SOURCE: AeroGrow International, Inc.

AeroGrow International, Inc.

August 17, 2009 09:00 ET

AeroGrow Reports Results for Quarter Ended June 30, 2009

Revenue of $3.0 Million for the Quarter; Net Loss Shrinks to $1.1 Million

BOULDER, CO--(Marketwire - August 17, 2009) - AeroGrow International, Inc. (OTCBB: AERO) ("AeroGrow" or the "Company"), makers of the AeroGarden® line of indoor gardening products, announced results for the quarter and year ended June 30, 2009.

For the quarter ended June 30, 2009, AeroGrow reported net revenue of $3.0 million, down 56% from the quarter ended June 30, 2008. The Company also reported a net loss for the quarter of $1.1 million, or -$0.08 per share, a $1.7 million improvement over last year's net loss of $2.8 million in the same period.

"The continued weak economy, our seasonal summer slowdown, and our cutback to all but the most efficient marketing spend, all contributed to the revenue decline," said AeroGrow CEO Jerry Perkins. "However, the impact of our cost reduction initiatives, including the dramatic reductions in headcount and overhead spending we've implemented, is also quite evident. Year over year, our personnel costs dropped almost in half. We also reduced our fulfillment costs, office expenses, travel, and contract services, along with most other overhead costs. This led to a 37% reduction in our operating loss despite lower revenue.

"As previously announced, we also made major improvements to our balance sheet by issuing preferred stock and restructuring our debt arrangements. The improved capitalization and the right-sizing of our business were necessary given the depth and duration of the economic downturn and the resulting impact on the demand for discretionary products."

Summary Results of Operations - Three Months Ended June 30, 2009

The quarter ended June 30, 2009, is AeroGrow's first 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 June 30, 2009, and the three months ended June 30, 2008:

                                              Three Months Ended June 30,
                                              ----------------------------
                                                  2009           2008
                                              -------------  -------------
Revenue
  Product sales - retail, net                          29.1%          39.3%
  Product sales - direct to consumer, net              67.5%          49.7%
  Product sales - international, net                    3.4%          11.0%
                                              -------------  -------------
    Total sales                                       100.0%         100.0%

Operating expenses
  Cost of revenue                                      62.8%          54.9%
  Research and development                             11.6%          10.8%
  Sales and marketing                                  38.9%          51.3%
  General and administrative                           42.8%          22.6%
                                              -------------  -------------
    Total operating expenses                          156.1%         139.6%
                                              -------------  -------------
Other (income) expense, net                           -20.5%           2.3%
      Net Loss                                        -35.6%         -41.9%
                                              =============  =============

For the three months ended June 30, 2009, our sales totaled $2,979,693, a 55.7% decrease from the same period in the prior year. The decline in sales reflected lower sales in each of our channels of distribution, principally because of 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, because of the general economic conditions and a low anticipated return on investment, we elected to reduce our spending on advertising and promotions in our direct-to-consumer business, causing a further reduction in these sales, but ultimately contributing to a reduced operating loss. Sales of AeroGardens declined 68.2% year-over-year; however, sales of seed kits and accessories, which represent recurring revenue related to cumulative sales of AeroGardens, declined by only 19.7%. As a result, sales of seed kits and accessories increased to 46.8% of total revenue from 25.8% in the prior year period.

The gross margin for the three months ended June 30, 2009, was 37.3% as compared to 45.1% for the prior year 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 was opened in July 2008, on a lower revenue base in the current year period. Operating expenses other than cost of revenue were reduced $2,913,756, or 51.2%, from the prior year reflecting cost savings initiatives, staffing reductions, and reduced spending on advertising and promotion.

The loss from operations totaled $1,670,366, which was $990,386 lower than the prior year loss from operations of $2,660,752. The reduced loss reflected the decrease in operating expenses other than cost of revenue, which more than offset the combined impact of lower sales and gross margin relative to a year earlier.

Other income totaled $608,634 as compared to other expense of $156,597 in the prior year, principally reflecting the impact of approximately $807,310 in gains that were recognized during the three months ended June 30, 2009, to reflect discounts negotiated on certain accounts payable balances, partially offset by higher interest expense resulting from a higher average level of debt outstanding.

The net loss for the three months ended June 30, 2009, was $1,061,732 as compared to a $2,817,349 net loss in the same period a year earlier.

                    CONDENSED STATEMENTS OF OPERATIONS
                                (Unaudited)


                                              Three months ended June 30,
                                              ----------------------------
                                                  2009           2008
                                              -------------  -------------
Revenue
  Product sales                               $   2,979,693  $   6,720,081

Operating expenses
  Cost of revenue                                 1,869,805      3,686,823
  Research and development                          344,198        725,415
  Sales and marketing                             1,159,796      3,449,883
  General and administrative                      1,276,260      1,518,712
                                              -------------  -------------
  Total operating expenses                        4,650,059      9,380,833
                                              -------------  -------------

Loss from operations                             (1,670,366)    (2,660,752)

Other (income) expense, net
  Interest (income)                                     (80)        (1,050)
  Interest expense                                  198,998        157,647
  Other (income)                                   (807,552)            --
                                              -------------  -------------
  Total other (income) expense, net                (608,634)       156,597
                                              -------------  -------------

Net loss                                      $  (1,061,732) $  (2,817,349)
                                              =============  =============

Net loss per share, basic and diluted         $       (0.08) $       (0.23)
                                              =============  =============

Weighted average number of common
 shares outstanding, basic and diluted           13,039,373     12,100,387
                                              =============  =============





                         CONDENSED BALANCE SHEETS
                                (Unaudited)


                                            June 30, 2009   March 31, 2009
                                            --------------  --------------
ASSETS
Current assets
  Cash                                      $    3,009,887  $      332,698
  Restricted cash                                  438,396         438,331
  Accounts receivable                              870,720       2,278,052
  Notes receivable                                 139,000              --
  Notes receivable, related party                  612,000              --
  Other receivables                                215,326         332,059
  Inventory                                      7,417,337       8,350,135
  Prepaid expenses and other                       309,750         565,454
                                            --------------  --------------

Total current assets                            13,012,416      12,296,729
Property and equipment                           1,549,651       1,768,369
Other assets
  Intangible assets                                233,063         231,590
  Deposit                                          110,776         110,776
  Deferred debt issuance costs                     154,674         201,726
                                            --------------  --------------
Total other assets                                 498,513         554,092
                                            --------------  --------------
Total Assets                                $   15,060,580  $   14,609,190
                                            ==============  ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
 (DEFICIT)
Current liabilities
  Current portion - long term debt          $    6,228,484  $    1,099,060
  Accounts payable                               4,364,077       8,338,559
  Accrued expenses                               1,917,727       2,318,670
  Customer deposits                                 31,179         246,728
  Deferred rent                                     53,155          57,283
                                            --------------  --------------
Total current liabilities                       12,594,622      12,060,300
Long term debt                                   1,406,878       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                    52,049,981      45,696,630
  Accumulated (deficit)                        (51,003,330)    (49,941,598)
                                            --------------  --------------
Total Stockholders' Equity (Deficit)             1,059,080      (4,231,625)
                                            --------------  --------------

Total Liabilities and Stockholders' Equity
 (Deficit)                                  $   15,060,580  $   14,609,190
                                            ==============  ==============





                             SALES BY CHANNEL
                                (Unaudited)


                                              Three Months Ended June 30,
                                            ------------------------------
                                                 2009           2008
                                            --------------  --------------
Revenue
  Product sales - retail, net                         29.1%           39.3%
  Product sales - direct to consumer, net             67.5%           49.7%
  Product sales - international                        3.4%           11.0%
                                            --------------  --------------
    Total sales                                      100.0%          100.0%


                                             Three Months Ended June 30,
                                            ------------------------------
                                                 2009            2008
                                            --------------  --------------
Revenue
  Product sales - retail, net               $      868,263  $    2,642,575
  Product sales - direct to consumer, net        2,010,243       3,339,410
  Product sales - international                    101,187         738,096
                                            --------------  --------------
    Total sales                             $    2,979,693  $    6,720,081
                                            ==============  ==============





                        SALES BY PRODUCT CATEGORY
                                (Unaudited)


                                               Three Months Ended June 30,
                                              ----------------------------
                                                  2009           2008
                                              -------------  -------------
Product Revenue
  AeroGardens                                 $   1,584,308  $   4,983,416
  Seed kits and accessories                       1,395,385      1,736,665
                                              -------------  -------------
    Total                                     $   2,979,693  $   6,720,081
                                              =============  =============

% of Total Revenue
  AeroGardens                                          53.2%          74.2%
  Seed kits and accessories                            46.8%          25.8%
                                              -------------  -------------
    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.

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

  • Contact:
    John Thompson
    303-444-7755