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This excerpt taken from the SMG 10-K filed Nov 29, 2007. Environmental/Socio-Political
Local, state, federal and foreign laws and regulations relating
to environmental matters affect us in several ways. In the
United States, all products containing pesticides must be
registered with the U.S. EPA (and similar state agencies)
before they can be sold. The inability to obtain or the
cancellation of any such registration could have an adverse
effect on our business, the severity of which would depend on
the products involved, whether another product could be
substituted and whether our competitors were similarly affected.
We attempt to anticipate regulatory developments and maintain
registrations of, and access to, substitute active ingredients,
but there can be no assurance that we will continue to be able
to avoid or minimize these risks.
The Food Quality Protection Act, enacted by the
U.S. Congress in August 1996, establishes a standard for
food-use pesticides, which standard is the reasonable certainty
that no harm will result from the cumulative effects of
pesticide exposures. Under this Act, the U.S. EPA is
evaluating the cumulative risks from dietary and non-dietary
exposures to pesticides. The pesticides in our products, certain
of which may be used on crops processed into various food
products, are typically manufactured by independent third
parties and continue to be evaluated by the U.S. EPA as
part of this exposure risk assessment. The U.S. EPA or the
third party registrant may decide that a pesticide we use in our
products will be limited or made unavailable to us. For example,
in December 2000, the U.S. EPA reached agreement with
various parties, including manufacturers of the active
ingredient diazinon, regarding a phased withdrawal from
retailers by December 2004 of residential uses of products
containing diazinon, also used in our lawn and garden products.
We cannot predict the outcome or the severity of the effect of
their continuing evaluations.
In addition, the use of certain pesticide and fertilizer
products is regulated by various local, state, federal and
foreign environmental and public health agencies. These
regulations may include requirements that only certified or
professional users apply the product or that certain products be
used only on certain types of locations, may require users to
post notices on properties to which products have
been or will be applied, may require notification to individuals
in the vicinity that products will be applied in the future or
may ban the use of certain ingredients. Even if we are able to
comply with all such regulations and obtain all necessary
registrations, we cannot assure you that our products,
particularly pesticide products, will not cause injury to the
environment or to people under all circumstances. The costs of
compliance, remediation or products liability have adversely
affected operating results in the past and could materially
affect future quarterly or annual operating results.
Perceptions that the products we produce and market are not safe
could adversely affect us and contribute to the risk we will be
subjected to legal action. We manufacture and market a number of
complex chemical products, such as fertilizers, growing media,
herbicides and pesticides. On occasion, allegations are made
that some of our products have failed to perform up to
expectations or have caused damage or injury to individuals or
property. Based on reports of contamination at a third party
supplier’s vermiculite mine, the public may perceive that
some of our products manufactured in the past using vermiculite
are or may be contaminated. Public perception that our products
are not safe, whether justified or not, could impair our
reputation, involve us in litigation, damage our brand names and
have a material adverse affect on our business.
The harvesting of peat for our growing media business has come
under increasing regulatory and environmental scrutiny. In the
United States, state regulations frequently require us to limit
our harvesting and to restore the property to an
agreed-upon
condition. In some locations, we have been required to create
water retention ponds to control the sediment content of
discharged water. In the United Kingdom, our peat extraction
efforts are also the subject of legislation.
In addition to the regulations already described, local, state,
federal and foreign agencies regulate the disposal, handling and
storage of waste, air and water discharges from our facilities.
The adequacy of our current environmental reserves and future
provisions is based on our operating in substantial compliance
with applicable environmental and public health laws and
regulations and several significant assumptions:
If there is a significant change in the facts and circumstances
surrounding these assumptions or if we are found not to be in
substantial compliance with applicable environmental and public
health laws and regulations, it could have a material impact on
future environmental capital expenditures and other
environmental expenses and our results of operations, financial
position and cash flows.
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