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.
- Sales increased 3% to $1.65 billion
compared to $1.60 billion a year ago. Adjusted sales were $1.61
billion a year-ago;
- Branded product sales increased 1% to
$1.32 billion compared to $1.31 billion for the same period a year
ago. Sales of other manufacturers’ products increased 12% to $335.7
million compared to $300.0 million a year ago;
- Gross profit increased 7.5% to $488.1
million compared to $454.0 million a year ago. Gross margin rose
130 basis points to 29.6% compared to 28.3% a year ago;
- SG&A expense as a percentage of
sales declined 120 basis points to 23.6% compared to 24.8% a year
ago. Adjusted SG&A as a percentage of sales declined 140 basis
points to 23.6% compared to 25.0% a year ago;
- Operating income increased 63% to $91.4
million compared to $56.2 million a year ago. Adjusted operating
income was up 45% to $98.7 million compared to $68.2 million a year
ago;
- Pet operating income increased 12% to
$98.8 million, compared to $88.1 million a year ago. Adjusted Pet
operating income was up 20% to $106.1 million, compared to $88.1
million (GAAP) a year ago;
- Garden operating income increased 47%
to $60.1 million, compared to $41.0 million a year ago, and was up
13% compared to adjusted operating income of $53.1 million a year
ago;
- Operating margin increased 200 basis
points to 5.5% compared to 3.5% a year ago. Adjusted operating
margin increased 180 basis points to 6.0% compared to 4.2% a year
ago;
- Net income increased 264% to $32.0
million compared to $8.8 million a year ago. Adjusted net income
increased 123% to $36.6 million compared to $16.4 million a year
ago; and
- Earnings per fully-diluted share
increased 256% to $0.64 compared to $0.18 a year ago. Adjusted
earnings per fully-diluted share increased 124% to $0.74 compared
to $0.33 a year ago.
Fiscal 2015 Fourth Quarter Financial
Highlights
- Fourth quarter adjusted earnings per
share were positive for the first time in recent years;
- Sales increased 3% to $386.4 million
compared to $374.2 million in the fourth quarter a year ago;
- Branded product sales increased 2% to
$309.3 million compared to $304.4 million in the fourth quarter a
year ago. Sales of other manufacturers’ products increased 10% to
$77.1 million from $69.8 million in the in the fourth quarter a
year ago;
- Gross profit was flat at $108.0 million
compared to $107.6 million in the fourth quarter a year ago. Gross
margin for the fourth quarter declined 80 basis points to 27.9%
compared to 28.7% in the fourth quarter a year ago;
- SG&A expense as a percentage of
sales for the fourth quarter decreased 270 basis points to 25.7%
compared to 28.4% in the fourth quarter a year ago. Adjusted
SG&A as a percentage of sales for the fourth quarter of 2015
declined 340 basis points to 25.7% compared to 29.1% in the fourth
quarter a year ago;
- Operating income decreased 7% to $1.3
million compared to $1.4 million in the same period a year ago.
Adjusted operating income increased to $8.6 million compared to an
adjusted operating loss of $1.5 million in the fourth quarter a
year ago;
- Operating margin decreased 10 basis
points to 0.3% compared to 0.4% in the fourth quarter a year ago.
Adjusted operating margin for the fourth quarter of 2015 increased
260 basis points to 2.2% compared to (0.4%) in the fourth quarter a
year ago;
- Net loss increased 7% to $4.4 million
compared to a loss of $4.1 million in the fourth quarter a year
ago. Adjusted net income for the fourth quarter of 2015 was $0.3
million versus a net loss of $5.9 million in the fourth quarter a
year ago; and
- Loss per fully-diluted share increased
to $0.09 compared to $0.08 in the fourth quarter a year ago.
Adjusted earnings per fully-diluted share were $0.01 compared with
a loss of $0.12 in the fourth quarter a year ago
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:
- 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;
- dependence on a small number of
customers for a significant portion of our business;
- uncertainty about new product
innovations and marketing programs;
- dependence upon key executives and the
ability to execute on our succession plan; and
- competition in our industries
- failure of acquired businesses to
achieve expected results
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,
2014
ASSETS
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 39,228
Equity:
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 expenses
99,367
106,183
389,345 397,811
Intangible 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 $ 0.18
Weighted 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 Charge
Gain 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, 2015
Fiscal 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
2014GAAP
Garden 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 2014
Income fromOperations
OperatingMargin
Income 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 Segment
Fiscal 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 $ 765,887
Income fromOperations
OperatingMargin
Income 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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