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 fiscal third quarter ended June
25, 2011.
The Company announced third quarter net sales of $484.3 million,
a 4 percent increase over the comparable fiscal 2010 period. The
Company’s sales gains were largely driven by the Garden Products
segment which reported sales growth of 6 percent for the quarter,
and an 11 percent sales increase for the nine-month period ended
June 25, 2011. Third quarter operating income was $36.6 million,
compared to operating income of $52.6 million in the comparable
2010 period, as the continued rise in raw material costs, change in
product mix, unfavorable weather, and the Company’s continued
strategic investments in marketing and brand building activities
impacted results. Net interest expense was $9.8 million for the
quarter ended June 25, 2011 consistent with the prior year. Net
income for the quarter totaled $17.1 million, or $0.31 per fully
diluted share, compared to net income of $25.9 million, or $0.40
per fully diluted share, in the year ago period.
“We continued to drive solid revenue growth in the third quarter
despite a difficult environment,” said Bill Brown, Chairman and
Chief Executive Officer. “However, the continued significant
escalation in raw material input costs, together with extreme
weather conditions that suppressed our chemical and controls
business and altered our product mix, negatively impacted our gross
margin and bottom line results. We have implemented price increases
to recover some of the input cost increases, but there is a lag in
retailer implementation that impacted the quarter and will continue
to cause margin pressure. Our operating income was further reduced
by our long-term commitment to strategic investments in marketing
and brand building. Although adversely impacted by significant
commodity price increases and extreme weather during the quarter,
our business remains fundamentally sound. We remain focused on
bringing innovative products to the marketplace, driving
operational efficiency throughout our operation, and delivering
top-line and bottom-line growth over the long-term.”
At June 25, 2011, the Company’s cash and short term investments
balance was $26.6 million. Depreciation and amortization expense
was $7.1 million in the third quarter of 2011, consistent with the
prior year. On June 9, 2011, the Company announced the amendment of
its $275 million five-year senior secured revolving credit facility
(the "Credit Facility"). Under the modified terms, the Credit
Facility’s borrowing capacity was increased by $100 million to $375
million and the maturity date was extended by approximately one
year to June 2016. The amended Credit Facility bears lower interest
rates and commitment fees and requires less interest coverage.
Total debt at June 25, 2011 was $450.5 million compared to $400.3
million at the end of the third fiscal quarter of 2010. The quarter
ending total leverage ratio, as defined in the Company’s credit
agreement, was 3.4x.
During the third quarter, the Company completed a $100 million
share repurchase program approved by the Board of Directors in July
2010 and began a new $100 million share repurchase program approved
by the Board of Directors and announced in June 2011. The Company
repurchased $30.1 million of its common stock during the third
quarter.
Third Quarter and Year-To-Date
Details
Third quarter net sales for the Garden Products segment
increased $14.2 million over the prior year, or 6 percent, to
$257.0 million. The Garden Products segment’s branded product sales
increased $20.8 million, or 10 percent, to $221.7 million. Sales of
other manufacturers’ products were $35.3 million, a decrease of
$6.6 million compared to the third quarter of 2010. The Garden
Product segment’s operating income was $18.0 million compared to
operating income of $30.1 million in the prior year.
Third quarter net sales for the Pet Products segment increased
$4.6 million over the prior year, or 2 percent, to $227.3 million.
The Pet Products segment’s branded product sales increased $4.4
million, or 2 percent, to $186.0 million. Sales of other
manufacturers’ products were $41.3 million, in-line with the third
quarter of 2010. The Pet Products segment’s operating income was
$27.2 million compared to operating income of $32.6 million in the
prior year.
The Company’s branded product sales increased $25.2 million, or
7 percent, to $407.7 million in the third quarter of 2011. Sales of
other manufacturers’ products were $76.6 million, a decrease of
$6.4 million compared to the year ago period.
For the nine months ending June 25, 2011, the Company reported
net sales of $1.25 billion, an increase of 6 percent, compared to
$1.18 billion in the comparable 2010 period. Branded products sales
equaled $1.06 billion, up 9 percent over the comparable 2010
period. Sales of other manufacturers’ products decreased 5 percent
to $196.4 million. Operating income for the period was $89.7
million compared to $113.7 million in the prior year. Net income
for the nine months ended June 25, 2011 was $39.3 million compared
to $54.6 million in the comparable 2010 period. Earnings per
diluted share were $0.68 compared to $0.83 per share per fully
diluted share in the year ago period. Depreciation and amortization
for the nine month period was $21.3 million compared to $21.7
million in the comparable 2010 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 third quarter
results. The conference call will be accessible via the internet
through Central’s website, 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
888-679-8034 (domestic) or 617-213-4847 (international) and enter
passcode 74753751. 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 17980907.
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 price
increases to cover rising input costs and top-line and bottom-line
growth over the long-term, 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, to be filed August 4,
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 Nine Months Ended
June 26,2010
June 25,2011
June 26,2010
June 25,2011
Net sales $ 465,486 $ 484,303 $ 1,176,658 $ 1,251,746 Cost
of goods sold and occupancy 302,712 334,914
764,926 856,031 Gross profit
162,774 149,389 411,732 395,715 Selling, general and administrative
expenses 110,134 112,795 298,049
305,974 Income from operations 52,640 36,594
113,683 89,741 Interest expense (9,797 ) (9,948 ) (24,555 ) (28,330
) Interest income 1 140 12 333 Other income 42
318 428 116 Income before income
taxes and noncontrolling interest 42,886 27,104 89,568 61,860
Income taxes 15,860 9,879 33,026
21,952 Income including noncontrolling
interest 27,026 17,225 56,542 39,908 Net income attributable to
noncontrolling interest 1,153 144
1,943 653 Net income attributable to
Central Garden & Pet Company $ 25,873 $ 17,081 $
54,599 $ 39,255 Net income per share
attributable to Central Garden & Pet Company: Basic $ 0.41
$ 0.32 $ 0.84 $ 0.68 Diluted $ 0.40
$ 0.31 $ 0.83 $ 0.68 Weighted
average shares used in the computation of net income per share:
Basic 63,810 54,020 64,879 57,635 Diluted 64,606 54,498 65,716
58,115 Central Garden & Pet Company Condensed
Consolidated Balance Sheets (Unaudited) (In thousands)
(See Note 1) June 26,
June 25, September 25, ASSETS 2010
2011 2010 Current assets: Cash and cash equivalents $
91,623 $ 11,233 $ 91,460 Short term investments - 15,320 15,320
Accounts receivable—net 223,845 257,418 192,422 Inventories 306,118
343,788 285,964 Prepaid expenses and other 30,643
40,095 42,733 Total current assets 652,229 667,854 627,899
Land, buildings, improvements and equipment—net 162,352
171,187 165,281 Goodwill 208,630 209,348 207,319 Other intangible
assets—net 99,828 85,705 86,798 Deferred income taxes and other
assets 60,668 21,638 43,587 Total $ 1,183,707
$ 1,155,732 $ 1,130,884
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 119,869 $ 115,380 $ 112,611
Accrued expenses 101,312 92,678 81,418 Current portion of long-term
debt 201 198 165 Total current liabilities
221,382 208,256 194,194 Long-term debt 400,138 450,266
400,106 Other long-term obligations 4,223 4,104 4,441 Total
Central Garden & Pet Company shareholders’ equity 556,537
492,506 530,696 Noncontrolling interest 1,427 600
1,447 Total equity 557,964 493,106
532,143 Total $ 1,183,707 $ 1,155,732 $ 1,130,884
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