SCOTTS MIRACLE GRO A 
By MARYSVILLE, Ohio, May 5, 2014 /PRNewswire/ -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's leading marketer of branded consumer lawn and garden products, today announced results for its fiscal second quarter ended March 29, 2014 that were driven by strong sell-in of its consumer products in both the U.S. and Europe.
Adjusted income from continuing operations increased 38 percent during the second quarter, driven by increased sales, continued margin expansion and strong control of operating expenses.
Net sales were $1.08 billion for the quarter, an increase of 7 percent compared to $1.01 billion a year ago, due to strong initial sell-in to retailers.
Fiscal year-to-date consumer purchases in the U.S. - as measured by point-of-sale data from the Company's largest retail partners - were slightly down through the end of April, below internal expectations, due primarily to poor weather and a delayed start to the season.
"It should come as no surprise that consumer activity was lighter than we had originally anticipated, but we have seen high levels of consumer purchases when the weather has cooperated," said Jim Hagedorn, chairman and chief executive officer. "We are pleased with the strong support we are seeing from our retail partners and glad to see a strong start to the season in Europe, where our business is currently trending ahead of our internal expectations.
"We remain optimistic about our prospects this season and continue to expect adjusted earnings per share of $3.05 to $3.20 for the full year."
Second Quarter Details
Sales in the Global Consumer segment increased 9 percent to $1.05 billion during the second quarter, compared to $962.8 million during the same quarter a year ago. Strong retailer support, pricing adjustments and the acquisition of the Tomcat business drove the increase.
Scotts LawnService sales were down 12 percent to $28.9 million in the second quarter, compared to $32.9 million a year ago, primarily due to a delay in the start of the spring season.
For the quarter, the adjusted company-wide gross margin rate was 40.1 percent, compared with 37.4 percent a year ago. The 270-basis-point improvement was primarily attributable to planned cost reductions, targeted pricing and increased sales volume due to strong sell-in to retailers. The increased sales volume drove favorable product mix and improved leverage on fixed costs.
Selling, general and administrative expenses (SG&A) increased $6 million to $212.2 million during the second quarter, compared to $206.7 million a year ago, in line with the Company's internal expectations.
The consolidated company-wide adjusted income from continuing operations before income taxes was $211.2 million during the second quarter, compared to $154.2 million a year ago. The operating income from the Global Consumer segment for the quarter increased 23 percent to $269.5 million, compared with $218.9 million a year ago. The Scotts LawnService segment reported operating loss of $20.3 million for the quarter, compared with a loss of $17.0 million during the same quarter a year ago.
Adjusted income from continuing operations for the second quarter increased to $136.7 million, or $2.17 per share, which excludes impairment, restructuring and other charges, as well as one-time costs related to financing. That compares with adjusted income of $99.3 million, or $1.59 per share, last year. On a GAAP basis, income from continuing operations was $125.7 million, or $2.00 per share, compared with $99.1 million, or $1.59 per share, a year ago.
Year-to-Date Details
Net sales for the first six months of fiscal 2014 were $1.27 billion, an increase of 6 percent from $1.20 billion a year ago. The year-over-year change was attributable to increased sales in the Global Consumer segment, primarily due to strong retailer support, targeted pricing and the acquisition of the Tomcat business. For the first six months of the year, Scotts LawnService sales were down 3 percent, primarily due to a delayed start to the season.
The adjusted company-wide gross margin rate for the first six months increased 290 basis points to 36.8 percent, compared to 33.9 percent a year ago, primarily due to planned cost reductions, targeted pricing and increased sales volume due to strong sell-in to retailers. The increased sales volume drove favorable product mix and improved leverage on fixed costs.
SG&A increased $6 million to $336.6 million for the first six months, in line with Company expectations.
Adjusted income from continuing operations was $71.1 million, or $1.13 per share, for the first six months of the year, compared to $30.8 million, or $0.49 per share, during the same period a year ago. Those results exclude impairment, restructuring and other charges, as well as one-time costs related to financing. Including those items, reported income from continuing operations for the first six months of fiscal 2014 was $59.9 million, or $0.95 per share, compared with $30.8 million, or $0.49 per share, a year ago.
Conference Call and Webcast Scheduled for 4:30 p.m. ET Today, May 5
The Company will discuss results during a webcast and conference call today at 4:30 p.m. Eastern Time. Conference call participants should call 1-888-359-3624 (Conference Code: 8255781). A live webcast of the call will be available on the investor relations section of the Company's website at http://investor.scotts.com. An archive of the webcast, as well as any accompanying financial information regarding any non-GAAP financial measures discussed by the Company during the call, will remain available for at least 12 months. In addition, a replay of the call can be heard by calling 1-888-203-1112. The replay will be available for 30 days.
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®, Fertiligene® and Substral®. For additional information, visit us at www.scotts.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 Six Months Ended
------------------ ----------------
Footnotes March 29, March 30, % Change March 29, March 30, % Change
2014 2013 2014 2013
---
Net sales $1,081.0 $1,007.9 7% $1,270.6 $1,203.0 6%
Cost of sales 647.2 630.6 802.9 795.1
Cost of sales -impairment,
restructuring and other - 0.1 - 0.1
--- --- --- ---
Gross profit 433.8 377.2 15% 467.7 407.8 15%
% of sales 40.1% 37.4% 36.8% 33.9%
Operating expenses:
Selling, general and
administrative 212.2 206.7 3% 336.6 330.8 2%
Impairment, restructuring and
other 6.1 0.1 6.4 (0.3)
Other income, net (1.6) (1.5) (2.7) (2.6)
---- ---- ---- ----
Income from operations 217.1 171.9 26% 127.4 79.9 59%
% of sales 20.1% 17.1% 10.0% 6.6%
Costs related to refinancing 10.7 - 10.7 -
Interest expense 12.0 17.9 25.9 31.1
---- ---- ---- ----
Income from continuing
operations before income taxes 194.4 154.0 26% 90.8 48.8 86%
Income tax expense from
continuing operations 68.7 54.9 30.9 18.0
---- ---- ---- ----
Income from continuing
operations 125.7 99.1 27% 59.9 30.8 94%
Income from
discontinued
operations, net of
tax (3) - 0.9 0.1 1.5
Net income $125.7 $100.0 $60.0 $32.3
====== ====== ===== =====
Basic income per
common share: (1)
Income from continuing
operations $2.03 $1.61 26% $0.97 $0.50 94%
Income from discontinued
operations - 0.01 - 0.02
Net income $2.03 $1.62 $0.97 $0.52
===== ===== ===== =====
Diluted income per
common share: (2)
Income from continuing
operations $2.00 $1.59 26% $0.95 $0.49 94%
Income from discontinued
operations - 0.01 - 0.02
--- ----
Net income $2.00 $1.60 $0.95 $0.51
===== ===== ===== =====
Common shares used in basic
income per share calculation 61.9 61.6 - % 62.0 61.5 1%
==== ==== ==== ====
Common shares and potential
common shares used in diluted
income per share calculation 62.9 62.4 1% 63.1 62.3 1%
==== ==== ==== ====
Non-GAAP results from
continuing operations:
Adjusted income from
continuing operations (4) $136.7 $99.3 38% $71.1 $30.8 131%
Adjusted diluted
income per share from
continuing operations (2) (4) $2.17 $1.59 36% $1.13 $0.49 131%
Adjusted EBITDA (3) (4) $233.3 $189.3 23% $159.7 $114.2 40%
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®. 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® 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 Six Months Ended
------------------ ----------------
March 29, March 30, % March 29, March 30, %
2014 2013 Change 2014 2013 Change
---- ---- ------ ---- ---- ------
Net Sales:
----------
Global Consumer $1,046.0 $962.8 9% $1,184.4 $1,105.4 7%
Scotts LawnService(R) 28.9 32.9 (12)% 75.2 77.7 (3)%
---- ---- ---- ----
Segment total 1,074.9 995.7 8% 1,259.6 1,183.1 6%
Corporate & Other 6.1 12.2 11.0 19.9
Consolidated $1,081.0 $1,007.9 7% $1,270.6 $1,203.0 6%
======== ======== ======== ========
Income (Loss) from Continuing
Operations before Income
Taxes:
-----------------------------
Global Consumer $269.5 $218.9 23% $202.1 $150.2 35%
Scotts LawnService(R) (20.3) (17.0) (19)% (17.7) (17.9) 1%
----- ----- ----- -----
Segment total 249.2 201.9 184.4 132.3
Corporate & Other (23.0) (27.3) (44.7) (47.6)
Intangible asset amortization (3.0) (2.5) (5.9) (5.0)
Impairment, restructuring and
other (6.1) (0.2) (6.4) 0.2
Costs related to refinancing (10.7) - (10.7) -
Interest expense (12.0) (17.9) (25.9) (31.1)
----- -----
Consolidated $194.4 $154.0 26% $90.8 $48.8 86%
====== ====== ===== =====
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Balance Sheets
(In millions)
March 29, March 30, September
30,
2014 2013 2013
---- ---- ----
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $152.7 $99.1 $129.8
Accounts receivable, net 1,088.8 966.6 313.3
Inventories 546.2 613.0 324.9
Prepaids and other current assets 149.9 158.0 113.0
----- ----- -----
Total current assets 1,937.6 1,836.7 881.0
Property, plant and equipment, net 443.6 417.8 422.3
Goodwill 333.3 314.5 315.1
Intangible assets, net 318.5 299.2 284.4
Other assets 38.2 28.7 34.4
---- ---- ----
Total assets $3,071.2 $2,896.9 $1,937.2
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt $278.6 $208.0 $92.4
Accounts payable 342.5 327.5 137.7
Other current liabilities 397.0 352.7 279.7
----- ----- -----
Total current liabilities 1,018.1 888.2 509.8
Long-term debt 1,145.3 1,163.0 478.1
Other liabilities 232.1 238.8 238.8
----- ----- -----
Total liabilities 2,395.5 2,290.0 1,226.7
Shareholders' equity 675.7 606.9 710.5
----- ----- -----
Total liabilities and shareholders' equity $3,071.2 $2,896.9 $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 March 29, 2014 Three Months Ended March 30, 2013
--------------------------------- ---------------------------------
As Impairment, Costs Adjusted As Impairment, Costs Adjusted
Restructuring Related to Reported Restructuring Related to
Reported and Other Refinancing and Other Refinancing
-------- --------- ----------- --------- -----------
Net sales $1,081.0 $ - $ - $1,081.0 $1,007.9 $ - $ - $1,007.9
Cost of sales 647.2 - - 647.2 630.6 - - 630.6
Cost of sales -
impairment,
restructuring and
other - - - - 0.1 0.1 - -
--- --- --- --- --- --- --- ---
Gross profit 433.8 - - 433.8 377.2 (0.1) - 377.3
% of sales 40.1% 40.1% 37.4% 37.4%
Operating expenses:
Selling, general and
administrative 212.2 - - 212.2 206.7 - - 206.7
Impairment,
restructuring and
other 6.1 6.1 - - 0.1 0.1 - -
Other income, net (1.6) - - (1.6) (1.5) - - (1.5)
---- --- --- ---- ---- --- --- ----
Income from
operations 217.1 (6.1) - 223.2 171.9 (0.2) - 172.1
% of sales 20.1% 20.6% 17.1% 17.1%
Costs related to
refinancing 10.7 10.7 - - - -
Interest expense 12.0 - - 12.0 17.9 - - 17.9
---- --- --- ---- ---- --- --- ----
Income from
continuing
operations before
income taxes 194.4 (6.1) (10.7) 211.2 154.0 (0.2) - 154.2
Income tax expense
(benefit) from
continuing
operations 68.7 (2.1) (3.7) 74.5 54.9 - - 54.9
---- ---- ---- ---- ---- --- --- ----
Income from
continuing
operations $125.7 $(4.0) $(7.0) $136.7 $99.1 $(0.2) $ - $99.3
====== ===== ===== ====== ===== ===== === === =====
Basic income per
share from
continuing
operations $2.03 $(0.07) $(0.11) $2.21 $1.61 $ - $ - $1.61
===== ====== ====== ===== ===== === === === === =====
Diluted income per
share from
continuing
operations $2.00 $(0.06) $(0.11) $2.17 $1.59 $ - $ - $1.59
===== ====== ====== ===== ===== === === === === =====
Common shares used
in basic income per
share calculation 61.9 61.9 61.9 61.9 61.6 61.6 61.6 61.6
==== ==== ==== ==== ==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income per
share calculation 62.9 62.9 62.9 62.9 62.4 62.4 62.4 62.4
==== ==== ==== ==== ==== ==== ==== ====
Calculation of Adjusted EBITDA:
Income from
continuing
operations $125.7 $99.1
Income tax expense
from continuing
operations 68.7 54.9
Income from
discontinued
operations, net of
tax - 0.9
Income tax expense
from discontinued
operations 0.4 0.3
Costs related to
refinancing 10.7 -
Interest expense 12.0 17.9
Depreciation 12.6 13.8
Amortization
(including Roundup) 3.2 2.7
Impairment,
restructuring and
other - -
Mark-to-market
adjustments on
derivatives - (0.3)
Adjusted EBITDA $233.3 $189.3
====== ======
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)
Six Months Ended March 29, 2014 Six Months Ended March 30, 2013
------------------------------- -------------------------------
As Impairment, Costs Adjusted As Impairment, Costs Adjusted
Reported Restructuring Related to Reported Restructuring Related to
and Other Refinancing and Other Refinancing
--------- --- --------- ---
Net sales $1,270.6 $ - $ - $1,270.6 $1,203.0 $ - $ - $1,203.0
Cost of sales 802.9 - - 802.9 795.1 - - 795.1
Cost of sales -
impairment,
restructuring and
other - - - - 0.1 0.1 - -
--- --- --- --- --- --- --- ---
Gross profit 467.7 - - 467.7 407.8 (0.1) - 407.9
% of sales 36.8% 36.8% 33.9% 33.9%
Operating expenses:
Selling, general and
administrative 336.6 - - 336.6 330.8 - - 330.8
Impairment,
restructuring and
other 6.4 6.4 - - (0.3) (0.3) - -
Other income, net (2.7) - - (2.7) (2.6) - - (2.6)
---- --- --- ---- ---- --- --- ----
Income from
operations 127.4 (6.4) - 133.8 79.9 0.2 - 79.7
% of sales 10.0% 10.5% 6.6% 6.6%
Costs related to
refinancing 10.7 10.7 - - - - -
Interest expense 25.9 - 25.9 31.1 - - 31.1
---- --- ---- ---- --- --- ----
Income from
continuing
operations before
income taxes 90.8 (6.4) (10.7) 107.9 48.8 0.2 - 48.6
Income tax expense
from continuing
operations 30.9 (2.2) (3.7) 36.8 18.0 0.2 - 17.8
---- ---- ---- ---- ---- --- --- ----
Income from
continuing
operations $59.9 $(4.2) $(7.0) $71.1 $30.8 $ - $ - $30.8
===== ===== ===== ===== ===== === === === === =====
Basic income per
share from
continuing
operations $0.97 $(0.07) $(0.11) $1.15 $0.50 $ - $ - $0.50
===== ====== ====== ===== ===== === === === === =====
Diluted income per
share from
continuing
operations $0.95 $(0.07) $(0.11) $1.13 $0.49 $ - $ - $0.49
===== ====== ====== ===== ===== === === === === =====
Common shares used
in basic income per
share calculation 62.0 62.0 62.0 62.0 61.5 61.5 61.5 61.5
==== ==== ==== ==== ==== ==== ==== ====
Common shares and
potential common
shares used in
diluted income per
share calculation 63.1 63.1 63.1 63.1 62.3 62.3 62.3 62.3
==== ==== ==== ==== ==== ==== ==== ====
Calculation of Adjusted EBITDA:
Income from
continuing
operations $59.9 $30.8
Income tax expense
from continuing
operations 30.9 18.0
Income from
discontinued
operations, net of
tax 0.1 1.5
Income tax expense
from discontinued
operations 0.5 0.7
Costs related to
refinancing 10.7 -
Interest expense 25.9 31.1
Depreciation 25.4 27.4
Amortization
(including Roundup) 6.3 5.4
Impairment,
restructuring and
other - (0.4)
Mark-to-market
adjustments on
derivatives - (0.3)
Adjusted EBITDA $159.7 $114.2
====== ======
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANY
Footnotes to Preceding Financial
Statements
(1) Basic income per
common share amounts
is calculated by
dividing income from
continuing
operations, income
from discontinued
operations and net
income by the
weighted average
number of common
shares outstanding
during the period.
--- ---------------------
(2) Diluted income per
common share amounts
are calculated by
dividing income from
continuing
operations, income
from discontinued
operations and net
income 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 from
continuing operations
and adjusted diluted
income per share 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
March 29, 2014) and
an interest coverage
ratio (minimum of
3.50 for the twelve
months ended March
29, 2014). The
Company was in
compliance with the
terms of all debt
covenants at March
29, 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
