Central Garden & Pet Company Announces Fiscal 2013 Second Quarter Results

  Central Garden & Pet Company Announces Fiscal 2013 Second Quarter Results

Second quarter sales increased 7% to $498.2 million; Diluted EPS of $0.46 per
                                    share

Business Wire

WALNUT CREEK, Calif. -- May 8, 2013

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 reported financial results for the
second quarter ended March 30, 2013.

The Company reported net sales of $498.2 million, a 7 percent increase over
the comparable fiscal 2012 period. The Company’s Garden and Pet segments both
delivered higher revenues during the quarter. The Company’s second quarter
operating income was $46.7 million, compared to operating income of $45.2
million in the second quarter of 2012. Net income was $22.2 million, or $0.46
per fully diluted share, compared with net income of $21.6 million or $0.45
per fully diluted share in the second quarter of 2012.

“Although our revenues grew during the quarter, our margins and bottom line
results were unsatisfactory. We are taking decisive action to improve our
results,” said John Ranelli, President and CEO of Central Garden & Pet. Mr.
Ranelli continued, “Since taking over the role of CEO during the middle of the
quarter, I have met with many of our customers and employees and it is clear
to me that they have a strong belief in Central and our brands. As we move
forward, we will be more customer-focused on delivering premier levels of
service, innovation and quality, while still reducing costs. This balanced
approach should enable us to drive increased revenue and profits for our
shareholders in the future.”

The Company believes it is likely that its fiscal third quarter 2013 results
will be lower than the prior year. In fiscal 2012, the Company's third quarter
results included the shipment of orders deferred from the second quarter due
to supply chain disruptions and the initial sell-in of flea and tick products
to a new channel. These events will not recur in the third quarter of 2013.

Second Quarter and Year-to-Date Details

Net sales for the Garden segment for the quarter were $263.4 million, a gain
of 8 percent over the second quarter of 2012, benefitting from higher bird
feed sales and initial sales of the company’s new innovative Amdro Powerflex
and Pennigton Smart Feed products. The Garden segment’s branded product sales
for the quarter increased $17.5 million, or 8 percent, to $229.2 million while
sales of other manufacturers’ products were $34.2 million, an increase of 5
percent compared with the second quarter of 2012. The Garden segment’s
operating margin declined during the quarter, impacted by lower gross margins
in its decor and fertilizer businesses as well as higher marketing expenses.
For the second quarter, the Garden segment’s operating income was $34.0
million, down from $36.6 million in the second quarter of 2012.

Net sales for the Pet segment for the quarter were $234.8 million, a gain of 6
percent over the second quarter of 2012, benefitting from higher bird feed
sales, strength in the dog and cat care business, and higher professional
sales. The Pet segment’s branded product sales for the quarter increased $13.3
million, or 7 percent, to $193.1 million while sales of other manufacturers’
products were $41.7 million, a decrease of 2 percent compared with the second
quarter of 2012. The Pet segment’s operating margin rose during the quarter,
benefitting from a greater percentage of sales from its higher-margined
businesses. For the second quarter, the Pet segment’s operating income was
$27.5 million, up from $21.0 million in the prior-year period.

For the six months ending March 30, 2013, the Company reported net sales of
$790.7 million, up from $769.0 million in the comparable 2012 period. Branded
products sales were $661.7 million, up 4 percent over the comparable 2012
period. Sales of other manufacturers' products decreased 2 percent to $128.9
million. Operating income for the period was $33.7 million compared to $33.9
million in the prior year. Net income for the six months ended March 30, 2013
was $6.9 million compared to $8.5 million in the comparable 2012 period.
Earnings per fully diluted share were $0.14 compared to $0.18 per fully
diluted share in the year ago period.

At March 30, 2013, the Company’s cash and short term investments balance
totaled $29.1 million. Net interest expense was $10.9 million for the quarter
and $10.4 million in the prior year period. Depreciation and amortization
expense was $8.3 million up from $7.6 million in the second quarter of 2012.
The Company’s effective tax rate for the second quarter was 36 percent
compared to 37 percent in the prior year period.

Total debt at March 30, 2013 was $593.7 million compared to $566.9 million at
March24, 2012. The quarter ending total leverage ratio, as defined in the
Company’s senior credit facility, at its seasonally high point, was 5.1x.
During the second quarter, the Company repurchased $1.5 million of its common
stock under its Board approved $100 million 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 and fiscal 2013 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 412-317-6789 and enter
passcode 10025918. A replay of the call will be available for three weeks by
dialing 412-317-0088 and entering passcode 10025918.

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 and the brands NORCAL POTTERY®, NEW ENGLAND POTTERY® and MATTHEWS
FOUR SEASONS™. 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 SYSTEMS®, 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®, VITA FLEX® and HORSE HEALTH^TM PRODUCTS. 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 3,500
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 lower fiscal 2013 results and future increased
revenue and profitability from the Company’s transformation and other
initiatives, 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. These risks are
described in Central’s Securities and Exchange Commission filings. Central
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
                                                             
                                                                 (See Note 1)
                                   March 30,    March 24,       September 29,
ASSETS                             2013          2012            2012
Current assets:
Cash and cash equivalents          $ 11,284      $ 10,281        $   48,475
Short term investments               17,820        17,820           22,705
Accounts receivable (less
allowance for doubtful accounts      322,190       309,299           202,422
of $21,201, $15,580 and $18,574)
Inventories                          435,883       380,812           330,032
Prepaid expenses and other          59,408       47,727           48,149
Total current assets                 846,585       765,939           651,783
                                                                 
Land, buildings, improvements        193,673       182,569           191,163
and equipment—net
Goodwill                             210,223       210,223           210,223
Other intangible assets—net          76,762        82,100            78,853
Deferred income taxes and other     19,338       19,243           17,525
assets
Total                              $ 1,346,581   $ 1,260,074     $   1,149,547
                                                                 
                                                                 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                   $ 165,691     $ 150,605       $   126,662
Accrued expenses                     76,915        75,004            79,491
Current portion of long-term        271          339              331
debt
Total current liabilities            242,877       225,948           206,484
                                                                 
Long-term debt                       593,424       566,603           449,483
Other long-term obligations          34,651        18,576            28,697
                                                                 
Equity:
Common stock, $.01 par value:
12,246,751, 12,252,443, and
12,247,571 shares outstanding at     122           123               122
March 30, 2013, March 24, 2012
and September 29, 2012
Class A common stock, $.01 par
value: 35,206,896, 34,325,662
and 34,706,902 shares                352           343               347
outstanding at March 30, 2013,
March 24, 2012 and September 29,
2012
Class B stock, $.01 par value:       16            16                16
1,652,262 shares outstanding
Additional paid-in capital           386,756       379,902           382,195
Accumulated earnings                 86,448        67,078            79,718
Accumulated other comprehensive     932          1,312            1,539
income
Total Central Garden & Pet           474,626       448,774           463,937
Company shareholders’ equity
Noncontrolling interest             1,003        173              946
Total equity                        475,629      448,947          464,883
Total                              $ 1,346,581   $ 1,260,074     $   1,149,547
See notes to condensed consolidated financial statements.
                                                                     

CENTRAL GARDEN & PET COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)
                                                
                     Three Months Ended            Six Months Ended
                     March 30,     March 24,      March 30,     March 24,
                     2013           2012           2013           2012
Net sales            $  498,169     $  466,903     $  790,666     $  768,969
Cost of goods sold     344,999       319,207       560,537       540,535
and occupancy
Gross profit            153,170        147,696        230,129        228,434
Selling, general
and administrative     106,424       102,474       196,477       194,492
expenses
Income from             46,746         45,222         33,652         33,942
operations
Interest expense        (10,937)       (10,468)       (21,252)       (20,015)
Interest income         27             28             92             56
Other income           (48)          (7)           (1,029)       (121)
(expense)
Income before
income taxes and        35,788         34,775         11,463         13,862
noncontrolling
interest
Income taxes           12,828        12,808        3,850         5,162
Income including
noncontrolling          22,960         21,967         7,613          8,700
interest
Net income
attributable to        764           344           686           167
noncontrolling
interest
Net income
attributable to      $  22,196      $  21,623      $  6,927       $  8,533
Central Garden &
Pet Company
                                                                  
Net income per
share attributable
to Central Garden
& Pet Company:
Basic                $  0.46        $  0.46        $  0.14        $  0.18
Diluted              $  0.46        $  0.45        $  0.14        $  0.18
                                                                  
Weighted average
shares used in the
computation of net
income per share:
Basic                   48,064         47,343         47,968         47,576
Diluted                 48,740         48,036         48,766         48,191

Contact:

Central Garden & Pet Company
Steve Zenker, 925-948-3657
Investor Relations