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- Hawthorne segment reports 20% sales growth; U.S. Consumer flat to prior year
- GAAP loss from continuing operations per share of $0.35 vs. $0.97 in prior year
- Non-GAAP adjusted loss per share of $1.08 compared with $0.88 in prior year
- Non-GAAP adjusted EPS guidance raised to $4.60 to $4.80 due to lower expected tax rate
- Full-year sales guidance reduced to a range of 2 to 4 percent
MARYSVILLE, Ohio, Jan. 30, 2018 (GLOBE NEWSWIRE) — The Scotts Miracle-Gro Company (NYSE:SMG), the world’s leading marketer of branded consumer lawn and garden as well as hydroponic growing products, today announced that company-wide sales increased 7 percent in its fiscal first quarter driven by the benefit of recently completed Hawthorne acquisitions.
For the quarter ended December 30, 2017, GAAP loss from continuing operations was $0.35 per share compared with $0.97 per share in the prior year as the Company recognized a net deferred tax benefit of $46 million as a result of the revaluation and reduction of deferred tax liabilities due to the recent tax law changes. The non-GAAP adjusted loss was $1.08 per share, compared with a loss of $0.88 per share for the same period a year ago largely due to the unfavorable impact of lower tax rate and share count in a loss-making quarter. Due to the seasonal nature of the lawn and garden category, the Company reports a loss each year during its first quarter.
“As we prepare for the start of the lawn and garden season, our core business is on pace with our internal expectations and we continue to expect solid consumer and retailer engagement once the weather breaks,” said Jim Hagedorn, chairman and chief executive officer. “In our Hawthorne segment, growth was driven by acquisitions. Excluding acquisitions, sales declined roughly $12 million from the prior year, which we attribute to the slower-than-expected pace of regulatory changes in California.”
“While we view the recent slow down within Hawthorne as temporary, it has continued into the second quarter. We now expect full-year organic sales growth at Hawthorne will be flat assuming a return to normal market conditions in the second half of the year. Our long-term prospects for this business remain unchanged and we continue to see Hawthorne having strong long-term growth.”
First quarter details
For the fiscal first quarter, the Company reported sales of $221.5 million, up 7 percent from $207.4 million a year earlier. Sales for the Hawthorne segment increased 20 percent to $76.7 million. U.S. Consumer segment sales were flat at $125.9 million.
The company-wide gross margin rates decreased to 15.3 percent from 17.7 percent. The change was driven primarily from lower sales volume within Hawthorne. Selling, general and administrative expenses (SG&A) increased 4 percent to $108.2 million due to newly acquired businesses and were in line with the Company’s internal expectation.
On a company-wide basis, GAAP loss from continuing operations was $20.0 million, or $0.35 per share, compared with a loss of $58.1 million, or $0.97 per share for the first quarter of fiscal 2017. Those results include impairment, restructuring, and other charges, and the impacts of the recent U.S. tax law changes. Excluding those items, the Non-GAAP adjusted loss from continuing operations was $62.2 million, or $1.08 per share, compared with $52.6 million, or $0.88 per share, last year. The year-over-year difference in non-GAAP performance is primarily non-operating in nature and due to both lower tax rate and share count, which had a negative impact of approximately $0.15 on earnings.
“We’ve started the year in a solid place, even with the decline in Hawthorne sales,” said Randy Coleman, chief financial officer. “I remain confident in the visibility we have on cost of goods and remain optimistic about our continued focus on controlling SG&A and improving our free cash flow.”
The Company also said it expects its effective tax rate to decline to a range of 26 to 27 percent in fiscal 2018, a rate that will likely remain consistent in future years. As a result of the lower rate, the Company increased its Non-GAAP adjusted earnings guidance to a range of $4.60 to $4.80 per share from the previous range of $4.15 to $4.35 per share. In addition, the Company reduced its full-year sales outlook to a range of 2 to 4 percent due to the slow start at Hawthorne but maintained a consistent operating earnings outlook primarily due to tighter SG&A spending.
“We appreciate both President Trump and Congress showing the courage to address the uncompetitive nature of the corporate tax structure in the U.S.,” Hagedorn said. “While our shareholders will benefit from this reduction, our associates will as well. We expect the first 20 percent of the savings we achieve will eventually result in higher wages for most of our hourly associates and improvements in our benefit programs for all of our people.”
About ScottsMiracle-Gro
The Scotts Miracle-Gro Company is the world’s largest marketer of branded consumer products for lawn and garden care. The Company’s brands are among the most recognized in the industry. The Company’s Scotts®, Miracle-Gro® and Ortho® brands are market-leading in their categories, as is the consumer Roundup® brand, which is marketed in the U.S. and certain other countries by Scotts and owned by Monsanto. We maintain a minority interest in TruGreen®, the largest residential lawn care service business, and in Bonnie Plants®, the largest marketer of edible gardening plants in retail channels. The Company’s wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting and other materials used in the hydroponic growing segment. For additional information, visit us at www.scottsmiraclegro.com.
Forward Looking Non-GAAP Measures
In this release, the Company provides an outlook for fiscal 2018 non-GAAP adjusted EPS. The Company does not provide a GAAP EPS outlook, which is the most directly comparable GAAP measure to non-GAAP adjusted EPS, because changes in the items that the Company excludes from GAAP EPS to calculate non-GAAP adjusted EPS, described above, can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of the Company’s routine operating activities. Additionally, due to their unpredictability, management does not forecast the excluded items for internal use and therefore cannot create or rely on a GAAP EPS outlook without unreasonable efforts. The timing and amount of any of the excluded items could significantly impact the Company’s GAAP EPS. As a result, the Company does not provide a reconciliation of guidance for non-GAAP adjusted EPS to GAAP EPS, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K.
Contact:
Jim King
Senior Vice President
Investor Relations & Corporate Affairs
(937) 578-5622
The Scotts Miracle Gro Co is operative in the agricultural industry. It manufactures and sells dry, granular slow-release lawn fertilizers, combination lawn fertilizer and control products.14111 Scottslawn Road Marysville, OH, 43041
USA
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