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 30,
2013.
The Company reported net sales of $498.2 million, a 7 percent
increase over the comparable fiscal 2012 period. The Company’s
Garden and Pet segments both delivered higher revenues during the
quarter. The Company’s second quarter operating income was $46.7
million, compared to operating income of $45.2 million in the
second quarter of 2012. Net income was $22.2 million, or $0.46 per
fully diluted share, compared with net income of $21.6 million or
$0.45 per fully diluted share in the second quarter of 2012.
“Although our revenues grew during the quarter, our margins and
bottom line results were unsatisfactory. We are taking decisive
action to improve our results,” said John Ranelli, President and
CEO of Central Garden & Pet. Mr. Ranelli continued, “Since
taking over the role of CEO during the middle of the quarter, I
have met with many of our customers and employees and it is clear
to me that they have a strong belief in Central and our brands. As
we move forward, we will be more customer-focused on delivering
premier levels of service, innovation and quality, while still
reducing costs. This balanced approach should enable us to drive
increased revenue and profits for our shareholders in the
future.”
The Company believes it is likely that its fiscal third quarter
2013 results will be lower than the prior year. In fiscal 2012, the
Company's third quarter results included the shipment of orders
deferred from the second quarter due to supply chain disruptions
and the initial sell-in of flea and tick products to a new channel.
These events will not recur in the third quarter of 2013.
Second Quarter and Year-to-Date
Details
Net sales for the Garden segment for the quarter were $263.4
million, a gain of 8 percent over the second quarter of 2012,
benefitting from higher bird feed sales and initial sales of the
company’s new innovative Amdro Powerflex and Pennigton Smart Feed
products. The Garden segment’s branded product sales for the
quarter increased $17.5 million, or 8 percent, to $229.2 million
while sales of other manufacturers’ products were $34.2 million, an
increase of 5 percent compared with the second quarter of 2012. The
Garden segment’s operating margin declined during the quarter,
impacted by lower gross margins in its decor and fertilizer
businesses as well as higher marketing expenses. For the second
quarter, the Garden segment’s operating income was $34.0 million,
down from $36.6 million in the second quarter of 2012.
Net sales for the Pet segment for the quarter were $234.8
million, a gain of 6 percent over the second quarter of 2012,
benefitting from higher bird feed sales, strength in the dog and
cat care business, and higher professional sales. The Pet segment’s
branded product sales for the quarter increased $13.3 million, or 7
percent, to $193.1 million while sales of other manufacturers’
products were $41.7 million, a decrease of 2 percent compared with
the second quarter of 2012. The Pet segment’s operating margin rose
during the quarter, benefitting from a greater percentage of sales
from its higher-margined businesses. For the second quarter, the
Pet segment’s operating income was $27.5 million, up from $21.0
million in the prior-year period.
For the six months ending March 30, 2013, the Company reported
net sales of $790.7 million, up from $769.0 million in the
comparable 2012 period. Branded products sales were $661.7 million,
up 4 percent over the comparable 2012 period. Sales of other
manufacturers' products decreased 2 percent to $128.9 million.
Operating income for the period was $33.7 million compared to $33.9
million in the prior year. Net income for the six months ended
March 30, 2013 was $6.9 million compared to $8.5 million in the
comparable 2012 period. Earnings per fully diluted share were $0.14
compared to $0.18 per fully diluted share in the year ago
period.
At March 30, 2013, the Company’s cash and short term investments
balance totaled $29.1 million. Net interest expense was $10.9
million for the quarter and $10.4 million in the prior year period.
Depreciation and amortization expense was $8.3 million up from $7.6
million in the second quarter of 2012. The Company’s effective tax
rate for the second quarter was 36 percent compared to 37 percent
in the prior year period.
Total debt at March 30, 2013 was $593.7 million compared to
$566.9 million at March 24, 2012. The quarter ending total
leverage ratio, as defined in the Company’s senior credit facility,
at its seasonally high point, was 5.1x. During the second quarter,
the Company repurchased $1.5 million of its common stock under its
Board approved $100 million 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 second quarter
and fiscal 2013 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
412-317-6789 and enter passcode 10025918. A replay of the call will
be available for three weeks by dialing 412-317-0088 and entering
passcode 10025918.
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®, VITA FLEX® and HORSE
HEALTHTM PRODUCTS. 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 3,500 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 lower fiscal
2013 results and future increased revenue and profitability from
the Company’s transformation and other 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 Central’s 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
(See Note 1) March 30,
March 24, September 29, ASSETS 2013
2012 2012 Current assets: Cash and cash equivalents $
11,284 $ 10,281 $ 48,475 Short term investments 17,820 17,820
22,705 Accounts receivable (less allowance for doubtful accounts of
$21,201, $15,580 and $18,574) 322,190 309,299 202,422 Inventories
435,883 380,812 330,032 Prepaid expenses and other 59,408
47,727 48,149 Total current assets 846,585 765,939
651,783 Land, buildings, improvements and equipment—net
193,673 182,569 191,163 Goodwill 210,223 210,223 210,223 Other
intangible assets—net 76,762 82,100 78,853 Deferred income taxes
and other assets 19,338 19,243 17,525 Total $
1,346,581 $ 1,260,074 $ 1,149,547
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 165,691 $
150,605
$
126,662 Accrued expenses 76,915 75,004 79,491 Current portion of
long-term debt 271 339 331 Total current
liabilities 242,877 225,948 206,484 Long-term debt 593,424
566,603 449,483 Other long-term obligations 34,651 18,576 28,697
Equity: Common stock, $.01 par value: 12,246,751,
12,252,443, and 12,247,571 shares outstanding at March 30, 2013,
March 24, 2012 and September 29, 2012 122 123 122 Class A common
stock, $.01 par value: 35,206,896, 34,325,662 and 34,706,902 shares
outstanding at March 30, 2013, March 24, 2012 and September 29,
2012 352 343 347 Class B stock, $.01 par value: 1,652,262 shares
outstanding 16 16 16 Additional paid-in capital 386,756 379,902
382,195 Accumulated earnings 86,448 67,078 79,718 Accumulated other
comprehensive income 932 1,312 1,539 Total
Central Garden & Pet Company shareholders’ equity 474,626
448,774 463,937 Noncontrolling interest 1,003 173
946 Total equity 475,629 448,947
464,883 Total $ 1,346,581 $ 1,260,074 $ 1,149,547
See notes to condensed consolidated
financial statements.
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended Six Months Ended
March 30, 2013 March 24, 2012 March 30,
2013 March 24, 2012 Net sales $ 498,169 $ 466,903
$ 790,666 $ 768,969 Cost of goods sold and occupancy 344,999
319,207 560,537 540,535 Gross profit 153,170
147,696 230,129 228,434 Selling, general and administrative
expenses 106,424 102,474 196,477
194,492 Income from operations 46,746 45,222 33,652 33,942 Interest
expense (10,937) (10,468) (21,252) (20,015) Interest income 27 28
92 56 Other income (expense) (48) (7) (1,029)
(121) Income before income taxes and noncontrolling interest
35,788 34,775 11,463 13,862 Income taxes 12,828
12,808 3,850 5,162 Income including noncontrolling
interest 22,960 21,967 7,613 8,700 Net income attributable to
noncontrolling interest 764 344 686 167
Net income attributable to Central Garden & Pet Company $
22,196 $ 21,623 $ 6,927 $ 8,533 Net income per share
attributable to Central Garden & Pet Company: Basic $ 0.46 $
0.46 $ 0.14 $ 0.18 Diluted $ 0.46 $ 0.45 $ 0.14 $ 0.18
Weighted average shares used in the computation of net income per
share: Basic 48,064 47,343 47,968 47,576 Diluted 48,740 48,036
48,766 48,191
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