Form: 8-K

Current report filing

May 3, 2006

Exhibit 99.1

FOR IMMEDIATE RELEASE

 

  Contact:    Paul Warburg
     Central Garden & Pet
     925.948.3686

CENTRAL GARDEN & PET ANNOUNCES RECORD SECOND QUARTER RESULTS

FOR FISCAL 2006

Sales Increased 6%; Income from Operations Increased 15%

Branded Products, Profit Acceleration Program and Acquisitions Drive Growth

Reiterates Fiscal 2006 EPS Guidance of $2.80 to $2.90 per Fully Diluted Share

WALNUT CREEK, CALIFORNIA, May 3, 2006 – Central Garden & Pet Company (NASDAQ: CENT) today announced second quarter results for its fiscal year ending September 30, 2006.

For the second quarter of fiscal 2006 the Company reported net sales of $401 million, an increase of 6% from $379 million in the comparable 2005 period. Income from operations for the quarter increased 15% to $45.7 million. Net income for the quarter increased 17% to $26.2 million from $22.4 million in the year ago period. Diluted earnings per share increased 13% to $1.17 from $1.04 in the year ago period. Branded product sales increased 9% while sales of other manufacturers’ products, as planned, declined 7%. Depreciation and amortization for the quarter was $6.0 million compared to $4.6 million in the year ago period. The results of the second quarter of fiscal 2006 include costs of $1.6 million related to the Company’s previously announced profit acceleration program, $1.6 million related to the early retirement of a previous credit facility, and $1.4 million related to equity-based compensation. Also, taxes for the quarter reflect a benefit of $2.6 million related to reversal of a tax reserve no longer required.

Net sales for the Garden Products segment were $214 million, a decline of 3% compared to the second quarter of fiscal 2005. Garden branded products sales were relatively flat while sales of other manufacturers’ products declined 13%. The Garden Products segment operating income was $26.4 million in the quarter, an increase of 9% when compared to the second quarter of fiscal 2005. Net sales for the Pet Products segment were $187 million, an increase of 18% compared to the second quarter of fiscal 2005. Pet branded products sales increased 23% and


sales of other manufacturers’ products increased 1%. Operating income for the Pet Products segment was $25.1 million in the quarter, an increase of 6%, which includes $1.6 million of profit acceleration program costs, when compared to the second quarter of fiscal 2005.

“The strength of our branded products and our ongoing profit acceleration program produced record results,” commented Glenn Novotny, President and Chief Executive Officer. “We have made significant progress by completing five strategic acquisitions year to date, and we are well positioned to pursue future internal and external growth opportunities.”

The Company updated its fiscal 2006 guidance to account for the impact of acquisitions and its corporate financing initiatives. Net sales for the year are now projected to be between $1.55 billion and $1.57 billion, an increase of approximately $100 million when compared to previous guidance. Operating income is expected to be between $133 million and $137 million, an increase of approximately $17 million when compared to previous guidance. Net income is expected to be between approximately $65 million and $68 million, an increase of approximately $3 million when compared to previous guidance. The corresponding earnings per fully diluted share is expected to be between $2.80 and $2.90, in-line with previous guidance. The fiscal year-ending fully-diluted share count is expected to be approximately 23.3 million, an increase of approximately 1 million shares when compared to previous guidance reflecting the partial-year impact of the Company’s 1.98 million share offering completed in March, 2006. These projected results do not include the impact from any future acquisitions.

For the six months ending March 25, 2006 of fiscal 2006, the Company reported net sales of $694 million, an increase of 8% from $644 million in the comparable 2005 period. Income from operations for the period increased 13% to $55.5 million. Net income for the first six month period increased 16% to $28.8 million from $24.9 million in the year ago period. Diluted earnings per share increased 12% to $1.30 from $1.16 in the year ago period. Branded product sales increased 10% while sales of other manufacturers’ products declined 1%. Depreciation and amortization for the first six month period was $11.2 million compared to $9.1 million in the year ago period. Results for the first six month period of fiscal 2006 include a benefit of $2.6 million related to a reversal of a tax reserve. The results also include costs of $3.2 million related to the Company’s previously announced profit acceleration program and $1.6 million related to the early retirement of a previous credit facility. Costs related to equity-based compensation were an additional $2.5 million.


The Company will discuss its second quarter results for fiscal 2006 on a conference call today at 4:30 p.m. EST. The conference call will be simultaneously broadcast over the Internet through Central’s website, http://www.central.com/. To listen to the webcast, please log on to the website prior to the scheduled call time to register and download any necessary audio software.

Central Garden & Pet Company is a leading innovator, marketer and producer of quality branded products for the pet and lawn and garden supplies markets. Our pet products include pet bird and small animal food, aquarium products, flea, tick, mosquito and other pest control products, edible bones, cages, carriers, pet books, and other dog, cat, reptile and small animal products. These products are sold under a number of brand names, including Kaytee, SuperPet, All-Glass Aquarium, Oceanic, Kent Marine, Energy Savers Unlimited, Zodiac, Pre-Strike, Altosid, Nylabone, TFH, Four Paws, Interpet, Breeder’s Choice and Farnam. Our lawn and garden products include grass seed, wild bird food, weed and insect control products, and decorative outdoor patio products. These products are sold under a number of brand names, including Pennington, Norcal Pottery, New England Pottery, GKI/Bethlehem Lighting, Lilly Miller, Matthews Four Seasons, Cedar Works, AMDRO, Grant’s, Sevin and Over’n Out. For additional information on Central Garden & Pet, including access to the Company’s SEC filings, please visit the Company’s website at http://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 future earnings guidance, 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 Company’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.

# # #

(Tables Follow)


Central Garden & Pet Company

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended     Six Months Ended  
     March 25,
2006
    March 26,
2005
    March 25,
2006
    March 26,
2005
 

Net Sales

   $ 401,332     $ 378,854     $ 694,063     $ 644,430  

Cost of Goods Sold and Occupancy

     264,580       251,980       465,313       431,515  
                                

Gross Profit

     136,752       126,874       228,750       212,915  

Selling, General and Administrative

        

Expenses

     91,018       87,198       173,241       163,723  
                                

Income from Operations

     45,734       39,676       55,509       49,192  

Interest Expense

     (10,227 )     (5,610 )     (16,571 )     (10,908 )

Interest Income

     602       107       1,287       210  

Other Income

     1,803       1,974       1,852       1,654  
                                

Income Before Income Taxes

     37,912       36,147       42,077       40,148  

Income Taxes

     11,687       13,775       13,292       15,260  
                                

Net Income

   $ 26,225     $ 22,372     $ 28,785     $ 24,888  
                                

Basic Earnings Per Common Share:

     1.21       1.08       1.34     $ 1.20  

Diluted Earnings Per Common Share:

     1.17       1.04       1.30     $ 1.16  

Weighted Average Shares Outstanding

        

Basic

     21,694       20,760       21,425       20,658  

Diluted

     22,415       21,515       22,096       21,391  


Central Garden & Pet Company

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

    

March 25,

2006

  

September 24,

2005

Assets

     

Current Assets:

     

Cash & Cash Equivalents

   $ 19,147    $ 28,792

Accounts Receivable

     289,096      184,896

Inventories

     364,504      270,736

Other Current Assets

     34,184      25,853
             

Total Current Assets

     706,931      510,277

Property & Equipment - Net

     130,311      110,595

Goodwill

     369,209      364,847

Other Assets

     378,625      70,630
             

Total

   $ 1,585,076    $ 1,056,349
             

Liabilities & Shareholders’ Equity

     

Current Liabilities:

     

Accounts Payable

   $ 139,051    $ 96,455

Accrued Expenses

     79,399      68,152

Current Portion of Long-Term Debt

     3,022      2,210
             

Total Current Liabilities

     221,472      166,817

Long-Term Debt

     652,790      320,854

Other Long-Term Obligations

     19,812      18,500

Convertible Redeemable Preferred Stock

     3,000      3,000

Shareholders’ Equity

     688,002      547,178
             

Total

   $ 1,585,076    $ 1,056,349