ScottsMiracle-Gro Reports Second Quarter Results; Reaffirms Full-Year Outlook

ScottsMiracle-Gro Reports Second Quarter Results; Reaffirms Full-Year Outlook

- Q2 adjusted earnings per share increased 36% to $2.17

- Q2 Global Consumer sales increased 9% due to strong retailer support,
acquisition

- Adjusted gross margin rate increased 270 basis points in Q2

- Company reaffirms full-year outlook for adjusted earnings of $3.05 to $3.20
per share

PR Newswire

MARYSVILLE, Ohio, May 5, 2014

MARYSVILLE, Ohio, May 5, 2014 /PRNewswire/ --The Scotts Miracle-Gro Company
(NYSE: SMG), the world's leading marketer of branded consumer lawn and garden
products, today announced results for its fiscal second quarter ended March
29, 2014 that were driven by strong sell-in of its consumer products in both
the U.S. and Europe.

Adjusted income from continuing operations increased 38 percent during the
second quarter, driven by increased sales, continued margin expansion and
strong control of operating expenses.

Net sales were $1.08 billion for the quarter, an increase of 7 percent
compared to $1.01 billion a year ago, due to strong initial sell-in to
retailers.

Fiscal year-to-date consumer purchases in the U.S. – as measured by
point-of-sale data from the Company's largest retail partners – were slightly
down through the end of April, below internal expectations, due primarily to
poor weather and a delayed start to the season.

"It should come as no surprise that consumer activity was lighter than we had
originally anticipated, but we have seen high levels of consumer purchases
when the weather has cooperated," said Jim Hagedorn, chairman and chief
executive officer. "We are pleased with the strong support we are seeing from
our retail partners and glad to see a strong start to the season in Europe,
where our business is currently trending ahead of our internal expectations.

"We remain optimistic about our prospects this season and continue to expect
adjusted earnings per share of $3.05 to $3.20 for the full year."

Second Quarter Details
Sales in the Global Consumer segment increased 9 percent to $1.05 billion
during the second quarter, compared to $962.8 million during the same quarter
a year ago. Strong retailer support, pricing adjustments and the acquisition
of the Tomcat business drove the increase.

Scotts LawnService sales were down 12 percent to $28.9 million in the second
quarter, compared to $32.9 million a year ago, primarily due to a delay in the
start of the spring season.

For the quarter, the adjusted company-wide gross margin rate was 40.1 percent,
compared with 37.4 percent a year ago. The 270-basis-point improvement was
primarily attributable to planned cost reductions, targeted pricing and
increased sales volume due to strong sell-in to retailers. The increased
sales volume drove favorable product mix and improved leverage on fixed costs.

Selling, general and administrative expenses (SG&A) increased $6 million to
$212.2 million during the second quarter, compared to $206.7 million a year
ago, in line with the Company's internal expectations.

The consolidated company-wide adjusted income from continuing operations
before income taxes was $211.2 million during the second quarter, compared to
$154.2 million a year ago. The operating income from the Global Consumer
segment for the quarter increased 23 percent to $269.5 million, compared with
$218.9 million a year ago. The Scotts LawnService segment reported operating
loss of $20.3 million for the quarter, compared with a loss of $17.0 million
during the same quarter a year ago.

Adjusted income from continuing operations for the second quarter increased to
$136.7 million, or $2.17 per share, which excludes impairment, restructuring
and other charges, as well as one-time costs related to financing. That
compares with adjusted income of $99.3 million, or $1.59 per share, last year.
On a GAAP basis, income from continuing operations was $125.7 million, or
$2.00 per share, compared with $99.1 million, or $1.59 per share, a year ago.

Year-to-Date Details
Net sales for the first six months of fiscal 2014 were $1.27 billion, an
increase of 6 percent from $1.20 billion a year ago. The year-over-year
change was attributable to increased sales in the Global Consumer segment,
primarily due to strong retailer support, targeted pricing and the acquisition
of the Tomcat business. For the first six months of the year, Scotts
LawnService sales were down 3 percent, primarily due to a delayed start to the
season.

The adjusted company-wide gross margin rate for the first six months increased
290 basis points to 36.8 percent, compared to 33.9 percent a year ago,
primarily due to planned cost reductions, targeted pricing and increased sales
volume due to strong sell-in to retailers. The increased sales volume drove
favorable product mix and improved leverage on fixed costs.

SG&A increased $6 million to $336.6 million for the first six months, in line
with Company expectations.

Adjusted income from continuing operations was $71.1 million, or $1.13 per
share, for the first six months of the year, compared to $30.8 million, or
$0.49 per share, during the same period a year ago. Those results exclude
impairment, restructuring and other charges, as well as one-time costs related
to financing. Including those items, reported income from continuing
operations for the first six months of fiscal 2014 was $59.9 million, or $0.95
per share, compared with $30.8 million, or $0.49 per share, a year ago.

Conference Call and Webcast Scheduled for 4:30 p.m. ET Today, May 5
The Company will discuss results during a webcast and conference call today at
4:30 p.m. Eastern Time. Conference call participants should call
1-888-359-3624 (Conference Code: 8255781). A live webcast of the call will be
available on the investor relations section of the Company's website at
http://investor.scotts.com. An archive of the webcast, as well as any
accompanying financial information regarding any non-GAAP financial measures
discussed by the Company during the call, will remain available for at least
12 months. In addition, a replay of the call can be heard by calling
1-888-203-1112. The replay will be available for 30 days.

About ScottsMiracle-Gro
With more than $2.8 billion in worldwide sales, The Scotts Miracle-Gro Company
is the world's largest marketer of branded consumer products for lawn and
garden care.The Company's brands are the most recognized in the industry.In
the U.S., the Company's Scotts®, Miracle-Gro® and Ortho® brands are
market-leading in their categories, as is the consumer Roundup® brand, which
is marketed in North America and most of Europe exclusively by Scotts and
owned by Monsanto.In the U.S., we operate Scotts LawnService®, the second
largest residential lawn care service business. In Europe, the Company's
brands include Weedol®, Pathclear®, Evergreen®, Levington®, Miracle-Gro®, KB®,
Fertiligene® and Substral®. For additional information, visit us at
www.scotts.com.

Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of
historical fact, which address activities, events and developments that the
Company expects or anticipates will or may occur in the future, including, but
not limited to, information regarding the future economic performance and
financial condition of the Company, the plans and objectives of the Company's
management, and the Company's assumptions regarding such performance and plans
are "forward-looking statements" within the meaning of the U.S. federal
securities laws that are subject to risks and uncertainties. These
forward-looking statements generally can be identified as statements that
include phrases such as "guidance," "outlook," "projected," "believe,"
"target," "predict," "estimate," "forecast," "strategy," "may," "goal,"
"expect," "anticipate," "intend," "plan," "foresee," "likely," "will,"
"should" or other similar words or phrases. Actual results could differ
materially from the forward-looking information in this release due to a
variety of factors, including, but not limited to:

  oCompliance 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;
  oIncreases in the prices of raw materials and fuel costs could adversely
    affect the Company's results of operations;
  oThe highly competitive nature of the Company's markets could adversely
    affect its ability to maintain or grow revenues;
  oBecause 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;
  oAdverse weather conditions could adversely impact financial results;
  oThe Company's international operations make the Company susceptible to
    fluctuations in currency exchange rates and to other costs and risks
    associated with international regulation;
  oThe Company may not be able to adequately protect its intellectual
    property and other proprietary rights that are material to the Company's
    business;
  oIf 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;
  oHagedorn Partnership, L.P. beneficially owns approximately 27% of the
    Company's common shares and can significantly influence decisions that
    require the approval of shareholders;
  oThe Company may pursue acquisitions, dispositions, investments, dividends,
    share repurchases and/or other corporate transactions that it believes
    will maximize equity returns of its shareholders but may involve risks.

Additional detailed information concerning a number of the important factors
that could cause actual results to differ materially from the forward-looking
information contained in this release is readily available in the Company's
publicly filed quarterly, annual and other reports. The Company disclaims any
obligation to update developments of these risk factors or to announce
publicly any revision to any of the forward-looking statements contained in
this release, or to make corrections to reflect future events or developments.



THE SCOTTS MIRACLE-GRO COMPANY

Condensed Consolidated Statement of Operations

(In millions, except for per common share data)

(Unaudited)
                          Three Months Ended                Six Months Ended
               Footnotes  March 29,    March 30,    %      March 29,    March 30,    %
                          2014        2013        Change  2014        2013        Change
Net sales                 $ 1,081.0    $ 1,007.9    7   %   $ 1,270.6    $ 1,203.0    6    %
Cost of sales             647.2        630.6                802.9        795.1
Cost of sales
- impairment,             —            0.1                  —            0.1
restructuring
and other
Gross profit              433.8        377.2        15  %   467.7        407.8        15   %
% of sales                40.1      %  37.4      %          36.8      %  33.9      %
Operating
expenses:
Selling,
general and               212.2        206.7        3   %   336.6        330.8        2    %
administrative
Impairment,
restructuring             6.1          0.1                  6.4          (0.3)
and other
Other income,             (1.6)        (1.5)                (2.7)        (2.6)
net
Income from               217.1        171.9        26  %   127.4        79.9         59   %
operations
% of sales                20.1      %  17.1      %          10.0      %  6.6       %
Costs related             10.7         —                    10.7         —
to refinancing
Interest                  12.0         17.9                 25.9         31.1
expense
Income from
continuing
operations                194.4        154.0        26  %   90.8         48.8         86   %
before income
taxes
Income tax
expense from              68.7         54.9                 30.9         18.0
continuing
operations
Income from
continuing                125.7        99.1         27  %   59.9         30.8         94   %
operations
Income from
discontinued   (3)        —            0.9                  0.1          1.5
operations,
net of tax
Net income                $ 125.7      $ 100.0              $ 60.0       $ 32.3
Basic income
per common     (1)
share:
Income from
continuing                $ 2.03       $ 1.61       26  %   $ 0.97       $ 0.50       94   %
operations
Income from
discontinued              —            0.01                 —            0.02
operations
Net income                $ 2.03       $ 1.62               $ 0.97       $ 0.52
Diluted income
per common     (2)
share:
 Income
from                      $ 2.00       $ 1.59       26  %   $ 0.95       $ 0.49       94   %
continuing
operations
 Income
from                      —            0.01                 —            0.02
discontinued
operations
Net income                $ 2.00       $ 1.60               $ 0.95       $ 0.51
Common shares
used in basic
income per                61.9         61.6         —   %   62.0         61.5         1    %
share
calculation
Common shares
and potential
common shares
used in                   62.9         62.4         1   %   63.1         62.3         1    %
diluted income
per share
calculation
Non-GAAP
results from
continuing
operations:
Adjusted
income from    (4)        $ 136.7      $ 99.3       38  %   $ 71.1       $ 30.8       131  %
continuing
operations
Adjusted
diluted income
per share from (2) (4)    $ 2.17       $ 1.59       36  %   $ 1.13       $ 0.49       131  %
continuing
operations
Adjusted       (3) (4)    $ 233.3      $ 189.3      23  %   $ 159.7      $ 114.2      40   %
EBITDA
Note: See accompanying footnotes at the end of
the release.



THE SCOTTS MIRACLE-GRO COMPANY
Net Sales and Income (Loss) from Continuing Operations before Income Taxes by
Segment
(In millions)
(Unaudited)

The Company is divided into the following reportable segments: Global Consumer
and Scotts LawnService®. This division of reportable segments is consistent
with how the segments report to and are managed by the chief operating
decision maker of the Company.

Segment performance is evaluated based on several factors, including income
(loss) from continuing operations before amortization, impairment,
restructuring and other charges, which is not a generally accepted accounting
principle ("GAAP") measure. Senior management of the Company uses this measure
of operating profit (loss) to evaluate segment performance because we believe
this measure is the most indicative of performance trends and the overall
earnings potential of each segment.

Corporate & Other consists of revenues and expenses associated with the
Company's supply agreements with Israel Chemicals Ltd. and the amortization
related to the Roundup® Marketing Agreement, as well as corporate, general and
administrative expenses and certain other income/expense items not allocated
to the business segments.



                    Three Months Ended            Six Months Ended
                    March 29,  March 30,  %       March 29,  March 30,  %
                    2014      2013      Change  2014      2013      Change
Net Sales:
Global Consumer     $ 1,046.0  $ 962.8    9    %  $ 1,184.4  $ 1,105.4  7    %
Scotts LawnService® 28.9       32.9       (12) %  75.2       77.7       (3)  %
Segment total       1,074.9    995.7      8    %  1,259.6    1,183.1    6    %
Corporate & Other   6.1        12.2               11.0       19.9
Consolidated        $ 1,081.0  $ 1,007.9  7    %  $ 1,270.6  $ 1,203.0  6    %
Income (Loss) from
Continuing
Operations before
Income Taxes:
Global Consumer     $ 269.5    $ 218.9    23   %  $ 202.1    $ 150.2    35   %
Scotts LawnService® (20.3)     (17.0)     (19) %  (17.7)     (17.9)     1    %
Segment total       249.2      201.9              184.4      132.3
Corporate & Other   (23.0)     (27.3)             (44.7)     (47.6)
Intangible asset    (3.0)      (2.5)              (5.9)      (5.0)
amortization
Impairment,
restructuring and   (6.1)      (0.2)              (6.4)      0.2
other
Costs related to    (10.7)     —                  (10.7)     —
refinancing
Interest expense    (12.0)     (17.9)             (25.9)     (31.1)
Consolidated        $ 194.4    $ 154.0    26   %  $ 90.8     $ 48.8     86   %





THE SCOTTS MIRACLE-GRO COMPANY

Condensed Consolidated Balance Sheets

(In millions)
                                       March 29,    March 30,    September 30,
                                       2014        2013        2013
ASSETS                                 (Unaudited)  (Unaudited)
Current assets:
Cash and cash equivalents              $  152.7     $  99.1      $   129.8
Accounts receivable, net               1,088.8      966.6        313.3
Inventories                            546.2        613.0        324.9
Prepaids and other current assets      149.9        158.0        113.0
Total current assets                   1,937.6      1,836.7      881.0
Property, plant and equipment, net     443.6        417.8        422.3
Goodwill                               333.3        314.5        315.1
Intangible assets, net                 318.5        299.2        284.4
Other assets                           38.2         28.7         34.4
Total assets                           $  3,071.2   $  2,896.9   $   1,937.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt                $  278.6     $  208.0     $   92.4
Accounts payable                       342.5        327.5        137.7
Other current liabilities              397.0        352.7        279.7
Total current liabilities              1,018.1      888.2        509.8
Long-term debt                         1,145.3      1,163.0      478.1
Other liabilities                      232.1        238.8        238.8
Total liabilities                      2,395.5      2,290.0      1,226.7
Shareholders' equity                   675.7        606.9        710.5
Total liabilities and shareholders'    $  3,071.2   $  2,896.9   $   1,937.2
equity

THE SCOTTS MIRACLE-GRO COMPANY

Reconciliation of Non- GAAP Disclosure Items (4)

(In millions, except per common share data)

(Unaudited)
               Three Months Ended March 29, 2014                  Three Months Ended March 30, 2013
               As          Impairment,   Costs                    As          Impairment,   Costs
                           Restructuring Related to  Adjusted     Reported    Restructuring Related to  Adjusted
               Reported   and Other     Refinancing                          and Other     Refinancing
Net sales      $ 1,081.0   $   —         $  —        $ 1,081.0    $ 1,007.9   $   —         $    —      $ 1,007.9
Cost of sales  647.2       —             —           647.2        630.6       —             —           630.6
Cost of sales
- impairment,  —           —             —           —            0.1         0.1           —           —
restructuring
and other
Gross profit   433.8       —             —           433.8        377.2       (0.1)         —           377.3
% of sales     40.1      %                           40.1      %  37.4      %                           37.4      %
Operating
expenses:
Selling,
general and    212.2       —             —           212.2        206.7       —             —           206.7
administrative
Impairment,
restructuring  6.1         6.1           —           —            0.1         0.1           —           —
and other
Other income,  (1.6)       —             —           (1.6)        (1.5)       —             —           (1.5)
net
Income from    217.1       (6.1)         —           223.2        171.9       (0.2)         —           172.1
operations
% of sales     20.1      %                           20.6      %  17.1      %                           17.1      %
Costs related  10.7                      10.7        —            —                         —           —
to refinancing
Interest       12.0        —             —           12.0         17.9        —             —           17.9
expense
Income from
continuing
operations     194.4       (6.1)         (10.7)      211.2        154.0       (0.2)         —           154.2
before income
taxes
Income tax
expense
(benefit) from 68.7        (2.1)         (3.7)       74.5         54.9        —             —           54.9
continuing
operations
Income from
continuing     $ 125.7     $   (4.0)     $  (7.0)    $ 136.7      $ 99.1      $   (0.2)     $    —      $ 99.3
operations
Basic income
per share from $ 2.03      $   (0.07)    $  (0.11)   $ 2.21       $ 1.61      $   —         $    —      $ 1.61
continuing
operations
Diluted income
per share from $ 2.00      $   (0.06)    $  (0.11)   $ 2.17       $ 1.59      $   —         $    —      $ 1.59
continuing
operations
Common shares
used in basic
income per     61.9        61.9          61.9        61.9         61.6        61.6          61.6        61.6
share
calculation
Common shares
and potential
common shares
used in        62.9        62.9          62.9        62.9         62.4        62.4          62.4        62.4
diluted income
per share
calculation
Calculation of
Adjusted
EBITDA:
Income from
continuing     $ 125.7                                            $ 99.1
operations
Income tax
expense from   68.7                                               54.9
continuing
operations
Income from
discontinued   —                                                  0.9
operations,
net of tax
Income tax
expense from   0.4                                                0.3
discontinued
operations
Costs related  10.7                                               —
to refinancing
Interest       12.0                                               17.9
expense
Depreciation   12.6                                               13.8
Amortization
(including     3.2                                                2.7
Roundup)
Impairment,
restructuring  —                                                  —
and other
Mark-to-market
adjustments on —                                                  (0.3)
derivatives
Adjusted       $ 233.3                                            $ 189.3
EBITDA
Note: See accompanying footnotes at the end of the
release.



THE SCOTTS MIRACLE-GRO COMPANY

Reconciliation of Non- GAAP Disclosure Items (4)

(In millions, except per common share data)

(Unaudited)
               Six Months Ended March 29, 2014                    Six Months Ended March 30, 2013
               As          Impairment,   Costs                    As          Impairment,   Costs
               Reported    Restructuring Related to  Adjusted     Reported    Restructuring Related to  Adjusted
                           and Other     Refinancing                          and Other     Refinancing
Net sales      $ 1,270.6   $   —         $  —        $ 1,270.6    $ 1,203.0   $     —       $    —      $ 1,203.0
Cost of sales  802.9       —             —           802.9        795.1       —             —           795.1
Cost of sales
- impairment,  —           —             —           —            0.1         0.1           —           —
restructuring
and other
Gross profit   467.7       —             —           467.7        407.8       (0.1)         —           407.9
% of sales     36.8      %                           36.8      %  33.9      %                           33.9      %
Operating
expenses:
Selling,
general and    336.6       —             —           336.6        330.8       —             —           330.8
administrative
Impairment,
restructuring  6.4         6.4           —           —            (0.3)       (0.3)         —           —
and other
Other income,  (2.7)       —             —           (2.7)        (2.6)       —             —           (2.6)
net
Income from    127.4       (6.4)         —           133.8        79.9        0.2           —           79.7
operations
% of sales     10.0      %                           10.5      %  6.6       %                           6.6       %
Costs related  10.7                      10.7        —            —           —             —           —
to refinancing
Interest       25.9                      —           25.9         31.1        —             —           31.1
expense
Income from
continuing
operations     90.8        (6.4)         (10.7)      107.9        48.8        0.2           —           48.6
before income
taxes
Income tax
expense from   30.9        (2.2)         (3.7)       36.8         18.0        0.2           —           17.8
continuing
operations
Income from
continuing     $ 59.9      $   (4.2)     $  (7.0)    $ 71.1       $ 30.8      $     —       $    —      $ 30.8
operations
Basic income
per share from $ 0.97      $   (0.07)    $  (0.11)   $ 1.15       $ 0.50      $     —       $    —      $ 0.50
continuing
operations
Diluted income
per share from $ 0.95      $   (0.07)    $  (0.11)   $ 1.13       $ 0.49      $     —       $    —      $ 0.49
continuing
operations
Common shares
used in basic
income per     62.0        62.0          62.0        62.0         61.5        61.5          61.5        61.5
share
calculation
Common shares
and potential
common shares
used in        63.1        63.1          63.1        63.1         62.3        62.3          62.3        62.3
diluted income
per share
calculation
Calculation of
Adjusted
EBITDA:
Income from
continuing     $ 59.9                                             $ 30.8
operations
Income tax
expense from   30.9                                               18.0
continuing
operations
Income from
discontinued   0.1                                                1.5
operations,
net of tax
Income tax
expense from   0.5                                                0.7
discontinued
operations
Costs related  10.7                                               —
to refinancing
Interest       25.9                                               31.1
expense
Depreciation   25.4                                               27.4
Amortization
(including     6.3                                                5.4
Roundup)
Impairment,
restructuring  —                                                  (0.4)
and other
Mark-to-market
adjustments on —                                                  (0.3)
derivatives
Adjusted       $ 159.7                                            $ 114.2
EBITDA
Note: See accompanying footnotes at the end of the
release.



THE SCOTTS MIRACLE-GRO COMPANY

Footnotes to Preceding Financial Statements
    Basic income per common share amounts is calculated by dividing income
(1) from continuing operations, income from discontinued operations and net
    income by the weighted average number of common shares outstanding during
    the period.
    Diluted income per common share amounts are calculated by dividing income
    from continuing operations, income from discontinued operations and net
(2) 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.
    In the second quarter of fiscal 2014, the Company completed the sale of
    its Wild Bird Food business. As a result, effective in its second quarter
(3) of fiscal 2014, the Company classified its results of operations for all
    periods presented to reflect the Wild Bird Food business as a discontinued
    operation.
    The Reconciliation of Non-GAAP Disclosure Items includes the following
    non-GAAP financial measures:

    Adjusted income from continuing operations and adjusted diluted income per
(4) share from continuing operations - These measures exclude charges or
    credits relating to impairments, restructurings, discontinued operations
    and other unusual items such as costs or gains related to discrete
    projects or transactions that are apart from, and not indicative of, the
    results of the operations of the business.
    Adjusted EBITDA - This measure is calculated as net income (loss) before
    interest, taxes, depreciation and amortization as well as certain other
    items such as the impact of the cumulative effect of changes in
    accounting, costs associated with debt refinancing and other
    non-recurring, non-cash items affecting net income. We believe this
    measure provides additional information for determining our ability to
    meet debt service requirements. The presentation of adjusted EBITDA herein
    is intended to be consistent with the calculation of that measure as
    required by our borrowing arrangements, and used to calculate a leverage
    ratio (maximum of 4.00 at March 29, 2014) and an interest coverage ratio
    (minimum of 3.50 for the twelve months ended March 29, 2014). The Company
    was in compliance with the terms of all debt covenants at March 29, 2014.
    The Company reports its financial results in accordance with U.S.
    generally accepted accounting principles (GAAP). However, management
    believes that certain non-GAAP financial measures used in managing the
    business may provide users of this financial information additional
    meaningful comparison between current results and results in prior
    operating periods. The Company believes that these non-GAAP financial
    measures are the most indicative of the Company's ongoing earnings
    capabilities and that disclosure of these non-GAAP financial measures
    therefore provides useful information to investors and other users of its
    financial statements, such as lenders. Non-GAAP financial measures should
    be viewed in addition to, and not as an alternative for, the Company's
    reported results prepared in accordance with GAAP.



SOURCE The Scotts Miracle-Gro Company

Website: http://www.scotts.com
Contact: Jim King, Senior Vice President, Investor Relations & Corporate
Affairs, (937) 578-5622
 
Press spacebar to pause and continue. Press esc to stop.