Central Garden & Pet Company Announces Fourth Quarter & Fiscal 2012 Results

Central Garden & Pet Company Announces Fourth Quarter & Fiscal 2012 Results

Fourth quarter sales of $397.2 million; EPS of $(0.21) per share


Fiscal 2012 sales of $1.7 billion; EPS of $0.44 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 fourteen and fifty-three week periods ended September 29, 2012.

The Company reported net sales of $397.2 million for the fourth quarter of 2012, a 5 percent increase over the comparable fiscal 2011 period. Sales benefitted from the inclusion of an extra week in the quarter versus the prior year, as well as strength in the Company's Pet segment. The Company's fourth quarter operating loss for 2012 was $8.5 million compared to an operating loss of $4.6 million in the fourth quarter of 2011. The net loss for the fourth quarter of 2012 was $10.1 million or $0.21 per fully diluted share compared with a loss of $10.9 million or $0.21 per fully diluted share in the fourth quarter of 2011.

Gus Halas, President & CEO of Central Operating Companies commented, "Our fourth quarter bottom line was impacted by several factors, including declines in our décor business, higher marketing and innovation expenditures, and investments related to our transformation. With the first year of the transformation behind us and much work still to do, we remain committed to delivering a more integrated company which delivers greater innovation and value to our customers and improved profitability to our shareholders."

The Company also announced today that it believes its sales and earnings for the first quarter will be below the results of the prior year.

Fourth Quarter 2012 Details

Reported net sales for the Pet segment for the quarter were $237.6 million, a gain of 12 percent over the fourth quarter of 2011, benefitting from higher animal health sales and strength in its pet distribution business as well as the inclusion of an extra week in the quarter versus the prior year. The Pet segment's branded product sales for the quarter increased $19.9 million, or 12 percent, to $191.7 million while sales of other manufacturers' products were $45.9 million, an increase of 15 percent compared with the fourth quarter of 2011. The Pet segment's operating margin declined during the quarter, impacted by higher marketing and innovation expenses. For the fourth quarter, the Pet segment's operating income was $16.3 million, up from $15.6 million in the fourth quarter of 2011.

Fourth quarter net sales for the Garden segment decreased 3 percent, or $5.5 million compared with the prior year, to $159.6 million, impacted by lower décor revenues. The Garden segment's branded product sales decreased $8.3 million, or 6 percent, to $140.2 million. Sales of other manufacturers' products were $19.4 million, an increase of 17% compared with the fourth quarter of 2011. The Garden segment's operating margin decreased during the quarter, impacted by higher marketing costs as well as lower profitability in its décor businesses, due primarily to product returns in the seasonal décor business. The Garden segment's operating loss was $7.7 million compared to an operating loss of $6.9 million in the prior year period.

At September 29, 2012, the Company's cash and short term investments balance totaled $71.2 million. Net interest expense was $9.5 million for the quarter and $9.8 million in the prior year period. Depreciation and amortization expense was $7.3 million in the fourth quarter of 2012, consistent with the prior year. The Company's effective tax rate for the fourth quarter of 2012 was 39.9 percent on its operating loss compared to 17.0 percent in the fourth quarter of 2011. The 2011 effective tax rate was lower than historical norms, impacted by the Company's inability to use tax benefits due to decreased fiscal 2011 income and increased tax valuation allowances.

Total debt at September 29, 2012 was $449.8 million compared to $435.6 million at fiscal year-end 2011. The quarter ending total leverage ratio, as defined in the Company's credit agreement, was 4.0x.

Fiscal 2012 Details

For the year ending September 29, 2012, the Company reported net sales of $1.7 billion, an increase of 4 percent, compared to $1.6 billion in fiscal 2011. The Company benefitted from an extra week in the fiscal year compared to a year ago. Branded products sales were $1.4 billion, up 3 percent over fiscal 2011. Sales of other manufacturers' products increased 11 percent to $280.0 million. Depreciation and amortization for the fiscal year period was $30.4 million compared with $28.6 million in the prior year. Operating income for the period totaled $74.4 million compared to $85.2 million in the prior year. The Company's results included transformational costs of $12.1 million that were incurred throughout the year as the Company moves from a portfolio model to an integrated, multi-brand organization. Net income for the year ended September 29, 2012 was $21.2 million compared to $28.3 million in fiscal 2011. Earnings per fully diluted share were $0.44 compared to $0.50 per fully diluted share in the year ago 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 fourth quarter and fiscal 2012 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 10019773. A replay of the call will be available for three weeks by dialing 412-317-0088 and entering passcode 10019773.

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 3,600 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 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

CONSOLIDATED BALANCE SHEETS

   
September 29,
2012
September 24,
2011

ASSETS

(in thousands)

Current assets:

Cash and cash equivalents $ 48,475 $ 12,031
Short term investments 22,705 17,820
Accounts receivable, net 202,422 195,417
Inventories 330,032 329,546
Prepaid expenses, deferred income taxes and other   48,149   47,772
Total current assets 651,783 602,586
Plant, property and equipment, net 191,163 176,402
Goodwill 210,223 210,223
Other intangible assets, net 78,853 84,526
Other assets   17,525   19,266

Total

$ 1,149,547 $ 1,093,003
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 126,662 $ 116,524
Accrued expenses 79,491 75,128
Current portion of long-term debt   331   279
Total current liabilities 206,484 191,931
Long-term debt 449,483 435,330
Deferred income taxes and other long-term obligations 28,697 8,960
 
Commitments and contingencies (Note 11)
 

Equity:

Common stock 122 129
Class A common stock 347 359
Class B stock 16 16
Additional paid-in capital 382,195 396,208
Retained earnings 79,718 59,045
Accumulated other comprehensive income   1,539   1,019
Total Central Garden & Pet shareholders' equity   463,937   456,776
Noncontrolling interest   946   6
Total equity   464,883   456,782
Total $ 1,149,547 $ 1,093,003
 

Central Garden & Pet Company

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

   
Three Months Ended Fiscal Year Ended

September 29,
2012

 

September 24,
2011

September 29,
2012

 

September 24,
2011

Net sales $ 397,236 $ 376, 906 $ 1,700,013 $ 1,628,652
Cost of goods sold and occupancy   292,164   278,702   1,185,855   1,134,733
Gross profit 105,072 98,204 514,158 493,919
Selling, general and administrative expenses   113,562   102,770   439,737   408,744
Income (loss) from operations (8,490) (4,566) 74,421 85,175
Interest expense (9,577) (9,786) (40,315) (38,044)
Interest income 61 35 145 296
Other income, net   697   434   678   550
Income (loss) before income taxes and noncontrolling interest (17,309) (13,883) 34,929 47,977
Income taxes   (6,900)   (2,357)   12,816   19,595
Income (loss) including noncontrolling interest (10,409) (11,526) 22,113 28,382
Net income attributable to noncontrolling interest   (350)   (594)   940   59
Net income (loss) attributable to Central Garden & Pet Company $ (10,059) $ (10,932) $ 21,173 $ 28,323
 
Net income (loss) per share attributable to Central Garden & Pet Company:
Basic $ (0.21) $ (0.21) $ 0.44 $ 0.50
Diluted $ (0.21) $ (0.21) $ 0.44 $ 0.50
 
Weighted average shares used in the computation of net income per share:
Basic 47,704 51,943 47,622 56,217
Diluted 47,704 51,943 48,374 56,645

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

KEYWORDS:   United States  North America  California

INDUSTRY KEYWORDS:

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