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 fiscal third quarter ended June 23, 2012. The Company reported third quarter net sales of $533.8 million, an increase of 10 percent from the same period a year ago. Third quarter operating income was $49.0 million, compared to operating income of $36.6 million in the third quarter of 2011, a 34 percent increase. The increase in operating income reflected higher sales and a favorable product mix, which resulted in both higher gross margins and higher operating margins. Net interest expense was $10.7 million compared to $9.8 million in the year-ago period. Net income totaled $22.7 million, or $0.47 per fully diluted share, compared with net income of $17.1 million, or $0.31 per fully diluted share, in the third quarter of 2011. “We are pleased with our third quarter revenue growth and bottom line results. We now have generated top-line growth in six of the last seven quarters,” said Gus Halas, President and CEO of Central Operating Companies. “Our Pet segment performed well during the quarter, benefitting from expanded distribution, product innovation and favorable weather for pest control products. Additionally, this quarter’s results also reflect the shipment of backlogged orders from the prior quarter. We believe our revenue growth underscores that our increased marketing investments and master brands strategy are yielding tangible results and helping build a solid base for sustained growth in the years ahead.” Mr. Halas added, “The transformation we began over a year ago is progressing as planned, but is by no means complete. As we move forward, we are continuing to focus on becoming more efficient and more integrated, enabling us to better meet the needs of our customers while raising the visibility of our products to consumers.”
Third Quarter and Year-To-Date Details
Net sales for the Pet segment increased 19 percent, or $44.0 million, from the same period a year ago to $271.3 million, on strength across many of its categories, especially flea and tick. The Pet segment’s branded product sales were $228.9 million and sales of other manufacturers’ products were $42.4 million. The Pet segment’s gross and operating margins rose from a year ago, due primarily to a favorable change in the mix of sales including higher flea & tick sales and lower third party product sales. The Pet segment’s operating income was $40.5 million compared to operating income of $27.2 million in the prior-year period, a $13.3 million or 49 percent increase. Net sales for the Garden segment rose 2 percent, or $5.5 million, from the same period a year ago to $262.5 million, in large part due to stronger chemical and control sales. The Garden segment’s branded product sales were $221.3 million and sales of other manufacturers’ products were $41.2 million. In the third quarter, the Garden segment’s gross and operating margins increased relative to the same period a year ago, aided by increased sales of higher-margin control products and improved margins on bird seed products. The Garden segment’s operating income in the quarter was $22.6 million, compared to operating income of $18.0 million in the third quarter of 2011, a $4.6 million or 26 percent increase. For the nine months ending June 23, 2012, the Company reported net sales of $1.30 billion, an increase of 4% from $1.25 billion in the comparable 2011 period. Branded products sales equaled $1.09 billion, increasing 3% over the comparable 2011 period. Sales of other manufacturers' products rose 9% to $214.6 million. Operating income for the period was $82.9 million compared to $89.7 million in the prior year. Net income for the nine months ended June 23, 2012 was $31.2 million compared to $39.3 million in the comparable 2011 period. Earnings per fully diluted share were $0.65 compared to $0.68 per fully diluted share in the year ago period.At June 23, 2012, the Company’s cash and short-term investments balance was $58.5 million compared to $26.6 million in the prior year-period. Total debt at June 23, 2012 was $449.9 million compared to $450.5 million at June 25, 2011. The quarter-ending total leverage ratio, as defined in the Company’s senior credit facility, was 3.9x. Depreciation and amortization expense was $8.0 million in the third quarter of 2012, compared with $7.1 million in the prior-year period. The Company’s effective tax rate for the third quarter of 2012 was 37.9 percent, compared with 36.4 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 fiscal third quarter 2012 results. The conference call will be accessible through the investor relations section of Central’s website, http://ir.central.com. Alternatively, to listen to the call by telephone, dial 1-412-317-6789 and enter passcode 10015876. A replay of the call will be available for three weeks by dialing 1-412-317-0088 (domestic and international) and entering passcode 10015876. 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 3,800 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 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, as well as the Company’s 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 BALANCE SHEETS | ||||||||||
| (in thousands, except share and per share amounts) | ||||||||||
| Unaudited | ||||||||||
| June 25, | June 23, | September 24, | ||||||||
| ASSETS | 2011 | 2012 | 2011 | |||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 11,233 | $ | 40,699 | $ | 12,031 | ||||
| Short term investments | 15,320 | 17,820 | 17,820 | |||||||
| Accounts receivable (less allowance for doubtful accounts of $18,782, $18,297 and $15,590) | 257,418 | 245,780 | 195,417 | |||||||
| Inventories | 343,788 | 334,796 | 329,546 | |||||||
| Prepaid expenses and other | 40,095 | 46,107 | 47,772 | |||||||
| Total current assets | 667,854 | 685,202 | 602,586 | |||||||
| Land, buildings, improvements and equipment—net | 171,187 | 185,225 | 176,402 | |||||||
| Goodwill | 209,348 | 210,223 | 210,223 | |||||||
| Other intangible assets—net | 85,705 | 80,529 | 84,526 | |||||||
| Deferred income taxes and other assets | 21,638 | 18,539 | 19,266 | |||||||
| Total | $ | 1,155,732 | $ | 1,179,718 | $ | 1,093,003 | ||||
| LIABILITIES AND EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 115,380 | $ | 125,111 | $ | 116,524 | ||||
| Accrued expenses | 92,678 | 106,818 | 75,128 | |||||||
| Current portion of long-term debt | 198 | 347 | 279 | |||||||
| Total current liabilities | 208,256 | 232,276 | 191,931 | |||||||
| Long-term debt | 450,266 | 449,530 | 435,330 | |||||||
| Deferred income taxes and other long-term obligations | 4,104 | 23,478 | 8,960 | |||||||
| Equity: | ||||||||||
| Common stock, $.01 par value: 13,755,693, 12,247,571 and 12,949,593 shares outstanding at June 25, 2011, June 23, 2012 and September 24, 2011 | 137 | 122 | 129 | |||||||
| Class A common stock, $.01 par value: 38,191,629, 34,506,329 and 35,941,360 shares outstanding at June 25, 2011, June 23, 2012 and September 24, 2011 | 382 | 345 | 359 | |||||||
| Class B stock, $.01 par value: 1,652,262 shares outstanding | 16 | 16 | 16 | |||||||
| Additional paid-in capital | 421,351 | 381,751 | 396,208 | |||||||
| Retained earnings | 69,234 | 89,777 | 59,045 | |||||||
| Accumulated other comprehensive income | 1,386 | 1,127 | 1,019 | |||||||
| Total Central Garden & Pet Company shareholders’ equity | 492,506 | 473,138 | 456,776 | |||||||
| Noncontrolling interest | 600 | 1,296 | 6 | |||||||
| Total equity | 493,106 | 474,434 | 456,782 | |||||||
| Total | $ | 1,155,732 | $ | 1,179,718 | $ | 1,093,003 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 25, 2011 | June 23, 2012 | June 25, 2011 | June 23, 2012 | |||||||||||||
| Net sales | $ | 484,303 | $ | 533,808 | $ | 1,251,746 | $ | 1,302,777 | ||||||||
| Cost of goods sold and occupancy | 334,914 | 353,156 | 856,031 | 893,691 | ||||||||||||
| Gross profit | 149,389 | 180,652 | 395,715 | 409,086 | ||||||||||||
| Selling, general and administrative expenses | 112,795 | 131,683 | 305,974 | 326,175 | ||||||||||||
| Income from operations | 36,594 | 48,969 | 89,741 | 82,911 | ||||||||||||
| Interest expense | (9,948 | ) | (10,723 | ) | (28,330 | ) | (30,738 | ) | ||||||||
| Interest income | 140 | 28 | 333 | 84 | ||||||||||||
| Other income (expense) | 318 | 102 | 116 | (19 | ) | |||||||||||
| Income before income taxes and noncontrolling interest | 27,104 | 38,376 | 61,860 | 52,238 | ||||||||||||
| Income taxes | 9,879 | 14,554 | 21,952 | 19,716 | ||||||||||||
| Income including noncontrolling interest | 17,225 | 23,822 | 39,908 | 32,522 | ||||||||||||
| Net income attributable to noncontrolling interest | 144 | 1,123 | 653 | 1,290 | ||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | 17,081 | $ | 22,699 | $ | 39,255 | $ | 31,232 | ||||||||
| Net income per share attributable to Central Garden & Pet Company: | ||||||||||||||||
| Basic | $ | 0.32 | $ | 0.48 | $ | 0.68 | $ | 0.66 | ||||||||
| Diluted | $ | 0.31 | $ | 0.47 | $ | 0.68 | $ | 0.65 | ||||||||
| Weighted average shares used in the computation of net income per share: | ||||||||||||||||
| Basic | 54,020 | 47,661 | 57,635 | 47,580 | ||||||||||||
| Diluted | 54,498 | 48,388 | 58,115 | 48,253 | ||||||||||||