The Scotts Miracle-Gro Company Dave Evans, CFO The Bank of America and Merrill Lynch Consumer Conference March 11 th, 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 forwardlooking 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 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 2008 2009 National TV Radio National TV Radio 2009 10
Gardens 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 11
Commodities Costs have retreated to historical levels and appear to have reached bottom in many of the commodity markets As of February 1 st : Urea requirements are 69% locked (i.e., melt urea, sized urea) Diesel, which was not hedged through Q1, is now 60% locked The price of potash has bucked overall commodity trends Relative Price 3.00 2.50 2.00 1.50 1.00 Relative Commodity Costs Movemtents Over Time Relative Commodity Cost Movements Over Time Urea Corn Diesel LLDPE 0.50 Between materials and distribution, we now expect inflation of approximately $140 million in 2009 - Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Source: Green Markets/EIA/Chemical Data/USDA/NYMEX/CBOT and internal forecast 12
The 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 Adjusted earnings per share (1) $2.05 $2.10 - $2.30 / share Free cash flow (2) $141 $150 - $170 million (early indications were $2.00 /share) (1) excludes restructuring and onetime charges of $20M (2) defined as cash provided by operating activities (GAAP defined) less capital expenditures 13
To request an investor relations kit please contact: Jim King Senior VP of Investor Relations & Corporate Communications 937-578-5622 jim.king@scotts.com 14