Ohio | 001-11593 | 31-1414921 |
(State or other jurisdiction | (Commission | (IRS Employer |
of incorporation or organization) | File Number) | Identification No.) |
14111 Scottslawn Road, Marysville, Ohio | 43041 | |
(Address of principal executive offices) | (Zip Code) |
Exhibit No. | Description |
99.1 | News release issued by The Scotts Miracle-Gro Company on February 2, 2016 |
THE SCOTTS MIRACLE-GRO COMPANY | ||
Dated: February 2, 2016 | By: | /s/ THOMAS RANDAL COLEMAN |
Printed Name: Thomas Randal Coleman | ||
Title: Executive Vice President and Chief Financial Officer |
Exhibit No. | Exhibit Description |
99.1 | News release issued by The Scotts Miracle-Gro Company on February 2, 2016 |
The Scotts Miracle-Gro Company | NEWS |
▪ | Q1 sales increased 14% to $245.7 million driven by volume growth and acquisitions |
▪ | Consumer purchases increase 14% in Q1 driven by strong fall lawn care |
▪ | 580 bps adjusted gross margin rate improvement due to product mix, lower commodities |
▪ | Adjusted Q1 seasonal loss of $1.13 per share flat versus year-ago results |
▪ | Bonnie transaction immediately EPS accretive, provides meaningful long-term potential |
▪ | Scotts LawnService joint venture with TruGreen on track to close in Q2 |
▪ | Company reaffirms full-year guidance for sales and adjusted EPS |
• | Compliance with environmental and other public health regulations could increase the Company’s costs of doing business or limit the Company’s ability to market all of its products; |
• | Increases in the prices of raw materials and fuel costs could adversely affect the Company’s results of operations; |
• | The highly competitive nature of the Company’s markets could adversely affect its ability to maintain or grow revenues; |
• | Because of the concentration of the Company’s sales to a small number of retail customers, the loss of one or more of, or significant reduction in orders from, its top customers could adversely affect the Company’s financial results; |
• | Adverse weather conditions could adversely impact financial results; |
• | The Company’s international operations make the Company susceptible to fluctuations in currency exchange rates and to other costs and risks associated with international regulation; |
• | The Company may not be able to adequately protect its intellectual property and other proprietary rights that are material to the Company’s business; |
• | If Monsanto Company were to terminate the Marketing Agreement for consumer Roundup products, the Company would lose a substantial source of future earnings and overhead expense absorption; |
• | Hagedorn Partnership, L.P. beneficially owns approximately 26% of the Company’s common shares and can significantly influence decisions that require the approval of shareholders; |
• | The Company may pursue acquisitions, dispositions, investments, dividends, share repurchases and/or other corporate transactions that it believes will maximize equity returns of its shareholders but may involve risks. |
Three Months Ended | ||||||||||||
Footnotes | January 2, 2016 | December 27, 2014 | % Change | |||||||||
Net sales | $ | 245.7 | $ | 216.2 | 14 | % | ||||||
Cost of sales | 199.6 | 186.9 | ||||||||||
Cost of sales—impairment, restructuring and other | 3.5 | — | ||||||||||
Gross profit | 42.6 | 29.3 | 45 | % | ||||||||
% of sales | 17.3 | % | 13.6 | % | ||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 139.5 | 126.9 | 10 | % | ||||||||
Impairment, restructuring and other | 4.3 | 9.6 | ||||||||||
Other income, net | (1.0 | ) | (1.2 | ) | ||||||||
Loss from operations | (100.2 | ) | (106.0 | ) | 5 | % | ||||||
% of sales | (40.8 | )% | (49.0 | )% | ||||||||
Costs related to refinancing | 8.8 | — | ||||||||||
Interest expense | 16.3 | 9.7 | ||||||||||
Loss before income taxes | (125.3 | ) | (115.7 | ) | (8 | )% | ||||||
Income tax benefit | (44.5 | ) | (41.7 | ) | ||||||||
Net loss | $ | (80.8 | ) | $ | (74.0 | ) | (9 | )% | ||||
Net income attributable to noncontrolling interest | (0.5 | ) | (0.6 | ) | ||||||||
Net loss attributable to controlling interest | $ | (81.3 | ) | $ | (74.6 | ) | ||||||
Basic loss per common share | (1) | $ | (1.32 | ) | $ | (1.23 | ) | (7 | )% | |||
Diluted loss per common share | (2) | $ | (1.32 | ) | $ | (1.23 | ) | (7 | )% | |||
Common shares used in basic loss per share calculation | 61.5 | 60.8 | 1 | % | ||||||||
Common shares and potential common shares used in diluted loss per share calculation | 61.5 | 60.8 | 1 | % | ||||||||
Non-GAAP results: | ||||||||||||
Adjusted loss attributable to controlling interest | (3) | $ | (69.5 | ) | $ | (68.5 | ) | (1 | )% | |||
Adjusted diluted loss per share | (2) (3) | $ | (1.13 | ) | $ | (1.13 | ) | — | % | |||
Adjusted EBITDA | (3) (4) | $ | (69.5 | ) | $ | (81.1 | ) | 14 | % | |||
Note: See accompanying footnotes on page 8 |
Three Months Ended | ||||||||||
January 2, 2016 | December 27, 2014 | % Change | ||||||||
Net Sales: | ||||||||||
Global Consumer | $ | 189.0 | $ | 163.6 | 16 | % | ||||
Scotts LawnService® | 51.2 | 46.7 | 10 | % | ||||||
Segment total | 240.2 | 210.3 | 14 | % | ||||||
Corporate & Other | 5.5 | 5.9 | ||||||||
Consolidated | $ | 245.7 | $ | 216.2 | 14 | % | ||||
Income (Loss) before Income Taxes: | ||||||||||
Global Consumer | $ | (63.1 | ) | $ | (74.2 | ) | 15 | % | ||
Scotts LawnService® | 0.5 | 1.5 | (67 | )% | ||||||
Segment total | (62.6 | ) | (72.7 | ) | ||||||
Corporate & Other | (23.7 | ) | (20.2 | ) | ||||||
Intangible asset amortization | (4.4 | ) | (3.5 | ) | ||||||
Impairment, restructuring and other | (9.5 | ) | (9.6 | ) | ||||||
Costs related to refinancing | (8.8 | ) | — | |||||||
Interest expense | (16.3 | ) | (9.7 | ) | ||||||
Consolidated | $ | (125.3 | ) | $ | (115.7 | ) | (8 | )% |
January 2, 2016 | December 27, 2014 | September 30, 2015 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 49.0 | $ | 130.1 | $ | 71.4 | |||||
Accounts receivable, net | 206.4 | 185.4 | 344.2 | ||||||||
Inventories | 759.2 | 682.8 | 407.6 | ||||||||
Prepaids and other current assets | 133.4 | 127.6 | 125.4 | ||||||||
Total current assets | 1,148.0 | 1,125.9 | 948.6 | ||||||||
Property, plant and equipment, net | 449.2 | 434.4 | 453.7 | ||||||||
Goodwill | 433.0 | 364.3 | 432.4 | ||||||||
Intangible assets, net | 658.0 | 308.9 | 663.5 | ||||||||
Other assets | 39.2 | 31.7 | 29.0 | ||||||||
Total assets | $ | 2,727.4 | $ | 2,265.2 | $ | 2,527.2 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current portion of debt | $ | 13.8 | $ | 36.6 | $ | 134.8 | |||||
Accounts payable | 233.5 | 220.0 | 197.9 | ||||||||
Other current liabilities | 183.3 | 165.3 | 280.4 | ||||||||
Total current liabilities | 430.6 | 421.9 | 613.1 | ||||||||
Long-term debt | 1,518.6 | 1,133.3 | 1,028.5 | ||||||||
Other liabilities | 251.5 | 249.1 | 252.5 | ||||||||
Total liabilities | 2,200.7 | 1,804.3 | 1,894.1 | ||||||||
Shareholders’ equity | 526.7 | 460.9 | 633.1 | ||||||||
Total liabilities and shareholders’ equity | $ | 2,727.4 | $ | 2,265.2 | $ | 2,527.2 |
Three Months Ended January 2, 2016 | Three Months Ended December 27, 2014 | |||||||||||||||||||||
As Reported | Impairment, Restructuring and Other | Costs Related to Refinancing | Adjusted | As Reported | Impairment, Restructuring and Other | Adjusted | ||||||||||||||||
Net sales | $ | 245.7 | $ | (0.2 | ) | $ | — | $ | 245.9 | $ | 216.2 | $ | — | $ | 216.2 | |||||||
Cost of sales | 199.6 | 1.5 | — | 198.1 | 186.9 | — | 186.9 | |||||||||||||||
Cost of sales—impairment, restructuring and other | 3.5 | 3.5 | — | — | — | — | — | |||||||||||||||
Gross profit | 42.6 | (5.2 | ) | — | 47.8 | 29.3 | — | 29.3 | ||||||||||||||
% of sales | 17.3 | % | 19.4 | % | 13.6 | % | 13.6 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Selling, general and administrative | 139.5 | — | — | 139.5 | 126.9 | — | 126.9 | |||||||||||||||
Impairment, restructuring and other | 4.3 | 4.3 | — | — | 9.6 | 9.6 | — | |||||||||||||||
Other income, net | (1.0 | ) | — | — | (1.0 | ) | (1.2 | ) | — | (1.2 | ) | |||||||||||
Loss from operations | (100.2 | ) | (9.5 | ) | — | (90.7 | ) | (106.0 | ) | (9.6 | ) | (96.4 | ) | |||||||||
% of sales | (40.8 | )% | (36.9 | )% | (49.0 | )% | (44.6 | )% | ||||||||||||||
Costs related to refinancing | 8.8 | — | 8.8 | — | — | — | — | |||||||||||||||
Interest expense | 16.3 | — | — | 16.3 | 9.7 | — | 9.7 | |||||||||||||||
Loss before income taxes | (125.3 | ) | (9.5 | ) | (8.8 | ) | (107.0 | ) | (115.7 | ) | (9.6 | ) | (106.1 | ) | ||||||||
Income tax benefit | (44.5 | ) | (3.4 | ) | (3.1 | ) | (38.0 | ) | (41.7 | ) | (3.5 | ) | (38.2 | ) | ||||||||
Net loss | (80.8 | ) | (6.1 | ) | $ | (5.7 | ) | (69.0 | ) | (74.0 | ) | (6.1 | ) | (67.9 | ) | |||||||
Net income attributable to noncontrolling interest | (0.5 | ) | — | (0.5 | ) | (0.6 | ) | — | (0.6 | ) | ||||||||||||
Net loss attributable to controlling interest | $ | (81.3 | ) | $ | (6.1 | ) | $ | (5.7 | ) | $ | (69.5 | ) | $ | (74.6 | ) | $ | (6.1 | ) | $ | (68.5 | ) | |
Basic loss per common share | $ | (1.32 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (1.13 | ) | $ | (1.23 | ) | $ | (0.10 | ) | $ | (1.13 | ) | |
Diluted loss per common share | $ | (1.32 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (1.13 | ) | $ | (1.23 | ) | $ | (0.10 | ) | $ | (1.13 | ) | |
Common shares used in basic loss per share calculation | 61.5 | 61.5 | 61.5 | 61.5 | 60.8 | 60.8 | 60.8 | |||||||||||||||
Common shares and potential common shares used in diluted loss per share calculation | 61.5 | 61.5 | 61.5 | 61.5 | 60.8 | 60.8 | 60.8 | |||||||||||||||
Calculation of Adjusted EBITDA (4) : | ||||||||||||||||||||||
Net loss | $ | (80.8 | ) | $ | (74.0 | ) | ||||||||||||||||
Income tax benefit | (44.5 | ) | (41.7 | ) | ||||||||||||||||||
Costs related to refinancing | 8.8 | — | ||||||||||||||||||||
Interest expense | 16.3 | 9.7 | ||||||||||||||||||||
Depreciation | 13.5 | 12.1 | ||||||||||||||||||||
Amortization (including Roundup®) | 4.6 | 3.7 | ||||||||||||||||||||
Impairment, restructuring and other | 9.5 | — | ||||||||||||||||||||
Mark-to-market adjustments on derivatives | — | 9.1 | ||||||||||||||||||||
Expense on certain leases | 0.9 | — | ||||||||||||||||||||
Share-based compensation expense | 2.2 | — | ||||||||||||||||||||
Adjusted EBITDA | $ | (69.5 | ) | $ | (81.1 | ) | ||||||||||||||||
Note: See accompanying footnotes on page 8 |
(1) | Basic income (loss) per common share amounts are calculated by dividing net income (loss) attributable to controlling interest by the weighted average number of common shares outstanding during the period. | |||||
(2) | Diluted income (loss) per common share amounts are calculated by dividing net income (loss) attributable to controlling interest by the weighted average number of common shares, plus all potential dilutive securities (common stock options, stock appreciation rights, performance shares, performance units, restricted stock and restricted stock units) outstanding during the period. | |||||
(3) | The Reconciliation of Non-GAAP Disclosure Items includes the following non-GAAP financial measures: Adjusted income (loss) attributable to controlling interest and adjusted diluted income (loss) per share attributable to controlling interest — These measures exclude charges or credits relating to impairments, restructurings, discontinued operations and other unusual items such as costs or gains related to discrete projects or transactions that are apart from and not indicative of the results of the operations of the business. | |||||
Adjusted EBITDA — This measure is calculated as net income (loss) before interest, taxes, depreciation and amortization as well as certain other items such as the impact of the cumulative effect of changes in accounting, costs associated with debt refinancing and other non-recurring or non-cash items affecting net income (loss). We believe this measure provides additional information for determining our ability to meet debt service requirements. The presentation of adjusted EBITDA herein is intended to be consistent with the calculation of that measure as required by our borrowing arrangements, and used to calculate a leverage ratio (maximum of 4.50 at January 2, 2016) and an interest coverage ratio (minimum of 3.00 for the twelve months ended January 2, 2016). The Company was in compliance with the terms of all debt covenants at January 2, 2016. | ||||||
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparison between current results and results in prior operating periods. The Company believes that these non-GAAP financial measures are the most indicative of the Company’s ongoing earnings capabilities and that disclosure of these non-GAAP financial measures therefore provides useful information to investors and other users of its financial statements, such as lenders. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. | ||||||
(4) | In the fourth quarter of fiscal 2015, the Company changed its calculation of adjusted EBITDA to reflect the measure as defined in our fourth amended credit agreement. Prior periods have not been adjusted as they reflect the presentation consistent with the calculation as required by our borrowing arrangements in place at that time. The revised calculation adds adjustments for share-based compensation expense, expense on certain leases, and impairment, restructuring and other charges (including cash and non-cash charges) and no longer includes an adjustment for mark-to-market adjustments on derivatives. |