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ScottsMiracle-Gro Reports First Quarter Results
Ohio Ag Connection - 02/11/2013

The Scotts Miracle-Gro Company announced results for its fiscal first quarter ended December 29, 2012.

Net sales were $205.8 million, an increase of 3 percent, compared to $199.6 million, during the same quarter a year ago. Sales in the Global Consumer segment were up 3 percent to $153.2 million, compared to $149.1 million a year ago, attributable to increased volume during the quarter, as price increases for fiscal 2013 did not take effect until January. Consumer purchases at point-of-sale (POS) at the Company's largest U.S. retailers increased 1 percent during the quarter. POS was in line with expectations for the first quarter, though it represents a small portion of the full year.

Scotts LawnService sales were up 19 percent to $44.8 million in the first quarter, compared to $37.6 million during the same quarter a year ago, primarily due to a 6 percent increase in customer count and a weather-driven delay of sales from the fiscal fourth quarter of 2012 to the fiscal first quarter of 2013.

"Continued consumer engagement, coupled with solid execution, leaves us well-positioned for the 2013 lawn and garden season," said Jim Hagedorn, chairman and chief executive officer. "We are on plan with our initiatives designed to drive meaningful and sustainable growth in earnings and cash flow, while continuing to maintain a strong consumer focus."

The loss from continuing operations was $68.3 million, or $1.11 per share, compared with a loss of $73.1 million, or $1.20 per share, during the same quarter a year ago. The adjusted loss from continuing operations for the first quarter of 2013 was $68.5 million, or $1.12 per share, which excludes impairment, restructuring and other charges. Given the seasonal nature of the lawn and garden category, the Company historically reports a loss in its fiscal first quarter.

The adjusted company-wide gross margin rate was 15.1 percent, compared with 12.8 percent during the first quarter a year ago. The 230-basis-point improvement was primarily attributable to increased volume within the higher-margin Scotts LawnService segment and favorable product mix in the Global Consumer segment.

Selling, general and administrative expenses (SG&A) were $124.5 million, compared to $122.5 million a year ago, in line with Company expectations.

The operating loss for the Global Consumer segment was $68.7 million during the first quarter, compared with a loss of $69.5 million last year. Scotts LawnService reported operating loss of $0.9 million, compared with a loss of $4.6 million a year ago. The consolidated company-wide adjusted loss from continuing operations before income taxes was $105.1 million during the first quarter of 2013, compared to a loss of $114.3 million during the same quarter a year ago.

The Company continues to expect company-wide net sales to increase by approximately 1 to 3 percent in fiscal 2013 on flat unit volume, modest price increases in its core business and the continued strong performance of Scotts LawnService.

The Company reaffirmed its expectations for fiscal 2013 adjusted earnings per share from continuing operations in the range of $2.50 to $2.75. In addition, the company continues to expect operating cash flow of at least $250 million for the year.

"Our immediate focus is to leverage our cost structure with an eye toward margin improvement, reduced SG&A and improved cash flow," said Hagedorn. "And we are taking a balanced approach in how we invest for long-term growth. I am confident in the plan we have put in place and believe our shareholders will begin to see significant improvement starting in the second half of the year."

With more than $2.8 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.

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