The Scotts Company today reported record financial results for the second quarter ended April 1, 2000. 

Net sales for the second quarter grew to $720.7 million, a 14% increase compared to the $631.5 million reported in the same quarter last year. Earnings before interest, taxes, depreciation and amortization ("EBITDA'') were $149.7 million, a 15% increase over the $130.5 million reported in the second quarter last year. Net earnings increased 29% to $63.6 million from $49.3 million, net of a $5.4 million extraordinary charge for the early extinguishment of debt, in the comparable quarter last year. On a per diluted share basis, earnings grew 33% to $2.16 compared with $1.63 in the second quarter last year, net of the extraordinary charge of $.18. 

Charles M. Berger, Chairman, and Chief Executive Officer, commented, "We are extremely pleased to report our best quarter ever, considerably exceeding expectations. Better-than-expected demand from our retailers for our products led to increased volumes in the second quarter, driving double-digit growth in our core North American consumer businesses.'' 

Second Quarter Results 

North American Consumer sales in the second quarter grew 20% to $548.7 million, compared with $458.9 million in the same quarter last year. Within the North American group, sales of the largest business group, consumer lawns, increased 16% which continues four years of very strong performance. Sales of the consumer gardens group grew 13% and consumer growing media group sales rose 24%. Sales of the Ortho business group, acquired in January 1999, increased 10% on a pro-forma basis, reflecting the benefits of the second year of increased media spending, as well as a shift in pre-season trade inventory building from the first quarter to the second quarter. 

North American Professional sales grew modestly to $41.5 million. On April 3, 2000, the Company announced that it has signed a definitive agreement to sell its Professional Turf business in order to focus on strategically important value-added professional horticulture and turf seed segments of the Professional business. 

International sales remained essentially flat at $130.5 million compared to $131.7 million in the second quarter of last year. Excluding the effect of foreign exchange rate changes, International sales increased 7%. Scotts' International business has moved towards direct distribution, improved product availability and merchandising efforts, as well as introduced attractive new products that fill consumer needs. International is well positioned to have an improved second half of Scotts' fiscal year, when its consumer purchases are normally made, which is later than North American products. 

Gross margin for the quarter expanded to 43.4% compared with 42.6% in the second quarter last year. The increase in margin reflects favorable product mix, higher production levels and better utilization of Scotts' expanded production facilities, which have resulted in cost savings and operating efficiencies. These initiatives have also enabled Scotts to better serve its retail customers and strengthen existing relationships. 

For the second quarter, the Company recognized a net $7.7 million in Roundup® commission compared with $12.6 million in the same quarter of 1999. The reduction in Roundup commission is due to the early adoption of SEC guidance, which defers recognition of revenue until minimum EBIT levels for the Roundup business are reached. This guidance does not affect the net Roundup commission to be earned for the fiscal year. 

Added Mr. Berger, "We remain confident that our strategy of leveraging the power of our brands
combined with aggressive advertising campaigns, will continue to drive retail sales growth, and improve profitability in all our businesses.'' 

Six-Month Results 

For the six months ended April 1, 2000, the Company reported net sales of $912.3 million, a 12%
increase compared with $815.9 million in the same period last year. EBITDA slightly increased to
$138.7 million from $135.2 million in the same period last year, due to the reduction in Roundup
commission in the current period, and the absence of Ortho operating expenses in the first quarter of 1999. Net earnings were $34.0 million compared to $38.9 million, net of extraordinary charges, compared to the prior year period. On a diluted per share basis, earnings were $1.14 compared with $1.01 on a pro-forma basis for the Ortho acquisition, in the same period last year. The $1.14 diluted per share earnings for the six months ended April 1, 2000 excludes a $.21 non-recurring earnings per share reduction resulting from the early conversion of the Class A Preferred Stock which occurred on October 4, 1999. 

North American Consumer sales in the first half of fiscal 2000 grew 22% to $650.3 million compared with $531.7 million in the same period last year. Within the North American group, sales of the consumer lawns group increased 17%, consumer gardens group grew 12%, and consumer growing media group rose 19%. On a pro-forma basis to adjust for the January 1999 acquisition, sales in the Ortho business group increased 6% compared to the prior year period. 

North American Professional sales were $65.2 million compared with $73.4 million in the first half of fiscal 1999. 

International sales for the six-month period decreased 7% to $196.8 million. Excluding the effect of foreign exchange rate changes, International sales increased 1%. 

For the six-month period, the Company recognized a net $6.7 million in Roundup commission compared with $17.6 million in the same period of 1999. The reduction in Roundup commission is due to the early adoption of SEC guidance as previously described. 

Mr. Berger stated, "If late spring and summer consumer purchases track strong early trends from this year, matched with historical buying patterns, then this fiscal year's financial performance should meet our 20% profit growth target. This will represent our fourth consecutive year of hitting or exceeding that lofty target.'' 

The Scotts Company is the world's leading supplier of consumer products for lawn and garden care, with a full range of products for professional turf care and horticulture as well. The company owns what are by far the industry's most recognized brands. In the U.S., consumer awareness of the company's Scotts®, Miracle-Gro® and Ortho® brands outscores the nearest competitors in their categories by several times, as does awareness of the consumer Roundup® brand which is owned by Monsanto. Scotts has entered into an agreement with Monsanto to be the exclusive marketing agent for consumer Roundup® worldwide. In the U.K., Scotts' brands include Weedol® and Pathclear®, the top-selling consumer herbicides; Evergreen®, the leading lawn fertilizer line; the Levington® line of lawn and garden products; and Miracle-Gro®, the leading plant fertilizer. The Company's leading brands in continental Europe include KB® and Fertiligene® in France and NexaLotte® and Celaflor® in Germany. 

Company news release
N2645