Scotts Raises Forecast, Casts Eyes Abroad

CHICAGO -- Scotts Co., a leading maker of lawn and garden products, on Wednesday raised its earnings forecast and said it was exploring options for its underperforming international business, sending its shares up nearly 7 percent.

The maker of Miracle-Gro fertilizer and Ortho bug and weed killer also said Michel Farkouh, who has led the international business since November 2000, was leaving the company "by mutual agreement."

Scotts said it now expects net income for its fiscal year ending Sept. 30 to rise 13 percent to 16 percent from the prior year, when it earned $114.7 million, or $3.57 per share, excluding special items.

The Marysville, Ohio-based company previously forecast a rise of 10 percent. It credited strong growth in North America for the higher forecast.

Analysts' average earnings estimate was $4.08 a share, a rise of 14.3 percent, according to Reuters Estimates. Analysts' Estimates ranged from $4 to $4.16 a share, or gains of 12 percent to 16.5 percent.

Scotts increased its full-year sales growth forecast to between 7 percent to 8 percent, up from its prior forecast of 6 percent to 7 percent. However, it said its international business would perform below expectations, with total sales down slightly for the year.

"While we are pleased to begin seeing some growth in key markets of our international business, the overall results remain unacceptable," said Chief Executive Jim Hagedorn in a statement. "As such, we are aggressively exploring all options for this business."

Scotts declined to be specific about what options it is considering or when a decision might be made.

For the third quarter, Scotts said it expects net income to rise 8 percent to 10 percent from a year earlier, with sales slightly ahead of its revised forecast for the full year.

Analysts' average third-quarter earnings forecast is $3.14 a share, an increase of 10.2 percent from a year earlier, according to Reuters Estimates. Estimates ranged from $3.04 to $3.20 a share, or gains of 6.6 percent to 12.3 percent.

Scotts also said it is refinancing $400 million of its outstanding term loans to lower interest costs. The new loans also will modify many of the borrowing covenants, it said, giving the company additional operating flexibility.

Scotts said it plans to retire its existing $500 million term loan facilities with the new loans plus $100 million of cash on hand. Scotts shares were up $4.10 to $64.30 in early trade on the New York Stock Exchange.