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 29, 2014.
The Company reported net sales of $501.6 million, a one percent increase
over the comparable fiscal 2013 period. The Company’s second quarter
operating income was $44.8 million, compared to operating income of
$46.7 million in the second quarter of 2013. Net income was $20.9
million, or $0.43 per fully diluted share, compared with net income of
$22.2 million or $0.46 per fully diluted share in the prior year.
“As expected, the second quarter had some positives and negatives,” said
John Ranelli, President & CEO of Central Garden & Pet Company. “While we
have made important changes to our operations – raising fill rates,
improving customer service, reducing costs and strengthening our
management team – we have significant challenges ahead of us to
overcome. We still believe that it will be a year or more before we are
able to fill our new product pipeline and execute in a consistent
manner.”
Second Quarter and Year-to-Date Details
Net sales for the Garden segment for the quarter were $284.9 million, a
gain of eight percent over the second quarter of 2013. Sales benefitted
from aggressive up-front retailer purchasing ahead of the Spring Garden
season as well as increased distribution in several of the Company’s
Garden businesses. The Garden segment’s branded product sales for the
quarter increased $18.1 million, or eight percent, to $247.3 million
while sales of other manufacturers’ products were $37.6 million, an
increase of 10 percent compared with the second quarter of 2013. The
Garden segment’s operating margin of 12.9% during the quarter was
similar to a year ago, with a decline in gross margin being offset by
lower SG&A expenses. For the second quarter, the Garden segment’s
operating income was $36.8 million, an increase from $34.0 million from
the second quarter of 2013.
The Company believes that its Garden product sales were shifted from
April into the second quarter and will likely result in the opposite
effect in the third quarter, with Garden sales being lower than the
prior year.
Net sales for the Pet segment for the quarter were $216.7 million, a
decrease of eight percent over the second quarter of 2013, impacted by
reduced retail distribution for some of its products as well as lower
consumer takeaway in areas of the Pet industry where the Company
participates. The Pet segment’s branded product sales for the quarter
decreased $23.3 million, or 12 percent, to $169.8 million while sales of
other manufacturers’ products were $46.9 million, an increase of 12
percent compared with the second quarter of 2013. The Pet segment’s
operating margin declined 50 basis points to 11.2% during the quarter.
Gross margin was relatively unchanged from a year ago. For the second
quarter, the Pet segment’s operating income was $24.2 million, a decline
from $27.5 million in the prior-year period.
For the six months ending March 29, 2014, the Company reported net sales
of $792.1 million, a slight increase from $790.7 million in the
comparable 2013 period. Branded products sales were $650.4 million, a
decrease of two percent over the comparable 2013 period. Sales of other
manufacturers' products increased 10 percent to $141.7 million.
Operating income for the period increased to $36.4 million compared to
$33.7 million in the prior year. Net income for the six months ended
March 29, 2014 was $8.2 million, an increase of $1.3 million compared to
the comparable 2013 period. Earnings per fully diluted share were $0.17
compared to $0.14 per fully diluted share in the year ago period.
At March 29, 2014, the Company’s cash and short term investments balance
totaled $31.0 million. Total debt at March 29, 2014 was $545.3 million
compared to $593.7 million at March 30, 2013. As of March 29, 2014,
there were borrowings of $95.0 million outstanding on the Company’s
senior-secured asset-based revolving credit facility and $295.0 million
remained available. Net interest expense was $10.4 million for the
quarter and $10.9 million in the prior year period. Depreciation and
amortization expense was $9.2 million, an increase from $8.3 million in
the second quarter of 2013. The Company’s effective tax rate for the
second quarter was 37.7 percent compared to 35.8 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 second quarter 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) 629-9835
and enter passcode 4669806. A replay of the call will be available for
three weeks by dialing (303) 590-3030 and entering passcode 4669806.
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 under
the PENNINGTON ® brand. 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 3,400 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 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:
-
uncertainty about new product innovations and marketing programs;
-
disruptions in the Company’s business; and increased costs and
expenses associated with the Company’s 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; 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, including our Annual Report on Form 10-K
filed December 12, 2013 and our Quarterly Report on Form 10-Q to be
filed on or about May 8, 2014. 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
|
|
|
|
March 29,
|
|
March 30,
|
|
September 28,
|
ASSETS
|
|
2014
|
|
2013
|
|
2013
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,748
|
|
$
|
11,284
|
|
$
|
15,156
|
Short term investments
|
|
|
14,220
|
|
|
17,820
|
|
|
17,820
|
Accounts receivable (less allowance for doubtful accounts of
$24,771, $21,201 and $21,158)
|
|
|
323,183
|
|
|
322,190
|
|
|
194,260
|
Inventories
|
|
|
402,720
|
|
|
435,883
|
|
|
391,934
|
Prepaid expenses and other
|
|
|
55,882
|
|
|
59,408
|
|
|
53,484
|
Total current assets
|
|
|
812,753
|
|
|
846,585
|
|
|
672,654
|
|
|
|
|
|
|
|
Land, buildings, improvements and equipment—net
|
|
|
185,354
|
|
|
193,673
|
|
|
188,913
|
Goodwill
|
|
|
205,756
|
|
|
210,223
|
|
|
205,756
|
Other intangible assets—net
|
|
|
77,895
|
|
|
76,762
|
|
|
79,868
|
Deferred income taxes and other assets
|
|
|
12,589
|
|
|
19,338
|
|
|
13,969
|
Total
|
|
$
|
1,294,347
|
|
$
|
1,346,581
|
|
$
|
1,161,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
142,152
|
|
$
|
165,691
|
|
$
|
103,569
|
Accrued expenses
|
|
|
80,886
|
|
|
76,915
|
|
|
78,618
|
Current portion of long-term debt
|
|
|
303
|
|
|
271
|
|
|
142
|
Total current liabilities
|
|
|
223,341
|
|
|
242,877
|
|
|
182,329
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
545,032
|
|
|
593,424
|
|
|
472,445
|
Other long-term obligations
|
|
|
40,470
|
|
|
34,651
|
|
|
36,362
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
Common stock, $.01 par value: 12,308,802, 12,246,751, and 12,246,751
shares outstanding at March 29, 2014, March 30, 2013 and September
28, 2013
|
|
|
123
|
|
|
122
|
|
|
122
|
Class A common stock, $.01 par value: 36,417,849, 35,206,896 and
35,291,001 shares outstanding at March 29, 2014, March 30, 2013 and
September 28, 2013
|
|
|
364
|
|
|
352
|
|
|
353
|
Class B stock, $.01 par value: 1,652,262 shares outstanding
|
|
|
16
|
|
|
16
|
|
|
16
|
Additional paid-in capital
|
|
|
396,490
|
|
|
386,756
|
|
|
389,153
|
Accumulated earnings
|
|
|
85,779
|
|
|
86,448
|
|
|
77,592
|
Accumulated other comprehensive income
|
|
|
1,529
|
|
|
932
|
|
|
1,442
|
Total Central Garden & Pet Company shareholders’ equity
|
|
|
484,301
|
|
|
474,626
|
|
|
468,678
|
Noncontrolling interest
|
|
|
1,203
|
|
|
1,003
|
|
|
1,346
|
Total equity
|
|
|
485,504
|
|
|
475,629
|
|
|
470,024
|
Total
|
|
$
|
1,294,347
|
|
$
|
1,346,581
|
|
$
|
1,161,160
|
|
|
|
|
|
|
|
|
|
|
|
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
March 29, 2014
|
|
March 30, 2013
|
|
March 29, 2014
|
|
March 30, 2013
|
Net sales
|
|
$
|
501,611
|
|
|
$
|
498,169
|
|
|
$
|
792,132
|
|
|
$
|
790,666
|
|
Cost of goods sold and occupancy
|
|
|
354,015
|
|
|
|
344,999
|
|
|
|
564,795
|
|
|
|
560,537
|
|
Gross profit
|
|
|
147,596
|
|
|
|
153,170
|
|
|
|
227,337
|
|
|
|
230,129
|
|
Selling, general and administrative expenses
|
|
|
102,827
|
|
|
|
106,424
|
|
|
|
190,923
|
|
|
|
196,477
|
|
Income from operations
|
|
|
44,769
|
|
|
|
46,746
|
|
|
|
36,414
|
|
|
|
33,652
|
|
Interest expense
|
|
|
(10,405
|
)
|
|
|
(10,937
|
)
|
|
|
(22,622
|
)
|
|
|
(21,252
|
)
|
Interest income
|
|
|
16
|
|
|
|
27
|
|
|
|
29
|
|
|
|
92
|
|
Other income (expense)
|
|
|
108
|
|
|
|
(48
|
)
|
|
|
(60
|
)
|
|
|
(1,029
|
)
|
Income before income taxes and noncontrolling interest
|
|
|
34,488
|
|
|
|
35,788
|
|
|
|
13,761
|
|
|
|
11,463
|
|
Income taxes
|
|
|
12,999
|
|
|
|
12,828
|
|
|
|
5,084
|
|
|
|
3,850
|
|
Income including noncontrolling interest
|
|
|
21,489
|
|
|
|
22,960
|
|
|
|
8,677
|
|
|
|
7,613
|
|
Net income attributable to noncontrolling interest
|
|
|
594
|
|
|
|
764
|
|
|
|
490
|
|
|
|
686
|
|
Net income attributable to Central Garden & Pet Company
|
|
$
|
20,895
|
|
|
$
|
22,196
|
|
|
$
|
8,187
|
|
|
$
|
6,927
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to Central Garden & Pet Company:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.43
|
|
|
$
|
0.46
|
|
|
$
|
0.17
|
|
|
$
|
0.14
|
|
Diluted
|
|
$
|
0.43
|
|
|
$
|
0.46
|
|
|
$
|
0.17
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the computation of net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
48,688
|
|
|
|
48,064
|
|
|
|
48,523
|
|
|
|
47,968
|
|
Diluted
|
|
|
49,116
|
|
|
|
48,740
|
|
|
|
48,963
|
|
|
|
48,766
|
|
Copyright Business Wire 2014