Scotts Announces Q4 Financials

MARYSVILLE, Ohio, – The Scotts Co. Thursday announced that strong sales in North America and Scotts LawnService, coupled with significant margin expansion, led to net income growth in fiscal 2004 of 18 percent on an adjusted basis, and down 3 percent from 2003 on a reported basis.

For the year ended Sept. 30, Scotts reported record company-wide sales of $2 billion, up 8 percent from $1.9 billion last year. Excluding the impact of foreign exchange, sales were up 5 percent over the prior year.

Adjusted net income for the year was a record $135.3 million, or $4.06 per diluted share, compared with $114.7 million, or $3.57 per diluted share, for the same period last year. Current period-adjusted net income excludes restructuring and other non-recurring charges of $34.4 million, net of tax. Including these restructuring and non-recurring items, reported net income for the year was $100.9 million, or $3.03 per diluted share compared to $103.8 million, or $3.23 for last year.

In North America, sales increased 6 percent to $250.4 million versus $235.5 million for last year’s comparable period driven by continued strength in sales of fall season products. Scotts LawnService sales for the fourth quarter increased 17 percent to $50.4 from $43.1 million last year. Additionally, on Oct. 1, the company acquired Smith & Hawken, a leading brand of garden-inspired products for a reported $68.5 million including the value of acquired tax benefits.

“We posted record results in 2004 while continuing to improve our financial condition, which demonstrates the strength of our brands, our team at Scotts and our commitment to enhancing shareholder value,” says Jim Hagedorn, chairman and chief executive officer. “Our continued focus on executing the fundamentals of our business not only paid off throughout the year but also has Scotts well-positioned for continued growth in 2005.”

During fiscal 2004, the company twice renegotiated its debt facilities to take advantage of its increased financial strength and favorable market conditions. As a result of the refinancing and the company’s election to pre-pay $100 million of term debt, the Company’s capital structure has been significantly improved, resulting in lower interest rate spreads, increased flexibility through an enhanced ability to pre-pay debt and less restrictive covenants. The $34.4 million of net non-recurring charges are primarily related to costs incurred with refinancing.

“Renegotiating our debt facilities in fiscal 2004 was an important element of our financial strategy,” says Chris Nagel, chief financial officer. “Our new structure better reflects our rapidly improving financial position and helps ensure we have the capital and flexibility to support future growth.”

The company says it expects its financial performance in 2005 to be in line with its long-term goal of increasing sales 5 to 7 percent a year and to improve net income by 10 to 12 percent. Scotts plans to provide more details on its outlook for 2005 in early December.

The company will discuss its full-year and fourth-quarter 2004 results during a webcast conference call at 10:00 a.m. EDT today. The call will be available live on the investor relations section of the Scotts’ web site and an archive of the webcast will be available for 12 months.