConferenceHeadquarters6
OUR PURPOSENurture happy and healthy homesCentral to HomeStrategyOUR MISSIONLead the future of the Garden and Pet industries one blade of grass and one wagging tail at a timeOUR STRATEGIC PILLARSCONSUMERCUSTOMERCENTRALCOSTCULTUREBuild and grow brandsConsumers loveWin with winningCustomers & ChannelsFortify theCentral PortfolioReduce Cost to improvemargins & fuel growthStrengthen our entrepreneurial,business-unit led growth Culture2021 J.P. Morgan Global High Yield & Leveraged Finance Conference7
We remain vigilant in our efforts to operate and conduct business safely.COVID-19UpdateOur facilities have diligently maintained strict health and safety standards.All our manufacturing facilities and distribution centers remain open and fullyoperational.COVID-19 continues to accelerate the trends in pet and garden.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference8
Investment Highlights2021 J.P. Morgan Global High Yield & Leveraged Finance Conference9
Investment Highlights1Garden & Pet are Highly Attractive, Resilient Growth Industries With Favorable Long-Term Trends2Central’s Broad Portfolio of Brands Across Garden and Pet is Leading in the Industry3Competitive Advantages Driven by Retailer Relationships and Strong Distribution Networks4Ample Opportunity to Cut Costs and Invest in Capacity and Capabilities for Future Growth5A Track Record of Building Value via Acquisitions6Consistent Track Record of Strong Growth and Financial Performance7Experienced and Passionate Leadership and a Strong BU-Led Growth Culture2021 J.P. Morgan Global High Yield & Leveraged Finance Conference10
Central plays in 30B of 33BLawn & GardenConsumables IndustryGarden is anAttractiveIndustryInsectRepellent 0.7BStrong industry trends:sustainability, homesteadingand eCommerceGrowing Media, Mulch 1.8BSeasonal businessWild Bird 1.6BGrass &OtherSeed 1.8BLawn &GardenConsumablesIndustryRevenueFertilizers& ControlsLive Goods 19.9BDominated by home centersand mass merchandisersUnderpenetrated ineCommerce, but accelerating 7.0BCentral one of a few large playersin a concentrated industry2021 J.P. Morgan Global High Yield & Leveraged Finance Conference11
Central plays in 28B of 101B Pet industry 7BPet is a DynamicGrowth Industry 1BTreats & ChewsPetSupplies 3BHousehold penetration of 90%Live Pets & Fish 20BPetIndustryRevenueLitter 31BDog & Cat Food2021 J.P. Morgan Global High Yield & Leveraged Finance ConferenceStrong industry trends:humanization, health & wellness,eCommerce and convenience 39BFragmented competitiveset across categoriesServices(Vet &Non-Medical)Broad distribution acrossretail channelsGrowing eCommerce channel,accelerated by COVID-1912
#2 in Pet Supplies#1 in Pet BirdLeading BrandsAcross AttractiveSegments#1 in Small Animal#2 in Lawn & GardenConsumablesProfessional#1 in Wild Bird#1 in FarmInsect Control#1 in Suet#2 in Aquatics#2 in Grass Seed#1 in MunicipalMosquito Control#2 in Dog Toys#2 in Dog Pads#2 in Fertilizer#3 in Reptile#3 in CalmingProducts#3 in ControlsSource: Nielsen, Amazon data L52W ending 9/5/20, Segment ranking includes Central brands and private label partnerships2021 J.P. Morgan Global High Yield & Leveraged Finance Conference13
Net Sales of 1.6Bin FY20Consumer &professionalbusinesses withleading brands 65% Branded 20% Distribution 15% Private LabelCentral is a Leaderin the Pet SegmentOutstanding FY20 performancein COVID-19 challenged environment 13% 26% 37%Net SalesEBITeCommerce2021 J.P. Morgan Global High Yield & Leveraged Finance Conference14
Net Sales of 1.1Bin FY20 70%Sales fromTop 3 customers 60% Brands 20% Distribution 20% Private LabelCentral is a Leaderin the GardenSegmentOutstanding FY20 performancein COVID-challenged environment 14% 30% 192%Net SalesEBITeCommerce2021 J.P. Morgan Global High Yield & Leveraged Finance Conference15
Long-standing, DeepRelationships WithOur Retail Partners 40 years of outstanding partnerships with top tier retailers Strong joint business planning Private label producer for many retailers in key categories Emerging eCommerce leadership2021 J.P. Morgan Global High Yield & Leveraged Finance Conference16
GeneratingFuel for GrowthScalingProcurement2021 J.P. Morgan Global High Yield & Leveraged Finance ConferenceInvesting inEfficient CapacityOptimizingG&A17
Innovation Expands our Industry LeadershipClean & CozyBone BrothExtreme Odor BeddingDog BonesFood Fromthe Wild 50% 10MM 2.6ppShare gain inPaper Bedding(1)Sales inyear oneShare gain in Small AnimalFood at launch customers(2)(1) L4W ending 10/10/20 at Nielsen Amazon combined for Kaytee Clean & Cozy Clean Comfort as % of Paper Bedding (2) L13W ending 10/31/20 at Petco Amazon combined, Small Animal Food2021 J.P. Morgan Global High Yield & Leveraged Finance Conference18
Investing Behind Winning InnovationPennington Lawn BoosterMarketing Campaign 10MM 130% 145%56%Sales inyear oneConversionratePageviewsOf engagementfrom women2021 J.P. Morgan Global High Yield & Leveraged Finance Conference19
Build a Leading eCommerce PlatformDeveloping Winning CapabilitiesActivationAssortment 209MMFY20 eCommerceSalesContent 55%FY20 SalesgrowthAvailabilityeCommerceFlywheel 20%Of business in Pet,Search2021 J.P. Morgan Global High Yield & Leveraged Finance Conference3% in GardenTop10Customers forCentral20
History of Growththrough M&A50Acquisitionsover the last25 years2021 J.P. Morgan Global High Yield & Leveraged Finance Conference21
1,829Our MetricsAcceleratedOver the LastFive YearsFY162,054FY17Net SalesGross Profit & Margin(in millions)(in 29.6%FY16FY17FY18FY19FY20553FY18FY19FY20Operating Income & MarginEBITDA & Margin(1)(in millions)(in %9.4%FY16FY17FY18FY19FY20(1) See non-GAAP reconciliations in the Appendix.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference22
Cash & Cash EquivalentsCash Flow from Operations(in millions)(in millions)48293Strong Cash Flowand FY17FY18FY19FY20FY16Long-Term DebtFY19FY20Total Leverage(1)(in 63.13.2FY18FY192.61.9FY17FY20(1) See non-GAAP reconciliations in the Appendix. Calculated as total debt excluding lease divided by Adj. EBITDA.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference23
Continued Strong Performance in Q1 FY21Net SalesGross ProfitOperating IncomeEBITDA(in millions)(as a percentage of Net Sales)(in millions)(in millions) 23% 70bps 25MM 25MM5924048327.9%2727.2%152Q1 FY20Q1 FY21Q1 FY20Q1 FY212021 J.P. Morgan Global High Yield & Leveraged Finance ConferenceQ1 FY20Q1 FY21Q1 FY20Q1 FY2124
Long-Term Algorithmfor Profitable GrowthOrganic Net SalesEBITEPSGrowth Outlook:Growth Outlook:Growth Outlook:Low Single DigitMid Single DigitMid-High Single DigitGrow at or above categoryaverageGrow faster than Net SalesGrow faster than EBITDrivers:Strengthened capabilities and increasedinvestment in marketing and salesDrivers:Operating leverage and cost controlsDriver:Financial leverage2021 J.P. Morgan Global High Yield & Leveraged Finance Conference25
Strong &ExperiencedLeadershipTeamTim CoferCEOConsumerCentralConsumerCentralNiko LahanasCFOJohn HansonJ.D. WalkerGlen AxelrodDan PenningtonPresident,Pet Consumer ProductsPresident,Garden Consumer ProductsSenior Vice President,Dog & Cat BrandsSenior Vice President, WildBird, Chemicals & Fertilizers30 years14 years29 years39 years25 years42 years1 year14 years1 year10 years23 years42 yearsChris WalterGeorge YuhasKen ElsburyMike McGoohanMarilyn LeahyJon BalousekSenior Vice President,Central Life SciencesSenior Vice President,Marketing & StrategySenior Vice President,Human ResourcesPresident,Corporate DevelopmentSenior Vice President &Chief Information OfficerGeneral Counsel& Secretary25 years17 years25 years26 years23 years10 yearsNewNew9 yearsNew15 years10 yearsCombination of Deep Central Experience and Relevant Consumer Industry Experience2021 J.P. Morgan Global High Yield & Leveraged Finance Conference26
FY21 Outlook2021 J.P. Morgan Global High Yield & Leveraged Finance Conference27
Continued Business Momentum in Q1 FY21 Strong POS across both pet and garden Executing well online and in storeInvesting for GrowthFY21 Outlook Expanding long-term capacity to meet increased demand Investing in capabilities and demand creationChallenges and Uncertainty Around COVID-19 Remain Uncertainty around COVID-19 and continued pressures on supply chain Inflationary costs across freight, commodities and laborConfirming FY21 EPS of 1.90 or Higher Translates to FY21 adjusted EPS of 2.09 or higher Better visibility to impact of acquisitions at our Q2 FY21 earnings call2021 J.P. Morgan Global High Yield & Leveraged Finance Conference28
Q&A2021 J.P. Morgan Global High Yield & Leveraged Finance Conference29
Appendix2021 J.P. Morgan Global High Yield & Leveraged Finance Conference30
Notes & DisclosuresUse of Non-GAAP Financial MeasuresWe report our financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, to supplement thefinancial results prepared in accordance with GAAP, we use non-GAAP financial measures including EBITDA, Adjusted EBITDA, organic sales, non-GAAPoperating income and non-GAAP net income and diluted net income per share. Management believes these non-GAAP financial measures that exclude theimpact of specific items (described on the next slide) may be useful to investors in their assessment of our ongoing operating performance and provideadditional meaningful comparisons between current and historical results.The reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP areshown in the tables below. We believe that the non-GAAP financial measures provide useful information to investors and other users of our financialstatements, by allowing for greater transparency in the review of our financial and operating performance. Management also uses these non-GAAP financialmeasures in making financial, operating and planning decisions and in evaluating our performance, and we believe these measures similarly may be usefulto investors in evaluating our financial and operating performance and the trends in our business from management's point of view. While our managementbelieves that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our GAAP financial resultsand should be read in conjunction with those GAAP results.We have not provided a reconciliation of forward-looking non-GAAP guidance measures to the corresponding GAAP measures, because such reconciliationcannot be done without unreasonable efforts due to the potential significant variability and limited visibility of the excluded items discussed below.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference31
Notes & DisclosuresEBITDA: Defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization (or operating income plusdepreciation and amortization expense). Other companies may calculate EBITDA differently and it may not be comparable.Organic net sales: A non-GAAP measure that excludes the impact of businesses purchased or exited in the prior 12 months, because we believe it permitsinvestors to better understand the performance of our historical business without the impact of recent acquisitions or dispositions.Non-GAAP financial measures reflect adjustments based on the following items:Incremental expenses from note redemption and issuance: We have excluded the expense related to the issuance of 500 million aggregateprincipal amount of 4.125% senior notes due October 2030 and redemption of our 400 million 6.125% senior notes due November 2023 as it represents aninfrequent transaction that occurs in limited circumstances that impacts the comparability between operating periods. We believe the adjustment of thisexpense supplements the GAAP information with a measure that may be used to assess the sustainability of our operating performance.Loss on the sale of a business: We have excluded the impact from the sale of our Breeder’s Choice business unit as it represents an infrequent transactionthat occurs in limited circumstances that impacts the comparability between operating periods. We believe that the adjustment of these charges supplementsthe GAAP information with a measure that can be used to assess the sustainability of our operating performance.Tax impact: adjustment represents the impact of the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income. The tax impactof the non-GAAP adjustments is calculated based on the consolidated effective tax rate on a GAAP basis, applied to the non-GAAP adjustments, unless theunderlying item has a materially different tax treatment.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference32
GAAP to Non-GAAP Reconciliationfor the Fiscal Quarter Ended(in thousands, except for per share amounts)26-Dec-2028-Dec-19GAAP net income (loss) attributable to Central Garden & Pet Company5,613(4,417)Incremental expenses from note redemption and issuance9,952-Loss on sale of business2,611-Tax effect of incremental expenses and loss on sale(2,470)-Non-GAAP net income attributable to Central Garden & Pet Company15,706(4,417)GAAP diluted net income per share0.10(0.08)Non-GAAP diluted net income per share0.29(0.08)54,68654,755Net Income & Diluted Net Income Per Share ReconciliationShares used in GAAP and non-GAAP diluted net earningsper share calculation2021 J.P. Morgan Global High Yield & Leveraged Finance Conference33
GAAP to Non-GAAP Reconciliationfor the Fiscal Quarter ended December 26, 2020(in millions)ConsolidatedPet SegmentGarden Segment% Change% Change% ChangeOrganic Net Sales ReconciliationReported net sales Q1 FY21 (GAAP)592.2436.4155.8Reported net sales Q1 FY20 (GAAP)482.8366.6116.2Increase in net sales109.4Effect of acquisitions and divestitures on increase in net salesIncrease in organic net sales22.7%1.6111.02021 J.P. Morgan Global High Yield & Leveraged Finance 39.333.8%34
GAAP to Non-GAAP Reconciliationfor the First Fiscal Quarter FY21 and FY20(in thousands)LTM Q1 FY21 LTM Q1 FY20EBITDA ReconciliationNet income attributable to Central Garden & Pet CompanyIncome tax expense (benefit)Other (income) expenseInterest expense, netNet income (loss) attributable to non-controlling interestDepreciation & AmortizationEBITDAStock-based compensationPreviously held investment interest fair value remeasurementLoss on sale of businessIntangible asset impairmentAdjusted EBITDA2021 J.P. Morgan Global High Yield & Leveraged Finance 820(3,215)2,611002,540300,196210,87535
GAAP to Non-GAAP Reconciliation(in thousands)FY20FY19FY18FY17FY16EBITDA ReconciliationNet income attributable to Central Garden & ,831169,35918,98214,66211,60211,1158,356Previously held investment interest fair valueremeasurement0(3,215)000Gain on sale of plant assets000(2,050)(2,363)Intangible asset 6177,180Income tax expense (benefit)Other (income) expenseInterest expense, netNet income (loss) attributable to non-controllinginterestDepreciation & AmortizationEBITDAStock-based compensationAdjusted EBITDA2021 J.P. Morgan Global High Yield & Leveraged Finance Conference36
About Central Garden & PetCentral Garden & Pet (NASDAQ: CENT, CENTA) understands that home is central to life and has proudlynurtured happy and healthy homes for over 40 years. With 2020 net sales of 2.7 billion, Central is on a mission tolead the future of the pet and garden industries. The Company’s innovative and trusted products are dedicated tohelp lawns grow greener, gardens bloom bigger, pets live healthier and communities grow stronger. Central is hometo a leading portfolio of more than 65 high-quality brands including Pennington, Nylabone, Kaytee, Amdro andAqueon, strong manufacturing and distribution capabilities and a passionate, entrepreneurial growth culture. CentralGarden & Pet is based in Walnut Creek, California and has over 6,300 employees across North America andEurope. For additional information about Central, please visit the Company’s website at www.central.com.2021 J.P. Morgan Global High Yield & Leveraged Finance Conference37
Please reach out to us with any comments or questions:IR@Central.com(925) 412-6726
Marketing & Strategy Ken Elsbury Senior Vice President, Central Life Sciences George Yuhas General Counsel & Secretary Marilyn Leahy Senior Vice President, Human Resources Glen Axelrod Senior Vice President, Dog & Cat Brands John Hanson President, Pet Consumer Products J.D. Walker Preside
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Technology, Media and Telecom onference MARH 1, 2021 Disney Speakers: ob hapek Chief Executive Officer. Morgan Stanley TMT Conference March 1, 2021 Page 2 PRESENTATION en Swinburne - Morgan Stanley & Co. LLC Hello, everybody. Welcome back. I'm en Swinburne, Morgan Stanley's media analyst.
