Central Garden & Pet Company Announces Fiscal 2012 Second Quarter Results

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 second quarter ended March 24, 2012.

The Company reported second quarter net sales of $466.9 million, a decrease of 4 percent from the same period a year ago. The second quarter operating income was $45.2 million, compared to operating income of $59.6 million in the second quarter of 2011, reflecting reduced sales and a lower gross margin. Net interest expense was $10.4 million compared to $9.3 million in the year-ago period. Net income for the quarter totaled $21.6 million, or $0.45 per fully diluted share, compared with net income of $31.8 million, or $0.54 per fully diluted share, in the second quarter of 2011.

“Even with strong demand from consumers for our products, our sales and earnings were impacted this quarter by short-term execution issues arising from our transformational efforts, which hindered our ability to fully meet demand,” said Bill Brown, Chairman and Chief Executive Officer. “We are addressing these issues and are continuing to see strong demand for our products. April sales are up significantly over last year, helped by delayed shipments and strong demand for our flea and tick products.”

Gus Halas, President and CEO of Central Operating Companies, commented, “As is often the case with business transformations, we encountered some disruptions as we transitioned operational activities during the quarter. We have made good progress executing on our transformational plan as we create a more efficient and effective operation to support our customers and position the Company for success in the coming years.”

Second Quarter and Year-To-Date Details

Net sales for the Garden Products segment decreased 6 percent or $15.9 million from the same period a year ago to $244.4 million, impacted by the delay in filling orders as well as lower grass seed and wild bird feed sales. The Garden Products segment’s branded product sales were $211.7 million and sales of other manufacturers’ products were $32.7 million. In the second quarter, the Garden Products segment’s gross and operating margins declined, impacted by the mix of product sales, including lower sales of higher-margin branded control products and grass seed and higher sales of third-party products. The Garden Products segment’s operating income in the quarter was $36.6 million, compared to an operating income of $46.9 million in the second quarter of 2011.

Net sales for the Pet Products segment decreased 1 percent, or $2.9 million, from the same period a year ago to $222.5 million, due primarily to a decline in wild bird feed sales. Delays in shipments to customers also impacted revenues during the quarter. The Pet Products segment’s branded product sales were $179.8 million and sales of other manufacturers’ products were $42.7 million. The Pet Product segment’s gross and operating margins declined from a year ago, in part as a result of short-term operational issues associated with the transformation. The Pet Products segment’s operating income was $21.0 million compared to operating income of $23.4 million in the prior-year period.

For the six months ending March 24, 2012, the Company reported net sales of $769.0 million, little changed from $767.4 million in the comparable 2011 period. Branded products sales equaled $638.0 million, down 2 percent over the comparable 2011 period. Sales of other manufacturers' products increased 9 percent to $131.0 million. Operating income for the period was $33.9 million compared to $53.1 million in the prior year. Net income for the six months ended March 24, 2012 was $8.5 million compared to $22.2 million in the comparable 2011 period. Earnings per fully diluted share were $0.18 compared to $0.37 per fully diluted share in the year ago period.

At March 24, 2012, the Company’s cash and short-term investments balance was $28.1 million. Net interest expense was $10.4 million for the quarter compared to $9.3 million in the prior-year period. Depreciation and amortization expense was $7.6 million in the second quarter of 2012, compared with $7.2 million in the prior-year period. The Company’s effective tax rate for the second quarter of 2012 was 37 percent, compared with 36 percent in the prior-year period.

On February 8, 2012, the Company issued an additional $50 million aggregate principal amount of its 2018 8.25% senior subordinated notes. The Company used the proceeds from the offering to pay a portion of the outstanding balance under its Credit Facility. Total debt at March 24, 2012 was $566.9 million compared to $517.2 million at March 25, 2011. The quarter-ending total leverage ratio, as defined in the Company’s senior credit facility, at its seasonally high point, was 5.5x. During the second quarter of 2012, the Company did not repurchase any of its common stock outstanding under its Board approved 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 2012 results. The conference call will be accessible through the investor relations section of Central’s website, http://www.central.com.

Alternatively, to listen to the call by telephone, dial 1-412-317-6789 and enter passcode 10012406. A replay of the call will be available for three weeks by dialing 1-412-317-0088 (domestic and international) and entering passcode 10012406.

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 4,000 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 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, Central’s Quarterly Report on Form 10-Q, expected to be filed on May 3, 2012, as well as 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 STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

 
  Three Months Ended   Six Months Ended

March 26, 2011
 

March 24, 2012

March 26, 2011
 

March 24, 2012
Net sales $ 485,724 $ 466,903 $ 767,443 $ 768,969
Cost of goods sold and occupancy   322,455     319,207     521,117     540,535  
Gross profit 163,269 147,696 246,326 228,434
Selling, general and administrative expenses   103,639     102,474     193,179     194,492  
Income from operations 59,630 45,222 53,147 33,942
Interest expense (9,343 ) (10,468 ) (18,382 ) (20,015 )
Interest income 60 28 193 56
Other income (expense)  

204
    (7 )   (202 )   (121 )
Income before income taxes and noncontrolling interest 50,551 34,775 34,756 13,862
Income taxes   18,190     12,808     12,073     5,162  
Income including noncontrolling interest 32,361 21,967 22,683 8,700
Net income attributable to noncontrolling interest   595     344     509     167  
Net income attributable to Central Garden & Pet Company $ 31,766   $ 21,623   $ 22,174   $ 8,533  
 
Net income per share attributable to Central Garden & Pet Company:
Basic $ 0.55   $ 0.46   $ 0.37   $ 0.18  
Diluted $ 0.54   $ 0.45   $ 0.37   $ 0.18  
 
Weighted average shares used in the computation of net income per share:
Basic 57,955 47,343 59,447 47,576
Diluted 58,433 48,036 59,961 48,191
 
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Unaudited
 
  March 26,   March 24,  

September 24,
ASSETS 2011 2012 2011
Current assets:
Cash and cash equivalents $ 11,186 $ 10,281 $ 12,031
Short term investments 15,320 17,820 17,820
Accounts receivable 327,090 309,299 195,417
Inventories 381,815 380,812 329,546
Prepaid expenses and other   43,655   47,727   47,772
Total current assets 779,066 765,939 602,586
 
Land, buildings, improvements and equipment—net 169,731 182,569 176,402
Goodwill 209,548 210,223 210,223
Other intangible assets—net 87,073 82,100 84,526
Deferred income taxes and other assets   27,139   19,243   19,266
Total $ 1,272,557 $ 1,260,074 $ 1,093,003
 
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 163,622 $ 150,605

$
116,524
Accrued expenses 84,415 75,004 75,128
Current portion of long-term debt   120   339   279
Total current liabilities 248,157 225,948 191,931
 
Long-term debt 517,134 566,603 435,330
Other long-term obligations 3,890 18,576 8,960
 
Equity:
Common stock 149 123 129
Class A common stock 399 343 359
Class B stock 16 16 16
Additional paid-in capital 443,169 379,902 396,208
Accumulated earnings 57,952 67,078 59,045
Accumulated other comprehensive income   1,235   1,312   1,019

Total Central Garden & Pet Company shareholders’ equity
502,920 448,774 456,776
Noncontrolling interest   456   173   6
Total equity   503,376   448,947   456,782
Total $ 1,272,557 $ 1,260,074 $ 1,093,003

Copyright Business Wire 2010

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