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| ScottsMiracle-Gro Announces Record Third Quarter Sales and Profit as Consumers Remain Highly Engaged in Lawn & Garden |
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Company-wide sales for the quarter ended June 27 were $1.28 billion, an increase of 9 percent from the same period a year ago. Adjusted net income for the quarter, which excludes the impact of product registration and recall costs, as well as impairment charges, was $153.7 million, or $2.32 per share, compared with $130.7 million, or $2.00 per share, for the same period last year. Including those items, reported net income was $147.8 million, or $2.23 per share, compared with $22.6 million, or $0.35 per share, for the same period last year. Global Consumer sales increased 16 percent to $1.08 billion from $930.1 million for the same period a year ago. Excluding the impact of foreign exchange, Global Consumer sales increased 19 percent. Within the segment, the North American business increased 21 percent and reported sales in Europe declined 12 percent. Excluding foreign exchange, sales in Europe rose by 6 percent. Consumer purchases, as measured by point-of-sale data from the Company's major retail partners in the U.S., increased 19 percent in the quarter. Adjusted operating income for the Global Consumer segment improved 28 percent in the quarter to $265.2 million from $207.9 million for the same period last year. "We couldn't be more pleased with the continued strength of our core consumer business," said Jim Hagedorn, chairman and chief executive officer. "Our investment in marketing, sales and innovation -- along with outstanding support from our retail partners -- has driven impressive growth throughout the season. Through the third quarter, each of our categories of lawn and garden in the U.S. reported strong growth. More impressively, on a year-to-date basis, consumer purchases are higher in every state and we have seen double-digit improvements in consumer purchases in 45 states. "Our strong year-to-date performance, coupled with ongoing margin improvement and a commitment to drive our fall business, gives us continued confidence in our earnings guidance of $2.35 to $2.45 per share on an adjusted basis." Scotts LawnService reported a 10 percent decrease in sales to $79.0 million from $87.4 million. Maintaining strong cost controls resulted in a 5 percent increase in adjusted operating income to $21.6 million compared with $20.6 million a year ago. "The performance of Scotts LawnService continues to be one of our best stories in fiscal 2009," Hagedorn said. "While we expected revenue to decline slightly this year due to the economy, this team has done an outstanding job managing the bottom line. We now feel confident that Scotts LawnService will report record profits this year and dramatically improved operating margin. We continue to believe this unit will be a key driver of long-term growth." Global Professional sales declined by 24 percent in the quarter to $75.4 million from $98.7 million last year. Excluding the impact of changes in foreign currency, sales declined 12 percent. Operating income for the segment decreased to $5.2 million from $11.9 million for the same period last year. Smith & Hawken reported $48.6 million in sales compared with $54.9 million last year, and posted an adjusted operating loss of $1.6 million. The Company previously announced plans to close Smith & Hawken by the end of the calendar year. The process of inventory mark-downs has commenced with strong consumer response. Adjusted gross margin increased to 38.5 percent in the quarter compared with 36.4 percent a year earlier. Selling, general and administrative expenses (SG&A) increased 16 percent in the quarter to $239.0 million from $206.9 million a year earlier. The increase was driven by higher marketing spending in the consumer businesses as well as increased variable compensation. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 12 percent to $263.7 million from $234.6 million a year ago. YEAR-TO-DATE RESULTS Company-wide net sales through the first nine months were $2.56 billion, up 5 percent from a year ago. Excluding the impact of foreign exchange, sales increased 9 percent. Global Consumer sales increased 10 percent to $2.09 billion and improved by 14 percent when excluding the impact of foreign currency. Scotts LawnService sales decreased 5 percent to $150.3 million. Smith & Hawken reported $99.8 million in sales, down 18 percent. Global Professional reported sales were $215.4 million, compared with $260.6 million for the same period last year. Excluding the impact of foreign exchange, Global Professional sales were down 4 percent. For the first nine months, company-wide adjusted gross margin improved 210 basis points to 36.7 percent compared with 34.6 percent. SG&A increased 9 percent to $608.1 million. "The improvement in gross margin rate for the year has been driven primarily by favorable product mix, supply chain improvements and pricing," said Dave Evans, chief financial officer. "We now expect the full-year improvement to be at least 210 basis points and we remain focused on continued improvement in 2010 and beyond. We also expect SG&A to increase about 10 percent compared with the prior year. This increase is primarily driven by higher marketing investments in the consumer business as well as higher variable compensation. "We continue to believe free cash flow for the year, defined as operating cash flow minus capital expenditures, will be at least $180 million. These strong levels of free cash flow will allow us to continue to pay down debt and further strengthen our balance sheet." Adjusted EBITDA in the first nine months increased 10 percent to $359.6 million versus $327.7 million in the comparable period last year. Adjusted net income for the first nine months increased 21 percent to $184.1 million, or $2.80 per share, compared with $151.6 million, or $2.31 per share, a year earlier. Reported net income was $168.2 million, or $2.56 per share, compared with $23.8 million, or $0.36 per share, for the same period last year. The Company will discuss its third quarter results during a Webcast and conference call at 9 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 and more than 6,000 associates, 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), 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 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:
-- Delays in the implementation of the Smith & Hawken closure process,
below forecast sales or margin resulting from the liquidation of
remaining Smith & Hawken inventory, unexpected costs associated with
mitigation of Smith & Hawken's lease obligations, the inability
to gain expected tax benefits and/or the escalation of other costs
associated with the execution of the Smith & Hawken closure process;
-- Adverse weather conditions could adversely affect the Company's
sales and financial results;
-- Failure to remain in compliance with the Company's debt covenants
could result in the acceleration of the indebtedness, increase the
Company's interest expense and harm the Company's ability to
obtain additional credit or maintain its existing credit without
significant costs, and therefore, could adversely affect the
Company's liquidity and financial health;
-- Public perceptions regarding the safety of the Company's products,
and/or compliance with heightened environmental and other public health
regulations, could increase the Company's cost of doing business
and/or negatively impact sales;
-- Costs associated with the Company's previously announced product
recalls and product registration issues and the corresponding
governmental investigation, including legal expenses, and potential
fines, penalties and/or judgments could adversely affect the
Company's financial results;
-- The loss of one or more of the Company's top customers could
adversely affect the Company's financial results because of the
concentration of the Company's sales with a small number of retail
customers; and
-- The Company's international operations make the Company susceptible
to fluctuations in currency exchange rates and to the costs of
international regulation.
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 Nine Months
Ended June 27, 2009 and June 28, 2008
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 11
Three Months Ended Nine Months Ended
------------------ -----------------
June 27, June 28, % June 27, June 28, %
Footnotes 2009 2008 Change 2009 2008 Change
--------- -------- -------- ------ -------- -------- ------
Net sales $1,280.0 $1,170.9 9% $2,558.1 $2,437.6 5%
Cost of sales 787.2 746.9 1,619.0 1,596.9
Cost of sales -
impairment charges 2.7 - 2.7 -
Cost of sales -
product
registration and
recall matters 3.3 0.2 7.1 22.8
--- --- --- ----
Gross profit 486.8 423.8 15% 929.3 817.9 14%
% of sales 38.0% 36.2% 36.3% 33.6%
Operating expenses:
Selling, general
and administrative 239.0 206.9 16% 608.1 559.6 9%
Product registration
and recall matters 3.1 5.6 14.8 6.8
Impairment charges - 123.3 - 123.3
Other income, net (1.0) (5.4) (3.4) (9.6)
---- ---- ---- ----
Total operating
expenses 241.1 330.4 -27% 619.5 680.1 -9%
----- ----- ----- -----
Income from
operations 245.7 93.4 163% 309.8 137.8 125%
% of sales 19.2% 8.0% 12.1% 5.7%
Interest expense 13.7 22.1 45.9 64.6
---- ---- ---- ----
Income before taxes 232.0 71.3 263.9 73.2
Income tax expense 84.2 48.7 95.7 49.4
---- ---- ---- ----
Net income 147.8 22.6 168.2 23.8
===== ==== ===== ====
Basic income per
share (1) $2.27 $0.35 $2.59 $0.37
===== ===== ===== =====
Diluted income
per share (2) $2.23 $0.35 $2.56 $0.36
===== ===== ===== =====
Common shares
used in basic
income per share
calculation 65.0 64.6 64.9 64.4
==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income per
share calculation 66.1 65.3 65.8 65.5
==== ==== ==== ====
Results of operations
excluding impairment
of assets and product
registration and recall
charges:
Adjusted net income (4) $153.7 $130.7 18% $184.1 $151.6 21%
====== ====== ====== ======
Adjusted diluted
income per share (2)(4) $2.32 $2.00 16% $2.80 $2.31 21%
===== ===== ===== =====
Adjusted EBITDA (3)(4) $263.7 $234.6 12% $359.6 $327.7 10%
====== ====== ====== ======
THE SCOTTS MIRACLE-GRO COMPANY
Net Sales by Segment for the Three and Nine Months
Ended June 27, 2009 and June 28, 2008
(in millions)
(Unaudited)
Three Months Ended
------------------
June 27, June 28,
2009 2008 % Change
---- ---- --------
Global Consumer $1,077.2 $930.1 16%
Global Professional 75.4 98.7 -24%
Scotts LawnService(R) 79.0 87.4 -10%
Corporate & Other 48.4 54.7 -12%
---- ----
Consolidated $1,280.0 $1,170.9 9%
======== ========
Nine Months Ended
-----------------
June 27, June 28,
2009 2008 % Change
---- ---- --------
Global Consumer $2,093.2 $1,898.9 10%
Global Professional 215.4 260.6 -17%
Scotts LawnService(R) 150.3 157.7 -5%
Corporate & Other 99.2 120.4 -18%
---- -----
Consolidated $2,558.1 $2,437.6 5%
======== ========
THE SCOTTS MIRACLE-GRO COMPANY
Consolidated Balance Sheets
June 27, 2009, June 28, 2008 and September 30, 2008
(in millions)
(Unaudited)
June 27, June 28, September 30,
2009 2008 2008
---- ---- ----
ASSETS
Current assets
Cash and cash equivalents $149.2 $166.0 $84.7
Accounts receivable, net 779.0 796.2 406.4
Inventories, net 547.4 474.9 415.9
Prepaids and other current assets 137.8 153.3 137.9
----- ----- -----
Total current assets 1,613.4 1,590.4 1,044.9
Property, plant and equipment, net 335.9 355.8 344.1
Goodwill, net 374.9 386.7 377.7
Other intangible assets, net 364.7 377.1 367.2
Other assets 20.3 23.9 22.4
---- ---- ----
Total assets $2,709.2 $2,733.9 $2,156.3
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt $152.9 $292.1 $150.0
Accounts payable 269.4 295.1 207.6
Other current liabilities 536.0 443.8 320.5
----- ----- -----
Total current liabilities 958.3 1,031.0 678.1
Long-term debt 967.7 1,028.3 849.5
Other liabilities 181.2 174.8 192.0
----- ----- -----
Total liabilities 2,107.2 2,234.1 1,719.6
Shareholders' equity 602.0 499.8 436.7
----- ----- -----
Total liabilities and
shareholders' equity $2,709.2 $2,733.9 $2,156.3
======== ======== ========
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items for the Three
Months Ended June 27, 2009 and June 28, 2008
(in millions, except per share data)
(Unaudited)
Note: See Notes 3 and 4 to the Accompanying Footnotes on Page 11
Three Months Ended June 27, 2009
--------------------------------
Product
Registration
and Recall
As Reported Matters Impairment Adjusted
----------- ------------ ---------- --------
Net sales $1,280.0 $- $- $1,280.0
Cost of sales 787.2 - - 787.2
Cost of sales - impairment
charges 2.7 - 2.7 -
Cost of sales - product
registration and recall
matters 3.3 3.3 - -
--- --- --- ---
Gross profit 486.8 (3.3) (2.7) 492.8
% of sales 38.0% 38.5%
Operating expenses:
Selling, general and
administrative 239.0 - - 239.0
Product registration
and recall matters 3.1 3.1 - -
Impairment charges - - - -
Other income, net (1.0) - - (1.0)
---- --- --- ----
Total operating expenses 241.1 3.1 - 238.0
----- --- --- -----
Income from operations 245.7 (6.4) (2.7) 254.8
% of sales 19.2% 19.9%
Interest expense 13.7 - - 13.7
---- --- --- ----
Income before taxes 232.0 (6.4) (2.7) 241.1
Income tax expense 84.2 (2.3) (0.9) 87.4
---- ---- ---- ----
Net income $147.8 $(4.1) $(1.8) $153.7
====== ===== ===== ======
Basic income per share $2.27 $(0.06) $(0.03) $2.36
===== ====== ====== =====
Diluted income per share $2.23 $(0.06) $(0.03) $2.32
----- ------ ------ -----
Common shares used in basic
income per share calculation 65.0 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 66.1
==== ==== ==== ====
Net income $147.8
Income tax expense 84.2
Interest expense 13.7
Depreciation 12.0
Amortization, including
marketing fees 2.9
Product registration and
recall matters, non-cash
portion 0.4
Impairment of assets 2.7
---
Adjusted EBITDA $263.7
======
Three Months Ended June 28, 2008
--------------------------------
Product
Registration
and Recall
As Reported Matters Impairment Adjusted
----------- ------------ ---------- --------
Net sales $1,170.9 $(5.2) $- $1,176.1
Cost of sales 746.9 (0.8) - 747.7
Cost of sales - impairment
charges - - - -
Cost of sales - product
registration and recall
matters 0.2 0.2 - -
--- --- --- ---
Gross profit 423.8 (4.6) - 428.4
% of sales 36.2% 36.4%
Operating expenses:
Selling, general and
administrative 206.9 - - 206.9
Product registration and
recall matters 5.6 5.6 - -
Impairment charges 123.3 - 123.3 -
Other income, net (5.4) - - (5.4)
---- --- --- ----
Total operating expenses 330.4 5.6 123.3 201.5
----- --- ----- -----
Income from operations 93.4 (10.2) (123.3) 226.9
% of sales 8.0% 19.3%
Interest expense 22.1 - - 22.1
---- --- --- ----
Income before taxes 71.3 (10.2) (123.3) 204.8
Income tax expense 48.7 (4.0) (21.4) 74.1
---- ---- ----- ----
Net income $22.6 $(6.2) $(101.9) $130.7
===== ===== ======= ======
Basic income per share $0.35 $(0.10) $(1.58) $2.02
===== ====== ====== =====
Diluted income per share $0.35 $(0.09) $(1.56) $2.00
----- ------ ------ -----
Common shares used in basic
income per share calculation 64.6 64.6 64.6 64.6
==== ==== ==== ====
Common shares and potential
common shares used in diluted
income per share calculation 65.3 65.3 65.3 65.3
==== ==== ==== ====
Net income $22.6
Income tax expense 48.7
Interest expense 22.1
Depreciation 13.7
Amortization, including
marketing fees 4.6
Product registration and
recall matters,
non-cash portion (0.4)
Impairment of assets 123.3
-----
Adjusted EBITDA $234.6
======
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items for the Nine
Months Ended June 27, 2009 and June 28, 2008
(in millions, except per share data)
(Unaudited)
Note: See Notes 3 and 4 to the Accompanying Footnotes on Page 11
Nine Months Ended June 27, 2009
-------------------------------
Product
Registration
and Recall
As Reported Matters Impairment Adjusted
----------- ------------ ---------- --------
Net sales $2,558.1 $(0.3) $- $2,558.4
Cost of sales 1,619.0 (0.2) - 1,619.2
Cost of sales - impairment
charges 2.7 - 2.7 -
Cost of sales - product
registration and recall
matters 7.1 7.1 - -
--- --- --- ---
Gross profit 929.3 (7.2) (2.7) 939.2
% of sales 36.3% 36.7%
Operating expenses:
Selling, general and
administrative 608.1 - - 608.1
Product registration and
recall matters 14.8 14.8 - -
Impairment charges - - - -
Other income, net (3.4) - - (3.4)
---- --- --- ----
Total operating expenses 619.5 14.8 - 604.7
----- ---- --- -----
Income from operations 309.8 (22.0) (2.7) 334.5
% of sales 12.1% 13.1%
Interest expense 45.9 - - 45.9
---- --- --- ----
Income before taxes 263.9 (22.0) (2.7) 288.6
Income tax expense 95.7 (7.9) (0.9) 104.5
---- ---- ---- -----
Net income $168.2 $(14.1) $(1.8) $184.1
====== ====== ===== ======
Basic income per share $2.59 $(0.22) $(0.03) $2.84
===== ====== ====== =====
Diluted income per share $2.56 $(0.21) $(0.03) $2.80
----- ------ ------ -----
Common shares used in basic
income per share calculation 64.9 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 65.8
==== ==== ==== ====
Net income $168.2
Income tax expense 95.7
Interest expense 45.9
Depreciation 35.0
Amortization, including
marketing fees 9.5
Product registration and
recall matters, non-cash
portion 2.6
Impairment of assets 2.7
---
Adjusted EBITDA $359.6
======
Nine Months Ended June 28, 2008
-------------------------------
Product
Registration
and Recall
As Reported Matters Impairment Adjusted
----------- ------------ ---------- --------
Net sales $2,437.6 $(24.2) $- $2,461.8
Cost of sales 1,596.9 (12.8) - 1,609.7
Cost of sales - impairment
charges - - - -
Cost of sales - product
registration and recall
matters 22.8 22.8 - -
---- ---- --- ---
Gross profit 817.9 (34.2) - 852.1
% of sales 33.6% 34.6%
Operating expenses:
Selling, general and
administrative 559.6 - - 559.6
Product registration and
recall matters 6.8 6.8 - -
Impairment charges 123.3 - 123.3 -
Other income, net (9.6) - - (9.6)
---- --- --- ----
Total operating expenses 680.1 6.8 123.3 550.0
----- --- ----- -----
Income from operations 137.8 (41.0) (123.3) 302.1
% of sales 5.7% 12.3%
Interest expense 64.6 - - 64.6
---- --- --- ----
Income before taxes 73.2 (41.0) (123.3) 237.5
Income tax expense 49.4 (15.1) (21.4) 85.9
---- ----- ----- ----
Net income $23.8 $(25.9) $(101.9) $151.6
===== ====== ======= ======
Basic income per share $0.37 $(0.40) $(1.58) $2.35
===== ====== ====== =====
Diluted income per share $0.36 $(0.40) $(1.56) $2.31
----- ------ ------ -----
Common shares used in basic
income per share calculation 64.4 64.4 64.4 64.4
==== ==== ==== ====
Common shares and potential
common shares used in diluted
income per share calculation 65.5 65.5 65.5 65.5
==== ==== ==== ====
Net income $23.8
Income tax expense 49.4
Interest expense 64.6
Depreciation 40.1
Amortization, including
marketing fees 12.8
Product registration and
recall matters, non-cash
portion 13.7
Impairment of assets 123.3
-----
Adjusted EBITDA $327.7
======
THE SCOTTS MIRACLE-GRO COMPANY Footnotes to Preceding Financial Statements Results of Operations --------------------- (1) Basic income per common share is calculated by dividing net income by average common shares outstanding during the period. (2) Diluted income per share is calculated by dividing net income by the average common shares and dilutive potential common shares (common stock options, stock appreciation rights, restricted stock and restricted stock units) outstanding during the period. (3) "Adjusted EBITDA" is defined as net income before interest, taxes, depreciation and amortization as well as certain other items such as the impact of discontinued operations, 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 as an indicator of operating performance or to cash flow as a measure of liquidity. (4) The Reconciliation of non-GAAP Disclosure Items includes the following non-GAAP financial measures: Adjusted net income and adjusted diluted income per share - These measures exclude charges or credits relating to refinancings, impairments, restructurings, product registration and recall matters, 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 the disclosure of these non-GAAP financial measures provides useful information to investors or other users of the financial statements, such as lenders. SOURCE The Scotts Miracle-Gro Company http://www.scotts.com |
