The Scotts Miracle-Gro Company (NYSE: SMG), the world’s leading
marketer of branded consumer lawn and garden as well as indoor and
hydroponic growing products, today announced its results for the
fourth quarter and fiscal year ended September 30, 2023.
The Company reported fiscal 2023 net sales in
line with guidance and adjusted non-GAAP earnings exceeding
guidance with faster realization of Project Springboard savings. On
a full-year basis, sales declined 10 percent. The company reported
a GAAP loss of $6.79 per share for fiscal 2023. Non-GAAP adjusted
earnings, which exclude impairment, restructuring and other
non-recurring items, were $1.21 per diluted share. The financial
outlook for fiscal 2024 incorporates meaningful progress on margin
recovery while adjusting for a higher share count, effective tax
rate and average cost of borrowing versus fiscal 2023.
“The outcome of fiscal ’23 is stabilization of
the business and a return to a more normal state of operating,”
said Chairman and CEO Jim Hagedorn. “We made measurable progress on
a number of fronts with Project Springboard cost savings, free cash
flow generation and debt reduction. We have secured greater
financial flexibility to drive improved performance and value
creation. We are on a path to margin recovery, growth in our
consumer business and a solution for Hawthorne.
“We have developed an aggressive operating plan
for fiscal ’24 that is built upon strong engagement with our
retailer partners as well as continued diligence with cost control,
free cash flow generation and debt paydown. Additionally, we
upgraded talent at the executive and senior levels with leaders who
bring energy and fresh perspectives. The team and our associates
are committed to the fiscal ‘24 plan and delivering improved
shareholder value.”
Fourth quarter detailsFor the
quarter ended September 30, 2023, company-wide sales decreased 24
percent to $374.5 million. U.S. Consumer segment sales declined 33
percent to $201.0 million, from $302.1 million a year ago, driven
by lower volumes and timing of shipments. Hawthorne segment sales
decreased 11 percent, to $149.7 million, compared with $168.5
million during the same period last year.
GAAP and non-GAAP adjusted gross margin rates
for the quarter were negative 15.2 percent and negative 8.8
percent, respectively. These compare to negative 14.3 percent and
positive 3.5 percent, respectively, in the prior year. The declines
were due primarily to unfavorable fixed cost leverage related to
lower volume along with lower net pricing. Those pressures were
partially offset by distribution savings from Project
Springboard.
Equity in loss of unconsolidated affiliates,
which represents our share of the results of our live goods joint
venture, Bonnie Plants, LLC, includes a non-cash, pre-tax
impairment charge of $94.7 million recorded during the fourth
quarter.
The fourth quarter GAAP net loss was $468.4
million, or $8.33 per share, compared with a prior year loss of
$220.1 million, or $3.97 per share. In addition to the live goods
joint venture impairment, these results include pre-tax charges of
$272.3 million, comprising $229.2 million of non-cash impairments
of intangible assets, goodwill and convertible debt investments as
well as restructuring and other charges of $43.1 million related to
Project Springboard.
Non-GAAP adjusted loss, which excludes
impairment, restructuring and other non-recurring items, was $155.4
million, or $2.77 per share, for the quarter, compared with a loss
of $113.3 million, or $2.04 per share, for the same period last
year.
Full year detailsFor the fiscal
year ended September 30, 2023, company-wide sales decreased 10
percent to $3.55 billion. U.S. Consumer segment sales declined 3
percent to $2.84 billion, from $2.93 billion, mainly driven by
lower volumes partially offset by pricing. Hawthorne segment sales
decreased 35 percent to $467.3 million compared with $716.2 million
during the same period last year.
The GAAP gross margin rate on a full-year basis
was 18.5 percent. The non-GAAP adjusted rate was 23.7 percent.
These compare to 22.2 percent and 26.3 percent, respectively, last
year. The declines are primarily due to unfavorable material costs,
fixed cost leverage and increased excess and obsolete inventory
write-offs, partially offset by favorable net pricing.
SG&A of $551.3 million was 15.5 percent of
net sales and reflects a 10-percent decrease from 2022 and a
25.9-percent decrease over two years primarily driven by continued
cost savings efforts associated with Project Springboard, the
Company’s $300 million cost-savings initiative. Approximately $15
million of the last $100 million phase of Springboard was
accelerated into fiscal 2023. The Company expects approximately
two-thirds of this final phase will be recognized in fiscal 2024
with the remainder to be recognized in fiscal 2025.
Interest expense increased $60.0 million to
$178.1 million for the year primarily due to an increase in average
borrowing rates. The non-GAAP adjusted effective tax rate for the
full year increased to 36.6 percent, from 21.8 percent last year,
primarily driven by the current year impact of valuation allowances
established against certain deferred tax assets, lower pre-tax
income and prior year excess tax benefits associated with employee
share-based compensation.
GAAP net loss was $380.1 million, or $6.79 per
share, compared with a loss of $437.5 million, or $7.88 per share,
in the prior year. Non-GAAP adjusted earnings, which exclude
impairment, restructuring and other non-recurring items, were $68.1
million, or $1.21 per diluted share, compared with $230.0 million,
or $4.10 per diluted share, last year.
Free cash flow for fiscal 2023 increased $680.7
million to $438.2 million mainly driven by reductions to inventory
levels during the year. The Company’s debt-to-EBITDA ratio at the
end of the year was 6.57 times and within the fourth-quarter
covenant maximum of 7.75 times.
“We managed exceptionally well this past year in
the face of many challenges. Our leaders and associates have
relentlessly worked to create outstanding solutions for our
consumers while significantly improving operations and
organizational efficiency,” said Matt Garth, executive vice
president and chief financial & administrative officer.
“Project Springboard cost savings have helped to expand margins and
maintain investments in the core consumer business. Through the
team’s efforts, we were able to close the year ahead of our latest
guidance and turn our full attention to fiscal 2024 planning and
execution.
“In fiscal 2024 we are focusing on maximizing
value with our retail partners and managing controllables. Our
guidance is grounded in our ability to increase shareholder value
through margin recovery, strong free cash flow generation and
improved financial flexibility.”
Fiscal 2024 outlookThe Company
will outline its expectations for fiscal 2024 during today’s
call.
Conference Call and Webcast Scheduled
for 9 a.m. ET Today, November 1The Company will discuss
results during a webcast and conference call today at 9:00 a.m. ET.
To participate in the conference call, please register in advance
at this link. Upon registration, all telephone participants will
receive the dial-in number along with a unique PIN number that can
be used to access the call. If you do not anticipate asking a
question, we recommend joining via the live webcast on the
Company’s investor relations website at http://investor.scotts.com.
The replay of the conference call will also be available on the
Company’s website, where an archive of the press release and any
accompanying information will remain available for at least a
12-month period.
Net sales details
Fiscal Fourth Quarter (July - September 2023) |
Net Sales Drivers (1) |
Volume & Mix |
Foreign Exchange |
Price |
Other(2) |
Net Sales |
U.S. Consumer |
(30)% |
–% |
(3)% |
–% |
(33)% |
Hawthorne |
(13)% |
3% |
(1)% |
–% |
(11)% |
Other |
(6)% |
(2)% |
11% |
–% |
3% |
Total SMG |
(23)% |
1% |
(2)% |
–% |
(24)% |
Fiscal Year 2023 (October 2022 - September
2023) |
Net Sales Drivers (1) |
Volume & Mix |
Foreign Exchange |
Price |
Other(2) |
Net Sales |
U.S. Consumer |
(8)% |
–% |
5% |
–% |
(3)% |
Hawthorne |
(38)% |
–% |
2% |
1% |
(35)% |
Other |
(16)% |
(5)% |
7% |
–% |
(14)% |
Total SMG |
(14)% |
(1)% |
5% |
–% |
(10)% |
(1) Net Sales percentage changes are
approximations based on quantitative formulas that are consistently
applied(2) Other includes the impact of acquisitions and
divestitures and rounding impacts necessary to reconcile volume to
net sales
About ScottsMiracle-GroWith
approximately $3.6 billion in sales, the 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. The Company’s wholly-owned
subsidiary, The Hawthorne Gardening Company, is a leading provider
of nutrients, lighting, and other materials used in the indoor and
hydroponic growing segment. For additional information, visit us at
www.scottsmiraclegro.com.
Cautionary Note Regarding
Forward-Looking Statements Statements contained in this
press release, other than statements of historical fact, which
address activities, events and developments that the Company
expects or anticipates will or may occur in the future, including,
but not limited to, information regarding the future economic
performance and financial condition of the Company, the plans and
objectives of the Company’s management, and the Company’s
assumptions regarding such performance and plans are
“forward-looking statements” within the meaning of the U.S. federal
securities laws that are subject to risks and uncertainties. These
forward-looking statements generally can be identified as
statements that include phrases such as “guidance,” “outlook,”
“projected,” “believe,” “target,” “predict,” “estimate,”
“forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,”
“intend,” “plan,” “foresee,” “likely,” “will,” “should” or other
similar words or phrases. Actual results could differ materially
from the forward-looking information in this release due to a
variety of factors, including, but not limited to:
- An economic downturn and economic uncertainty may adversely
affect demand for the Company’s products;
- If the Company underestimates or overestimates demand for its
products and does not maintain appropriate inventory levels, its
net sales and/or working capital could be negatively impacted;
- The Company’s operations, financial condition or reputation,
may be impaired if its information technology systems fail to
perform adequately or if it is the subject of a data breach or
cyber-attack;
- Climate change and unfavorable weather conditions could
adversely impact financial results;
- Our success depends upon the retention and availability of key
personnel and the effective succession of senior management;
- Our workforce reductions may cause undesirable consequences and
our results of operations may be harmed;
- Disruptions in availability or increases in the prices of raw
materials, fuel or transportation costs could adversely affect our
results of operations;
- A significant interruption in the operation of the Company’s or
its suppliers’ facilities could impact the Company’s capacity to
produce products and service its customers, which could adversely
affect the Company’s revenues and earnings;
- Acquisitions, other strategic alliances and investments could
result in operating difficulties, dilution and other harmful
consequences that may adversely impact the Company’s business and
results of operations;
- Compliance with environmental and other public health
regulations or changes in such regulations or regulatory
enforcement priorities could increase our costs of doing business
or limit our ability to market all of our products;
- Because of the concentration of the Company’s sales to a small
number of retail customers, the loss of one or more of, or
significant reduction in orders from, its top customers, or a
material reduction in the inventory of the Company’s products that
they carry, could adversely affect the Company’s financial
results;
- The Company’s indebtedness could limit its flexibility and
adversely affect its financial condition;
- The Company’s decision to maintain, reduce or discontinue
paying cash dividends to its shareholders or repurchasing its
Common Shares could cause the market price for its common shares to
decline;
- If the perception of the Company’s brands or organizational
reputation are damaged, its customers, distributors and retailers
may react negatively, which could materially and adversely affect
the Company’s business, financial condition and results of
operations;
- In the event the Third Restated Marketing Agreement for
consumer Roundup products terminates, or Monsanto’s consumer
Roundup business materially declines the Company would lose a
substantial source of future earnings and overhead expense
absorption; and
- Hagedorn Partnership, L.P. beneficially owns approximately 25%
of the Company’s common shares and can significantly influence
decisions that require the approval of shareholders.
Additional detailed information concerning a number of the
important factors that could cause actual results to differ
materially from the forward-looking information contained in this
release is readily available in the Company’s publicly filed
quarterly, annual and other reports. The Company disclaims any
obligation to update developments of these risk factors or to
announce publicly any revision to any of the forward-looking
statements contained in this release, or to make corrections to
reflect future events or developments.
For investor inquiries:Aimee
DeLucaSr. Vice PresidentInvestor
Relationsaimee.deluca@scotts.com(937)
578-5621
For media inquiries:Tom
MatthewsChief Communications
OfficerCorporate Affairs(937)
644-7044
|
|
|
|
Three Months Ended |
|
|
|
Twelve Months Ended |
|
|
|
|
Footnotes |
|
September 30,2023 |
|
September 30,2022 |
|
% Change |
|
September 30,2023 |
|
September 30,2022 |
|
% Change |
Net sales |
|
|
|
$ |
374.5 |
|
|
$ |
493.6 |
|
|
(24 |
)% |
|
$ |
3,551.3 |
|
|
$ |
3,924.1 |
|
|
(10 |
)% |
Cost of sales |
|
|
|
|
407.5 |
|
|
|
475.4 |
|
|
|
|
|
2,708.3 |
|
|
|
2,891.1 |
|
|
|
Cost of sales—impairment,
restructuring and other |
|
|
|
|
23.9 |
|
|
|
89.0 |
|
|
|
|
|
185.7 |
|
|
|
160.1 |
|
|
|
Gross margin |
|
|
|
|
(56.9 |
) |
|
|
(70.8 |
) |
|
20 |
% |
|
|
657.3 |
|
|
|
872.9 |
|
|
(25 |
)% |
% of sales |
|
|
|
(15.2 |
)% |
|
(14.3 |
)% |
|
|
|
|
18.5 |
% |
|
|
22.2 |
% |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
108.0 |
|
|
|
118.4 |
|
|
(9 |
)% |
|
|
551.3 |
|
|
|
613.0 |
|
|
(10 |
)% |
Impairment, restructuring and other |
|
|
|
|
248.5 |
|
|
|
32.9 |
|
|
|
|
|
280.5 |
|
|
|
693.1 |
|
|
|
Other (income) expense, net |
|
|
|
|
2.7 |
|
|
|
1.8 |
|
|
|
|
|
(0.1 |
) |
|
|
0.8 |
|
|
|
Loss from operations |
|
|
|
|
(416.1 |
) |
|
|
(223.9 |
) |
|
(86 |
)% |
|
|
(174.4 |
) |
|
|
(434.0 |
) |
|
60 |
% |
% of sales |
|
|
|
(111.1 |
)% |
|
(45.4 |
)% |
|
|
|
(4.9 |
)% |
|
(11.1 |
)% |
|
|
Equity in loss of
unconsolidated affiliates |
|
|
|
|
104.6 |
|
|
|
14.2 |
|
|
|
|
|
101.1 |
|
|
|
12.9 |
|
|
|
Interest expense |
|
|
|
|
40.0 |
|
|
|
34.9 |
|
|
|
|
|
178.1 |
|
|
|
118.1 |
|
|
|
Other non-operating income,
net |
|
|
|
|
— |
|
|
|
(1.4 |
) |
|
|
|
|
(0.3 |
) |
|
|
(6.9 |
) |
|
|
Loss before income taxes |
|
|
|
|
(560.7 |
) |
|
|
(271.6 |
) |
|
(106 |
)% |
|
|
(453.3 |
) |
|
|
(558.1 |
) |
|
19 |
% |
Income tax benefit |
|
|
|
|
(92.3 |
) |
|
|
(51.5 |
) |
|
|
|
|
(73.2 |
) |
|
|
(120.6 |
) |
|
|
Net loss |
|
|
|
$ |
(468.4 |
) |
|
$ |
(220.1 |
) |
|
(113 |
)% |
|
$ |
(380.1 |
) |
|
$ |
(437.5 |
) |
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per common
share: |
|
(1) |
|
$ |
(8.33 |
) |
|
$ |
(3.97 |
) |
|
(110 |
)% |
|
$ |
(6.79 |
) |
|
$ |
(7.88 |
) |
|
14 |
% |
Diluted net loss per common
share: |
|
(2) (4) |
|
$ |
(8.33 |
) |
|
$ |
(3.97 |
) |
|
(110 |
)% |
|
$ |
(6.79 |
) |
|
$ |
(7.88 |
) |
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares used in basic
net loss per share calculation |
|
|
|
|
56.2 |
|
|
|
55.5 |
|
|
1 |
% |
|
|
56.0 |
|
|
|
55.5 |
|
|
1 |
% |
Common shares and potential
common shares used in diluted net loss per share calculation |
|
|
|
|
56.2 |
|
|
|
55.5 |
|
|
1 |
% |
|
|
56.0 |
|
|
|
55.5 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(loss) |
|
(3) |
|
$ |
(155.4 |
) |
|
$ |
(113.3 |
) |
|
(37 |
)% |
|
$ |
68.1 |
|
|
$ |
230.0 |
|
|
(70 |
)% |
Adjusted diluted net income
(loss) per common share |
|
(2) (3) (4) |
|
$ |
(2.77 |
) |
|
$ |
(2.04 |
) |
|
(36 |
)% |
|
$ |
1.21 |
|
|
$ |
4.10 |
|
|
(70 |
)% |
Adjusted EBITDA |
|
(3) |
|
$ |
(106.1 |
) |
|
$ |
(71.3 |
) |
|
(49 |
)% |
|
$ |
446.9 |
|
|
$ |
557.9 |
|
|
(20 |
)% |
Note: See
accompanying footnotes. |
|
|
|
|
|
|
|
|
|
|
|
|
The Company divides its operations into three
reportable segments: U.S. Consumer, Hawthorne and Other. U.S.
Consumer consists of the Company’s consumer lawn and garden
business in the United States. Hawthorne consists of the Company’s
indoor and hydroponic gardening business. Other primarily consists
of the Company’s consumer lawn and garden business outside the
United States. 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. In addition,
Corporate consists of general and administrative expenses and
certain other income and expense items not allocated to the
business segments.
The performance of each reportable segment is
evaluated based on several factors, including income (loss) 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 |
|
Twelve Months Ended |
|
September 30,2023 |
|
September 30,2022 |
|
% Change |
|
September 30,2023 |
|
September 30,2022 |
|
% Change |
Net
Sales: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Consumer |
$ |
201.0 |
|
|
$ |
302.1 |
|
|
(33 |
)% |
|
$ |
2,843.7 |
|
|
$ |
2,928.8 |
|
|
(3 |
)% |
Hawthorne |
|
149.7 |
|
|
|
168.5 |
|
|
(11 |
)% |
|
|
467.3 |
|
|
|
716.2 |
|
|
(35 |
)% |
Other |
|
23.8 |
|
|
|
23.0 |
|
|
3 |
% |
|
|
240.3 |
|
|
|
279.1 |
|
|
(14 |
)% |
Consolidated |
$ |
374.5 |
|
|
$ |
493.6 |
|
|
(24 |
)% |
|
$ |
3,551.3 |
|
|
$ |
3,924.1 |
|
|
(10 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit (Loss) (Non-GAAP): |
|
|
|
|
|
|
U.S. Consumer |
$ |
(99.3 |
) |
|
$ |
(52.1 |
) |
|
(91 |
)% |
|
$ |
454.1 |
|
|
$ |
568.6 |
|
|
(20 |
)% |
Hawthorne |
|
(6.4 |
) |
|
|
(23.2 |
) |
|
72 |
% |
|
|
(48.1 |
) |
|
|
(21.1 |
) |
|
(128 |
)% |
Other |
|
(9.4 |
) |
|
|
(2.5 |
) |
|
(276 |
)% |
|
|
12.4 |
|
|
|
20.2 |
|
|
(39 |
)% |
Total Segment Profit (Loss) (Non-GAAP) |
|
(115.1 |
) |
|
|
(77.8 |
) |
|
(48 |
)% |
|
|
418.4 |
|
|
|
567.7 |
|
|
(26 |
)% |
Corporate |
|
(24.3 |
) |
|
|
(16.6 |
) |
|
|
|
|
(101.6 |
) |
|
|
(112.4 |
) |
|
|
Intangible asset
amortization |
|
(4.4 |
) |
|
|
(8.6 |
) |
|
|
|
|
(25.2 |
) |
|
|
(37.1 |
) |
|
|
Impairment, restructuring and
other |
|
(272.3 |
) |
|
|
(120.9 |
) |
|
|
|
|
(466.0 |
) |
|
|
(852.2 |
) |
|
|
Equity in loss of
unconsolidated affiliates |
|
(104.6 |
) |
|
|
(14.2 |
) |
|
|
|
|
(101.1 |
) |
|
|
(12.9 |
) |
|
|
Interest expense |
|
(40.0 |
) |
|
|
(34.9 |
) |
|
|
|
|
(178.1 |
) |
|
|
(118.1 |
) |
|
|
Other non-operating income,
net |
|
— |
|
|
|
1.4 |
|
|
|
|
|
0.3 |
|
|
|
6.9 |
|
|
|
Loss before income taxes (GAAP) |
$ |
(560.7 |
) |
|
$ |
(271.6 |
) |
|
(106 |
)% |
|
$ |
(453.3 |
) |
|
$ |
(558.1 |
) |
|
19 |
% |
|
|
September 30,2023 |
|
September 30,2022 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
31.9 |
|
|
$ |
86.8 |
|
Accounts receivable, net |
|
|
304.2 |
|
|
|
378.8 |
|
Inventories |
|
|
880.3 |
|
|
|
1,343.5 |
|
Prepaid and other current assets |
|
|
181.4 |
|
|
|
172.8 |
|
Total current assets |
|
|
1,397.8 |
|
|
|
1,981.9 |
|
Investment in unconsolidated affiliates |
|
|
91.9 |
|
|
|
193.8 |
|
Property, plant and equipment, net |
|
|
610.3 |
|
|
|
606.0 |
|
Goodwill |
|
|
243.9 |
|
|
|
254.0 |
|
Intangible assets, net |
|
|
436.7 |
|
|
|
580.2 |
|
Other assets |
|
|
633.1 |
|
|
|
680.9 |
|
Total assets |
|
$ |
3,413.7 |
|
|
$ |
4,296.8 |
|
LIABILITIES AND EQUITY (DEFICIT) |
Current liabilities: |
|
|
|
|
Current portion of debt |
|
$ |
52.3 |
|
|
$ |
144.3 |
|
Accounts payable |
|
|
271.2 |
|
|
|
422.6 |
|
Other current liabilities |
|
|
450.2 |
|
|
|
397.0 |
|
Total current liabilities |
|
|
773.7 |
|
|
|
963.9 |
|
Long-term debt |
|
|
2,557.4 |
|
|
|
2,826.2 |
|
Other liabilities |
|
|
349.9 |
|
|
|
359.0 |
|
Total liabilities |
|
|
3,681.0 |
|
|
|
4,149.1 |
|
Equity (deficit) |
|
|
(267.3 |
) |
|
|
147.7 |
|
Total liabilities and equity (deficit) |
|
$ |
3,413.7 |
|
|
$ |
4,296.8 |
|
|
Year Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
OPERATING ACTIVITIES |
|
|
|
Net loss |
$ |
(380.1 |
) |
|
$ |
(437.5 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
Impairment, restructuring and other |
|
288.6 |
|
|
|
666.8 |
|
Share-based compensation expense |
|
68.9 |
|
|
|
34.3 |
|
Depreciation |
|
67.3 |
|
|
|
68.1 |
|
Amortization |
|
25.2 |
|
|
|
37.1 |
|
Deferred taxes |
|
(58.7 |
) |
|
|
(182.8 |
) |
Equity in loss of unconsolidated affiliates |
|
101.1 |
|
|
|
12.9 |
|
Other, net |
|
1.3 |
|
|
|
1.1 |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
Accounts receivable |
|
77.7 |
|
|
|
102.8 |
|
Inventories |
|
450.5 |
|
|
|
(203.8 |
) |
Prepaid and other current assets |
|
18.6 |
|
|
|
(3.3 |
) |
Accounts payable |
|
(153.6 |
) |
|
|
(171.2 |
) |
Other current liabilities |
|
52.0 |
|
|
|
(68.4 |
) |
Other non-current items |
|
(30.7 |
) |
|
|
20.1 |
|
Other, net |
|
2.9 |
|
|
|
(5.2 |
) |
Net cash provided by (used in) operating activities |
|
531.0 |
|
|
|
(129.0 |
) |
INVESTING ACTIVITIES |
|
|
|
Proceeds from sale of long-lived assets |
|
2.5 |
|
|
|
63.3 |
|
Investments in property, plant and equipment |
|
(92.8 |
) |
|
|
(113.5 |
) |
Proceeds from loans receivable |
|
37.0 |
|
|
|
— |
|
Payment for acquisitions, net of cash acquired |
|
— |
|
|
|
(237.3 |
) |
Purchase of convertible debt investments |
|
— |
|
|
|
(25.0 |
) |
Other investing, net |
|
(12.4 |
) |
|
|
29.3 |
|
Net cash used in investing activities |
|
(65.7 |
) |
|
|
(283.2 |
) |
FINANCING ACTIVITIES |
|
|
|
Borrowings under revolving and bank lines of credit and term
loans |
|
1,336.2 |
|
|
|
3,617.4 |
|
Repayments under revolving and bank lines of credit and term
loans |
|
(1,689.8 |
) |
|
|
(2,937.3 |
) |
Financing and issuance fees |
|
(6.4 |
) |
|
|
(9.6 |
) |
Dividends paid |
|
(149.1 |
) |
|
|
(166.2 |
) |
Purchase of Common Shares |
|
(9.3 |
) |
|
|
(257.9 |
) |
Cash received from exercise of stock options |
|
2.3 |
|
|
|
3.3 |
|
Other financing, net |
|
(4.0 |
) |
|
|
5.6 |
|
Net cash (used in) provided by financing activities |
|
(520.1 |
) |
|
|
255.3 |
|
Effect
of exchange rate changes on cash |
|
(0.1 |
) |
|
|
(0.4 |
) |
Net
decrease in cash and cash equivalents |
|
(54.9 |
) |
|
|
(157.3 |
) |
Cash and
cash equivalents at beginning of year |
|
86.8 |
|
|
|
244.1 |
|
Cash and
cash equivalents at end of year |
$ |
31.9 |
|
|
$ |
86.8 |
|
|
|
Three Months Ended September 30, 2023 |
|
Three Months Ended September 30, 2022 |
|
|
AsReported(GAAP) |
Impairment,Restructuringand Other |
Equityin loss ofunconsolidatedaffiliates |
Adjusted (Non-GAAP) |
|
AsReported(GAAP) |
Impairment,Restructuringand Other |
Adjusted(Non-GAAP) |
Gross margin |
|
$ |
(56.9 |
) |
$ |
(23.9 |
) |
$ |
— |
|
$ |
(33.0 |
) |
|
$ |
(70.8 |
) |
$ |
(88.0 |
) |
$ |
17.2 |
|
Gross margin as a % of
sales |
|
(15.2 |
)% |
|
|
(8.8 |
)% |
|
(14.3 |
)% |
|
|
3.5 |
% |
Loss from operations |
|
|
(416.1 |
) |
|
(272.3 |
) |
|
— |
|
|
(143.7 |
) |
|
|
(223.9 |
) |
|
(120.9 |
) |
|
(103.0 |
) |
Loss from operations as a % of
sales |
|
(111.1 |
)% |
|
|
(38.4 |
)% |
|
(45.4 |
)% |
|
(20.9 |
)% |
Loss before income taxes |
|
|
(560.7 |
) |
|
(272.3 |
) |
|
(94.7 |
) |
|
(193.7 |
) |
|
|
(271.6 |
) |
|
(120.9 |
) |
|
(150.7 |
) |
Income tax benefit |
|
|
(92.3 |
) |
|
(30.3 |
) |
|
(23.7 |
) |
|
(38.3 |
) |
|
|
(51.5 |
) |
|
(14.2 |
) |
|
(37.4 |
) |
Net loss |
|
|
(468.4 |
) |
|
(242.1 |
) |
|
(70.9 |
) |
|
(155.4 |
) |
|
|
(220.1 |
) |
|
(106.7 |
) |
|
(113.3 |
) |
Diluted net loss per
common share |
|
|
(8.33 |
) |
|
(4.31 |
) |
|
(1.26 |
) |
|
(2.77 |
) |
|
|
(3.97 |
) |
|
(1.92 |
) |
|
(2.04 |
) |
Common shares and potential
common shares used in diluted net loss per share calculation
(4) |
|
|
56.2 |
|
|
|
|
56.2 |
|
|
|
55.5 |
|
|
|
55.5 |
|
Calculation of
Adjusted EBITDA (3): |
|
Three Months Ended September 30, 2023 |
|
Three Months Ended September 30, 2022 |
Net loss (GAAP) |
|
$ |
(468.4 |
) |
|
$ |
(220.1 |
) |
Income tax benefit |
|
|
(92.3 |
) |
|
|
(51.5 |
) |
Interest expense |
|
|
40.0 |
|
|
|
34.9 |
|
Depreciation |
|
|
17.8 |
|
|
|
17.8 |
|
Amortization |
|
|
4.4 |
|
|
|
8.6 |
|
Impairment, restructuring and other charges |
|
|
272.3 |
|
|
|
120.9 |
|
Equity in loss of unconsolidated affiliates |
|
|
104.6 |
|
|
|
14.2 |
|
Interest income |
|
|
(0.7 |
) |
|
|
(1.7 |
) |
Share-based compensation expense |
|
|
16.2 |
|
|
|
5.6 |
|
Adjusted EBITDA
(Non-GAAP) |
|
$ |
(106.1 |
) |
|
$ |
(71.3 |
) |
|
|
|
|
|
Note: See
accompanying footnotes. |
The sum of the
components may not equal due to rounding. |
|
|
Twelve Months Ended September 30, 2023 |
|
Twelve Months Ended September 30, 2022 |
|
|
AsReported(GAAP) |
Impairment,Restructuringand Other |
Equityin loss ofunconsolidatedaffiliates |
Adjusted (Non-GAAP) |
|
AsReported(GAAP) |
Impairment,Restructuringand Other |
Adjusted(Non-GAAP) |
Gross margin |
|
$ |
657.3 |
|
$ |
(185.6 |
) |
$ |
— |
|
$ |
842.9 |
|
|
$ |
872.9 |
|
$ |
(159.1 |
) |
$ |
1,032.0 |
|
Gross margin as a % of
sales |
|
|
18.5 |
% |
|
|
|
23.7 |
% |
|
|
22.2 |
% |
|
|
26.3 |
% |
Income (loss) from
operations |
|
|
(174.4 |
) |
|
(466.0 |
) |
|
— |
|
|
291.7 |
|
|
|
(434.0 |
) |
|
(852.2 |
) |
|
418.2 |
|
Income (loss) from operations
as a % of sales |
|
(4.9 |
)% |
|
|
|
8.2 |
% |
|
(11.1 |
)% |
|
|
10.7 |
% |
Income (loss) before income
taxes |
|
|
(453.3 |
) |
|
(466.0 |
) |
|
(94.7 |
) |
|
107.4 |
|
|
|
(558.1 |
) |
|
(852.2 |
) |
|
294.1 |
|
Income tax expense
(benefit) |
|
|
(73.2 |
) |
|
(88.8 |
) |
|
(23.7 |
) |
|
39.3 |
|
|
|
(120.6 |
) |
|
(184.7 |
) |
|
64.1 |
|
Net income
(loss) |
|
|
(380.1 |
) |
|
(377.2 |
) |
|
(70.9 |
) |
|
68.1 |
|
|
|
(437.5 |
) |
|
(667.6 |
) |
|
230.0 |
|
Diluted net income
(loss) per common share |
|
|
(6.79 |
) |
|
(6.69 |
) |
|
(1.26 |
) |
|
1.21 |
|
|
|
(7.88 |
) |
|
(11.90 |
) |
|
4.10 |
|
Common shares and potential
common shares used in diluted net income (loss) per share
calculation (4) |
|
|
56.0 |
|
|
|
|
56.4 |
|
|
|
55.5 |
|
|
|
56.1 |
|
Calculation of
Adjusted EBITDA (3): |
|
Twelve Months Ended September 30, 2023 |
|
Twelve Months Ended September 30, 2022 |
Net loss (GAAP) |
|
$ |
(380.1 |
) |
|
$ |
(437.5 |
) |
Income tax benefit |
|
|
(73.2 |
) |
|
|
(120.6 |
) |
Interest expense |
|
|
178.1 |
|
|
|
118.1 |
|
Depreciation |
|
|
67.3 |
|
|
|
68.1 |
|
Amortization |
|
|
25.2 |
|
|
|
37.1 |
|
Impairment, restructuring and other charges |
|
|
466.0 |
|
|
|
852.2 |
|
Equity in loss of unconsolidated affiliates |
|
|
101.1 |
|
|
|
12.9 |
|
Interest income |
|
|
(6.4 |
) |
|
|
(6.7 |
) |
Share-based compensation expense |
|
|
68.9 |
|
|
|
34.3 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
446.9 |
|
|
$ |
557.9 |
|
|
|
|
|
|
Note: See
accompanying footnotes. |
The sum of the
components may not equal due to rounding. |
|
|
Year Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
Calculation of free
cash flow (3): |
|
|
|
|
Net cash provided by (used in) operating activities (GAAP) |
|
$ |
531.0 |
|
|
$ |
(129.0 |
) |
Investments in property, plant and equipment |
|
|
(92.8 |
) |
|
|
(113.5 |
) |
Free cash flow
(Non-GAAP) |
|
$ |
438.2 |
|
|
$ |
(242.5 |
) |
|
|
|
|
|
Note: See
accompanying footnotes. |
(1) Basic net income (loss) per common share
amounts are calculated by dividing net income (loss) by the
weighted average number of common shares outstanding during the
period.
(2) Diluted net income (loss) per common share
amounts are calculated by dividing net income (loss) 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
investors with a supplemental comparison of operating results and
trends for the periods presented. Management believes these
non-GAAP financial measures are also useful to investors as such
measures allow investors to evaluate performance using the same
metrics that management uses to evaluate past performance and
prospects for future performance. Management views free cash flow
as an important measure because it is one factor used in
determining the amount of cash available for dividends and
discretionary investment.
Exclusions from Non-GAAP Financial Measures
Non-GAAP financial measures reflect adjustments
based on the following items:
- Impairments, which are excluded
because they do not occur in or reflect the ordinary course of the
Company’s ongoing business operations and their exclusion results
in a metric that provides supplemental information about the
sustainability of operating performance.
- Restructuring and employee
severance costs, which include charges for discrete projects or
transactions that fundamentally change the Company’s operations and
are excluded because they are not part of the ongoing operations of
its underlying business, which includes normal levels of
reinvestment in the business.
- Costs related to refinancing, which
are excluded because they do not typically occur in the normal
course of business and may obscure analysis of trends and financial
performance. Additionally, the amount and frequency of these types
of charges is not consistent and is significantly impacted by the
timing and size of debt financing transactions.
- Discontinued operations and other
unusual items, which include costs or gains related to discrete
projects or transactions and are excluded because they are not
comparable from one period to the next and are not part of the
ongoing operations of the Company’s underlying business.
The tax effect for each of the items listed
above is determined using the tax rate and other tax attributes
applicable to the item and the jurisdiction(s) in which the item is
recorded.
Definitions of Non-GAAP Financial Measures
The reconciliations of non-GAAP disclosure items
include the following financial measures that are not calculated in
accordance with GAAP and are utilized by management in evaluating
the performance of the business, engaging in financial and
operational planning, determining incentive compensation and
determining the amount of cash available for dividends and
discretionary investments, and by investors and analysts in
evaluating performance of the business:
Adjusted
gross margin: Gross margin excluding impairment,
restructuring and other charges / recoveries.Adjusted
income (loss) from operations: Income (loss) from
operations excluding impairment, restructuring and other charges /
recoveries.Adjusted income (loss) before income
taxes: Income (loss) before income taxes excluding
impairment, restructuring and other charges / recoveries, costs
related to refinancing and certain other non-operating income /
expense items.Adjusted income tax expense
(benefit): Income tax expense (benefit) excluding the tax
effect of impairment, restructuring and other charges / recoveries,
costs related to refinancing and certain other non-operating income
/ expense items.Adjusted net income (loss): Net
income (loss) excluding impairment, restructuring and other charges
/ recoveries, costs related to refinancing and certain other
non-operating income / expense items, each net of
tax.Adjusted diluted net income (loss) per common
share: Diluted net income (loss) per common share
excluding impairment, restructuring and other charges / recoveries,
costs related to refinancing and certain other non-operating income
/ expense items, each net of tax.Adjusted EBITDA:
Net income (loss) before interest, taxes, depreciation and
amortization as well as certain other items such as the impact of
the cumulative effect of changes in accounting, costs associated
with debt refinancing and other non-recurring or non-cash items
affecting net income (loss). A form of Adjusted EBITDA is used in
agreements governing the Company’s outstanding indebtedness for
debt covenant compliance purposes. Adjusted EBITDA as used in those
agreements includes additional adjustments to the Adjusted EBITDA
presented in the Company’s earnings press releases and investor
presentations which may decrease or increase Adjusted EBITDA for
purposes of the Company’s financial covenants. Free cash
flow: Net cash provided by (used in) operating activities
reduced by investments in property, plant and equipment.
For the three and twelve months ended
September 30, 2023, the following items were adjusted, in
accordance with the definitions above, to arrive at the non-GAAP
financial measures:
- During the three and twelve months
ended September 30, 2023, the Company recognized non-cash,
pre-tax goodwill and intangible asset impairment charges of $127.9
million in the “Impairment, restructuring and other” line in the
Condensed Consolidated Statements of Operations, comprised of
$117.7 million of finite-lived intangible asset impairment charges
associated with the Hawthorne segment and $10.3 million of goodwill
impairment charges associated with the Other segment.
- During the three and twelve months
ended September 30, 2023, the Company recognized a non-cash,
pre-tax other-than-temporary impairment charge related to its
convertible debt investments of $101.3 million in the “Impairment,
restructuring and other” line in the Condensed Consolidated
Statements of Operations.
- During the three and twelve months
ended September 30, 2023, the Company recognized a non-cash,
pre-tax impairment charge of $94.7 million associated with its
investment in Bonnie Plants, LLC in the “Equity in loss of
unconsolidated affiliates” line in the Condensed Consolidated
Statements of Operations.
- During the three and twelve months
ended September 30, 2023, the Company established a valuation
allowance against certain deferred tax assets associated with
non-cash impairment charges, which resulted in the recognition of
additional tax expense of $29.7 million in the “Income tax benefit”
line in the Condensed Consolidated Statements of Operations.
- During fiscal 2022, the Company
began implementing a series of Company-wide organizational changes
and initiatives intended to create operational and management-level
efficiencies. As part of this restructuring initiative, the Company
is reducing the size of its supply chain network, reducing staffing
levels and implementing other cost-reduction initiatives. During
the three and twelve months ended September 30, 2023, the
Company incurred costs of $23.9 million and $184.8 million,
respectively, in the “Cost of sales—impairment, restructuring and
other” line in the Condensed Consolidated Statements of Operations
and $19.1 million and $44.1 million, respectively, in the
“Impairment, restructuring and other” line in the Condensed
Consolidated Statements of Operations associated with this
restructuring initiative primarily related to inventory write-down
charges, employee termination benefits, facility closure costs and
impairment of right-of-use assets and property, plant and
equipment.
For the three and twelve months ended
September 30, 2022, the following items were adjusted, in
accordance with the definitions above, to arrive at the non-GAAP
financial measures:
- During the three and twelve months
ended September 30, 2022, the Company recognized non-cash,
pre-tax goodwill and intangible asset impairment charges of zero
and $632.4 million, respectively, associated with an interim
impairment review for its Hawthorne segment in the “Impairment,
restructuring and other” line in the Condensed Consolidated
Statements of Operations, comprised of $522.4 million of goodwill
impairment charges and $110.0 million of finite-lived intangible
asset impairment charges.
- During the three and twelve months
ended September 30, 2022, the Company incurred inventory
write-down charges of $74.9 million and $120.9 million,
respectively, in the “Cost of sales—impairment, restructuring and
other” line in the Condensed Consolidated Statements of Operations
and incurred finite-lived intangible asset impairment charges of
$35.3 million in the “Impairment, restructuring and other” line in
the Condensed Consolidated Statements of Operations associated with
its decision to discontinue and exit the market for certain
Hawthorne lighting products and brands.
- During fiscal 2022, the Company
began implementing a series of organizational changes and
initiatives intended to create operational and management-level
efficiencies. During the three and twelve months ended
September 30, 2022, the Company incurred costs of $11.6
million and $36.8 million, respectively, in the “Cost of
sales—impairment, restructuring and other” line in the Condensed
Consolidated Statements of Operations and $7.5 million and $28.4
million, respectively, in the “Impairment, restructuring and other”
line in the Condensed Consolidated Statements of Operations
primarily related to employee termination benefits and impairment
of property, plant and equipment associated with this restructuring
initiative.
- During the three and twelve months
ended September 30, 2022, the Company recognized gains of
$11.9 million and $16.2 million, respectively, in the “Impairment,
restructuring and other” line in the Condensed Consolidated
Statements of Operations associated with the sale of property,
plant and equipment.
Forward Looking Non-GAAP Measures
In this release, the Company presents certain
forward-looking non-GAAP measures. The Company does not provide
outlook on a GAAP basis because changes in the items that the
Company excludes from GAAP to calculate the comparable non-GAAP
measure, 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 many of the excluded items for internal use and
therefore cannot create or rely on a GAAP outlook without
unreasonable efforts. The occurrence, timing and amount of any of
the items excluded from GAAP to calculate non-GAAP could
significantly impact the Company’s GAAP results. As a result, the
Company does not provide a reconciliation of forward-looking
non-GAAP measures to GAAP measures, in reliance on the unreasonable
efforts exception provided under Item 10(e)(1)(i)(B) of Regulation
S-K.
(4) Due to the GAAP net loss for the three and
twelve months ended September 30, 2023, diluted average common
shares used in the GAAP diluted loss per common share calculation
excluded potential Common Shares of 0.4 million because the effect
of their inclusion would be anti-dilutive. Due to the non-GAAP net
loss for the three months ended September 30, 2023, diluted
average common shares used in the non-GAAP adjusted diluted loss
per common share calculation excluded potential Common Shares of
0.4 million because the effect of their inclusion would be
anti-dilutive. Diluted average common shares used in the non-GAAP
adjusted diluted income per common share calculation for the twelve
months ended September 30, 2023 included dilutive potential
Common Shares of 0.4 million.
Due to the GAAP net loss for the three and
twelve months ended September 30, 2022, diluted average common
shares used in the GAAP diluted loss per common share calculation
excluded potential Common Shares of 0.2 million and 0.6 million,
respectively, because the effect of their inclusion would be
anti-dilutive. Due to the non-GAAP net loss for the three months
ended September 30, 2022, diluted average common shares used in the
non-GAAP adjusted diluted loss per common share calculation
excluded potential Common Shares of 0.2 million because the effect
of their inclusion would be anti-dilutive. Diluted average common
shares used in the non-GAAP adjusted diluted income per common
share calculation for the twelve months ended September 30, 2022
included dilutive potential Common Shares of 0.6 million.
Grafico Azioni Scotts Miracle Gro (NYSE:SMG)
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