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
|
|
Copyright Business Wire 2013