Central Garden & Pet Company Announces Fiscal 2011 Third Quarter Results
Third quarter sales increase to $484.3 million; Diluted EPS $0.31 per share
WALNUT CREEK, Calif.--(BUSINESS WIRE)-- 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 25, 2011.
The Company announced third quarter net sales of $484.3 million, a 4 percent increase over the comparable fiscal 2010 period. The Company’s sales gains were largely driven by the Garden Products segment which reported sales growth of 6 percent for the quarter, and an 11 percent sales increase for the nine-month period ended June 25, 2011. Third quarter operating income was $36.6 million, compared to operating income of $52.6 million in the comparable 2010 period, as the continued rise in raw material costs, change in product mix, unfavorable weather, and the Company’s continued strategic investments in marketing and brand building activities impacted results. Net interest expense was $9.8 million for the quarter ended June 25, 2011 consistent with the prior year. Net income for the quarter totaled $17.1 million, or $0.31 per fully diluted share, compared to net income of $25.9 million, or $0.40 per fully diluted share, in the year ago period.
“We continued to drive solid revenue growth in the third quarter despite a difficult environment,” said Bill Brown, Chairman and Chief Executive Officer. “However, the continued significant escalation in raw material input costs, together with extreme weather conditions that suppressed our chemical and controls business and altered our product mix, negatively impacted our gross margin and bottom line results. We have implemented price increases to recover some of the input cost increases, but there is a lag in retailer implementation that impacted the quarter and will continue to cause margin pressure. Our operating income was further reduced by our long-term commitment to strategic investments in marketing and brand building. Although adversely impacted by significant commodity price increases and extreme weather during the quarter, our business remains fundamentally sound. We remain focused on bringing innovative products to the marketplace, driving operational efficiency throughout our operation, and delivering top-line and bottom-line growth over the long-term.”
At June 25, 2011, the Company’s cash and short term investments balance was $26.6 million. Depreciation and amortization expense was $7.1 million in the third quarter of 2011, consistent with the prior year. On June 9, 2011, the Company announced the amendment of its $275 million five-year senior secured revolving credit facility (the "Credit Facility"). Under the modified terms, the Credit Facility’s borrowing capacity was increased by $100 million to $375 million and the maturity date was extended by approximately one year to June 2016. The amended Credit Facility bears lower interest rates and commitment fees and requires less interest coverage. Total debt at June 25, 2011 was $450.5 million compared to $400.3 million at the end of the third fiscal quarter of 2010. The quarter ending total leverage ratio, as defined in the Company’s credit agreement, was 3.4x.
During the third quarter, the Company completed a $100 million share repurchase program approved by the Board of Directors in July 2010 and began a new $100 million share repurchase program approved by the Board of Directors and announced in June 2011. The Company repurchased $30.1 million of its common stock during the third quarter.
Third Quarter and Year-To-Date Details
Third quarter net sales for the Garden Products segment increased $14.2 million over the prior year, or 6 percent, to $257.0 million. The Garden Products segment’s branded product sales increased $20.8 million, or 10 percent, to $221.7 million. Sales of other manufacturers’ products were $35.3 million, a decrease of $6.6 million compared to the third quarter of 2010. The Garden Product segment’s operating income was $18.0 million compared to operating income of $30.1 million in the prior year.
Third quarter net sales for the Pet Products segment increased $4.6 million over the prior year, or 2 percent, to $227.3 million. The Pet Products segment’s branded product sales increased $4.4 million, or 2 percent, to $186.0 million. Sales of other manufacturers’ products were $41.3 million, in-line with the third quarter of 2010. The Pet Products segment’s operating income was $27.2 million compared to operating income of $32.6 million in the prior year.
The Company’s branded product sales increased $25.2 million, or 7 percent, to $407.7 million in the third quarter of 2011. Sales of other manufacturers’ products were $76.6 million, a decrease of $6.4 million compared to the year ago period.
For the nine months ending June 25, 2011, the Company reported net sales of $1.25 billion, an increase of 6 percent, compared to $1.18 billion in the comparable 2010 period. Branded products sales equaled $1.06 billion, up 9 percent over the comparable 2010 period. Sales of other manufacturers’ products decreased 5 percent to $196.4 million. Operating income for the period was $89.7 million compared to $113.7 million in the prior year. Net income for the nine months ended June 25, 2011 was $39.3 million compared to $54.6 million in the comparable 2010 period. Earnings per diluted share were $0.68 compared to $0.83 per share per fully diluted share in the year ago period. Depreciation and amortization for the nine month period was $21.3 million compared to $21.7 million in the comparable 2010 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 third quarter results. The conference call will be accessible via the internet through Central’s website, www.central.com.
To access the webcast link, log on to Central’s website and locate the link in the investor relations section of the website. Alternatively, to listen to the call by telephone, dial 888-679-8034 (domestic) or 617-213-4847 (international) and enter passcode 74753751. A replay of the call will be available for three weeks by dialing 888-286-8010 (domestic) and 617-801-6888 (international) and entering passcode 17980907.
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 SEEDTM 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®, 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®, 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 4,300 employees, primarily in North America and Europe. 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 the potential for price increases to cover rising input costs and top-line and bottom-line growth over the long-term, 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 November 19, 2010, and Central’s Quarterly Report on Form 10-Q, to be filed August 4, 2011, and 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.
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Central Garden & Pet Company |
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| Condensed Consolidated Statements of Income | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
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June 26, |
June 25, |
June 26, |
June 25, |
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| Net sales | $ | 465,486 | $ | 484,303 | $ | 1,176,658 | $ | 1,251,746 | ||||||||
| Cost of goods sold and occupancy | 302,712 | 334,914 | 764,926 | 856,031 | ||||||||||||
| Gross profit | 162,774 | 149,389 | 411,732 | 395,715 | ||||||||||||
| Selling, general and administrative expenses | 110,134 | 112,795 | 298,049 | 305,974 | ||||||||||||
| Income from operations | 52,640 | 36,594 | 113,683 | 89,741 | ||||||||||||
| Interest expense | (9,797 | ) | (9,948 | ) | (24,555 | ) | (28,330 | ) | ||||||||
| Interest income | 1 | 140 | 12 | 333 | ||||||||||||
| Other income | 42 | 318 | 428 | 116 | ||||||||||||
| Income before income taxes and noncontrolling interest | 42,886 | 27,104 | 89,568 | 61,860 | ||||||||||||
| Income taxes | 15,860 | 9,879 | 33,026 | 21,952 | ||||||||||||
| Income including noncontrolling interest | 27,026 | 17,225 | 56,542 | 39,908 | ||||||||||||
| Net income attributable to noncontrolling interest | 1,153 | 144 | 1,943 | 653 | ||||||||||||
| Net income attributable to Central Garden & Pet Company | $ | 25,873 | $ | 17,081 | $ | 54,599 | $ | 39,255 | ||||||||
| Net income per share attributable to Central Garden & Pet Company: | ||||||||||||||||
| Basic | $ | 0.41 | $ | 0.32 | $ | 0.84 | $ | 0.68 | ||||||||
| Diluted | $ | 0.40 | $ | 0.31 | $ | 0.83 | $ | 0.68 | ||||||||
| Weighted average shares used in the computation of net income per share: | ||||||||||||||||
| Basic | 63,810 | 54,020 | 64,879 | 57,635 | ||||||||||||
| Diluted | 64,606 | 54,498 | 65,716 | 58,115 | ||||||||||||
| Central Garden & Pet Company | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
| (See Note 1) | |||||||||
| June 26, | June 25, | September 25, | |||||||
| ASSETS | 2010 | 2011 | 2010 | ||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 91,623 | $ | 11,233 | $ | 91,460 | |||
| Short term investments | - | 15,320 | 15,320 | ||||||
| Accounts receivable—net | 223,845 | 257,418 | 192,422 | ||||||
| Inventories | 306,118 | 343,788 | 285,964 | ||||||
| Prepaid expenses and other | 30,643 | 40,095 | 42,733 | ||||||
| Total current assets | 652,229 | 667,854 | 627,899 | ||||||
| Land, buildings, improvements and equipment—net | 162,352 | 171,187 | 165,281 | ||||||
| Goodwill | 208,630 | 209,348 | 207,319 | ||||||
| Other intangible assets—net | 99,828 | 85,705 | 86,798 | ||||||
| Deferred income taxes and other assets | 60,668 | 21,638 | 43,587 | ||||||
| Total | $ | 1,183,707 | $ | 1,155,732 | $ | 1,130,884 | |||
| LIABILITIES AND EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 119,869 | $ | 115,380 | $ | 112,611 | |||
| Accrued expenses | 101,312 | 92,678 | 81,418 | ||||||
| Current portion of long-term debt | 201 | 198 | 165 | ||||||
| Total current liabilities | 221,382 | 208,256 | 194,194 | ||||||
| Long-term debt | 400,138 | 450,266 | 400,106 | ||||||
| Other long-term obligations | 4,223 | 4,104 | 4,441 | ||||||
| Total Central Garden & Pet Company shareholders’ equity | 556,537 | 492,506 | 530,696 | ||||||
| Noncontrolling interest | 1,427 | 600 | 1,447 | ||||||
| Total equity | 557,964 | 493,106 | 532,143 | ||||||
| Total | $ | 1,183,707 | $ | 1,155,732 | $ | 1,130,884 | |||
Central Garden & Pet Company
Steve Zenker, 925-948-3657
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Source: Central Garden & Pet Company
Released August 3, 2011
