UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 23, 2007
THE SCOTTS MIRACLE-GRO COMPANY
(Exact name of registrant as specified in its charter)
| OHIO | 1-13292 | 31-1414921 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 14111 SCOTTSLAWN RD MARYSVILLE, OHIO | 43041 | |||
| (Address of principal executive offices) | (Zip Code) | |||
| (937) 644-0011 | ||||
| (Registrant’s telephone number, including area code) |
||||
| Not Applicable | ||||
| (Former name or former address, if changed since last report) |
||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 2.02. Results of Operation and Financial Condition.
On January 23, 2007, The Scotts Miracle-Gro Company issued a News Release concerning information regarding its results of operations and financial condition for the three month period ended December 30, 2006. The News Release is attached hereto as Exhibit 99.1.
The News Release includes the following non-GAAP financial measures as defined in Regulation G: (1) adjusted net loss, (2) adjusted diluted loss per share and (3) adjusted EBITDA. The Registrant’s management believes that the disclosure of these non-GAAP financial measures provides useful information to investors or other users of the financial statements, such as lenders. As to adjusted net loss and adjusted diluted loss per share, impairment, restructuring and other charges are excluded as these items typically relate to costs or gains for discrete projects or transactions related to the closure, downsizing or divestiture of certain operations that are apart from and not indicative of the results of the operations of the business. The presentation of adjusted EBITDA is provided as a convenience to the Registrant’s lenders because adjusted EBITDA is a component of certain debt compliance covenants. Adjusted EBITDA, as defined by the Registrant's credit facility, is calculated as net income or loss before interest, taxes, depreciation and amortization, as well as certain other items such as the impact of discontinued operations, the cumulative effect of changes in accounting, costs associated with debt refinancing, and other non-recurring, non-cash items effecting income. The Registrant's calculation of adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by accounting principles generally accepted in the United States of America. The Registrant makes no representation or assertion that adjusted EBITDA is indicative of its cash flows from operations or results of operations. The Registrant has provided a reconciliation of adjusted EBITDA to net loss solely for the purpose of complying with Regulation G and not as an indication that adjusted EBITDA is a substitute measure for loss from operations.
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(a)
|
Financial Statements of business acquired | ||
| Not applicable | |||
(b)
|
Pro Forma Financial Information | ||
| Not applicable | |||
(c)
|
Shell Company transactions: | ||
| Not applicable | |||
(d)
|
Exhibits: |
| Exhibit No. | Description | |
99.1
|
News Release issued on January 23, 2007 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
| THE SCOTTS MIRACLE-GRO COMPANY |
||||
| By: | /s/ David C. Evans | |||
| David C. Evans | ||||
| Executive Vice President and Chief Financial Officer |
||||
Date: January 23, 2007
Index to Exhibits
Current Report on Form 8-K
Dated January 23, 2007
The Scotts Miracle-Gro Company
| Exhibit No. | Description | |
99.1
|
News Release issued on January 23, 2007 |
Exhibit 99.1
FOR IMMEDIATE RELEASE
| The Scotts Miracle-Gro Company | NEWS | |
The Scotts Miracle-Gro Company Reports Record First Quarter Sales
Company reaffirms full-year outlook, remains on track with recapitalization effort
North America sales up 10%, Scotts LawnService and International report 9% increases
MARYSVILLE, Ohio (January 23, 2007) — The Scotts Miracle-Gro Company (NYSE: SMG), the world’s
leading marketer of branded consumer lawn and garden products, today reported record first quarter
sales of $271 million, up 9 percent from the same period a year ago. The improvement was led by a
10 percent increase in North America, as well as a 9 percent reported improvement in both Scotts
LawnService and International. Smith & Hawken sales increased 6 percent.
The Company reported a seasonal net loss of $59.4 million, or 88 cents per share, slightly
better than the outlook it provided in December, 2006. This result compares with a net loss of
$52.7 million, or 78 cents per share, a year earlier. In fiscal 2006, excluding restructuring and
other charges, the Company reported an adjusted net loss of $49.1 million, or 72 cents per share.
“We’re pleased with our start to the year and look forward to the beginning of the lawn and
garden season,” said Jim Hagedorn, chairman and chief executive officer. “Typically, our first
quarter loss increases each year due to higher expenses that are not offset until later in the
year. While sales in the quarter represent less than 10 percent of the full year, it is a critical
time for us. During the winter months, our teams have been focused on sales, marketing and supply
chain initiatives that leave us well positioned as we prepare for spring.”
While the first quarter typically has only a modest level of consumer activity, the Company
said consumer purchases of its products increased in every category, including an 8 percent
increase in controls and plant food, as well as a 12 percent increase in growing media.
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“The fact that consumers remained loyal to our brands and engaged in the category, even during
the slow part of the season, is extremely encouraging,” Hagedorn said. “With the launch of several
new products, improved advertising campaigns and trade promotions, we remain confident that we can
increase company-wide sales 8 to 10 percent in fiscal 2007.”
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter
was a loss of $68.2 million, compared with a loss of $59.9 million a year earlier.
Sales for North America increased 10 percent to $137.6 million versus $125.6 million for last
year’s comparable period. International sales increased to $63.4 million from $58.3 million.
Excluding the impact of foreign exchange rates, International sales declined 2 percent in the
quarter. Scotts LawnService had revenues of $25.8 million, compared with $23.6 million last year.
Smith & Hawken reported sales of $44.4 million, up 6 percent from last year.
The gross margin rate was 20.4 percent in the quarter compared with 21.4 percent a year
earlier. The expected decline primarily reflects the impact of lower margin strategic acquisitions
made in fiscal 2006 as well as higher commodity costs that are not yet offset by price increases
that took effect at the beginning of the second quarter.
Total SG&A expense for the first quarter was $142.2 million, compared with $126.0 million a
year earlier. Interest expense in the first quarter was $8.2 million compared with $7.1 million in
the prior year.
Separately, the Company remains on schedule with its initiative to return $750 million to
shareholders. ScottsMiracle-Gro is in the midst of completing a modified Dutch auction to
repurchase up to $250 million worth of its common shares as well as a tender offer for its 6.625
percent senior subordinated notes. Both offers are expected to expire February 8, 2007. After the
tenders are complete, the Company plans to declare a special one-time cash dividend of at least
$500 million. To accomplish these efforts, ScottsMiracle-Gro is finalizing a new $2.1 — $2.3
billion credit facility, which it expects to be initially priced at LIBOR plus 125 basis points. As
a result, the Company anticipates full-year interest expense for fiscal 2007 to be in a range of
$75 million to $80 million.
“We remain very confident in the progress we’re making and the approach we are taking to
return $750 million to our shareholders,” said Dave Evans, chief financial officer. “The continued
strength of our business, combined with the non-cyclical nature of our cash flow, should allow us
to return our leverage ratios to their current levels by 2011.”
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The Company will discuss its first quarter 2007 results during a Webcast conference call at
10:00 a.m. EDT 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 more than $2.7 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® 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. The Company also owns Smith & Hawken®, a
leading brand of garden-inspired products that includes pottery, watering equipment, gardening
tools, outdoor furniture and live goods, and Morning Song®, a leading brand in the wild bird food
market. 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; |
| • | The Company’s historical seasonality could impair the Company’s ability to pay obligations as they come due and operating expenses; |
| • | The Company’s substantial indebtedness could adversely affect the Company’s financial health; |
| • | Public perceptions regarding the safety of the Company’s products could adversely affect the Company; |
| • | 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 to a small number of retail customers; |
| • | The expiration of certain patents could substantially increase the Company’s competition in the United States; |
| • | Compliance with environmental and other public health regulations could increase the Company’s cost of doing business; and, |
| • | The Company’s significant international operations make the Company more susceptible to fluctuations in currency exchange rates and to the costs of international regulation. |
Additional detailed information concerning a number of 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.
Contact:
Jim King
Vice President
Investor Relations & Corporate Communications
(937) 578-5622
Jim King
Vice President
Investor Relations & Corporate Communications
(937) 578-5622
Page 3
THE SCOTTS MIRACLE-GRO COMPANY
Results of Operations for the Three Months
Ended December 30, 2006 and December 31, 2005
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 8
Results of Operations for the Three Months
Ended December 30, 2006 and December 31, 2005
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 8
| Three Months Ended | ||||||||||||||||
| December 30, | December 31, | % | ||||||||||||||
| Footnotes | 2006 | 2005 | Change | |||||||||||||
Net sales |
$ | 271.2 | $ | 249.5 | 9 | % | ||||||||||
Cost of sales |
215.9 | 196.0 | ||||||||||||||
Gross profit |
55.3 | 53.5 | 3 | % | ||||||||||||
% of sales |
20.4 | % | 21.4 | % | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative |
142.2 | 126.0 | 13 | % | ||||||||||||
Impairment, restructuring and other charges |
— | 5.7 | ||||||||||||||
Other income, net |
(2.3 | ) | (1.6 | ) | ||||||||||||
Total operating expenses |
139.9 | 130.1 | 8 | % | ||||||||||||
Loss from operations |
(84.6 | ) | (76.6 | ) | -10 | % | ||||||||||
% of sales |
-31.2 | % | -30.7 | % | ||||||||||||
Interest expense |
8.2 | 7.1 | ||||||||||||||
Loss before taxes |
(92.8 | ) | (83.7 | ) | -11 | % | ||||||||||
Income tax benefit |
(33.4 | ) | (31.0 | ) | ||||||||||||
Net loss |
$ | (59.4 | ) | $ | (52.7 | ) | -13 | % | ||||||||
Basic loss per share |
(1 | ) | $ | (0.88 | ) | $ | (0.78 | ) | -13 | % | ||||||
Diluted loss per share |
(2 | ) | $ | (0.88 | ) | $ | (0.78 | ) | -13 | % | ||||||
Common shares used in basic loss
per share calculation
|
67.2 | 68.0 | -1 | % | ||||||||||||
Common shares and potential common shares used
in diluted loss per share calculation |
67.2 | 68.0 | -1 | % | ||||||||||||
Results of operations excluding restructuring
and loss on impairment: |
||||||||||||||||
Adjusted net loss |
$ | (59.4 | ) | $ | (49.1 | ) | -21 | % | ||||||||
Adjusted diluted loss per share |
(2 | ) | $ | (0.88 | ) | $ | (0.72 | ) | -22 | % | ||||||
Adjusted EBITDA |
(3 | ) | $ | (68.2 | ) | $ | (59.9 | ) | -14 | % | ||||||
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THE SCOTTS MIRACLE-GRO COMPANY
Net Sales by Segment — Three Months
Ended December 30, 2006 and December 31, 2005
(in millions)
(unaudited)
Net Sales by Segment — Three Months
Ended December 30, 2006 and December 31, 2005
(in millions)
(unaudited)
| Three Months Ended | |||||||||||||
| December 30, | December 31, | ||||||||||||
| 2006 | 2005 | % Change | |||||||||||
North America |
$ | 137.6 | $ | 125.6 | 10 | % | |||||||
International |
63.4 | 58.3 | 9 | % | |||||||||
Scotts LawnService |
25.8 | 23.6 | 9 | % | |||||||||
Corporate & Other |
44.4 | 42.0 | 6 | % | |||||||||
Consolidated |
$ | 271.2 | $ | 249.5 | 9 | % | |||||||
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THE SCOTTS MIRACLE-GRO COMPANY
Consolidated Balance Sheets
December 30, 2006 and December 31, 2005
(Unaudited)
(in millions)
Consolidated Balance Sheets
December 30, 2006 and December 31, 2005
(Unaudited)
(in millions)
| December 30, | December 31, | September 30, | ||||||||||
| 2006 | 2005 | 2006 | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 36.1 | $ | 37.8 | $ | 48.1 | ||||||
Accounts receivable, net |
264.5 | 250.8 | 380.4 | |||||||||
Inventories, net |
629.1 | 558.8 | 409.2 | |||||||||
Prepaid and other current assets |
106.8 | 63.5 | 104.3 | |||||||||
Total current assets |
1,036.5 | 910.9 | 942.0 | |||||||||
Property, plant and equipment, net |
369.3 | 361.0 | 367.6 | |||||||||
Goodwill, net |
471.0 | 450.5 | 458.1 | |||||||||
Other intangible assets, net |
425.4 | 472.3 | 424.7 | |||||||||
Other assets |
25.8 | 21.2 | 25.2 | |||||||||
Total assets |
$ | 2,328.0 | $ | 2,215.9 | $ | 2,217.6 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Current
portion of debt |
15.2 | 13.9 | 6.0 | |||||||||
Accounts payable |
220.9 | 215.7 | 200.4 | |||||||||
Other current liabilities |
205.0 | 204.4 | 289.8 | |||||||||
Total current liabilities |
441.1 | 434.0 | 496.2 | |||||||||
Long-term debt |
679.3 | 679.1 | 475.2 | |||||||||
Other liabilities |
166.0 | 126.5 | 164.5 | |||||||||
Total liabilities |
1,286.4 | 1,239.6 | 1,135.9 | |||||||||
Shareholders’ equity |
1,041.6 | 976.3 | 1,081.7 | |||||||||
Total
liabilities and shareholders’ equity |
$ | 2,328.0 | $ | 2,215.9 | $ | 2,217.6 | ||||||
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THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items for the Three
Months Ended December 30, 2006 and December 31, 2005
(in millions, except per share data)
Note: See Note 4 to the Accompanying Footnotes on Page 8
Reconciliation of Non-GAAP Disclosure Items for the Three
Months Ended December 30, 2006 and December 31, 2005
(in millions, except per share data)
Note: See Note 4 to the Accompanying Footnotes on Page 8
| Three Months Ended | ||||||||
| December 30, | December 31, | |||||||
| 2006 | 2005 | |||||||
Loss before taxes |
$ | (92.8 | ) | $ | (83.7 | ) | ||
Restructuring and other charges |
— | 4.7 | ||||||
Impairment of intangibles |
— | 1.0 | ||||||
Adjusted loss before taxes |
(92.8 | ) | (78.0 | ) | ||||
Income tax benefit |
(33.4 | ) | (28.9 | ) | ||||
Adjusted net loss |
$ | (59.4 | ) | $ | (49.1 | ) | ||
Diluted loss per share (items net of tax) |
$ | (0.88 | ) | $ | (0.78 | ) | ||
Restructuring and other charges |
— | 0.05 | ||||||
Impairment of intangibles |
— | 0.01 | ||||||
Adjusted diluted loss per share |
$ | (0.88 | ) | $ | (0.72 | ) | ||
Net loss |
$ | (59.4 | ) | $ | (52.7 | ) | ||
Income tax benefit |
(33.4 | ) | (31.0 | ) | ||||
Interest |
8.2 | 7.1 | ||||||
Depreciation |
12.7 | 12.2 | ||||||
Amortization, including marketing fee |
3.7 | 3.5 | ||||||
Loss on impairment |
— | 1.0 | ||||||
Adjusted EBITDA |
$ | (68.2 | ) | $ | (59.9 | ) | ||
Page 7
THE SCOTTS MIRACLE-GRO COMPANY
Footnotes to Preceding Financial Statements
(in millions, except per share data)
Footnotes to Preceding Financial Statements
(in millions, except per share data)
Results of Operations
| (1) | Basic earnings per common share is calculated by dividing net income by average common shares outstanding during the period. |
| (2) | Diluted earnings per common share is calculated by dividing net income by the average common shares and dilutive potential common shares (common stock options and restricted stock) outstanding during the period. If there is a loss, diluted earnings per share is equal to basic earnings per share. |
| (3) | “Adjusted EBITDA” is defined as net income before interest, taxes, depreciation and amortization as well as certain other items such as the impact of discontinued operations, the cumulative effect of changes in accounting, costs associated with debt refinancings and other non-recurring, non-cash items effecting net income. Adjusted EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. |
| (4) | The Reconciliation of Non-GAAP Disclosure Items includes the following non-GAAP financial measures (1) adjusted net loss, (2) adjusted diluted loss per share and (3) adjusted EBITDA. The Company believes that the disclosure of these non-GAAP financial measures provides useful information to investors or other users of the financial statements, such as lenders. As to adjusted net loss and adjusted diluted loss per share, impairment, restructuring and other charges are excluded as these items typically relate to costs or gains for discrete projects or transactions related to the closure, downsizing or divestiture of certain operations that are apart from and not indicative of the results of the operations of the business. The presentation of adjusted EBITDA is provided as a convenience to the Registrant’s lenders because adjusted EBITDA is a component of certain debt compliance covenants. |
Page 8