AGM 2019

Jan 25, 2019

Good day, and welcome to the Scotts Miracle Growth Annual Meeting of Stockholders. I would now like to turn the conference over to Jim Hagedorn. Please go ahead. Good morning, everyone. My name is Jim Hagedorn, Chairman and Chief Executive Officer of The Scotts Miracle Gro Company. And I'd like to thank you for joining us this morning for our Annual Meeting of Shareholders. Before we launch into our agenda, I want to thank our shareholders for their continued support. We take your feedback seriously and many of the strategic initiatives we've embarked on in recent years were the result of input we received from shareholders. At any point, feel free to reach out to us and we'll do everything we can to answer your questions or explain the business. Speaking of our business, I want to touch briefly on how we're doing. Obviously, fiscal 2018 was a challenging year for us. Poor weather led to a slow start to our season. Additionally, major changes in the regulatory structure of the authorized cannabis industry led to a disappointing result in our Hawthorne unit. Unfortunately, these facts caused us to fall well short of our initial outlook when we started the year. And over the course of the fiscal year, SMG shares moved from an all time high to a multiyear low. The challenges of 2018 prompted the entire management team to assess our performance, our plans and our organization. While we fell short of our goals last year, we remain absolutely committed to our long term strategy and confident in where we believe it can take us. We expect to see a strong recovery in fiscal 2019 and believe shareholders will once again benefit from our commitment to driving value. Before we move on, I want to address the issue of say on pay that was in front of our shareholders. Last year, we had a disappointing outcome on this issue due to a tax gross up provision in one of our long term equity plans. While the measure was approved, the number of yes votes equaled only slightly more than 60% of the total, not good enough in our view. So our Board has debated this issue throughout 2018 before ultimately engaging in a formal outreach effort to some of our largest shareholders. The feedback of our Board received prompted us to reevaluate our decision and ultimately to remove the gross up provision from the plan. On behalf of the entire Board, I want to thank those shareholders for their candid feedback. This year, we expect the yes vote on say on pay to exceed more than 90% of the votes cast. We have always prided ourselves in being responsive to our key stakeholders and I believe this was a good example of our willingness to be responsive. Moving on, in today's meeting, we will tend to the business outlined in our proxy statement. When we're done with that portion of the meeting, we will answer questions that shareholders may have asked online. If you have a question, please post it over the next several minutes. Our Board members are also present for this virtual meeting. As a reminder, our Board of Directors is comprised of the following members: Dave Evans Brian Finn Adam Hanft Craig Hargraves Steve Johnson, Tom Kelly, Kate Hagedorn Littlefield, Jim McCann, Nancy Mistretta, Pete Chumlin and General John Vines, plus myself. This is a diverse group of professionals who play an active oversight role in providing counsel to the entire management team. Their experiences vary between finance, government, strategic planning, consulting, corporate leadership, advertising, consumer marketing and the United States military. I believe our shareholders are extremely lucky to be represented by such a talented and engaged group of directors. I'd also like to say the same thing about my own management team. Joining me here this morning are our President and Chief Operating Officer, Mike Lukemire our Chief Financial Officer, Randy Coleman our General Counsel and Corporate Secretary, Ivan Smith our Global Head of Human Resources, Denise Stump and our Senior Vice President of Corporate Affairs, Jim King. At this point, we will move to the business of the Annual Meeting of Shareholders. Please note that the polls are currently open, so if you are a shareholder who has not yet voted or a shareholder looking to change your vote, you may do so by clicking the voting button on the web portal and following the instructions there. I will now turn the floor over to Ivan Smith, our General Counsel and Corporate Secretary. Ivan? Thank you, Jim. I would like to add my welcome to the Annual Meeting of Shareholders and introduce Gary Farrar, who will serve as our Inspector of Elections and Kevin Crum, Lead Client Service Partner at the Lloyd and Touche LLP, our outside independent auditor. This is the formal part of our meeting where we address the matters that are set forth in the proxy statement sent to our shareholders. When we finished, I'll turn the podium back over to Jim for Q and A. Only validated shareholders will be able to ask questions in the designated field on the web portal. Out of consideration for others, I ask that you please limit yourself to one question. This meeting is being recorded. However, no one attending via webcast is permitted to use any audio recording device. During the course of our discussions this morning, we may make forward looking statements regarding the company's future performance. Want to remind everyone that actual results could differ materially from what we discuss based on a variety of risk factors. We encourage investors to familiarize themselves with those risk factors, which are spelled out in detail in our Form 10 ks, which is filed with the SEC. We can now proceed with the business of our meeting. 1st, with regard to last year's annual meeting of shareholders, I'd like the record to reflect that minutes of that meeting have been filed with the records of the company. Next, Jim King will confirm our mailing procedures and registered shareholders. Thank you, Ivan. I'd like to present the affidavit of Broadridge Financial Solutions pursuant to which Broadridge has confirmed that the notice of this meeting, proxy statement, the form of proxy and the 2018 annual report were timely mailed to the shareholders of the company. Thanks, Jim. The affidavit and proxy materials are directed to be filed with the records of the company. I would also like to present a list of the registered shareholders of the company's common shares. As of the close of business November 30, 2018, the record date for this meeting. Operator, at this time, please open the line for Gary Farrar, our Inspector of Elections. Thank you. The list of registered shareholders is directed to be filed with the records of the company. Next, I'd like to offer a final voted via telephone or the Internet, Shareholders who have sent in proxies or voted via telephone or the Internet and do not want to change their vote do not need to take any further action. Mr. Farrar, please present your report regarding the number common shares present at today's meeting. Mr. Smith, a minimum of 51,000,000 634,000 675 shares or 93.32 percent of the common shares are present in person or by proxy. Thank you, Mr. Farrar. The proxies, substitution of proxies and ballots presented to the meeting are hereby ordered to be filed with the records of the company. According to Mr. Farrar's report, a quorum is present so that business may be properly conducted. As set forth in the proxy statement, the business of this meeting includes 3 proposals. Proposal number 1 is to elect 4 directors, each to serve for a 3 year term expiring at the Annual Meeting of Shareholders to be held in the year 2022. Proposal 2 is to conduct an advisory vote on the compensation of the company's named executive officers, and proposal 3 is to ratify the Audit Committee's selection of Deloitte and 2 Shell LP as the company's independent registered public accounting firm for the fiscal year ending September 30, 2019. Proceeding to proposal number 1, I recognize Denise Stump, Executive Vice President, Global Human Resources, for the purpose of nominating the 4 directors. Thank you, Ivan. I hereby move that the following persons be elected as directors of the company, each to hold office until the annual meeting of shareholders to be held in the year 2022 and until their successors are duly elected and qualified or until their earlier death, resignation or removal. David C. Evans, Stephen L. Johnson, Adam Hanft and Catherine Hagedorn Littlefield. Is there a second to the motion? I second the motion and move that voting for the election of directors be closed. Is there a second to the motion to close the voting? I second the motion. Voting for the election of directors is hereby closed. As a person appointed as an official proxy, I report that I have voted in accordance with the proxies received from shareholders. Mr. Farrar, may I have your report of the vote regarding the election of the 4 directors? Mr. Smith, I report that each of the 4 nominees for election as a director received not less than 22,901,235 votes. I hereby declare that David C. Evans, Stephen L. Johnson, Adam Hanst and Catherine Hagedorn Littlefield have been duly elected as Directors of the company. The meeting will now proceed to consideration of proposal number 2. I recognize Denise Stumpf for the purpose of presenting that proposal. I hereby move that shareholders approve on an advisory basis the compensation of the company's named executive officers. Is there a second to that motion? I second the motion and move that voting on proposal number 2 be closed. Is there a second to the motion to close the voting? I second the motion. Voting on proposal number 2 is hereby closed. As a person appointed as an official proxy, I report that I have voted in accordance with the proxies received from shareholders. Mr. Farrar, may I have your report of the advisory vote regarding the compensation of the company's named executive officers? Mr. Smith, I report that not less than 43,991,548 advisory votes were received for approval of the compensation of the company's named executive officers. I hereby declare that the shareholders have approved on an advisory basis the compensation of the company's named executive officers. The meeting will now proceed to consideration of proposal number 3. I recognize Randy Coleman for the purpose of presenting that proposal. Thank you, Ivan. I hereby move that the Audit Committee's selection of Deloitte and Touche LLP as the company's independent registered public accounting firm for the fiscal year ending September 30, 2019 be ratified. Is there a second to the motion? I second the motion and move that voting on proposal number 3 be closed. Is there a second to the motion to close the voting? I second the motion. Voting on proposal number 3 is hereby closed. As a person appointed as an official proxy, I report that I have voted in accordance with the proxies received from shareholders. Mr. Farr, may I have your report of the vote regarding the ratification of the Audit Committee selection of Deloitte and Touche LLP as the company's independent registered public accounting firm? Mr. Smith, I report that ratification of the Yacht Committee's selection of Deloitte and Tuchel, LP as the company's independent registered public accounting firm the fiscal year ending September 30, 2019 received not less than 2,587,023 votes. I hereby declare that the Audit Committee's selection of Deloitte and Touje LLP as the company's independent registered public accounting firm for the fiscal year ending September 30, 2019 has been ratified. Mr. Chairman, this concludes the formal business portion of our meeting. Thank you, Ivan. I would now like to open things up for shareholder questions and comments. Please note, I will attempt to answer as many questions or comments as time allows, but only questions or comments that are germane to the meeting will be addressed. Mr. Chairman, there is one question related to West Coast shareholder asking us to consider moving the start time next year to a later time. But other than that, there are no other questions from shareholders. So I'll just make a comment that we will definitely consider that. No problem. That's it. That's it. Yes, sir. Thank you all very much for your continued support of Scotts Miracle Gro. There being no further business to come before this meeting, the 2019 Annual Meeting of Shareholders of The Scotts Miracle Gro Company has now been adjourned.