http://www.aerogrow.com/investors/AeroGrow Reports Results for Fourth Quarter and Year Ending March 31, 2009
Revenue of $5.9 million for the quarter
Revenue of $37.4 million for the full year
$7.6 million recapitalization completed June 30, 2009
Boulder, CO - June 30, 2009 - AeroGrow International, Inc. (NASDAQ:AERO - News) ("AeroGrow" or the "Company"), makers of the AeroGarden® line of indoor gardening products, announced results for the quarter and year ended March 31, 2009.
For the fiscal year ended March 31, 2009, AeroGrow reported revenue of $37.4 million, down 2.4% from the year ended March 31, 2008. Overall, the decline reflected the impact of the slowdown in economic activity in the United States that began in the calendar fourth quarter. AeroGrow reported a net loss for the year of $10.3 million, or an $0.82 loss per share, from a loss of $9.8 million, or an $0.84 loss per share, for the year ended March 31, 2008.
AeroGrow also announced that on Tuesday, June 30, 2009, it completed a $7.6 million recapitalization including the conversion of $1.4 million in accounts payable to long-term debt, the amendment of terms of its senior secured revolving credit facility, and other fundraising, as detailed in concurrent releases today.
"Our financial results mirrored that of the overall economy as our high-growth strategy ran into the sudden, severe and unforeseen market contraction," said AeroGrow CEO Jerry Perkins. "The speed of the contraction left us with far too much product on the shelves both at retail and in inventory, and this has dramatically impacted our wholesale shipments, marketing spend and overall sales for the last two quarters. The rate of deceleration was significant – we went from a 60% year-over-year increase in sales in the first two quarters of the year, to finishing the fiscal year about flat versus the previous year.
"The economic crisis forced us to quickly shift from targeting double digit growth to targeting the cost containment, overhead reduction and recapitalization needed to survive the downturn and preserve the long-term equity in the products and brand that we've built. In the last few months we've executed initiatives that reduce our costs by about $10 million annually, and we've just completed a major restructuring of our balance sheet. Our lenders, vendors and shareholders have supported this transition because consumer demand for AeroGardens has remained strong, validating the consumer proposition for the product category we've defined and built. We saw a better than 20% increase in the recurring revenue side of our business, and home vegetable gardening has seen double-digit increases this year. This burgeoning interest in home growing leaves us uniquely positioned to benefit in the coming months and years."
The year ended March 31, 2009, represented AeroGrow's third full fiscal year of operations. The following table sets forth our quarterly financial results for the last 12 months of operations:
Quarterly Condensed Financial Information
(Unaudited)
FISCAL YEAR ENDED MARCH 31, 2009
Quarter ended
June 30,
Sept 30,
Dec 31,
Mar 31,
Fiscal Year
2008
2008
2008
2009
2009
Total revenue $ 6,720,081
$ 13,854,930
$ 11,010,885
$ 5,863,972
$ 37,449,868
Operating expenses
Cost of revenue 3,686,823
8,026,325
7,558,322
4,439,317
23,710,787
Research and development 725,415
416,778
703,133
301,167
2,146,493
Sales and marketing 3,449,883
2,875,729
4,704,912
2,742,298
13,772,822
General and administrative 1,518,712
1,902,113
2,037,797
1,584,769
7,043,391
Total operating expenses 9,380,833
13,220,945
15,004,164
9,067,551
46,673,493
Total other (income) expense, net
156,597
215,615
408,943
308,734
1,089,889
Net profit (loss) $ (2,817,349)
$ 418,370
$ (4,402,222)
$ (3,512,313)
$ (10,313,514)
Net profit (loss) per share, basic and diluted $ (0.23)
$ 0.03
$ (0.35)
$ (0.26)
$ (0.82)
For the fiscal year ended March 31, 2009, our net sales totaled $37,449,868, a decrease of 2.4% from the fiscal year ended March 31, 2008. The sales decrease reflected the impact of the sudden disruptions in the global credit markets, the decline in general economic activity, and the consequent decline in consumer spending that occurred in the second half of our fiscal year. In the first half of the fiscal year (the six month period ended September 30, 2008), our sales increased almost 64%, reflecting our greatly expanded distribution through our retailer customers; however, the sudden change in the economic environment resulted in our sales declining 35% in the second half of the fiscal year. The impact of the economic downturn on sales was experienced in both our sales to retailer customers and in our direct-to-consumer business.
In our international business sales increased 214% year-over-year, principally reflecting the comparison to a partial year of operations in the prior fiscal year.
Our sales to retailers were also adversely impacted during the second half of the fiscal year by an unusually high level of sales allowances, totaling $2,077,622, that we recognized to reflect our cost of supporting discounting programs executed by some of our largest retailer customers.
Our gross margin for the fiscal year ended March 31, 2009, was 37%, down from 40% in the prior year. The reduction in margin reflected a number of factors including the unusual sales allowances (which reduced sales and gross profit), inventory reserves we established during the year, and the increased percentage mix of our sales that came from our lower-margin international operations. Partially offsetting these negative impacts were cost reductions we achieved in our manufacturing and distribution operations, most notably resulting from the opening of a company-operated distribution facility in Indianapolis, Indiana, in July 2008.
Operating expenses other than cost of revenue for the fiscal year ended March 31, 2009, decreased $1,811,487, or 7%, reflecting reduced spending in our sales and marketing operations and in our research and development operations. In both cases, the declines reflected cost saving actions, including headcount reductions, taken in the second half of the fiscal year in response to the sudden decline in sales volume we experienced. Offsetting the decline in sales and marketing and research and development expense was a year-over-year $958,563 increase in general and administrative expense. This increase principally reflected severance expense of $362,271, amortization of debt issuance costs of $243,937, and a $414,831 increase in depreciation and amortization, partially offset by the net impact of cost reduction actions taken during the year.
Other expense for the fiscal year ended March 31, 2009, principally interest expense, increased $646,870 to $1,089,889 from the prior fiscal year, reflecting the higher proportion of debt in our capital structure during the year. Our net loss totaled $10,313,514 for the fiscal year ended March 31, 2009, $477,593 higher than the prior year, as the increase in other expense more than offset the decline in our loss from operations.
