House & Home
Thu, December 1, 2011
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 fourth quarter and full fiscal year ended September 24, 2011.
"We are pleased with our top-line growth in a tough quarter, but are dissatisfied with the bottom line"
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 Companyas 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.
aWe are pleased with our top-line growth in a tough quarter, but are dissatisfied with the bottom line,a said Bill Brown, Chairman & CEO. aAs 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.a
Mr. Halas commented, aWe 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.a
Fourth Quarter 2011 Details
The Companyas 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 segmentas branded product sales increased $31.6 million, or 27 percent, to $148.5 million while sales of other manufacturersa products were $16.6 million, in line with the fourth quarter of 2010. The Companyas gross and operating margins were adversely impacted by higher raw material input costs during the quarter. The Garden Products segmentas 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 segmentas branded product sales decreased $1.8 million, or one percent, to $171.8 million. Sales of other manufacturersa products were $40.0 million, in line with the fourth quarter of 2010. The Pet Products segmentas 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 Companyas 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 Companyas 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 Companyas 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 Companyas 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 manufacturersa 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 Companyas 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 Centralas website, [ http://www.central.com. ]
To access the webcast link, log on to Centralas 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 SEEDa" and THE REBELSa"; 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 SEASONSa". 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 ADAMSa" and ZODIAC; aquatics and reptile and the brands OCEANIC, AQUEONa" and ZILLAa"; 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 Companyas website at [ www.central.com ].
aSafe Harbora 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 Companyas 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 Centralas 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 equipmenta"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 shareholdersa 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, | September 25, | ||||||||||||
| 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 | 12,000 | 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 includesadjustments to operating income (loss), GAAP net income (loss), and earnings per shareforthe 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 ofthe impairment of an intangible asset. We believe that they are useful assupplemental measures in assessing the operating performance of our business.These measuresare used by our management, including our chief operating decision maker, to evaluate business results. We excludeimpairment charges which we believe are not representative of theon-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 tonet income (loss) forthe 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) tothe total Companyas operating income (loss) forthe 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) tothe Pet Segmentas operating income (loss) forthe 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 Segmentas 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 | % | ||||
