Press Release

MARYSVILLE, Ohio, Nov. 7, 2013 /PRNewswire/ -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's leading marketer of branded consumer lawn and garden products, today announced that fiscal 2013 adjusted earnings improved 39 percent to $2.79 per share due to the Company's strong second half performance in the core U.S. lawn and garden business, as well as better-than-expected execution of its Project Max productivity efforts.

Net sales of $2.82 billion for the year, essentially flat from a year ago, were achieved after a 9 percent increase in the second half of the year, including a 10 percent increase in the fourth quarter.

Adjusted income from continuing operations for the year ended September 30, 2013 was $174.4 million, or $2.79 per share, compared with $124.9 million, or $2.01 per share a year ago.  Those results exclude the impact of product registration and recall costs, as well as impairment, restructuring and other charges.  Including those items, income from continuing operations was $161.2 million, or $2.58 per share in 2013, compared to $113.2 million, or $1.82 per share a year ago.

The strong earnings improvement was driven by a 6 percent reduction in selling, general and administrative expense (SG&A) as the result of Project Max. In addition, increased pricing, combined with cost-out efforts related to Project Max, contributed to a 100 basis point improvement in the Company's adjusted gross margin rate.

"These results are a giant step forward in returning our business to a proper level of profitability and reflect the deep commitment of our team of associates around the world," said Jim Hagedorn, chairman and chief executive officer. "Despite dramatic delays in our season due to poor spring weather, consumers were highly engaged in the second half of the year, allowing us to exceed our guidance. Additionally, the acceleration of Project Max allowed us to move faster than we anticipated and put us in a good position entering next year.

"We continue to believe the consumer marketplace remains soft. Therefore, as we did in 2013, we will plan conservatively but look for opportunities to drive better-than-expected results. Our initial outlook is for sales growth of 2 to 3 percent and earnings per share growth of 10 to 15 percent in fiscal 2014, which could represent up to a 60 percent improvement in earnings over a two-year period."

Fourth-Quarter Details

Company-wide net sales increased 10 percent in the fourth quarter to $443.0 million, compared with $401.2 million during the same quarter a year ago.  Global Consumer segment sales increased 12 percent in the fourth quarter to $347.5 million. Sales in the U.S. increased 15 percent during the quarter.  Outside the U.S., sales increased 2 percent, excluding the impact of foreign exchange rates. The operating loss for the Global Consumer segment was $6.7 million during the fourth quarter, compared with a loss of $39.1 million a year ago.  Consumer purchases at the Company's largest U.S. retailers increased 6 percent in the fourth quarter, compared to a year ago.

Scotts LawnService sales increased 7 percent to $90.2 million in the fourth quarter, compared to $84.5 million during the same quarter a year ago.  Operating income for the segment increased 10 percent during the quarter to $24.3 million, compared with $22.1 million a year ago.

The company-wide adjusted gross margin rate was 29.7 percent during the fourth quarter, compared with 26.2 percent during the same quarter a year ago. The year-over-year improvement was due to increased pricing, favorable commodity costs, increased sales volume and continued growth in the Scotts LawnService business.

SG&A in the fourth quarter decreased 6 percent, or $8.6 million, to $140.1 million, compared with $148.7 million a year ago.  The year-over-year savings were driven by expense reduction as part of the Company's Project Max initiative.

Adjusted loss from continuing operations was $11.1 million in the fourth quarter, or $0.18 per share, compared with a loss of $36.4 million, or $0.59 per share, a year ago.  Those results exclude costs related to impairment, restructuring and other charges, as well as product registration and recall matters.  Including those items, reported loss from continuing operations for the fourth quarter was $18.6 million, or $0.30 per share, compared with a loss of $36.6 million, or $0.60 per share, a year ago.

The quarter included an $11.6 million non-cash impairment charge related to the Ortho brand as part of the Company's annual impairment review.

Full-Year Details

Company-wide net sales were flat in 2013 at $2.82 billion, as were Global Consumer sales at $2.53 billion.  Scotts LawnService sales increased 5 percent to $257.8 million for the year, compared to $245.8 million a year ago. Consumer purchases at the Company's largest U.S. retailers were in line with 2012.

On an adjusted basis, the company-wide gross margin rate increased 100 basis points to 35.0 percent for the year. The improvement was attributable primarily to increased pricing, cost-out efforts and other cost efficiencies, partially offset by planned commodity cost inflation and lower-than-expected sales volume.

SG&A decreased 6 percent, or $44.6 million, to $661.1 million, compared to $705.7 million a year ago.  The year-over-year savings in nearly all areas were driven by the Company's Project Max initiative.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $390.5 million, an increase of 29 percent, compared to $302.9 million a year ago.

Adjusted income from continuing operations for fiscal 2013 was $174.4 million, or $2.79 per share, compared to $124.9 million, or $2.01 per share a year ago.  Those results exclude costs related to impairment, restructuring and other charges, as well as product registration and recall matters.  Including those items, reported income from continuing operations for 2013 was $161.2 million, or $2.58 per share, compared with $113.2 million, or $1.82 per share, a year ago.

For the full year, the Company recorded $20.3 million in impairment, restructuring and other charges, with $9.1 million attributed to its efforts to improve the profitability of its international operations. 

The Global Consumer segment reported a 20 percent increase in operating income to $406.4 million for fiscal 2013, compared to $338.3 million a year ago.  Scotts LawnService reported a 6 percent increase in operating income to $28.7 million during the year, compared to $27.0 million in fiscal 2012.  The consolidated company-wide adjusted income from continuing operations before income taxes increased 39 percent to $274.3 million during fiscal 2013, compared to $197.1 million a year ago.

Cash flow from operations was $342 million in 2013, well above the Company's original projections for the year due to better-than-expected inventory management and a non-recurring cash benefit from a recovery of taxes overpaid in 2012.

"Our focus in 2013 was to significantly improve margin and cash flow, and we succeeded," Hagedorn said. "In addition to hitting our earnings targets – even on lower sales than we originally projected – we also reduced our leverage ratio during the year and increased our quarterly dividend by 35 percent. That focus will remain core to our near-term thinking as we continue to drive shareholder value through a combination of improved performance and returning cash to shareholders."

Company to Hold Its Analyst Day Meeting on Dec. 13

The Company will hold its Analyst & Investor Day on Friday, December 13, 2013 at the Waldorf Astoria Hotel in New York.  A live webcast of the meeting will be available on the investor relations section of the Company's website at http://investor.scotts.com. Presentation slides and a replay of the webcast will be available on the website following the meeting.

Conference Call and Webcast Scheduled for 9:00 a.m. ET Today, Nov. 7

The Company will discuss its fiscal fourth-quarter and full-year 2013 results during a webcast and conference call today at 9:00 a.m. ET. Conference call participants should call 888-364-3109.  A replay of the call can be heard by calling 888-203-1112 (Reference Number: 3700119).  The replay will be available for 30 days.  The live webcast is available 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 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®, 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;
• 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.

SOURCE The Scotts Miracle-Gro Company