Central Garden & Pet Co. : Central Garden & Pet Company Announces Fourth Quarter & Fiscal 2011 Results
11/17/2011| 04:50pm US/Eastern
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Fourth quarter sales increase 9% to $376.9 million; EPS of
$(0.21) per share
Fiscal 2011 sales increase 7% to $1.6 billion; EPS of $0.50
per share
WALNUT CREEK, Calif.--(BUSINESS WIRE)--Nov. 17, 2011--
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 fourth quarter and
full fiscal year ended September 24, 2011.
The Company reported net sales of $376.9 million for the
fourth quarter 2011, a nine percent increase over the
comparable fiscal 2010 period. The Company's operating loss
was $4.6 million for both the fourth quarter of 2011 and
2010. The prior period included a non-cash, pre-tax charge of
$12.0 million related to the impairment of an intangible
asset. Without the impairment charge, operating income would
have been $7.4 million in the fourth quarter of 2010. The net
loss for the fourth quarter of 2011 was $10.9 million or
$0.21 per fully diluted share compared with a loss of $8.8
million or $0.14 per fully diluted share in the fourth
quarter of 2010, or a loss of $0.02 excluding the impairment
charge.
"We are pleased with our top-line growth in a tough quarter,
but are dissatisfied with the bottom line," said Bill Brown,
Chairman & CEO. "As highlighted on our last quarterly call,
we have committed to a broad set of transformation
initiatives that are expected to take significant cost out of
the company, improve margins meaningfully and enable more
aggressive reinvestment in our brands to drive top-line
growth. Gus Halas, President and CEO of Central Operating
Companies, who joined us in April, is already well underway
in reshaping Central from what was essentially a portfolio of
siloed companies, into a single, more integrated company that
can better meet the needs of customers and deliver
substantially better results for shareholders."
Mr. Halas commented, "We have a roadmap for improved
financial performance beginning in the second half of
calendar 2012 and into 2013. We expect to update shareholders
on our progress in the coming quarters. Central is already on
a dramatically different path than it has ever been before
and we expect it to lead to sustained growth and improved
profitability well into the future."
Fourth Quarter 2011 Details
The Company's sales gains were driven by the Garden Products
segment, which reported net sales for the quarter of $165.1
million, a gain of 24 percent over the fourth quarter of
2010. The Garden Products segment's branded product sales
increased $31.6 million, or 27 percent, to $148.5 million
while sales of other manufacturers' products were $16.6
million, in line with the fourth quarter of 2010. The
Company's gross and operating margins were adversely impacted
by higher raw material input costs during the quarter. The
Garden Products segment's operating loss during the quarter
was $6.9 million compared to an operating loss of $7.6
million in the fourth quarter of 2010.
Fourth quarter net sales for the Pet Products segment
decreased one percent, or $2.1 million over the prior year,
to $211.8 million. The Pet Products segment's branded product
sales decreased $1.8 million, or one percent, to $171.8
million. Sales of other manufacturers' products were $40.0
million, in line with the fourth quarter of 2010. The Pet
Products segment's operating income was $15.6 million
compared to operating income of $12.9 million in the prior
year period. Excluding the impairment charge in the fourth
quarter of last year, operating income for the fourth quarter
of 2010 would have been $24.9 million for the Pet Products
segment.
At September 24, 2011, the Company's cash and short term
investments balance totaled $29.9 million. Net interest
expense was $9.8 million for the quarter and $9.0 million in
the prior year period. Depreciation and amortization expense
was $7.3 million in the fourth quarter of 2011, consistent
with the prior year. The Company's effective tax rate for the
fourth quarter of 2011 was 17 percent on its operating loss
compared to 36 percent in the fourth quarter of 2010. The
change in the effective tax rate was due primarily to the
Company's reduced ability to use tax benefits due to
decreased fiscal 2011 income and increased tax valuation
allowances.
Total debt at September 24, 2011 was $435.6 million compared
to $400.3 million at fiscal year-end 2010. The quarter ending
total leverage ratio, as defined in the Company's credit
agreement, was 3.6x. During the fourth quarter, the Company
repurchased 3.2 million shares of its common stock, for $24.6
million, as part of a $100 million share repurchase program
announced in June 2011.
Fiscal 2011 Details
For the year ending September 24, 2011, the Company reported
net sales of $1.6 billion, an increase of seven percent,
compared to $1.5 billion in the comparable 2010 period.
Branded products sales were $1.4 billion, up nine percent
over the comparable 2010 period. Sales of other
manufacturers' products decreased four percent to $253.0
million. Operating income for the period totaled $85.2
million compared to $109.1 million in the prior year. The
Company's gross and operating margins were adversely impacted
by higher raw material input costs throughout the fiscal
year. Net income for the year ended September 24, 2011 was
$28.3 million compared to $45.8 million in the comparable
2010 period. Earnings per fully diluted share were $0.50
compared to $0.70 per fully diluted share in the year ago
period. Included in the full year results for fiscal year
2010 is the non-cash, pre-tax charge of $12.0 million related
to the impairment of an intangible asset. Excluding this
charge, operating income for fiscal 2010 would have been
$121.1 million, and net income and earnings per share would
have been $53.5 million and $0.82, respectively. Depreciation
and amortization for the fiscal year period was $28.6 million
consistent with the prior year.
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 fourth
quarter and fiscal 2011 results. The conference call will be
accessible via the Internet through Central's website, http://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 617-597-5378 and enter passcode 86126177. A replay of
the call will be available for three weeks by dialing
617-801-6888 and entering passcode 72823975.
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®, 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
forecasted cost reductions, margin improvements and improved
financial performance 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, to be filed in the next
several business days, 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.
CENTRAL GARDEN & PET COMPANY
CONSOLIDATED BALANCE SHEETS
September 24,
2011
September 25,
2010
ASSETS
Current assets:
(in thousands)
Cash and cash equivalents
$
12,031
$
91,460
Short term investments
17,820
15,320
Accounts receivable, net
195,417
192,422
Inventories
329,546
285,964
Prepaid expenses, deferred income taxes and other
47,772
42,733
Total current assets
602,586
627,899
Land, buildings, improvements and equipment:
Land
9,254
8,925
Buildings and improvements
100,439
95,664
Transportation equipment
6,550
4,031
Machinery and warehouse equipment
168,475
150,215
Office furniture and equipment
108,967
91,294
Total.
393,685
350,129
Less accumulated depreciation and amortization
(217,283
)
(184,848
)
Land, buildings, improvements and equipment-net
176,402
165,281
Goodwill
210,223
207,319
Other intangible assets, net
84,526
86,798
Deferred income taxes and other assets
19,266
43,587
Total.
$
1,093,003
$
1,130,884
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
116,524
$
112,611
Accrued expenses
75,128
81,418
Current portion of long-term debt
279
165
Total current liabilities
191,931
194,194
Long-term debt
435,330
400,106
Deferred taxes and other long-term obligations
8,960
4,441
Commitments and contingencies
Equity:
Common stock
129
163
Class A common stock
359
437
Class B stock
16
16
Additional paid-in capital
396,208
483,817
Retained earnings
59,045
45,319
Accumulated other comprehensive income
1,019
944
Total Central Garden & Pet shareholders' equity
456,776
530,696
Noncontrolling interest
6
1,447
Total equity
456,782
532,143
Total
$
1,093,003
$
1,130,884
Central Garden & Pet Company
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended
Fiscal Year Ended
September 24,
2011
September 25,
2010
September 24,
2011
September 25,
2010
Net sales
$
376,906
$
346,990
$
1,628,652
$
1,523,648
Cost of goods sold and occupancy
278,702
243,556
1,134,733
1,008,482
Gross profit
98,204
103,434
493,919
515,166
Selling, general and administrative expenses
102,770
96,043
408,744
394,092
Intangible asset impairments
0
12,000
0
12,000
Income (loss) from operations
(4,566
)
(4,609
)
85,175
109,074
Interest expense
(9,786
)
(9,151
)
(38,044
)
(33,706
)
Interest income
35
107
296
119
Other income
434
(9
)
550
419
Income (loss) before income taxes and noncontrolling
interest
(13,883
)
(13,662
)
47,977
75,906
Income taxes
(2,357
)
(4,916
)
19,595
28,110
Income including noncontrolling interest
(11,526
)
(8,746
)
28,382
47,796
Net income attributable to noncontrolling interest
(594
)
20
59
1,963
Net income attributable to Central Garden & Pet Company
$
(10,932
)
$
(8,766
)
$
28,323
$
45,833
Net income per share attributable to Central Garden & Pet
Company:
Basic
$
(0.21
)
$
(0.14
)
$
0.50
$
0.71
Diluted
$
(0.21
)
$
(0.14
)
$
0.50
$
0.70
Weighted average shares used in the computation of net
income per share:
Basic
51,943
62,476
56,217
64,272
Diluted
51,943
62,476
56,645
65,091
Non-GAAP Financial Measures
This press release includes adjustments to operating
income (loss), GAAP net income (loss), and earnings per
share for the fourth quarter and fiscal year ended
September 25, 2010. Adjusted operating income (loss), net
income (loss) and adjusted earnings per share, are non-GAAP
financial measures which exclude the impact of the
impairment of an intangible asset. We believe that they are
useful as supplemental measures in assessing the
operating performance of our business. These
measures are used by our management, including our chief
operating decision maker, to evaluate business results. We
exclude impairment charges which we believe are not
representative of the on-going results of operations of
our business and are not used to determine compliance with
the financial covenants in our credit facility and indenture.
We provide this information to investors and other users of
the financial statements, such as lenders, to assist in
comparisons of past, present and future operating results and
to assist in highlighting the results of on-going operations.
While management believes adjusted operating income (loss),
net income (loss) and adjusted earnings per share are useful
supplemental information, such adjusted results are not
intended to replace our GAAP financial results and should be
used in conjunction with those GAAP results.
Below is a reconciliation of this non-GAAP (unaudited)
measure to net income (loss) for the fourth quarter
and net income for the fiscal year ended September 25, 2010.
Fourth Quarter 2010
Fiscal 2010
Dollars
EPS
Dollars
EPS
(in millions)
(in millions)
Reconciliation of net loss to adjusted net income:
Net income (loss), as reported
$
(8.8
)
$
(0.14
)
$
45.8
$
0.70
Adjustment for impairment of an intangible asset, net
of taxes
7.7
0.12
7.7
0.12
Adjusted net income (loss)
$
(1.1
)
$
( 0.02
)
$
53.5
$
0.82
Below is a reconciliation of this non-GAAP measure
(unaudited) to the total Company's operating income
(loss) for the fourth quarter and fiscal year ended
September 25, 2010.
Fourth Quarter 2010
Fiscal 2010
Dollars
Margin
Dollars
Margin
(in millions)
(in millions)
Reconciliation of total Company operating income:
Operating income (loss), as reported
$
(4.6
)
(1.3
)%
$
109.1
7.2
%
Adjustment for impairment of an intangible asset
12.0
3.4
%
12.0
0.7
%
Adjusted operating income (loss)
$
7.4
2.1
%
$
121.1
7.9
%
Below is a reconciliation of this non-GAAP measure
(unaudited) to the Pet Segment's operating income (loss)
for the fourth quarter and fiscal year ended September
25, 2010.
Fourth Quarter 2010
Fiscal 2010
Dollars
Margin
Dollars
Margin
(in millions)
(in millions)
Reconciliation of Pet Segment's operating income:
Operating income (loss), as reported
$
12.9
6.0
%
$
97.9
11.6
%
Adjustment for impairment of an intangible asset
12.0
5.6
%
12.0
1.5
%
Adjusted operating income (loss)
$
24.9
11.6
%
$
109.9
13.1
%
Source: Central Garden & Pet Company
Central Garden & Pet Company
Steve Zenker, 925-948-3657 (Investor Relations)
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