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þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OHIO | 31-1414921 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
14111 SCOTTSLAWN ROAD, | ||
MARYSVILLE, OHIO | 43041 | |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
Class | Outstanding at August 3, 2009 | |
Common Shares, $0.01 stated value, no par value | 65,752,052 common shares |
INDEX
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3 | ||||||||
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6 | ||||||||
24 | ||||||||
32 | ||||||||
32 | ||||||||
32 | ||||||||
32 | ||||||||
33 | ||||||||
34 | ||||||||
35 | ||||||||
36 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 |
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net sales | $ | 1,280.0 | $ | 1,170.9 | $ | 2,558.1 | $ | 2,437.6 | ||||||||
Cost of sales | 787.2 | 746.9 | 1,619.0 | 1,596.9 | ||||||||||||
Cost of sales — other charges | 2.7 | — | 2.7 | — | ||||||||||||
Cost of sales — product registration and recall matters | 3.3 | 0.2 | 7.1 | 22.8 | ||||||||||||
Gross profit | 486.8 | 423.8 | 929.3 | 817.9 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 239.0 | 206.9 | 608.1 | 559.6 | ||||||||||||
Product registration and recall matters | 3.1 | 5.6 | 14.8 | 6.8 | ||||||||||||
Impairment and other charges | — | 123.3 | — | 123.3 | ||||||||||||
Other income, net | (1.0 | ) | (5.4 | ) | (3.4 | ) | (9.6 | ) | ||||||||
Income from operations | 245.7 | 93.4 | 309.8 | 137.8 | ||||||||||||
Interest expense | 13.7 | 22.1 | 45.9 | 64.6 | ||||||||||||
Income before income taxes | 232.0 | 71.3 | 263.9 | 73.2 | ||||||||||||
Income taxes | 84.2 | 48.7 | 95.7 | 49.4 | ||||||||||||
Net income | $ | 147.8 | $ | 22.6 | $ | 168.2 | $ | 23.8 | ||||||||
BASIC NET INCOME PER COMMON SHARE: | ||||||||||||||||
Weighted-average common shares outstanding during the period | 65.0 | 64.6 | 64.9 | 64.4 | ||||||||||||
Basic net income per common share | $ | 2.27 | $ | 0.35 | $ | 2.59 | $ | 0.37 | ||||||||
DILUTED NET INCOME PER COMMON SHARE: | ||||||||||||||||
Weighted-average common shares outstanding during the period plus dilutive potential common shares | 66.1 | 65.3 | 65.8 | 65.5 | ||||||||||||
Diluted net income per common share | $ | 2.23 | $ | 0.35 | $ | 2.56 | $ | 0.36 | ||||||||
Dividends declared per common share | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.375 | ||||||||
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NINE MONTHS ENDED | ||||||||
JUNE 27, | JUNE 28, | |||||||
2009 | 2008 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 168.2 | $ | 23.8 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Impairment and other | 2.7 | 123.3 | ||||||
Stock-based compensation expense | 12.1 | 9.2 | ||||||
Depreciation | 35.0 | 40.1 | ||||||
Amortization | 9.5 | 12.8 | ||||||
Gain on of sale of property, plant, and equipment | (0.7 | ) | — | |||||
Changes in assets and liabilities, net of acquired businesses: | ||||||||
Accounts receivable | (367.0 | ) | (388.2 | ) | ||||
Inventories | (135.4 | ) | (64.2 | ) | ||||
Prepaid and other current assets | (3.4 | ) | (22.5 | ) | ||||
Accounts payable | 59.6 | 88.5 | ||||||
Accrued liabilities | 218.4 | 139.0 | ||||||
Restructuring reserves | (0.3 | ) | (0.9 | ) | ||||
Other non-current items | 3.8 | (5.6 | ) | |||||
Other, net | 1.0 | 5.2 | ||||||
Net cash provided by (used in) operating activities | 3.5 | (39.5 | ) | |||||
INVESTING ACTIVITIES | �� | |||||||
Proceeds from the sale of property, plant and equipment | 0.8 | 1.0 | ||||||
Investments in property, plant and equipment | (26.7 | ) | (35.8 | ) | ||||
Investments in intellectual property | (1.0 | ) | — | |||||
Investments in acquired businesses, net of cash acquired | (9.3 | ) | — | |||||
Net cash used in investing activities | (36.2 | ) | (34.8 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Borrowings under revolving and bank lines of credit | 1,317.3 | 838.0 | ||||||
Repayments under revolving and bank lines of credit | (1,197.9 | ) | (651.7 | ) | ||||
Dividends paid | (25.2 | ) | (24.4 | ) | ||||
Payments on seller notes | (1.0 | ) | (1.8 | ) | ||||
Financing and issuance fees | (0.1 | ) | — | |||||
Excess tax benefits from share-based payment arrangements | 1.1 | 2.1 | ||||||
Cash received from the exercise of stock options | 4.8 | 7.2 | ||||||
Net cash provided by financing activities | 99.0 | 169.4 | ||||||
Effect of exchange rate changes on cash | (1.8 | ) | 3.0 | |||||
Net increase in cash and cash equivalents | 64.5 | 98.1 | ||||||
Cash and cash equivalents at beginning of period | 84.7 | 67.9 | ||||||
Cash and cash equivalents at end of period | $ | 149.2 | $ | 166.0 | ||||
Supplemental cash flow information | ||||||||
Interest paid, net of interest capitalized | 36.0 | 60.7 | ||||||
Income taxes refunded | 0.2 | 1.7 |
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JUNE 27, | JUNE 28, | SEPTEMBER 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
UNAUDITED | (SEE NOTE 1) | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 149.2 | $ | 166.0 | $ | 84.7 | ||||||
Accounts receivable, less allowances of $12.0, $12.9 and $10.6, respectively | 755.5 | 435.0 | 259.8 | |||||||||
Accounts receivable pledged | 23.5 | 361.2 | 146.6 | |||||||||
Inventories, net | 547.4 | 474.9 | 415.9 | |||||||||
Prepaid and other assets | 137.8 | 153.3 | 137.9 | |||||||||
Total current assets | 1,613.4 | 1,590.4 | 1,044.9 | |||||||||
Property, plant and equipment, net of accumulated depreciation of $486.8, $464.3 and $460.6, respectively | 335.9 | 355.8 | 344.1 | |||||||||
Goodwill | 374.9 | 386.7 | 377.7 | |||||||||
Intangible assets, net | 364.7 | 377.1 | 367.2 | |||||||||
Other assets | 20.3 | 23.9 | 22.4 | |||||||||
Total assets | $ | 2,709.2 | $ | 2,733.9 | $ | 2,156.3 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of debt | $ | 152.9 | $ | 292.1 | $ | 150.0 | ||||||
Accounts payable | 269.4 | 295.1 | 207.6 | |||||||||
Other current liabilities | 536.0 | 443.8 | 320.5 | |||||||||
Total current liabilities | 958.3 | 1,031.0 | 678.1 | |||||||||
Long-term debt | 967.7 | 1,028.3 | 849.5 | |||||||||
Other liabilities | 181.2 | 174.8 | 192.0 | |||||||||
Total liabilities | 2,107.2 | 2,234.1 | 1,719.6 | |||||||||
Commitments and contingencies (notes 3 and 11) | ||||||||||||
Shareholders’ equity: | ||||||||||||
Common shares and capital in excess of $.01 stated value per share, 65.7, 64.6 and 65.2 shares issued and outstanding, respectively | 463.8 | 476.6 | 472.4 | |||||||||
Retained earnings | 359.7 | 259.9 | 216.7 | |||||||||
Treasury shares, at cost: 3.0, 3.6, and 3.4 shares, respectively | (161.7 | ) | (194.1 | ) | (185.3 | ) | ||||||
Accumulated other comprehensive loss | (59.8 | ) | (42.6 | ) | (67.1 | ) | ||||||
Total shareholders’ equity | 602.0 | 499.8 | 436.7 | |||||||||
Total liabilities and shareholders’ equity | $ | 2,709.2 | $ | 2,733.9 | $ | 2,156.3 | ||||||
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Smith & Hawken® promotes its products primarily through catalogs. Costs related to the production, printing and distribution of catalogs are expensed over the expected sales life of the related catalog: four weeks for consumer catalogs and 52 weeks for trade catalogs. Other advertising costs, such as Internet, radio and print, are expensed as incurred. The costs deferred at June 27, 2009, June 28, 2008 and September 30, 2008 were $0.8 million, $0.9 million and $0.6 million, respectively.
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, 2009 | JUNE 28, 2008 | JUNE 27, 2009 | JUNE 28, 2008 | |||||||||||||
(IN MILLIONS, EXCEPT PER SHARE DATA) | ||||||||||||||||
Determination of diluted weighted-average common shares outstanding: | ||||||||||||||||
Weighted-average common shares outstanding | 65.0 | 64.6 | 64.9 | 64.4 | ||||||||||||
Assumed conversion of dilutive potential common shares | 1.1 | 0.7 | 0.9 | 1.1 | ||||||||||||
Diluted weighted-average common shares outstanding | 66.1 | 65.3 | 65.8 | 65.5 | ||||||||||||
Basic net income per common share | $ | 2.27 | $ | 0.35 | $ | 2.59 | $ | 0.37 | ||||||||
Diluted net income per common share | $ | 2.23 | $ | 0.35 | $ | 2.56 | $ | 0.36 | ||||||||
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, 2009 | JUNE 28, 2008 | JUNE 27, 2009 | JUNE 28, 2008 | |||||||||||||
(IN MILLIONS) | ||||||||||||||||
Net sales — product recalls | $ | — | $ | (5.2 | ) | $ | (0.3 | ) | $ | (24.2 | ) | |||||
Cost of sales — product recalls | — | (0.8 | ) | (0.2 | ) | (12.8 | ) | |||||||||
Cost of sales — other charges | 3.3 | 0.2 | 7.1 | 22.8 | ||||||||||||
Gross profit | (3.3 | ) | (4.6 | ) | (7.2 | ) | (34.2 | ) | ||||||||
Selling, general and administrative | 3.1 | 5.6 | 14.8 | 6.8 | ||||||||||||
Loss from operations | (6.4 | ) | (10.2 | ) | (22.0 | ) | (41.0 | ) | ||||||||
Income tax benefit | 2.3 | 4.0 | 7.9 | 15.1 | ||||||||||||
Net loss | $ | (4.1 | ) | $ | (6.2 | ) | $ | (14.1 | ) | $ | (25.9 | ) | ||||
ADDITIONAL | ||||||||||||||||
RESERVES AT | COSTS AND | RESERVES AT | ||||||||||||||
SEPTEMBER 30, | CHANGES IN | RESERVES | JUNE 27, | |||||||||||||
2008 | ESTIMATE | USED | 2009 | |||||||||||||
(IN MILLIONS) | ||||||||||||||||
Sales returns — product recalls | $ | 0.2 | $ | 0.3 | $ | (0.5 | ) | $ | — | |||||||
Cost of sales returns — product recalls | (0.1 | ) | (0.2 | ) | 0.3 | — | ||||||||||
Inventory reserves | 5.9 | 2.6 | (3.8 | ) | 4.7 | |||||||||||
Other incremental costs of sales | 3.2 | 4.5 | (3.6 | ) | 4.1 | |||||||||||
Other general and administrative costs | 4.3 | 14.8 | (17.2 | ) | 1.9 | |||||||||||
Accrued liabilities and inventory reserves | $ | 13.5 | $ | 22.0 | $ | (24.8 | ) | $ | 10.7 | |||||||
JUNE 27, | JUNE 28, | SEPTEMBER 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
(IN MILLIONS) | ||||||||||||
Finished goods | $ | 319.7 | $ | 316.1 | $ | 277.3 | ||||||
Work-in-process | 40.6 | 29.5 | 29.9 | |||||||||
Raw materials | 187.1 | 129.3 | 108.7 | |||||||||
$ | 547.4 | $ | 474.9 | $ | 415.9 | |||||||
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, 2009 | JUNE 28, 2008 | JUNE 27, 2009 | JUNE 28, 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
Gross commission | $ | 36.9 | $ | 33.6 | $ | 54.9 | $ | 50.7 | ||||||||
Contribution expenses | (5.0 | ) | (5.0 | ) | (15.0 | ) | (15.0 | ) | ||||||||
Amortization of marketing fee | (0.2 | ) | (0.2 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Net commission income | 31.7 | 28.4 | 39.3 | 35.1 | ||||||||||||
Reimbursements associated with Marketing Agreement | 21.8 | 15.7 | 52.6 | 45.8 | ||||||||||||
Total net sales associated with Marketing Agreement | $ | 53.5 | $ | 44.1 | $ | 91.9 | $ | 80.9 | ||||||||
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JUNE 27, | JUNE 28, | SEPTEMBER 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
(IN MILLIONS) | ||||||||||||
Credit Facilities: | ||||||||||||
Revolving loans | $ | 564.7 | $ | 483.4 | $ | 375.8 | ||||||
Term loans | 526.4 | 554.4 | 540.4 | |||||||||
Master Accounts Receivable Purchase Agreement | 10.0 | 260.2 | 62.1 | |||||||||
Notes due to sellers | 11.4 | 13.5 | 12.8 | |||||||||
Foreign bank borrowings and term loans | 1.5 | 0.2 | 0.7 | |||||||||
Other | 6.6 | 8.7 | 7.7 | |||||||||
1,120.6 | 1,320.4 | 999.5 | ||||||||||
Less current portions | 152.9 | 292.1 | 150.0 | |||||||||
$ | 967.7 | $ | 1,028.3 | $ | 849.5 | |||||||
NOTIONAL AMOUNT | EFFECTIVE | EXPIRATION | FIXED | |||||||||
(IN MILLIONS) | DATE (a) | DATE | RATE | |||||||||
$200 (b) | 3/30/2007 | 3/30/2010 | 4.87% | |||||||||
200 (b) | 2/14/2007 | 2/14/2012 | 5.20% | |||||||||
50 (b) | 2/14/2012 | 2/14/2016 | 3.78% | |||||||||
150 (c) | 11/16/2009 | 5/16/2016 | 3.26% | |||||||||
50 (d) | 2/16/2010 | 5/16/2016 | 3.05% |
(a) | The effective date refers to the date on which interest payments are first hedged by the applicable swap contract. | |
(b) | Interest payments made between the effective date and expiration date are hedged by the swap contracts. | |
(c) | Interest payments made during the six-month period beginning November 14 of each year between the effective date and expiration date are hedged by the swap contract. | |
(d) | Interest payments made during the three-month period beginning February 14 of each year between the effective date and expiration date are hedged by the swap contract. |
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
Net income | $ | 147.8 | $ | 22.6 | $ | 168.2 | $ | 23.8 | ||||||||
Other comprehensive income (expense): | ||||||||||||||||
Change in valuation of derivative instruments | 12.1 | 11.3 | (2.1 | ) | (6.1 | ) | ||||||||||
Change in pension and other postretirement liabilities | (2.3 | ) | — | 5.8 | — | |||||||||||
Foreign currency translation adjustments | (6.4 | ) | 1.3 | 3.6 | 5.5 | |||||||||||
Comprehensive income | $ | 151.2 | $ | 35.2 | $ | 175.5 | $ | 23.2 | ||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
Frozen defined benefit plans | $ | 0.9 | $ | 0.1 | $ | 2.7 | $ | 0.4 | ||||||||
International benefit plans | 2.4 | 1.3 | 6.1 | 3.8 | ||||||||||||
Retiree medical plan | 0.5 | 0.6 | 1.5 | 1.8 |
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NINE MONTHS ENDED | ||||||||
JUNE 27, 2009 | JUNE 28, 2008 | |||||||
Options | 696,100 | 889,700 | ||||||
Performance shares | — | 40,000 | ||||||
Restricted stock | 240,400 | 154,900 | ||||||
Restricted stock units (including deferred stock units) | 232,350 | 30,134 | ||||||
Total share-based awards | 1,168,850 | 1,114,734 | ||||||
Aggregate fair value at grant dates (in millions) | $ | 16.5 | $ | 18.7 |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, 2009 | JUNE 28, 2008 | JUNE 27, 2009 | JUNE 28, 2008 | |||||||||||||
Share-based compensation | $ | 4.0 | $ | 2.0 | $ | 12.1 | $ | 9.2 | ||||||||
Tax benefit recognized | 1.5 | 0.8 | 4.4 | 3.5 |
JUNE 27, | SEPTEMBER 30, | |||||||
2009 | 2008 | |||||||
(IN MILLIONS) | ||||||||
Unrecognized tax benefits | $ | 7.4 | $ | 7.2 | ||||
Portion that, if recognized, would impact the effective tax rate | 7.4 | 6.5 | ||||||
Accrued penalties on unrecognized tax benefits | 0.6 | 0.6 | ||||||
Accrued interest on unrecognized tax benefits | 1.1 | 1.2 |
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COMMODITY | VOLUME | |
Urea | 72,000 tons | |
Diesel | 2,478,000 gallons | |
Gasoline | 546,000 gallons |
ASSETS / (LIABILITIES) | ||||||||||||
JUNE 27, 2009 | JUNE 28, 2008 | |||||||||||
BALANCE SHEET | FAIR | BALANCE SHEET | FAIR | |||||||||
LOCATION | VALUE | LOCATION | VALUE | |||||||||
DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS UNDER SFAS 133 | ||||||||||||
Interest rate swap agreements | Other assets | $ | — | Other assets | $ | 0.8 | ||||||
Other liabilities | (23.5 | ) | Other liabilities | (19.2 | ) | |||||||
Commodity hedging instruments | Prepaid and other assets | 0.3 | Prepaid and other assets | 6.0 | ||||||||
Other current liabilities | 0.1 | Other current liabilities | — | |||||||||
Total derivatives designated as hedging instruments under SFAS 133 | $ | (23.1 | ) | $ | (12.4 | ) | ||||||
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS UNDER SFAS 133(1) | ||||||||||||
Commodity hedging instruments | Prepaid and other assets | $ | 0.1 | Prepaid and other assets | $ | 2.0 | ||||||
Other current liabilities | 0.3 | Other current liabilities | 1.5 | |||||||||
Total derivatives not designated as hedging instruments under SFAS 133(1) | $ | 0.4 | $ | 3.5 | ||||||||
Total derivatives | $ | (22.7 | ) | $ | (8.9 | ) | ||||||
(1) | See discussion above for additional information regarding the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategy. |
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AMOUNT OF GAIN / (LOSS) RECOGNIZED IN OCI | ||||||||||||||||
(IN MILLIONS) | ||||||||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
DERIVATIVES IN SFAS 133 CASH FLOW HEDGING RELATIONSHIPS | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Interest rate swap agreements | $ | 2.0 | $ | 6.0 | $ | (15.6 | ) | $ | (10.0 | ) | ||||||
Commodity hedging instruments | 0.1 | 2.8 | (6.9 | ) | 3.3 | |||||||||||
Total | $ | 2.1 | $ | 8.8 | $ | (22.5 | ) | $ | (6.7 | ) | ||||||
AMOUNT OF GAIN / (LOSS) RECLASSIFIED FROM OCI INTO | ||||||||||||||||||
EARNINGS | ||||||||||||||||||
(IN MILLIONS) | ||||||||||||||||||
LOCATION OF GAIN / (LOSS) | THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||
DERIVATIVES IN SFAS 133 CASH | RECLASSIFIED FROM | JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
FLOW HEDGING RELATIONSHIPS | OCI INTO EARNINGS | 2009 | 2008 | 2009 | 2008 | |||||||||||||
Interest rate swap agreements | Interest expense | $ | (4.0 | ) | $ | (3.3 | ) | $ | (11.5 | ) | $ | (3.7 | ) | |||||
Commodity hedging instruments | Cost of sales | (5.1 | ) | 0.6 | (8.1 | ) | 1.9 | |||||||||||
Total | $ | (9.1 | ) | $ | (2.7 | ) | $ | (19.6 | ) | $ | (1.8 | ) | ||||||
AMOUNT OF GAIN / (LOSS) RECOGNIZED IN EARNINGS | ||||||||||||||||||
(IN MILLIONS) | ||||||||||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||
DERIVATIVES NOT DESIGNATED AS | LOCATION OF GAIN / (LOSS) | JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
HEDGING INSTRUMENTS UNDER SFAS 133 | RECOGNIZED IN INCOME | 2009 | 2008 | 2009 | 2008 | |||||||||||||
Foreign currency swap agreements | Interest expense | $ | — | $ | — | $ | (6.4 | ) | $ | 1.0 | ||||||||
Commodity hedging instruments | Cost of sales | 0.2 | 2.4 | (0.5 | ) | 3.7 | ||||||||||||
Other income, net | — | 2.6 | — | 2.6 | ||||||||||||||
Total | $ | 0.2 | $ | 5.0 | $ | (6.9 | ) | $ | 7.3 | |||||||||
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Quoted Prices in Active | ||||||||||||||||
Markets for Identical | Significant Other | Unobservable | ||||||||||||||
Assets | Observable Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Assets | ||||||||||||||||
Derivatives | ||||||||||||||||
Commodity hedging instruments | $ | — | $ | 0.4 | $ | — | $ | 0.4 | ||||||||
Other | 4.9 | — | — | 4.9 | ||||||||||||
Total | $ | 4.9 | $ | 0.4 | $ | — | $ | 5.3 | ||||||||
Liabilities | ||||||||||||||||
Derivatives | ||||||||||||||||
Interest rate swap agreements | $ | — | $ | (23.5 | ) | $ | — | $ | (23.5 | ) | ||||||
Commodity hedging instruments | — | 0.4 | — | 0.4 | ||||||||||||
Other | (4.9 | ) | — | — | (4.9 | ) | ||||||||||
Total | $ | (4.9 | ) | $ | (23.1 | ) | $ | — | $ | (28.0 | ) | |||||
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THREE MONTHS | NINE MONTHS | |||||||||||||||
ENDED | ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
Net sales: | ||||||||||||||||
Global Consumer | $ | 1,077.2 | $ | 935.3 | $ | 2,093.2 | $ | 1,922.7 | ||||||||
Global Professional | 75.4 | 98.7 | 215.4 | 260.6 | ||||||||||||
Scotts LawnService® | 79.0 | 87.4 | 150.6 | 158.1 | ||||||||||||
Corporate & Other | 48.6 | 54.9 | 99.8 | 121.0 | ||||||||||||
Segment total | 1,280.2 | 1,176.3 | 2,559.0 | 2,462.4 | ||||||||||||
Roundup® amortization | (0.2 | ) | (0.2 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Product registration and recall matters-returns | — | (5.2 | ) | (0.3 | ) | (24.2 | ) | |||||||||
Consolidated | $ | 1,280.0 | $ | 1,170.9 | $ | 2,558.1 | $ | 2,437.6 | ||||||||
Operating income (loss): | ||||||||||||||||
Global Consumer | $ | 265.2 | $ | 207.9 | $ | 428.9 | $ | 349.1 | ||||||||
Global Professional | 5.2 | 11.9 | 27.1 | 34.6 | ||||||||||||
Scotts LawnService® | 21.6 | 20.6 | (2.3 | ) | (9.4 | ) | ||||||||||
Corporate & Other | (34.3 | ) | (9.0 | ) | (109.7 | ) | (59.5 | ) | ||||||||
Segment total | 257.7 | 231.4 | 344.0 | 314.8 | ||||||||||||
Roundup® amortization | (0.2 | ) | (0.2 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Other amortization | (2.7 | ) | (4.3 | ) | (8.9 | ) | (12.1 | ) | ||||||||
Product registration and recall matters | (6.4 | ) | (10.2 | ) | (22.0 | ) | (41.0 | ) | ||||||||
Impairment and other charges | (2.7 | ) | (123.3 | ) | (2.7 | ) | (123.3 | ) | ||||||||
Consolidated | $ | 245.7 | $ | 93.4 | $ | 309.8 | $ | 137.8 | ||||||||
JUNE 27, | JUNE 28, | SEPTEMBER 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
(IN MILLIONS) | ||||||||||||
Total assets: | ||||||||||||
Global Consumer | $ | 1,856.3 | $ | 2,038.8 | $ | 1,483.8 | ||||||
Global Professional | 387.8 | 302.7 | 289.9 | |||||||||
Scotts LawnService® | 180.4 | 188.4 | 186.5 | |||||||||
Corporate & Other | 284.7 | 204.0 | 196.1 | |||||||||
Consolidated | $ | 2,709.2 | $ | 2,733.9 | $ | 2,156.3 | ||||||
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• | Executive summary |
• | Results of operations |
• | Segment results |
• | Liquidity and capital resources |
• | Regulatory matters |
• | Critical accounting policies and estimates |
Percent Net Sales by Quarter | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
First Quarter | 10.4 | % | 9.5 | % | 9.3 | % | ||||||
Second Quarter | 32.1 | % | 34.6 | % | 33.6 | % | ||||||
Third Quarter | 39.3 | % | 38.2 | % | 38.9 | % | ||||||
Fourth Quarter | 18.2 | % | 17.7 | % | 18.2 | % |
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales | 61.5 | 63.8 | 63.3 | 65.5 | ||||||||||||
Cost of sales — other charges | 0.2 | — | 0.1 | — | ||||||||||||
Cost of sales — product registration and recall matters | 0.3 | — | 0.3 | 0.9 | ||||||||||||
Gross profit | 38.0 | 36.2 | 36.3 | 33.6 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 18.7 | 17.7 | 23.8 | 23.0 | ||||||||||||
Product registration and recall matters | 0.2 | 0.5 | 0.5 | 0.3 | ||||||||||||
Impairment and other charges | — | 10.5 | — | 5.0 | ||||||||||||
Other income, net | (0.1 | ) | (0.5 | ) | (0.1 | ) | (0.4 | ) | ||||||||
Income from operations | 19.2 | 8.0 | 12.1 | 5.7 | ||||||||||||
Interest expense | 1.1 | 1.9 | 1.8 | 2.7 | ||||||||||||
Income before income taxes | 18.1 | 6.1 | 10.3 | 3.0 | ||||||||||||
Income taxes | 6.6 | 4.2 | 3.7 | 2.0 | ||||||||||||
Net income | 11.5 | % | 1.9 | % | 6.6 | % | 1.0 | % | ||||||||
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||||||
Advertising | $ | 62.5 | $ | 59.3 | $ | 122.8 | $ | 123.8 | ||||||||
Other selling, general and administrative | 173.8 | 143.3 | 476.4 | 423.7 | ||||||||||||
Amortization of intangibles | 2.7 | 4.3 | 8.9 | 12.1 | ||||||||||||
$ | 239.0 | $ | 206.9 | $ | 608.1 | $ | 559.6 | |||||||||
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THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||||||
Global Consumer | $ | 1,077.2 | $ | 935.3 | $ | 2,093.2 | $ | 1,922.7 | ||||||||
Global Professional | 75.4 | 98.7 | 215.4 | 260.6 | ||||||||||||
Scotts LawnService® | 79.0 | 87.4 | 150.6 | 158.1 | ||||||||||||
Corporate & Other | 48.6 | 54.9 | 99.8 | 121.0 | ||||||||||||
Segment total | 1,280.2 | 1,176.3 | 2,559.0 | 2,462.4 | ||||||||||||
Roundup® amortization | (0.2 | ) | (0.2 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Product registration and recall matters — returns | — | (5.2 | ) | (0.3 | ) | (24.2 | ) | |||||||||
Consolidated | $ | 1,280.0 | $ | 1,170.9 | $ | 2,558.1 | $ | 2,437.6 | ||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
JUNE 27, | JUNE 28, | JUNE 27, | JUNE 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(IN MILLIONS) | (IN MILLIONS) | |||||||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||||||
Global Consumer | $ | 265.2 | $ | 207.9 | $ | 428.9 | $ | 349.1 | ||||||||
Global Professional | 5.2 | 11.9 | 27.1 | 34.6 | ||||||||||||
Scotts LawnService® | 21.6 | 20.6 | (2.3 | ) | (9.4 | ) | ||||||||||
Corporate & Other | (34.3 | ) | (9.0 | ) | (109.7 | ) | (59.5 | ) | ||||||||
Segment total | 257.7 | 231.4 | 344.0 | 314.8 | ||||||||||||
Roundup® amortization | (0.2 | ) | (0.2 | ) | (0.6 | ) | (0.6 | ) | ||||||||
Other amortization | (2.7 | ) | (4.3 | ) | (8.9 | ) | (12.1 | ) | ||||||||
Product registration and recall matters | (6.4 | ) | (10.2 | ) | (22.0 | ) | (41.0 | ) | ||||||||
Impairment and other charges | (2.7 | ) | (123.3 | ) | (2.7 | ) | (123.3 | ) | ||||||||
Consolidated | $ | 245.7 | $ | 93.4 | $ | 309.8 | $ | 137.8 | ||||||||
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NOTIONAL AMOUNT | EFFECTIVE | EXPIRATION | FIXED | |||||||||
(IN MILLIONS) | DATE (a) | DATE | RATE | |||||||||
$200 (b) | 3/30/2007 | 3/30/2010 | 4.87% | |||||||||
200 (b) | 2/14/2007 | 2/14/2012 | 5.20% | |||||||||
50 (b) | 2/14/2012 | 2/14/2016 | 3.78% | |||||||||
150 (c) | 11/16/2009 | 5/16/2016 | 3.26% | |||||||||
50 (d) | 2/16/2010 | 5/16/2016 | 3.05% |
(a) | The effective date refers to the date on which interest payments are first hedged by the applicable swap contract. | |
(b) | Interest payments made between the effective date and expiration date are hedged by the swap contract. | |
(c) | Interest payments made during the six-month period beginning November 14 of each year between the effective date and expiration date are hedged by the swap contract. |
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(d) | Interest payments made during the three-month period beginning February 14 of each year between the effective date and expiration date are hedged by the swap contract. |
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Total Number of | ||||||||||||||||
Common Shares | Maximum Number of | |||||||||||||||
Average Price | Purchased as | Common Shares That | ||||||||||||||
Total Number of | Paid | Part of Publicly | May Yet Be | |||||||||||||
Common Shares | per Common | Announced Plans or | Purchased Under the | |||||||||||||
Period | Purchased(1) | Share | Programs | Plans or Programs | ||||||||||||
March 29 through April 25, 2009 | 325 | $ | 38.42 | 0 | Not applicable | |||||||||||
April 26 through May 23, 2009 | 359 | $ | 34.79 | 0 | Not applicable | |||||||||||
May 24 through June 27, 2009 | 1,175 | $ | 34.66 | 0 | Not applicable | |||||||||||
Total | 1,859 | $ | 35.34 | 0 | Not applicable | |||||||||||
(1) | Amounts in this column represent Common Shares purchased by the trustee of the rabbi trust established by the Company as permitted pursuant to the terms of The Scotts Company LLC Executive Retirement Plan (the “ERP”). The ERP is an unfunded, non-qualified deferred compensation plan which, among other things, provides eligible employees the opportunity to defer compensation above specified statutory limits applicable to The Scotts Company LLC Retirement Savings Plan and with respect to any Executive Management Incentive Pay, Performance Award (each as defined in the ERP) or other bonus awarded to such eligible employees. Pursuant to the terms of the ERP, each eligible employee has the right to elect an investment fund, including a fund consisting of Common Shares (the “Scotts Miracle-Gro Common Stock Fund”), against which amounts allocated to such employee’s accounts under the ERP will be benchmarked (all ERP accounts are bookkeeping accounts only and do not represent a claim against specific assets of the Company). Amounts allocated to employee accounts under the ERP represent deferred compensation obligations of the Company. The Company established the rabbi trust in order to assist the Company in discharging such deferred compensation obligations. When an eligible employee elects to benchmark some or all of the amounts allocated to such employee’s accounts against the Scotts Miracle-Gro Common Stock Fund, the trustee of the rabbi trust purchases the number of Common Shares equivalent to the amount so benchmarked. All Common Shares purchased by the trustee are purchased on the open market and are held in the rabbi trust until such time as they are distributed pursuant to the terms of the ERP. All assets of the rabbi trust, including any Common Shares purchased by the trustee, remain, at all times, assets of the Company, subject to the claims of its creditors. The terms of the ERP do not provide for a specified limit on the number of Common Shares that may be purchased by the trustee of the rabbi trust. |
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None of the Common Shares purchased during the three months ended June 27, 2009 were purchased pursuant to a publicly announced plan or program. |
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THE SCOTTS MIRACLE-GRO COMPANY | ||||
Date: August 5, 2009 | /s/ DAVID C. EVANS | |||
David C. Evans | ||||
Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer) (Duly Authorized Officer) |
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QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 2009
EXHIBIT NO. | DESCRIPTION | LOCATION | ||||
10.1 | Master Accounts Receivable Purchase Agreement, dated as of May 1, 2009, by and among The Scotts Company LLC as the Company, The Scotts Miracle-Gro Company as the Parent and Calyon New York Branch as the Bank | Incorporated herein by reference to the Current Report on Form 8-K of The Scotts Miracle-Gro Company filed May 6, 2009 (File No. 1-11593) [Exhibit 10.1] | ||||
31.1 | Rule 13a-14(a)/15d-14(a) Certifications (Principal Executive Officer) | * | ||||
31.2 | Rule 13a-14(a)/15d-14(a) Certifications (Principal Financial Officer) | * | ||||
32 | Section 1350 Certifications (Principal Executive Officer and Principal Financial Officer) | * |
* | Filed herewith |
36