Central Garden & Pet Company

Ladies and gentlemen, thank you for standing by. Welcome to Central Garden & Pets first quarter fiscal 2020 financial results conference call. My name is Diego and I will be your conference operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If anyone should require operator assistance during the conference, please press star followed by zero on your touchtone phone. As a reminder, this conference call is being recorded. I would now like to turn the call over to Howard Machek. Please go ahead.

Thank you, Diego. Good afternoon, everyone. Thank you for joining us. With me on the call today are Tim Cofer, Central's Chief Executive Officer, Nico Lahanas, Chief Financial Officer, J.D. Walker, President, Garden Branded Business, and John Hanson, President, Pet Consumer Products. Our press release providing results for our first quarter ended December 28, 2019 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 Tim, I would like to remind you that statements made during this conference call, which are not historical facts, including adjusted EPS guidance, For 2020, expectations for new product introductions, long-term organic growth goals, future acquisitions and future revenue, margin expansion, cost savings, and profitability 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 27, 2019. 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, Tim Cofer.

Tim? Thank you, Howard, and thanks to all of you on the phone for joining today. As you know, this was my first quarter here as Central's CEO. My time with colleagues, customers, and consumers over the last four months has only strengthened my conviction about the value creation opportunities ahead. These include sustained and attractive organic top line growth, margin expansion, and continued smart M&A activity. We have the platform, the people, and the resources required to unlock our potential. and I look forward to providing, as promised on the last call, a more robust view when we share our strategy later this year. As you have seen from our press release, first quarter performance was generally in line with the guidance we gave on our last earnings call. Total sales rose 4.5% with the increase driven principally by the ARDN and CNS acquisitions. Organic sales were flat. Our loss per share was 8 cents, close to our November guidance of a loss of 10 to 15 cents. This compares to income of 3 cents per share in the first quarter of 2019. You'll recall that the key factors that made for a tough comparison with last year's first quarter include Our strategic exit of the fashion-oriented pottery product line in mid-2019, a major retailer's decision in 2019 to exit the live fish business, a fire in one of our pet bedding facilities, and the inclusion of Arden in our garden segment. Arden typically has a loss or little to no profit in its out-of-season quarters. Importantly, Q1 is typically our smallest in terms of revenues and earnings because of the seasonality of our garden segment. Back in November, I spoke to you about my view that Central needed to invest more in growth initiatives and consumer-oriented capabilities to drive success in the years ahead. To that end, I challenged each of our businesses to identify areas where they believe significant opportunity exists to increase sales and profits if resources were made available to them to help spur growth. The response from the businesses was encouraging with numerous areas identified for smart investments. Examples include incremental marketing and promotion activities, enhanced digital and e-commerce initiatives, increased capital expenditures, and select additional personnel in targeted functions. We plan to begin executing on these initiatives very soon with many of them being funded during 2020. The early top line benefits of these actions will likely begin to show up later this year and we expect to see a nice overall return on these investments over the next 18 to 36 months. So while there may be a negative income impact as we invest in the short term, including in our second quarter, this is the right path to enable sustainable growth and strong shareholder returns in the years ahead. Importantly, our planned investments are embedded in the fiscal 2020 EPS guidance we gave last quarter. We are not changing that guidance today. We continue to expect 2020 EPS to be at or modestly above fiscal 19 EPS of $1.61. Last quarter, I also discussed Central's efforts in the months ahead to evaluate and fortify our long-term strategy. We've kicked off these efforts to identify and prioritize the initiatives we believe will be most important in driving our success in the years ahead. Internally, we're calling it Vision 2025, and we currently have leaders across our business units and functions engaged in this important effort. We expect to share further information of this plan with investors this summer, and we'll tell you more about the specific date and format as we get closer. Finally, I want to reinforce my confidence in the long-term potential of Central Garden & Pet. We've got work to do, but I'm confident that we can deliver. And with that, let me turn it over to our CFO, Nico, to share more of the Q1 details for the company and across our Garden & Pet segments. Thank you, Tim. Good afternoon, everyone.