Central Garden & Pet Announces Fourth Quarter and Full Year Results for Fiscal 2002

Business Wire, Dec 12, 2002

Business Editors

LAFAYETTE, Calif.--(BUSINESS WIRE)--Dec. 12, 2002

Central Garden & Pet Company (Nasdaq:CENT)

4Q 2002 Net Income of $0.04 Per Diluted Share Compared

to Loss of $0.74 in 2001

Fiscal 2002 Net Income Before SFAS No. 142 Accounting Charge of

$1.44 Per Diluted Share Compared to a Loss of $0.39 in 2001

Provides Guidance for Fiscal 2003 Net Income in the Range of

$1.70-$1.80 Per Diluted Share

Central Garden & Pet Company (Nasdaq:CENT) today announced financial results for the fiscal fourth quarter and full year ended September 28, 2002.

Net income for the fiscal fourth quarter increased to $751,000, or $0.04 per diluted share, from a loss of $13.7 million, or $0.74 per diluted share, in the comparable 2001 period. The improved earnings were driven by continued growth of our higher margin proprietary branded product sales, significant cost reductions, including unusual expenses, the elimination of goodwill amortization and lower interest expense. Net sales for the 2002 quarter were $240.8 million compared to $246.3 million in the year-ago period. Sales declined slightly due to lower sales of other manufacturers' products, partially offset by increases in our branded product sales.

"During the past several years, we have transitioned to a leading marketer and producer of branded products from a traditional pet and lawn and garden supplies distributor," said William Brown, CEO of Central Garden & Pet. "Virtually all of our sales before fiscal 1997 were from distributing other manufacturers' products. Since then, our branded product sales have grown to approximately $800 million, or approximately 75% of total sales, in fiscal 2002. During this same period, sales of other manufacturers' products have declined to approximately $250 million, or approximately 25% of total sales, and our gross profit margins improved from 13.6% in fiscal 1996 to 29.7% in fiscal 2002. We are pleased with our progress and profitability in 2002 and our prospects for 2003 and beyond."

Fiscal 2002 fourth quarter results do not include goodwill amortization due to the Company's adoption of Financial Accounting Standards Board Statement No. 142 ("SFAS No. 142"), effective September 30, 2001. Fourth quarter 2001 results included $3.0 million of goodwill amortization. The results for the fourth quarter of fiscal 2002 included $2.1 million of expense items which management regards as unusual, primarily related to litigation costs. The fourth quarter of fiscal 2001 included $16.6 million of unusual expense items, principally associated with the downsizing of the Company's lower margin distribution business and litigation costs.

Results for the fourth fiscal quarters of 2002 and 2001 included depreciation and amortization of $4.8 million and $7.0 million, respectively.

Net income for fiscal year 2002 before the effect of SFAS No. 142 was $28.5 million, or $1.44 per diluted share, compared to a loss of $7.1 million, or $0.39 per diluted share, in fiscal year 2001. The improved earnings for the year were attributable to growth of our higher margin branded product sales, significant cost reductions, including unusual expenses, the elimination of approximately $11 million of goodwill amortization, increased other income, and reduced interest expense.

As previously reported, Central adopted SFAS No. 142, "Goodwill and Other Intangible Assets" for the fiscal year beginning September 30, 2001. As a result, the Company recorded a pre-tax non-cash charge to write down goodwill of $146.7 million, or $112.2 million after-tax. Including the effect of the accounting charge, the Company reported a net loss of $83.7 million, or $3.44 per diluted share, for fiscal year 2002. Net sales declined slightly from $1.12 billion in fiscal year 2001 to $1.08 billion in fiscal year 2002 due to fewer sales of other manufacturers' products.

The weighted average number of diluted shares outstanding was 19.1 million for the quarter and 23.0 million for fiscal year 2002. Diluted shares outstanding for the fiscal year 2002 include the Company's convertible securities, as the assumed conversion is dilutive in the full year 2002 period but the securities are excluded in the fourth quarter of 2002 and fiscal 2001 as their inclusion would be anti-dilutive in those periods.

Central anticipates substantial earnings growth in fiscal 2003. The Company's expectation for fiscal 2003 is that net income will be in the range of $1.70-$1.80 per diluted share.

The Company will discuss this earnings guidance and its fourth quarter and fiscal 2002 results on an earnings conference call today at 5:30 p.m. EST. The earnings conference call will be simultaneously broadcast over the Internet through Central's website, http://www.centralgardenandpet.com. To listen to the webcast, please log on to the website prior to the scheduled call time to register and download any necessary audio software.

Central Garden & Pet Company is a leading marketer and producer of quality branded products for the pet and lawn and garden supplies markets. Our pet products include pet bird and small animal food, aquarium products, flea, tick and pest control products, edible bones, cages, carriers, pet books, and other dog, cat, reptile and small animal products. These products are sold under a number of brand names, including Kaytee, All-Glass Aquarium, Zodiac, Nylabone, TFH and Four Paws. Our lawn and garden products include grass seed, wild bird seed, weed and insect control products, decorative outdoor patio products and ant control products. These products are sold under a number of brand names, including Pennington, Norcal Pottery, Lilly Miller, Matthews Four Seasons, AMDRO and Grant's. For additional information on Central Garden & Pet, including access to the Company's SEC filings, please visit the Company's website at http://www.centralgardenandpet.com.