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| ScottsMiracle-Gro Announces Record Second Quarter Results; Strong Consumer Support Evident as Lawn & Garden Season Nears Peak |
MARYSVILLE, Ohio, May 6, 2010 /PRNewswire via COMTEX/ --Consumer purchases at major U.S. retailers up 11% through May 2Second quarter sales climb 19% to record $1.12 billion Adjusted gross margin rate improves 80 basis pointsReported earnings from continuing operations: $1.78 per shareAdjusted earnings per share grows $0.45 to $1.80Company increases full-year adjusted EPS guidance to $3.25 or higher The Scotts Miracle-Gro Company (NYSE: SMG), the world's largest marketer of branded consumer lawn and garden products, announced today that high levels of consumer demand and strong retailer support resulted in record second quarter results - including a 19 percent improvement in company-wide sales. Consumer purchases of the Company's products at its major U.S. retailers were up 7 percent fiscal year-to-date through the quarter, which ended April 3. Strong growth in April led to fiscal year-to-date improvement of 11 percent through May 2. Nearly 40 states have reported double-digit increases in consumer purchases with growth in every consumer category. Based on the robust start to the season, the Company raised its full-year outlook for adjusted earnings to $3.25 per share or better, compared with previous guidance of $3.00 to $3.10 per share. "We couldn't be more pleased with the level of consumer engagement we're seeing and the support we're receiving from our retail partners," said Jim Hagedorn, chairman and chief executive officer. "The sell-in to our retailers in the second quarter was extremely strong and our brands are once again front and center in driving growth in the lawn and garden category. We appear to be on our way to another year of record results and believe adjusted earnings will be at least $3.25 per share. The next several weeks remain critical to the year and we expect to provide an update to our outlook in mid-June." SECOND QUARTER RESULTS For the quarter ended April 3, 2010, ScottsMiracle-Gro reported sales of $1.12 billion, up 19 percent from last year and driven by a 21 percent improvement in its largest segment, Global Consumer. Excluding the impact of foreign exchange, company-wide sales increased 17 percent. It is important to note that the timing of the Company's fiscal calendar resulted in a five-day shift forward of the second quarter end as compared with 2009. When adjusted to reflect comparable reporting periods, company-wide sales in the second quarter were up 10 percent. The shift impacted earnings by $0.23 per share for the quarter. There is no full-year impact as the shift will reverse itself in the second half of the fiscal year. Reported sales for Global Consumer were $1.01 billion, up from $840.6 million for the same period last year. Excluding the impact of foreign exchange, sales for Global Consumer increased 19 percent. Increased sales and improved gross margins resulted in adjusted operating income for the Global Consumer segment of $254.5 million, a 28 percent improvement from $199.5 million for the same period last year. Scotts LawnService reported a 7 percent decrease in sales to $30.6 million from $32.8 million. Improved operating efficiencies resulted in an 11 percent improvement in the segment operating loss, reducing the loss to $14.4 million compared with $16.1 million a year ago. Scotts LawnService historically earns all of its profits in the second half, although the business reported its first profitable March on record. Global Professional sales increased by 16 percent to $78.0 million from $67.5 million last year. Excluding the impact in changes in foreign currency, sales increased 10 percent. Unit volume improved in most areas of the business, and operating income for the segment was $7.7 million, essentially flat with the same period last year. "We're pleased with the results from all our segments and particularly encouraged that Scotts LawnService appears to be trending in a favorable direction," Hagedorn said. "Our Global Professional business also appears to have positive momentum with strong unit volume growth. We expect a strong rebound in Global Professional's operating income in the second half as both costs and pricing normalize." For the quarter, company-wide adjusted gross margin increased to 38.9 percent compared with 38.1 percent a year earlier. The Company had projected that the gross margin rate would be less than the prior year for the quarter, but stable commodity costs combined with significantly higher volume drove the rate higher. Selling, general and administrative expenses (SG&A) increased in the quarter to $228.4 million from $204.0 million a year earlier. The increase was due primarily to increased advertising and sales support for early season products. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 35 percent to $207.6 million from $154.2 million a year ago. Adjusted income from continuing operations was $121.0 million, or $1.80 per share, compared with $89.1 million, or $1.35 per share, for the same period last year. Theses results exclude the impact of product registration and recall costs. Including those items, reported income from continuing operations was $119.9 million, or $1.78 per share, compared with $84.1 million, or $1.28 per share, for the same period last year. FIRST-HALF DETAILS Company-wide net sales through the first six months were $1.43 billion, a 16 percent increase from a year ago. Excluding the impact of foreign exchange, sales increased 14 percent. When adjusted to reflect the shift in the fiscal calendar, company-wide sales increased 8 percent on a year-to-date basis. Reported sales for Global Consumer increased 19 percent to $1.23 billion versus $1.03 billion for last year's comparable period. Scotts LawnService sales decreased 11 percent to $63.6 million. Global Professional reported sales of $133.4 million an increase of 5 percent from the same period last year. Excluding the impact of foreign exchange, Global Professional sales were essentially flat, with unit volume growth of about 9 percent offsetting declining prices. For the first six months, company-wide adjusted gross margin was 35.3 percent compared with 35.7 percent in the same period last year. SG&A increased 7 percent to $366.0 million. "We are extremely pleased with the vigorous pace of volume growth in the Consumer segment and the improving trend in gross margin rates during the second quarter," said Dave Evans, chief financial officer. "We established a long-term goal of restoring gross margin rates to historic levels in order to continue investing in key initiatives to drive future growth. This is another step in the right direction." Adjusted EBITDA in the first six months increased 53 percent to $146.7 million versus $95.9 million in the comparable period last year. Adjusted income from continuing operations for the first six months - which excludes costs related to the product registration and recall matters - increased 77 percent to $72.9 million, or $1.08 per share, compared with $41.1 million, or $0.63 per share, a year earlier. Reported income from continuing operations was $70.1 million, or $1.04 per share, compared with $31.2 million, or $0.47 per share, the same period last year. FULL-YEAR OUTLOOK The Company's updated outlook for the full-year now assumes sales growth of 7 to 8 percent, with stronger growth expected in the Global Consumer segment. Gross margin rate is also likely to be better than originally anticipated, with an improvement of up to 50 basis points due mostly to efficiencies generated by higher sales volume. SG&A expense for the full year, which management had previously anticipated to be flat from 2009, is expected to increase 3 to 4 percent. The Company now anticipates increased investments in both sales and advertising to drive continued volume momentum. Also, the strong operating performance is likely to result in less year-over-year improvement related to variable compensation than previously expected. Free cash flow is expected to exceed $200 million, compared with previous guidance of about $190 million. "Given the strong start to the season and continued support from our retail partners, we believe our updated guidance accurately reflects our outlook for the business on a real-time basis," Hagedorn said. "The month of May remains a critical time of our year and our team will stay focused on continuing to drive our business during this peak season as well as throughout the year." The Company will discuss its second quarter results during a Webcast and conference call at 10 a.m. Eastern Time today. The call will be available live on the Investor Relations section of the ScottsMiracle-Gro Web site, http://investor.scotts.com. An archive of the Webcast, as well as accompanying financial information regarding any non-GAAP financial measures discussed by the Company during the call, will be available on the Web site for at least 12 months. About ScottsMiracle-Gro With approximately $3 billion in worldwide sales, The Scotts Miracle-Gro Company, through its wholly-owned subsidiary, The Scotts Company LLC, is the world's largest marketer of branded consumer products for lawn and garden care, with products for professional horticulture as well. The Company's brands are the most recognized in the industry. In the U.S., the Company's Scotts(R), Miracle-Gro(R) and Ortho(R) brands are market-leading in their categories, as is the consumer Roundup(R) brand, which is marketed in North America and most of Europe exclusively by Scotts and owned by Monsanto. In the U.S., we operate Scotts LawnService(R), the second largest residential lawn care service business. In Europe, the Company's brands include Weedol(R), Pathclear(R), Evergreen(R), Levington(R), Miracle-Gro(R), KB(R), Fertiligene(R) and Substral(R). For additional information, visit us at www.scotts.com. Statement under the Private Securities Litigation Act of 1995: Certain of the statements contained in this press release, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company's management, and the Company's assumptions regarding such performance and plans are forward looking in nature. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
Additional detailed information concerning a number of the important factors that could cause actual results to differ materially from the forward-looking information contained in this release is readily available in the Company's publicly filed quarterly, annual and other reports.
THE SCOTTS MIRACLE-GRO COMPANY
Results of Operations for the Three and Six Months
Ended April 3, 2010 and March 28, 2009
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 14
Three Months Ended
------------------
March
April 3, 28, %
Footnotes 2010 2009 Change
--------- ---- ---- ------
Net sales $1,123.1 $940.7 19%
Cost of sales 686.5 581.9
Cost of sales -
product registration
and recall matters 0.6 2.5
--- ---
Gross profit 436.0 356.3 22%
% of sales 38.8% 37.9%
Operating expenses:
Selling, general and
administrative 228.4 204.0 12%
Product registration
and recall matters 1.1 5.5
Other expense
(income), net 0.2 0.4
--- ---
Income from operations 206.3 146.4 41%
% of sales 18.4% 15.6%
Interest expense 15.1 15.9
---- ----
Income from continuing
operations before
income taxes 191.2 130.5 47%
Income tax expense
from continuing
operations 71.3 46.4
---- ----
Income from continuing
operations 119.9 84.1 43%
Loss from discontinued
operations, net of
tax (1.4) (6.7)
---- ----
Net income $118.5 $77.4
====== =====
Basic income per
common share: (1)
Income from continuing
operations $1.81 $1.29
Loss from discontinued
operations (0.02) (0.10)
----- -----
Net income $1.79 $1.19
===== =====
Diluted income per
common share: (2)
Income from continuing
operations $1.78 $1.28
Loss from discontinued
operations (0.02) (0.10)
Net income $1.76 $1.18
===== =====
Common shares used in
basic
income per share
calculation 66.2 64.9
==== ====
Common shares and
potential common
shares used in diluted
income
per share calculation 67.4 65.8
==== ====
Results from
continuing operations
excluding
product registration
and recall matters:
Adjusted income from
continuing operations (4) $121.0 $89.1 36%
====== =====
Adjusted diluted
income per share from
continuing operations (2) (4) $1.80 $1.35 33%
===== =====
Adjusted EBITDA (3) (4) $207.6 $154.2 35%
====== ======
Six Months Ended
----------------
March
April 3, 28, %
2010 2009 Change
---- ---- ------
Net sales $1,425.3 $1,226.8 16%
Cost of sales 922.7 789.4
Cost of sales -product
registration and recall matters 1.5 3.8
--- ---
Gross profit 501.1 433.6 16%
% of sales 35.2% 35.3%
Operating expenses:
Selling, general and administrative 366.0 342.7 7%
Product registration and recall
matters 2.8 11.7
Other expense (income), net (6.4) (1.3)
---- ----
Income from operations 138.7 80.5 72%
% of sales 9.7% 6.6%
Interest expense 25.8 32.2
---- ----
Income from continuing operations
before income taxes 112.9 48.3 134%
Income tax expense from continuing
operations 42.8 17.1
---- ----
Income from continuing operations 70.1 31.2 125%
Loss from discontinued operations,
net of tax (9.3) (10.8)
---- -----
Net income $60.8 $20.4
===== =====
Basic income per common share:
Income from continuing operations $1.06 $0.48
Loss from discontinued operations (0.14) (0.17)
----- -----
Net income $0.92 $0.31
===== =====
Diluted income per common share:
Income from continuing operations $1.04 $0.47
Loss from discontinued operations (0.14) (0.16)
Net income $0.90 $0.31
===== =====
Common shares used in basic
income per share calculation 66.0 64.8
==== ====
Common shares and potential common
shares used in diluted income
per share calculation 67.2 65.7
==== ====
Results from continuing operations
excluding
product registration and recall
matters:
Adjusted income from continuing
operations $72.9 $41.1 77%
===== =====
Adjusted diluted income per share
from continuing operations $1.08 $0.63 73%
===== =====
Adjusted EBITDA $146.7 $95.9 53%
====== =====
THE SCOTTS MIRACLE-GRO COMPANY
Net Sales and Income (Loss) from Operations by Segment for the
Three and Six Months Ended April 3, 2010 and March 28, 2009
(in millions)
(Unaudited)
The Company is divided into the following reportable segments: Global
Consumer, Global Professional, Scotts LawnService(R) and Corporate &
Other. The Corporate & Other segment consists of corporate general
and administrative expenses. This division of reportable segments
is consistent with how the segments report to and are managed by
senior management of the Company. Certain reclassifications were
made to the Global Consumer and Global Professional prior period
amounts to reflect changes in the structure of the Company's
organization effective fiscal 2010.
Segment performance is evaluated based on several factors, including
income from continuing operations before amortization, product
registration and recall costs, and impairment, restructuring and
other charges, which are not generally accepted accounting
principles ("GAAP") measures. Management uses this measure of
operating profit to gauge segment performance because we believe
this measure is the most indicative of performance trends and the
overall earnings potential of each segment.
The Company follows a 13-week quarterly accounting cycle, with our
first three fiscal quarters ending on a Saturday, while our fiscal
year end always occurs on September 30th. This fiscal calendar
convention requires the Company to cycle forward its first three
fiscal quarter ends every four to five years. Fiscal 2010 is the
most recent year impacted by this fiscal quarter end cycle forward
process. The Company's second quarter of fiscal 2010 ended on April
3rd, compared to March 28th for the second quarter of fiscal 2009.
Because this second quarter cycle forward occurred during the
Company's peak spring selling season, this shift had a significant
impact on the Company's Results of Operations for the three and six
months ended April 3, 2010 as compared to the three and six months
ended March 28, 2010. The "Normalized for Calendar Shift" columns
in the table below provide management's estimate of net sales and
income (loss) from operations growth for the three and six months
ended April 3, 2010 normalized for the calendar shift.
Three Months Ended
------------------
% Change
--------
Normalized
for
March Calendar
April 3, 28, Reported Shift
2010 2009 -------- -----------
---- ----
Net Sales:
----------
Global Consumer $1,014.7 $840.6 21% 11%
Global Professional 78.0 67.5 16% 14%
Scotts LawnService(R) 30.6 32.8 -7% -19%
---- ----
Segment total $1,123.3 $940.9 19% 10%
Roundup(R) amortization (0.2) (0.2)
Product registration and
recall matters - -
--- ---
Consolidated $1,123.1 $940.7 19% 10%
======== ======
Income (Loss) from
Operations:
------------------
Global Consumer $254.5 $199.5 28% 14%
Global Professional 7.7 7.8 -1% -4%
Scotts LawnService(R) (14.4) (16.1) 11% 8%
Corporate and Other (37.1) (33.7) -10% -10%
----- -----
Segment total $210.7 $157.5 34% 16%
Roundup(R) amortization (0.2) (0.2)
Other amortization (2.5) (2.9)
Product registration and
recall matters (1.7) (8.0)
---- ----
Consolidated $206.3 $146.4 41% 21%
====== ======
Six Months Ended
----------------
% Change
--------
Normalized
for
Calendar
April 3, March 28, Reported Shift
2010 2009 -------- -----------
---- ----
Net Sales:
----------
Global Consumer $1,228.7 $1,028.9 19% 10%
Global
Professional 133.4 127.0 5% 2%
Scotts
LawnService(R) 63.6 71.6 -11% -17%
---- ----
Segment total $1,425.7 $1,227.5 16% 8%
Roundup(R)
amortization (0.4) (0.4)
Product
registration and
recall matters - (0.3)
--- ----
Consolidated $1,425.3 $1,226.8 16% 8%
======== ========
Income (Loss)
from Operations:
-----------------
Global Consumer $217.5 $164.0 33% 15%
Global
Professional 8.4 21.6 -61% -63%
Scotts
LawnService(R) (21.3) (23.9) 11% 8%
Corporate and
Other (56.0) (59.0) 5% 5%
----- -----
Segment total $148.6 $102.7 45% 15%
Roundup(R)
amortization (0.4) (0.4)
Other
amortization (5.2) (6.2)
Product
registration and
recall matters (4.3) (15.6)
---- -----
Consolidated $138.7 $80.5 72% 29%
====== =====
THE SCOTTS MIRACLE-GRO COMPANY
Consolidated Balance Sheets
April 3, 2010, March 28, 2009 and September 30, 2009
(in millions)
(Unaudited)
April 3, March 28, September 30,
2010 2009 2009
---- ---- ----
ASSETS
Current assets
Cash and cash
equivalents $39.3 $48.1 $71.6
Accounts receivable,
net 1,093.4 1,008.4 401.3
Inventories, net 589.4 667.6 458.9
Prepaids and other
current assets 198.5 159.9 159.1
----- ----- -----
Total current assets 1,920.6 1,884.0 1,090.9
Property, plant and
equipment, net 377.1 335.5 369.7
Goodwill, net 371.3 368.0 375.2
Other intangible
assets, net 353.5 361.5 364.2
Other assets 29.1 18.9 20.1
---- ---- ----
Total assets $3,051.6 $2,967.9 $2,220.1
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Current portion of
debt $244.3 $396.0 $160.4
Accounts payable 319.6 352.3 190.0
Other current
liabilities 441.5 382.7 406.4
----- ----- -----
Total current
liabilities 1,005.4 1,131.0 756.8
Long-term debt 1,156.0 1,196.2 649.7
Other liabilities 216.5 187.5 229.1
----- ----- -----
Total liabilities 2,377.9 2,514.7 1,635.6
Shareholders' equity 673.7 453.2 584.5
----- ----- -----
Total liabilities and
shareholders' equity $3,051.6 $2,967.9 $2,220.1
======== ======== ========
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items for the Three
Months Ended April 3, 2010 and March 28, 2009
(in millions, except per share data)
(Unaudited)
Note: See Notes 3 and 4 to the Accompanying Footnotes on Page 14
Three Months Ended April 3, 2010
--------------------------------
Product
Registration
As Reported and Adjusted
----------- Recall Matters --------
--------------
Net sales $1,123.1 $- 1,123.1
Cost of sales 686.5 - 686.5
Cost of sales -
product
registration and
recall matters 0.6 0.6 -
--- --- ---
Gross profit 436.0 (0.6) 436.6
% of sales 38.8% 38.9%
Operating expenses:
Selling, general and
administrative 228.4 - 228.4
Product registration
and recall matters 1.1 1.1 -
Other expense, net 0.2 - 0.2
--- --- ---
Income from
operations 206.3 (1.7) 208.0
% of sales 18.4% 18.5%
Interest expense 15.1 - 15.1
---- --- ----
Income from
continuing
operations before
income taxes 191.2 (1.7) 192.9
Income tax expense
from continuing
operations 71.3 (0.6) 71.9
---- ---- ----
Income from
continuing
operations $119.9 $(1.1) $121.0
====== ===== ======
Basic income per
share from
continuing
operations $1.81 $(0.02) $1.83
===== ====== =====
Diluted income per
share from
continuing
operations $1.78 $(0.02) $1.80
----- ------ -----
Common shares used
in basic
income per share
calculation 66.2 66.2 66.2
==== ==== ====
Common shares and
potential common
shares used in
diluted income
per share
calculation 67.4 67.4 67.4
==== ==== ====
Income from
continuing
operations $119.9
Income tax expense
from continuing
operations 71.3
Loss from
discontinued
operations, net of
tax (1.4)
Income tax benefit
from discontinued
operations (0.5)
Interest expense 15.1
Depreciation 12.0
Amortization,
including marketing
fees 2.7
Product registration
and recall matters,
non-cash portion -
Smith & Hawken
closure process,
non-cash portion (11.5)
-----
Adjusted EBITDA $207.6
======
Three Months Ended March 28, 2009
---------------------------------
Product
Registration
As Reported and Adjusted
----------- Recall Matters --------
--------------
Net sales $940.7 $- $940.7
Cost of sales 581.9 - 581.9
Cost of sales -
product registration
and recall matters 2.5 2.5 -
--- --- ---
Gross profit 356.3 (2.5) 358.8
% of sales 37.9% 38.1%
Operating expenses:
Selling, general and
administrative 204.0 - 204.0
Product registration
and recall matters 5.5 5.5 -
Other expense, net 0.4 - 0.4
--- --- ---
Income from operations 146.4 (8.0) 154.4
% of sales 15.6% 16.4%
Interest expense 15.9 - 15.9
---- --- ----
Income from continuing
operations before
income taxes 130.5 (8.0) 138.5
Income tax expense
from continuing
operations 46.4 (3.0) 49.4
---- ---- ----
Income from continuing
operations $84.1 $(5.0) $89.1
===== ===== =====
Basic income per share
from continuing
operations $1.29 $(0.08) $1.37
===== ====== =====
Diluted income per
share from continuing
operations $1.28 $(0.08) $1.35
----- ------ -----
Common shares used in
basic
income per share
calculation 64.9 64.9 64.9
==== ==== ====
Common shares and
potential common
shares used in diluted
income
per share calculation 65.8 65.8 65.8
==== ==== ====
Income from continuing
operations $84.1
Income tax expense
from continuing
operations 46.4
Loss from discontinued
operations, net of
tax (6.7)
Income tax benefit
from discontinued
operations (2.8)
Interest expense 15.9
Depreciation 11.7
Amortization,
including marketing
fees 3.1
Product registration
and recall matters,
non-cash portion 2.5
Smith & Hawken closure
process, non-cash
portion -
---
Adjusted EBITDA $154.2
======
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items for the Six
Months Ended April 3, 2010 and March 28, 2009
(in millions, except per share data)
(Unaudited)
Note: See Notes 3 and 4 to the Accompanying Footnotes on Page 14
Six Months Ended April 3, 2010
------------------------------
Product
Registration
As Reported and Adjusted
----------- Recall Matters --------
--------------
Net sales $1,425.3 $- $1,425.3
Cost of sales 922.7 - 922.7
Cost of sales -
product registration
and recall matters 1.5 1.5 -
--- --- ---
Gross profit 501.1 (1.5) 502.6
% of sales 35.2% 35.3%
Operating expenses:
Selling, general and
administrative 366.0 - 366.0
Product registration
and recall matters 2.8 2.8 -
Other income, net (6.4) - (6.4)
---- --- ----
Income from
operations 138.7 (4.3) 143.0
% of sales 9.7% 10.0%
Interest expense 25.8 - 25.8
---- --- ----
Income from
continuing
operations before
income taxes 112.9 (4.3) 117.2
Income tax expense
from continuing
operations 42.8 (1.5) 44.3
---- ---- ----
Income from
continuing
operations $70.1 $(2.8) $72.9
===== ===== =====
Basic income per
share from
continuing
operations $1.06 $(0.04) $1.10
===== ====== =====
Diluted income per
share from
continuing
operations $1.04 $(0.04) $1.08
----- ------ -----
Common shares used in
basic income
per share calculation 66.0 66.0 66.0
==== ==== ====
Common shares and
potential common
shares used in
diluted income
per share calculation 67.2 67.2 67.2
==== ==== ====
Income from
continuing
operations $70.1
Income tax expense
from continuing
operations 42.8
Loss from
discontinued
operations, net of
tax (9.3)
Income tax expense
(benefit) from
discontinued
operations 0.2
Interest expense 25.8
Depreciation 24.2
Amortization,
including marketing
fees 5.6
Product registration
and recall matters,
non-cash portion 0.4
Smith & Hawken
closure process,
non-cash portion (13.1)
-----
Adjusted EBITDA $146.7
======
Six Months Ended March 28, 2009
-------------------------------
Product
Registration
As Reported and Adjusted
----------- Recall Matters --------
--------------
Net sales $1,226.8 $(0.3) $1,227.1
Cost of sales 789.4 (0.2) 789.6
Cost of sales -
product registration
and recall matters 3.8 3.8 -
--- --- ---
Gross profit 433.6 (3.9) 437.5
% of sales 35.3% 35.7%
Operating expenses:
Selling, general and
administrative 342.7 - 342.7
Product registration
and recall matters 11.7 11.7 -
Other income, net (1.3) - (1.3)
---- --- ----
Income from operations 80.5 (15.6) 96.1
% of sales 6.6% 7.8%
Interest expense 32.2 - 32.2
---- --- ----
Income from continuing
operations before
income taxes 48.3 (15.6) 63.9
Income tax expense
from continuing
operations 17.1 (5.7) 22.8
---- ---- ----
Income from continuing
operations $31.2 $(9.9) $41.1
===== ===== =====
Basic income per share
from continuing
operations $0.48 $(0.15) $0.63
===== ====== =====
Diluted income per
share from continuing
operations $0.47 $(0.15) $0.63
----- ------ -----
Common shares used in
basic income
per share calculation 64.8 64.8 64.8
==== ==== ====
Common shares and
potential common
shares used in diluted
income
per share calculation 65.7 65.7 65.4
==== ==== ====
Income from continuing
operations $31.2
Income tax expense
from continuing
operations 17.1
Loss from discontinued
operations, net of
tax (10.8)
Income tax expense
(benefit) from
discontinued
operations (5.6)
Interest expense 32.2
Depreciation 23.0
Amortization,
including marketing
fees 6.6
Product registration
and recall matters,
non-cash portion 2.2
Smith & Hawken closure
process, non-cash
portion -
---
Adjusted EBITDA $95.9
=====
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items
For the fiscal years ended September 30, 2009, 2008 and 2007
(in millions, except per share data)
(Unaudited)
Note: See Notes 4 and 5 to the Accompanying Footnotes on Page 14
Fiscal 2009
-----------
Product
Registration
As Reported and Adjusted
Recall
----------- Matters --------
-------
Net sales $2,980.7 $(0.3) $2,981.0
Cost of sales 1,911.4 (0.2) 1,911.6
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 11.7 11.7 -
---- ---- ---
Gross profit 1,057.6 (11.8) 1,069.4
% of sales 35.5% 35.9%
Operating expenses:
Selling, general and
administrative 742.9 - 742.9
Impairment, restructuring and
other charges - - -
Product registration and
recall matters 16.8 16.8 -
Other expense (income), net 0.3 - 0.3
--- --- ---
Income from operations 297.6 (28.6) 326.2
% of sales 10.0% 10.9%
Costs related to refinancings - - -
Interest expense 56.4 - 56.4
---- --- ----
Income from continuing
operations before income
taxes 241.2 (28.6) 269.8
Income tax expense (benefit) 86.6 (10.3) 96.9
---- ----- ----
Income from continuing
operations $154.6 $(18.3) $172.9
====== ====== ======
Basic income per share from
continuing operations $2.38 $(0.28) $2.66
===== ====== =====
Diluted income per share from
continuing operations $2.34 $(0.28) $2.62
----- ------ -----
Common shares used in basic
income
per share calculation 65.0 65.0 65.0
==== ==== ====
Common shares and potential
common
shares used in diluted income
per share calculation 66.1 66.1 66.1
==== ==== ====
Fiscal 2008
-----------
Product
As Registration
Reported and Impairment Adjusted
Recall
--------- Matters ---------- --------
-------
Net sales $2,823.2 $(22.3) $- $2,845.5
Cost of sales 1,883.0 (11.1) - 1,894.1
Cost of sales -
impairment,
restructuring and
other charges 1.3 - 1.3 -
Cost of sales -
product
registration and
recall matters 27.2 27.2 - -
---- ---- --- ---
Gross profit 911.7 (38.4) (1.3) 951.4
% of sales 32.3% 33.4%
Operating expenses:
Selling, general
and administrative 657.1 - - 657.1
Impairment,
restructuring and
other charges 109.8 - 109.8 -
Product
registration and
recall matters 12.7 12.7 - -
Other expense
(income), net (7.7) - - (7.7)
---- --- --- ----
Income from
operations 139.8 (51.1) (111.1) 302.0
% of sales 5.0% 10.6%
Costs related to
refinancings - - - -
Interest expense 82.2 - - 82.2
---- --- --- ----
Income from
continuing
operations before
income taxes 57.6 (51.1) (111.1) 219.8
Income tax expense
(benefit) 24.8 (17.9) (32.2) 74.9
---- ----- ----- ----
Income from
continuing
operations $32.8 $(33.2) $(78.9) $144.9
===== ====== ====== ======
Basic income per
share from
continuing
operations $0.51 $(0.51) $(1.22) $2.25
===== ====== ====== =====
Diluted income per
share from
continuing
operations $0.50 $(0.51) $(1.21) $2.22
----- ------ ------ -----
Common shares used
in basic income
per share
calculation 64.5 64.5 64.5 64.5
==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income
per share
calculation 65.4 65.4 65.4 65.4
==== ==== ==== ====
Fiscal 2007
-----------
Impairment, Cost related
Restructuring to
As Reported and Other Refinancings Adjusted
----------- -------------- ------------- --------
Net sales $2,687.8 $- $- $2,687.8
Cost of
sales 1,735.0 - - 1,735.0
Cost of
sales -
impairment,
restructuring
and other
charges - - - -
Cost of
sales -
product
registration
and recall
matters - - - -
--- --- --- ---
Gross
profit 952.8 - - 952.8
% of sales 35.4% 35.4%
Operating
expenses:
Selling,
general
and
administrative 635.6 - - 635.6
Impairment,
restructuring
and other
charges 8.8 8.8 - -
Product
registration
and recall
matters - - - -
Other
expense
(income),
net (9.6) - - (9.6)
---- --- --- ----
Income from
operations 318.0 (8.8) - 326.8
% of sales 11.8% 12.2%
Costs
related to
refinancings 18.3 - 18.3 -
Interest
expense 70.7 - - 70.7
---- --- --- ----
Income from
continuing
operations
before
income
taxes 229.0 (8.8) (18.3) 256.1
Income tax
expense
(benefit) 79.7 (3.1) (6.4) 89.2
---- ---- ---- ----
Income from
continuing
operations $149.3 $(5.7) $(11.9) $166.9
====== ===== ====== ======
Basic
income per
share from
continuing
operations $2.29 $(0.09) $(0.18) $2.56
===== ====== ====== =====
Diluted
income per
share from
continuing
operations $2.23 $(0.08) $(0.18) $2.49
----- ------ ------ -----
Common
shares
used in
basic
income
per share
calculation 65.2 65.2 65.2 65.2
==== ==== ==== ====
Common
shares and
potential
common
shares used
in diluted
income
per share
calculation 67.0 67.0 67.0 67.0
==== ==== ==== ====
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items
For the fiscal year ended September 30, 2009
(Unaudited) (in millions, except per share data)
(Unaudited)
Note: See Notes 4 and 5 to the Accompanying Footnotes on Page 14
Q1 F09
------
Product
As Registration
Reported and Adjusted
--------- Recall Matters --------
--------------
Net sales $286.1 $(0.3) $286.4
Cost of sales 207.5 (0.2) 207.7
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 1.3 1.3 -
--- --- ---
Gross profit 77.3 (1.4) 78.7
% of sales 27.0% 27.5%
Operating expenses:
Selling, general and
administrative 138.7 - 138.7
Impairment, restructuring
and other charges - - -
Product registration and
recall matters 6.2 6.2 -
Other income, net (1.7) - (1.7)
---- --- ----
Income (loss) from
operations (65.9) (7.6) (58.3)
% of sales -23.0% -20.4%
Interest expense 16.3 - 16.3
---- --- ----
Income (loss) from
continuing operations
before income taxes (82.2) (7.6) (74.6)
Income tax expense (benefit) (29.3) (2.7) (26.6)
----- ---- -----
Income (loss) from
continuing operations $(52.9) $(4.9) $(48.0)
====== ===== ======
Basic income (loss) per
share from continuing
operations $(0.82) $(0.08) $(0.74)
====== ====== ======
Diluted income (loss) per
share from continuing
operations $(0.82) $(0.08) $(0.74)
------ ------ ------
Common shares used in basic
income
per share calculation 64.7 64.7 64.7
==== ==== ====
Common shares and potential
common
shares used in diluted
income
per share calculation 64.7 64.7 64.7
==== ==== ====
Q2 F09
------
Product
As Registration
Reported and Adjusted
--------- Recall Matters --------
--------------
Net sales $940.7 $- $940.7
Cost of sales 581.9 - 581.9
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 2.5 2.5 -
--- --- ---
Gross profit 356.3 (2.5) 358.8
% of sales 37.9% 38.1%
Operating expenses:
Selling, general and
administrative 204.0 - 204.0
Impairment, restructuring
and other charges - - -
Product registration and
recall matters 5.5 5.5 -
Other income, net 0.4 - 0.4
--- --- ---
Income (loss) from
operations 146.4 (8.0) 154.4
% of sales 15.6% 16.4%
Interest expense 15.9 - 15.9
---- --- ----
Income (loss) from
continuing operations
before income taxes 130.5 (8.0) 138.5
Income tax expense (benefit) 46.4 (3.0) 49.4
---- ---- ----
Income (loss) from
continuing operations $84.1 $(5.0) $89.1
===== ===== =====
Basic income (loss) per
share from continuing
operations $1.29 $(0.08) $1.37
===== ====== =====
Diluted income (loss) per
share from continuing
operations $1.28 $(0.08) $1.35
----- ------ -----
Common shares used in basic
income
per share calculation 64.9 64.9 64.9
==== ==== ====
Common shares and potential
common
shares used in diluted
income
per share calculation 65.8 65.8 65.8
==== ==== ====
Q3 F09
------
Product
As Registration
Reported and Adjusted
--------- Recall Matters --------
--------------
Net sales $1,231.4 $- $1,231.4
Cost of sales 752.4 - 752.4
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 3.3 3.3 -
--- --- ---
Gross profit 475.7 (3.3) 479.0
% of sales 38.6% 38.9%
Operating expenses:
Selling, general and
administrative 223.0 - 223.0
Impairment, restructuring and
other charges - - -
Product registration and
recall matters 3.1 3.1 -
Other income, net (0.4) - (0.4)
---- --- ----
Income (loss) from operations 250.0 (6.4) 256.4
% of sales 20.3% 20.8%
Interest expense 13.7 - 13.7
---- --- ----
Income (loss) from continuing
operations before income
taxes 236.3 (6.4) 242.7
Income tax expense (benefit) 85.6 (2.1) 87.7
---- ---- ----
Income (loss) from continuing
operations $150.7 $(4.3) $155.0
====== ===== ======
Basic income (loss) per share
from continuing operations $2.32 $(0.07) $2.38
===== ====== =====
Diluted income (loss) per
share from continuing
operations $2.28 $(0.07) $2.34
----- ------ -----
Common shares used in basic
income
per share calculation 65.0 65.0 65.0
==== ==== ====
Common shares and potential
common
shares used in diluted income
per share calculation 66.1 66.1 66.1
==== ==== ====
Q4 F09
------
Product
As Registration
Reported and Adjusted
--------- Recall Matters --------
--------------
Net sales $522.5 $- $522.5
Cost of sales 369.6 - 369.6
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 4.6 4.6 -
--- --- ---
Gross profit 148.3 (4.6) 152.9
% of sales 28.4% 29.3%
Operating expenses:
Selling, general and
administrative 177.2 - 177.2
Impairment, restructuring and
other charges - - -
Product registration and
recall matters 2.0 2.0 -
Other income, net 2.0 - 2.0
--- --- ---
Income (loss) from operations (32.9) (6.6) (26.3)
% of sales -6.3% -5.0%
Interest expense 10.5 - 10.5
---- --- ----
Income (loss) from continuing
operations before income
taxes (43.4) (6.6) (36.8)
Income tax expense (benefit) (16.1) (2.5) (13.6)
----- ---- -----
Income (loss) from continuing
operations $(27.3) $(4.1) $(23.2)
====== ===== ======
Basic income (loss) per share
from continuing operations $(0.42) $(0.06) $(0.36)
====== ====== ======
Diluted income (loss) per
share from continuing
operations $(0.42) $(0.06) $(0.36)
------ ------ ------
Common shares used in basic
income
per share calculation 65.3 65.3 65.3
==== ==== ====
Common shares and potential
common
shares used in diluted income
per share calculation 65.3 65.3 65.3
==== ==== ====
Fiscal F09
----------
Product
As Registration
Reported and Adjusted
--------- Recall Matters --------
--------------
Net sales $2,980.7 $(0.3) $2,981.0
Cost of sales 1,911.4 (0.2) 1,911.6
Cost of sales -impairment,
restructuring and other
charges - - -
Cost of sales -product
registration and recall
matters 11.7 11.7 -
---- ---- ---
Gross profit 1,057.6 (11.8) 1,069.4
% of sales 35.5% 35.9%
Operating expenses:
Selling, general and
administrative 742.9 - 742.9
Impairment, restructuring and
other charges - - -
Product registration and
recall matters 16.8 16.8 -
Other income, net 0.3 - 0.3
--- --- ---
Income (loss) from operations 297.6 (28.6) 326.2
% of sales 10.0% 10.9%
Interest expense 56.4 - 56.4
---- --- ----
Income (loss) from continuing
operations before income
taxes 241.2 (28.6) 269.8
Income tax expense (benefit) 86.6 (10.3) 96.9
---- ----- ----
Income (loss) from continuing
operations $154.6 $(18.3) $172.9
====== ====== ======
Basic income (loss) per share
from continuing operations $2.38 $(0.28) $2.66
===== ====== =====
Diluted income (loss) per
share from continuing
operations $2.34 $(0.28) $2.62
----- ------ -----
Common shares used in basic
income
per share calculation 65.0 65.0 65.0
==== ==== ====
Common shares and potential
common
shares used in diluted income
per share calculation 66.1 66.1 66.1
==== ==== ====
THE SCOTTS MIRACLE-GRO COMPANY
Footnotes to Preceding Financial Statements
Results of Operations
---------------------
Basic income per common share amounts are calculated by
dividing income from continuing operations, loss from
discontinued operations and net income by average common
(1) shares outstanding during the period.
---
Diluted income per common share amounts are calculated by
dividing income from continuing operations, loss from
discontinued operations and net income by the average common
shares and dilutive potential common shares (common stock
options, stock appreciation rights, restricted stock and
(2) restricted stock units) outstanding during the period.
---
"Adjusted EBITDA" is defined as net income before interest,
taxes, depreciation and amortization as well as certain other
items such as the impact of the cumulative effect of changes
in accounting, costs associated with debt refinancing and
other non-recurring, non-cash items affecting net income.
Adjusted EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting
principles and should not be used as an alternative to net
income or income from continuing operations as an indicator of
operating performance or to cash flow as a measure of
(3) liquidity.
---
The Reconciliation of non-GAAP Disclosure Items includes the
(4) following non-GAAP financial measures:
---
Adjusted income from continuing operations and adjusted diluted
income per share from continuing operations -These measures
exclude charges or credits relating to refinancings, impairments,
restructurings, product registration and recall matters,
discontinued operations and other unusual items such as costs or
gains related to discrete projects or transactions that are apart
from and not indicative of the results of the operations of the
business.
------------------------------------------------------------------
Adjusted EBITDA -The presentation of adjusted EBITDA is provided
as a convenience to the Company's lenders because adjusted EBITDA
is a component of certain debt covenants.
------------------------------------------------------------------
The Company believes that these non-GAAP financial measures are
the most indicative of the Company's ongoing earnings
capabilities and that disclosure of these non-GAAP financial
measures therefore provides useful information to investors and
other users of its financial statements, such as lenders.
----------------------------------------------------------------
Effective in its first quarter of fiscal 2010, the Company
classified Smith & Hawken as discontinued operations.
Accordingly, the Company has reclassified its results of
operations to reflect Smith & Hawken as discontinued
operations separate from its results of continuing operations.
As a service to its investors, lenders and other interested
parties, the Company is providing a reconciliation of income
(loss) from continuing operations to adjusted income (loss)
from continuing operations and diluted income (loss) per share
from continuing operations to adjusted diluted income (loss)
per share from continuing operations for each of the fiscal
years ended September 30, 2009, 2008 and 2007 as well as each
quarterly period in the fiscal year ended September 30, 2009,
which reflect the reclassification of Smith & Hawken as
(5) discontinued operations.
---
SOURCE The Scotts Miracle-Gro Company |
