|
R
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
£
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
OHIO
|
31-1414921
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
14111
SCOTTSLAWN ROAD,
MARYSVILLE,
OHIO
|
43041
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large accelerated filer R
|
Accelerated filer £
|
|
Non-accelerated filer
£ (Do not check if a smaller reporting company)
|
Smaller reporting company £
|
Class
|
Outstanding
at May 6, 2009
|
|
Common
Shares, $0.01 stated value, no par value
|
65,673,288
common shares
|
PAGE NO.
|
||
PART
I. FINANCIAL INFORMATION:
|
||
Item
1.
|
Financial
Statements
|
|
Condensed,
Consolidated Statements of Operations — Three and six months ended March
28, 2009 and March 29, 2008
|
3
|
|
Condensed,
Consolidated Statements of Cash Flows — Six months ended March 28, 2009
and March 29, 2008
|
4
|
|
Condensed,
Consolidated Balance Sheets — March 28, 2009, March 29, 2008 and September
30, 2008
|
5
|
|
Notes
to Condensed, Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
23
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
30
|
Item
4.
|
Controls
and Procedures
|
30
|
PART
II. OTHER INFORMATION:
|
||
Item
1.
|
Legal
Proceedings
|
31
|
Item
1A.
|
Risk
Factors
|
31
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
32
|
Item
6.
|
Exhibits
|
32
|
Signatures
|
33
|
|
Index
to Exhibits
|
34
|
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH
28,
2009
|
MARCH
29,
2008
|
MARCH
28,
2009
|
MARCH
29,
2008
|
|||||||||||||
Net
sales
|
$ | 960.1 | $ | 958.0 | $ | 1,278.1 | $ | 1,266.7 | ||||||||
Cost
of sales
|
599.3 | 612.6 | 831.8 | 850.0 | ||||||||||||
Cost
of sales – product registration and recall matters
|
2.5 | 22.6 | 3.8 | 22.6 | ||||||||||||
Gross
profit
|
358.3 | 322.8 | 442.5 | 394.1 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
215.9 | 208.4 | 369.1 | 352.7 | ||||||||||||
Product
registration and recall matters
|
5.5 | 1.2 | 11.7 | 1.2 | ||||||||||||
Other
income, net
|
— | (1.0 | ) | (2.4 | ) | (4.2 | ) | |||||||||
Income
from operations
|
136.9 | 114.2 | 64.1 | 44.4 | ||||||||||||
Interest
expense
|
15.9 | 23.5 | 32.2 | 42.5 | ||||||||||||
Income
before income taxes
|
121.0 | 90.7 | 31.9 | 1.9 | ||||||||||||
Income
taxes
|
43.6 | 32.7 | 11.5 | 0.7 | ||||||||||||
Net
income
|
$ | 77.4 | $ | 58.0 | $ | 20.4 | $ | 1.2 | ||||||||
BASIC
NET INCOME PER COMMON SHARE:
|
||||||||||||||||
Weighted-average
common shares outstanding during the period
|
64.9 | 64.4 | 64.8 | 64.3 | ||||||||||||
Basic
net income per common share
|
$ | 1.19 | $ | 0.90 | $ | 0.31 | $ | 0.02 | ||||||||
DILUTED
NET INCOME PER COMMON SHARE:
|
||||||||||||||||
Weighted-average
common shares outstanding during the period plus dilutive potential common
shares
|
65.8 | 65.6 | 65.7 | 65.7 | ||||||||||||
Diluted
net income per common share
|
$ | 1.18 | $ | 0.88 | $ | 0.31 | $ | 0.02 | ||||||||
Dividends
declared per common share
|
$ | 0.125 | $ | 0.125 | $ | 0.250 | $ | 0.250 |
SIX MONTHS ENDED
|
||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income
|
$ | 20.4 | $ | 1.2 | ||||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
Stock-based
compensation expense
|
8.1 | 7.2 | ||||||
Depreciation
|
23.0 | 26.4 | ||||||
Amortization
|
6.6 | 8.2 | ||||||
Gain
on sale of property, plant and equipment
|
(0.7 | ) | — | |||||
Changes
in assets and liabilities, net of acquired businesses:
|
||||||||
Accounts
receivable
|
(613.5 | ) | (624.1 | ) | ||||
Inventories
|
(263.4 | ) | (213.5 | ) | ||||
Prepaid
and other current assets
|
(23.8 | ) | (29.7 | ) | ||||
Accounts
payable
|
151.5 | 160.7 | ||||||
Accrued
liabilities
|
75.5 | 116.2 | ||||||
Restructuring
reserves
|
(0.3 | ) | (0.7 | ) | ||||
Other
non-current items
|
2.7 | (4.9 | ) | |||||
Other,
net
|
(5.0 | ) | (2.7 | ) | ||||
Net
cash used in operating activities
|
(618.9 | ) | (555.7 | ) | ||||
INVESTING
ACTIVITIES
|
||||||||
Proceeds
from the sale of property, plant and equipment
|
0.8 | 0.6 | ||||||
Investments
in property, plant and equipment
|
(19.1 | ) | (25.1 | ) | ||||
Investments
in intellectual property
|
(1.0 | ) | — | |||||
Investments
in acquired businesses, net of cash acquired
|
(9.3 | ) | — | |||||
Net
cash used in investing activities
|
(28.6 | ) | (24.5 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Borrowings
under revolving and bank lines of credit
|
895.3 | 760.1 | ||||||
Repayments
under revolving and bank lines of credit
|
(270.5 | ) | (168.6 | ) | ||||
Dividends
paid
|
(17.1 | ) | (16.4 | ) | ||||
Payments
on seller notes
|
(0.8 | ) | (1.4 | ) | ||||
Excess
tax benefits from share-based payment arrangements
|
0.9 | 1.6 | ||||||
Cash
received from the exercise of stock options
|
4.1 | 5.5 | ||||||
Net
cash provided by financing activities
|
611.9 | 580.8 | ||||||
Effect
of exchange rate changes on cash
|
(1.0 | ) | 8.4 | |||||
Net
(decrease) increase in cash
|
(36.6 | ) | 9.0 | |||||
Cash
and cash equivalents at beginning of period
|
84.7 | 67.9 | ||||||
Cash
and cash equivalents at end of period
|
$ | 48.1 | $ | 76.9 | ||||
Supplemental
cash flow information
|
||||||||
Interest
paid, net of interest capitalized
|
25.8 | 34.0 | ||||||
Income
taxes refunded
|
7.6 | 6.9 |
MARCH
28,
2009
|
MARCH
29,
2008
|
SEPTEMBER
30,
2008
|
||||||||||
UNAUDITED
|
(SEE
NOTE 1)
|
|||||||||||
ASSETS
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 48.1 | $ | 76.9 | $ | 84.7 | ||||||
Accounts
receivable, less allowances of $13.6, $15.7 and $10.6,
respectively
|
637.5 | 738.9 | 259.8 | |||||||||
Accounts
receivable pledged
|
370.9 | 296.2 | 146.6 | |||||||||
Inventories,
net
|
667.6 | 625.1 | 415.9 | |||||||||
Prepaid
and other current assets
|
159.9 | 159.7 | 137.9 | |||||||||
Total
current assets
|
1,884.0 | 1,896.8 | 1,044.9 | |||||||||
Property,
plant and equipment, net of accumulated depreciation of $467.6, $447.6 and
$460.6, respectively
|
335.5 | 363.3 | 344.1 | |||||||||
Goodwill,
net
|
368.0 | 467.3 | 377.7 | |||||||||
Intangible
assets, net
|
361.5 | 417.9 | 367.2 | |||||||||
Other
assets
|
18.9 | 25.6 | 22.4 | |||||||||
Total
assets
|
$ | 2,967.9 | $ | 3,170.9 | $ | 2,156.3 | ||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||
Current
liabilities:
|
||||||||||||
Current
portion of debt
|
$ | 396.0 | $ | 281.8 | $ | 150.0 | ||||||
Accounts
payable
|
352.3 | 368.0 | 207.6 | |||||||||
Other
current liabilities
|
382.7 | 421.2 | 320.5 | |||||||||
Total
current liabilities
|
1,131.0 | 1,071.0 | 678.1 | |||||||||
Long-term
debt
|
1,196.2 | 1,445.9 | 849.5 | |||||||||
Other
liabilities
|
187.5 | 187.8 | 192.0 | |||||||||
Total
liabilities
|
2,514.7 | 2,704.7 | 1,719.6 | |||||||||
Commitments
and contingencies (notes 2 and 10)
|
||||||||||||
Shareholders’
equity:
|
||||||||||||
Common
shares and capital in excess of $.01 stated value per share, 65.6, 64.5
and 65.2 shares issued and outstanding, respectively
|
460.8 | 476.4 | 472.4 | |||||||||
Retained
earnings
|
220.0 | 245.4 | 216.7 | |||||||||
Treasury
shares, at cost: 3.0, 3.7 and 3.4 shares,
respectively
|
(164.4 | ) | (200.4 | ) | (185.3 | ) | ||||||
Accumulated
other comprehensive loss
|
(63.2 | ) | (55.2 | ) | (67.1 | ) | ||||||
Total
shareholders’ equity
|
453.2 | 466.2 | 436.7 | |||||||||
Total
liabilities and shareholders’ equity
|
$ | 2,967.9 | $ | 3,170.9 | $ | 2,156.3 |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28, 2009
|
MARCH 29, 2008
|
MARCH 28, 2009
|
MARCH 29, 2008
|
|||||||||||||
(IN MILLIONS, EXCEPT PER SHARE DATA)
|
||||||||||||||||
Determination
of diluted weighted-average common shares outstanding:
|
||||||||||||||||
Weighted-average
common shares outstanding
|
64.9 | 64.4 | 64.8 | 64.3 | ||||||||||||
Assumed
conversion of dilutive potential common shares
|
0.9 | 1.2 | 0.9 | 1.4 | ||||||||||||
Diluted
weighted-average common shares outstanding
|
65.8 | 65.6 | 65.7 | 65.7 | ||||||||||||
Basic
net income per common share
|
$ | 1.19 | $ | 0.90 | $ | 0.31 | $ | 0.02 | ||||||||
Diluted
net income per common share
|
$ | 1.18 | $ | 0.88 | $ | 0.31 | $ | 0.02 |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28, 2009
|
MARCH 29, 2008
|
MARCH 28, 2009
|
MARCH 29, 2008
|
|||||||||||||
(IN
MILLIONS)
|
||||||||||||||||
Net
sales — product recalls
|
$ | — | $ | (19.0 | ) | $ | (0.3 | ) | $ | (19.0 | ) | |||||
Cost
of sales — product recalls
|
— | (12.0 | ) | (0.2 | ) | (12.0 | ) | |||||||||
Cost
of sales — inventory impairment and other
|
2.5 | 22.6 | 3.8 | 22.6 | ||||||||||||
Gross
profit
|
(2.5 | ) | (29.6 | ) | (3.9 | ) | (29.6 | ) | ||||||||
Selling,
general and administrative
|
5.5 | 1.2 | 11.7 | 1.2 | ||||||||||||
Loss
from operations
|
(8.0 | ) | (30.8 | ) | (15.6 | ) | (30.8 | ) | ||||||||
Income
tax benefit
|
2.9 | 11.1 | 5.6 | 11.1 | ||||||||||||
Net
loss
|
$ | (5.1 | ) | $ | (19.7 | ) | $ | (10.0 | ) | $ | (19.7 | ) |
RESERVES
AT
SEPTEMBER 30, 2008 |
ADDITIONAL
COSTS
AND
CHANGES
IN
ESTIMATE
|
RESERVES
USED |
RESERVES
AT
MARCH 28, 2009
|
|||||||||||||
(IN
MILLIONS)
|
||||||||||||||||
Sales
returns — product recalls
|
$ | 0.2 | $ | 0.3 | $ | (0.5 | ) | $ | — | |||||||
Cost
of sales returns — product recalls
|
(0.1 | ) | (0.2 | ) | 0.3 | — | ||||||||||
Inventory
impairment
|
5.9 | 2.2 | (2.4 | ) | 5.7 | |||||||||||
Other
incremental costs of sales
|
3.2 | 1.6 | (2.1 | ) | 2.7 | |||||||||||
Other
general and administrative costs
|
4.3 | 11.7 | (12.8 | ) | 3.2 | |||||||||||
Accrued
liabilities and inventory reserves
|
$ | 13.5 | $ | 15.6 | $ | (17.5 | ) | $ | 11.6 |
MARCH
28,
2009 |
MARCH
29,
2008 |
SEPTEMBER
30,
2008 |
||||||||||
(IN
MILLIONS)
|
||||||||||||
Finished
goods
|
$ | 462.6 | $ | 470.0 | $ | 277.3 | ||||||
Work-in-process
|
46.2 | 30.5 | 29.9 | |||||||||
Raw
materials
|
158.8 | 124.6 | 108.7 | |||||||||
$ | 667.6 | $ | 625.1 | $ | 415.9 |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28, 2009
|
MARCH 29, 2008
|
MARCH 28, 2009
|
MARCH 29, 2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
Gross
commission
|
$ | 18.0 | $ | 17.1 | $ | 18.0 | $ | 17.1 | ||||||||
Contribution
expenses
|
(5.0 | ) | (5.0 | ) | (10.0 | ) | (10.0 | ) | ||||||||
Amortization
of marketing fee
|
(0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Net
commission income
|
12.8 | 11.9 | 7.6 | 6.7 | ||||||||||||
Reimbursements
associated with Marketing Agreement
|
15.2 | 17.6 | 30.8 | 30.1 | ||||||||||||
Total
net sales associated with Marketing Agreement
|
$ | 28.0 | $ | 29.5 | $ | 38.4 | $ | 36.8 |
MARCH 28,
2009
|
MARCH 29,
2008
|
SEPTEMBER 30,
2008
|
||||||||||
(IN MILLIONS)
|
||||||||||||
Credit Facilities:
|
||||||||||||
Revolving
loans
|
$ | 757.9 | $ | 894.1 | $ | 375.8 | ||||||
Term
loans
|
533.4 | 557.2 | 540.4 | |||||||||
Master
Accounts Receivable Purchase Agreement
|
275.0 | 241.9 | 62.1 | |||||||||
Notes
due to sellers
|
12.1 | 13.6 | 12.8 | |||||||||
Foreign
bank borrowings and term loans
|
6.6 | 12.0 | 0.7 | |||||||||
Other
|
7.2 | 8.9 | 7.7 | |||||||||
1,592.2 | 1,727.7 | 999.5 | ||||||||||
Less
current portions
|
396.0 | 281.8 | 150.0 | |||||||||
$ | 1,196.2 | $ | 1,445.9 | $ | 849.5 |
NOTIONAL
AMOUNT
(IN
MILLIONS)
|
EFFECTIVE
DATE
(a)
|
EXPIRATION
DATE
|
FIXED
RATE
|
|||||
$200
(b)
|
3/31/2007
|
3/31/2009
|
4.90%
|
|||||
200
(b)
|
3/30/2007
|
3/30/2010
|
4.87%
|
|||||
200
(b)
|
2/14/2007
|
2/14/2012
|
5.20%
|
|||||
50
(b)
|
2/14/2012
|
2/14/2016
|
3.78%
|
|||||
150
(c)
|
11/16/2009
|
5/16/2016
|
3.26%
|
|||||
50
(d)
|
2/16/2010
|
5/16/2016
|
3.05%
|
(a)
|
The
effective date refers to the date on which interest payments are first
hedged by the applicable swap
contract.
|
(b)
|
Interest
payments made between the effective date and expiration date are hedged by
the swap contracts.
|
(c)
|
Interest
payments made during the six-month period beginning November 14 of each
year between the effective date and expiration date are hedged by the swap
contract.
|
(d)
|
Interest
payments made during the three-month period beginning February 14 of each
year between the effective date and expiration date are hedged by the swap
contract.
|
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
Net
income
|
$ | 77.4 | $ | 58.0 | $ | 20.4 | $ | 1.2 | ||||||||
Other
comprehensive income (expense):
|
||||||||||||||||
Change
in valuation of derivative instruments
|
4.4 | (12.3 | ) | (14.2 | ) | (17.4 | ) | |||||||||
Change
in pension and other postretirement liabilities
|
1.7 | — | 8.1 | — | ||||||||||||
Foreign
currency translation adjustments
|
0.6 | 1.6 | 10.0 | 4.2 | ||||||||||||
Comprehensive
income (loss)
|
$ | 84.1 | $ | 47.3 | $ | 24.3 | $ | (12.0 | ) |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
Frozen
defined benefit plans
|
$ | 0.9 | $ | 0.1 | $ | 1.8 | $ | 0.3 | ||||||||
International
benefit plans
|
1.9 | 1.2 | 3.7 | 2.4 | ||||||||||||
Retiree
medical plan
|
0.5 | 0.6 | 1.0 | 1.2 |
SIX MONTHS ENDED
|
||||||||
MARCH 28, 2009
|
MARCH 29, 2008
|
|||||||
Options
|
696,100 | 884,700 | ||||||
Performance
shares
|
— | 40,000 | ||||||
Restricted
stock
|
240,400 | 149,900 | ||||||
Restricted
stock units (including deferred stock units)
|
218,641 | 29,995 | ||||||
Total
share-based awards
|
1,155,141 | 1,104,595 | ||||||
Aggregate
fair value at grant dates (in millions)
|
$ | 16.0 | $ | 18.5 |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28, 2009
|
MARCH 29, 2008
|
MARCH 28, 2009
|
MARCH 29, 2008
|
|||||||||||||
Share-based
compensation
|
$ | 4.4 | $ | 3.7 | $ | 8.1 | $ | 7.2 | ||||||||
Tax
benefit recognized
|
1.6 | 1.3 | 2.9 | 2.6 |
MARCH 28,
2009
|
SEPTEMBER 30,
2008
|
|||||||
(IN MILLIONS)
|
||||||||
Unrecognized
tax benefits
|
$ | 7.2 | $ | 7.2 | ||||
Portion
that, if recognized, would impact the effective tax rate
|
6.8 | 6.5 | ||||||
Accrued
penalties on unrecognized tax benefits
|
0.7 | 0.6 | ||||||
Accrued
interest on unrecognized tax benefits
|
1.2 | 1.2 |
COMMODITY
|
VOLUME
|
|
Urea
|
8,000
tons
|
|
Diesel
|
4,452,000
gallons
|
|
Gasoline
|
714,000
gallons
|
ASSETS
/ (LIABILITIES)
|
|||||||||||
MARCH
28, 2009
|
MARCH
29, 2008
|
||||||||||
BALANCE
SHEET
LOCATION
|
FAIR
VALUE
|
BALANCE
SHEET
LOCATION
|
FAIR
VALUE
|
||||||||
DERIVATIVES
DESIGNATED AS HEDGING
INSTRUMENTS UNDER SFAS 133
|
|||||||||||
Interest
rate swap agreements
|
Other
assets
|
$
|
–
|
Other
assets
|
$
|
1.0
|
|||||
Other
liabilities
|
(36.0
|
)
|
Other
liabilities
|
(31.6
|
)
|
||||||
Commodity
hedging instruments
|
Other
current liabilities
|
(2.6
|
)
|
Other
current liabilities
|
(0.6
|
)
|
|||||
Total
derivatives designated as hedging instruments under SFAS
133
|
$
|
(38.6
|
)
|
$
|
(31.2
|
)
|
|||||
DERIVATIVES
NOT DESIGNATED AS HEDGING
INSTRUMENTS UNDER SFAS 133
(1)
|
|||||||||||
Commodity
hedging instruments
|
Prepaid
and other assets
|
$
|
–
|
Prepaid
and other assets
|
$
|
1.1
|
|||||
Other
current liabilities
|
(0.6
|
)
|
Other
current liabilities
|
0.6
|
|||||||
Total
derivatives not designated as hedging instruments under SFAS 133 (1)
|
$
|
(0.6
|
)
|
$
|
1.7
|
||||||
Total
derivatives
|
$
|
(39.2
|
)
|
$
|
(29.5
|
)
|
(1) |
See
discussion above for additional information regarding the Company’s
purpose for entering into derivatives not designated as hedging
instruments and its overall risk management
strategy.
|
AMOUNT
OF GAIN / (LOSS) RECOGNIZED IN OCI
(IN
MILLIONS)
|
||||||||||||||||
THREE
MONTHS
ENDED
|
SIX
MONTHS
ENDED
|
|||||||||||||||
DERIVATIVES
IN SFAS 133 CASH FLOW HEDGING
RELATIONSHIPS
|
MARCH
28,
2009 |
MARCH
29,
2008 |
MARCH
28,
2009 |
MARCH
29,
2008 |
||||||||||||
Interest
rate swap agreements
|
$ | (5.0 | ) | $ | (10.3 | ) | $ | (17.6 | ) | $ | (16.1 | ) | ||||
Commodity
hedging instruments
|
1.0 | (1.2 | ) | (7.0 | ) | 0.5 | ||||||||||
Total
|
$ | (4.0 | ) | $ | (11.5 | ) | $ | (24.6 | ) | $ | (15.6 | ) |
LOCATION
OF GAIN / (LOSS)
|
AMOUNT
OF GAIN / (LOSS) RECLASSIFIED FROM
ACCUMULATED OCI INTO INCOME (IN
MILLIONS)
|
|||||||||||||||||
DERIVATIVES
IN SFAS 133 CASH
|
RECLASSIFIED
FROM
|
THREE
MONTHS
ENDED
|
SIX
MONTHS
ENDED
|
|||||||||||||||
FLOW
HEDGING
RELATIONSHIPS |
ACCUMULATED
OCI
INTO
INCOME
|
MARCH
28,
2009 |
MARCH
29,
2008 |
MARCH
28,
2009 |
MARCH
29,
2008 |
|||||||||||||
Interest
rate swap agreements
|
Interest
expense
|
$ | (5.1 | ) | $ | (0.7 | ) | $ | (7.5 | ) | $ | (0.3 | ) | |||||
Commodity
hedging instruments
|
Cost
of sales
|
(3.1 | ) | 1.1 | (3.0 | ) | 1.2 | |||||||||||
Total
|
$ | (8.2 | ) | $ | 0.4 | $ | (10.5 | ) | $ | 0.9 |
AMOUNT
OF GAIN / (LOSS) RECOGNIZED IN INCOME
(IN
MILLIONS)
|
||||||||||||||||||
DERIVATIVES NOT DESIGNATED AS
|
LOCATION OF GAIN /
|
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
HEDGING
INSTRUMENTS UNDER SFAS 133
|
(LOSS)
RECOGNIZED IN INCOME |
MARCH 28,
2009 |
MARCH 29,
2008 |
MARCH 28,
2009 |
MARCH 29,
2008 |
|||||||||||||
Foreign
currency swap agreements
|
Interest
expense
|
$ | – | $ | – | $ | (6.4 | ) | $ | 1.0 | ||||||||
Commodity
hedging instruments
|
Cost
of sales
|
(0.6 | ) | 1.7 | (0.6 | ) | 1.7 | |||||||||||
Total
|
$ | (0.6 | ) | $ | 1.7 | $ | (7.0 | ) | $ | 2.7 |
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities.
|
|
Level
2 – Observable inputs other than quoted prices included in Level 1, such
as quoted prices for similar assets and liabilities in active markets;
quoted prices for similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by
observable market data.
|
|
Level
3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities.
This includes pricing models, discounted cash flow methodologies and
similar techniques that use significant unobservable
inputs.
|
Quoted
Prices in Active
Markets for Identical
Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
Unobservable
Inputs (Level 3)
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Derivatives
|
$ | – | $ | – | $ | – | $ | – | ||||||||
Other
|
4.4 | – | – | 4.4 | ||||||||||||
Total
|
$ | 4.4 | $ | – | $ | – | $ | 4.4 | ||||||||
Liabilities
|
||||||||||||||||
Derivatives
|
||||||||||||||||
Interest
rate swap agreements
|
$ | – | $ | (36.0 | ) | $ | – | $ | (36.0 | ) | ||||||
Commodity hedging instruments
|
– | (3.2 | ) | – | (3.2 | ) | ||||||||||
Other
|
(4.4 | ) | – | – | (4.4 | ) | ||||||||||
Total
|
$ | (4.4 | ) | $ | (39.2 | ) | $ | – | $ | (43.6 | ) |
THREE MONTHS
ENDED
|
SIX MONTHS
ENDED
|
|||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
Net
sales:
|
||||||||||||||||
Global
Consumer
|
$ | 833.7 | $ | 820.5 | $ | 1,016.0 | $ | 987.4 | ||||||||
Global
Professional
|
74.5 | 99.5 | 140.0 | 161.9 | ||||||||||||
Scotts
LawnService®
|
32.8 | 32.4 | 71.6 | 70.7 | ||||||||||||
Corporate
& Other
|
19.3 | 24.8 | 51.2 | 66.1 | ||||||||||||
Segment
total
|
960.3 | 977.2 | 1,278.8 | 1,286.1 | ||||||||||||
Roundup®
amortization
|
(0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Product
registration and recall matters-returns
|
— | (19.0 | ) | (0.3 | ) | (19.0 | ) | |||||||||
Consolidated
|
$ | 960.1 | $ | 958.0 | $ | 1,278.1 | $ | 1,266.7 | ||||||||
Operating
income (loss):
|
||||||||||||||||
Global
Consumer
|
$ | 199.3 | $ | 179.2 | $ | 163.7 | $ | 141.2 | ||||||||
Global
Professional
|
8.0 | 16.3 | 21.9 | 22.7 | ||||||||||||
Scotts
LawnService®
|
(16.1 | ) | (18.5 | ) | (23.9 | ) | (30.0 | ) | ||||||||
Corporate
& Other
|
(43.2 | ) | (27.9 | ) | (75.4 | ) | (50.5 | ) | ||||||||
Segment
total
|
148.0 | 149.1 | 86.3 | 83.4 | ||||||||||||
Roundup®
amortization
|
(0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Other
amortization
|
(2.9 | ) | (3.9 | ) | (6.2 | ) | (7.8 | ) | ||||||||
Product
registration and recall matters
|
(8.0 | ) | (30.8 | ) | (15.6 | ) | (30.8 | ) | ||||||||
Consolidated
|
$ | 136.9 | $ | 114.2 | $ | 64.1 | $ | 44.4 |
MARCH 28,
2009
|
MARCH 29,
2008
|
SEPTEMBER 30,
2008
|
||||||||||
(IN
MILLIONS)
|
||||||||||||
Total
assets:
|
||||||||||||
Global
Consumer
|
$ | 2,289.1 | $ | 2,414.5 | $ | 1,483.8 | ||||||
Global
Professional
|
299.0 | 350.5 | 289.9 | |||||||||
Scotts
LawnService®
|
175.0 | 180.5 | 186.5 | |||||||||
Corporate
& Other
|
204.8 | 225.4 | 196.1 | |||||||||
Consolidated
|
$ | 2,967.9 | $ | 3,170.9 | $ | 2,156.3 |
·
|
Executive
summary
|
·
|
Results
of operations
|
·
|
Segment
results
|
·
|
Liquidity
and capital resources
|
·
|
Regulatory
matters
|
·
|
Critical
accounting policies and estimates
|
Percent Net Sales by Quarter
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
First
Quarter
|
10.4 | % | 9.5 | % | 9.3 | % | ||||||
Second
Quarter
|
32.1 | % | 34.6 | % | 33.6 | % | ||||||
Third
Quarter
|
39.3 | % | 38.2 | % | 38.9 | % | ||||||
Fourth
Quarter
|
18.2 | % | 17.7 | % | 18.2 | % |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(UNAUDITED)
|
(UNAUDITED)
|
|||||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of sales
|
62.4 | 63.9 | 65.1 | 67.1 | ||||||||||||
Cost
of sales – product registration and recall matters
|
0.3 | 2.4 | 0.3 | 1.8 | ||||||||||||
Gross
profit
|
37.3 | 33.7 | 34.6 | 31.1 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
22.4 | 21.8 | 28.9 | 27.8 | ||||||||||||
Selling,
general and administrative – product registration and recall
matters
|
0.6 | 0.1 | 0.9 | 0.1 | ||||||||||||
Other
income, net
|
— | (0.1 | ) | (0.2 | ) | (0.3 | ) | |||||||||
Income
from operations
|
14.3 | 11.9 | 5.0 | 3.5 | ||||||||||||
Interest
expense
|
1.7 | 2.4 | 2.5 | 3.4 | ||||||||||||
Income
before income taxes
|
12.6 | 9.5 | 2.5 | 0.1 | ||||||||||||
Income
taxes
|
4.6 | 3.4 | 0.9 | 0.0 | ||||||||||||
Net
income
|
8.0 | % | 6.1 | % | 1.6 | % | 0.1 | % |
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
|||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
(UNAUDITED)
|
(UNAUDITED)
|
|||||||||||||||
Advertising
|
$ | 46.1 | $ | 49.7 | $ | 60.3 | $ | 64.5 | ||||||||
Other
selling, general and administrative
|
166.9 | 154.8 | 302.6 | 280.4 | ||||||||||||
Amortization
of intangibles
|
2.9 | 3.9 | 6.2 | 7.8 | ||||||||||||
$ | 215.9 | $ | 208.4 | $ | 369.1 | $ | 352.7 |
The following table sets forth net sales by segment:
|
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
(UNAUDITED)
|
(UNAUDITED)
|
|||||||||||||||
Global
Consumer
|
$ | 833.7 | $ | 820.5 | $ | 1,016.0 | $ | 987.4 | ||||||||
Global
Professional
|
74.5 | 99.5 | 140.0 | 161.9 | ||||||||||||
Scotts
LawnService®
|
32.8 | 32.4 | 71.6 | 70.7 | ||||||||||||
Corporate
& other
|
19.3 | 24.8 | 51.2 | 66.1 | ||||||||||||
Segment
total
|
960.3 | 977.2 | 1,278.8 | 1,286.1 | ||||||||||||
Roundup®
amortization
|
(0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Product
registrations and recall matters - returns
|
— | (19.0 | ) | (0.3 | ) | (19.0 | ) | |||||||||
Consolidated
|
$ | 960.1 | $ | 958.0 | $ | 1,278.1 | $ | 1,266.7 |
The following table sets forth operating income (loss) by segment:
|
THREE MONTHS ENDED
|
SIX MONTHS ENDED
|
||||||||||||||
MARCH 28,
2009
|
MARCH 29,
2008
|
MARCH 28,
2009
|
MARCH 29,
2008
|
|||||||||||||
(IN MILLIONS)
|
(IN MILLIONS)
|
|||||||||||||||
(UNAUDITED)
|
(UNAUDITED)
|
|||||||||||||||
Global
Consumer
|
$ | 199.3 | $ | 179.2 | $ | 163.7 | $ | 141.2 | ||||||||
Global
Professional
|
8.0 | 16.3 | 21.9 | 22.7 | ||||||||||||
Scotts
LawnService®
|
(16.1 | ) | (18.5 | ) | (23.9 | ) | (30.0 | ) | ||||||||
Corporate
& other
|
(43.2 | ) | (27.9 | ) | (75.4 | ) | (50.5 | ) | ||||||||
Segment
total
|
148.0 | 149.1 | 86.3 | 83.4 | ||||||||||||
Roundup®
amortization
|
(0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Other
amortization
|
(2.9 | ) | (3.9 | ) | (6.2 | ) | (7.8 | ) | ||||||||
Product
registration and recall matters
|
(8.0 | ) | (30.8 | ) | (15.6 | ) | (30.8 | ) | ||||||||
Consolidated
|
$ | 136.9 | $ | 114.2 | $ | 64.1 | $ | 44.4 |
NOTIONAL AMOUNT
(IN MILLIONS)
|
EFFECTIVE
DATE (a)
|
EXPIRATION
DATE
|
FIXED
RATE
|
|||||
$200(b)
|
3/31/2007
|
3/31/2009
|
4.90%
|
|||||
200(b)
|
3/30/2007
|
3/30/2010
|
4.87%
|
|||||
200(b)
|
2/14/2007
|
2/14/2012
|
5.20%
|
|||||
50(b)
|
2/14/2012
|
2/14/2016
|
3.78%
|
|||||
150(c)
|
11/16/2009
|
5/16/2016
|
3.26%
|
|||||
50(d)
|
2/16/2010
|
5/16/2016
|
3.05%
|
(a)
|
The
effective date refers to the date on which interest payments are first
hedged by the applicable swap
contract.
|
(b)
|
Interest
payments made between the effective date and expiration date are hedged by
the swap contract.
|
(c)
|
Interest
payments made during the six-month period beginning November 14 of each
year between the effective date and expiration date are hedged by the swap
contract.
|
(d)
|
Interest
payments made during the three-month period beginning February 14 of each
year between the effective date and expiration date are hedged by the swap
contract.
|
|
(c)
|
Issuer
Purchases of Equity Securities
|
Period
|
Total Number of
Common Shares
Purchased(1)
|
Average Price
Paid
per Common
Share
|
Total Number of
Common Shares
Purchased as
Part of Publicly
Announced Plans or
Programs
|
Maximum Number of
Common Shares That
May Yet Be
Purchased Under the
Plans or Programs
|
|||||||||
December
28, 2008 through January 24, 2009
|
486 | $ | 29.92 | 0 |
Not applicable
|
||||||||
January
25 through February 21, 2009
|
1,721 | $ | 31.03 | 0 |
Not applicable
|
||||||||
February
22 through March 28, 2009
|
21 | $ | 35.98 | 0 |
Not applicable
|
||||||||
Total
|
2,228 | $ | 30.84 | 0 |
Not applicable
|
(1)
|
Amounts
in this column represent Common Shares purchased by the trustee of the
rabbi trust established by the Company as permitted pursuant to the terms
of The Scotts Company LLC Executive Retirement Plan (the “ERP”). The ERP
is an unfunded, non-qualified deferred compensation plan which, among
other things, provides eligible employees the opportunity to defer
compensation above specified statutory limits applicable to The Scotts
Company LLC Retirement Savings Plan and with respect to any Executive
Management Incentive Pay, Performance Award (each as defined in the ERP)
or other bonus awarded to such eligible employees. Pursuant to the terms
of the ERP, each eligible employee has the right to elect an investment
fund, including a fund consisting of Common Shares (the “Scotts
Miracle-Gro Common Stock Fund”), against which amounts allocated to such
employee’s accounts under the ERP will be benchmarked (all ERP accounts
are bookkeeping accounts only and do not represent a claim against
specific assets of the Company). Amounts allocated to employee accounts
under the ERP represent deferred compensation obligations of the Company.
The Company established the rabbi trust in order to assist the Company in
discharging such deferred compensation obligations. When an eligible
employee elects to benchmark some or all of the amounts allocated to such
employee’s accounts against the Scotts Miracle-Gro Common Stock Fund, the
trustee of the rabbi trust purchases the number of Common Shares
equivalent to the amount so benchmarked. All Common Shares purchased by
the trustee are purchased on the open market and are held in the rabbi
trust until such time as they are distributed pursuant to the terms of the
ERP. All assets of the rabbi trust, including any Common Shares purchased
by the trustee, remain, at all times, assets of the Company, subject to
the claims of its creditors. The terms of the ERP do not provide for a
specified limit on the number of Common Shares that may be purchased by
the trustee of the rabbi trust.
|
THE
SCOTTS MIRACLE-GRO COMPANY
|
||
Date:
May 6, 2009
|
/s/ DAVID C. EVANS
|
|
David
C. Evans
|
||
Executive
Vice President and Chief Financial Officer
|
||
(Principal
Financial and Principal Accounting Officer)
|
||
(Duly
Authorized Officer)
|
EXHIBIT
NO.
|
DESCRIPTION
|
LOCATION
|
||
10.1
|
Specimen
form of Deferred Stock Unit Award Agreement for Nonemployee Directors
(with Related Dividend Equivalents) used to evidence grants of Deferred
Stock Units which may be made under The Scotts Miracle-Gro Company Amended
and Restated 2006 Long-Term Incentive Plan (post-January 22, 2009
version)
|
*
|
||
10.2
|
Summary
of Compensation for Nonemployee Directors of The Scotts Miracle-Gro
Company, effective as of January 23, 2009
|
*
|
||
10.3
|
Employment
Agreement, effective as of October 1, 2007, between The Scotts
Company LLC and Barry Sanders (executed by Mr. Sanders on
November 16, 2007 and on behalf of The Scotts Company LLC on
November 19, 2007)
|
Incorporated
herein by reference to the Annual Report on Form 10-K of The Scotts
Miracle-Gro Company (the “Registrant”) for the fiscal year ended
September 30, 2007 (File No. 1-11593) [Exhibit
10(m)]
|
||
10.4
|
First
Amendment to Employment Agreement, effective as of January 14, 2009, by
and between The Scotts Company LLC and Barry Sanders
|
Incorporated
herein by reference to the Registrant’s Current Report on Form 8-K
dated January 20, 2009 (File No. 1-11593) [Exhibit
10.2]
|
||
10.5
|
Master
Accounts Receivable Purchase Agreement, dated as of May 1, 2009, by and
among The Scotts Company LLC as the Company, The Scotts Miracle-Gro
Company as the Parent and Calyon New York Branch as the
Bank
|
Incorporated
herein by reference to the Registrant’s Current Report on Form 8-K filed
May 6, 2009 (File No. 1-11593) [Exhibit 10.1]
|
||
31.1
|
Rule
13a-14(a)/15d-14(a) Certifications (Principal Executive
Officer)
|
*
|
||
31.2
|
Rule
13a-14(a)/15d-14(a) Certifications (Principal Financial
Officer)
|
*
|
||
32
|
Section
1350 Certifications (Principal Executive Officer and Principal Financial
Officer)
|
*
|