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8-K - FORM 8-K - CENTRAL GARDEN & PET COd345899d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

CENTRAL GARDEN & PET COMPANY ANNOUNCES FISCAL 2012 SECOND QUARTER RESULTS

Second quarter sales decrease 4 percent to $467 million; Diluted EPS $0.45 per share

WALNUT CREEK, CALIFORNIA, May 2, 2012 – 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 second quarter ended March 24, 2012.

The Company reported second quarter net sales of $466.9 million, a decrease of 4 percent from the same period a year ago. The second quarter operating income was $45.2 million, compared to operating income of $59.6 million in the second quarter of 2011, reflecting reduced sales and a lower gross margin. Net interest expense was $10.4 million compared to $9.3 million in the year-ago period. Net income for the quarter totaled $21.6 million, or $0.45 per fully diluted share, compared with net income of $31.8 million, or $0.54 per fully diluted share, in the second quarter of 2011.

“Even with strong demand from consumers for our products, our sales and earnings were impacted this quarter by short-term execution issues arising from our transformational efforts, which hindered our ability to fully meet demand” said Bill Brown, Chairman and Chief Executive Officer. “We are addressing these issues and are continuing to see strong demand for our products. April sales are up significantly over last year, helped by delayed shipments and strong demand for our flea and tick products.”

Gus Halas, President and CEO of Central Operating Companies, commented, “As is often the case with business transformations, we encountered some disruptions as we transitioned operational activities during the quarter. We have made good progress executing on our transformational plan as we create a more efficient and effective operation to support our customers and position the Company for success in the coming years.”


Second Quarter and Year-To-Date Details

Net sales for the Garden Products segment decreased 6 percent or $15.9 million from the same period a year ago to $244.4 million, impacted by the delay in filling orders as well as lower grass seed and wild bird feed sales. The Garden Products segment’s branded product sales were $211.7 million and sales of other manufacturers’ products were $32.7 million. In the second quarter, the Garden Products segment’s gross and operating margins declined, impacted by the mix of product sales, including lower sales of higher-margin branded control products and grass seed and higher sales of third-party products. The Garden Products segment’s operating income in the quarter was $36.6 million, compared to an operating income of $46.9 million in the second quarter of 2011.

Net sales for the Pet Products segment decreased 1 percent, or $2.9 million, from the same period a year ago to $222.5 million, due primarily to a decline in wild bird feed sales. Delays in shipments to customers also impacted revenues during the quarter. The Pet Products segment’s branded product sales were $179.8 million and sales of other manufacturers’ products were $42.7 million. The Pet Product segment’s gross and operating margins declined from a year ago, in part as a result of short-term operational issues associated with the transformation. The Pet Products segment’s operating income was $21.0 million compared to operating income of $23.4 million in the prior-year period.

For the six months ending March 24, 2012, the Company reported net sales of $769.0 million, little changed from $767.4 million in the comparable 2011 period. Branded products sales equaled $638.0 million, down 2 percent over the comparable 2011 period. Sales of other manufacturers’ products increased 9 percent to $131.0 million. Operating income for the period was $33.9 million compared to $53.1 million in the prior year. Net income for the six months ended March 24, 2012 was $8.5 million compared to $22.2 million in the comparable 2011 period. Earnings per fully diluted share were $0.18 compared to $0.37 per fully diluted share in the year ago period.


At March 24, 2012, the Company’s cash and short-term investments balance was $28.1 million. Net interest expense was $10.4 million for the quarter compared to $9.3 million in the prior-year period. Depreciation and amortization expense was $7.6 million in the second quarter of 2012, compared with $7.2 million in the prior-year period. The Company’s effective tax rate for the second quarter of 2012 was 37 percent, compared with 36 percent in the prior-year period.

On February 8, 2012, the Company issued an additional $50 million aggregate principal amount of its 2018 8.25% senior subordinated notes. The Company used the proceeds from the offering to pay a portion of the outstanding balance under its Credit Facility. Total debt at March 24, 2012 was $566.9 million compared to $517.2 million at March 25, 2011. The quarter-ending total leverage ratio, as defined in the Company’s senior credit facility, at its seasonally high point, was 5.5x. During the second quarter of 2012, the Company did not repurchase any of its common stock outstanding under its Board approved 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 2012 results. The conference call will be accessible through the investor relations section of Central’s website, http://www.central.com.

Alternatively, to listen to the call by telephone, dial 1-412-317-6789 and enter passcode 10012406. A replay of the call will be available for three weeks by dialing 1-412-317-0088 (domestic and international) and entering passcode 10012406.

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 4,000 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 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 the Central’s Annual Report on Form 10-K, filed on November 21, 2011, Central’s Quarterly Report on Form 10-Q, expected to be filed on May 3, 2012, as well as 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.

Contact: Steve Zenker

VP of Investor Relations & Communications

Central Garden & Pet Company

925.948.3657

# # #

(Tables Follow)


CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

     Three Months Ended     Six Months Ended  
     March 26,
2011
    March 24,
2012
    March 26,
2011
    March 24,
2012
 

Net sales

   $ 485,724      $ 466,903      $ 767,443      $ 768,969   

Cost of goods sold and occupancy

     322,455        319,207        521,117        540,535   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     163,269        147,696        246,326        228,434   

Selling, general and administrative expenses

     103,639        102,474        193,179        194,492   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     59,630        45,222        53,147        33,942   

Interest expense

     (9,343     (10,468     (18,382     (20,015

Interest income

     60        28        193        56   

Other income (expense)

     204        (7     (202     (121
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes and noncontrolling interest

     50,551        34,775        34,756        13,862   

Income taxes

     18,190        12,808        12,073        5,162   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income including noncontrolling interest

     32,361        21,967        22,683        8,700   

Net income attributable to noncontrolling interest

     595        344        509        167   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Central Garden & Pet Company

   $ 31,766      $ 21,623      $ 22,174      $ 8,533   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to Central Garden & Pet Company:

        

Basic

   $ 0.55      $ 0.46      $ 0.37      $ 0.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.54      $ 0.45      $ 0.37      $ 0.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares used in the computation of net income per share:

        

Basic

     57,955        47,343        59,447        47,576   

Diluted

     58,433        48,036        59,961        48,191   


CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

Unaudited

 

     March 26,      March 24,      September 24,  
     2011      2012      2011  
ASSETS         

Current assets:

        

Cash and cash equivalents

   $ 11,186       $ 10,281       $ 12,031   

Short term investments

     15,320         17,820         17,820   

Accounts receivable

     327,090         309,299         195,417   

Inventories

     381,815         380,812         329,546   

Prepaid expenses and other

     43,655         47,727         47,772   
  

 

 

    

 

 

    

 

 

 

Total current assets

     779,066         765,939         602,586   

Land, buildings, improvements and equipment—net

     169,731         182,569         176,402   

Goodwill

     209,548         210,223         210,223   

Other intangible assets—net

     87,073         82,100         84,526   

Deferred income taxes and other assets

     27,139         19,243         19,266   
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,272,557       $ 1,260,074       $ 1,093,003   
  

 

 

    

 

 

    

 

 

 
LIABILITIES AND EQUITY         

Current liabilities:

        

Accounts payable

   $ 163,622       $ 150,605         116,524   

Accrued expenses

     84,415         75,004         75,128   

Current portion of long-term debt

     120         339         279   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     248,157         225,948         191,931   

Long-term debt

     517,134         566,603         435,330   

Other long-term obligations

     3,890         18,576         8,960   

Equity:

        

Common stock

     149         123         129   

Class A common stock

     399         343         359   

Class B stock

     16         16         16   

Additional paid-in capital

     443,169         379,902         396,208   

Accumulated earnings

     57,952         67,078         59,045   

Accumulated other comprehensive income

     1,235         1,312         1,019   
  

 

 

    

 

 

    

 

 

 

Total Central Garden & Pet Company

shareholders’ equity

     502,920         448,774         456,776   

Noncontrolling interest

     456         173         6   
  

 

 

    

 

 

    

 

 

 

Total equity

     503,376         448,947         456,782   
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,272,557       $ 1,260,074       $ 1,093,003