SMG 10-K & 10-Q changes, risk factors and insider trading
Scotts Miracle-gro Co. · NYSE · Agricultural Chemicals · CIK 825542 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Climate change and unfavorable weather conditions could adversely impact our financial results.”
New heading “Our business could be negatively impacted by corporate citizenship and sustainability matters (including climate change) and/or our reporting of such matters.”
New heading “Uncertainty surrounding legislation, regulation and governmental policy at the U.S. federal level could lead to disruptions in or have the effect of negatively impacting our financial condition, results of operations and cash flows.”
New heading “Product recalls or other product liability claims could materially and adversely affect our business, financial condition and results of operations.”
New heading “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.”
New heading “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.”
New heading “Our insurance coverage may not be sufficient to avoid or effectively mitigate or transfer the adverse impact of claims or liabilities against us on our financial position or results of operations and we may not be able to obtain appropriate insurance coverage in the future.”
New heading “Changes in credit ratings issued by nationally recognized statistical rating organizations (“NRSROs”) could adversely affect our cost of financing and the market price of our Senior Notes.”
Removed heading “Climate change and unfavorable weather conditions could adversely impact financial results.”
Removed heading “Our business could be negatively impacted by corporate citizenship and sustainability matters - including climate change - and/or our reporting of such matters.”
Removed heading “Product recalls or other product liability claims could materially and adversely affect our business, financial condition and results of operation.”
Removed heading “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.”
Removed heading “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.”
Removed heading “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.”
Removed heading “Changes in credit ratings issued by nationally recognized statistical rating organizations (NRSROs) could adversely affect our cost of financing and the market price of our Senior Notes.”
Largest changes
see in full comparisonWeTherehaveareobservedindications of increased economic uncertainty in the U.S. including the potential for an economic recession. Impacts of such general economic weakness include, without limitation: reduced credit availability; reduced liquidity; volatility in credit, equity and foreign exchange markets; increasing job losses, bankruptcies and rising interest rates. Inaddition,recentconsumersyears,maytherereducehavediscretionarybeen instances of Congress and the President failing to reach agreement on federal budgetary and spendingduringmatters.periodsAofgovernment shutdown or a default by the U.S. government on its debt obligations, or related credit-rating downgrades could also have adverse effects on the broader global economy and contribute to, or worsen, an economicuncertainty,recession.whichWecouldbelievereducethatsalesanyvolumes of our productsextended orresultrenewed economic disruptions or deterioration inatheshiftglobalin our product mix from higher margin to lower margin products. Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, whicheconomy could havea materialan adverse impact on our business,includingfinancialourconditionoperatingormargins.resultsContinuedofhigh inflation has had a negative impact on our operating margins in recent periods including, for example, through persistently high manufacturing costs.operations.
“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.”see in full comparison
“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.”see in full comparison
“Changes in credit ratings issued by nationally recognized statistical rating organizations (“NRSROs”) could adversely affect our cost of financing and the market price of our Senior Notes.”see in full comparison
“Changes in credit ratings issued by nationally recognized statistical rating organizations (NRSROs) could adversely affect our cost of financing and the market price of our Senior Notes.”see in full comparison
“Product recalls or other product liability claims could materially and adversely affect our business, financial condition and results of operation.”see in full comparison
Full comparison: every changed paragraph (125)
This Form 10-K, including the exhibits hereto and the information incorporated by reference herein, as well as our 20242025 Annual Report to Shareholders (our “20242025 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,Act, which are subject to risks and uncertainties. Information regarding activities, events and developments that we expect or anticipate will or may occur in the future, including, but not limited to, information relating to our future growth and profitability targets and strategies designed to increase total shareholder value, are forward-looking statements based on management’s estimates, assumptions and projections. Forward-looking statements also include, but are not limited to, statements regarding our future economic and financial condition and results of operations, the plans and objectives of management and our assumptions regarding our performance and such plans and objectives, as well as the amount and timing of dividends and repurchases of common shares of Scotts Miracle-Gro (“Common Shares”) or other uses of cash flows. Forward-looking statements generally can be identified through the use of words such as “guidance,” “outlook,” “projected,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” and other similar words and variations.
Our ability to manage our inventory levels to meet our customers’ demand for our products is important for our business. Our production levels and inventory management goals for our products are based on estimates of demand,demand takingand take into account production capacity, timing of shipments,shipments and inventory levels. Due to a number of factors, including manufacturing lead-times,lead times, seasonal purchasing patterns,patterns and the potential for material price increases, we may carry additional inventory and increase our working capital and related financing requirements. ThisCarrying additional inventory may increase our warehousing costs orand result in excess inventory that may become difficult to manage, unusable or obsolete and adversely impact our ability to realize anticipated returns from product sales. If we overestimate or underestimate either channel or retail demand for any of our products during a given season, we may not maintain appropriate inventory levels, which could negatively impact our net sales, profit margins, net earnings, working capital and/or cash flow, hinder our ability to meet customer demand, result in loss of customers,customers or cause us to incur excess and obsolete inventory charges or excess warehouse storage costs.
WeThere haveare observedindications of increased economic uncertainty in the U.S. including the potential for an economic recession. Impacts of such general economic weakness include, without limitation: reduced credit availability; reduced liquidity; volatility in credit, equity and foreign exchange markets; increasing job losses, bankruptcies and rising interest rates. In addition,recent consumersyears, maythere reducehave discretionarybeen instances of Congress and the President failing to reach agreement on federal budgetary and spending duringmatters. periodsA ofgovernment shutdown or a default by the U.S. government on its debt obligations, or related credit-rating downgrades could also have adverse effects on the broader global economy and contribute to, or worsen, an economic uncertainty,recession. whichWe couldbelieve reducethat salesany volumes of our productsextended or resultrenewed economic disruptions or deterioration in athe shiftglobal in our product mix from higher margin to lower margin products. Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, whicheconomy could have a materialan adverse impact on our business, includingfinancial ourcondition operatingor margins.results Continuedof high inflation has had a negative impact on our operating margins in recent periods including, for example, through persistently high manufacturing costs.operations.
In addition, consumers may reduce discretionary spending during periods of economic uncertainty, which could reduce sales volumes of our products or result in a shift in our product mix from higher margin to lower margin products. 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, financial condition or results of operations.
Increases in the prices of key commodities and other raw materials could adversely affect our ability to manage our cost structure. Market conditions may limit our ability to raise selling prices to offset increases in our raw material costs. Further, sustained price increases may lead to declines in volume as competitors may not adjust their prices or customers and/or consumers may decide not to pay the higher prices, which could lead to sales declines and loss of market share. Our projections may not accurately predict the volume impact of price increases, which could adversely affect our business, financial condition and results of operations.
Our proprietary technologies can limit our ability to locate or utilize alternative inputs for certain products. For certain inputs, new sources of supply may have to be qualified under regulatory standards, which can require additional investment and delay bringing a product to market. We utilize hedge agreements periodically to fix the prices of a portion of our urea and fuel needs. The hedge agreements are designed to mitigate the earnings and cash flow fluctuations associated with the costs of urea and fuel. In periods of declining prices, utilizing these hedge agreements may effectively increase our expenditures for these raw materials.
Our top two retail customers, The Home Depot and Lowe’s, together accounted for 48%52% of our fiscal 20242025 net sales and 18%25% of our outstanding accounts receivable as of September 30, 2024.2025. The loss of, or reduction in orders fromfrom, any major customer for any reason (including, for example, changes in a retailer’s strategy, reduction in inventories of our products that they maintain, claims or allegations that our products or products we market on behalf of third parties are unsafe, a decline in consumer demand, regulatory, legal or other external pressures or a change in marketing strategy), and customer disputes regarding shipments, fees, merchandise condition or related matters could have a material adverse effect on our business, 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.
Our future success depends on creating and successfully competing in markets for our products including our ability to maintain an adequate innovation pipeline, improve our existing product lines and products and to develop and manufacture new product lines and products to meet evolving consumer needs. We cannot provide any assurance that we will successfully develop and manufacture new product lines and products or product innovations that satisfy consumer needs or achieve market acceptance, or that we will develop, manufacture and market new product lines and products or product innovations in a timely manner. If we fail to successfully develop and manufacture new product lines and products or product innovations, our ability to maintain or grow our market share may be adversely affected, which could materially adversely affect our business, financial condition and results of operations. In addition, the development and introduction of new product lines and products and product innovations require substantial research and development expenditures, which we may be unable to recoup if such new product lines, products or innovations do not achieve market acceptance.
Many of the products we manufacture and market contain active ingredients that are subject to regulatory approval. The need to obtain such approval could delay the launch of new products or product innovations that contain active ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations.
We invest substantial resources in advertising, consumer promotions and other marketing activities to maintain, extendmaintain and expand our brand image. Negative publicity about us or our brands, including publicity regarding product safety, quality, efficacy, environmental impacts (including packaging, energy and water use and matters related to climate impact and waste management) and other sustainability or similar issues, whether real or perceived, could occur and could be widely and rapidly disseminated, including through the use of social media sites. There can be no assurances that our marketing strategies will be effective or that the amount we invest in advertisingmarketing activities will result in a corresponding increase in sales of our products. 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),customers, we will have incurred significant expenses without the benefit of higher revenues.
Each of our operating segments participates in highly competitive markets. Our products compete against national and regional products and private label products produced by various suppliers. Many of our competitors sell their products at prices lower than ours. Our most price sensitive consumers may trade down to lower pricedlower-priced products during challenging economic times or if current economic conditions worsen. We compete primarily on the basis of product innovation, product quality, product performance, value, brand strength, supply chain competency, field sales support, in-store sales support, the strength of our relationships with major retailers and advertising. Some of our competitors have significant financial resources. The strong competition that we face in all of our markets may prevent us from achieving our revenue goals, which may have a material adverse effect on our financial condition, results of operations and cash flows.
We may not be able to maintain or develop efficient, low-cost manufacturing capability and processes that will enable us to meet the quality, price, design and product standards or production volumes required to successfully manufacture our products. Our efforts to improve efficiencies in our manufacturing capabilities by investing in automation could be disruptive to our operations, divert the attention of management and require significant investments. 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. This reliance generates a number of risks, including decreased control over the production and related processes, which could lead to production delays or interruptions and inferior product quality control. 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.delays.
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 and unpredictable customs laws, regulations, tax requirements, forced labor laws and trade regulations, such as tariffs set by governments, either through mutual agreements or bilateral actions. TariffsThe U.S. has enacted tariffs on goods imported into the U.S.,U.S. particularly goods from China,which have increased the cost of the goods we purchase. AdditionalSignificant 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. The overall effect of these risks is that our costs may increase or we may experience supply disruptions, which in turn may result in lower profitability if we are unable to offset such increases through higher prices, and/or that we may suffer a decline in sales if our customers do not accept price increases.
A significant interruption in the operation of our or our suppliers’ facilities could adversely impact our capacity to producemanufacture products and servicesupply our customers, which could adversely affect revenuesour results of operations and earnings.financial position.
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. A significant interruption in the operation of our or our suppliers’ facilities could significantly impact our capacity to producemanufacture products and servicesupply our customersproducts in a timely manner, which could have a material adverse effect on our revenues, earnings and financial position, particularly with respect to products that we manufacture at a limited number of facilities,facilities such as our fertilizer and liquid products.products, which could have a material adverse effect on our results of operations and financial position.
Our operations are dependent on our ability to protect our infrastructure against damage from catastrophe, natural disaster, or severe weather, as well as events resulting from unauthorized security breach, power loss, telecommunications failure, terrorist attack, pandemic, or other events that could have a significant disruptive effect on our operations. We have disaster recovery and business continuity plans in place that are ready to be executed if we encounter a disruptive event. However, we cannot be certain that our plans, or those of third-party service providers we rely on, will be successful in the event of a disaster. If our disaster recovery or business continuity plans are unsuccessful in a disaster recovery scenario, we could potentially experience material adverse impacts including loss of data, damage to important facilities, disruption to our operations, regulatory intervention, reputational harm and loss of customers.
We may experience disruptions to the transportation channels usedwe use to distribute our products, including increased congestion, a lack of transportation capacity, increased fuel expenses, import or export controls or delays,delays and labor disputes or shortages. 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.
Climate change and unfavorable weather conditions could adversely impact financial results.
Our consumer lawn and garden net sales in any year are susceptible to weather conditions in the markets in which our products are sold. For instance, periods of abnormally wet or dry weather can adversely impact the sale of certain products, while increasing demand for other products making the overall impact on the Company difficult to predict.
The effects of climate change could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels. These changes could over time affect, for example, the availability and cost of raw materials, commodities and energy, which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.
Consumers and businesses may independently change their behavior because of concerns regarding the impact of climate change and public perceptions. For example, consumers may elect to garden less frequently than historic patterns due to the unpredictability of weather patterns. Those consumers who are less directly impacted by climate change may also engage in less gardening due to discomfort or concerns about perceptions stemming from the direct impact of climate change on others. Current or potential retail customers may pull back from all or parts of the lawn and garden category in response to softening consumer demand. Also, our ability to finance the development of climate resilient product offerings may suffer if consumers become less engaged in lawn and gardening.
Our business could be negatively impacted by corporate citizenship and sustainability matters - including climate change - and/or our reporting of such matters.
Certain investors, customers, consumers, associates, governmental authorities and other stakeholders are increasing their focus on corporate citizenship and sustainability matters (including climate changes). From time to time, we communicate certain initiatives, including goals, regarding environmental matters, responsible sourcing and social investments, including pursuant to our Corporate Responsibility Report. 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.
Moreover, there are adopted and proposed international accords and treaties, as well as federal, state and local laws and regulations, that would attempt to control or limit the causes of climate change, including the effect of greenhouse gas emissions on the environment. In the event that the U.S. government or foreign governments enact new climate change laws or regulations or make changes to existing laws or regulations, compliance with applicable laws or regulations may result in increased manufacturing costs for our products, such as by requiring investment in new pollution control equipment or changing the ways in which certain of our products are made. Additional compliance burdens could be imposed by laws requiring the collection, measurement and analysis of climate-related data which can be costly, time-consuming, dependent on third-party cooperation and unreliable. Furthermore, methodologies for measuring, tracking and reporting on such matters continue to change over time, which requires our processes and controls for such data to evolve as well. 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.
Any failure to achieve our goals with respect to corporate citizenship and sustainability matters or a perception (whether or not valid) of our failure to act responsibly with respect to the environment or to adequately manage the political, legal and regulatory impacts of corporate citizenship or other sustainability matters could adversely affect our financial condition, results of operations, cash flows and reputation.
Product recalls or other product liability claims could materially and adversely affect our business, financial condition and results of operation.
Due to the highly regulated nature of our products, which are primarily designed for consumer use, we may be required to stop selling, return or recall products due to a variety of potential concerns including suspected or confirmed product contamination, adulteration, product mislabeling or misbranding, tampering, or other deficiencies. Product recalls or voluntary market withdrawals could result in significant losses due to their costs, the destruction of product inventory, and lost sales due to the unavailability of the product for a period of time. 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.
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. A significant product liability, legal judgment or a related regulatory enforcement action against us, or a significant product recall or voluntary withdrawal, may materially and adversely affect our business, financial condition and results of operation.
We believe we have built our reputation on the efficacy and safety of our brands. Any incident that erodes consumer affinity for our brands or our business operations could significantly reduce our value and damage our business. For example, negative third-party research or media reports on our product safety or efficacy, whether accurate or not, may adversely affect consumer perceptions, which could cause the value of our brands to suffer and adversely affect our business. We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as:
• public health concerns, illness or safety;
• the perception of our environmental stewardship and the effects our business has on the environment;
• security breaches of confidential company, customer or employee information; or
• employee related claims relating to alleged employment discrimination, health care and benefit issues.
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.
We sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries or segments, including the growing of cannabis, that may not grow or achieve market acceptance in a manner that we can predict. The demand for these products depends on the uncertain growth of these industries or segments. 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. 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.
In addition, we sell products that end users may purchase for use in industries or segments, including the growing of cannabis, that are subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions. For example, certain countries and 38 U.S. states have adopted frameworks that authorize, regulate, and tax the cultivation, processing, sale, and use of cannabis for medicinal and/or non-medicinal use, while the U.S. Controlled Substances Act and the laws of other U.S. states prohibit growing cannabis.
We sell certain of our products over the Internet through our online store and our retail customer’s e-commerce retail 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. It is essential that these platforms provide a shopping experience that will generate orders and return visits to the respective platforms.
We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce business, including: changes in required technology interfaces; website downtime and other technical failures; costs and technical issues associated with website software, systems and technology investments and upgrades; data and system security; system failures, disruptions and breaches and the costs to address and remedy such failures, disruptions or breaches; computer viruses; and changes in and compliance with applicable federal and state regulations. In addition, our efforts to remain competitive with technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, may increase our costs and may not increase sales or attract 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.
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 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. 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 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. As cyber-attacks increase in frequency and magnitude, we may be unable to obtain cyber-security insurance in amounts and on terms we view as appropriate for our operations.
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, consumers, associates, suppliers and others, including personally identifiable information. We are required to comply with increasingly complex and changing data privacy and security laws and regulations, that apply to the collection, storage, use, transmission and protection of personal information and other consumer and employee data, including particularly the transfer of personal data between or among countries. High-profile security breaches of the information systems of a number of U.S. companies and/or government agencies may result in increased regulations and new security laws.
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. 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. 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 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.
Additionally, it is possible one or more of our insurers could specifically exclude from our policy certain chemicals used in our products. 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.
Our international operations makesubject us susceptible to the costs and risks associated with operating internationally.
We operate manufacturing, sales and service facilities outside of the United States, particularly in Canada, the Netherlands, MexicoCanada and China.Mexico. Accordingly, we are subject to risks associated with operating in foreign countries, including:
In addition, our operations outside the United States are subject to the risk of new and different legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations and potentially adverse tax consequences. The costs associated with operating our continuing international business could adversely affect our financial condition, results of operations, financial conditionoperations and cash flows in the future.flows.
Our operations depend on our ability to protect our infrastructure against damage from catastrophe, natural disaster or severe weather, as well as events resulting from unauthorized security breach, power loss, telecommunications failure, act of war, terrorist attack, pandemic or other events that could have a significant disruptive effect on our operations. Further, the development of artificial intelligence is creating more sophisticated avenues to disrupt operational systems. We have disaster recovery and business continuity plans in place that are ready to be executed if we encounter a disruptive event. However, we cannot be certain that our plans, or those of third-party service providers we rely on, will be successful in the event of a disaster. If our disaster recovery or business continuity plans are unsuccessful in a disaster recovery scenario, we could potentially experience material adverse impacts including loss of data, damage to important facilities, disruption to our operations, regulatory intervention, reputational harm and loss of customers.
Climate change and unfavorable weather conditions could adversely impact our financial results.
Our consumer lawn and garden business in any year is susceptible to weather conditions in the markets in which our products are sold. These climate conditions may adversely impact the sale of certain products or increase demand for other products thereby making the overall impact of abnormal or extreme weather conditions on us difficult to predict.
The effects of climate change could include varying temperature levels, water shortages and changes to rainfall amounts, rainfall patterns, storm patterns and storm intensities. These effects could affect the availability and cost of raw materials, commodities and energy, which in turn may impact our ability to procure the quantities and levels of goods or services required to operate our business.
Consumers and businesses may independently change their behavior because of concerns regarding the impact of climate change and public perceptions. For example, consumers may elect to garden less frequently than historic patterns due to the unpredictability of weather patterns. Those consumers who are less directly impacted by climate change may also engage in less gardening due to discomfort or concerns about perceptions stemming from the direct impact of climate change on others. Current or potential retail customers may pull back from all or parts of the lawn and garden category in response to softening consumer demand. Our ability to finance the development of climate appropriate product offerings may also suffer if consumers become less engaged in lawn and gardening.
Our business could be negatively impacted by corporate citizenship and sustainability matters (including climate change) and/or our reporting of such matters.
Certain investors, customers, consumers, associates, governmental authorities and other stakeholders are increasing their focus on corporate citizenship and sustainability matters (including climate change). From time to time, we communicate certain initiatives, such as goals, regarding environmental matters, responsible sourcing and social investments, including pursuant to our Corporate Responsibility Report. 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.
Moreover, there are adopted and proposed international accords and treaties, as well as federal, state and local laws and regulations, that would attempt to regulate certain disclosures and behavior pertaining to sustainability matters, including the effect of greenhouse gas emissions on the environment. If the U.S., state or foreign governments enact new climate change laws or regulations or make changes to existing laws or regulations, compliance with applicable laws or regulations may result in increased manufacturing costs for our products and may require additional investment in new pollution control equipment or changes to manufacturing methods for our products. Additional compliance burdens could be imposed by laws requiring the collection, measurement and analysis of climate-related data, such as Scope 1, 2 and 3 greenhouse gas emissions similar to the California statutory greenhouse gas emission reporting requirements. Such compliance may be costly, time-consuming and, because disclosures would largely depend on third-party cooperation, uncertain. 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.
Any failure or perception of our failure (whether or not valid) to achieve our initiatives or goals with respect to corporate citizenship and sustainability matters, to act responsibly with respect to corporate citizenship and sustainability matters or to adequately manage the political, legal and regulatory impacts of corporate citizenship or other sustainability matters could adversely affect our financial condition, results of operations and cash flows.
Uncertainty surrounding legislation, regulation and governmental policy at the U.S. federal level could lead to disruptions in or have the effect of negatively impacting our financial condition, results of operations and cash flows.
Management's Discussion & Analysis (MD&A)
New heading “Trends Affecting our Business”
Removed heading “Share Repurchases”
Largest changes
“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. We also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce on hand inventory to align with the reduced network capacity. …”see in full comparison
“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. We also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce on hand inventory to align with the reduced network capacity. …”see in full comparison
“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. 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. …”see in full comparison
“As of September 30, 2024, 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. However, our assessment of our ability to meet our future obligations is inherently subjective, judgment-based, and susceptible to change based on future events. A covenant violation may result in an event of default. …”see in full comparison
“We continue to monitor the impacts of macroeconomic conditions, including elevated interest rates and the impact of inflationary pressures on input costs and consumer behavior; as well as geopolitical uncertainty, including the duration and resolution of ongoing conflicts, potential escalation of tensions and global supply chain disruptions. We are also continuing to monitor ongoing changes to global trade policies, including the imposition of tariffs. …”see in full comparison
“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. Refer to “NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET” of the Notes to the Consolidated Financial Statements included in this Form 10-K for further details.”see in full comparison
Full comparison: every changed paragraph (135)
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. 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. In addition, Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the businessoperating segments. See “SEGMENT RESULTS” below for additional information regarding our evaluation of segment performance.
Through our U.S. Consumer and Other segments, we are the leading manufacturer and marketer of branded consumer lawn and garden products in North America. 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. We are the exclusive agent of Monsanto for the marketing and distribution of certain of Monsanto’s consumer Roundup® branded products within the United States and certain other specified countries. In addition, we have an equity interest in Bonnie Plants, LLC, a joint venture with 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. Our keysignature brands include General Hydroponics®, Gavita®, Botanicare®, Agrolux®, Gro Pro®, Mother Earth®, Grower’s Edge®, HydroLogic Purification System® and CYCO®.
As a leading consumer branded lawn and garden company, our product development and marketing efforts are largely focused on providing innovative and differentiated products and continually increasing brand and product awareness to inspire consumers to create retail demand. We have implemented this model for a number of years by focusing on research and developmentdevelopment, advertising and investingconsumer approximatelyactivation 3-5%programs ofwith our U.S. Consumer segment annual net sales in advertisingcustomers to support and promote our consumer lawn and garden products and brands. We continually explore new and innovative ways to communicate with consumers. We believe that we receive a significant benefit from these expenditures and we anticipate acontinued similargrowth commitmentin to research and development, advertising and marketingthese investments in the future, with the continuing objective of driving category growth and profitably maintaining and/or increasing market share.
Our consumer lawn and garden net salesbusiness in any one year areis susceptible to weather conditions in the markets in which our products are sold. ForThese instance,climate periodsconditions of abnormally wet or dry weather canmay adversely impact the sale of certain products,products whileor increasingincrease demand for other products.products thereby making the overall impact of abnormal or extreme weather conditions on us difficult to predict. We believe that our diversified product line and our geographic diversification reduce this risk, although to a lesser extent in a year in which unfavorable weather is geographically widespread and extends across a significant portion of the lawn and garden season. We also believe that weather conditions in any one year, positive or negative, do not materially impact longer-term category growth trends.
Due to the seasonal nature of the consumer lawn and garden business, significant portions of our U.S. 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. 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.
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. These metrics include consumer purchases (point-of-sale data), market share, category growth, e-commerce penetration, household penetration, net sales (including unit volume, mix, pricing and foreignother exchange movementsdrivers), 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. We also focus on measures to optimize cash flow and return on invested capital, including the management of working capital and capital expenditures.
Trends Affecting our Business
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 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. These efforts have delivered run-rate annualized savings of more than $300.0, which has increased our gross margin rate and lowered SG&A. 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. Costs incurred from the inception of this restructuring initiative through September 30, 2024 were $383.5. Future costs associated with this restructuring initiative are not expected to be material.
During fiscal 2024,2025, our Hawthorne segment continued to experience adverse financial results primarily due to decreased sales volume. TheThis decreasewas in sales volume ispartially attributable to an oversupply of cannabis, which has led to a prolonged period of lower cannabis wholesale prices andprices, reduced indoor and outdoor cannabis cultivation.cultivation and consolidation of retail establishments. 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 enforcementapproaches ofto regulations.state regulation and enforcement. We expect that the oversupply of cannabis will continue to adversely impact our Hawthorne segment. If the oversupply of cannabis persists longer, or is more significant than we expect, our results of operations could be materially and adversely impacted for a longer period and to a greater extent than we currently anticipate.
During fiscal 2024, our Hawthorne segment announced a strategic partnership with BFG Supply (“BFG”), a leading national horticultural and agricultural product distributor, under which BFG will distribute Hawthorne’s proprietary Signature brand cultivation supplies and solutions. Our Hawthorne segment also announced it is discontinuing thediscontinued distribution of other companies’ products andin shiftingorder to shift its focus solely to marketing, innovating and supporting its portfolio of Signaturesignature brands,brands. including General Hydroponics®, Gavita®, Botanicare®, Gro Pro®, Mother Earth®, Grower’s Edge®, HydroLogic Purification System® and CYCO®. We expect theThe discontinuation of sales of other companies’ products willhas decreaseresulted thein lower sales volume ofwhen ourcompared Hawthorneto segment in futurehistorical periods, but willhas enableenabled continued optimization of itsHawthorne’s operations and improvement of its profitability.
We continue to monitor the impacts of macroeconomic conditions, including elevated interest rates and the impact of inflationary pressures on input costs and consumer behavior; as well as geopolitical uncertainty, including the duration and resolution of ongoing conflicts, potential escalation of tensions and global supply chain disruptions. We are also continuing to monitor ongoing changes to global trade policies, including the imposition of tariffs. The impact that these events and conditions will have on our operational and financial performance will depend on future developments, which are difficult to predict.
During fiscal 2024, we continued to experience the impacts of cost inflation and uncertain macroeconomic and geopolitical conditions (including the ongoing conflicts in Ukraine and the Middle East), resulting in persistently high manufacturing costs, elevated interest rates and volatile commodity costs. 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. 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.
During fiscal 2024, we recorded a non-cash, pre-tax other-than-temporary impairment charge of $64.6 related to our convertible debt investments in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations. Refer to “NOTE 16. FAIR VALUE MEASUREMENTS” of the Notes to the Consolidated Financial Statements included in this Form 10-K for more information regarding convertible debt investments. 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. INVESTMENT IN UNCONSOLIDATED AFFILIATES” of the Notes to the Consolidated Financial Statements included in this Form 10-K for more information regarding our investment in Bonnie Plants, LLC.
Net sales for fiscal 2025 were $3,413.1, a decrease of 3.9% from net sales of $3,552.7 for fiscal 2024. Net sales for fiscal 2024 were $3,552.7 as comparedflat to net sales of $3,551.3 for fiscal 2023. Net sales for fiscal 2023 decreased 9.5% from net sales of $3,924.1 for fiscal 2022. Factors contributing to the change in net sales are outlined in the following table:
The decrease in net sales for fiscal 2025 as compared to fiscal 2024 was primarily driven by:
•decreased net sales of 2.1% included within “volume and mix” related to nonrecurring fiscal 2024 sales of bulk raw materials and AeroGarden® products in our U.S. Consumer segment and the discontinuation of sales of other companies’ products in our Hawthorne segment;
•decreased sales volume of 1.0% comprised of the net impact of lower volume in our Hawthorne segment driven by all product categories, partially offset by higher volume in our U.S. Consumer segment driven by soils, mulch, grass seed and spreader products; and
•decreased pricing, primarily driven by additional investments in consumer activation activities in our U.S. Consumer segment.
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. Consumer segment; and
•the unfavorable impact of foreign exchange rates as a result of the strengthening of the U.S. dollar relative to the Canadian dollar;
•partially offset by increased pricing in our U.S. Consumer, Hawthorne and Other segments.
The decrease in cost of sales for fiscal 2025 as compared to fiscal 2024 was primarily driven by:
•lower material costs in our U.S. Consumer segment;
•lower sales volume in our Hawthorne segment;
•nonrecurring fiscal 2024 sales of bulk raw materials and AeroGarden® products in our U.S. Consumer segment and the discontinuation of sales of other companies’ products in our Hawthorne segment;
•lower warehousing and transportation costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments;
•lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer, Hawthorne and Other segments;
•lower inventory write-down charges included within “volume, mix and other” associated with our U.S. Consumer segment; and
•partially offset by higher sales volume in our U.S. Consumer segment.
•a decrease in impairment, restructuring and other charges;
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. Consumer, Hawthorne and Other segments;
•lower warehousing costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments; and
•the favorable impact of foreign exchange rates as a result of the strengthening of the U.S. dollar relative to the Canadian dollar;
•partially offset by higher material costs in our U.S. Consumer, Hawthorne and Other segments;
•higher manufacturing costs, primarily labor, included within “volume, mix and other” in our U.S. Consumer, Hawthorne and Other segments;
•inventory write-down charges included within “volume, mix and other” associated with our U.S. Consumer segment;
•an increase in costs associated with the Roundup® marketing agreement; and
•an increase in impairment, restructuring and other charges.
The increase in gross margin rate for fiscal 2025 as compared to fiscal 2024 was primarily driven by:
•lower material costs in our U.S. Consumer segment;
•favorable mix associated with our U.S. Consumer and Hawthorne segments;
•lower warehousing and transportation costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments;
•lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer, Hawthorne and Other segments;
•lower inventory write-down charges included within “volume, mix and other” associated with our U.S. Consumer segment; and
•partially offset by decreased pricing, primarily driven by additional investments in consumer activation activities in our U.S. Consumer segment; and
•unfavorable leverage of fixed costs, included within “volume, mix and other” driven by lower sales volume in our Hawthorne segment.
•a decrease in impairment, restructuring and other charges;
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, Hawthorne and Other segments;
•higher manufacturing costs, primarily labor, included within “volume, mix and other” in our U.S. Consumer, Hawthorne and Other segments;
•unfavorable leverage of fixed costs, included within “volume, mix and other,” driven by lower sales and production volume in our 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.
SG&A increased $44.4, or 7.9%, during fiscal 2025 compared to fiscal 2024. Advertising expense increased $11.3, or 8.0%, in fiscal 2025 due to higher media spending in our U.S. Consumer segment. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, decreased $10.5, or 18.4%, primarily due to lower long-term incentive compensation expense. Other SG&A increased by $45.6, or 14.6%, driven by higher short-term variable cash incentive compensation expense and higher marketing spend.
What changed in the latest 10-Q
Risk Factors
Largest changes
You should evaluate forward-looking statements in the context of these risks and uncertainties and are cautioned not to place undue reliance on such statements.see in full comparisonTheseThe risk factors described may notcontainidentify allof the factorsrisks thatarecouldimportantbe material toyou.investors. We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements that we make in this Form 10-Q are based on management’s current views and assumptions regarding future events and speak only as oftheirthedates.date on which they are made. We disclaim any obligation to updatedevelopments ofthese risk factors or any forward-looking statement 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.
Full comparison: every changed paragraph (2)
The Company’s risk factors, as of MarchJune 28,27, 2026, have not materially changed from those described in Part I, Item 1A of the 2025 Annual Report.
You should evaluate forward-looking statements in the context of these risks and uncertainties and are cautioned not to place undue reliance on such statements. TheseThe risk factors described may not containidentify all of the factorsrisks that arecould importantbe material to you.investors. We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements that we make in this Form 10-Q are based on management’s current views and assumptions regarding future events and speak only as of theirthe dates.date on which they are made. We disclaim any obligation to update developments of these risk factors or any forward-looking statement 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.
Management's Discussion & Analysis (MD&A)
New heading “Other Non-Operating Expense, net”
Largest changes
“During the three and nine months ended June 27, 2026, we recorded employee and executive severance charges of $1.0 and $1.7, respectively, in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations primarily related to our U.S. Consumer segment; and $21.5 and $21.7, respectively, in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations primarily related to Corporate. During the three and nine months ended June 28, 2025, we recorded employee and executive severance charges of $2.0 and $5. …”see in full comparison
Income from operations wassee in full comparison$401.8$169.6 for the three months endedMarchJune28,27, 2026,anaincreasedecrease of14.9%23.5% compared to$349.7$221.8 for the three months endedMarchJune29,28, 2025; and was$380.0$549.7 for thesixnine months endedMarchJune28,27, 2026, an increase of25.0%4.6% compared to$303.9$525.7 for thesixnine months endedMarchJune29,28, 2025. For the three months ended June 27, 2026, the decrease was primarily driven by higher impairment, restructuring andsixother charges and a lower gross margin rate, partially offset by higher net sales. For the nine months endedMarchJune28,27, 2026, the increase was primarily driven by higher netsales,sales and a higher gross marginrate and lower impairment, restructuring and other charges,rate, partially offset by higher SG&A.A and higher impairment, restructuring and other charges.
“During the three and six months ended March 29, 2025, we incurred employee and executive severance charges of $3.0 in our U.S. Consumer segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations. During the three and six months ended March 29, 2025, we incurred employee and executive severance charges of $3.3 in our U.S. Consumer segment and $2.1 and $11.6, respectively, at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.”see in full comparison
“During the three and nine months ended June 27, 2026, we recorded a charge of $4.0 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations associated with a settlement agreement to resolve a dispute with former shareholders of a business that was acquired in fiscal 2021.”see in full comparison
“During the three and nine months ended June 28, 2025, we recorded a non-cash loss of $0.0 and $7.0, respectively, in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital for an investment in FLUENT.”see in full comparison
Net income from continuing operations wassee in full comparison$215.6,$319.1, or$3.65$5.40 per diluted share, for thesixnine months endedMarchJune28,27, 2026 compared to$154.7,$309.4, or$2.64$5.28 per diluted share, for thesixnine months endedMarchJune29,28, 2025. The increase was driven by higher net sales, a higher gross marginrate, lower impairment, restructuring and other chargesrate and lower interest expense, partially offset by higherSG&Aimpairment, restructuring and other charges, higher other non-operating expense, higher income taxexpense.expense and higher SG&A.
Full comparison: every changed paragraph (89)
On June 29, 2026, the Company announced that its Board of Directors had named Nathan E. Baxter as President & Chief Executive Officer of the Company effective June 26, 2026. In addition, the Board elected Mr. Baxter to the Board of Directors. Mr. Baxter succeeds James Hagedorn, who served as Chief Executive Officer of the Company since 2001. Mr. Hagedorn, who served as Chairman of the Board since 2003, also resigned from the Board, and the Board elected Lead Independent Director Peter Shumlin as Chairman.
During the three months ended December 27, 2025, we determined that the Hawthorne business met the criteria to be classified as held for sale, and classified the related assets and liabilities as held for sale on the Condensed Consolidated Balance Sheets for all periods presented. We determined this represents a strategic shift, and therefore, effective in the first quarter of fiscal 2026, we classified our results of operations for all periods presented to reflect the Hawthorne business as a discontinued operation. For the three and six months ended March 28, 2026, we incurred pre-tax charges of $29.6 and $134.4, respectively, related to valuation adjustments to recognize the carrying amount of the Hawthorne business at fair value less estimated costs to sell in the “Loss from discontinued operations, net of tax” line on the Condensed Consolidated Statements of Operations.
During the three months ended December 27, 2025, we determined that the Hawthorne business met the criteria to be classified as held for sale, and classified the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets for all periods presented. We determined this represented a strategic shift, and therefore, effective in the first quarter of fiscal 2026, we classified our results of operations for all periods presented to reflect the Hawthorne business as a discontinued operation. On April 8, 2026, we completed the sale of the Hawthorne business in North America to Vireo in exchange for 213.0 million common shares of Vireo, which represented approximately 14% of Vireo’s total outstanding common shares as of the closing date, and a warrant with a five yearfive-year term to acquire 80.0 million additional common shares of Vireo at a strike price of $0.85 per share. On the closing date, the Hawthorne business held cash and cash equivalents of $35.0 that was transferred to Vireo as part of the sale. Additionally, in connection with the transaction, we entered into a contract manufacturing agreement and agreed to provide Vireo with up to $20.0 of manufacturing services over a two-year period for no cost. For the nine months ended June 27, 2026, we recorded a loss of $101.8 related to the sale of the Hawthorne business in North America. The completion of the divestiture during the thirdthree quartermonths ofended fiscalJune 27, 2026 resulted in an ordinary taxable loss that will allow the realization of deferred tax assets to reduce cash taxes paid over the next several fiscal years.
Unless specifically stated, all discussion herein refers to results from our continuing operations. The following table sets forth the components of earnings as a percentage of net sales for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:
The following table sets forth the components of earnings as a percentage of net sales for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:
Net sales for the three months ended MarchJune 28,27, 2026 were $1,459.5,$1,172.1, an increase of 5.0%1.1% from net sales of $1,389.7$1,159.3 for the three months ended MarchJune 29,28, 2025. Net sales for the sixnine months ended MarchJune 28,27, 2026 were $1,814.0,$2,986.1, an increase of 3.3%2.4% from net sales of $1,756.3$2,915.7 for the sixnine months ended MarchJune 29,28, 2025. Factors contributing to the change in net sales are outlined in the following table:
The increase in net sales for the three months ended MarchJune 28,27, 2026 as compared to the three months ended MarchJune 29,28, 2025 was primarily driven by:
•higherfavorable sales volumemix in our U.S. Consumer segment driven by soils,higher grasssales seed,of fertilizer, plant food and controlsbranded products, partially offset by lower sales of mulch products;
•higher sales volume in our Other segment; and
•higher net sales associated with the Roundup® marketing agreement.
The increase in net sales for the nine months ended June 27, 2026 as compared to the nine months ended June 28, 2025 was primarily driven by:
•favorable mix in our U.S. Consumer segment driven by higher sales of branded products including soils, grass seed, controls and fertilizer products, partially offset by lower sales of mulch products;
•increased pricing in our U.S. Consumer segment.and Other segments.
The increase in net sales for the six months ended March 28, 2026 as compared to the six months ended March 29, 2025 was primarily driven by:
•higher sales volume in our U.S. Consumer segment driven by soils, grass seed and fertilizer products, partially offset by lower sales of mulch products;
•higher net sales associated with the Roundup® marketing agreement; and
•increased pricing in our U.S. Consumer segment.
The increase in cost of sales for the three months ended MarchJune 28,27, 2026 as compared to the three months ended MarchJune 29,28, 2025 was primarily driven by:
•sales mix in our U.S. Consumer segment driven by higher sales of branded products, partially offset by lower sales of mulch products;
•higher sales volume in our U.S. ConsumerOther segment; and
•an increase in costs associated with the Roundup® marketing agreement; and
•higher material costs in our U.S. Consumer segment;
•partiallyhigher offset by lower manufacturingtransportation costs included within “volume, mix and other” in our U.S. Consumer segment; and
•partially offset by favorable material costs driven by supply chain savings initiatives in our U.S. Consumer segment, net of the impact of higher commodity costs.
The increase in cost of sales for the nine months ended June 27, 2026 as compared to the nine months ended June 28, 2025 was primarily driven by:
•sales mix in our U.S. Consumer segment driven by higher sales of branded products, partially offset by lower sales of mulch products; and
•higher transportation costs included within “volume, mix and other” in our U.S. Consumer segment;
•partially offset by favorable material costs driven by supply chain savings initiatives in our U.S. Consumer segment, net of the impact of higher commodity costs; and
The decrease in cost of sales for the six months ended March 28, 2026 as compared to the six months ended March 29, 2025 was primarily driven by:
•lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer segment; and
•a decrease in impairment, restructuring and other charges;
•partially offset by higher sales volume in our U.S. Consumer segment;
•an increase in costs associated with the Roundup® marketing agreement; and
•higher material costs in our U.S. Consumer segment.
As a percentage of net sales, our gross margin rate was 41.8%31.2% and 39.0%32.1% for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively, and was 38.5%35.7% and 35.9%34.4% for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:
The increasedecrease in gross margin rate for the three and six months ended MarchJune 28,27, 2026 as compared to the three and six months ended MarchJune 29,28, 2025 was primarily driven by:
•higher transportation costs included within “volume, mix and other” in our U.S. Consumer segment;
•partially offset by favorable mix associated with our U.S. Consumer segment;
•favorable material costs driven by supply chain savings initiatives in our U.S. Consumer segment, net of the impact of higher commodity costs; and
•higher commission associated with the Roundup® marketing agreement.
The increase in gross margin rate for the nine months ended June 27, 2026 as compared to the nine months ended June 28, 2025 was primarily driven by:
•lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer segment;
•increased pricing in our U.S. Consumer segmentand Other segments; and
•favorable material costs driven by supply chain savings initiatives in our U.S. Consumer segment, net of the impact of higher commodity costs; and
•partially offset by higher materialtransportation costs included within “volume, mix and other” in our U.S. Consumer segment.
SG&A increased $21.4, or 12.0%, during the three months ended March 28, 2026 compared to the three months ended March 29, 2025. Advertising expense increased $19.4, or 31.4%, due to higher media spending in our U.S. Consumer segment. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares for the three months ended March 29, 2025, increased $5.2, or 40.3%, primarily due to the timing of long-term incentive compensation grants. Other SG&A decreased $2.6, or 2.8%, driven by lower short-term variable cash incentive compensation expense.
SG&A increased $13.8,$0.8, or 4.7%,0.6%, during the sixthree months ended MarchJune 28,27, 2026 compared to the sixthree months ended MarchJune 29,28, 2025. Advertising expense increaseddecreased $23.0,$3.0, or 29.0%,6.0%, duedriven toby higherthe timing of media spending in our U.S. Consumer segment. Other SG&A decreased $11.9, or 6.9%, driven by lower short-term variable cash incentive compensation expense partially offset by higher marketing spend.
SG&A increased $14.5, or 3.3%, during the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025. Advertising expense increased $20.0, or 15.5%, and other marketing expense increased $6.2, or 14.9%, driven by planned higher spending in our U.S. Consumer segment. Other SG&A decreased $16.4, or 7.9%, driven by lower short-term variable cash incentive compensation expense.
During the three and nine months ended June 27, 2026, we recorded employee and executive severance charges of $1.0 and $1.7, respectively, in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations primarily related to our U.S. Consumer segment; and $21.5 and $21.7, respectively, in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations primarily related to Corporate. During the three and nine months ended June 28, 2025, we recorded employee and executive severance charges of $2.0 and $5.0, respectively, in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations primarily related to our U.S. Consumer segment. During the three months ended June 28, 2025, employee and executive severance charges recorded in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations were not material. During the nine months ended June 28, 2025, we recorded employee and executive severance charges of $13.5 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations, including charges of $1.9 in our U.S. Consumer segment and $11.6 at Corporate.
Impairment, restructuring and other charges for the three and six months ended March 28, 2026 were not material.
During the three and six months ended March 29, 2025, we incurred employee and executive severance charges of $3.0 in our U.S. Consumer segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations. During the three and six months ended March 29, 2025, we incurred employee and executive severance charges of $3.3 in our U.S. Consumer segment and $2.1 and $11.6, respectively, at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.
During the three and sixnine months ended MarchJune 29,27, 2025,2026, we incurredrecorded a non-cash losscharge of $0.0$8.7 andfor $7.0,expected respectively,credit losses related to a seller financing loan in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital for an investment in FLUENT.Operations.
During the three and nine months ended June 27, 2026, we recorded a non-cash charge of $7.9 for expected credit losses related to a convertible debt investment in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.
During the three and nine months ended June 27, 2026, we recorded a charge of $4.0 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations associated with a settlement agreement to resolve a dispute with former shareholders of a business that was acquired in fiscal 2021.
During the three and nine months ended June 28, 2025, we recorded a non-cash loss of $0.0 and $7.0, respectively, in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital for an investment in FLUENT.
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. During the three andmonths sixended June 28, 2025, costs associated with this restructuring initiative were not material. During the nine months ended MarchJune 29,28, 2025, we incurredrecorded costs of $2.3 and $3.7, respectively, in our U.S. Consumer segment$3.6 in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations associated with this restructuring initiative.
Other expense is comprised of activities such as the discount on sales of accounts receivable under the Master Receivables Purchase Agreement, royalty income from the licensing of certain of our brand names and foreign exchange transaction gains and losses. Other expense was $7.3$3.7 and $4.2$7.1 for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively; and was $10.2$13.7 and $8.4$15.5 for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively.
Income from operations was $401.8$169.6 for the three months ended MarchJune 28,27, 2026, ana increasedecrease of 14.9%23.5% compared to $349.7$221.8 for the three months ended MarchJune 29,28, 2025; and was $380.0$549.7 for the sixnine months ended MarchJune 28,27, 2026, an increase of 25.0%4.6% compared to $303.9$525.7 for the sixnine months ended MarchJune 29,28, 2025. For the three months ended June 27, 2026, the decrease was primarily driven by higher impairment, restructuring and sixother charges and a lower gross margin rate, partially offset by higher net sales. For the nine months ended MarchJune 28,27, 2026, the increase was primarily driven by higher net sales,sales and a higher gross margin rate and lower impairment, restructuring and other charges,rate, partially offset by higher SG&A.A and higher impairment, restructuring and other charges.
Equity in LossIncome of Unconsolidated Affiliates
Equity in lossincome of unconsolidated affiliates was $4.5$29.2 and $5.9$25.3 for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively; and was $17.6$11.6 and $15.8$9.5 for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively. Equity in lossincome of unconsolidated affiliates associated with Bonnie Plants, LLC was $4.5$29.2 and $15.1$27.2 for the three months ended June 27, 2026 and sixJune 28, 2025, respectively; and was $14.2 and $11.4 for the nine months ended MarchJune 28,27, 2026, respectively, compared to $5.92026 and $15.8June for the three and six months ended March 29,28, 2025, respectively. We anticipated a net loss for Bonnie Plants, LLC in the second quarter due to the seasonal nature of its business, in which sales are heavily weighted to the spring and summer selling periods during our third fiscal quarter. During the three months ended December 27, 2025, our investment balance in FLUENT was reduced to zero, and we discontinued equity method recognition of our proportionate share of FLUENT losses.
SMG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 3 filings (3 insiders, 3 trade dates, 32,002 shares, about $2.2M). Net open-market shares: -32,002 (purchases minus sales); net value about -$2.2M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-02 | Scheiwer Mark J |
Shares withheld for tax | 1,559 | $49.02 | $76.4K |
| 2026-10-01 | Sandoval Brian E |
Grant/award | 575 | — | — |
| 2026-10-01 | Johnson Stephen L |
Grant/award | 144 | — | — |
| 2026-09-30 | Scheiwer Mark J |
Other | 3 | $45.88 | $150 |
| 2026-09-05 | Baxter Nathan Eric |
Shares withheld for tax | 12,023 | $57.53 | $691.7K |
| 2026-08-31 | Scheiwer Mark J |
Other | 3 | $53.41 | $150 |
| 2026-08-31 | Hagedorn Christopher |
Other | 4 | $53.41 | $217 |
| 2026-08-10 | Kingdon Mark D |
Open-market sale | 831 | $61.65 | $51.2K |
| 2026-08-03 | Hagedorn Partnership, L.p. |
Open-market sale | 1,207 | $68.16 | $82.3K |
| 2026-08-03 | Hagedorn Partnership, L.p. |
Open-market sale | 28,793 | $67.42 | $1.9M |
| 2026-07-31 | Scheiwer Mark J |
Other | 3 | $56.55 | $150 |
| 2026-07-31 | Baxter Nathan Eric |
Other | 88 | $56.55 | $5.0K |
| 2026-07-31 | Hagedorn Christopher |
Other | 4 | $56.55 | $217 |
| 2026-07-30 | Johnson Stephen L |
Open-market sale | 1,171 | $68.32 | $80.0K |
| 2026-07-01 | Johnson Stephen L |
Grant/award | 105 | $68.57 | $7.2K |
| 2026-07-01 | Miaritis Nick |
Grant/award | 16,043 | — | — |
| 2026-07-01 | Baxter Nathan Eric |
Grant/award | 29,168 | — | — |
| 2026-07-01 | Sandoval Brian E |
Grant/award | 420 | $68.57 | $28.8K |
| 2026-06-30 | Scheiwer Mark J |
Other | 3 | $52.42 | $150 |
| 2026-06-30 | Hagedorn Christopher |
Other | 4 | $52.42 | $217 |
| 2026-06-30 | Baxter Nathan Eric |
Other | 95 | $52.42 | $5.0K |
| 2026-05-29 | Scheiwer Mark J |
Other | 3 | $50.53 | $150 |
| 2026-05-29 | Baxter Nathan Eric |
Other | 99 | $50.53 | $5.0K |
| 2026-05-29 | Hagedorn Christopher |
Other | 4 | $50.53 | $217 |
| 2026-05-29 | Hagedorn James |
Other | 40 | $50.53 | $2.0K |
| 2026-04-30 | Hagedorn Christopher |
Other | 4 | $51.04 | $217 |
| 2026-04-30 | Baxter Nathan Eric |
Other | 98 | $51.04 | $5.0K |
| 2026-04-30 | Scheiwer Mark J |
Other | 3 | $51.04 | $150 |
| 2026-04-30 | Hagedorn James |
Other | 39 | $51.04 | $2.0K |
| 2026-04-28 | Baxter Nathan Eric |
Shares withheld for tax | 5,897 | $65.38 | $385.5K |
| 2026-03-31 | Baxter Nathan Eric |
Other | 91 | $54.67 | $5.0K |
| 2026-03-31 | Hagedorn Christopher |
Other | 4 | $54.67 | $217 |
| 2026-03-31 | Scheiwer Mark J |
Other | 3 | $54.67 | $150 |
| 2026-03-31 | Hagedorn James |
Other | 37 | $54.67 | $2.0K |
Well-known investors holding SMG (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Two Sigma Investments | 2026-06-30 | 813,379 | $55.4M | 0.04% | Added 52% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 272,451 | $18.3M | 0.01% | Reduced 15% |
| Renaissance Technologies | 2026-06-30 | 179,000 | $12.2M | 0.02% | New position |
| Markel Group (Tom Gayner) | 2026-06-30 | 168,000 | $10.2M | — | Sold out |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 114,973 | $7.0M | — | Sold out |
| Bridgewater Associates | 2026-06-30 | 99,119 | $6.8M | 0.03% | Added 59% |
| Millennium Management (Israel Englander) | 2026-06-30 | 49,470 | $3.4M | 0.0% | Reduced 88% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 22,960 | $1.6M | 0.0% | Reduced 34% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 8,475 | $577.2K | 0.0% | Reduced 83% |