The Scotts Miracle-Gro Company reported earnings for their fiscal 2nd quarter were up 33% . Here is the full release:
– Global Consumer sales increase 8% excluding foreign exchange; up 4% reported
– Company-wide adjusted gross margin rate improves 150 basis points
– Adjusted earnings per share of $1.25; Reported earnings per share of $1.18
– Consumer purchases at major U.S. retailers increase 18 percent
– Company expects full-year adjusted EPS in the upper half of previous guidance
MARYSVILLE, Ohio, April 28 /PRNewswire-FirstCall/ — The Scotts Miracle-Gro Company (NYSE: SMG – News), the world’s leading marketer of branded consumer lawn and garden products, announced that high levels of retailer support and consumer demand resulted in strong second quarter earnings and momentum entering the critical months of the lawn and garden season.
“In the face of a deteriorating economy, the lawn and garden category continues to show its resiliency, and we continue to see the power of our brands,” said Jim Hagedorn, chairman and chief executive officer. “The strong level of consumer demand in the category now gives us confidence that adjusted earnings will be in the upper half of our guidance of $2.10 to $2.30 per share. While it’s still early, we could see upside to our projections if current trends in the core business continue throughout the balance of the lawn and garden season.
“The results so far in April are encouraging, as the past two weeks have each resulted in record levels of consumer purchases of our products at our major retail partners in the United States.”
SECOND QUARTER DETAILS
Company-wide sales of $960.1 million led to adjusted net income for the quarter of $82.5 million, or $1.25 per share, compared with $77.7 million, or $1.19 per share, for the same period last year. This result excludes the impact of product registration and recall costs. Including those items, reported net income was $77.4 million, or $1.18 per share, compared with $58.0 million, or $0.88 per share, for the same period last year.
Sales in Global Consumer – which is comprised of both the North America and Europe consumer businesses – increased by 4 percent to $833.7 million from $801.9 million for the same period last year. Excluding the impact of foreign exchange, sales for Global Consumer increased 8 percent.
Reported sales in the North American consumer business increased by 10 percent in the quarter. Consumer sell-through of the Company’s products at retailers in the United States – as measured by available point of sale data – improved 18 percent led by strong growth in both lawn fertilizer and growing media. Reported sales in the European consumer business decreased by 25 percent on a reported basis and 7 percent in local currency, primarily due to delayed purchases by several key retailers.
Adjusted operating income for the Global Consumer segment improved to $199.3 million from $179.2 million for the same period last year, an 11 percent increase.
“Retail inventory levels are appropriate as we head into the peak of the season,” Hagedorn said. “We’re encouraged with the level of consumer activity and the strong support the category is receiving from our retail partners.”
Scotts LawnService reported a 3 percent increase in sales to $32.8 million from $32.0 million. Strong cost controls resulted in a 13 percent reduction in operating loss, improving to a loss of $16.2 million compared with $18.5 million a year ago.
Global Professional sales declined by 25 percent to $74.5 million from $99.5 million last year. Excluding the impact in changes in foreign currency, sales declined 11 percent primarily due to slower sales within North America as professional growers and distributors decided to lower their inventory and delay purchases of fertilizers and other inputs. Operating income for the segment decreased to $8.0 million from $16.3 million for the same period last year.
Smith and Hawken reported $19.3 million in sales compared with $24.8 million last year, driven by a decline in both retail and trade sales.
For the quarter, adjusted gross margin increased to 37.6 percent compared with 36.1 percent a year earlier. Selling, general and administrative expenses (SG&A) increased 4 percent in the quarter to $215.9 million from $208.4 million a year earlier.
“We are extremely pleased with the improvement in gross margin rates,” said Dave Evans, chief financial officer. “We established a goal of restoring gross margin rates to historic levels in order to continue investing in key initiatives to drive future growth. This is a step in the right direction.”
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 6 percent to $154.2 million from $145.7 million a year ago.
FIRST HALF DETAILS
Company-wide net sales through the first six months were $1.28 billion, a 1 percent increase from a year ago. Excluding the impact of foreign exchange, sales increased 6 percent.
Global Consumer sales increased 5 percent to $1.02 billion versus $968.8 million for last year’s comparable period. Scotts LawnService sales increased 1 percent to $71.3 million. Smith & Hawken reported $51.3 million in sales, down 22 percent. Global Professional reported sales of $140 million down 14 percent for the same period last year. Excluding the impact of foreign exchange, Global Professional sales were essentially flat.
“Our Global Professional business has clearly started the year slower than we anticipated,” Hagedorn said. “While trends are improving, we now believe this business will see a decline in sales from 2008 even after excluding the impact from currency.”
For the first six months, company-wide adjusted gross margin improved 190 basis points to 34.9 percent compared with 33 percent. SG&A increased 5 percent to $369.1 million.
Adjusted EBITDA in the first six months increased 3 percent to $95.9 million versus $93.1 million in the comparable period last year.
Adjusted net income for the first six months – which excludes costs related to the product registration and recall matters – increased 45 percent to $30.4 million, or $0.46 per share, compared with $20.9 million, or $0.32 per share, a year earlier. Reported net income was $20.4 million, or $0.31 per share, compared with $1.2 million, or $0.02 per share, the same period last year.
“In addition to improved gross margin rates, we’re also seeing strong working capital management,” Evans said. “We are increasingly confident in our estimates that free cash flow will range from $150 million to $170 million for the full year.”
The Company will discuss its second quarter results during a Webcast and conference call at 9 a.m. Eastern Time today. The call will be available live on the Investor Relations section of the ScottsMiracle-Gro 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 nearly $3 billion in worldwide sales and more than 6,000 associates, 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, with products for professional horticulture as well. The Company’s brands are the most recognized in the industry. In the U.S., the Company’s Scotts®, Miracle-Gro®, Ortho® and Smith & Hawken 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.
Statement under the Private Securities Litigation Act of 1995: Certain of the statements contained in this press release, 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 in nature. Actual results could differ materially from the forward-looking information in this release, due to a variety of factors, including, but not limited to:
- Adverse weather conditions could adversely affect the Company’s sales and financial results;
- Failure to remain in compliance with the Company’s debt covenants could result in the acceleration of the indebtedness, increase the Company’s interest expense and harm the Company’s ability to obtain additional credit or maintain its existing credit without significant costs, and therefore, could adversely affect the Company’s liquidity and financial health;
- Public perceptions regarding the safety of our products, and/or compliance with heightened environmental and other public health regulations, could increase the Company’s cost of doing business and/or negatively impact sales;
- Costs associated with the Company’s previously announced product recalls and product registration issues and the corresponding governmental investigation, including recall costs, legal and advertising expenses, lost sales and potential fines, penalties and/or judgments could adversely affect the Company’s financial results;
- The loss of one or more of the Company’s top customers could adversely affect the Company’s financial results because of the concentration of the Company’s sales with a small number of retail customers;
- The Company’s international operations make the Company susceptible to fluctuations in currency exchange rates and to the costs of international regulation.
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.