The Scotts Miracle-Gro Company Dave Evans, CFO The Bank of America and Merrill Lynch Consumer Conference March 11th, 2009
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The Scotts Miracle-Gro Company
Dave Evans, CFO
The Bank of America and Merrill Lynch
Consumer Conference
March 11th, 2009
1
Safe Harbor Disclosure
Statement under the Private Securities Litigation Act of 1995: Certain of the
statements contained in this presentation, 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 in nature. Actual results could differ materially from the forward-looking
information in this presentation due to a variety of factors.
The Scotts Miracle-Gro Company encourages investors to learn more about
these risk factors. A detailed explanation of these factors are available in the
company’s quarterly and annual reports filed with the Securities and Exchange
Commission.
2
Why ScottsMiracle-Gro …
Our strengths, resilience, and long-term plan create a
compelling story
What will continue to set us apart …
Clear and strong market leadership
Unrivaled relationships with consumers & retailers
A world-class supply chain
An experienced leadership team
Comprehensive plans to drive long-term growth
We are focused on “redefining our
leadership” position to further drive
growth that enhances shareholder value
3
Strong long-term prospects …
We believe we can continue to drive strong earnings
growth and improvement in free cash flow
How we will succeed:
Game changing innovation that will drive growth
Regional execution designed to capture share in under-penetrated markets
$300 to $500 million of incremental growth
$50 million in cost savings
$100 million improvement in working capital
Reduced debt levels to provide increased financial flexibility
Increased focus on cash flow and asset productivity
4
In the near-term …
Across the U.S. business, our competitive advantages
will help drive improvement in 2009
Cautious optimism for 2009
An historically resilient category
Gardening remains the No. 1 outdoor leisure activity
Early markets continue to demonstrate strong consumer engagement
Strong retailer support, improved shelf-space
Cocooning trends
Increases in edible gardening
Growth through product innovation
5
Overcoming the economy …
Despite broader issues, we are entering the 2009
season with cautious optimism
A moderating macro environment
Falling commodity prices
Lower interest rates
Volume increases from U.S. private label business
Regional marketing efforts more targeted toward local needs
6
Private Label …
The departure of a major competitor has provided
SMG a unique opportunity to gain share, drive profits
Approximately $100 million of incremental volume:
Vigoro lawn fertilizer at Home Depot
Vigoro plant food at Home Depot
Expert Gardener soils at Walmart
By leveraging our supply chain, sales force
and other overhead, private label will be
accretive to earnings
7
Lawn fertilizer and grass seed….
With higher prices in place, our marketing efforts
will focus on value
1. Creating a powerhouse Turf
Builder franchise across the
lawns portfolio
2. Clearly communicating our
product advantages
(The Scotts Advantage).
3. Reducing our price premium at
the shelf
4. Investing and winning at the
local level
8
Controls …
Led by Home Defense, our pest control presence continues
to expand as we enter new categories in 2009
More new product launches in 2009
than any year in Ortho’s 103 year
history
Focusing on the eco-minded
consumer
Strengthening core weed and insect
businesses
Entering rodenticide category
$100M category
No category leader
9
Controls …
Roundup’s growth will continue from extending Pump N Go
and investing to extend the season
2008 2009
Roundup Pump n Go was our most
successful new product launch ever
In 2009, expanding Pump n Go to
Extended Control
Poison Ivy Tough Brush
Europe
Increasing advertising and in-store marketing
by 30% to capture early season markets and
extend POS through the end of summer
National TV
Radio National TV Radio
2009
10Gardens …
Expanding the ‘Moisture Control’ portfolio in the
garden soil and reinvigorating plant food will be key
Building off success, increasing consumer education are key
#1 reason plants fail is under/over watering
Moisture Control Garden Soil is a natural extension
of Moisture Control Potting Mix - 4 yr/CAGR of 28%
50% of consumers buying plants don’t feed
Must create consumer “need to feed” mindset
11Commodities …
Costs have retreated to historical levels and appear to have
reached bottom in many of the commodity markets
RelativeCommodity
Relative Commodity CostsCost
Movemtents Over Time Over Time
Movements
As of February 1st:
3.00
• Urea requirements are 69% locked Urea
Corn
(i.e., melt urea, sized urea) 2.50 Diesel
LLDPE
• Diesel, which was not hedged through Q1, 2.00
R e la tiv e Pric e
is now 60% locked
1.50
• The price of potash has bucked overall
commodity trends
1.00
0.50
-
Between materials and distribution, Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09
we now expect inflation of
approximately $140 million in 2009 Source: Green Markets/EIA/Chemical Data/USDA/NYMEX/CBOT and internal forecast
12The full year outlook …
Our guidance for 2009 benefits from higher sales,
improved margins and lower interest
$ in millions (except EPS)
2008 2009 guidance
Sales $3,004 0 - 2%
Gross margin rate 33.1% +100 bps - +200 bps
SG&A $718 4 - 9%
Income from operations $286 (1) - 4%
Interest expense $82 $60 - $65 million
(1)
Adjusted earnings per share $2.05 $2.10 - $2.30 / share (early indications were $2.00 /share)
(2)
Free cash flow $141 $150 - $170 million
(1)excludes restructuring and onetime charges of $20M
(2)defined as cash provided by operating activities (GAAP defined) less capital expenditures
13To request an investor relations kit please contact:
Jim King
Senior VP of Investor Relations
& Corporate Communications
937-578-5622
jim.king@scotts.com
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