- Company-wide sales increase 9%; up 16% in Global Consumer segment
– Consumer purchases in the U.S. increase 19% in third quarter
– Company-wide adjusted gross margin rate improves 210 basis points
– Company re-affirms full year adjusted EPS guidance of $2.35 to $2.45
MARYSVILLE, Ohio, July 29 /PRNewswire-FirstCall/ — The Scotts Miracle-Gro Company (NYSE: SMG), the world’s leading marketer of branded consumer lawn and garden products, announced strong third quarter results driven by a high level of consumer engagement in nearly all aspects of the lawn and garden category.
Company-wide sales for the quarter ended June 27 were $1.28 billion, an increase of 9 percent from the same period a year ago. Adjusted net income for the quarter, which excludes the impact of product registration and recall costs, as well as impairment charges, was $153.7 million, or $2.32 per share, compared with $130.7 million, or $2.00 per share, for the same period last year. Including those items, reported net income was $147.8 million, or $2.23 per share, compared with $22.6 million, or $0.35 per share, for the same period last year.
Global Consumer sales increased 16 percent to $1.08 billion from $930.1 million for the same period a year ago. Excluding the impact of foreign exchange, Global Consumer sales increased 19 percent. Within the segment, the North American business increased 21 percent and reported sales in Europe declined 12 percent. Excluding foreign exchange, sales in Europe rose by 6 percent.
Consumer purchases, as measured by point-of-sale data from the Company’s major retail partners in the U.S., increased 19 percent in the quarter.
Adjusted operating income for the Global Consumer segment improved 28 percent in the quarter to $265.2 million from $207.9 million for the same period last year.
“We couldn’t be more pleased with the continued strength of our core consumer business,” said Jim Hagedorn, chairman and chief executive officer. “Our investment in marketing, sales and innovation — along with outstanding support from our retail partners — has driven impressive growth throughout the season. Through the third quarter, each of our categories of lawn and garden in the U.S. reported strong growth. More impressively, on a year-to-date basis, consumer purchases are higher in every state and we have seen double-digit improvements in consumer purchases in 45 states.
“Our strong year-to-date performance, coupled with ongoing margin improvement and a commitment to drive our fall business, gives us continued confidence in our earnings guidance of $2.35 to $2.45 per share on an adjusted basis.”
Scotts LawnService reported a 10 percent decrease in sales to $79.0 million from $87.4 million. Maintaining strong cost controls resulted in a 5 percent increase in adjusted operating income to $21.6 million compared with $20.6 million a year ago.
“The performance of Scotts LawnService continues to be one of our best stories in fiscal 2009,” Hagedorn said. “While we expected revenue to decline slightly this year due to the economy, this team has done an outstanding job managing the bottom line. We now feel confident that Scotts LawnService will report record profits this year and dramatically improved operating margin. We continue to believe this unit will be a key driver of long-term growth.”
Global Professional sales declined by 24 percent in the quarter to $75.4 million from $98.7 million last year. Excluding the impact of changes in foreign currency, sales declined 12 percent. Operating income for the segment decreased to $5.2 million from $11.9 million for the same period last year.
Smith & Hawken reported $48.6 million in sales compared with $54.9 million last year, and posted an adjusted operating loss of $1.6 million. The Company previously announced plans to close Smith & Hawken by the end of the calendar year. The process of inventory mark-downs has commenced with strong consumer response.
Adjusted gross margin increased to 38.5 percent in the quarter compared with 36.4 percent a year earlier. Selling, general and administrative expenses (SG&A) increased 16 percent in the quarter to $239.0 million from $206.9 million a year earlier. The increase was driven by higher marketing spending in the consumer businesses as well as increased variable compensation.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 12 percent to $263.7 million from $234.6 million a year ago.
Company-wide net sales through the first nine months were $2.56 billion, up 5 percent from a year ago. Excluding the impact of foreign exchange, sales increased 9 percent.
Global Consumer sales increased 10 percent to $2.09 billion and improved by 14 percent when excluding the impact of foreign currency. Scotts LawnService sales decreased 5 percent to $150.3 million. Smith & Hawken reported $99.8 million in sales, down 18 percent. Global Professional reported sales were $215.4 million, compared with $260.6 million for the same period last year. Excluding the impact of foreign exchange, Global Professional sales were down 4 percent.
For the first nine months, company-wide adjusted gross margin improved 210 basis points to 36.7 percent compared with 34.6 percent. SG&A increased 9 percent to $608.1 million.
“The improvement in gross margin rate for the year has been driven primarily by favorable product mix, supply chain improvements and pricing,” said Dave Evans, chief financial officer. “We now expect the full-year improvement to be at least 210 basis points and we remain focused on continued improvement in 2010 and beyond. We also expect SG&A to increase about 10 percent compared with the prior year. This increase is primarily driven by higher marketing investments in the consumer business as well as higher variable compensation.
“We continue to believe free cash flow for the year, defined as operating cash flow minus capital expenditures, will be at least $180 million. These strong levels of free cash flow will allow us to continue to pay down debt and further strengthen our balance sheet.”
Adjusted EBITDA in the first nine months increased 10 percent to $359.6 million versus $327.7 million in the comparable period last year.
Adjusted net income for the first nine months increased 21 percent to $184.1 million, or $2.80 per share, compared with $151.6 million, or $2.31 per share, a year earlier. Reported net income was $168.2 million, or $2.56 per share, compared with $23.8 million, or $0.36 per share, for the same period last year.
The Company will discuss its third quarter results 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.
With approximately $3 billion in worldwide sales and more than 6,000 associates, 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(R), Miracle-Gro(R), 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, the Company’s brands include Weedol(R), Pathclear(R), Evergreen(R), Levington(R), Miracle-Gro(R), KB(R), Fertiligene(R) and Substral(R). For additional information, visit us at www.scotts.com