Scotts Miracle-Gro(US:SMG)2025-05-07 20:04Financial Performance - Net sales for the three months ended March 29, 2025, were $1,421.0 million, a decrease of 6.8% from $1,525.4 million for the same period in 2024[120] - Net sales for the six months ended March 29, 2025, were $1,837.8 million, a decrease of 5.1% from $1,935.8 million for the same period in 2024[120] - Net income for the three months ended March 29, 2025, was $217.5 million, or 15.3% of net sales, compared to $157.5 million or 10.3% for the same period in 2024[117] - Net income for the six months ended March 29, 2025, was $148.0 million, an increase of 92.2% from $77.0 million for the same period in 2024[140] - The company reported a net income of $151.9 million for the six months ended March 29, 2025, a significant recovery from a net loss of $16.1 million for the year ended September 30, 2024[184] Profitability Metrics - Gross margin for the three months ended March 29, 2025, was $547.9 million, representing 38.6% of net sales, compared to $463.7 million or 30.4% for the same period in 2024[117] - Income from operations for the three months ended March 29, 2025, was $344.7 million, or 24.3% of net sales, compared to $272.1 million or 17.8% for the same period in 2024[117] - Gross margin rate increased to 38.6% for the three months ended March 29, 2025, compared to 30.4% for the same period in 2024, and to 35.0% for the six months ended March 29, 2025, compared to 27.2% in 2024[124] - Total Segment Profit (Non-GAAP) for the six months ended March 29, 2025, was $409.1 million, an increase of 14.1% from $358.5 million for the same period in 2024[145] Sales Performance by Segment - The Hawthorne segment experienced decreased sales volume due to an oversupply of cannabis, impacting future performance expectations[115] - U.S. Consumer segment net sales decreased by 4.9% to $1,311.5 million in Q2 2025 from $1,379.8 million in Q2 2024, and by 2.0% to $1,652.4 million for the first six months of fiscal 2025 from $1,686.5 million in the prior year[146] - Hawthorne segment net sales fell by 50.8% to $32.7 million in Q2 2025 from $66.4 million in Q2 2024, and by 42.2% to $84.7 million for the first six months of fiscal 2025 from $146.6 million in the prior year[147] - Other segment net sales decreased by 3.0% to $76.8 million in Q2 2025 from $79.2 million in Q2 2024, and by 1.9% to $100.7 million for the first six months of fiscal 2025 from $102.7 million in the prior year[149] Expenses and Costs - Cost of sales for the three months ended March 29, 2025, was $865.8 million, a decrease from $986.8 million for the same period in 2024[121] - Selling, general and administrative expenses for the three months ended March 29, 2025, were $188.3 million, representing 13.3% of net sales, compared to $178.7 million or 11.7% for the same period in 2024[117] - SG&A expenses increased by $9.6 million, or 5.4%, for the three months ended March 29, 2025, and by $19.6 million, or 6.7%, for the six months ended March 29, 2025, compared to the same periods in 2024[128] - Share-based compensation expense decreased by $4.7 million, or 25.8%, for the three months ended March 29, 2025, primarily due to lower long-term incentive compensation expense[127] Debt and Financing - The company had net borrowings under credit facilities of $321.2 million during the six months ended March 29, 2025, compared to $205.0 million in the prior year[155] - The Master Receivables Purchase Agreement allows the company to sell up to $750.0 million of outstanding customer accounts receivable, with proceeds from sales totaling $1,022.2 million for the six months ended March 29, 2025[156] - The company has a total borrowing capacity of $2,500 million under the Sixth A&R Credit Agreement, which includes a revolving credit facility of $1,500 million and a term loan of $1,000 million[159] - The interest coverage ratio was 4.17 for the twelve months ended March 29, 2025, exceeding the minimum required ratio of 2.00[172] Macroeconomic Factors - The company continues to monitor macroeconomic conditions, including elevated interest rates and inflationary pressures, which may impact operational performance[116] Legal and Compliance - The company is involved in various judicial and administrative proceedings, which may materially affect future operating results[185] - The company believes it is in substantial compliance with environmental protection laws, although potential financial impacts from legal actions remain uncertain[186] - The company is in compliance with all applicable covenants in the agreements governing its debt as of March 29, 2025[165] Cash Flow and Assets - Cash used in operating activities totaled $257.2 million for the six months ended March 29, 2025, compared to $39.0 million for the same period in 2024[153] - Cash provided by financing activities was $237.9 million for the six months ended March 29, 2025, an increase from $142.8 million for the same period in 2024[155] - As of March 29, 2025, cash and cash equivalents totaled $16.9 million, with $9.4 million held by controlled foreign corporations[158] - Current assets increased to $1,524.1 million as of March 29, 2025, compared to $838.4 million as of September 30, 2024[183] - Non-current liabilities increased to $2,774.2 million as of March 29, 2025, from $2,471.6 million as of September 30, 2024[183] Interest and Taxation - Interest expense decreased to $36.6 million for the three months ended March 29, 2025, a 17.0% decrease from $44.1 million in 2024, and to $70.3 million for the six months ended March 29, 2025, a 19.0% decrease from $86.8 million in 2024[136] - The effective tax rate for the six months ended March 29, 2025, was 27.8%, compared to 27.1% for the same period in 2024[137] Accounting and Market Risks - Critical accounting estimates related to revenue recognition and promotional allowances have not changed materially from the previous annual report[189] - Market risks have not changed materially from those disclosed in the 2024 Annual Report[190]