UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission file number 33-47073
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
The Scotts Company
Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
REQUIRED INFORMATION
The following financial statements [and supplemental schedule?] for The
Scotts Company Retirement Savings Plan are being filed herewith:
Audited Financial Statements:
Report of Independent Accountants
Financial Statements:
Statements of Net Assets Available
for Benefits as of December 31, 2002 and 2001
Statements of Changes in Net Assets Available
for Benefits for the Years Ended December 31, 2002 and
2001
Notes to Financial Statements - December 31, 2002 and 2001
The following exhibits are being filed herewith:
Exhibit No. Description
----------- -----------
23.1 Consent of Independent Public Accountants
99.1 Certification Pursuant to Title 18, United States Code,
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
-2-
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
Date: June 27, 2003 By: /s/ George A. Murphy
---------------------------------------
Printed Name: George A. Murphy
-----------------------------
Title: Vice President
------------------------------------
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
PAGE
----
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2002 and 2001 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2002 and 2002 3
Notes to Financial Statements 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of The Scotts
Company Retirement Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The Scotts Company Retirement Savings Plan (the "Plan") at December 31,
2002 and 2001, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
April 3, 2003
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
Net assets available for benefits:
Investment in master trust $123,269,016 $134,662,464
Participant loans 2,945,054 3,025,420
Employer contribution receivable 748,013 1,029,359
Employee contribution receivable 541,524 761,455
------------ ------------
Total net assets available for benefits $127,503,607 $139,478,698
============ ============
-2-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
------------- -------------
Increases:
Employer contributions $ 8,943,178 $ 8,500,365
Participant contributions 9,379,811 8,739,261
Interest on Participant Loans 236,633 255,333
------------- -------------
Total increases 18,559,622 17,494,959
------------- -------------
Decreases:
Net loss from master trust 16,667,907 9,159,673
Benefits paid to participants 13,853,291 15,655,559
Other 13,515 594
------------- -------------
Total decreases 30,534,713 24,815,826
------------- -------------
Net decrease in net assets available for benefits (11,975,091) (7,320,867)
Net assets available for benefits, beginning of year 139,478,698 146,799,565
------------- -------------
Net assets available for benefits, end of year $ 127,503,607 $ 139,478,698
============= =============
-3-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002
AND 2001
1. PLAN DESCRIPTION
The plan is a contributory defined contribution plan sponsored by
The Scotts Company (the "Company"). The following brief
description of the Company Retirement Savings Plan (the "Plan")
provides only general information. Participants should refer to
the Plan document for a more complete description of Plan
provisions, such as eligibility, vesting, allocation and funding.
ELIGIBILITY
Regular domestic employees of the Company are eligible to
participate in the Plan on the first day of the month immediately
following their date of employment. Regular employees of E.G.
Systems, Inc. doing business as Scotts Lawn Service, a subsidiary
of the Company, are eligible to receive base retirement
contributions on the first day of the month after completing one
year of eligibility service and are eligible to make contributions
and receive matching contributions on the first day of the month
after completing 90 days of service if hire date is prior to
January 1, 2001 (60 days of service if hire date is January 1,
2001 or subsequent). Temporary employees are eligible to
participate on the January 1 or July 1 subsequent to completing
one year of eligibility service and attaining age 21.
EMPLOYEE CONTRIBUTIONS
The Plan provides for a participant to make pre-tax or after-tax
contributions up to 75% of eligible wages, not to exceed the
annual Internal Revenue Service (IRS) maximum deferral amount.
EMPLOYER CONTRIBUTIONS
The Plan provides a base retirement contribution for all eligible
employees. Generally, eligible employees receive an allocation
equal to 2% of monthly compensation. This percentage increases to
4% when employees' year-to-date compensation exceeds 50% of the
social security taxable wage base. The Company also matches
participant pre-tax contributions dollar for dollar for the first
3% of pay, and matches $0.50 on the dollar for the next 2% of
participant pre-tax contributions. Additionally, the Company
remits transition contributions to certain participants who were
also participants of certain retirement plans previously sponsored
by The Scotts Company or its subsidiaries.
VESTING
Participants are immediately vested in their contributions plus
actual earnings thereon. Matching and transition contributions
made by the Company vest immediately. However, base contributions
made by the Company vest after three years of service, or
immediately upon death or disability.
FORFEITURES
The nonvested portions of participant account balances are
forfeitable and used to reduce employer contributions to the Plan.
Plan forfeitures totaled $98,148 for the year ended December 31,
2002 and $133,198 for the year ended December 31, 2001.
INVESTMENTS
All investments are participant-directed. Participants can change
their investment options on a daily basis. The following
investment options are available to participants:
-4-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
- FIDELITY PURITAN FUND--assets are invested in high-yielding U.S.
and foreign securities, common and preferred stocks, and bonds of
any maturity.
- FIDELITY CONTRAFUND--assets are primarily invested in U.S. and
foreign common stocks that are believed to be undervalued.
- FIDELITY BLUE CHIP FUND--assets are primarily invested in common
stock of established and/or rapidly growing companies.
Approximately 65% of this fund's total assets invest in common
stock of blue chip companies.
- FIDELITY WORLDWIDE FUND--assets are invested in stocks and other
securities of companies located around the world.
- FIDELITY FREEDOM INCOME FUND--assets are primarily invested in
bond and money market funds. A smaller percentage of assets are
invested in equity mutual funds.
- FIDELITY FREEDOM 2000 FUND--assets are invested in a combination
of equity, fixed income and money market mutual funds of Fidelity
Investments. Assets are allocated among these funds according to
an asset allocation strategy which becomes more conservative over
time.
- FIDELITY FREEDOM 2010 FUND--assets are invested in a combination
of equity, fixed income and money market mutual funds of Fidelity
Investments. The asset mix becomes more conservative as year 2010
approaches.
- FIDELITY FREEDOM 2020 FUND--assets are invested in a combination
of equity, fixed income and money market mutual funds of Fidelity
Investments. The asset mix becomes more conservative as year 2020
approaches.
- FIDELITY FREEDOM 2030 FUND--assets are invested in a combination
of equity, fixed income and money market mutual funds. The asset
mix becomes more conservative as year 2030 approaches.
- FIDELITY MANAGED INCOME PORTFOLIO--assets are invested in
investment contracts of major insurance companies and other
approved financial institutions, and in other fixed income
securities. A small percentage of assets are invested in money
market funds to provide daily liquidity.
- SPARTAN U.S. EQUITY INDEX FUND--assets are invested in stocks and
in approximately the same proportions as the Standard & Poor's 500
Stock Index.
- BARON ASSET FUND--assets are invested in stocks with prices
perceived as low relative to the related companies' profits,
assets, and other value measures.
- PIMCO TOTAL RETURN FUND--assets are invested in various types of
bonds, including U.S. government, corporate, mortgage, and foreign
bonds with an average portfolio duration of three to six years
(approximately equal to an average maturity of five to twelve
years).
- THE SCOTTS COMPANY COMMON SHARES--assets consist entirely of The
Scotts Company common shares and cash equivalents.
The following investment options became available to participants in
2002:
- DODGE AND COX STOCK FUND - assets are invested in a broadly
diversified portfolio of common stocks. At least 80% of this
fund's total assets invest in common stock.
- FIDELITY LOW PRICE STOCK FUND - assets are invested primarily in
small and medium sized companies. At least 80% of this fund's
total assets invest in low-priced stock (at or below $35 per
share).
- FIDELITY FREEDOM 2040 FUND - assets are invested primarily in
mutual funds of Fidelity Investments. The mix of funds becomes
more conservative as year 2040 approaches.
-5-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
- MANAGERS SPECIAL EQUITY FUND (REPLACING THE BARON ASSET FUND) -
assets are invested primarily in common and preferred stocks of
small and medium sized US Companies that are believed to have
superior growth potential.
- EUROPACIFIC GROWTH FUND - CLASS A (REPLACING THE FIDELITY
WORLDWIDE FUND) - assets are invested primarily in companies with
most of their business outside of the US. At least 80% of the
fund's total assets will be invested in securities of companies
from Europe or the Pacific Basin.
BENEFIT PAYMENTS
Participants are eligible to receive benefit payments upon
termination, retirement, death or disability equal to the vested
balance of the participant's account as of the business day the
trustee processes the distribution. The Plan also provides for
hardship and in-service withdrawals for active employees under certain
circumstances.
PARTICIPANT LOANS
Loans are available to participants from their individual accounts
subject to the terms of the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
INVESTMENTS
Excluding participant loans, investments are stated at quoted market
prices. Participants' loans are valued at cost, which approximates
fair value.
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation in the fair value of its
investments, which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments. Gains and
losses on sales of investments are based on the average cost method.
ADMINISTRATIVE EXPENSES
The Company pays for all administrative fees except those that are
participant specific, such as loan establishment and maintenance fees.
PAYMENTS OF BENEFITS
Benefits are recorded when paid.
USE OF ESTIMATES
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles requires the Plan to make
estimates and assumptions that affect the reported amounts of net
assets available for benefits at the date of the financial statements,
changes in net assets available for benefits during the reporting
period and, when applicable, disclosures of contingent assets and
liabilities at the date of the financial statements. Actual results
could differ from those estimates.
-6-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
RECLASSFICATION
Certain balances in the December 31, 2001 statements have been
reclassified to conform with the December 31, 2002 presentation. These
changes had no impact on previously reported results of operations.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options, which are subject to
various risks, such as interest rate, market, and credit risks. Due to
the level of risk associated with certain investment securities, it is
at least reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could
materially affect participant account balances and the amounts reported
in the statement of net assets available for benefits.
3. MASTER TRUST
Effective January 1, 2000, a master trust was established to invest
certain assets of the Plan and certain assets of the Company's other
defined contribution plan, The Scotts Company Union Retirement Savings
Plan. Each plan's accounting is maintained separately; the respective
plan's value is a percentage of the master trust. Plan activities, such
as contributions and benefit payments, are recorded in the individual
plan's accounting records.
Net earnings of the master trust are allocated between the plans based
on a weighted average of assets related to each plan. Total net
earnings for the master trust for the year ended December 31, 2002 and
2001 are as follows:
-7-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NET
APPRECIATION
(DEPRECIATION)
INTEREST AND IN FAIR VALUE ADMINISTRATION
2002 DIVIDENDS OF SECURITIES EXPENSES TOTAL
------------------------------------------- ---------------- ------------------- ------------------ -----------------
Mutual funds $ 1,757,539 $(19,955,817) $ (15,319) $(18,213,597)
Common trust fund 895,172 - (4,684) 890,488
The Scotts Company Common Shares - 636,447 (1,626) 634,821
---------------- ------------------- ------------------ -----------------
Total $2,652,711 $(19,319,370) $ (21,629) $(16,688,288)
================ =================== ================== =================
NET
APPRECIATION
(DEPRECIATION)
INTEREST AND IN FAIR VALUE ADMINISTRATION
2001 DIVIDENDS OF SECURITIES EXPENSES TOTAL
------------------------------------------- ---------------- ------------------- ------------------ -----------------
Mutual funds $ 3,201,181 $(15,290,778) $ (14,345) $(12,103,942)
Common trust fund 858,935 - (3,431) 855,504
The Scotts Company Common Shares 23,687 2,054,105 (1,750) 2,076,042
---------------- ------------------- ------------------ -----------------
Total $4,083,803 $(13,236,673) $ (19,526) $(9,172,396)
================ =================== ================== =================
-8-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
Total assets held in the master trust at December 31, 2002 and 2001
were as follows:
2002 2001
------------- -------------
Cash and cash equivalents $ 517,001 $ 486,922
Investments
Mutual funds, at fair value 94,709,701 112,359,577
Common trust fund, at fair value 21,081,383 15,190,528
The Scotts Company Common Shares, at fair value 7,015,025 6,786,189
------------- -------------
Total investments 122,806,109 134,336,294
------------- -------------
Receivable from broker 303,773 1,076
Payable to broker (236,220) -
------------- -------------
Total master trust net assets 123,390,663 134,824,292
The Scotts Company Retirement Savings Plan interest
in master trust net assets 99.900% 99.877%
============= =============
Accounting policies discussed in Note 2 also apply to the master trust.
Cash equivalents include short-term investments with original term to
maturity of 90 days or less. Cost approximates fair value.
At December 31, 2002 and 2001, the Plan held certain investments in
mutual funds managed by the Trustee. Purchases and sales of these
mutual funds are open market transactions at fair value. Consequently,
such transactions are permitted under the provisions of the Plan and
exempt from prohibition of party-in-interest transactions under the IRS
Code and ERISA.
4. INVESTMENTS IN THE SCOTTS COMPANY
At December 31, 2002 and 2001, the master trust had investments in The
Scotts Company common shares, as follows:
2002 2001
----------------------------------- ---------------------------------
FAIR MARKET FAIR MARKET
SHARES VALUE SHARES VALUE
----------------- --------------- --------------- ----------------
143,047 $7,015,025 142,567 $6,786,189
================= =============== =============== ================
The Company's common shares are valued at quoted market prices, which were
$49.04 per share at December 31, 2002 and $47.60 per share at December 31, 2001.
-9-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
5. TAX STATUS
The Plan obtained a determination letter on January 28, 1997, in which
the Internal Revenue Service stated that the Plan was in compliance
with the applicable requirements of the Internal Revenue Code. The
Company requested a further determination from the IRS on November 27,
2002 that addresses the effect of recent Plan amendments. As of the
date of these financials statements, the Company has not received this
determination letter. However, the Plan administrator (the Company) and
the Plan's legal counsel believe that the Plan is designed and has been
operated in compliance with the applicable requirements of the Internal
Revenue Code.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan or its contributions subject
to the provisions of the Employee Retirement Income Security Act of
1974. In the event the Plan is terminated, participants will become
fully vested in their accounts.
7. RECONCILIATION TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------- -------------
Net assets available for benefits per
the financial statements $ 127,503,607 $ 139,478,698
Amounts allocated to withdrawing
participants (128,732) (649)
------------- -------------
Net assets available for benefits
per Form 5500 $ 127,374,875 $ 139,478,049
============= =============
-10-
THE SCOTTS COMPANY RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------
Benefits paid to participants per
the financial statements $ 13,853,291 $ 15,655,559
Amounts allocated to withdrawing
participants at December 31, 2002 128,732 -
Amounts allocated to withdrawing
participants at December 31, 2001 (649) 649
Amounts allocated to withdrawing
participants at December 31, 2000 (50,607)
------------ ------------
Benefits paid to participants per
the Form 5500 $ 13,981,374 $ 15,605,601
============ ============
-11-
THE SCOTTS COMPANY
RETIREMENT SAVINGS PLAN
ANNUAL REPORT ON FORM 11-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
23.1 Consent of Independent Public Accountants
99.1 Certification Pursuant to Title 18, United States Code,
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002