Sales increased 1% to $501.6 million;
Diluted EPS of $0.43 per share
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 the second quarter ended March 29,
2014.
The Company reported net sales of $501.6 million, a one percent
increase over the comparable fiscal 2013 period. The Company’s
second quarter operating income was $44.8 million, compared to
operating income of $46.7 million in the second quarter of 2013.
Net income was $20.9 million, or $0.43 per fully diluted share,
compared with net income of $22.2 million or $0.46 per fully
diluted share in the prior year.
“As expected, the second quarter had some positives and
negatives,” said John Ranelli, President & CEO of Central
Garden & Pet Company. “While we have made important changes to
our operations – raising fill rates, improving customer service,
reducing costs and strengthening our management team – we have
significant challenges ahead of us to overcome. We still believe
that it will be a year or more before we are able to fill our new
product pipeline and execute in a consistent manner.”
Second Quarter and Year-to-Date
Details
Net sales for the Garden segment for the quarter were $284.9
million, a gain of eight percent over the second quarter of 2013.
Sales benefitted from aggressive up-front retailer purchasing ahead
of the Spring Garden season as well as increased distribution in
several of the Company’s Garden businesses. The Garden segment’s
branded product sales for the quarter increased $18.1 million, or
eight percent, to $247.3 million while sales of other
manufacturers’ products were $37.6 million, an increase of 10
percent compared with the second quarter of 2013. The Garden
segment’s operating margin of 12.9% during the quarter was similar
to a year ago, with a decline in gross margin being offset by lower
SG&A expenses. For the second quarter, the Garden segment’s
operating income was $36.8 million, an increase from $34.0 million
from the second quarter of 2013.
The Company believes that its Garden product sales were shifted
from April into the second quarter and will likely result in the
opposite effect in the third quarter, with Garden sales being lower
than the prior year.
Net sales for the Pet segment for the quarter were $216.7
million, a decrease of eight percent over the second quarter of
2013, impacted by reduced retail distribution for some of its
products as well as lower consumer takeaway in areas of the Pet
industry where the Company participates. The Pet segment’s branded
product sales for the quarter decreased $23.3 million, or 12
percent, to $169.8 million while sales of other manufacturers’
products were $46.9 million, an increase of 12 percent compared
with the second quarter of 2013. The Pet segment’s operating margin
declined 50 basis points to 11.2% during the quarter. Gross margin
was relatively unchanged from a year ago. For the second quarter,
the Pet segment’s operating income was $24.2 million, a decline
from $27.5 million in the prior-year period.
For the six months ending March 29, 2014, the Company reported
net sales of $792.1 million, a slight increase from $790.7 million
in the comparable 2013 period. Branded products sales were $650.4
million, a decrease of two percent over the comparable 2013 period.
Sales of other manufacturers' products increased 10 percent to
$141.7 million. Operating income for the period increased to $36.4
million compared to $33.7 million in the prior year. Net income for
the six months ended March 29, 2014 was $8.2 million, an increase
of $1.3 million compared to the comparable 2013 period. Earnings
per fully diluted share were $0.17 compared to $0.14 per fully
diluted share in the year ago period.
At March 29, 2014, the Company’s cash and short term investments
balance totaled $31.0 million. Total debt at March 29, 2014 was
$545.3 million compared to $593.7 million at March 30, 2013.
As of March 29, 2014, there were borrowings of $95.0 million
outstanding on the Company’s senior-secured asset-based revolving
credit facility and $295.0 million remained available. Net interest
expense was $10.4 million for the quarter and $10.9 million in the
prior year period. Depreciation and amortization expense was $9.2
million, an increase from $8.3 million in the second quarter of
2013. The Company’s effective tax rate for the second quarter was
37.7 percent compared to 35.8 percent in the prior year period.
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
results. The conference call will be accessible via the internet
through Central’s website, http://ir.central.com.
Alternatively, to listen to the call by telephone, dial (480)
629-9835 and enter passcode 4669806. A replay of the call will be
available for three weeks by dialing (303) 590-3030 and entering
passcode 4669806.
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 under the PENNINGTON ® brand. 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 3,400 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 expectations for future
favorable results and lower borrowing costs, 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. All forward-looking
statements are based upon the Company’s current expectations and
various assumptions. There are a number of risks and uncertainties
that could cause our actual results to differ materially from the
forward-looking statements contained in this release including, but
not limited to, the following factors:
- uncertainty about new product
innovations and marketing programs;
- disruptions in the Company’s business;
and increased costs and expenses associated with the Company’s
change initiatives;
- seasonality and fluctuations in the
Company’s operating results and cash flow;
- fluctuations in market prices for seeds
and grains and other raw materials and the Company’s ability to
pass through cost increases in a timely manner;
- adverse weather conditions;
- dependence on a small number of
customers for a significant portion of our business; and
- implementation of a new enterprise
resource planning information technology system.
These risks and others are described in Central’s Securities and
Exchange Commission filings, including our Annual Report on Form
10-K filed December 12, 2013 and our Quarterly Report on Form 10-Q
to be filed on or about May 8, 2014. 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 BALANCE
SHEETS
(in thousands, except share and per
share amounts)
Unaudited
March 29, March 30,
September 28, ASSETS 2014 2013
2013 Current assets: Cash and cash equivalents $ 16,748 $
11,284 $ 15,156 Short term investments 14,220 17,820 17,820
Accounts receivable (less allowance for doubtful accounts of
$24,771, $21,201 and $21,158) 323,183 322,190 194,260 Inventories
402,720 435,883 391,934 Prepaid expenses and other 55,882
59,408 53,484 Total current assets 812,753 846,585
672,654 Land, buildings, improvements and equipment—net
185,354 193,673 188,913 Goodwill 205,756 210,223 205,756 Other
intangible assets—net 77,895 76,762 79,868 Deferred income taxes
and other assets 12,589 19,338 13,969 Total $
1,294,347 $ 1,346,581 $ 1,161,160
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 142,152 $
165,691 $ 103,569 Accrued expenses 80,886 76,915 78,618 Current
portion of long-term debt 303 271 142 Total
current liabilities 223,341 242,877 182,329 Long-term debt
545,032 593,424 472,445 Other long-term obligations 40,470 34,651
36,362 Equity: Common stock, $.01 par value: 12,308,802,
12,246,751, and 12,246,751 shares outstanding at March 29, 2014,
March 30, 2013 and September 28, 2013 123 122 122 Class A common
stock, $.01 par value: 36,417,849, 35,206,896 and 35,291,001 shares
outstanding at March 29, 2014, March 30, 2013 and September 28,
2013 364 352 353 Class B stock, $.01 par value: 1,652,262 shares
outstanding 16 16 16 Additional paid-in capital 396,490 386,756
389,153 Accumulated earnings 85,779 86,448 77,592 Accumulated other
comprehensive income 1,529 932 1,442 Total
Central Garden & Pet Company shareholders’ equity 484,301
474,626 468,678 Noncontrolling interest 1,203 1,003
1,346 Total equity 485,504 475,629
470,024 Total $ 1,294,347 $ 1,346,581 $ 1,161,160
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended Six Months
Ended
March 29,2014
March 30, 2013
March 29,2014
March 30,2013
Net sales $ 501,611 $ 498,169 $ 792,132 $ 790,666 Cost of goods
sold and occupancy 354,015 344,999
564,795 560,537 Gross profit 147,596
153,170 227,337 230,129 Selling, general and administrative
expenses 102,827 106,424 190,923
196,477 Income from operations 44,769 46,746
36,414 33,652 Interest expense (10,405 ) (10,937 ) (22,622 )
(21,252 ) Interest income 16 27 29 92 Other income (expense)
108 (48 ) (60 ) (1,029 ) Income before
income taxes and noncontrolling interest 34,488 35,788 13,761
11,463 Income taxes 12,999 12,828
5,084 3,850 Income including
noncontrolling interest 21,489 22,960 8,677 7,613 Net income
attributable to noncontrolling interest 594
764 490 686 Net income
attributable to Central Garden & Pet Company $ 20,895 $
22,196 $ 8,187 $ 6,927 Net income per
share attributable to Central Garden & Pet Company: Basic $
0.43 $ 0.46 $ 0.17 $ 0.14 Diluted $
0.43 $ 0.46 $ 0.17 $ 0.14
Weighted average shares used in the computation of net income per
share: Basic 48,688 48,064 48,523 47,968 Diluted 49,116 48,740
48,963 48,766
Central Garden & Pet CompanySteve Zenker,
925-948-3657Investor Relations
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