SCOTTS MIRACLE GRO A 
By MARYSVILLE, Ohio, Feb. 6, 2013 /PRNewswire-FirstCall/ -- 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 first quarter ended December 29, 2012.
Net sales were $205.8 million, an increase of 3 percent, compared to $199.6 million, during the same quarter a year ago. Sales in the Global Consumer segment were up 3 percent to $153.2 million, compared to $149.1 million a year ago, attributable to increased volume during the quarter, as price increases for fiscal 2013 did not take effect until January. Consumer purchases at point-of-sale (POS) at the Company's largest U.S. retailers increased 1 percent during the quarter. POS was in line with expectations for the first quarter, though it represents a small portion of the full year.
Scotts LawnService sales were up 19 percent to $44.8 million in the first quarter, compared to $37.6 million during the same quarter a year ago, primarily due to a 6 percent increase in customer count and a weather-driven delay of sales from the fiscal fourth quarter of 2012 to the fiscal first quarter of 2013.
"Continued consumer engagement, coupled with solid execution, leaves us well-positioned for the 2013 lawn and garden season," said Jim Hagedorn, chairman and chief executive officer. "We are on plan with our initiatives designed to drive meaningful and sustainable growth in earnings and cash flow, while continuing to maintain a strong consumer focus."
The loss from continuing operations was $68.3 million, or $1.11 per share, compared with a loss of $73.1 million, or $1.20 per share, during the same quarter a year ago. The adjusted loss from continuing operations for the first quarter of 2013 was $68.5 million, or $1.12 per share, which excludes impairment, restructuring and other charges. Given the seasonal nature of the lawn and garden category, the Company historically reports a loss in its fiscal first quarter.
The adjusted company-wide gross margin rate was 15.1 percent, compared with 12.8 percent during the first quarter a year ago. The 230-basis-point improvement was primarily attributable to increased volume within the higher-margin Scotts LawnService segment and favorable product mix in the Global Consumer segment.
Selling, general and administrative expenses (SG&A) were $124.5 million, compared to $122.5 million a year ago, in line with Company expectations.
The operating loss for the Global Consumer segment was $68.7 million during the first quarter, compared with a loss of $69.5 million last year. Scotts LawnService reported operating loss of $0.9 million, compared with a loss of $4.6 million a year ago. The consolidated company-wide adjusted loss from continuing operations before income taxes was $105.1 million during the first quarter of 2013, compared to a loss of $114.3 million during the same quarter a year ago.
Management Reaffirms Full-Year Outlook
The Company continues to expect company-wide net sales to increase by approximately 1 to 3 percent in fiscal 2013 on flat unit volume, modest price increases in its core business and the continued strong performance of Scotts LawnService.
The Company reaffirmed its expectations for fiscal 2013 adjusted earnings per share from continuing operations in the range of $2.50 to $2.75. In addition, the Company continues to expect operating cash flow of at least $250 million for the year.
"Our immediate focus is to leverage our cost structure with an eye toward margin improvement, reduced SG&A and improved cash flow," said Hagedorn. "And we are taking a balanced approach in how we invest for long-term growth. I am confident in the plan we have put in place and believe our shareholders will begin to see significant improvement starting in the second half of the year."
Conference Call and Webcast Scheduled for 9 a.m. ET Today, Feb. 6
The Company will discuss its results during a webcast and conference call today at 9 a.m. Eastern Time. Conference call participants should call 1-866-682-3515 (Conference ID: 88031745). A webcast of the call will be available live at http://investor.scotts.com. An archive of the webcast, as well as accompanying financial information regarding any non-GAAP financial measures discussed by the Company during the call, will be available on the website for at least 12 months.
About ScottsMiracle-Gro
With more than $2.8 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:
-- 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;
-- The Company depends on key personnel and may not be able to retain those
employees or recruit additional qualified personnel;
-- 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-COMPANYCondensed Consolidated Statement of Operations(In millions, except for per common share data)(Unaudited)
Three Months Ended
------------------
Footnotes December 29, December 31, % Change
2012 2011
---
Net sales $205.8 $199.6 3%
Cost of sales 174.7 174.0
----- -----
Gross profit 31.1 25.6 21%
% of sales 15.1% 12.8%
Operating expenses:
Selling, general and administrative 124.5 122.5 2%
Impairment, restructuring and other (0.4) 2.4
Product registration and recall matters - 0.3
Other income, net (1.1) (0.6)
---- ----
Loss from operations (91.9) (99.0) 7%
% of sales (44.7)% (49.6)%
Interest expense 13.2 15.3
---- ----
Loss from continuing operations before income taxes (105.1) (114.3) 8%
Income tax benefit from continuing operations (36.8) (41.2)
----- -----
Loss from continuing operations (68.3) (73.1) 7%
Income (loss) from discontinued operations, net of tax (3) 0.6 (0.8)
Net loss $(67.7) $(73.9)
====== ======
Basic income (loss) per common share: (1)
Loss from continuing operations $(1.11) $(1.20) 8%
Income (loss) from discontinued operations 0.01 (0.01)
Net loss $(1.10) $(1.21)
====== ======
Diluted income (loss) per common share: (2)
Loss from continuing operations $(1.11) $(1.20) 8%
Income (loss) from discontinued operations 0.01 (0.01)
Net loss $(1.10) $(1.21)
====== ======
Common shares used in basic loss per share calculation 61.4 60.9 1%
==== ====
Common shares and potential common shares used in diluted loss per share calculation 61.4 60.9 1%
==== ====
Non-GAAP results from continuing operations:
Adjusted loss from continuing operations (4) $(68.5) $(71.4) 4%
Adjusted diluted loss per share from continuing operations (2) (4) $(1.12) $(1.17) 4%
Adjusted EBITDA (3) (4) $(75.4) $(84.4) 11%
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANY
Net Sales and Loss from Continuing
Operations before Income Taxes by
Segment
(In millions)
(Unaudited)
The Company is divided into the
following reportable segments: Global
Consumer and Scotts LawnService(R).
This division of reportable segments
is consistent with how the segments
report to and are managed by the chief
operating decision maker of the
Company.
Segment performance is evaluated based
on several factors, including income
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
evaluate segment performance because
we believe this measure is the most
indicative of performance trends and
the overall earnings potential of each
segment.
Corporate & Other consists of revenues
and expenses associated with the
Company's supply agreements with
Israel Chemicals Ltd. and the
amortization related to the Roundup(R)
Marketing Agreement, as well as
corporate, general and administrative
expenses and certain other income/
expense items not allocated to the
business segments. Corporate & Other
assets primarily include deferred
financing and debt issuance costs and
corporate intangible assets, as well
as deferred tax assets.
Three Months Ended
------------------
December 29, December 31, % Change
2012 2011
---- ----
Net Sales:
----------
Global Consumer $153.2 $149.1 3%
Scotts LawnService(R) 44.8 37.6 19%
---- ----
Segment total 198.0 186.7 6%
Corporate & Other 7.8 12.9
Consolidated $205.8 $199.6 3%
====== ======
Loss from Continuing
Operations before
Income Taxes:
--------------------
Global Consumer $(68.7) $(69.5) 1%
Scotts LawnService(R) (0.9) (4.6) 80%
---- ----
Segment total (69.6) (74.1)
Corporate & Other (20.2) (19.7)
Intangible asset
amortization (2.5) (2.5)
Product registration
and recall matters - (0.3)
Impairment,
restructuring and
other 0.4 (2.4)
Interest expense (13.2) (15.3)
----- -----
Consolidated $(105.1) $(114.3) 8%
======= =======
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Balance Sheets
(In millions)
December 29, December 31, September 30,
2012 2011 2012
---- ---- ----
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $115.6 $127.8 $131.9
Accounts receivable, net 168.4 166.5 330.9
Inventories 646.7 654.8 414.9
Prepaids and other current assets 126.2 148.8 122.3
----- ----- -----
Total current assets 1,056.9 1,112.2 1,000.0
Property, plant and equipment, net 424.0 391.4 427.4
Goodwill 314.4 309.1 309.4
Intangible assets, net 303.3 316.2 307.1
Other assets 29.5 35.4 30.5
---- ---- ----
Total assets $2,128.1 $2,164.3 $2,074.4
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt $4.3 $8.1 $1.5
Accounts payable 185.5 220.4 152.3
Other current liabilities 186.6 220.6 279.8
----- ----- -----
Total current liabilities 376.4 449.1 433.6
Long-term debt 981.9 1,026.1 781.1
Other liabilities 256.0 224.9 257.8
----- ----- -----
Total liabilities 1,614.3 1,700.1 1,472.5
Shareholders' equity 513.8 464.2 601.9
----- ----- -----
Total liabilities and shareholders' equity $2,128.1 $2,164.3 $2,074.4
======== ======== ========
THE SCOTTS MIRACLE-GRO COMPANYReconciliation of Non- GAAP Disclosure Items (4)(In millions, except per common share data)(Unaudited)
Three Months Ended December 29, 2012 Three Months Ended December 31, 2011
------------------------------------ ------------------------------------
As Impairment, Adjusted As Product Impairment,
Restructuring Registration Restructuring
and Other and and Other
Charges Charges Adjusted
Reported Reported Recall Matters
-------- -------- --------------
Net sales $205.8 $ - $205.8 $199.6 $ - $ - $199.6
Cost of sales 174.7 - 174.7 174.0 - - 174.0
----- --- ----- ----- --- --- -----
Gross profit 31.1 - 31.1 25.6 - - 25.6
% of sales 15.1% 15.1% 12.8% 12.8%
Operating expenses:
Selling, general and administrative 124.5 - 124.5 122.5 - - 122.5
Impairment, restructuring and other (0.4) (0.4) - 2.4 - 2.4 -
Product registration and recall matters - - - 0.3 0.3 - -
Other income, net (1.1) - (1.1) (0.6) - - (0.6)
---- --- ---- ---- --- --- ----
Loss from operations (91.9) 0.4 (92.3) (99.0) (0.3) (2.4) (96.3)
% of sales (44.7)% (44.8)% (49.6)% (48.2)%
Interest expense 13.2 - 13.2 15.3 - - 15.3
---- --- ---- ---- --- --- ----
Loss from continuing operations before income taxes (105.1) 0.4 (105.5) (114.3) (0.3) (2.4) (111.6)
Income tax benefit from continuing operations (36.8) 0.2 (37.0) (41.2) (0.1) (0.9) (40.2)
----- --- ----- ----- ---- ---- -----
Loss from continuing operations $(68.3) $0.2 $(68.5) $(73.1) $(0.2) $(1.5) $(71.4)
====== ==== ====== ====== ===== ===== ======
Basic loss per share from continuing operations $(1.11) $0.01 $(1.12) $(1.20) $(0.01) $(0.02) $(1.17)
====== ===== ====== ====== ====== ====== ======
Diluted loss per share from continuing operations $(1.11) $0.01 $(1.12) $(1.20) $(0.01) $(0.02) $(1.17)
====== ===== ====== ====== ====== ====== ======
Common shares used in basic loss per share calculation 61.4 61.4 61.4 60.9 60.9 60.9 60.9
==== ==== ==== ==== ==== ==== ====
Common shares and potential common shares used in diluted loss per share calculation 61.4 61.4 61.4 60.9 60.9 60.9 60.9
==== ==== ==== ==== ==== ==== ====
Calculation of Adjusted EBITDA:
Loss from continuing operations $(68.3) $(73.1)
Income tax benefit from continuing operations (36.8) (41.2)
Income (loss) from discontinued operations, net of tax 0.6 (0.8)
Income tax expense (benefit) from discontinued operations 0.3 (0.4)
Interest expense 13.2 15.3
Depreciation 13.6 12.9
Amortization (including Roundup) 2.7 2.7
Impairment, restructuring and other charges (0.4) -
Mark-to-market adjustments on derivatives (0.3) 0.2
Adjusted EBITDA $(75.4) $(84.4)
====== ======
Note: See accompanying footnotes at the end of the release.
THE SCOTTS MIRACLE-GRO COMPANYFootnotes to Preceding
Financial Statements
(1) Basic income
(loss) per
common share
amounts are
calculated by
dividing
income (loss)
from
continuing
operations,
loss from
discontinued
operations
and net loss
by the
weighted
average
number of
common shares
outstanding
during the
period.
--- -------------
(2) Diluted income
(loss) per
common share
amounts are
calculated by
dividing loss
from
continuing
operations,
income (loss)
from
discontinued
operations
and net loss
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. Since
there is a
loss for the
three months
ended
December 29,
2012 and
December 31,
2011,
potentially
dilutive
securities
were not
included in
the
calculations
for those
periods
because to do
so would have
been anti-
dilutive.
--- --------------
(3) In the fourth
quarter of
fiscal 2012,
the Company
completed the
wind down of
the Company's
professional
seed
business. As
a result,
effective in
its fourth
quarter of
fiscal 2012,
the Company
classified
its results
of operations
for all
periods
presented to
reflect the
professional
seed business
as a
discontinued
operation.
--- --------------
(4) The
Reconciliation
of Non-GAAP
Disclosure
Items
includes the
following
non-GAAP
financial
measures:
Adjusted loss
from
continuing
operations
and adjusted
diluted loss
per share
from
continuing
operations -
These
measures
exclude
charges or
credits
relating to
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 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
3.50 at
December 29,
2012) and an
interest
coverage
ratio
(minimum of
3.50 for the
twelve months
ended
December 29,
2012). The
Company was
in compliance
with the
terms of all
debt
covenants at
December 29,
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
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
