Exhibit 99.1
FOR IMMEDIATE RELEASE
THE SCOTTS COMPANY NEWS
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THE SCOTTS COMPANY REPORTS RECORD FIRST QUARTER SALES
COMPANY REAFFIRMS ITS FULL-YEAR GUIDANCE TO GROW ADJUSTED NET INCOME
10-12 PERCENT
- Reported sales improved 35%, up 8% excluding Smith & Hawken and
foreign exchange
- Sales and operating profits for every business segment exceeded
budgeted projections
- Reported gross margin improved 160 basis points, up 130 basis points
excluding restructuring and other non-recurring charges
MARYSVILLE, Ohio (January 25, 2005) - The Scotts Company (NYSE: SMG),
the world's leading marketer of branded consumer lawn and garden products, today
reported that sales increased 35 percent in its fiscal 2005 first quarter to a
record $244 million. Total sales include the impact of Smith & Hawken, which the
Company recently acquired. Excluding Smith & Hawken, as well as the impact of
foreign exchange rates, sales increased 8 percent.
Consumer purchases of Scotts' products at its largest retail partners
also increased 8 percent during the quarter.
"We're off to a great start in 2005 as every business segment exceeded
our budget expectations for both sales and operating profits," said Jim
Hagedorn, chairman and chief executive officer. "Our strong start, coupled with
the combination of new products, trade programs and continued consumer interest
in gardening, gives us increased confidence that we can deliver 10 to 12 percent
adjusted net income growth in 2005."
Given the seasonal nature of the business, Scotts typically reports a
net loss in the first quarter. For the period ended January 1, 2005, the Company
reported an adjusted net loss, excluding restructuring and other charges, of
$49.0 million, or $1.49 per share. This compares with an adjusted net loss of
$43.1 million, or $1.34 per share, for the same quarter last year. Including
restructuring and non-recurring items, reported net loss for the quarter was
$49.1 million, or $1.49 per share, compared with a reported net loss of $70.7
million, or $2.21 per share, for the same period last year. Results in the first
quarter of 2004 include the pre-tax costs
1
of $43.7 million associated with the Company's refinancing efforts. As part of
its annual strategic planning process, the Company is reviewing whether a
non-cash impairment charge is necessary to write down the value of certain
European assets. The Company will complete its analysis prior to filing its
first quarter consolidated financial statements to be included in form 10-Q,
which will be filed next month with the Securities and Exchange Commission.
The year-over-year increase in the adjusted net loss reflects an
increase in selling, general and administrative (SG&A) costs to support the
growth of the business as well as the timing of non-recurring benefits realized
in the first quarter of 2004.
Adjusted loss before interest, taxes, depreciation and amortization
(EBITDA) for the first quarter was $52.4 million for the year compared with a
loss of $44.6 million a year earlier. Including restructuring and other charges,
reported EBITDA was a loss of $52.6 million, compared with a loss of $45.6
million last year.
Sales for the North America business increased 9 percent to $113.0
million versus $104.0 million for last year's comparable period. Scotts
LawnService had a strong finish to its season with revenues up 13 percent for
the quarter to $20.9 million, compared with $18.5 million last year.
International sales increased 16 percent to $68.4 million. Excluding the impact
of foreign exchange rates, International sales increased 6 percent in the
quarter.
Gross margin, excluding restructuring charges, improved to 28.0 percent
from 26.7 percent for the same period a year earlier. The improvement was
primarily due to the impact of Smith & Hawken, which enjoys higher gross margin
than the Company's other businesses in the first quarter of the fiscal year.
Excluding Smith & Hawken, gross margin increased 30 basis points.
Scotts reported net expense of $7.1 million related to the Roundup(R)
commission in the first quarter, unchanged from 2004. The Company made a
contribution payment to Monsanto of $6.3 million but did not record any
commission in the first quarter for either year. Scotts does not recognize
commission until minimum profit levels, required by the Roundup agreement, are
reached - typically in the second fiscal quarter.
Total SG&A expense for the quarter was $112.5 million compared with
$90.9 million a year ago. The planned increase in SG&A was driven by the
addition of Smith & Hawken ($9 million), Scotts LawnService ($3 million),
foreign exchange ($2 million), as well as increased costs for legal ($2
million), North America selling ($2 million) and Sarbanes-Oxley compliance
2
and audit fees ($1 million). The increase also includes the incremental
third-year impact associated with the Company's 2003 decision to expense stock
options ($1 million). The Company expects total SG&A expense for the full year
to remain in line with previous guidance.
Interest expense in the first quarter was $10.4 million compared with
$55.6 million in the prior year. Prior year interest expense in the quarter
included the previously mentioned $43.7 million of costs associated with the
refinancing of the Company's debt.
The Company will discuss its first quarter 2005 results during a
Webcast conference call at 10:00 a.m. EDT today. The call will be available live
on the investor relations section of 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.
DEDICATED TO A BEAUTIFUL WORLD
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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. THE COMPANY ALSO OWNS SMITH & HAWKEN(R), A LEADING BRAND OF
GARDEN-INSPIRED PRODUCTS THAT INCLUDES POTTERY, WATERING EQUIPMENT, GARDENING
TOOLS, OUTDOOR FURNITURE AND LIVE GOODS. 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;
3
- Compliance with environmental and other public health regulations
could increase the Company's cost of doing business; and,
- The Company's significant international operations make the Company
more susceptible to fluctuations in currency exchange rates and to the
costs of international regulation.
Additional detailed information concerning a number of important factors that
could cause actual results to differ materially from the forward looking
information contained in this release is readily available in the Company's
publicly filed quarterly, annual and other reports.
Contact:
Jim King
Director, Investor Relations & Corporate Communications
(937) 578-5622
4
THE SCOTTS COMPANY
RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED JANUARY 1, 2005 AND DECEMBER 27, 2003
(in millions, except per share data)
(Unaudited)
Note: See Accompanying Footnotes on Page 9
Three Months Ended
------------------------
January 1, December 27,
Footnotes 2005 2003
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Net sales $ 244.0 $ 181.4
Cost of sales 175.8 133.0
Cost of sales - restructuring and other - 0.5
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Gross profit 68.2 47.9
% of sales 28.0% 26.4%
Gross commission from marketing agreement - -
Contribution expenses under marketing agreement 6.3 6.3
Amortization of marketing fee 0.8 0.8
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Net commission from marketing agreement (7.1) (7.1)
Operating expenses:
Advertising 14.7 8.3
S,G&A - excluding lawn service business
and stock based compensation 96.1 77.7
Stock-based compensation 2.3 1.3
S,G&A - lawn service business 13.9 11.4
S,G&A - restructuring and other 0.2 0.5
Amortization of intangibles 2.6 2.4
Other (income) expense (0.2) (1.8)
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Total operating expenses 129.6 99.8
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Loss from operations (68.5) (59.0)
% of sales -28.1% -32.5%
Interest expense - refinancing - 43.7
Interest expense - recurring 10.4 11.9
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Loss before taxes (78.9) (114.6)
Income tax benefit (30.0) (43.9)
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Net loss from continuing operations (48.9) (70.7)
Net loss from discontinued operations (0.2) -
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Net loss $ (49.1) $ (70.7)
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Basic loss per share (1) $ (1.49) $ (2.21)
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Diluted loss per share (2) $ (1.49) $ (2.21)
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Common shares used in basic loss
per share calculation 33.0 32.0
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Common shares and potential common
shares used in diluted loss per
share calculation 33.0 32.0
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EBITDA (3) $ (52.6) $ (45.6)
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Results of operations excluding restructuring and
refinancing charges:
Adjusted net loss $ (49.0) $ (43.1)
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Adjusted diluted loss per share (2) $ (1.49) $ (1.34)
========================
Adjusted EBITDA (3) $ (52.4) $ (44.6)
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THE SCOTTS COMPANY
NET SALES BY SEGMENT - THREE MONTHS
ENDED JANUARY 1, 2005 AND DECEMBER 27, 2003
(in millions)
(unaudited)
Three Months Ended % Change
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January 1, December 27,
2005 2003 Actual
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North America $ 113.0 $ 104.0 8.7%
Scotts LawnService 20.9 18.5 13.0%
International 68.4 58.9 16.1%
Other 41.7 - NA
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Consolidated $ 244.0 $ 181.4 34.5%
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THE SCOTTS COMPANY
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2005, DECEMBER 27, 2003 AND SEPTEMBER 30, 2004
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARES & SHARE PRICES)
January 1, December 27, September 30,
2005 2003 2004
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ASSETS
Current assets
Cash and cash equivalents $ 29.1 $ 26.3 $ 115.6
Investments - - 57.2
Accounts receivable, net 245.7 229.1 292.4
Inventories, net 501.2 442.4 290.1
Current deferred tax asset 24.8 60.7 24.9
Prepaid and other current assets 55.0 32.3 50.1
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Total current assets 855.8 790.8 830.3
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Property, plant and equipment, net 343.8 333.8 328.0
Goodwill, net 450.2 412.5 417.9
Other intangible assets, net 457.1 436.2 431.0
Other assets 46.2 42.0 40.6
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Total assets $ 2,153.1 $ 2,015.3 $ 2,047.8
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt $ 20.5 $ 30.8 $ 22.1
Accounts payable 196.7 181.4 130.3
Other current liabilities 234.5 165.9 281.2
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Total current liabilities 451.7 378.1 433.6
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Long-term debt 727.2 810.1 608.5
Other liabilities 132.7 160.7 131.1
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Total liabilities 1,311.6 1,348.9 1,173.2
Shareholders' equity 841.5 666.4 874.6
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Total liabilities and equity $ 2,153.1 $ 2,015.3 $ 2,047.8
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KEY STATISTICS:
Debt to book capitalization 47.0% 55.8% 41.9%
Market capitalization:
Common shares outstanding and
dilutive common share equivalents 33.9 32.8 33.3
Share price on balance sheet date 73.52 59.20 64.15
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$ 2,492.3 $ 1,941.8 $ 2,136.2
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THE SCOTTS COMPANY
RECONCILIATION OF NON-GAAP DISCLOSURE ITEMS FOR THE THREE
MONTHS ENDED JANUARY 1, 2005 AND DECEMBER 27, 2003
(in millions, except per share data)
Three Months Ended
--------------------------
January 1, December 27,
2005 2003
--------------------------
Net loss $ (49.1) $ (70.7)
Restructuring and other charges, net of tax 0.1 0.6
Debt refinancing charges, net of tax - 27.0
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Adjusted net loss $ (49.0) $ (43.1)
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Loss from operations $ (68.5) $ (59.0)
Depreciation 12.5 10.2
Amortization, including marketing fee 3.4 3.2
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EBITDA $ (52.6) $ (45.6)
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Restructuring and other charges, gross 0.2 1.0
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Adjusted EBITDA $ (52.4) $ (44.6)
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Diluted loss per share $ (1.49) $ (2.21)
Restructuring and other charges, net of tax - 0.02
Debt refinancing charges, net of tax - 0.85
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Adjusted diluted loss per share $ (1.49) $ (1.34)
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THE SCOTTS COMPANY
FOOTNOTES TO PRECEDING FINANCIAL STATEMENTS
(in millions, except per share data)
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RESULTS OF OPERATIONS
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(1) Basic earnings per common share is calculated by dividing net income by
average common shares outstanding during the period.
(2) Diluted earnings per common share is calculated by dividing net income by
the average common shares and dilutive potential common shares (common
stock warrants and options) outstanding during the period. If there is a
loss, diluted earnings per share is equal to basic earnings per share.
(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.
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