CENT Central Garden and Pet Co

Central Garden & Pet Company (NASDAQ: CENT)(NASDAQ: CENTA) today announced results for its third quarter ended June 27, 2009.

The Company reported net sales of $482 million in the quarter, a decline of two percent compared to $493 million in the comparable fiscal 2008 period. The Company reported operating income of $51.6 million, an increase of 52 percent compared to $33.9 million in the year ago period. Net interest expense was $5.2 million compared to $9.0 million a year ago. Net income for the quarter was $31.1 million, or $0.44 per fully diluted share compared to net income of $15.6 million or $0.22 per fully diluted share in the year ago period. Branded products sales were $407 million, a decrease of three percent. Sales of other manufacturers’ products were $76 million, an increase of two percent. Depreciation and amortization was $7.2 million compared to $8.4 million in the year ago period. The quarter-ending leverage ratio was 2.7x compared to 4.1x a year ago.

“Once again, we made progress in the quarter against our three operating objectives,” noted William Brown, Chairman and Chief Executive Officer of Central Garden & Pet Company. “Gross profit margins improved substantially, we further lowered operating expenses, and we continued to significantly reduce our investment in working capital. Building upon these achievements, our goal is to drive further margin and capital efficiency improvement across the business.”

Fiscal third quarter net sales for the Garden Products segment were $267 million, an increase of five percent from $253 million in the comparable fiscal 2008 period. Operating income for Garden Products was $35.3 million compared to $12.6 million in the year ago period. Branded products sales were $231 million, an increase of six percent compared to last year. Sales of other manufacturers’ products were unchanged at $37 million compared to last year.

Fiscal third quarter net sales for the Pet Products segment were $215 million, a decline of ten percent from $239 million compared to the fiscal 2008 period. Operating income for the Pet Products segment was $29.8 million, compared to $32.7 million in the year ago period. Branded products sales were $176 million, a decrease of 13 percent compared to last year. Sales of other manufacturers’ products were $39 million, an increase of three percent compared to last year.

For the nine months ended June 27, 2009, the Company reported net sales of $1.25 billion compared to $1.29 billion in the comparable fiscal 2008 period, a decline of three percent. Operating income for the period was $106.1 million compared to an operating loss of $312.1 million in the year ago period. Branded product sales declined three percent and sales of other manufacturers’ products declined two percent. Depreciation and amortization for the nine month period was $21.9 million compared to $24.4 million in the year ago period. Net income for the nine months ended June 27, 2009 was $57.9 million compared to a net loss of $253 million in the comparable fiscal 2008 period. Earnings per diluted share were $0.82 compared to a loss of $3.55 per fully diluted share in the year ago period.

Included in the year-to-date results for fiscal 2008 was a non-cash, pre-tax charge of $400 million, or $290 million net of taxes, related to goodwill impairment charge as required under SFAS No.142 “Goodwill and Other Intangible Assets.” Also included in the year-to-date results for fiscal 2008 was a pre-tax gain of $11.1 million, or $6.9 million net of taxes, related to the sale of properties and legal settlement proceeds. Adjusted net income and earnings per share in the first nine months of fiscal 2008, excluding the impact of the impairment, the gain on sale of properties and legal settlement proceeds was $30.1 million, or $0.42 per fully diluted share.

The Company will discuss its third quarter results on a conference call today at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. Individuals may access the call by dialing 1-888-680-0869 and passcode 1594 6934 (domestic) or 617-213-4854 and passcode 1594 6934 (international). The conference call will be simultaneously broadcast over the Internet through Central’s website, http://www.central.com/ or you may link directly to the webcast on our website at http://phx.corporate-ir.net/phoenix.zhtml?c=93879&p=irol-calendar To listen to the webcast, please log on to the website prior to the scheduled call time to register and download any necessary audio software.

In order to simplify your registration process, you may pre-register at the following link: https://www.theconferencingservice.com/prereg/key.process?key=PGR96EBMC. By pre-registering, you may bypass the operator and go directly to the teleconference with a unique PIN number as soon as the call begins. At the time of the call, after dialing the number and passcode mentioned above, enter your PIN for immediate access to the teleconference.

Re-play dial-in numbers for the call will be available for three weeks: 888-680-0869 and passcode 1594 6934 (domestic) and 617-213-4854 and passcode 1594 6934 (international).

Central Garden & Pet Company is a leading innovator, marketer and producer of quality branded products for the lawn & garden and pet supplies markets. Committed to new product innovation, our products are sold to specialty independent and mass retailers. Participating categories in Lawn & Garden include: Grass seed including the brands PENNINGTON®, SMART SEEDTM and THE REBELS™; wild bird feed and the brands PENNINGTON® and KAYTEE®; weed and insect control and the brands AMDRO®, SEVIN®, IRONITE® and Over ‘N Out®; and decorative outdoor patio products and the brands NORCAL®, NEW ENGLAND POTTERY® and MATTHEWS FOUR SEASONS™. We also provide a host of other regional and application-specific garden brands and supplies. Participating categories in Pet include: Animal health and the brands ADAMS™ and ZODIAC®; aquatics and reptile and the brands OCEANIC®, AQUEON™ and ZILLA™; bird & small animal and the brands KAYTEE®, SUPER PET® and CRITTER TRAIL®; dog & cat and the brands TFH™, NYLABONE®, FOUR PAWS®, PINNACLE® and Avoderm®; and equine and the brands FARNAM®, BRONCO® and SUPER MASK®. We also provide a host of other application-specific Pet brands and supplies. Central Garden & Pet Company is based in Walnut Creek, California, and has approximately 5,000 employees, primarily in North America and Europe. For additional information on Central Garden & Pet Company, including access to the Company's SEC filings, please visit the Company’s website at www.central.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts, including the potential for further margin and capital efficiency improvements, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Annual Report on Form 10-K, filed November 26, 2008, and other Securities and Exchange Commission filings. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise.

Central Garden & Pet Company

 

Condensed Consolidated Statements of Operations

 

(Unaudited)

(In thousands, except per share amounts)

    Three Months Ended Nine Months Ended June 28,   June 27, June 28,   June 27,   2008     2009     2008     2009     Net Sales $ 492,937 $ 482,162 $ 1,291,410 $ 1,251,129 Cost of Goods Sold and Occupancy   339,990     317,108     884,331     840,041     Gross Profit 152,947 165,054 407,079 411,088   Selling, General and Administrative Expenses 119,079 113,484 319,175 305,028 Impairment of Goodwill  

-

   

-

    400,000    

-

    Income (Loss) from Operations 33,868 51,570 (312,096 ) 106,060   Interest Expense (9,346 ) (5,211 ) (30,631 ) (17,846 ) Interest Income 360 12 914 614 Other Income   783     1,161     2,457     80    

Income (Loss) Before Income Taxes (Tax Benefit) and Minority Interest

25,665 47,532 (339,356 ) 88,908   Income Taxes (Tax Benefit) 9,574 15,371 (86,837 ) 29,498 Minority Interest   443     1,085     906     1,498     Net Income (Loss) $ 15,648   $ 31,076   $ (253,425 ) $ 57,912     Net Income (Loss) Per Share: Basic $ 0.22 $ 0.45 $ (3.55 ) $ 0.83   Diluted $ 0.22 $ 0.44 $ (3.55 ) $ 0.82   Weighted Average Shares Used in the Computation Of Net Income (Loss) Per Share: Basic 71,493 69,345 71,367 69,885 Diluted 72,148 70,449 71,367 70,798

Central Garden & Pet Company

 

Condensed Consolidated Balance Sheets

 

(Unaudited)

(In thousands)

    June 28,

2008

  June 27,

2009

  September 27,

2008

Assets Current Assets: Cash and Cash Equivalents $ 8,522 $ 25,390 $ 26,929 Accounts Receivable - Net 292,746 262,735 260,639 Inventories 371,052 313,820 349,499 Other Current Assets   36,767   43,117   34,686   Total Current Assets 709,087 645,062 671,753   Property and Equipment - Net 194,064 165,519 174,013   Goodwill 201,624 206,873 201,499 Other Intangible Assets – Net 110,710 104,318 107,404 Deferred Income Taxes and Other Assets   119,016   80,539   104,649   Total $ 1,334,501 $ 1,202,311 $ 1,259,318     Liabilities and Shareholders’ Equity Current Liabilities: Accounts Payable $ 118,611 $ 117,083 $ 133,364 Accrued Expenses 102,014 114,432 84,345 Current Portion of Long-Term Debt   3,350   3,311   3,340   Total Current Liabilities 223,975 234,826 221,049   Long-Term Debt 580,494 405,676 519,807 Other Long-Term Obligations 4,606 4,685 7,037 Minority Interest 2,741 2,087 2,667 Shareholders’ Equity   522,685   555,037   508,758   Total $ 1,334,501 $ 1,202,311 $ 1,259,318

Non-GAAP Financial Measures

This press release includes adjustments to GAAP net loss for the nine months ended June 28, 2008. Adjusted net income and earnings per share, which excludes the impact of the impairment of goodwill and gains from the sale of properties and a legal settlement, is a non-GAAP financial measure. We believe that it is useful as a supplemental measure in assessing the performance of our operating business. This measure is used by our management, including our chief operating decision maker, to evaluate business results. We exclude goodwill impairment and gains from the sale of properties and a legal settlement, because it is not representative of the on-going results of operations of our business. Below is a reconciliation of this non-GAAP measure to net loss for the nine months ended June 28, 2008, excluding the goodwill impairment and gains from the sale of properties and a legal settlement.

  Dollars   EPS (in millions) Reconciliation of Net Loss to Adjusted Net Income: Net Loss $ (253.4 ) $ (3.55 ) Adjusted for Goodwill Impairment Charge, Net of Taxes 290.4 4.07 Less: Gain on Sale of Properties and Legal Settlement Proceeds, Net of Taxes   (6.9 )   (0.10 ) Adjusted Net Income and Earnings per Share $ 30.1   $ 0.42