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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Central Garden and Pet Co | NASDAQ:CENT | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.28 | 3.35% | 39.335 | 39.27 | 39.34 | 39.435 | 38.17 | 38.17 | 14,303 | 16:17:07 |
Fiscal 2015 diluted EPS of $0.64 vs. diluted EPS of $0.18 for fiscal 2014
Fiscal 2015 adjusted diluted EPS of $0.74 vs. adjusted diluted EPS of $0.33 for fiscal 2014
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 announced financial results for its full year and fourth quarter ended September 26, 2015.
“2015 was a year of major accomplishments for Central. The operational and financial success we are achieving is now very evident in our financial results and is validation that the multi-year plan we outlined in 2013 is working, and we are on plan and the right path, said John Ranelli, President & CEO of Central Garden & Pet. “In addition to realizing the positive results from our efforts to put our customers first, lower our expenses and operate more efficiently, we are now beginning to see the effects of the initiatives we undertook during 2015 to grow our top line.” Ranelli concluded, “I couldn’t be more pleased with the progress that we are continuing to make and expect another year of solid progress in 2016.”
The Company currently expects continued growth in 2016, with adjusted earnings per fully diluted share expected to increase at least 28% to $0.95 or higher. This includes the interest savings from its recent refinancing, but adjusting for a one-time call premium, 30 days of extra interest expense and unamortized financing costs. While adjusted earnings for the year are expected to be higher, adjusted earnings for the first quarter are expected to be relatively flat vs. the prior year due to revenue timing differences.
Fiscal 2015 Financial Highlights
Fiscal 2015 adjusted operating income and adjusted earnings per share exclude a Pet non-cash intangible impairment charge of $7.3 million. Fiscal 2014 adjusted operating income and earnings per share exclude a $16.9 million Garden charge for the discontinuance of products and a $4.9 million gain on the sale of plant manufacturing assets.
Fiscal 2015 Fourth Quarter Financial Highlights
Pet Segment Fourth Quarter Details
Fourth quarter sales for the Pet segment increased $18.5 million, or 8.5 percent to $235.6 million, from the same period a year ago. Sales rose in most pet categories, particularly in the dog and cat and professional categories, as well as in sales of other manufacturers’ products. The dog and cat category benefitted from including two months revenue from the IMS acquisition, which closed during the fourth quarter. The Pet segment’s branded product sales were $180.9 million in the fourth quarter of 2015, and sales of other manufacturers’ products were $54.8 million.
The Pet segment’s operating income on a GAAP basis for the fourth quarter was $18.2 million compared to $21.1 million in the fourth quarter of 2014. On an adjusted basis, excluding a $7.3 million non-cash intangibles impairment charge, the Pet segment’s operating income increased $4.4 million to $25.5 million. The increase in adjusted operating income was largely due to higher sales during the period as well as lower SG&A expenses. The Pet segment’s adjusted operating margin increased 110 basis points, primarily due to lower SG&A expenses in the Company’s flea & tick, dog and cat, and small animal businesses.
Garden Segment Fourth Quarter Details
Sales for the Garden segment were $150.8 million, a decrease of $6.4 million or 4.1 percent compared to the fourth quarter of 2014. The decrease in sales was largely due to a decline in grass seed and décor revenue. Higher wild bird feed sales and sales of other manufacturers’ products moderated the Garden sales decline. The Garden segment’s branded product sales were $128.5 million in the fourth quarter of 2015, and sales of other manufacturers’ products were $22.3 million.
The Garden segment’s operating income in the fourth quarter of 2015 decreased by $5.5 million, to $0.9 million, compared to reported operating income in the fourth quarter of 2014 of $6.4 million. Adjusted operating income for the fourth quarter of 2014, excluding a $2.9 million gain on the sale of plant manufacturing assets, was $3.6 million. The Garden segment’s operating margin declined to 0.6% compared to the operating margin in the prior year period of 4.1% on a GAAP basis and declined to 2.3% on an adjusted basis. The decline in operating income and margin was primarily due to lower profitability in the décor category. Partially offsetting the décor decline were higher operating margins in the grass seed and wild bird feed businesses.
Additional Information
At September 26, 2015, the Company’s cash and short-term investments balance was $47.6 million, compared to $88.7 million a year ago. For fiscal year 2015, cash flow from operations was $87.4 million. Cash flow from operations for the fourth quarter of 2015 was $30.8 million, compared to $57.6 million in the fourth quarter of 2014. The Company’s inventory balance rose by $9.6 million from a year ago, due to increasing sales and a fourth quarter acquisition.
The Company’s long-term debt declined to $400.1 million at September 26, 2015 compared to $450.2 million at September 27, 2014. Net interest expense for the fourth quarter of fiscal 2015 was $8.6 million for the period compared to $9.7 million in the prior-year period. The lower debt and interest expense is reflective of lower average borrowings due to the redemption of $50 million of the Company’s 8.25% senior subordinated notes due March 2018 earlier this year.
Subsequent to the end of the fiscal year, the Company issued $400 million of 6.125% senior unsecured notes and redeemed its remaining outstanding 8.25% senior subordinated notes. This issuance is expected to result in annualized interest savings of approximately $8.5 million. The issuance is also expected to result in a charge in our fiscal 2016 first quarter of approximately $8.3 million related to the payment of the call premium and a $3.2 million non-cash charge for the write-off of unamortized financing costs in interest expense. The first quarter of 2016 will also include 30 days of overlapping interest payments, resulting in one-time additional interest expense of approximately $2.8 million.
Depreciation and amortization expense for fiscal year 2015 was $33.7 million, compared with $35.8 million in fiscal year 2014. The Company’s effective tax rate for the fiscal year 2015 was 36.0 percent, compared with 29.2 percent for fiscal year 2014. The prior year benefitted from a release of valuation allowances.
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 full year and fourth quarter 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 (201) 689-8345 (domestic and international) using confirmation # 13623200. A replay of the call will be available for ten days by dialing (201) 612-7415 and entering confirmation #13623200.
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®, 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 under the PENNINGTON ® brand. 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 AQUEON®, CORALIFE® and ZILLA®; bird & small animal and the brands KAYTEE®, Forti-Diet® and CRITTER TRAIL®; dog & cat and the brands TFH™, NYLABONE®, FOUR PAWS®, IMS™, PINNACLE® and AVODERM®; and equine and the brands FARNAM®, HORSE HEALTH™ and VITAFLEX®. 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 3,300 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 earnings guidance for fiscal 2016 and expectations for future favorable results 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. All forward-looking statements are based upon the Company’s current expectations and various assumptions. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this release including, but not limited to, the following factors:
These risks and others are described in the Company’s Securities and Exchange Commission filings. The Company 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 26, 2015 September 27, 2014ASSETS
Current assets:
(in thousands) Cash and cash equivalents $ 47,584 $ 78,676 Restricted cash 13,157 14,283 Short term investments 0 9,990 Accounts receivable, net 207,402 193,729 Inventories 335,946 326,386 Prepaid expenses, deferred income taxes and other 49,731 48,488 Total current assets 653,820 671,552 Plant, property and equipment, net 162,809 166,849 Goodwill 209,089 208,233 Other intangible assets, net 75,460 87,997 Other assets 33,576 14,096 Total $ 1,134,754$
1,148,727 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 88,889 $ 88,428 Accrued expenses 87,724 84,379 Current portion of long-term debt 291 291 Total current liabilities 176,904 173,098 Long-term debt 399,848 449,948 Deferred income taxes and other long-term obligations 51,622 39,228Equity:
Common stock 119 124 Class A common stock 364 369 Class B stock 16 16 Additional paid-in capital 388,636 396,586 Retained earnings 115,987 86,396 Accumulated other comprehensive income 164 1,232 Total Central Garden & Pet shareholders’ equity 505,286 484,723 Noncontrolling interest 1,094 1,730 Total equity 506,380 486,453 Total $ 1,134,754 $ 1,148,727
CENTRAL GARDEN & PET COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Fiscal Year Ended September 26,2015 September 27,2014 September 26,2015 September 27,2014 (in thousands, except per share amounts) Net sales $ 386,369 $ 374,238 $ 1,650,737 $ 1,604,357 Cost of goods sold and occupancy 278,397 266,682 1,162,685 1,150,333 Gross profit 107,972 107,556 488,052 454,024 Selling, general and administrative expenses99,367
106,183
389,345 397,811Intangible asset and goodwill impairment
7,272
0
7,272 0 Income from operations 1,333 1,373 91,435 56,213 Interest expense (8,670 ) (9,793 ) (40,027 ) (42,844 ) Interest income 33 51 129 94 Other income (expense) (83 ) 7 13 403 Income (loss) before income taxes and noncontrolling interest(7,387
)
(8,362
)
51,550 13,866 Income tax expense (benefit) (2,992 ) (4,172 ) 18,535 4,045 Net income (loss) including noncontrolling interest(4,395
)
(4,190
)
33,015 9,821 Net income attributable to noncontrolling interest(26
)
(120
)
1,044 1,017 Net income (loss) attributable to Central Garden & Pet Company$
(4,369
)
$
(4,070
)
$ 31,971 $ 8,804 Net income (loss) per share attributable to Central Garden & Pet Company: Basic $ (0.09 ) $ (0.08 ) $ 0.66 $ 0.18 Diluted $ (0.09 ) $ (0.08 ) $ 0.64 $ 0.18Weighted average shares used in the computation of net income per share:
Basic 48,322 49,324 48,562 48,880 Diluted 48,322 49,324 49,638 49,397
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures that exclude the impact of Pet segment charges related to a non-cash intangible asset impairment in fiscal 2015 and Garden segment charges in fiscal 2014 and Garden segment gains recognized during fiscal 2014 related to the sale of plant assets may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior periods that should be considered when assessing our ongoing performance. The Company believes that these non-GAAP financial measures provide useful information to investors and other users of its financial statements, such as lenders. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. While the Company's management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company's GAAP financial results and should be read in conjunction with those GAAP results.
CENTRAL GARDEN & PET COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited, in thousands, except per share amounts)GAAP FourthQuarter 2015
IntangibleImpairment (A)
Adjusted FourthQuarter 2015
Net sales $ 386,369 $ - $ 386,369 Cost of goods sold and occupancy 278,397 278,397 Gross profit 107,972 - 107,972 Selling, general and admin expenses and impairment 106,639 (7,272 ) 99,367 Income (loss) from operations 1,333 7,272 8,605 Net income (loss) attributable to Central Garden & Pet Company $ (4,369 ) $ 4,654 $ 285 Earnings per share - Diluted $ (0.09 ) $ 0.01 Weighted shares outstanding - Diluted 48,322 49,922 Gross margin 27.9 % 27.9 % Selling, general and administrative expenses as a percentage of sales 25.7 % 25.7 % Operating margin 0.3 % 2.2 % CENTRAL GARDEN & PET COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited, in thousands, except per share amounts)GAAP FourthQuarter 2014
Garden ChargeGain on PlantAssets Sale (B)
Adjusted FourthQuarter 2014
Net sales $ 374,238 $ - $ - $ 374,238 Cost of goods sold and occupancy 266,682 266,682 Gross profit 107,556 - - 107,556 Selling, general and admin expenses 106,183 2,879 109,062 Income (loss) from operations 1,373 - (2,879 ) (1,506 ) Net loss $ (4,070 ) $ - $ (1,814 ) $ (5,884 ) Loss per share - Diluted $ (0.08 ) $ (0.12 ) Weighted shares outstanding 49,324 49,324 Gross margin 28.7 % 28.7 % Selling, general and administrative expenses as a percentage of sales 28.4 % 29.1 % Operating margin 0.4 % (0.4 %) (A) In the fourth quarter of fiscal 2015, we recognized a non-cash intangible asset impairment charge within our Pet segment. (B) The garden charges reflect the impact of a Garden segment charge in fiscal 2014 related to the discontinuance of certain products.
GAAP to Non-GAAP Reconciliation(unaudited, in thousands, except per share amounts)
For the Year Ended September 26, 2015Fiscal 2015GAAP
IntangibleImpairment (A)
Fiscal 2015As Adjusted
Net sales $ 1,650,737 $ — $ 1,650,737 Cost of goods sold and occupancy 1,162,685 — 1,162,685 Gross profit 488,052 — 488,052 Selling, general and administrative expenses and impairment 396,617 (7,272 ) 389,345 Income from operations 91,435 7,272 98,707 Net income attributable to Central Garden & Pet Company $ 31,971 $ 4,654 $ 36,625 Earnings per share - Diluted $ 0.64 $ 0.74 Weighted shares outstanding 49,638 49,638 Gross margin 29.6 % 29.6 % Selling, general and administrative expenses and impairment as a percentage of sales 24.0 % 23.6 % Operating margin 5.5 % 6.0 %GAAP to Non-GAAP Consolidated Reconciliation(unaudited, in thousands, except per share amounts)
For Fiscal Year Ended September 27, 2014 Fiscal 2014GAAPGarden Charge(B)
Gain on Sale ofPlant Assets (C)
Fiscal 2014As Adjusted Net sales $ 1,604,357 $ 7,035 $ - $ 1,611,392 Cost of goods sold and occupancy 1,150,333 (9,873 ) 1,140,460 Gross profit 454,024 16,908 470,932 Selling, general and administrative expenses 397,811 4,875 402,686 Income from operations $ 56,213 $ 16,908 $ (4,875 ) $ 68,246 Net income (loss) $ 8,804 $ 10,652 $ (3,071 ) $ 16,385 Net loss per share attributable to Central Garden & Pet Co. Earnings per share – Diluted $ 0.18 $ 0.33 Weighted shares outstanding 49,397 49,397 Gross margin 28.3 % 29.2 % Selling, general and administrative expenses as a percentage of sales 24.8 % 25.0 % Operating margin 3.5 % 4.2 % (A) In the fourth quarter of fiscal 2015, we recognized a non-cash intangible asset impairment charge within our Pet segment. (B) The garden charges reflect the impact of a Garden segment charge in fiscal 2014 related to the discontinuance of certain products. (C) In fiscal 2014, we recognized a gain from the sale of manufacturing plant assets related to a product the Garden segment will now purchase rather than produce.
Non-GAAP Consolidated Comparative Summary
(unaudited, in thousands, except per share amounts)
Three MonthsEndedSeptember 26, 2015
Three MonthsEndedSeptember 27, 2014
Fiscal Year EndedSeptember 26, 2015
Fiscal Year EndedSeptember 27, 2014 Adjusted net sales $ 386,369 $ 374,238 $ 1,650,737 $ 1,611,392 Adjusted gross profit 107,972 107,556 $ 488,052 $ 470,932 Adjusted gross margin 27.9 % 28.7 % 29.6 % 29.2 %Adjusted selling, general and administrative expenses
$ 99,367 $ 109,062 $ 389,345 $ 402,686 Adjusted selling, general and administrative as a percentage of sales 25.7 % 29.1 % 23.6 % 25.0 % Adjusted income from operations $ 8,605 $ (1,506 ) $ 98,707 $ 68,246 Adjusted operating margin 2.2 % (0.4 %) 6.0 % 4.2 % Adjusted EPS - diluted $ 0.00 ($0.12 ) $ 0.74 $ 0.33 Pet Segment: Fiscal 2015 Fiscal 2014Income fromOperations
OperatingMarginIncome fromOperations
OperatingMargin Fiscal year as reported (GAAP) $ 98,798 11.0% $ 88,077 10.4% Intangible asset impairment charge (A) 7,272 Fiscal year as adjusted $ 106,070 11.9% $ 88,077 10.4% Garden SegmentFiscal 2015Net Sales
Fiscal 2014Net Sales
Fiscal year as reported (GAAP) $ 756,188 $ 758,852 Garden charge (B) - 7,035 Fiscal year as adjusted $ 756,188 $ 765,887Income fromOperations
OperatingMarginIncome fromOperations
OperatingMargin Fiscal year as reported (GAAP) $ 60,145 8.0% $ 41,020 5.4% Garden charge (B) 16,908 Gain on sale of plant assets (C) (4,875) Fiscal year as adjusted $ 60,145 8.0% $ 53,053 6.9% (A) In fiscal 2015, we recognized a non-cash intangible asset impairment charge within our Pet segment. (B) The garden charges reflect the impact of a Garden segment charge in fiscal 2014 related to the discontinuance of certain products. (C) In fiscal 2014, we recognized a gain from the sale of manufacturing plant assets related to a product the Garden segment will now purchase rather than produce.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151207006274/en/
Central Garden & Pet CompanyContact: Steve Zenker, 925-948-3657VP of Investor Relations & Communications
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