UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q/A
(Amendment No. 1)
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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or
[_] TRANSITION REPORT PURSUANT OF SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________________to__________________________
Commission File Number: 000 - 20242
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CENTRAL GARDEN & PET COMPANY
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Delaware 68-0275553
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3697 Mt. Diablo Blvd., Suite 310, Lafayette, California 94549
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(Address of principle executive offices)
(925) 283-4573
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [_] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding as of June 30, 2001 16,776,466
Class B Stock Outstanding as of June 30, 2001 1,656,462
This Form 10-Q/A is being filed to correct an error in "Footnote 5 - Segment
Information" to Central Garden & Pet Company's financial statements included in
"Part I. Financial Information Item 1. Financial Statements" of the Form 10-Q
for the quarter ended June 30, 2001. The complete text of "Part I. Financial
Information - Item 1. Financial Statements", as amended, is set forth below.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Central Garden & Pet Company
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
(unaudited)
September 30, June 30,
2000 2001
------------- ------------
ASSETS
Current assets:
Cash & cash equivalents $ 5,685 $ 7,146
Accounts receivable (less allowance for doubtful
accounts of $8,050 and $10,618) 151,190 165,627
Inventories 242,617 234,650
Prepaid expenses and other assets 20,658 20,989
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Total current assets 420,150 428,412
Land, buildings, improvements and equipment - net 111,740 109,281
Goodwill 382,294 377,173
Other assets 33,234 35,297
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Total $ 947,418 $ 950,163
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 129,239 $ 148,832
Accounts payable 121,705 117,877
Accrued expenses 42,801 41,569
Current portion of long-term debt 5,277 5,412
------------- ------------
Total current liabilities 299,022 313,690
Long-term debt 148,242 153,690
Deferred income taxes and other long-term obligations 36,207 12,464
Shareholders' Equity:
Class B stock, $.01 par value: 1,657,762 and 1,656,462 shares
outstanding at September 30, 2000 and June 30, 2001 16 16
Common stock, $.01 par value: 30,417,421 and 30,518,716 issued
and 16,675,171 and 16,776,466 outstanding at September 30, 2000
and June 30, 2001 304 305
Additional paid-in capital 525,793 526,258
Retained earnings 82,661 88,567
Treasury stock (144,827) (144,827)
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Total shareholders' equity 463,947 470,319
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Total $ 947,418 $ 950,163
============= ============
Central Garden & Pet Company
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
-------------------------------------
June 24, June 30,
2000 2001
--------------- ---------------
Cash flows from operating activities:
Net income $ 18,495 $ 5,906
Adjustments to reconcile net income to net cash provided
(used) in operating activities:
Depreciation and amortization 17,531 23,925
Change in assets and liabilities:
Receivables (64,107) (10,737)
Inventories 64,502 12,267
Prepaid expenses and other assets (5,376) (8,023)
Accounts payable (40,187) (3,833)
Accrued expenses and other long term obligations 5,087 (5,087)
-------- --------
Net cash provided by (used in) operating activities (4,055) 14,417
Cash flows from investing activities:
Additions to land, buildings, improvements and equipment (9,964) (10,674)
Payments to acquire companies, net of cash acquired (34,745) (18,277)
Proceeds from sale of land, buildings, improvements and equipment 0 3,098
-------- --------
Net cash used in investing activities (44,709) (25,853)
Cash flows from financing activities:
Borrowings under lines of credit, net 66,435 19,593
Repayments of long-term debt (616) (7,162)
Proceeds from issuance of common stock - net 1,091 466
Payments to reacquire common stock (18,595) 0
-------- --------
Net cash provided by financing activities 48,315 12,897
Net increase (decrease) in cash (449) 1,461
Cash at beginning of period 8,017 5,685
-------- --------
Cash at end of period $ 7,568 $ 7,146
======== ========
Supplemental Information
Cash paid for interest 13,319 15,253
Cash paid for income taxes 8,848 7,709
Assets (excluding cash) acquired through purchase of subsidiaries 8,069 8,282
Liabilities assumed through the purchase of subsidiaries 21,306 5
Central Garden & Pet Company
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
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June 24, June 30,
2000 2001
----------------- ------------------
Net sales $ 452,384 $ 343,068
Cost of goods sold and occupancy 339,056 238,481
----------------- ------------------
Gross profit 113,328 104,587
Selling, general and
administrative expenses 84,980 83,563
----------------- ------------------
Income from operations 28,348 21,024
Interest expense (6,865) (5,707)
Interest income 97 121
Other income 1,420 529
----------------- ------------------
Income before income taxes 23,000 15,967
Income taxes 10,125 8,303
----------------- ------------------
Net income $ 12,875 $ 7,664
================= ==================
Basic earnings per common share $ 0.69 $ 0.42
================= ==================
Weighted average shares outstanding 18,572 18,433
================= ==================
Diluted earnings per common share $ 0.61 $ 0.38
================= ==================
Weighted average shares outstanding 22,850 22,598
================= ==================
Central Garden & Pet Company
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
Nine Months Ended
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June 24, June 30,
2000 2001
----------------- ------------------
Net sales $ 1,054,445 $ 880,388
Cost of goods sold and occupancy 783,585 611,083
----------------- ------------------
Gross profit 270,860 269,305
Selling, general and
administrative expenses 222,049 239,535
----------------- ------------------
Income from operations 48,811 29,770
Interest expense (17,228) (18,336)
Interest income 182 458
Other income 1,270 1,064
----------------- ------------------
Income before income taxes 33,035 12,956
Income taxes 14,540 7,050
----------------- ------------------
Net income $ 18,495 $ 5,906
================= ==================
Basic earnings per common share $ 0.98 $ 0.32
================= ==================
Weighted average shares outstanding 18,867 18,395
================= ==================
Diluted earnings per common share $ 0.94 $ 0.32
================= ==================
Weighted average shares outstanding 23,064 18,440
================= ==================
Central Garden & Pet Company
Notes to Condensed Consolidated Financial Statements
Three and Nine Months Ended June 30, 2001
(unaudited)
1. Basis of Presentation
---------------------
The condensed consolidated balance sheet as of June 30, 2001, the Condensed
consolidated Statements of income for both the three and nine months ended
June 24, 2000 and June 30, 2001 and the condensed consolidated statements
of cash flows for the nine months ended June 24, 2000 and June 30, 2001
have been prepared by the Company, without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) considered necessary to present fairly the financial position,
results of operations and cash flows of the Company for the periods
mentioned above, have been made.
Due to the seasonal nature of the Company's business, the results of
operations for the three and nine months ended June 30, 2001 are not
indicative of the operating results that may be expected for the year
ending September 29, 2001.
It is suggested that these interim financial statements be read in
conjunction with the annual audited financial statements, accounting
policies and financial notes thereto, included in the Company's 2000 Annual
Report on Form 10-K which has previously been filed with the Securities and
Exchange Commission.
2. New Accounting Pronouncements
-----------------------------
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements", which provides the SEC staff's views on selected revenue
recognition issues. In March 2000, the SEC released SAB 101A, which delayed
for one quarter the implementation date of SAB 101 for registrants with
fiscal years beginning between December 16, 1999 and March 15, 2000. In
June 2000, the SEC released SAB 101B, which delayed the implementation date
of SAB 101 until no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. The Company is evaluating what impact,
if any, SAB 101 will have on the Company's income statement presentation,
however, the Company does not believe it will have any impact on its
financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and
SFAS No.142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
that all business combinations initiated after June 30, 2001 be accounted
for under the purchase method and addresses the initial recognition and
measurement of goodwill and other intangible assets acquired in a business
combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible
assets subsequent to their acquisition. SFAS No. 142 provides that
intangible assets with finite useful lives be amortized and that goodwill
and intangible assets with indefinite lives will not be amortized, but will
rather be tested at least annually for impairment. The Company is not
required to adopt SFAS No. 142 until its fiscal year beginning September
29, 2002.
3. Recent Acquisitions
-------------------
In October 2000, the Company's Pennington subsidiary acquired the Rebel and
Lofts line of grass seed from KRB Seed Company, LLC, for approximately $8
million in cash which approximated the fair market value of the assets
acquired, and signed perpetual licensing agreements under which the Company
will make royalty payments to KRB Seed Company, LLC over the term of the
licensing agreements. The acquisition was accounted for under the purchase
method. Royalty payments will be recorded as expense as they are incurred.
The operations of this business have been included in the Company's results
of operations since October 2000.
In September 2000, Central's Pennington subsidiary acquired All-Glass
Aquarium Co., Inc., a leading manufacturer and marketer of aquariums and
related products, based in Franklin, Wisconsin and its Oceanic Systems
subsidiary in Dallas, Texas for approximately $10 million, which was
recorded as a liability in the Consolidated Balance Sheet as of September
30, 2000, and was subsequently paid during the three months ended December
30, 2000. The operations of this business have been included in the
Company's results of operations since October 1, 2000.
4. Earnings Per Share
------------------
The following is a reconciliation of the numerators and denominators of the
basic and diluted per-share computations for income from continuing
operations:
Three Months Ended Nine Months Ended
June 30, 2001 June 30, 2001
--------------------------- -----------------------------
Income Shares Per Share Income Shares Per Share
------ ------ --------- ------- ------ ---------
Basic EPS:
Net Income $ 7,664 18,433 $ 0.42 $ 5,906 18,394 $ 0.32
Effect of dilutive securities:
Options to purchase common stock 58 46
Convertible notes 893 4,107
Diluted EPS:
Net income attributable
to common shareholders $ 8,557 22,598 $ 0.38 $ 5,906 18,440 $ 0.32
Three Months Ended Nine Months Ended
June 24, 2000 June 24, 2000
--------------------------- ---------------------------
Income Shares Per Share Income Shares Per Share
------ ------ --------- ------ ------ ---------
Basic EPS:
Net Income $12,875 18,640 $ 0.69 $18,495 18,867 $ 0.98
Effect of dilutive securities:
Options to purchase common stock 103 90
Convertible notes 1,042 4,107 3,124 4,107
Diluted EPS:
Net income attributable to
common shareholders $13,917 22,850 $ 0.61 $21,619 23,064 $ 0.94
Shares of common stock from the assumed conversion of the Company's
convertible securities totaling 4,107,143 were not included in the
computation of diluted EPS for the nine month period ended June 30,2001
because the assumed conversion would have been anti-dilutive.
5. Segment Information
------------------------
In December 2000, the Company cancelled a proposed spin-off of its garden
distribution business and adopted a plan to reorganize its garden and pet
businesses. Under the reorganization plan, the Company's garden products
and distribution businesses became one operating unit and its pet products
and distribution businesses became another operating unit.
Consistent with the above changes, management has determined that the
reportable segments of the Company are Garden Products and Pet Products,
based on the level at which the chief operating decision making group
reviews the results of operations to make decisions regarding performance
assessment and resource allocation. This represents a change in the
segments reported in the Company's fiscal 2000 Annual Report filed on Form
10-K. Segment information, based upon the new reportable segments, for the
three and nine month periods ended June 30, 2001 and June 24, 2000 and
segment assets as of September 30, 2000 and June 30, 2001 is set forth
below (dollars in thousands):
Three Months Ended
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June 24, June 30,
2000 2001
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Net sales
Pet Products $ 120,256 $ 127,377
Garden Products 350,830 236,087
Intersegment eliminations (18,702) (20,396)
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Total net sales $ 452,384 $ 343,068
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Intersegment sales
Pet Products $ 6,405 $ 11,139
Garden Products 12,297 9,257
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Total intersegment sales $ 18,702 $ 20,396
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Income (loss)from operations
Pet Products $ 9,157 $ 12,524
Garden Products 25,473 16,208
Corporate (6,282) (7,708)
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Total income from operations 28,348 21,024
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Interest expense - net (6,768) (5,586)
Other income 1,420 529
Income taxes (10,125) (8,303)
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Net income $ 12,875 $ 7,664
============ ============
Nine Months Ended
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June 24, June 30,
2000 2001
------------ ------------
Net sales
Pet Products $ 358,262 $ 389,809
Garden Products 743,849 541,788
Intersegment eliminations (47,666) (51,209)
------------ ------------
Total net sales $ 1,054,445 $ 880,388
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Intersegment sales
Pet Products $ 17,765 $ 30,989
Garden Products 29,901 20,220
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Total intersegment sales $ 47,666 $ 51,209
------------ ------------
Income (loss) from operations
Pet Products $ 24,235 $ 27,622
Garden Products 44,475 23,214
Corporate (19,899) (21,066)
------------ ------------
Total income from operations 48,811 29,770
------------ ------------
Interest expense - net (17,046) (17,878)
Other income (expense) 1,270 1,064
Income taxes (14,540) (7,050)
------------ ------------
Net income $ 18,495 $ 5,906
============ ============
September 30, June 30,
2000 2001
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Assets
Pet Products $ 173,843 $ 164,572
Garden Products 340,311 338,916
Corporate 433,264 446,675
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Total assets $ 947,418 $ 950,163
============ ============
6. Other Charges
---------------
Activity affecting the reserve balances associated with Other Charges
recorded in fiscal 2000 and prior years is as follows (in millions):
Severance Exit Related
and Other Total
------------------------- --------
Balance September 30, 2000 $ 0.4 $ 9.1 $ 9.5
Costs incurred and paid (1.6) (1.6)
------------------------- --------
Balance December 30, 2000 $ 0.4 $ 7.5 $ 7.9
Costs incurred and paid (1.9) (1.9)
------------------------- --------
Balance March 31, 2001 $ 0.4 $ 5.6 $ 6.0
Costs incurred and paid $ (0.3) $ (4.3) $ (4.6)
------------------------- --------
Balance June 30, 2001 $ 0.1 $ 1.3 $ 1.4
========================= ========
Remaining reserve balances totaling $1.4 million are included in the
Condensed Consolidated Balance Sheet within the categories "accounts
payable" and "accrued expenses", comprised of $0.4 million associated with
charges recorded in the fiscal year ended September 25, 1999 and $1.0
million associated with charges recorded in the fiscal year ended September
30, 2000. Costs paid during the three and nine months ended June 30, 2001
relate to facility closure costs and lease terminations associated with the
charges recorded in the years ended September 26, 1998 and September 30,
2000. In addition, as a direct result of the termination of the
distribution relationship with The Scotts Company, the Company made cash
payments which were guaranteed to certain employees in the event of such
termination. The remaining exit costs are expected to be incurred and paid
during fiscal 2001.
SIGNATURES
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Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunder
duly authorized.
CENTRAL GARDEN & PET COMPANY
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Registrant
Dated: October 2, 2001
/s/ Lee D. Hines, Jr.
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Lee D. Hines, Jr., Vice President and
Chief Financial Officer