Status Update

Dec 19, 2014

Press Release

Hi, this is Jim Hagedorn, Chairman and CEO of Scotts Miracle Gro. I'm sharing this brief recorded message to provide greater context regarding the press release we issued today announcing the departure of Barry Sanders and Mark Welhelmi. A little more than 2 years ago, I told you we recognized the need to begin I wanted to find ways to better support our brands and R and D pipeline to ensure long term success. And I wanted to eliminate things that slowed us down. We did those things while also focusing on improving our margins, our cash flow and returning more cash to shareholders. Last month in our year end conference call, I outlined numerous ways that we had lived up to that commitment. Over the past year, we began to focus on our organizational structure. Since then, we've reduced the senior leadership ranks by more than 25%. We've pushed decision making lower into the organization and greatly improved our communication and collaboration. And Barry has been a big part of that effort. But as this evolution occurred, it became apparent that we could go further. Frankly, we no longer needed 3 layers of executive decision making. Previously it was me, then Barry and then each of our respective operating leads. We're not GE and we're not Procter and Gamble. While we are by far the leader in lawn and garden, we are not quite a $3,000,000,000 business. Three layers of executive leadership simply isn't necessary in this organization. Over the past several months, I've spent significant time with each of my direct reports working on finding the best solution. Barry was an active participant in this process and he's a good and smart executive. He agreed that reducing our executive staff made sense and he was supportive of the decision to divide his duties between myself and Mike Lukemire. So Mike, who has led our supply chain, our Southern Regional Office, the U. S. Sales force and now the entire North American operation will serve as the Chief Operating Officer. In this capacity, the North American and international consumer teams will report to him. Scott's Lawn Service will also report to him. Mike will report directly to me. The strategic planning and M and A functions previously reporting to Barry will now report to me. As you probably saw earlier this month, we named Brian Finn to our Board, a finance executive with more than 30 years of experience, much of it in M and A. His addition is not a signal that we're changing our philosophy regarding M and A. However, his addition to the Board will help us better vet the opportunities we're exploring and determine whether they make strategic sense. Speaking of our Board, this is another area we've improved the organization. Over the past year or so, the composition of the Board has changed and so has their level of engagement with the management team. Instead of simply coming to Ohio 4 or 5 times a year for routine meetings, they are actively engaged in areas like marketing, innovation, regulatory, HR and finance. You also saw this morning that we announced the retirement of Mark Walhelmy as the Head of Scott's Lawn Service. Mark's been with us for 40 years and his contributions are too lengthy to list here. You may recall that a year ago we set up a succession plan in SLS. We named Mark to lead the business in the short term until Jim Jimison was ready to step up. We think that time has come, so we no longer have co leaders of this business. During his time in our supply chain and his 7 years of SLS, Mark has been an outstanding leader and has made significant contributions to the success of both groups. I want to personally thank him for what he did. As I said a few minutes ago, we began the process of delaying our executive ranks about a year ago. We're not quite done, but we're getting close. We're not looking for any widespread or headline grabbing changes here. Instead, our efforts will be more narrowly focused, but still with the goal of eliminating redundancies and improving business execution. From an earnings perspective, you should expect to see restructuring costs throughout the first half of the fiscal year. As it relates to staffing and people changes, we're hoping to be wrapped up by the end of March. I want to close by recognizing the contributions that both Barry and Amarok have made to this organization, many of which will benefit us for years to come. I wish them both good health and good fortune. Thanks for listening. If you have follow-up questions you need answered, please call Jim King at 937 5785 622.