Fiscal 3Q 2016 sales increased 12.0% to
$514.5 million;
Fiscal 3Q 2016 Diluted EPS increased 34.2%
to $0.51 from $0.38;
Adjusted Fiscal 3Q 2016 Diluted EPS
increased 26.3% to $0.48;
Raised Adjusted EPS guidance to $1.18 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 third quarter ended
June 25, 2016.
Fiscal 2016 Third Quarter Financial
Results
- Sales increased 12.0% to $514.5 million
compared to $459.4 million in the third quarter a year ago. Organic
sales growth, excluding three businesses acquired in the prior 12
months and one business exited earlier in the year, rose 5.0%. The
Pet and Garden segments both experienced organic growth;
- Gross margin improved 90 basis points
compared to the third quarter a year ago to 31.8%, driven by a
favorable mix of product sales, reduced raw material input costs
and manufacturing efficiency improvements;
- Operating income of $48.2 million
increased 23.6% compared to the third quarter a year ago. Operating
income included a $2.4 million gain on the sale of a manufacturing
plant. Operating margin of 9.4% increased 90 basis points compared
to the third quarter a year ago;
- Net income on a GAAP basis of $26.0
million increased 38.5% compared to the third quarter a year ago,
and earnings per diluted share increased 34.2% to $0.51. On an
adjusted basis, excluding the plant sale, net income was $24.5
million, and earnings per diluted share was $0.48.
"Central's strong showing this quarter continues its trend of
revenue and profit growth," said George Roeth, President & CEO
of Central Garden & Pet. "The areas where we have been focused
are the main drivers of our success. Organic sales growth was
driven by our customer first orientation, our gross margin
expansion was enabled by executing on key cost savings initiatives,
and our bottom line was enhanced by the effective on-going
integration of our recent acquisitions and exiting an unprofitable
business."
Pet Segment Fiscal 2016 Third Quarter
Results
Third quarter net sales for the Pet segment increased 20.6% to
$287.2 million, from the same period a year ago. Pet organic sales
grew 4.3%, driven by higher sales of other manufacturers' products
as well as strength in the professional and wild bird feed
categories. The Pet segment’s branded product sales were $227.8
million, up 24.3% compared to the third quarter a year ago and
sales of other manufacturers’ products were $59.4 million, an
increase of 8.4%.
The Pet segment’s operating income rose 17.7% compared to the
third quarter a year ago to $38.7 million and included a gain of
$2.4 million from the sale of a manufacturing plant during the
quarter. Pet operating margin decreased slightly to 13.5%, a
decline of 30 basis points compared to the third quarter a year
ago.
Garden Segment Fiscal 2016 Third
Quarter Results
Net sales for the Garden segment rose 2.7% compared to the third
quarter a year ago to $227.3 million, despite a decrease of $7.7
million from the seasonal decor business that the Company exited
earlier in the year. Higher sales of other manufacturers' products,
as well as gains in wild bird feed and controls revenues, drove the
sales increase. The Garden segment’s branded product sales were
$175.9 million in the quarter, down 2.5% compared to the third
quarter a year ago, reflecting the exit from the seasonal decor
business. Sales of other manufacturers’ products were up 25.7% to
$51.4 million.
The Garden segment’s operating income in the quarter rose 12.8%
compared to the third quarter a year ago to $26.5 million. Garden
operating margin improved 100 basis points to 11.6%. The increase
in operating margin was driven by the absence of the seasonal decor
business, which the Company exited earlier in the year, as well as
a favorable mix of product sales, lower raw material costs, and
manufacturing efficiency improvements, somewhat offset by increased
marketing expenditures.
Year-to-Date Results & Fiscal Year
Guidance
- Net sales increased 12.0% to $1.42
billion from the prior year period;
- Branded product sales of $1.11 billion
increased 10.7% and sales of other manufacturers’ products of
$302.7 million rose 17.0%;
- Operating income of $116.4 million was
up 29.1% over the prior year period and included $2.4 million of
gains from a manufacturing plant sale. Operating margin increased
110 basis points to 8.2%;
- Net income on a GAAP basis was $50.1
million, a 37.9% increase compared to the prior year period;
- Earnings per share increased 35.6% to
$0.99 per fully diluted share; and
- Adjusted net income, excluding $14.3
million of charges in the first quarter related to the Company's
refinancing of its fixed rate note and $2.4 million of income
related to the sale of a manufacturing plant in the third quarter,
was $57.8 million, a 59.1% gain compared to the nine-month period a
year ago. Adjusted earnings per fully diluted share increased 56.2%
to $1.14.
Roeth said, "Going forward, we will be even more aggressive in
executing on the initiatives we believe are important to the
Company's long-term success. These include continuing to focus on
our customers' needs, increasing our innovation output and success
rate, and lowering our costs to invest in growth. While there is a
near-term cost to some of these actions, we believe we will have
the financial flexibility to fund incremental investment while
continuing to drive meaningful sales and profit growth." Roeth
concluded, "We will have more to say on our longer-term strategy
and goals later this calendar year. In the meantime, we will stay
focused on executing on our current plan."
The Company currently expects adjusted earnings per
fully-diluted share of $1.18 or higher for fiscal 2016, an increase
of over 59% from the prior year.
Additional Information
Total debt at June 25, 2016 was $395.1 million compared to
$396.7 million at June 27, 2015. Net interest expense was $6.9
million for the third quarter compared to $9.0 million in the
prior-year period. The decline in interest expense was due to the
Company's debt refinancing in its fiscal first quarter.
The Company’s effective tax rate for the third quarter of 2016
was 35.9%, compared with 37.5% for the third quarter of 2015. The
decline in the tax rate was due primarily to projected additional
tax credits in the current year quarter. During the quarter, the
Company did not repurchase any shares of its common stock.
Approximately $35.0 million remains available 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 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 #13639789.
A replay of the call will be available for ten days by dialing
(201) 612-7415 and entering confirmation #13639789.
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 cost reductions and earnings guidance for
fiscal 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 recent transition to a new CEO and
our dependence upon our key executives;
- 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
COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS(in
thousands, except share and per share
amounts)Unaudited
ASSETS
June 25, 2016
June 27, 2015
September 26, 2015
Current assets: Cash and cash equivalents $ 40,000 $ 43,841 $
47,584 Restricted cash 12,029 12,590 13,157 Accounts receivable
(less allowance for doubtful accounts of $25,429, $18,573 and
$19,296) 241,954 223,149 207,402 Inventories 361,813 340,233
335,946 Prepaid expenses and other 45,075 54,558
49,731 Total current assets 700,871 674,371 653,820 Land,
buildings, improvements and equipment—net 159,430 162,969 162,809
Goodwill 233,011 209,089 209,089 Other intangible assets—net 95,070
83,841 75,460 Other assets 28,525 25,467 30,419 Total
$ 1,216,907 $ 1,155,737 $ 1,131,597
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 96,906 $ 90,423 $ 88,889 Accrued expenses 102,953 110,070 87,724
Current portion of long-term debt 530 290 291 Total
current liabilities 200,389 200,783 176,904 Long-term debt
394,603 396,395 396,691 Other long-term obligations 63,975 47,147
51,622 Equity: Common stock, $0.01 par value: 11,998,472,
11,908,317, and 11,908,317 shares outstanding at June 25, 2016,
June 27, 2015 and September 26, 2015 120 119 119 Class A common
stock, $0.01 par value: 37,197,569, 35,970,174 and 36,462,299
shares outstanding at June 25, 2016, June 27, 2015 and September
26, 2015 371 360 364 Class B stock, $0.01 par value: 1,652,262
shares outstanding 16 16 16 Additional paid-in capital 390,270
388,762 388,636 Accumulated earnings 166,112 120,356 115,987
Accumulated other comprehensive income (loss) (805 ) 679 164
Total Central Garden & Pet Company shareholders’ equity 556,084
510,292 505,286 Noncontrolling interest 1,856 1,120
1,094 Total equity 557,940 511,412 506,380 Total $
1,216,907 $ 1,155,737 $ 1,131,597
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
amounts)(unaudited)
Three Months Ended Nine Months Ended
June 25, 2016
June 27, 2015
June 25, 2016
June 27, 2015
Net sales $ 514,544 $ 459,446 $ 1,415,605 $ 1,264,368 Cost of goods
sold and occupancy 350,799 317,409 982,735
884,288 Gross profit 163,745 142,037 432,870 380,080
Selling, general and administrative expenses 115,560 103,044
316,509 289,978 Income from operations 48,185
38,993 116,361 90,102 Interest expense (6,964 ) (8,978 ) (36,205 )
(31,357 ) Interest income 43 7 74 96 Other income (expense) 318
585 (243 ) 96 Income before income taxes and
noncontrolling interest 41,582 30,607 79,987 58,937 Income taxes
14,916 11,484 28,509 21,527 Income
including noncontrolling interest 26,666 19,123 51,478 37,410 Net
income attributable to noncontrolling interest 636 323
1,353 1,070 Net income attributable to Central
Garden & Pet Company $ 26,030 $ 18,800 $ 50,125
$ 36,340 Net income per share attributable to
Central Garden & Pet Company: Basic $ 0.53 $ 0.39
$ 1.03 $ 0.75 Diluted $ 0.51 $ 0.38 $
0.99 $ 0.73 Weighted average shares used in
the computation of net income per share: Basic 49,120 48,167 48,801
48,642 Diluted 51,063 49,290 50,743 49,496
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 and the $2.4 million gain from the
sale of a manufacturing plant during the quarter ended June 25,
2016 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 $14.3 million impact of the redemption of our 2018
Notes and issuance of our 2023 Notes is included in interest
expense in the condensed consolidated statements of operations. The
$2.4 million gain from the sale of a manufacturing plant is
included in selling, general and administrative expenses 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. 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 Three months
ended June 25, 2016 June
25, 2016
June 25, 2016 June 27, 2015
GAAP Adjustment (A) As Adjusted GAAP
Gross profit 163,745 — 163,745 142,037 Selling, general and
administrative expenses 115,560 2,363 117,923
103,044 Income from operations 48,185 (2,363 ) 45,822
38,993 Income tax expense 14,916 (848 ) 14,068 11,484
Net income $ 26,030 $ (1,515 ) $ 24,515 $ 18,800
Earnings per share – diluted $ 0.51 $ 0.48 $ 0.38 Weighted shares
outstanding 51,063 51,063 49,290
GAAP to Non-GAAP
Reconciliation(unaudited, in thousands, except per share
amounts) For the Nine months ended June 25, 2016 June
25, 2016 Adjustments
June 25, 2016
June 27, 2015 GAAP (A)(B) As Adjusted
GAAP Gross profit $ 432,870 $ — 432,870 $ 380,080 Selling,
general and administrative expenses 316,509 2,363
318,872 289,978 Income from operations 116,361 (2,363 )
113,998 90,102 Interest expense 36,205 14,339 21,866
31,357 Income tax expense 28,509 4,268 32,777
21,527 Net income $ 50,125 $ 7,708 $ 57,833
$ 36,340 Earnings per share – diluted $ 0.99 $ 1.14 $ 0.73
Weighted shares outstanding 50,743 50,743 49,496
(A) During the third quarter of fiscal 2016, we recorded a $2.4
million gain in our Pet Segment from the sale of a manufacturing
plant resulting from rationalizing our facilities to reduce excess
capacity.
(B) 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.
Organic net sales is a non-GAAP measure that excludes the impact
of acquisitions and dispositions in the comparable periods. We have
provided this measure because we believe it permits investors to
better understand the performance of our historical business
without the impacts from acquisitions and dispositions. The
following tables provide a reconciliation for our reported net
sales under GAAP to our organic net sales for our consolidated
operations and Pet segment.
GAAP to Non-GAAP
Reconciliation(unaudited, in thousands) For the Three
months ended June 25, 2016
June 25,
2016 June 27, 2015
Percentagechange
Consolidated Reported Net Sales - GAAP $ 514.5 $ 459.4
12.0%
Effect of acquisitions (40.1 ) — Effect of divestitures (0.3 ) (8.0
) Organic net sales $ 474.1 $ 451.4
5.0%
GAAP to
Non-GAAP Reconciliation(unaudited, in thousands) For
the Three months ended June 25, 2016 June 25, 2016
June 27, 2015
Percentagechange
Pet Segment Reported Net Sales - GAAP $ 287.2 $ 238.1
20.6%
Effect of acquisitions (38.8 ) — Effect of divestitures — —
Organic net sales $ 248.4 $ 238.1
4.3%
Adjusted earnings per-fully diluted
share
The company currently expects adjusted earnings per
fully-diluted share (a non-GAAP measure) of $1.18 or higher for
fiscal 2016. We have not provided GAAP estimates of expected
earnings per fully diluted share or a reconciliation to expected
adjusted earnings per fully-diluted share as the adjusted earnings
per share guidance excludes the impact of any potential
acquisitions, non-operational charges or impairments that may occur
prior to fiscal year end, and are not known or contemplated at this
time. Any such adjustments could have a significant impact on our
fiscal 2016 GAAP results.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160802006746/en/
Central Garden & Pet CompanySteve Zenker, 925-948-3657VP of
Investor Relations & Communications
Central Garden and Pet (NASDAQ:CENT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Central Garden and Pet (NASDAQ:CENT)
Historical Stock Chart
From Apr 2023 to Apr 2024