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 second quarter ended March 24,
2012.
The Company reported second quarter net sales of $466.9 million,
a decrease of 4 percent from the same period a year ago. The second
quarter operating income was $45.2 million, compared to operating
income of $59.6 million in the second quarter of 2011, reflecting
reduced sales and a lower gross margin. Net interest expense was
$10.4 million compared to $9.3 million in the year-ago period. Net
income for the quarter totaled $21.6 million, or $0.45 per fully
diluted share, compared with net income of $31.8 million, or $0.54
per fully diluted share, in the second quarter of 2011.
“Even with strong demand from consumers for our products, our
sales and earnings were impacted this quarter by short-term
execution issues arising from our transformational efforts, which
hindered our ability to fully meet demand,” said Bill Brown,
Chairman and Chief Executive Officer. “We are addressing these
issues and are continuing to see strong demand for our products.
April sales are up significantly over last year, helped by delayed
shipments and strong demand for our flea and tick products.”
Gus Halas, President and CEO of Central Operating Companies,
commented, “As is often the case with business transformations, we
encountered some disruptions as we transitioned operational
activities during the quarter. We have made good progress executing
on our transformational plan as we create a more efficient and
effective operation to support our customers and position the
Company for success in the coming years.”
Second Quarter and Year-To-Date
Details
Net sales for the Garden Products segment decreased 6 percent or
$15.9 million from the same period a year ago to $244.4 million,
impacted by the delay in filling orders as well as lower grass seed
and wild bird feed sales. The Garden Products segment’s branded
product sales were $211.7 million and sales of other manufacturers’
products were $32.7 million. In the second quarter, the Garden
Products segment’s gross and operating margins declined, impacted
by the mix of product sales, including lower sales of higher-margin
branded control products and grass seed and higher sales of
third-party products. The Garden Products segment’s operating
income in the quarter was $36.6 million, compared to an operating
income of $46.9 million in the second quarter of 2011.
Net sales for the Pet Products segment decreased 1 percent, or
$2.9 million, from the same period a year ago to $222.5 million,
due primarily to a decline in wild bird feed sales. Delays in
shipments to customers also impacted revenues during the quarter.
The Pet Products segment’s branded product sales were $179.8
million and sales of other manufacturers’ products were $42.7
million. The Pet Product segment’s gross and operating margins
declined from a year ago, in part as a result of short-term
operational issues associated with the transformation. The Pet
Products segment’s operating income was $21.0 million compared to
operating income of $23.4 million in the prior-year period.
For the six months ending March 24, 2012, the Company reported
net sales of $769.0 million, little changed from $767.4 million in
the comparable 2011 period. Branded products sales equaled $638.0
million, down 2 percent over the comparable 2011 period. Sales of
other manufacturers' products increased 9 percent to $131.0
million. Operating income for the period was $33.9 million compared
to $53.1 million in the prior year. Net income for the six months
ended March 24, 2012 was $8.5 million compared to $22.2 million in
the comparable 2011 period. Earnings per fully diluted share were
$0.18 compared to $0.37 per fully diluted share in the year ago
period.
At March 24, 2012, the Company’s cash and short-term investments
balance was $28.1 million. Net interest expense was $10.4 million
for the quarter compared to $9.3 million in the prior-year period.
Depreciation and amortization expense was $7.6 million in the
second quarter of 2012, compared with $7.2 million in the
prior-year period. The Company’s effective tax rate for the second
quarter of 2012 was 37 percent, compared with 36 percent in the
prior-year period.
On February 8, 2012, the Company issued an additional $50
million aggregate principal amount of its 2018 8.25% senior
subordinated notes. The Company used the proceeds from the offering
to pay a portion of the outstanding balance under its Credit
Facility. Total debt at March 24, 2012 was $566.9 million compared
to $517.2 million at March 25, 2011. The quarter-ending total
leverage ratio, as defined in the Company’s senior credit facility,
at its seasonally high point, was 5.5x. During the second quarter
of 2012, the Company did not repurchase any of its common stock
outstanding under its Board approved share repurchase program.
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 second quarter
2012 results. The conference call will be accessible through the
investor relations section of Central’s website,
http://www.central.com.
Alternatively, to listen to the call by telephone, dial
1-412-317-6789 and enter passcode 10012406. A replay of the call
will be available for three weeks by dialing 1-412-317-0088
(domestic and international) and entering passcode 10012406.
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 POTTERY®,
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 SYSTEMS®, 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 4,000 employees,
primarily in North America. 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 improved efficiency and
profitability 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, filed on November 21, 2011, Central’s Quarterly Report on
Form 10-Q, expected to be filed on May 3, 2012, as well as 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 INCOME (in thousands, except per
share amounts) (unaudited)
Three Months Ended Six Months Ended
March 26,2011
March 24,2012
March 26,2011
March 24,2012
Net sales $ 485,724 $ 466,903 $ 767,443 $ 768,969 Cost of goods
sold and occupancy 322,455 319,207
521,117 540,535 Gross profit 163,269
147,696 246,326 228,434 Selling, general and administrative
expenses 103,639 102,474 193,179
194,492 Income from operations 59,630 45,222
53,147 33,942 Interest expense (9,343 ) (10,468 ) (18,382 ) (20,015
) Interest income 60 28 193 56 Other income (expense)
204
(7 ) (202 ) (121 ) Income before income
taxes and noncontrolling interest 50,551 34,775 34,756 13,862
Income taxes 18,190 12,808
12,073 5,162 Income including noncontrolling
interest 32,361 21,967 22,683 8,700 Net income attributable to
noncontrolling interest 595 344
509 167 Net income attributable to Central
Garden & Pet Company $ 31,766 $ 21,623 $ 22,174
$ 8,533 Net income per share attributable to
Central Garden & Pet Company: Basic $ 0.55 $ 0.46
$ 0.37 $ 0.18 Diluted $ 0.54 $ 0.45 $
0.37 $ 0.18 Weighted average shares used in
the computation of net income per share: Basic 57,955 47,343 59,447
47,576 Diluted 58,433 48,036 59,961 48,191
CENTRAL GARDEN
& PET COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Unaudited March 26, March
24,
September 24,
ASSETS 2011 2012 2011 Current assets:
Cash and cash equivalents $ 11,186 $ 10,281 $ 12,031 Short term
investments 15,320 17,820 17,820 Accounts receivable 327,090
309,299 195,417 Inventories 381,815 380,812 329,546 Prepaid
expenses and other 43,655 47,727 47,772 Total
current assets 779,066 765,939 602,586 Land, buildings,
improvements and equipment—net 169,731 182,569 176,402 Goodwill
209,548 210,223 210,223 Other intangible assets—net 87,073 82,100
84,526 Deferred income taxes and other assets 27,139
19,243 19,266 Total $ 1,272,557 $ 1,260,074 $ 1,093,003
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 163,622 $ 150,605
$
116,524 Accrued expenses 84,415 75,004 75,128 Current portion of
long-term debt 120 339 279 Total current
liabilities 248,157 225,948 191,931 Long-term debt 517,134
566,603 435,330 Other long-term obligations 3,890 18,576 8,960
Equity: Common stock 149 123 129 Class A common stock 399
343 359 Class B stock 16 16 16 Additional paid-in capital 443,169
379,902 396,208 Accumulated earnings 57,952 67,078 59,045
Accumulated other comprehensive income 1,235 1,312
1,019
Total Central Garden & Pet Company
shareholders’ equity
502,920 448,774 456,776 Noncontrolling interest 456
173 6 Total equity 503,376 448,947
456,782 Total $ 1,272,557 $ 1,260,074 $ 1,093,003
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