EXHIBIT 99.1
FOR IMMEDIATE RELEASE
THE SCOTTS COMPANY NEWS
THE SCOTTS COMPANY ANNOUNCES STRONG SECOND QUARTER RESULTS
2004 FULL YEAR GUIDANCE REAFFIRMED, STRONG FOCUS ON CORE NORTH AMERICA BUSINESS
- - Adjusted net income increases 14 percent, up 17 percent on a reported
basis
- - Adjusted earnings per share of $2.23; Reported earnings per share of $2.21
- - Net sales increase 5% excluding impact of foreign exchange rates; 8% on a
reported basis
- - Consumer purchases at largest accounts grow 7 percent over 2003
- - Gross margins up 170 basis points for the second quarter, up 160 basis
points excluding restructuring charges
- - 12-month average debt, net of cash, down $72 million
MARYSVILLE, Ohio (April 27, 2004) - The Scotts Company (NYSE: SMG), the world's
leading marketer of branded consumer lawn and garden products, today announced
that strong North America and Scotts LawnService sales, coupled with favorable
product mix, led to adjusted net income growth of 14 percent in the quarter and
a 17 percent increase on a reported basis.
For the quarter ended March 27, 2004, Scotts reported company-wide sales
of $729.2 million, up 8 percent from $676.2 million a year earlier. Excluding
the impact of foreign exchange rates, net sales increased 5 percent.
Net income was $73.1 million, or $2.21 per diluted share, compared with
$62.5 million, or $1.94 per diluted share the same period last year. Excluding
restructuring and other charges, adjusted net income was $73.7 million, or $2.23
per share, compared with $64.4 million, or $2.00 per diluted share, for the same
period last year.
"The gardening season got off to a great start in March, even against very
difficult comparisons from our strong performance a year earlier," said Jim
Hagedorn, chairman and chief executive officer. "Our focus on growing our core
business in North America and strengthening our business model at Scotts
LawnService were evident in the quarter, as was our continued emphasis on
improving gross margins. The strong
1
performance through the first half of the year puts us in a great position
entering the peak of the lawn and garden season and gives us continued
confidence in our full year guidance of adjusted net income growth of at least
10 percent."
SECOND QUARTER RESULTS
During the quarter, Scotts' North America sales increased 7 percent to
$557.8 million from $521.0 million. The Lawns, Gardens and Controls businesses
each had solid growth in the quarter and collectively achieved a 7 percent
increase in consumer purchases at the Company's largest retail partners. The
largest increase in consumer purchases was in Controls, which improved by more
than 20 percent led by the introduction of new products, including Ortho
Season-Long Grass & Weed Killer.
Scotts LawnService reported a 42 percent increase in sales to $16.3
million and continued to see improvement in customer retention rates. The
business also had strong responses to changes in its direct mail marketing
program in the quarter and its customer count is growing ahead of expectations.
International sales were $155.1 million, up 8 percent from $143.7 million
a year earlier. Excluding the impact of foreign exchange rates, sales in the
quarter decreased 6 percent. The sales shortfall was due primarily to a late
breaking season in nearly all markets.
Gross margins in the quarter improved 170 basis points to 39.8 percent.
Excluding restructuring, gross margin improved 160 basis points due mainly to
favorable product mix.
Net Roundup commission was $8.2 million in the quarter, compared with $4.2
million a year earlier, driven by sales volume and the timing of media
purchases.
Earnings before interest, taxes, depreciation and amortization (EBITDA),
were $147.2 million in the quarter, compared to $132.4 million a year earlier.
Excluding restructuring and other charges, adjusted EBITDA was $147.6 million,
compared with $135.5 million the same period last year.
SIX MONTHS
2
Net sales through the first six months were $915.4 million, up 7 percent
compared with $856.9 million a year earlier. Excluding the impact of foreign
exchange rates, year-to-date sales increased 3 percent. In North America, sales
in the first half increased 6 percent to $660.5 million, versus $625.6 million
for last year's comparable period. Scotts LawnService sales increased 30 percent
to $34.9 from $26.8 million last year.
Year-to-date International sales were $220.0 million, up 8 percent
compared with $204.5 million for the same period in 2003. Excluding the impact
of foreign exchange rates, sales decreased 7 percent.
Gross margins for the first six months improved 270 basis points to 37.1
percent. Excluding restructuring, gross margin improved 210 basis points. Prior
year gross margins were impacted by higher restructuring costs related to the
outsourcing of logistics in the United States and the international growth and
integration plan.
Net Roundup commission through the first six months was $1.1 million,
compared to a net expense of $2.9 million for the first six months of 2003.
EBITDA in the first six months was $101.8 million compared to $85.1
million. Excluding restructuring and other charges, adjusted EBITDA was $103.2
million, compared with $94.5 million the same period last year. Net income was
$2.4 million, or $0.07 per diluted share, compared with net income of $15.7
million, or $0.49 per share the same period last year. Excluding restructuring
and other charges, adjusted net income was $30.6 million, or $0.93 per share,
compared with $21.5 million, or $0.67 per diluted share, for the same period
last year.
"Overall, we are pleased where we stand at the midway point of our year,"
Hagedorn said. "Our efforts in marketing, supply chain and sales have us well
positioned to continue to grow the overall lawn and category and be benefactors
of that growth."
The Company will discuss its second quarter results and provide a more
detailed explanation of its quarterly guidance during a webcast and conference
call at 10:00 a.m. eastern time today. That call will be available live on the
investor relations section of the Scotts web site, http://investor.scotts.com.
An archive of the webcast, as well as accompanying financial information
regarding any non-GAAP financial measures discussed by the Company during the
call, will be available on the web site for at least 12 months.
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DEDICATED TO A BEAUTIFUL WORLD
THE SCOTTS COMPANY IS THE WORLD'S LARGEST MARKETER OF BRANDED CONSUMER PRODUCTS
FOR LAWN AND GARDEN CARE, WITH A FULL RANGE OF PRODUCTS FOR PROFESSIONAL
HORTICULTURE AS WELL. THE COMPANY OWNS THE INDUSTRY'S MOST RECOGNIZED BRANDS. IN
THE U.S., THE COMPANY'S SCOTTS(R), MIRACLE-GRO(R) AND ORTHO(R) BRANDS ARE MARKET
LEADING IN THEIR CATEGORIES, AS IS THE CONSUMER ROUNDUP(R) BRAND WHICH IS
MARKETED IN NORTH AMERICA AND MOST OF EUROPE EXCLUSIVELY BY SCOTTS AND OWNED BY
MONSANTO. IN EUROPE, SCOTTS' BRANDS INCLUDE WEEDOL(R), PATHCLEAR(R),
EVERGREEN(R), LEVINGTON(R), MIRACLE-GRO(R), KB(R), FERTILIGENE(R) AND
SUBSTRAL(R).
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995: Certain of the
statements contained in this press release, including, but not limited to,
information regarding the future economic performance and financial condition of
the company, the plans and objectives of the company's management, and the
company's assumptions regarding such performance and plans are forward looking
in nature. Actual results could differ materially from the forward looking
information in this release, due to a variety of factors, including, but not
limited to:
- - Adverse weather conditions could adversely affect the Company's sales and
financial results;
- - The Company's historical seasonality could impair the Company's ability to
pay obligations as they come due and operating expenses;
- - The Company's substantial indebtedness could adversely affect the
Company's financial health;
- - Public perceptions regarding the safety of the Company's products could
adversely affect the Company;
- - The loss of one or more of the Company's top customers could adversely
affect the Company's financial results because of the concentration of the
Company's sales to a small number of retail customers;
- - The expiration of certain patents could substantially increase the
Company's competition in the United States;
- - Compliance with environmental and other public health regulations could
increase the Company's cost of doing business; and
- - The Company's significant international operations make the Company more
susceptible to fluctuations in currency exchange rates and to the costs of
international regulation.
Additional detailed information concerning a number of the important factors
that could cause actual results to differ materially from the forward looking
information contained in this release is readily available in the company's
publicly filed quarterly, annual, and other reports.
Contact:
Jim King
Director, Investor Relations & Corporate Communications
(937) 578-6522
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THE SCOTTS COMPANY
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
ENDED MARCH 27, 2004 AND MARCH 29, 2003
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 9
Three Months Ended Six Months Ended
-------------------- ---------------------
March 27, March 29, % March 27, March 29, %
Footnotes 2004 2003 Change 2004 2003 Change
--------- --------- --------- ---------- ---------
Net sales $729.2 $676.2 7.84% $915.4 $856.9 6.83%
Cost of sales 439.0 417.6 5.12% 575.4 556.6 3.38%
Cost of sales - restructuring and other 0.2 0.7 -71.43% 0.7 5.1 -86.27%
------ ------ ------ ------
Gross profit 290.0 257.9 12.45% 339.3 295.2 14.94%
% of sales 39.8% 38.1% 4.27% 37.1% 34.4% 7.59%
Gross commission from marketing agreement 15.3 11.3 35.40% 15.3 11.3 35.40%
Contribution expenses under marketing agreement 6.3 6.3 0.00% 12.5 12.5 0.00%
Amortization of marketing fee 0.8 0.8 0.00% 1.7 1.7 0.00%
------ ------ ------ ------
Net commission from marketing agreement 8.2 4.2 95.24% 1.1 (2.9) -137.93%
Operating expenses:
Advertising 39.8 34.9 14.04% 48.1 43.5 10.57%
S,G&A - excluding lawn service business
and stock-based compensation 107.1 91.7 16.79% 185.1 159.3 16.20%
Stock-based compensation 3.1 0.8 287.50% 4.4 1.1 300.00%
S,G&A - lawn service business 15.2 13.1 16.03% 27.6 23.1 19.48%
S,G&A - restructuring and other 0.2 2.4 -91.67% 0.7 4.3 -83.72%
Amortization of intangibles 2.3 2.1 9.52% 4.8 4.1 17.07%
Other (income) expense (2.1) (2.4) -12.50% (3.9) (3.6) 8.33%
------ ------ ------ ------
Total operating expenses 165.6 142.6 16.13% 266.8 231.8 15.10%
------ ------ ------ ------
Income from operations 132.6 119.5 10.96% 73.6 60.5 21.65%
% of sales 18.2% 17.7% 2.90% 8.0% 7.1% 13.88%
Interest expense - refinancing 0.6 -- 44.3 --
Interest expense - recurring 13.5 18.7 -27.81% 25.4 35.2 -27.84%
------ ------ ------ ------
Income before taxes 118.5 100.8 17.56% 3.9 25.3 -84.58%
Income tax expense 45.4 38.3 18.54% 1.5 9.6 -84.38%
------ ------ ------ ------
Net income 73.1 62.5 16.96% 2.4 15.7 -84.71%
====== ====== ====== ======
Basic earnings per share (1) 2.27 2.04 11.51% 0.07 0.52 -85.75%
====== ====== ====== ======
Diluted earnings per share (2) 2.21 1.94 13.61% 0.07 0.49 -85.09%
====== ====== ====== ======
Common shares used in basic earnings
per share calculation 32.2 30.7 4.89% 32.1 30.5 5.25%
====== ====== ====== ======
Common shares and potential common
shares used in diluted earnings per
share calculation 33.0 32.2 2.48% 32.9 32.1 2.49%
====== ====== ====== ======
EBITDA (3) $147.2 $132.4 11.18% $101.8 $ 85.1 19.62%
====== ====== ====== ======
Results of operations excluding restructuring
and refinancing charges:
Adjusted net income 73.7 64.4 30.6 21.5
====== ====== ====== ======
Adjusted diluted earnings per share (2) 2.23 2.00 0.93 0.67
====== ====== ====== ======
Adjusted EBITDA (3) $147.6 $135.5 $103.2 $ 94.5
====== ====== ====== ======
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THE SCOTTS COMPANY
NET SALES BY SEGMENT - THREE AND SIX MONTHS
ENDED MARCH 27, 2004 AND MARCH 29, 2003
(in millions)
(unaudited)
Three Months Ended % Change
----------------------- --------
March 27, March 29,
2004 2003 Actual
---- ---- ------
North America $ 557.8 $ 521.0 7.1%
Scotts LawnService 16.3 11.5 41.7%
International 155.1 143.7 7.9%
-------- --------
Consolidated $ 729.2 $ 676.2 7.8%
======== ========
Six Months Ended % Change
----------------------- --------
March 27, March 29,
2003 2002 Actual
---- ---- ------
North America $ 660.5 $ 625.6 5.6%
Scotts LawnService 34.9 26.8 30.2%
International 220.0 204.5 7.6%
-------- --------
Consolidated $ 915.4 $ 856.9 6.8%
======== ========
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THE SCOTTS COMPANY
CONSOLIDATED BALANCE SHEETS
MARCH 27, 2004, MARCH 29, 2003 AND SEPTEMBER 30, 2003
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARES & SHARE PRICES)
March 27, March 29, September 30,
2004 2003 2003
----------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents 14.2 12.3 155.9
Accounts receivable, net 776.0 724.3 290.5
Inventories, net 418.6 400.2 276.1
Current deferred tax asset 60.7 72.5 56.9
Prepaid and other current assets 46.2 50.8 33.2
----------- ----------- -----------
Total current assets 1,315.7 1,260.1 812.6
----------- ----------- -----------
Property, plant and equipment, net 329.5 342.6 338.2
Goodwill and other intangible assets, net 855.0 803.7 835.5
Other assets 41.1 47.5 44.0
----------- ----------- -----------
Total assets $ 2,541.3 $ 2,453.9 $ 2,030.3
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt 27.7 287.7 55.4
Accounts payable 279.2 264.2 149.0
Other current liabilities 286.4 276.8 243.8
----------- ----------- -----------
Total current liabilities 593.3 828.7 448.2
----------- ----------- -----------
Long-term debt 1,039.9 873.0 702.2
Other liabilities 162.3 132.2 151.7
----------- ----------- -----------
Total liabilities 1,795.5 1,833.9 1,302.1
Shareholders' equity 745.8 620.0 728.2
----------- ----------- -----------
Total liabilities and equity $ 2,541.3 $ 2,453.9 $ 2,030.3
=========== =========== ===========
KEY STATISTICS:
Debt to book capitalization 58.9% 65.2% 51.0%
Market capitalization:
Common shares outstanding and
dilutive common share equivalents 33.0 32.2 32.1
Share price on balance sheet date 63.26 52.49 54.70
----------- ----------- -----------
$ 2,087.6 $ 1,690.2 $ 1,757.6
=========== =========== ===========
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THE SCOTTS COMPANY
RECONCILIATION OF NON-GAAP DISCLOSURE ITEMS FOR THE THREE
AND SIX MONTHS ENDED MARCH 27, 2004 AND MARCH 29, 2003
(in millions, except per share data)
Three Months Ended Six Months Ended
------------------- --------------------
March 27, March 29, March 27, March 29,
2004 2003 2004 2003
------- ------- ------- ------
Net income $ 73.1 $ 62.5 $ 2.4 $ 15.7
Restructuring and other charges, net of tax 0.2 1.9 0.9 5.8
Debt refinancing charges, net of tax 0.4 -- 27.3 --
------- ------- ------- ------
Adjusted net income $ 73.7 $ 64.4 $ 30.6 $ 21.5
======= ======= ======= ======
Income from operations $ 132.6 $ 119.5 $ 73.6 $ 60.5
Depreciation per cash flow 11.5 10.0 21.7 18.8
Amortization, including marketing fee 3.1 2.9 6.5 5.8
------- ------- ------- ------
EBITDA 147.2 132.4 101.8 85.1
======= ======= ======= ======
Restructuring and other charges, gross 0.4 3.1 1.4 9.4
------- ------- ------- ------
Adjusted EBITDA $ 147.6 $ 135.5 $ 103.2 $ 94.5
======= ======= ======= ======
Diluted earnings per share $ 2.21 $ 1.94 $ 0.07 $ 0.49
Restructuring and other charges, net of tax 0.01 0.06 0.03 0.18
Debt refinancing charges, net of tax 0.01 -- 0.83 --
------- ------- ------- ------
Adjusted diluted earnings per share $ 2.23 $ 2.00 $ 0.93 $ 0.67
======= ======= ======= ======
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THE SCOTTS COMPANY
FOOTNOTES TO PRECEDING FINANCIAL STATEMENTS
(in millions, except per share data)
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
(1) Basic earnings per common share is calculated by dividing income
applicable to common shareholders by average common shares outstanding
during the period.
(2) Diluted earnings per common share is calculated by dividing net income by
the average common shares and dilutive potential common shares (common
stock warrants and options) outstanding during the period.
(3) "EBITDA" is defined as income from operations, plus depreciation and
amortization. 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.
Page 9