This excerpt taken from the SMG 10-K filed Dec 14, 2006.
Research and Development
As the Company views its commitment to innovation as a competitive advantage, the Company continually invests in research and development to improve existing or develop new products, manufacturing processes and packaging and delivery systems. Spending on research and development was $35.1 million, $38.0 million and $34.4 million in fiscal 2006, fiscal 2005, and fiscal 2004, including
registrations of $8.2 million, $7.5 million and $6.8 million, respectively. The Companys long-standing commitment to innovation is evidenced by a portfolio of patents worldwide that supports many of our fertilizers, grass seeds and application devices. In addition to the benefits of our own research and development, we benefit from the research and development activities of our suppliers.
Our research and development worldwide headquarters is located at the Dwight G. Scott Research Center in Marysville, Ohio. We also have research and development facilities in the United Kingdom, France, the Netherlands and Sydney, Australia, as well as several research field stations located throughout the United States.
The Companys biotechnology program is evidence of its commitment to responsible research in search of more effective and easier-to-use products that are preferred by consumers and are better for the environment. By employing technology already proven in agriculture, the Company is working to develop turf varieties that could one day require less maintenance, less water and fewer chemical inputs to resist insects, weeds and disease.
Before a product enhanced with biotechnology may be sold in the United States, it must be deregulated by appropriate governmental agencies. Deregulation involves compliance with the rules and regulations of, and cooperation with, the United States Department of Agriculture (the USDA), Animal and Plant Health Inspection Service, the United States Environmental Protection Agency (the U.S. EPA) and/or the Food and Drug Administration (the FDA). As part of the deregulation process for any product enhanced with biotechnology, we are required to present evidence to the USDA in the form of scientifically rigorous studies showing that the product poses no additional toxicological or ecological risk than products of the same species that have not been enhanced with biotechnology. We are also required to satisfy other agencies, such as the U.S. EPA and the FDA, as to their appropriate areas of regulatory authority. This process typically takes years to complete and also includes at least two opportunities for public comment. Therefore, any enhanced product for which we seek commercialization through submission of a petition for deregulation will be subjected to rigorous and thorough governmental regulatory review.
We submitted a petition for deregulation of a non-residential turfgrass product enhanced with biotechnology to the USDA on April 14, 2003. This turfgrass has been shown, through our research trials, to provide simple, more flexible and better weed control for golf courses in a manner we believe is more environmentally friendly. The USDA has a variety of options in adjudicating a petition to deregulate a biotechnology-derived plant product. The USDA has decided to employ the formal Environmental Impact Statement (EIS) process to judge the acceptability of our petition for deregulation. We welcome this process as the most thorough evaluative step available to the USDA.
We believe there is a substantial market for turfgrass products enhanced with biotechnology, and our product, if approved, can capture a significant portion of this market. However, there can be no assurance our petition for deregulation of this product will be approved, or if approved and commercially introduced, this product will generate any revenues or contribute to our earnings.