ScottsMiracle-Gro Reports Strong Second Quarter Financial Results Driven by Strong Start to U.S. Lawn & Garden Season

GlobeNewswire - finance.yahoo.com Posted 6 years ago
.9

    $ 1,013.3     17 %   $ 1,488.0     $ 1,234.9     20 % Cost of sales       716.8     604.1         977.8     791.7       Cost of sales—impairment, restructuring and other       1.0     —         3.5     —       Gross profit       472.1     409.2     15 %   506.7     443.2     14 % % of sales       39.7 %   40.4 %       34.1 %   35.9 %     Operating expenses:                             Selling, general and administrative       179.7     166.0     8 %   296.0     274.2     8 % Impairment, restructuring and other       0.2     10.2         3.7     10.0       Other (income) expense, net       2.0     0.7         1.6     (1.4 )     Income from operations       290.2     232.3     25 %   205.4     160.4     28 % % of sales       24.4 %   22.9 %       13.8 %   13.0 %     Equity in income of unconsolidated affiliates       (2.0 )   (1.5 )       (3.3 )   (2.1 )     Interest expense       28.9     22.6         54.1     40.4       Other non-operating (income) expense, net       (260.1 )   9.2         (262.9 )   6.7       Income from continuing operations before income taxes       523.4     202.0     159 %   417.5     115.4     262 % Income tax expense (benefit) from continuing operations       126.5     49.3         103.2     (17.3 )     Income from continuing operations       396.9     152.7     160 %   314.3     132.7     137 % Income (loss) from discontinued operations, net of tax       (0.5 )   (3.7 )       2.5     (4.9 )     Net income       $ 396.4     $ 149.0         $ 316.8     $ 127.8       Net (income) loss attributable to noncontrolling interest       0.1     (0.1 )       0.1     (0.1 )     Net income attributable to controlling interest       $ 396.5     $ 148.9         $ 316.9     $ 127.7                                     Basic income (loss) per common share:   (1 )                         Income from continuing operations       $ 7.17     $ 2.70     166 %   $ 5.68     $ 2.33     144 % Income (loss) from discontinued operations       (0.01 )   (0.06 )       0.04     (0.09 )     Net income       $ 7.16     $ 2.64         $ 5.72     $ 2.24                                     Diluted income (loss) per common share:   (2 )                         Income from continuing operations       $ 7.10     $ 2.66     167 %   $ 5.62     $ 2.29     145 % Income (loss) from discontinued operations       (0.01 )   (0.07 )       0.05     (0.09 )     Net income       $ 7.09     $ 2.59         $ 5.67     $ 2.20                                     Common shares used in basic income (loss) per share calculation       55.4     56.5     (2 )%   55.4     57.0     (3 )% Common shares and potential common shares used in diluted income (loss) per share calculation       55.9     57.4     (3 )%   55.9     58.0     (4 )%                               Non-GAAP results:                             Adjusted net income attributable to controlling interest from continuing operations   (3 )   $ 203.2     $ 165.2     23 %   $ 126.2     $ 103.0     23 % Adjusted diluted income per common share from continuing operations   (2) (3)   $ 3.64     $ 2.88     26 %   $ 2.26     $ 1.78     27 % Adjusted EBITDA   (3 )   $ 327.4     $ 272.9     20 %   $ 280.1     $ 228.0     23 % Note: See accompanying footnotes on page 10.                                                  


THE SCOTTS MIRACLE-GRO COMPANY
Segment Results
(In millions)
(Unaudited)

The Company divides its business into three reportable segments: U.S. Consumer, Hawthorne and Other. U.S. Consumer consists of the Company’s consumer lawn and garden business located in the geographic United States. Hawthorne consists of the Company’s indoor, urban and hydroponic gardening business. Other consists of the Company’s consumer lawn and garden business in geographies other than the U.S. and the Company’s product sales to commercial nurseries, greenhouses and other professional customers. Corporate consists of general and administrative expenses and certain other income/expense items not allocated to the business segments. This identification of reportable segments is consistent with how the segments report to and are managed by the chief operating decision maker of the Company.

The performance of each reportable segment is evaluated based on several factors, including income (loss) from continuing operations before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”), which is a non-GAAP financial measure.  Senior management uses Segment Profit (Loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment.

The following tables present financial information for the Company’s reportable segments for the periods indicated:

       
  Three Months Ended   Six Months Ended
  March 30,
 2019
  March 31,
 2018
  % Change   March 30,
 2019
  March 31,
 2018
  % Change
Net Sales:                      
U.S. Consumer $ 993.5     $ 920.2     8 %   $ 1,130.4     $ 1,046.1     8 %
Hawthorne 144.1     41.8     245 %   284.8     118.5     140 %
Other 52.3     51.3     2 %   72.8     70.3     4 %
Consolidated $ 1,189.9     $ 1,013.3     17   $ 1,488.0     $ 1,234.9     20 %
                       
Segment Profit (Loss) (Non-GAAP):            
U.S. Consumer $ 320.0     $ 286.2     12 %   $ 277.0     $ 248.3     12 %
Hawthorne 10.3     (4.8 )   315 %   14.7     (3.0 )   590 %
Other 3.8     1.6     138 %   (0.2 )   (2.5 )   92 %
Total Segment Profit (Non-GAAP) 334.1     283.0     18   291.5     242.8     20
Corporate (34.3 )   (33.6 )       (62.1 )   (58.7 )    
Intangible asset amortization (8.4 )   (6.9 )       (16.8 )   (13.7 )    
Impairment, restructuring and other (1.2 )   (10.2 )       (7.2 )   (10.0 )    
Equity in income of unconsolidated affiliates 2.0     1.5         3.3     2.1      
Interest expense (28.9 )   (22.6 )       (54.1 )   (40.4 )    
Other non-operating income (expense), net 260.1     (9.2 )       262.9     (6.7 )    
Income from continuing operations before income taxes (GAAP) $ 523.4     $ 202.0     159   $ 417.5     $ 115.4     262
                                           


THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)

  March 30,
 2019
  March 31,
 2018
  September 30,
 2018
 
     
ASSETS            
Current assets:            
Cash and cash equivalents $ 37.5     $ 33.0     $ 33.9    
Accounts receivable, net 1,032.9     931.3     310.5    
Inventories 675.3     596.9     481.4    
Prepaid and other current assets 93.7     78.1     59.9    
Total current assets 1,839.4     1,639.3     885.7    
Investment in unconsolidated affiliates 34.5     33.2     36.1    
Property, plant and equipment, net 513.9     463.6     530.8    
Goodwill 539.6     466.8     543.0    
Intangible assets, net 837.9     777.6     857.3    
Other assets 191.2     195.0     201.6    
Total assets $ 3,956.5     $ 3,575.5     $ 3,054.5    
LIABILITIES AND EQUITY      
Current liabilities:            
Current portion of debt $ 357.7     $ 335.8     $ 132.6    
Accounts payable 298.7     253.5     150.5    
Other current liabilities 503.5     316.8     329.6    
Total current liabilities 1,159.9     906.1     612.7    
Long-term debt 2,039.1     1,937.7     1,883.8    
Distributions in excess of investment in unconsolidated affiliate —     21.9     21.9    
Other liabilities 135.4     213.9     176.5    
Total liabilities 3,334.4     3,079.6     2,694.9    
Equity 622.1     495.9     359.6    
Total liabilities and equity $ 3,956.5     $ 3,575.5     $ 3,054.5    
                         


THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items (3)
(In millions, except per common share data)
(Unaudited)

         
    Three Months Ended March 30, 2019   Three Months Ended March 31, 2018
    As
Reported
(GAAP)
Discontinued
Operations
Impairment,
Restructuring
and Other
Other
Non-
Operating
Adjusted
(Non-GAAP)
  As
Reported
(GAAP)
Discontinued
Operations
Impairment,
Restructuring
and Other
Other
Non-
Operating
Adjusted
(Non-
GAAP)
Gross profit   $ 472.1   $ —   $ (1.0 ) $ —   $ 473.1     $ 409.2   $ —   $ —   $ —   $ 409.2  
Gross profit as a % of sales   39.7 %       39.8 %   40.4 %       40.4 %
Income from operations   290.2   —   (1.2 ) —   291.4     232.3   —   (10.2 ) —   242.5  
Income from operations as a % of sales   24.4 %       24.5 %   22.9 %       23.9 %
Income from continuing operations before income taxes   523.4   —   (1.2 ) 257.3   267.3     202.0   —   (10.2 ) (11.7 ) 223.9  
Income tax expense from continuing operations   126.5   —   (1.5 ) 63.8   64.2     49.3   —   (6.3 ) (3.0 ) 58.6  
Income from continuing operations   396.9   —   0.3   193.5   203.1     152.7   —   (3.9 ) (8.7 ) 165.3  
Net income attributable to controlling interest   396.5   (0.5 ) 0.3   193.5   203.2     148.9   (3.7 ) (3.9 ) (8.7 ) 165.2  
Diluted income per common share from continuing operations   7.10   —   0.01   3.46   3.64     2.66   —   (0.07 ) (0.15 ) 2.88  
                                             


         
Calculation of Adjusted EBITDA (3):   Three Months Ended
March 30, 2019
  Three Months Ended
March 31, 2018
Net income (GAAP)   $ 396.4     $ 149.0  
Income tax expense from continuing operations   126.5     49.3  
Income tax expense (benefit) from discontinued operations   0.4     (1.8 )
Loss on sale / contribution of business   —     3.7  
Interest expense   28.9     22.6  
Depreciation   14.0     12.8  
Amortization   8.4     7.1  
Impairment, restructuring and other charges from continuing operations   1.2     10.2  
Impairment, restructuring and other charges from discontinued operations   —     0.2  
Other non-operating (income) expense, net   (257.3 )   11.7  
Interest income   (2.4 )   (2.5 )
Expense on certain leases   0.9     0.9  
Share-based compensation expense   10.4     9.7  
Adjusted EBITDA (Non-GAAP)   $ 327.4     $ 272.9  
         
Note: See accompanying footnotes on page 10.
The sum of the components may not equal due to rounding.
 


THE SCOTTS MIRACLE-GRO COMPANY
Reconciliation of Non-GAAP Disclosure Items (3)
(In millions, except per common share data)
(Unaudited)

         
    Six Months Ended March 30, 2019   Six Months Ended March 31, 2018
    As
Reported
(GAAP)
Discontinued
Operations
Impairment,
Restructuring
and Other
Other
Non-
Operating
Adjusted
(Non-
GAAP)
  As
Reported
(GAAP)
Discontinued
Operations
Impairment,
Restructuring
and Other
Other
Non-
Operating
Adjusted
(Non-
GAAP)
Gross profit   $ 506.7   $ —   $ (3.5 ) $ —   $ 510.2     $ 443.2   $ —   $ —   $ —   $ 443.2  
Gross profit as a % of sales   34.1 %       34.3 %   35.9 %       35.9 %
Income from operations   205.4   —   (7.2 ) —   212.6     160.4   —   (10.0 ) —   170.4  
Income from operations as a % of sales   13.8 %       14.3 %   13.0 %       13.8 %
Income from continuing operations before income taxes   417.5   —   (7.2 ) 257.3   167.4     115.4   —   (10.0 ) (11.7 ) 137.1  
Income tax expense from continuing operations   103.2   —   (1.9 ) 63.8   41.3     (17.3 ) —   (48.3 ) (3.0 ) 34.0  
Income from continuing operations   314.3   —   (5.3 ) 193.5   126.1     132.7   —   38.3   (8.7 ) 103.1  
Net income attributable to controlling interest   316.9   2.5   (5.3 ) 193.5   126.2     127.7   (4.9 ) 38.3   (8.7 ) 103.0  
Diluted income per common share from continuing operations   5.62   —   (0.09 ) 3.46   2.26     2.29   —   0.66   (0.15 ) 1.78  
                                             


         
Calculation of Adjusted EBITDA (3):   Six Months Ended
March 30, 2019
  Six Months Ended
March 31, 2018
Net income (GAAP)   $ 316.8     $ 127.8  
Income tax expense (benefit) from continuing operations   103.2     (17.3 )
Income tax expense (benefit) from discontinued operations   2.3     (1.8 )
Loss on sale / contribution of business   —     3.5  
Interest expense   54.1     40.4  
Depreciation   27.9     25.5  
Amortization   16.8     14.1  
Impairment, restructuring and other charges from continuing operations   7.2     10.0  
Impairment, restructuring and other charges (recoveries) from discontinued operations   (4.9 )   1.6  
Other non-operating (income) expense, net   (257.3 )   11.7  
Interest income   (4.8 )   (5.0 )
Expense on certain leases   1.8     1.8  
Share-based compensation expense   17.0     15.7  
Adjusted EBITDA (Non-GAAP)   $ 280.1     $ 228.0  
         
Note: See accompanying footnotes on page 10.
The sum of the components may not equal due to rounding.


THE SCOTTS MIRACLE-GRO COMPANY
Footnotes to Preceding Financial Statements

(1) Basic income (loss) per common share amounts are calculated by dividing income (loss) from continuing operations, income (loss) from discontinued operations and 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 income (loss) from continuing operations, income (loss) from discontinued operations and net income (loss) attributable to controlling interest by the weighted average number of common shares, plus all potential dilutive securities (common stock options, performance shares, performance units, restricted stock and restricted stock units) outstanding during the period.

(3) Reconciliation of Non-GAAP Measures

Use of Non-GAAP Measures

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses non-GAAP financial measures. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables above. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than the Company, limiting the usefulness of those measures for comparative purposes.

In addition to GAAP measures, management uses these non-GAAP financial measures to evaluate the Company’s performance, engage in financial and operational planning and determine incentive compensation because it believes that these measures provide additional perspective on and, in some circumstances are more closely correlated to, the performance of the Company’s underlying, ongoing business.

Management believes that these non-GAAP financial measures are useful to investors in their assessment of operating performance and the valuation of the Company. In addition, these non-GAAP financial measures address questions routinely received from analysts and investors and, in order to ensure that all investors have access to the same data, management has determined that it is appropriate to make this data available to all investors. Non-GAAP financial measures exclude the impact of certain items (as further described below) and provide supplemental information regarding operating performance. By disclosing these non-GAAP financial measures, management intends to provide