SCOTTS MIRACLE GRO A MARYSVILLE, Ohio, Nov. 5, 2014 /PRNewswire/ -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's leading marketer of branded consumer lawn and garden products, today announced that fiscal 2014 adjusted earnings improved 19 percent driven by the Company's strong second half of the lawn and garden season, with continued momentum driving a 5 percent improvement in the fourth quarter.
Adjusted income from continuing operations for the year ended September 30, 2014 was $206.3 million, or $3.29 per share, compared with $172.6 million, or $2.76 per share a year ago. Results exclude costs related to impairment, restructuring and other charges, and one-time costs related to financing. Including those items, reported income from continuing operations for fiscal 2014 was $165.7 million, or $2.64 per share, compared with $159.4 million, or $2.55 per share, a year ago.
"The strong results we delivered in fiscal 2014 - in the face of a weather-delayed season - speak to the strength of our team, the resilience of the lawn and garden category and the confidence that our consumers and retail partners have in our brands," said Jim Hagedorn, chairman and chief executive officer. "In addition to over-delivering against the earnings guidance we provided, we also returned about $350 million to shareholders in 2014 through recurring and one-time dividend payments and share purchases.
"We are confident in our business plans for 2015 and expect sales for the year to increase 4 to 5 percent resulting in adjusted earnings per share in the range of $3.40 to $3.60."
Fourth-Quarter 2014 Details
Company-wide net sales increased 5 percent in the fourth quarter to $454.3 million, compared with $433.6 million during the same quarter a year ago.
Global Consumer segment sales increased 5 percent in the fourth quarter to $354.8 million. Sales in the U.S. increased 3 percent during the quarter. Outside the U.S., sales increased 13 percent, excluding the impact of foreign exchange rates. Scotts LawnService sales increased 5 percent to $95.0 million in the fourth quarter, compared to $90.2 million during the same quarter a year ago.
The company-wide adjusted gross margin rate was 30.9 percent during the fourth quarter, compared with 30.1 percent during the same quarter a year ago. The year-over-year improvement was due to targeted pricing and material cost reductions, partially offset by higher distribution costs.
SG&A in the fourth quarter increased $15.3 million to $154.9 million, compared with $139.6 million a year ago. The year-over-year difference was primarily due to increased marketing efforts for the Tomcat brand, costs related to the Company's acquisitions of Fafard & Brothers in Quebec and UK-based Solus Garden & Leisure, as well as increased investments in the Hawthorne Gardening Company, a wholly-owned subsidiary focused on indoor and urban gardening.
The operating loss for the Global Consumer segment was $7.8 million during the fourth quarter, compared with a loss of $6.9 million a year ago. Operating income for the Scotts LawnService segment increased 12 percent during the quarter to $27.2 million, compared with $24.3 million a year ago. On a company-wide basis, the operating loss improved to $22.3 million from a loss of $29.7 million a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter were $0.3 million, compared with $9.6 million a year ago.
Adjusted loss from continuing operations was $10.8 million in the fourth quarter, or $0.18 per share, compared with a loss of $11.7 million, or $0.19 per share, a year ago. Those results include a one-time $0.03 gain on the Company's investment in AeroGrow International, however they exclude impairment, restructuring and other charges. Including those items, reported loss from continuing operations for the fourth quarter was $14.9 million in fiscal 2014, or $0.24 per share, compared with a loss of $19.2 million, or $0.31 per share, a year ago.
Full-Year 2014 Details
Company-wide net sales increased 2 percent in 2014 to $2.84 billion, compared to $2.77 billion a year ago. Global Consumer sales increased 3 percent to $2.55 billion in 2014, compared to $2.48 billion a year ago. Scotts LawnService sales increased 2 percent to $263.0 million for the year, compared to $257.8 million a year ago.
On an adjusted basis, the company-wide gross margin rate increased 100 basis points to 36.3 percent for the year. The improvement was attributable primarily to targeted pricing and material cost reductions, partially offset by higher-than-expected distribution costs and unfavorable product mix.
SG&A increased 3 percent to $680.5 million, compared to $659.6 million a year ago. The year-over-year increase was driven by increased marketing and selling in the Global Consumer and LawnService segments, costs associated with the Hawthorne Gardening Company, and diligence and integration costs associated with the recently announced acquisitions of Solus and Fafard.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $412.4 million, an increase of 6 percent, compared to $390.5 million a year ago.
For the full year, the Company recorded $51 million in impairment, restructuring and other charges, with $15 million attributed to severance costs associated with the Company's restructuring plans.
The Global Consumer segment reported a 9 percent increase in operating income to $438.8 million for fiscal 2014, compared to $403.7 million a year ago. Scotts LawnService reported a 5 percent increase in operating income to $30.2 million during the year, compared to $28.7 million in fiscal 2013. Company-wide operating income improved to $256.6 million from $251.3 million.
Cash flow from operations was $240.2 million in 2014, slightly below the Company's original projections for the year, primarily due to higher inventory levels resulting from sales volume shortfalls earlier in the lawn and garden season.
2015 Outlook
The Company expects company-wide net sales to increase by approximately 4 to 5 percent in fiscal 2015 on increased U.S. unit volume, the recent acquisitions of Action Pest Control, Solus and Fafard, and the consolidation of AeroGrow, as well as the continued organic growth of its LawnService business.
Total company sales growth is expected to result in adjusted earnings from continuing operations in the range of $3.40 to $3.60 per share in fiscal 2015. Cash flow from operations is expected to range from $275 million to $300 million in 2015.
The Company will provide a more detailed commentary on its expectations for fiscal 2015 in its conference call later today.
Conference Call and Webcast Scheduled for 9:00 a.m. ET Today, Nov. 5
The Company will discuss its fiscal fourth quarter and full year 2014 results during a webcast and conference call today at 9:00 a.m. ET. Conference call participants should call 888-298-3451 (Conference Code: 3252177). A replay of the call can be heard by calling 888-203-1112. The replay will be available for 30 days. The live webcast is available at 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 website for 12 months.
About ScottsMiracle-Gro
With more than $2.8 billion in worldwide sales, The Scotts Miracle-Gro Company is the world's largest marketer of branded consumer products for lawn and garden care. The Company's brands are the most recognized in the industry. In the U.S., the Company's Scotts®, Miracle-Gro® and Ortho® brands are market-leading in their categories, as is the consumer Roundup® 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®, the second largest residential lawn care service business. In Europe, the Company's brands include Weedol®, Pathclear®, Evergreen®, Levington®, Miracle-Gro®, KB®, Fertiligène® and Substral®. For additional information, visit us at www.scottsmiraclegro.com.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, 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 statements" within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as "guidance," "outlook," "projected," "believe," "target," "predict," "estimate," "forecast," "strategy," "may," "goal," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will," "should" or other similar words or phrases. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
-- Compliance with environmental and other public health regulations could
increase the Company's costs of doing business or limit the Company's
ability to market all of its products;
-- Increases in the prices of raw materials and fuel costs could adversely
affect the Company's results of operations;
-- The highly competitive nature of the Company's markets could adversely
affect its ability to maintain or grow revenues;
-- Because of the concentration of the Company's sales to a small number of
retail customers, the loss of one or more of, or significant reduction
in orders from, its top customers could adversely affect the Company's
financial results;
-- Adverse weather conditions could adversely impact financial results;
-- The Company's international operations make the Company susceptible to
fluctuations in currency exchange rates and to other costs and risks
associated with international regulation;
-- The Company may not be able to adequately protect its intellectual
property and other proprietary rights that are material to the Company's
business;
-- If Monsanto Company were to terminate the Marketing Agreement for
consumer Roundup products, the Company would lose a substantial source
of future earnings and overhead expense absorption;
-- Hagedorn Partnership, L.P. beneficially owns approximately 27% of the
Company's common shares and can significantly influence decisions that
require the approval of shareholders;
-- The Company may pursue acquisitions, dispositions, investments,
dividends, share repurchases and/or other corporate transactions that it
believes will maximize equity returns of its shareholders but may
involve risks.
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 Company disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Statement of Operations
(In millions, except for per common share data)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------ -------------------
Footnotes September 30, September 30, % Change September 30, September 30, % Change
2014 2013 2014 2013
---- ---- ---- ----
Net sales $454.3 $433.6 5% $2,841.3 $2,773.7 2%
Cost of sales 313.9 302.9 1,809.9 1,793.3
Cost of sales -impairment,
restructuring and other - 0.6 - 2.2
--- --- --- ---
Gross profit 140.4 130.1 8% 1,031.4 978.2 5%
% of sales 30.9% 30.0% 36.3% 35.3%
Operating expenses:
Selling, general and
administrative 154.9 139.6 11% 680.5 659.6 3%
Impairment, restructuring and
other 5.4 11.4 51.0 18.1
Other income, net (6.2) (2.5) (14.7) (10.0)
---- ---- ----- -----
Income (loss) from operations (13.7) (18.4) 26% 314.6 310.5 1%
% of sales (3.0)% (4.2)% 11.1% 11.2%
Costs related to refinancing - - 10.7 -
Interest expense 8.6 11.3 47.3 59.2
--- ---- ---- ----
Income (loss) from continuing
operations before income taxes (22.3) (29.7) 25% 256.6 251.3 2%
Income tax expense (benefit)
from continuing operations (7.1) (10.5) 91.2 91.9
---- ----- ---- ----
Income (loss) from continuing
operations (15.2) (19.2) 21% 165.4 159.4 4%
Income (loss) from discontinued
operations, net of tax (3) (0.3) (0.2) 0.8 1.7
Net income (loss) $(15.5) $(19.4) $166.2 $161.1
------ ------ ------ ------
Net loss attributable to
noncontrolling interest 0.3 - 0.3 -
--- --- --- ---
Net income (loss) attributable
to controlling interest $(15.2) $(19.4) $166.5 $161.1
====== ====== ====== ======
Basic income (loss) per common
share: (1)
Income (loss) from continuing
operations $(0.24) $(0.31) 23% $2.69 $2.58 4%
Income from discontinued
operations - - 0.01 0.03
Net income (loss) $(0.24) $(0.31) $2.70 $2.61
====== ====== ===== =====
Diluted income (loss) per common
share: (2)
Income (loss) from continuing
operations $(0.24) $(0.31) 23% $2.64 $2.55 4%
Income from discontinued
operations - - 0.01 0.02
--- ---
Net income (loss) $(0.24) $(0.31) $2.65 $2.57
====== ====== ===== =====
Common shares used in basic
income per share calculation 61.0 62.0 (2)% 61.6 61.7 - %
==== ==== ==== ====
Common shares and potential
common shares used in diluted
income per share calculation 61.0 62.0 (2)% 62.7 62.6 - %
==== ==== ==== ====
Non-GAAP results from
continuing operations:
Adjusted income (loss) from
continuing operations (4) $(10.8) $(11.7) 8% $206.3 $172.6 20%
====== ====== ====== ======
Adjusted diluted income (loss)
per share from continuing
operations (2) (4) $(0.18) $(0.19) 5% $3.29 $2.76 19%
====== ====== ===== =====
Adjusted EBITDA (3) (4) $0.3 $9.6 (97)% $412.4 $390.5 6%
==== ==== ====== ======
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANY
Net Sales and Income (Loss) from Continuing Operations before Income Taxes by Segment
(In millions)
(Unaudited)
The Company is divided into the following reportable segments: Global Consumer and Scotts LawnService(R). This division of reportable segments is consistent with how the segments report to, and are managed by, the chief operating decision maker of the Company.
Segment performance is evaluated based on several factors, including income (loss) from continuing operations before amortization, impairment, restructuring and other charges, which is not a generally accepted accounting principle ("GAAP") measure. Senior management of the Company uses this measure of operating profit
(loss) to evaluate segment performance because we believe this measure is the most indicative of performance trends and the overall earnings potential of each segment.
Corporate & Other consists of revenues and expenses associated with the Company's supply agreements with Israel Chemicals Ltd. and the amortization related to the Roundup(R) Marketing Agreement, as well as corporate, general and administrative expenses and certain other income/expense items not allocated to the business
segments.
Three Months Ended Twelve Months Ended
------------------ -------------------
September September % Change September September % Change
30, 30, 30, 30,
2014 2013 2014 2013
---- ---- ---- ----
Net Sales:
----------
Global Consumer $354.8 $338.1 5% $2,552.0 $2,484.7 3%
Scotts LawnService(R) 95.0 90.2 5% 263.0 257.8 2%
---- ---- ----- -----
Segment total 449.8 428.3 5% 2,815.0 2,742.5 3%
Corporate & Other 4.5 5.3 26.3 31.2
Consolidated $454.3 $433.6 5% $2,841.3 $2,773.7 2%
====== ====== ======== ========
Income (Loss) from Continuing Operations
before Income Taxes:
----------------------------------------
Global Consumer $(7.8) $(6.9) (13)% $438.8 $403.7 9%
Scotts LawnService(R) 27.2 24.3 12% 30.2 28.7 5%
---- ---- ---- ----
Segment total 19.4 17.4 469.0 432.4
Corporate & Other (24.3) (20.9) (90.4) (91.2)
Intangible asset
amortization (3.4) (2.9) (13.0) (10.4)
Impairment, restructuring
and other (5.4) (12.0) (51.0) (20.3)
Costs related to refinancing - - (10.7) -
Interest expense (8.6) (11.3) (47.3) (59.2)
Consolidated $(22.3) $(29.7) 25% $256.6 $251.3 2%
====== ====== ====== ======
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Balance Sheets
(In millions)
September 30, September 30,
2014 2013
---- ----
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $89.3 $129.8
Accounts receivable, net 337.7 313.3
Inventories 385.1 324.9
Prepaids and other current assets 122.9 113.0
----- -----
Total current assets 935.0 881.0
Property, plant and equipment, net 437.0 422.3
Goodwill 353.3 315.1
Intangible assets, net 300.3 284.4
Other assets 32.7 34.4
---- ----
Total assets $2,058.3 $1,937.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt $91.9 $92.4
Accounts payable 193.3 137.7
Other current liabilities 259.5 279.7
----- -----
Total current liabilities 544.7 509.8
Long-term debt 692.4 478.1
Other liabilities 254.0 238.8
----- -----
Total liabilities 1,491.1 1,226.7
Shareholders' equity 567.2 710.5
----- -----
Total liabilities and shareholders' equity $2,058.3 $1,937.2
======== ========
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non- GAAP Disclosure Items (4)
(In millions, except per common share data)
(Unaudited)
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
As Impairment, Adjusted As Reported Impairment,
Restructuring and Restructuring and
Other Other Adjusted
Reported
--------
Net sales $454.3 $ - $454.3 $433.6 $ - $433.6
Cost of sales 313.9 - 313.9 302.9 - 302.9
Cost of sales -
impairment,
restructuring and
other - - - 0.6 0.6 -
--- --- --- --- --- ---
Gross profit 140.4 - 140.4 130.1 (0.6) 130.7
% of sales 30.9% 30.9% 30.0% 30.1%
Operating expenses:
Selling, general and
administrative 154.9 - 154.9 139.6 - 139.6
Impairment,
restructuring and
other 5.4 5.4 - 11.4 11.4 -
Other income, net (6.2) - (6.2) (2.5) - (2.5)
---- --- ---- ---- --- ----
Loss from operations (13.7) (5.4) (8.3) (18.4) (12.0) (6.4)
% of sales (3.0)% (1.8)% (4.2)% (1.5)%
Costs related to
refinancing - - - - - -
Interest expense 8.6 - 8.6 11.3 - 11.3
--- --- --- ---- --- ----
Loss from continuing
operations before
income taxes (22.3) (5.4) (16.9) (29.7) (12.0) (17.7)
Income tax benefit
from continuing
operations (7.1) (1.3) (5.8) (10.5) (4.5) (6.0)
---- ---- ---- ----- ---- ----
Loss from continuing
operations (15.2) (4.1) (11.1) (19.2) (7.5) (11.7)
Loss attributable to
noncontrolling
interest 0.3 - 0.3 - - -
--- --- --- --- --- ---
Loss attributable to
controlling interest
from continuing
operations $(14.9) $(4.1) $(10.8) $(19.2) $(7.5) $(11.7)
====== ===== ====== ====== ===== ======
Basic loss per share
from continuing
operations $(0.24) $(0.06) $(0.18) $(0.31) $(0.12) $(0.19)
------ ------ ------ ------ ------ ------
Diluted loss per share
from continuing
operations $(0.24) $(0.06) $(0.18) $(0.31) $(0.12) $(0.19)
====== ====== ====== ====== ====== ======
Common shares used in
basic income per
share calculation 61.0 61.0 61.0 62.0 62.0 62.0
==== ==== ==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income per
share calculation 61.0 61.0 61.0 62.0 62.0 62.0
==== ==== ==== ==== ==== ====
Calculation of Adjusted EBITDA:
Loss from continuing
operations $(15.2) $(19.2)
Income tax benefit
from continuing
operations (7.1) (10.5)
Loss from discontinued
operations, net of
tax (0.3) (0.2)
Income tax benefit
from discontinued
operations (0.1) (0.7)
Costs related to
refinancing - -
Interest expense 8.6 11.3
Depreciation 12.8 13.9
Amortization
(including Roundup) 3.6 3.1
Gain on investment of
unconsolidated
affiliate (3.3) -
Impairment,
restructuring and
other - 11.6
Mark-to-market
adjustments on
derivatives 1.3 0.3
Adjusted EBITDA $0.3 $9.6
==== ====
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non- GAAP Disclosure Items (4)
(In millions, except per common share data)
(Unaudited)
Twelve Months Ended September 30, 2014 Twelve Months Ended September 30, 2013
-------------------------------------- --------------------------------------
As Reported Impairment, Costs Related to Adjusted As Reported Impairment,
Restructuring Refinancing Restructuring
and Other and Other Adjusted
----------- -------------- ---------------- -------- ----------- -------------- --------
Net sales $2,841.3 $ - $ - $2,841.3 $2,773.7 $ - $2,773.7
Cost of sales 1,809.9 - - 1,809.9 1,793.3 - 1,793.3
Cost of sales -
impairment,
restructuring and
other - - - - 2.2 2.2 -
--- --- --- --- --- --- ---
Gross profit 1,031.4 - - 1,031.4 978.2 (2.2) 980.4
% of sales 36.3% 36.3% 35.3% 35.3%
Operating expenses:
Selling, general and
administrative 680.5 - - 680.5 659.6 - 659.6
Impairment,
restructuring and
other 51.0 51.0 - - 18.1 18.1 -
Other income, net (14.7) - - (14.7) (10.0) - (10.0)
----- --- --- ----- ----- --- -----
Income from operations 314.6 (51.0) - 365.6 310.5 (20.3) 330.8
% of sales 11.1% 12.9% 11.2% 11.9%
Costs related to
refinancing 10.7 - 10.7 - - - -
Interest expense 47.3 - - 47.3 59.2 - 59.2
---- --- --- ---- ---- --- ----
Income from continuing
operations before
income taxes 256.6 (51.0) (10.7) 318.3 251.3 (20.3) 271.6
Income tax expense
from continuing
operations 91.2 (17.4) (3.7) 112.3 91.9 (7.1) 99.0
---- ----- ---- ----- ---- ---- ----
Income from continuing
operations 165.4 (33.6) (7.0) 206.0 159.4 (13.2) 172.6
Loss attributable to
noncontrolling
interest 0.3 - - 0.3 - - -
Income attributable to
controlling interest
from continuing
operations $165.7 $(33.6) $(7.0) $206.3 $159.4 $(13.2) $172.6
====== ====== ===== ====== ====== ====== ======
Basic income per share
from continuing
operations $2.69 $(0.55) $(0.11) $3.35 $2.58 $(0.22) $2.80
===== ====== ====== ===== ===== ====== =====
Diluted income per
share from continuing
operations $2.64 $(0.54) $(0.11) $3.29 $2.55 $(0.21) $2.76
===== ====== ====== ===== ===== ====== =====
Common shares used in
basic income per
share calculation 61.6 61.6 61.6 61.6 61.7 61.7 61.7
==== ==== ==== ==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income per
share calculation 62.7 62.7 62.7 62.7 62.6 62.6 62.6
==== ==== ==== ==== ==== ==== ====
Calculation of Adjusted EBITDA:
Income from continuing
operations $165.4 $159.4
Income tax expense
from continuing
operations 91.2 91.9
Income from
discontinued
operations, net of
tax 0.8 1.7
Income tax expense
from discontinued
operations 0.9 0.9
Costs related to
refinancing 10.7 -
Interest expense 47.3 59.2
Depreciation 50.6 54.7
Amortization
(including Roundup) 13.8 11.2
Gain on investment of
unconsolidated
affiliate (3.3) -
Impairment,
restructuring and
other 33.7 11.2
Mark-to-market
adjustments on
derivatives 1.3 0.3
Adjusted EBITDA $412.4 $390.5
====== ======
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANY
Footnotes to Preceding Financial
Statements
(1) Basic income (loss)
per common share
amounts are
calculated by
dividing income
(loss) from
continuing
operations, income
(loss) from
discontinued
operations and net
income (loss)
attributable to
controlling interest
by the weighted
average number of
common shares
outstanding during
the period.
--- --------------------
(2) Diluted income (loss)
per common share
amounts are
calculated by
dividing income
(loss) from
continuing
operations, income
(loss) from
discontinued
operations and net
income (loss)
attributable to
controlling interest
by the weighted
average number of
common shares, plus
all potential
dilutive securities
(common stock
options, stock
appreciation rights,
performance shares,
performance units,
restricted stock and
restricted stock
units) outstanding
during the period.
--- ---------------------
(3) In the second quarter
of fiscal 2014, the
Company completed
the sale of its Wild
Bird Food business.
As a result,
effective in its
second quarter of
fiscal 2014, the
Company classified
its results of
operations for all
periods presented to
reflect the Wild
Bird Food business
as a discontinued
operation.
--- ---------------------
(4) The Reconciliation of
Non-GAAP Disclosure
Items includes the
following non-GAAP
financial measures:
Adjusted income
attributable to
controlling interest
from continuing
operations and
adjusted diluted
income per share
attributable to
controlling interest
from continuing
operations -These
measures exclude
charges or credits
relating to
impairments,
restructurings,
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 -
This measure is
calculated as net
income (loss) 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. We believe
this measure
provides additional
information for
determining our
ability to meet debt
service
requirements. The
presentation of
adjusted EBITDA
herein is intended
to be consistent
with the calculation
of that measure as
required by our
borrowing
arrangements, and
used to calculate a
leverage ratio
(maximum of 4.00 at
September 30, 2014)
and an interest
coverage ratio
(minimum of 3.50 for
the twelve months
ended September 30,
2014). The Company
was in compliance
with the terms of
all debt covenants
at September 30,
2014.
The Company reports
its financial
results in
accordance with U.S.
generally accepted
accounting
principles (GAAP).
However, management
believes that
certain non-GAAP
financial measures
used in managing the
business may provide
users of this
financial
information
additional
meaningful
comparison between
current results and
results in prior
operating periods.
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. Non-GAAP
financial measures
should be viewed in
addition to, and not
as an alternative
for, the Company's
reported results
prepared in
accordance with
GAAP.
--------------------
SOURCE The Scotts Miracle-Gro Company
