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What changed in SCOTTS MIRACLE-GRO CO's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SCOTTS MIRACLE-GRO CO's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+406 added−412 removedSource: 10-K (2024-11-26) vs 10-K (2023-11-22)

Top changes in SCOTTS MIRACLE-GRO CO's 2024 10-K

406 paragraphs added · 412 removed · 311 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+10 added−16 removed31 unchanged
Biggest changeThe permits typically specify the condition in which the property must be left after the peat is fully harvested, with the residual use typically being natural wetland habitats combined with open water areas. We are generally required by these permits to limit our harvesting and to restore the property consistent with the intended residual use.
Biggest changeFor example, permits must be obtained in order to harvest peat and to discharge storm water run-off or water pumped from peat deposits. The permits typically specify the condition in which the property must be left after the peat is fully harvested, with the residual use typically being natural wetland habitats combined with open water areas.
Our key consumer lawn and garden brands include Scotts ® and Turf Builder ® lawn fertilizer and Scotts ® grass seed products; Miracle-Gro ® soil, plant food and gardening products; Ortho ® herbicide and pesticide products; and Tomcat ® rodent control and animal repellent products.
Our key consumer lawn and garden brands include Scotts ® Turf Builder ® lawn fertilizer and Scotts ® grass seed products; Miracle-Gro ® soil, plant food and gardening products; Ortho ® herbicide and pesticide products; and Tomcat ® rodent control and animal repellent products.
We are the exclusive agent of the Monsanto Company, a subsidiary of Bayer AG (“Monsanto”), for the marketing and distribution of certain of Monsanto’s consumer Roundup ®1 branded products within the United States (“U.S.”) and certain other specified countries. In addition, we have an equity interest in Bonnie Plants, LLC, a joint venture with Alabama Farmers Cooperative, Inc.
We are the exclusive agent of Monsanto Company, a subsidiary of Bayer AG (“Monsanto”), for the marketing and distribution of certain of Monsanto’s consumer Roundup ®1 branded products within the United States (“U.S.”) and certain other specified countries. In addition, we have an equity interest in Bonnie Plants, LLC, a joint venture with Alabama Farmers Cooperative, Inc.
This division of reportable segments is consistent with how the segments report to and are managed by our Chief Executive Officer (the chief operating decision maker of the Company). In addition, Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the business segments.
This division of reportable segments is consistent with how the segments report to and are managed by our Chief Executive Officer (the chief operating decision maker of the Company). In addition, Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the reportable business segments.
Products within this category include lawn fertilizer products under the Scotts ® and Turf Builder ® brand names; grass seed products under the Scotts ® , Turf Builder ® , EZ Seed ® , PatchMaster ® and Thick’R Lawn TM brand and sub-brand names; and lawn-related weed, pest and disease control products primarily under the Scotts ® brand name, including sub-brands such as GrubEx ® .
Products within this category include lawn fertilizer products under the Scotts ® and Turf Builder ® brand and sub-brand names; grass seed products under the Scotts ® , EZ Seed ® , PatchMaster ® and Thick’R Lawn TM brand and sub-brand names; and lawn-related weed, pest and disease control products primarily under the Scotts ® brand name, including sub-brands such as GrubEx ® .
Significant Customers Home Depot and Lowe’s are our two largest customers and are the only customers that individually represent more than 10% of reported consolidated net sales during any of the three most recent fiscal years. For additional details regarding significant customers, see “ITEM 1A.
Significant Customers The Home Depot and Lowe’s are our two largest customers and are the only customers that individually represent more than 10% of reported consolidated net sales during any of the three most recent fiscal years. For additional details regarding significant customers, see “ITEM 1A.
Our Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of outdoor growing in North America during our second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during our third and fourth fiscal quarters.
Our Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of growing patterns in North America during our second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during our third and fourth fiscal quarters.
Our annual sales for this business are further concentrated in our second and third fiscal quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products.
Our annual net sales for this business are further concentrated in our second and third fiscal quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products.
Products within this category include a complete line of water-soluble plant foods under the Miracle-Gro ® brand and sub-brands such as LiquaFeed ® , continuous-release plant foods under the Miracle-Gro ® brand and sub-brands such as Shake ‘N Feed ® ; potting mixes, garden soils, ground cover and mulches under the Miracle-Gro ® , Scotts ® , Hyponex ® and Earthgro ® brand names; plant-related pest and disease control products under the Ortho ® brand; organic garden products under the Miracle-Gro ® Performance Organics ® , Miracle-Gro ® Organic Choice ® , Scotts ® , Whitney Farms ® and EcoScraps ® brand names; and live goods and seeding solutions under the Miracle-Gro ® brand.
Products within this category include a complete line of water-soluble plant foods under the Miracle-Gro ® brand and sub-brands such as LiquaFeed ® ; continuous-release plant foods under the Miracle-Gro ® brand and sub-brands such as Shake ‘N Feed ® ; potting mixes, garden soils, ground cover and mulches under the Miracle-Gro ® , Scotts ® , Hyponex ® and Earthgro ® brand names; plant-related pest and disease control products under the Ortho ® brand; organic garden products under the Miracle-Gro ® Performance Organics ® , Miracle-Gro ® Organic, Miracle-Gro ® Organic Choice TM , Scotts ® and Whitney Farms ® brand names; and live goods and seeding solutions under the Miracle-Gro ® brand.
RISK FACTORS — Risks Related to Our Business — Because of the concentration of our sales to a small number of retail customers, the loss of one or more of, or a significant reduction in orders from, any of our top customers, or a material reduction in the inventory of our products that they carry, could adversely affect our financial results” of this Form 10-K and “NOTE 21.
RISK FACTORS — Risks Related to Our Business — Because of the concentration of our sales to a small number of retail customers, the loss of one or more of, or a significant reduction in orders from, any of our top customers, or a material reduction in the inventory of our products that they carry, could adversely affect our financial results” of this Form 10-K and “NOTE 20.
RISK FACTORS — Risks Related to Our Business — In the event the Third Restated Agreement for Monsanto’s consumer Roundup ® products terminates or Monsanto’s consumer Roundup ® business materially declines, we would lose a substantial source of future earnings and overhead expense absorption ” of this Form 10-K and “NOTE 7.
RISK FACTORS — Risks Related to Our Business — In the event the Third Restated Agreement for Monsanto’s consumer Roundup ® products terminates or Monsanto’s consumer Roundup ® business materially declines, we would lose a substantial source of future earnings and overhead expense absorption ” in this Form 10-K and “NOTE 6.
ITEM 1. BUSINESS Company Description and Development of the Business The discussion below describes the business conducted by The Scotts Miracle-Gro Company, an Ohio corporation (“Scotts Miracle-Gro” and, together with its subsidiaries, the “Company,” “we,” “our” or “us”), including general developments in our business during fiscal 2023.
ITEM 1. BUSINESS Company Description and Development of the Business The discussion below describes the business conducted by The Scotts Miracle-Gro Company, an Ohio corporation (“Scotts Miracle-Gro” and, together with its subsidiaries, the “Company,” “we,” “our” or “us”), including general developments in our business during fiscal 2024.
Today, the Scotts ® , Turf Builder ® , Miracle-Gro ® , Ortho ® and Roundup ® brands make us the most widely recognized company in the consumer lawn and garden industry in the United States. Business Segments We divide our business into the following reportable segments: • U.S. Consumer • Hawthorne • Other U.S.
Today, the Scotts ® , Turf Builder ® , Miracle-Gro ® , Ortho ® and Roundup ® brands make us the most widely recognized company in the consumer lawn and garden industry in the U.S. Business Segments We divide our business into the following reportable segments: • U.S. Consumer • Hawthorne • Other U.S.
We compete primarily on the basis of brand strength, product innovation, product quality, product performance, advertising, value, supply chain competency, field sales support, in-store sales support and the strength of our relationships with major retailers and distributors. In the lawn and garden, pest control and indoor gardening and hydroponic markets, our products compete against private-label as well as branded products.
We compete primarily on the basis of brand strength, product innovation, product quality, product performance, advertising, value, supply chain competency, field sales support, in-store sales support and the strength of our relationships with major retailers and distributors. 4 Table of Contents In the lawn and garden, pest control and indoor gardening and hydroponic markets, our products compete against private label as well as branded products.
The expansion of our business may expand the regulatory oversight to which we are subject. If we enter new product categories and/or new jurisdictions, we may become subject to additional applicable legal and regulatory requirements. For more information regarding how compliance with local, state, federal and foreign laws and regulations may affect us, see “ITEM 1A.
The expansion of our business may expand the regulatory oversight to which we are subject. If we enter new product categories and/or new jurisdictions, we may become subject to additional applicable legal and regulatory requirements. 5 Table of Contents For more information regarding how compliance with local, state, federal and foreign laws and regulations may affect us, see “ITEM 1A.
Principal Markets and Methods of Distribution We sell our products through our direct sales force, e-commerce website and our network of brokers and distributors primarily to home centers, mass merchandisers, warehouse clubs, large hardware chains, independent hardware stores, nurseries, garden centers, e-commerce platforms, food and drug stores, indoor gardening and hydroponic product distributors, retailers and growers. 3 Table of Contents The majority of our shipments to customers are made via common carriers or through distributors in the United States.
Principal Markets and Methods of Distribution We sell our products through our direct sales force, e-commerce website and network of brokers and distributors primarily to home centers, mass merchandisers, warehouse clubs, large hardware chains, independent hardware stores, nurseries, garden centers, e-commerce platforms, food and drug stores, indoor gardening and hydroponic product distributors, retailers and growers. 3 Table of Contents The majority of our shipments to customers are made via common carriers or through distributors in the U.S.
We recognize that certain other stakeholders (such as customers, employees and non-governmental organizations) may be interested in more detailed information on these topics. We encourage you to review the “Supporting Our People” section of our 2023 Corporate Responsibility Report, located on our website at https://scottsmiraclegro.com/responsibility/environmental-social-and-governance, for more detailed information regarding our human capital programs and initiatives.
We recognize that certain other stakeholders (such as customers, associates and non-governmental organizations) may be interested in more detailed information on these topics. We encourage you to review the “Supporting Our People” section of our 2024 Corporate Responsibility Report, located on our website at https://scottsmiraclegro.com/responsibility/environmental-social-and-governance, for more detailed information regarding our human capital programs and initiatives.
It is possible, therefore, that some of these actions will have an impact – direct or indirect – on our business. 5 Table of Contents Packaging has also become subject to increased governmental scrutiny in many states.
It is possible, therefore, that some of these actions will have an impact – direct or indirect – on our business. Packaging has also become subject to increased governmental scrutiny in many states.
The contents of our corporate website are not incorporated by reference in this Form 10-K or in any other report or document we file with the Securities and Exchange Commission (the “SEC”). Associates As of September 30, 2023, we employed approximately 5,500 associates.
The contents of our corporate website are not incorporated by reference in this Form 10-K or in any other report or document we file with the Securities and Exchange Commission (the “SEC”). Associates As of September 30, 2024, we employed approximately 5,300 associates.
EPA released its PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, which sets timelines by which the U.S. EPA plans to take specific actions during the first term of the Biden Administration.
EPA released its PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, which sets timelines by which the U.S. EPA plans to take specific actions during the Biden Administration.
SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in this Form 10-K. 4 Table of Contents Competitive Marketplace The markets in which we sell our products are highly competitive.
SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in this Form 10-K. Competitive Marketplace The markets in which we sell our products are highly competitive.
In fiscal 1999, we acquired the Ortho ® brand in the United States and obtained exclusive rights to market Monsanto’s consumer Roundup ® brand within the United States and other contractually specified countries, thereby adding industry-leading weed, pest and disease control products to our portfolio.
In fiscal 1999, we acquired the Ortho ® brand in the U.S. and obtained exclusive rights to market Monsanto’s consumer Roundup ® brand within the U.S. and other contractually specified countries, thereby adding industry-leading weed, pest and disease control products to our portfolio.
We endeavor to make our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance (“ESG”) practices. In fiscal 2023, we published our 12th Corporate Responsibility Report, prepared in reference to the Global Reporting Initiative (“GRI”) Standards (2021) and with consideration for the Sustainability Accounting Standards Board’s (“SASB’s”) Chemicals industry standard.
We endeavor to make our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance (“ESG”) practices. In fiscal 2024, we published our annual Corporate Responsibility Report, prepared in reference to the Global Reporting Initiative Standards (2021) and with consideration for the Sustainability Accounting Standards Board’s Chemicals industry standard.
MARKETING AGREEMENT” of the Notes to Consolidated Financial Statements included in this Form 10-K. Acquisitions and Divestitures There were no material acquisitions or divestitures during fiscal 2023. Refer to “NOTE 8. ACQUISITIONS AND INVESTMENTS” of the Notes to the Consolidated Financial Statements included in this Form 10-K for more information regarding fiscal 2022 and fiscal 2021 acquisitions and investments.
MARKETING AGREEMENT” of the Notes to Consolidated Financial Statements included in this Form 10-K. Acquisitions and Divestitures There were no material acquisitions or divestitures during fiscal 2024 or fiscal 2023. Refer to “NOTE 7. ACQUISITIONS AND INVESTMENTS” of the Notes to the Consolidated Financial Statements included in this Form 10-K for more information regarding fiscal 2022 acquisitions.
Included within these numbers, during fiscal 2023, we employed a total of approximately 2,500 full-time and seasonal in-store associates within the United States to help our retail partners merchandise our products in their lawn and garden departments directly to consumers.
Included within these numbers, during fiscal 2024, we employed a total of approximately 2,500 full-time and seasonal in-store associates within the United States to help our retail partners merchandise our products in their lawn and garden departments directly to consumers. Engagement Our success depends on the engagement of our associates.
Regulatory Matters We are subject to various regulatory proceedings, none of which are expected to be material to our business. At September 30, 2023, $2.7 million was accrued for environmental matters. During fiscal 2023, fiscal 2022 and fiscal 2021, we expensed $0.4 million, $0.2 million and $0.5 million, respectively, for such environmental matters.
Regulatory Matters We are subject to various regulatory proceedings, none of which are expected to be material to our business. At September 30, 2024, $2.6 million was accrued for environmental matters. During fiscal 2024, fiscal 2023 and fiscal 2022, we expensed $0.1 million, $0.4 million and $0.2 million, respectively, for such environmental matters.
The lawn care category also includes spreaders and other durables under the Scotts ® brand name, including Turf Builder ® EdgeGuard ® spreaders and Handy Green ® II handheld spreaders. Gardening and Landscape: The gardening and landscape category is designed to help consumers grow and enjoy flower and vegetable gardens and beautify landscaped areas.
The lawn care category also includes spreaders and other durables under the Scotts ® brand name, including Turf Builder ® EdgeGuard ® spreaders and Whirl TM and Wizz TM handheld spreaders. Gardening and Landscape: The gardening and landscape category is designed to help consumers grow and enjoy flower and vegetable gardens and beautify landscaped areas.
Financial information about these segments for each of the three fiscal years ended September 30, 2023, 2022 and 2021 is presented in “NOTE 21.
Financial information about these segments for each of the three fiscal years ended September 30, 2024, 2023 and 2022 is presented in “NOTE 20.
Spending on research and development was $35.7 million, $45.3 million and $45.4 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, including product registration costs of $12.4 million, $13.0 million and $12.3 million, respectively.
Spending on research and development was $34.6 million, $35.7 million and $45.3 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively, including product registration costs of $9.0 million, $12.4 million and $13.0 million, respectively.
Trademarks, Patents, Trade Secrets and Licenses We believe that our trademarks, patents, trade secrets and licenses provide us with significant competitive advantages. We pursue a vigorous trademark protection strategy consisting of registration, renewal and maintenance of key trademarks and proactive monitoring and enforcement activities to protect against infringement.
Sufficient raw materials were available during fiscal 2024. Trademarks, Patents, Trade Secrets and Licenses We believe that our trademarks, patents, trade secrets and licenses provide us with significant competitive advantages. We pursue a vigorous trademark protection strategy consisting of registration, renewal and maintenance of key trademarks and proactive monitoring and enforcement activities to protect against infringement.
We primarily utilize third parties to manage the key distribution centers for our consumer lawn and garden business, which are strategically located across the United States and Canada. For our Hawthorne business, we primarily self-manage distribution centers across the United States and Canada. Growing media products are generally shipped direct-to-store without passing through a distribution center.
We primarily utilize third parties to manage the key distribution centers for our consumer lawn and garden business, which are strategically located across the U.S. and Canada. Growing media products are generally shipped direct-to-store without passing through a distribution center. Raw Materials We purchase raw materials for our products from various sources.
Recognizing there is value to associates in engaging directly with our leadership team, we host Town Hall meetings each quarter to disseminate enterprise-wide information and to allow interactive communication. 6 Table of Contents Diversity We value our associates’ diversity and encourage them to leverage their varied life experiences at our Company.
Recognizing there is significant value in hearing directly from our leadership team, we continue to host Town Hall meetings each quarter to disseminate enterprise-wide information and to allow for interactive communication. Diversity We value our associates’ diversity and encourage them to leverage their varied life experiences at our Company.
We maintain a Supplier Code of Conduct that establishes the minimum standards that suppliers must satisfy to sell goods to or do business with the Company. Further ESG initiatives in fiscal 2023 included responding to the Carbon Disclosure Project’s climate questionnaire and completing the S&P Corporate Sustainability Assessment.
We maintain a Supplier Code of Conduct that establishes the minimum standards that suppliers must satisfy to sell goods to or do business with the Company. Further ESG initiatives in fiscal 2024 included responding to the Carbon Disclosure Project’s climate change and water questionnaires.
(“AFC”), focused on planting, growing, developing, distributing, marketing, and selling live plants. Through our Hawthorne segment, we are a leading manufacturer, marketer and distributor of lighting, nutrients, growing media, growing environments and hardware products for indoor and hydroponic gardening in North America.
(“AFC”), focused on planting, growing, developing, distributing, marketing and selling live plants. Through our Hawthorne segment, we are a leading provider of nutrients, lighting and other materials used for indoor and hydroponic gardening in North America.
All associates and business partners, including contractors, are covered by our EHS management system. Our associates are encouraged to participate in safety committees to spur associate engagement with safety on a local and national level.
Health and Safety We maintain several health and safety programs to protect our team members, including our comprehensive Environmental Health and Safety (“EHS”) management system. All associates and business partners, including contractors, are covered by our EHS management system. Our associates are encouraged to participate in safety committees to spur associate engagement with safety on a local and national level.
During peak sales and production periods in fiscal 2023, our workforce totaled approximately 7,250, comprised of approximately 6,500 employees including seasonal associates and approximately 750 in temporary labor.
During peak sales and production periods in fiscal 2024, our workforce totaled approximately 7,100, comprised of approximately 6,200 associates including seasonal associates and approximately 900 in temporary labor.
We publish our Corporate Responsibility Report and several ESG-related policies and statements on the ESG section of our corporate website, which is located at https://scottsmiraclegro.com/responsibility/environmental-social-and-governance. These policies and statements address environmental, health and safety and human rights concerns.
The Company continues to benchmark, set and make progress towards goals and seek continuous improvement around these focus areas. We publish our Corporate Responsibility Report and several ESG-related policies and statements on the ESG section of our corporate website, which is located at https://scottsmiraclegro.com/responsibility/environmental-social-and-governance. These policies and statements address environmental, health and safety and human rights concerns.
In some locations, these facilities have been required to create water retention ponds to control the sediment content of discharged water. In addition, in 2021 the Biden Administration announced a multi-agency plan to address per- and polyfluoroalkyl substances (“PFAS”) contamination nationwide. Agencies, including the U.S. EPA, the Department of Defense, the Food and Drug Administration, the U.S.
In addition, in 2021 the Biden Administration announced a multi-agency plan to address per- and polyfluoroalkyl substances (“PFAS”) contamination nationwide. Agencies, including the U.S. EPA, the Department of Defense, the Food and Drug Administration, the U.S.
Raw Materials We purchase raw materials for our products from various sources. We are subject to market risk as a result of the fluctuating prices of raw materials, including urea and other fertilizer inputs, resins, diesel, gasoline, natural gas, sphagnum peat, bark and grass seed.
We are subject to market risk as a result of the fluctuating prices of raw materials, including urea and other fertilizer inputs, resins, diesel, gasoline, natural gas, sphagnum peat, bark and grass seed. Our objectives surrounding the procurement of these materials are to ensure continuous supply, minimize costs and improve supply and pricing predictability.
Marketing Agreement: We are Monsanto’s exclusive agent for the marketing and distribution of certain of Monsanto’s consumer Roundup ® branded products in the United States and certain other specified countries.
Hydroponic gardening focused controls products are marketed under the Alchemist ® , Grower’s Edge ® and General Hydroponics ® brand names. Marketing Agreement: We are Monsanto’s exclusive agent for the marketing and distribution of certain of Monsanto’s consumer Roundup ® branded products in the United States and certain other specified countries.
When appropriate, we commit to purchase a certain percentage of our needs in advance of the lawn and garden season to secure pre-determined prices. We also hedge certain commodities, particularly diesel and urea, to improve cost predictability and control. Sufficient raw materials were available during fiscal 2023.
We seek to achieve these objectives through negotiation of contracts with favorable terms directly with vendors. When appropriate, we commit to purchase a certain percentage of our needs in advance of the lawn and garden season to secure pre-determined prices. We also hedge certain commodities, particularly diesel and urea, to improve cost predictability and control.
This report provides detailed information regarding our ESG strategy, focus areas and governance structure. The Company’s ESG focus areas are Product Stewardship and Safety, Operations and Supply Chain, Associate Engagement and Wellness, Community Engagement and Governance and Transparency. The Company continues to benchmark, set and make progress towards goals and seek continuous improvement around these focus areas.
The report maps our sustainability efforts to the United Nations Sustainable Development Goals and provides detailed information regarding our ESG strategy, focus areas and governance structure. The Company’s ESG focus areas are Product Stewardship and Safety, Operations and Supply Chain, Associate Engagement and Wellness, Community Engagement and Governance and Transparency.
Lighting : The lighting category is designed to provide growers a complete selection of lighting systems and components for use in hydroponic and indoor gardening applications.
Lighting : The lighting category is designed to provide growers a complete selection of lighting systems and components for use in hydroponic and indoor gardening applications. Products in this category include lighting sensors, controls, fixtures, cords and hangars, and are marketed under the Gavita ® , Agrolux ® and Titan ® brand names.
This feedback is shared and leveraged as human capital initiatives are defined. In light of our recent work force restructuring, we have prioritized ensuring that our associates have access to the information they need to understand the business decisions being made, the reasons behind them and how changes will impact them in their role.
We believe that an informed workforce contributes to an engaged workforce. As such, we have prioritized ensuring our associates have access to the information they need to understand the business decisions being made, the reasons behind them and how changes will impact them in their role.
Hydroponic hardware and growing environments : This category is designed to provide durable goods to grow plants, flowers and vegetables using little or no soil.
Hydroponic and indoor gardening focused growing media and nutrients products are marketed under the Mother Earth ® , Botanicare ® , General Hydroponics ® and CYCO ® brand names. Hydroponic hardware and growing environments : This category is designed to provide durable goods to grow plants, flowers and vegetables using little or no soil.
Products within this category include growing systems, trays, fans, filters, humidifiers, dehumidifiers, timers, instruments, water pumps, irrigation supplies and hand tools, and are marketed under the Botanicare ® , Gro Pro ® , AeroGarden ® and HydroLogic Purification System ® brand names as well as brands owned by third parties for which we serve as distributor.
Products within this category include growing systems, trays, fans, filters, humidifiers, dehumidifiers, water pumps, irrigation supplies and hand tools. These products are marketed under the Botanicare ® , CAN-FAN TM , CAN-FILTERS ® , EcoPlus ® , Gro Pro ® , Grower’s Edge ® and Hydro-Logic Purification System ® brand names.
Our ongoing development processes are designed to grow knowledge, improve skills and capabilities, and achieve competence in specific behaviors to meet performance expectations and prepare for potential future roles within our Company. Compensation and Benefits Our passion extends far beyond gardening and growing to include the well-being of our associates.
Our managers support associates as development happens on the job through cross-functional team assignments, expanded roles and rotational assignments. Our ongoing development processes are designed to grow knowledge, improve skills and capabilities, and achieve competence in specific behaviors to meet performance expectations and prepare for potential future roles within our Company.
Analogous regulatory regimes apply to certain pesticides that we sell or distribute in other countries. Fertilizer and growing media products are also subject to various laws and regulations, some of which require registration, mandate labeling requirements, and/or govern the sale and distribution of the products.
Fertilizer and growing media products are also subject to various laws and regulations, some of which require registration, mandate labeling requirements, and/or govern the sale and distribution of the products. Our grass seed products are regulated in the U.S. by the Federal Seed Act and various state regulations.
We use an EHS scorecard composed of leading and lagging indicators to evaluate our health and safety performance including progress measurements for safety training, behavioral-based safety observations, near-miss reporting, total recordable incident rate and lost time accident rate. Information Systems We understand the critical nature of real-time, measurable data and insights from a human capital perspective.
We use an EHS scorecard composed of leading and lagging indicators to evaluate our health and safety performance including progress measurements for safety training, behavioral-based safety observations, near-miss reporting, total recordable incident rate and lost time accident rate. 7 Table of Contents Environmental, Social and Governance Our stakeholders, including shareholders, customers, suppliers, associates, communities as well as the environment and society, are essential to our business.
Professional Development We view development and retention of our associates as valuable components of our business operations and creating a culture of leadership throughout our Company. We offer both online micro-learning and virtual learning content that accelerates the development of practical skills and competencies.
Professional Development We view development and retention of our associates as valuable components of our business operations and critical to creating a culture of leadership throughout our Company. Our associates have the opportunity to learn new skills through exposure and involvement in business challenges.
Our ERGs drive continuous improvement of our inclusive work environment and are open to all associates, regardless of the business department, location or management level. Our ERGs consist of the Scotts Women’s Network, the Scotts Black Employees Network, the Scotts Veterans Network, the Scotts Young Professionals, Scotts GroPride and Scotts Associates for a Greener Earth.
Our ERGs consist of the Scotts Associate Board, Scotts Associates For A Greener Earth, the Scotts Black Employees Network, the Scotts Christian Fellowship, Scotts Gro-Masters, Scotts GroPride, the Scotts Veterans Network, the Scotts Women’s Network and the Scotts Young Professionals.
We conduct an annual analysis of our pay and compensation practices, from both an external market and internal consistency perspective, to ensure that our pay decisions are fair and equitable. Health and Safety We maintain several health and safety programs to protect our team members, including our comprehensive Environmental Health and Safety (“EHS”) management system.
Each year we conduct an analysis of our pay and compensation practices, from both an external market and internal consistency perspective, to ensure that our pay decisions are fair and equitable, adjusting as needed. To ensure transparency and understanding of our compensation programs, we have enhanced our education opportunities and communications for our managers and associates.
Our employee resource groups (“ERGs”) are voluntary, associate-led groups usually formed by people with a common affinity such as gender, race, national origin, sexual orientation, military status or other attributes. Each ERG establishes a mission to positively impact the business by cultivating relationships through networking and developing talent through experiences, programs and mentoring.
This includes diversity in terms of gender, sexuality, race, thoughts, interests, languages, beliefs and more. 6 Table of Contents Our employee resource groups (“ERGs”) are voluntary, associate-led groups typically formed by people with a common affinity such as gender, race, national origin, sexual orientation, military status or other attributes.
Our grass seed products are regulated in the U.S. by the Federal Seed Act and various state regulations. In addition, governmental agencies regulate the disposal, transport, handling and storage of waste, the remediation of contaminated sites, air and water discharges from our facilities, and workplace health and safety.
In addition, governmental agencies regulate the disposal, transport, handling and storage of waste, the remediation of contaminated sites, air and water discharges from our facilities, and workplace health and safety. Governmental authorities generally require operating facilities to obtain permits (sometimes on an annual basis) relating to site-specific conditions and/or activities.
Research and Development We continually invest in research and development, both in the laboratory and at the consumer level, to improve our products, manufacturing processes, packaging and delivery systems.
Research and Development We continually invest in research and development to design new or improve existing product formulae and packaging, as well as to streamline our manufacturing processes.
EPA in addition to various local, state and federal environmental and/or public health agencies.
EPA in addition to various local, state and federal environmental and/or public health agencies. These regulations may restrict or ban the use of certain ingredients or categories of products altogether. Analogous regulatory regimes apply to certain pesticides that we sell or distribute in other countries.
Removed
Hydroponic and indoor gardening focused growing media and nutrients products are marketed under the Mother Earth ® , Botanicare ® , General Hydroponics ® and Cyco ® brand names as well as brands owned by third parties for which we serve as distributor.
Added
We are generally required by these permits to limit our harvesting and to restore the property consistent with the intended residual use. In some locations, these facilities have been required to create water retention ponds to control the sediment content of discharged water.
Removed
Products in this category include lighting sensors, controls, fixtures, reflectors, lamps, cords and hangars, and are marketed under the Gavita ® , Agrolux ® and Titan ® brand names as well as brands owned by third parties for which we serve as distributor.
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To drive engagement, we take a purposeful approach focused on enhancing the associate experience centering on creating a positive workplace and fostering trust in leadership. We recognize that two-way communication enhances trust and improves collaboration and overall engagement. We gather associate feedback both formally and informally throughout the year through such initiatives as pulse surveys, leadership meetings and roundtable discussions.
Removed
Hydroponic gardening focused controls products are marketed under the Alchemist ® and General Hydroponics ® brand names as well as brands owned by third parties for which we serve as distributor.
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In fiscal 2024, we surveyed our global associate population on topics spanning the employee experience. Categories included positive workplace, strong leadership, health & well-being, meaningful work, growth opportunity, trust in the organization and ethics. Engagement surveys provide us with insight into what we are doing well and where we have opportunities to improve.
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Our objectives surrounding the procurement of these materials are to ensure continuous supply, minimize costs and improve supply and pricing predictability. We seek to achieve these objectives through negotiation of contracts with favorable terms directly with vendors.
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Results from the fiscal 2024 Associate Experience Survey highlighted focus areas for fiscal 2024 and beyond. Another source of associate sentiment comes from exit interviews, when we ask for ratings, rankings and feedback from all salaried associates who voluntarily leave our organization. These valuable inputs are shared with senior leadership and integrated into practice as human capital initiatives are deployed.
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These regulations may, for example, include requirements that only certified or professional users apply the product, that certain products be used only on certain types of locations (such as “not for use on sod farms or golf courses”), that users post notices on properties to which products have been or will be applied, or that may require notification to individuals in the vicinity that products will be applied in the future, or may ban the use of certain ingredients or categories of products altogether.
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Each ERG establishes a mission to positively impact the business by cultivating relationships through networking and developing talent through experiences, programs and mentoring. Our ERGs drive continuous improvement of our inclusive work environment and are open to all associates.
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Governmental authorities generally require operating facilities to obtain permits (sometimes on an annual basis) relating to site-specific conditions and/or activities. For example, permits must be obtained in order to harvest peat and to discharge storm water run-off or water pumped from peat deposits.
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In fiscal 2024, we developed and implemented a leadership development framework for our people leaders, delivering on two key areas — leader accountabilities at the Company and critical skill training for our front line leaders.
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During fiscal 2023, we continued strategic reductions in our workforce as part of an ongoing series of organizational changes and initiatives intended to create operational and management-level efficiencies. Engagement The level of engagement created through our associate experience directly impacts our business. To advance engagement, we take a purposeful approach focused on enhancing the employee experience.
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Compensation and Benefits We believe financial health and mental wellness are core components of our associates’ overall well-being and we are committed to ensuring fair and competitive compensation to our associates based on their roles.
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Communication between members of our leadership team and our other associates impacts our success by building trust and improving collaboration and overall engagement. We gather the voices of our associates formally and informally throughout the year through, among other initiatives, executive town halls, pulse surveys and leadership skip-level meetings.
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We also prioritize sharing our financial successes with associates through our incentive plans for eligible participants and our profit-sharing program and discretionary bonuses for those who are not incentive eligible. Through our LiveTotal Health program, we demonstrate our commitment to the overall well-being of our associates.
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To accomplish this, we execute comprehensive change management plans to support our associates through business transitions.
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In response to feedback from our most recent Associate Experience Survey, we enhanced our benefits to provide more comprehensive mental health support, including a broader range of services and improved access to mental healthcare. This focus on mental well-being is complemented by our suite of benefits, designed to meet the diverse needs of our workforce.
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This includes diversity in terms of gender, sexuality, race, thoughts, interests, languages, beliefs and more. We continue to hold ourselves accountable to fostering a positive workplace, one that creates a sense of belonging and community. This comes to life in the programs and support we provide our associates.
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Our offerings include healthcare coverage, family leave, 401(k) matching, and other essential benefits that support both our associates and their families. Additionally, we provide tailored benefits such as a discounted stock purchase plan, healthcare navigation and advocacy concierge services, structured reimbursement for adoption and surrogacy expenses, a Marysville onsite fitness facility, and limited reimbursement for well-being expenses.
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Content is selected by associates and updated frequently to align to the development needs of our associates and address trending topics. Our associates have the opportunity to learn new skills through exposure and involvement in business challenges. Our managers support associates as development happens on the job through cross-functional team assignments, expanded roles and rotational assignments.
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We provide a variety of learning tools and experiences to our associates to help them embrace a growth mindset that leads to higher levels of achievement and personal satisfaction.
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We are a Company that has been rooted in family since our founding in 1868, and one way we demonstrate this is our commitment to enhancing the health and financial security of our associates and their families and our support for everyday challenges through our LiveTotalHealth program – the Company’s holistic and comprehensive approach to wellness.
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We formed a partnership with an innovative leader in the healthcare navigation and advocacy space to provide our associates and their family members with access to healthcare experts who can guide them throughout their healthcare journeys. We also believe financial health is a core component to our associates’ overall wellbeing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

93 edited+31 added−9 removed119 unchanged
Biggest changeThe areas where we face risks include: • Assumptions implicit to our acquisition strategy or valuations are not realized. • Diversion of management time and focus from operating our business to acquisition integration challenges. • Failure to successfully further develop the acquired business or product lines. • Implementation or remediation of controls, procedures and policies at the acquired company. • Integration of the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions. 17 Table of Contents • Transition of operations, users and customers onto our existing platforms. • Reliance on the expertise of our strategic partners with respect to market development, sales, local regulatory compliance and other operational matters. • Failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition. • In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries. • Cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire. • Liability for or reputational harm from activities of the acquired company before the acquisition or from our strategic partners, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities. • Litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former shareholders or other third parties.
Biggest changeThe areas where we face risks include: • Assumptions implicit to our acquisition strategy or valuations are not realized. • Diversion of management time and focus from operating our business to acquisition integration challenges. • Failure to successfully further develop the acquired business or product lines. • Implementation or remediation of controls, procedures and policies at the acquired company. • Integration of the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions. • Transition of operations, users and customers onto our existing platforms. • Reliance on the expertise of our strategic partners with respect to market development, sales, local regulatory compliance and other operational matters. • Failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition. • In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries. • Cultural challenges associated with integrating associates from the acquired company into our organization, and retention of associates from the businesses we acquire. 18 Table of Contents • Strategic investments in which we have a minority ownership stake and that we do not control may from time to time have economic, business, or legal interests or goals that are inconsistent with our goals.
As consumers demonstrate greater reliance on on e-commerce channels, the success of our business depends on our investment in e-commerce platforms, consumer preferences and buying trends relating to e-commerce, and our ability to both maintain the continuous operation of our online store and our fulfillment operations that support both our own and our retail customers’ e-commerce platforms.
As consumers demonstrate greater reliance on e-commerce channels, the success of our business depends on our investment in e-commerce platforms, consumer preferences and buying trends relating to e-commerce, and our ability to both maintain the continuous operation of our online store and our fulfillment operations that support both our own and our retail customers’ e-commerce platforms.
These regulations may, among other things, ban the use of certain ingredients contained in such products or require (i) that only certified or professional users apply the product, (ii) that certain products be used only on certain types of locations, (iii) users to post notices on properties to which products have been or will be applied, and/or (iv) notification to individuals in the vicinity that products will be applied in the future.
These regulations may, among other things, limit or ban the use of certain ingredients contained in such products or require (i) that only certified or professional users apply the product, (ii) that certain products be used only on certain types of locations, (iii) users to post notices on properties to which products have been or will be applied, and/or (iv) notification to individuals in the vicinity that products will be applied in the future.
The adequacy of our current non-FIFRA compliance-related environmental accruals and future provisions depends upon our operating in substantial compliance with applicable environmental and public health laws and regulations, as well as the assumptions that we have both identified all of the significant sites that must be remediated and that there are no significant conditions of potential contamination that are unknown to us.
The adequacy of our current non-FIFRA compliance-related environmental accruals and future provisions depends upon our operating in substantial compliance with applicable environmental and public health laws and regulations, as well as the assumptions that we have both identified the significant sites that must be remediated and that there are no significant conditions of potential contamination that are unknown to us.
The performance of the financial markets and changes in interest rates impact the funded status of these plans and cause volatility in our postretirement-related costs and future funding requirements. If the financial markets do not provide the expected long-term returns on invested assets, we could be required to make significant pension contributions.
The performance of the financial markets and changes in interest rates impact the funded status of these plans and may cause volatility in our postretirement-related costs and future funding requirements. If the financial markets do not provide the expected long-term returns on invested assets, we could be required to make significant pension contributions.
Accordingly, we are subject to risks associated with operating in foreign countries, including: • fluctuations in currency exchange rates; • limitations on the remittance of dividends and other payments by foreign subsidiaries; • additional costs of compliance with local regulations; • historically, in certain countries, higher rates of inflation than in the United States; • changes in the economic conditions or consumer preferences or demand for our products in these markets; • restrictive actions by multinational governing bodies, foreign governments or subdivisions thereof; • changes in foreign labor laws and regulations affecting our ability to hire and retain employees; • changes in U.S. and foreign laws regarding trade and investment, including the impact of tariffs; • less robust protection of our intellectual property under foreign laws; and • difficulty in obtaining distribution and support for our products, including the impact of shipping port delays.
Accordingly, we are subject to risks associated with operating in foreign countries, including: • fluctuations in currency exchange rates; • limitations on the remittance of dividends and other payments by foreign subsidiaries; • additional costs of compliance with local regulations; • historically, in certain countries, higher rates of inflation than in the United States; • changes in the economic conditions or consumer preferences or demand for our products in these markets; • restrictive actions by multinational governing bodies, foreign governments or subdivisions thereof; • changes in foreign labor laws and regulations affecting our ability to hire and retain associates; • changes in U.S. and foreign laws regarding trade and investment, including the impact of tariffs; • less robust protection of our intellectual property under foreign laws; and • difficulty in obtaining distribution and support for our products, including the impact of shipping port delays.
Also in August 2023, Moody's Investors Service lowered our (i) Corporate Family Rating to B1 from Ba3 and our (ii) Probability of Default Rating to B1-PD from Ba3-PD and (iii) rating on the Senior Notes to B2 from B1. A failure to dispose of assets or businesses in a timely manner may cause the results of the Company to suffer.
Also in August 2023, Moody’s Investors Service lowered (i) our Corporate Family Rating to B1 from Ba3, (ii) our Probability of Default Rating to B1-PD from Ba3-PD and (iii) its rating on the Senior Notes to B2 from B1. A failure to dispose of assets or businesses in a timely manner may cause the results of the Company to suffer.
Any of these issues could have a material adverse effect on our business and harm our reputation. Our operations, financial condition or reputation may be impaired if our information technology systems fail to perform adequately or if we are the subject of a data breach or cyber-attack.
Any of these issues could have a material adverse effect on our business and harm our reputation. Our operations, financial condition or reputation may be impaired if our information or operational technology systems fail to perform adequately or if we are the subject of a data breach or cyber-attack.
We also may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber-attacks. Any such attacks or precautionary measures taken to prevent anticipated attacks may result in increasing costs, including costs for additional technologies, training and third party consultants.
We may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber-attacks. Any such attacks or precautionary measures taken to prevent anticipated attacks may result in increasing costs, including costs for additional technologies, training and third-party consultants.
While we expect to be able to continue our insurance coverages, there can be no assurance we will be able to continue such insurance coverage, or that such policy limits will be adequate to cover any liability we may incur, or that our insurance premiums will continue to be available at a cost similar to our cost today.
While we expect to be able to continue our insurance coverages, there can be no assurance that we will be able to procure insurance coverage, or that such policy limits will be adequate to cover any liability we may incur, or that our insurance premiums will continue to be available at a cost similar to our cost today.
A failure to pay dividends, an inability to resume increases of our cash dividends or an inability to begin repurchasing Common Shares at historical levels could result in a lower market valuation of our Common Shares. Hagedorn Partnership, L.P. beneficially owns approximately 23% of our Common Shares and can significantly influence decisions that require the approval of shareholders.
A failure to pay dividends, an inability to resume increases of our cash dividends or an inability to begin repurchasing Common Shares at historical levels could result in a lower market valuation of our Common Shares. Hagedorn Partnership, L.P. beneficially owns approximately 24% of our Common Shares and can significantly influence decisions that require the approval of shareholders.
An operational failure or breach of security from increasingly sophisticated cyber-threats could lead to loss, misuse or unauthorized disclosure of this information about our employees or consumers, which may result in regulatory or other legal proceedings, and have a material adverse effect on our business and reputation.
An operational failure or breach of security from increasingly sophisticated cyber-threats could lead to loss, misuse or unauthorized disclosure of this information about our associates or consumers, which may result in regulatory or other legal proceedings, and have a material adverse effect on our business and reputation.
Prior to fiscal 2022, we generally increased the cash dividends on our Common Shares as well as engaged in share repurchase activity. Since fiscal 2022, we have not changed the dividend amount nor have we engaged in share repurchase activity outside of our compensation programs. As of September 30, 2023, we do not have a board authorized share repurchase program.
Prior to fiscal 2022, we generally increased the cash dividends on our Common Shares as well as engaged in share repurchase activity. Since fiscal 2022, we have not changed the dividend amount nor have we engaged in share repurchase activity outside of our compensation programs. As of September 30, 2024, we do not have a board authorized share repurchase program.
Despite our program, it is possible that claims or liabilities against us may have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain adequate insurance coverage, when our existing insurance policies expire.
Despite our program, it is possible that claims or liabilities against us may have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain sufficient insurance coverage, when our existing insurance policies expire.
This workforce reduction may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our employees who were not affected by the reduction in workforce to seek alternate employment. Employees whose positions were eliminated or those who determine to seek alternate employment may seek employment with our competitors.
This workforce reduction may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our associates who were not affected by the reduction in workforce to seek alternate employment. Associates whose positions were eliminated or those who determine to seek alternate employment may seek employment with our competitors.
The forward-looking statements that we make in this Form 10-K and our 2023 Annual Report are based on management’s current views and assumptions regarding future events and speak only as of their dates.
The forward-looking statements that we make in this Form 10-K and our 2024 Annual Report are based on management’s current views and assumptions regarding future events and speak only as of their dates.
If our marketing initiatives are unsuccessful, including our ability to leverage new media such as digital media and social networks to reach existing and potential customers or our brands suffer damage to reputation due to real or perceived quality issues (which damage can be quickly multiplied by social media), we will have incurred significant expenses without the benefit of higher revenues.
If our marketing initiatives are unsuccessful, including our ability to leverage digital media and social networks to reach existing and potential customers or our brands suffer damage to reputation due to real or perceived quality issues (which damage can be quickly multiplied by social media), we will have incurred significant expenses without the benefit of higher revenues.
Even if we successfully maintain and develop our manufacturing capabilities and processes, we may not be able to do so in time to satisfy the requirements of our customers. We rely on third parties to manufacture certain products.
Even if we successfully maintain and develop our manufacturing capabilities and processes, we may not be able to do so in time to satisfy the needs of our customers. We rely on third parties to manufacture certain products.
The costs associated with operating our continuing international business could adversely affect our results of operations, financial condition and cash flows in the future. 14 Table of Contents In the event the Third Restated Agreement for Monsanto’s consumer Roundup ® products terminates or Monsanto’s consumer Roundup ® business materially declines, we would lose a substantial source of future earnings and overhead expense absorption.
The costs associated with operating our continuing international business could adversely affect our results of operations, financial condition and cash flows in the future. In the event the Third Restated Agreement for Monsanto’s consumer Roundup ® products terminates or Monsanto’s consumer Roundup ® business materially declines, we would lose a substantial source of future earnings and overhead expense absorption.
We disclaim any obligation to update developments of these risk factors or to announce publicly any revisions to any of the forward-looking statements that we make, or to make corrections to reflect future events or developments, except as required by the federal securities laws. 8 Table of Contents Risks Related to Our Business If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net sales and/or working capital could be negatively impacted.
We disclaim any obligation to update developments of these risk factors or to announce publicly any revisions to any of the forward-looking statements that we make, or to make corrections to reflect future events or developments, except as required by law. 8 Table of Contents Risks Related to Our Business If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net sales and/or working capital could be negatively impacted.
We cannot provide any assurance that the holders of such indebtedness would waive a default or that we could pay the accelerated indebtedness in full. Subject to compliance with certain covenants under our credit facility and the indentures governing the Senior Notes, we may incur additional debt in the future.
We cannot provide any assurance that the holders of such indebtedness would waive a default or that we would have the resources to pay the accelerated indebtedness in full. Subject to compliance with certain covenants under our credit facility and the indentures governing the Senior Notes, we may incur additional debt in the future.
In particular, the carrying value of deferred tax assets, which are predominantly related to our operations in the United States, is dependent on our ability to generate future taxable income of the appropriate character in the relevant jurisdiction. From time to time, tax proposals are introduced or considered by the U.S.
In particular, the carrying value of deferred tax assets, which are predominantly related to our operations in the United States, is dependent on our ability to generate future taxable income of the appropriate character in the relevant jurisdiction. 21 Table of Contents From time to time, tax proposals are introduced or considered by the U.S.
RISK FACTORS Cautionary Note Regarding Forward-Looking Statements This Form 10-K, including the exhibits hereto and the information incorporated by reference herein, as well as our 2023 Annual Report to Shareholders (our “2023 Annual Report”), contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties.
RISK FACTORS Cautionary Note Regarding Forward-Looking Statements This Form 10-K, including the exhibits hereto and the information incorporated by reference herein, as well as our 2024 Annual Report to Shareholders (our “2024 Annual Report”), contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties.
The costs of compliance, remediation or products liability have adversely affected operating results in the past and could materially adversely affect future quarterly or annual operating results. Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business.
The costs of compliance, remediation or products liability have adversely affected operating results in the past and could materially adversely affect future quarterly or annual operating results. 20 Table of Contents Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business.
To the extent such concentration continues to occur, our net sales and income from operations may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments involving our relationship with, one or more of our 9 Table of Contents key customers.
To the extent such concentration continues to occur, our net sales and income from operations may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments involving our relationship with, one or more of our key customers.
Our failure to successfully respond to these risks and uncertainties might adversely affect the sales of our e-commerce business, as well as damage our reputation and brands. Additionally, the success of our e-commerce business and the satisfaction of our consumers depend on the timely receipt of our products by our consumers.
Our failure to successfully respond to these risks and uncertainties might adversely affect the sales of our e-commerce business, as well as damage our reputation and brands. 13 Table of Contents Additionally, the success of our e-commerce business and the satisfaction of our consumers depend on the timely receipt of our products by our consumers.
Operations at our and our suppliers’ facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters, disease outbreaks or pandemics, acts of war, terrorism, government shut-downs and work stoppages.
Operations at our and our suppliers’ facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters, disease outbreaks or pandemics, acts of war, terrorism, government shutdowns and work stoppages.
Our insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting from claims or liabilities against us, and we may not be able to obtain insurance coverage in the future.
Our insurance coverage may not be sufficient to avoid or effectively mitigate the material impact on our financial position or results of operations resulting from claims or liabilities against us, and we may not be able to obtain appropriate insurance coverage in the future.
Under certain environmental laws and regulations, we may be liable for the costs of investigation and remediation of the presence of certain regulated materials, as well as related costs of investigation and remediation of damage to natural resources, at various properties, including our current and former properties as well as offsite waste handling or disposal sites that we have used.
Under certain environmental laws and regulations, we may be liable for the costs of investigation and remediation of the presence of certain regulated materials or damage to natural resources, at various properties, including current and former properties we have owned or operated, as well as offsite waste handling or disposal sites that we have used.
We rely on information technology systems to conduct business, including communicating with employees and our key retail customers, ordering and managing materials from suppliers, shipping products to retail customers and analyzing and reporting results of operations.
We rely on information and operational technology systems to conduct business, including communicating with associates and our key retail customers, ordering and managing materials from suppliers, shipping products to retail customers and analyzing and reporting results of operations.
In some locations, we have been 19 Table of Contents required to create water retention ponds to control the sediment content of discharged water. In Canada, our peat extraction efforts are also the subject of regulation.
In some locations, we have been required to create water retention ponds to control the sediment content of discharged water. In Canada, our peat extraction efforts are also the subject of regulation.
We maintain insurance coverage to manage exposure to future claims and liabilities that may adversely impact our financial position or results of operations. The extent of our insurance program is under continuous review and coverages are modified as we deem necessary.
We maintain insurance coverage to manage our exposure to future claims and liabilities that may adversely impact our financial position or results of operations. The extent of our insurance program is under continuous review and coverages are modified as we deem necessary to mitigate current or emerging risks.
If our information technology systems are damaged or cease to function properly for an extended period of time, whether as a result of a significant cyber-incident or otherwise, our ability to communicate internally as well as with our retail customers, vendors, suppliers and other parties critical to our business, could be significantly impaired, which may adversely impact our business.
If our information or operational technology systems are damaged or cease to function properly for an extended period of time, whether as a result of a significant cyber-incident or any other adverse event, our ability to operate or communicate internally as well as with our retail customers, vendors, suppliers and other parties critical to our business, could be significantly impaired, which may adversely impact our business.
Additionally, in the normal course of our business, we collect, store and transmit proprietary and confidential information regarding our customers, employees, suppliers and others, including personally identifiable information.
Additionally, in the normal course of our business, we collect, store and transmit proprietary and confidential information regarding our customers, consumers, associates, suppliers and others, including personally identifiable information.
If we are unable to effectively provide for the succession of senior management, including our chief executive officer, our business, prospects, results of operations, financial condition and cash flows may be materially adversely affected. 15 Table of Contents Our workforce reductions may cause undesirable consequences and our results of operations may be harmed.
If we are unable to effectively provide for the succession of senior management, including our chief executive officer, our business, prospects, results of operations, financial condition and cash flows may be materially adversely affected. Our workforce reductions may cause undesirable consequences and adversely affect our business and results of operations.
Hagedorn Partnership, L.P.’s interests could differ from, or conflict with, the interests of other shareholders. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Hagedorn Partnership, L.P.’s interests could differ from, or conflict with, the interests of other shareholders. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 22 Table of Contents
During fiscal 2023 and fiscal 2022, we undertook a strategic reduction in our workforce as part of an on-going series of organizational changes and initiatives intended to create operational and management-level efficiencies.
During fiscal 2024, fiscal 2023 and fiscal 2022, we undertook strategic reductions in our workforce as part of an on-going series of organizational changes and initiatives intended to create operational and management-level efficiencies.
Consequently, we may have to stop using those chemicals or compounds or be forced to substitute less effective or more expensive alternatives to continue manufacturing and/or distributing such goods. A substantial increase in liability exposure or the loss of customers or product lines could each have a material adverse effect on our results of operations and financial condition.
Consequently, we may have to cease use of those chemicals and/or be forced to substitute less effective or more expensive alternatives to continue manufacturing and/or distributing such goods. A substantial increase in liability exposure or the loss of customers or product offerings could each have a material adverse effect on our results of operations and financial condition.
We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur.
LEGAL PROCEEDINGS” of this Form 10-K. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur.
Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, which could have a material adverse impact on our business, including our operating margins. Continued high inflation has had a negative impact on our operating margins in recent periods.
Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, which could have a material adverse impact on our business, including our operating margins. Continued high inflation has had a negative impact on our operating margins in recent periods including, for example, through persistently high manufacturing costs.
The volatility of the insurance and reinsurance markets are subject to macroeconomic conditions and events that are outside of our control. Additionally, it is possible one or more of our insurers could exclude from our policy certain chemicals or compounds used in our products.
The volatility of the insurance and reinsurance markets are also subject to macroeconomic conditions and events that are outside of our control. 14 Table of Contents Additionally, it is possible one or more of our insurers could specifically exclude from our policy certain chemicals used in our products.
For example, under our credit facility the maximum permitted leverage ratio is (i) 7.75 for the fourth quarter of fiscal 2023, (ii) 8.25 for the first quarter of fiscal 2024, (iii) 7.75 for the second quarter of fiscal 2024, (iv) 6.50 for the third quarter of fiscal 2024, (v) 6.00 for the fourth quarter of fiscal 2024, (vi) 5.50 for the first quarter of fiscal 2025, (vii) 5.25 for the second quarter of fiscal 2025, (viii) 5.00 for the third quarter of fiscal 2025, (ix) 4.75 for the fourth quarter of fiscal 2025 and (x) 4.50 for the first quarter of fiscal 2026 and thereafter.
For example, under our credit facility the maximum permitted leverage ratio is (i) 6.00 for the fourth quarter of fiscal 2024, (ii) 5.50 for the first quarter of fiscal 2025, (iii) 5.25 for the second quarter of fiscal 2025, (iv) 5.00 for the third quarter of fiscal 2025, (v) 4.75 for the fourth quarter of fiscal 2025 and (vi) 4.50 for the first quarter of fiscal 2026 and thereafter.
Extended producer responsibility programs typically include targets and reporting responsibilities for post-consumer recycling usage, compostable packaging, material reduction, refill strategies, etc.
Extended producer responsibility programs typically include targets and reporting responsibilities for, among other things, post-consumer recycling usage, compostable packaging, material reduction and refill strategies.
Disruptions to transportation channels that we use to distribute our products may adversely affect our margins and profitability. We may experience disruptions to the transportation channels used to distribute our products, including increased congestion, a lack of transportation capacity, increased fuel expenses, import or export controls or delays, and labor disputes or shortages.
We may experience disruptions to the transportation channels used to distribute our products, including increased congestion, a lack of transportation capacity, increased fuel expenses, import or export controls or delays, and labor disputes or shortages.
In addition, if we continue to reduce our workforce, it may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities and to execute on our business plans. Additionally, reductions in workforce may make it more difficult to recruit and retain new employees.
In addition, if we continue to reduce our workforce, it may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities and to execute our business plans. Additionally, reductions in workforce may make it more difficult to recruit and retain associates if they perceive uncertainty in employment.
For example, our debt level could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness; • make us more vulnerable to general adverse economic and industry conditions; • require us to dedicate a substantial portion of cash flows from operating activities to payments on our indebtedness, which would reduce the cash flows available to fund working capital, capital expenditures, advertising, research and development efforts, pay dividends, repurchase our Common Shares and other general corporate activities; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • limit our ability to borrow additional funds; • expose us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates; and • place us at a competitive disadvantage compared to our competitors that have less debt. 16 Table of Contents Our ability to make payments on or to refinance our indebtedness, fund planned capital expenditures and acquisitions, pay dividends and make repurchases of our Common Shares will depend on our ability to generate cash in the future which, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
For example, our debt level could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness; • make us more vulnerable to general adverse economic and industry conditions; • require us to dedicate a substantial portion of cash flows from operating activities to payments on our indebtedness, which would reduce the cash flows available to fund working capital, capital expenditures, advertising, research and development efforts, pay dividends, repurchase our Common Shares and other general corporate activities; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • limit our ability to borrow additional funds; • expose us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates; and • place us at a competitive disadvantage compared to our competitors that have less debt.
Additionally, defending against these legal proceedings may involve significant expense and diversion of management’s attention and resources. Risks Related to Our M&A, Lending and Financing Activities Our indebtedness could limit our flexibility and adversely affect our financial condition. As of September 30, 2023, we had $2,630.6 million of debt and $1,156.7 million in available borrowings under our credit facility.
Additionally, defending against these legal proceedings may involve significant expense and diversion of management’s attention and resources. Risks Related to Our M&A, Lending and Financing Activities Our indebtedness could limit our flexibility and adversely affect our financial condition. As of September 30, 2024, we had $2,242.8 million of debt and $1,167.0 million in available borrowings under our credit facility.
In 2021, the Biden Administration announced a multi-agency plan to address PFAS contamination. Various federal agencies, including the U.S. EPA, will take actions to prevent the release of PFAS into the air, drinking systems, and food supply and to expand cleanup efforts to remediate the impacts of PFAS pollution. As part of this announcement, the U.S.
In 2021, the Biden Administration announced a multi-agency plan to address PFAS contamination. Various federal agencies, including the U.S. EPA, have and are expected to continue to take actions to prevent the release of PFAS into the air, drinking systems, and food supply and to expand cleanup efforts to remediate the impacts of PFAS pollution.
The oversupply has been driven by the impacts of increased licensing activity across the U.S., significant capital investment in the cannabis production marketplace over the past several years, inconsistent enforcement of regulations and the market impacts of the COVID-19 pandemic.
The oversupply has been driven by increased licensing activity across the U.S. and significant capital investment in the cannabis production marketplace over the past several years, as well as inconsistent enforcement of regulations.
EPA or the third-party registrant may decide that a pesticide we use in our products will be limited or made unavailable to us. We cannot predict the outcome or the severity of the effect of these continuing evaluations.
EPA as part of this exposure risk assessment. The U.S. EPA or the third-party registrant may decide that a pesticide we use in our products will be limited or made unavailable to us. We cannot predict the outcome or the severity of the effect of these continuing evaluations.
Hagedorn Partnership, L.P. beneficially owned approximately 23% of our outstanding Common Shares on a fully diluted basis as of November 17, 2023. As a result, it has sufficient voting power to significantly influence the election of directors and the approval of other actions requiring the approval of our shareholders, including entering into certain business combination transactions.
Hagedorn Partnership, L.P. beneficially owned approximately 24% of our outstanding Common Shares as of November 18, 2024. As a result, it has sufficient voting power to significantly influence the election of directors and the approval of other actions requiring the approval of our shareholders, including entering into certain business combination transactions.
The losses incurred from a breach of data security and operational failures as well as the precautionary measures required to address this evolving risk may adversely impact our financial condition, results of operations, cash flows and reputation.
The losses incurred from a cybersecurity-related event as well as the precautionary measures required to address this evolving risk may adversely impact our financial condition, results of operations, cash flows and reputation.
Our top two retail customers, Home Depot and Lowe’s, together accounted for 47% of our fiscal 2023 net sales and 41% of our outstanding accounts receivable as of September 30, 2023.
Our top two retail customers, The Home Depot and Lowe’s, together accounted for 48% of our fiscal 2024 net sales and 18% of our outstanding accounts receivable as of September 30, 2024.
Tariffs on goods imported into the U.S., particularly goods from China, have increased the cost of the goods we purchase. Additional tariffs could be imposed by the U.S. with relatively short notice to us. These governmental actions could have, and any similar future actions may have, a material adverse effect on our business, financial condition and results of operations.
Additional tariffs and protectionist duties could be imposed by the U.S. with relatively short notice to us. These governmental actions could have, and any similar future actions may have, a material adverse effect on our business, financial condition and results of operations.
Because our consumers may associate the public figures that market and endorse our products with us, any negative publicity on behalf of such individuals may cause negative publicity about us and our products.
Because our consumers may associate the public figures that market and endorse our products with us, any negative publicity on behalf of such individuals may cause negative publicity about us and our products. This negative publicity could materially and adversely affect our brands and reputation and our revenue and profits.
Our fixed charge coverage ratio was 1.56 for the twelve months ended September 30, 2023. The Senior Notes contain an interest coverage ratio covenant which sets the minimum permitted interest coverage ratio at 2.00. Our interest coverage ratio was 2.81 for the twelve months ended September 30, 2023.
The Senior Notes contain an interest coverage ratio covenant which sets the minimum permitted interest coverage ratio at 2.00. Our interest coverage ratio was 3.57 for the twelve months ended September 30, 2024.
We could fail, or be perceived to fail, to achieve such initiatives or goals, or we could fail to fully and accurately report our progress on such initiatives and goals. In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters.
In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters.
This negative publicity could materially and adversely affect our brands and reputation and our revenue and profits. 12 Table of Contents Certain of our products may be purchased for use in new and emerging industries or segments and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.
Certain of our products may be purchased for use in new and emerging industries or segments and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.
If we incur additional debt, the risks described above could intensify. Significant or prolonged periods of higher interest rates may have an adverse effect on our results of operations, financial condition and cash flows. Interest rates have a direct impact on our business due to the amount of variable debt the Company utilizes in its operations.
If we incur additional debt, the risks described above could intensify. 17 Table of Contents Significant or prolonged periods of higher interest rates may have an adverse effect on our results of operations, financial condition and cash flows.
For example, our Hawthorne segment sales volume has decreased due to an oversupply of cannabis, which has driven cannabis wholesale prices down significantly and has resulted in a decrease in indoor and outdoor cultivation.
For example, our Hawthorne segment sales volume has decreased due to an oversupply of cannabis, which has led to a prolonged period of lower cannabis wholesale prices and reduced indoor and outdoor cannabis cultivation.
Our inability to collect accounts receivable from one of our major customers, or a significant deterioration in the financial condition of one of these customers, including a bankruptcy filing or a liquidation, could also have a material adverse effect on our financial condition, results of operations and cash flows.
Our inability to collect accounts receivable from one of our major customers, or a significant deterioration in the financial condition of one of these customers, including a bankruptcy filing or a liquidation, could also have a material adverse effect on our financial condition, results of operations and cash flows. 9 Table of Contents We do not have long-term sales agreements with, or other contractual assurances as to future sales to, any of our major retail customers.
In addition, if one or more of our third-party manufacturers becomes insolvent or unwilling to continue to manufacture products of acceptable quality, at acceptable costs and in a timely manner, our ability to deliver products to our retail customers could be significantly impaired.
In addition, performance problems at these third-party manufacturers could lead to cost overruns, shortages or other problems, which could increase our costs of production or result in delivery shortages or delays to our customers. 10 Table of Contents In addition, if one or more of our third-party manufacturers becomes insolvent or unwilling to continue to manufacture products of acceptable quality, at acceptable costs and in a timely manner, our ability to deliver products to our retail customers could be significantly impaired.
In addition, while we maintain cyber-security insurance, costs related to a cyber-attack may exceed the amount of insurance coverage or be excluded under the terms of our 13 Table of Contents cyber-security insurance policy.
We have experienced and may continue to experience an increase in the number of such cyber threats. In addition, while we maintain cyber-security insurance, costs related to a cyber-attack may exceed the amount of insurance coverage or be excluded under the terms of our cyber-security insurance policy.
The pesticides in our products, certain of which may be also used on crops processed into various food products, are manufactured by independent third parties and continue to be evaluated by the U.S. EPA as part of this exposure risk assessment. The U.S.
Under this Act, the U.S. EPA is evaluating the cumulative and aggregate risks from dietary and non-dietary exposures to pesticides. The pesticides in our products, certain of which may be also used on crops processed into various food products, are manufactured by independent third parties and continue to be evaluated by the U.S.
Forward-looking statements in this Form 10-K and our 2023 Annual Report are predictions only and actual results could differ materially from management’s expectations due to a variety of factors, including those described below. All forward-looking statements attributable to us or persons working on our behalf are expressly qualified in their entirety by such risk factors.
Forward-looking statements in this Form 10-K and our 2024 Annual Report are predictions only and actual results could differ materially from management’s expectations due to a variety of factors, including those described below.
For additional information regarding the Third Restated Agreement including certain of our rights and remedies under the Third Restated Agreement, see “NOTE 7. MARKETING AGREEMENT” of the Notes to Consolidated Financial Statements included in this Form 10-K. We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.
MARKETING AGREEMENT” of the Notes to Consolidated Financial Statements included in this Form 10-K. 15 Table of Contents We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.
We do not have long-term sales agreements with, or other contractual assurances as to future sales to, any of our major retail customers. In addition, continued consolidation in the retail industry has resulted in an increasingly concentrated retail base, and as a result, we are significantly dependent upon sales to key retailers who have significant bargaining strength.
In addition, continued consolidation in the retail industry has resulted in an increasingly concentrated retail base, and as a result, we are significantly dependent upon sales to key retailers who have significant bargaining strength.
Prolonged periods of higher interest rates may have a negative impact on the Company’s results of operations, financial condition and cash flows. All of our debt under the Sixth A&R Credit Agreement bears interest at variable rates primarily derived from, as defined therein, the (i) the Alternate Base Rate, (ii) the Adjusted Term SOFR Rate or (iii) the Swingline Rate.
All of our debt under the sixth amended and restated credit agreement (the “Sixth A&R Credit Agreement”) bears interest at variable rates primarily derived from, as defined therein, the (i) the Alternate Base Rate, (ii) the Adjusted Term SOFR Rate or (iii) the Swingline Rate.
Disruptions in our trucking capacity may result in reduced sales or increased costs, including the additional use of more expensive or less efficient alternatives to meet demand. Congestion can affect previously negotiated contracts with shipping companies, resulting in unexpected increases in shipping costs, reduction in our profitability or reduced sales.
Disruptions in our trucking capacity may result in reduced sales or increased costs, including the additional use of more expensive or less efficient alternatives to meet demand.
While we monitor our exposure, there can be no guarantee we will be able to successfully mitigate all of these risks. Credit losses, if significant, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 18 Table of Contents Our hedging arrangements expose us to certain counterparty risks.
These or other credit losses, if significant, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 19 Table of Contents Our hedging arrangements expose us to certain counterparty risks.
For example, product liability claims challenging the safety of our products or products we market on behalf of third parties may also result in a decline in sales for a particular product and could damage the reputation or the value of related brands, involve us in litigation and have a material adverse effect on our business.
For example, product liability claims challenging the safety of our products or products we market on behalf of third parties may also result in a decline in sales for a particular product and could damage the reputation or the value of related brands, involve us in litigation and have a material adverse effect on our business. 16 Table of Contents From time to time, we are also involved in legal proceedings involving contract, intellectual property and other matters including, for example, the securities litigation and shareholder derivative suits discussed in “ITEM 3.
While we have taken steps to ensure the security of our information and operational technology systems, including those of our customers, vendors, suppliers and other third-party service providers with whom we have contracted, our systems have, in the past, been and may, in the future, be vulnerable to cyber-threats such as computer viruses or other malicious codes, security breaches, unauthorized access, phishing attacks and other disruptions from employee error, unauthorized uses, system failures (including Internet outages), unintentional or malicious actions of employees or contractors and cyber-attacks by hackers, criminal groups and social-activist organizations.
While we have taken steps to ensure the security of our information and operational technology systems, including those of our customers, vendors, suppliers and other third-party service providers on whom we rely, our systems, as well the systems utilized by our customers, vendors, suppliers and other third-party service providers, have, in the past, been and may, in the future, be vulnerable to cyber threats such as malware, security breaches, phishing attacks, unauthorized activity, system failures, defects, unintentional or malicious actions of associates, contractors, and bad actors (e.g., cyber criminal groups, nation state actors and hacktivist organizations).
We expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions. The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.
The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.
Adverse attention about these types of concerns, whether or not valid, may damage our reputation, discourage consumers from buying our products, or cause production and delivery disruptions that could negatively impact our sales and financial condition.
Adverse attention about these types of concerns, whether or not valid, may damage our reputation, discourage consumers from buying our products, or cause production and delivery disruptions that could negatively impact our sales and financial condition. 12 Table of Contents We may also suffer losses if our products or operations violate applicable laws or regulations, or if our products are alleged to cause damage to property, injury, illness, or death.
Under the Food Quality Protection Act, enacted by the U.S. Congress in 1996, food-use pesticides are evaluated to determine whether there is reasonable certainty that no harm will result from the cumulative effects of pesticide exposures. Under this Act, the U.S. EPA is evaluating the cumulative and aggregate risks from dietary and non-dietary exposures to pesticides.
In addition, several provinces in Canada have adopted regulations that substantially restrict our ability to market and sell certain consumer pesticide products. Under the Food Quality Protection Act, enacted by the U.S. Congress in 1996, food-use pesticides are evaluated to determine whether there is reasonable certainty that no harm will result from the cumulative effects of pesticide exposures.
As a result, the ultimate resolution of our tax audits, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods. 20 Table of Contents Risks Related to Our Common Shares The Company’s decision to maintain, reduce or discontinue paying cash dividends to our shareholders or repurchasing our Common Shares could cause the market price for our Common Shares to decline.
As a result, the ultimate resolution of our tax audits, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.
EPA released its PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, which identifies timelines by which the U.S. EPA plans to take specific actions during the first term of the Biden Administration. It is possible that some of these actions may have an impact – direct or indirect – on our business. For example, in August 2022, the U.S.
As part of this announcement, the U.S. EPA released its PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, which identifies timelines by which the U.S. EPA plans to take specific actions during the Biden Administration. For example, in August 2022, the U.S.
We import many of our raw materials and finished goods from countries outside of the United States, including but not limited to China. Our import operations are subject to complex customs laws, regulations, tax requirements, and trade regulations, such as tariffs set by governments, either through mutual agreements or bilateral actions.
Our import operations are subject to complex customs laws, regulations, tax requirements, forced labor laws and trade regulations, such as tariffs set by governments, either through mutual agreements or bilateral actions. Tariffs on goods imported into the U.S., particularly goods from China, have increased the cost of the goods we purchase.
Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase. Consumers and businesses may independently change their behavior because of concerns regarding the impact of climate change and public perceptions.
Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase. We may incur some of these costs directly and others may be passed on to us from our third-party suppliers.
Our leverage ratio was 6.57 at September 30, 2023. In addition, our credit facility contains a fixed charge coverage ratio covenant which sets the minimum permitted fixed charge coverage ratio at (i) 0.75 for the fourth quarter of fiscal 2023 through the third quarter of fiscal 2024 and (ii) 1.00 for the fourth quarter of fiscal 2024 and thereafter.
Our leverage ratio was 4.86 at September 30, 2024. In addition, our credit facility contains a fixed charge coverage ratio covenant which sets the minimum permitted fixed charge coverage ratio at 1.00. Our fixed charge coverage ratio was 1.27 for the twelve months ended September 30, 2024.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMost of the manufacturing properties, which include growing media properties and peat harvesting properties, have production lines, warehouses, offices and field processing areas. 2 Includes one distribution center that is not operational. Disposition efforts are underway. 3 Includes one manufacturing location under development with operations scheduled to begin in 2025. 4 Includes nine distribution centers that are not operational.
Biggest changeMost of the manufacturing properties, which include growing media properties and peat harvesting properties, have production lines, warehouses, offices and field processing areas. 2 Includes one manufacturing location that is not operational. 3 Includes one manufacturing location under development with operations scheduled to begin in fiscal 2025. 4 Includes ten distribution centers that are not operational.
We own or lease 15 manufacturing properties and 1 research and development property in Canada, 1 manufacturing property in the Netherlands and 1 research and development property in China.
We own or lease 15 manufacturing properties, 1 distribution property and 1 research and development property in Canada, 2 manufacturing properties in the Netherlands and 1 research and development property in China.
The following is a summary of owned and leased primary operating properties by country as of September 30, 2023: Location Owned Leased United States 36 2 60 3,4 Canada 10 13 Mexico — 1 China — 6 The Netherlands — 2 Total 46 82 We own or lease 46 manufacturing properties, 16 distribution properties and 4 research and development properties in the United States.
The following is a summary of owned and leased primary operating properties by country as of September 30, 2024: Location Owned Leased United States 35 2 55 3,4 Canada 10 13 Mexico — 1 China — 6 The Netherlands — 3 Total 45 78 We own or lease 45 manufacturing properties, 16 distribution properties and 4 research and development properties in the United States.
Disposition efforts are underway. 21 Table of Contents
Disposition and sublease efforts are underway or in place. 25 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn our opinion, these claims individually and in the aggregate are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.
Biggest changeIn our opinion, these claims individually and in the aggregate are not expected to have a material adverse effect on our financial condition, results of operations or cash flows. 26 Table of Contents
Added
On June 6, 2024, a purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03132) on behalf of a proposed class of purchasers of Common Shares between November 3, 2021, and August 1, 2023.
Added
On July 26, 2024, another purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03766) on behalf of a proposed class of purchasers of Common Shares between June 2, 2021, and August 1, 2023.
Added
These lawsuits, which will likely be consolidated with any subsequently filed lawsuits alleging similar facts, assert claims under Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act against the Company and certain of its current and former officers based on alleged misstatements about the Company’s inventories, sales and business prospects.
Added
The actions seek, among other things, unspecified monetary damages, reasonable costs and expenses and equitable/injunctive or other relief as deemed appropriate by the Court. The Company believes that the claims asserted are without merit and intends to vigorously defend the actions.
Added
On July 3, 2024, a purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03636), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On July 30, 2024, a second purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No.1:24-cv-00402), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On August 23, 2024, a third purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03880), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On September 9, 2024, a fourth purported shareholder filed a shareholder derivative lawsuit in the Union County (Ohio) Court of Common Pleas (Case No. 24CV0193), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On September 26, 2024, a fifth purported shareholder filed a shareholder derivative lawsuit in the Union County (Ohio) Court of Common Pleas (Case No. 24CV0203), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On November 19, 2024, a sixth purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-04180), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
On November 22, 2024, a seventh purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-04190), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors.
Added
The federal lawsuits will likely be consolidated with one another, along with any subsequently filed federal lawsuits alleging similar facts, and the state court lawsuits will likely be consolidated with one another, along with any subsequently filed state lawsuits alleging similar facts.
Added
All of the lawsuits include allegations that generally mirror those asserted in the securities lawsuits described above and assert claims for breaches of fiduciary duties and unjust enrichment, as well as abuse of control, gross mismanagement, and waste of corporate assets.
Added
The federal lawsuits also assert claims under Section 10(b), Rule 10b-5, Section 14(a), Rule 14a-9, and Section 20(a) of the Securities Exchange Act, and contribution under Sections 10(b) and 21D of the Securities Exchange Act.
Added
The actions seek a judgment in favor of the Company for damages in an unspecified amount, disgorgement, interest, and costs and expenses, including attorneys’ and experts’ fees.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

10 edited+2 added−1 removed0 unchanged
Biggest changeDeMuesy served as Vice President, HR Operations from July 2018 until November 2021. Prior to July 2018, Ms. DeMuesy has held several senior leadership positions at the Company since 2016 when she rejoined the Company after a ten year absence. Mr. C. Hagedorn was named Division President of Scotts Miracle-Gro in January 2021. Prior to this appointment, Mr. C.
Biggest changeOTHER INFORMATION” of this Form 10-K. Mr. C. Hagedorn was named Executive Vice President & Chief of Staff of Scotts Miracle-Gro in November 2024. Prior to this appointment, Mr. C. Hagedorn served as Division President of Scotts Miracle-Gro from January 2021 through November 2024. Previously, Mr. C.
ITEM 4. MINE SAFETY DISCLOSURE Not Applicable. 22 PART II SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of Scotts Miracle-Gro, their positions and, as of November 17, 2023, their ages and years with Scotts Miracle-Gro (and its predecessors) are set forth below.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of Scotts Miracle-Gro, their positions and, as of November 20, 2024, their ages and years with Scotts Miracle-Gro (and its predecessors) are set forth below.
The business experience of each of the individuals listed above during at least the past five years is as follows: Mr. Hagedorn was named Chairman of the Board of Scotts Miracle-Gro’s predecessor in January 2003 and Chief Executive Officer of Scotts Miracle-Gro’s predecessor in May 2001. In October 2023, Mr. Hagedorn also assumed the additional duties of President.
The business experience of each of the individuals listed above during at least the past five years is as follows: Mr. Hagedorn was named Chairman of the Board of Scotts Miracle-Gro’s predecessor in January 2003 and Chief Executive Officer of Scotts Miracle-Gro’s predecessor in May 2001. Prior to these appointments, Mr.
Prior to these appointments, Mr. Hagedorn held several senior leadership positions at the Company. Mr. Hagedorn serves on Scotts Miracle-Gro’s Board of Directors, a position he has held with Scotts Miracle-Gro (or its predecessor) since 1995. Mr. Hagedorn is the brother of Katherine Hagedorn Littlefield, a director of Scotts Miracle-Gro, and is the father of Christopher J.
Hagedorn held several senior leadership positions at the Company including President from October 2023 until November 2024. Mr. Hagedorn serves on Scotts Miracle-Gro’s Board of Directors, a position he has held with Scotts Miracle-Gro (or its predecessor) since 1995. Mr. Hagedorn is the brother of Katherine Hagedorn Littlefield, a director of Scotts Miracle-Gro, and is the father of Christopher J.
Prior to this appointment, Mr. Todorov served as Vice President, Legal, a position he held since June 2015. 23 Table of Contents
Todorov served as Vice President, Legal, a position he held since June 2015. 27 Table of Contents
Hagedorn served as Senior Vice President and General Manager, Hawthorne, a position he held since January 2017. Mr. C. Hagedorn is the son of Mr. J. Hagedorn, the Chairman, President and CEO of Scotts Miracle-Gro. Mr. Todorov was named Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer of the Company in December 2022.
Hagedorn served as Senior Vice President & General Manager, Hawthorne, a position he held since January 2017. Mr. C. Hagedorn is the son of Mr. Hagedorn, the Chief Executive Officer, President & Chairman of the Board of Scotts Miracle-Gro. Mr. Todorov was named Executive Vice President, Chief Legal Officer & Corporate Secretary in November 2024. Prior to this appointment, Mr.
Name Age Position(s) Held Years with Company James Hagedorn 68 Chief Executive Officer, President and Chairman of the Board 36 Matthew E. Garth 49 Executive Vice President, Chief Financial Officer and Chief Administrative Officer 1 Nathan E. Baxter 51 Executive Vice President and Chief Operating Officer 1 Julie A.
Name Age Position(s) Held Years with Company James Hagedorn 69 Chairman & Chief Executive Officer 37 Nathan E. Baxter 52 President & Chief Operating Officer 1 Matthew E. Garth 50 Executive Vice President, Chief Financial Officer & Chief Administrative Officer 2 Christopher J.
DeMuesy 53 Senior Vice President, Chief Human Resources Officer and Chief Ethics Officer 13 Christopher J. Hagedorn 39 Division President 12 Dimiter Todorov 51 Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer 15 Executive officers serve at the discretion of the Board of Directors of Scotts Miracle-Gro and pursuant to executive severance agreements or other arrangements.
Hagedorn 40 Executive Vice President & Chief of Staff 13 Dimiter Todorov 52 Executive Vice President, Chief Legal Officer & Corporate Secretary 16 Executive officers serve at the discretion of the Board of Directors of Scotts Miracle-Gro and pursuant to executive severance agreements or other arrangements.
Garth served as Senior Vice President, Finance and Treasury, and Chief Financial Officer for Mineral Technologies Inc., a specialty mineral company. Mr. Baxter was named Executive Vice President and Chief Operating Officer of the Company in August 2023. Prior to this appointment, Mr. Baxter served as Executive Vice President, Global Technology and Operations, a position he held since April 2023.
Hagedorn, an executive officer of the Company. Mr. Baxter was named Executive Vice President & Chief Operating Officer of Scotts Miracle-Gro in August 2023 and President in November 2024. Prior to August 2023, Mr. Baxter served as Executive Vice President, Technology & Operations, a position he held since April 2023. Previously, Mr. Baxter served as President of Tokyo Electron U.S.
Hagedorn, an executive officer of the Company. Mr. Garth was named Executive Vice President, Chief Financial Officer and Chief Administrative Officer of the Company in October 2023. Prior to this appointment, Mr. Garth served as Executive Vice President and Chief Financial Officer, a position he held since December 2022. Previously, Mr.
Holdings, a semiconductor manufacturing equipment company. Mr. Baxter is a general partner of the Hagedorn Partnership, L.P., the largest shareholder of the Company. Mr. Garth was named Executive Vice President, Chief Financial Officer & Chief Administrative Officer of Scotts Miracle-Gro in October 2023. Prior to this appointment, Mr.
Removed
Previously, Mr. Baxter served as President of Tokyo Electron U.S. Holdings, a semiconductor manufacturing equipment company. Ms. DeMuesy was named Senior Vice President, Chief Human Resources Officer and Chief Ethics Officer of the Company in October 2023. Prior to this appointment, Ms. DeMuesy served as Senior Vice President, HR Operations from November 2021 until September 2023. Previously, Ms.
Added
Garth served as Executive Vice President & Chief Financial Officer, a position he held since December 2022. Previously, Mr. Garth served as Senior Vice President, Finance and Treasury, and Chief Financial Officer for Mineral Technologies Inc., a specialty mineral company. Mr. Garth will be departing the Company effective December 31, 2024. For additional information regarding this departure, see “ITEM 9B.
Added
Todorov served as Executive Vice President, General Counsel, Corporate Secretary & Chief Ethics and Compliance Officer of Scotts Miracle-Gro, a position he held since October 2024, and Executive Vice President, General Counsel, Corporate Secretary & Chief Compliance Officer, a position he held since December 2022. Previously, Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table shows the purchases of Common Shares made by or on behalf of Scotts Miracle-Gro or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of Scotts Miracle-Gro for each of the three fiscal months in the quarter ended September 30, 2023: Period Total Number of Common Shares Purchased (1) Average Price Paid per Common Share (2) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Common Shares That May Yet Be Purchased Under the Plans or Programs (3) July 2, 2023 through July 29, 2023 1,291 $ 69.87 — N/A July 30, 2023 through August 26, 2023 1,743 $ 53.07 — N/A August 27, 2023 through September 30, 2023 4,270 $ 52.61 — N/A Total 7,304 $ 55.77 — (1) All of the Common Shares purchased during the fourth quarter of fiscal 2023 were purchased in open market transactions.
Biggest changeThe following table shows the purchases of Common Shares made by or on behalf of Scotts Miracle-Gro or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of Scotts Miracle-Gro for each of the three fiscal months in the quarter ended September 30, 2024: Period Total Number of Common Shares Purchased (1) Average Price Paid per Common Share (2) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Common Shares That May Yet Be Purchased Under the Plans or Programs (3) June 30, 2024 through July 27, 2024 1,295 $ 70.29 — N/A July 28, 2024 through August 24, 2024 — $ — — N/A August 25, 2024 through September 30, 2024 2,350 $ 77.46 — N/A Total 3,645 $ 74.91 — (1) All of the Common Shares purchased during the fourth quarter of fiscal 2024 were purchased in open market transactions.
The issuances of the Common Shares were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2). Scotts Miracle-Gro issued the Common Shares in privately negotiated transactions, and such restricted shares were acquired for the recipient’s accounts for investment purposes.
The issuances of the Common Shares were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2). Scotts Miracle-Gro issued the Common Shares in privately negotiated transactions, and such restricted shares were acquired for the recipient’s account for investment purposes.
The program expired on March 25, 2023 and, as of September 30, 2023, the Company does not have an active repurchase program. 24 Table of Contents Comparison of Cumulative Five-Year Total Return* The following graph compares the yearly change in the cumulative total stockholder return on our Common Shares for the past five fiscal years with the cumulative total return of the Russell 2000 Index and the S&P 500 Household Products Index.
The program expired on March 25, 2023 and, as of September 30, 2024, the Company does not have an active repurchase program. 28 Table of Contents Comparison of Cumulative Five-Year Total Return* The following graph compares the yearly change in the cumulative total stockholder return on our Common Shares for the past five fiscal years with the cumulative total return of the Russell 2000 Index and the S&P 500 Household Products Index.
On December 14, 2022 and September 13, 2023, Scotts Miracle-Gro issued 388,878 and 373,831 Common Shares, respectively, having a contractual value of $20.0 million each, to a vendor who is an accredited investor as consideration for advertising services.
On September 4, 2024, September 13, 2023 and December 14, 2022, Scotts Miracle-Gro issued 286,204, 373,831 and 388,878 Common Shares, respectively, having a contractual value of $20.0 million each, to a vendor who is an accredited investor as consideration for advertising services.
The Common Shares purchased during the quarter consisted of 7,304 Common Shares purchased by the trustee of the rabbi trust established by the Company as permitted pursuant to the terms of The Scotts Company LLC Executive Retirement Plan. (2) The average price paid per Common Share is calculated on a settlement basis and includes commissions.
The Common Shares purchased during the quarter consisted of 3,645 Common Shares purchased by the trustee of the rabbi trust established by the Company as permitted pursuant to the terms of The Scotts Company LLC Executive Retirement Plan. (2) The average price paid per Common Share is calculated on a settlement basis and includes commissions.
Amendment No. 2 limits the Company’s ability to declare or pay any discretionary dividends, distributions or other restricted payments to only the payment of (i) regularly scheduled cash dividends to holders of its Common Shares in an aggregate amount not to exceed $225.0 million per fiscal year and (ii) other dividends, distributions or other restricted payments in an aggregate amount not to exceed $25.0 million.
Amendment No. 2 to the Sixth A&R Credit Agreement (“Amendment No. 2”) limits the Company’s ability to declare or pay any discretionary dividends, distributions or other restricted payments to only the payment of (i) regularly scheduled cash dividends to holders of its Common Shares in an aggregate amount not to exceed $225.0 million per fiscal year and (ii) other dividends, distributions or restricted payments in an aggregate amount not to exceed $25.0 million.
As of November 17, 2023, there were approximately 268,000 shareholders, including holders of record and our estimate of beneficial holders.
As of November 18, 2024, there were approximately 226,000 shareholders, including holders of record and our estimate of beneficial holders.
Removed
On April 8, 2022, we entered into a sixth amended and restated credit agreement (the “Sixth A&R Credit Agreement”), providing the Company and certain of its subsidiaries with five-year senior secured loan facilities in the aggregate principal amount of $2.5 billion, comprised of a revolving credit facility of $1.5 billion and a term loan in the original principal amount of $1.0 billion.
Removed
On July 31, 2023, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the Sixth A&R Credit Agreement.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following table sets forth the components of earnings as a percentage of net sales: Year Ended September 30, 2023 % of Net Sales 2022 % of Net Sales 2021 % of Net Sales Net sales $ 3,551.3 100.0 % $ 3,924.1 100.0 % $ 4,925.0 100.0 % Cost of sales 2,708.3 76.3 2,891.1 73.7 3,431.3 69.7 Cost of sales—impairment, restructuring and other 185.7 5.2 160.1 4.1 24.7 0.5 Gross margin 657.3 18.5 872.9 22.2 1,469.0 29.8 Operating expenses: Selling, general and administrative 551.3 15.5 613.0 15.6 743.5 15.1 Impairment, restructuring and other 280.5 7.9 693.1 17.7 4.3 0.1 Other (income) expense, net (0.1) — 0.8 — (1.8) — Income (loss) from operations (174.4) (4.9) (434.0) (11.1) 723.0 14.7 Equity in (income) loss of unconsolidated affiliates 101.1 2.8 12.9 0.3 (14.4) (0.3) Interest expense 178.1 5.0 118.1 3.0 78.9 1.6 Other non-operating income, net (0.3) — (6.9) (0.2) (18.6) (0.4) Income (loss) from continuing operations before income taxes (453.3) (12.8) (558.1) (14.2) 677.1 13.7 Income tax expense (benefit) from continuing operations (73.2) (2.1) (120.6) (3.1) 159.8 3.2 Income (loss) from continuing operations (380.1) (10.7) (437.5) (11.1) 517.3 10.5 Loss from discontinued operations, net of tax — — — — (3.9) (0.1) Net income (loss) $ (380.1) (10.7) % $ (437.5) (11.1) % $ 513.4 10.4 % The sum of the components may not equal due to rounding. 28 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Net Sales Net sales for fiscal 2023 were $3,551.3, a decrease of 9.5% from net sales of $3,924.1 for fiscal 2022.
Biggest changeResults of Operations The following table sets forth the components of earnings as a percentage of net sales: Year Ended September 30, 2024 % of Net Sales 2023 % of Net Sales 2022 % of Net Sales Net sales $ 3,552.7 100.0 % $ 3,551.3 100.0 % $ 3,924.1 100.0 % Cost of sales 2,618.7 73.7 2,708.3 76.3 2,891.1 73.7 Cost of sales—impairment, restructuring and other 83.5 2.4 185.7 5.2 160.1 4.1 Gross margin 850.5 23.9 657.3 18.5 872.9 22.2 Operating expenses: Selling, general and administrative 559.0 15.7 551.3 15.5 613.0 15.6 Impairment, restructuring and other 62.8 1.8 280.5 7.9 693.1 17.7 Other (income) expense, net 19.9 0.6 (0.1) — 0.8 — Income (loss) from operations 208.8 5.9 (174.4) (4.9) (434.0) (11.1) Equity in loss of unconsolidated affiliates 68.1 1.9 101.1 2.8 12.9 0.3 Interest expense 158.8 4.5 178.1 5.0 118.1 3.0 Other non-operating (income) expense, net 5.5 0.2 (0.3) — (6.9) (0.2) Loss before income taxes (23.6) (0.7) (453.3) (12.8) (558.1) (14.2) Income tax expense (benefit) 11.3 0.3 (73.2) (2.1) (120.6) (3.1) Net loss $ (34.9) (1.0) % $ (380.1) (10.7) % $ (437.5) (11.1) % The sum of the components may not equal due to rounding.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of our financial condition and results of operations by focusing on changes in certain key measures from year-to-year.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide an understanding of our financial condition and results of operations by focusing on changes in certain key measures from year-to-year.
Our products are marketed under some of the most recognized brand names in the industry. Our key consumer lawn and garden brands include Scotts ® and Turf Builder ® lawn fertilizer and Scotts ® grass seed products; Miracle-Gro ® soil, plant food and gardening products; Ortho ® herbicide and pesticide products; and Tomcat ® rodent control and animal repellent products.
Our products are marketed under some of the most recognized brand names in the industry. Our key consumer lawn and garden brands include Scotts ® Turf Builder ® lawn fertilizer and Scotts ® grass seed products; Miracle-Gro ® soil, plant food and gardening products; Ortho ® herbicide and pesticide products; and Tomcat ® rodent control and animal repellent products.
Consumer U.S. Consumer segment net sales were $2,843.7 in fiscal 2023, a decrease of 2.9% from fiscal 2022 net sales of $2,928.8. The decrease was driven by lower sales volume of 8.3%, partially offset by increased pricing of 5.4%. The decrease in sales volume for fiscal 2023 was driven by lawn care, plant food and controls products. U.S.
Consumer segment net sales were $2,843.7 in fiscal 2023, a decrease of 2.9% from fiscal 2022 net sales of $2,928.8. The decrease was driven by lower sales volume of 8.3%, partially offset by increased pricing of 5.4%. The decrease in sales volume for fiscal 2023 was driven by lawn care, plant food and controls products. U.S.
Financing Activities Cash used in financing activities totaled $520.1 for fiscal 2023 compared to cash provided by financing activities of $255.3 for fiscal 2022.
Cash used in financing activities totaled $520.1 for fiscal 2023 compared to cash provided by financing activities of $255.3 for fiscal 2022.
Additionally, Amendment No. 2 limits our ability to declare or pay any discretionary dividends, distributions or other restricted payments during the Leverage Adjustment Period to only the payment of (i) regularly scheduled cash dividends to holders of our Common Shares in an aggregate amount not to exceed $225.0 per fiscal year and (ii) other dividends, distributions or other restricted payments in an aggregate amount not to exceed $25.0.
Additionally, Amendment No. 2 limits our ability to declare or pay any discretionary dividends, distributions or other restricted payments during the Leverage Adjustment Period to only the payment of (i) regularly scheduled cash dividends to holders of our Common Shares in an aggregate amount not to exceed $225.0 per fiscal year and (ii) other dividends, distributions or restricted payments in an aggregate amount not to exceed $25.0.
The 5.250% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt. The 5.250% Senior Notes have interest payment dates of June 15 and December 15 of each year. On October 22, 2019, Scotts Miracle-Gro issued $450.0 aggregate principal amount of 4.500% Senior Notes due 2029.
The 5.250% Senior Notes have interest payment dates of June 15 and December 15 of each year. On October 22, 2019, Scotts Miracle-Gro issued $450.0 aggregate principal amount of 4.500% Senior Notes due 2029. The 4.500% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt.
The 4.500% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt. The 4.500% Senior Notes have interest payment dates of April 15 and October 15 of each year. On March 17, 2021, Scotts Miracle-Gro issued $500.0 aggregate principal amount of 4.000% Senior Notes due 2031.
The 4.500% Senior Notes have interest payment dates of April 15 and October 15 of each year. On March 17, 2021, Scotts Miracle-Gro issued $500.0 aggregate principal amount of 4.000% Senior Notes due 2031. The 4.000% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt.
The 4.000% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt. The 4.000% Senior Notes have interest payment dates of April 1 and October 1 of each year. On August 13, 2021, Scotts Miracle-Gro issued $400.0 aggregate principal amount of 4.375% Senior Notes due 2032.
The 4.000% Senior Notes have interest payment dates of April 1 and October 1 of each year. On August 13, 2021, Scotts Miracle-Gro issued $400.0 aggregate principal amount of 4.375% Senior Notes due 2032. The 4.375% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with our existing and future unsecured senior debt.
Our Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of outdoor growing in North America during our second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during our third and fourth fiscal quarters.
Our Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of growing patterns in North America during our second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during our third and fourth fiscal quarters.
Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, increased $15.4, or 44.9%, driven by short-term variable incentive compensation that was provided to employees as share-based awards for fiscal 2023 in lieu of a cash-based program, partially offset by the recognition of a cumulative adjustment for certain performance-based award units to reflect management’s assessment of a lower probability of achievement of performance goals.
Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, increased $15.4, or 44.9%, driven by short-term variable incentive compensation that was provided to associates as share-based awards for fiscal 2023 in lieu of a cash-based program, partially offset by the recognition of a cumulative adjustment for certain performance-based award units to reflect management’s assessment of a lower probability of achievement of performance goals.
Purchase obligations primarily represent commitments for materials used in our manufacturing processes, including urea and packaging, as well as commitments for warehouse services, grass seed, marketing services and information technology services which comprise the unconditional purchase obligations disclosed in “NOTE 19. COMMITMENTS” of the Notes to Consolidated Financial Statements included in this Form 10-K.
Purchase obligations primarily represent commitments for materials used in our manufacturing processes, including urea and packaging, as well as commitments for warehouse services, grass seed, marketing services and information technology services which comprise the unconditional purchase obligations disclosed in “NOTE 18. COMMITMENTS” of the Notes to Consolidated Financial Statements included in this Form 10-K.
Amounts in the table represent scheduled future maturities of debt principal for the periods indicated. The interest payments for our credit facilities are based on outstanding borrowings as of September 30, 2023. Actual interest expense will likely be higher due to the seasonality of our business and associated higher average borrowings.
Amounts in the table represent scheduled future maturities of debt principal for the periods indicated. The interest payments for our credit facilities are based on outstanding borrowings as of September 30, 2024. Actual interest expense will likely be higher due to the seasonality of our business and associated higher average borrowings.
Senior management uses Segment Profit (Loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment. The following table sets forth net sales by segment: Year Ended September 30, 2023 2022 2021 U.S.
Senior management uses Segment Profit (Loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment. The following table sets forth net sales by segment: Year Ended September 30, 2024 2023 2022 U.S.
Amendment No. 1 also increased the interest rate applicable to borrowings under the revolving credit facility by 35 bps and the term loan facility by 50 bps, and increased the annual facility fee rate on the revolving credit facility by 15 bps, in each case, when the Company’s quarterly-tested leverage ratio exceeded 4.75.
Amendment No. 1 also increased the interest rate applicable to borrowings under the revolving credit facility by 35 bps and the term loan facility by 50 bps, and increased the annual facility fee rate on the revolving credit facility by 15 bps, in each case, when our quarterly-tested leverage ratio exceeded 4.75.
Consumer consists of our consumer lawn and garden business in the United States. Hawthorne consists of our indoor and hydroponic gardening business. Other primarily consists of our consumer lawn and garden business in Canada. This division of reportable segments is consistent with how the segments report to and are managed by our chief operating decision maker.
Hawthorne consists of our indoor and hydroponic gardening business. Other primarily consists of our consumer lawn and garden business in Canada. This division of reportable segments is consistent with how the segments report to and are managed by our chief operating decision maker.
These metrics include consumer purchases (point-of-sale data), market share, category growth, net sales (including unit volume, pricing and foreign exchange movements), gross margins, advertising to net sales ratios, income from operations, income from continuing operations, net income, earnings per share, earnings before interest, taxes, depreciation and amortization (“EBITDA”), leverage ratio, fixed charge coverage ratio and interest coverage ratio.
These metrics include consumer purchases (point-of-sale data), market share, category growth, net sales (including unit volume, mix, pricing and foreign exchange movements), gross margins, advertising to net sales ratios, income (loss) from operations, net income (loss), earnings per share, earnings before interest, taxes, depreciation and amortization (“EBITDA”), leverage ratio, fixed charge coverage ratio and interest coverage ratio.
The impact that these trends will continue to have on our operational and financial performance will depend on future developments, including inflationary and macroeconomic conditions and their impact on consumer behavior, which are difficult to predict.
The impact that these trends will continue to have on our operational and financial performance will depend on future developments, including inflationary, macroeconomic and geopolitical conditions, and their potential impact on consumer behavior, which are difficult to predict.
Diluted average common shares used in the diluted loss per common share calculation for fiscal 2023 and fiscal 2022 were 56.0 million and 55.5 million, respectively, which excluded potential common shares of 0.4 million and 0.6 million, respectively, because the effect of their inclusion would be anti-dilutive as we incurred a net loss for fiscal 2023 and fiscal 2022.
Diluted average common shares used in the diluted loss per common share calculation for fiscal 2024, fiscal 2023 and fiscal 2022 were 56.8 million, 56.0 million and 55.5 million, respectively, which excluded potential common shares of 0.9 million, 0.4 million and 0.6 million, respectively, because the effect of their inclusion would be anti-dilutive as we incurred a net loss for fiscal 2024, 2023 and 2022.
The weighted average interest rates on average borrowings under the credit facilities, excluding the impact of interest rate swaps, were 7.6%, 2.8% and 1.9% for fiscal 2023, fiscal 2022 and fiscal 2021, respectively.
The weighted average interest rates on average borrowings under the credit facilities, excluding the impact of interest rate swaps, were 9.1%, 7.6% and 2.8% for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.
Segment Results The performance of each reportable segment is evaluated based on several factors, including income (loss) from continuing operations before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”), which is a non-GAAP financial measure.
Segment Results The performance of each reportable segment is evaluated based on several factors, including income (loss) before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”), which is a non-GAAP financial measure.
The decrease was driven by lower net sales, a decrease in gross margin rate, higher impairment, restructuring and other charges, lower other income, lower equity in income of unconsolidated affiliates, higher interest expense and lower other non-operating income, partially offset by lower SG&A.
The decrease was driven by lower impairment, restructuring and other charges, and lower SG&A, partially offset by lower net sales, a decrease in gross margin rate, higher equity in loss of unconsolidated affiliates, higher interest expense, lower other non-operating income and lower income tax benefit.
We also believe that weather conditions in any one year, positive or negative, do not materially impact longer-term category growth trends. 26 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Due to the seasonal nature of the consumer lawn and garden business, for our U.S.
We also believe that weather conditions in any one year, positive or negative, do not materially impact longer-term category growth trends. 30 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Due to the seasonal nature of the consumer lawn and garden business, significant portions of our U.S.
The Sixth A&R Credit Agreement replaced the fifth amended and restated credit agreement and will terminate on April 8, 2027. The Sixth A&R Credit Facilities are available for the issuance of letters of credit up to $100.0. The terms of the Sixth A&R Credit Agreement include customary representations and warranties, affirmative and negative covenants, financial covenants, and events of default.
The Sixth A&R Credit Agreement will terminate on April 8, 2027. The Sixth A&R Credit Facilities are available for the issuance of letters of credit up to $100.0. The terms of the Sixth A&R Credit Agreement include customary representations and warranties, affirmative and negative covenants, financial covenants, and events of default.
The Senior Notes are guaranteed by certain consolidated domestic subsidiaries of Scotts Miracle-Gro (collectively, the “Guarantors”) and, therefore, we report summarized financial information in accordance with SEC Regulation S-X, Rule 13-01, “Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The guarantees are “full and unconditional,” as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that a Guarantor’s guarantee will be released in certain circumstances set forth in the indentures governing the Senior Notes, such as: (i) upon any sale or other disposition of all or substantially all of the assets of the Guarantor (including by way of merger or consolidation) to any person other than Scotts Miracle-Gro or any “restricted subsidiary” under the applicable indenture; (ii) if the Guarantor merges with and into Scotts Miracle-Gro, with Scotts Miracle-Gro surviving such merger; (iii) if the Guarantor is designated an “unrestricted subsidiary” in accordance with the applicable indenture or otherwise ceases to be a “restricted subsidiary” (including by way of liquidation or dissolution) in a transaction permitted by such indenture; (iv) upon legal or covenant defeasance; (v) at the election of Scotts Miracle-Gro following the Guarantor’s release as a guarantor under the Sixth A&R Credit Agreement, except a release by or as a result of the repayment of the Sixth A&R Credit Agreement; or (vi) if the Guarantor ceases to be a “restricted subsidiary” and the Guarantor is not otherwise required to provide a guarantee of the Senior Notes pursuant to the applicable indenture.
The Senior Notes are guaranteed by certain consolidated domestic subsidiaries of Scotts Miracle-Gro (collectively, the “Guarantors”) and, therefore, we report summarized financial information in accordance with SEC Regulation S-X, Rule 13-01, “Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The guarantees are “full and unconditional,” as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that a Guarantor’s guarantee will be released in certain circumstances set forth in the indentures governing the Senior Notes, such as: (i) upon any sale or other disposition of all or substantially all of the assets of the Guarantor (including by way of merger or consolidation) to any person other than Scotts Miracle-Gro or any “restricted subsidiary” under the applicable indenture; (ii) if the Guarantor merges with and into Scotts Miracle-Gro, with Scotts Miracle-Gro surviving such merger; (iii) if the Guarantor is designated an “unrestricted subsidiary” in accordance with the applicable indenture or otherwise ceases to be a “restricted subsidiary” (including by way of liquidation or dissolution) in a transaction permitted by such indenture; (iv) upon legal or covenant defeasance; (v) at the election of Scotts Miracle-Gro following the Guarantor’s release as a guarantor under the Sixth A&R Credit Agreement, except a release by or as a result of the repayment of the Sixth A&R Credit Agreement; or (vi) if the Guarantor ceases to be a “restricted subsidiary” and the Guarantor is not otherwise required to provide a guarantee of the Senior Notes pursuant to the applicable indenture. 44 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Our foreign subsidiaries and certain of our domestic subsidiaries are not guarantors (collectively, the “Non-Guarantors”) of the Senior Notes.
Changes in our assumptions could materially impact our fair value estimates. Assumptions critical to our fair value estimates were: (i) discount rates; (ii) royalty rates used in our intangible asset valuations; (iii) projected future revenues and profitability; and (iv) projected long-term growth rates used in the derivation of terminal year values.
Assumptions critical to our fair value estimates were: (i) discount rates; (ii) royalty rates used in our intangible asset valuations; (iii) projected future revenues and profitability; and (iv) projected long-term growth rates used in the derivation of terminal year values.
Other obligations include actuarially determined retiree benefit payments and pension funding to comply with local funding requirements. Pension funding requirements are based on preliminary estimates using actuarial assumptions determined as of September 30, 2023. These amounts represent expected payments through 2033.
Other obligations include actuarially determined retiree benefit payments and pension funding to comply with local funding requirements. Pension funding requirements are based on preliminary estimates using actuarial assumptions determined as of September 30, 2024. These amounts represent expected payments through 2034.
Consumer and Other segments, significant portions of our products ship to our retail customers during our second and third fiscal quarters, as noted in the following table. Our annual net sales are further concentrated in the second and third fiscal quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products.
Consumer and Other segment net sales ship to our retail customers during our second and third fiscal quarters, as noted in the following table. Our annual net sales are further concentrated in the second and third fiscal quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products.
The Receivables Facility expired on August 18, 2023. The sale of receivables under the Receivables Facility was accounted for as short-term debt and we continued to carry the receivables on our Consolidated Balance Sheets, primarily as a result of our requirement to repurchase receivables sold.
The sale of receivables under the Receivables Facility was accounted for as short-term debt and we continued to carry the receivables on our Consolidated Balance Sheets, primarily as a result of our requirement to repurchase receivables sold.
The increase was driven by an increase in our weighted average interest rate, net of the impact of interest rate swaps, of 180 basis points, primarily due to higher borrowing rates on the Sixth A&R Credit Agreement.
The increase was driven by an increase in our weighted average interest rate, net of the impact of interest rate swaps, of 180 basis points, primarily driven by higher borrowing rates under the Sixth A&R Credit Agreement.
As of September 30, 2023, our indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,613.3. We do not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.
As of September 30, 2024, our indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,225.0. We do not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.
Recent Events During fiscal 2022, we began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. As part of this restructuring initiative, we are reducing the size of our supply chain network, reducing staffing levels and implementing other cost-reduction initiatives.
During fiscal 2022, we began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. As part of this restructuring initiative, we reduced the size of our supply chain network, reduced staffing levels and implemented other cost-reduction initiatives.
Hawthorne Hawthorne segment net sales were $467.3 in fiscal 2023, a decrease of 34.8% from fiscal 2022 net sales of $716.2. The decrease was driven by lower sales volume of 38.1%, partially offset by increased pricing of 2.5% and acquisitions of 0.8%.
The improvement was driven by a higher gross margin rate and lower SG&A, partially offset by lower net sales. Hawthorne segment net sales were $467.3 in fiscal 2023, a decrease of 34.8% from fiscal 2022 net sales of $716.2. The decrease was driven by lower sales volume of 38.1%, partially offset by increased pricing of 2.5% and acquisitions of 0.8%.
As a result, no payments are required to be made from the assets of the Non-Guarantors, unless those assets are transferred by dividend or otherwise to Scotts Miracle-Gro or a Guarantor.
Payments on the Senior Notes are only required to be made by Scotts Miracle-Gro and the Guarantors. As a result, no payments are required to be made from the assets of the Non-Guarantors, unless those assets are transferred by dividend or otherwise to Scotts Miracle-Gro or a Guarantor.
Pursuant to Amendment No. 2, the maximum permitted leverage ratio is (i) 7.75 for the fourth quarter of fiscal 2023, (ii) 8.25 for the first quarter of fiscal 2024, (iii) 7.75 for the second quarter of fiscal 2024, (iv) 6.50 for the third quarter of fiscal 2024, (v) 6.00 for the fourth quarter of fiscal 2024, (vi) 5.50 for the first quarter of fiscal 2025, (vii) 5.25 for the second quarter of fiscal 2025, (viii) 5.00 for the third quarter of fiscal 2025, (ix) 4.75 for the fourth quarter of fiscal 2025 and (x) 4.50 for the first quarter of fiscal 2026 and thereafter.
Pursuant to Amendment No. 2, the maximum permitted leverage ratio is (i) 6.00 for the fourth quarter of fiscal 2024, (ii) 5.50 for the first quarter of fiscal 2025, (iii) 5.25 for the second quarter of fiscal 2025, (iv) 5.00 for the third quarter of fiscal 2025, (v) 4.75 for the fourth quarter of fiscal 2025 and (vi) 4.50 for the first quarter of fiscal 2026 and thereafter.
Based on the accounting rules for defined benefit pension plans and retirement health care plans, the liabilities reflected in our Consolidated Balance Sheets differ from these expected future payments (see Notes to Consolidated Financial Statements included in this Form 10-K).
Based on the accounting rules for defined benefit pension plans and retirement health care plans, the liabilities reflected in our Consolidated Balance Sheets differ from these expected future payments (see “NOTE 9. RETIREMENT PLANS” and “NOTE 10. ASSOCIATE MEDICAL BENEFITS” of the Notes to Consolidated Financial Statements included in this Form 10-K).
On June 8, 2022, we entered into Amendment No. 1 (“Amendment No. 1”) to the Sixth A&R Credit Agreement which increased the maximum permitted leverage ratio for the quarterly leverage covenant effective for the third quarter of fiscal 2022 until April 1, 2024.
On June 8, 2022, we entered into Amendment No. 1 to the Sixth A&R Credit Agreement (“Amendment No. 1”). Amendment No. 1 increased the maximum permitted leverage ratio for the quarterly leverage covenant until April 1, 2024.
The decrease in net sales for fiscal 2022 as compared to fiscal 2021 was primarily driven by: • decreased sales volume driven by lighting, nutrients, growing media, hardware and growing environments products in our Hawthorne segment; and lawn care, soils, controls, plant food and mulch products in our U.S.
The decrease in net sales for fiscal 2023 as compared to fiscal 2022 was primarily driven by: • decreased sales volume across all segments driven by growing environments, growing media, hardware, nutrients and lighting products in our Hawthorne segment; and lawn care, plant food and controls products in our U.S.
Percent of Net Sales from Continuing Operations by Quarter 2023 2022 2021 First Quarter 14.8 % 14.4 % 15.2 % Second Quarter 43.2 % 42.8 % 37.1 % Third Quarter 31.5 % 30.2 % 32.7 % Fourth Quarter 10.5 % 12.6 % 15.0 % Management focuses on a variety of key indicators and operating metrics to monitor the financial condition and performance of the continuing operations of our business.
Percent of Net Sales from Continuing Operations by Quarter 2024 2023 2022 First Quarter 11.6 % 14.8 % 14.4 % Second Quarter 42.9 % 43.2 % 42.8 % Third Quarter 33.8 % 31.5 % 30.2 % Fourth Quarter 11.7 % 10.5 % 12.6 % Management focuses on a variety of key indicators and operating metrics to monitor the financial condition and performance of the continuing operations of our business.
Income (Loss) from Continuing Operations Loss from continuing operations was $(380.1), or $(6.79) per diluted share, in fiscal 2023 compared to $(437.5), or $(7.88) per diluted share, in fiscal 2022.
Net loss was $380.1, or $6.79 per diluted share, in fiscal 2023 compared to $437.5, or $7.88 per diluted share, in fiscal 2022.
The cash and cash equivalents balances of $31.9 and $86.8 at September 30, 2023 and 2022, respectively, included $26.6 and $4.2, respectively, held by controlled foreign corporations. As of September 30, 2023, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.
The cash and cash equivalents balances of $71.6 and $31.9 at September 30, 2024 and 2023, respectively, included $15.9 and $26.6, respectively, held by controlled foreign corporations. As of September 30, 2024, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.
Based on the results of the annual quantitative evaluation for fiscal 2023, the fair values of our indefinite-lived intangible assets exceeded their respective carrying values in a range of 14% to over 1,200%. A 100 basis point change in the discount rate would not have resulted in an impairment of any of our indefinite-lived intangible assets.
Based on the results of the annual quantitative evaluation for fiscal 2024, the fair values of our indefinite-lived intangible assets substantially exceeded their respective carrying values. A 100 basis point change in the discount rate would not have resulted in an impairment of any of our indefinite-lived intangible assets.
The Senior Notes contain an affirmative covenant regarding our interest coverage ratio determined as of the end of each of our fiscal quarters, calculated as Adjusted EBITDA divided by interest expense excluding costs related to refinancings. The minimum required interest coverage ratio is 2.00. Our interest coverage ratio was 2.81 for the twelve months ended September 30, 2023.
The Senior Notes contain an affirmative covenant regarding our interest coverage ratio determined as of the end of each of our fiscal quarters, calculated as Adjusted EBITDA divided by interest expense excluding costs related to refinancings. The minimum required interest coverage ratio is 2.00.
Consumer and Hawthorne segments. The decrease in gross margin rate for fiscal 2022 as compared to fiscal 2021 was primarily driven by: • higher material costs in our U.S. Consumer, Hawthorne and Other segments; • higher transportation and warehousing costs included within “volume, mix and other” associated with our U.S.
Consumer, Hawthorne and Other segments; and • inventory write-down charges included within “volume, mix and other” associated with our U.S. Consumer segment. The decrease in gross margin rate for fiscal 2023 as compared to fiscal 2022 was primarily driven by: • higher material costs in our U.S.
Consumer and Other segments; • higher transportation and warehousing costs included within “volume, mix and other” in our U.S.
Consumer, Hawthorne and Other segments; and • lower warehousing costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments.
As part of this restructuring initiative, we are reducing the size of our supply chain network, reducing staffing levels and implementing other cost-reduction initiatives. In addition, to reduce our on hand inventory to align with the optimized network capacity, we have accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products.
As part of this restructuring initiative, we reduced the size of our supply chain network, reduced staffing levels and implemented other cost-reduction initiatives. We also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce our on hand inventory to align with the reduced network capacity.
Factors contributing to the change in gross margin rate are outlined in the following table: Year Ended September 30, 2023 2022 Volume, mix and other (4.0) % (6.6) % Material costs (3.3) (3.4) Roundup ® commissions and reimbursements (0.3) (0.2) Acquisitions — (0.1) Pricing 5.0 6.3 (2.6) (4.0) Impairment, restructuring and other (1.1) (3.6) Change in gross margin rate (3.7) % (7.6) % The decrease in gross margin rate for fiscal 2023 as compared to fiscal 2022 was primarily driven by: • higher material costs in our U.S.
Factors contributing to the change in gross margin rate are outlined in the following table: Year Ended September 30, 2024 2023 Volume, mix and other 2.4 % (4.0) % Material costs 0.7 (3.3) Roundup ® commissions and reimbursements 0.3 (0.3) Pricing (0.8) 5.0 2.6 (2.6) Impairment, restructuring and other 2.8 (1.1) Change in gross margin rate 5.4 % (3.7) % The increase in gross margin rate for fiscal 2024 as compared to fiscal 2023 was primarily driven by: • lower warehousing and transportation costs included within “volume, mix and other” in our U.S.
The following table details impairment, restructuring and other charges (recoveries) for each of the periods presented: Year Ended September 30, 2023 2022 2021 Cost of sales—impairment, restructuring and other: Restructuring and other charges (recoveries), net $ 148.5 $ 143.6 $ (0.3) Right-of-use asset impairments 25.8 — — Property, plant and equipment impairments 11.4 16.6 — COVID-19 related costs — — 25.0 Operating expenses—impairment, restructuring and other: Goodwill and intangible asset impairments 127.9 668.3 — Convertible debt other-than-temporary impairments 101.3 — — Restructuring and other charges, net 51.2 40.9 0.1 Gains on sale of property, plant and equipment — (16.2) — COVID-19 related costs — — 4.2 Total impairment, restructuring and other charges $ 466.1 $ 853.2 $ 29.0 During fiscal 2023, we recorded non-cash, pre-tax goodwill and intangible asset impairment charges of $127.9 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations, comprised of $117.7 of finite-lived intangible asset impairment charges associated with our Hawthorne segment and $10.3 of goodwill impairment charges associated with our Other segment.
The following table details impairment, restructuring and other charges (recoveries) for each of the periods presented: Year Ended September 30, 2024 2023 2022 Cost of sales—impairment, restructuring and other: Restructuring and other charges, net $ 72.9 $ 148.5 $ 143.6 Property, plant and equipment impairments 5.3 11.4 16.6 Right-of-use asset impairments 5.3 25.8 — Operating expenses—impairment, restructuring and other: Convertible debt other-than-temporary impairments 64.6 101.3 — Goodwill and intangible asset impairments 2.5 127.9 668.3 Restructuring and other charges (recoveries), net (4.3) 51.2 40.9 Gains on sale of property, plant and equipment — — (16.2) Total impairment, restructuring and other charges $ 146.3 $ 466.1 $ 853.2 During fiscal 2024 and fiscal 2023, we recorded non-cash, pre-tax other-than-temporary impairment charges related to our convertible debt investments of $64.6 and $101.3, respectively, in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations.
At September 30, 2023, we had letters of credit outstanding in the aggregate principal amount of $5.0, and had $1,156.7 of borrowing availability under the Sixth A&R Credit Agreement.
At September 30, 2024, we had letters of credit outstanding in the aggregate principal amount of $83.0, and had $1,167.0 of borrowing availability under the Sixth A&R Credit Agreement.
During fiscal 2023, we incurred costs of $184.8 in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations and $44.1 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with this restructuring initiative primarily related to inventory write-down charges, employee termination benefits, facility closure costs and impairment of right-of-use assets and property, plant and equipment.
During fiscal 2024, we incurred costs of $83.5 in the “Cost of sales—impairment, restructuring and other” line and $6.0 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with this restructuring initiative primarily related to inventory write-down charges, employee termination benefits, facility closure costs and impairment of right-of-use assets, intangible assets, property, plant and equipment and software.
As of September 30, 2023, we were in compliance with all applicable covenants in the agreements governing our debt. Based on our projections of financial performance for the twelve-month period subsequent to the date of the filing of this Form 10-K, we expect to remain in compliance with the financial covenants under the Sixth A&R Credit Agreement.
Based on our projections of financial performance for the twelve-month period subsequent to the date of the filing of this Form 10-K, we expect to remain in compliance with the financial covenants under the Sixth A&R Credit Agreement.
Consumer Segment Profit was $568.6 in fiscal 2022, a decrease of 21.8% from fiscal 2021 Segment Profit of $726.7. The decrease for fiscal 2022 was primarily due to lower net sales and a lower gross margin rate, partially offset by lower SG&A.
Consumer Segment Profit was $454.1 in fiscal 2023, a decrease of 20.1% from fiscal 2022 Segment Profit of $568.6. The decrease for fiscal 2023 was primarily due to lower net sales and a lower gross margin rate, partially offset by lower SG&A.
The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at September 30, 2023 are shown in the table below: Notional Amount ($) Effective Date (a) Expiration Date Fixed Rate 200 (b) 1/20/2022 6/20/2024 0.49 % 200 6/7/2023 6/8/2026 0.80 % 150 6/7/2023 4/7/2027 3.37 % 50 6/7/2023 4/7/2027 3.34 % (a) The effective date refers to the date on which interest payments are first hedged by the applicable swap agreement.
The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at September 30, 2024 are shown in the table below: Notional Amount ($) Effective Date (a) Expiration Date Fixed Rate 150 6/7/2023 4/7/2027 3.37 % 50 6/7/2023 4/7/2027 3.34 % 100 (b) 11/20/2023 3/22/2027 4.74 % 150 (b) 9/20/2024 9/20/2029 4.25 % (a) The effective date refers to the date on which interest payments are first hedged by the applicable swap agreement.
This MD&A includes the following sections: • Executive summary • Results of operations • Segment results • Liquidity and capital resources • Non-GAAP measures • Regulatory matters • Critical accounting policies and estimates Executive Summary Our operations are divided into three reportable segments: U.S. Consumer, Hawthorne and Other. U.S.
This MD&A includes the following sections: • Executive summary • Results of operations • Segment results • Liquidity and capital resources • Regulatory matters • Critical accounting estimates Executive Summary Our operations are divided into three reportable segments: U.S. Consumer, Hawthorne and Other. U.S. Consumer consists of our consumer lawn and garden business in the United States.
Consumer segment, $8.1 in our Hawthorne segment, $0.7 in our Other segment and $7.7 at Corporate in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2022. Costs incurred to date since the inception of this restructuring initiative are $45.5 for our U.S.
Consumer segment, $8.1 in our Hawthorne segment, $0.7 in our Other segment and $7.7 at Corporate in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2022. Costs incurred since the inception of this restructuring initiative through September 30, 2024 were $58.3 for our U.S.
Substantially all of Scotts Miracle-Gro’s directly and indirectly owned domestic subsidiaries serve as guarantors of the 5.250% Senior Notes, the 4.500% Senior Notes, the 4.000% Senior Notes and the 4.375% Senior Notes.
The 4.375% Senior Notes have interest payment dates of February 1 and August 1 of each year. Substantially all of Scotts Miracle-Gro’s directly and indirectly owned domestic subsidiaries serve as guarantors of the 5.250% Senior Notes, the 4.500% Senior Notes, the 4.000% Senior Notes and the 4.375% Senior Notes.
Consumer $ 454.1 $ 568.6 $ 726.7 Hawthorne (48.1) (21.1) 163.8 Other 12.4 20.2 42.1 Total Segment Profit (Non-GAAP) 418.4 567.7 932.6 Corporate (101.6) (112.4) (149.7) Intangible asset amortization (25.2) (37.1) (30.9) Impairment, restructuring and other (466.0) (852.2) (29.0) Equity in income (loss) of unconsolidated affiliates (101.1) (12.9) 14.4 Interest expense (178.1) (118.1) (78.9) Other non-operating income, net 0.3 6.9 18.6 Income (loss) from continuing operations before income taxes (GAAP) $ (453.3) $ (558.1) $ 677.1 U.S.
Consumer $ 498.0 $ 454.1 $ 568.6 Hawthorne (14.2) (48.1) (21.1) Other 4.7 12.4 20.2 Total Segment Profit (Non-GAAP) 488.5 418.4 567.7 Corporate (117.7) (101.6) (112.4) Intangible asset amortization (15.7) (25.2) (37.1) Impairment, restructuring and other (146.3) (466.0) (852.2) Equity in loss of unconsolidated affiliates (68.1) (101.1) (12.9) Interest expense (158.8) (178.1) (118.1) Other non-operating income (expense), net (5.5) 0.3 6.9 Loss before income taxes (GAAP) $ (23.6) $ (453.3) $ (558.1) U.S.
Consumer, Hawthorne and Other segments; • inventory write-down charges included within “volume, mix and other” associated with our U.S. Consumer segment; and • an increase in impairment, restructuring and other charges; • partially offset by increased pricing in our U.S. Consumer, Hawthorne and Other segments; and • lower warehousing costs included within “volume, mix and other” in our U.S.
Consumer and Hawthorne segments; • lower material costs in our U.S. Consumer segment; • lower sales volume in our Hawthorne segment; and • a decrease in impairment, restructuring and other charges; • partially offset by higher sales volume in our U.S. Consumer segment; • inventory write-down charges included within “volume, mix and other” associated with our U.S.
Revenues are measured based on the amount of consideration that we expect to receive as derived from a list price, reduced by estimates for 46 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) variable consideration. Variable consideration includes the cost of current and continuing promotional programs and expected sales returns.
Revenues are measured based on the amount of consideration that we expect to receive as derived from a list price, reduced by estimates for variable consideration. Variable consideration includes the cost of current and continuing promotional programs and expected sales returns.
Other Other segment net sales were $240.3 in fiscal 2023, a decrease of 13.9% from fiscal 2022 net sales of $279.1. The decrease was driven by lower sales volume of 16.0% and unfavorable foreign exchange rates of 4.8%, partially offset by increased pricing of 6.9%.
The decrease was driven by lower sales volume of 16.0% and unfavorable foreign exchange rates of 4.8%, partially offset by increased pricing of 6.9%. Other Segment Profit was $12.4 in fiscal 2023, a decrease of 38.6% from fiscal 2022 Segment Profit of $20.2. The decrease was driven by lower net sales and a lower gross margin rate.
The above table excludes liabilities for unrecognized tax benefits and insurance accruals as we are unable to estimate the timing of payments for these items. Non-GAAP Measures Use of Non-GAAP Measures To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures.
The above table excludes liabilities for unrecognized tax benefits and insurance accruals as we are unable to estimate the timing of payments for these items.
Higher costs over the past several years required us to implement significant price increases across our business in fiscal 2022 and 2023. Inflationary headwinds, volatile commodity costs and higher interest rates are expected to continue.
Higher costs over the past several years required us to implement significant price increases across our business in fiscal 2022 and fiscal 2023, and we implemented targeted price reductions on certain products during fiscal 2024. We expect inflationary headwinds, volatile commodity costs and elevated interest rates to continue.
Investing Activities Cash used in investing activities totaled $65.7 for fiscal 2023, a decrease of $217.5 compared to $283.2 for fiscal 2022. Cash used for investments in property, plant and equipment during fiscal 2023 was $92.8, a decrease from fiscal 2022 due to higher spending in the prior period on capital projects to expand network capacity.
Cash used for investments in property, plant and equipment during fiscal 2023 was $92.8, a decrease from $113.5 in fiscal 2022 due to higher spending in fiscal 2022 on capital projects to expand network capacity.
As a result, the Senior Notes are effectively subordinated to all the liabilities of the Non-Guarantors. 41 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) The guarantees may be subject to review under federal bankruptcy laws or relevant state fraudulent conveyance or fraudulent transfer laws.
As a result, the Senior Notes are effectively subordinated to all the liabilities of the Non-Guarantors. The guarantees may be subject to review under federal bankruptcy laws or relevant state fraudulent conveyance or fraudulent transfer laws.
Transactions between Scotts Miracle-Gro and the Guarantors have been eliminated and the summarized financial information does not reflect investments of the Scotts Miracle-Gro and the Guarantors in the Non-Guarantor subsidiaries. September 30, 2023 Current assets $ 1,212.0 Non-current assets (a) 1,911.2 Current liabilities 683.9 Non-current liabilities 2,833.3 (a) Includes amounts due from Non-Guarantor subsidiaries of $26.2.
Transactions between Scotts Miracle-Gro and the Guarantors have been eliminated and the summarized financial information does not reflect investments of the Scotts Miracle-Gro and the Guarantors in the Non-Guarantor subsidiaries. September 30, 2024 Current assets $ 838.4 Non-current assets (a) 1,805.1 Current liabilities 667.3 Non-current liabilities 2,471.6 (a) Includes amounts due from Non-Guarantor subsidiaries of $49.5.
The decrease was driven by lower net sales, a decrease in gross margin rate, higher impairment, restructuring and other charges and lower other income, partially offset by lower SG&A.
The decrease was driven by lower impairment, restructuring and other charges, a higher gross margin rate, lower equity in loss of unconsolidated affiliates and lower interest expense, partially offset by higher other expense, higher income tax expense and higher SG&A.
The decrease was driven by lower impairment, restructuring and other charges and lower SG&A, partially offset by lower net sales and a decrease in gross margin rate. Income (loss) from operations was $(434.0) in fiscal 2022 compared to $723.0 in fiscal 2021.
The increase was primarily driven by lower impairment, restructuring and other charges and a higher gross margin rate, partially offset by higher other expense and higher SG&A. Loss from operations was $(174.4) in fiscal 2023 compared to $(434.0) in fiscal 2022.
Cost of Sales The following table shows the major components of cost of sales: Year Ended September 30, 2023 2022 2021 Materials $ 1,524.1 $ 1,616.7 $ 1,962.5 Distribution and warehousing 556.3 660.1 684.0 Manufacturing labor and overhead 545.4 546.4 714.0 Costs associated with Roundup ® marketing agreement 82.5 67.9 70.8 Cost of sales 2,708.3 2,891.1 3,431.3 Cost of sales—impairment, restructuring and other 185.7 160.1 24.7 $ 2,894.0 $ 3,051.2 $ 3,456.0 29 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Factors contributing to the change in cost of sales are outlined in the following table: Year Ended September 30, 2023 2022 Volume, mix and other $ (299.7) $ (641.4) Foreign exchange rates (10.4) (16.9) Material cost changes 112.7 121.0 Costs associated with Roundup ® marketing agreement 14.6 (2.9) (182.8) (540.2) Impairment, restructuring and other 25.6 135.4 Change in cost of sales $ (157.2) $ (404.8) The decrease in cost of sales for fiscal 2023 as compared to fiscal 2022 was primarily driven by: • lower sales volume in our U.S.
Cost of Sales The following table shows the major components of cost of sales: Year Ended September 30, 2024 2023 2022 Materials $ 1,401.7 $ 1,524.1 $ 1,616.7 Manufacturing labor and overhead 610.8 545.4 546.4 Distribution and warehousing 515.0 556.3 660.1 Costs associated with Roundup ® marketing agreement 91.2 82.5 67.9 Cost of sales 2,618.7 2,708.3 2,891.1 Cost of sales—impairment, restructuring and other 83.5 185.7 160.1 $ 2,702.2 $ 2,894.0 $ 3,051.2 Factors contributing to the change in cost of sales are outlined in the following table: Year Ended September 30, 2024 2023 Volume, mix and other $ (71.4) $ (299.7) Material cost changes (26.6) 112.7 Foreign exchange rates (0.3) (10.4) Costs associated with Roundup ® marketing agreement 8.7 14.6 (89.6) (182.8) Impairment, restructuring and other (102.2) 25.6 Change in cost of sales $ (191.8) $ (157.2) The decrease in cost of sales for fiscal 2024 as compared to fiscal 2023 was primarily driven by: • lower warehousing and transportation costs included within “volume, mix and other” in our U.S.
Consumer segment, $3.2 in our Hawthorne segment and $0.6 in our Other segment in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2021. We incurred costs of $4.0 in our U.S.
Consumer segment and $71.8 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2024. We incurred costs of $1.5 in our U.S.
We believe that our assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that future quarterly or annual operating results will not be materially affected by these proceedings, whether as a result of adverse outcomes or as a result of significant defense costs. 42 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Contractual Obligations The following table summarizes our future cash outflows for contractual obligations as of September 30, 2023: Payments Due by Period Contractual Cash Obligations Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Debt obligations $ 2,613.7 $ 50.4 $ 100.0 $ 1,113.3 $ 1,350.0 Interest expense on debt obligations 688.0 128.9 262.1 167.4 129.6 Finance lease obligations 20.8 2.6 4.6 3.4 10.2 Operating lease obligations 344.8 88.9 128.9 54.2 72.8 Purchase obligations 799.4 349.8 321.9 76.6 51.1 Other, primarily retirement plan obligations 53.4 6.1 10.8 10.8 25.7 Total contractual cash obligations $ 4,520.1 $ 626.7 $ 828.3 $ 1,425.7 $ 1,639.4 We had long-term debt obligations and interest payments due primarily under the 5.250% Senior Notes, 4.500% Senior Notes, 4.000% Senior Notes and 4.375% Senior Notes and our credit facilities.
We believe that our assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that future quarterly or annual operating results will not be materially affected by these proceedings, whether as a result of adverse outcomes or as a result of significant defense costs. 45 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Contractual Obligations The following table summarizes our future cash outflows for contractual obligations as of September 30, 2024: Payments Due by Period Contractual Cash Obligations Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Debt obligations $ 2,225.0 $ 50.0 $ 825.0 $ — $ 1,350.0 Interest expense on debt obligations 501.0 112.7 194.8 121.7 71.8 Finance lease obligations 21.5 3.4 5.6 3.9 8.6 Operating lease obligations 340.9 89.8 122.7 65.9 62.5 Purchase obligations 681.2 310.9 272.7 63.9 33.7 Other, primarily retirement plan obligations 46.5 5.1 9.7 9.6 22.1 Total contractual cash obligations $ 3,816.1 $ 571.9 $ 1,430.5 $ 265.0 $ 1,548.7 We had long-term debt obligations and interest payments due primarily under the 5.250% Senior Notes, 4.500% Senior Notes, 4.000% Senior Notes, 4.375% Senior Notes and our credit facilities.
Consumer $ 2,843.7 $ 2,928.8 $ 3,197.7 Hawthorne 467.3 716.2 1,424.2 Other 240.3 279.1 303.1 Consolidated $ 3,551.3 $ 3,924.1 $ 4,925.0 The following table sets forth Segment Profit (Loss) as well as a reconciliation to income (loss) from continuing operations before income taxes, the most directly comparable measure prepared in accordance with U.S. generally accepted accounting principles (“GAAP”): Year Ended September 30, 2023 2022 2021 U.S.
Consumer $ 3,013.7 $ 2,843.7 $ 2,928.8 Hawthorne 294.7 467.3 716.2 Other 244.3 240.3 279.1 Consolidated $ 3,552.7 $ 3,551.3 $ 3,924.1 38 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) The following table sets forth Segment Profit (Loss) as well as a reconciliation to loss before income taxes, the most directly comparable measure prepared in accordance with U.S. generally accepted accounting principles (“GAAP”): Year Ended September 30, 2024 2023 2022 U.S.
Corporate expenses were $112.4 in fiscal 2022, a decrease of 24.9% from fiscal 2021 expenses of $149.7.
Corporate expenses were $101.6 in fiscal 2023, a decrease of 9.6% from fiscal 2022 expenses of $112.4.
Consumer, Hawthorne and Other segments. 31 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) Selling, General and Administrative Expenses The following table sets forth the components of selling, general and administrative expenses (“SG&A”): Year Ended September 30, 2023 2022 2021 Advertising $ 123.7 $ 120.3 $ 165.7 Advertising as a percentage of net sales 3.5 % 3.1 % 3.4 % Share-based compensation 49.7 34.3 40.6 Research and development 35.7 45.3 45.4 Amortization of intangibles 22.6 31.0 29.1 Other selling, general and administrative 319.6 382.1 462.7 $ 551.3 $ 613.0 $ 743.5 SG&A decreased $61.7, or 10.1%, during fiscal 2023 compared to fiscal 2022.
Selling, General and Administrative Expenses The following table sets forth the components of selling, general and administrative expenses (“SG&A”): Year Ended September 30, 2024 2023 2022 Advertising $ 141.0 $ 123.7 $ 120.3 Advertising as a percentage of net sales 4.0 % 3.5 % 3.1 % Share-based compensation 57.2 49.7 34.3 Research and development 34.6 35.7 45.3 Amortization of intangibles 13.9 22.6 31.0 Other selling, general and administrative 312.3 319.6 382.1 $ 559.0 $ 551.3 $ 613.0 SG&A increased $7.7, or 1.4%, during fiscal 2024 compared to fiscal 2023.
Amortization expense decreased $8.4, or 27.1%, driven by the impairment of certain Hawthorne segment intangible assets during fiscal 2022 and fiscal 2023. Other SG&A and research and development costs decreased by a combined $72.1, or 16.9%, driven by the reductions in staffing levels and other cost-reduction initiatives. SG&A decreased $130.5, or 17.6%, during fiscal 2022 compared to fiscal 2021.
Amortization expense decreased $8.7, or 38.5%, driven by the impairment of certain Hawthorne segment intangible assets during fiscal 2023. Other SG&A decreased by $7.3, or 2.3%, driven by reductions in staffing levels and other cost-reduction initiatives. SG&A decreased $61.7, or 10.1%, during fiscal 2023 compared to fiscal 2022.
During fiscal 2022, we recorded non-cash, pre-tax goodwill and intangible asset impairment charges of $632.4 as a result of interim impairment testing of our Hawthorne segment in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations, comprised of $522.4 of goodwill impairment charges and $110.0 of finite-lived intangible asset impairment charges.
During fiscal 2023, we recorded non-cash, pre-tax goodwill and intangible asset impairment charges of $127.9 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations, comprised of $117.7 of finite-lived intangible asset impairment charges associated with our Hawthorne segment and $10.3 of goodwill impairment charges associated with our Other segment. 36 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) During fiscal 2022, we recorded non-cash, pre-tax goodwill and intangible asset impairment charges of $632.4 as a result of interim impairment testing of our Hawthorne segment in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations, comprised of $522.4 of goodwill impairment charges and $110.0 of finite-lived intangible asset impairment charges.
The eligible accounts receivable consisted of accounts receivable generated by sales to three specified customers. The eligible amount of customer accounts receivables which could be sold under the Receivables Facility was $400.0 and the commitment amount during the seasonal commitment period that began on February 24, 2023 and ended on June 16, 2023 was $160.0.
The eligible accounts receivable consisted of accounts receivable generated by sales to three specified customers. The eligible amount of customer accounts receivables which could be sold under the Receivables Facility was $400.0. The Receivables Facility expired on August 18, 2023.
Consumer segment; • an increase in costs associated with the Roundup ® marketing agreement; and • an increase in impairment, restructuring and other charges. The decrease in cost of sales for fiscal 2022 as compared to fiscal 2021 was primarily driven by: • lower sales volume in our U.S.
Consumer segment; and 33 Table of Contents THE SCOTTS MIRACLE-GRO COMPANY (Dollars in millions, except per share data) • an increase in costs associated with the Roundup ® marketing agreement. The decrease in cost of sales for fiscal 2023 as compared to fiscal 2022 was primarily driven by: • lower sales volume in our U.S.
In addition, we recorded a non-cash, pre-tax impairment charge of $94.7 associated with our investment in Bonnie Plants, LLC in the “Equity in (income) loss of unconsolidated affiliates” line in the Consolidated Statements of Operations during fiscal 2023.
In addition, we recorded pre-tax impairment charges of $61.9 associated with our investment in Bonnie Plants, LLC in the “Equity in loss of unconsolidated affiliates” line in the Consolidated Statements of Operations during fiscal 2024. Refer to “NOTE 8.
Through our Hawthorne segment, we are a leading manufacturer, marketer and distributor of lighting, nutrients, growing media, growing environments and hardware products for indoor and hydroponic gardening in North America.
Through our Hawthorne segment, we are a leading provider of nutrients, lighting and other materials used for indoor and hydroponic gardening in North America.
During fiscal 2022, we recorded gains of $16.2 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with the sale of property, plant and equipment. During fiscal 2021, we incurred costs of $29.2 associated with the COVID-19 pandemic primarily related to premium pay. We incurred costs of $21.2 in our U.S.
During fiscal 2022, we recorded gains of $16.2 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with the sale of property, plant and equipment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeExpected Maturity Date Total Fair Value 2023 2024 2025 2026 2027 2028 After Long-term debt: Fixed rate debt $ — $ — $ — $ 250.0 $ — $ 1,350.0 $ 1,600.0 $ 1,283.9 Average rate — — — 5.3 % — 4.3 % 4.4 % — Variable rate debt $ 50.0 $ 50.0 $ 50.0 $ 863.3 $ — $ — $ 1,013.3 $ 1,013.3 Average rate 8.2 % 8.2 % 8.2 % 8.1 % — — 8.1 % — Interest rate derivatives: Interest rate swaps $ 13.1 $ 9.3 $ 7.5 $ 1.5 $ — $ — $ 31.4 $ 31.4 Average rate 1.6 % 2.1 % 2.3 % 3.4 % — — 2.1 % — Expected Maturity Date Total Fair Value 2022 2023 2024 2025 2026 2027 After Long-term debt: Fixed rate debt $ — $ — $ — $ — $ 250.0 $ 1,350.0 $ 1,600.0 $ 1,190.3 Average rate — — — — 5.3 % 4.3 % 4.4 % — Variable rate debt $ 125.0 $ 50.0 $ 50.0 $ 50.0 $ 1,075.5 $ — $ 1,350.5 $ 1,350.5 Average rate 4.6 % 5.4 % 5.4 % 5.4 % 5.3 % — 5.2 % — Interest rate derivatives: Interest rate swaps $ 12.5 $ 8.4 $ 5.8 $ 4.3 $ — $ — $ 31.0 $ 31.0 Average rate 1.2 % 0.8 % 0.9 % 0.9 % — — 1.0 % — Excluded from the information provided above are miscellaneous debt instruments of $0.4 and $12.7 and finance lease obligations of $16.9 and $28.9 at September 30, 2023 and 2022, respectively.
Biggest changeExpected Maturity Date (Fiscal Year) Total Fair Value 2024 2025 2026 2027 2028 2029 After Long-term debt: Fixed rate debt $ — $ — $ 250.0 $ — $ — $ 1,350.0 $ 1,600.0 $ 1,507.1 Average rate — — 5.3 % — — 4.3 % 4.4 % — Variable rate debt $ 50.0 $ 50.0 $ 525.0 $ — $ — $ — $ 625.0 $ 625.0 Average rate 7.5 % 7.5 % 7.5 % — — — 7.5 % — Interest rate derivatives: Interest rate swaps $ (1.0) $ (1.0) $ (1.1) $ (0.7) $ (0.6) $ — $ (4.4) $ (4.4) Average rate 3.7 % 3.7 % 3.9 % 4.2 % 4.2 % — 3.9 % — Expected Maturity Date (Fiscal Year) Total Fair Value 2023 2024 2025 2026 2027 2028 After Long-term debt: Fixed rate debt $ — $ — $ — $ 250.0 $ — $ 1,350.0 $ 1,600.0 $ 1,283.9 Average rate — — — 5.3 % — 4.3 % 4.4 % — Variable rate debt $ 50.0 $ 50.0 $ 50.0 $ 863.3 $ — $ — $ 1,013.3 $ 1,013.3 Average rate 8.2 % 8.2 % 8.2 % 8.1 % — — 8.1 % — Interest rate derivatives: Interest rate swaps $ 13.1 $ 9.3 $ 7.5 $ 1.5 $ — $ — $ 31.4 $ 31.4 Average rate 1.6 % 2.1 % 2.3 % 3.4 % — — 2.1 % — Excluded from the information provided above are miscellaneous debt instruments of $0.0 and $0.4 and finance lease obligations of $17.8 and $16.9 at September 30, 2024 and 2023, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As part of our ongoing business, we are exposed to certain market risks, including fluctuations in interest rates, foreign currency exchange rates and commodity prices. Financial derivatives and other instruments are used to manage these risks. These instruments are not used for speculative purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As part of our ongoing business, we are exposed to certain market risks, including fluctuations in interest rates, foreign currency exchange rates and commodity prices. Financial derivatives and other instruments are used to manage these risks. These instruments are not used for trading or speculative purposes.
Interest Rate Risk The following table summarizes information about our debt instruments and derivative financial instruments that are sensitive to changes in interest rates as of September 30, 2023 and 2022. For debt instruments, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates.
Interest Rate Risk The following table summarizes information about our debt instruments and derivative financial instruments that are sensitive to changes in interest rates as of September 30, 2024 and 2023. For debt instruments, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates.
Other Market Risks We are subject to market risk from fluctuations in foreign currency exchange rates and fluctuating prices of certain raw materials, including urea and other fertilizer inputs, resins, diesel, gasoline, natural gas, sphagnum peat, bark and grass seed. Refer to “NOTE 16.
Other Market Risks We are subject to market risk from fluctuations in foreign currency exchange rates and fluctuating prices of certain raw materials, including urea and other fertilizer inputs, resins, diesel, gasoline, natural gas, sphagnum peat, bark and grass seed. Refer to “NOTE 15.
The swap agreements had a maximum total U.S. dollar equivalent notional amount of $600.0 and $800.0 at September 30, 2023 and 2022, respectively. Weighted-average variable rates are based on rates in effect at September 30, 2023 and 2022.
The swap agreements had a maximum total U.S. dollar equivalent notional amount of $450.0 and $600.0 at September 30, 2024 and 2023, respectively. Weighted-average variable rates are based on rates in effect at September 30, 2024 and 2023.
Assuming average unhedged variable interest rate borrowing levels during fiscal 2023 of $1,200.0, a change in our variable interest rate of 100 basis points for a full twelve-month period would have an impact of $12.0 on interest expense.
Assuming average unhedged variable interest rate borrowing levels during fiscal 2024 of $575.0, a change in our variable interest rate of 100 basis points for a full twelve-month period would have an impact of $5.8 on interest expense.

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