Three Months Nine Months
Ended 12/31 Ended 12/31
---------------- ----------------
Product revenue 2008 2007 2008 2007
------- ------- ------- -------
Sales - Retail 51.1% 62.6% 62.6% 66.7%
Sales - Direct to Consumer 44.2% 34.9% 30.3% 32.0%
Sales - International 4.7% 2.5% 7.1% 1.3%
------- ------- ------- -------
Total 100.0% 100.0% 100.0% 100.0%
Operating expenses
Cost of revenue 68.6% 61.1% 61.0% 59.9%
Research and development 6.4% 4.7% 5.9% 6.8%
Sales and marketing 42.7% 34.1% 34.9% 40.8%
General and administrative 18.5% 10.1% 17.3% 13.5%
------- ------- ------- -------
Total operating expenses 136.2% 110.0% 119.1% 121.0%
------- ------- ------- -------
Profit (loss) from operations -36.2% -10.0% -19.1% -21.0%
======= ======= ======= =======
For the three months ended December 31, 2008, our sales totaled
$11,010,885, a 24.8% decrease from the same period in 2007. The revenue
decline reflected a 38.7% decrease in sales to retailer customers and a
4.7% decrease in direct-to-consumer sales, partially offset by a 44.8%
increase in sales to international distributors. Macroeconomic factors and
changes in retailer buying patterns caused shipments into the retail
channel to decline by approximately 19%, despite an overall 63% increase in
consumer purchases of AeroGarden units from our top 11 retailers that
provide us with their sales data. Compounding the decline in shipments to
retailers was the impact of approximately $1.84 million in gross sales
allowances we recognized in the three months ended December 31, 2008, the
result of discounting programs in the 2008 holiday period and estimates of
the impact of similar programs in the future. The decline in
direct-to-consumer sales reflected a reduction in the number of airings of
our direct response commercials during the three months ending December 31,
2008, partially offset by the impact of increased catalog operations and
web marketing activity. We began selling to distributors outside of North
America in late 2007, so the increase in international sales during the
three months ended December 31, 2008, primarily reflects our initial
penetration into new markets in Europe, Asia, and Australia.
The gross margin for the three months ended December 31, 2008, was 31.4%,
down from 38.9% for the same period in 2007 because of the impact on sales
of the $1.84 million in gross sales allowances, and because of a $174,545
inventory reserve established during the three months ended December 31,
2008. Excluding these items, the gross margin for the three months ended
December 31, 2008, would have increased by approximately four percentage
points, reflecting improvements in product and distribution costs, and an
increase in direct-to-consumer sales as a percentage of total sales, which
have higher margins than sales to retailers and international distributors.
Operating expenses other than cost of revenue totaled $7.4 million during
the three months ended December 31, 2008, an increase of $294,224, or 4.1%,
from the same period in 2007. The higher costs in 2008 include a $362,701
increase in non-cash stock option expense, reflecting a cumulative expense
catch-up related to the October 1, 2008, approval by our stockholders of
changes to our 2005 Equity Compensation Plan. In addition, we recognized
$264,059 in severance charges incurred as a result of a 35% reduction in
our workforce in mid-December 2008. These increased costs were partially
offset by reductions in sales and marketing costs, including advertising
and sales commissions, and reduced spending on general and administrative
expenses.
For the three months ended December 31, 2008, our net loss totaled
$4,402,222, or $0.35 per share, as compared to the $1,655,887 net loss
($0.13 per share) reported for the three months ended December 31, 2007.
Earnings Conference Call
AeroGrow will host a conference call today, Thursday, February 12, 2009, to
review operational results for the quarter ended December 31, 2008.
The conference call is scheduled for 12:00 PM (noon) ET. To participate in
the call, please dial:
U.S. and Canada: 1 (888) 241-0558
International: 1 (647) 427-3417
A replay of the call will be available within 12 hours of completion. You
will be able to access it for the following 30 days through the AeroGrow
website at www.aerogrow.com/investors or by phone until March 12, 2009. To
access the replay by phone, please dial:
U.S. and Canada: 1 (800) 839-9820
International: 1 (402) 220-4281
Conference ID: 84211496
AeroGrow International, Inc.
CONDENSED
STATEMENTS OF
OPERATIONS Three Months Nine Months
(Unaudited) Ended 12/31 Ended 12/31
-------------------------- --------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenue
Product sales $ 11,010,885 $ 14,637,742 $ 31,585,896 $ 27,199,821
Operating expenses
Cost of revenue 7,558,322 8,938,857 19,271,470 16,286,651
Research and
development 703,133 682,453 1,845,326 1,840,441
Sales and marketing 4,704,912 4,997,801 11,030,524 11,089,338
General and
administrative 2,037,797 1,471,364 5,458,622 3,679,397
------------ ------------ ------------ ------------
Total operating
expenses 15,004,164 16,090,475 37,605,942 32,895,827
------------ ------------ ------------ ------------
Profit (loss) from
operations (3,993,279) (1,452,733) (6,020,046) (5,696,006)
Other (income)
expense, net
Interest (income) (939) (31,679) (2,443) (101,879)
Interest expense 409,882 234,833 783,598 426,681
Other (income) - - - (2,929)
------------ ------------ ------------ ------------
Total other (income)
expense, net 408,943 203,154 781,155 321,873
------------ ------------ ------------ ------------
Net profit (loss) $ (4,402,222) $ (1,655,887) $ (6,801,201) $ (6,017,879)
============ ============ ============ ============
Net profit (loss)
per share, basic
and diluted $ (0.35) $ (0.13) $ (0.56) $ (0.52)
Weighted average
number of common
shares outstanding,
basic and diluted 12,546,780 12,371,517 12,250,693 11,529,472
AeroGrow International, Inc.
BALANCE SHEETS 12/31/2008 3/31/2008
------------ ------------
(Unaudited)
ASSETS
Cash $ 834,181 $ 1,559,792
Restricted cash 431,999 86,676
Accounts receivable 6,164,936 2,412,101
Other receivables 225,474 422,530
Inventory 11,041,422 4,688,444
Prepaid expenses 863,570 762,013
------------ ------------
Total current assets 19,561,582 9,931,556
Property and equipment 1,841,714 1,830,646
Other assets
Intangible assets 212,418 56,263
Deposits 101,164 101,164
Deferred debt issuance costs 279,412 -
------------ ------------
Total other assets 592,994 157,427
------------ ------------
TOTAL ASSETS $ 21,996,290 $ 11,919,629
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities
Current portion - long term debt $ 8,942,402 $ 128,927
Due to factor - 1,480,150
Accounts payable 8,833,832 3,023,366
Accrued expenses 4,541,556 2,452,025
Customer deposits 472,255 232,200
Deferred rent 60,535 65,037
------------ ------------
Total current liabilities 22,850,580 7,381,705
Long term debt 49,876 129,373
Stockholders' equity (deficit)
Common stock 13,342 12,076
Additional paid-in capital 45,511,777 44,024,559
Accumulated surplus/(deficit) (46,429,285) (39,628,084)
------------ ------------
Total stockholders' equity (904,166) 4,408,551
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY/(DEFICIT) $ 21,996,290 $ 11,919,629
AeroGrow International, Inc.
SALES BY CHANNEL Three Months Nine Months
(Unaudited) Ended 12/31 Ended 12/31
-------------------------- --------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Product revenue
Sales - Retail $ 5,621,688 $ 9,168,337 $ 19,772,293 $ 18,148,237
Sales - Direct to
Consumer 4,867,808 5,109,405 9,572,656 8,691,584
Sales -
International 521,389 360,000 2,240,947 360,000
------------ ------------ ------------ ------------
Total $ 11,010,885 $ 14,637,742 $ 31,585,896 $ 27,199,821
% of revenue
Product sales -
Retail 51.1% 62.6% 62.6% 66.7%
Product sales -
Direct to Consumer 44.2% 34.9% 30.3% 32.0%
Product sales -
International 4.7% 2.5% 7.1% 1.3%
------------ ------------ ------------ ------------
Total sales 100.0% 100.0% 100.0% 100.0%
AeroGrow International, Inc.
SALES BY PRODUCT Three Months Nine Months
(Unaudited) Ended 12/31 Ended 12/31
-------------------------- --------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Product revenue
AeroGardens $ 8,683,670 $ 12,145,733 $ 24,945,346 $ 22,605,871
Seed kits and
accessories 2,327,215 2,492,009 6,640,550 4,593,950
------------ ------------ ------------ ------------
Total $ 11,010,885 $ 14,637,742 $ 31,585,896 $ 27,199,821
% of revenue
AeroGardens 78.9% 83.0% 79.0% 83.1%
Seed kits and
accessories 21.1% 17.0% 21.0% 16.9%
------------ ------------ ------------ ------------
Total 100.0% 100.0% 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.
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 Information: CONTACTS: Corporate John Thompson AeroGrow International, Inc. (303) 444-7755