The Scotts Miracle-Gro Co., based in Marysville, Ohio, reported its fiscal 2013 adjusted earnings improved 39 percent to $2.79 per share due to the company’s strong second half performance in the core U.S. lawn and garden business, including a 7 percent sales increase from Scotts LawnService in the fourth quarter.
Versus its $84.5 million sales during the fourth quarter a year ago, Scotts LawnService rang in $90.2 million in sales in the fourth quarter of 2013. Additionally, operating income for the segment increased10 percent during the quarter to $24.3 million, compared with $22.1 million a year ago.
And while company-wide net sales were flat in 2013 at $2.82 billion—an amount achieved after a 9 percent increase in the second half of the year, including a 10 percent increase in the fourth quarter—Scotts LawnService sales increased 5 percent to $257.8 million for the year, compared to $245.8 million a year ago.
“These results are a giant step forward in returning our business to a proper level of profitability and reflect the deep commitment of our team of associates around the world,” said Jim Hagedorn, chairman and CEO. “Despite dramatic delays in our season due to poor spring weather, consumers were highly engaged in the second half of the year, allowing us to exceed our guidance. …We continue to believe the consumer marketplace remains soft. Therefore, as we did in 2013, we will plan conservatively but look for opportunities to drive better-than-expected results. Our initial outlook is for sales growth of 2 to 3 percent and earnings per share growth of 10 to 15 percent in fiscal 2014, which could represent up to a 60 percent improvement in earnings over a two-year period.”
The company-wide adjusted gross margin rate was 29.7 percent during the fourth quarter, compared with 26.2 percent during the same quarter a year ago. The year-over-year improvement was due to increased pricing, favorable commodity costs, increased sales volume and continued growth in the Scotts LawnService business.
For the year, on an adjusted basis, the company-wide gross margin rate increased 100 basis points to 35 percent. The improvement was attributable primarily to increased pricing, cost-out efforts and other cost efficiencies, partially offset by planned commodity cost inflation and lower-than-expected sales volume.
Also for fiscal 2013, the global consumer segment reported a 20 percent increase in operating income to $406.4 million, compared to $338.3 million a year ago. Scotts LawnService reported a 6 percent increase in operating income to $28.7 million during the year, compared to $27.0 million in fiscal 2012. The consolidated company-wide adjusted income from continuing operations before income taxes increased 39 percent to $274.3 million during fiscal 2013, compared to $197.1 million a year ago.
Cash flow from operations was $342 million in 2013, well above the company’s original projections for the year due to better-than-expected inventory management and a non-recurring cash benefit from a recovery of taxes overpaid in 2012.
“Our focus in 2013 was to significantly improve margin and cash flow, and we succeeded,” Hagedorn said. “In addition to hitting our earnings targets – even on lower sales than we originally projected – we also reduced our leverage ratio during the year and increased our quarterly dividend by 35 percent. That focus will remain core to our near-term thinking as we continue to drive shareholder value through a combination of improved performance and returning cash to shareholders.”
