Sales increase 17% to $359.8 million;
Company increases 2016 guidance
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
announced financial results for its fiscal first quarter ended
December 26, 2015.
“We are right where we want to be. Our strategic initiatives are
working,” said John Ranelli, President & CEO of Central Garden
& Pet. “We are growing organically. We are starting to
demonstrate the potential of Central’s operating leverage by
increasing gross profits significantly more than SG&A.” Ranelli
continued, “We are showing our willingness and ability to manage
and improve our portfolio, through organic growth, making accretive
acquisitions and divesting non-strategic assets. While I am very
pleased with the progress we are making, we still have a lot of
work to do, particularly in our Garden segment.”
The Company is increasing its guidance for the full year. It now
expects adjusted earnings per fully diluted share to grow at least
35% for the year, to $1.00 or higher.
Fiscal 2016 First Quarter Financial
Highlights
- The first quarter loss on a GAAP basis
of ($0.18) included $14.3 million of charges related to the
Company’s refinancing of its fixed rate notes. Excluding the
charges, adjusted earnings rose to $0.01 from a loss of ($0.12) in
the first quarter of 2015;
- Sales increased 17% to $359.8 million
compared to $307.3 million in the first quarter a year ago;
Approximately half of the growth was organic and half from
acquisitions;
- Branded product sales increased 17% to
$276.5 million compared to $237.0 million in the first quarter a
year ago. Sales of other manufacturers’ products increased 18% to
$83.3 million from $70.3 million in the first quarter a year
ago;
- Gross profit increased 13% to $99.8
million compared to $88.0 million in the first quarter a year ago.
Gross margin for the first quarter declined 90 basis points to
27.7% compared to 28.6% in the first quarter a year ago;
- SG&A expense increased $4.2 million
for the first quarter but declined 300 basis points as a percentage
of sales to 25.3% compared to 28.3% in the first quarter a year
ago;
- Operating income increased to $8.8
million compared to $1.1 million in the first quarter a year
ago;
- Operating margin increased 200 basis
points to 2.4% compared to 0.4% in the first quarter a year
ago;
- Net loss on a GAAP basis increased 51%
to $8.6 million. Adjusted net income increased to $0.3 million
compared to a loss of $5.7 million in the first quarter a year
ago;
- Loss per fully-diluted share on a GAAP
basis increased to ($0.18). Adjusted earnings per share rose to
$0.01 compared to a loss of ($0.12) in the first quarter a year
ago.
Pet Segment Fiscal 2016 First Quarter
Results
First quarter net sales for the Pet segment increased $49.4
million, or 25 percent, from the same period a year ago to $248.7
million. Approximately 57% of the gain was due to acquisitions
while the remaining 43% was organic growth. Sales increases in the
dog & cat and aquatics categories, as well as higher sales of
other manufacturers’ products, drove the increase in organic sales.
The dog & cat and aquatics categories benefitted from increased
distribution while sales of other manufacturers’ products were
driven by strength in the e-commerce channel and increased
distribution for a new third-party customer. The Pet segment’s
branded product sales were $188.6 million in the first quarter of
2016 and sales of other manufacturers’ products were $60.1
million.
The Pet segment’s operating income rose 27% to $26.2 million
compared to $20.6 million in the first quarter of 2015. Pet
operating margin improved 20 basis points, more than offsetting a
decline in the segment’s gross margin. The margin increase was
largely due to a more favorable mix of sales, with a greater
percentage of dog & cat revenues, inclusive of the Company’s
new acquisitions, and a reduction in the percentage of sales of
other manufacturers’ products.
Garden Segment Fiscal 2016 First
Quarter Results
Net sales for the Garden segment increased 3% to $111.1 million,
due primarily to stronger grass seed sales as well as higher sales
of other manufacturers’ products. Grass seed sales benefitted from
favorable fall weather. The gain in sales of other manufacturers’
products was due in part to increased distribution across multiple
channels. The Garden segment’s branded product sales were $88.0
million in the first quarter of 2016 and sales of other
manufacturers’ products were $23.1 million. First quarter revenues
for the Garden segment are generally the lowest of any quarter of
the year due to the seasonality of the lawn and garden market.
The Garden segment’s operating loss in the quarter improved $0.2
million to $3.3 million, compared to an operating loss of $3.5
million in the first quarter of 2015. Garden operating margin
improved 40 basis points, more than offsetting a decline in the
segment’s gross margin. Grass seed, fertilizers and other
manufacturers’ products were the biggest contributors to the first
quarter operating margin increase offset somewhat by lower margins
in wild bird feed.
Additional Information
At December 26, 2015, the Company’s cash and short-term
investments balance was $9.0 million, compared to $89.6
million a year ago. The primary reasons for the decrease were
approximately $90 million in expenditures for the acquisition of
three companies over the past 12 months and a redemption of $50
million in long term fixed rate debt in the 2015 second quarter.
Total debt at December 26, 2015 was $436.2 million compared to
$445.5 million at December 27, 2014. Net interest expense was $22.1
million for the period compared to $10.4 million in the prior-year
period.
The interest expense for the first quarter includes $14.3
million related to the refinancing of the Company’s fixed rate debt
during the quarter. Excluding these charges, interest expense
declined $2.7 million to $7.8 million. Depreciation and
amortization expense was $9.0 million, compared with $8.5 million
in the prior-year period. The Company’s effective tax benefit rate
for the first quarter of 2016 was 38 percent on its operating loss,
compared with 41 percent for the first quarter of 2015. The income
tax benefit rate decrease was primarily due to a larger discrete
tax benefit in the prior year quarter.
During the quarter, the Company did not repurchase any shares of
its common stock. Approximately $35.0 million remains under the
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 first 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 (201)
689-8345 (domestic and international) using confirmation #
13627977. A replay of the call will be available for ten days by
dialing (201) 612-7415 and entering confirmation #13627977.
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®, 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 AQUEON®, CORALIFE® and ZILLA®; bird &
small animal and the brands KAYTEE®, Forti-Diet® and CRITTER
TRAIL®; dog & cat and the brands TFH™, NYLABONE®, FOUR PAWS®,
IMS™, CADET®, PINNACLE® and AVODERM®; and equine and the brands
FARNAM®, HORSE HEALTH™ and VITAFLEX®. 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 3,700 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 earnings guidance for 2016 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:
- 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;
- uncertainty about new product
innovations and marketing programs; and
- competition in our industries
These risks and others are described in the Company’s Securities
and Exchange Commission filings. The Company undertakes no
obligation to publicly update these forward-looking statements to
reflect new information, subsequent events or otherwise.
CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands, except share and per share amounts)
(Unaudited) December 26,
December 27, September 26,
ASSETS 2015 2014 2015 Current assets:
Cash and cash equivalents $ 9,006 $ 79,588 $ 47,584 Restricted cash
11,939 19,690 13,157 Short term investments 0 9,992 0 Accounts
receivable (less allowance for doubtful accounts of $21,213,
$24,184 and $19,296) 195,357 142,877 207,402 Inventories 416,458
399,936 335,946 Prepaid expenses and other 59,873
64,280 49,731 Total current assets 692,633 716,363
653,820 Land, buildings, improvements and equipment—net
163,948 163,546 162,809 Goodwill 209,089 208,233 209,089 Other
intangible assets—net 74,552 87,061 75,460 Other assets
70,987 9,104 30,419 Total $ 1,211,209 $
1,184,307 $ 1,131,597
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 129,091 $ 128,485 $ 88,889
Accrued expenses 89,047 93,208 87,724 Current portion of long-term
debt 292 50,289 291 Total current
liabilities 218,430 271,982 176,904 Long-term debt 435,893
395,257 396,691 Other long-term obligations 58,005 42,212 51,622
Equity: Common stock, $.01 par value: 11,908,317,
12,220,627, and 11,908,317 shares outstanding at December 26, 2015,
December 27, 2014 and September 26, 2015 119 122 119 Class A common
stock, $.01 par value: 36,591,487, 36,445,726 and 36,462,299 shares
outstanding at December 26, 2015, December 27, 2014 and September
26, 2015 366 364 364 Class B stock, $.01 par value: 1,652,262
shares outstanding 16 16 16 Additional paid-in capital 390,583
393,494 388,636 Accumulated earnings 107,385 80,136 115,987
Accumulated other comprehensive income (loss) (69 )
670 164 Total Central Garden & Pet Company shareholders’
equity 498,400 474,802 505,286 Noncontrolling interest 481
54 1,094 Total equity 498,881
474,856 506,380 Total $ 1,211,209 $ 1,184,307
$ 1,131,597
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share amounts)
(Unaudited) Three Months Ended
December 26, December 27 2015
2014 Net sales $ 359,812 $ 307,320 Cost of goods sold and
occupancy 260,026 219,339 Gross profit
99,786 87,981 Selling, general and administrative expenses
91,013 86,843 Income from operations 8,773
1,138 Interest expense (22,145 ) (10,503 ) Interest income 22 71
Other expense (473 ) (368 ) Loss before income taxes
and noncontrolling interest (13,823 ) (9,662 ) Income tax benefit
(5,200 ) (3,969 ) Loss including noncontrolling
interest (8,623 ) (5,693 ) Net income (loss) attributable to
noncontrolling interest (21 ) 4 Net loss
attributable to Central Garden & Pet Company $ (8,602 ) $
(5,697 ) Net loss per share attributable to Central Garden
& Pet Company: Basic $ (0.18 ) $ (0.12 ) Diluted $ (0.18 ) $
(0.12 ) Weighted average shares used in the computation of
net income per share: Basic 48,566 49,379 Diluted 48,566 49,379
Use of Non-GAAP Financial Measures –
We report our financial results in accordance with U.S.
generally accepted accounting principles (GAAP). However,
management believes that certain non-GAAP financial measures that
exclude the $14.3 million impact of the redemption of our 2018
Notes and the issuance of our 2023 Notes recognized during the
quarter ended December 26, 2015 may be useful in certain instances
to provide additional meaningful comparisons between current
results and results in prior operating periods that should be
considered when assessing our ongoing performance and providing
consistency with our prior year disclosure. The amount is included
in interest expense in the condensed consolidated statements of
operations. We believe that the non-GAAP financial measures provide
useful information to investors and other users of our financial
statements, such as lenders. Management also uses these non-GAAP
financial measures in making financial, operating and planning
decisions and in evaluating our performance. While our management
believes that non-GAAP measurements are useful supplemental
information, such adjusted results are not intended to replace our
GAAP financial results and should be read in conjunction with those
GAAP results.
GAAP to Non-GAAP Reconciliation (unaudited, in thousands,
except per share amounts) For the Three Months Ended
December 26, Bond December 26,
December 27,
2015 Redemption 2105
2014
GAAP (A) As Adjusted GAAP
Interest expense $ (22,145 ) $ 14,339 $
(7,806
) $ (10,503 ) Loss before income taxes and noncontrolling interest
(13,823 ) 14,339 516 (9,662 ) Income tax expense (benefit) (5,200 )
(5,394 ) 194 (3,969 ) Net Income (loss) $ (8,602 ) $ 8,945 $ 343 $
(5,697 ) Earnings (loss) per share - Diluted $ (0.18 ) $ 0.18 $
0.01 $ (0.12 )
(A) The Non-GAAP financial information excludes the impact of
the redemption of our 2018 Notes and issuance of our 2023 Notes. As
a result of the bond redemption, we incurred incremental expenses
of $14.3 million, comprised of a call premium payment of $8.3
million, a $2.7 million payment of overlapping interest expense for
30 days and a $3.3 million non-cash charge for the write off of
unamortized deferred financing costs and discount related to the
2018 Notes. These amounts are included in interest expense in the
condensed consolidated statements of operations.
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version on businesswire.com: http://www.businesswire.com/news/home/20160202006479/en/
Central Garden & Pet CompanySteve Zenker, 925-948-3657VP of
Investor Relations & Communications
Central Garden and Pet (NASDAQ:CENT)
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