Q1 2020 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to Central Garden and pet.
First quarter fiscal.
2020 financial results conference call.
My name is Diego and I will be Roth conference operator for today.
Time, all participants are in listen only mode. Later, we will conduct a question and answer session instructions will be given at that time, if anyone should require operator systems. During the conference. Please press star followed by zero on your Touchtone phone.
As a reminder, this conference call is being recorded.
I'd 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, our Timco for.
Central's Chief Executive Officer.
Nicola Honda Chief Financial Officer.
Grady Walker precedents garden branded business and John Hanson President consumer products.
Our press release, providing results for our first quarter ended December 28 2019.
It's available on our website at Www Dot central Dot Com and contains the GAAP to non-GAAP reconciliation.
Non-GAAP measures discussed on this call.
Before I turn the call over the 10 I would like to remind you that statements made during this conference call, which are not historical facts, including adjusted EPS guidance.
2020.
Expectations for new product introductions.
Long term organic growth goals.
You draft positions and future revenue margin expansion cost savings and profitability.
Forward looking statements subject to risks and uncertainties that could cause actual results to differ materially.
That's implied by forward looking statements.
These risks and others are described in Central 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 kimco for sale.
Thank you our and thanks to all of you on the phone for joining today.
No that's what my first quarter here as central CEO.
My time with colleagues customers and consumers over the last four months has only strengthened my conviction about the value creation opportunities.
These include sustained and attractive organic topline growth margin expansion and continued smart M&A activity.
We have to platform the people and the resources required to unlock or potential and I look forward to providing has 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 her last earnings call.
Total sales rose 4.5%.
With the increase driven principally by the Arden and CNS acquisitions.
Organic sales were flat.
Our loss per share was eight cents.
Close to our November guidance of a lots of 10 to 15 centers.
This compares to income of three cents per share in the first quarter up 29 team.
[laughter], 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 retailers decision in 2019 to exit the like fish business.
Hi, Eric and one of our pet bedding facilities and the inclusion of Oregon, and our Garden segment.
Pardon typically has a loss for little to no profit and it's out of season quarters.
Importantly, Q1 is typically our smallest in terms of revenues and earnings because of the seasonality of our garden segment.
[noise] 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 challenge each of our businesses to identify areas, where they believe significant opportunity exists to increase sales and profits. If resources were made available for them to help spur growth.
The response from the businesses was encouraging.
With numerous areas identified for smart investments.
[noise] examples include incremental marketing and promotion activities enhanced digital and ecommerce 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 twentytwenty.
The early topline benefits of these actions will likely began 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 Twentytwenty EPS guidance, we gave last quarter.
We are not changing that guidance today.
We continue to expect Twentytwenty he has to be apps for modestly above fiscal 19 EPS of $1.61.
Last quarter I also discuss central's efforts in the months ahead to evaluate and fortify our long term strategy.
We 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 the slab 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 and 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 the coupon details for the company and across our garden and pet segments.
Thank you Tim good afternoon, everyone.
First quarter total company sales increased 4.5% or 21 million to 483 million from 462 million in the first quarter last year.
A recent acquisitions for the main drivers or the sales game organic sales came in relatively flat negatively impacted by the factors Tim mentioned earlier.
Consolidated gross profit for the quarter increased 1 million in our gross margin decreased 100 basis points to 27.2% negatively impacted by unfavorable mix of sales and the impact at the lower volumes to core and live fish businesses.
<unk> expense for the quarter rose, 8% or 9 million versus a year ago due to the recent transaction acquisitions.
Our corporate expense increased.
Versus the first quarter last year, due primarily to higher variable compensation expense and increased third party expenses as a percent of sale Sta increased 80 basis points to 26.8%.
Central operating income for the quarter decreased to 2 million, an operating margin decreased 180 basis point to 0.4% due in part to the Arden acquisition, the lower gross margin and the higher SGN excesses.
EBITDA for the quarter decreased 33% to 15 million.
Turning now to the pet segment.
Pet segment sales for the quarter increased 4% or 14 million to 354 million and grew 1% on inorganic basis. Despite the life fish and pet bedding declines mentioned earlier.
Most of the other pet category had positive organic growth.
Segment operating income for the quarter increase.
Right proximately half a million or 2% compared to the prior year to 30 million aided by the CNS acquisition.
Pet operating margin decreased 20 basis points and remains at 9%.
Our aquatic business was the main factor in the decline as supply constraints that carried over from the prior quarter impacted the period.
We would expect those challenges to now be behind us.
Had EBITDA for the quarter increased 2% to 39 million.
Turning now to garner.
For the quarter Garden segment sales increased 6% or 7 million to 129 million due to the Arden acquisition.
Organic sales decreased 4%, despite a 4% increase npls for the quarter.
Sales were negatively impacted by our exit from the fashion oriented decor business lower grass seed and control sales due in part the timing factors and much higher than normal temperatures in the eastern third of the country in early fall. We're also factors in the decline.
Offsetting some of the weakness with stronger sales in our bell nursery business, which benefited from new distribution.
Just to remind you the first quarter is typically the smallest for our garden segment.
Garden's operating loss increased to 8 million in the quarter compared to 5 million in the first quarter of last year.
Garden operating margin decreased 270 basis points to negative 6.5%.
Almost two thirds of the decline was due to the inclusion of art.
Which was not in last year's garden results and the decor category, which was impacted by lower volumes and the disposition of obsolete inventory of the exited businesses.
Garden EBITDA was lots of 5 million versus the last 2 million a year ago.
Now getting back to our consolidated results in the first quarter. We had other income of 300000 compared to other expense of 200000 a year ago.
Net interest expense increased half a million to 8.6 million due primarily to lower interest earned on our cash balances this year versus a year ago.
Our tax rate for the quarter was 27.6% as compared to 14.3% in the first quarter a year ago.
Turning to our balance sheet cashless payments.
Gosh it beyond the first quarter was 446 million down from 479 million at the end of the first quarter last year.
For the quarter cash used by operations was 18 million versus cash generated of 7 million in the first quarter a year ago due primarily to the loss for the period and higher inventories.
Capex was 10 million an increase of 2 million from 8 million in the first quarter of 2019.
Total debt was 693 million relatively unchanged from last year.
Our gross leverage ratio at the end of the quarter increased to 3.0 times.
Well within our target range, we had no borrowings under our 400 million credit line at the end of the court.
Depreciation and amortization for the quarter was 13 million up from 12 million a year ago.
During the quarter, we repurchased approximately 829000 shares or 22 million of our stock.
It remains a 100 million I'm. The board's previously authorized share repurchase program, an additional 600000 shares under the board equity dilution authorization.
It is worth noting a substantial change to our balance sheet this quarter.
We adopted the new gap lease accounting standard and have now added leases to our balance sheet.
The effect was to gross up our balance sheet by about 105 million.
At quarter end, we had a right of use asset at a 105 million and a related liability of 110 million.
As Tim mentioned earlier, we are maintaining the 2020 earnings guidance, we gave last quarter at or slightly above last year's diluted EPS of $1.61.
It is still very early in the year in our first quarter is typically the smallest up the year in terms of sales and profitability.
As we see how the garden season plays out we will be in a better positioned to update our guidance if needed on the next earnings call.
Now operator, please open the line for questions.
Thank you.
Ladies and gentlemen at this time, we will conduct our question and answer session.
If you would like to ask a question. Please press star followed by one on your telephone keypad a confirmation toma indicate your line is in the question Q.
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My first question comes from Chris carry with Bank of America. Please state your question.
Hi, good evening.
Hi, Chris Chris.
Hi.
<unk> Nico just a I wanted to just ask quickly on your last comment there around you'll see how the lawn and garden season shapes up before thinking about it adjusting the guidance and I ask this in the context of clearly more of a a weighted year to the next.
Quarters, then what is typical given given the Q1 earnings which would you had expected.
So were you referring to the fact.
That that weather as is always a bit of a wildcard or.
Or or or were there other comments embedded and to that.
And to that and to that view on the depends on the Ceight earnings guidance only after seeing how the lawn and garden season shakes out.
No.
There is yes that you know the largest part of the year still remains out in front of US and you know like every year. After Q1, it's really too early for us to call and you know who the you know not wise rested change or adjust guidance at this stage because really the season haven't played out.
Okay, and am I, correct and Chris.
Jim.
The other thing to build on what an equal said, it's just what you said, which is the good news is that the quarter result was was within our expectations I'm talking Q1.
So you don't so far we're on track with our plan and that puts us in a position of confirming that full year guidance.
Yep, Okay make sense and then just just given that the pet segment has been one that as required a bit more attention recently or are you able to kind of frame the impact of the live fish retailer exit and the fire and the pet bedding Bill.
This to get a sense of what the underlying trend of the business might be and how you might see that play out over the remainder of the or with some of these headwinds baidu.
Yeah. This is John wrong.
As we mentioned in a wide foolish those wells the photo did have an impact on our Q1.
We would say that you know it was less than 3% of total pet sales combined Oh the fire impact.
You know is something that's fully covered by insurance I mean, there may be.
No quarterly based on when we see the insurance payments coming on other maybe some quarterly ups and downs on it but we feel very good that's fully covered.
In addition, we are currently filling all orders doing all customers.
No no very good position going forward.
Okay, but at that okay. So it's a relatively small impact than perhaps the on the trend that we've seen this quarter and that business is a reasonable to assume that that's indicative of the underlying trend of the business more or less.
Yes, okay.
And then and then I suppose this last one right you know in the context of outlook for this year.
And the investment spending that you're going to be putting into the business has the has the earnings outlook.
And you had mentioned I'm expecting for investments to come to fruition over the next 18 to 36 Watson starting to feel the impact of the piano I Wonder if you're expecting any of the investments that you are we getting and this fiscal year.
Uh huh.
Any upside in the back half of the or said another way, whether you're embedding. Some some positive impact from these investments over the course of this year I'm in order to hit your numbers.
Yeah, Chris.
As I said in the.
In the prepared remarks.
The investment on below.
I believe was part of the overall plan and therefore embedded in the guidance that we provided.
Down into the P.S. line. So you don't know new news for really favorability around favorability on that I wouldn't say since we're beginning to Greenlight goes investments now there is the opportunity to see maybe a little pickup on the on the organic topline if we go into the back half versus what Weve.
Here in Q1.
But of course, we're in investment mode. So that so much.
Not so much on the bottom line.
Over time over the next couple of years, obviously, we're we're investing on these based on good ROI credentials and so we feel good about the ROI on it over a broader timeframe, but again I would tell you that the important takeaways and encourage you to take is one that investment is built into the guidance that we've already.
Share.
And to we're doing the right thing for the long term and the business I mean I. It's been an area of focus the last couple of years in this company.
But my view is.
We needed a little bit more in a few areas that have highlighted there is some some certain brand positions, where we have an opportunity to smartly step up the investment.
To fortify if not expand our share positions, there's some places, especially in digital marketing and E Commerce, where I think we're still at a at a point of the investment curve, where there was some really nice returns to step up.
And there's some few capability and a couple of what areas that we need to build.
All towards setting up this company for long term sustainable returns.
Okay makes sense, thanks very much.
Thank you. Our next question comes from Bill Chappell with Suntrust Robinson Humphrey. Please state your question.
Thanks, Good afternoon.
No.
From the last release to this one I guess, we've moved to the financial update from the spring to summer and then I think the guidance was slightly better than last year to now slightly better inclusive of some of the the changes that you're making so can you give us I guess why.
It's been pushed out a little bit further and then also maybe quantify if there's some difference or <unk> or maybe some color there of or you're not going to spend that much. This year anyway. So it's not that big of a difference or is there a five tencent cushion to your guidance.
Sure I'll start pills Tim.
Look I mean, you know spring and summer.
Adjacent season, So I think we're still as I said in my comments Phil.
Looking for a date a date, that's kind of work for for us and where we're getting good.
And appropriate participation rate from both like you. So we'll be back shortly on that it'll be somewhere in that late spring early summer season.
And so.
I don't think a big change there on your second point Bill No I guess I don't see it that way we guided.
At the end of last year to to be at four modestly above 2019 S.
That included our investment plans and we're reconfirming that today.
So I don't see a change bill.
Yes, I guess asked another way is there a way to quantify what the investment changes are doing this year's GPS.
We don't we don't know that yet because we have to still see how the ROI plays out on a lot of those investments. So it's a little bit hard for us to predict.
And some of them, obviously, we're going to drill over into into next year in the year after.
Which is why we're a little reluctant to.
To give an exact number yes, I mean, bill you know if nothing else a little bit on competitive reasons, we're not willing at this stage to share Wellstat investment incremental investment number is but I think you'll see us as the quarters play out I think you'll see that show up in our numbers in terms of incremental commercial investment.
I get all contemplated within the guidance share last quarter and reaffirmed this quarter.
Keep in mind to build that you know on the garden side those investments, we still have to see how to weather plays out.
If it if it's a her ethnic whether you're not going to lean into that and incrementally. So.
We're going to going to be pretty disciplined in the approach and we still have to see how things play out.
Okay.
Switching gears, just actually is into the garden segment.
Scott's implied on their call and their numbers that they're kind of I guess re accelerating some growth at Walmart, which has been both your core customer in your core kind of place where you've gained some share of the past four or five years didn't know if that.
Impacts your outlook. If you are seeing that how we should should read that per your upcoming garden season.
Bill its JV I'll take that question.
I'd say, it's difficult to tell and we wouldn't comment on a specific retailer on the impact from a specific retailer, but as you know there their portfolio is different than ours. So it's it's possible they could have some gains in some.
Categories in which we don't compete they are big in bulk shouldn't rodenticides and much bigger and soils and.
We are bigger and things like Wild bird food in and you know we're in live goods now and we're still own pottery and the terracotta segment or pottery, but no. We don't feel well first of all we feel like we're wrong do have a we're very bullish an optimistic on the upcoming year, we feel good about our plans at that specific retailer and others. So.
They may have called that out, but I don't they see that did during us from achieving our plans for the years for the year.
Okay, great. Thanks, so much.
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Our next question comes from William Reuter with Bank of America Merrill Lynch. Please state your question.
Good afternoon.
My first is is a channel question and the Pet segment I guess, if you could provide any color and how the growth of brick and mortar is trending versus the growth that you're seeing and a in her E commerce customers.
Yes. This is John.
You know first of all you know, we see E com drawing.
You know much faster than brick and mortar both from the categories in our business.
Oh, we were happy with our girls, but we think we got long runway ahead of US Oh, we continued to build capability and investing that growth.
Both on the marketing side and capabilities side, and we're very excited about future become.
So it's just the brick and mortar Oh, we continued apartment partnering with our major customers and we continue to make progress we don't speak to individual customers, but we also feel very good about the relationships we have in the future there as well.
That's a that's helpful. You continue to have a large cash balance you did some share repurchases during the quarter does the pace of share repurchases in the quarter reflect maybe what we should expect going forward or do you expect it there, but the pipeline for M&A may pick up and that that will be where you allocate more of the cash.
Yes.
Yeah, we look at that obviously every day and we're going to buy back shares where it makes sense.
We have different levels, which we purchase for we think there's there's tremendous value.
And I think you know again, we played out off of what's going on in M&A.
My preference right now would be would be to do more M&A.
And and then also invest in the business.
You know organically.
You know with Capex or low cost producer type of initiatives and then have the stock repurchase program B B in third place.
All right and then lastly from me I think last call you mentioned the Capex is going to be up this year I don't remember hearing a number do you have a target now that we're one quarter and and I guess, maybe one or two of the larger increases or items are contributing to the increase our this year.
[music].
Yeah, I think we gave a range of 40 to 45 million.
In terms of what we expect this year.
Last year some of that is carryover from last year and if you recall last year's Capex was.
It was a little bit on on the low side.
So that's why you're seeing a little bit little higher Capex here in 2020 and also the.
The renewed willingness to invest in the business with Tim stepping on board. So I think thats really the way to look at it.
It's really not any one or two projects said that I would call out I think it's there's theres good breadth across pet and garden.
So.
We're pretty pleased with those projects and the other part two is we evaluate them all on on their merit. So we look at the ROI of each project before before it gets done and we have a whole process and the Capex committee around that.
Great. That's all from you all past others. Thank you.
Thank you. Our next question comes from Brad Thomas with Keybanc capital markets. Please state your question.
Hey, good afternoon, thanks for taking my questions.
JT just wanted to follow a little up a little bit more about Tom.
Trends that you're seeing I'm, just trying to make sure I understood. If there had been any timing shift between for Q1, Q and any further quantification of that and then just thoughts on how sell in had ban in hand, you know how your door count in shelf space, you know shaping up for the share.
Sure.
Thanks, Brad.
First of all with regard to timing there were some minor tiny differences between some volume that it shifted into Q4 versus Q1 that had a minor impact on Q1.
I can call it significant the two big drivers there were called out in the script. One was the addition of Arden and together, where the our intentional exit of the.
Fashion pottery business. So those were the big drivers there.
In terms of timing that would that would be about it in terms of how retailers our staffing up for the for the year are stocking up for the year, we're seeing.
Opening orders that are a little bit smaller than they were a year ago. When I think that's intentional on their part I think there being a little bit more surgical in the way they're flowing the goods to the stores are not by the way I think that Thats, probably smart we have one major retailer last year that put an awful lot of inventory in the stores early on they did that to prove a point.
We're seeing their opening orders this year be a little bit smaller under it will be closer to consumption. Having said that you know it'll continue to build throughout Q2 and they'll be ready for the season.
We feel good about the engagement level of the retailers going into season.
And we feel good about our listing so I'd say from a the controllable standpoint things like inventory levels inventory levels at retail were in great shape coming into this year, we weren't heavy on inventory that retailer foreign heavy on inventory.
The customers are engaged and we have the level of support we need and in terms of our distribution for this year, if you factor out the.
In our intentional exit of some of the pottery skews if you factor that out our points of distribution are up mid single digits year over year. So we feel very good about that.
Very helpful. Thank thank you Judy.
And Tim I was hoping to just ask you a question about Tom you know the opportunity for acquisitions and how you're thinking about.
You know if there's any brands that are maybe worth pruning just could you give us a sense of heavier state of mind on the on the portfolio today and your aptitude to take on maybe a medium or bigger acquisition if it presents itself.
Sure.
Look I think you know.
As you well no I mean, M&A sent a just a real critical part of the playbook building. This company its central Garden, and pet and a you know it was one of the many points of attraction for me in joining this company.
And I expect that to continue.
So you know when I look at our positions across garden and pet.
Got a number of a strong business is good brands in a number of nieces and segments, but there's so much more to clay and you know there are both in terms of the.
Categories and segments in which we compete today to strengthen leadership positions and fortify ourselves and then in other places you know I think there's some you know why didn't call more adjacent seats that are very very attractive so.
And it's fair to say that in the last a number of months you know, there's no proven that putting yet.
But as Nikos shared in the past don't don't mistake that for lack of appetite and lack of activity and you got to swing the bad a few times and we are swinging the bat, but have nothing yet.
Nothing yet report on it but you know I can assure you that Anthony concept from a capital allocation strategy.
Strategy standpoint, it for me, it's about reinvesting in the business and smart growth opportunities.
Then, it's about M&A and adding to our platform.
And then if we feel lot it makes sense based on price some some buybacks.
Very helpful. Tim I mean, if I could squeeze one more in here for Niko perhaps on on.
Modeling for the second quarter.
I don't think Theres real explicit commentary on how to think about to Q, but.
Yeah, I think I was referencing there being investments is a little bit of a headwind.
It looks like maybe the streets modeling earnings up a little bit year over year.
Does that seem reasonable to you or or are there any other considerations, we should take that as we think about to Q.
No I think where the street is it is reasonable you know assuming we we have.
Relatively normal weather does not see a great weather quarter, but but you know a fairly normalized one and I think you know the numbers right now are fairly reasonable.
Very helpful. Thank you all so much.
Thanks, Brad.
Our next question comes from Hale Holden with Barclays. Please state your question.
Hi, Good afternoon. Thanks for taking my question I had one or two quick ones here.
The.
Increased investment that's baked into your guidance for this year it sounded like it was more on on marketing muscle.
And that's Chang.
So I was wondering if you do you feel like you also have the right product set or is there or would there also increased investment in product innovation for miscues.
I'm very much innovation is part of the.
You know part as a consideration set.
He will have some at some a pretty exciting initiatives and a couple of different business units.
That are either you know hitting the shelves today for will in the balance of the year and part of that growth investment is against.
Porting that innovation I think on top of that in general there. So theres a recognition right now with me in the leadership team at Central Garden impact that you know, we can still build further capability in innovation.
And.
Increase our consumer orientation to improve the success rate of our innovation. So part of the investment envelope is also.
Building some of those capabilities and that is you know, including things like some as I said earlier, some select additional personnel and in in key areas, but innovation back to the core of your question is definitely part of the evoke sets of investments.
And then.
When you get this flywheel moving do you have a sense of what the the capture rate would be in terms of.
How much more growth first is the categories you could achieve or maybe what you're currently missing out on neither one of your two core categories.
Sure Yeah I would.
First part of the answer is I do expect to be able to share more later this year. When we have the chance to come out and give you a a perspective on our evolve strategy and I think that that will be part of what we share.
But I would tell you know if you look at the organic growth.
Central Garden and pet the last couple of years, it's been a more in the flat territory and the majority of the growth then.
Through M&A I think collectively we have an ambition that we could do better than that.
But there's a few things were going to need to do to assure that on a sustainable basis and make sure of course that we do it in a profitable way. So you know if I if I have to.
To give you a little bit of a preview you know I think there'll be an ambition to see that stepped up but you know more to come a little later.
Great. Thank you and then just very quickly.
Do you guys, having any supply issues from China related to factors that may be on extended shutdowns because of the virus.
Yes.
Well.
We're monitoring that situation that as is everybody.
And you know interestingly this virus broke out right around Chinese new year. So we typically order quite a bit in advanced the Chinese new year.
So I think in the short term, we feel really good about our position from an inventory standpoint.
But you know again more to come we don't really have a sense of how long. This is going to go on.
And so more to come are going to continue to monitor that obviously the longer. This goes on you know this hospital guy.
But I think thats going to affect.
A lot of people not just our company.
Great. Thank you so much.
Thank you just a reminder to ask a question press star followed by one on your telephone keypad to remove yourself from the Q Press Star followed by to once again ask the question Press Star followed by one on your telephone keypad.
Our next question comes from Jim Chartier with Moness Crespi Hardt. Please state your question.
Hi, Thanks, taking my questions.
First I just wanted to clarify on the impact of the life, there's from a pet bedding. So excluding those two items organic sales for pet would've been closer to 4% is that correct.
No I think you're wrong. So so on the pet bedding business as I've mentioned, Oh, we did have some shortages and in the quarter and we focus you know very heavily on making sure that we serve a song customers.
And the impact on that no short term is less than 1% of ourselves, but a million dollars total online fish as we continue to well Walmart we're seeing we're seeing.
A decline year over year, a bit of that and we'll see it through June of this year, but the majority of it will be October basin in April may time period.
So hopefully that helps.
Great and.
You've been talking last year about the animal health business.
It's a meaningful headwind I, just feel where inventories in the channel for that business and what are your thoughts on that for the upcoming year.
Well, we feel pretty good about inventory levels. We don't we don't think that they are crazy.
But that said, we still have to see about the.
Really the health of the farmer and what their piano looks like and are they going to lean in and spend a little extra on on the products that we provide so that that remains to be seen you know the weather will play a role there.
What I can tell you about this last quarter you know the volume was down in animal health, but.
We really like the mix and we had some nice margin expansion, but but again the volumes were down so we have to see.
Now that how that really recovers over the long haul and again that one really mirrors.
Garden really the garden controls business, because because most of these products control Pes and so we'll know more you know as Q2 winds down into Q3.
Okay, and then on the pottery decor business that you guys exited.
Can you give a sense of how big that business was and just I guess given the seasonality of the garden business is it fair to say the first quarter would be the most impacted from a percentage standpoint from being sort of that business.
So Jim its J.D., Oh, we haven't disclosed the size of that that that business, having said that.
It would be fair to assume that the largest percentage would be in Q3.
Is there seasonality similar to the rest the garden business.
It is it it's I'd say that you know typically for pottery to peak would be in the month, but may so.
Q2, Q3 got that I'd say it tracks very closely to the rest of this.
To the seasonality the rest of the business, Okay, and then finally.
In terms the investment spending was was there any investment spending increase in first quarter related to your plans for the year.
Yeah, I think I think what a in the first quarter there was limited incremental investment over prior year.
Q2, you'll see it go up higher and then yes.
Material increases in the back half.
Great. That's all I had thanks for time.
Ladies and gentlemen, there no further questions at this time I'll turn it back to Tim copper for closing remarks. Thank you.
Thanks, everyone for joining the call today and look forward to talking to you again soon after that.
Thank you. This concludes today's call all parties may disconnect have a great day.