Welcome to The Scotts Miracle-Gro Company third quarter 2008 earnings conference call. (Operator Instructions) If you have any objections, you may disconnect at this time. Now I will turn the meeting over to Jim King, Senior Vice President of Investor Relations and Corporate Affairs.

With me this morning in Marysville is Jim Hagedorn, our Chairman and Chief Executive Officer, and Dave Evans, our Chief Financial Officer. By now I’m sure you’ve seen a copy of our third quarter financial results that we issued after the close of the markets yesterday; however if you don’t have a copy, you can find it on the Investor Relations section of our website at www.scotts.com. We’re going to start this morning with some prepared remarks from Dave who will provide some details on the results we issued last night. We’ll then turn the call over to Jim who will provide some additional context as well as commentary on our outlook as we prepare for fiscal 2009. I want to remind all of you that our comments this morning will indeed include forward-looking statements. As such, actual results may differ materially from what we discuss here today. We encourage investors to read the risk factors associated with our business which are outlined in yesterday’s press release and are discussed in more detail in our filings with the SEC. As Julie stated, today’s call is being recorded. In addition to any service you may subscribe to, you’ll find an audio archive of this call on our website. One final point before we get started, if we discuss any non-GAAP measures not covered in the press release this morning, we will elaborate on those on the website as well. With that let me turn the call over to Dave Evans to discuss the results we issued last night.

As we said in our press release last night we’re very pleased with our third quarter results. By nearly any measure the last several months have posed one of the strongest tests of our organization from top to bottom of any I can recall. But we have successfully managed extremely volatile commodities, an uncertain economy, a late break to the season, and product recall and registration issues to remain on track to deliver earnings within the range provided last May. Earnings per share in the third fiscal quarter and on a year-to-date basis were effectively flat to prior year on an adjusted pro forma basis. While sure of our original plan, the results are consistent with the expectations we conveyed in May. So let’s move on to the results. In the third quarter total sales increased 7%. Our largest segment, global consumer, posted 6% improvement which equated to a little less than 5% excluding the impact of foreign exchange rates. Within global consumer, point of sale purchases by consumers or POS and our US gardening business which includes both growing media and plant foods were up 4% for the quarter and 1% year-to-date. We continue to increase market share within the growing media category and consumers continue to show a willingness to trade up to premium soils and mulches, the continuation of a multi-year trend. As an illustration, shipments of our premium potting soils which include Miracle-Gro Moisture Control and Organic Choice products were up 6% year-to-date, outperforming mid-tier and commodity soils which declined 10%. Retail prices for premium potting soils are about 80% higher than those for mid-tier and commodity soils. A similar price difference exists in the mulch category. Still, Scotts Nature Scapes our premium mulch offering continue the five-year run of impressive double-digit sales growth. POS in…

I’m not used to going last but I guess that happens when you’re out of the office for a couple of days. I was out in Oshkosh flying my P-51 earlier this week and while I was gone, King and Evans hijacked my position on the call and they told me Dave would speak first, then myself. All kidding aside, I actually think this format works better for this quarter because much of what I’ll talk about is forward looking and I think that’s probably more in line with what our investors are thinking about these days, which will make a smoother transition into the Q&A. At least that’s the plan. Before I get there though I want to reinforce what our first speaker had to say. The lawn and garden category has proved to be exactly what we thought it would be in a difficult economic environment, resilient. We’ve said all along that we believed the category would perform well on a relative basis and that it would likely outperform nearly all other categories at our largest retail accounts. Well, that’s what happened. While we benefited from easy comps in April, we also saw positive POS growth throughout June. Even better we carried that momentum into July. So we’re cautiously optimistic as we move forward toward the end of the fiscal year that the guidance we provided in May is still accurate. While we’ve got a lot of good stories, commodities surely isn’t one of them. What’s the net of all this? We believe the most likely scenario is we come in within the range we provided at May, about $2.00 a share. The timing and strength of the late summer consumer activity will likely be the determining factor as to whether we exceed $2.00 or fall short. Regardless…

Let’s go ahead and start the Q&A.

(Operator Instructions) Our first question comes from William Chappell - SunTrust Robinson Humphrey.

On the quarter, I’m just trying to get a better understanding. When you talk about 80% of consumer takeaway and if we look at year-to-date the sell-in has only been up 2%, how do I make sense and maybe you can talk a little bit about inventory levels being up and where they stand going into the off season?

Are you talking about our inventory levels or retail inventory levels?

Both because I assume you have to take some back towards the end of the season.

Barry, why don’t you take retail inventories and then I guess Dave, why don’t you take our inventories.

POS is what it is. Going through the quarter inventories are slightly down at the retailers so just as always in the past, year-over-year we continue to work with our retailers, try to get more efficient so the takeaway at retail is slightly higher than what we actually shipped into them. And part of that’s also pricing relative to what they price the products and so forth. So triangulated on it, there sales are going to be slightly higher than what ours are this year.

And cleaner. I think less risk on returns; not more.

Bill with regard to our inventory, our inventories were up about $44 million at June 30. About half of that is just due to cost increases that we’ve seen on mostly our fertilizer products and about a quarter of it is due to foreign exchange rates on our international inventory. You also asked about kind of divergence of POS in shipments. I think for the nine months period they’re actually fairly close. As a total company our sales are up 3%, if you drill into global consumer up 6% and you back out fx, you kind of get down to 5% and you see our POS up year-to-date is 2%. There are a lot of moving parts in that but I can tell you that if we go business-by-business, meaning lawns, home protection, and gardens, the shipments out are all within call it 100 basis points in terms of change versus the POS change. So I think retail inventory’s in good shape and they’re fairly aligned at this point.

I also want to give some credit to the supply chain who I think in a very volatile sales season has done an awesome job especially if you exclude foreign exchange of managing our inventory, which at the end of the day is going to roll off into free cash flow. So they’ve done an awesome job and Luke deserves credit for that.

On the pricing, I guess you’ve gone through the line reviews and told all the retailers about a 30% price increase on the lawn fertilizer but when do you lock in costs? It seems like urea goes up every day. So how do you gauge and do you have cushion to further price increases if need be as we go through the season?

Typically we would be locking into that now, so going to the line review as we present the pricing and that gets locked in. Relative to urea which I think is an extraordinary environment that we’re in, we’re evaluating that going forward and trying to manage that on an ongoing basis with our retailers. As you recall this year we had a mid-year price increase which we had to take for this year, which was the first ever as far as I’m concerned. So we’ll be evaluating that going forward and we’ll look at that late into the fall and beginning into the year and make the adjustments that we need to make relative to lawn fertilizer.

With regards to the costs on urea, I think you’re aware we’ve historically been out in the market about six months ahead of our needs. Our strategy in that regard hasn’t changed, so we’re at a different point in the production cycle but we continue with that strategy.

I was speaking to the North American Finance Group this morning and I think that if prices stay where they are, I think people are comfortable on the margins based on that price increase. But it’s such an unpredictable market on sort of the nutrient side that we’ll just have to see. It might require additional pricing next year even if prices stay where it is as these costs kind of roll through our inventory. But I think right now based on where urea is, if it stays where it is, I think we’re kind of fixed.

Our next question comes from Olivia Tong - Merrill Lynch.

Obviously you talked to the retailers about the 30% increase in fertilizers. Have you heard anything about the competitor response to that?

No. We focus on our pricing; not our competitors.

We’re all in the same world so I expect that they better be taking that kind of pricing. And this is not a competitive issue. I’m just saying, just because their costs will be all food barred up if they’re not. And given that I have looked at their business when it was for sale, I think they’ll need to do that.

Based on what you’re thinking for pricing, can you give me a little idea on the component of sales growth next year, volume versus price?

I’ve got to say. I don’t believe we’re far enough into the budget. It’s all going to come down to the sort of elasticity issue of what people think and we’ve got a lot of new products. I think Dan’s got some really, really cool programs and new products that are going to be part of his 09 business that I think are helpful to the consumer and the retailer and us in this environment. I think that this is the hard part of looking people in the eyes across the table as we budget because people would like to be conservative, but with this kind of pricing I think they’re pretty nervous about elasticity with the consumer. And it’s all going to come down to that. Because that’s really what your question leads to is where units are at versus pricing, and until we internally agree on that which I’m positive will be a compromise then I don’t think we can really talk about it yet.

How much is pricing for this quarter in consumer?

Olivia, I can tell you as a company $45 million. I’m sorry. I’m misinterpreting it. It’s 4% to 5% for the quarter.

For the total company?

For North American consumer.

All that 210 basis point year-over-year change in gross margin ex the product recall and registration costs, can you give us an idea how much is raw materials versus promotion and other factors?

On a year-to-date basis, and you can do the math, but on the year-to-date basis we see our input costs up about $115 million through June. So we’re thinking full-year about $140 million; year-to-date about $115 million. If you look at pricing then year-to-date as a total company, our pricing has been around $80 million and the full year we expect our pricing to be closer to $100 million. So if you do the math on that, that’s where you’ll derive the 250 basis point challenge because of those two facts.

Our next question comes from Sam Darkatsh - Raymond James.

I know that fertilizer’s getting all the attention now and unfortunately I’m no different. Talk to me about what is your fixed cost structure fertilizer versus the other categories? And how much fixed cost under absorption might there be if you get a fairly significant leg down in volume production?

Before that gets answered, I think that the lawns team is - again this gets back to units because it’s all going to come down to the tonnage that they run through the plant - Anne has got and the lawns group has got a really, really cool plan to give consumers what they need and a promotional plan I think that is a much more competitive approach to advertising of why Scotts is better. So I think we are seriously getting down into our Pearl Harbor on the lawns business and I think this is going to be extremely attractive to the consumer; I think extremely attractive to the retailer; and I think Dan is not ready to announce it until he’s ready because it’s secret. I’m a big believer personally in it and so again I think the big leg down or whatever you called it which is tons running through the plant largely depends on how well this works. But I’ve got to say, I believe in it and I’m less concerned about absorption issues than maybe others are.

Let me add just another comment. With all the comments Jim just provided you, I’d say that the supply chain team is also actively looking at mitigation strategies to help offset if there is an impact. So what they’re actively doing is looking at fertilizer production and other third parties today that we could have the possibility of moving inside. So we’re doing multiple things to try to ensure that our production volume is as stable as possible year-over-year. And when you look at our manufacturing facilities for fertilizers, I’d say just as a very rough estimate with probably a third of the costs variable so the impact is somewhat diminished by that as well.

A third of what costs are variable?

Well you started the question I think asking about manufacturing conversion, right?

Right. So a third of what costs? You’re talking about the overhead costs being the variable versus fixed overhead?

Yes. It was included within the conversion element.

This may be a complete moot point because of the macroeconomic environment that we’re operating in, but I’m sure you guys have internal sensitivity historical models of demand elasticity for fertilizer for certain movements in selling prices. Can you give us a directional sense of how sensitive historically fertilizer has been to major moves in pricing in the industry?

I’m going to say no, largely because number one, nobody has ever seen this kind of change and we have always believed that - I’ll be Jim like it or not for a minute or two on this questions because it’s a big deal. We can get all complicated about what’s going on with fertilizer demand or you can look at the abortion that March was, which was in my opinion virtually all weather related. If March wasn’t March and we didn’t have the cost of goods issues, Dan would be a way happier guy and nobody would be looking over his shoulders as much as it’s happening. You look at the business for the quarter and so while I think Dave talked about mixed issues occurring as people stepped down to straight ferts in our Turfbuilder line, if you look at Q3 business is up 17% and the Plus 2 business has performed really well in that period. I’m not sure it’s exactly clear what’s happening. I know one thing. The costs are way up, which is affecting our margins, and March sucked. We’d be probably having a completely different discussion if that wasn’t the case. I do think though that there is some evidence and is mostly recent because we’ve never seen this before that there is some level of elasticity and that the entire category becomes challenged because you can look at it and you can see people moving into your basic commodity kind of 10-10-10s. I think that probably is some evidence to show that there is some level of elasticity. And again, that being said, our response to it I think you’re going to see is innovative and extremely aggressive in how we’re approaching selling price points within the line both on the branded side and on a more medium mid-level tier. I think that it will be exciting but I don’t know that we have any history that is really useful here because in our lifetimes, I’m looking over at Mike Kelty, have we ever seen anything like this before?

No, not like this.

So there you go.

You mentioned that you gained share in the third quarter in fertilizer after having lost share in fertilizer and you’re still seeing however some consumer migration to lower price points. What are both of those things telling you in terms of potential consumer reaction to this, I’ll call it what it is, a very courageous move on your behalf and you’re to be commended for it. But what do those two things tell you about the likely consumer response?

I think consumers are paying more. How the hell do I know? If I could be a genius, I would tell you. Dan, it’s your business.

The specific share numbers I won’t share with you but the trade down from the combination products to the fertilizers is a pretty significant trend that I think we’ve got to capitalize. Jim was talking about that. Other than sharing specific share numbers, I think that’s the biggest insight. So the hard core consumers are staying in the category and sort of the latent or the ones that go in and out are either exiting the category due to costs or they’re trading down. I’d say that’s how you’d sum it up quickly.

Again, I would say stay tuned because when our programs become clear and that’ll be as late as possible and working with the retailers, I think you’ll be really excited and enthused by what I would say is the courageousness of a new and innovative approach to marketing lawn products.

Maybe if I could sum it up, historically what we’ve seen is a half to a three-quarter point of elasticity per point for 1% price increase on the fertilizer and that’s when we’re taking mid-single-digit price increases. So in the neighborhood of 30%, we can run the models and it’s fairly hard to calculate that, but in summary what Jim is saying is we’re going to have to take those price increases but we’re working on some products that are going to try to mitigate that 30% price increase to offer the consumer products at price points that are going to give them solutions that we think will keep people in the category, address the moving from combos to straight ferts, and give the consumer the opportunity. So our plan at this point is we’re going to calculate those elasticities but what we’re also going to do is develop a plan that can maintain the volume at the price points that we think the consumers are going to buy those products. We think we have a good plan and we’re working on the manufacturing issues, pulling that stuff in, but overall what we’re going to try to pursue is keep the consumer engaged and keep the units right where they’re at on a historical basis.

You’re talking about you’re trying to get to the $2.00 bogey for next year Jim. Should we look at that as the mid-point on the bell curve or is that a stretch goal or how should we on the street right now take a look at that expectation for next year?

I think exactly what I said. It’s something we’re aspiring to. Listen, it could be plus or minus. I would not view it as the center of a bell. I think that we just haven’t done enough work yet to know but I think we understand the challenges and again it’s like everything in this conversation so far. I’m not complaining about that. It’s all about units. It’ll all come down to units and this issue of elasticity. But the business is good; it’s healthy; we’re seeing great sales right now. I don’t think there’s any fear in people. I think it’s just how the numbers are going to roll up and then what compromises we’re going to have to make. And I think that’s going to be the budget drill, dealing with the elasticity and then saying “All right. So how do we deal with our expense structure to bring it in the number that we’re looking to bring in?” I think that at this point we just don’t know enough to talk about it. I’m not being apologetic about it; we’re just not ready for that. I’ve got a Board meeting next week which we’re going to begin updating our plan that we’ve given to the Board in the past and say “This is the new reality. Where do we go from here?” and then based on the response we get from our Board, the management team will sit down and sort of roll it up and then we’ll talk to you guys at the year-end call. And we’ll give you definitely more update then.

Our next question comes from Alice Longley - Buckingham Research Group, Inc.

When we look at this 30% price increase for next year, you’ve got a downward shift in mix going on there because you’re going to be pushing some of the simpler fertilizers. And you also talked about the need to maybe add promotional activity to stimulate the consumer and that would come off of the sales too. How should we think about that 30% increase on like-for-like products? Once we throw in mix and promotions would it be more like 15% to 20%?

I think within our normal operating margin on sales, I don’t think you’re going to see an increase in percent margin for promotion probably or advertising. And I think Dan got a pretty big increase this year. So I don’t think you’re going to see significant at least margin shift within sort of the stat units. I think if you look at mix, I don’t know how those numbers are going to look. But again I know that right now while we would have said in the last call that the higher margin products were under stress and we’re seeing mixed downward flow, I think in Q3 the Turfbuilder Plus 2 business performed really well. I personally believe that when you see a sunny day outside, people are more willing to spend and are more optimistic and more enthused than on a grim gray day where they’re feeling like they put all their money in their gas tank and they want to save a few bucks on lawn fertilizer. I think the mix issue is something we’ll just have to work through as we budget.

So just to add to what Jim said, we’re talking 30% pricing. Now we then have this mix - the whole basket of promotion, programs, media - and we’re really re-examining all those costs as a basket with the general sense early on that we’re going to keep those fairly fixed but we’re going to better adapt the spending to the environment we’re in. As an example, where we may have more aspirational television advertising in this year, next year it might be moving to more aggressive hard-hitting radio or moving to more price promotion type of dollars. Right now we’re looking at that, a $0 sum pool of money that we’re just trying to optimize; not add to in aggregate.

You haven’t talked about pricing for other products. Could you tell us what you’re thinking of for some of the other categories?

It’s in the mid-single-digit range, anywhere from 3% to 5% depending on the category.

You’re not seeing a shift to private label anymore in fertilizer. Are you in any other categories?

No. Other than fertilizer, that would be the only shift.

I’m still confused about the third quarter number for the North American consumer. How much was that up in dollars and with the 4% to 5% pricing was it North America so we can back out what the unit shipments were? How much were the North American consumer shipments up?

Global consumer shipments for the quarter are up 6%. If you back out foreign exchange, it’s closer to 5%. Of that 5% pricing is about 4%. So what we’re seeing in aggregate is about 1% organic unit growth in the global consumer segment.

And can you do US versus Europe?

No.

But I would guess that there’s not a huge difference in those numbers.

Do you think that in the US your volumes have won in your pricing floor and comparable for Europe?

Barry’s saying yes.

Yes.

Again so the numbers are straight, your shipments were up 1% in the US in volume, 5% in dollars and consumer purchasing of your products was up how much?

In the quarter?

In the quarter.

It’s very hard to compare the quarter but it’s up 8% for the quarter POS.

And that’s you; your stuff?

Yes. Our consumer purchases of Scotts products in dollars for the third fiscal quarter was up 8%.

Could you give us the comparable numbers for year-to-date?

Year-to-date the same numbers, 2%.

For shipments?

No.

Point of sale.

And what’s the year-to-date shipment number for US?

About one.

And the pricing in your shipment number in North America was probably what? 2% or something?

It was around 5%.

For year-to-date?

It’s still 5%.

Our next question comes from Eric Bossard - Cleveland Research Company.

The input cost data that you provided for the year suggested up $140 million and $100 million of price. What has kept you in the current year from getting sufficient price to offset all the input costs?

Inability to price on a daily basis. If you look at our pro business, I think we priced five times this year. But as Barry said, in his memory we’ve never had a mid-year price increase like we did this year so I think the difference between the consumer business and the pro business is that it’s not effectively real-time pricing. That’s the issue.

Just take urea as an example. Today it’s nearly $800. A month ago it was $673. In the consumer market we do not and have not been taking pricing on a month-to-month basis. So that’s why we’re going to see in the fourth quarter increased margin degradation consistent with the trend in the third quarter but then we get to reset it again for next year.

The amount of price that you would assume next year that we should be thinking about next year, based on what we look at the $140 million of costs this year sounds like it could be $250 million of cost inflation. Then you’re assumption would be that you’ll get $250 million of price to offset that? Is that how we should be thinking about it?

Yes. When we look globally, if this year is $140 million in cost increases, we’re looking at something more like double the rate of that increase next year in costs. And as we’ve done in prior years, we go into the year with the expectation of trying to realize price increases equivalent to the dollar cost increase. So I think that’s an appropriate assumption to say those two are in bounds. But you can see when you factor that in, we’re going to have just by that alone as I recall a couple hundred basis points of margin rate degradation as you layer that into our P&L for 2009.

And your discussions with the retailers give you confidence at this point that you’ll get that $280 million or price increase accomplished?

Yes.

And related to this, the units in 08 you just said that the year-to-date shipments I think are up 1%. Excuse me, dollars are up 1%. And as you think about next year with that magnitude of price, what is the assumption in terms of what the shipments, I guess let’s just talk about the units which would be down 3% in 08, what would the assumption be for the units next year? I was a little confused with Barry’s comments on price elasticity. Should we assume a similar type of unit environment or should we assume the elasticity that you’ve experienced historically?

I would say none of the above. That’s what I would say. I think everybody is operating and trying to figure it out. I go back to say remember that when you look at unit volume in this year, remember that the pricing again in this business was very skewed toward lawns in 08 and so when you think of unit volume, it’s different by business. I would again tell you March was a month that was down 33% or some damn thing and a huge month it was down POS like 33%. I know it had a huge impact and without that, there’d be a very different discussion going on if March hadn’t been what it is and that the months since then have all been positive. I don’t know. I think we believe that there is some elasticity; we have I think a very aggressive response to that which will I think be very good for units; and it’s not bad for us on a margin point of view or for the retailer from a margin point of view. It’s the same question we’ve been talking about, which is “What does elasticity mean with this kind of pricing?” I don’t know. Every time somebody wants to talk on this one, you’re hearing all the internal dialogue that’s going on between us. So I’m not sure there’s much more to say on it.

In terms of mix, what’s the difference of your profitability on a Plus type product versus just a straight product? It sounds like the promotion and focus next year will be towards affordability for the consumer which is more of a straight product. Can you just remind us of how the math works in terms of your profitability in that situation?

I’m not going to provide real specific information on product-by-product but I would say directionally we have better margin rate on combination products than straight fertilizers but that’s also the case when you look at as an example our growing media category. So when you look across the span of the entire North American enterprise this year and you try to measure what the impact is of mix from trade up and trade down, then that impact is actually fairly insignificant because we’re able to manage the downward trend in fertilizers with the corresponding upward trend in growing media. So it has not been a pronounced impact on our margin rate for this year nor have I really spoken to it because of that fact.

Do you think that you can accomplish enough in other categories next year as you’ve done historically to offset the trade down that’s likely to take place in fertilizer?

I think that the trend we saw in growing media this year was not a one-year phenomenon. It’s been a multi-year phenomenon. I think that the challenge we have is to not just rest on our laurels and assume it’s going to repeat again next year and the marketing team is working with sales in aggressively development plans to make sure that happens.

The answer is simple in that generally when we are innovating, that’s margin positive for us and I think we have an excellent pipeline of products going forward that will allow us to innovate and buffer that.

The market share experience in lawn fertilizer in 3Q relative to the first half, first of all am I correct that lawn fertilizer share still looks down a bit year-to-date just improved because of third quarter’s [inaudible]?

Yes. I would say marginally down in share at this point.

Why was the third quarter experience than the first half experience do you think with market share?

I think Dan would say number one is like he had a lot of his advertising in Water Smart. That Water Smart advertising really hit in the quarter so I think a lot of it is his most important banging was occurring after the quarter was over in April. I think that’s part of it; I think the weather was better; I think psychologically when it’s sunny outside consumers feel better and are willing to buy. Maybe other people have better answers.

I think there’s one more factor: The regionality of the business. Where we saw the economics hardest hit is in the South. Florida really starts the season in our second quarter so the business was down and as you roll into April our season got pushed in. Fortunately we planned accordingly with our advertising and promotions so we just had a much better regionality of business. And the way that we ran our business was favorable and the Midwest, even some of that business actually shifted into the first quarter which where we were very strong regionally. So overall it was just a much better quarter.

And you had a very major clearance going on of an outdated product line at one of our major retailers that occurred in March as well. It was an unbelievable deal.

Our next question comes from Douglas Lane - Jefferies & Company, Inc. Douglas Lane - Jefferies & Company, Inc.: Dave, can you tell us specifically how much urea costs for fiscal 09 are locked in? And do you have any concerns about actually obtaining physical supply with the shortages out there?

To answer the first question, right now about 25% of our urea needs for next year have been locked in; the pricing. No, urea’s not an issue for us. Douglas Lane - Jefferies & Company, Inc.: Are there other ingredients where you’re facing shortages?

If there are any, I’d say it’s in very niche specialty NPK type of particles. They’re more used in our professional business than in the consumer. So I’d say it’s fairly isolated exceptions. Douglas Lane - Jefferies & Company, Inc.: Commodity cost inflation is widespread. Urea’s obviously the poster child. But are there other product categories where you’re looking to take at least double-digit price increases next year?

Org food is one and maybe the only other one where we have dramatic price increases. Douglas Lane - Jefferies & Company, Inc.: This question was sort of asked before but maybe I’ll ask it a different way. I know that this commodity cycle is unprecedented and I understand that in general, but have there been instances in the past where you have raised prices double digits that you can give us some sort of feel for elasticity in at least isolated examples historically?

I think this is unprecedented for us.

I grew up in this business and I’ve never seen anything like this, ever. If you look at the phosphorous, potassium, sulphur, urea; you’re talking triple-digit increases in a year.

There is an example that would be the closest to this in the grass seed category. There’s a long history in grass seed of taking pricing every year to better reflect commodity. I think we’ve seen back in 07 some fairly dramatic pricing in seed and the outcome was we were able to maintain share. We didn’t see a dramatic impact in the category within seed. That’s about the only example we can find.

We may not be the average price of $10 or less but it’s still less than $20 and you get a lot of bang for your dollar in an environment where your house prices are under stress, so it’s a lot of beautification for less than $20. And I think that when people are running tight of money historically they’ve spent more time at home; they haven’t been going on vacations; they haven’t been driving as much; and they put more time and effort into their yard and keeping their home looking good.

Our next question comes from Joseph Altobello - Oppenheimer & Company. Joseph Altobello - Oppenheimer & Company: First for Dave, the 25% of urea costs you’ve hedged thus far, I think last year you had hedged about 60% by December. Do you guys expect to be more aggressive on that front to lock in more of your costs up front?

I think Joe it’s going to be fairly consistent year-over-year in the pace in which we’re locking, and we’re looking at the same mix of things to lock this year as last year. Joseph Altobello - Oppenheimer & Company: So you’ll probably be at that 60% level by December?

Yes, that would be my expectation. Joseph Altobello - Oppenheimer & Company: And secondly for Jim, you talked about retiring probably around 2010. Has this recent commodity cost spike and turmoil that’s going on changed that at all?

Yes. I’m leaving tomorrow. No. I think that I feel like we’re working together well as a team and I will say that we meaning myself and the Board have made a lot of progress on getting me some bandwidth help so we’ll be making announcements in that regard soon. But I think that for all kinds of reasons, mostly psychological and economic, I’d like to see us get stock price back up so I would say that I’m not permanently changing my plans but I think that there’s a need and I feel like I’m part of a team that’s working well together and I’m not abandoning ship in a trying time. So I think it just means that when the company’s ready and I’m ready, I’ll leave. But right now there’s a need for everybody to be working together and of any of the top team there’s no room for anybody to bail now. Joseph Altobello - Oppenheimer & Company: So there is some flexibility on that 2010 date it sounds like?

Yes, I’ve already made that decision. Joseph Altobello - Oppenheimer & Company: Not to put you on the spot, but the potential successor you have in mind, is he or she in the room or on the call today?

For all kinds of reasons I’m not answering that but I think that the qualities of that person will be well-known, understood and there’ll be a lot of comfort with that. I wouldn’t say that I’m talking about my successor. I would say that it’s additional leadership bandwidth coming in to help run the business. That’s all.

Our next question comes from Jim Barrett - C.L. King & Associates. Jim Barrett - C.L. King & Associates: Jim, obviously your advertising and doing lots of it is in your blood. If we’re entering a new period of time when natural gas prices keep moving higher and higher, would you envision fairly soon in order to maintain a reasonable amount of volume and in order to keep people in the category and considering that the company already does 80% of the industry’s advertising anyway, I know it’s a bit of a chicken-and-egg sort of dynamic, but could you see a day where you’d dramatically or significantly cut back on your advertising to achieve a reasonable return on capital to offset what might be a secular increase in energy costs?

I guess whoever follows me could think about that. I think that would be a huge mistake. I do think though that we’ve got to look at our sales and marketing expenses and they’ve got to be justified. I do think that TV is a tough place to advertise these days and I think we get a lot of bang for our dollar and I think we have experienced that this year where we can call to action advertising. I think we like radio a lot. I think we believe that this is a period where consumers are making decisions at the shelf. And I think we’ve got to be prepared to battle there just as well. So I think a better question would be “Do you think there’s a need to significantly increase the spend?” and I think the answer to that is no but I think we can spend the money better and in a much more in the battle kind of way that is much more competitive and much more responsive and much more right now. I think that you’re going to see that.

Julie, I know we’re running short on time here so why don’t we take two more questions and if we don’t get to everybody, we can follow up with them by phone.

Our next question comes from Connie Maneaty - BMO Capital Markets.

Just a housekeeping question on the third quarter. The gross margin degradation, was it more due to diesel or urea?

I believe it’s more so general NPK. We talk about urea and it’s kind of the poster child but actually there are several ingredients in the fertilizer/nutrients and those as a package have really been going up most dramatically. Recall we had hedged about two-thirds of our diesel last fall so while diesel’s going up pretty dramatically right now, the impact to us has been somewhat mitigated because of our prior hedging strategy.

The pressure in the quarter was due to what then you bought on the stock market or was it hedged some months earlier?

It would be hedged NPK but remember this isn’t necessarily that we waited to buy it at the peak. This has been going up all season. So what we saw running through the P&L this quarter was probably urea that we had purchased or locked last December as an example. And that’s why the thing is just kind of moving through the python here and while we’ve been six months ahead of the path on urea as one example, we see it in the pipe right now. That’s why in Q4 all the materials are bought and we already know how much it costs to buy them and they’re going to be higher than they were in the third quarter.

If we could just spend a second on Scotts LawnService, how are the cancellation rates running?

Cancellation rates were high through the spring in renewals; a couple hundred basis points higher than prior year. Since Memorial Day they’ve been spot on comparable to last year. And cancellation rates for new sales this year have been favorable to last year since the beginning of the year. So it kind of varies.

Have you also hedged diesel for the next season for Scotts LawnService?

We’ve hedged through this season. We have not yet hedged for next year.

You can make the assumption that we will be hedged on diesel.

On the asset impairment charges, are they Smith & Hawken only or is the bird food in there as well?

You’re making leaps of faith here. It’s not exactly as intuitive as you would think because what you initially have visibility to is what’s the different carrying values of our assets on our books. So that’s really the other piece of the puzzle. What I would tell you from a segment perspective of $123 million about $70 million of it is coming from the global consumer segment, I believe it’s about $30 million is coming from our global professional segment, and about $20 million is coming from what we call corporate and other which includes Smith & Hawken but also includes some other small trade names and things. So I wouldn’t want to lead you that 100% of corporate and other is Smith & Hawken.

Our next question comes from Jon Andersen - William Blair & Company, LLC. Jon Andersen - William Blair & Company, LLC: One quick one on the September quarter, I know it’s a smaller quarter for you, but I’m wondering how much of the quarter is really driven by pipeline shipments and how much by consumer response to the fall gardening season? And then what you see as the key swing factors in hitting that $2.00 number for the current year?

I would say little pipeline although a lot of the stuff now, part of it will get sold but I would say not like in the past where people were buying for next season. So this would be entirely in the fall season products, some of which will be sold in Q1 but I would say little pipeline fill and almost all based on experience and consumer takeaway.

The retailers will do an initial set and there will be a swing based on what the consumer buys in September as far as refill. So that will be entirely consumer driven based on their activity between September and October. Jon Andersen - William Blair & Company, LLC: And the strength that you commented on in July, is that across the consumer portfolio or were there particular pockets of strength in terms of product lines or pieces of the business?

It was really across all the portfolio. We’ve seen a shift moving out from earlier spring into summer activity across the entire portfolio.

We’re going to wrap things up. If we didn’t get to everybody in the queue or you have any other questions that we didn’t touch upon, you can call me directly. That’s 937-578-5622. Otherwise, thanks and have a great day.