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SCOTTS MIRACLE-GRO ANNOUNCES RECORD THIRD QUARTER SALES AND PROFIT
Source: Scotts Miracle-Gro press release

Marysville, OH -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's leading marketer of branded consumer lawn and garden products, has announced that continued consumer interest in gardening activities as well as momentum from its regionalization efforts resulted in record third quarter results.

In addition, the Company said its Board of Directors has authorized the Company to repurchase up to $500 million of SMG common shares over the next four years. The Board also voted to increase the quarterly dividend paid to shareholders to $0.25 per share, double the current level.

"Our business and cash flow are strong, our balance sheet is healthy and our low debt-to-EBITDA level gives us tremendous flexibility in managing our business," said Jim Hagedorn, chairman and chief executive officer. "We will continue to make wise investments that drive profitable long-term growth while also increasing the amount of cash we return to our shareholders. Our continued success demonstrates the power of our brands with consumers, the strength of our retail partnerships and the resiliency of our category.

"All of these factors are evident in the decision made by our Board to double our dividend and repurchase our shares, both of which demonstrate our confidence in the long-term outlook for our business."

THIRD QUARTER RESULTS

Company-wide sales from continuing operations for the quarter ended July 3, 2010 were $1.24 billion, an increase of 1 percent from the same period a year ago. It is important to note that the timing of the Company's fiscal calendar resulted in a five-day shift forward of the third quarter as compared with fiscal 2009. When adjusted to reflect comparable reporting periods, company-wide sales in the third quarter were up 5 percent.

Adjusted income from continuing operations, which excludes the impact of product registration and recall costs, was $176.9 million, or $2.61 per share, compared with $155.0 million, or $2.34 per share, for the same period last year. Reported income from continuing operations was $175.9 million, or $2.59 per share, compared with $150.7 million, or $2.28 per share, for the same period last year.

Global Consumer sales increased to $1.09 billion, up slightly from a year ago with foreign exchange having essentially no impact on sales. Adjusted for the calendar shift, Global Consumer sales increased 5 percent. Point-of-sale data from the Company's major retail partners in the U.S. showed that consumer purchases increased 5 percent in the quarter.

Adjusted operating income for the Global Consumer segment improved 10 percent in the quarter to $292.7 million from $265.2 million for the same period last year.

Scotts LawnService reported a 3 percent increase in sales to $81.3 million from $79.0 million. Adjusted operating income increased 6 percent to $22.8 million, compared with $21.6 million a year ago.

Global Professional sales increased by 3 percent in the quarter to $71.9 million from $69.5 million last year. Excluding the impact of foreign currency, sales increased 7 percent. Operating income for the segment increased to $6.9 million from $5.2 million for the same period last year.

Adjusted gross margin rate increased to 40.7 percent in the quarter, compared with 38.9 percent a year earlier. Selling, general and administrative expenses (SG&A) decreased 4 percent in the quarter to $214.4 million from $223.0 million a year earlier.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 15 percent to $304.4 million from $263.7 million a year ago.

YEAR-TO-DATE RESULTS

Company-wide net sales through the first nine months were $2.66 billion, up 8 percent from a year ago. Excluding the impact of foreign exchange, sales increased 7 percent.

Global Consumer sales increased 10 percent to $2.31 billion and improved by 9 percent when excluding the impact of foreign currency. Adjusted for the calendar shift, sales in Global Consumer increased 8 percent. Point-of-sale data from the Company's major retail partners in the U.S. showed that consumer purchases increased 6 percent.

"We had outstanding growth in both sell-in and consumer purchases earlier in the season, some of which was accelerated due to good weather in April," Hagedorn said. "While we expected our growth to moderate as the year progressed, our momentum slowed slightly more than expected beginning in May as the weather became increasingly challenging. Nonetheless, weather is part of the reality in the lawn and garden industry. Our strong growth in unit volume and market share on a year-to-date basis speaks to a high level of focus and execution that allowed us to continue to drive our business."

Scotts LawnService sales decreased 4 percent to $144.9 million. Global Professional reported sales increased by 4 percent to $205.3 million. Excluding the impact of foreign exchange, Global Professional sales increased 2 percent.

For the first nine months, company-wide adjusted gross margin improved 50 basis points to 37.8 percent, compared with 37.3 percent. SG&A increased 3 percent to $580.4 million.

Adjusted EBITDA in the first nine months increased 25 percent to $451.1 million, compared with $359.6 million in the comparable period last year.

Adjusted income from continuing operations for the first nine months increased 27 percent to $249.8 million, or $3.71 per share, compared with $196.1 million, or $2.98 per share, a year earlier. Reported income from continuing operations was $246.0 million, or $3.65 per share, compared with $181.9 million, or $2.76 per share, for the same period last year.

"Gross margins continue to benefit from a more stable and historically normalized pricing and commodity environment," said Dave Evans, chief financial officer. "We still expect strong improvement in gross margin rate for the full year. That fact, coupled with solid mid-single digit sales growth, allows us to confidently reaffirm our full-year guidance of $3.25 to $3.35 per share on an adjusted basis."

SHARE REPURCHASE AND DIVIDEND INCREASE

Under the share repurchase authorization, the Company may purchase shares from time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the repurchases under Rule 10b5-1 plans, which may be entered into from time to time and enable the Company to make repurchases on a more regular basis, or pursuant to accelerated share repurchases. The authorization, which expires September 30, 2014, may be suspended or discontinued at any time.

The cash dividend approved by the Board of Directors of $0.25 per share is payable September 10, 2010 to shareholders of record on August 27, 2010.

The Company will discuss its third quarter results as well as these initiatives during a Webcast and conference call at 9 a.m. Eastern Time today. The call will be available live on the Investor Relations section of the ScottsMiracle-Gro 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.

About ScottsMiracle-Gro

With approximately $3 billion in worldwide sales, The Scotts Miracle-Gro Company, through its wholly-owned subsidiary, The Scotts Company LLC, is the world's largest marketer of branded consumer products for lawn and garden care, with products for professional horticulture as well. The Company's brands are the most recognized in the industry. In the U.S., the Company's Scotts, Miracle-Gro and Ortho brands are market-leading in their categories, as is the consumer Roundup brand, which is marketed in North America and most of Europe exclusively by Scotts and owned by Monsanto. In the U.S., we operate Scotts LawnService, the second largest residential lawn care service business. In Europe, the Company's brands include Weedol, Pathclear, Evergreen, Levington, Miracle-Gro, KB, Fertiligene and Substral. For additional information, visit us at www.scotts.com.