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
23, 2012.
The Company reported third quarter net sales of $533.8 million,
an increase of 10 percent from the same period a year ago. Third
quarter operating income was $49.0 million, compared to operating
income of $36.6 million in the third quarter of 2011, a 34 percent
increase. The increase in operating income reflected higher sales
and a favorable product mix, which resulted in both higher gross
margins and higher operating margins. Net interest expense was
$10.7 million compared to $9.8 million in the year-ago period. Net
income totaled $22.7 million, or $0.47 per fully diluted share,
compared with net income of $17.1 million, or $0.31 per fully
diluted share, in the third quarter of 2011.
“We are pleased with our third quarter revenue growth and bottom
line results. We now have generated top-line growth in six of the
last seven quarters,” said Gus Halas, President and CEO of Central
Operating Companies. “Our Pet segment performed well during the
quarter, benefitting from expanded distribution, product innovation
and favorable weather for pest control products. Additionally, this
quarter’s results also reflect the shipment of backlogged orders
from the prior quarter. We believe our revenue growth underscores
that our increased marketing investments and master brands strategy
are yielding tangible results and helping build a solid base for
sustained growth in the years ahead.” Mr. Halas added, “The
transformation we began over a year ago is progressing as planned,
but is by no means complete. As we move forward, we are continuing
to focus on becoming more efficient and more integrated, enabling
us to better meet the needs of our customers while raising the
visibility of our products to consumers.”
Third Quarter and Year-To-Date
Details
Net sales for the Pet segment increased 19 percent, or $44.0
million, from the same period a year ago to $271.3 million, on
strength across many of its categories, especially flea and tick.
The Pet segment’s branded product sales were $228.9 million and
sales of other manufacturers’ products were $42.4 million. The Pet
segment’s gross and operating margins rose from a year ago, due
primarily to a favorable change in the mix of sales including
higher flea & tick sales and lower third party product sales.
The Pet segment’s operating income was $40.5 million compared to
operating income of $27.2 million in the prior-year period, a $13.3
million or 49 percent increase.
Net sales for the Garden segment rose 2 percent, or $5.5
million, from the same period a year ago to $262.5 million, in
large part due to stronger chemical and control sales. The Garden
segment’s branded product sales were $221.3 million and sales of
other manufacturers’ products were $41.2 million. In the third
quarter, the Garden segment’s gross and operating margins increased
relative to the same period a year ago, aided by increased sales of
higher-margin control products and improved margins on bird seed
products. The Garden segment’s operating income in the quarter was
$22.6 million, compared to operating income of $18.0 million in the
third quarter of 2011, a $4.6 million or 26 percent increase.
For the nine months ending June 23, 2012, the Company reported
net sales of $1.30 billion, an increase of 4% from $1.25 billion in
the comparable 2011 period. Branded products sales equaled $1.09
billion, increasing 3% over the comparable 2011 period. Sales of
other manufacturers' products rose 9% to $214.6 million. Operating
income for the period was $82.9 million compared to $89.7 million
in the prior year. Net income for the nine months ended June 23,
2012 was $31.2 million compared to $39.3 million in the comparable
2011 period. Earnings per fully diluted share were $0.65 compared
to $0.68 per fully diluted share in the year ago period.
At June 23, 2012, the Company’s cash and short-term investments
balance was $58.5 million compared to $26.6 million in the prior
year-period. Total debt at June 23, 2012 was $449.9 million
compared to $450.5 million at June 25, 2011. The quarter-ending
total leverage ratio, as defined in the Company’s senior credit
facility, was 3.9x. Depreciation and amortization expense was $8.0
million in the third quarter of 2012, compared with $7.1 million in
the prior-year period. The Company’s effective tax rate for the
third quarter of 2012 was 37.9 percent, compared with 36.4 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 fiscal third
quarter 2012 results. The conference call will be accessible
through the investor relations section of Central’s website,
http://ir.central.com.
Alternatively, to listen to the call by telephone, dial
1-412-317-6789 and enter passcode 10015876. A replay of the call
will be available for three weeks by dialing 1-412-317-0088
(domestic and international) and entering passcode 10015876.
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 3,800 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 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, as well as the
Company’s 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 BALANCE SHEETS (in thousands, except share and
per share amounts) Unaudited June
25, June 23, September 24,
ASSETS 2011 2012 2011 Current assets:
Cash and cash equivalents $ 11,233 $ 40,699 $ 12,031 Short term
investments 15,320 17,820 17,820 Accounts receivable (less
allowance for doubtful accounts of $18,782, $18,297 and $15,590)
257,418 245,780 195,417 Inventories 343,788 334,796 329,546 Prepaid
expenses and other 40,095 46,107 47,772 Total
current assets 667,854 685,202 602,586 Land, buildings,
improvements and equipment—net 171,187 185,225 176,402 Goodwill
209,348 210,223 210,223 Other intangible assets—net 85,705 80,529
84,526 Deferred income taxes and other assets 21,638
18,539 19,266 Total $ 1,155,732 $ 1,179,718 $ 1,093,003
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 115,380 $ 125,111 $ 116,524 Accrued expenses
92,678 106,818 75,128 Current portion of long-term debt 198
347 279 Total current liabilities 208,256 232,276
191,931 Long-term debt 450,266 449,530 435,330 Deferred
income taxes and other long-term obligations 4,104 23,478 8,960
Equity: Common stock, $.01 par value: 13,755,693, 12,247,571
and 12,949,593 shares outstanding at June 25, 2011, June 23, 2012
and September 24, 2011 137 122 129 Class A common stock, $.01 par
value: 38,191,629, 34,506,329 and 35,941,360 shares outstanding at
June 25, 2011, June 23, 2012 and September 24, 2011 382 345 359
Class B stock, $.01 par value: 1,652,262 shares outstanding 16 16
16 Additional paid-in capital 421,351 381,751 396,208 Retained
earnings 69,234 89,777 59,045 Accumulated other comprehensive
income 1,386 1,127 1,019 Total Central Garden
& Pet Company shareholders’ equity 492,506 473,138 456,776
Noncontrolling interest 600 1,296 6 Total
equity 493,106 474,434 456,782 Total $
1,155,732 $ 1,179,718 $ 1,093,003
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except per share
amounts) (unaudited) Three Months
Ended Nine Months Ended
June 25,2011
June 23,2012
June 25,2011
June 23,2012
Net sales $ 484,303 $ 533,808 $ 1,251,746 $ 1,302,777 Cost
of goods sold and occupancy 334,914 353,156
856,031 893,691 Gross profit
149,389 180,652 395,715 409,086 Selling, general and administrative
expenses 112,795 131,683 305,974
326,175 Income from operations 36,594 48,969
89,741 82,911 Interest expense (9,948 ) (10,723 ) (28,330 ) (30,738
) Interest income 140 28 333 84 Other income (expense) 318
102 116 (19 ) Income
before income taxes and noncontrolling interest 27,104 38,376
61,860 52,238 Income taxes 9,879 14,554
21,952 19,716 Income including
noncontrolling interest 17,225 23,822 39,908 32,522 Net income
attributable to noncontrolling interest 144
1,123 653 1,290 Net income
attributable to Central Garden & Pet Company $ 17,081 $
22,699 $ 39,255 $ 31,232 Net income per
share attributable to Central Garden & Pet Company: Basic $
0.32 $ 0.48 $ 0.68 $ 0.66 Diluted $
0.31 $ 0.47 $ 0.68 $ 0.65
Weighted average shares used in the computation of net income per
share: Basic 54,020 47,661 57,635 47,580 Diluted 54,498 48,388
58,115 48,253
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