EX-99.1 2 ex99-1.htm ex99-1.htm
Exhibit 99.1
 
AeroGrow Reports Results for Quarter Ended June 30, 2009
 
·  
Revenue of $3.0 million for the quarter
·  
Net loss shrinks to $1.1 million

Boulder, COAugust 17, 2009 - AeroGrow International, Inc. (OTCBB:AERO - News) ("AeroGrow" or the "Company"), makers of the AeroGarden® line of indoor gardening products, announced results for the quarter and year ended June 30, 2009.

For the quarter ended June 30, 2009, AeroGrow reported net revenue of $3.0 million, down 56% from the quarter ended June 30, 2008. The Company also reported a net loss for the quarter of $1.1 million, or -$0.08 per share, a $1.7 million improvement over last year’s net loss of $2.8 million in the same period.

“The continued weak economy, our seasonal summer slowdown, and our cutback to all but the most efficient marketing spend, all contributed to the revenue decline,” said AeroGrow CEO Jerry Perkins.  “However, the impact of our cost reduction initiatives, including the dramatic reductions in headcount and overhead spending we’ve implemented, is also quite evident.  Year over year, our personnel costs dropped almost in half.  We also reduced our fulfillment costs, office expenses, travel, and contract services, along with most other overhead costs.  This led to a 37% reduction in our operating loss despite lower revenue.

“As previously announced, we also made major improvements to our balance sheet by issuing preferred stock and restructuring our debt arrangements.  The improved capitalization and the right-sizing of our business were necessary given the depth and duration of the economic downturn and the resulting impact on the demand for discretionary products.”

Summary Results of Operations – Three Months Ended June 30, 2009

The quarter ended June 30, 2009, is AeroGrow's first quarter of the fiscal year. The following table sets forth, as a percentage of sales, our unaudited quarterly financial results for the three months ended June 30, 2009, and the three months ended June 30, 2008:

 
   
Three Months Ended June 30,
 
   
2009
   
2008
 
Revenue
           
Product sales - retail, net
    29.1 %     39.3 %
Product sales - direct to consumer, net
    67.5 %     49.7 %
Product sales – international, net
    3.4 %     11.0 %
    Total sales
    100.0 %     100.0 %
                 
Operating expenses
               
Cost of revenue
    62.8 %     54.9 %
Research and development
    11.6 %     10.8 %
Sales and marketing
    38.9 %     51.3 %
General and administrative
    42.8 %     22.6 %
Total operating expenses
    156.1 %     139.6 %
Other (income) expense, net
    -20.5 %     2.3 %
Net Loss
    -35.6 %     -41.9 %
 
 
 

 
 
For the three months ended June 30, 2009, our sales totaled $2,979,693, a 55.7% decrease from the same period in the prior year.  The decline in sales reflected lower sales in each of our channels of distribution, principally because of the decline in economic activity associated with the global recession, which adversely affected the levels of consumer spending and retailer procurement relative to the prior year period.  In addition, because of the general economic conditions and a low anticipated return on investment, we elected to reduce our spending on advertising and promotions in our direct-to-consumer business, causing a further reduction in these sales, but ultimately contributing to a reduced operating loss.  Sales of AeroGardens declined 68.2% year-over-year; however, sales of seed kits and accessories, which represent recurring revenue related to cumulative sales of AeroGardens, declined by only 19.7%.  As a result, sales of seed kits and accessories increased to 46.8% of total revenue from 25.8% in the prior year period.

The gross margin for the three months ended June 30, 2009, was 37.3% as compared to 45.1% for the prior year period.  The decline reflected changes in channel, customer and product mix, as well as the impact of fixed facility costs in our Indianapolis, Indiana, manufacturing and distribution facility that was opened in July 2008, on a lower revenue base in the current year period.  Operating expenses other than cost of revenue were reduced $2,913,756, or 51.2%, from the prior year reflecting cost savings initiatives, staffing reductions, and reduced spending on advertising and promotion.
 
The loss from operations totaled $1,670,366, which was $990,386 lower than the prior year loss from operations of $2,660,752.  The reduced loss reflected the decrease in operating expenses other than cost of revenue, which more than offset the combined impact of lower sales and gross margin relative to a year earlier.

Other income totaled $608,634 as compared to other expense of $156,597 in the prior year, principally reflecting the impact of approximately $807,310 in gains that were recognized during the three months ended June 30, 2009, to reflect discounts negotiated on certain accounts payable balances, partially offset by higher interest expense resulting from a higher average level of debt outstanding.

The net loss for the three months ended June 30, 2009, was $1,061,732 as compared to a $2,817,349 net loss in the same period a year earlier.
 
 
 

 
 
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
   
Three months ended June 30,
 
   
2009
   
2008
 
Revenue
           
Product sales
  $ 2,979,693     $ 6,720,081  
                 
Operating expenses
               
Cost of revenue
    1,869,805       3,686,823  
Research and development
    344,198       725,415  
Sales and marketing
    1,159,796       3,449,883  
General and administrative
    1,276,260       1,518,712  
Total operating expenses
    4,650,059       9,380,833  
                 
Loss from operations
    (1,670,366 )     (2,660,752 )
                 
Other (income) expense, net
               
Interest (income)
    (80 )     (1,050 )
Interest expense
    198,998       157,647  
Other (income)
    (807,552 )     --  
Total other (income) expense, net
    (608,634 )     156,597  
                 
Net loss
  $ (1,061,732 )   $ (2,817,349 )
                 
Net loss per share, basic and diluted
  $ (0.08 )   $ (0.23 )
                 
Weighted average number of common
               
shares outstanding, basic and diluted
    13,039,373       12,100,387  
 
 
 

 

 
CONDENSED BALANCE SHEETS
(Unaudited)

   
June 30, 2009
   
March 31, 2009
 
ASSETS
           
Current assets
           
Cash
  $ 3,009,887     $ 332,698  
Restricted cash
    438,396       438,331  
Accounts receivable
    870,720       2,278,052  
Notes receivable
    139,000       --  
Notes receivable, related party
    612,000       --  
Other receivables
    215,326       332,059  
Inventory
    7,417,337       8,350,135  
Prepaid expenses and other
    309,750       565,454  
Total current assets
    13,012,416       12,296,729  
Property and equipment
    1,549,651       1,768,369  
Other assets
               
Intangible assets
    233,063       231,590  
Deposit
    110,776       110,776  
Deferred debt issuance costs
    154,674       201,726  
Total other assets
    498,513       554,092  
Total Assets
  $ 15,060,580     $ 14,609,190  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
Current liabilities
               
Current portion - long term debt
  $ 6,228,484     $ 1,099,060  
Accounts payable
    4,364,077       8,338,559  
Accrued expenses
    1,917,727       2,318,670  
Customer deposits
    31,179       246,728  
Deferred rent
    53,155       57,283  
Total current liabilities
    12,594,622       12,060,300  
Long term debt
    1,406,878       5,547,144  
Long term debt - related party
    --       1,233,371  
Stockholders' equity
               
Preferred stock
    7       --  
Common stock
    12,422       13,343  
Additional paid-in capital
    52,049,981       45,696,630  
Accumulated (deficit)
    (51,003,330 )     (49,941,598 )
Total Stockholders' Equity (Deficit)
    1,059,080       (4,231,625 )
                 
Total Liabilities and Stockholders' Equity (Deficit)
  $ 15,060,580     $ 14,609,190  


 
 

 

SALES BY CHANNEL
(Unaudited)
 
 
   
Three Months Ended June 30,
 
 
 
2009
   
2008
 
Revenue
           
Product sales - retail, net
    29.1 %     39.3 %
Product sales - direct to consumer, net
    67.5 %     49.7 %
Product sales - international
    3.4 %     11.0 %
    Total sales
    100.0 %     100.0 %

 
   
Three Months Ended June 30,
 
   
2009
   
2008
 
Revenue
           
Product sales - retail, net
  $ 868,263     $ 2,642,575  
Product sales - direct to consumer, net
    2,010,243       3,339,410  
Product sales - international
    101,187       738,096  
    Total sales
  $ 2,979,693     $ 6,720,081  



SALES BY PRODUCT CATEGORY
(Unaudited)
 
   
Three Months Ended June 30,
 
   
2009
   
2008
 
Product Revenue
           
AeroGardens
 
$
1,584,308
   
$
4,983,416
 
Seed kits and accessories
   
1,395,385
     
1,736,665
 
Total
 
$
2,979,693
   
$
6,720,081
 
 
% of Total Revenue
               
AeroGardens
   
53.2
%
   
74.2
%
Seed kits and accessories
   
46.8
%
   
25.8
%
Total
   
100.0
%
   
100.0
%
 

 
About AeroGrow International, Inc.
 
Founded in 2002 in Boulder, Colorado, AeroGrow International, Inc. is dedicated to the research, development and marketing of the AeroGarden line of foolproof, dirt-free indoor gardens. AeroGardens allow anyone to grow farmer's market fresh herbs, salad greens, tomatoes, chili peppers, flowers and more, indoors, year-round, so simply and easily that no green thumb is required. See www.aerogrow.com.
 
 
FORWARD-LOOKING STATEMENTS
 
 
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements by Jerry Perkins, and/or the Company, statements regarding growth of the AeroGarden product line, optimism related to the business, expanding sales, and other statements in this press release are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business. Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual results could vary materially from the description contained herein due to many factors including continued market acceptance of the Company's products or the need to raise additional capital. In addition, actual results could vary materially based on changes or slower growth in the indoor garden market; the potential inability to realize expected benefits and synergies; domestic and international business and economic conditions; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or technological changes; technological advances; shortages of manufacturing capacity; future production variables impacting excess inventory and other risk factors listed from time to time in the Company's Securities and Exchange Commission (SEC) filings under "risk factors" and elsewhere. The forward-looking statements contained in this press release speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.