Fiscal 2Q 2016 sales increase 8.8% to $541.2
million;
Fiscal 2Q 2016 Diluted EPS increases 38.3%
to $0.65 from $0.47;
Raises Adjusted EPS guidance to $1.10 or
higher for FY 2016
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 second quarter ended
March 26, 2016.
"We are very pleased to have achieved the highest quarterly
revenues in the Company's history and its highest quarterly
earnings per share in ten years," said John Ranelli, President
& CEO of Central Garden & Pet. “These results reflect our
success in increasing revenues, reducing costs, and positioning our
portfolio of businesses for success. These efforts are on-going,
and the Company remains committed to growing in the years ahead by
continuing to execute on the strategy and plan we have been
following over the course of the last few years." Ranelli
continued, "With our leverage ratio down to 3.1x at the end of the
quarter vs. 4.5x a year ago, Central is well-positioned to utilize
its strong cash flow and balance sheet to fund future growth both
organically and through acquisitions."
Ranelli concluded, "Central's excellent results reflect the
dedication and leadership of our management and the significant
commitment to excellence of all our employees, ensuring our
customers and consumers are receiving the very best in products and
services."
The company currently expects adjusted earnings per
fully-diluted share of $1.10 or higher for fiscal 2016, an increase
of at least 49% from the prior year.
Fiscal 2016 Second Quarter Financial
Highlights
- Sales increased 8.8% to $541.2 million
compared to $497.6 million in the second quarter a year ago;
- Branded product sales increased 6.8% to
$432.7 million compared to $405.1 million in the second quarter a
year ago. Sales of other manufacturers’ products increased 17.3% to
$108.5 million from $92.5 million in the second quarter a year
ago;
- Gross profit increased 12.8% to $169.3
million compared to $150.1 million in the second quarter a year
ago. Gross margin for the second quarter increased 110 basis points
to 31.3% compared to 30.2% in the second quarter a year ago;
- SG&A expense increased $9.8 million
for the second quarter and rose as a percentage of sales to 20.3%
compared to 20.1% in the second quarter a year ago;
- Operating income increased to $59.4
million compared to $50.0 million in the second quarter a year
ago;
- Operating margin increased 100 basis
points to 11.0% compared to 10.0% in the second quarter a year
ago;
- Net income increased 40.7% to $32.7
million compared to $23.2 million in the second quarter a year ago;
and
- Earnings per fully-diluted share
increased 38.3% to $0.65 compared to $0.47 in the second quarter a
year ago.
Pet Segment Fiscal 2016 Second Quarter
Results
Second quarter net sales for the Pet segment increased 24.3% to
$275.3 million, an increase of $53.8 million from the same period a
year ago. Acquisitions accounted for approximately two-thirds of
the increase with the remaining one-third from organic growth.
Organic sales were driven by stronger dog & cat and
professional revenues as well as higher sales of other
manufacturers' products. The Pet segment’s branded product sales
were $216.9 million, and sales of other manufacturers’ products
were $58.4 million.
The Pet segment’s operating income rose 19.8% to $32.4 million
compared to $27.1 million in the second quarter of 2015. Pet
operating margin decreased 40 basis points, due to the impact of
two recently acquired businesses.
Garden Segment Fiscal 2016 Second
Quarter Results
Net sales for the Garden segment decreased 3.7% to $265.9
million, a decline of $10.2 million compared to a year ago, due in
part to exiting a marginally-profitable private label fertilizer
customer relationship and the Company's exit from the seasonal
decor business. Grass seed sales during the period were up
significantly, as were sales of other manufacturers' products,
while wild bird feed was down due to unfavorable weather. The
Garden segment’s branded product sales were $215.8 million in the
second quarter of 2016 and sales of other manufacturers’ products
were $50.1 million.
The Garden segment’s operating income in the quarter improved
$5.1 million to $44.4 million, a gain of 12.9% compared to
operating income of $39.3 million in the second quarter of 2015.
Garden operating margin improved 250 basis points to 16.7 percent.
The increase in operating margin was driven mainly by higher grass
seed profits.
Year-to-Date Results
For the six months ending March 26, 2016, the Company
reported net sales of $901.1 million, an increase of $96.2 million,
or 11.9 percent, from the prior year period. Branded product sales
were $709.3 million, a 10.5 percent increase from the comparable
2015 period, and sales of other manufacturers’ products were $191.8
million, a 17.8 percent increase. Operating income for the period
was $68.2 million compared to $51.1 million in the prior year
period, and operating margin increased 130 basis points to 7.6%.
Net income on a GAAP basis for the period was $24.1 million, a $6.6
million increase compared to the prior year period and earnings per
share increased to $0.48 per fully diluted share from $0.35 per
fully diluted share. Excluding $14.3 million of charges in the
first quarter related to the Company's refinancing of its fixed
rate notes, adjusted net income rose $33.4 million and adjusted
earnings per fully diluted share increased 89 percent to $0.66 from
$0.35 in the six month period a year ago.
Additional Information
At March 26, 2016, the Company’s cash and short-term
investments balance was $9.8 million, compared to $11.9 million a
year ago. Cash used in operations for the second quarter of 2016
was $50.4 million, compared to $114.4 million in the second quarter
of 2015. Total debt at March 26, 2016 was $497.0 million
compared to $511.4 million at March 28, 2015. Net interest
expense was $7.1 million for the second quarter compared to $11.9
million in the prior-year period due to the Company's debt
refinancing in its first quarter and lower overall debt levels.
Depreciation and amortization expense was $9.2 million, compared
with $8.4 million in the prior-year period. The Company’s effective
tax rate for the second quarter of 2016 was 36.0 percent, compared
with 36.9 percent for the second quarter of 2015.
During the quarter, the Company did not repurchase any shares of
its common stock. Approximately $35.0 million remains under the
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
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 #
13635291. A replay of the call will be available for ten days by
dialing (201) 612-7415 and entering confirmation # 13635291.
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™, CADET®, 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 3,700 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 future
favorable results and earnings guidance for 2016 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:
- seasonality and fluctuations in the
Company’s operating results and cash flow;
- fluctuations in market prices for seeds
and grains and other raw materials and the Company’s ability to
pass through cost increases in a timely manner;
- adverse weather conditions;
- the impending retirement of our CEO,
the transition to his successor, our dependence upon our key
executives and the ability to execute on our succession plan;
- dependence on a small number of
customers for a significant portion of our business;
- uncertainty about new product
innovations and marketing programs; and
- competition in our industries.
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
ASSETS March 26, 2016 March
28, 2015 September 26, 2015 Current assets: Cash and
cash equivalents $ 9,826 $ 11,943 $ 47,584 Restricted cash 11,946
12,583 13,157 Accounts receivable (less allowance for doubtful
accounts of $23,759, $20,813 and $19,296) 340,526 321,765 207,402
Inventories 390,754 382,328 335,946 Prepaid expenses and other
50,758 58,251 49,731 Total current assets 803,810
786,870 653,820 Land, buildings, improvements and
equipment—net 164,794 163,207 162,809 Goodwill 213,753 209,089
209,089 Other intangible assets—net 82,989 85,185 75,460 Other
assets 57,753 24,846 30,419 Total $ 1,323,099
$ 1,269,197 $ 1,131,597
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 133,211 $ 139,821 $ 88,889
Accrued expenses 97,682 83,442 87,724 Current portion of long-term
debt 594 289 291 Total current liabilities 231,487
223,552 176,904 Long-term debt 496,396 511,113 396,691 Other
long-term obligations 62,274 44,549 51,622 Equity: Common
stock, $0.01 par value: 11,908,317, 11,919,749, and 11,908,317
shares outstanding at March 26, 2016, March 28, 2015 and September
26, 2015 119 119 119 Class A common stock, $0.01 par value:
36,794,100, 35,765,091 and 36,462,299 shares outstanding at March
26, 2016, March 28, 2015 and September 26, 2015 368 357 364 Class B
stock, $0.01 par value: 1,652,262 shares outstanding 16 16 16
Additional paid-in capital 391,665 387,074 388,636 Accumulated
earnings 140,082 101,556 115,987 Accumulated other comprehensive
income (loss) (528 ) 64 164 Total Central Garden & Pet
Company shareholders’ equity 531,722 489,186 505,286 Noncontrolling
interest 1,220 797 1,094 Total equity 532,942
489,983 506,380 Total $ 1,323,099 $ 1,269,197
$ 1,131,597
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended Six Months Ended
March 26,2016
March 28,2015
March 26,2016
March 28,2015
Net sales $ 541,249 $ 497,602 $ 901,061 $ 804,922 Cost of goods
sold and occupancy 371,910 347,540
631,936 566,879 Gross profit 169,339 150,062
269,125 238,043 Selling, general and administrative expenses
109,936 100,091 200,949
186,934 Income from operations 59,403 49,971 68,176 51,109
Interest expense (7,096 ) (11,876 ) (29,241 ) (22,379 ) Interest
income 9 18 31 89 Other income (expense) (88 ) (121 )
(561 ) (489 ) Income before income taxes and noncontrolling
interest 52,228 37,992 38,405 28,330 Income taxes 18,793
14,012 13,593 10,043
Income including noncontrolling interest 33,435 23,980 24,812
18,287 Net income attributable to noncontrolling interest 738
743 717 747 Net
income attributable to Central Garden & Pet Company $ 32,697
$ 23,237 $ 24,095 $ 17,540 Net
income per share attributable to Central Garden & Pet Company:
Basic
$
0.67
$
0.48
$
0.50
$
0.36
Diluted $ 0.65
$
0.47
$
0.48
$
0.35
Weighted average shares used in the computation of
net income per share: Basic 48,717 48,384 48,641 48,882 Diluted
50,445 49,439 50,558 49,689
Use of Non-GAAP Financial Measures –
We report our financial results in accordance with U.S.
generally accepted accounting principles (GAAP). However,
management believes that certain non-GAAP financial measures that
exclude the $14.3 million impact of the redemption of our 2018
Notes and the issuance of our 2023 Notes recognized during the
quarter ended December 26, 2015 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 amount is included
in interest expense in the condensed consolidated statements of
operations. We believe that the non-GAAP financial measures provide
useful information to investors and other users of our financial
statements, such as lenders. Management also uses these non-GAAP
financial measures in making financial, operating and planning
decisions and in evaluating our performance and we believe these
measures similarly may be useful to investors in evaluating our
financial and operating performance and the trends in our business
from management's point of view. While our management believes that
non-GAAP measurements are useful supplemental information, such
adjusted results are not intended to replace our 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 Six Months
Ended March 26, 2016 2018 Notes
March 26, 2016 March 28, 2015 GAAP
Redemption (A) As Adjusted GAAP Interest
expense $ (29,241 ) $ 14,339 $ (14,902 ) $ (22,379 ) Income before
income taxes and noncontrolling interest 38,405 14,339 52,744
28,330 Income tax expense 13,593 5,075 18,668 10,043 Net income $
24,095 $ 9,264 $ 33,359 $ 17,540 Earnings per share - Diluted $
0.48 $ 0.18 $ 0.66 $ 0.35 (A) The Non-GAAP financial
information excludes the impact of the redemption of our 2018 Notes
and issuance of our 2023 Notes. As a result of the bond redemption,
we incurred incremental expenses of $14.3 million, comprised of a
call premium payment of $8.3 million, a $2.7 million payment of
overlapping interest expense for 30 days and a $3.3 million
non-cash charge for the write off of unamortized deferred financing
costs and discount related to the 2018 Notes. These amounts are
included in interest expense in the condensed consolidated
statements of operations.
Adjusted earnings per-fully diluted
share
The company currently expects adjusted earnings per
fully-diluted share (a non-GAAP measure) of $1.10 or higher for
fiscal 2016. A reconciliation to expected earnings per
fully-diluted share (a GAAP measure) has not been provided as the
adjusted earnings per share guidance excludes the impact of any
non-operational charges or impairments that may occur, and are not
known or contemplated at this time, as well as the impact of the
redemption of our 2018 Notes and issuance of our 2023 Notes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160504006609/en/
Central Garden & Pet CompanySteve Zenker, 925-948-3657VP of
Investor Relations & Communications
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