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The Scotts Miracle-Gro (SMG)
Q1 2014 Earnings Call
February 06, 2014 9:00 am ET
Jim King - Chief Communications Officer and Senior Vice President
James Hagedorn - Executive Chairman and Chief Executive Officer
Barry W. Sanders - President and Chief Operating Officer
Lawrence A. Hilsheimer - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Eric Bosshard - Cleveland Research Company
Joshua Borstein - Longbow Research LLC
Olivia Tong - BofA Merrill Lynch, Research Division
Alice Beebe Longley - The Buckingham Research Group Incorporated
Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division
William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division
Jon Andersen - William Blair & Company L.L.C., Research Division
Previous Statements by SMG
» The Scotts Miracle-Gro Management Discusses Q4 2013 Results - Earnings Call Transcript
» The Scotts Miracle-Gro Company Discusses Q4 2013 Results (Webcast)
» The Scotts Miracle-Gro Management Discusses Q3 2013 Results - Earnings Call Transcript
Thank you, Mar, and good morning, everyone, and thanks for joining us on our first quarter call. With me here in sunny and warm Marysville, Ohio are Jim Hagedorn, our Chairman and CEO; Barry Sanders, our President and Chief Operating Officer; and our CFO, Larry Hilsheimer. Barry will provide an overview of -- Jim and Barry will provide an overview of the business and our preparation for the upcoming lawn and garden season, and Barry will provide some more detailed highlights on some of the growth initiatives currently underway. Larry's going to cover the first quarter financials, as well as provide some comments on our outlook for the full year, and then we'll take your questions. [Operator Instructions]. So with that, let's move on with the call.
I want to remind everyone that our comments this morning will contain forward-looking statements, and as such, actual results may differ materially. Due to that risk, Scotts Miracle-Gro encourages investors to review the risk factors outlined on our Form 10-K, which is filed with the SEC. As a reminder, the call is being recorded, and an archived version of the call will be available on the Investor Relations section of our website, investor.scotts.com.
With that, let me turn the call over to Jim Hagedorn and -- to discuss our performance. Jim?
Thank you, James. What did you say? This was your...
Sunny -- 50th call.
Your 50th call, which I think has probably changed since you did. I guess we're going to make weather jokes, so it is a winter wonderland out here in Ohio. But good morning, everybody. We're going to keep it brief this morning.
As you know, the first quarter historically represents 6% to 7% of the year and has always been a loss quarter. From a consumer perspective, the last quarter is really more of a reflection of last season than the upcoming one, so I'd encourage you not to read too much into the results.
With that said, loss in the quarter has improved from a year ago, so we're off to a decent start. The results were mostly driven by gross margin improvement and expense control, both of which remain important themes for us.
The one thing that does matter right now is the preparation for the season. For our sales, marketing and supply chain teams, this is a crucial time of the year, and I feel really good about the work that they've been doing. Barry will elaborate in just a moment.
The one thing I do want to say is that I'm extremely encouraged with the current trajectory of the business. You're going to hear this from Barry as well, but we're launching a new version of our Bonus S product this year. We have a major renovation in Roundup. We're moving forward in a major way with natural and organic products. We have new advertising we will be launching in a few weeks, and our retail partners are highly engaged. So the near-term business is on solid footing. And last week, we held our strategic planning session with the board, and I believe that we all came away encouraged by the discussion. It was a more detailed discussion on the sum of the themes that we shared with you in December regarding the long-term opportunities we see for growth and the commitment we have to continue focusing on initiatives that drive shareholder value. But back to the results today.
We're off to a good start. And as far as 2014 is concerned, I'm confident in our plans. We continue to have solid support from our retail partners, and I believe we are well positioned to make good in the commitments we've made to our shareholders. We remain focused on margin improvement and expect another year of strong operating cash flow. Combined with the management of the balance sheet, we have plenty of flexibility to support the business and return cash to shareholders.
With that, let me turn things over to Barry to discuss what we're seeing so far.
Barry W. Sanders
Thanks, Jim. I know the vast majority of the people on this call today are in New York or some other northern climate. And so you might think that winter is a quiet time for lawn and garden, just the opposite is true. Whether it's creating new advertising, preparing new product launches, building store displays or running our manufacturing plants on multiple shifts, things are anything but quiet right now. And as I see all of the pieces of the puzzle coming together, I'm confident we'll have a successful season. I'll come back to these points in a few minutes.
First, I want to go through some details from the quarter. Obviously, there isn't much gardening activity happening in any of our markets right now. I'll share consumer purchases in the quarter as measured by point-of-sale, or POS, at our largest retailers. But please keep in mind that most of the consumer activity in Q1 happens in October, so it's hard to expect -- extract any trends from the data.