Fiscal 3Q 2017 sales increased 11.7% to
$574.6 million; Organic sales rose 7.6%Fiscal 3Q 2017
diluted EPS increased to $0.62 from $0.51
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 record financial results for its fiscal third quarter
ended June 24, 2017.
"Central's businesses continued to perform at a high level in
our third quarter, driving meaningful organic growth and increased
profitability," said George Roeth, President & CEO. "Our Garden
segment's strong results were a key driver, with market share gains
broadly across categories, driven by strong partnerships with
customers, increased demand creation activities including new
products, and a continued focus on reducing operating costs. Very
simply, we had outstanding execution. Our Pet segment also
performed well during the quarter. It delivered its eighth
consecutive quarter of year-over-year organic growth and continued
to increase market share, with point-of-sale-data tracking well
above category averages." Roeth continued, "The Company's strong
earnings growth this quarter was achieved despite higher costs
related to our continuing investments for future growth, as we
brought new facilities on-line, increased our innovation spending
and continued to successfully integrate our acquisitions."
Fiscal 2017 Third Quarter Financial
Results
Net sales increased 11.7% to $574.6 million compared to $514.5
million in the third quarter a year ago, primarily driven by strong
organic growth in the Garden segment. Total Company organic sales
growth, which excludes the Segrest and K&H businesses, rose
7.6%. Significantly, branded product sales of $462.1 million
increased 14.5%, and sales of other manufacturers’ products of
$112.5 million rose 1.4%.
Third quarter gross margin rose 10 basis points to 31.9%
compared to the third quarter a year ago. Operating income
increased to $57.9 million from $48.2 million and operating margin
of 10.1% increased 70 basis points, compared to 9.4% in the third
quarter a year ago. Operating leverage from higher revenues and
other cost savings resulted in SG&A as a percent of sales
declining 70 basis points to 21.8%. Net income of $32.2 million
rose 23.9% compared to $26.0 million in the third quarter a year
ago, and earnings per diluted share increased 21.6% to $0.62 from
$0.51.
Pet Segment Fiscal 2017 Third Quarter
Results
Third quarter net sales for the Pet segment increased 9.1% to
$313.4 million, from the same period a year ago, driven primarily
by the Segrest and K&H acquisitions. Pet organic sales grew
1.7%, benefiting from stronger results in many of the Company's
consumer businesses, more than offsetting lower revenues from the
Company's animal health business. Point of sale data continues to
indicate market share gains in the majority of the consumer Pet
categories in which the Company operates. The Pet segment’s third
quarter branded product sales were $254.3 million, up 11.7%
compared to a year ago and sales of other manufacturers’ products
were $59.0 million, a decrease of 0.8%.
The Pet segment’s operating income decreased 6.9% compared to
the third quarter a year ago to $36.1 million. Pet operating margin
decreased to 11.5%, a decline of 200 basis points compared to the
third quarter a year ago. The prior year period's operating margin
benefited from a $2.4 million gain from the sale of a manufacturing
facility. Excluding the impact of the sale, pet operating margin
declined 120 basis points. Pet operating margin was also negatively
impacted by expenses to expand, move and consolidate facilities, an
unfavorable mix of sales in the animal health business, and the
Company's recent acquisitions, which were negatively impacted by
purchase price accounting amortization costs.
Garden Segment Fiscal 2017 Third
Quarter Results
Net sales for the Garden segment, all organic, rose 14.9%
compared to the third quarter a year ago to $261.2 million, due to
share gains and widespread strength across all categories except
wild bird feed. Grass seed and private label sales were especially
strong. The Garden segment’s branded product sales were $207.7
million in the quarter, up 18.1% compared to the third quarter a
year ago. Sales of other manufacturers’ products were up 4.0% to
$53.5 million.
The Garden segment’s operating income in the quarter rose to
$38.3 million compared to $26.5 million in the third quarter a year
ago on the higher volumes and an increase in gross margin. Garden
operating margin improved 310 basis points to 14.7%, benefiting
from operating leverage from higher volumes and cost saving
initiatives which more than offset higher demand-creation
expenditures.
Year-to-date 2017 Operating Income, Net
Earnings and EPS
Year-to-date non-GAAP results through the third quarter of 2017
exclude a $2.0 million gain on the sale of a distribution facility
in the first quarter. Results for the same period a year ago
exclude a gain of $2.4 million from the sale of a manufacturing
plant in the third quarter as well as the impact of $14.3 million
of incremental costs from the redemption of the Company's 2018
Notes and issuance of its 2023 Notes in the first quarter.
For the nine months ending June 24, 2017, the Company
reported:
- Year-to-date sales of $1.6 billion
compared with $1.4 billion a year ago, an increase of 10.5% Organic
sales increased 5.2%.
- Operating income of $141.7 million
increased $25.3 million from $116.4 million in the first nine
months of 2016; non-GAAP operating income increased to $139.7
million from $114.0 million.
- Operating margin of 9.1% increased 90
basis points from 8.2% in the first nine months of 2016. Non-GAAP
operating margin of 8.9% increased 80 basis points from 8.1%.
- Net income rose 48.8% to $74.6 million
from $50.1 million a year ago. Non-GAAP net income rose 26.7% to
$73.3 million compared to $57.8 million in the first nine months of
2016.
- Diluted EPS of $1.44 rose 45.5% from
$0.99 per share a year ago. Non-GAAP earnings per diluted share
increased 24.6% to $1.42 from $1.14 in the first nine months of
2016.
2017 Guidance
The Company is raising its guidance and now expects non-GAAP
earnings per fully-diluted share of $1.44 or higher for fiscal
2017, an increase of 14.3% or more from the prior year. As noted in
last quarter's earnings release, certain non-operating factors are
expected to impact net income in the remainder of the year. These
factors include higher corporate expenses versus the prior year as
well as two new joint venture investments which are expected to
negatively impact earnings in the remainder of the current fiscal
year while favorably impacting earnings next fiscal year.
Roeth concluded, "We had a terrific quarter driving sales,
profit, and share while continuing to invest for the future."
Additional Information
Other income increased from $0.3 million to $1.6 million,
largely driven by increased profitability in one of the Company's
recent minority investments. Going forward, the Company expects to
see continued increased variability in other income due to the
seasonal nature of one of the larger investments.
Total debt at June 24, 2017 was $435.4 million compared to
$395.1 million at June 25, 2016. Net interest expense was $7.2
million for the third quarter compared to $6.9 million in the
prior-year period.
The Company’s effective tax rate for the third quarter of 2017
was 37.2%, compared with 35.9% for the third quarter of 2016. The
increase in the tax rate was due primarily to reduced projected tax
incentives in the current year.
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 #13665253.
A replay of the call will be available for three days by dialing
(201) 612-7415 and entering confirmation #13665253.
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®, SEGREST 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®,
DMC™, K&H Pet Products®, 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 4,100 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
financial results and earnings guidance for fiscal 2017 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;
- 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
COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share and per
share amounts)
(Unaudited)
ASSETS June 24, 2017 June 25, 2016
September 24, 2016 Current assets: Cash and cash equivalents
$ 14,473 $ 40,000 $ 92,982 Restricted cash 10,999 12,029 10,910
Accounts receivable (less allowance for doubtful accounts of
$21,277, $25,429 and $21,069) 279,504 241,954 201,151 Inventories
383,449 361,813 362,004 Deferred taxes, prepaid expenses and other
51,964 45,075 47,759 Total current assets
740,389 700,871 714,806 Land, buildings, improvements and
equipment—net 177,784 159,430 158,224 Goodwill 230,385 233,011
231,385 Other intangible assets—net 90,004 95,070 95,865 Other
assets 113,185 28,525 11,913 Total $ 1,351,747
$ 1,216,907 $ 1,212,193
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 106,408 $
96,906 $ 102,413 Accrued expenses 112,091 102,953 99,343 Current
portion of long-term debt 375 530 463 Total
current liabilities 218,874 200,389 202,219 Long-term debt
435,074 394,603 394,806 Deferred taxes and other long-term
obligations 68,792 63,975 60,581 Equity:
Common stock, 12,160,023, 11,998,472, and
11,998,472 shares outstanding at June 24, 2017, June 25, 2016 and
September 24, 2016
122 120 120
Class A common stock, $0.01 par value:
37,933,970, 37,197,569 and 37,418,572 shares outstanding at June
24, 2017, June 25, 2016 and September 24, 2016
379 371 374 Class B stock, $0.01 par value: 1,652,262 shares
outstanding 16 16 16 Additional paid-in capital 392,995 390,270
393,297 Accumulated earnings 235,070 166,112 160,501 Accumulated
other comprehensive income (loss) (1,487 ) (805 ) (1,294 ) Total
Central Garden & Pet Company shareholders’ equity 627,095
556,084 553,014 Noncontrolling interest 1,912 1,856
1,573 Total equity 629,007 557,940 554,587
Total $ 1,351,747 $ 1,216,907 $ 1,212,193
CENTRAL GARDEN & PET
COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
amounts)
(Unaudited)
Three Months Ended Nine Months Ended June
24, 2017 June 25, 2016 June 24, 2017
June 25, 2016 Net sales $ 574,592 $ 514,544 $
1,564,014 $ 1,415,605 Cost of goods sold and occupancy 391,319
350,799 1,076,534 982,735 Gross profit
183,273 163,745 487,480 432,870 Selling, general and administrative
expenses 125,340 115,560 345,749 316,509
Operating income 57,933 48,185 141,731 116,361 Interest
expense (7,273 ) (6,964 ) (20,976 ) (36,205 ) Interest income 53 43
99 74 Other income (expense) 1,626 318 (306 ) (243 )
Income before income taxes and noncontrolling interest 52,339
41,582 120,548 79,987 Income tax expense 19,450 14,916
44,621 28,509 Income including noncontrolling
interest 32,889 26,666 75,927 51,478 Net income attributable to
noncontrolling interest 641 636 1,358 1,353
Net income attributable to Central Garden & Pet Company
$ 32,248 $ 26,030 $ 74,569 $ 50,125
Net income per share attributable to Central Garden &
Pet Company: Basic $ 0.64 $ 0.53 $ 1.49 $ 1.03
Diluted $ 0.62 $ 0.51 $ 1.44 $ 0.99
Weighted average shares used in the computation of
net income per share: Basic 50,507 49,120 50,084 48,801 Diluted
51,825 51,063 51,769 50,743
Use of Non-GAAP Financial Measures
We report our financial results in accordance with U.S.
generally accepted accounting principles (GAAP). However, to
supplement the financial results prepared in accordance with GAAP,
we use non-GAAP financial measures including non-GAAP operating
income on a consolidated and segment basis and non-GAAP net income
and diluted net income per share. Management believes these
non-GAAP financial measures that exclude the impact of specific
items (described below) may be useful to investors in their
assessment of our ongoing operating performance and provide
additional meaningful comparisons between current results and
results in prior operating periods.
The reconciliations of these non-GAAP measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are shown in the tables below. We believe that
the non-GAAP financial measures provide useful information to
investors and other users of our financial statements, by allowing
for greater transparency in the review of our financial and
operating performance. 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.
We have not provided a reconciliation of non-GAAP guidance measures
to the corresponding GAAP measures on a forward-looking basis,
because such reconciliation cannot be done without unreasonable
efforts due to the potential significant variability and limited
visibility of the excluded items discussed below.
Non-GAAP financial measures reflect adjustments based on the
following items:
- Gains or losses on disposals of
significant plant assets: we have excluded the impact of gains or
losses on the disposal of facilities as these represent infrequent
transactions that impact comparability between operating periods.
We believe the adjustment of these gains or losses supplements the
GAAP information with a measure that may be used to help assess the
sustainability of our continuing operating performance.
- Loss on early extinguishment of debt:
we have excluded the charges associated with the refinancing of our
2018 Notes as the amount and frequency of such charges are not
consistent and are significantly impacted by the timing and size of
debt financing transactions.
- Tax impact: the adjustment represents
the impact of the tax effect of the pre-tax non-GAAP adjustments
excluded from non-GAAP net income. The tax impact of the non-GAAP
adjustments is calculated based on the consolidated effective tax
rate on a GAAP basis, applied to the non-GAAP adjustments, unless
the underlying item has a materially different tax treatment.
- We have also provided organic net
sales, a non-GAAP measure that excludes the impact of businesses
purchased or exited in the prior 12 months, because we believe it
permits investors to better understand the performance of our
historical business without the impact of recent acquisitions or
dispositions.
From time to time in the future, there may be other items that
we may exclude if we believe that doing so is consistent with the
goal of providing useful information to investors and
management.
The non-GAAP adjustments reflect the following:
(1) During the first quarter of fiscal 2017, we recorded a
$2.0 million gain in our Garden segment from the sale of a
distribution facility resulting from rationalizing our facilities
to reduce excess capacity. This adjustment was recorded as part of
selling, general and administrative costs in the condensed
consolidated statements of operations. (2) During the first
quarter of fiscal 2016, we redeemed our 2018 Notes and issued
senior notes due November 2023. As a result of the 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 for fiscal 2016. (3) 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.
Operating Income Reconciliation GAAP to
Non-GAAP Reconciliation(in thousands) For the Nine
Months Ended June 24, 2017 June 25, 2016
GAAP operating income $ 141,731 $ 116,361 Sale of distribution
facility
(1) (3)
(2,050 ) (2,363 ) Non-GAAP operating income $ 139,681 $
113,998 GAAP operating margin 9.1 % 8.2 % Non-GAAP operating
margin 8.9 % 8.1 %
GAAP to Non-GAAP
Reconciliation(in thousands, except per share amounts)
For the Nine Months Ended Net Income and Diluted Net
Income Per Share Reconciliation June 24, 2017
June 25, 2016 GAAP net income (loss) attributable to Central
Garden & Pet $ 74,569 $ 50,125 Sale of distribution facility
(1) (3)
(2,050 ) (2,363 ) 2018 notes redemption
(2)
— 14,339 Tax effects of non-GAAP adjustments 759 (4,268 )
Total net income (loss) impact from non-GAAP adjustments $ (1,291 )
$ 7,708 Non-GAAP net income attributable to Central Garden &
Pet $ 73,278 $ 57,833 GAAP diluted net income per
share $ 1.44 $ 0.99 Non-GAAP diluted net income per share $ 1.42 $
1.14 Shares used in GAAP diluted net earnings per share calculation
51,769 50,743 Shares used in non-GAAP diluted net earnings per
share calculation 51,769 50,743
Organic Net Sales Reconciliation
We have provided organic net sales, a non-GAAP measure that
excludes the impact of recent acquisitions and dispositions,
because we believe it permits investors to better understand the
performance of our historical business. We define organic net sales
as net sales from our historical business derived by excluding the
net sales from businesses acquired or exited in the preceding 12
months. After an acquired business has been part of our
consolidated results for 12 months, the change in net sales
thereafter is considered part of the increase or decrease in
organic net sales.
GAAP to Non-GAAP Reconciliation(in millions)
For the Three Months Ended June 24, 2017
Consolidated Pet Segment
Percentagechange
Percentagechange
Reported net sales - Q3 FY17 (GAAP) 574.6 313.4 Reported net
sales - Q3 FY16 (GAAP) 514.5 287.2 Increase in net sales 60.1 11.7
% 26.2 9.1 % Effect of acquisition and divestitures on increase in
net sales 21.0 4.0 % 21.3 7.4 % Increase in organic net sales - Q3
2017 39.1 7.6 % 4.9 1.7 %
GAAP to Non-GAAP
Reconciliation(in millions) For the Nine Months Ended
June 24, 2017 Consolidated Pet Segment
Garden Segment
Percentchange
Percentchange
Percentchange
Reported net sales - Q3 FY17 (GAAP) $ 1,564.0 $ 915.9 648.1
Reported net sales - Q3 FY16 (GAAP) 1,415.6 811.2
604.4 Increase in net sales 148.4 10.5 % 104.7 12.9 % 43.7
7.2 % Effect of acquisition and divestitures on increase in net
sales 75.5 5.3 % 81.0 10.0 % (5.5 ) (1.0 )% Increase
in organic net sales $ 73.0 5.2 % $ 23.7 2.9 % 49.2 8.2 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170802006255/en/
Central Garden & Pet CompanySteve Zenker, 925-948-3657VP
Finance - Investor Relations, FP&A, & Corporate
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