Good morning and welcome to the fourth quarter 2011 earnings conference call. (Operator Instructions). After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Jim King, you may begin your conference.

Thanks. Good morning, everyone, and thanks for joining us. With me here in Marysville this morning are Jim Hagedorn, our Chairman and CEO; Barry Sanders, our President, Dave Evans, our CFO as well as other members of the management team. Jim will get started shortly with some prepared remarks related to our key learnings from 2011 and our early thoughts about 2012. Dave will then walk through the financials. When we are done we will take your questions and Barry will also join us for Q&A. In advance of that and in the interest of time we are requesting that you ask a single question and a single follow-up. If we don't address all your questions, I am glad to follow-up with you after the call and in fact I believe we already have some calls scheduled with many of you. And one more important item of housekeeping before I turn things over to Jim. We are going to be holding our Analyst Day meeting this year on February 14th in New York. I have told many of you in recent months that we would once again be holding the meeting in Florida at the end of February, but we've changed those plans in the recent weeks. We are still working out all the details, but we will have more to share with you in the next three to four weeks. With that let’s move on with the call. I want to remind everyone that our comments this morning will contain forward-looking statements. As such, actual results may differ materially and due to that risk, we encourage investors to review the risk factors outlined in our form 10-K, which is filed with the Securities and Exchange Commission. If you haven’t received the copy of today’s press release, you can find one on the Investor Relation portion of our website scotts.com. And as a reminder this call is being recorded and an archived version of the call will be available on the website at all, as well. If we make any comments related to non-GAAP financial measure not covered in the press release, we will provide a bridge to those items on the website as well. With that, let me turn the call over to Jim Hagedorn to discuss our performance.

Thanks, Jim. Good morning, everybody. I am sure. I speak for all of us here in saying that we’re glad to had to have fiscal 2011 behind us. From our previous calls, press releases and interactions with our IR team most of you are well aware of the challenges as we faced throughout the year. I’ve been in and around this industry for my entire life and I don’t remember a season quite like this. Remember though the challenges were confined to the US consumer business. We’re pleased with the performance of our international business which benefited from innovation, the good marketing plan and improved cost structure. I am also pleased that Scott’s Lawn service pulled off another solid year on both the top and bottom line. Before going further, let me set your expectations for the call. As we said back in August, we think our top line growth in 2012 will be at least 6%. I’ll explain the drivers behind that in a few minutes and then between Dave and I, we will share an update on our commodity outlook, discuss some investments we are making behind the brands and discuss a few items below the operating line. As is being the case in the past years, we won’t provide specific EPS guidance until our Analyst Day meeting in February. With so many pieces of the puzzle still moving, there’s no upside to getting ahead of ourselves. Dave will provide more details around the 2011 numbers. As for me, most of my comments this morning will be focused in the continued progress we’re making against our long-term strategy and lessons from 2011 that apply to that strategy. I’ll start by saying that our long-term strategy has not changed. We continue to be focused on transforming the business from…

Thanks Jim. Good morning, everyone. I have three objectives with my prepared comments this morning. First, provide you with some color around our fourth quarter and full year results. Second, provide some additional clarity around the adjustments to GAAP earnings. And finally fill in a few more details around 2012. I’ll start by focusing on adjusted results for continuing operations. Net sales for the fourth quarter were $417 million, down 1% from last year. As outlined in our press release last month, the effects of Hurricane Irene and other incremental weather were simply too much to overcome as two key weeks of our fall, lawn and garden season were essentially eliminated. This impacted not only the U.S. consumer business but Scotts lawn services as well. When combined with the first three quarters, consolidated net sales for the full year was down $62 million to prior year or 2%. We believe weather was the largest contributor in the miss of plan, with the balance coming from weakness from the mass merchant channel as well as the impact of a more pronounced price promotional environment that occurred during the spring and summer seasons. It is worth pointing out that consumer purchases in the home center channel within the U.S. were essentially flat year-over-year, which we view as a positive result given the severe weather challenges all season. Now on the surface, it may be difficult to understand how a 2% decline in sales could result in a 13% decline in adjusted operating income, especially with the decrease in SG&A. As you saw in our press release, the explanation starts at gross margin rate. On an adjusted basis, gross margin rate was down 110 basis points for the full year. Growth in sales within Corporate and Other is a largest screen cost of…

(Operator Instructions)

Your first question comes from Mark Rupe with Longbow Research.

This is (inaudible) well actually filling in for Mark this morning. Just to have a question here on and you went into some good detail there on the commodities, but just to be clear, I think on the last call you said that you would offset about half of that with price. It sounds like it is going to be a little bit less than that now, is that the right way to think about that?

No, it’s about right.

So still kind of looking at that little single digit range for pricing?

Yeah globally, across all of our businesses, yes; that’s where we would infer for that.

And then in terms of the increase in the media and the marketing spend for next year, is that over and above the cost savings that you’ll be realizing with some of SG&A changes from this year or will that offset there?

Well, I mean, in an absolute, compared to what we spend last year, it’s an incremental increase.

Okay. It will be incremental.

It will, I mean, but ROE, look I mean, on the other hand, I am thinking is it’s good to sort of do these calls, because you know I could sort of listen not like to what I say, but to what everybody else is saying and then the preparation it goes into. We’re on a journey and that journey is, we took effectively an entire layer of management where I think getting back to and approach to sort of our supply chain which is or have to be the lowest cost of goods, kind of on everything we make and we’re making a lot of progress on that. So our purchasing savings continue to increase and we’ve also been taking kind of small bites at the trade programs. Now, effectively at the end of the day, how does all the money get used, as we save money and we increase other investments we’re making, I guess you could say they’re all connected. But sort of the increase in advertising is kind of absolute, could use sort of and further as we do that, as some of that balances is coming out of programs and cost reductions within SG&A, I guess you could say that; I am not sure we’re looking it at that way, but I think you could.

So I guess, I am just trying to understand, looking at 2005 what kind of all the puts and takes time at that operating expense line; should we expect more leverage I guess, should we expect those expenses to be relatively flat year-over-year?

I think you should take away from this is three things with regard to SG&A, first as Jim has articulated, we are making a substantial investment in media and marketing. Second, there will be some form of reinstatement of variable comp, so that remains to be defined. And third, we’ll see a partial offset in those two increases as an outcome of the restructuring program that we completed in our fourth quarter and some other efficiencies’ we are driving through indirect purchasing. There is a myriad of other details, but I think those are the key movers that you ought to think about when you think about SG&A for 2012.

Your next question comes from Olivia Tong with Bank of America.

Just sort of following up on that; if I think about you know $30 million to $35 million reinstatement of variable comp, and then another $40 million in advertising and the $17 million in the savings that you are planning; is it right to assume that that’s probably going to drag about – but ballpark about $0.50 to $0.55 on your EPS for next year? And what am I leaving out that’s going help offset that obviously, pricing to some extent and some other things? Thanks.

So I think what you just stated on SG&A is a correct statement. So there will be a share effect of the incremental media, reinstatement vest of variable comp which will not be entirely offset by other cost efficiencies. And correct in assuming that the equation between commodities and pricing will present further challenge on our EPS; we’re expecting growth of at least 6% so that will be helpful, but I think those are the headlines as we think about 2012.

And as you sort of look forward after that, actually on advertising, have you ever spent at those levels that are implied now?

I think it depends by brand, okay. So I think that the answer is yes and when we talk about kind of some of the things that are virtuous when we have sort of trade programs and advertising and balance, I think what we see is higher margin. I think you can sort of look at certain businesses like our grass seed business right now, like Roundup and say a sort of a long term high level of spend, we are spending. I think Miracle-Gro, I am going to say earlier in this company, but for sure as a private business, we spent at much higher rates sort of as a percent of sales than what we’re talking about here. So I think that there is not one easy answer here. I think within certain of our brands, we do spend at this level and what we’re doing is we’re going to continue to do that and then spend on our other sort of strategic brand initiatives at that level as well. Does that make sense?

Your next question comes from Bill Chappell with SunTrust.

Just one I guess more of a question on regionalization focus and kind of your changes on marketing now, I mean should we look at this as kind of reversal, I mean did you go to regional with some of your advertising and marketing and what have you so that and you have to kind of reverse back to do a more national and get more [banks you are barging]. And also on that same thoughts, have been a fair amount of cost savings and incremental revenue coming from utilization has that’s not materialized or is that a bit into your numbers as well? Thanks.

Well, it’s a lot of stuff there. In regard to like regional marketing and advertising, I don’t think we expected the kind of disefficiencies that it turns out we’ve achieved call it in the last two years. I think we are figuring improved targeting and about kind of 10-ish percent disefficiencies; not the disefficiencies, if that’s a word, are probably greater than that may be on like twice that’s what we saw coming out of ’11. And we don’t find that susceptible and Bill it’s required, I have to go back to a more national buy and then sort of plug regional products and I think we probably do that. I also think we could execute the buy-better and we’re going to be making changes in how we purchase next year, because I don’t think we have to stop over these kind of disefficiencies. And so I think that, no, we continue to believe that precision targeting or regional targeting is a good idea. We just cannot give up the kind of disefficiencies that we gave up and have that work. I think where we’ve continue to be committed to sort of our regional approach and our presence, we’re on the line and I only say that because my view is we continue to make progress in sort of our regional management structure which was never really designed around saving money, it was designed around selling more and being much more local and in our certain product offerings. And so, we continue to make progress in all kinds of ways on that book. Most importantly in their ability to stand up and kind of be heard within this organization. So, I think we are continuing to see benefits to that and in regard to the first part of the question, I hand that to Barry.

Hi, this is Barry. I would say we’re happy with the progress, remember, two years ago we stood up the southern regions. Last year was the first year for the mid-western and northeast. So, we are learning as we go and we’re making some adjustments, but we’re happy with their progress. Relative to share, I would say there were two things that hurt this year that the regions could overcome, one was, we’ve talked about quite a bit what’s this some changes that happened that merchandising programs at [Mass]. So those hurt us and then some specific prior label fertilizer those brought back and one of our customers. But you pull that away on our efforts and so forth. The best example what we saw last year was kind of the southwest and particularly Texas, which had some significant drought issues there. We gained share there in those specific marketing programs that we’ve put in place, and going into this year we are as confident in that from both the learning curve that we have experienced behind us and the specific programs that we’ve put in place. So I think what Jim has said, we’re learning how to buy the regional media better. We’re committed to that and we continue to have the same expectations for the regions going forward that we’ve previously stated.

Okay, and then just switching to the gross margin side I was trying to understand, I think you stated you are 40% locked whereas more like 60% or 70% locked this time of the year so the thought by the RVC covers from December will be 70 and I guess, it would give confidence or what you see on the horizon where you not had as much on keeping yourself more open to other fluctuations in the near term.

Bill, this is Dave. So I am not sure this is the number you stated - we are typically 60% locked in a year, and if I go back and look at last year, I think we are probably more like in the low 40s in terms of what we have locked. So a little bit behind where you were a year ago not to the magnitude that maybe you might perceive. By the time we get to the investor conferences in December we will be close to a 50% locked. I think what we are doing this year though in terms of the mix of what we are locking on there is a bit more of a story there. We are getting out more aggressively on fuels, gasoline and we are being a bit more tepid on the urea. So we are managing each element of that portfolio in light of the market place we are seeing. We are not dramatically behind where we were a year ago, and I suspect by the time we get to our Analyst Day in February will be two-thirds locked not inconsistent with what we were a year ago.

Great. And then so just to make sure you are going to give EPS guidance in December or that will come in February?

In December we can shape the quarter little bit more precisely, but we really want to wait until our analyst day we can give a complete review of the business from a marketing programs and give more precision in the EPS.

Your next question comes from Eric Bossard with Cleveland Research.

Two, sort of, straight forward questions. Then a bigger one, more of one question everyone to look at it. In terms of the media spend increase in ’12 of $40 million, what did that number do in 2011?

Eric, this is flat in 2011.

Okay. Is there -- in the last couple of years, is that number going down or how is it trended?

If you go back to when we first started talking about, kind of, this more consumer-oriented strategy with the regions, from ‘9 to ‘10, we had a fairly substantial increase in our advertizing. As I would recall, it was in the neighborhood of 15%. Don’t hold me up, but isn’t that order of magnitude. In the ’11 though, we did not sustain that momentum.

But I can tell you, Eric, I think that – I am not sure ’11 caused much of a story to be honest. We started off the year normally. The year went a [crap]. We started betting on the season and if we talked about that to the two new sort of $20 million bucks. A lot of that went into, sort of, display and promotional work that we did, and then that didn’t pay off, and we looked at the season, then we’ve said, [Jeez, Louis] basically said we’re not going to bet harder going into this, and we sort of backed off. But I think that it was larger response to a blown season, and I wouldn’t try to read too much in to what happened in ’11. I think the longer-term trend has been positive, but I think it’s has been offset by, sort of, more campaigns with a modestly rising number in a period of to some extent, some inflation within the [medium] market, which I am still stunned by, and this move toward much more regional and targeted spend, which is not been a suspicion as we would have hoped, and so I think it’s kind of muted, so that the sort of effective advertising, I would say, would be sort of after the adjustments and this is a lot of the work we’ve done at the end of the summer, has been sort of flat to down effectively, even though the dollar amounts been up. But again, I wouldn’t use ‘11 as much of a indicator, except it was just a kind of [Fubar] year and we were trying to make things working and this wasn’t happening.

Second thing, you talked about is reducing trade spending and I am just wondering if you can talk about how that -- how your experiences battle that and how that works and what appears to be a more competitive market share environment?

Well, I spent time with senior people, particularly in home improvement and basically saying, look, I mean, we -- if there’s anybody better in service in the stores -- tell me who it is, because my view is between Behr Paints and Scotts. We are the, sort of, best service people in-store. We are shipping, I don’t know, 98% to 99% on time in fall. So excellent service provider, supply chain is right. We have these big brands. We do all this advertising. We have a good team here, which we pay okay. And so the bottom line is that we also -- and we started really looking at this back in the Chris Nagel days. You know, it’s not a super-high margin business. And so the end result of all that is we can’t give a lot of money away to retail, in spite of the fact that it’s not truly giving away for retail partners who are listening to the call, the stuff that we get for it. But that being said, we cannot do everything and especially not at the price of being in a relationship with our consumer. So, what do I think? I think we are talking about a very difficult subject and that is and maybe the first step of a 12-step program is saying, acknowledging you have an issue and what I am saying is I can draw you charts that show you where we spend properly behind our brands, good things tend to happen. Where you don't, I think you tend to be in a margin slide and the competitive situation doesn't get better and if we would see this big unit increase, if we saw a commensurate increase of unit volume when it comes along with trade spending which the world of consumer goods with nobody seeing that. So I think that this is a completely righteous discussion, it’s something we have to do and in discussions with retailers I think we have to explain who we are or what we do, what we add to the department and I think it improves our competitive position. It does not improve it. I mean we are not talking about walking away from trade programs. We are saying they cannot be growing at a multiple of sales.

And then last I guess strategic issue, you've said you are rethinking what you are trying to do to grow the long term, the last couple of years you have raised price, the media spend and the regional strategy hasn't translated apparently into what you wanted to in terms of growth and so as you rethink this of now spending more money on media, can you just talk about what you are trying to, why you think this strategy will accomplish if it’s category growth I am assuming what you are aiming at, why do you think this strategy over the next couple of years, as its evolved from what the last couple of years have been like why this strategy will prove effective.

I think that the really deep look at this has come, if you look at our Lawn business. I think over, I don’t know you can call it from ‘07 ‘08 I don’t know. In turning back, how far back you want to look, I can go back further. I think what you’ll see is we have not lost share. We’ve gained share of a smaller unit universe and we’ve got very significant shares in our most important categories. We’ve got to show we can grow these categories. At the end of the day, Eric that’s what it is all about is we’re going to show we can growth the categories. And it goes back to the previous part you know, so part A of the question which is do I think that retail programs are driving unit volume and the answer is they ain’t. Okay, not like even a little bit, they are not. And where we go back and look at our business and this has been a lot of peeling the onion back brand by brand and sort of by advertising campaign, we can effectively like drive consumer behavior. Now part of this is innovation and this is another part of where we are at. I think the world has changed. I mean I seriously do, particularly within mass. The ability to innovate and get units and margin out of that, for true innovation I think it’s still there. You just have to look at EZ seed and it is a perfect example of really good innovation where the consumer is happy as (inaudible) and it drives the business. I am using like good language here. So I think true innovation you can, but I think today what we see is and this is what our research…

Your next question comes from Alice Longley with Buckingham Research.

So continuing with some of these questions; I am little confused you said one half of the sales are published here as weather and the rest is basically loss of market share and if could you just clarify that and also if that’s so could clarify or could you quantify somehow the loss of market share in other words if your domestics sales were down 7% how much was the industry down for the year like 4% I think you just said home centers were flat, a massive big drop?

I’ve got to take notes Alice from – I think what we said is the profit mix was about half sales; I think that’s what we said. And so I think that’s true; what we’re saying is other things were driving the P&L of the side just a sales shortfall.

Can you comment on your share? How much was the industry down this year?

Let me answer your first question Alice, our share, we were down about a point in share this year.

What do you sort of at this point estimate your share is?

This is total category around 53%, 54%.

And how about within your own mix; did you loose share in fertilizer from Scott’s Turf Builder to figure out in Home Depot?

No, we do not.

So there wasn’t a downward shift in mix in fertilizer within Home Depot?

Correct.

And as far as your innovations are concerned, you seem to be talking about kind of a bifurcated strategy for innovation, which actually sounds like some of the other consumer non-durables companies; so you’re going to have super premium innovations. But also you’re going to have some more value innovations for Wal-Mart and could you comment if that’s an accurate reading and also does that – what does that do to margins if you’re pushing more value innovations for Wal-Mart?

I think the answer is yes. And on the margin front, I think this is where I am pushing very hard on both marketing and R&D that this innovation should not be margin dilutive.

Even the Wal-Mart innovation?

Yes Ma’am.

And then my final question is lawn service has been doing well – you know if maybe you’re not doing so well at retail because you’re losing consumers to lawn service?

Alice, this is Barry again. The actual consumer count overall, we believe in lawn service is actually flat. So we’re not losing share there. I think, you know as Jim said, we feel the (inaudible). You know, you look at the lawn service business, these customers are signed up as a long-term relationship with us and they tend to stick with us overtime. So I think there is less in and out in that category and the consumer tends to be more dedicated as long as you’re doing good service, which I think our service is at an all time high, versus you look at the category this year for the consumer do-it-yourself, with as much rain as there was. All the consumer had to do was look out the window and the grass was green. Their biggest issue was keeping up with mowing this year and so, I think some consumers may have opted out this year just based on the pure ergonomics, but we did not lose consumers in lawn service.

With non-services growing, is the consumer kind of flat – how is launch service growing?

With our productivity levels and lawn service relative to the way we’re running the business is both from a productivity of our associates were up significantly and the effectiveness of our marketing spend is far more effective than its ever been, So they have positioned themselves such as we make much more money on a flat consumer count to where we have been. The other thing is we think that we’re also picking up shares in lawn service and so you put that model together, there was lots of productivity gains that drove the economic performance of the business unit.

I think you know Alice without sort of getting stuck in quick sand here because I don’t’ want to do that; I do think as you said all that’s interesting; that is really the debate which is not losing share, a category either flat or declining and so and the reversal of that and are we doing the things necessary to grow the category and this is really where we’re at as a company, its not that we’re confused and don’t know what to do. I think we know what to do, we’re making the choice and that’s kind of a – it is a message to this call, that’s what it is.

Your next question comes from Sam Darkatsh with Raymond James.

Most of my questions have been asked and answered, there is a couple of clarifications, first off, Dave what was the specific negative impact on 2011 gross margin from mix in basis points if you have it?

We have not provided that level of precision. What I have said is, we’re down a 110 basis points or roughly a third of that relates specifically to this whole phenomenon of the sales growth related to corporate and other, and then of the remaining two-thirds of the margin rate decline, Sam, the biggest single reason was mix within the US consumer.

Okay. And from an SG&A standpoint, excluding the ad spending and excluding the incentive comp next year, are you still looking at SG&A growing half the rate of sales as to your prior goal indicated or when there will be perhaps close less than a core amount because of the other initiatives that you are taking?

Yeah, what we talked about that half the rate of sales growth, it wasn’t necessarily every individual year. It was going to, it could be lumpy and what I will tell you, that's actually a good news story for ’12. We are going to see more lumpiness. We took more aggressive steps to do better than that, excluding the effects of variable comps and media, and those aggressive steps came to our restructuring program as well as you know, they are more modest, but a longer term sustained effort in driving increased productivity through indirect purchasing. So, as you articulated, excluding the two items we will do better than half the rate of sales growth.

And then the last question, Jim I guess this would be for schematic, and you've already touched on some of this, but I am just trying to reconcile the two or three statements that you guys have made, which is the importance of keeping the consumers engaged, keeping prices down, heavy ad spending and then kind of contrasting that with what we've historically been conditioned to think about the business, which is this is -- last economically sensitive, there is a lot of brand equity here. Consumers, as they age, increasingly gravitate towards the category. Has there been -- a ground shift in consumer appeal or interest in the category or they are just certain products or product lines that you are selling that you are finding is that heck of a lot more elastic than other?

Sam, I think there is a lot of the ground shift is occurring intellectually here, okay. And so up to some extent -- is I have taken the board through this, is trying to view fiscal year ‘011 which the weather stock men, it’s like if the weather hasn’t [sucked] I could throw a bunch of things at you, if the weather hasn’t sucked, if, you know, commodities haven’t gone up, if there hadn’t been sort of difficulty in account and math, you know, we wouldn’t be having a question, I am not sure we would appeal the (earning) back this far. You know I do think that the big ground shift in attitude in his comments, the result that really peeling up a difficult year causing us to really dig deep in and like look it what fundamentally happened over a multi-year period. And, so, I don’t think fundamentally that -- and our research doesn’t show this, that the consumer is less engaged or less willing to participate. In fact, the numbers look better, not worse as far as willingness to participate. I want to make sure we are getting everything we can, and that means people who, you know, look -- and I think this goes back, you know I hate to keep going back for alone for a [wiser] but you want to buy a four-step program 5M, eight of an acre, you know you are talking like a 100 bucks, 15M, a third of an acre, 200 bucks. You know I think that there are people who want to participate and work to some extent pricing them out. This does not mean, that the long term answer is expect crap margins. It doesn’t. It does mean no -- right now I am basically creating a breather…

Your next question comes from Joe Altobello with Oppenheimer.

Just a couple of questions. First, in terms of promotion, how should we think about that this year? I mean, obviously with the media spending going up, is your intention to keep promotion flat or some of the spending on media coming from promotion?

And all the above?

Yes.

I would like to see trade not be growing as a percentage of sales over our rate of sales, okay? Meaning – and I think we have made some adjustments already to program that we did in ’11 that we’re not intended to be repeat it and wont be repeat it that have allowed us to redeploy some of that money into this increase in advertising. So, I think, that it’s kind of both, Joe.

Okay. So, it’s down modestly, it sounds like?

Joe, I would think about consumer promotions as those will be – and you have to look at it by category. It’ll be flat to down, all of the incremental money will be going on to consumer-facing media, whether it’s television, internet, radio, social media, the 100% of the incremental investment will be on media focused type activities.

So, Joe, it is question as Jim said, where do you want to match these, sort of, offset these different variables we’re talking about. When we talk about pricing, and I think there’s an earlier question about how much of our cost that we offset with pricing. When we think about pricing, it’s fairly holistically. It’s not just a list price change but it’s as well of the elimination of unproductive trade spend, is essentially equal to a price increase. So all of that, the kind of increased efficiency we are driving towards and the trade is part of our dialog around pricing this year.

Got it. Okay, that’s helpful. And then just, kind of, a follow up on that. I mean, you obviously had discussions with your retailers about the strategy. What’s been the response and is there a different response from the home center to this strategy versus the independent?

I am trying to have the conversation with the number one and two guys in the business where you know, I think at the merchant level, it’s a different discussion. But I do think at the sort of CEO level, this is a discussion which is, lawn and garden plays an extremely part of kind of, I am going to call it the hardware business in general, particularly as sort of significant investment in the home has kind of been more difficult at the highend. And so, some of the more expensive projects. So, lawn and garden is a hugely important category for them and if Scotts is going to be the company that drives consumers in to their stores and they use our brands to bring customers in the stores and then they buy other things within those stores. We can’t have a difficult conversation over something as simple as, we need to support our brands properly and we’ve gotten out of balance. You know, I am sort of reluctant personally to have that conversation with the merchants, the team needs to have it. But I need to enable those conversations at the senior level first. And I think there is a broad agreement that how important Scotts is a vendor and I say that carefully, even to these accounts in regard to these critically important categories in times like this. And so, you know, my view is the understanding of what we’re trying to do is understood and people accept it. How that translates down at the lower levels is kind of up to Barry and Brian Kura and the folks in the BDTs that are managing the relationships on a day-to-day basis, but long term, the strength of this company and the strength of our brand and the ability for us to grow these categories is hugely important to these retailers and that’s the context that this conversation used to happen in.

Okay. That’s very helpful and just one last one in terms of modeling, how should we think about the corporate underlying for 2012 versus the $68 million in sales you did this year or in 2011?

So I would say when you think about the sales growth in corporate and other as we have said, we have two businesses in there, US proceed, first one, the proceed business, we are winding down, but my expectation is that sales for proceed will be nearly flat year-over-year in that process of winding in it down. The second element of this is the supply agreements with ICL. we will see growth in that, you know, I think order of magnitude, it might be like $15 million, $20 million, $25 million you know that’s kind of the order of magnitude, you ought to think about it in and I think with that, what your math will tell you is that it will drive some incremental though modest incremental pressure on margin rate in 2012. Now what we will see in 2013 and I am talking way out, but in 2013, we should be complete with the wind down of the proceed business, so we will then get somewhat of the modest tailwind in 2013 as we exit that no-margin business.

Your next question comes from Carla Casella with JPMorgan

One question on the SG&A, the increasing marketing media spend, is the timing of marketing or media going to change next year or should it follow the normal seasonal pattern of sales?

Well Carla there's probably two different questions in there. One is the timing of actual airing of the media and the other is from an accounting practice, how do we, what is our accounting policy. What we do, looking at a more granular level of detail in total consumer, we do spread our media expense over the season with our sales curve. The actual timing of the media is a bit different from that. So I am not sure which question you are really driving towards.

I guess I was wondering how it runs through the P&L, but I guess given what you said I have been curious as to how much the cash timing of it will differ from the P&L timing?

Well, let me just modify it, so it’s a little less of a financial and it’s more of a media deployment question. You know we very much had a weather triggered, we call it approach to our advertising last year except like the weather never got better and so we sort of, I think you are likely to see sort of a change in bias to saying we are going to be advertising within constraints of what is traditionally lawn and garden season to some extent and this is just a bias issue, not a 100% but maybe 50% based on when people are starting to think about lawn and garden and then move into where we can full advertising if we know the weather is bad to still do that, just not 100% so that we are not sort of owning people’s heads when they think about lawn and garden. And which I think we to some extent since the weather was so bad this year, we did that. As we spend more, I am sort of looking over to Jim Lyski, wondering what he is going to say because part of it is we are looking at the long-term weather charts and seeing how are the forecasters looking out into the spring and when is it going to happen and so I think this work is not 100% complete yet and I am not sure we could answer it except to say maybe a little bit more forward-looking than we did in ‘011. I don’t know Jim, you must speak for yourself.

I just, I would you would expect us to start a little bit earlier than we did last year you know weather permitting of course and then also extend the season a bit in some specific regions, are we are going to take advantage of our regional structure and where we can better match the POS curve for each region we are and we are going to do that by each product category also.

Yes Carla, just to put a precise point to wrap this up, on your question. Sales, our shipments in to proceed the consumer takeaway. Our advertising is more match to the consumer takeaway. So therefore from a cash perspective which was your question, the cash I think that answers your question and the accounting recognition proceeds the cash flow recognition.

And just, it sounds like for moving the big, one of the big difference is for moving from trade spend into consumer marketing as you have to get out there a little bit sooner in front of the spend, but it does sound like you can still pull back on 50% of it or so if you aren’t seeing the weather cooperate or any other changes in the consumers, does that sound about right?

Yes.

Your next question comes from Connie Maneaty with BMO Capital.

I have a couple of questions. A few years ago when you were taking big price increases; part of the reason was to recapture gross margin pressure over the prior four years and now you’re willing to forego some of that pricing. So inflation has been rising in your category from I don’t know five or six or seven years at this point; should we assume that you are willing to take a structurally lower gross margin going forward?

Definitely not.

So how would the pricing -- I mean do you expect lower trade promotion or other savings or how this is all going to work?

Well, I think it’s complicated and I am not saying that to be sort of stupid. I think innovation matters; I think the delay of MAT28 as sort of DuPont deals with the issues; that was a very important tool for us and what I think is very massive innovation in the category for sort of effect that we control particularly in the Southeast and the delay of that product which I think upward in the delay category. I think was a pretty big disappointment to us as far as bringing innovation and I think innovation and margin do go together. I do think that the ad spend within the lawn category is more diffused, it’s less efficient and the sort of effective rate of advertising has not been increasing even though the dollars we might look at them and say, well it kind of is. And so I think there is some very important work Jim and his team have to do to sort of get that expense, so it’s a lot more productive and I think trade programs growing at a rate that they are growing have got to be pulled back. And so the net of all that is consumers will pay for innovation; we have really important innovation available and it’s not the only thing. MAT by itself is not sort of the key to innovation within the sort of lawn fertilizer category, I mean it’s clearly a historic active ingredient; it does have some teething issues which need to be resolved. But there are other innovations we’re working on that will add and people will need to pay for it; the Snap is an innovation and its important to us and we’re going be launching that on a national basis this coming year. But the bottom line is, do I think structurally margins need to be lower on lawn fertilizer? No, I don’t. Do I think margins are important in this business? I mean, you heard me talk about it before; it is the jet fuel for everything we do here. So margins are important, but this time out particularly in lawn ferts is important as we reorient our strategy for this business which is really just getting back to what’s the business, I am going to say my father, Chuck Berger and to some extent myself have developed. And I think we can’t do everything and I think to some extent there is a trade between trade programs and advertising that is going to have to be better balanced.

How should we or what are you looking at to measure success for all of these changes, not in fiscal ’12, but in the years beyond. I mean the sales growth, category gross margin expansion, operating profit, I mean, it can’t be everything?

I spend quite a bit of time here trying to sort of translate, sort of things that I find intuitive to the rest of the management team. And so, I do know what you mean and what you heard me talk about as category growth. I think significant category growth and loss of share would be a big problem for me, meaning we’re growing the category and we’re letting other people take that from us. So I do think that if we can grow the category, very important, taking share and continuing taking a little bit of share, at the same time we’re growing category, we’ll deal with the sales, so but indirectly and gross margin, I think in mix matter within the business. And then I would say, basically if I were talking to a stranger, I would say balance between trade and consumer based brand support would also be something I would be looking at. So I think, that’s what I would be looking at.

And just one final question, does the increase in trade promotion or the acceleration of it have any thing to do with changes that may have been made when Mark Baker was with the company given his such close ties with retail?

I loved deploying Baker, but it wouldn’t be fair. No, I think it’s an easy thing to get into, I mean, it is not because it wasn’t to some extent, you know as I said, if you looked at sort of top line growth, gross margin market share, share price, I don’t know, if you know whatever you want to sort of all the big dog metrics, we are feeling pretty good about it. I think the problem is that when you peel it back and look really carefully at it, I don’t like what I was seeing and that is that there is a certain level of advertising support that requires sort of per campaign and per brand, and I think we were drifting really close to being insufficient. And if you look and say, then where is the money going, I think it’s in trade programs and if you look at the trade programs and you say basically are really growing unit volume like we expect to see based on that kind of investment, the answer is no. And it’s not really a Mark Baker thing. I think if you look and said, when did it really sort of take off, I think I would say,’07-’08 but I wouldn’t blame it on Mark, I would say we just – I wish I could say it was Mark, but it’s not and it’s a drift issue that we all are responsible for.

Your next question comes from Jason Gere with RBC Capital.

So I guess two questions; the first one, as we think about your decision, not to price and some of your categories, I was just wondering if you could talk about the competitive landscape and what you are hearing at least in the trade, what some of those players are doing right now and maybe the magnitude of their innovation, obviously the goal is to increase category growth, but, you are the leader, and so I am just wondering how they are responding to that?

Jason, this is Barry Sanders. And what we are seeing is relatively little price income next year, and so I think it’s pretty consistent with where we are at and we are certainly, I would agree with you with a leader, and we are doing appropriate things relative to some of the innovations, but we are not taking pricing to -- what Jim has said where the value doesn’t warrant it in and I think that's pretty consistent within the industry.

Okay, even though your peers obviously don't have much as much critical mass as you do, they are just kind of adhering to the same type of policy, I guess at this point?

Jason you have to look at it by category, I mean some categories you are going to have to take pricing relative to the increase -- maybe things like bird food. But when you look at the core lawn and garden categories, I think it’s pretty consistent with where we are at.

Okay, and then just I guess the last question, trying to tie everything together here I know you guys didn't give official EPS guidance, but it sounds like, you know, sales bettered, interest expense little lower, shares outstanding should help, SG&A as a percentage of sales flat, so it leaves kind of gross margin as the wild card. So, I mean, are we anticipating that there will be EPS growth year-over-year. Is this going to be below the 10% threshold, I mean, I know it’s a few months away for people to kind of rattle their brains in trying to figure it out, but I am just trying to get the message here that it isn't an investment year for you, you guys are making the right decisions for the long term, but should we anticipate growth just trying to manage expectations out there?

Yeah, Jason I think I would ask if you can go back and then listen to the script carefully, and I think we gave what we felt comfortable with in terms a guidance on a line by line level. So, we are trying to avoid providing, for all the reasons we discussed, due to the uncertainty we have in the top line and frankly in commodity at this point, really trying to avoid boxing us into a narrow range at this early date. We haven't done it in prior years, and frankly consistent with the theme that Jim has been articulating the entire morning, the concern is that forces us into a real short-term focus on the business, which is not we want to happen this season. So, you know, I just encourage you to go back and go through the script and I ask you -- I won’t repeat it all in answering your question, but I think those are the answers you are looking for.

Okay. Thanks.

Your next question comes from Jim Barrett with C.L. King & Associates.

Jim, could you -- I think Barry you mentioned your market share was roughly down about a 100 basis points, is there any way to provide us some color on that by channel i.e Big boxes versus mass merch versus independent?

Jim, I will give you I think some general guidance weather specifically by retailer -- home center is well it flat to slightly down depending on the category and there are some specifics there relative to some Fertilizer and mass were down a little bit more than that based on all the things that we’ve talked about before, which that’s down to about a 100 basis points.

Okay. And did you do any tracking studies on a related note to determine whether the home centers are simply taking customer that of mass or is the customer within mass simply shifting to other products, but staying there?

Well, I mean, listen what we know and what are debt tells us is that there has been a significant share decline in lawn garden at mass and a significant share increase at Big Bucks home centers for lawn and garden. So, I think that answers your question.

Operator, in the interest of time, we are going to take two more calls and then we’ll wrap it up after that.

Our next question comes from Sam Yake with BGB Securities.

Yes, good morning. I just have one question. I'm wondering if you can comment if there’s been any progress on the S.C. Johnson negotiations. I remember you had said at the Analyst Day that you had some hope that ultimately that deal may end up somewhere along the lines of the months and around up situation which was very encouraging, and I'm just wondering what the update would be on that?

I’ll let Barry who’s been dealing with this kind of on a day-to-day basis, but let me just start that saying we currently have a relationship with SCJ where we represent within our major categories, their products and they are representing ours. I think so this is the beginning of what we hope is a bigger relationship, and I am going to say where we are today everybody feels really good about. So, it’s been a really good kind of first year. I think that they’re happy in Racine, we’re happy in Marysville and may be Barry, if you want to add some color?

Sure. I think the initial intent of the relationship was we are very good and our home center channels, and they’re very good in their grocery (inaudible) channels, and to leverage our respective capabilities within those channels. And so to Jim’s point is, I think for that first year, which is just start up year of the relationship, both of our expectations have been exceeded for our respective businesses within those channels. The teams are working very well together and we’re already out planning the future year. So it’s a great start up, better than expectations and we look forward to that going forward, and to James point on the round up, it took a long time to build that relationship. But I think we are off to a great start.

I think we are not trying to, like use lethal words. I know how Fisk and I feel about it, which is that we would like to move to a bigger, more substantial relationship. The good news is that the first year of the relationship -- and you know for us to be representing in our class of the trade, often rate, that is a big first step and we feel really good about it. So we’ve not talked a lot about it. But so far so good.

Your next question comes from Jon Andersen with William Blair.

Jim, you mentioned that you’re doing a lot great things for the business here and one of the indications is that marketing spending will be up next year. I was just wondering if you could talk a little bit more about how your key retailers play into position, the category next year. Are they going to be spending more, less or they going to be spending differently? And what are your expectations for your space on the shelf, off shelf this year versus next year?

There is a couple of questions in there. I am just trying to think before I respond. So, in all, like hanging myself. I’ve got a, what I consider to be a, sort of good friendship with Frank Blake at Home Depot. And he got hired, I mean, I knew him before when he got hired right when my daughter died and we spent a lot of time talking about certain personal things. And we became pretty good friends over time. And when I took him through this sort of presentation about a week and a half ago, two weeks ago, he told me how important lawn and garden was to the Home Depot side. So, I can sort of, I can just relate a conversation I had with Frank that’s not particularly private. But just how important lawn and garden is to the Depot especially in these times where consumers are hurting. And major home improvement projects are tough for them. So, the commitment that I heard from Frank was very significant for lawn and garden, and I think I had not heard anything different from Craig Menear or Scott Manning on how they feel about lawn and garden and it’s importance at this time for the Home Depot, and I haven’t heard anything different from other accounts that I talked to, nor have I heard other accounts. I haven’t talked to about others as Scott have, anything else and then it’s in a very important category. So, I actually came away from the meeting with Frank, actually feeling really good and when I related this fact to the team here is that how important as a singular source of consumers lawn and garden is to our largest account. At all, we just feel little bit better that they’re seeing things in a way that we think is positive for our business, and I think that’s really the nature of your question, and I hope Frank’s not mad at me for mentioning the conversation, but he is, I think, he is a really great guy and a good CEO.

Thanks a lot.

Barry, you want to add something.

Yeah, I would – No, Jon, I would say, Jim was talking to our big accounts. What I would add, given how difficult this year was, when you talk about the small independent businessman – you know, it’s a lot tougher times, and so we have started off our distributor shows, the hardware co-op shows, and the sign that I think is really positive for lawn and garden is that the morale and attitude of the small independent businessman relative to lawn and garden, we are seeing very good orders and volumes and attitudes coming from those retailers. So, I would say, from the biggest accounts all the way down to the smallest accounts, I think there is a positive momentum going into this year, and you know I think the attitude is, is a lot of what you drove over, was weather to Jim’s point on half of that and they think next year is going to be a better year than it was this year. So, I think overall on our account base, pretty good attitude and it’s relative to lawn and garden.

I would now like to turn the call back to Jim King for closing remarks. Jim King Okay. Thank you. I know there might be some people who got caught in the queue that we didn’t get to. So if you want to give me a call, directly you can do that, 937-578-5622. Other than that, as Dave mentioned, he and I are going to be out at various conference over the next several weeks, I think we have three conferences between now and mid-December, and we will be providing an update on Q1 during the last of those, I think, on December 8. So, other than that, we appreciate your time today, and look forward to talking to you after our Q1 results. Thanks and have a great day.

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