Central Garden & Pet reports improved financials for fourth quarter
Pet segment down on smaller flea and tick segment margins, less favorable mix of sales
Central Garden & Pet Company has reported improved financial results for the fourth quarter and full year ended September 27, 2014.
The company’s 2014 fourth quarter operating income was US$1.4 million, compared to an operating loss of US$26.4 million in the fourth quarter of 2013, which included two charges—the 2013 garden charge of US$11.2 million and a US$7.7 million non-cash charge related to the impairment of goodwill in the garden segment. The net loss for the quarter was US$4.1 million, compared with a net loss of US$22.6 million in the fourth quarter of 2013.
Fourth quarter net sales of US$374.2 million increased 1% from US$368.8 million in the comparable fiscal 2013 period. Gross margin for the quarter increased 670 basis points compared to the prior year, reflecting higher margins in the company’s garden segment, principally due to the non-recurrence of a charge included in the prior year’s fourth quarter, as well as higher controls and grass seed gross margins. In the fourth quarter of 2013, the company’s gross profit included a US$11.2 million charge (“2013 Garden Charge”) associated with two garden products that were subsequently discontinued.
Fourth quarter: Pet segment
The pet segment’s operating income for the fourth quarter was US$21.1 million versus US$24.7 million in the comparable prior year period, a decline of US$3.6 million. The pet segment’s gross and operating margins declined during the quarter. Pet’s operating margin declined 150 basis points to 9.7%, due in part to lower operating margins in the professional and flea and tick businesses, as well as a less favorable mix of sales, with higher sales of other manufacturers’ products and lower higher-margined flea and tick and professional sales than a year ago. Margins increased in several businesses, most notably dog and cat and small animal.
Fourth quarter net sales for the pet segment were US$217.1 million, a decrease of 2% from the comparable prior year quarter. The decline was in large part due to lower sales in the company’s flea and tick and small animal businesses, partially offset by higher sales of other manufacturers’ products, as well as higher professional and dog and cat sales. Industry weakness, reduced shelf space and increased competition in the flea and tick business and certain other businesses continued to weigh on sales in the segment. As in the garden segment, wild bird feed sales were also impacted by lower selling prices. The pet segment’s branded product sales for the quarter decreased US$9.1 million, or 5%, to US$166.5 million from US$175.6 million. Sales of other manufacturers’ products increased US$5.7 million to US$50.6 million, an increase of 13% versus the comparable prior year period, due primarily to a selling mix difference in the independent channel.
The fiscal 2014 adjusted operating income excludes the 2014 Garden Charge and a US$4.9 million gain on the sale of plant manufacturing assets. The fiscal 2013 adjusted operating loss excluded the US$11.2 million 2013 Garden Charge and the US$7.7 million garden goodwill impairment charge.
Adjusted net sales for the year ended September 27, 2014 were US$1.61 billion, down from US$1.66 billion a year ago. Adjusted operating income for the year was US$68.2 million compared to US$59 million in the prior year. Fiscal year 2014 adjusted garden operating income was US$53.1 million, an increase of US$25.9 million from the prior year. Pet operating income was US$88.1 million in fiscal 2014, a decrease of US$7.3 million from fiscal 2013. Adjusted consolidated operating margin increased to 4.2% from 3.6% in the prior year. Net income for the fiscal year ended September 27, 2014 was US$8.8 million compared to a loss of US$1.9 million in fiscal year 2013. Adjusted net income was US$16.4 million, compared to US$10 million for the year ended September 28, 2013.