2009-11-20 01:20:01 -
BOULDER, CO -- (Marketwire) -- 11/19/09 -- AeroGrow International, Inc. (OTCBB: AERO) ("AeroGrow" or the "Company"), makers of the AeroGarden® line of indoor gardening products, announced results for the quarter ended September 30, 2009.
For the quarter ended September 30, 2009, AeroGrow reported net revenue of $3.3 million, down 76% from the quarter ended September 30, 2008. The Company also reported a net loss for the quarter of $1.8 million, or -$0.14 per share, down from a net profit of $0.4 million, or $.03 per share, last year in the same period.
"The decline in sales reflects the continued economic downturn as well as a global shift in purchasing patterns at retail, from large stocking orders to later, smaller, more just-in-time inventory purchases," said Jerry Perkins, CEO of AeroGrow. "We expected this would change the seasonal pattern of our sales to retailers, and push more sales into the December quarter as retailers shifted inventory risk to manufacturers to conserve cash. In addition, our total retail storefronts declined from about 9,000 in September of last year to about 3,600 this year. A combination of factors led to the reduction, including a decision on our part to lower our inventory risk in a volatile marketplace.
"In contrast, our direct-to-consumer sales managed modest year-over-year growth even in the face of a 26% reduction in media spending. This was fueled primarily by demand for seed kits and accessories, which increased as a percentage of total sales to 29% from 19% last year. Stronger performance in this area reflects the leverage or our recurring revenue model and the loyalty or our customers as we continue to build our user base.
"Our cash remained extremely tight throughout the quarter, which at times impacted our ability to manage efficiently on a day-to-day basis, and adversely affected our margins. As previously announced, we raised $0.6 million in new cash proceeds through the sale of preferred stock in October to improve our liquidity position. In terms of spending, I continue to be encouraged by the results of our cost reduction initiatives that have driven year-over-year reductions in almost every key spending category.
These decreases in our expenses and the continued strong performance of our direct business represent positive developments in difficult times."
The quarter ended September 30, 2009, is AeroGrow's second quarter of the fiscal year. The following table sets forth, as a percentage of sales, our unaudited quarterly financial results for the three months ended September 30, 2009, and the three months ended September 30, 2008:
Three Months Ended
September 30,
------------------------
2009 2008
---------- -----------
Revenue
Product sales - retail, net 55.8 % 83.0%
Product sales - direct to consumer, net 41.8 % 9.9%
Product sales - international 2.4 % 7.1%
---------- -----------
Total sales 100.0 % 100.0%
Operating expenses
Cost of revenue 69.1 % 57.9%
Research and development 5.3 % 3.0%
Sales and marketing 38.0 % 20.8%
General and administrative 41.2 % 13.7%
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Total operating expenses 153.6 % 95.4%
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Profit/(loss) from operations (53.6)% 4.6%
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Summary Results of Operations - Three Months Ended September 30, 2009
For the three months ended September 30, 2009, our sales totaled $3,285,949, a 76.3% decrease from the same period in the prior year. The decline in sales reflected an 84.1% reduction in sales to retailers, caused in part by the decline in economic activity associated with the global recession, which adversely affected the levels of consumer spending and retailer procurement relative to the prior year period. In addition, our sales to retailers relative to the prior year period declined because of a comparison to the 2008 period during which retailers took large stocking orders in anticipation of the holiday shopping season. In 2009, retailers are delaying orders until later in the year, and ordering inventories on a just-in-time, replenishment basis, rather than placing large stocking orders. In addition, we experienced a decline in the number of retail storefronts carrying our products, from approximately 9,000 at September 30, 2008 to approximately 3,600 at September 30, 2009, reflecting a shift in stocking strategy by many retail chains to focus inventory investment on more traditional consumer product categories. Our direct-to-consumer sales were up slightly from the prior year, despite a 25.9% reduction in the amount of revenue-generating media spending during the period. The increase in sales was driven by strong direct-to-consumer sales of seed kits and accessories, reflecting continued strength in the recurring revenue portion of our direct-to-consumer business, as the cumulative number of AeroGardens sold continued to increase, to 852,092 as of September 30, 2009. As a percent of total revenue, seed kits and accessories represented 28.7% for the three months ended September 30, 2009, up from 18.6% in the prior year period.
The gross margin for the three months ended September 30, 2009, was 30.9% as compared to 42.1% for the year earlier period. The decline reflected changes in channel, customer, and product mix, as well as the impact of fixed facility costs in our Indianapolis, Indiana manufacturing and distribution facility that became fully operational in September 2008, on a lower revenue base in the current year period. Operating expenses other than cost of revenue were reduced $2,419,382, or 46.6%, from the prior year reflecting cost saving initiatives and staffing reductions.
The loss from operations totaled $1,759,845 for the three months ended September 30, 2009, as compared to an operating profit of $633,985 in the prior year period. The increased loss principally reflected the impact of the decline in revenue and the lower gross margin, which, in combination, more than offset the significant decrease in operating expenses other than cost of revenue.
The net loss for the three months ended September 30, 2009 was $1,765,254 as compared to a net profit of $418,370 in the same period a year earlier.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months ended
--------------------------
September 30,
--------------------------
2009 2008
------------ ------------
Revenue
Product sales $ 3,285,949 $ 13,854,930
Operating expenses
Cost of revenue 2,270,556 8,026,325
Research and development 173,354 416,778
Sales and marketing 1,248,102 2,875,729
General and administrative 1,353,782 1,902,113
------------ ------------
Total operating expenses 5,045,794 13,220,945
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Profit (loss) from operations (1,759,845) 633,985
Other (income) expense, net
Interest (income) (61) (454)
Interest expense 185,756 216,069
Other (income) (180,286) -
------------ ------------
Total other (income) expense, net 5,409 215,615
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Net income (loss) (1,765,254) $ 418,370
============ ============
Net income (loss) per share, basic (0.14) $ 0.03
============ ============
Net income (loss) per share, diluted (0.14) $ 0.03
============ ============
Weighted average number of common shares
outstanding used to calculate basic net
income per share 12,422,249 12,121,858
============ ============
Effect of dilutive securities:
Equity based compensation - 254,698
------------
Weighted average number of common shares
outstanding used to calculate diluted net
income per share 12,422,249 12,376,556
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Six Months ended
--------------------------
September 30,
--------------------------
2009 2008
------------ ------------
Revenue
Product sales $ 6,265,642 $ 20,575,011
Operating expenses
Cost of revenue 4,140,361 11,713,148
Research and development 742,552 1,142,193
Sales and marketing 2,407,898 6,325,612
General and administrative 2,405,042 3,420,825
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Total operating expenses 9,695,853 22,601,778
------------ ------------
Profit (loss) from operations (3,430,211) (2,026,767)
Other (income) expense, net
Interest (income) (141) (1,504)
Interest expense 384,754 373,716
Other (income) (987,838) -
------------ ------------
Total other (income) expense, net (603,225) 372,212
------------ ------------
Net income (loss) (2,826,986) (2,398,979)
============ ============
Net income (loss) per share, basic (0.22) (0.20)
============ ============
Net income (loss) per share, diluted (0.22) (0.20)
============ ============
Weighted average number of common shares
outstanding used to calculate basic net
income per share 12,729,125 12,108,177
============ ============
Effect of dilutive securities:
Equity based compensation - -
Weighted average number of common shares
outstanding used to calculate diluted net
income per share 12,729,125 12,108,177
============ ============
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, March 31,
2009 2009
------------- -------------
ASSETS
Current assets
Cash $ 46,891 $ 332,698
Restricted cash 438,441 438,331
Accounts receivable 2,444,181 2,278,052
Other receivable 39,461 332,059
Inventory 7,753,816 8,350,135
Prepaid expenses and other 506,356 565,454
------------- -------------
Total current assets 11,229,146 12,296,729
Property and equipment 1,336,464 1,768,369
Other assets
Intangible assets 257,145 231,590
Deposit 190,776 110,776
Deferred debt issuance costs 162,990 201,726
------------- -------------
Total other assets 610,911 544,092
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Total Assets $ 13,176,521 $ 14,609,190
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Current portion - long term debt $ 5,996,083 $ 1,099,060
Accounts payable 4,452,184 8,338,559
Accrued expenses 1,474,916 2,318,670
Customer deposits 459,869 246,728
Deferred rent 49,028 57,283
------------- -------------
Total current liabilities 12,432,080 12,060,300
Long term debt 1,405,113 5,547,144
Long term debt-related party - 1,233,371
Stockholders' equity
Preferred stock 7 --
Common stock 12,422 13,343
Additional paid-in capital 52,095,483 45,696,630
Accumulated (deficit) (52,768,584) (49,941,598)
------------- -------------
Total Stockholders' Equity (Deficit) (660,672) (4,231,625)
------------- -------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 13,176,521 $ 14,609,190
============= =============
SALES BY CHANNEL
(Unaudited)
Three Months Ended
September 30,
------------------------
2009 2008
----------- -----------
Revenue
Product sales - retail, net 55.8% 83.0%
Product sales - direct to consumer, net 41.8% 9.9%
Product sales - international 2.4% 7.1%
----------- -----------
Total sales 100.0% 100.0%
Three Months Ended
September 30,
-------------------------
Product Revenue 2009 2008
------------ ------------
Retail, net $ 1,831,781 $ 11,508,030
Direct to consumer, net 1,375,141 1,365,438
International 79,027 981,462
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Total $ 3,285,949 $ 13,854,930
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SALES BY PRODUCT CATEGORY
(Unaudited)
Three Months Ended
September 30,
--------------------------
2009 2008
------------ ------------
Product Revenue
AeroGardens $ 2,343,439 $ 11,278,260
Seed kits and accessories 942,510 2,576,670
------------ ------------
Total $ 3,285,949 $ 13,854,930
============ ============
% of Total Revenue
AeroGardens 71.3% 81.4%
Seed kits and accessories 28.7% 18.6%
------------ ------------
Total 100.0% 100.0%
============ ============
About AeroGrow International, Inc.
Founded in 2002 in Boulder, Colorado, AeroGrow International, Inc. is dedicated to the research, development and marketing of the AeroGarden line of foolproof, dirt-free indoor gardens. AeroGardens allow anyone to grow farmer's market fresh herbs, salad greens, tomatoes, chili peppers, flowers and more, indoors, year-round, so simply and easily that no green thumb is required. See www.aerogrow.com :
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FORWARD-LOOKING STATEMENTS
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements by Jerry Perkins, and/or the Company, statements regarding growth of the AeroGarden product line, optimism related to the business, expanding sales, and other statements in this press release are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business. Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual results could vary materially from the description contained herein due to many factors including continued market acceptance of the Company's products or the need to raise additional capital. In addition, actual results could vary materially based on changes or slower growth in the indoor garden market; the potential inability to realize expected benefits and synergies; domestic and international business and economic conditions; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or technological changes; technological advances; shortages of manufacturing capacity; future production variables impacting excess inventory and other risk factors listed from time to time in the Company's Securities and Exchange Commission (SEC) filings under "risk factors" and elsewhere. The forward-looking statements contained in this press release speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.
Contact:
John Thompson
303-444-7755
