Press Release

• Company-wide sales increase 7 percent in fourth quarter
• Q4 consumer purchases increase 10 percent; full-year purchases up 2%
• Company-wide full year gross margin improves 180 basis points
• GAAP EPS from continuing operations: $4.09; Pro forma adjusted EPS: $3.75
• 2017 Guidance: Adjusted EPS of $4.10 to $4.30 on sales growth of 6 to 7%

MARYSVILLE, Ohio, Nov. 03, 2016 (GLOBE NEWSWIRE) -- The Scotts Miracle-Gro Company (NYSE:SMG), the world’s leading marketer of branded consumer lawn and garden products, today announced fiscal 2016 financial results highlighted by record full-year earnings per share driven by ongoing consumer demand for core products, margin improvement and double-digit growth in hydroponics.

For the year ended September 30, 2016, company-wide reported net sales increased 4 percent to $2.84 billion. Acquisitions and strong consumer demand for core lawn and garden products helped drive a 7 percent increase in fourth quarter sales versus the same period a year ago.

GAAP income from continuing operations for the full year was $4.09 per share compared with $2.23 per share in the prior year. Pro forma adjusted earnings, which exclude impairment, restructuring and other one-time charges, were $3.75 per share compared with $3.53 per share a year ago. The 2016 results include dilution of $0.22 per share from the company’s minority equity investment in its joint venture with TruGreen.

“This was an outstanding season and a giant step forward in the execution of our long-term strategic plan,” said Jim Hagedorn, chairman and chief executive officer. “Not only did our core business have an exceptional recovery after weather-related challenges at the peak of the season, we also completed the joint venture between Scotts LawnService and TruGreen, closed on two major hydroponics acquisitions and created a new partnership with Bonnie Plants. As we enter Year 2 of ‘Project Focus,’ we will continue with the reconfiguration of our portfolio to add emphasis on our core U.S. consumer business and emerging high-growth opportunities under the Hawthorne Gardening Company umbrella.

“Overall, we remain optimistic about our company-wide growth prospects for 2017 and remain on track to achieve our long-term operating margin goal of 18 percent.”

Fourth quarter details
Company-wide sales increased 7 percent to 402.3 million, or 8 percent excluding the impact of foreign exchange rates. The quarter had five fewer days than the same quarter a year ago due to shift in the company’s fiscal calendar in 2016. That shift negatively impacted sales by $37 million in the quarter, $27 million of which impacted the U.S. Consumer segment. As a result, U.S. Consumer sales decreased 1 percent in the quarter to $277.8 million. Those same factors, along with the closure of a small UK-based business, impacted the Europe Consumer business where sales declined to $37.3 million compared with $43.8 million. Sales in the “Other” segment increased 70 percent to $87.2 million, primarily due to growth within The Hawthorne Gardening Company.

For the quarter, the company-wide GAAP and adjusted gross margin rate was 24.8 percent and 25.3 percent respectively, compared with 24.2 percent and 25.0 percent, respectively, a year ago. The year-over-year difference was primarily attributable to lower commodity costs and improvements in distribution. SG&A increased 7 percent to $131.0 million due mostly to acquisitions and higher variable compensation.

The Company reported a seasonal loss from continuing operations on a GAAP basis of $20.2 million or $0.33 per share, compared with a loss of $41.3 million, or $0.65 per share. The loss on a pro forma adjusted basis was $18.6 million, or $0.30 per share, compared with $7.4 million, or $0.12 per share.

“The only area of disappointment in the quarter was related to operating results from our joint venture with TruGreen,” Hagedorn said. “Lower-than-expected sales caused a higher level of dilution than we had expected, however, the business remains on track to achieve the cost synergies outlined when the JV was announced.”

Year-to-Date Details
Company-wide sales increased 4 percent to $2.84 billion, compared to $2.73 billion a year ago, or 5 percent excluding the impact of foreign exchange rates. The shift in the fiscal calendar had no impact on full-year results. Sales in the U.S. Consumer segment increased 2 percent, to $2.19 billion. Europe Consumer declined 10 percent, or 6 percent excluding the impact of foreign exchange rates, to $274.2 million. The “Other” segment increased 33 percent to $374.5 million due to acquisition and growth activity within The Hawthorne Gardening Company.

The GAAP and adjusted gross margin rates on a year-to-date basis were 35.1 percent and 35.4 percent, respectively, compared with 33.3 percent and 33.7 percent, respectively, a year ago. SG&A was $597.1 million, a 4 percent increase from 2015 primarily related to deal costs and expenses from acquired businesses.

GAAP income from continuing operations was $253.3 million or $4.09 per share, compared with $137.8 million or $2.23 per share. Pro forma adjusted earnings were $232.6 million, or $3.75 per share, compared with $219.3 million, or $3.53 per share a year ago. Those results exclude impairment, restructuring and other one-time charges, including costs and subsequent insurance recoveries related to the Bonus S product remediation and consumer complaint matter in 2015. Also, excluded from the pro forma adjusted results is a one-time gain in 2016 of $84.3 million related to the contribution of Scotts LawnService to a joint venture with TruGreen, and $11.7 million of Scotts’ share of non-recurring integration and restructuring charges and transaction related costs associated with the joint venture.  As part of the transaction with TruGreen, the Company received a $196.0 million cash distribution.

2017 Outlook

The Company also provided detailed guidance for fiscal 2017 that includes projected sales growth of 6 to 7 percent, gross margin rate improvement of 50-100 basis points and SG&A growth in line with sales. Adjusted earnings per share is expected between $4.10 and $4.30.

“Our business has had a solid multi-year run of predictable growth and steady improvement in net income, and we’re confident we’ll see that again in 2017,” Coleman said. “We expect our core business to continue growing in the low single digits and be supplemented by higher levels of growth from Hawthorne.

“As a result of the recent operating challenges with TruGreen, we are taking a conservative approach in our assumptions related to equity income next year. However, the combination of favorable commodity costs, strong expense control and incremental pricing should continue to support margin improvement and double digit EPS growth in 2017.”

Conference Call and Webcast Scheduled for 9:00 a.m. ET Today, November 3

The Company will discuss results during a webcast and conference call today at 9:00 a.m. Eastern Time. Conference call participants should call 888-394-8206 (Conference Code: 1007538) 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 888-203-1112. The replay will be available for 30 days.

About ScottsMiracle-Gro
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 near worldwide by Scotts and owned by Monsanto. In the U.S., we maintain a minority interest in TruGreen®, the largest residential lawn care service business, and in Bonnie Plants®, the largest marketer of edible gardening plants in retail channels.  In Europe, the Company's brands include Weedol®, Pathclear®, Evergreen®, Levington®, Miracle-Gro®, KB®, Fertiligène® 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;
• 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 27% 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
Net Sales and Income (Loss) from Continuing Operations before Income Taxes by Segment
(In millions)
(Unaudited)

 The Company divides its business into three reportable segments: U.S. Consumer, Europe Consumer and Other. These segments differ from those used in prior periods due to the change in the Company’s internal organization structure associated with Project Focus, which is a series of initiatives announced in the first quarter of fiscal 2016 designed to maximize the value of the Company’s non-core assets and concentrate its focus on emerging categories of the lawn and garden industry in its core U.S. business. On April 13, 2016, as part of this project, the Company completed the contribution of the Scotts lawn service business (the “SLS Business”) to a newly formed subsidiary of TruGreen Holding Corporation (the “Joint Venture”) in exchange for a minority equity interest of approximately 30% in the Joint Venture. As a result, effective in its second quarter of fiscal 2016, the Company classified its results of operations for all periods presented to reflect the SLS Business as a discontinued operation and classified the assets and liabilities of the SLS Business as held for sale. The prior period amounts have been reclassified to conform with the new segments. 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. U.S. Consumer consists of the Company’s consumer lawn and garden business located in the geographic United States. Europe Consumer consists of the Company’s consumer lawn and garden business located in geographic Europe. Other consists of the Company’s consumer lawn and garden business in geographies other than the U.S. and Europe, the Company’s indoor, urban and hydroponics gardening business, and revenues and expenses associated with the Company’s supply agreements with Israel Chemicals, Ltd. Corporate consists of general and administrative expenses and certain other income/expense items not allocated to the business segments.

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 uses this measure of operating profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.

Contact:
Jim King
Senior Vice President
Investor Relations & Corporate Affairs
(937) 578-5622

Scotts Miracle-Gro Company