Central Garden & Pet Company Announces Highest Quarterly Revenues in Its History

Fiscal 2Q 2016 sales increase 8.8% to $541.2 million;

Fiscal 2Q 2016 Diluted EPS increases 38.3% to $0.65 from $0.47;

Raises Adjusted EPS guidance to $1.10 or higher for FY 2016

WALNUT CREEK, Calif.–(BUSINESS WIRE)–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 fiscal second quarter ended March 26, 2016.

“We are very pleased to have achieved the highest quarterly revenues in
the Company’s history and its highest quarterly earnings per share in
ten years,” said John Ranelli, President & CEO of Central Garden & Pet.
“These results reflect our success in increasing revenues, reducing
costs, and positioning our portfolio of businesses for success. These
efforts are on-going, and the Company remains committed to growing in
the years ahead by continuing to execute on the strategy and plan we
have been following over the course of the last few years.” Ranelli
continued, “With our leverage ratio down to 3.1x at the end of the
quarter vs. 4.5x a year ago, Central is well-positioned to utilize its
strong cash flow and balance sheet to fund future growth both
organically and through acquisitions.”

Ranelli concluded, “Central’s excellent results reflect the dedication
and leadership of our management and the significant commitment to
excellence of all our employees, ensuring our customers and consumers
are receiving the very best in products and services.”

The company currently expects adjusted earnings per fully-diluted share
of $1.10 or higher for fiscal 2016, an increase of at least 49% from the
prior year.

Fiscal 2016 Second Quarter Financial Highlights

• Sales increased 8.8% to $541.2 million compared to $497.6 million in
  the second quarter a year ago;
• Branded product sales increased 6.8% to $432.7 million compared to
  $405.1 million in the second quarter a year ago. Sales of other
  manufacturers’ products increased 17.3% to $108.5 million from $92.5
  million in the second quarter a year ago;
• Gross profit increased 12.8% to $169.3 million compared to $150.1
  million in the second quarter a year ago. Gross margin for the second
  quarter increased 110 basis points to 31.3% compared to 30.2% in the
  second quarter a year ago;
• SG&A expense increased $9.8 million for the second quarter and rose as
  a percentage of sales to 20.3% compared to 20.1% in the second quarter
  a year ago;
• Operating income increased to $59.4 million compared to $50.0 million
  in the second quarter a year ago;
• Operating margin increased 100 basis points to 11.0% compared to 10.0%
  in the second quarter a year ago;
• Net income increased 40.7% to $32.7 million compared to $23.2 million
  in the second quarter a year ago; and
• Earnings per fully-diluted share increased 38.3% to $0.65 compared to
  $0.47 in the second quarter a year ago.

Pet Segment Fiscal 2016 Second Quarter Results

Second quarter net sales for the Pet segment increased 24.3% to $275.3
million, an increase of $53.8 million from the same period a year ago.
Acquisitions accounted for approximately two-thirds of the increase with
the remaining one-third from organic growth. Organic sales were driven
by stronger dog & cat and professional revenues as well as higher sales
of other manufacturers’ products. The Pet segment’s branded product
sales were $216.9 million, and sales of other manufacturers’ products
were $58.4 million.

The Pet segment’s operating income rose 19.8% to $32.4 million compared
to $27.1 million in the second quarter of 2015. Pet operating margin
decreased 40 basis points, due to the impact of two recently acquired
businesses.

Garden Segment Fiscal 2016 Second Quarter
Results

Net sales for the Garden segment decreased 3.7% to $265.9 million, a
decline of $10.2 million compared to a year ago, due in part to exiting
a marginally-profitable private label fertilizer customer relationship
and the Company’s exit from the seasonal decor business. Grass seed
sales during the period were up significantly, as were sales of other
manufacturers’ products, while wild bird feed was down due to
unfavorable weather. The Garden segment’s branded product sales were
$215.8 million in the second quarter of 2016 and sales of other
manufacturers’ products were $50.1 million.

The Garden segment’s operating income in the quarter improved $5.1
million to $44.4 million, a gain of 12.9% compared to operating income
of $39.3 million in the second quarter of 2015. Garden operating margin
improved 250 basis points to 16.7 percent. The increase in operating
margin was driven mainly by higher grass seed profits.

Year-to-Date Results

For the six months ending March 26, 2016, the Company reported net sales
of $901.1 million, an increase of $96.2 million, or 11.9 percent, from
the prior year period. Branded product sales were $709.3 million, a 10.5
percent increase from the comparable 2015 period, and sales of other
manufacturers’ products were $191.8 million, a 17.8 percent increase.
Operating income for the period was $68.2 million compared to $51.1
million in the prior year period, and operating margin increased 130
basis points to 7.6%. Net income on a GAAP basis for the period was
$24.1 million, a $6.6 million increase compared to the prior year period
and earnings per share increased to $0.48 per fully diluted share from
$0.35 per fully diluted share. Excluding $14.3 million of charges in the
first quarter related to the Company’s refinancing of its fixed rate
notes, adjusted net income rose $33.4 million and adjusted earnings per
fully diluted share increased 89 percent to $0.66 from $0.35 in the six
month period a year ago.

Additional Information

At March 26, 2016, the Company’s cash and short-term investments balance
was $9.8 million, compared to $11.9 million a year ago. Cash used in
operations for the second quarter of 2016 was $50.4 million, compared to
$114.4 million in the second quarter of 2015. Total debt at March 26,
2016 was $497.0 million compared to $511.4 million at March 28, 2015.
Net interest expense was $7.1 million for the second quarter compared to
$11.9 million in the prior-year period due to the Company’s debt
refinancing in its first quarter and lower overall debt levels.

Depreciation and amortization expense was $9.2 million, compared with
$8.4 million in the prior-year period. The Company’s effective tax rate
for the second quarter of 2016 was 36.0 percent, compared with 36.9
percent for the second quarter of 2015.

During the quarter, the Company did not repurchase any shares of its
common stock. Approximately $35.0 million remains under the Board
approved 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 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 # 13635291. A replay of
the call will be available for ten days by dialing (201) 612-7415 and
entering confirmation # 13635291.

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™, CADET®, 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
3,700 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 future favorable results
and earnings guidance for 2016 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;
• the impending retirement of our CEO, the transition to his successor,
  our dependence upon our key executives and the ability to execute on
  our succession plan;
• dependence on a small number of customers for a significant portion of
  our business;
• uncertainty about new product innovations and marketing programs; and
• competition in our industries.

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.

Use of Non-GAAP Financial Measures –

We report our financial results in accordance with U.S. generally
accepted accounting principles (GAAP). However, management believes that
certain non-GAAP financial measures that exclude the $14.3 million
impact of the redemption of our 2018 Notes and the issuance of our 2023
Notes recognized during the quarter ended December 26, 2015 may be
useful in certain instances to provide additional meaningful comparisons
between current results and results in prior operating periods that
should be considered when assessing our ongoing performance and
providing consistency with our prior year disclosure. The amount is
included in interest expense in the condensed consolidated statements of
operations. We believe that the non-GAAP financial measures provide
useful information to investors and other users of our financial
statements, such as lenders. Management also uses these non-GAAP
financial measures in making financial, operating and planning decisions
and in evaluating our performance and we believe these measures
similarly may be useful to investors in evaluating our financial and
operating performance and the trends in our business from management’s
point of view. While our management believes that non-GAAP measurements
are useful supplemental information, such adjusted results are not
intended to replace our GAAP financial results and should be read in
conjunction with those GAAP results.

Adjusted earnings per-fully diluted share

The company currently expects adjusted earnings per fully-diluted share
(a non-GAAP measure) of $1.10 or higher for fiscal 2016. A
reconciliation to expected earnings per fully-diluted share (a GAAP
measure) has not been provided as the adjusted earnings per share
guidance excludes the impact of any non-operational charges or
impairments that may occur, and are not known or contemplated at this
time, as well as the impact of the redemption of our 2018 Notes and
issuance of our 2023 Notes.

Contacts

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