CENT Central Garden and Pet Co

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 26, 2011.

The Company reported second quarter net sales of $485.7 million, an increase of 10 percent over the same period a year ago. Strong net sales growth in its Garden Products segment contributed significantly to the overall increase. The Company reported operating income of $59.6 million, compared to operating income of $60.5 million in the comparable 2010 period, impacted by rising raw material input costs and the Company’s continued strategic investments in marketing and brand building activities. Net interest expense was $9.3 million compared to $9.8 million in the year-ago period. Net income for the quarter totaled $31.8 million, or $0.54 per fully diluted share, compared with net income of $31.6 million, or $0.49 per fully diluted share, in the second quarter of 2010, on fewer shares outstanding.

“Our revenues have continued to grow,” said Bill Brown, Chairman and Chief Executive Officer. “We are especially pleased with the strong growth demonstrated by our Garden business this quarter, led by our premium grass seed and our garden chemical and control products. Although our revenues grew again this quarter, our earnings were impacted by the continued rise in input costs and by our strategic investment in brand building, which enhances consumer awareness of the quality and benefits of our products.” Brown added, “Innovation continues to be a key focus for our organization. As we plan our future, we are confident that the strength of our product portfolio, financial discipline and the dedication of our talented team strongly position us for continued, profitable long-term growth.”

Branded product sales increased $49.4 million, or 13 percent, to $417.3 million in the second quarter of 2011. Sales of other manufacturers’ products were $68.4 million, a decrease of $5.6 million compared to the year ago period. The Garden Products segment’s branded product sales increased $46.2 million or 25 percent to $231.3 million, and sales of other manufacturers’ products were $29.0 million, a decrease of $5.5 million compared to the second quarter of 2010. The Pet Products segment’s branded product sales were $186.0 million, an increase of $3.2 million, and sales of other manufacturers’ products were $39.4 million, relatively flat compared to the second quarter of 2010.

Net sales for the Garden Products segment in the second quarter were $260.3 million, an increase of 19 percent from $219.6 million in the second quarter of 2010. The Garden Product segment’s operating income was $46.9 million compared to operating income of $36.8 million in the year ago period. Net sales for the Pet Products segment were $225.4 million, an increase of 1 percent compared to $222.3 million in the year ago period. Operating income for the Pet Products segment totaled $23.3 million, compared to $34.8 million in the year ago period, impacted by rising raw material input costs and strategic investments in activities to build the Company’s brands.

At March 26, 2011, the Company’s cash and short term investments balance was $26.5 million. Depreciation and amortization expense was $7.2 million in the second quarter of 2011, consistent with the second quarter of the prior year. The quarter ending total leverage ratio, as defined in the Company’s credit agreement, was 3.5x. During the second quarter, the Company repurchased $39 million of its common stock as part of its $100 million share repurchase program, approved by the Board of Directors in July 2010.

For the six months ending March 26, 2011, the Company reported net sales of $767.4 million, an increase of 8 percent, compared to $711.2 million in the comparable 2010 period. Branded products sales equaled $647.6 million, up 10 percent over the comparable 2010 period. Sales of other manufacturers’ products decreased 3 percent to $119.8 million. Operating income for the period was $53.1 million compared to $61.0 million in the prior year. Net income for the six months ended March 26, 2011 was $22.2 million compared to $28.7 million in the comparable 2010 period. Earnings per diluted share were $0.37 compared to $0.43 per share per fully diluted share in the year ago 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://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 888-680-0865 (domestic) or 617-213-4853 (international) and enter passcode 9979 1913. A replay of the call will be available for three weeks by dialing 888-286-8010 (domestic) and 617-801-6888 (international) and entering passcode 7040 4322.

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 SEEDTM 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 the potential for incorrect profitable sales, 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 November 19, 2010, and Central’s Quarterly Report on Form 10-Q, filed February 3, 2011, 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 Income

 

(Unaudited)

(In thousands, except per share amounts)

                          Three Months Ended Six Months Ended

March 26,

        March 27, March 26,         March 27,   2011     2010     2011     2010     Net Sales $ 485,724 $ 441,936 $ 767,443 $ 711,172 Cost of Goods Sold and Occupancy   322,455     280,747     521,117     462,214     Gross Profit 163,269 161,189 246,326 248,958   Selling, General and Administrative Expenses   103,639     100,667     193,179     187,915     Income From Operations 59,630 60,522 53,147 61,043   Interest Expense (9,343 ) (9,814 ) (18,382 ) (14,758 ) Interest Income 60 1 193 11 Other Income (Expense)   204     (206 )   (202 )   386     Income Before Income Taxes 50,551 50,503 34,756 46,682   Income Taxes   18,190     18,568     12,073     17,166   Income Including Noncontrolling Interest 32,361 31,935 22,683 29,516 Net Income Attributable to Noncontrolling Interest   595     315     509     790     Net Income Attributable to Central Garden & Pet $ 31,766   $ 31,620   $ 22,174   $ 28,726     Net Income Per Share: Basic: $ 0.55 $ 0.49 $ 0.37 $ 0.44   Diluted $ 0.54 $ 0.49 $ 0.37 $ 0.43   Weighted Average Shares Outstanding Basic 57,955 63,988 59,447 65,408 Diluted 58,433 64,950

 

59,961 66,435                              

Central Garden & Pet Company

 

Condensed Consolidated Balance Sheets

 

(Unaudited)

(In thousands)

    March 26,

2011

March 27,

2010

September 25,

2010

Assets Current Assets: Cash and Cash Equivalents $ 11,186 $ 27,037 $ 91,460 Short Term Investments 15,320 --- 15,320 Accounts Receivable 327,090 277,354 192,422 Inventories 381,815 330,570 285,964 Other Current Assets   43,655   30,167   42,733   Total Current Assets 779,066 665,128 627,899   Property and Equipment – net 169,731 162, 296 165,281   Goodwill 209,548 208,630 207,319 Other Intangible Assets – Net 87,073 101,007 86,798 Deferred Income Taxes and Other Assets   27,139   58,644   43,587   Total $ 1,272,557 $ 1,195,705 $ 1,130,884     Liabilities and Equity Current Liabilities: Accounts Payable $ 163,622 $ 147,698 $ 112,611 Accrued Expenses 84,415 88,573 81,418 Current Portion of Long-Term Debt   120   14,957   165   Total Current Liabilities 248,157 251,228 194,194   Long-Term Debt 517,134 400,171 400,106 Other Long-Term Obligations 3,890 4,274 4,441

Total Central Garden & Pet Company

Shareholders’ Equity

502,920 539,758 530,696 Non Controlling Interest   456   274   1,447 Total Equity   503,376   540,032   532,143   Total $ 1,272,557 $ 1,195,705 $ 1,130,884