The Scotts Miracle-Gro Company 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-13292
THE SCOTTS MIRACLE-GRO COMPANY
(Exact Name of Registrant as Specified in Its Charter)
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OHIO
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31-1414921 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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14111 SCOTTSLAWN ROAD, |
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MARYSVILLE, OHIO
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43041 |
(Address of principal executive offices)
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(Zip Code) |
(937) 644-0011
(Registrants telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date:
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Class |
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Outstanding at May 1, 2008 |
Common Shares, $0.01 stated value, no par value
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64,518,590 common shares |
THE SCOTTS MIRACLE-GRO COMPANY
INDEX
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SCOTTS MIRACLE-GRO COMPANY
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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MARCH 29, |
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MARCH 31, |
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MARCH 29, |
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MARCH 31, |
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2008 |
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2007 |
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2008 |
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2007 |
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Net sales |
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$ |
958.0 |
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$ |
993.3 |
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$ |
1,266.7 |
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$ |
1,264.5 |
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Cost of sales |
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635.2 |
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624.9 |
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872.6 |
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840.8 |
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Gross profit |
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322.8 |
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368.4 |
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394.1 |
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423.7 |
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Operating expenses: |
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Selling, general and administrative |
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209.6 |
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203.0 |
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353.9 |
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345.2 |
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Other income, net |
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(1.0 |
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(1.1 |
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(4.2 |
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(3.4 |
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Income from operations |
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114.2 |
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166.5 |
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44.4 |
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81.9 |
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Costs related to refinancing |
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18.3 |
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18.3 |
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Interest expense |
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23.5 |
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17.9 |
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42.5 |
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26.1 |
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Income before income taxes |
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90.7 |
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130.3 |
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1.9 |
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37.5 |
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Income taxes |
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32.7 |
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46.9 |
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0.7 |
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13.5 |
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Net income |
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$ |
58.0 |
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$ |
83.4 |
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$ |
1.2 |
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$ |
24.0 |
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BASIC NET INCOME PER COMMON SHARE: |
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Weighted-average common shares outstanding during the period |
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64.4 |
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66.1 |
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64.3 |
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66.6 |
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Basic net income per common share |
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$ |
0.90 |
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$ |
1.26 |
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$ |
0.02 |
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$ |
0.36 |
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DILUTED NET INCOME PER COMMON SHARE: |
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Weighted-average common shares outstanding during the
period plus dilutive potential common shares |
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65.6 |
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67.8 |
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65.7 |
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68.4 |
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Diluted net income per common share |
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$ |
0.88 |
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$ |
1.23 |
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$ |
0.02 |
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$ |
0.35 |
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Dividends declared per common share |
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$ |
0.125 |
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$ |
8.125 |
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$ |
0.250 |
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$ |
8.250 |
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See notes to condensed, consolidated financial statements
3
THE
SCOTTS MIRACLE-GRO COMPANY
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
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SIX MONTHS ENDED |
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MARCH 29, |
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MARCH 31, |
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2008 |
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2007 |
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OPERATING ACTIVITIES |
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Net income |
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$ |
1.2 |
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$ |
24.0 |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Costs related to refinancing |
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18.3 |
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Stock-based compensation expense |
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7.2 |
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10.0 |
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Depreciation |
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26.4 |
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26.4 |
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Amortization |
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8.2 |
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7.7 |
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Gain on sale of property, plant and equipment |
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(0.4 |
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Changes in assets and liabilities, net of acquired businesses: |
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Accounts receivable |
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(624.1 |
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(616.8 |
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Inventories |
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(213.5 |
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(158.0 |
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Prepaid and other current assets |
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(29.7 |
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(28.3 |
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Accounts payable |
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160.7 |
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141.3 |
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Accrued liabilities |
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116.2 |
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64.2 |
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Restructuring reserves |
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(0.7 |
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(4.2 |
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Other non-current items |
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(4.9 |
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(2.1 |
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Other, net |
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(2.7 |
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(1.8 |
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Net cash used in operating activities |
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(555.7 |
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(519.7 |
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INVESTING ACTIVITIES |
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Proceeds from the sale of property, plant and equipment |
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0.6 |
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0.4 |
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Investment in property, plant and equipment |
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(25.1 |
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(30.1 |
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Investment in acquired businesses, net of cash acquired |
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(6.3 |
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Net cash used in investing activities |
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(24.5 |
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(36.0 |
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FINANCING ACTIVITIES |
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Borrowings under revolving and bank lines of credit |
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760.1 |
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2,122.8 |
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Repayments under revolving and bank lines of credit |
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(168.6 |
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(611.1 |
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Repayments of 6 5/8% senior subordinated notes |
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(209.6 |
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Dividends paid |
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(16.4 |
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(528.4 |
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Purchase of common shares and related costs |
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(246.7 |
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Financing fees |
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(12.7 |
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Payments on seller notes |
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(1.4 |
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(1.2 |
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Excess tax benefits from share-based payment arrangements |
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1.6 |
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12.9 |
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Cash received from the exercise of stock options |
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5.5 |
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21.8 |
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Net cash provided by financing activities |
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580.8 |
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547.8 |
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Effect of exchange rate changes on cash |
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8.4 |
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3.3 |
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Net increase (decrease) in cash |
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9.0 |
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(4.6 |
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Cash and cash equivalents at beginning of period |
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67.9 |
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48.1 |
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Cash and cash equivalents at end of period |
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$ |
76.9 |
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$ |
43.5 |
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Supplemental cash flow information
Interest paid, net of interest capitalized |
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34.0 |
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24.1 |
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Income taxes (refunded) paid |
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(6.9 |
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6.3 |
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See notes to condensed, consolidated financial statements
4
THE
SCOTTS MIRACLE-GRO COMPANY
CONDENSED, CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT PER SHARE AMOUNT)
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MARCH 29, |
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MARCH 31, |
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SEPTEMBER 30, |
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2008 |
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2007 |
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2007 |
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UNAUDITED |
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(SEE NOTE 1) |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
76.9 |
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$ |
43.5 |
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$ |
67.9 |
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Accounts receivable, less allowances of $15.7, $15.0 and $11.4,
respectively |
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738.9 |
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1,001.0 |
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248.3 |
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Accounts receivable pledged |
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296.2 |
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149.5 |
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Inventories, net |
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625.1 |
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571.9 |
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405.9 |
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Prepaid and other assets |
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159.7 |
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131.0 |
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127.7 |
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Total current assets |
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1,896.8 |
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1,747.4 |
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999.3 |
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Property, plant and equipment, net of accumulated
depreciation of $447.6, $398.1 and $418.8, respectively |
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363.3 |
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369.2 |
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365.9 |
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Goodwill |
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467.3 |
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475.0 |
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462.9 |
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Intangible assets, net |
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417.9 |
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421.7 |
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418.8 |
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Other assets |
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25.6 |
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29.5 |
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30.3 |
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Total assets |
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$ |
3,170.9 |
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$ |
3,042.8 |
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$ |
2,277.2 |
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities: |
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Current portion of debt |
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$ |
281.8 |
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$ |
23.7 |
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$ |
86.4 |
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Accounts payable |
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368.0 |
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341.5 |
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202.5 |
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Other current liabilities |
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421.2 |
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355.8 |
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297.7 |
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Total current liabilities |
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1,071.0 |
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721.0 |
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586.6 |
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Long-term debt |
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1,445.9 |
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1,783.2 |
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1,031.4 |
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Other liabilities |
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187.8 |
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163.8 |
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179.9 |
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Total liabilities |
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2,704.7 |
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2,668.0 |
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1,797.9 |
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Commitments and contingencies (notes 5 and 12) |
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Shareholders equity: |
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Common shares and capital in excess of $.01 stated value per
share, 64.5, 63.5 and 64.1 shares issued and outstanding,
respectively |
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476.4 |
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492.2 |
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480.3 |
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Retained earnings |
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245.4 |
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186.3 |
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260.5 |
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Treasury shares, at cost: 3.7, 4.6, and 4.0 shares, respectively |
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(200.4 |
) |
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(252.9 |
) |
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(219.5 |
) |
Accumulated other comprehensive loss |
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(55.2 |
) |
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(50.8 |
) |
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(42.0 |
) |
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Total shareholders equity |
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466.2 |
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374.8 |
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479.3 |
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Total liabilities and shareholders equity |
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$ |
3,170.9 |
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$ |
3,042.8 |
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$ |
2,277.2 |
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See notes to condensed, consolidated financial statements
5
NOTES TO CONDENSED,
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Scotts Miracle-Gro Company (Scotts Miracle-Gro) and its subsidiaries (collectively, the
Company) are engaged in the manufacture, marketing and sale of lawn and garden care products. The
Companys major customers include home improvement centers, mass merchandisers, warehouse clubs,
large hardware chains, independent hardware stores, nurseries, garden centers, food and drug
stores, commercial nurseries and greenhouses, and specialty crop growers. The Companys products
are sold primarily in North America and the European Union. The Company also operates the Scotts
LawnService® business which provides lawn, tree and shrub fertilization, insect control and other
related services in the United States of America (the United States or U.S.) and Smith & Hawken®, a leading brand in the outdoor living
and gardening lifestyle category.
Due to the nature of the lawn and garden business, the majority of shipments to retailers occur in
the Companys second and third fiscal quarters. On a combined basis, net sales for the second and
third fiscal quarters generally represent 70% to 75% of annual net sales. As a result of the
seasonal nature of our business, results for the first half of our fiscal year are not indicative
of the full year.
ORGANIZATION AND BASIS OF PRESENTATION
The Companys condensed, consolidated financial statements are unaudited; however, in the opinion
of management, these financial statements are presented in accordance with accounting principles
generally accepted in the United States. The condensed, consolidated financial
statements include the accounts of Scotts Miracle-Gro and all wholly-owned and majority-owned
subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation. The
Companys consolidation criteria are based on majority ownership (as evidenced by a majority voting
interest in the entity) and an objective evaluation and determination of effective management
control. Interim results reflect all normal and recurring adjustments and are not necessarily
indicative of results for a full year. The interim financial statements and notes are presented as
specified by Regulation S-X of the Securities and Exchange Commission, and should be read in
conjunction with the consolidated financial statements and accompanying notes in the Scotts
Miracle-Gros Annual Report on Form 10-K for the fiscal year ended September 30, 2007.
The Condensed, Consolidated Balance
Sheet at September 30, 2007 has been derived from the audited Consolidated Balance Sheet at
that date, but does not include all of the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect
the amounts reported in the condensed, consolidated financial statements and accompanying notes.
Although these estimates are based on managements best knowledge of current events and actions the
Company may undertake in the future, actual results ultimately may differ from the estimates.
REVENUE RECOGNITION
Revenue is recognized when title and risk of loss transfer, which generally occurs when products
are received by the customer. Provisions for estimated returns and allowances are recorded at the
time revenue is recognized based on historical rates and are periodically adjusted for known
changes in return levels. Shipping and handling costs are included in cost of sales. Scotts
LawnService® revenues are recognized at the time service is provided to the customer.
Under the terms of the Amended and Restated Exclusive Agency and Marketing Agreement (the
Marketing Agreement) between the Company and Monsanto, the Company, in its role as exclusive
agent performs certain functions, such as sales support, merchandising, distribution and logistics,
and incurs certain costs in support of the consumer Roundup® business. The actual costs incurred by
the Company on behalf of Roundup® are recovered from Monsanto through the terms of the Marketing
Agreement. The reimbursement of costs for which the Company is considered the primary obligor is
included in net sales.
PROMOTIONAL ALLOWANCES
The Company promotes its branded products through cooperative advertising programs with retailers.
Retailers also are offered in-
6
store promotional allowances and rebates based on sales volumes. Certain products are promoted with
direct consumer rebate programs and special purchasing incentives. Promotion costs (including
allowances and rebates) incurred during the year are expensed to interim periods in relation to
revenues and are recorded as a reduction of net sales. Accruals for expected payouts under these
programs are included in the Other current liabilities line in
the Condensed, Consolidated Balance Sheets.
ADVERTISING
The Company advertises its branded products through national and regional media. Advertising costs
incurred during the year are expensed to interim periods in relation to revenues. All advertising
costs, except for external production costs, are expensed within the fiscal year in which such
costs are incurred. External production costs for advertising programs are deferred until the
period in which the advertising is first aired.
Scotts LawnService® promotes its service offerings primarily through direct mail campaigns.
External costs associated with these campaigns, that qualify as direct response advertising costs,
are deferred and recognized as advertising expense in proportion to revenues over a period not
beyond the end of the subsequent calendar year. The costs deferred at March 29, 2008, March 31,
2007 and September 30, 2007 were $11.8 million, $10.6 million and $5.7 million, respectively.
STOCK-BASED COMPENSATION AWARDS
The fair value of awards is expensed ratably over the vesting period, generally three years. The
Company uses a binomial model to fair value its option grants.
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS
During the third quarter of fiscal 2007, the Company changed the timing of its annual goodwill
impairment testing from the last day of the fiscal first quarter to the first day of the fiscal
fourth quarter. In addition, the Company also changed the date of its annual indefinite life
intangible impairment testing to the first day of the fiscal fourth quarter.
The impairment analyses for the first quarter of fiscal 2007 indicated that no impairment charges
were required.
NET INCOME PER COMMON SHARE
The following represents a reconciliation from basic net income per common share to diluted net income per
common share. Basic net income per common share is computed based on the weighted-average number of
common shares outstanding each period. Diluted net income per common share is computed based on the
weighted-average number of common shares and dilutive potential common shares (stock options,
restricted stock, performance shares and stock appreciation rights)
outstanding each period. Stock options with exercise prices greater than the average market price of the underlying common shares
are excluded from the computation of diluted net income per share because the effect would be
antidilutive. The number of stock options excluded at March 29, 2008 was 2.6
million. The number of stock options excluded at March 31, 2007 was immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
|
|
(IN MILLIONS, EXCEPT PER SHARE DATA) |
|
Determination of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding |
|
|
64.4 |
|
|
|
66.1 |
|
|
|
64.3 |
|
|
|
66.6 |
|
Assumed conversion of dilutive potential common shares |
|
|
1.2 |
|
|
|
1.7 |
|
|
|
1.4 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding |
|
|
65.6 |
|
|
|
67.8 |
|
|
|
65.7 |
|
|
|
68.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share |
|
$ |
0.90 |
|
|
$ |
1.26 |
|
|
$ |
0.02 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share |
|
$ |
0.88 |
|
|
$ |
1.23 |
|
|
$ |
0.02 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 3, Recapitalization for a discussion of the Companys recapitalization transactions that were consummated in
the second quarter of fiscal 2007.
7
RECENT ACCOUNTING PRONOUNCEMENTS
FIN 48 Accounting For Uncertainty In Income Taxes An Interpretation Of FASB Statement No.
109
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 48,
Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 (FIN
48). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS 109, Accounting for Income Taxes. FIN
48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. This
Interpretation also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition.
The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is
recognition. The enterprise determines whether it is more-likely-than-not that a tax position will
be sustained upon examination, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. In evaluating whether a tax position has met the
more-likely-than-not recognition threshold, the enterprise should presume that the position will be
examined by the appropriate taxing authority that would have full knowledge of all relevant
information. The second step is measurement. A tax position that meets the more-likely-than-not
recognition threshold is measured to determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount of benefit that is greater than 50
percent likely of being realized upon ultimate settlement.
Tax positions that previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent financial reporting period in which that threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not recognition
threshold should be derecognized in the first subsequent financial reporting period in which that
threshold is no longer met.
The Company, as required, adopted FIN 48 as of the beginning of its 2008 fiscal year, resulting in
a $0.4 million decrease to retained earnings at October 1,
2007. See Note 11, Income Taxes for additional
information.
Statement of Financial Accounting Standards No. 157 Fair Value Measurements
In
September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157) SFAS 157, defines fair
value, establishes a framework for measuring fair value, and expands disclosures about fair value
measurements. The Company will be required to adopt SFAS 157 no later than October 1, 2008, the
beginning of its 2009 fiscal year. The provisions of SFAS 157 should be applied prospectively to
the beginning of the fiscal year in which SFAS 157 is initially applied, except with respect to
certain financial instruments as defined by SFAS 157. The Company is in the process of evaluating
the impact that the adoption of SFAS 157 will have on its financial statements.
Statement of Financial Accounting Standards No. 159 The Fair Value Option for Financial
Assets and Financial Liabilities
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115, (SFAS 159) which allows an entity the
irrevocable option to elect fair value for the initial and subsequent measurement for certain
financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value
of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159
further establishes certain additional disclosure requirements. SFAS 159 is effective for the
Companys financial statements for the fiscal year beginning October 1, 2008, with earlier adoption
permitted. No entity is permitted to apply SFAS 159 retrospectively to fiscal years preceding the
effective date unless the entity chooses early adoption. The Company is in the process of
evaluating the impact that the adoption of SFAS 159 will have on its financial statements.
Statement of Financial Accounting Standards No. 141(R) Business Combinations
In December 2007, the FASB issued SFAS 141(R), Business Combinations, (SFAS 141(R))which replaces SFAS 141.
The objective of SFAS 141(R) is to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its financial reports about a
business combination and its effects. SFAS 141(R) establishes principles and requirements for how
the acquirer recognizes and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain purchase; and determines
what information to disclose to enable users of the financial statements to evaluate the nature and
8
financial effects of the business combination. SFAS 141(R) applies to all transactions or other
events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree),
including those sometimes referred to as true mergers or mergers of equals and combinations
achieved without the transfer of consideration. SFAS 141(R) is effective for the Companys
financial statements for the fiscal year beginning October 1, 2009. The Company is in the process
of evaluating the impact that the adoption of SFAS 141(R) will have on its financial statements.
Statement of Financial Accounting Standards No. 160 Noncontrolling Interests in Consolidated
Financial Statements
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements-an amendment of ARB No. 51 (SFAS 160). The objective of SFAS 160 is to improve the
relevance, comparability, and transparency of the financial information that a reporting entity
provides in its consolidated financial statements. SFAS 160 amends ARB No. 51 to establish
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 also changes the way the consolidated financial
statements are presented, establishes a single method of accounting for changes in a parents
ownership interest in a subsidiary that do not result in deconsolidation, requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated and expanded disclosures
in the consolidated financial statements that clearly identify and distinguish between the parents
ownership interest and the interest of the noncontrolling owners of a subsidiary. The provisions of
SFAS 160 should be applied prospectively as of the beginning of the fiscal year in which SFAS 160
is adopted, except for the presentation and disclosure requirements, which are to be applied
retrospectively for all periods presented. SFAS 160 is effective for the Companys financial
statements for the fiscal year beginning October 1, 2009. The Company is in the process of
evaluating the impact, if any, that the adoption of SFAS 160 will have on its financial statements.
Statement of Financial Accounting Standards No. 161 Disclosures about Derivative Instruments
and Hedging Activitiesan amendment of FASB Statement No. 133
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133 (SFAS 161). The objective of SFAS 161 is to
enhance the current disclosure framework in Statement 133 and improve the transparency of financial
reporting for derivative instruments and hedging activities. SFAS 161 requires entities to provide
enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under Statement 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an
entitys financial position, financial performance, and cash flows. SFAS 161 is effective for the
Companys financial statements for the fiscal year beginning October 1, 2010. The Company is in the
process of evaluating the impact, if any, that the adoption of SFAS 161 will have on its financial
statements.
2. 2008
PRODUCT RECALLS
In March 2008, the Company announced a voluntary recall of certain wild bird food products which
had been treated with pest control products labeled for use on certain stored grains that can be
processed for human and/or animal consumption. However, these pest control products were not
labeled for use on wild bird food products. These products were treated with pest control products
to avoid insect infestations, especially at retail stores, a practice which pre-dates the Companys
acquisition of Gutwein & Co., Inc. in November 2005.
In
April 2008, the Company, in cooperation with an investigation by the U.S. Environmental
Protection Agency (USEPA), announced a recall of certain consumer lawn and garden products and a
Scotts LawnService® (SLS) product. These products contain active ingredients that require USEPA
registrations before they can be marketed to consumers or used by SLS. An investigation led by the
USEPA, with the U.S. Department of Justice (the USDOJ), revealed that valid registrations for
these products either had not been obtained or that the products were
not properly labeled. While the Company
is cooperating in the on-going investigation, evidence indicates that a former employee of the
Company apparently deliberately circumvented Company policies and USEPA regulations by failing to
obtain valid registrations for the products and/or causing invalid product registration forms to be
submitted to regulators.
As a result of these recalls, for the quarter ended March 29, 2008, the Company reversed sales
associated with estimated returns of these products, recorded an impairment estimate for affected
inventory, and accrued other recall-related costs. The following table summarizes the impact of
the product recalls on the statement of operations:
|
|
|
|
|
|
|
THREE AND SIX MONTHS |
|
|
|
ENDED |
|
|
|
MARCH 29, 2008 |
|
|
|
(IN MILLIONS) |
|
Net sales product returns |
|
$ |
(19.0 |
) |
Cost of sales product returns |
|
|
(12.0 |
) |
Cost of sales impairment of inventory |
|
|
14.1 |
|
Cost of sales incremental costs |
|
|
8.5 |
|
|
|
|
|
Gross profit |
|
|
(29.6 |
) |
Selling, general and administrative product returns |
|
|
1.2 |
|
|
|
|
|
Loss from operations product returns |
|
$ |
(30.8 |
) |
|
|
|
|
Through the period ended March 29, 2008, there has been no reserve activity for the product
recalls, such as inventory write-offs or payments of invoices, that reduces the $30.8 million of
related reserves recorded on the Condensed, Consolidated Balance Sheet. Furthermore, no reserves
have been established with respect to any potential civil or criminal
fines or penalties at the state and/or federal level related
to the product registration issues as the scope and magnitude of such amounts are not currently
estimable. However, it is possible that such fines and/or penalties could
be material and have an adverse effect on the Companys financial condition and results of
operations.
A
comprehensive investigation into all the Companys product
registrations is in process, and this investigation may
result in future state or federal action with respect to additional product registration issues. Until such investigation
is complete, the Company cannot fully quantify the extent of additional issues or their consequences.
Scotts Miracle-Gro is committed to providing its customers and consumers with products of superior
quality and value to enhance their lawns, gardens and overall outdoor living environments. The
Company believes consumers have come to trust our brands based on the superior quality and value
they deliver, and that trust is highly valued. The Company is also committed to conducting business
with the highest degree of ethical standards and in adherence to the law. The Company is
disappointed in these recent occurrences and is working diligently to address the issues, including
retaining independent firms to conduct a forensic examination of its
existing product registrations and to enhance its product registration compliance and control processes.
However, these events may nevertheless have a negative impact on future demand for the Companys
products.
9
3. RECAPITALIZATION
On
December 12, 2006, Scotts Miracle-Gro announced a recapitalization plan to return $750 million its shareholders. This plan expanded and accelerated the previously announced five-year $500
million share repurchase program (which was canceled) under which Scotts Miracle-Gro repurchased 2.0
million of its common shares for $87.9 million during fiscal 2006. Pursuant to the
recapitalization plan, on February 14, 2007, Scotts Miracle-Gro completed a modified Dutch auction
tender offer, resulting in the repurchase of 4.5 million of the its common shares for an
aggregate purchase price of $245.5 million ($54.50 per share). On February 16, 2007, the
Board of Directors of Scotts Miracle-Gro declared a special one-time cash dividend of $8.00 per share ($508 million in
the aggregate), which was paid on March 5, 2007, to shareholders of record on February 26, 2007.
In order to fund these transactions, Scotts Miracle-Gro and
certain of its subsidiaries
entered into credit facilities aggregating $2.15
billion and terminated its prior credit facility. As part of this debt restructuring, Scotts Miracle-Gro
also conducted a cash tender offer to retire its outstanding 6 5/8% senior subordinated notes in an
aggregate principal amount of $200 million. Reference should be made to Note 7, Debt for further
information as to the credit facilities and the repayment and termination of the prior credit
facility and the 6 5/8% senior subordinated notes.
The payment of the special one-time cash dividend required the Company to adjust the number of
common shares subject to stock options and stock appreciation rights outstanding under the
Companys share-based award programs, as well as the price at which the awards may be exercised.
Reference should be made to Note 10, Stock-Based Compensation Awards for further information.
The Companys interest expense will be significantly higher for periods subsequent to the
recapitalization as a result of the borrowings incurred to fund the cash returned to shareholders.
The following pro forma financial information has been compiled as if the Company had completed the
recapitalization transactions as of October 1, 2006 for fiscal 2007. Borrowing rates in effect as
of March 30, 2007 were used to compute pro forma interest expense. As the recapitalization
involved a share repurchase, pro forma diluted common shares are also provided. No pro forma
adjustments are necessary for the three and six month periods ended March 29, 2008 as the recapitalization transactions
were consummated prior to the start of those periods.
10
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA FINANCIAL INFORMATION |
|
|
|
THREE MONTHS
ENDED |
|
|
SIX MONTHS
ENDED |
|
|
|
MARCH 31, 2007 |
|
|
MARCH 31, 2007 |
|
|
|
(IN MILLIONS EXCEPT PER SHARE DATA) |
|
Income before income taxes, as reported |
|
$ |
130.3 |
|
|
$ |
37.5 |
|
Add back reported interest expense |
|
|
17.9 |
|
|
|
26.1 |
|
Add back costs related to refinancing |
|
|
18.3 |
|
|
|
18.3 |
|
Deduct pro forma interest expense |
|
|
(27.2 |
) |
|
|
(49.7 |
) |
|
|
|
|
|
|
|
Pro forma income before income taxes |
|
|
139.3 |
|
|
|
32.2 |
|
Pro forma income taxes |
|
|
50.1 |
|
|
|
11.7 |
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
89.2 |
|
|
$ |
20.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic net income per common share |
|
$ |
1.41 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
Pro forma diluted net income per common share |
|
$ |
1.37 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported interest expense |
|
$ |
17.9 |
|
|
$ |
26.1 |
|
Incremental interest on recapitalization borrowings |
|
|
8.7 |
|
|
|
21.8 |
|
Credit facilities interest rate differential |
|
|
0.5 |
|
|
|
1.5 |
|
Incremental amortization of credit facilities fees |
|
|
0.1 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
Pro forma interest expense |
|
$ |
27.2 |
|
|
$ |
49.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma effective tax rates |
|
|
36.0 |
% |
|
|
36.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA SHARES |
|
|
|
THREE MONTHS
ENDED |
|
|
SIX MONTHS
ENDED |
|
|
|
MARCH 31, 2007 |
|
|
MARCH 31, 2007 |
|
|
|
(IN MILLIONS) |
|
Weighted-average common shares outstanding during the period |
|
|
66.1 |
|
|
|
66.6 |
|
Incremental full period impact of repurchased common shares |
|
|
(2.7 |
) |
|
|
(3.6 |
) |
|
|
|
|
|
|
|
Pro forma basic common shares |
|
|
63.4 |
|
|
|
63.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding during
the period plus dilutive potential common shares |
|
|
67.8 |
|
|
|
68.4 |
|
Incremental full period impact of repurchased common shares |
|
|
(2.7 |
) |
|
|
(3.6 |
) |
Impact on dilutive potential common shares |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
Pro forma diluted common shares |
|
|
65.2 |
|
|
|
65.0 |
|
|
|
|
|
|
|
|
4. DETAIL OF INVENTORIES, NET
Inventories, net of provisions for slow moving and obsolete inventory of $29.4 million, $15.8
million, and $15.6 million, as of March 29, 2008, March 31, 2007 and September 30, 2007,
respectively, consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
SEPTEMBER 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
Finished goods |
|
$ |
470.0 |
|
|
$ |
427.5 |
|
|
$ |
289.9 |
|
Work-in-process |
|
|
30.5 |
|
|
|
31.7 |
|
|
|
28.3 |
|
Raw materials |
|
|
124.6 |
|
|
|
112.7 |
|
|
|
87.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
625.1 |
|
|
$ |
571.9 |
|
|
$ |
405.9 |
|
|
|
|
|
|
|
|
|
|
|
11
5. MARKETING AGREEMENT
The Company is Monsantos exclusive agent for the domestic and international marketing and
distribution of consumer Roundup® herbicide products. Under the terms of the Marketing Agreement
with Monsanto, the Company is entitled to receive an annual commission from Monsanto in
consideration for the performance of the Companys duties as agent. The annual gross commission
under the Marketing Agreement is calculated as a percentage of the actual earnings before interest
and income taxes (EBIT) of the consumer Roundup® business, as defined in the Marketing Agreement.
Each years percentage varies in accordance with the terms of the Marketing Agreement based on the
achievement of two earnings thresholds and on commission rates that vary by threshold and program
year. The Marketing Agreement also requires the Company to make annual payments to Monsanto as a
contribution against the overall expenses of the consumer Roundup® business. The annual
contribution payment is defined in the Marketing Agreement as $20 million.
In consideration for the rights granted to the Company under the Marketing Agreement for North
America, the Company was required to pay a marketing fee of $33 million to Monsanto. The Company
has deferred this amount on the basis that the payment will provide a future benefit through
commissions that will be earned under the Marketing Agreement. Based on managements current
assessment of the likely term of the Marketing Agreement, the useful life over which the marketing
fee is being amortized is 20 years.
Under the terms of the Marketing Agreement, the Company performs certain functions, primarily
manufacturing conversion, selling and marketing support, on behalf of Monsanto in the conduct of
the consumer Roundup® business. The actual costs incurred for these activities are charged to and
reimbursed by Monsanto, for which the Company recognizes no gross profit or net income. The Company
records costs incurred under the Marketing Agreement for which the Company is the primary obligor
on a gross basis, recognizing such costs in Cost of sales and the reimbursement of these costs in
Net sales, with no effect on gross profit or net income. The related net sales and cost of sales
were $17.6 million and $10.5 million for the three-month periods and $30.1 million and $20.0
million for the six-month periods ended March 29, 2008 and March 31, 2007, respectively.
The elements of the net commission earned under the Marketing Agreement and included in Net sales
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
Gross commission |
|
$ |
17.1 |
|
|
$ |
21.7 |
|
|
$ |
17.1 |
|
|
$ |
21.4 |
|
Contribution expenses |
|
|
(5.0 |
) |
|
|
(5.0 |
) |
|
|
(10.0 |
) |
|
|
(10.0 |
) |
Amortization of marketing fee |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net commission income |
|
|
11.9 |
|
|
|
16.5 |
|
|
|
6.7 |
|
|
|
11.0 |
|
Reimbursements associated with Marketing Agreement |
|
|
17.6 |
|
|
|
10.5 |
|
|
|
30.1 |
|
|
|
20.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales associated with Marketing Agreement |
|
$ |
29.5 |
|
|
$ |
27.0 |
|
|
$ |
36.8 |
|
|
$ |
31.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Marketing Agreement has no definite term except as it relates to the European Union (EU) countries.
With respect to the EU countries, the term of the Marketing Agreement had previously
been extended through September 30, 2008, with the option of both parties to renew for two
additional successive terms ending on September 30, 2015 and 2018, with a separate determination
being made by the parties at least six months prior to the expiration of each such term as to
whether to commence a subsequent renewal term. On March 28, 2008, the parties agreed to extend the
EU term of the Marketing Agreement through September 30, 2011 plus up to two additional
automatic renewal periods of two years each. In consideration for the extension of the EU team of the Marketing
Agreement, the Company and Monsanto agreed to develop a multi-year strategic plan for the European
Union countries. The Company will work with Monsanto to review and refine this plan by June 30,
2008.
The Marketing Agreement provides Monsanto with the right to terminate the Marketing Agreement for
an event of default (as defined in the Marketing Agreement) by the Company or a change in control
of Monsanto or the sale of the consumer Roundup® business. The Marketing Agreement provides the
Company with the right to terminate the Marketing Agreement in certain circumstances including an
event of default by Monsanto or the sale of the consumer Roundup® business. Unless Monsanto
terminates the Marketing Agreement for an event of default by the Company, Monsanto is required to
pay a termination fee to the Company that varies by program year. If Monsanto terminates the
Marketing Agreement upon a change of control of Monsanto or the sale of the consumer Roundup®
business prior to September 30, 2008, the Company will be entitled to a termination fee in excess
of $100 million. If the Company terminates the Marketing Agreement upon an uncured material breach,
material fraud or material willful misconduct by Monsanto, it is entitled to receive a termination
fee in excess of $100 million if the termination occurs prior to September 30, 2008. The
termination fee declines over time from $100 million to a minimum of $16 million for terminations
between September 30, 2008 and September 30, 2018. If Monsanto were to terminate the Marketing
Agreement for cause, the Company would
12
not be entitled to any termination fee, and it would lose all, or a significant portion, of the
significant source of earnings and overhead expense absorption the Marketing Agreement provides.
Monsanto may also be able to terminate the Marketing Agreement within a given region, including
North America, without paying a termination fee if sales to consumers in that region decline: (1)
over a cumulative three fiscal year period; or (2) by more than 5% for each of two consecutive
years.
6. IMPAIRMENT, RESTRUCTURING AND OTHER CHARGES
FISCAL 2008
The Company recorded no goodwill or indefinite-lived intangible asset impairment charges or
restructuring charges in the three and six month periods ended March 29, 2008.
FISCAL 2007
The Company recorded no goodwill or indefinite-lived intangible asset impairment charges or
restructuring and other charges in the three and six month periods ended March 31, 2007.
The following table summarizes the Companys reserves and reserve activity for accrued
restructuring and other charges, which are included in Other current liabilities in the Condensed,
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
|
|
(IN MILLIONS) |
|
Amounts reserved for restructuring and other charges at beginning of fiscal year |
|
$ |
2.5 |
|
|
$ |
6.4 |
|
Payments and other |
|
|
(0.7 |
) |
|
|
(4.2 |
) |
|
|
|
|
|
|
|
Amounts reserved for restructuring and other charges at end of period |
|
$ |
1.8 |
|
|
$ |
2.2 |
|
|
|
|
|
|
|
|
7. DEBT
The components of long-term debt as of March 29, 2008, March 31, 2007 and September 30, 2007 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
SEPTEMBER 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving loans |
|
$ |
894.1 |
|
|
$ |
1,208.8 |
|
|
$ |
469.2 |
|
Term loans |
|
|
557.2 |
|
|
|
560.0 |
|
|
|
558.6 |
|
Master Accounts Receivable Purchase Agreement |
|
|
241.9 |
|
|
|
|
|
|
|
64.4 |
|
Notes due to sellers |
|
|
13.6 |
|
|
|
14.9 |
|
|
|
15.1 |
|
Foreign bank borrowings and term loans |
|
|
12.0 |
|
|
|
14.7 |
|
|
|
|
|
Other |
|
|
8.9 |
|
|
|
8.5 |
|
|
|
10.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,727.7 |
|
|
|
1,806.9 |
|
|
|
1,117.8 |
|
Less current portions |
|
|
281.8 |
|
|
|
23.7 |
|
|
|
86.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,445.9 |
|
|
$ |
1,783.2 |
|
|
$ |
1,031.4 |
|
|
|
|
|
|
|
|
|
|
|
In connection with the recapitalization transactions discussed in Note 3, Recapitalization. Scotts Miracle-Gro and
certain of its subsidiaries entered into the following loan facilities totaling up to $2.15 billion
in the aggregate: (a) a senior secured five-year term loan in the principal amount of $560 million
and (b) a senior secured five-year revolving loan facility in the aggregate principal amount of up
to $1.59 billion. Under the terms of the loan facilities, the Company may request an additional
$200 million in revolving credit and/or term credit commitments, subject to approval from the
lenders. Borrowings may be made in various currencies including U.S. dollars, Euros, British pounds
sterling, Australian dollars and Canadian dollars. The $2.15 billion senior secured credit
facilities replaced the Companys former $1.05 billion senior credit facility. The Company also
retired all of the 6 5/8% senior subordinated notes under the terms of a tender offer, at an
aggregate cost of $209.6 million including an early redemption premium. Amortization payments on
the term loan portion of the credit facilities began on September 30, 2007 and will continue
quarterly through 2012. As of March 29, 2008, the cumulative total amortization payments on the
term loan were $2.8 million, reducing the balance of the Companys term loans and effectively
reducing the size of the credit facilities.
13
As of March 29, 2008, there was $672.2 million of availability under the revolving loan facility.
Under the revolving loan facility, the Company has the ability to issue letter of credit
commitments up to $65.0 million. At March 29, 2008, the Company had letters of credit in the
amount of $26.5 million outstanding.
At March 29, 2008, the Company had outstanding interest rate swaps with major financial
institutions that effectively converted a portion of variable-rate debt denominated in the Euro,
British pound and U.S. dollar to a fixed rate. The swap agreements have a total U.S. dollar
equivalent notional amount of $724.9 million at March 29,
2008. The term, expiration date and rates of these swaps
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTIONAL AMOUNT IN |
|
|
|
|
|
|
|
|
USD |
|
|
|
|
|
|
CURRENCY |
|
(IN MILLIONS) |
|
TERM |
|
EXPIRATION DATE |
|
FIXED RATE |
British pound |
|
$ |
57.4 |
|
|
3 years |
|
|
11/17/2008 |
|
|
|
4.76 |
% |
Euro |
|
|
67.5 |
|
|
3 years |
|
|
11/17/2008 |
|
|
|
2.98 |
% |
U.S. dollar |
|
|
200.0 |
|
|
2 years |
|
|
3/31/2009 |
|
|
|
4.90 |
% |
U.S. dollar |
|
|
200.0 |
|
|
3 years |
|
|
3/31/2010 |
|
|
|
4.87 |
% |
U.S. dollar |
|
|
200.0 |
|
|
5 years |
|
|
2/14/2012 |
|
|
|
5.20 |
% |
Master Accounts Receivable Purchase Agreement
On April 11, 2007, the Company entered into a Master Accounts Receivable Purchase Agreement (the
Original MARP Agreement) with a termination date of April 10, 2008. On April 9, 2008, the Company
terminated the Original MARP Agreement and entered into a new Master Accounts Receivable Purchase
Agreement (the New MARP Agreement) with a termination date of April 8, 2009, or such later date
as may be extended by mutual agreement of the Company and its lenders. The terms of the New MARP
Agreement are substantially the same as the Original MARP Agreement. The New MARP Agreement
provides for the discounted sale, on a revolving basis, of accounts receivable generated by
specified account debtors, with seasonally adjusted monthly aggregate limits ranging from $10
million to $300 million. The New MARP Agreement also provides for specified account debtor
sublimit amounts, which provide limits on the amount of receivables owed by individual account
debtors that can be sold to the banks.
The caption Accounts receivable pledged on the accompanying Condensed, Consolidated Balance
Sheets in the amounts of $296.2 and $149.5 as of March 29, 2008 and September 30, 2007,
respectively, represents the pool of receivables that have been designated as sold and serve as
collateral for short-term debt in the amount of $241.9 million and $64.4 million, as of those
dates, respectively.
The Company was in compliance with the terms of all borrowing agreements at March 29, 2008.
8. COMPREHENSIVE INCOME
The components of other comprehensive income and total comprehensive income for the three and six
month periods ended March 29, 2008 and March 31, 2007, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
Net income |
|
$ |
58.0 |
|
|
$ |
83.4 |
|
|
$ |
1.2 |
|
|
$ |
24.0 |
|
Other comprehensive income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation of derivative instruments |
|
|
(12.3 |
) |
|
|
(2.5 |
) |
|
|
(17.4 |
) |
|
|
|
|
Foreign currency translation adjustments |
|
|
1.6 |
|
|
|
2.9 |
|
|
|
4.2 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
47.3 |
|
|
$ |
83.8 |
|
|
$ |
(12.0 |
) |
|
$ |
24.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
9. RETIREMENT AND RETIREE MEDICAL PLANS COST INFORMATION
The following summarizes the net periodic benefit cost for the various retirement and retiree
medical plans sponsored by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
MARCH 29, |
|
MARCH 31, |
|
MARCH 29, |
|
MARCH 31, |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
|
(IN MILLIONS) |
|
(IN MILLIONS) |
Frozen defined benefit plans |
|
$ |
0.1 |
|
|
$ |
0.4 |
|
|
$ |
0.3 |
|
|
|
|
|
|
$ |
0.9 |
|
International benefit plans |
|
|
1.2 |
|
|
|
2.0 |
|
|
|
2.4 |
|
|
|
|
|
|
|
3.8 |
|
Retiree medical plan |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.2 |
|
|
|
|
|
|
|
1.3 |
|
10. STOCK-BASED COMPENSATION AWARDS
The following is a recap of the share-based awards granted during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, 2008 |
|
|
MARCH 31, 2007 |
|
Key employees |
|
|
|
|
|
|
|
|
Options |
|
|
884,700 |
|
|
|
802,100 |
|
Options and SARs due to recapitalization |
|
|
|
|
|
|
872,147 |
|
Performance shares |
|
|
40,000 |
|
|
|
|
|
Restricted stock |
|
|
149,900 |
|
|
|
191,300 |
|
Board of Directors |
|
|
|
|
|
|
|
|
Deferred stock units, options |
|
|
29,995 |
|
|
|
127,000 |
|
Options due to recapitalization |
|
|
|
|
|
|
202,649 |
|
|
|
|
|
|
|
|
Total share-based awards |
|
|
1,104,595 |
|
|
|
2,195,196 |
|
|
|
|
|
|
|
|
Aggregate fair value at grant dates (in millions) |
|
$ |
18.5 |
|
|
$ |
28.6 |
|
Total share-based compensation and the tax benefit recognized in compensation expense were as
follows for the period indicated (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
MARCH 29, 2008 |
|
MARCH 31, 2007 |
|
MARCH 29, 2008 |
|
MARCH 31, 2007 |
Share-based compensation |
|
$ |
3.7 |
|
|
$ |
5.9 |
|
|
$ |
7.2 |
|
|
$ |
10.0 |
|
Tax benefit recognized |
|
|
1.3 |
|
|
|
2.1 |
|
|
|
2.6 |
|
|
|
3.6 |
|
11. INCOME TAXES
The Company adopted FIN 48 as of October 1, 2007, the beginning of its 2008 fiscal year. Upon
adoption, the Company continues to classify interest and penalties on tax uncertainties as a
component of the provision for income taxes. As of the date of adoption, the total amount of gross
unrecognized tax benefits for uncertain tax positions, including positions impacting only timing
benefits, was $10.0 million (compared to $9.6 million as of September 30, 2007, prior to adoption).
Of the $10.0 million accrued at the date of adoption, the amount of unrecognized tax benefits that,
if recognized, would impact the effective tax rate was $9.5 million, which includes accrued
interest and penalties of $1.4 million and $0.8 million, respectively. The corresponding amounts
of accrued interest and penalties at March 29, 2008 were $1.6 million and $0.5 million,
respectively. As a result of adoption, the Company recognized a $0.4 million decrease to retained
earnings at October 1, 2007.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction,
and various state, local, and foreign jurisdictions. With few exceptions, the Company is no longer
subject to examinations by these tax authorities for fiscal year 2003 and prior. The Company is
under examination by the Canada Revenue Agency (CRA) and some U.S. state and local tax authorities.
In addition, certain other tax deficiency issues and refund claims for previous years remain
unresolved. The CRA is currently auditing income tax returns for fiscal years 2002 and 2003.
There are U.S. state and local audits covering tax years 2002 through 2005 in process.
15
The Company anticipates that a few of these audits will be resolved during fiscal 2008. However,
the Company does believe that some individual audits or issues may be agreed to within the next 12
months. The Company is unable to make a reasonably reliable estimate of when the cash settlements
with taxing authorities may occur. Although audit outcomes and the timing of audit payments are
subject to significant uncertainty, the Company does not anticipate that the resolution of these
matters will result in a material change to its consolidated financial condition or results of
operations.
12. CONTINGENCIES
Management continually evaluates the Companys contingencies, including various lawsuits and claims
which arise in the normal course of business, product and general liabilities, workers
compensation, property losses and other fiduciary liabilities for which the Company is self-insured
or retains a high exposure limit. Self-insurance reserves are established based on actuarial loss
estimates for specific individual claims plus actuarial estimated amounts for incurred but not
reported claims and adverse development factors for existing claims. Legal costs incurred in
connection with the resolution of claims, lawsuits and other contingencies generally are expensed
as incurred. In the opinion of management, its assessment of contingencies is reasonable and
related reserves, in the aggregate, are adequate; however, there can be no assurance that future
quarterly or annual operating results will not be materially affected by final resolution of these
matters. The following are the more significant of the Companys identified contingencies.
Product Registrations
On April 10, 2008, the Company learned of a criminal investigation into certain of its product registrations which the Company
understands is being led by the U.S. Environmental Protection Agency (USEPA) and the U.S. Department of Justice (USDOJ),
with assistance from the Ohio Department of Agriculture. Since then, the Company has learned that one of its employees apparently
deliberately circumvented Company policies and USEPA regulations by failing to obtain valid registrations for products and/or
causing invalid product registration forms to be submitted to regulators. The sale of products which lack valid registrations is a violation of federal and state law. The
Company has since terminated the employee in question and engaged
independent firms to conduct a forensic investigation into its
existing product registrations and to review its product registration
compliance processes and procedures. While the Company believes these products do not pose a public health or environmental risk,
it is working in cooperation with the USEPA to recall the affected
products from the marketplace (see Note 2, 2008 Product Recalls).
While
disappointed that the actions of one employee could cause
unregistered or not properly labeled products to be marketed and sold, the
Company takes full responsibility for ensuring that each of its
products meets all federal and state regulations, and is safe for consumer
use. A comprehensive investigation into all of the Companys product registrations is in process, and this
investigation may result in
future state or federal action with respect to additional product registration issues.
Until such investigation is complete, the Company cannot fully quantify the
extent of additional issues. Furthermore, the Company may be subject
to civil or criminal fines or penalties at the state and/or federal
level as a result of these
product registration issues. At this time, management cannot reasonably determine the scope or magnitude of possible liabilities that
could result from known or potential additional product registration issues, and no reserves for these claims have been established as
of March 29, 2008. However, it is possible that such fines and/or penalties could be material and have an adverse effect on the
Companys financial condition and results of operations.
Environmental Matters
In 1997, the Ohio Environmental Protection Agency (the Ohio EPA) initiated an enforcement action
against the Company with respect to alleged surface water violations and inadequate treatment
capabilities at the Marysville, Ohio facility seeking corrective action under the federal Resource
Conservation and Recovery Act. The action related to discharges from on-site waste water treatment
and several discontinued on-site disposal areas.
Pursuant to a Consent Order entered by the Union County Common Pleas Court in 2002, the Company is
actively engaged in restoring the site to eliminate exposure to waste materials from the
discontinued on-site disposal areas.
At March 29, 2008, $3.5 million was accrued for environmental and regulatory matters. While the
amounts accrued are believed to be adequate to cover known environmental exposures based on current
facts and estimates of likely outcomes, the adequacy of these accruals is based on several
significant assumptions:
|
|
that all significant sites that must be remediated have been identified; |
|
|
that there are no significant conditions of contamination that are unknown to the Company; and |
16
|
|
that with respect to the agreed judicial Consent Order in Ohio, the potentially
contaminated soil can be remediated in place rather than having to be removed and only
specific stream segments will require remediation as opposed to the entire stream. |
If there is a significant change in the facts and circumstances surrounding these assumptions, it
could have a material impact on the ultimate outcome of these matters and the Companys financial condition and results of
operations.
U.S. Horticultural Supply, Inc. (F/K/A E.C. Geiger, Inc.)
On November 5, 2004, U.S. Horticultural Supply, Inc. (Geiger) filed suit against the Company in
the U.S. District Court for the Eastern District of Pennsylvania. This complaint alleges that the
Company conspired with another distributor, Griffin Greenhouse Supplies, Inc., to restrain trade in
the horticultural products market, in violation of Section 1 of the Sherman Antitrust Act. On June
2, 2006, the Court denied the Companys motion to dismiss the complaint. Fact discovery and expert
discovery are closed. Geigers damages expert quantifies Geigers alleged damages at approximately
$3.3 million, which could be trebled under antitrust laws. Geiger also seeks recovery of
attorneys fees and costs. The Company has moved for summary judgment requesting dismissal of
Geigers claims.
The Company continues to vigorously defend against Geigers claims. The Company believes that
Geigers claims are without merit and that the likelihood of an unfavorable outcome is remote.
Therefore, no accrual has been established related to this matter. However, the Company cannot
predict the ultimate outcome with certainty. If the above action is determined adversely to the
Company, the result could have a material adverse effect on the Companys results of operations,
financial position and cash flows. The Company had previously sued and obtained a judgment against
Geiger on April 25, 2005, based on Geigers default on obligations to the Company, and the Company
is proceeding to collect that judgment.
Other
The Company has been named a defendant in a number of cases alleging injuries that the lawsuits
claim resulted from exposure to asbestos-containing products, apparently based on the Companys
historic use of vermiculite in certain of its products. The complaints in these cases are not
specific about the plaintiffs contacts with the Company or its products. The Company in each case
is one of numerous defendants and none of the claims seeks damages from the Company alone. The
Company believes that the claims against it are without merit and is vigorously defending them. It
is not currently possible to reasonably estimate a probable loss, if any, associated with the cases
and, accordingly, no accrual or reserves have been recorded in the Companys condensed,
consolidated financial statements. There can be no assurance that these cases, whether as a result
of adverse outcomes or as a result of significant defense costs, will not have a material adverse
effect on the Companys financial condition, results of operations or cash flows.
The Company is reviewing agreements and policies that may provide insurance coverage or indemnity
as to these claims and is pursuing coverage under some of these agreements and policies, although
there can be no assurance of the results of these efforts.
On April 27, 2007, the Company received a proposed Order On Consent from the New York State
Department of Environmental Conservation (the Proposed Order) alleging that during the calendar
year 2003, the Company and James Hagedorn, individually and as Chairman of the Board and the Chief
Executive Officer of the Company, unlawfully donated to a Port Washington, New York youth sports
organization forty bags of Scotts® LawnPro Annual Program Step 3 Insect Control Plus Fertilizer
which, while federally registered, was allegedly not registered in the state of New York. The
Proposed Order requests penalties totaling $695,000. The Company has made its position clear to the
New York State Department of Environmental Conservation and is awaiting a response.
The Company is involved in other lawsuits and claims which arise in the normal course of business.
These claims individually and in the aggregate are not expected to result in a material adverse
effect on the Companys financial condition and results of
operations.
17
13. ACQUISITIONS
There were no acquisitions in the first six months of fiscal 2008. In the first six months of
fiscal 2007, the Company continued to invest in the growth of the Scotts LawnService® business,
investing $7.7 million in acquisitions, comprised of $6.3 million paid in cash and $1.4 million of
notes issued and liabilities assumed.
14. SEGMENT INFORMATION
For fiscal 2008, the Company is divided into the following segments Global Consumer, Global
Professional, Scotts LawnService®, and Corporate & Other. These segments differ from those used in
the prior year due to the realignment of the North America and International segments into the
Global Consumer and Global Professional segments. The prior year amounts have been reclassified to
conform with the fiscal 2008 segments. This division of reportable segments is consistent with how
the segments report to and are managed by senior management of the Company.
The Global Consumer segment consists of the North American Consumer and International Consumer
business groups. The business groups comprising this segment manufacture, market and sell dry,
granular slow-release lawn fertilizers, combination lawn fertilizer and control products, grass
seed, spreaders, water-soluble, liquid and continuous release garden and indoor plant foods, plant
care products, potting, garden and lawn soils, mulches and other growing media products, and
pesticide products. Products are marketed to mass merchandisers, home improvement centers, large
hardware chains, warehouse clubs, distributors, garden centers, and grocers in the United States,
Canada, and Europe.
The Global Professional segment is focused on a full line of horticultural products including
controlled-release and water-soluble fertilizers and plant protection products, grass seeds,
spreaders, and customer application services. Products are sold to commercial nurseries and
greenhouses, and specialty crop growers primarily in North America and Europe. Our consumer
businesses in Australia and Latin America are also part of the Global Professional segment.
The Scotts LawnService® segment provides lawn fertilization, disease and insect control and other
related services such as core aeration and tree and shrub fertilization primarily to residential
consumers through company-owned branches and franchises in the United States. In our larger
branches, an exterior barrier pest control service is also offered.
The Corporate & Other segment consists of the Smith & Hawken® business and corporate general and
administrative expenses.
The following table presents segment financial information in accordance with SFAS 131,
Disclosures about Segments of an Enterprise and Related
Information. (SFAS 131). Pursuant to SFAS 131, the
presentation of the segment financial information is consistent with the basis used by management
(i.e., certain costs not allocated to business segments for internal management reporting purposes
are not allocated for purposes of this presentation).
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS |
|
|
SIX MONTHS |
|
|
|
ENDED |
|
|
ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Consumer |
|
$ |
820.5 |
|
|
$ |
852.3 |
|
|
$ |
987.4 |
|
|
$ |
996.9 |
|
Global Professional |
|
|
99.5 |
|
|
|
77.1 |
|
|
|
161.9 |
|
|
|
133.5 |
|
Scotts LawnService® |
|
|
32.4 |
|
|
|
33.7 |
|
|
|
70.7 |
|
|
|
59.5 |
|
Corporate & Other |
|
|
24.6 |
|
|
|
30.2 |
|
|
|
65.7 |
|
|
|
74.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total |
|
|
977.0 |
|
|
|
993.3 |
|
|
|
1,285.7 |
|
|
|
1,264.5 |
|
Product recalls |
|
|
(19.0 |
) |
|
|
|
|
|
|
(19.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
958.0 |
|
|
$ |
993.3 |
|
|
$ |
1,266.7 |
|
|
$ |
1,264.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Consumer |
|
$ |
179.2 |
|
|
$ |
209.2 |
|
|
$ |
141.2 |
|
|
$ |
165.6 |
|
Global Professional |
|
|
16.3 |
|
|
|
12.0 |
|
|
|
22.7 |
|
|
|
17.9 |
|
Scotts LawnService® |
|
|
(18.5 |
) |
|
|
(16.7 |
) |
|
|
(30.0 |
) |
|
|
(33.1 |
) |
Corporate & Other |
|
|
(27.9 |
) |
|
|
(34.0 |
) |
|
|
(50.5 |
) |
|
|
(60.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total
|
|
|
149.1 |
|
|
|
170.5 |
|
|
|
83.4 |
|
|
|
89.6 |
|
Roundup® amortization |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Amortization |
|
|
(3.9 |
) |
|
|
(3.8 |
) |
|
|
(7.8 |
) |
|
|
(7.3 |
) |
Product recalls |
|
|
(30.8 |
) |
|
|
|
|
|
|
(30.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
114.2 |
|
|
$ |
166.5 |
|
|
$ |
44.4 |
|
|
$ |
81.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
SEPTEMBER 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Global Consumer |
|
$ |
2,414.5 |
|
|
$ |
2,309.0 |
|
|
$ |
1,551.9 |
|
Global Professional |
|
|
350.5 |
|
|
|
299.2 |
|
|
|
308.0 |
|
Scotts LawnService® |
|
|
180.5 |
|
|
|
162.0 |
|
|
|
189.2 |
|
Corporate & Other |
|
|
225.4 |
|
|
|
272.6 |
|
|
|
228.1 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
3,170.9 |
|
|
$ |
3,042.8 |
|
|
$ |
2,277.2 |
|
|
|
|
|
|
|
|
|
|
|
Segment operating income or loss represents earnings before amortization of intangible assets,
interest and taxes, since this is the measure of profitability used by management. Accordingly, the
Corporate & Other operating loss for the three and six month periods ended March 29, 2008 and March
31, 2007 includes unallocated corporate general and administrative expenses, and certain other
income/expense items not allocated to the business segments.
Total assets reported for the Companys operating segments include the intangible assets for the
acquired businesses within those segments. Corporate & Other assets primarily include deferred
financing and debt issuance costs, corporate intangible assets, deferred tax assets and Smith &
Hawken® assets.
19
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Managements Discussion and Analysis (MD&A) is organized in the following sections:
|
|
Executive summary |
|
|
|
Results of operations |
|
|
|
Segment discussion |
|
|
|
Liquidity and capital resources |
Executive Summary
We are dedicated to delivering strong, consistent financial results and outstanding shareholder
returns by providing consumers with products of superior quality and value to enhance their outdoor
living environments. We are a leading manufacturer and marketer of consumer branded products for
lawn and garden care and professional horticulture in North America and Europe. We are Monsantos
exclusive agent for the marketing and distribution of consumer Roundup® non-selective herbicide
products within the United States and other contractually specified countries. We have a presence
in similar consumer branded and professional horticulture products in Australia, the Far East,
Latin America and South America. In the United States, we operate Scotts LawnService®, the second
largest residential lawn care service business, and Smith & Hawken®, a leading brand in the outdoor living and garden lifestyle category. In fiscal 2008, our operations are divided
into the following reportable segments: Global Consumer, Global Professional, Scotts LawnService®
and Corporate & Other. The Corporate & Other segment consists of the Smith & Hawken® business and
corporate general and administrative expenses.
As a leading consumer branded lawn and garden company, our marketing efforts are largely focused on
building brand and product level awareness, to inspire consumers and create retail demand. We have
successfully applied this consumer marketing focus for a number of years, consistently investing
approximately 5% of our annual net sales in advertising to support and promote our products and
brands. We continually explore new and innovative ways to communicate with consumers. We believe
that we receive a significant return on these marketing expenditures and anticipate a similar level
of future advertising and marketing investments, with the continuing objective of driving category
growth and increasing market share.
Our sales are susceptible to global weather conditions. For instance, periods of wet weather can
adversely impact sales of certain products, while increasing demand for other products. We believe
that our diversified product line provides some mitigation to this risk. We also believe that our
broad geographic diversification further reduces this risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent Net Sales by Quarter |
|
|
2007 |
|
2006 |
|
2005 |
|
First Quarter |
|
|
9.5 |
% |
|
|
9.3 |
% |
|
|
10.4 |
% |
Second Quarter |
|
|
34.6 |
% |
|
|
33.6 |
% |
|
|
34.3 |
% |
Third Quarter |
|
|
38.2 |
% |
|
|
38.9 |
% |
|
|
38.0 |
% |
Fourth Quarter |
|
|
17.7 |
% |
|
|
18.2 |
% |
|
|
17.3 |
% |
Due to the nature of our lawn and garden business, significant portions of our shipments occur in
the second and third fiscal quarters. Over the past few years, retailers have reduced their
pre-season inventories as they have come to place greater reliance on our ability to deliver
products in season when consumers buy our products.
Management focuses on a variety of key indicators and operating metrics to monitor the health and
performance of our business. These metrics include consumer purchases (point-of-sale data), market
share, net sales (including volume, pricing and foreign exchange), gross profit margins, income
from operations, net income and earnings per share. To the extent applicable, these measures are
evaluated with and without impairment, restructuring and other charges. We also focus on measures
to optimize cash flow and return on invested capital, including the management of working capital
and capital expenditures.
20
Given the Companys strong performance and consistent cash flows, our Board of Directors has
undertaken a number of actions over the past several years to return cash to our shareholders. We
began paying a quarterly cash dividend of 12.5 cents per share in the fourth quarter of fiscal
2005. In fiscal 2006, our Board launched a five-year $500 million share repurchase program pursuant
to which we repurchased 2.0 million common shares for $87.9 million during fiscal 2006. Most
recently, in December 2006, the Company announced a recapitalization plan to return $750 million to
the Companys shareholders. This plan expanded and accelerated the previously announced five-year
$500 million share repurchase program (which was canceled). Pursuant to the recapitalization plan,
in February 2007, the Company repurchased 4.5 million of the Companys common shares for an
aggregate purchase price of $245.5 million ($54.50 per share) and paid a special one-time cash
dividend of $8.00 per share ($508 million in the aggregate) in early March 2007.
In order to fund this recapitalization, the Company entered into credit facilities aggregating
$2.15 billion and terminated its prior credit facility. Reference should be made to Note 7 to the
accompanying condensed, consolidated financial statements for further information as to the credit
facilities and the repayment and termination of the prior credit facility and the 6 5/8% senior
subordinated notes.
The actions described above reflect managements confidence in the continued growth of the Company
coupled with strong and consistent cash flows that can support the higher levels of debt incurred
to finance these actions. Even with an increase in borrowings, we believe we will maintain the
capacity to pursue targeted, strategic acquisitions that leverage our core competencies.
2008 PRODUCT RECALLS
In March 2008, the Company announced a voluntary recall of certain wild bird food products which had been treated with pest control
products labeled for use on certain stored grains that can be processed for human and/or animal consumption. However, these pest
control products were not labeled for use on wild bird food products. These products were treated with pest control products to avoid
insect infestations, especially at retail stores, a practice which
pre-dates the Companys acquisition of Gutwein & Co., Inc. in
November 2005.
In April 2008, the Company, in cooperation with an investigation by the U.S. Environmental Protection Agency
(USEPA), announced a recall of certain consumer lawn and garden products and one Scotts LawnService®
(SLS) product. These products contain active ingredients that require USEPA registrations before they can be
marketed to consumers or used by SLS. On April 10, 2008, the Company learned of a criminal investigation into certain of its product
registrations which the Company understands is being led by the USEPA and the U.S. Department of Justice (USDOJ),
with assistance from the Ohio Department of Agriculture. Since then, the Company has learned that one of its employees apparently
deliberately circumvented Company policies and USEPA regulations by failing to obtain valid registrations for products and/or
causing invalid product registration forms to be submitted to regulators. The sale of products which lack valid
registrations is a violation of federal and state law. The
Company has since terminated the employee in question and engaged
independent firms to conduct a forensic investigation into its
existing product registrations and to review its product registration
compliance processes and procedures. While the Company believes these products do not pose a public health or environmental risk,
it is working in cooperation with the USEPA to recall the affected products from the marketplace.
While
disappointed that the actions of one employee could cause
unregistered or not properly labeled products to be marketed and sold, the
Company takes full responsibility for ensuring that each of its
products meets all federal and state regulations, and is safe for consumer
use. A comprehensive investigation into all of the Companys product registrations is in process, and this investigation may
result in future state or federal action with respect to additional product registration
issues. Until such investigation is complete, the Company cannot fully
quantify the extent of additional issues. Furthermore, the Company
may be subject to civil or criminal fines or penalties at the state
and/or federal level as a
result of the product registration issues. At this time, management cannot reasonably determine the scope or magnitude of possible
liabilities that could result from known or potential additional product registration issues, and no reserves for these claims have been
established as of March 29, 2008. However, it is possible that such fines and/or penalties could be material and have an adverse effect
on the Companys financial condition and results of operations.
As a result of these recalls, for the quarter ended March 29, 2008, the Company reversed sales associated with estimated returns of
these products, recorded an impairment estimate for affected inventory, and accrued other recall-related costs. The cumulative impact
of these adjustments reduced income from operations by $30.8 million for the three and six months ended March 29, 2008.
Scotts Miracle-Gro is committed to providing its customers and consumers with products of superior quality and value to enhance
their lawns, gardens and overall outdoor living environments. We believe consumers have come to trust our brands based on the
superior quality and value they deliver, and that trust is highly valued. We are also committed to conducting business with the highest
degree of ethical standards and in adherence to the law. We are disappointed in these recent occurrences and are working diligently to
address the issues, including retaining independent firms to conduct
a forensic examination of its existing product registrations and
enhance our product registration compliance and control processes.
However, these events may nevertheless have a negative impact on future demand for the Companys products.
21
RESULTS OF OPERATIONS
The following table sets forth the components of income and expense as a percentage of net sales
for the three and six month periods ended March 29, 2008 and March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(UNAUDITED) |
|
|
(UNAUDITED) |
|
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
66.3 |
|
|
|
62.9 |
|
|
|
68.9 |
|
|
|
66.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
33.7 |
|
|
|
37.1 |
|
|
|
31.1 |
|
|
|
33.5 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
21.9 |
|
|
|
20.4 |
|
|
|
27.9 |
|
|
|
27.3 |
|
Other expense (income), net |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.3 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
11.9 |
|
|
|
16.8 |
|
|
|
3.5 |
|
|
|
6.5 |
|
Costs related to refinancing |
|
|
|
|
|
|
1.9 |
|
|
|
|
|
|
|
1.4 |
|
Interest expense |
|
|
2.4 |
|
|
|
1.8 |
|
|
|
3.4 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
9.5 |
|
|
|
13.1 |
|
|
|
0.1 |
|
|
|
3.0 |
|
Income taxes |
|
|
3.4 |
|
|
|
4.7 |
|
|
|
0.0 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
6.1 |
% |
|
|
8.4 |
% |
|
|
0.1 |
% |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for the three months ended March 29, 2008 were $958.0 million, a decrease of 3.5% from
net sales of $993.3 million for the three months ended March 31, 2007. Net sales for the first six
months of fiscal 2008 were flat versus the comparable period of
fiscal 2007. Excluding the impact of foreign
exchange rates and product recalls, sales for the second quarter and first six months decreased 4.1% and 1.0%,
respectively, due largely to a slow start to the lawn and garden season. Global Consumer sales
decreased 3.7% to $820.5 million for the second quarter and decreased by
1.0% to $987.4 million for the first
six months. Excluding the impact of foreign exchange rates and product recalls, our Global Consumer segment reported
declines of 5.8% and 3.2% in net sales for the second quarter and first six months of fiscal 2008,
respectively. Global Professional sales increased 29.1% to $99.5 million from $77.1 million for the
same quarter a year ago, and 21.2% to $161.9 million from $133.5 million for the first six months a
year ago. Excluding the impact of foreign exchange rates, Global Professional sales increased 19.5%
and 13.1% for the second quarter and first six months, respectively. Scotts
LawnService® sales were $32.4
million for the second quarter compared to $33.7 million a year
earlier. Year-to-date, Scotts LawnService®
sales increased from $59.5 million to $70.7 million.
Corporate and other sales, primarily Smith & Hawken®, decreased from $30.2
million in the second quarter of fiscal 2007 to $24.6 million in
the second quarter of fiscal 2008, and
from $74.6 million in the first six months of fiscal 2007 to $65.7 million in the first six months
of fiscal 2008. In recent years, net sales for our second quarter typically comprise between 33% to
35% of our total fiscal year net sales, while sales for the first six
months have typically comprised 43% to
45%. There can be no assurance that a similar sales trend will occur for our full fiscal 2008
year.
As a percentage of net sales, gross profit was 33.7% for the second quarter of fiscal 2008 compared
to 37.1% for second quarter of fiscal 2007. For the first six months of fiscal 2008, our gross
profit percentage declined to 31.1% from 33.5% in the comparable period of fiscal 2007. The fiscal
2008 second quarter and year-to-date gross profit rate decreases were
driven by product recalls and higher promotional costs. Excluding the impact of
the product recalls, which reduced gross profit by $29.6 million, second quarter and year-to-date
gross profit rates for fiscal 2008 were 36.1% and 33.0%, respectively.
Selling,
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
|
|
(UNAUDITED) |
|
|
(UNAUDITED) |
|
Advertising |
|
$ |
49.7 |
|
|
$ |
50.3 |
|
|
$ |
64.5 |
|
|
$ |
63.7 |
|
Other selling, general and administrative |
|
|
154.8 |
|
|
|
148.9 |
|
|
|
280.4 |
|
|
|
274.2 |
|
Product recall costs |
|
|
1.2 |
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
Amortization of intangibles |
|
|
3.9 |
|
|
|
3.8 |
|
|
|
7.8 |
|
|
|
7.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
209.6 |
|
|
$ |
203.0 |
|
|
$ |
353.9 |
|
|
$ |
345.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
SG&A expenses increased $6.6 million, or 3.3%, to $209.6 million in the second quarter and $8.7
million, or 2.5%, to $353.9 million for the first six months of fiscal 2008. During the second
quarter of fiscal 2008, we recorded $1.2 million of product
recall costs, primarily attorney fees. Excluding foreign exchange rates and product recall costs, SG&A
expenses for the second quarter increased $1.1 million or 0.5% and were flat for the first six months of
fiscal 2008. We continue to expect full year growth of SG&A
expenses in the range of 6 to 8 percent as we make strategic
investments in technology and innovation, as well as targeted marketing and selling spending, to
support our long-term growth initiatives.
Interest expense for the second quarter and first six months of fiscal 2008 was $23.5 million and
$42.5 million, respectively, compared to $17.9 million and $26.1 million for the second quarter and
first six months of fiscal 2007. The increase in interest expense for the year-to-date period is
primarily attributable to an increase in borrowings resulting from the recapitalization
transactions that were consummated during the second quarter of fiscal 2007. We also recorded $18.3
million in costs related to the refinancing undertaken to facilitate the recapitalization
transactions in fiscal 2007. Average borrowings increased $505.0 million during the first six
months of fiscal 2008 as compared to the prior year period. Weighted average interest rates also
increased by 17 basis points.
The income tax expense was calculated assuming an effective tax rate of 36.0% for both the first
half of fiscal 2008 and fiscal 2007. The effective tax rate used for interim reporting purposes is
based on managements best estimate of factors impacting the effective tax rate for the fiscal
year. Factors affecting the estimated rate include assumptions as to income by jurisdiction
(domestic and foreign), the availability and utilization of tax credits, the existence of elements
of income and expense that may not be taxable or deductible, as well as other items. There can be
no assurance that the effective tax rate estimated for interim financial reporting purposes will
approximate the effective tax rate determined at fiscal year end. The estimated effective tax rate
is subject to revision in later interim periods and at fiscal year end as facts and circumstances
change during the course of the fiscal year.
Diluted
average common shares used in the diluted net income per common share calculation decreased
from 67.8 million for the second quarter and 68.4 million for the six months ended March 31, 2007 to 65.6
million for the second quarter and 65.7 million for the six months ended March 29, 2008. These decreases
are attributable to the 4.5 million common shares repurchased as part of the recapitalization
consummated during the second quarter of fiscal 2007, weighted for the period outstanding, and
offset by common shares issued upon the exercise of share-based awards and the vesting of restricted
stock. Diluted average common shares also include 1.2 million and 1.4 million equivalent shares for the
second quarter and year-to-date periods in fiscal 2008 to reflect the effect of the assumed conversion of
dilutive stock options and restricted stock awards.
SEGMENT RESULTS
The Company is divided into the following segments: Global Consumer, Global Professional, Scotts
LawnService®, and Corporate & Other. These segments differ from those used in the prior year due to
the realignment of the North America and International segments into the Global Consumer and Global
Professional segments. The Corporate & Other segment consists of Smith & Hawken® and corporate
general and administrative expenses. The prior year amounts have been reclassified to conform to
the fiscal 2008 segments. Segment performance is evaluated based on several factors, including
income from operations before amortization, and impairment, restructuring and other charges, which
is a non-GAAP measure. Management uses this measure of operating profit to gauge segment
performance because we believe this measure is the most indicative of performance trends and the
overall earnings potential of each segment.
The Global Consumer segment consists of the North American Consumer and International Consumer
business groups which manufacture, market and sell dry, granular slow-release lawn fertilizers,
combination lawn fertilizer and control products, grass seed, spreaders, water-soluble, liquid and
continuous release garden and indoor plant foods, plant care products, potting, garden and lawn
soils, mulches and other growing media products, and pesticide products. Products are marketed to
mass merchandisers, home improvement centers, large hardware chains, warehouse clubs, distributors,
garden centers, and grocers in the United States, Canada and Europe.
The Global Professional segment is focused on a full line of horticultural products including
controlled-release and water-soluble fertilizers and plant protection products, grass seed,
spreaders, and customer application services. Products are sold to commercial nurseries and
greenhouses, and specialty crop growers primarily in North America and Europe. Our consumer
businesses in Australia and Latin America are also part of the Global Professional segment.
The Scotts LawnService® segment provides lawn fertilization, disease and insect control and other
related services such as core aeration and tree and shrub fertilization primarily to residential
consumers through company-owned branches and franchises in the United States. In our larger
branches, an exterior barrier pest control service is also offered.
23
The Corporate & Other segment consists of the Smith & Hawken® business and corporate general and
administrative expenses.
The following table sets forth net sales by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
|
|
(UNAUDITED) |
|
|
(UNAUDITED) |
|
Global Consumer |
|
$ |
820.5 |
|
|
$ |
852.3 |
|
|
$ |
987.4 |
|
|
$ |
996.9 |
|
Global Professional |
|
|
99.5 |
|
|
|
77.1 |
|
|
|
161.9 |
|
|
|
133.5 |
|
Scotts LawnService® |
|
|
32.4 |
|
|
|
33.7 |
|
|
|
70.7 |
|
|
|
59.5 |
|
Corporate & other |
|
|
24.6 |
|
|
|
30.2 |
|
|
|
65.7 |
|
|
|
74.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total |
|
|
977.0 |
|
|
|
993.3 |
|
|
|
1,285.7 |
|
|
|
1,264.5 |
|
Product recalls |
|
|
(19.0 |
) |
|
|
|
|
|
|
(19.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
958.0 |
|
|
$ |
993.3 |
|
|
$ |
1,266.7 |
|
|
$ |
1,264.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
sets forth
operating income by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
MARCH 29, |
|
|
MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(IN MILLIONS) |
|
|
(IN MILLIONS) |
|
|
|
(UNAUDITED) |
|
|
(UNAUDITED) |
|
Global Consumer |
|
$ |
179.2 |
|
|
$ |
209.2 |
|
|
$ |
141.2 |
|
|
$ |
165.6 |
|
Global Professional |
|
|
16.3 |
|
|
|
12.0 |
|
|
|
22.7 |
|
|
|
17.9 |
|
Scotts LawnService® |
|
|
(18.5 |
) |
|
|
(16.7 |
) |
|
|
(30.0 |
) |
|
|
(33.1 |
) |
Corporate & other |
|
|
(27.9 |
) |
|
|
(34.0 |
) |
|
|
(50.5 |
) |
|
|
(60.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total |
|
|
149.1 |
|
|
|
170.5 |
|
|
|
83.4 |
|
|
|
89.6 |
|
Roundup® amortization |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Other amortization |
|
|
(3.9 |
) |
|
|
(3.8 |
) |
|
|
(7.8 |
) |
|
|
(7.3 |
) |
Product recalls |
|
|
(30.8 |
) |
|
|
|
|
|
|
(30.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
114.2 |
|
|
$ |
166.5 |
|
|
$ |
44.4 |
|
|
$ |
81.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Consumer
Excluding the impact of product recalls, Global Consumer segment net sales were $820.5 million in
the second quarter and $987.4 million for the first six months of
fiscal 2008, a decrease of 3.7% and 1.0%
from the second quarter and first six months of fiscal 2007, respectively. The impact of pricing increased sales by 4.1% for both the second quarter and first
six months of fiscal 2008, while the impact of foreign exchange increased sales by 2.0% and 2.2%
for the second quarter and first six months, respectively. Excluding the impact of
price increases and foreign exchange movements, net sales decreased
by 9.9% and 7.3% from the
second quarter and first six months of fiscal 2007. Within Global Consumer, North America consumer sales,
excluding the impact of foreign exchange rates, declined 6.9% and 4.1% for the second quarter
and first six months, respectively, compared to the respective declines in North American
point-of-sale purchases of 19.6% and 10.0% for the second quarter and first six months driven by
cold and wet weather causing a delayed start to the lawn and garden season. Largely driven by
France and Germany, consumer sales in Europe increased 10.3% and
10.8% for the second quarter and
year-to-date, respectively, or 0.4% and 0.9% excluding the impact of
foreign exchange rates.
The Global Consumer segment operating income decreased by $30.0 million and $24.4 million in the
second quarter and first six months of fiscal 2008, respectively. The decrease in operating income was
driven by the decrease in net sales accompanied by a decrease in gross margin rates of 90 basis
points and 60 basis points for the second quarter and first six months of fiscal 2008 excluding the
impact of product recalls. The decrease in gross margin rates is the result of higher promotional
costs. As a result of the product recalls, gross margin rates declined by 280 and 240 basis points
for the second quarter and first six months of fiscal 2008, respectively. SG&A spending, including media
advertising, increased 4.0% for the second quarter and 3.8% for the year-to-date period after the impact
of foreign exchange rates.
Global Professional
Global
Professional segment net sales were $99.5 million in the second quarter and $161.9 million for the
first six months of fiscal 2008, an increase of 29.1% and 21.2% from
the second quarter and first six
months of fiscal 2007, respectively. Excluding the effect of exchange rates, net sales increased by
19.5% and 13.1% for the second quarter and first six months, respectively. These increases reflect
strong sales
24
in all
components of the business, led by the largest component, Europe, with net sales increases of
18.0% and 14.4% for the second quarter and first six months excluding the impact of exchange rates.
Primarily due to the strong growth in net sales, the Global Professional segment operating income
increased by $4.3 million and $4.8 million in the second quarter and first six months of fiscal 2008,
respectively. Excluding the effect of exchange rates, operating income increased by 15.5% and 8.3%
compared to the second quarter and first six months of fiscal 2007, respectively.
Scotts LawnService®
Compared to the same periods in the prior fiscal year, Scotts LawnService® revenues decreased 3.9% to $32.4 million in the second quarter of
fiscal 2008 and increased 18.8% to $70.7 million in the first
six months of fiscal 2008. The decrease for the second quarter is
primarily attributable to poor weather in the
midwest and northern markets. The increase for the year-to-date period is attributable to
acquisition growth of 6.3% as well as the shifting of late season lawn treatments to the first
quarter of fiscal 2008.
Scotts LawnService® segment operating loss
increased by $1.8 million in the second quarter driven by the decrease in revenues and gross profit. The
Scotts LawnService® segment operating loss decreased by $3.1 million in the first six months of
fiscal 2008 driven by the increase in revenues and gross profit, partially offset by an increase in
SG&A spending.
Corporate & Other
Net sales for the Corporate & Other segment, which pertain primarily to Smith & Hawken®, decreased
$5.6 million for the second quarter and $8.9 million year to date. These decreases are primarily due to
our catalog, business-to-business, and wholesale channels. Additionally, the first half of fiscal
2007 benefited from initial start-up activity with Starbucks®.
The
operating loss for Corporate & Other decreased by $6.1 million in the second quarter and $10.3 million
for the first six months of fiscal 2007. The decreases in operating
loss for the second quarter and year
to date were driven by lower Corporate spending.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities amounted to $555.7 million and $519.7 million for the six months
ended March 29, 2008 and March 31, 2007, respectively. The use of cash in the first six months of
our fiscal year is due to the seasonal nature of our operations. We build inventories in
preparation for the spring selling season and accounts receivable increase significantly due to
heavy March shipments. The increase in the use of cash for operating activities during fiscal 2008
compared to fiscal 2007 was due primarily to a higher level of inventory builds in fiscal 2008
compared to fiscal 2007 due to sales below plan and higher input costs.
Cash used in investing activities was $24.5 million and $36.0 million for the six months ended
March 29, 2008 and March 31, 2007, respectively. There was no acquisition activity in the first
half of fiscal 2008 compared to the $6.3 million cash outlay for acquisitions relating to our
Scotts LawnService® business in the first half of fiscal 2007. Capital spending on property, plant
and equipment in the normal course of business was reasonably consistent, with $25.1 million spent
during the first half of fiscal 2008 compared to the $30.1 million spent in the first half of
fiscal 2007.
Financing activities provided cash of $580.8 million and $547.8 million for the six months ended
March 29, 2008 and March 31, 2007, respectively.
Our recapitalization plan that was consummated during the second quarter of fiscal 2007 returned
$750 million to shareholders. In addition, we repurchased all of our 6 5/8% senior subordinated
notes in an aggregate principal amount of $200 million. These actions were financed by replacing,
effective February 7, 2007, our prior Revolving Credit Agreement with senior secured $2.15 billion
multicurrency credit facilities that provide for revolving credit and term loans through February
7, 2012.
On April 11, 2007, the Company entered into a Master Accounts Receivable Purchase Agreement (the
Original MARP Agreement) with a stated termination date of April 10, 2008. On April 9, 2008, the Company
terminated the Original MARP Agreement and entered into a new Master Accounts Receivable Purchase
Agreement (the New MARP Agreement) with a stated termination date of April 8, 2009, or such later date
as may be extended by mutual agreement of the Company and its lenders. The terms of the New MARP
Agreement are substantially the same as the Original MARP Agreement. The New MARP Agreement was
entered into as it provides an interest rate savings of 40 basis points as compared to borrowing
under our senior secured credit facilities. The New MARP Agreement provides
25
for the sale, on a revolving basis, of account receivables generated by specified account debtors,
with seasonally adjusted monthly aggregate limits ranging from $10 million to $300 million. The
New MARP Agreement also provides for specified account debtor sublimit amounts, which provide
limits on the amount of receivables owed by individual account debtors that can be sold to the
banks. Borrowings under the MARP Agreement at March 29, 2008 were $241.9 million.
At March 29, 2008, the Company had outstanding interest rate swaps with major financial
institutions that effectively converted a portion of our variable-rate debt denominated in the Euro
dollar, British pound and U.S. dollar to a fixed rate. The swaps agreements have a total
U.S. dollar equivalent notional amount of $724.9 million at
March 29, 2008. The term, expiration date and rates of
these swaps are shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTIONAL |
|
|
|
|
|
|
|
|
AMOUNT IN |
|
|
|
|
|
|
|
|
USD |
|
|
|
|
|
|
CURRENCY |
|
(IN MILLIONS) |
|
TERM |
|
EXPIRATION DATE |
|
FIXED RATE |
British pound |
|
$ |
57.4 |
|
|
3 years |
|
|
11/17/2008 |
|
|
|
4.76 |
% |
Euro dollar |
|
|
67.5 |
|
|
3 years |
|
|
11/17/2008 |
|
|
|
2.98 |
% |
US dollar |
|
|
200.0 |
|
|
2 years |
|
|
3/31/2009 |
|
|
|
4.90 |
% |
US dollar |
|
|
200.0 |
|
|
3 years |
|
|
3/31/2010 |
|
|
|
4.87 |
% |
US dollar |
|
|
200.0 |
|
|
5 years |
|
|
2/14/2012 |
|
|
|
5.20 |
% |
As of
March 29, 2008, there was $672.2 million of availability
under our revolving loan facility and we
were in compliance with all debt covenants. Our primary sources of liquidity are cash generated by
operations and borrowings under our credit facilities. We believe our facilities will continue to
provide the Company with the capacity to pursue targeted, strategic acquisitions that leverage our
core competencies.
We are party to various pending judicial and administrative proceedings arising in the ordinary
course of business. These include, among others, proceedings based on accidents or product
liability claims and alleged violations of environmental laws. We have reviewed our pending
environmental and legal proceedings, including the probable outcomes, reasonably anticipated costs
and expenses, reviewed the availability and limits of our insurance coverage and have established
what we believe to be appropriate reserves. We do not believe that any liabilities that may result
from these proceedings are reasonably likely to have a material adverse effect on our liquidity,
financial condition or results of operations; however, there can be no assurance that future
quarterly or annual operating results will not be materially affected by final resolution of these
matters.
In our opinion, cash flows from operations and capital resources will be sufficient to meet debt
service and working capital needs during fiscal 2008 and thereafter for the foreseeable future.
However, we cannot ensure that our business will generate sufficient cash flow from operations or
that future borrowings will be available under our credit facilities in amounts sufficient to pay
indebtedness or fund other liquidity needs. Actual results of operations will depend on numerous
factors, many of which are beyond our control.
ENVIRONMENTAL MATTERS
We are subject to local, state, federal and foreign environmental protection laws and regulations
with respect to our business operations and believe we are operating in substantial compliance
with, or taking actions aimed at ensuring compliance with, such laws and regulations. We are
involved in several legal actions with various governmental agencies related to environmental
matters. While it is difficult to quantify the potential financial impact of actions involving
environmental matters, particularly remediation costs at waste disposal sites and future capital
expenditures for environmental control equipment, in the opinion of management, the ultimate
liability arising from such environmental matters, taking into account established reserves, should
not have a material adverse effect on our financial position. However, there can be no assurance
that the resolution of these matters will not materially affect our future quarterly or annual
results of operations, financial condition or cash flows. Additional information on environmental
matters affecting us is provided in our Annual Report on Form 10-K
for the fiscal year ended September 30, 2007 under ITEM 1.
BUSINESS Environmental and Regulatory Considerations, ITEM 1. BUSINESS Regulatory Actions
and ITEM 3. LEGAL PROCEEDINGS.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preceding discussion and analysis of the consolidated results of operations and financial
position should be read in conjunction with our condensed, consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q. Our Annual Report on Form 10-K for the
fiscal year ended September 30, 2007 includes additional information about the Company, our
operations, our
26
financial position, our critical accounting policies and accounting estimates, and should be read
in conjunction with this Quarterly
Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks have not changed significantly from those disclosed in the Scotts Miracle-Gro Annual Report on
Form 10-K for the fiscal year ended September 30, 2007.
ITEM 4. CONTROLS AND PROCEDURES
With the participation of the Scotts Miracle-Gro principal executive officer and principal financial
officer, Scotts Miracle-Gro management has evaluated the effectiveness of its disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act), as of the end of the fiscal quarter covered by this Quarterly Report
on Form 10-Q. Based upon that evaluation, Scotts Miracle-Gro principal executive officer and principal
financial officer have concluded that:
|
(A) |
|
information required to be disclosed by Scotts Miracle-Gro in this Quarterly Report on Form 10-Q
and the other reports that Scotts Miracle-Gro files or submits under the Exchange Act would be
accumulated and communicated to its management, including its principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure; |
|
|
(B) |
|
information required to be disclosed by Scotts Miracle-Gro in this Quarterly Report on Form 10-Q
and the other reports that Scotts Miracle-Gro files or submits under the Exchange Act would be
recorded, processed, summarized, and reported within the time periods specified in the SECs
rules and forms; and |
|
|
(C) |
|
Scotts Miracle-Gros disclosure controls and procedures are effective as of the end of the
fiscal quarter covered by this Quarterly Report on Form 10-Q. |
In addition, there were no changes in Scotts Miracle-Gros internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) that occurred
during its fiscal second quarter
ended March 29, 2008, that have materially affected, or are reasonably likely to materially affect,
Scotts Miracle-Gros internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 10, 2008, the Company learned of a criminal investigation into
certain of its U.S. Environmental Protection Agency (USEPA) product registrations. The Company understands that the
investigation is being led by the USEPA and the U.S. Department of Justice (USDOJ), with assistance
from the Ohio Department of Agriculture. The Company is cooperating with the USDOJ and
USEPA in connection with their investigation, and, while the investigation is on-going, evidence indicates that a former employee
of the Company apparently deliberately circumvented Company policies and USEPA regulations by failing to obtain valid registrations
for products and/or causing invalid product registration forms to be submitted to regulators. As a result of this investigation,
in April 2008, the Company, in cooperation with the USEPA, announced a recall of certain consumer lawn and garden products and one
Scotts LawnService® product. A comprehensive investigation into
all of the Company's product registrations is in process, and this
investigation may result in future state or federal action with
respect to additional
product registration issues. There can be no assurance that the ultimate outcome of these investigations will not result in further
action,
whether administrative, civil or criminal, by the USDOJ, USEPA or state regulatory agencies against the Company. Such actions may
include the imposition of regulatory fines and/or penalties against the Company, and there can be no assurance that any such fines
and/or penalties, in addition to the costs the Company has already incurred and expects to incur in connection with the product
recalls, will not have a material and adverse effect on the Company's financial
condition and results of operations.
On April 27, 2007, the Company received a proposed Order On Consent from the New York State
Department of Environmental Conservation (the Proposed Order) alleging that during the calendar
year 2003, the Company and James Hagedorn, individually and as Chairman of the Board and the Chief
Executive Officer of the Company, unlawfully donated to a Port Washington, New York youth sports
organization forty bags of Scotts® LawnPro Annual Program Step 3 Insect Control Plus Fertilizer
which, while federally registered, was allegedly not registered in the state of New York. The
Proposed Order requests penalties totaling $695,000. The Company is currently investigating this
matter.
Other than as discussed in the preceding paragraphs, pending material legal proceedings have not
changed significantly since the first quarter of fiscal 2008.
ITEM 1A. RISK FACTORS
Cautionary Statement on Forward-Looking Statements
We have made and will make forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 in this Quarterly
Report on Form 10-Q and in other contexts relating to future growth and profitability targets and
strategies designed to increase total shareholder value. Forward-looking statements also include,
but are not limited to, information regarding our future economic and financial condition, the
plans and objectives of our management and our assumptions regarding our performance and these
plans and objectives.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements to encourage companies
27
to provide prospective information, so long as those statements are identified as forward-looking
and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual results to differ
materially from those discussed in the forward-looking statements. We desire to take advantage of
the safe harbor provisions of that Act.
Some forward-looking statements that we make in this Quarterly Report on Form 10-Q and in other
contexts represent challenging goals for the Company, and the achievement of these goals is subject
to a variety of risks and assumptions and numerous factors beyond our
control. All forward-looking statements attributable to us or persons working
on our behalf are expressly qualified in their entirety by those cautionary statements. Important factors
that could cause actual results to differ materially from the forward-looking statements we make
are included in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal
year ended September 30, 2007.
Updates
to our risk facts as a result of our 2008 product recalls and the
related governmental investigation are discussed below.
Costs associated with product recalls and the corresponding governmental investigation could materially and adversely affect us or our financial results.
In April 2008, we announced that a former employee apparently deliberately circumvented our policies,
causing unregistered or not properly labeled products to be marketed and sold. During
the same time period, we learned of a criminal investigation, which
we understand is being led by the U.S. Environmental Protection
Agency (USEPA) and the U.S. Department of Justice
(USDOJ), with assistance from the Ohio Department of Agriculture, related to the status of the registrations of these products,
some of which had entered commerce and some of which had not. As a result of the investigation, we recalled, or are in the process of recalling, certain consumer lawn and garden products and one Scotts LawnService® product.
In connection with these product recalls, we have recorded, and in the future may record, charges and costs, based on our most recent estimates, of retailer inventory returns, consumer returns and replacement costs, associated legal and professional fees and costs associated with advertising and administration of product recalls.
Because these current and expected future charges are based on estimates, they may increase as a result of numerous factors, many of which are beyond our control, including the amount of products that may be returned by consumers and retailers, the number and type of legal or regulatory proceedings relating to these product recalls and regulatory or judicial orders or decrees that may require
us to take certain actions in connection with product recalls or to pay civil or criminal fines and/or penalties at the state and/or federal level.
The costs associated with these product recalls and any potential fines
and/or penalties, both those which we have estimated to date and any amounts in excess of our current estimates, could have a
material and adverse effect on our financial condition and results of
operations.
In addition, there can be no assurance that the ultimate outcome of the
investigation will not result in further action against us, whether administrative, civil or criminal by the USDOJ, USEPA or state
regulatory agencies, and any such action, in addition to the costs we have incurred and will continue to incur in connection therewith,
could materially and adversely affect us or our financial condition
and results of operations.
Product recalls and the corresponding governmental investigation may harm our reputation and acceptance of our products by our retail customers and consumers, which may materially and adversely affect our business operations, decrease sales and increase costs.
The product recalls we announced in April 2008, together with the corresponding governmental investigation by the USDOJ and USEPA, have resulted in coverage critical of us in the press and media. While we believe that these recalls are the result of the misguided actions of a former employee who misled us and that we have acted promptly, responsibly and
in the public interest, these product recalls may harm our reputation and the acceptance of our products by consumers and our retailer customers. Our retailer customers may be less willing to purchase our products or to provide marketing support for those products, such as shelf space, promotions, and advertising or may impose additional
requirements that would adversely affect our business operations, decrease sales and increase costs.
ITEM 6. EXHIBITS
See Index
to Exhibits at page 30 for a list of the exhibits included herewith.
28
SIGNATURES
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, thereunto duly authorized.
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THE SCOTTS MIRACLE-GRO COMPANY |
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Date: May 8, 2008 |
/s/ DAVID C. EVANS |
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David C. Evans |
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Executive Vice President and Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
(Duly Authorized Officer) |
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29
THE SCOTTS MIRACLE-GRO COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2008
INDEX TO EXHIBITS
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EXHIBIT NO. |
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DESCRIPTION |
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LOCATION |
10(a) |
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Specimen form of Award Agreement for Employees used to evidence
Nonqualified Stock Options which may be granted under The Scotts Miracle-Gro Company
2006 Long-Term Incentive Plan (now known as The Scotts Miracle-Gro
Company Amended and Restated 2006 Long-Term Incentive Plan)
(Standard International Specimen covering Australia, Canada, Austria,
Germany and
The Netherlands) |
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* |
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10(b) |
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Specimen form of Award Agreement for Employees used to evidence
Nonqualified Stock Options which may be granted under The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan (now known as The
Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term
Incentive Plan) (Belgian Specimen) |
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* |
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10(c)(1) |
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Specimen form of Award Agreement for Employees used to evidence
Restricted Stock which may be granted under The Scotts Miracle-Gro Company
2006 Long-Term Incentive Plan (now known as The Scotts Miracle-Gro Company
Amended and Restated 2006 Long-Term Incentive Plan) (French Specimen)
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* |
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10(c)(2) |
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Specimen form of Award Agreement for Employees used to evidence
Nonqualified Stock Options which may be granted under The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan (now known as The
Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term
Incentive Plan) (French Specimen) |
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* |
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10(d) |
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Specimen form of Award Agreement for Employees used to evidence
Nonqualified Stock Options which may be granted under The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan (now known as The
Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term
Incentive Plan) (Polish Specimen) |
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* |
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10(e)(1) |
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Specimen form of Award Agreement for United Kingdom Employees used
to evidence Nonqualified Stock Options which may be granted under The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan (now known as The
Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term
Incentive Plan) (United Kingdom Specimen) |
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* |
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10(e)(2) |
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Specimen form of Award Agreement for United Kingdom Employees used to
evidence Restricted Stock which may be granted under The Scotts Miracle-Gro
Company 2006 Long-Term Incentive Plan (now known as The Scotts Miracle-Gro
Company Amended and Restated 2006 Long-Term Incentive Plan) (United
Kingdom Specimen)
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* |
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10(e)(3) |
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UK Sub-Plan for equity awards which may be granted under The Scotts Miracle-Gro Company 2006 Long-Term
Incentive Plan (now known as The Scotts Miracle-Gro Company Amended and
Restated 2006 Long-Term Incentive Plan)
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* |
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10(f) |
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Termination and Release Agreement,
dated as of April 9, 2008, by and among the Scotts Company LLC, the
Scotts Miracle-Gro Company and LaSalle Bank National Association |
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Incorporated herein by reference from Exhibit 10.1 to the Current
Report on Form 8-K of the Scotts Miracle-Gro Company dated and filed
April 15, 2008 (File No. 1-13292) |
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10(g) |
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Master Accounts Receivable Purchase
Agreement, dated as of April 9, 2008, among the Scotts Company LLC as
seller, the Scotts Miracle-Gro Company as guarantor and Bank of
America N.A. as purchased |
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Incorporated herein by reference
from Exhibit 10.2 to the Current Report on Form 8-K of the Scotts
Miracle-Gro Company dated and filed April 15, 2008 (File No. 1-13292) |
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30
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EXHIBIT NO. |
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DESCRIPTION |
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LOCATION |
10(h) |
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Specimen form of Deferred Stock
Unit Award Agreement for Nonemployee Directors (with Related Dividend
Equivalents) to evidence grants of Deferred Stock Units which may be
made under the Scotts Miracle-Gro Company Amended and Related 2006
Long-Term incentive plan (used on and after February 4, 2008) |
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Incorporated herein by reference
from Exhibit 10(m) to the Quarterly
Report on Form 10-Q of the Scotts Miracle-Gro Company for the
quarterly period ended
December 29, 2007 (File No. 1-13292) |
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10(i) |
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Performance Share Award Agreement for
Employees (with Related Dividend Equivalents) evidencing grant of
Performance Shares made on October 30, 2007 to Barry W. Sanders under the
Scotts Miracle-Gro Company [Amended and Restated] 2006
Long-Term Incentive Plan, executed by the Scotts Miracle-Gro Company
on December 20, 2007 and by Barry W. Sanders on January 7, 2008 |
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Incorporated herein by reference from
Exhibit 10(n) to the Quarterly
Report on Form 10-Q of the Scotts Miracle-Gro Company for the
quarterly period ended
December 29, 2007 (File No. 1-13292) |
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10(j) |
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Summary of Compensation for
Directors of the Scotts Miracle-Gro Company effective
as February 4, 2008 |
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Incorporated herein by reference
from Exhibit 10(r) to the Quarterly
Report on Form 10-Q of the Scotts Miracle-Gro Company for the
quarterly period ended
December 29, 2007 (File No. 1-13292) |
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31(a) |
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Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer) |
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* |
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31(b) |
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Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer) |
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* |
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32 |
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Section 1350 Certification (Principal Executive Officer and
Principal Financial Officer) |
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* |
31
EX-10(A)
Exhibit 10(a)
Standard International Form
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT FOR EMPLOYEES
NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan
(Plan) through which key employees, like you, may acquire (or share in the appreciation of)
common shares, without par value, of the Company (Shares). Capitalized terms that are not
defined in this Award Agreement have the same meanings as in the Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
1. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTION
You have been granted a Nonqualified Stock Option (NSO) to purchase [Number of Common Shares]
Shares at an exercise price of $[Exercise Price] for each Share (Exercise Price) on or before
[Expiration Date No Later Than 10 Years After Grant Date] (Expiration Date), subject to the terms
and conditions of the Plan and this Award Agreement. The Grant Date of the NSO is [Grant Date].
2. LIMITS ON EXERCISING YOUR NSO
(a) Normally, your NSO will vest (and become exercisable) on [Vesting Date] (the Vesting
Date) but only if you are actively employed by the Company or any Subsidiary or Affiliate on the
Vesting Date and all other conditions described in this Award Agreement and the Plan are met. This
does not mean that you must exercise your NSO on this date; this is merely the first date that you
may do so. However, except as described below, your NSO will expire to the extent it is not
exercised on or before the Expiration Date.
There are some special situations in which your NSO may vest earlier. These are described in
Sections 4(a) and 4(c) of this Award Agreement.
(b) At any one time, you may not exercise your NSO to buy fewer than 100 Shares (or, if less,
the number of Shares underlying the vested portion of your NSO). Also, you may never exercise your
NSO to purchase a fractional Share. Any fractional Share shall be redeemed for cash equal to the
Fair Market Value of such fractional Share.
3. EXERCISING YOUR NSO
(a) After your NSO vests, you may exercise the NSO by completing an Exercise Notice. A copy
of this Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice
and a description of the procedures that you must follow to exercise your NSO are available from
[Third Party Administrator] at [TPA Telephone Number] or at the address given above.
(b) You may use one of three methods to exercise your NSO and to pay any taxes related to that
exercise. You will decide on the method at the time of exercise.
CASHLESS EXERCISE AND SELL: If you elect this alternative, you will be deemed to
have simultaneously exercised the NSO and to have sold the Shares underlying the
portion of the NSO you exercised. When the transaction is complete, you will receive
cash (but no Shares) equal to the difference between the aggregate Fair Market Value
of the Shares deemed to have been acquired through the exercise minus the aggregate
Exercise Price and related taxes.
2
COMBINATION EXERCISE: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSO and to have sold a number of those Shares with a
Fair Market Value equal to the aggregate Exercise Price and related taxes. When the
transaction is complete, the balance of the Shares subject to the portion of the NSO
you exercised will be transferred to you.
EXERCISE AND HOLD: If you elect this alternative, you must pay the full Exercise
Price plus related taxes (in cash, a cash equivalent or in Shares having a Fair
Market Value equal to the Exercise Price and which you have owned for at least six
months before the exercise date). When the transaction is complete, you will
receive the number of Shares purchased.
(c) Before choosing an exercise method, you should read the Plan Prospectus, as supplemented,
to ensure you understand the income tax effect of exercising your NSO.
(d) If you do not elect one of the methods set forth in Section 3(b) above, we will apply the
Cashless Exercise and Sell method described in Section 3(b).
4. GENERAL TERMS AND CONDITIONS
(a) YOU MAY FORFEIT YOUR NSO IF YOU TERMINATE. Normally, you may exercise your NSO after it
vests and before the Expiration Date. However, your NSO may be cancelled earlier than the
Expiration Date if you Terminate. For purposes of this Award Agreement, Terminate (or any form
thereof) means cessation of the employee-employer relationship between you and the Company and all
Affiliates and Subsidiaries for any reason.
(i) If you are Terminated for Cause, the portion of your NSO that has not been
exercised will be forfeited (whether or not then vested) on the date you Terminate; or
(ii) If you die or you Terminate due to your Disability (as defined below), your NSO
will become fully vested and expire on the earlier of the Expiration Date or 12 months after
you Terminate. For purposes of this Award Agreement, Disability means your inability to
perform your normal duties for a period of at least six months due to a physical or mental
infirmity; or
(iii) If you Terminate after reaching either (A) age 55 and completing at least 10
years of employment with the Company, its Affiliates and/or its Subsidiaries or (B) age 62
regardless of your years of service, your NSO will become fully vested and expire on the
earlier of the Expiration Date or 12 months after you Terminate; or
(iv) If you Terminate for any other reason, the unvested portion of your NSO will be
forfeited immediately and the vested portion of your NSO will expire on the earlier of the
Expiration Date or 90 days after you Terminate.
Note, it is your responsibility to keep track of when your NSO expires.
3
(b) YOU MAY FORFEIT YOUR NSO IF YOU ENGAGE IN CONDUCT THAT IS HARMFUL TO THE COMPANY (OR ANY
AFFILIATE OR SUBSIDIARY). You will forfeit your NSO and must return to the Company all Shares and
other amounts you have received through the Plan if, without the Companys written consent, you do
any of the following within 180 days before and 730 days after you Terminate:
(i) You serve (or agree to serve) as an officer, director, manager, consultant or
employee of any proprietorship, partnership, corporation or other entity or become the owner
of a business or a member of a partnership, limited liability company or other entity that
competes with any portion of the Companys (or any Affiliates or Subsidiarys) business
with which you have been involved any time within five years before your Termination or
render any service (including, without limitation, advertising or business consulting) to
entities that compete with any portion of the Companys (or any Affiliates or Subsidiarys)
business with which you have been involved any time within five years before your
Termination;
(ii) You refuse or fail to consult with, supply information to or otherwise cooperate
with the Company or any Affiliate or Subsidiary after having been requested to do so;
(iii) You deliberately engage in any action that the Company concludes has caused
substantial harm to the interests of the Company or any Affiliate or Subsidiary;
(iv) On your own behalf or on behalf of any other person, partnership, association,
corporation, limited liability company or other entity, you solicit or in any manner attempt
to influence or induce any employee of the Company or any Affiliate or Subsidiary to leave
the Companys or any Affiliates or Subsidiarys employment or use or disclose to any
person, partnership, association, corporation, limited liability company or other entity any
information obtained while an employee of the Company or any Affiliate or Subsidiary
concerning the names and addresses of the Companys or any Affiliates or Subsidiarys
employees;
(v) You disclose confidential and proprietary information relating to the Companys or
any Affiliates or Subsidiarys business affairs (Trade Secrets), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Companys or any
Affiliates or Subsidiarys products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;
(vi) You fail to return all property (other than personal property), including keys,
notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes,
disks, cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
employment with the Company or any Affiliate or Subsidiary; or
4
(vii) You engaged in conduct that the Committee reasonably concludes would have given
rise to a Termination for Cause had it been discovered before you Terminated.
(c) CHANGE IN CONTROL. Normally, your NSO will vest only in the circumstances described in
Section 2(a). However, if there is a Change in Control, your NSO may vest earlier. You should
read the Plan carefully to ensure that you understand how this may happen.
(d) NO RIGHT TO EMPLOYMENT. Your NSO award is a voluntary, discretionary bonus being made on
a one-time basis and it does not constitute a commitment to make any future awards. This Award and
any payments made hereunder will not be considered salary or other compensation for purposes of any
severance pay or similar allowance, except as otherwise required by law. Nothing in this Award
Agreement will give you any right to continue employment with the Company or any Subsidiary or
Affiliate, as the case may be, or interfere in any way with the right of the Company or a
Subsidiary or an Affiliate to terminate your employment.
(e) DATA PRIVACY. Information about you and your participation in the Plan (i.e., your name,
home address and telephone number, date of birth, social insurance number (only to the extent
required or permitted by local law), salary, nationality (only to the extent essential to identify
your participation in the Plan), job title, any shares of stock or directorships held in the
Company, and details of the NSO or other entitlement to shares of stock awarded, cancelled,
exercised, vested, unvested or outstanding in your favor) may be collected, recorded, held, used
and disclosed by the Company, its Affiliates and Subsidiaries, namely The Scotts Miracle-Go Company
(located in the United States of America), [Name of the local subsidiary] (located in ___),
and the [Third Party Administrator] (located in the United States of America) for any purpose
related to the administration of the Plan. You understand that the Company and its Subsidiaries or
Affiliates may transfer such information to any third party administrators, regardless of whether
such persons are located within your country of residence, the European Economic Area or in
countries outside of the European Economic Area, including the United States of America. You
understand that any country outside the European Economic Area will have different data protection
laws, rules and regulations than the protection offered in your country of residence pursuant to
the European Privacy Directive 95/46/EC of October 24, 1995. You consent to the processing of
information relating to you and your participation in the Plan in any one or more of the ways
referred to above. This consent may be withdrawn at any time in writing by sending a declaration
of withdrawal to the [Third Party Administrator].
(f) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, we may amend or terminate
this Award Agreement or the Plan at any time.
(g) RIGHTS BEFORE YOUR NSO IS EXERCISED. You may not vote, or receive any dividends
associated with, the Shares underlying your NSO before your NSO is exercised with respect to such
Shares.
(h) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive or to
exercise the vested portion of your NSO that is unexercised when
5
you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form need not be completed now and is not required as a condition of
receiving your Award. If you die without completing a Beneficiary Designation Form or if you do
not complete that Form correctly, your beneficiary will be your surviving spouse or, if you do not
have a surviving spouse, your estate.
(i) TRANSFERRING YOUR NSO. Normally your NSO may not be transferred to another person.
However, you may complete a Beneficiary Designation Form to name the person who may exercise your
NSO if you die before the Expiration Date. Also, the Committee may allow you to place your NSO
into a trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
(j) ELECTRONIC DELIVERY. The Company may, in its sole discretion, deliver any documents
related to your NSO and your participation in the Plan, or future awards that may be granted under
the Plan, by electronic means or to request your consent to participate in the Plan by electronic
means. You hereby consent to receive such documents by electronic delivery and, if requested,
agree to participate in the Plan through an on-line or electronic system established and maintained
by the Company or another third party designated by the Company.
(k) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(l) OTHER AGREEMENTS. Your NSO will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement.
(m) ADJUSTMENTS TO YOUR NSO. Subject to the terms of the Plan, your NSO will be adjusted, if
appropriate, to reflect any change to the Companys capital structure (e.g., the number of Shares
underlying your NSO and the Exercise Price will be adjusted to reflect a stock split).
(n) OTHER TERMS AND CONDITIONS. Your NSO is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of the NSO made to you under this Award Agreement.
5. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
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Copies of the Plan and Plan Prospectus have been made available to you; |
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(b) |
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You understand and accept the terms and conditions of your NSO; and |
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(c) |
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You must return a signed copy of this Award Agreement to the address given |
6
above before [Date 30 Days After Grant Date]. |
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[Grantees Name] |
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THE SCOTTS MIRACLE-GRO COMPANY |
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BY:
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BY: |
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Date signed: |
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[Name of Company representative] |
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[Title of Company representative] |
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Date signed: |
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7
Standard International Form
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION EXERCISE NOTICE
FOR NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
Additional copies of this Nonqualified Stock Option Exercise Notice (Exercise Notice) (and any
further information you may need about this Exercise Notice or exercising your NSO) are available
from [Third Party Administrator] at the address given below.
By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise all or a portion of the NSO and to purchase the Shares described
below. Capitalized terms not defined in this Exercise Notice have the same meanings as in the Plan
and applicable Award Agreement.
NOTE: You must complete a separate Exercise Notice for each NSO being exercised (e.g., if
you are simultaneously exercising an NSO to purchase 200 Shares granted on January 1, 2008
and an NSO to purchase 100 Shares granted on January 1, 2009 under a separate award
agreement, you must complete two Exercise Notices, one for each NSO being exercised).
NSO TO BE EXERCISED AND SHARES TO BE PURCHASED: This Exercise Notice relates to the following NSO
and number of Shares (fill in the blanks):
Grant Date of NSO: [Grant Date]
Number of Shares Being Purchased:
EXERCISE PRICE: The aggregate Exercise Price due is $ .
NOTE: This amount must equal the product of [Exercise Price] multiplied by the number of
Shares being purchased.
PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any related taxes by (check
one):
NOTE: These methods are described in the applicable Award Agreement.
Cashless Exercise and Sell.
Combination Exercise.
Exercise and Hold.
NOTE:
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If you select the Exercise and Hold method, you must follow the procedures
described in the Award Agreement to pay the Exercise Price and the taxes related to
this exercise. You should contact [Third Party Administrator] at the address given
below to find out the amount of taxes due. |
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If you select either the Cashless Exercise and Sell method or the Combination
Exercise method, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the
number of Shares you will receive. |
YOUR ACKNOWLEDGMENT
By signing below, you acknowledge and agree that:
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You fully understand the effect (including the investment effect) of exercising your NSO
and buying Shares and understand that there is no guarantee that the value of these Shares
will appreciate or will not depreciate; |
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This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the NSO expires, as specified in the Award
Agreement under which the NSO was granted; and |
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The Shares you are buying by completing and returning this Exercise Notice will be
issued to you as soon as administratively practicable. You will not have any rights as a
shareholder of the Company until the Shares are issued. |
[Grantees Name]
(signature)
Date signed:
A signed copy of this Exercise Notice must be received at the following address no later than the
date the NSO expires, as specified in the Award Agreement under which the NSO was granted:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
*****
2
ACKNOWLEDGEMENT OF RECEIPT
A signed copy of the Nonqualified Stock Option Exercise Notice was received on:
.
[Grantees Name]:
Has effectively exercised the portion of the NSO described in this Exercise Notice; or
Has not effectively exercised the portion of the NSO described in this Exercise Notice
because:
The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee
By:
Date:
Note: Keep a copy of this Exercise Notice as part of the Plans permanent records.
3
EX-10(B)
Exhibit 10(b)
Form Belgium (Without Election)
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT FOR EMPLOYEES
NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan
(Plan) through which key employees, like you, may acquire (or share in the appreciation of)
common shares, without par value, of the Company (Shares). Capitalized terms that are not
defined in this Award Agreement have the same meanings as in the Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
If you accept the NSO, you must return a signed copy of this Award Agreement, together with the
Acceptance Form, to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Also, upon receipt of this Award Agreement, you must execute an acknowledgment of receipt in the
form as attached hereto (the Acknowledgment of Receipt or Acknowledgment) and return this
Acknowledgment to [Third Party Administrator] at the address listed in the Acknowledgment within
[ days following the Grant Date] [THIS SHOULD BE A SHORTER PERIOD THAN FOR THE ACCEPTANCE AS THE
ACKNOWLEDGMENT SIMPLY SERVES TO ACKNOWLEDGE RECEIPT OF THE DOCUMENTS AND OF
Scotts Option Agreement (Belgium)
-1-
Form Belgium (Without Election)
THE AWARD THAT WAS MADE] and decide whether you wish to accept the NSO. If you decide to accept
the NSO, you must also complete the Acceptance Form attached hereto.
Acceptance of the NSO hereunder will only take place by returning this Award Agreement and the
Acceptance Form attached hereto, all duly executed by you, to [Third Party Administrator] at the
address listed in the Acknowledgment within ___days following the Grant Date.
If you do not return a signed copy of the Acknowledgement within [___days following the Grant Date]
[THIS SHOULD BE A SHORTER PERIOD AS THE ACKNOWLEDGMENT SIMPLY SERVES TO ACKNOWLEDGE RECEIPT OF THE
DOCUMENTS AND OF THE AWARD THAT WAS MADE] to the address shown below and a signed copy of the Award
Agreement and the Acceptance Form on or before [___days following the Grant Date] [THIS SHOULD
REFLECT THE ULTIMATE DATE THAT THE GRANTEE CAN ACCEPT THE NSO], your NSO will be forfeited and you
will not be entitled to receive anything on account of this award of the NSO.
Scotts Option Agreement (Belgium)
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Form Belgium (Without Election)
1. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTION
You have been granted a Nonqualified Stock Option (NSO) to purchase [Number of Common
Shares] Shares at an exercise price of $[Exercise Price] for each Share (Exercise Price) on or
before [Expiration Date No Later Than 10 Years After Grant Date] (Expiration Date), subject to
the terms and conditions of the Plan and this Award Agreement. The Grant Date of the NSO is [Grant
Date].
2. LIMITS ON EXERCISING YOUR NSO
(a) Normally, your NSO will vest (and become exercisable) on [Vesting Date] (the Vesting
Date) but only if you are actively employed by the Company or any Subsidiary or Affiliate on the
Vesting Date and all other conditions described in this Award Agreement and the Plan are met. This
does not mean that you must exercise your NSO on this date; this is merely the first date that you
may do so. However, except as described below, your NSO will expire to the extent it is not
exercised on or before the Expiration Date.
There are some special situations in which your NSO may vest earlier. These are described in
Sections 4(a) and 4(c) of this Award Agreement.
(b) At any one time, you may not exercise your NSO to buy fewer than 100 Shares (or, if less,
the number of Shares underlying the vested portion of your NSO). Also, you may never exercise your
NSO to purchase a fractional Share. Any fractional Share shall be redeemed for cash equal to the
Fair Market Value of such fractional Share. You acknowledge and accept that this redemption may
trigger different Belgian tax and social security treatment than when Shares are issued upon
exercising your NSO and that you have consulted any tax attorneys or accountants you deem advisable
thereon and that you are fully informed on such tax and/or social security treatment and you accept
all liability with regard to such taxes and/or social security and the payment thereof.
3. EXERCISING YOUR NSO
(a) After your NSO vests, you may exercise the NSO by completing an Exercise Notice. A copy
of this Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice
and a description of the procedures that you must follow to exercise your NSO are available from
[Third Party Administrator] at [TPA Telephone Number] or at the address given above.
(b) Given that you accept your NSO after the 60th day following the Grant Date, you
will only be subject to tax and/or social security when you exercise your NSO. Before accepting
your NSO, you should read the Federal Income Tax section of the Plan Prospectus, as supplemented,
to ensure you understand the U.S. federal and Belgian income tax effect of accepting your NSO.
(c) The amount of tax and/or social security owed will be withheld by the social secretariat
of your employer from your salary in the month in which the NSO becomes taxable and will be paid to
the Belgian tax and/or social security authorities.
Scotts Option Agreement (Belgium)
-3-
Form Belgium (Without Election)
(d) At the time of exercise, you must pay the aggregate exercise price plus taxes and or
employee social security contributions, if any. Payment of the aggregate Exercise Price and any
related taxes (for the purpose of this Section 3(d), the term tax shall refer to both tax and
employee social security contributions, as applicable) shall be done by any of the following
methods, or a combination thereof, at your election:
EXERCISE AND HOLD: If you elect this alternative, you must pay the full Exercise
Price plus related taxes in cash, in a cash equivalent, or in Shares having a Fair
Market Value equal to the Exercise Price plus related taxes and which you have owned
for at least six months before the exercise date. When the transaction is complete,
you will receive the number of Shares purchased.
CASHLESS EXERCISE AND SELL: If you elect this alternative, you will be deemed to
have simultaneously exercised the NSO and to have sold the Shares underlying the
portion of the NSO you exercised. When the transaction is complete, you will
receive cash (but no Shares) equal to the difference between the aggregate Fair
Market Value of the Shares deemed to have been acquired through the exercise minus
the aggregate Exercise Price and related taxes. You acknowledge and accept that
this way of exercising your NSO may trigger additional Belgian taxes and/or social
security and that you have consulted any tax attorneys or accountants you deem
advisable thereon and that you are fully informed on such additional taxes and/or
social security and you accept all liability with regard to such additional taxes
and/or social security and the payment thereof.
COMBINATION EXERCISE: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSO and to have sold a number of those Shares with a
Fair Market Value equal to the aggregate Exercise Price and related taxes. When the
transaction is complete, the balance of the Shares subject to the portion of the NSO
you exercised will be transferred to you. You acknowledge and accept that this way
of exercising your NSO may trigger additional Belgian taxes and/or social security
and that you have consulted any tax attorneys or accountants you deem advisable
thereon and that you are fully informed on such additional taxes and/or social
security and you accept all liability with regard to such additional taxes and/or
social security and the payment thereof.
(e) Before choosing an exercise method, you should read the Plan Prospectus, as supplemented,
to ensure you understand the income tax effect of exercising your NSO.
(f) If you do not elect one of the methods set forth in Section 3(d) above, we will apply the
Cashless Exercise and Sell method described in Section 3(d).
4. GENERAL TERMS AND CONDITIONS
(a) YOU MAY FORFEIT YOUR NSO IF YOU TERMINATE. Normally, you may exercise your NSO after it
vests and before the Expiration Date. However, your NSO may be cancelled earlier than the
Expiration Date if you Terminate. For purposes of this Award Agreement, Terminate (or any form
thereof) means cessation of the employee-employer
Scotts Option Agreement (Belgium)
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Form Belgium (Without Election)
relationship between you and the Company and all Affiliates and Subsidiaries for any reason.
(i) If you are Terminated for Cause, the portion of your NSO that has not been
exercised will be forfeited (whether or not then vested) on the date you Terminate; or
(ii) If you die or you Terminate due to your Disability (as defined below), your NSO
will become fully vested and expire on the earlier of the Expiration Date or 12 months after
you Terminate. For purposes of this Award Agreement, Disability means your inability to
perform your normal duties for a period of at least six months due to a physical or mental
infirmity; or
(iii) If you Terminate after reaching either (A) age 55 and completing at least 10
years of employment with the Company, its Affiliates and/or its Subsidiaries or (B) age 62
regardless of your years of service, your NSO will become fully vested and expire on the
earlier of the Expiration Date or 12 months after you Terminate; or
(iv) If you Terminate for any other reason, the unvested portion of your NSO will be
forfeited immediately and the vested portion of your NSO will expire on the earlier of the
Expiration Date or 90 days after you Terminate.
Note, it is your responsibility to keep track of when your NSO expires.
(b) YOU MAY FORFEIT YOUR NSO IF YOU ENGAGE IN CONDUCT THAT IS HARMFUL TO THE COMPANY (OR ANY
AFFILIATE OR SUBSIDIARY). You will forfeit your NSO and must return to the Company all Shares and
other amounts you have received through the Plan if, without the Companys written consent, you do
any of the following within 180 days before and 730 days after you Terminate:
(i) You serve (or agree to serve) as an officer, director, manager, consultant or
employee of any proprietorship, partnership, corporation or other entity or become the owner
of a business or a member of a partnership, limited liability company or other entity that
competes with any portion of the Companys (or any Affiliates or Subsidiarys) business
with which you have been involved any time within five years before your Termination or
render any service (including, without limitation, advertising or business consulting) to
entities that compete with any portion of the Companys (or any Affiliates or Subsidiarys)
business with which you have been involved any time within five years before your
Termination;
(ii) You refuse or fail to consult with, supply information to or otherwise cooperate
with the Company or any Affiliate or Subsidiary after having been requested to do so;
(iii) You deliberately engage in any action that the Company concludes has caused
substantial harm to the interests of the Company or any Affiliate or Subsidiary;
(iv) On your own behalf or on behalf of any other person, partnership, association,
corporation, limited liability company or other entity, you solicit or in any
Scotts Option Agreement (Belgium)
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Form Belgium (Without Election)
manner attempt to influence or induce any employee of the Company or any Affiliate or
Subsidiary to leave the Companys or any Affiliates or Subsidiarys employment or use or
disclose to any person, partnership, association, corporation, limited liability company or
other entity any information obtained while an employee of the Company or any Affiliate or
Subsidiary concerning the names and addresses of the Companys or any Affiliates or
Subsidiarys employees;
(v) You disclose confidential and proprietary information relating to the Companys or
any Affiliates or Subsidiarys business affairs (Trade Secrets), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Companys or any
Affiliates or Subsidiarys products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;
(vi) You fail to return all property (other than personal property), including keys,
notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes,
disks, cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
employment with the Company or any Affiliate or Subsidiary; or
(vii) You engaged in conduct that the Committee reasonably concludes would have given
rise to a Termination for Cause had it been discovered before you Terminated.
(c) CHANGE IN CONTROL. Normally, your NSO will vest only in the circumstances described in
Section 2(a). However, if there is a Change in Control, your NSO may vest earlier. You should
read the Plan carefully to ensure that you understand how this may happen.
(d) NO RIGHT TO EMPLOYMENT. Your NSO award is a voluntary, discretionary bonus being made on
a one-time basis and it does not constitute a commitment to make any future awards. This Award and
any payments made hereunder will not be considered salary or other compensation for purposes of any
severance pay or similar allowance, except as otherwise required by law. Nothing in this Award
Agreement will give you any right to continue employment with the Company or any Subsidiary or
Affiliate, as the case may be, or interfere in any way with the right of the Company or a
Subsidiary or an Affiliate to terminate your employment.
(e) DATA PRIVACY. Information about you and your participation in the Plan, including,
without limitation, your name, home address and telephone number, date of birth, social insurance
number, salary, nationality, job title, any shares of stock or directorships held in the Company,
and details of the NSO or other entitlement to shares of stock awarded, cancelled, exercised,
vested, unvested or outstanding in your favor) may be collected, recorded, held, used and disclosed
by the Company, its Affiliates and Subsidiaries and the [Third Party Administrator] for any purpose
related to the administration of the Plan. You understand that the Company and its Subsidiaries or
Affiliates may transfer such information to any third party
Scotts Option Agreement (Belgium)
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Form Belgium (Without Election)
administrators, regardless of whether such persons are located within your country of
residence, the European Economic Area or in countries outside of the European Economic Area,
including the United States of America. You consent to the processing of information relating to
you and your participation in the Plan in any one or more of the ways referred to above. This
consent may be withdrawn at any time in writing by sending a declaration of withdrawal to the
[Third Party Administrator]. You understand, however, that refusing or withdrawing your consent
may affect your ability to participate in the Plan. You may, at any time, view the data relating
to you and require the modification thereof, without costs, by contacting the [Third Party
Administrator].
(f) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, we may amend or terminate
this Award Agreement or the Plan at any time.
(g) RIGHTS BEFORE YOUR NSO IS EXERCISED. You may not vote, or receive any dividends
associated with, the Shares underlying your NSO before your NSO is exercised with respect to such
Shares.
(h) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive or to
exercise the vested portion of your NSO that is unexercised when you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form need not be completed now and is not required as a condition of
receiving your Award. If you die without completing a Beneficiary Designation Form or if you do
not complete that Form correctly, your beneficiary will be your surviving spouse or, if you do not
have a surviving spouse, your estate.
(i) TRANSFERRING YOUR NSO. Normally your NSO may not be transferred to another person.
However, you may complete a Beneficiary Designation Form to name the person who may exercise your
NSO if you die before the Expiration Date. Also, the Committee may allow you to place your NSO
into a trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
(j) ELECTRONIC DELIVERY. The Company may, in its sole discretion, deliver any documents
related to your NSO and your participation in the Plan, or future awards that may be granted under
the Plan, by electronic means or to request your consent to participate in the Plan by electronic
means. You hereby consent to receive such documents by electronic delivery and, if requested,
agree to participate in the Plan through an on-line or electronic system established and maintained
by the Company or another third party designated by the Company.
(k) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(l) OTHER AGREEMENTS. Your NSO will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement.
Scotts Option Agreement (Belgium)
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Form Belgium (Without Election)
(m) ADJUSTMENTS TO YOUR NSO. Subject to the terms of the Plan, your NSO will be adjusted, if
appropriate, to reflect any change to the Companys capital structure (e.g., the number of Shares
underlying your NSO and the Exercise Price will be adjusted to reflect a stock split).
(n) OTHER TERMS AND CONDITIONS. Your NSO is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of the NSO made to you under this Award Agreement.
5. YOUR ACKNOWLEDGMENT OF RECEIPT
By signing below, you acknowledge and agree that:
(a) Copies of the Plan and Plan Prospectus, as supplemented, have been made available to you;
(b) You understand and accept the terms and conditions of your NSO;
(c) If you do not return a signed copy of this Acknowledgement within [___days following the
Grant Date] [THIS SHOULD BE A SHORTER PERIOD AS THIS ACKNOWLEDGMENT SIMPLY SERVES TO ACKNOWLEDGE
RECEIPT OF THE DOCUMENTS AND OF THE AWARD THAT WAS MADE] to the address shown below and a signed
copy of the Award Agreement and the Acceptance Form on or before [___Days following the Grant
Date] [THIS SHOULD REFLECT THE ULTIMATE DATE THAT THE GRANTEE CAN ACCEPT THE NSO], your NSO will be
forfeited and you will not be entitled to receive anything on account of this award of the NSO; and
(d) If you accept the NSO, you must return a signed copy of this Award Agreement to the
address given above before together with the Acceptance Form.
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[Grantees Name] |
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THE SCOTTS MIRACLE-GRO COMPANY |
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BY:
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Date signed: |
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[Name of Company representative] |
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[Title of Company representative] |
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Date signed: |
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Scotts Option Agreement (Belgium)
-8-
Form Belgium (Without Election)
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
ACCEPTANCE FORM
You agree to be bound by the terms and conditions of this Acceptance Form, the Award
Agreement, the Plan, and the Plan Prospectus, as supplemented, and hereby accept or reject the NSO
granted under the Award Agreement, as specifically designated below. You acknowledge that you have
been encouraged to discuss this matter with your financial or tax advisor and that this acceptance
is made knowingly.
If you elect to accept the NSO, please sign this Acceptance Form and the Award
Agreement and indicate your acceptance below.
You hereby accept:
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the NSO by , 200 (i.e., after 60 days after the Grant Date) to obtain
taxation on the difference between the Exercise Price and the Fair Market Value of the
Shares at exercise. |
OR
If you intend to reject the NSO award, indicate your rejection below.
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You have considered the NSO award, and hereby expressly reject the NSO award.
You acknowledge that you have been encouraged to discuss this matter with your
financial advisor and that this rejection is made knowingly. You further acknowledges
that you, by rejecting the NSO award, will not be entitled to any payment or benefit in
lieu of the NSO. |
To the extent that you accept the NSO award, by signing below, you acknowledge and agree
that:
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you understand and accept the conditions placed on your NSO award and understand
what you have to do to earn and exercise your NSO award; and |
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you will consent (on your own behalf and on behalf of your beneficiaries and without
any further consideration) to any necessary change to your NSO or the Award Agreement
to comply with any law and to avoid paying penalties under Section 409A of the Internal
Revenue Code, even if those changes affect the terms of your NSO and reduce their value
or potential value. |
Scotts Option Agreement (Belgium)
-9-
Form Belgium (Without Election)
This completed form should be executed and returned to the attention of [Third Party Administrator]
at the latest by the [___ day following the Grant Date].
Scotts Option Agreement (Belgium)
-10-
Form Belgium (Without Election)
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION EXERCISE NOTICE
FOR NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
Additional copies of this Nonqualified Stock Option Exercise Notice (Exercise Notice) (and any
further information you may need about this Exercise Notice or exercising your NSO) are available
from [Third Party Administrator] at the address given below.
By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise all or a portion of the NSO and to purchase the Shares described
below. Capitalized terms not defined in this Exercise Notice have the same meanings as in the Plan
and applicable Award Agreement.
NOTE: You must complete a separate Exercise Notice for each NSO being exercised (e.g., if
you are simultaneously exercising an NSO to purchase 200 Shares granted on January 1, 2008
and an NSO to purchase 100 Shares granted on January 1, 2009 under a separate award
agreement, you must complete two Exercise Notices, one for each NSO being exercised).
NSO TO BE EXERCISED AND SHARES TO BE PURCHASED: This Exercise Notice relates to the following NSO
and number of Shares (fill in the blanks):
Grant Date of NSO: [Grant Date]
Number of Shares Being Purchased:
EXERCISE PRICE: The aggregate Exercise Price due is US$ .
NOTE: This amount must equal the product of [Exercise Price] multiplied by the number of
Shares being purchased.
PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any related taxes and/or
employee social security contributions by (check one):
NOTE: These methods are described in the applicable Award Agreement.
Cashless Exercise and Sell.
Combination Exercise.
Exercise and Hold.
Scotts Option Agreement (Belgium)
-11-
Form Belgium (Without Election)
NOTE:
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If you select the Exercise and Hold method, you must follow the procedures
described in the Award Agreement to pay the Exercise Price and the taxes plus the
employee social security contributions, if any, related to this exercise. You
should contact [Third Party Administrator] at the address given below to find out
the amount of taxes due. |
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If you select either the Cashless Exercise and Sell method or the Combination
Exercise method, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the
number of Shares you will receive. |
YOUR ACKNOWLEDGMENT
By signing below, you acknowledge and agree that:
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You fully understand the effect (including the investment effect) of exercising your NSO
and buying Shares and understand that there is no guarantee that the value of these Shares
will appreciate or will not depreciate; |
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This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the NSO expires, as specified in the Award
Agreement under which the NSO was granted; and |
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The Shares you are buying by completing and returning this Exercise Notice will be
issued to you as soon as administratively practicable. You will not have any rights as a
shareholder of the Company until the Shares are issued. |
[Grantees Name]
(signature)
Date signed:
A signed copy of this Exercise Notice must be received at the following address no later than
the date the NSO expires, as specified in the Award Agreement under which the NSO was granted:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
*****
Scotts Option Agreement (Belgium)
-12-
Form Belgium (Without Election)
ACKNOWLEDGEMENT OF RECEIPT
A signed copy of the Nonqualified Stock Option Exercise Notice was received on:
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[Grantees Name]:
Has effectively exercised the portion of the NSO described in this Exercise Notice; or
Has not effectively exercised the portion of the NSO described in this Exercise Notice
because:
The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee
By:
Date:
Note: Keep a copy of this Exercise Notice as part of the Plans permanent records.
Scotts Option Agreement (Belgium)
-13-
EX-10(C)(1)
Exhibit 10(c)(1)
Form France
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT FOR EMPLOYEES
RESTRICTED STOCK GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan
(Plan) through which key employees, like you, may acquire (or share in the appreciation of)
common shares, without par value, of the Company (Shares). Capitalized terms that are not
defined in this Award Agreement have the same meanings as in the Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement, and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Scotts RS Agreement France
1. DESCRIPTION OF YOUR RESTRICTED STOCK
You have been granted [Number of Common Shares] Shares of Restricted Stock, subject to the terms
and conditions of the Plan and this Award Agreement. Until the Period of Restriction (as described
below) lapses, your Restricted Stock will be subject to a risk of forfeiture and you may not sell
or transfer your Shares of Restricted Stock. Your Restricted Stock will be held in escrow until it
is distributed or forfeited, as described below.
2. PERIOD OF RESTRICTION
Subject to the terms of the Plan and this Award Agreement (including Section 3), the restrictions
imposed on your Restricted Stock normally will lapse if you are actively employed by the Company or
any Subsidiary or Affiliate on [Vesting Date] (the Vesting Date). If all applicable terms and
conditions have been satisfied, your Restricted Stock will be released from escrow and distributed
to you as soon as administratively practicable, but no later than 60 days, after the Vesting Date.
3. GENERAL TERMS AND CONDITIONS
(a) YOU WILL FORFEIT YOUR RESTRICTED STOCK IF YOU TERMINATE. Normally, your Restricted Stock
will be settled on the Vesting Date. However, the Shares of Restricted Stock will be forfeited if
you Terminate for any reason before the Vesting Date. For purposes of this Award Agreement,
Terminate (or any form thereof) means the date of notification of the cessation of the
employee-employer relationship between you and the Company and all Affiliates and Subsidiaries for
any reason.
(b) CHANGE IN CONTROL. Normally, your Restricted Stock will vest only under the circumstances
described in Section 2. However, if there is a Change in Control, your Restricted Stock may vest
earlier. You should read the Plan carefully to ensure that you understand how this may happen.
(c) NO RIGHT TO EMPLOYMENT. Your Restricted Stock award is a voluntary, discretionary bonus
being made on a one-time basis and it does not constitute a commitment to make any future awards.
This Award and any payments made hereunder will not be considered salary or other compensation for
purposes of any severance pay or similar allowance, except as otherwise required by law. Nothing
in this Award Agreement will give you any right to continue employment with the Company or any
Subsidiary or Affiliate, as the case may be, or interfere in any way with the right of the Company
or a Subsidiary or an Affiliate to terminate your employment.
(d) DATA PRIVACY. Information about you and your participation in the Plan, including, but
not limited to, your name, home address and telephone number, date of birth, social insurance
number, salary, nationality, job title, any shares of stock or directorships held in the Company,
details of your Restricted Stock Award or other entitlement to shares of stock awarded, cancelled,
exercised, vested, unvested or outstanding in your favor, may be collected, recorded, held, used
and disclosed for any purpose related to the administration and management of the Plan and in order
to satisfy legal and regulatory requirements. You understand that the
Scotts RS Agreement France
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Company will keep your personal data in accordance with the rules set forth by Law No. 78-17, dated
January 6, 1978, related to software, files and liberties (the Law). The Company will also
take reasonable measures in order to protect your personal data and to observe the requirements set
forth by the Commission Nationale de lInformatique et des Libertés. Pursuant to the Law,
you have the right to access, correct and request deletion of any of your personal data that is
inaccurate, incomplete, ambiguous, obsolete or whose collection, use, communication or conservation
is prohibited. You also understand that the Company and its Subsidiaries or Affiliates may
transfer such information to any third party administrators, regardless of whether such persons are
located within your country of residence, the European Economic Area or in countries outside of the
European Economic Area, including the United States of America, where the rules protecting such
data are less stringent than those applicable within the European Economic Area. You expressly
consent and agree to the collection, holding, use, disclosure, transfer in electronic or other
form, and processing of information relating to you and your participation in the Plan.
French translation:
(d) PROTECTION DES DONNES PERSONNELLES. Les informations vous concernant ainsi que votre
participation dans le Plan, y compris mais non limitativement, votre nom, votre adresse personnelle
et numéro de téléphone, date de naissance, numéro de sécurité sociale, salaire, nationalité,
intitulé de poste, toutes participations ou tous mandats détenus dans la Société, les
renseignements sur le NSO ou sur tout autre droit à des participations octroyées, annulées,
exercées, disponibles ou non disponbiles ou en circulation en votre faveur, peuvent être
rassemblées, enregistrées, détenues, utilisées et divulguées pour toute raison liée à
ladministration et la gestion du Plan et afin de satisfaire aux exigences légales et
réglementaires. Vous comprenez que la Société conservera vos données personnelles conformément aux
règles posées par la Loi No. 78-17 du 7 janvier 1978 relative à linformatique, aux fichiers et
aux libertés (la Loi). La Société pendra également toutes les mesures raisonnables afin de
protéger vos données personnelles et dobserver les exigences posées par la Commission Nationale de
lInformatique et des Libertés. En application de la Loi, vous bénéficiez dun droit daccès, de
modification et de suppression de vos données personelles qui seraient incorrectes, incomplètes,
ambigües, obsolètes ou dont la collecte, lutilisation, la communication ou la conservation
seraient prohibées. Vous comprenez également que la Société et ses Filiales ou Sociétés Affiliées
peuvent transférer ces informations à des tiers administrateurs, peu importe que ces personnes
soient situées dans votre pays de résidence, lEspace Economique Européen ou dans des pays autres
que lEspace Economique Européen, y compris, les Etas-Unis dAmérique, où les règles de protection
de telles données personnelles sont moins contraingrantes que celles applicables dans lEspace
Economique Européen. Vous consentez expressément et vous acceptez la collecte, la détention,
lutilisation, la divulgation, le transfert sous forme électronique ou autre et plus généralement
le traitement des informations vous concernant et concernant votre participation au Plan.
(e) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, the Company may amend or
terminate this Award Agreement or the Plan at any time.
(f) RIGHTS BEFORE YOUR RESTRICTED STOCK VESTS. During the Period of Restriction (even though
your Restricted Stock is held in escrow until it is settled or
Scotts RS Agreement France
3
forfeited):
(i) You may exercise any voting rights associated with the Shares of Restricted Stock
while it is held in escrow.
(ii) You will be entitled to receive any dividends paid with respect to the Shares of
Restricted Stock, although these dividends will be held in escrow and subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid under this Award Agreement. A reasonable rate of interest,
as determined by the Committee in its sole discretion, will be credited to you and held in
escrow during the Period of Restriction with respect to any such cash dividends that are
declared and paid during the period beginning on [Grant Date] and ending on the Vesting
Date. At the end of the Period of Restriction, any such dividends and interest thereon will
be distributed to you in accordance with Section 2 of this Award Agreement or forfeited,
depending on whether or not you have met the conditions described in this Award Agreement
and the Plan.
(g) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive any
Restricted Stock that is vested before you die but settled after you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form does not need to be completed now and is not required as a condition
of receiving your Award. However, if you die without completing a Beneficiary Designation Form or
if you do not complete that Form correctly, your beneficiary will be your surviving spouse or, if
you do not have a surviving spouse, your estate.
(h) TRANSFERRING YOUR RESTRICTED STOCK. Normally your Restricted Stock may not be transferred
to another person. However, as described in Section 3(g), you may complete a Beneficiary
Designation Form to name the person to receive any Restricted Stock that is vested before you die
but settled after you die. Also, the Committee may allow you to place your Restricted Stock into a
trust established for your benefit or the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
(i) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(j) OTHER AGREEMENTS. Your Restricted Stock will be subject to the terms of any other written
agreements between you and the Company or any Affiliate or Subsidiary to the extent that those
other agreements do not directly conflict with the terms of the Plan or this Award Agreement.
(k) ADJUSTMENTS TO YOUR RESTRICTED STOCK. Subject to the terms of the Plan, your Restricted
Stock will be adjusted, if appropriate, to reflect any change to the Companys capital structure
(e.g., the number of Shares underlying your Restricted Stock will be adjusted to reflect a stock
split).
Scotts RS Agreement France
4
(l) OTHER RULES. Your Restricted Stock is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of Restricted Stock under this Award Agreement.
4. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
(a) Copies of the Plan and the Plan Prospectus have been made available to you;
(b) You understand and accept the terms and conditions of your Award; and
(c) You must return a signed copy of this Award Agreement to the address given above before
[Date 30 Days After Grant Date].
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THE SCOTTS MIRACLE-GRO COMPANY |
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[Name of Company Representative] |
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[Title of Company Representative] |
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Scotts RS Agreement France
5
EX-1-(C)(2)
Exhibit 10(c)(2)
Form France
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT FOR EMPLOYEES
NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan
(Plan) through which key employees, like you, may acquire (or share in the appreciation of)
common shares, without par value, of the Company (Shares). Capitalized terms that are not
defined in this Award Agreement have the same meanings as in the Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Scotts NSO Agreement France
1. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTION
You have been granted a Nonqualified Stock Option (NSO) to purchase [Number of Common Shares]
Shares at an exercise price of $[Exercise Price] for each Share (Exercise Price) on or before
[Expiration Date No Later Than 10 Years After Grant Date] (Expiration Date), subject to the terms
and conditions of the Plan and this Award Agreement. The Grant Date of the NSO is [Grant Date].
2. LIMITS ON EXERCISING YOUR NSO
(a) Normally, your NSO will vest (and become exercisable) on [Vesting Date] (the Vesting
Date) but only if you are actively employed by the Company or any Subsidiary or Affiliate on the
Vesting Date and all other conditions described in this Award Agreement and the Plan are met. This
does not mean that you must exercise your NSO on this date; this is merely the first date that you
may do so. However, except as described below, your NSO will expire to the extent it is not
exercised on or before the Expiration Date.
There are some special situations in which your NSO may vest earlier. These are described in
Sections 4(a) and 4(b) of this Award Agreement.
(b) At any one time, you may not exercise your NSO to buy fewer than 100 Shares (or, if less,
the number of Shares underlying the vested portion of your NSO). Also, you may never exercise your
NSO to purchase a fractional Share. Any fractional Share shall be redeemed for cash equal to the
Fair Market Value of such fractional Share.
3. EXERCISING YOUR NSO
(a) After your NSO vests, you may exercise the NSO by completing an Exercise Notice. A copy of
this Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice and
a description of the procedures that you must follow to exercise your NSO are available from [Third
Party Administrator] at [TPA Telephone Number] or at the address given above.
(b) You may use one of three methods to exercise your NSO and to pay any taxes related to that
exercise. You will decide on the method at the time of exercise.
CASHLESS EXERCISE AND SELL: If you elect this alternative, you will be deemed to
have simultaneously exercised the NSO and to have sold the Shares underlying the
portion of the NSO you exercised. When the transaction is complete, you will receive
cash (but no Shares) equal to the difference between the aggregate Fair Market Value
of the Shares deemed to have been acquired through the exercise minus the aggregate
Exercise Price and related taxes.
Scotts NSO Agreement France
2
COMBINATION EXERCISE: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSO and to have sold a number of those Shares with a
Fair Market Value equal to the aggregate Exercise Price and related taxes. When the
transaction is complete, the balance of the Shares subject to the portion of the NSO
you exercised will be transferred to you.
EXERCISE AND HOLD: If you elect this alternative, you must pay the full Exercise
Price plus related taxes (in cash, a cash equivalent or in Shares having a Fair
Market Value equal to the Exercise Price and which you have owned for at least six
months before the exercise date). When the transaction is complete, you will
receive the number of Shares purchased.
(c) Before choosing an exercise method, you should read the Plan Prospectus, as supplemented,
to ensure you understand the income tax effect of exercising your NSO.
(d) If you do not elect one of the methods set forth in Section 3(b) above, we will apply the
Cashless Exercise and Sell method described in Section 3(b).
4. GENERAL TERMS AND CONDITIONS
(a) YOU MAY FORFEIT YOUR NSO IF YOU TERMINATE. Normally, you may exercise your NSO after it
vests and before the Expiration Date. However, to the extent permitted by law, your NSO may be
cancelled earlier than the Expiration Date if you Terminate. For purposes of this Award Agreement,
Terminate (or any form thereof) means the date of notification of the cessation of the
employee-employer relationship between you and the Company and all Affiliates and Subsidiaries for
any reason.
(i) If you are Terminated for Cause, the portion of your NSO that has not been
exercised will be forfeited (whether or not then vested) on the date you Terminate; or
(ii) If you die or you Terminate due to your Disability (as defined below), your NSO
will become fully vested and expire on the earlier of the Expiration Date or 12 months after
you Terminate. For purposes of this Award Agreement, Disability means your inability to
perform your normal duties for a period of at least six months due to a physical or mental
infirmity; or
(iii) If you Terminate after reaching either (A) age 55 and completing at least 10
years of employment with the Company, its Affiliates and/or its Subsidiaries or (B) age 62
regardless of your years of service, your NSO will become fully vested and expire on the
earlier of the Expiration Date or 12 months after you Terminate; or
(iv) If you Terminate for any other reason, the unvested portion of your NSO will be
forfeited immediately and the vested portion of your NSO will expire on the earlier of the
Expiration Date or 90 days after you Terminate.
Note, it is your responsibility to keep track of when your NSO expires.
Scotts NSO Agreement France
3
(b) CHANGE IN CONTROL. Normally, your NSO will vest only in the circumstances described in
Section 2(a). However, if there is a Change in Control, your NSO may vest earlier. You should read
the Plan carefully to ensure that you understand how this may happen.
(c) NO RIGHT TO EMPLOYMENT. Your NSO award is a voluntary, discretionary bonus being made on
a one-time basis and it does not constitute a commitment to make any future awards. This Award and
any payments made hereunder will not be considered salary or other compensation for purposes of any
severance pay or similar allowance, except as otherwise required by law. Nothing in this Award
Agreement will give you any right to continue employment with the Company or any Subsidiary or
Affiliate, as the case may be, or interfere in any way with the right of the Company or a
Subsidiary or an Affiliate to terminate your employment.
(d) DATA PRIVACY. Information about you and your participation in the Plan, including, but
not limited to, your name, home address and telephone number, date of birth, social insurance
number, salary, nationality, job title, any shares of stock or directorships held in the Company,
details of the NSO or other entitlement to shares of stock awarded, cancelled, exercised, vested,
unvested or outstanding in your favor, may be collected, recorded, held, used and disclosed for any
purpose related to the administration and management of the Plan and in order to satisfy legal and
regulatory requirements. You understand that the Company will keep your personal data in
accordance with the rules set forth by Law No. 78-17, dated January 6, 1978, related to software,
files and liberties (the Law). The Company will also take reasonable measures in order to
protect your personal data and to observe the requirements set forth by the Commission
Nationale de lInformatique et des Libertés. Pursuant to the Law, you have the right to
access, correct and request deletion of any of your personal data that is inaccurate, incomplete,
ambiguous, obsolete or whose collection, use, communication or conservation is prohibited. You
also understand that the Company and its Subsidiaries or Affiliates may transfer such information
to any third party administrators, regardless of whether such persons are located within your
country of residence, the European Economic Area or in countries outside of the European Economic
Area, including the United States of America, where the rules protecting such data are less
stringent than those applicable within the European Economic Area. You expressly consent and agree
to the collection, holding, use, disclosure, transfer in electronic or other form, and processing
of information relating to you and your participation in the Plan.
French translation:
(d) PROTECTION DES DONNES PERSONNELLES. Les informations vous concernant ainsi que votre
participation dans le Plan, y compris mais non limitativement, votre nom, votre adresse personnelle
et numéro de téléphone, date de naissance, numéro de sécurité sociale, salaire, nationalité,
intitulé de poste, toutes participations ou tous mandats détenus dans la Société, les
renseignements sur le NSO ou sur tout autre droit à des participations octroyées, annulées,
exercées, disponibles ou non disponbiles ou en circulation en votre faveur, peuvent être
rassemblées, enregistrées, détenues, utilisées et divulguées pour toute raison liée à
ladministration et la gestion du Plan et afin de satisfaire aux exigences légales et
réglementaires.
Scotts NSO Agreement France
4
Vous comprenez que la Société conservera vos données personnelles conformément aux règles
posées par la Loi No. 78-17 du 7 janvier 1978 relative à linformatique, aux fichiers et aux
libertés (la Loi). La Société pendra également toutes les mesures raisonnables afin de protéger
vos données personnelles et dobserver les exigences posées par la Commission Nationale de
lInformatique et des Libertés. En application de la Loi, vous bénéficiez dun droit daccès, de
modification et de suppression de vos données personelles qui seraient incorrectes, incomplètes,
ambigües, obsolètes ou dont la collecte, lutilisation, la communication ou la conservation
seraient prohibées. Vous comprenez également que la Société et ses Filiales ou Sociétés Affiliées
peuvent transférer ces informations à des tiers administrateurs, peu importe que ces personnes
soient situées dans votre pays de résidence, lEspace Economique Européen ou dans des pays autres
que lEspace Economique Européen, y compris, les Etas-Unis dAmérique, où les règles de protection
de telles données personnelles sont moins contraingrantes que celles applicables dans lEspace
Economique Européen. Vous consentez expressément et vous acceptez la collecte, la détention,
lutilisation, la divulgation, le transfert sous forme électronique ou autre et plus généralement
le traitement des informations vous concernant et concernant votre participation au Plan.
(e) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, we may amend or terminate
this Award Agreement or the Plan at any time.
(f) RIGHTS BEFORE YOUR NSO IS EXERCISED. You may not vote, or receive any dividends
associated with, the Shares underlying your NSO before your NSO is exercised with respect to such
Shares.
(g) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive or to
exercise the vested portion of your NSO that is unexercised when you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form need not be completed now and is not required as a condition of
receiving your Award. If you die without completing a Beneficiary Designation Form or if you do
not complete that Form correctly, your beneficiary will be your surviving spouse or, if you do not
have a surviving spouse, your estate.
(h) TRANSFERRING YOUR NSO. Normally your NSO may not be transferred to another person.
However, you may complete a Beneficiary Designation Form to name the person who may exercise your
NSO if you die before the Expiration Date. Also, the Committee may allow you to place your NSO into
a trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
(i) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(j) OTHER AGREEMENTS. Your NSO will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement.
Scotts NSO Agreement France
5
(k) ADJUSTMENTS TO YOUR NSO. Subject to the terms of the Plan, your NSO will be adjusted, if
appropriate, to reflect any change to the Companys capital structure (e.g., the number of Shares
underlying your NSO and the Exercise Price will be adjusted to reflect a stock split).
(l) OTHER TERMS AND CONDITIONS. Your NSO is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of the NSO made to you under this Award Agreement.
5. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
(a) Copies of the Plan and Plan Prospectus have been made available to you;
(b) You understand and accept the terms and conditions of your NSO; and
(c) You must return a signed copy of this Award Agreement to the address given above before
[Date 30 Days After Grant Date].
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[Grantees Name] |
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THE SCOTTS MIRACLE-GRO COMPANY |
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Date signed: |
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[Name of Company Representative] |
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[Title of Company Representative] |
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Scotts NSO Agreement France
6
Form France
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION EXERCISE NOTICE
FOR NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
Additional copies of this Nonqualified Stock Option Exercise Notice (Exercise Notice) (and any
further information you may need about this Exercise Notice or exercising your NSO) are available
from [Third Party Administrator] at the address given below.
By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise all or a portion of the NSO and to purchase the Shares described
below. Capitalized terms not defined in this Exercise Notice have the same meanings as in the Plan
and applicable Award Agreement.
NOTE: You must complete a separate Exercise Notice for each NSO being exercised (e.g., if
you are simultaneously exercising an NSO to purchase 200 Shares granted on January 1, 2008
and an NSO to purchase 100 Shares granted on January 1, 2009 under a separate award
agreement, you must complete two Exercise Notices, one for each NSO being exercised).
NSO TO BE EXERCISED AND SHARES TO BE PURCHASED: This Exercise Notice relates to the following NSO
and number of Shares (fill in the blanks):
Grant Date of NSO: [Grant Date]
Number of Shares Being Purchased:
EXERCISE PRICE: The aggregate Exercise Price due is $ .
NOTE: This amount must equal the product of [Exercise Price] multiplied by the number of
Shares being purchased.
PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any related taxes by (check
one):
NOTE: These methods are described in the applicable Award Agreement.
Cashless Exercise and Sell.
Combination Exercise.
Exercise and Hold.
Scotts NSO Agreement France
NOTE:
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If you select the Exercise and Hold method, you must follow the procedures
described in the Award Agreement to pay the Exercise Price and the taxes related to
this exercise. You should contact [Third Party Administrator] at the address given
below to find out the amount of taxes due. |
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If you select either the Cashless Exercise and Sell method or the Combination
Exercise method, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the
number of Shares you will receive. |
YOUR ACKNOWLEDGMENT
By signing below, you acknowledge and agree that:
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You fully understand the effect (including the investment effect) of exercising your NSO
and buying Shares and understand that there is no guarantee that the value of these Shares
will appreciate or will not depreciate; |
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This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the NSO expires, as specified in the Award
Agreement under which the NSO was granted; and |
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The Shares you are buying by completing and returning this Exercise Notice will be
issued to you as soon as administratively practicable. You will not have any rights as a
shareholder of the Company until the Shares are issued. |
[Grantees Name]
A signed copy of this Exercise Notice must be received at the following address no later than the
date the NSO expires, as specified in the Award Agreement under which the NSO was granted:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
*****
Scotts NSO Agreement France
2
ACKNOWLEDGEMENT OF RECEIPT
A signed copy of the Nonqualified Stock Option Exercise Notice was received on:
.
[Grantees Name]:
Has effectively exercised the portion of the NSO described in this Exercise Notice; or
Has not effectively exercised the portion of the NSO described in this Exercise Notice
because:
The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee
Note: Keep a copy of this Exercise Notice as part of the Plans permanent records.
Scotts NSO Agreement France
3
EX-10(D)
Exhibit 10(d)
Form Poland
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT FOR EMPLOYEES
NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan
(Plan) through which key employees, like you, may acquire (or share in the appreciation of)
common shares, without par value, of the Company (Shares). Capitalized terms that are not
defined in this Award Agreement have the same meanings as in the Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Scotts Option Agreement (Poland)
1. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTION
You have been granted a Nonqualified Stock Option (NSO) to purchase [Number of Common Shares]
Shares at an exercise price of $[Exercise Price] for each Share (Exercise Price) on or before
[Expiration Date No Later Than 10 Years After Grant Date] (Expiration Date), subject to the terms
and conditions of the Plan and this Award Agreement. The Grant Date of the NSO is [Grant Date].
2. LIMITS ON EXERCISING YOUR NSO
(a) Normally, your NSO will vest (and become exercisable) on [Vesting Date] (the Vesting
Date) but only if you are actively employed by the [name of the Polish employer] (the Employer)
on the Vesting Date and all other conditions described in this Award Agreement and the Plan are
met. The term actively employed as used above includes the entire duration of employment, except
for the periods of (i) unpaid leave; and (ii) childcare leave (urlop wypoczynkowy), if any.
This does not mean that you must exercise your NSO on this date; this is merely the first date
that you may do so. However, except as described below, your NSO will expire to the extent it is
not exercised on or before the Expiration Date.
There are some special situations in which your NSO may vest earlier. These are described in
Sections 4(a) and 4(c) of this Award Agreement.
(b) At any one time, you may not exercise your NSO to buy fewer than 100 Shares (or, if less,
the number of Shares underlying the vested portion of your NSO). Also, you may never exercise your
NSO to purchase a fractional Share. Any fractional Share shall be redeemed for cash equal to the
Fair Market Value of such fractional Share.
3. EXERCISING YOUR NSO
(a) After your NSO vests, you may exercise the NSO by completing an Exercise Notice. A copy of
this Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice and
a description of the procedures that you must follow to exercise your NSO are available from [Third
Party Administrator] at [TPA Telephone Number] or at the address given above.
(b) You may use one of three methods to exercise your NSO and to pay any taxes related to that
exercise. You will decide on the method at the time of exercise.
CASHLESS EXERCISE AND SELL: If you elect this alternative, you will be deemed to
have simultaneously exercised the NSO and to have sold the Shares underlying the
portion of the NSO you exercised. When the transaction is complete, you will receive
cash (but no Shares) equal to the difference between the aggregate Fair Market Value
of the Shares deemed to have been acquired through the exercise minus the aggregate
Exercise Price and related taxes.
Scotts Option Agreement (Poland)
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COMBINATION EXERCISE: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSO and to have sold a number of those Shares with a
Fair Market Value equal to the aggregate Exercise Price and related taxes. When the
transaction is complete, the balance of the Shares subject to the portion of the NSO
you exercised will be transferred to you.
EXERCISE AND HOLD: If you elect this alternative, you must pay the full Exercise
Price plus related taxes (in cash, a cash equivalent or in Shares having a Fair
Market Value equal to the Exercise Price and which you have owned for at least six
months before the exercise date). When the transaction is complete, you will
receive the number of Shares purchased.
(c) Before choosing an exercise method, you should read the Plan Prospectus, as supplemented,
to ensure you understand the income tax effect of exercising your NSO.
(d) If you do not elect one of the methods set forth in Section 3(b) above, we will apply the
Cashless Exercise and Sell method described in Section 3(b).
4. GENERAL TERMS AND CONDITIONS
(a) YOU MAY FORFEIT YOUR NSO IF YOU TERMINATE. Normally, you may exercise your NSO after it
vests and before the Expiration Date. However, your NSO may be cancelled earlier than the
Expiration Date if you Terminate. For purposes of this Award Agreement, Terminate (or any form
thereof) means cessation of the employee-employer relationship between you and the Employer for any
reason.
(i) If you are Terminated for Cause, the portion of your NSO that has not been
exercised will be forfeited (whether or not then vested) on the date you Terminate; or
(ii) If you die or you Terminate due to your Disability (as defined below), your NSO
will become fully vested and expire on the earlier of the Expiration Date or 12 months after
you Terminate. For purposes of this Award Agreement, Disability means your inability to
perform your normal duties for a period of at least six months due to a physical or mental
infirmity, confirmed by a decision of a significant or moderate degree of disability
(orzeczenie ustalajqce znaczny lub umiarkowany stopień niepelnosprawności); or
(iii) If you Terminate after reaching either (A) age 55 and completing at least 10
years of employment with the Employer or (B) age 62 regardless of your years of service,
your NSO will become fully vested and expire on the earlier of the Expiration Date or 12
months after you Terminate; or
(iv) If you Terminate for any other reason, the unvested portion of your NSO will be
forfeited immediately and the vested portion of your NSO will expire on the earlier of the
Expiration Date or 90 days after you Terminate.
Scotts Option Agreement (Poland)
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Note, it is your responsibility to keep track of when your NSO expires.
(b) YOU MAY FORFEIT YOUR NSO IF YOU ENGAGE IN CONDUCT THAT IS HARMFUL TO THE COMPANY (OR ANY
AFFILIATE OR SUBSIDIARY). You will forfeit your NSO and must return to the Company all Shares and
other amounts you have received through the Plan if, without the Companys written consent, you do
any of the following within 180 days before and 730 days after you Terminate:
(i) You serve (or agree to serve) as an officer, director, manager, consultant or
employee of any proprietorship, partnership, corporation or other entity or become the owner
of a business or a member of a partnership, limited liability company or other entity that
competes with any portion of the Companys (or any Affiliates or Subsidiarys) business
with which you have been involved any time within five years before your Termination or
render any service (including, without limitation, advertising or business consulting) to
entities that compete with any portion of the Companys (or any Affiliates or Subsidiarys)
business with which you have been involved any time within five years before your
Termination;
(ii) You refuse or fail to consult with, supply information to or otherwise cooperate
with the Company or any Affiliate or Subsidiary after having been requested to do so;
(iii) You deliberately engage in any action that the Company concludes has caused
substantial harm to the interests of the Company or any Affiliate or Subsidiary;
(iv) On your own behalf or on behalf of any other person, partnership, association,
corporation, limited liability company or other entity, you solicit or in any manner attempt
to influence or induce any employee of the Company or any Affiliate or Subsidiary to leave
the Companys or any Affiliates or Subsidiarys employment or use or disclose to any
person, partnership, association, corporation, limited liability company or other entity any
information obtained while an employee of the Company or any Affiliate or Subsidiary
concerning the names and addresses of the Companys or any Affiliates or Subsidiarys
employees;
(v) You disclose confidential and proprietary information relating to the Companys or
any Affiliates or Subsidiarys business affairs (Trade Secrets), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Companys or any
Affiliates or Subsidiarys products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;
(vi) You fail to return all property (other than personal property), including keys,
notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes,
disks, cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that
Scotts Option Agreement (Poland)
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you have produced or received or have otherwise been submitted to you in the course of
your employment with the Employer; or
(vii) You engaged in conduct that the Committee reasonably concludes would have given
rise to a Termination for Cause had it been discovered before you Terminated.
(c) CHANGE IN CONTROL. Normally, your NSO will vest only in the circumstances described in
Section 2(a). However, if there is a Change in Control, your NSO may vest earlier. You should
read the Plan carefully to ensure that you understand how this may happen.
(d) NO RIGHT TO EMPLOYMENT. Your NSO award is a voluntary act by the Company being made on a
one-time basis and it does not constitute a commitment to make any future awards. This Award and
any payments made hereunder do not originate and are not due from the Employer and they will not be
considered salary or other compensation for purposes of any severance pay or similar allowance,
except as otherwise required by law. Nothing in this Award Agreement will give you any right to
continue employment with the Employer, as the case may be, or interfere in any way with the right
of the Employer to terminate your employment.
(e) DATA PRIVACY. Information about you and your participation in the Plan (i.e., your name,
home address and telephone number, date of birth, social insurance number, salary, nationality, job
title, any shares of stock or directorships held in the Company, and details of the NSO or other
entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or outstanding in
your favor) may be collected, recorded, held, used and disclosed by the Company, its Affiliates and
Subsidiaries, namely The Scotts Miracle-Go Company (located in the United States of America), [Name
of Polish subsidiary] (located in Poland), and the [Third Party Administrator] (located in the
United States of America) for any purpose related to the administration of the Plan. You
understand that the Employer, the Company and its Subsidiaries or Affiliates may transfer such
information to any third party administrators, regardless of whether such persons are located
within your country of residence, the European Economic Area or in countries outside of the
European Economic Area, including the United States of America. Your execution of the Award
Agreement is tantamount to your consent to the transfer of your personal data as provided above and
the processing of information relating to you and your participation in the Plan in any one or more
of the ways referred to above. This consent may be withdrawn at any time in writing by sending a
declaration of withdrawal to the [Third Party Administrator].
(f) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, we may amend or terminate
this Award Agreement or the Plan at any time.
(g) RIGHTS BEFORE YOUR NSO IS EXERCISED. You may not vote, or receive any dividends
associated with, the Shares underlying your NSO before your NSO is exercised with respect to such
Shares.
(h) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive or to
exercise the vested portion of your NSO that is unexercised when
Scotts Option Agreement (Poland)
5
you die. This may be done only on the attached Beneficiary Designation Form and by following
the rules described in that Form. The Beneficiary Designation Form need not be completed now and is
not required as a condition of receiving your Award. If you die without completing a Beneficiary
Designation Form or if you do not complete that Form correctly, your beneficiary will be your
surviving spouse or, if you do not have a surviving spouse, your estate.
(i) TRANSFERRING YOUR NSO. Normally your NSO may not be transferred to another person.
However, you may complete a Beneficiary Designation Form to name the person who may exercise your
NSO if you die before the Expiration Date. Also, the Committee may allow you to place your NSO
into a trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
(j) ELECTRONIC DELIVERY. The Company may, in its sole discretion, deliver any documents
related to your NSO and your participation in the Plan, or future awards that may be granted under
the Plan, by electronic means or to request your consent to participate in the Plan by electronic
means. You hereby consent to receive such documents by electronic delivery and, if requested,
agree to participate in the Plan through an on-line or electronic system established and maintained
by the Company or another third party designated by the Company.
(k) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(l) OTHER AGREEMENTS. Your NSO will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement.
(m) ADJUSTMENTS TO YOUR NSO. Subject to the terms of the Plan, your NSO will be adjusted, if
appropriate, to reflect any change to the Companys capital structure (e.g., the number of Shares
underlying your NSO and the Exercise Price will be adjusted to reflect a stock split).
(n) OTHER TERMS AND CONDITIONS. Your NSO is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of the NSO made to you under this Award Agreement.
5. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
(a) Copies of the Plan and Plan Prospectus have been made available to you;
(b) You understand and accept the terms and conditions of your NSO; and
(c) You must return a signed copy of this Award Agreement to the address given
Scotts Option Agreement (Poland)
6
above before [Date 30 Days After Grant Date].
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THE SCOTTS MIRACLE-GRO COMPANY |
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BY:
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BY: |
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Date signed: |
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[Name of Company representative] |
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[Title of Company representative] |
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Scotts Option Agreement (Poland)
7
Form Poland
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION EXERCISE NOTICE
FOR NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
Additional copies of this Nonqualified Stock Option Exercise Notice (Exercise Notice) (and any
further information you may need about this Exercise Notice or exercising your NSO) are available
from [Third Party Administrator] at the address given below.
By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise all or a portion of the NSO and to purchase the Shares described
below. Capitalized terms not defined in this Exercise Notice have the same meanings as in the Plan
and applicable Award Agreement.
NOTE: You must complete a separate Exercise Notice for each NSO being exercised (e.g., if
you are simultaneously exercising an NSO to purchase 200 Shares granted on January 1, 2008
and an NSO to purchase 100 Shares granted on January 1, 2009 under a separate award
agreement, you must complete two Exercise Notices, one for each NSO being exercised).
NSO TO BE EXERCISED AND SHARES TO BE PURCHASED: This Exercise Notice relates to the following NSO
and number of Shares (fill in the blanks):
Grant Date of NSO: [Grant Date]
Number of Shares Being Purchased:
EXERCISE PRICE: The aggregate Exercise Price due is $ .
NOTE: This amount must equal the product of [Exercise Price] multiplied by the number of
Shares being purchased.
PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any related taxes by (check
one):
NOTE: These methods are described in the applicable Award Agreement.
Cashless Exercise and Sell.
Combination Exercise.
Exercise and Hold.
Scotts Option Agreement (Poland)
NOTE:
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If you select the Exercise and Hold method, you must follow the procedures
described in the Award Agreement to pay the Exercise Price and the taxes related to
this exercise. You should contact [Third Party Administrator] at the address given
below to find out the amount of taxes due. |
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If you select either the Cashless Exercise and Sell method or the Combination
Exercise method, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the
number of Shares you will receive. |
YOUR ACKNOWLEDGMENT
By signing below, you acknowledge and agree that:
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You fully understand the effect (including the investment effect) of exercising your NSO
and buying Shares and understand that there is no guarantee that the value of these Shares
will appreciate or will not depreciate; |
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This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the NSO expires, as specified in the Award
Agreement under which the NSO was granted; and |
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The Shares you are buying by completing and returning this Exercise Notice will be
issued to you as soon as administratively practicable. You will not have any rights as a
shareholder of the Company until the Shares are issued. |
[Grantees Name]
(signature)
Date signed:
A signed copy of this Exercise Notice must be received at the following address no later than the
date the NSO expires, as specified in the Award Agreement under which the NSO was granted:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
*****
Scotts Option Agreement (Poland)
2
ACKNOWLEDGEMENT OF RECEIPT
A signed copy of the Nonqualified Stock Option Exercise Notice was received on:
.
[Grantees Name]:
Has effectively exercised the portion of the NSO described in this Exercise Notice; or
Has not effectively exercised the portion of the NSO described in this Exercise Notice
because:
The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee
Note: Keep a copy of this Exercise Notice as part of the Plans permanent records.
Scotts Option Agreement (Poland)
3
EX-10(E)(1)
Exhibit 10(e)(1)
Form UK
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT FOR UNITED KINGDOM EMPLOYEES
NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted the UK Sub-Plan (the Sub-Plan) under The Scotts Miracle-Gro Company Amended and
Restated 2006 Long-Term Incentive Plan (Plan) through which key employees, like you, may acquire
(or share in the appreciation of) common shares, without par value, of the Company (Shares).
Capitalized terms that are not defined in this Award Agreement have the same meanings as in the
Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, the Sub-Plan, this Award Agreement, and the Plan Prospectus, as supplemented,
carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Scotts NSO Agreement UK
1. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTION
You have been granted a Nonqualified Stock Option (NSO) to purchase [Number of Common Shares]
Shares at an exercise price of $[Exercise Price] for each Share (Exercise Price) on or before
[Expiration Date No Later Than 10 Years After Grant Date] (Expiration Date), subject to the terms
and conditions of the Plan and this Award Agreement. The Grant Date of the NSO is [Grant Date].
2. LIMITS ON EXERCISING YOUR NSO
(a) Normally, your NSO will vest (and become exercisable) on [Vesting Date] (the Vesting
Date) but only if you are actively employed by the Company or any Subsidiary or Affiliate on the
Vesting Date and all other conditions described in this Award Agreement, the Plan and the Sub-Plan
are met. This does not mean that you must exercise your NSO on this date; this is merely the first
date that you may do so. However, except as described below, your NSO will expire to the extent it
is not exercised on or before the Expiration Date.
There are some special situations in which your NSO may vest earlier. These are described in
Sections 4(a) and 4(b) of this Award Agreement.
(b) At any one time, you may not exercise your NSO to buy fewer than 100 Shares (or, if less,
the number of Shares underlying the vested portion of your NSO). Also, you may never exercise your
NSO to purchase a fractional Share. Any fractional Share shall be redeemed for cash equal to the
Fair Market Value of such fractional Share.
3. EXERCISING YOUR NSO
(a) After your NSO vests, you may exercise the NSO by completing an Exercise Notice. A copy of
this Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice and
a description of the procedures that you must follow to exercise your NSO are available from [Third
Party Administrator] at [TPA Telephone Number] or at the address given above.
(b) You may use one of three methods to exercise your NSO and to pay any taxes related to that
exercise. You will decide on the method at the time of exercise.
CASHLESS EXERCISE AND SELL: If you elect this alternative, you will be deemed to
have simultaneously exercised the NSO and to have sold the Shares underlying the
portion of the NSO you exercised. When the transaction is complete, you will receive
cash (but no Shares) equal to the difference between the aggregate Fair Market Value
of the Shares deemed to have been acquired through the exercise minus the aggregate
Exercise Price and related taxes.
Scotts NSO Agreement UK
2
COMBINATION EXERCISE: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSO and to have sold a number of those Shares with a
Fair Market Value equal to the aggregate Exercise Price and related taxes. When the
transaction is complete, the balance of the Shares subject to the portion of the NSO
you exercised will be transferred to you.
EXERCISE AND HOLD: If you elect this alternative, you must pay the full Exercise
Price plus related taxes (in cash, a cash equivalent or in Shares having a Fair
Market Value equal to the Exercise Price and which you have owned for at least six
months before the exercise date). When the transaction is complete, you will
receive the number of Shares purchased.
(c) For purposes of this Section 3, taxes include, without limitation, UK income tax and UK
primary class 1 (employees) national insurance contributions, and the Company or the Subsidiary or
Affiliate which employs you will have the power and the right to deduct or withhold, or require you
to remit to the Company or the relevant Subsidiary or Affiliate any amounts required to be withheld
as a result of the exercise of your NSO. Before choosing an exercise method, you should read the
Plan Prospectus Supplement entitled UK Tax Consequences in the Plan Prospectus to ensure you
understand the income tax effect of exercising your NSO.
(d) If you do not elect one of the methods set forth in Section 3(b) above, we will apply the
Cashless Exercise and Sell method described in Section 3(b).
4. GENERAL TERMS AND CONDITIONS
(a) YOU MAY FORFEIT YOUR NSO IF YOU TERMINATE. Normally, you may exercise your NSO after it
vests and before the Expiration Date. However, your NSO may be cancelled earlier than the
Expiration Date if you Terminate. For purposes of this Award Agreement, Terminate (or any form
thereof) means cessation of the employee-employer relationship between you and the Company and all
Affiliates and Subsidiaries for any reason.
(i) If you are Terminated for Cause, the portion of your NSO that has not been
exercised will be forfeited (whether or not then vested) on the date you Terminate; or
(ii) If you die or you Terminate due to your Disability (as defined below), your NSO
will become fully vested and expire on the earlier of the Expiration Date or 12 months after
you Terminate. For purposes of this Award Agreement, Disability means either (A) your
inability to perform your normal duties for a period of at least six months due to a
physical or mental infirmity, or (B) where you are disabled for the purposes of
legislation applicable in the country in which you ordinarily perform your duties, and your
employment is terminated for a reason related to your inability to fully and properly
perform your normal duties provided such inability is caused in whole or in part by your
disability; or
(iii) If you Terminate for any other reason, the unvested portion of your NSO
Scotts NSO Agreement UK
3
will be forfeited immediately and the vested portion of your NSO will expire on the
earlier of the Expiration Date or 90 days after you Terminate.
Note, it is your responsibility to keep track of when your NSO expires.
(b) CHANGE IN CONTROL. Normally, your NSO will vest only in the circumstances described in
Section 2(a). However, if there is a Change in Control, your NSO may vest earlier. You should
read the Plan carefully to ensure that you understand how this may happen.
(c) DATA PRIVACY. Information about you and your participation in the Plan (i.e.,
your name, home address and telephone number, date of birth, social insurance number, salary,
nationality, job title, any shares of stock or directorships held in the Company, and details of
the NSO or other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or
outstanding in your favor) may be collected, recorded, held, used and disclosed by the Company, and
the [Third Party Administrator] for any purpose related to the administration of the Plan. You
understand that the Company and its Subsidiaries or Affiliates may transfer such information to any
third party administrators, regardless of whether such persons are located within your country of
residence, the European Economic Area or in countries outside of the European Economic Area,
including the United States of America. You consent to the processing of information relating to
you and your participation in the Plan in any one or more of the ways referred to above. This
consent may be withdrawn at any time in writing by sending a declaration of withdrawal to the
[Third Party Administrator].
(d) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, we may amend or terminate
this Award Agreement or the Plan at any time.
(e) RIGHTS BEFORE YOUR NSO IS EXERCISED. You may not vote, or receive any dividends
associated with, the Shares underlying your NSO before your NSO is exercised with respect to such
Shares.
(f) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive or to
exercise the vested portion of your NSO that is unexercised when you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form need not be completed now and is not required as a condition of
receiving your Award. If you die without completing a Beneficiary Designation Form or if you do
not complete that Form correctly, your beneficiary will be your surviving spouse or, if you do not
have a surviving spouse, your estate.
(g) TRANSFERRING YOUR NSO. Normally your NSO may not be transferred to another person.
However, as described in Section 4(f), you may complete a Beneficiary Designation Form to name the
person who may exercise your NSO if you die before the Expiration Date. Also, the Committee may
allow you to place your NSO into a trust established for your benefit or for the benefit of your
family, but the beneficiaries of any such trust cannot extend beyond the restricted class of
beneficiaries in Section 15 of the Plan (as amended by the Sub-Plan). Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given above if you are interested in
doing this.
Scotts NSO Agreement UK
4
(h) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan or the Sub-Plan to the substantive law of another jurisdiction.
(i) OTHER AGREEMENTS. Your NSO will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan, the Sub-Plan or this Award
Agreement.
(j) ADJUSTMENTS TO YOUR NSO. Subject to the terms of the Plan, your NSO will be adjusted, if
appropriate, to reflect any change to the Companys capital structure (e.g., the number of Shares
underlying your NSO and the Exercise Price will be adjusted to reflect a stock split).
(l) OTHER TERMS AND CONDITIONS. Your NSO is subject to more rules described in the Plan and
the Sub-Plan. You should read the Plan and Sub-Plan carefully to ensure you fully understand all
the terms and conditions of the grant of the NSO made to you under this Award Agreement.
5. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
(a) Copies of the Plan, the Sub-Plan and the Plan Prospectus have been made available to you;
(b) You understand and accept the terms and conditions of your NSO; and
(c) You must return a signed copy of this Award Agreement to the address given above before
[Date 30 Days After Grant Date].
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[Grantees Name] |
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THE SCOTTS MIRACLE-GRO COMPANY |
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BY:
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BY: |
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Date signed: |
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[Name of Company representative] |
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Scotts NSO Agreement UK
5
Form UK
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
NONQUALIFIED STOCK OPTION EXERCISE NOTICE
FOR NONQUALIFIED STOCK OPTION GRANTED
TO [Grantees Name] ON [Grant Date]
Additional copies of this Nonqualified Stock Option Exercise Notice (Exercise Notice) (and any
further information you may need about this Exercise Notice or exercising your NSO) are available
from [Third Party Administrator] at the address given below.
By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise all or a portion of the NSO and to purchase the Shares described
below. Capitalized terms not defined in this Exercise Notice have the same meanings as in the Plan
and applicable Award Agreement.
NOTE: You must complete a separate Exercise Notice for each NSO being exercised (e.g., if
you are simultaneously exercising an NSO to purchase 200 Shares granted on January 1, 2008
and an NSO to purchase 100 Shares granted on January 1, 2009 under a separate award
agreement, you must complete two Exercise Notices, one for each NSO being exercised).
NSO TO BE EXERCISED AND SHARES TO BE PURCHASED: This Exercise Notice relates to the following NSO
and number of Shares (fill in the blanks):
Grant Date of NSO: [Grant Date]
Number of Shares Being Purchased:
EXERCISE PRICE: The aggregate Exercise Price due is $ .
NOTE: This amount must equal the product of [Exercise Price] multiplied by the number of
Shares being purchased.
PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any related taxes by (check
one):
NOTE: These methods are described in the applicable Award Agreement.
Cashless Exercise and Sell.
Combination Exercise.
Exercise and Hold.
Scotts NSO Agreement UK
NOTE:
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If you select the Exercise and Hold method, you must follow the procedures
described in the Award Agreement to pay the Exercise Price and the taxes related to
this exercise. You should contact [Third Party Administrator] at the address given
below to find out the amount of taxes due. |
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If you select either the Cashless Exercise and Sell method or the Combination
Exercise method, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the
number of Shares you will receive. |
YOUR ACKNOWLEDGMENT
By signing below, you acknowledge and agree that:
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You fully understand the effect (including the investment effect) of exercising your NSO
and buying Shares and understand that there is no guarantee that the value of these Shares
will appreciate or will not depreciate; |
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This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the NSO expires, as specified in the Award
Agreement under which the NSO was granted; and |
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The Shares you are buying by completing and returning this Exercise Notice will be
issued to you as soon as administratively practicable. You will not have any rights as a
shareholder of the Company until the Shares are issued. |
[Grantees Name]
A signed copy of this Exercise Notice must be received at the following address no later than the
date the NSO expires, as specified in the Award Agreement under which the NSO was granted:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
*****
Scotts NSO Agreement UK
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ACKNOWLEDGEMENT OF RECEIPT
A signed copy of the Nonqualified Stock Option Exercise Notice was received on:
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[Grantees Name]:
Has effectively exercised the portion of the NSO described in this Exercise Notice; or
Has not effectively exercised the portion of the NSO described in this Exercise Notice
because:
The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee
Note: Keep a copy of this Exercise Notice as part of the Plans permanent records.
Scotts NSO Agreement UK
3
EX-10(E)(2)
Exhibit 10(e)(2)
Form UK
THE SCOTTS MIRACLE-GRO COMPANY
AMENDED AND RESTATED
2006 LONG-TERM INCENTIVE PLAN
RESTRICTED STOCK AWARD
AGREEMENT FOR EMPLOYEES IN THE UNITED KINGDOM
RESTRICTED STOCK GRANTED
TO [Grantees Name] ON [Grant Date]
The Scotts Miracle-Gro Company (Company) believes that its business interests are best served by
ensuring that you have an opportunity to share in the Companys business success. To this end, the
Company adopted the UK Sub-Plan (the Sub-Plan) under The Scotts Miracle-Gro Company Amended and
Restated 2006 Long-Term Incentive Plan (Plan) through which key employees, like you, may acquire
(or share in the appreciation of) common shares, without par value, of the Company (Shares).
Capitalized terms that are not defined in this Award Agreement have the same meanings as in the
Plan.
This Award Agreement describes the type of Award that you have been granted and the terms and
conditions of your Award. To ensure you fully understand these terms and conditions, you should:
- Read the Plan, this Award Agreement and the Plan Prospectus, as supplemented, carefully; and
- Contact [Title] at [Telephone Number] if you have any questions about your Award. Or, you may
send a written inquiry to the address shown below:
The Scotts Miracle-Gro Company
Attention: [Title]
14111 Scottslawn Road
Marysville, Ohio 43041
Also, no later than [Date 30 Days After Grant Date], you must return a signed copy of this Award
Agreement to:
[Third Party Administrator]
Attention: [TPA Contacts Name]
[TPA Contacts Address]
[TPA Telephone Number]
Scotts RS Agreement UK
1. DESCRIPTION OF YOUR RESTRICTED STOCK
You have been granted [Number of Common Shares] Shares of Restricted Stock, subject to the terms
and conditions of the Plan and this Award Agreement. Until the Period of Restriction (as described
below) lapses, your Restricted Stock will be subject to a risk of forfeiture and you may not sell
or transfer your Shares of Restricted Stock. Your Restricted Stock will be held in escrow until it
is distributed or forfeited, as described below.
2. PERIOD OF RESTRICTION
Subject to the terms of the Plan and this Award Agreement (including Section 3), the restrictions
imposed on your Restricted Stock normally will lapse if you are actively employed by the Company or
any Subsidiary or Affiliate on [Vesting Date] (the Vesting Date). If all applicable terms and
conditions have been satisfied, your Restricted Stock will be released from escrow and distributed
to you as soon as administratively practicable, but no later than 60 days, after the Vesting Date.
3. GENERAL TERMS AND CONDITIONS
(a) YOU WILL FORFEIT YOUR RESTRICTED STOCK IF YOU TERMINATE. Normally, your Restricted Stock
will be settled on the Vesting Date. However, the Shares of Restricted Stock will be forfeited if
you Terminate for any reason before the Vesting Date. For purposes of this Award Agreement,
Terminate (or any form thereof) means cessation of the employee-employer relationship between you
and the Company and all Affiliates and Subsidiaries for any reason.
(b) CHANGE IN CONTROL. Normally, your Restricted Stock will vest only under the circumstances
described in Section 2. However, if there is a Change in Control, your Restricted Stock may vest
earlier. You should read the Plan carefully to ensure that you understand how this may happen.
(c) DATA PRIVACY. Information about you and your participation in the Plan (i.e.,
your name, home address and telephone number, date of birth, social insurance number, salary,
nationality, job title, any shares of stock or directorships held in the Company, and details of
the Restricted Stock or other entitlement to shares of stock awarded, cancelled, exercised, vested,
unvested or outstanding in your favor) may be collected, recorded, held, used and disclosed by the
Company, and the [Third Party Administrator] for any purpose related to the administration of the
Plan. You understand that the Company and its Subsidiaries or Affiliates may transfer such
information to any third party administrators, regardless of whether such persons are located
within your country of residence, the European Economic Area or in countries outside of the
European Economic Area, including the United States of America. You consent to the processing of
information relating to you and your participation in the Plan in any one or more of the ways
referred to above. This consent may be withdrawn at any time in writing by sending a declaration
of withdrawal to the [Third Party Administrator].
(d) AMENDMENT AND TERMINATION. Subject to the terms of the Plan, the Company may amend or
terminate this Award Agreement or the Plan at any time.
Scotts RS Agreement UK
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(e) RIGHTS BEFORE YOUR RESTRICTED STOCK VESTS. During the Period of Restriction (even though
your Restricted Stock is held in escrow until it is settled or forfeited):
(i) You may exercise any voting rights associated with the Shares of Restricted Stock
while it is held in escrow.
(ii) You will be entitled to receive any dividends paid with respect to the Shares of
Restricted Stock, although these dividends will be delivered only in Shares and will be held
in escrow and subject to the same restrictions on transferability and forfeitability as the
Shares of Restricted Stock with respect to which they were paid under this Award Agreement.
A reasonable rate of interest, as determined by the Committee in its sole discretion, will
be credited to you and held in escrow during the Period of Restriction with respect to any
such cash dividends that are declared and paid during the period beginning on [Grant Date]
and ending on the Vesting Date and will be delivered in Shares. At the end of the Period of
Restriction, any such dividends and interest thereon will be distributed to you in
accordance with Section 2 of this Award Agreement or forfeited, depending on whether or not
you have met the conditions described in this Award Agreement and the Plan.
(f) BENEFICIARY DESIGNATION. You may name a beneficiary or beneficiaries to receive any
Restricted Stock that is vested before you die but settled after you die. This may be done only on
the attached Beneficiary Designation Form and by following the rules described in that Form. The
Beneficiary Designation Form does not need to be completed now and is not required as a condition
of receiving your Award. However, if you die without completing a Beneficiary Designation Form or
if you do not complete that Form correctly, your beneficiary will be your surviving spouse or, if
you do not have a surviving spouse, your estate.
(g) TRANSFERRING YOUR RESTRICTED STOCK. Normally your Restricted Stock may not be transferred
to another person. However, as described in Section 3(f), you may complete a Beneficiary
Designation Form to name the person to receive any Restricted Stock that is vested before you die
but settled after you die. Also, the Committee may allow you to place your Restricted Stock into a
trust established for your benefit or the benefit of your family, but the beneficiaries of any such
trust cannot extend beyond the restricted class of beneficiaries in Section 15 of the Plan (as
amended by the Sub-Plan). Contact [Third Party Administrator] at [TPA Telephone Number] or at the
address given above if you are interested in doing this.
(h) GOVERNING LAW. This Award Agreement shall be governed by the laws of the State of Ohio,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.
(i) OTHER AGREEMENTS. Your Restricted Stock will be subject to the terms of any other written
agreements between you and the Company or any Affiliate or Subsidiary to the extent that those
other agreements do not directly conflict with the terms of the Plan or this Award Agreement.
(j) ADJUSTMENTS TO YOUR RESTRICTED STOCK. Subject to the terms of
Scotts RS Agreement UK
3
the Plan, your Restricted Stock will be adjusted, if appropriate, to reflect any change to the
Companys capital structure (e.g., the number of Shares underlying your Restricted Stock will be
adjusted to reflect a stock split).
(k) OTHER RULES. Your Restricted Stock is subject to more rules described in the Plan. You
should read the Plan carefully to ensure you fully understand all the terms and conditions of the
grant of Restricted Stock under this Award Agreement.
4. YOUR ACKNOWLEDGMENT OF AWARD CONDITIONS
By signing below, you acknowledge and agree that:
(a) Copies of the Plan and the Plan Prospectus have been made available to you;
(b) You understand and accept the terms and conditions of your Award; and
(c) You must return a signed copy of this Award Agreement to the address given above before
[Date 30 Days After Grant Date].
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[Grantees Name] |
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THE SCOTTS MIRACLE-GRO COMPANY |
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By:
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By: |
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Date signed: |
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[Name of Company Representative]
[Title of Company Representative] |
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Date signed: |
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Scotts RS Agreement UK
4
EX-10(E)(3)
Exhibit
10 (e)(3)
UK SUB-PLAN
under
THE SCOTTS MIRACLE-GRO COMPANY
2006 LONG-TERM INCENTIVE PLAN
This Sub-Plan, adopted under The Scotts Miracle-Gro Company Long-Term Incentive Plan (the Plan),
is made as of the 30th day of October, 2007, pursuant to resolutions adopted by the Compensation
and Organization Committee of the Board of The Scotts Miracle-Gro Company (the Company), and the
provisions of Article 21.9 of the Plan.
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Purpose. The purpose of this Sub-Plan is primarily to amend those provisions of the Plan
which are required to be amended in order: |
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for grants made under the Plan, and communications concerning those grants, to
be exempt from provisions of the United Kingdom Financial Services and Markets Act
2000; and |
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(b) |
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to take account of United Kingdom tax treatment; |
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with respect solely to grants made to officers and employees of the Company or one of its
Subsidiaries who are residents of the United Kingdom. This Sub-Plan shall not apply to any
other grants made under the Plan. |
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Restricted Availability of Grants. Any grants made pursuant to this Sub-Plan shall be made
only to officers and employees of the Company or one of its Subsidiaries who are residents of
the United Kingdom. |
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Restricted Delivery of Awards. Any payments made pursuant to this Sub-Plan shall be made
only in common shares of the Company. For the avoidance of doubt, and without limitation,
dividend equivalents granted pursuant to Article 14 of the Plan may be delivered only in
Shares and no earlier than the Shares to which they relate are delivered under the Award. |
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Restricted Beneficiary Designation. For purposes of grants made pursuant to this Sub-Plan,
the persons to whom any benefit may be designated under Article 15 of the Plan shall be
limited to a Participants children and step-children under the age of eighteen, spouses and
surviving spouses and civil partners (within the meaning of the United Kingdom Civil
Partnerships Act 2004) and surviving partners. |
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Inapplicability of Certain Provisions of Plan. For purposes of grants made pursuant to this
Sub-Plan, the entireties of Articles 7 and 13 of the Plan are not applicable to said grants. |
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Modification of Certain Provisions of Plan. For purposes of grants made pursuant to this
Sub-Plan:
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[Article 8 (Restricted Stock and Restricted Stock Units): Article 8 of the Plan
shall be extended by the addition of the following sub-Article: |
8.8 Section 430 Election. The Committee may provide in an Award Agreement
that the Award of Restricted Stock is conditional upon the Participant
making a joint election with the Company or a Subsidiary with respect to the
Award under Section 430(1) of the United Kingdom Income Tax (Earnings and
Pensions) Act 2003.]
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Article 16 (Rights of Participants): The following paragraph shall be added to
Article 16.1: |
Any Participant who leaves the employment of the Company or any Subsidiary
shall not be entitled to any compensation for any loss of any right or
benefit or prospective right or benefit under the Plan which they might
otherwise have enjoyed whether such compensation is claimed by way of
damages for breach of contract or by way of compensation for loss of office
or otherwise.
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Article 19 (Withholding): Article 19.1 shall be amended to read as follows: |
The Company or any Subsidiary shall have the power and the right to deduct
or withhold, or require a Participant to remit to the Company or a
Subsidiary any amounts to satisfy federal, state and local taxes, domestic
or foreign required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan. Foreign taxes shall, for
these purposes, include without limitation, any United Kingdom primary class
1 (employees) national insurance contributions and, if so agreed
specifically between the Company and the Participant, any United Kingdom
secondary class 1 (employers) national insurance contributions.
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Incorporation of Remaining Plan Provisions. With the exception of the provisions noted
above, the provisions of the Plan will apply or be available to all grants made pursuant to
this Sub-Plan. |
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THE SCOTTS MIRACLE-GRO COMPANY
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By: |
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Title: |
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2
EX-31(A)
Exhibit 31(a)
Rule 13a-14(a)/15d-14(a) Certification
(Principal Executive Officer)
I, James Hagedorn, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of The Scotts Miracle-Gro Company for
the quarterly period ended March 29, 2008; |
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Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Dated: May 8, 2008 |
By: |
/s/ JAMES HAGEDORN
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Name: |
Printed James Hagedorn |
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Title: |
President, Chief Executive Officer and Chairman of the Board |
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EX-31(B)
Exhibit 31(b)
Rule 13a-14(a)/15d-14(a) Certification
(Principal Financial Officer)
I, David C. Evans, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of The Scotts Miracle-Gro Company for
the quarterly period ended March 29, 2008; |
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Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Dated: May 8, 2008 |
By: |
/s/ DAVID C. EVANS
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Name: |
Printed David C. Evans |
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Title: |
Executive Vice President and Chief Financial Officer |
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EX-32
Exhibit 32
SECTION 1350 CERTIFICATION*
In connection with the Quarterly Report of The Scotts Miracle-Gro Company (the Company) on Form
10-Q for the quarterly period ended March 29, 2008 as filed with the Securities and Exchange
Commission on the date hereof (the Report), the undersigned James Hagedorn, President, Chief
Executive Officer and Chairman of the Board of the Company, and David C. Evans, Executive Vice
President and Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter
63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of their knowledge:
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The Report fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934; and |
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The information contained in the Report fairly presents, in all material respects, the
consolidated financial condition and results of operations of the Company and its
subsidiaries. |
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/s/ JAMES HAGEDORN |
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/s/ DAVID C. EVANS |
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James Hagedorn |
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David C. Evans |
President, Chief Executive Officer |
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Executive Vice President |
and Chairman of the Board |
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and Chief Financial Officer |
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May 8, 2008 |
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May 8, 2008 |
* |
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THIS CERTIFICATION IS BEING FURNISHED AS REQUIRED BY RULE 13a-14(b) UNDER THE SECURITIES
EXCHANGE ACT OF 1934 (THE EXCHANGE ACT) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE
UNITED STATES CODE, AND SHALL NOT BE DEEMED FILED FOR PURPOSES OF SECTION 18 OF THE EXCHANGE
ACT OR OTHERWISE SUBJECT TO THE LIABILITY OF THAT SECTION. THIS CERTIFICATION SHALL NOT BE
DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE
EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
CERTIFICATION BY REFERENCE. |