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These excerpts taken from the SMG 10-K filed Dec 3, 2008. Product
Registration and Recall Matters
In April 2008, the Company learned that a former associate
apparently deliberately circumvented the Company’s policies
and U.S. Environmental Protection Agency
(“U.S. EPA”) regulations under the Federal
Insecticide, Fungicide, and Rodenticide Act of 1947, as amended
(“FIFRA”), by failing to obtain valid registrations
for products
and/or
causing invalid product registration forms to be submitted to
regulators. Since that time, the Company has been cooperating
with the U.S. EPA in its civil investigation into pesticide
product registration issues involving the Company and with the
U.S. EPA and the U.S. Department of Justice (the
“U.S. DOJ”) in a related criminal investigation.
In late April of 2008, in connection with the
U.S. EPA’s investigation, the Company was required to
conduct a consumer-level recall of certain consumer lawn and
garden products and a Scotts
LawnService®
product. Subsequently, the Company and the U.S. EPA agreed
upon a Compliance Review Plan for conducting a comprehensive,
independent review of the Company’s product registration
records. Pursuant to the Compliance Review Plan, an independent
third-party firm,
Table of Contents
Quality Associates Incorporated (“QAI”), has been
reviewing all of the Company’s U.S. pesticide product
registration records, some of which are historical in nature and
no longer support sales of the Company’s products. The
Company has identified approximately 132 of the registrations
under review as relating to products for which there was sales
activity in the period generally representing the Company’s
2008 fiscal year (“Active Registrations”). These
Active Registrations supported products which accounted for
approximately $680 million of the Company’s net sales
in the period. The U.S. EPA investigation and QAI review
process identified several issues affecting Active Registrations
which resulted in the issuance of a number of Stop Sale, Use or
Removal Orders by the U.S. EPA and caused the Company to
temporarily suspend sales and shipments of affected products. In
addition, as the QAI review process or the Company’s
internal review has identified a FIFRA registration issue or a
potential FIFRA registration issue (some of which appear
unrelated to the former associate), the Company has endeavored
to stop selling or distributing the affected products until the
issue could be resolved with the U.S. EPA.
To date, QAI has completed a review of the registration records
for substantially all of the Company’s Active
Registrations. Based on such review, and with the cooperation
and prompt attention of the U.S. EPA, the Company believes
it has restored the ability to sell and distribute products
representing over 90% of the sales associated with Active
Registrations; and the Company is hopeful that it will be able
to satisfactorily resolve most, if not all, of the remaining
issues prior to the start of the 2009 lawn and garden season.
The QAI review process is expected to continue with a focus on
reviewing advertising and related promotional support of our
registered pesticide products.
While the Company believes it has made substantial progress
toward completing the FIFRA compliance review process, the
process continues and may result in future state or federal
action with respect to additional product registration issues.
Until such investigation is complete, the Company cannot fully
quantify the extent of additional issues. Furthermore, the
Company may be subject to civil or criminal fines and/or
penalties or private rights of action at the state
and/or
federal level as a result of the product registration issues. At
this time, management cannot reasonably determine the scope or
magnitude of possible liabilities that could result from known
or potential additional product registration issues, and no
reserves for these claims have been established as of
September 30, 2008. However, it is possible that such
fines, penalties
and/or
judgments could be material and have an adverse effect on the
Company’s financial condition, results of operations and
cash flows.
On September 26, 2008, the Company, doing business as
Scotts
LawnService®,
was named as a defendant in a purported class action filed in
the U.S. District Court for the Eastern District of
Michigan relating to certain pesticide products. In the suit,
Mark Baumkel, on behalf of himself and the purported classes,
seeks an unspecified amount of damages, plus costs and attorney
fees, for alleged claims involving breach of contract, unjust
enrichment and violation of the Michigan consumer protection
act. Given the preliminary stages of the proceedings, no
reserves have been booked at this time, and the Company intends
to vigorously contest the plaintiff’s assertions.
In addition, in fiscal 2008 the Company conducted a voluntary
recall of most of its wild bird food products due to a
formulation issue. The wild bird food products had been treated
with pest control additives to avoid insect infestation,
especially at retail stores. While the pest control additives
had been labeled for use on certain stored grains that can be
processed for human
and/or
animal consumption, they were not labeled for use on wild bird
food products. This voluntary recall was completed prior to the
end of fiscal 2008.
As a result of these registration and recall matters, the
Company has reversed sales associated with estimated returns of
affected products, recorded an impairment estimate for affected
inventory and recorded other registration and recall-related
costs. The cumulative impact of these adjustments reduced income
from operations by $51.1 million for the fiscal year ended
September 30, 2008. While the Company continues to evaluate
the financial impact of the registration and recall matters, the
Company currently expects total fiscal year 2008 and 2009 costs
related to the recalls and known registration issues to be
limited to approximately $65 million, exclusive of
potential fines, penalties
and/or
judgments.
Scotts Miracle-Gro is committed to providing its customers and
consumers with products of superior quality and value to enhance
their lawns, gardens and overall outdoor living environments. We
believe consumers have come to trust our brands based on the
superior quality and value they deliver, and that trust is
highly valued. We are also committed to conducting business with
the highest degree of ethical
Table of Contents
standards and in adherence to the law. While we are disappointed
in these recent events, we believe we have made significant
progress in addressing the issues and restoring customer and
consumer confidence in our products.
Product Registration and Recall Matters In April 2008, the Company learned that a former associate apparently deliberately circumvented the Company’s policies and U.S. Environmental Protection Agency (“U.S. EPA”) regulations under the Federal Insecticide, Fungicide, and Rodenticide Act of 1947, as amended (“FIFRA”), by failing to obtain valid registrations for products and/or causing invalid product registration forms to be submitted to regulators. Since that time, the Company has been cooperating with the U.S. EPA in its civil investigation into pesticide product registration issues involving the Company and with the U.S. EPA and the U.S. Department of Justice (the “U.S. DOJ”) in a related criminal investigation. In late April of 2008, in connection with the U.S. EPA’s investigation, the Company was required to conduct a consumer-level recall of certain consumer lawn and garden products and a Scotts LawnService® product. Subsequently, the Company and the U.S. EPA agreed upon a Compliance Review Plan for conducting a comprehensive, independent review of the Company’s product registration records. Pursuant to the Compliance Review Plan, an independent third-party firm, Table of ContentsQuality Associates Incorporated (“QAI”), has been reviewing all of the Company’s U.S. pesticide product registration records, some of which are historical in nature and no longer support sales of the Company’s products. The Company has identified approximately 132 of the registrations under review as relating to products for which there was sales activity in the period generally representing the Company’s 2008 fiscal year (“Active Registrations”). These Active Registrations supported products which accounted for approximately $680 million of the Company’s net sales in the period. The U.S. EPA investigation and QAI review process identified several issues affecting Active Registrations which resulted in the issuance of a number of Stop Sale, Use or Removal Orders by the U.S. EPA and caused the Company to temporarily suspend sales and shipments of affected products. In addition, as the QAI review process or the Company’s internal review has identified a FIFRA registration issue or a potential FIFRA registration issue (some of which appear unrelated to the former associate), the Company has endeavored to stop selling or distributing the affected products until the issue could be resolved with the U.S. EPA. To date, QAI has completed a review of the registration records for substantially all of the Company’s Active Registrations. Based on such review, and with the cooperation and prompt attention of the U.S. EPA, the Company believes it has restored the ability to sell and distribute products representing over 90% of the sales associated with Active Registrations; and the Company is hopeful that it will be able to satisfactorily resolve most, if not all, of the remaining issues prior to the start of the 2009 lawn and garden season. The QAI review process is expected to continue with a focus on reviewing advertising and related promotional support of our registered pesticide products. While the Company believes it has made substantial progress toward completing the FIFRA compliance review process, the process continues and may result in future state or federal action with respect to additional product registration issues. Until such investigation is complete, the Company cannot fully quantify the extent of additional issues. Furthermore, the Company may be subject to civil or criminal fines and/or penalties or private rights of action at the state and/or federal level as a result of the product registration issues. At this time, management cannot reasonably determine the scope or magnitude of possible liabilities that could result from known or potential additional product registration issues, and no reserves for these claims have been established as of September 30, 2008. However, it is possible that such fines, penalties and/or judgments could be material and have an adverse effect on the Company’s financial condition, results of operations and cash flows. On September 26, 2008, the Company, doing business as Scotts LawnService®, was named as a defendant in a purported class action filed in the U.S. District Court for the Eastern District of Michigan relating to certain pesticide products. In the suit, Mark Baumkel, on behalf of himself and the purported classes, seeks an unspecified amount of damages, plus costs and attorney fees, for alleged claims involving breach of contract, unjust enrichment and violation of the Michigan consumer protection act. Given the preliminary stages of the proceedings, no reserves have been booked at this time, and the Company intends to vigorously contest the plaintiff’s assertions. In addition, in fiscal 2008 the Company conducted a voluntary recall of most of its wild bird food products due to a formulation issue. The wild bird food products had been treated with pest control additives to avoid insect infestation, especially at retail stores. While the pest control additives had been labeled for use on certain stored grains that can be processed for human and/or animal consumption, they were not labeled for use on wild bird food products. This voluntary recall was completed prior to the end of fiscal 2008. As a result of these registration and recall matters, the Company has reversed sales associated with estimated returns of affected products, recorded an impairment estimate for affected inventory and recorded other registration and recall-related costs. The cumulative impact of these adjustments reduced income from operations by $51.1 million for the fiscal year ended September 30, 2008. While the Company continues to evaluate the financial impact of the registration and recall matters, the Company currently expects total fiscal year 2008 and 2009 costs related to the recalls and known registration issues to be limited to approximately $65 million, exclusive of potential fines, penalties and/or judgments. Scotts Miracle-Gro is committed to providing its customers and consumers with products of superior quality and value to enhance their lawns, gardens and overall outdoor living environments. We believe consumers have come to trust our brands based on the superior quality and value they deliver, and that trust is highly valued. We are also committed to conducting business with the highest degree of ethical Table of Contentsstandards and in adherence to the law. While we are disappointed in these recent events, we believe we have made significant progress in addressing the issues and restoring customer and consumer confidence in our products. These excerpts taken from the SMG 10-K filed Nov 25, 2008. Product
Registration and Recall Matters
In April 2008, the Company learned that a former associate
apparently deliberately circumvented the Company’s policies
and U.S. Environmental Protection Agency
(“U.S. EPA”) regulations under the Federal
Insecticide, Fungicide, and Rodenticide Act of 1947, as amended
(“FIFRA”), by failing to obtain valid registrations
for products
and/or
causing invalid product registration forms to be submitted to
regulators. Since that time, the Company has been cooperating
with the U.S. EPA in its civil investigation into pesticide
product registration issues involving the Company and with the
U.S. EPA and the U.S. Department of Justice (the
“U.S. DOJ”) in a related criminal investigation.
In late April of 2008, in connection with the
U.S. EPA’s investigation, the Company was required to
conduct a consumer-level recall of certain consumer lawn and
garden products and a Scotts
LawnService®
product. Subsequently, the Company and the U.S. EPA agreed
upon a Compliance Review Plan for conducting a comprehensive,
independent review of the Company’s product registration
records. Pursuant to the Compliance Review Plan, an independent
third-party firm, Quality Associates Incorporated
(“QAI”), has been reviewing all of the Company’s
U.S. pesticide product registration records, some of which are
historical in nature and no longer support sales of the
Company’s products. The Company has identified
approximately 132 of the registrations under review as relating
to products for which there was sales activity in the period
Table of Contents
generally representing the Company’s 2008 fiscal year
(“Active Registrations”). These Active Registrations
supported products which accounted for approximately
$680 million of the Company’s net sales in the period.
The U.S. EPA investigation and QAI review process
identified several issues affecting Active Registrations which
resulted in the issuance of a number of Stop Sale, Use or
Removal Orders by the U.S. EPA and caused the Company to
temporarily suspend sales and shipments of affected products. In
addition, as the QAI review process or the Company’s
internal review has identified a FIFRA registration issue or a
potential FIFRA registration issue (some of which appear
unrelated to the former associate), the Company has endeavored
to stop selling or distributing the affected products until the
issue could be resolved with the U.S. EPA.
To date, QAI has completed a review of the registration records
for substantially all of the Company’s Active
Registrations. Based on such review, and with the cooperation
and prompt attention of the U.S. EPA, the Company believes
it has restored the ability to sell and distribute products
representing over 90% of the sales associated with Active
Registrations; and the Company is hopeful that it will be able
to satisfactorily resolve most, if not all, of the remaining
issues prior to the start of the 2009 lawn and garden season.
The QAI review process is expected to continue with a focus on
reviewing advertising and related promotional support of our
registered pesticide products.
While the Company believes it has made substantial progress
toward completing the FIFRA compliance review process, the
process continues and may result in future state or federal
action with respect to additional product registration issues.
Until such investigation is complete, the Company cannot fully
quantify the extent of additional issues. Furthermore, the
Company may be subject to civil or criminal fines and/or
penalties or private rights of action at the state
and/or
federal level as a result of the product registration issues. At
this time, management cannot reasonably determine the scope or
magnitude of possible liabilities that could result from known
or potential additional product registration issues, and no
reserves for these claims have been established as of
September 30, 2008. However, it is possible that such
fines, penalties
and/or
judgments could be material and have an adverse effect on the
Company’s financial condition, results of operations and
cash flows.
On September 26, 2008, the Company, doing business as
Scotts
LawnService®,
was named as a defendant in a purported class action filed in
the U.S. District Court for the Eastern District of
Michigan relating to certain pesticide products. In the suit,
Mark Baumkel, on behalf of himself and the purported classes,
seeks an unspecified amount of damages, plus costs and attorney
fees, for alleged claims involving breach of contract, unjust
enrichment and violation of the Michigan consumer protection
act. Given the preliminary stages of the proceedings, no
reserves have been booked at this time, and the Company intends
to vigorously contest the plaintiff’s assertions.
In addition, in fiscal 2008 the Company conducted a voluntary
recall of most of its wild bird food products due to a
formulation issue. The wild bird food products had been treated
with pest control additives to avoid insect infestation,
especially at retail stores. While the pest control additives
had been labeled for use on certain stored grains that can be
processed for human
and/or
animal consumption, they were not labeled for use on wild bird
food products. This voluntary recall was completed prior to the
end of fiscal 2008.
As a result of these registration and recall matters, the
Company has reversed sales associated with estimated returns of
affected products, recorded an impairment estimate for affected
inventory and recorded other registration and recall-related
costs. The cumulative impact of these adjustments reduced income
from operations by $51.1 million for the fiscal year ended
September 30, 2008. While the Company continues to evaluate
the financial impact of the registration and recall matters, the
Company currently expects total fiscal year 2008 and 2009 costs
related to the recalls and known registration issues to be
limited to approximately $65 million, exclusive of
potential fines, penalties
and/or
judgments.
Scotts Miracle-Gro is committed to providing its customers and
consumers with products of superior quality and value to enhance
their lawns, gardens and overall outdoor living environments. We
believe consumers have come to trust our brands based on the
superior quality and value they deliver, and that trust is
highly valued. We are also committed to conducting business with
the highest degree of ethical standards and in adherence to the
law. While we are disappointed in these recent events, we
believe we have made significant progress in addressing the
issues and restoring customer and consumer confidence in our
products.
Table of Contents
Product Registration and Recall Matters In April 2008, the Company learned that a former associate apparently deliberately circumvented the Company’s policies and U.S. Environmental Protection Agency (“U.S. EPA”) regulations under the Federal Insecticide, Fungicide, and Rodenticide Act of 1947, as amended (“FIFRA”), by failing to obtain valid registrations for products and/or causing invalid product registration forms to be submitted to regulators. Since that time, the Company has been cooperating with the U.S. EPA in its civil investigation into pesticide product registration issues involving the Company and with the U.S. EPA and the U.S. Department of Justice (the “U.S. DOJ”) in a related criminal investigation. In late April of 2008, in connection with the U.S. EPA’s investigation, the Company was required to conduct a consumer-level recall of certain consumer lawn and garden products and a Scotts LawnService® product. Subsequently, the Company and the U.S. EPA agreed upon a Compliance Review Plan for conducting a comprehensive, independent review of the Company’s product registration records. Pursuant to the Compliance Review Plan, an independent third-party firm, Quality Associates Incorporated (“QAI”), has been reviewing all of the Company’s U.S. pesticide product registration records, some of which are historical in nature and no longer support sales of the Company’s products. The Company has identified approximately 132 of the registrations under review as relating to products for which there was sales activity in the period Table of Contentsgenerally representing the Company’s 2008 fiscal year (“Active Registrations”). These Active Registrations supported products which accounted for approximately $680 million of the Company’s net sales in the period. The U.S. EPA investigation and QAI review process identified several issues affecting Active Registrations which resulted in the issuance of a number of Stop Sale, Use or Removal Orders by the U.S. EPA and caused the Company to temporarily suspend sales and shipments of affected products. In addition, as the QAI review process or the Company’s internal review has identified a FIFRA registration issue or a potential FIFRA registration issue (some of which appear unrelated to the former associate), the Company has endeavored to stop selling or distributing the affected products until the issue could be resolved with the U.S. EPA. To date, QAI has completed a review of the registration records for substantially all of the Company’s Active Registrations. Based on such review, and with the cooperation and prompt attention of the U.S. EPA, the Company believes it has restored the ability to sell and distribute products representing over 90% of the sales associated with Active Registrations; and the Company is hopeful that it will be able to satisfactorily resolve most, if not all, of the remaining issues prior to the start of the 2009 lawn and garden season. The QAI review process is expected to continue with a focus on reviewing advertising and related promotional support of our registered pesticide products. While the Company believes it has made substantial progress toward completing the FIFRA compliance review process, the process continues and may result in future state or federal action with respect to additional product registration issues. Until such investigation is complete, the Company cannot fully quantify the extent of additional issues. Furthermore, the Company may be subject to civil or criminal fines and/or penalties or private rights of action at the state and/or federal level as a result of the product registration issues. At this time, management cannot reasonably determine the scope or magnitude of possible liabilities that could result from known or potential additional product registration issues, and no reserves for these claims have been established as of September 30, 2008. However, it is possible that such fines, penalties and/or judgments could be material and have an adverse effect on the Company’s financial condition, results of operations and cash flows. On September 26, 2008, the Company, doing business as Scotts LawnService®, was named as a defendant in a purported class action filed in the U.S. District Court for the Eastern District of Michigan relating to certain pesticide products. In the suit, Mark Baumkel, on behalf of himself and the purported classes, seeks an unspecified amount of damages, plus costs and attorney fees, for alleged claims involving breach of contract, unjust enrichment and violation of the Michigan consumer protection act. Given the preliminary stages of the proceedings, no reserves have been booked at this time, and the Company intends to vigorously contest the plaintiff’s assertions. In addition, in fiscal 2008 the Company conducted a voluntary recall of most of its wild bird food products due to a formulation issue. The wild bird food products had been treated with pest control additives to avoid insect infestation, especially at retail stores. While the pest control additives had been labeled for use on certain stored grains that can be processed for human and/or animal consumption, they were not labeled for use on wild bird food products. This voluntary recall was completed prior to the end of fiscal 2008. As a result of these registration and recall matters, the Company has reversed sales associated with estimated returns of affected products, recorded an impairment estimate for affected inventory and recorded other registration and recall-related costs. The cumulative impact of these adjustments reduced income from operations by $51.1 million for the fiscal year ended September 30, 2008. While the Company continues to evaluate the financial impact of the registration and recall matters, the Company currently expects total fiscal year 2008 and 2009 costs related to the recalls and known registration issues to be limited to approximately $65 million, exclusive of potential fines, penalties and/or judgments. Scotts Miracle-Gro is committed to providing its customers and consumers with products of superior quality and value to enhance their lawns, gardens and overall outdoor living environments. We believe consumers have come to trust our brands based on the superior quality and value they deliver, and that trust is highly valued. We are also committed to conducting business with the highest degree of ethical standards and in adherence to the law. While we are disappointed in these recent events, we believe we have made significant progress in addressing the issues and restoring customer and consumer confidence in our products. Table of Contents | EXCERPTS ON THIS PAGE:
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