SCOTTSMIRACLE-GRO ANNOUNCES RECORD SECOND QUARTER RESULTS
May 16, 2011
Maryville, Ohio -- The Scotts Miracle-Gro Company (NYSE: SMG), the world's largest marketer of branded consumer lawn and garden products, has announced that strong sales entering the lawn and garden season, coupled with continued gross margin rate improvement, led to a 30 percent increase in adjusted income from continuing operations for the second quarter.
For the quarter ended April 2, 2011, the Company reported net sales of $1.13 billion from continuing operations, an 8 percent improvement from the previous year. Adjusted income from continuing operations for the quarter was $150.3 million, or $2.22 per share, compared with $115.3 million, or $1.71 per share, for the same period a year ago. Those results exclude the Company's Global Professional business, the sale of which was completed during the quarter. The results also exclude costs related to product registration and recall matters.
Consumer purchases of the Company's products at its largest retailers increased 2 percent on a year-to-date basis through March. Due to the strength of early season consumer purchases in 2010, the Company anticipated a decline in consumer purchases on a year-over-year basis from mid-March through mid-April. That fact, combined with a slow start to the 2011 season driven by unfavorable weather, resulted in a 7 percent decline in year-to-date consumer purchases entering May.
"While faced with the challenge of a late break to the season, we remain optimistic in our full year outlook," said Jim Hagedorn, chairman and chief executive officer. "The consumer remains highly engaged as demonstrated by strong purchase activity whenever and wherever the weather has cooperated. Retailer support also remains strong as our retail partners continue to show commitment to the overall category, but especially to our brands.
"While we need cooperation from the weather, we remain well positioned and our strong second quarter results provide a nice tailwind for the second half of the year. We have locked in 90 percent of our raw material costs for the year and expect interest expense to be lower than first anticipated. As a result, we remain confident and reaffirm our full year outlook for adjusted earnings in the range of $3.60 to $3.70 per share."
SECOND QUARTER DETAILS
Sales from the Company's largest segment, Global Consumer, increased 7 percent from last year to $1.09 billion. Foreign exchange rates favorably benefited sales growth by 70 basis points. Operating income for Global Consumer was $299.8 million, a 20 percent improvement from $250.7 million for the same period last year.
Scotts LawnService reported a 7 percent increase in sales to $32.7 million. The operating loss in the quarter was $15.2 million, essentially flat from a year earlier. Scotts LawnService historically earns all of its profits in the second half of the fiscal year.
For the quarter, Company-wide adjusted gross margin rate increased to 41.1 percent compared with 39.6 percent a year earlier. The improvement was due to the benefit of lower commodity costs as well as supply chain efficiencies and favorable product mix. Selling, general and administrative expenses (SG&A) in the quarter were $216.2 million, essentially flat from the previous year.
"We projected gross margins would improve 70 to 100 basis points for fiscal 2011, with a disproportionate amount of the improvement in the first half due mainly to the timing of changes to commodity costs," said Dave Evans, chief financial officer. "While we expect the improvement to significantly moderate in the second half of the year, we remain confident in our original full-year outlook."
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 29 percent to $267.3 million from $207.6 million a year ago.
Adjusted income from continuing operations was $150.3 million, or $2.22 per share, compared with $115.3 million, or $1.71 per share, for the same period last year. Including the impact of product registration and recall costs, reported income from continuing operations was $148.6 million, or $2.20 per share, compared with $114.2 million, or $1.69 per share, for the same period last year.
FIRST HALF DETAILS
Company-wide net sales through the first six months were $1.36 billion, a 4 percent increase from a year ago. Foreign exchange rates benefited sales growth by 40 basis points. Sales for Global Consumer increased 4 percent to $1.28 billion versus $1.23 billion for last year's comparable period and operating income was $244.7 million compared with $210.3 million. Scotts LawnService sales increased 10 percent to $69.8 million. The operating loss for the segment was $19.7 million, an improvement of 13 percent from a loss of $22.6 million a year earlier.
For the first six months, Company-wide adjusted gross margin rate was 37.8 percent compared with 36.0 percent in the same period last year. SG&A increased 5 percent to $359.4 million.
Adjusted EBITDA in the first six months increased 31 percent to $192.3 million versus $146.7 million in the comparable period last year.
Adjusted income from continuing operations for the first six months - which excludes costs related to the product registration and recall matters - increased 27 percent to $84.7 million, or $1.25 per share, compared with $66.9 million, or $0.99 per share, a year earlier. Reported income from continuing operations was $81.9 million, or $1.21 per share, compared with $64.1 million, or $0.95 per share, for the same period last year.
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. 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, Fertiligène and Substral. For additional information, visit us at www.scotts.com.