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Scotts Miracle-Gro Co : ScottsMiracle-Gro Announces Second Quarter Results; Strong Start to Lawn & Garden Season Leads to Sales of $1.17 Billion

05/08/2012 | 07:05am US/Eastern
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MARYSVILLE, Ohio, May 8, 2012 /PRNewswire-FirstCall/ -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's largest marketer of branded consumer lawn and garden products, announced today that a record level of consumer purchases in March led to a 4 percent improvement in company-wide sales in the second quarter to $1.17 billion. Adjusted net income from continuing operations in the quarter was $133.2 million, or $2.15 per share.

Entering May, consumer purchases of the Company's products at its largest retail partners in the U.S. were up 8 percent, with growth in 45 states, all major retail channels and nearly all product categories.

"We are well positioned as we conclude the peak weeks of the lawn fertilizer season and move into the peak of gardening activity," said Jim Hagedorn, chairman and chief executive officer. "We have seen strong consumer engagement across the U.S. whenever the weather has cooperated as evidenced by the 20 percent increase in consumer purchases for the second quarter. Entering May, consumer purchases are up 8 percent, an outstanding result with growth and market share gains in nearly every category and region.

"I'm pleased that we are on track to deliver on the goals we set forth at the beginning of the year - to grow the industry and gain market share by leveraging the strengths of our industry-leading brands and in-store sales force, as well as our world-class supply chain. We remain confident in our guidance for full year sales growth of 6 to 8 percent and earnings per share of $2.65 to $2.85."

SECOND QUARTER DETAILS
Sales in the Company's largest segment, Global Consumer, increased 3 percent from last year to $1.12 billion. Sales in the U.S. business increased 3 percent while sales in the International business increased 5 percent, or 8 percent excluding the impact of foreign exchange rates. Due to planned increases in advertising spending, as well as lower gross margin rates, principally related to higher product costs, operating income for Global Consumer was $275.2 million, compared with $299.0 million for the same period a year ago.

Scotts LawnService reported a 10 percent increase in sales to $35.9 million. The operating loss in the quarter was $12.9 million, a 15 percent improvement from a year earlier. Scotts LawnService historically earns all of its profits in the second half of the fiscal year.

For the quarter, company-wide adjusted gross margin rate was 39.5 percent compared with 41.1 percent a year earlier. The decline was expected due to higher product costs and negative mix, both of which were partially offset by pricing of less than 1 percent.

"While the gross margin rate in the quarter was consistent with our expectations, we are closely monitoring recent trends in material and distribution costs, product mix and trade promotions," said Dave Evans, executive vice president and chief financial officer. "Continued negative trends in any of these areas increase the likelihood that gross margin rate could fall below the low end of the range that we outlined earlier this year."

Selling, general and administrative expenses (SG&A) in the quarter were $237.0 million, compared with $216.2 million, with the increase related to advertising spending.

Adjusted income from continuing operations was $133.2 million, or $2.15 per share, compared with $150.3 million, or $2.22 per share for the same period a year ago. Those results exclude the Company's Global Professional business, the sale of which was completed during the second quarter of 2011 and which is reflected in discontinued operations. Adjusted results also exclude charges related to product registration and recall matters, including adjustments to reserves for potential fines and penalties. They also exclude impairment, restructuring and other charges, incurred primarily as a result of issues related to the commercialization of products including the active ingredient MAT 28. These were non-cash charges. Including those items, reported income from continuing operations was $127.2 million, or $2.05 per share, compared with $148.6 million, or $2.20 per share last year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $236.7 million, compared with $267.3 million a year ago.

YEAR-TO-DATE DETAILS
Company-wide net sales through the first six months were $1.38 billion, a 2 percent increase from a year ago. Foreign exchange rates negatively impacted sales growth by 50 basis points. Sales for Global Consumer were essentially flat at $1.27 billion and operating income was $205.8 million, compared with $243.9 million. Scotts LawnService sales increased 5 percent to $73.5 million. The operating loss for the segment was $17.5 million, an improvement of 11 percent from a loss of $19.7 million a year earlier.

For the first six months, company-wide adjusted gross margin rate was 35.2 percent compared with 37.8 percent in the same period last year. SG&A was flat at $360.0 million.

Adjusted EBITDA in the first six months was $152.1 million versus $192.3 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 as well as impairment, restructuring and other changes - was $61.1 million, or $0.99 per share, compared with $84.7 million, or $1.25 per share, a year earlier. Reported income from continuing operations was $53.3 million, or $0.86 per share, compared with $81.9 million, or $1.21 per share, for the same period last year.

The Company will discuss its second quarter results during a Webcast and conference call at 9 a.m. Eastern Time today. To participate in the conference call, please call 1-866-682-3515 (Conference ID: 71971861). A replay of the call can be heard by calling 1-855-859-2056. A live Webcast of the call and the press release will be available on the Investor Relations section of the Company's 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. 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:

    --  The ongoing governmental investigations regarding the Company's
        compliance with the Federal Insecticide, Fungicide, and Rodenticide Act
        of 1947, as amended, could adversely affect the Company's financial
        condition, results of operations or cash flows;
    --  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;
    --  Disruptions in availability or increases in the prices of raw materials
        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
        the costs and risks associated with operating internationally;
    --  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 30% 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 Statements of Operations
                                                                                                      (in millions, except per common share data)
                                                                                                                      (Unaudited)


                                                                                    Three Months Ended                                                                     Six Months Ended
                                                                                    ------------------                                                                     ----------------
                                                                                        March 31,                                           April 2,              %                         March 31,           April 2,              %
                                                                 Footnotes                                 2012                                          2011  Change                                     2012               2011  Change
                                                                 ---------                                 ----                                          ----  ------                                     ----               ----  ------

    Net sales                                                                                          $1,173.5                                      $1,129.6           4%                            $1,384.7           $1,359.8           2%
    Cost of sales                                                                                         710.5                                         665.6                                            896.9              845.9
    Cost of sales - product registration and recall matters                                                 0.2                                           1.3                                              0.2                2.1
                                                                                                            ---                                           ---                                              ---                ---

    Gross profit                                                                                          462.8                                         462.7           0%                               487.6              511.8          -5%
    % of sales                                                                                             39.4%                                         41.0%                                            35.2%              37.6%

    Operating expenses:
    Selling, general and administrative                                                                   237.0                                         216.2          10%                               360.0              359.4           0%
    Impairment, restructuring and other charges                                                             5.6                                             -                                              8.2                  -
    Product registration and recall matters                                                                 3.3                                           1.2                                              3.6                2.1
    Other income, net                                                                                      (1.3)                                         (0.3)                                            (2.2)              (0.8)
                                                                                                           ----                                          ----                                             ----               ----

    Income from operations                                                                                218.2                                         245.6         -11%                               118.0              151.1         -22%
    % of sales                                                                                             18.6%                                         21.7%                                             8.5%              11.1%

    Interest expense                                                                                       17.9                                          13.8                                             33.2               23.3
                                                                                                           ----                                          ----                                             ----               ----

    Income from continuing operations before income taxes                                                 200.3                                         231.8         -14%                                84.8              127.8

    Income tax expense from continuing operations                                                          73.1                                          83.2                                             31.5               45.9
                                                                                                           ----                                          ----                                             ----               ----

    Income from continuing operations                                                                     127.2                                         148.6         -14%                                53.3               81.9         -35%


    Income from discontinued operations, net of tax                             (3)                           -                                          29.0                                                -               27.8


    Net income                                                                                           $127.2                                        $177.6                                            $53.3             $109.7
                                                                                                         ======                                        ======                                            =====             ======



    Basic income per common share:                                              (1)
         Income from continuing operations                                                                $2.09                                         $2.26          -8%                               $0.88              $1.24         -29%
         Income from discontinued operations                                                                  -                                          0.44                                                -               0.42
                                                                                                            ---                                          ----                                              ---               ----
    Net income                                                                                            $2.09                                         $2.70                                            $0.88              $1.66
                                                                                                          =====                                         =====                                            =====              =====

    Diluted income per common share:                                            (2)
         Income from continuing operations                                                                $2.05                                         $2.20          -7%                               $0.86              $1.21         -29%
         Income from discontinued operations                                                                  -                                          0.43                                                -               0.41
    Net income                                                                                            $2.05                                         $2.63                                            $0.86              $1.62
                                                                                                          =====                                         =====                                            =====              =====

    Common shares used in basic
          income per share calculation                                                                     60.9                                          65.8          -7%                                60.6               66.1          -8%
                                                                                                           ====                                          ====                                             ====               ====

    Common shares and potential common
          shares used in diluted
          income per share calculation                                                                     62.0                                          67.6          -8%                                61.7               67.7          -9%
                                                                                                           ====                                          ====                                             ====               ====



    Non-GAAP results from continuing operations:

    Adjusted income from continuing operations                                  (4)                      $133.2                                        $150.3         -11%                               $61.1              $84.7         -28%


    Adjusted diluted income per share from continuing operations           (2) (4)                        $2.15                                         $2.22          -3%                               $0.99              $1.25         -21%


    Adjusted EBITDA                                                        (3) (4)                       $236.7                                        $267.3         -11%                              $152.1             $192.3         -21%
                                                                                                         ======                                        ======                                           ======             ======

    Note: See accompanying footnotes at the end of the release.


                                                                                                                                                                                            THE SCOTTS MIRACLE-GRO COMPANY
                                                                                                                                                                    Net Sales and Income 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 from continuing operations before amortization, product registration and recall costs, 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 to gauge
     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 the Company's professional seed business, 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. Corporate & Other assets primarily include deferred financing and debt issuance costs and corporate intangible assets, as well as deferred tax assets.

                                                                                                                       Three Months Ended                                                                                       Six Months Ended
                                                                                                                       ------------------                                                                                       ----------------
                                                                                                                       March 31,                                            April 2,                                      % Change                                                  March 31,                                        April 2,                                % Change
                                                                                                                                          2012                                                 2011                                                                                                   2012                                             2011
                                                                                                                                          ----                                                 ----                                                                                                   ----                                             ----
    Net Sales:
    ----------
    Global Consumer                                                                                                                   $1,119.6                                             $1,084.8                                       3%                                                      $1,268.7                                         $1,273.6                             0%
    Scotts LawnService(R)                                                                                                                 35.9                                                 32.7                                      10%                                                          73.5                                             69.8                             5%
                                                                                                                                          ----                                                 ----                                                                                                   ----                                             ----

         Segment total                                                                                                                 1,155.5                                              1,117.5                                       3%                                                       1,342.2                                          1,343.4                             0%

    Corporate & Other                                                                                                                     18.0                                                 12.1                                                                                                   42.5                                             16.4
                                                                                                                                          ----                                                 ----                                                                                                   ----                                             ----

         Consolidated                                                                                                                 $1,173.5                                             $1,129.6                                       4%                                                      $1,384.7                                         $1,359.8                             2%
                                                                                                                                      ========                                             ========                                                                                               ========                                         ========

    Income from Continuing Operations
         before Income Taxes:
         --------------------
    Global Consumer                                                                                                                     $275.2                                               $299.0                                      -8%                                                        $205.8                                           $243.9                           -16%
    Scotts LawnService(R)                                                                                                                (12.9)                                               (15.2)                                     15%                                                         (17.5)                                           (19.7)                           11%
                                                                                                                                         -----                                                -----                                                                                                  -----                                            -----

         Segment total                                                                                                                   262.3                                                283.8                                                                                                  188.3                                            224.2

    Corporate & Other                                                                                                                    (32.9)                                               (33.0)                                                                                                 (53.7)                                           (63.9)
    Intangible asset amortization                                                                                                         (2.0)                                                (2.7)                                                                                                  (4.5)                                            (5.0)
    Product registration and recall matters                                                                                               (3.6)                                                (2.5)                                                                                                  (3.9)                                            (4.2)
    Impairment, restructuring and other charges                                                                                           (5.6)                                                   -                                                                                                   (8.2)                                               -
    Interest expense                                                                                                                     (17.9)                                               (13.8)                                                                                                 (33.2)                                           (23.3)
                                                                                                                                         -----                                                -----                                                                                                  -----                                            -----

         Consolidated                                                                                                                   $200.3                                               $231.8                                     -14%                                                         $84.8                                           $127.8                           -34%
                                                                                                                                        ======                                               ======                                                                                                  =====                                           ======

                                                                                                                                                                                                                                                                                                    
                                                                                                                                 THE SCOTTS MIRACLE-GRO COMPANY
                                                                                                                             Condensed Consolidated Balance Sheets
                                                                                                                                         (in millions)
                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                           March 31,                                        April 2,                                      September 30,
                                                                                                                                                                                              2012                                             2011                                           2011
                                                                                                                                                                                              ----                                             ----                                           ----
                                                                                                                                                                          (Unaudited)                                      (Unaudited)
    ASSETS
                     Current assets:
                     Cash and cash equivalents                                                                                                       $122.4                                          $128.7                                           $130.9
                     Accounts receivable, net                                                                                                       1,133.2                                         1,142.3                                            323.5
                     Inventories                                                                                                                      601.6                                           556.1                                            387.0
                     Prepaids and other current assets                                                                                                169.4                                           164.5                                            151.1
                                                                                                                                                      -----                                           -----                                            -----
                                                                                                                                                                                                                                                                                                    
                                                         Total current assets                                                                                                              2,026.6                                          1,991.6                                          992.5
                     Property, plant and equipment, net                                                                                               387.8                                           396.1                                            394.7
                     Goodwill                                                                                                                         309.1                                           305.8                                            309.1
                     Intangible assets, net                                                                                                           311.8                                           344.7                                            319.6
                     Other assets                                                                                                                      34.4                                            36.4                                             36.3
                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                    
                                                         Total assets                                                                                                                     $3,069.7                                         $3,074.6                                       $2,052.2
                                                                                                                                                                                          ========                                         ========                                       ========
                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                    
    LIABILITIES AND SHAREHOLDERS' EQUITY
                     Current liabilities:
                     Current portion of debt                                                                                                         $227.8                                          $764.6                                             $3.2
                     Accounts payable                                                                                                                 346.1                                           365.9                                            150.0
                     Other current liabilities                                                                                                        438.5                                           508.5                                            315.4
                                                                                                                                                      -----                                           -----                                            -----
                                                                                                                                                                                                                                                                                                    
                                                         Total current liabilities                                                                                                         1,012.4                                          1,639.0                                          468.6
                                                                                                                                                                                                                                                                                                    
                     Long-term debt                                                                                                                 1,241.2                                           416.0                                            791.8
                     Other liabilities                                                                                                                226.4                                           231.0                                            232.0
                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                    
                                                         Total liabilities                                                                                                                 2,480.0                                          2,286.0                                        1,492.4
                                                                                                                                                                                                                                                                                                    
                     Shareholders' equity                                                                                                             589.7                                           788.6                                            559.8
                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                    
                                                         Total liabilities and shareholders' equity                                                                                       $3,069.7                                         $3,074.6                                       $2,052.2
                                                                                                                                                                                          ========                                         ========                                       ========

                                                                                                                                      THE SCOTTS MIRACLE-GRO COMPANY
                                                                                                                             Reconciliation of Non-GAAP Disclosure Items (4)
                                                                                                                               (in millions, except per common share data)
                                                                                                                                               (Unaudited)


                                                                Three Months Ended March 31, 2012                                                                              Three Months Ended April 2, 2011
                                                                ---------------------------------                                                                              --------------------------------
                                                                           As Reported                Product                            Impairment,                         Adjusted                           As Reported              Product                Impairment,                     Adjusted
                                                                                                    Registration and                    Restructuring and                                                                             Registration and         Restructuring and
                                                                                                     Recall Matters                       Other Charges                                                                                Recall Matters            Other Charges
                                                                                                                                                                                        -------------                                                                                       ---          ------------- ---
    Net sales                                                                             $1,173.5           $            -                        $               -                       $1,173.5                         $1,129.6           $            -             $               -                $1,129.6
    Cost of sales                                                                            710.5                        -                                        -                          710.5                            665.6                        -                             -                   665.6
    Cost of sales - product registration and recall matters                                    0.2                      0.2                                        -                              -                              1.3                      1.3                             -                       -
                                                                                               ---                      ---                                      ---                            ---                              ---                      ---                           ---                     ---

    Gross profit                                                                             462.8                     (0.2)                                       -                          463.0                            462.7                     (1.3)                            -                   464.0
    % of sales                                                                                39.4%                                                                                            39.5%                            41.0%                                                                          41.1%

    Operating expenses:
    Selling, general and administrative                                                      237.0                        -                                        -                          237.0                            216.2                        -                             -                   216.2
    Impairment, restructuring and other charges                                                5.6                        -                                      5.6                              -                                -                        -                             -                       -
    Product registration and recall matters                                                    3.3                      3.3                                        -                              -                              1.2                      1.2                             -                       -
    Other income, net                                                                         (1.3)                       -                                        -                           (1.3)                            (0.3)                       -                             -                    (0.3)
                                                                                              ----                      ---                                      ---                           ----                             ----                      ---                           ---                    ----

    Income from operations                                                                   218.2                     (3.5)                                    (5.6)                         227.3                            245.6                     (2.5)                            -                   248.1
    % of sales                                                                                18.6%                                                                                            19.4%                            21.7%                                                                          22.0%

    Interest expense                                                                          17.9                        -                                        -                           17.9                             13.8                        -                             -                    13.8
                                                                                              ----                      ---                                      ---                           ----                             ----                      ---                           ---                    ----

    Income from continuing operations before income taxes                                    200.3                     (3.5)                                    (5.6)                         209.4                            231.8                     (2.5)                            -                   234.3

    Income tax expense from continuing operations                                             73.1                     (0.6)                                    (2.5)                          76.2                             83.2                     (0.8)                            -                    84.0
                                                                                              ----                     ----                                     ----                           ----                             ----                     ----                           ---                    ----

    Income from continuing operations                                                       $127.2                    $(2.9)                                   $(3.1)                        $133.2                           $148.6                    $(1.7)            $               -                  $150.3
                                                                                            ======                    =====                                    =====                         ======                           ======                    =====             =================                  ======

    Basic income per share from continuing operations                                        $2.09                   $(0.05)                                  $(0.05)                         $2.19                            $2.26                   $(0.02)            $               -                   $2.28
                                                                                             =====                   ======                                   ======                          =====                            =====                   ======             =================                   =====

    Diluted income per share from continuing operations                                      $2.05                   $(0.05)                                  $(0.05)                         $2.15                            $2.20                   $(0.02)            $               -                   $2.22
                                                                                             -----                   ------                                   ------                          -----                            -----                   ------             -----------------                   -----

    Common shares used in basic
         income per share calculation                                                         60.9                     60.9                                     60.9                           60.9                             65.8                     65.8                             -                    65.8
                                                                                              ====                     ====                                     ====                           ====                             ====                     ====                           ===                    ====

    Common shares and potential common
          shares used in diluted income
          per share calculation                                                               62.0                     62.0                                     62.0                           62.0                             67.6                     67.6                             -                    67.6
                                                                                              ====                     ====                                     ====                           ====                             ====                     ====                           ===                    ====



    Calculation of Adjusted EBITDA:
       Income from continuing operations                                                    $127.2                                                                                                                            $148.6
       Income tax expense from continuing operations                                          73.1                                                                                                                              83.2
       Income from discontinued operations, net of tax
             (excluding impact of Global Pro sale)                                               -                                                                                                                               3.7
       Income tax expense from discontinued operations
             (excluding tax impact of Global Pro sale)                                           -                                                                                                                               1.4
       Interest expense                                                                       17.9                                                                                                                              13.8
       Interest expense from discontinued operations                                             -                                                                                                                               0.6
       Depreciation                                                                           12.5                                                                                                                              12.4
       Amortization (including Roundup)                                                        2.2                                                                                                                               2.9
       Impairment, restructuring and other charges                                             4.7                                                                                                                                 -
       Product registration and recall matters                                                   -                                                                                                                               0.7
       Mark-to-market adjustments on derivatives                                              (0.9)                                                                                                                                -
                                                                                              ----                                                                                                                               ---

    Adjusted EBITDA                                                                         $236.7                                                                                                                            $267.3
                                                                                            ======                                                                                                                            ======

    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 31, 2012                                                                                      Six Months Ended April 2, 2011
                                                                -------------------------------                                                                                      ------------------------------
                                                                          As Reported             Product Registration and                         Impairment,                     Adjusted                         As Reported           Product Registration and          Impairment,                 Adjusted
                                                                                                         Recall Matters                           Restructuring and                                                                              Recall Matters            Restructuring and
                                                                                                                                                    Other Charges                                                                                                            Other Charges
                                                                                                                              ---                                                                                                                                     ---                                             ---
    Net sales                                                                           $1,384.7               $                -                            $               -                 $1,384.7                         $1,359.8               $                -             $               -          $1,359.8
    Cost of sales                                                                          896.9                                -                                            -                    896.9                            845.9                                -                             -             845.9
    Cost of sales - product registration and recall matters                                  0.2                              0.2                                            -                        -                              2.1                              2.1                             -                 -
                                                                                             ---                              ---                                          ---                      ---                              ---                              ---                           ---               ---

    Gross profit                                                                           487.6                             (0.2)                                           -                    487.8                            511.8                             (2.1)                            -             513.9
    % of sales                                                                              35.2%                                                                                                  35.2%                            37.6%                                                                            37.8%

    Operating expenses:
    Selling, general and administrative                                                    360.0                                -                                            -                    360.0                            359.4                                -                             -             359.4
    Impairment, restructuring and other charges                                              8.2                                -                                          8.2                        -                                -                                -                             -                 -
    Product registration and recall matters                                                  3.6                              3.6                                            -                        -                              2.1                              2.1                             -                 -
    Other income, net                                                                       (2.2)                               -                                            -                     (2.2)                            (0.8)                               -                             -              (0.8)
                                                                                            ----                              ---                                          ---                     ----                             ----                              ---                           ---              ----

    Income from operations                                                                 118.0                             (3.8)                                        (8.2)                   130.0                            151.1                             (4.2)                            -             155.3
    % of sales                                                                               8.5%                                                                                                   9.4%                            11.1%                                                                            11.4%

    Interest expense                                                                        33.2                                -                                            -                     33.2                             23.3                                -                             -              23.3
                                                                                            ----                              ---                                          ---                     ----                             ----                              ---                           ---              ----

    Income from continuing operations before income taxes                                   84.8                             (3.8)                                        (8.2)                    96.8                            127.8                             (4.2)                            -             132.0

    Income tax expense from continuing operations                                           31.5                             (0.7)                                        (3.5)                    35.7                             45.9                             (1.4)                            -              47.3
                                                                                            ----                             ----                                         ----                     ----                             ----                             ----                           ---              ----

    Income from continuing operations                                                      $53.3                            $(3.1)                                       $(4.7)                   $61.1                            $81.9                            $(2.8)            $               -             $84.7
                                                                                           =====                            =====                                        =====                    =====                            =====                            =====             =================             =====

    Basic income per share from continuing operations                                      $0.88                           $(0.05)                                      $(0.08)                   $1.01                            $1.24                           $(0.04)            $               -             $1.28
                                                                                           =====                           ======                                       ======                    =====                            =====                           ======             =================             =====

    Diluted income per share from continuing operations                                    $0.86                           $(0.05)                                      $(0.08)                   $0.99                            $1.21                           $(0.04)            $               -             $1.25
                                                                                           -----                           ------                                       ------                    -----                            -----                           ------             -----------------             -----

    Common shares used in basic income
          per share calculation                                                             60.6                             60.6                                         60.6                     60.6                             66.1                             66.1                             -              66.1
                                                                                            ====                             ====                                         ====                     ====                             ====                             ====                           ===              ====

    Common shares and potential common
          shares used in diluted income
          per share calculation                                                             61.7                             61.7                                         61.7                     61.7                             67.7                             67.7                             -              67.7
                                                                                            ====                             ====                                         ====                     ====                             ====                             ====                           ===              ====



    Calculation of Adjusted EBITDA:
       Income from continuing operations                                                   $53.3                                                                                                                                   $81.9
       Income tax expense from continuing operations                                        31.5                                                                                                                                    45.9
       Income from discontinued operations, net of tax
             (excluding impact of Global Pro sale)                                             -                                                                                                                                     6.3
       Income tax expense from discontinued operations
             (excluding tax impact of Global Pro sale)                                         -                                                                                                                                     2.5
       Interest expense                                                                     33.2                                                                                                                                    23.3
       Interest expense from discontinued operations                                           -                                                                                                                                     1.7
       Depreciation                                                                         25.4                                                                                                                                    24.6
       Amortization (including Roundup)                                                      4.9                                                                                                                                     5.4
       Impairment, restructuring and other charges                                           4.7                                                                                                                                       -
       Product registration and recall matters                                                 -                                                                                                                                     0.7
       Mark-to-market adjustments on derivatives                                            (0.9)                                                                                                                                      -
                                                                                            ----                                                                                                                                     ---

    Adjusted EBITDA                                                                       $152.1                                                                                                                                  $192.3
                                                                                          ======                                                                                                                                  ======


    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 are 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)  On February 28, 2011, the Company
         completed the sale of a significant
         majority of the assets of its
         global professional business
         (excluding the non-European
         professional seed business, "Global
         Pro"). As a result of the then-
         pending sale, effective in the
         Company's first quarter of fiscal
         2011, the Company reclassified the
         assets and liabilities of Global
         Pro to assets and liabilities held
         for sale and included the results
         of operations of Global Pro in
         discontinued operations for all
         periods presented.
        ------------------------------------

    (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 common 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 - This measure is
         calculated 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. In addition,
         non-recurring cash items affecting
         net income or loss that are
         incurred between April 3, 2011 and
         June 30, 2012 in an aggregate
         amount not to exceed $40 million
         are also excluded from the
         determination of adjusted EBITDA.
         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 3.50 at March 31, 2012) and an
         interest coverage ratio (minimum of
         3.50 for the twelve moths ended
         March 31, 2012). The Company was in
         compliance with the terms of all
         debt covenants at March 31, 2012.

         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
         comparisons 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

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