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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 | |
---|---|---|---|---|---|---|---|---|---|---|
1.14 | 3.00% | 39.20 | 39.14 | 39.25 | 39.435 | 38.17 | 38.17 | 26,375 | 18:10:58 |
Sales increase 5 percent; 3 percent on adjusted basis to $459 million; Diluted EPS increases to $0.38 compared to adjusted diluted EPS of $0.28
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 fiscal third quarter ended June 27, 2015.
Fiscal 2015 Third Quarter Financial Highlights
On an adjusted basis, net sales improved 3 percent, gross margin improved by 30 basis points, and SG&A as a percentage of sales improved by 70 basis points. The combination of these improvements generated an operating margin of 8.5%, a 100 basis point improvement over the prior year.
“The positive impact of the actions we have taken over the past two years to increase revenue, lower SG&A expenses and improve operating margins are clearly reflected in our third quarter financial results, which came in significantly above last year’s reported and adjusted results, as well as above our earlier expectations,” said John Ranelli, President & CEO of Central Garden & Pet. “The trend in Pet revenues continues to be on the upswing, and both our Garden and Pet segments showed solid gains in operating income. We are focused on continuing to drive earnings growth in the years ahead through our initiatives to increase revenues and lower costs.”
While it is still early in the quarter, and there are a number of variables that could impact the Company’s fourth quarter results, an improvement in earnings is expected. The Company currently expects fiscal 2015 earnings per share of $0.63 or higher, well ahead of adjusted earnings per share of $0.33 in the prior year.
Garden Segment Third Quarter Details
Sales for the Garden segment were $221.3 million, an increase of $10.4 million or 4.9 percent compared to reported GAAP numbers from the third quarter of 2014 and up 1.6 percent over adjusted third quarter 2014 results. The increase in sales was primarily due to higher control product revenues and increased sales of other manufacturers’ products, partially offset by declines in wild bird feed sales. The Garden segment’s branded product sales were $180.4 million in the third quarter of 2015, and sales of other manufacturers’ products were $40.9 million.
The Garden segment’s operating income in the quarter improved by $19.5 million, to $23.5 million, compared to reported GAAP operating income of $4.0 million. Adjusted operating income for the third quarter of 2014 was $18.9 million. The Garden segment’s operating margin improved 870 basis points compared to reported GAAP operating margin and 190 basis points compared to adjusted operating margin in the prior year period. Higher profitability in the grass seed and private label controls and fertilizers businesses drove the increase, more than offsetting lower profitability in the décor and wild bird feed businesses.
Pet Segment Third Quarter Details
Third quarter sales for the Pet segment increased $11.0 million, or 4.8 percent, from the same period a year ago to $238.1 million, due in large part to higher professional revenues and higher sales of other manufacturers’ products. Professional sales benefitted from increased sales of the Company’s active ingredient products, including higher sales from its Envincio division, which was acquired last year. Sales of other manufacturers’ products also increased, primarily due to higher sales in the e-commerce channel. Partially offsetting the revenue gains were lower revenues in the flea and tick and wild bird feed categories. The Pet segment’s branded product sales were $183.3 million in the third quarter of 2015, and sales of other manufacturers’ products were $54.8 million.
The Pet segment’s operating income was $32.9 million compared to $28.4 million in the third quarter of 2014. The increase in operating income was largely due to the increase in sales. The Pet segment’s operating margin increased 130 basis points, benefitting from increased efficiencies due to higher volume in the Company’s professional business, a favorable mix shift inclusive of more professional sales, lower marketing expenditures in its flea & tick business, and a higher gross margin in its dog & cat business. The aquatics and equine businesses experienced lower operating margins during the quarter, partially offsetting the gains.
Year-to-Date Fiscal 2015 Financial Highlights
Additional Information
At June 27, 2015, the Company’s cash and short-term investments balance was $43.8 million, compared to $46.1 million a year ago. Cash flow from operations for the third quarter of 2015 was $155.1 million, compared to $128.9 million in the third quarter of 2014. The Company reduced its inventory balance by $24.8 million during the quarter compared to the same period a year ago, in addition to a $48.1 million inventory reduction in the third quarter of 2014 compared to the prior year.
The Company’s long term debt was $400.2 million compared to $450.3 million at June 28, 2014. Net interest expense was $9.0 million for the period compared to $10.4 million in the prior-year period. The lower debt and interest expense is reflective of lower average borrowings including the redemption of $50 million of the Company’s 8.25% senior subordinated notes due March 2018 earlier this year.
Depreciation and amortization expense was $8.3 million, compared with $9.2 million in the prior-year period. The Company’s effective tax rate for the third quarter of 2015 was 37.5 percent, compared with 37.0 percent for the third quarter of 2014.
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 third 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 # 13615304. A replay of the call will be available for ten days by dialing (201) 612-7415 and entering confirmation #13615304.
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 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 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 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 the fourth quarter and fiscal 2015 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
June 27, June 28,September 27,
ASSETS 2015 2014 2014 Current assets: Cash and cash equivalents $ 43,841 $ 31,846 $ 78,676 Restricted cash 12,590 0 14,283 Short term investments 0 14,220 9,990 Accounts receivable (less allowance for doubtful accounts of $18,573, $29,221 and $25,212) 223,149 214,120 193,729 Inventories 340,233 365,035 326,386 Prepaid expenses and other 54,558 53,689 48,488 Total current assets 674,371 678,910 671,552 Land, buildings, improvements and equipment—net 162,969 177,660 166,849 Goodwill 209,089 205,756 208,233 Other intangible assets—net 83,841 76,923 87,997 Deferred income taxes and other assets 28,951 26,689 14,096 Total $ 1,159,221 $ 1,165,938 $ 1,148,727 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 90,423 $ 89,959 $ 88,428 Accrued expenses 110,070 89,521 84,379 Current portion of long-term debt 290 296 291 Total current liabilities 200,783 179,776 173,098 Long-term debt 399,879 449,994 449,948 Other long-term obligations 47,147 43,236 39,228 Equity: Common stock, $.01 par value: 11,908,317, 12,308,802, and 12,437,307 shares outstanding at June 27, 2015, June 28, 2014 and September 27, 2014 119 123 124 Class A common stock, $.01 par value: 35,970,174, 36,479,590 and 36,887,311 shares outstanding at June 27, 2015, June 28, 2014 and September 27, 2014 360 365 369 Class B stock, $.01 par value: 1,652,262 shares outstanding 16 16 16 Additional paid-in capital 388,762 398,244 396,586 Accumulated earnings 120,356 90,466 86,396 Accumulated other comprehensive income 679 1,868 1,232 Total Central Garden & Pet Company shareholders’ equity 510,292 491,082 484,723 Noncontrolling interest 1,120 1,850 1,730 Total equity 511,412 492,932 486,453 Total $ 1,159,221 $ 1,165,938 $ 1,148,727
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended June 27,2015
June 28,2014
June 27, 2015 June 28, 2014 Net sales $ 459,446 $ 437,987 $ 1,264,368 $ 1,230,119 Cost of goods sold and occupancy 317,409 318,856 884,288 883,651 Gross profit 142,037 119,131 380,080 346,468 Selling, general and administrative expenses 103,044 100,705 289,978 291,628 Income from operations 38,993 18,426 90,102 54,840 Interest expense (8,978 ) (10,429 ) (31,357 ) (33,051 ) Interest income 7 14 96 43 Other income 585 456 96 396 Income before income taxes and noncontrolling interest 30,607 8,467 58,937 22,228 Income taxes 11,484 3,133 21,527 8,217 Income including noncontrolling interest 19,123 5,334 37,410 14,011 Net income attributable to noncontrolling interest 323 647 1,070 1,137 Net income attributable to Central Garden & Pet Company $ 18,800 $ 4,687 $ 36,340 $ 12,874 Net income per share attributable to Central Garden & Pet Company: Basic $ 0.39 $ 0.10 $ 0.75 $ 0.26 Diluted $ 0.38 $ 0.09 $ 0.73 $ 0.26 Weighted average shares used in the computation of net income per share: Basic 48,167 49,148 48,642 48,732 Diluted 49,290 49,841 49,496 49,201
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 the garden charge and a gain recognized during the quarter ended June 28, 2014 in the garden segment 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 operating periods that should be considered when assessing our ongoing performance and providing consistency with our prior year disclosure. 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.
GAAP to Non-GAAP Reconciliation(unaudited, in thousands, except per share amounts)
For the Three Months Ended June 28, 2014GAAP
Garden Charge (A) Gain on SaleOf
Fixed Assets (B)
June 28, 2014 As AdjustedJune 27, 2015
GAAP
Net sales $ 437,987 $ 7,035 $ - $ 445,022 $ 459,446 Cost of goods sold and occupancy 318,856 (9,873 ) - 308,983 317,409 Gross profit 119,131 16,908 - 136,039 142,037 Selling, general and administrative expenses 100,705 - 1,996 102,701 103,044 Income from operations 18,426 16,908 (1,996 ) 33,338 38,993 Net Income $ 4,687 $ 10,652 $ (1,258 ) $ 14,081 $ 18,800 Earnings per share - Diluted $ 0.09 $ 0.21 $ (0.02 ) $ 0.28 $ 0.38 Weighted Shares Outstanding 49,841 49,841 49,841 49,841 49,290 Gross margin 27.2 % 30.6 % 30.9 % Selling, general and administrative expenses as a percentage of sales 23.0 % 23.1 % 22.4 % Operating margin 4.2 % 7.5 % 8.5 %For the Nine Months Ended June 28, 2014
GAAP
Garden Charge (A) Gain on SaleOf
Fixed Assets (B)
June 28, 2014 As Adjusted June 27, 2015GAAP
Net sales $ 1,230,119 $ 7,035 $ - $ 1,237,154 $ 1,264,368 Cost of goods sold and occupancy 883,651 (9,873 ) - 873,778 884,288 Gross profit 346,468 16,908 - 363,376 380,080 Selling, general and administrative expenses 291,628 - 1,996 293,624 289,978 Income from operations 54,840 16,908 (1,996 ) 69,752 90,102 Net Income $ 12,874 $ 10,652 $ (1,258 ) $ 22,268 $ 36,340 Earnings per share - Diluted $ 0.26 $ 0.22 $ (0.03 ) $ 0.45 $ 0.73 Weighted Shares Outstanding 49,201 49,201 49,201 49,201 49,496 Gross margin 28.2 % 29.4 % 30.1 % Selling, general and administrative expenses as a percentage of sales 23.7 % 23.7 % 22.9 % Operating margin 4.5 % 5.6 % 7.1 %For the Three Months Ended For the Nine Months Ended Garden Segment: Net Sales Net Sales June 28, 2014 as reported (GAAP) $ 210,905 $ 601,688 Garden charge (A) 7,035 7,035 June 28, 2014 as adjusted $ 217,940 $ 608,723 June 27, 2015 as reported (GAAP) $ 221,320 $ 605,437
Income from Operations Operating Margin Income from Operations Operating Margin June 28, 2014 as reported (GAAP) $ 4,011 1.9 % $ 34,579 5.7 % Garden charge (A) 16,908 16,908 Gain on sale of fixed assets (B) (1,996 ) (1,996 ) June 28, 2014 as adjusted $ 18,923 8.7 % $ 49,491 8.1 % June 27, 2015 as reported (GAAP) $ 23,458 10.6 % $ 59,248 9.8 %
(A) The Non-GAAP financial information excludes the impact of a garden segment charge to write off inventory, account for product returns and promotional allowances and other costs related to the discontinuance of certain products introduced in 2013.
(B) The gain on sale of fixed assets correlates to the sale of plant assets during the quarter ended June 28, 2014 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/20150804006776/en/
Central Garden & Pet CompanySteve Zenker, 925-948-3657VP of Investor Relations & Communications
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