Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ:CENTA),
a leading innovator, marketer and producer of quality branded
products for the lawn and garden and pet supplies markets, today
reported financial results for its fourth quarter and full fiscal
year ended September 24, 2011.
The Company reported net sales of $376.9 million for the fourth
quarter 2011, a nine percent increase over the comparable fiscal
2010 period. The Company’s operating loss was $4.6 million for both
the fourth quarter of 2011 and 2010. The prior period included a
non-cash, pre-tax charge of $12.0 million related to the impairment
of an intangible asset. Without the impairment charge, operating
income would have been $7.4 million in the fourth quarter of 2010.
The net loss for the fourth quarter of 2011 was $10.9 million or
$0.21 per fully diluted share compared with a loss of $8.8 million
or $0.14 per fully diluted share in the fourth quarter of 2010, or
a loss of $0.02 excluding the impairment charge.
“We are pleased with our top-line growth in a tough quarter, but
are dissatisfied with the bottom line,” said Bill Brown, Chairman
& CEO. “As highlighted on our last quarterly call, we have
committed to a broad set of transformation initiatives that are
expected to take significant cost out of the company, improve
margins meaningfully and enable more aggressive reinvestment in our
brands to drive top-line growth. Gus Halas, President and CEO of
Central Operating Companies, who joined us in April, is already
well underway in reshaping Central from what was essentially a
portfolio of siloed companies, into a single, more integrated
company that can better meet the needs of customers and deliver
substantially better results for shareholders.”
Mr. Halas commented, “We have a roadmap for improved financial
performance beginning in the second half of calendar 2012 and into
2013. We expect to update shareholders on our progress in the
coming quarters. Central is already on a dramatically different
path than it has ever been before and we expect it to lead to
sustained growth and improved profitability well into the
future.”
Fourth Quarter 2011 Details
The Company’s sales gains were driven by the Garden Products
segment, which reported net sales for the quarter of $165.1
million, a gain of 24 percent over the fourth quarter of 2010. The
Garden Products segment’s branded product sales increased $31.6
million, or 27 percent, to $148.5 million while sales of other
manufacturers’ products were $16.6 million, in line with the fourth
quarter of 2010. The Company’s gross and operating margins were
adversely impacted by higher raw material input costs during the
quarter. The Garden Products segment’s operating loss during the
quarter was $6.9 million compared to an operating loss of $7.6
million in the fourth quarter of 2010.
Fourth quarter net sales for the Pet Products segment decreased
one percent, or $2.1 million over the prior year, to $211.8
million. The Pet Products segment’s branded product sales decreased
$1.8 million, or one percent, to $171.8 million. Sales of other
manufacturers’ products were $40.0 million, in line with the fourth
quarter of 2010. The Pet Products segment’s operating income was
$15.6 million compared to operating income of $12.9 million in the
prior year period. Excluding the impairment charge in the fourth
quarter of last year, operating income for the fourth quarter of
2010 would have been $24.9 million for the Pet Products
segment.
At September 24, 2011, the Company’s cash and short term
investments balance totaled $29.9 million. Net interest expense was
$9.8 million for the quarter and $9.0 million in the prior year
period. Depreciation and amortization expense was $7.3 million in
the fourth quarter of 2011, consistent with the prior year. The
Company’s effective tax rate for the fourth quarter of 2011 was 17
percent on its operating loss compared to 36 percent in the fourth
quarter of 2010. The change in the effective tax rate was due
primarily to the Company’s reduced ability to use tax benefits due
to decreased fiscal 2011 income and increased tax valuation
allowances.
Total debt at September 24, 2011 was $435.6 million compared to
$400.3 million at fiscal year-end 2010. The quarter ending total
leverage ratio, as defined in the Company’s credit agreement, was
3.6x. During the fourth quarter, the Company repurchased 3.2
million shares of its common stock, for $24.6 million, as part of a
$100 million share repurchase program announced in June 2011.
Fiscal 2011 Details
For the year ending September 24, 2011, the Company reported net
sales of $1.6 billion, an increase of seven percent, compared to
$1.5 billion in the comparable 2010 period. Branded products sales
were $1.4 billion, up nine percent over the comparable 2010 period.
Sales of other manufacturers’ products decreased four percent to
$253.0 million. Operating income for the period totaled $85.2
million compared to $109.1 million in the prior year. The Company’s
gross and operating margins were adversely impacted by higher raw
material input costs throughout the fiscal year. Net income for the
year ended September 24, 2011 was $28.3 million compared to $45.8
million in the comparable 2010 period. Earnings per fully diluted
share were $0.50 compared to $0.70 per fully diluted share in the
year ago period. Included in the full year results for fiscal year
2010 is the non-cash, pre-tax charge of $12.0 million related to
the impairment of an intangible asset. Excluding this charge,
operating income for fiscal 2010 would have been $121.1 million,
and net income and earnings per share would have been $53.5 million
and $0.82, respectively. Depreciation and amortization for the
fiscal year period was $28.6 million consistent with the prior
year.
Conference Call
The Company will host a conference call today at 4:30 p.m.
Eastern Time / 1:30 p.m. Pacific Time to discuss its fourth quarter
and fiscal 2011 results. The conference call will be accessible via
the Internet through Central’s website, http://www.central.com.
To access the webcast link, log on to Central’s website and
locate the link in the investor relations section of the website.
Alternatively, to listen to the call by telephone, dial
617-597-5378 and enter passcode 86126177. A replay of the call will
be available for three weeks by dialing 617-801-6888 and entering
passcode 72823975.
About Central Garden & Pet
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 and the brands PENNINGTON®, SMART SEED™ and THE REBELS™;
wild bird feed and the brand PENNINGTON®; 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 4,300 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 forecasted cost reductions,
margin improvements and improved financial performance from the
Company’s transformation initiatives, 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 Central’s Annual Report on Form 10-K, to be filed in the
next several business days, 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
CONSOLIDATED BALANCE SHEETS
September 24, 2011 September
25,2010 ASSETSCurrent assets:
(in
thousands) Cash and cash equivalents $ 12,031 $ 91,460
Short term investments 17,820 15,320 Accounts receivable, net
195,417 192,422 Inventories 329,546 285,964 Prepaid expenses,
deferred income taxes and other 47,772 42,733
Total current assets 602,586 627,899 Land, buildings,
improvements and equipment: Land 9,254 8,925 Buildings and
improvements 100,439 95,664 Transportation equipment 6,550 4,031
Machinery and warehouse equipment 168,475 150,215 Office furniture
and equipment 108,967 91,294 Total.
393,685 350,129 Less accumulated depreciation and amortization
(217,283 ) (184,848 ) Land, buildings, improvements
and equipment–net 176,402 165,281 Goodwill 210,223 207,319 Other
intangible assets, net 84,526 86,798 Deferred income taxes and
other assets 19,266 43,587 Total. $
1,093,003 $ 1,130,884
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 116,524 $ 112,611 Accrued
expenses 75,128 81,418 Current portion of long-term debt 279
165 Total current liabilities 191,931 194,194
Long-term debt 435,330 400,106 Deferred taxes and other long-term
obligations 8,960 4,441 Commitments and contingencies
Equity:
Common stock 129 163 Class A common stock 359 437 Class B stock 16
16 Additional paid-in capital 396,208 483,817 Retained earnings
59,045 45,319 Accumulated other comprehensive income 1,019
944 Total Central Garden & Pet
shareholders’ equity 456,776 530,696
Noncontrolling interest 6 1,447 Total
equity 456,782 532,143 Total $
1,093,003 $ 1,130,884
Central Garden & Pet
Company
Condensed Consolidated Statements of
Operations
(In thousands, except per share
amounts)
Three Months Ended Fiscal Year Ended
September 24,
2011
September 25,
2010
September 24, 2011
September 25, 2010
Net sales $
376,906
$ 346,990 $ 1,628,652 $ 1,523,648 Cost of goods sold and occupancy
278,702 243,556 1,134,733
1,008,482 Gross profit 98,204 103,434 493,919 515,166
Selling, general and administrative expenses 102,770 96,043 408,744
394,092 Intangible asset impairments 0 12,000
0 12,000 Income (loss) from
operations (4,566 ) (4,609 ) 85,175 109,074 Interest expense (9,786
) (9,151 ) (38,044 ) (33,706 ) Interest income 35 107 296 119 Other
income 434 (9 ) 550 419
Income (loss) before income taxes and noncontrolling
interest (13,883 ) (13,662 ) 47,977 75,906 Income taxes
(2,357 ) (4,916 ) 19,595 28,110
Income including noncontrolling interest (11,526 ) (8,746 ) 28,382
47,796 Net income attributable to noncontrolling interest
(594 ) 20 59 1,963 Net
income attributable to Central Garden & Pet Company $ (10,932 )
$ (8,766 ) $ 28,323 $ 45,833 Net income per
share attributable to Central Garden & Pet Company: Basic $
(0.21 ) $ (0.14 ) $ 0.50 $ 0.71 Diluted $ (0.21 ) $
(0.14 ) $ 0.50 $ 0.70 Weighted average shares
used in the computation of net income per share: Basic 51,943
62,476 56,217 64,272 Diluted 51,943 62,476 56,645 65,091
Non-GAAP Financial Measures
This press release includes adjustments to operating income
(loss), GAAP net income (loss), and earnings per
share for the fourth quarter and fiscal year ended
September 25, 2010. Adjusted operating income (loss), net income
(loss) and adjusted earnings per share, are non-GAAP financial
measures which exclude the impact of the impairment of an
intangible asset. We believe that they are useful
as supplemental measures in assessing the operating
performance of our business. These measures are used by
our management, including our chief operating decision maker, to
evaluate business results. We exclude impairment charges which
we believe are not representative of the on-going results of
operations of our business and are not used to determine compliance
with the financial covenants in our credit facility and
indenture.
We provide this information to investors and other users of the
financial statements, such as lenders, to assist in comparisons of
past, present and future operating results and to assist in
highlighting the results of on-going operations. While management
believes adjusted operating income (loss), net income (loss) and
adjusted earnings per share are useful supplemental information,
such adjusted results are not intended to replace our GAAP
financial results and should be used in conjunction with those GAAP
results.
Below is a reconciliation of this non-GAAP (unaudited) measure
to net income (loss) for the fourth quarter and net
income for the fiscal year ended September 25, 2010.
Fourth Quarter 2010 Fiscal 2010
Dollars EPS Dollars
EPS (in millions) (in millions)
Reconciliation of net loss to adjusted net income:
Net income (loss), as reported
$ (8.8 ) $ (0.14 ) $ 45.8 $ 0.70
Adjustment for impairment of an intangible
asset, net of taxes
7.7
0.12
7.7
0.12
Adjusted net income (loss) $ (1.1 ) $ ( 0.02 ) $ 53.5 $ 0.82
Below is a reconciliation of this non-GAAP measure (unaudited)
to the total Company’s operating income (loss) for the
fourth quarter and fiscal year ended September 25, 2010.
Fourth Quarter 2010 Fiscal 2010
Dollars Margin Dollars
Margin (in millions) (in millions)
Reconciliation of total Company operating income:
Operating income (loss), as reported
$ (4.6 )
(1.3
)%
$ 109.1 7.2 %
Adjustment for impairment of an intangible
asset
12.0 3.4 %
12.0
0.7 % Adjusted operating income (loss) $ 7.4 2.1 % $ 121.1
7.9 %
Below is a reconciliation of this non-GAAP measure (unaudited)
to the Pet Segment’s operating income (loss) for the
fourth quarter and fiscal year ended September 25, 2010.
Fourth Quarter 2010 Fiscal 2010
Dollars Margin Dollars
Margin (in millions) (in millions)
Reconciliation of Pet Segment’s operating income:
Operating income (loss), as reported
$ 12.9 6.0 % $ 97.9 11.6 %
Adjustment for impairment of an intangible
asset
12.0 5.6 %
12.0
1.5 % Adjusted operating income (loss) $ 24.9 11.6 % $ 109.9 13.1 %
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