Scotts Miracle-Gro narrows fiscal Q1 net loss to US$68.3M from loss of US$73.1M in year-ago period, as seasonal nature of lawn, garden category often leads to Q1 loss, company says; net sales up 3% to US$205.8M

MARYSVILLE, Ohio , February 6, 2013 (press release) – 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-COMPANY

Condensed Consolidated Statement of Operations

(In millions, except for per common share data)

(Unaudited)

 

 
     

Three Months Ended

     
 

Footnotes

 

December 29,
2012

 

December 31,
2011

 

% Change

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.

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