Central Garden & Pet Company Announces Fiscal 2013 Second Quarter Results

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Central Garden & Pet Company Announces Fiscal 2013 Second Quarter Results

Second quarter sales increased 7% to $498.2 million; Diluted EPS of $0.46 per share


WALNUT CREEK, Calif.--(BUSINESS WIRE)-- Central Garden & Pet Company (NAS: CENT) (NAS: 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 30, 2013.

The Company reported net sales of $498.2 million, a 7 percent increase over the comparable fiscal 2012 period. The Company's Garden and Pet segments both delivered higher revenues during the quarter. The Company's second quarter operating income was $46.7 million, compared to operating income of $45.2 million in the second quarter of 2012. Net income was $22.2 million, or $0.46 per fully diluted share, compared with net income of $21.6 million or $0.45 per fully diluted share in the second quarter of 2012.

"Although our revenues grew during the quarter, our margins and bottom line results were unsatisfactory. We are taking decisive action to improve our results," said John Ranelli, President and CEO of Central Garden & Pet. Mr. Ranelli continued, "Since taking over the role of CEO during the middle of the quarter, I have met with many of our customers and employees and it is clear to me that they have a strong belief in Central and our brands. As we move forward, we will be more customer-focused on delivering premier levels of service, innovation and quality, while still reducing costs. This balanced approach should enable us to drive increased revenue and profits for our shareholders in the future."

The Company believes it is likely that its fiscal third quarter 2013 results will be lower than the prior year. In fiscal 2012, the Company's third quarter results included the shipment of orders deferred from the second quarter due to supply chain disruptions and the initial sell-in of flea and tick products to a new channel. These events will not recur in the third quarter of 2013.

Second Quarter and Year-to-Date Details

Net sales for the Garden segment for the quarter were $263.4 million, a gain of 8 percent over the second quarter of 2012, benefitting from higher bird feed sales and initial sales of the company's new innovative Amdro Powerflex and Pennigton Smart Feed products. The Garden segment's branded product sales for the quarter increased $17.5 million, or 8 percent, to $229.2 million while sales of other manufacturers' products were $34.2 million, an increase of 5 percent compared with the second quarter of 2012. The Garden segment's operating margin declined during the quarter, impacted by lower gross margins in its decor and fertilizer businesses as well as higher marketing expenses. For the second quarter, the Garden segment's operating income was $34.0 million, down from $36.6 million in the second quarter of 2012.

Net sales for the Pet segment for the quarter were $234.8 million, a gain of 6 percent over the second quarter of 2012, benefitting from higher bird feed sales, strength in the dog and cat care business, and higher professional sales. The Pet segment's branded product sales for the quarter increased $13.3 million, or 7 percent, to $193.1 million while sales of other manufacturers' products were $41.7 million, a decrease of 2 percent compared with the second quarter of 2012. The Pet segment's operating margin rose during the quarter, benefitting from a greater percentage of sales from its higher-margined businesses. For the second quarter, the Pet segment's operating income was $27.5 million, up from $21.0 million in the prior-year period.

For the six months ending March 30, 2013, the Company reported net sales of $790.7 million, up from $769.0 million in the comparable 2012 period. Branded products sales were $661.7 million, up 4 percent over the comparable 2012 period. Sales of other manufacturers' products decreased 2 percent to $128.9 million. Operating income for the period was $33.7 million compared to $33.9 million in the prior year. Net income for the six months ended March 30, 2013 was $6.9 million compared to $8.5 million in the comparable 2012 period. Earnings per fully diluted share were $0.14 compared to $0.18 per fully diluted share in the year ago period.

At March 30, 2013, the Company's cash and short term investments balance totaled $29.1 million. Net interest expense was $10.9 million for the quarter and $10.4 million in the prior year period. Depreciation and amortization expense was $8.3 million up from $7.6 million in the second quarter of 2012. The Company's effective tax rate for the second quarter was 36 percent compared to 37 percent in the prior year period.

Total debt at March 30, 2013 was $593.7 million compared to $566.9 million at March 24, 2012. The quarter ending total leverage ratio, as defined in the Company's senior credit facility, at its seasonally high point, was 5.1x. During the second quarter, the Company repurchased $1.5 million of its common stock under its Board approved $100 million 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 and fiscal 2013 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 412-317-6789 and enter passcode 10025918. A replay of the call will be available for three weeks by dialing 412-317-0088 and entering passcode 10025918.

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®, VITA FLEX® and HORSE HEALTHTM PRODUCTS. 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 3,500 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 lower fiscal 2013 results and future increased revenue and profitability from the Company's transformation and other 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 Central'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.

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


Unaudited

   
(See Note 1)
March 30, March 24,September 29,
ASSETS201320122012
Current assets:
Cash and cash equivalents$11,284$10,281$48,475
Short term investments17,82017,820

 

22,705
Accounts receivable (less allowance for doubtful accounts of $21,201, $15,580 and $18,574)322,190309,299202,422
Inventories435,883380,812330,032
Prepaid expenses and other 59,408 47,727 48,149
Total current assets846,585765,939651,783
 
Land, buildings, improvements and equipment—net193,673182,569191,163
Goodwill210,223210,223210,223
Other intangible assets—net76,76282,10078,853
Deferred income taxes and other assets 19,338 19,243 17,525
Total$1,346,581$1,260,074$1,149,547
 
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$165,691$150,605

$

126,662
Accrued expenses76,91575,00479,491
Current portion of long-term debt 271 339 331
Total current liabilities242,877225,948206,484
 
Long-term debt593,424566,603449,483
Other long-term obligations34,65118,57628,697
 
Equity:
Common stock, $.01 par value: 12,246,751, 12,252,443, and 12,247,571 shares outstanding at March 30, 2013, March 24, 2012 and September 29, 2012122123122
Class A common stock, $.01 par value: 35,206,896, 34,325,662 and 34,706,902 shares outstanding at March 30, 2013, March 24, 2012 and September 29, 2012352343347
Class B stock, $.01 par value: 1,652,262 shares outstanding161616
Additional paid-in capital386,756379,902382,195
Accumulated earnings86,44867,07879,718
Accumulated other comprehensive income 932 1,312 1,539
Total Central Garden & Pet Company shareholders' equity474,626448,774463,937
Noncontrolling interest 1,003 173 946
Total equity 475,629 448,947 464,883
Total$1,346,581$1,260,074$1,149,547

See notes to condensed consolidated financial statements.

 

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)


(unaudited)

  
Three Months EndedSix Months Ended
March 30, 2013 March 24, 2012March 30, 2013 March 24, 2012
Net sales$498,169$466,903$790,666$768,969
Cost of goods sold and occupancy 344,999 319,207 560,537 540,535
Gross profit153,170147,696230,129228,434
Selling, general and administrative expenses 106,424 102,474 196,477 194,492
Income from operations46,74645,22233,65233,942
Interest expense(10,937)(10,468)(21,252)(20,015)
Interest income27289256
Other income (expense) (48) (7) (1,029) (121)
Income before income taxes and noncontrolling interest35,78834,77511,46313,862
Income taxes 12,828 12,808 3,850 5,162
Income including noncontrolling interest22,96021,9677,6138,700
Net income attributable to noncontrolling interest 764 344 686 167
Net income attributable to Central Garden & Pet Company$22,196$21,623$6,927$8,533
 
Net income per share attributable to Central Garden & Pet Company:
Basic$0.46$0.46$0.14$0.18
Diluted$0.46$0.45$0.14$0.18
 
Weighted average shares used in the computation of net income per share:
Basic48,06447,34347,96847,576
Diluted48,74048,03648,76648,191



Central Garden & Pet Company
Steve Zenker, 925-948-3657
Investor Relations

KEYWORDS:   United States  North America  California

INDUSTRY KEYWORDS:

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