ScottsMiracle-Gro Announces Third Quarter Results

By CnAgri2012-08-17 19:56:00 Print

The Scotts Miracle-Gro Company, Marysville, Ohio, the world's largest marketer of branded consumer lawn and garden products, announced its results for the third quarter ended June 30, 2012.

Sales in the quarter were $1.06 billion, the same as a year ago. Adjusted income from continuing operations was $99.4 million, or $1.60 per share. That compares with adjusted income of $126.7 million, or $1.91 per share, for the same period a year ago.

The Company said consumer purchases of its products at its largest retail partners in the U.S. were up 1 percent on a year-to-date basis entering August after declining 5 percent in the third quarter.

"After a strong start to the season, consumer engagement clearly began to decline in May and June," said Jim Hagedorn, chairman and chief executive officer. "We're pleased to see strong year-over-year improvement in consumer purchases of mulch and controls, but our fertilizer and growing media categories are flat so far this year and have not delivered the results we expected.

"As we look ahead to fiscal 2013, it has become clear that the pace of near-term category growth is slower than we had expected. While our strategy to become a more consumer-centric business will not change, we are adjusting how we execute that strategy. We will move as quickly as we reasonably can to restore the level of profitability that our business reported just two years ago. In addition to planned price increases, we're focusing on several other initiatives to improve the gross margin rate and we will reduce expenses in areas that have not delivered a reasonable rate of return. We are confident that an emphasis on gross margin improvement, cost productivity and working capital management will drive improved earnings and cash flow."

Hagedorn said the Company's near-term growth assumptions would require less operating cash be deployed for capital expenditures and acquisitions. The near-term bias, he stated, would be to focus over time on more shareholder-friendly actions.

"While we will continue to evaluate acquisition opportunities, our near-term focus will be on restoring our current business to an appropriate level of profitability, not on integrating something new," Hagedorn said.

Separately, the company announced its board of directors has approved an 8 percent increase in the quarterly dividend to $0.325 per share. The fourth quarter dividend is payable September 10 to shareholders of record on August 27.

Sales in the Company's largest segment, Global Consumer, increased 1 percent from last year to $960.7 million. Sales in the U.S. business increased 6 percent while sales in the International business decreased 17 percent, or 12 percent excluding the impact of foreign exchange rates. Operating income for Global Consumer was $171.7 million, compared with $209.9 million for the same period a year ago, with the decline principally attributed to increased commodity costs and advertising.

Scotts LawnService (SLS) reported a 7 percent increase in revenue to $87.8 million, driven by increased customer counts, which were up 7 percent during the quarter. Operating income for SLS was $22.4 million, the same as a year ago.

For the third quarter, the company-wide adjusted gross margin rate was 34.5 percent, compared with 37.9 percent a year earlier. The decline was primarily due to higher commodity costs, freight associated with expediting shipments in the early weeks of the quarter to replenish strong March consumer demand, costs associated with innovation in the Ortho product line and unfavorable product mix.

Selling, general and administrative expenses (SG&A) in the quarter were $197.5 million, compared with $192.4 million.

Adjusted income from continuing operations was $99.4 million, or $1.60 per share, compared with $126.7 million, or $1.91 per share, for the same period a year ago. Adjusted results exclude charges related to product registration and recall matters, including adjustments to reserves for potential fines and penalties. They also exclude impairment, restructuring and other charges. Reported income from continuing operations was $95.0 million, or $1.53 per share, compared with $111.7 million, or $1.69 per share last year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $185.0 million in the third quarter, compared with $227.9 million a year ago.