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)â€), 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 (“GAAPâ€), 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