Fourth quarter sales of $368.8 million; EPS
of $(0.47) per share
Fiscal 2013 sales of $1.65 billion; EPS of
$(0.04) per share
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 thirteen and fifty-two week
periods ended September 28, 2013.
The Company reported net sales of $368.8 million for the fourth
quarter of 2013, a seven percent decrease over the fourteen week
comparable fiscal 2012 period. Sales comparisons were impacted by
an extra week in the prior year quarter and full year periods. The
Company’s fourth quarter operating loss for 2013 was $26.4 million
compared to an operating loss of $8.5 million in the fourth quarter
of 2012. The net loss for the fourth quarter of 2013 was $22.6
million or $0.47 per fully diluted share compared with a loss of
$10.1 million or $0.21 per fully diluted share in the fourth
quarter of 2012. The results for the fourth quarter of 2013 include
a non-cash, pre-tax charge of $7.7 million related to the
impairment of goodwill in the Garden segment.
John Ranelli, President & CEO of Central Garden & Pet
commented, “Our financial results are simply unacceptable. While we
will see some improvements along the way, it is going to take
another year or two to get our performance consistently where we
want it to be. We are taking deliberate actions to improve our
Company’s performance and achieve its true potential. We will
continue to focus on putting our customers first, cutting costs,
and raising profits to drive shareholder value.” Ranelli continued,
“We have made good progress in our Pet segment in laying the
foundation for future success. However, our Garden results are
disappointing. We are beginning to implement the same operating
philosophies and disciplines we are instituting in our Pet segment
to drive improvement in our Garden segment.” Ranelli concluded,
“Although our Company’s results are expected to be choppy, I am
confident these improvements will drive more favorable results over
the long term.”
Fourth Quarter 2013 Details
Reported net sales for the Pet segment for the quarter were
$220.4 million, a decline of seven percent over the fourth quarter
of 2012, which includes the impact of an extra week in the fourth
quarter of the prior year. The Pet segment’s branded product sales
for the quarter decreased $16.1 million, or eight percent, to
$175.6 million while sales of other manufacturers’ products were
$44.8 million, a decrease of two percent compared with the fourth
quarter of 2012. The Pet segment’s operating margin improved for
the quarter, aided by higher gross margins and lower marketing
expenses. For the fourth quarter, the Pet segment’s operating
income was $24.7 million, an increase from $16.5 million, in the
fourth quarter of 2012.
Fourth quarter net sales for the Garden segment decreased seven
percent, or $11.2 million compared with the prior year, to $148.4
million, which includes the impact of one less week in the quarter
than the fourth quarter of 2012. The Garden segment’s branded
product sales decreased $12.1 million, or nine percent, to $128.1
million. Sales of other manufacturers’ products were $20.3 million,
an increase of five percent compared with the fourth quarter of
2012. The Garden segment’s operating margin declined during the
quarter, meaningfully impacted by lower gross margins as well as a
$7.7 million non-cash, pretax charge for the impairment of
goodwill. The Garden segment’s gross margin included an $11.2
million charge for the costs associated with inventory adjustments
and product and packaging changes to certain new products
introduced in the Spring of 2013. The Garden segment’s operating
loss was $30.8 million compared to an operating loss of $7.7
million in the prior year period.
Depreciation and amortization expense was $8.8 million in the
fourth quarter of 2013, compared to $7.3 million the prior year.
The Company’s effective tax rate for the fourth quarter of 2013 was
37.9 percent on its operating loss compared to 39.9 percent in the
fourth quarter of 2012.
Total debt at September 28, 2013 was $472.6 million compared to
$449.8 million at fiscal year-end 2012. The fourth quarter ending
total leverage ratio, as defined in the Company’s credit agreement,
was 4.9x. At September 28, 2013, $23 million was outstanding and
after giving effect to the financial covenants in the Credit
Facility, $168.3 million of the $375 million Credit Facility
remained available. The Company was in compliance with all debt
covenants at September 28, 2013.
On December 5, 2013, the Company replaced its existing $375
million Credit Facility, maturing in June 2016, with a new $390
million senior secured asset-based revolving credit facility (ABL
Revolver.) The ABL Revolver has a five-year term and matures in
December 2018. The ABL revolver bears a lower interest rate and
commitment fees than the previous Credit Facility and is expected
to lower the company’s borrowing costs on a comparative basis while
increasing the amount currently available to borrow. The Company
has the option to increase the size of the ABL Revolver by an
additional $200 million of incremental borrowings should it
exercise its option and one or more lenders are willing to make
such increased amounts available to it. At the inception of the ABL
Revolver on December 5, there were no borrowings outstanding.
Fiscal 2013 Details
For the year ended September 28, 2013, the Company reported net
sales of $1.65 billion, a decrease of three percent, compared to
$1.70 billion in fiscal 2012. The Company benefitted from an extra
week in the prior fiscal year period compared to the current year.
Branded products sales were $1.38 billion, down three percent over
fiscal 2012. Sales of other manufacturers’ products decreased one
percent to $278.2 million. Depreciation and amortization for the
fiscal year period was $33.0 million compared with $30.4 million in
the prior year. Operating income for the year totaled $40.2 million
compared to $74.4 million in the prior year. The net loss for the
year ended September 28, 2013 was $1.9 million compared to net
income of $21.2 million in fiscal 2012. The net loss per fully
diluted share was $(0.04) compared to net income of $0.44 per fully
diluted share in the year ago period. Included in the full year
results is the non-cash, pre-tax charge of $7.7 million related to
the impairment of goodwill.
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 fourth 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 (480)
629-9819 and enter passcode 4653907. A replay of the call will be
available for three weeks by dialing (303) 590-3030 and entering
passcode 4653907.
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 3,300 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.
Amdro, Aqueon, Avo-Derm, Ironite, Matthews Four Seasons, New
England Pottery, Norcal, Oceanic, Pinnacle, and Zilla are
trademarks of Central Garden & Pet Company. Zodiac is a
registered trademark of Wellmark International. Over-N-Out is a
registered trademark of Tech Pac, L.L.C. Kaytee is a registered
trademark of Kaytee Products, Incorporated. Super Pet and Critter
Trail are registered trademarks of Pets International, Ltd. T.F.H.
and Nylabone are registered trademarks of T.F.H. Publications, Inc.
Four Paws is a registered trademark of Four Paws Products, Ltd.
Pennington, Smart Seed, and The Rebels are registered trademarks of
Pennington Seed, Inc. Farnam, Horse Health, Red Cell, and Vita Flex
are trademarks of Farnam Companies, Inc. Sevin is a registered
trademark of Tessenderlo Kerley, Inc. All other trademarks are
property of their respective owners.
“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 lower borrowing costs, 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:
- disruptions in the Company’s business
arising from the implementation of the Company’s change
initiatives; and increased costs and expenses associated with the
Company’s transformational change initiatives;
- 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
- implementation of a new enterprise
resource planning information technology system.
These risks and others 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
CONSOLIDATED BALANCE SHEETS
September 28,
2013
September 29,
2012
ASSETS
(in thousands)
Current assets:
Cash and cash equivalents $ 15,156 $ 48,475 Short term investments
17,820 22,705 Accounts receivable, net 194,260 202,422 Inventories
391,934 330,032 Prepaid expenses, deferred income taxes and other
53,484 48,149 Total current assets 672,654 651,783
Plant, property and equipment, net 188,913 191,163 Goodwill 205,756
210,223 Other intangible assets, net 79,868 78,853 Other assets
13,969 17,525 Total $ 1,161,160 $ 1,149,547
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 103,569 $ 126,662 Accrued expenses 78,618 79,491
Current portion of long-term debt 142 331 Total
current liabilities 183,329 206,484 Long-term debt 472,445 449,483
Deferred income taxes and other long-term obligations 36,362 28,697
Equity:
Common stock 122 122 Class A common stock 353 347 Class B stock 16
16 Additional paid-in capital 389,153 382,195 Retained earnings
77,592 79,718 Accumulated other comprehensive income 1,442
1,539 Total Central Garden & Pet shareholders’ equity
468,678 463,937 Noncontrolling interest 1,346 946
Total equity 470,024 464,883 Total $ 1,161,160 $
1,149,547
CENTRAL GARDEN & PET
COMPANY
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended Fiscal Year Ended
September 28 2013
September 29,2012
September 28,2013
September 29,2012
Net sales $ 368,837 $ 397,236 $ 1,653,633 $ 1,700,013 Cost
of goods sold and occupancy 287,530 292,164
1,189,731 1,185,855 Gross profit
81,307 105,072 463,902 514,158 Selling, general and administrative
expenses 99,987 113,562 416,038 439,737 Goodwill impairments
7,709 0 7,709 0
Income (loss) from operations (26,389 ) (8,490 ) 40,155 74,421
Interest expense (10,513 ) (9,577 ) (43,112 ) (40,315 ) Interest
income 22 61 142 145 Other income, net (1 ) 697
(677 ) 678 Income (loss) before income
taxes and noncontrolling interest (36,881 ) (17,309 ) (3,492 )
34,929 Income taxes (13,962 ) (6,900 ) (2,592
) 12,816 Income (loss) including noncontrolling
interest (22,919 ) (10,409 ) (900 ) 22,113 Net income attributable
to noncontrolling interest (338 ) (350 ) 1,029
940 Net income (loss) attributable to Central
Garden & Pet Company $ (22,581 ) $ (10,059 ) $ (1,929 ) $
21,173 Net income (loss) per share attributable to
Central Garden & Pet Company: Basic $ (0.47 ) $ (0.21 ) $ (0.04
) $ 0.44 Diluted $ (0.47 ) $ (0.21 ) $ (0.04 ) $ 0.44
Weighted average shares used in the computation of net
income per share: Basic 48,264 47,704 48,094 47,622 Diluted 48,264
47,704 48,094 48,374
Central Garden & Pet CompanySteve Zenker,
925-948-3657Investor Relations
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