·	Third quarter sales improve 7%, led by 32% improvement in Global Professional

·	Global Consumer sales grow 6% with improvements in both U.S. and Europe

·	Consumer purchases at major retailer partners in the U.S. increase 8%

·	Company reaffirms previous earnings guidance entering fall lawn care season

·	Adverse weather conditions could adversely affect our sales and financial results;

·	Our historical seasonality could impair our ability to pay obligations and operating expenses as they come due and operating expenses;

·	Our substantial indebtedness could adversely affect our financial health;

·	Public perceptions regarding the safety of our products, particularly in light of our recently announced product recalls, could adversely affect us;

·	Costs associated with our recently announced product recalls and product registration issues and the corresponding governmental investigation, including recall costs, legal and advertising expenses, lost sales and potential governmental fines could adversely affect our financial results;

·	The loss of one or more of our top customers could adversely affect our financial results because of the concentration of our sales to a small number of retail customers;

·	The expiration of certain patents could substantially increase our competition in the United States;

·	Compliance with environmental and other public health regulations could increase our cost of doing business; and

·	Our significant international operations make us more susceptible to fluctuations in currency exchange rates and to the costs of international regulation.

 

		Three Months Ended
		June 28,			June 30,
		2008			2007			% Change
Global Consumer			930.1			875.4			6	%
Global Professional			98.7			75.0			32	%
Scotts LawnService®			87.4			84.6			3	%
Corporate & Other			54.7			63.4			-14	%
Consolidated		$	1,170.9		$	1,098.4			7	%

 

		Nine Months Ended
		June 28,			June 30,
		2008			2007			% Change
Global Consumer			1,898.9			1,872.3			1	%
Global Professional			260.6			208.5			25	%
Scotts LawnService®			157.7			144.1			9	%
Corporate & Other			120.4			138.0			-13	%
Consolidated		$	2,437.6		$	2,362.9			3	%

				June 28,			June 30,			September 30,
				2008			2007			2007
ASSETS
Current assets
Cash and cash equivalents			$	166.0		$	66.9		$	67.9
Accounts receivable, net				796.2			711.1			397.8
Inventories, net				474.9			432.4			405.9
Prepaids and other current assets				153.3			112.7			127.7
Total current assets				1,590.4			1,323.1			999.3
Property, plant and equipment, net				355.8			364.8			365.9
Goodwill, net				386.7			477.7			462.9
Other intangible assets, net				377.1			418.7			418.8
Other assets				23.9			34.6			30.3
Total assets			$	2,733.9		$	2,618.9		$	2,277.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt			$	292.1		$	237.2		$	86.4
Accounts payable				295.1			274.1			202.5
Other current liabilities				443.8			410.0			297.7
Total current liabilities				1,031.0			921.3			586.6
Long-term debt				1,028.3			1,030.1			1,031.4
Other liabilities				174.8			161.4			179.9
Total liabilities				2,234.1			2,112.8			1,797.9
Shareholders' equity				499.8			506.1			479.3
Total liabilities and shareholders' equity			$	2,733.9		$	2,618.9		$	2,277.2

		Three Months Ended June 28, 2008												Three Months Ended June 30, 2007 (a)
		As Reported			Product Registration/Recalls			Impairment			Adjusted			As Reported
Net sales		$	1,170.9		$	(5.2	)	$	-		$	1,176.1		$	1,098.4
Cost of sales			746.9			(0.8	)		-			747.7			675.7
Cost of sales - product registrations/recalls			0.2			0.2			-			-			-
Gross profit			423.8			(4.6	)		-			428.4			422.7
% of sales			36.2	%								36.4	%		38.5	%
Operating expenses:
Selling, general and administrative			206.9			-			-			206.9			199.2
Impairment and product registrations/recalls			128.9			5.6			123.3			-			-
Other income, net			(5.4	)		-			-			(5.4	)		(3.6	)
Total operating expenses			330.4			5.6			123.3			201.5			195.6
Income from operations			93.4			(10.2	)		(123.3	)		226.9			227.1
% of sales			8.0	%								19.3	%		20.7	%
Costs related to refinancings			-			-			-			-			-
Interest expense			22.1			-			-			22.1			26.2
Income before taxes			71.3			(10.2	)		(123.3	)		204.8			200.9
Income tax expense			48.7			(4.0	)		(21.4	)		74.1			71.2
Net income (reported, adjusted and pro forma)		$	22.6		$	(6.2	)	$	(101.9	)	$	130.7		$	129.7
Basic income per share		$	0.35		$	(0.10	)	$	(1.58	)	$	2.02		$	2.04
Diluted income per share		$	0.35		$	(0.09	)	$	(1.56	)	$	2.00		$	1.98
Common shares used in basic income
per share calculation			64.6			64.6			64.6			64.6			63.6
Common shares and potential common
shares used in diluted income per
share calculation			65.3			65.3			65.3			65.3			65.4
Net income			22.6												129.7
Income tax expense			48.7												71.2
Interest expense			22.1												26.2
Product registrations/recalls			(0.4	)											-
Costs related to refinancing			-												-
Depreciation			13.7												12.8
Amortization, including marketing fees			4.6												4.4
Impairment of assets			123.3												-
Adjusted EBITDA		$	234.6											$	244.3
(a) - For the three months ended June 30, 2007, there were no items impacting comparability.

 

 

 

(1)	Basic earnings per common share is calculated by dividing net income by average common shares outstanding during the period.

 

(2)	Diluted income per share is calculated by dividing net income by the average common shares and dilutive potential common shares (common stock options, stock appreciation rights, and restricted stock) outstanding during the period.

 

(3)

"Adjusted EBITDA" is defined as net income before interest, taxes, depreciation and amortization as well as certain other items such as the impact of discontinued operations, the cumulative effect of changes in accounting, costs associated with debt refinancing and other non-recurring, non-cash items effecting net income. Adjusted EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity.

 

(4)	The Reconciliation of non-GAAP Disclosure Items includes the following non-GAAP financial measures:

 

(5)

During the second quarter of fiscal 2007, Scotts Miracle-Gro completed a significant recapitalization plan. The objective of this plan, announced on December 12, 2006, was to return $750 million to the Company's shareholders. This was accomplished via a share repurchase that totaled $245.5 million, or 4.5 million shares, which was completed via a modified Dutch auction tender offer on February 14, 2007, and a special one-time cash dividend of $8.00 per share, totaling $508.0 million, which was paid on March 5, 2007 to shareholders of record as of February 26, 2007.