Adjusted income from continuing operations for the year ended September 30, 2014 was $206.3 million, or $3.29 per share, compared with $172.6 million, or $2.76 per share a year ago. Results exclude costs related to impairment, restructuring and other charges, and one-time costs related to financing. Including those items, reported income from continuing operations for fiscal 2014 was $165.7 million, or $2.64 per share, compared with $159.4 million, or $2.55 per share, a year ago.
Scotts LawnService recorded 2014 sales of $95 million, up 5 percent from $90.2 million in 2013, the company reported.
"The strong results we delivered in fiscal 2014 – in the face of a weather-delayed season – speak to the strength of our team, the resilience of the lawn and garden category and the confidence that our consumers and retail partners have in our brands," said Jim Hagedorn, chairman and chief executive officer. "In addition to over-delivering against the earnings guidance we provided, we also returned about $350 million to shareholders in 2014 through recurring and one-time dividend payments and share purchases.
"We are confident in our business plans for 2015 and expect sales for the year to increase 4 to 5 percent resulting in adjusted earnings per share in the range of $3.40 to $3.60."
Fourth-Quarter 2014 Details
Company-wide net sales increased 5 percent in the fourth quarter to $454.3 million, compared with $433.6 million during the same quarter a year ago.
Global Consumer segment sales increased 5 percent in the fourth quarter to $354.8 million. Sales in the U.S. increased 3 percent during the quarter. Outside the U.S., sales increased 13 percent, excluding the impact of foreign exchange rates. Scotts LawnService sales increased 5 percent to $95.0 million in the fourth quarter, compared to $90.2 million during the same quarter a year ago.
The company-wide adjusted gross margin rate was 30.9 percent during the fourth quarter, compared with 30.1 percent during the same quarter a year ago. The year-over-year improvement was due to targeted pricing and material cost reductions, partially offset by higher distribution costs.
SG&A in the fourth quarter increased $15.3 million to $154.9 million, compared with $139.6 million a year ago. The year-over-year difference was primarily due to increased marketing efforts for the Tomcat brand, costs related to the Company’s acquisitions of Fafard & Brothers in Quebec and UK-based Solus Garden & Leisure, as well as increased investments in the Hawthorne Gardening Company, a wholly-owned subsidiary focused on indoor and urban gardening.
The operating loss for the Global Consumer segment was $7.8 million during the fourth quarter, compared with a loss of $6.9 million a year ago. Operating income for the Scotts LawnService segment increased 12 percent during the quarter to $27.2 million, compared with $24.3 million a year ago. On a company-wide basis, the operating loss improved to $22.3 million from a loss of $29.7 million a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter were $0.3 million, compared with $9.6 million a year ago.
Adjusted loss from continuing operations was $10.8 million in the fourth quarter, or $0.18 per share, compared with a loss of $11.7 million, or $0.19 per share, a year ago. Those results include a one-time $0.03 gain on the Company’s investment in AeroGrow International, however they exclude impairment, restructuring and other charges. Including those items, reported loss from continuing operations for the fourth quarter was $14.9 million in fiscal 2014, or $0.24 per share, compared with a loss of $19.2 million, or $0.31 per share, a year ago.
Full-Year 2014 Details
Company-wide net sales increased 2 percent in 2014 to $2.84 billion, compared to $2.77 billion a year ago. Global Consumer sales increased 3 percent to $2.55 billion in 2014, compared to $2.48 billion a year ago. Scotts LawnService sales increased 2 percent to $263.0 million for the year, compared to $257.8 million a year ago.
On an adjusted basis, the company-wide gross margin rate increased 100 basis points to 36.3 percent for the year. The improvement was attributable primarily to targeted pricing and material cost reductions, partially offset by higher-than-expected distribution costs and unfavorable product mix.
SG&A increased 3 percent to $680.5 million, compared to $659.6 million a year ago. The year-over-year increase was driven by increased marketing and selling in the Global Consumer and LawnService segments, costs associated with the Hawthorne Gardening Company, and diligence and integration costs associated with the recently announced acquisitions of Solus and Fafard.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $412.4 million, an increase of 6 percent, compared to $390.5 million a year ago.
For the full year, the Company recorded $51 million in impairment, restructuring and other charges, with $15 million attributed to severance costs associated with the Company’s restructuring plans.
The Global Consumer segment reported a 9 percent increase in operating income to $438.8 million for fiscal 2014, compared to $403.7 million a year ago. Scotts LawnService reported a 5 percent increase in operating income to $30.2 million during the year, compared to $28.7 million in fiscal 2013. Company-wide operating income improved to $256.6 million from $251.3 million.
Cash flow from operations was $240.2 million in 2014, slightly below the Company’s original projections for the year, primarily due to higher inventory levels resulting from sales volume shortfalls earlier in the lawn and garden season.
2015 Outlook
The Company expects company-wide net sales to increase by approximately 4 to 5 percent in fiscal 2015 on increased U.S. unit volume, the recent acquisitions of Action Pest Control, Solus and Fafard, and the consolidation of AeroGrow, as well as the continued organic growth of its LawnService business.
Total company sales growth is expected to result in adjusted earnings from continuing operations in the range of $3.40 to $3.60 per share in fiscal 2015. Cash flow from operations is expected to range from $275 million to $300 million in 2015.
