SMG Scotts Miracle-Gro Co - 10-K

ITEM 1A.     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 2025 Annual Report to Shareholders (our “2025 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 Exchange 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 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.

Forward-looking statements in this Form 10-K and our 2025 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 and other cautionary statements that we make from time to time in our other SEC filings and public communications.

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. These factors may not contain all of the factors that are important to you. 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-K and our 2025 Annual Report are based on management’s current views and assumptions regarding future events and speak only as of their dates. 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.

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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.

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 and take into account production capacity, timing of shipments and inventory levels. Due to a number of factors, including manufacturing lead times, seasonal purchasing patterns and the potential for material price increases, we may carry additional inventory and increase our working capital and related financing requirements. Carrying additional inventory may increase our warehousing costs and 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 or cause us to incur excess and obsolete inventory charges or excess warehouse storage costs.

An economic downturn and economic uncertainty may adversely affect demand for our products.

There are indications 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 recent years, there have been instances of Congress and the President failing to reach agreement on federal budgetary and spending matters. A government 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 recession. We believe that any extended or renewed economic disruptions or deterioration in the global economy could have an adverse impact on our business, financial condition or results of 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.

Disruptions in availability or increases in the prices of raw materials, fuel or transportation costs could adversely affect our results of operations.

We source many of our commodities and other raw materials on a global basis. The general availability and price of those raw materials can be affected by numerous forces beyond our control, including political instability, trade restrictions and other government regulations, duties and tariffs, price controls, changes in currency exchange rates and weather. A significant disruption in the availability or price of any of our key raw materials could negatively impact our business.

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 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.

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.

Our top two retail customers, The Home Depot and Lowe’s, together accounted for 52% of our fiscal 2025 net sales and 25% of our outstanding accounts receivable as of September 30, 2025. The loss of, or reduction in orders from, 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.

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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. 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. In addition, our business may be negatively affected by changes in the policies of our retailers, such as inventory reductions, limitations on access to shelf space, price demands and other conditions.

We may not successfully develop new product lines and products or improve existing product lines and products.

Our future success depends on our ability to maintain an adequate innovation pipeline, improve our existing product lines and products and 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 or otherwise prevent us from developing and manufacturing certain products and product innovations.

Our marketing activities may not be successful.

We invest substantial resources in advertising, consumer promotions and other marketing activities to maintain and expand our brand image. There can be no assurances that our marketing strategies will be effective or that the amount we invest in marketing 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, we will have incurred significant expenses without the benefit of higher revenues.

The highly competitive nature of our markets could adversely affect our ability to maintain or grow 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-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.

Our manufacturing operations, including our reliance on third-party manufacturers, could harm our business.

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.

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. Substitute manufacturers may not be available or, if available, may be unwilling or unable to manufacture the products we need on acceptable terms. Moreover, if customer demand for our products increases, we may be unable to secure sufficient additional capacity from our current third-party manufacturers, or others, on commercially reasonable terms, or at all.

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Our business is subject to risks associated with sourcing and manufacturing outside of the U.S. and risks from tariffs and/or international trade wars.

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. The U.S. has enacted tariffs on goods imported into the U.S. which have increased the cost of the goods we purchase. Significant 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.

Our reliance on a limited base of suppliers may result in disruptions to our business and adversely affect our financial results.

Although we continue to implement risk mitigation strategies for single-source suppliers, we also rely on a limited number of suppliers for certain of our raw materials, product components and other necessary supplies, including certain active ingredients used in our products. If we are unable to maintain supplier arrangements and relationships, if we are unable to contract with suppliers at the quantity and quality levels needed for our business, or if any of our key suppliers becomes insolvent or experience other financial distress, we could experience disruptions in production, which could have a material adverse effect on our financial condition, results of operations and cash flows.

A significant interruption in the operation of our or our suppliers’ facilities could adversely impact our capacity to manufacture products and supply our customers, which could adversely affect our results of operations and 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, 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 manufacture products and supply our products in a timely manner, particularly with respect to products that we manufacture at a limited number of facilities such as our fertilizer and liquid products, which could have a material adverse effect on our results of operations and financial position.

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 we use 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. 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.

Our international operations subject us to the costs and risks associated with operating internationally.

We operate manufacturing, sales and service facilities outside of the United States, particularly in Canada and Mexico. 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.

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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 and cash flows.

In the event of a disaster, our disaster recovery and business continuity plans may fail, which could adversely interrupt our operations.

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 failure to adequately manage the consumer and retail impacts of climate change could have a material adverse effect on our financial condition, results of operations and cash flows.

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.

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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.

Uncertainty surrounding legislation, regulation and government policy at the U.S. federal level may impact the U.S. and global economies, international trade and relations, unemployment rates, energy prices, tariffs, immigration, taxes, inflation and the general U.S. regulatory environment, among other things. Although we cannot predict the impact, if any, of these changes, they could negatively affect our financial condition, results of operations and cash flows.

Product recalls or other product liability claims could materially and adversely affect our business, financial condition and results of operations.

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 or discourage consumers from buying our products and 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 operations.

If the perception of our brands or organizational reputation are damaged, our consumers, distributors and retailers may react negatively, which could materially and adversely affect our business, financial condition and results of operations.

We believe we have built our reputation on the trust of consumers and performance 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 quality, efficacy and safety, 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, including:

• public health concerns, illness or safety;

• the perception of our environmental stewardship and the impacts our business has on the environment (including packaging, energy and water use and matters related to climate impact and waste management) and other sustainability issues;

• security breaches of confidential company, customer or employee information; or

• employee related claims relating to alleged employment discrimination, health care and benefit issues.

Such negative publicity may be widely and rapidly disseminated, including through social media platforms.

As part of our marketing initiatives, we have contracted with certain public figures to market and endorse our products. While we maintain specific selection criteria and are diligent in our efforts to seek out public figures that resonate genuinely and effectively with our consumer audience, the individuals we choose to market and endorse our products may fall into negative favor with the general public. 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.

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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, reduced indoor and outdoor cannabis cultivation and consolidation of retail establishments. The oversupply has been driven by increased licensing activity across the U.S. as well as inconsistent approaches to state regulation and enforcement.

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 39 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.

If we are unable to effectively execute our e-commerce business, our reputation and operating results may be harmed.

We sell certain of our products through our online store and our retail customers’ e-commerce retail platforms. As consumers increasingly utilize 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.

Our e-commerce business is subject to various risks and uncertainties, 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, cyber attacks; 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 such as generative artificial intelligence powered search platforms, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications may increase our costs but may not increase sales or attract consumers. Our failure to effectively address these risks and uncertainties may 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. The efficient delivery of our products to our consumers requires that our distribution centers have adequate capacity to support the current level of e-commerce operations and any anticipated increased levels that may occur as a result of the growth of our e-commerce business. If we encounter difficulties with our distribution centers, or if any distribution centers shut down for any reason, including as a result of pandemics, acts of war, terrorism, government shut downs, work stoppages and fire or other natural disasters, we could face inventory shortages that may result in out of stock conditions in our online store, incur significantly higher costs and longer lead times associated with distributing our products to our consumers and experience dissatisfaction from our consumers. 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 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. 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 with our retail customers, vendors, suppliers and other parties critical to our business, could be significantly impaired, which may adversely impact our business.

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).

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We have experienced and may continue to experience an increase in the number of such cyber threats. The rapid evolution and growing adoption of artificial intelligence and machine learning technologies present emerging risks to the security of our information, as well as the information of our customers and business partners. Furthermore, the increasing use of artificial intelligence by threat actors is enhancing the sophistication, speed and effectiveness of cyber attacks and amplifying existing security challenges. Additionally, the use of artificial intelligence by our employees, or by our customers and business partners, could increase our exposure to cyber threats. As cyber attacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as appropriate for our operations.

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 data privacy and security laws.

An operational failure or breach of security from increasingly sophisticated cyber threats could lead to the loss, misuse or unauthorized disclosure of this information about our customers, consumers, associates and suppliers, 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 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 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.

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. 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.

We maintain an insurance program that includes coverage to de-risk against claims associated with property damage, management liability, cargo liability, cyber threats, workers compensation and general liability losses. 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. The volatility of the insurance and reinsurance markets are also subject to macroeconomic conditions and events that are outside of our control.

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 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 have a material adverse effect on our results of operations and financial condition.

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.

If we (i) become insolvent, (ii) commit a material breach, material fraud or material willful misconduct under the Third Restated Agreement, (iii) experience a change of control (subject to certain exceptions) or (iv) impermissibly assign our rights or delegate our obligations under the Third Restated Agreement, Monsanto may terminate the Third Restated Agreement without paying a termination fee to the Company, subject to certain terms and conditions as set forth therein. In addition, if Program EBIT (as defined in the Third Restated Agreement) falls below $50.0 million in any program year, Monsanto may terminate the Third Restated Agreement without paying a termination fee to the Company, subject to certain terms and conditions as set forth therein.

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Monsanto may also terminate the Third Restated Agreement in the event of (a) a change of control of Monsanto or a sale of the Roundup ® business effective at the end of the fifth full year after providing notice of termination, subject to certain terms and conditions as set forth in the applicable agreements, or (b) Monsanto’s decision to decommission the permits, licenses and registrations needed for, and the trademarks, trade names, packages, copyrights and designs used in, the sale of the Roundup ® products in the lawn and garden market (a “Brand Decommissioning Event”), but, in each case, Monsanto would have to pay a termination fee to the Company.

If circumstances exist or otherwise develop that result in a material decline in Monsanto’s consumer Roundup ® business, or in the event of Monsanto’s insolvency or bankruptcy, we would seek to mitigate the impact on us by exercising various rights and remedies under the Third Restated Agreement and applicable law. We cannot, however, provide any assurance that our exercise of such rights or remedies would produce the desired outcomes or that a material decline in Monsanto’s consumer Roundup ® business would not have a material adverse effect on our business, financial condition or results of operations.

In the event that the Third Restated Agreement terminates or Monsanto’s consumer Roundup ® business materially declines, we would lose all, or a substantial portion, of the significant source of earnings and overhead expense absorption the Third Restated Agreement provides.

For additional information regarding the Third Restated Agreement including certain of our rights and remedies under the Third Restated Agreement, see “NOTE 6. 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.

Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other intellectual property rights we own or license, particularly our registered brand names and issued patents. Although we have a robust portfolio of registered trademarks, we have not sought to register each of our marks either in the United States or in every country in which each such mark is used. Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive the same protection in other countries as we would in the United States with respect to the registered brand names and issued patents we hold.

In addition, advances in artificial intelligence and the increasingly widespread use of such technology by us, our third parties or others, including generative artificial intelligence tools, may increase the risk of (a) claims against us for infringing third party intellectual property rights, and (b) the unauthorized access to, or use of, our intellectual property and unauthorized or unintended exposure of our confidential and proprietary information, all of which could adversely affect the value of our intellectual property, including our brands, our trade secrets and our investment in research and development. If we are unable to protect our intellectual property, proprietary information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products or services infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of our resources. A successful claim of trademark, patent or other intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition and results of operations.

Our success depends upon the retention and availability of key personnel and the effective succession of senior management.

Our success largely depends on the performance of our management team and other key personnel. Our future operations could be harmed if we are unable to attract and retain talented, highly qualified senior executives and other key personnel. In recent years, we experienced management transitions involving our Chief Financial Officer, Chief Operating Officer, Chief Human Resources Officer and Chief Legal Officer. If we are unable to effectively provide for the succession of senior management, including our Chief Executive Officer, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.

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Our workforce reductions may cause undesirable consequences and adversely affect our business and results of operations.

In recent years, we have undertaken strategic reductions in our workforce as part of a series of organizational changes and initiatives intended to create operational and management-level efficiencies. These workforce reductions 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 workforce reductions to seek alternate employment. Associates whose positions were eliminated or those who determine to seek alternate employment may seek employment with our competitors.

We cannot provide any assurance that we will not undertake additional workforce reductions or that we will be able to realize the cost savings and other anticipated benefits from any of our previous or future workforce reduction plans. In addition, continued workforce reductions may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities and to execute our business plans. Additionally, workforce reductions may make it more difficult to recruit and retain associates if they perceive uncertainty in employment. If we need to increase the size of our workforce in the future, we may encounter a competitive hiring market due to labor shortages, increased employee turnover, changes in the availability of workers and increased wage costs.

We are involved in a number of legal proceedings and, while we cannot predict the outcomes of such proceedings and other contingencies with certainty, some of these outcomes could adversely affect our business, financial condition, results of operations and cash flows.

We are involved in legal proceedings and are subject to investigations, inspections, audits, inquiries and similar actions by governmental authorities, arising in the course of our business (see the discussion in “ITEM 3. LEGAL PROCEEDINGS” of this Form 10-K). Legal proceedings, in general, can be expensive and disruptive. Some of these suits may purport or be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts of damages, including punitive or exemplary damages, and may remain unresolved for several years. 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.

From time to time, we are also involved in legal proceedings involving contract, employment, intellectual property and other matters including, for example, the securities litigation and shareholder derivative suits discussed in “ITEM 3. 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. As a result, we could from time to time incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations in the period in which the amounts are accrued and/or our cash flows in the period in which the amounts are paid. The outcome of some of these legal proceedings and other contingencies could require us to take, or refrain from taking, actions which could negatively affect our operations and, depending on the nature of the allegations, could negatively impact our reputation or the reputation of products we market on behalf of third parties. 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, 2025, we had $2,119.7 million of debt and $1,166.9 million in available borrowings under the sixth amended and restated credit agreement (the “Sixth A&R Credit Agreement”), which was in effect during the entirety of fiscal 2025. On November 21, 2025, the Company entered into a seventh amended and restated credit agreement (the “Seventh A&R Credit Agreement”), which replaced the Sixth A&R Credit Agreement. Our inability to meet restrictive financial and non-financial covenants associated with our debt, or to generate sufficient cash flow to repay maturing debt, could adversely affect our financial condition. 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, dividends, Common Share repurchases 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;

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• 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.

Our ability to make payments on or to refinance our indebtedness (including, for example, our 5.250% Senior Notes due 2026 (the “5.250% Senior Notes”)), fund planned capital expenditures and acquisitions, pay dividends and repurchase 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. We cannot provide any assurance that our business will generate sufficient cash flow from operating activities or that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

The Sixth A&R Credit Agreement, Seventh A&R Credit Agreement and the indentures governing our 5.250% Senior Notes, our 4.500% Senior Notes due 2029 (the “4.500% Senior Notes”), our 4.000% Senior Notes due 2031 (the “4.000% Senior Notes”) and our 4.375% Senior Notes due 2032 (the “4.375% Senior Notes” and, collectively with the 5.250% Senior Notes, the 4.500% Senior Notes and the 4.000% Senior Notes, the “Senior Notes”) contain restrictive covenants and cross-default provisions. For example, under the Sixth A&R Credit Agreement, the maximum permitted leverage ratio was 4.75 for the fourth quarter of fiscal 2025. Our leverage ratio was 4.10 at September 30, 2025. In addition, the Sixth A&R Credit Agreement contained a fixed charge coverage ratio covenant which set the minimum permitted fixed charge coverage ratio at 1.00. Our fixed charge coverage ratio was 1.42 for the twelve months ended September 30, 2025. Under the Seventh A&R Credit Agreement, the maximum permitted leverage ratio is 5.00 for the first quarter of fiscal 2026 and thereafter. The Seventh A&R Credit Agreement also contains a minimum interest coverage ratio of (i) 3.00 for each of the fiscal quarters within fiscal 2026, (ii) 3.25 for each of the fiscal quarters within fiscal 2027 and (iii) 3.50 for fiscal quarters thereafter. The Senior Notes contain an independently calculated interest coverage ratio covenant which sets the minimum permitted interest coverage ratio at 2.00. Our interest coverage ratio was 4.78 for the twelve months ended September 30, 2025. A breach of any of the financial ratio covenants or other covenants in the Seventh A&R Credit Agreement or Senior Notes could result in a default and/or a cross default under the Seventh A&R Credit Agreement or Senior Notes, as applicable. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, and could cease making further loans and institute foreclosure proceedings against our assets. 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 the Seventh A&R Credit Agreement and the indentures governing the Senior Notes, we may incur additional debt in the future. 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 financial condition, results of operations and cash flows.

Interest rates have a direct impact on our business due to the amount of variable rate debt the Company utilizes in its operations. Prolonged periods of higher interest rates may have a negative impact on our financial condition, results of operations and cash flows. All of our debt under the Seventh A&R Credit Agreement bears interest at variable rates primarily derived from the U.S. Prime Rate, Federal Reserve Bank of New York Rate, Secured Overnight Financing Rate, Euro Interbank Offered Rate, Canadian Prime Rate or Canadian Overnight Repo Rate Average (all as defined in the Seventh A&R Credit Agreement), based on our election, plus a spread that depends on our quarterly-tested leverage ratio. In a rising interest rate environment, debt financing will become more expensive and may have higher transactional and servicing costs.

Although the Company has taken steps to reduce our exposure to variable rate debt instruments, if interest rates remain relatively high or increase in the future, we could see increases in our borrowing costs which could have a material adverse effect on our financial condition, results of operations and cash flows.

Global economic and capital market conditions may limit our access to capital and/or increase the costs of such capital.

In the future, we may need new or additional financing to provide liquidity to conduct our operations, expand our business or refinance existing indebtedness. Any sustained weakness in general economic conditions and/or U.S. or global capital markets could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and we may also rely in the future, on access to financial markets as a source of liquidity for working capital requirements, acquisitions and general corporate purposes. Our access to funds under the Seventh A&R Credit Agreement depends on the ability of the lenders that are parties to that facility to meet their funding commitments. Moreover, the obligations of the lenders under the Seventh A&R Credit Agreement are several and not joint and, as a result, a funding default by one lender does not need to be made up by the others. Longer term volatility in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions or reduced alternatives could adversely affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

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Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact our business and results of operations.

Acquisitions, strategic alliances and investments are an important element of our long-term corporate strategy and use of capital, and these transactions could be material to our financial condition and results of operations. 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 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.

• 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 or the goals of regulators or business partners. As a result, business decisions or other actions or omissions of controlling owners, management or other persons or entities who control companies in which we invest may adversely affect the value of our investment, result in litigation, commercial or regulatory action against us or otherwise damage our reputation.

• 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 associates, customers, former shareholders or other third parties.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments or strategic alliances could cause us to fail to realize the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally.

Our acquisitions, strategic alliances and investments could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition, results of operations and cash flows. Also, the anticipated benefits of many of our acquisitions may not materialize.

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A failure to dispose of assets or businesses in a timely manner may have an adverse effect on our results of operations and financial condition.

We evaluate as necessary the potential disposition of assets and businesses that may no longer help meet our objectives. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. Alternatively, we may dispose of a business at a price or on terms that are less than we had anticipated. After reaching an agreement with a buyer for the disposition of a business, the pre-closing conditions must also be satisfied or waived, which may prevent us from completing the transaction. Dispositions may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations. Under these arrangements, performance by the divested businesses or other conditions outside our control could affect our future financial results.

Our lending activities may adversely impact our business and results of operations.

As part of our strategic initiatives, we have provided financing to certain strategic partners. Our exposure to credit losses on these financing balances and strategic investments will depend on the financial condition of these counterparties as well as legal, regulatory and macroeconomic factors beyond our control, such as deteriorating conditions in the world economy or in the industries served by the borrowers. While we monitor our exposure, there can be no guarantee we will be able to successfully mitigate all of these risks. For example, during fiscal 2024 and fiscal 2023, the Company recorded non-cash, pre-tax other-than-temporary impairment charges related to its convertible debt investments of $64.6 million and $101.3 million, respectively. These or other credit losses, if significant, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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.

NRSROs rate the Senior Notes and the Company based on factors that include our operating results, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by the NRSROs can include maintaining, upgrading or downgrading the current rating or placing us on a watch list for possible future downgrading. Downgrading the credit rating of the Senior Notes or placing us on a watch list for possible future downgrading could increase our cost of financing, limit our access to the capital markets and have an adverse effect on the market price of the Senior Notes. In August 2025, S&P Global Ratings affirmed our B+ rating and upgraded our outlook from “stable” to “positive.” Also, in August 2025, Moody’s Investors Service affirmed our B1 “stable” rating.

Our hedging arrangements expose us to certain counterparty and market risks.

We periodically utilize hedging agreements to fix the prices of a portion of our urea and fuel needs. The hedging 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 expenditure for these raw materials.

In addition to commodity hedge agreements, we utilize interest rate swap agreements to manage the net interest rate risk inherent in our sources of borrowing, as well as foreign currency forward contracts to manage the exchange rate risk associated with certain intercompany loans with foreign subsidiaries and other approved transactional currency exposures.

Utilizing these hedge agreements exposes us to certain counterparty risks. The failure of one or more of the counterparties to fulfill their obligations under the hedge agreements, whether because of weakening financial stability or otherwise, could adversely affect our financial condition, results of operations and cash flows.

Our postretirement-related costs and funding requirements could increase as a result of volatility in the financial markets, changes in interest rates and actuarial assumptions.

We sponsor a number of defined benefit pension plans associated with our U.S. and former international businesses, as well as a postretirement medical plan in the United States for certain retired associates and their dependents. 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. Additionally, changes in interest rates and legislation enacted by governmental authorities can impact the timing and amounts of contribution requirements.

We utilize third-party actuaries to evaluate assumptions used in determining projected benefit obligations and the fair value of plan assets for our pension and other postretirement benefit plans. In the event we determine that our assumptions should be revised, such as the discount rate or expected return on assets, our future pension and postretirement benefit expenses could increase or decrease. The assumptions we use may differ from actual results, which could have a significant impact on our pension and postretirement liabilities and related costs and funding requirements.

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Risks Related to Regulation of Our Company

Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase our costs of doing business or limit our ability to market certain products.

Laws and regulations relating to environmental matters affect us in several ways. All pesticide products sold in the United States must comply with FIFRA and most must be registered with the U.S. EPA and similar state agencies. Our inability to obtain or maintain such registrations, or the cancellation of any such registration of our products, could have an adverse effect on our business, the severity of which would depend on a variety of factors, including the product(s) involved, whether another product could be substituted and whether our competitors were similarly affected. We attempt to anticipate regulatory developments and maintain registrations of, and access to, substitute active ingredients, but there can be no assurance that we will be able to avoid these risks. For example, there are indications that federal agencies in the U.S. may take more restrictive positions on 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, 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. 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. 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.

In addition, the use of certain fertilizer and pesticide products is regulated by various environmental and public health agencies. 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. Even if we are able to comply with all such regulations and obtain all necessary registrations and licenses, we cannot provide assurance that our products, particularly pesticide products, will not cause or be alleged to cause injury to the environment or to people under all circumstances, particularly when used improperly or contrary to instructions. The costs of compliance, remediation or products liability have adversely affected operating results in the past and could adversely affect our financial condition, results of operations and cash flows.

Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business. For example, we are subject to regulations relating to our harvesting of peat for our growing media business which has come under increasing regulatory and environmental scrutiny. In the United States, state regulations frequently require us to limit our harvesting and to restore the property to an agreed-upon condition. 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.

In addition to the laws and regulations already described, various 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. 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. Liability may be imposed upon us without regard to whether we knew of or caused the presence of such materials and, under certain circumstances, on a joint and several basis. There can be no assurances that the presence of such regulated materials at any such locations, or locations that we may acquire in the future, will not result in liability to us under such laws or regulations or expose us to third-party actions such as tort suits based on alleged conduct or environmental conditions.

Regulatory agencies around the world have been establishing programs and restrictions relating to preventing the release of PFAS into the air, drinking water systems and food supply and to expand cleanup efforts to remediate the impacts of PFAS pollution. In 2021, the federal government announced a multi-agency plan to address PFAS contamination nationwide. Further, in April 2024, the U.S. EPA designated PFOA and PFOS, including their salts and structural isomers – as hazardous substances under section 102(a) of CERCLA, which could have wide-ranging impact on companies across industries. Further, many states have taken independent action to address PFAS ranging from appropriation bills for funding research to complete bans on any PFAS-containing products. Complicating this patchwork of state regulation is that various jurisdictions define PFAS differently with some definitions being comparatively broad. It is possible, therefore, that some of these actions will have an impact – direct or indirect – on our business.

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Packaging has also become subject to increased governmental scrutiny. Several states in the U.S. have enacted legislation to reduce single use plastics and establish extended producer responsibility programs, which are designed to bolster the recycling industry by transferring the cost of packaging disposal to the manufacturers. 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. Similar extended producer responsibility programs are active in several Canadian provinces.

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. A significant change in the facts and circumstances underlying these assumptions or in current enforcement policies or requirements, or a finding that we are not in substantial compliance with applicable environmental and public health laws and regulations, could have a material adverse effect on future environmental capital expenditures and other environmental expenses, as well as our financial condition, results of operations and cash flows.

Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial condition, results of operations and cash flows.

We are subject to income and other taxes in the United States federal jurisdiction and various local, state and foreign jurisdictions. Our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets (such as net operating losses and tax credits) and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. 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. Congress or the legislative bodies in local, state and foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets or our tax liabilities. Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses, funding and other items in intercompany transactions. We are subject to ongoing tax audits in various jurisdictions. In connection with these audits (or future audits), tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. We regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision. 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.

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.

Our payment of quarterly cash dividends on and repurchase of our Common Shares pursuant to a stock repurchase program are subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, credit facility provisions and other factors. 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, 2025, we do not have a board authorized share repurchase program.

We may maintain, or increase or decrease (including eliminating) the amount of cash dividends on, and increase or decrease the amount of repurchases of, our Common Shares in the future. Any decision by us regarding the payment of quarterly cash dividends or repurchases of our Common Shares could cause the market price of our Common Shares to decline. 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.

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Hagedorn Partnership, L.P. beneficially owns approximately 23% of our Common Shares and can significantly influence decisions that require the approval of shareholders.

Hagedorn Partnership, L.P. beneficially owned approximately 23% of our outstanding Common Shares as of November 21, 2025. 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. In addition, because of the percentage of ownership and voting concentration in Hagedorn Partnership, L.P., elections of our Board of Directors will generally be within the control of Hagedorn Partnership, L.P. While all of our shareholders are entitled to vote on matters submitted to our shareholders for approval, the concentration of our Common Shares and voting control presently lies with Hagedorn Partnership, L.P. As such, it would be difficult for shareholders to propose and have approved proposals not supported by Hagedorn Partnership, L.P. Hagedorn Partnership, L.P.’s interests could differ from, or conflict with, the interests of other shareholders.

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. 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

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. Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the operating 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 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 signature brands include General Hydroponics ® , Gavita ® , Botanicare ® , 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 development, advertising and consumer activation programs with our customers 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 continued growth in these 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 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. 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.

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

Percent of Net Sales by Quarter

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

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 other drivers), 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

During fiscal 2025, our Hawthorne segment continued to experience decreased sales volume. This was partially attributable to an oversupply of cannabis, which has led to a prolonged period of lower cannabis wholesale prices, reduced indoor and outdoor cannabis cultivation and consolidation of retail establishments. The oversupply has been driven by increased licensing activity across the U.S. as well as inconsistent approaches to 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 discontinued distribution of other companies’ products in order to shift its focus solely to marketing, innovating and supporting its portfolio of signature brands. The discontinuation of sales of other companies’ products has resulted in lower sales volume when compared to historical periods, but has enabled continued optimization of Hawthorne’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.

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

Results of Operations

The following table sets forth the components of earnings as a percentage of net sales:

Year Ended September 30,

% of Net Sales

% of Net Sales

% of Net Sales

Net sales

Cost of sales

Cost of sales—impairment, restructuring and other

Gross margin

Operating expenses:

Selling, general and administrative

Impairment, restructuring and other

Other (income) expense, net

Income (loss) from operations

Equity in loss of unconsolidated affiliates

Interest expense

Other non-operating (income) expense, net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

The sum of the components may not equal due to rounding.

Net Sales

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 flat to net sales of $3,551.3 for fiscal 2023. Factors contributing to the change in net sales are outlined in the following table:

Year Ended September 30,

Volume and mix

Pricing

Change in net sales

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.

Net sales for fiscal 2024 as compared to fiscal 2023 were primarily driven by the offsetting changes below:

• increased sales volume, comprised of the net impact of higher volume in our U.S. Consumer segment driven by mulch, soils and controls products, partially offset by lower volume in our Hawthorne segment driven by the discontinuation of sales of other companies’ products; and

• increased net sales associated with the Roundup ® marketing agreement;

• offset by decreased pricing in our U.S. Consumer, Hawthorne and Other segments.

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

Cost of Sales

The following table shows the major components of cost of sales:

Year Ended September 30,

Materials

Manufacturing labor and overhead

Distribution and warehousing

Costs associated with Roundup ® marketing agreement

Cost of sales

Cost of sales—impairment, restructuring and other

Factors contributing to the change in cost of sales are outlined in the following table:

Year Ended September 30,

Volume, mix and other

Material cost changes

Costs associated with Roundup ® marketing agreement

Foreign exchange rates

Impairment, restructuring and other

Change in cost of sales

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

• a decrease in impairment, restructuring and other charges;

• partially offset by higher sales volume in our U.S. Consumer segment.

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 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. Consumer segment; and

• an increase in costs associated with the Roundup ® marketing agreement.

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

Gross Margin

As a percentage of net sales, our gross margin rate was 30.6%, 23.9% and 18.5% for fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:

Year Ended September 30,

Volume, mix and other

Material costs

Roundup ® commissions and reimbursements

Pricing

Impairment, restructuring and other

Change in gross margin rate

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

• a decrease in impairment, restructuring and other charges;

• 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.

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. Consumer and Hawthorne segments;

• favorable mix driven by lower sales in our Hawthorne segment relative to our U.S. Consumer segment;

• lower material costs in our U.S. Consumer segment; and

• a decrease in impairment, restructuring and other charges;

• partially offset by decreased pricing in 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.

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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,

Advertising

Advertising as a percentage of net sales

Share-based compensation

Research and development

Amortization of intangibles

Other selling, general and administrative

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.

SG&A increased $7.7, or 1.4%, during fiscal 2024 compared to fiscal 2023. Advertising expense increased $17.3, or 14.0%, in fiscal 2024 driven by increased media spending in our U.S. Consumer segment. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, increased $7.5, or 15.1%, due to a cumulative adjustment recognized during fiscal 2023 for certain performance-based award units to reflect management’s assessment of a lower probability of achievement of performance goals. 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.

Impairment, Restructuring and Other

Activity described herein is classified within the “Cost of sales—impairment, restructuring and other” and “Impairment, restructuring and other” lines in the Consolidated Statements of Operations. The following table details impairment, restructuring and other charges (recoveries) for each of the periods presented:

Year Ended September 30,

Cost of sales—impairment, restructuring and other:

Restructuring and other charges, net

Right-of-use asset impairments

Property, plant and equipment impairments

Operating expenses—impairment, restructuring and other:

Restructuring and other charges (recoveries), net

Loss on sale of business

Loss on exchange of convertible debt investment

Goodwill and intangible asset impairments

Convertible debt other-than-temporary impairments

Total impairment, restructuring and other charges

On September 30, 2025, we completed the divestiture of our Hawthorne professional horticulture business based in the Netherlands for $8.5, which was financed by us in the form of a loan bearing interest at 6.0% with a maturity date of December 31, 2029. The seller financing loan is recorded in the “Other assets” line in the Consolidated Balance Sheets and was classified as an investing activity in the Consolidated Statements of Cash Flows. We incurred a non tax-deductible loss on the sale of $17.7 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2025. The loss included a write-off of accumulated foreign currency translation adjustments of $9.5.

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(Dollars in millions, except per share data)

During fiscal 2025, we incurred employee and executive severance charges of $25.3. We incurred charges of $6.1 in our U.S. Consumer segment and $1.2 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2025. We incurred charges of $2.3 in our U.S. Consumer segment, $3.0 in our Hawthorne segment, $1.1 in our Other segment and $11.6 at Corporate in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2025.

During fiscal 2025, we incurred a charge of $7.5 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with a settlement agreement to resolve litigation with the former shareholders of a business that was acquired in fiscal 2021.

During fiscal 2025, we incurred a non-cash loss of $7.0 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital Inc. (“RIV Capital”) for non-voting exchangeable shares of FLUENT Corp. (formerly Cansortium Inc.) (“FLUENT”). Refer to “NOTE 7. INVESTMENT IN UNCONSOLIDATED AFFILIATES” of the Notes to the Consolidated Financial Statements included in this Form 10-K for further details.

During fiscal 2025, we incurred impairment charges of $3.6 associated with Hawthorne finite-lived intangible assets in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations.

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. During fiscal 2025, we incurred costs of $13.0 associated with this restructuring initiative primarily related to facility closure costs and impairment of right-of-use assets and property, plant and equipment. We incurred costs of $4.0 in our U.S. Consumer segment and $9.0 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2025. During fiscal 2024, we incurred costs of $89.4 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. We incurred costs of $11.3 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. Consumer segment, $1.0 in our Hawthorne segment, $1.1 in our Other segment and $2.4 at Corporate in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2024. During fiscal 2023, we incurred costs of $229.0 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. We incurred costs of $16.3 in our U.S. Consumer segment and $168.5 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2023. We incurred costs of $7.7 in our U.S. Consumer segment, $20.7 in our Hawthorne segment, $0.8 in our Other segment and $14.9 at Corporate in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations during fiscal 2023. Costs incurred since the inception of this restructuring initiative through September 30, 2025 were $62.4 for our U.S. Consumer segment, $306.2 for our Hawthorne segment, $2.9 for our Other segment and $25.1 at Corporate.

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. Refer to “NOTE 15. FAIR VALUE MEASUREMENTS” of the Notes to the Consolidated Financial Statements included in this Form 10-K for further details.

During fiscal 2024, we recorded a gain of $12.1 in the “Impairment, restructuring and other” line in the Consolidated Statements of Operations associated with a payment received in resolution of a dispute with the former ownership group of a business that was acquired in fiscal 2022. This payment was classified as an operating activity in the Consolidated Statements of Cash Flows.

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.

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

Other (Income) Expense, net

Other (income) 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 (income) expense was $18.8, $19.9 and $(0.1) in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. The increase in other expense for fiscal 2025 and fiscal 2024 compared to fiscal 2023 was primarily due to the discount on sales of accounts receivable under the Master Receivables Purchase Agreement.

Income (Loss) from Operations

Income (loss) from operations was $358.6 in fiscal 2025 compared to $208.8 in fiscal 2024. The increase was primarily driven by a higher gross margin rate, partially offset by lower net sales and higher SG&A.

Income (loss) from operations was $208.8 in fiscal 2024 compared to $(174.4) in fiscal 2023. 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.

Equity in Loss of Unconsolidated Affiliates

Equity in loss of unconsolidated affiliates was $2.8, $68.1 and $101.1 in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Equity in (income) loss of unconsolidated affiliates associated with Bonnie Plants, LLC was $(5.4), $68.1 and $101.1 in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. We recorded pre-tax impairment charges associated with our investment in Bonnie Plants, LLC of $61.9 and $94.7 during fiscal 2024 and fiscal 2023, respectively. Equity in loss of unconsolidated affiliates associated with FLUENT was $8.2 in fiscal 2025. Refer to “NOTE 7. INVESTMENT IN UNCONSOLIDATED AFFILIATES” of the Notes to the Consolidated Financial Statements included in this Form 10-K for further details.

Interest Expense

Interest expense was $128.8 in fiscal 2025, a decrease of 18.9% compared to $158.8 in fiscal 2024. The decrease was driven by lower average borrowings of $301.4 and a decrease in our weighted average interest rate, net of the impact of interest rate swaps, of 50 basis points. The decrease in average borrowings was driven by our focus on using available cash flow to reduce our debt. The decrease in our weighted average interest rate was primarily driven by lower borrowing rates under the Sixth A&R Credit Agreement.

Interest expense was $158.8 in fiscal 2024, a decrease of 10.8% compared to $178.1 in fiscal 2023. The decrease was driven by lower average borrowings of $554.8, partially offset by an increase in our weighted average interest rate, net of the impact of interest rate swaps, of 40 basis points. The decrease in average borrowings was driven by our focus on using available cash flow to reduce our debt as well as the impact of the expiration of the Receivables Facility and the execution of the Master Receivables Purchase Agreement. The increase in our weighted average interest rate was primarily driven by higher borrowing rates under the Sixth A&R Credit Agreement.

Income Tax Expense (Benefit)

A reconciliation of the federal corporate income tax rate and the effective tax rate on income (loss) before income taxes is summarized below:

Year Ended September 30,

Statutory income tax rate

Effect of foreign operations

State taxes, net of federal benefit

Effect of other permanent differences

Research and Experimentation and other federal tax credits

Effect of tax contingencies

Change in valuation allowances

Other

Effective income tax rate

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THE SCOTTS MIRACLE-GRO COMPANY

(Dollars in millions, except per share data)

During fiscal 2025, we incurred a non tax-deductible loss on the sale of our Hawthorne professional horticulture business of $17.7 and this impact is included in the “Effect of other permanent differences” line in the table above. We also recorded a full valuation allowance during fiscal 2025 against deferred tax assets related to $8.2 of equity in loss of unconsolidated affiliates associated with FLUENT and $7.0 of non-cash loss related to the exchange of our convertible debt investment in RIV Capital, and this impact is included in the “Change in valuation allowances” line in the table above.

For fiscal 2024, the impact on the effective tax rate of the items noted in the table above increased due to the decrease in loss before income taxes for fiscal 2024 as compared to fiscal 2023. Deferred tax assets related to unrealized losses on convertible debt investments were $43.6 and $33.4 at September 30, 2024 and 2023, respectively. A full valuation allowance was recorded against these losses at September 30, 2024 and 2023 as we do not expect to utilize them prior to their expiration, and this impact is included in the “Change in valuation allowances” line in the table above.

Net Income (Loss)

Net income (loss) was $145.2, or $2.47 per diluted share, in fiscal 2025 compared to $(34.9), or $(0.61) per diluted share, in fiscal 2024. The increase was driven by a higher gross margin rate, lower equity in loss of unconsolidated affiliates and lower interest expense, partially offset by lower net sales, higher income tax expense and higher SG&A.

Diluted average common shares used in the diluted net income per common share calculation for fiscal 2025 were 58.7 million, which included dilutive potential common shares of 1.1 million. Diluted average common shares used in the diluted net loss per common share calculation for fiscal 2024 were 56.8 million, which excluded potential common shares of 0.9 million because the effect of their inclusion would be anti-dilutive as we incurred a net loss for fiscal 2024. The increase in diluted average common shares was also driven by the exercise and issuance of share-based compensation awards.

Net income (loss) was $(34.9), or $(0.61) per diluted share, in fiscal 2024 compared to $(380.1), or $(6.79) per diluted share, in fiscal 2023. 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.

Diluted average common shares used in the diluted net loss per common share calculation for fiscal 2024 and fiscal 2023 were 56.8 million and 56.0 million, respectively, which excluded potential common shares of 0.9 million and 0.4 million, respectively, because the effect of their inclusion would be anti-dilutive as we incurred a net loss for fiscal 2024 and 2023. The increase in diluted average common shares was primarily the result of the exercise and issuance of share-based compensation awards.

Segment Results

We have three operating segments and two reportable segments: U.S. Consumer and Hawthorne. U.S. Consumer consists of our consumer lawn and garden business in the United States. Hawthorne consists of our indoor and hydroponic gardening business. We have chosen to provide separate reportable segment disclosures for Hawthorne notwithstanding the fact that it does not meet any of the quantitative thresholds requiring such disclosure. The Other operating segment primarily consists of our consumer lawn and garden business in Canada and does not meet any of the quantitative thresholds requiring separate reportable segment disclosures.

Segment performance 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. We 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,

U.S. Consumer

Hawthorne

Reportable segment total

Other

Consolidated

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(Dollars in millions, except per share data)

The following table sets forth Segment Profit (Loss) as well as a reconciliation to income (loss) before income taxes, the most directly comparable measure prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

Year Ended September 30,

U.S. Consumer

Hawthorne

Reportable segment total

Other

Corporate

Intangible asset amortization

Impairment, restructuring and other

Equity in loss of unconsolidated affiliates

Interest expense

Other non-operating income (expense), net

Income (loss) before income taxes (GAAP)

U.S. Consumer

U.S. Consumer segment net sales were $2,993.7 in fiscal 2025, a decrease of 0.7% from fiscal 2024 net sales of $3,013.7. The decrease was driven by nonrecurring fiscal 2024 sales of bulk raw materials and AeroGarden ® products of 1.4% and decreased pricing of 0.6%, partially offset by higher sales volume of 1.4%. The increase in sales volume for fiscal 2025 was driven by soils, mulch, grass seed and spreader products. Decreased pricing in fiscal 2025 was due to additional investments in consumer activation activities.

U.S. Consumer Segment Profit was $572.6 in fiscal 2025, an increase of 15.0% from fiscal 2024 Segment Profit of $498.0. The increase for fiscal 2025 was primarily due to a higher gross margin rate, partially offset by higher SG&A and lower net sales.

U.S. Consumer segment net sales were $3,013.7 in fiscal 2024, an increase of 6.0% from fiscal 2023 net sales of $2,843.7. The increase was driven by higher sales volume of 7.3%, partially offset by decreased pricing of 1.3%. The increase in sales volume for fiscal 2024 was driven by mulch, soils and controls products as well as increased net sales associated with the Roundup ® marketing agreement.

U.S. Consumer Segment Profit was $498.0 in fiscal 2024, an increase of 9.7% from fiscal 2023 Segment Profit of $454.1. The increase for fiscal 2024 was primarily due to higher net sales and a higher gross margin rate, partially offset by higher SG&A driven by advertising expense and higher other expense driven by the discount on sales of accounts receivable.

Hawthorne

Hawthorne segment net sales were $165.8 in fiscal 2025, a decrease of 43.7% from fiscal 2024 net sales of $294.7. The decrease was driven by lower sales volume of 32.8%, the discontinuation of sales of other companies’ products of 9.9% and decreased pricing of 1.4%.

Hawthorne Segment Profit was $2.8 in fiscal 2025 compared to fiscal 2024 Segment Loss of $(14.2). 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 $294.7 in fiscal 2024, a decrease of 36.9% from fiscal 2023 net sales of $467.3. The decrease was driven by lower sales volume of 36.8% and decreased pricing of 0.5%, partially offset by favorable foreign exchange rates of 0.4%. The decrease in sales volume for fiscal 2024 was driven by all product categories and the impact of the discontinuation of sales of other companies’ products.

Hawthorne Segment Loss was $14.2 in fiscal 2024 compared to fiscal 2023 Segment Loss of $48.1. The improvement was driven by a higher gross margin rate and lower SG&A, partially offset by lower net sales.

Other

Other segment net sales were $253.6 in fiscal 2025, an increase of 3.8% from fiscal 2024 net sales of $244.3. The increase was driven by higher sales volume of 6.5% and increased pricing of 0.3%, partially offset by unfavorable foreign exchange rates of 2.5%.

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(Dollars in millions, except per share data)

Other segment profit was $12.7 in fiscal 2025, an increase of 170.2% from fiscal 2024 segment profit of $4.7. The increase was driven by higher net sales and a higher gross margin rate, partially offset by higher SG&A.

Other segment net sales were $244.3 in fiscal 2024, an increase of 1.7% from fiscal 2023 net sales of $240.3. The increase was driven by higher sales volume of 3.5%, partially offset by decreased pricing of 1.0% and unfavorable foreign exchange rates of 0.8%.

Other segment profit was $4.7 in fiscal 2024, a decrease of 62.1% from fiscal 2023 segment profit of $12.4. The decrease was driven by a lower gross margin rate and higher SG&A, partially offset by higher net sales.

Corporate

Corporate expenses were $133.4 in fiscal 2025, an increase of 13.3% from fiscal 2024 expenses of $117.7. The increase was primarily driven by higher short-term variable incentive compensation expense, partially offset by lower share-based compensation expense.

Corporate expenses were $117.7 in fiscal 2024, an increase of 15.8% from fiscal 2023 expenses of $101.6. The increase was primarily driven by higher share-based compensation expense due to the recognition of a cumulative adjustment in fiscal 2023 for certain performance-based award units to reflect management’s assessment of a lower probability of achievement of performance goals, partially offset by reductions in staffing levels and other cost-reduction initiatives.

Liquidity and Capital Resources

The following table summarizes cash activities for the years ended September 30:

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Operating Activities

Cash provided by operating activities totaled $371.3 for fiscal 2025 compared to $667.5 for fiscal 2024. The decrease was driven by higher inventory production, the timing of accounts receivable sales, higher short-term variable cash incentive compensation payments and higher SG&A, partially offset by higher gross margin and lower interest payments. Accounts receivable sale timing was driven by our entry into the Master Receivable Purchasing Agreement during fiscal 2024.

Cash provided by operating activities totaled $667.5 for fiscal 2024 compared to $531.0 for fiscal 2023. This increase was driven by lower accounts receivable, higher gross margin, accounts payable timing, lower payments associated with restructuring activities and lower interest payments, partially offset by higher inventory production, higher payments to customers related to promotional programs and lower income tax refunds received. Lower accounts receivable is driven by the favorable impact of accounts receivable sold under the Master Receivables Purchase Agreement. Accounts payable timing is driven by the impact of extended payment terms with vendors for payments originally due in the final weeks of fiscal 2022 that were paid in the first quarter of fiscal 2023.

The seasonal nature of our North America consumer lawn and garden business generally requires cash to fund significant increases in inventories during the first half of the fiscal year. Receivables and payables also build substantially in our second quarter of the fiscal year in line with the timing of sales to support our retailers’ spring selling season.

Investing Activities

Cash used in investing activities totaled $112.1 for fiscal 2025 compared to $100.4 for fiscal 2024. Cash used for investments in property, plant and equipment during fiscal 2025 and fiscal 2024 was $97.4 and $84.0, respectively, driven by higher spending on capital projects in fiscal 2025. On September 30, 2025, we completed the divestiture of our Hawthorne professional horticulture business based in the Netherlands for $8.5, which was financed by us in the form of an interest bearing loan that was classified as an investing activity in the Consolidated Statements of Cash Flows. We also had other investing cash outflows of $3.7 during fiscal 2025.

Cash used in investing activities totaled $100.4 for fiscal 2024, an increase of $34.7 compared to $65.7 for fiscal 2023. Cash used for investments in property, plant and equipment during fiscal 2024 and fiscal 2023 was $84.0 and $92.8, respectively. We also acquired an additional equity interest in Bonnie Plants, LLC for $21.4 and had other investing cash inflows of $5.0 during fiscal 2024.

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(Dollars in millions, except per share data)

For the three fiscal years ended September 30, 2025, we allocated our capital spending as follows: 68% for maintenance of existing productive assets; 22% for cost savings projects, focused primarily on supply chain and information technology; and 10% for innovation and expansion. We expect fiscal 2026 capital expenditures to be approximately $100.0 and we expect to allocate approximately 46% to maintenance of existing productive assets, 28% to cost savings projects and 26% to innovation and expansion projects.

Financing Activities

Cash used in financing activities totaled $294.0 for fiscal 2025 compared to $527.9 for fiscal 2024. During fiscal 2025, we had net debt repayments of $122.1, paid dividends of $154.3 and repurchased Common Shares for $18.4 (which includes cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation). In addition, we received cash from the exercise of stock options of $11.9 (which also includes amounts received from employee purchases under the employee stock purchase plan) during fiscal 2025. We also had other financing cash outflows of $11.1 during fiscal 2025 primarily related to prior year collections of previously sold accounts receivable that were submitted to the buyer in the current year.

Cash used in financing activities totaled $527.9 for fiscal 2024 compared to $520.1 for fiscal 2023. During fiscal 2024, we had net debt repayments of $391.0, paid dividends of $151.3 and repurchased Common Shares for $5.1 (which includes cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation). We also had other financing cash inflows of $15.7 during fiscal 2024 related to collections of previously sold accounts receivable not yet submitted to the buyer. Higher debt repayment is driven by our focus on using available cash flow to reduce our debt.

Accounts Receivable Sales

On October 27, 2023, we entered into the Master Receivables Purchase Agreement under which we could sell up to $600.0 of available and eligible outstanding customer accounts receivable generated by sales to four specified customers. On September 1, 2024, we amended the Master Receivables Purchase Agreement to permit us to sell up to $750.0 of available and eligible outstanding customer accounts receivable generated by sales to five specified customers. On August 28, 2025, the Master Receivables Purchase Agreement, which is uncommitted, was extended and now expires on September 1, 2026. Transactions under the Master Receivables Purchase Agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Consolidated Balance Sheets at the time of the sales transaction. Proceeds received from the sales of accounts receivable are classified as operating cash flows and collections of previously sold accounts receivable not yet submitted to the buyer are classified as financing cash flows in the Consolidated Statements of Cash Flows. We record the discount on sales in the “Other (income) expense, net” line in the Consolidated Statements of Operations. At September 30, 2025 and 2024, net receivables derecognized were $163.3 and $186.6, respectively. During fiscal 2025 and fiscal 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $1,906.1 and $1,938.6, respectively, and the total discount recorded on sales was $20.7 and $24.6, respectively.

Supplier Finance Program

We have an agreement to provide a supplier finance program which facilitates participating suppliers’ ability to finance our payment obligations with a designated third-party financial institution. Participating suppliers may, at their sole discretion, elect to finance our payment obligations prior to their scheduled due dates at a discounted price to the participating financial institution. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under this arrangement. The payment terms that we negotiate with our suppliers are consistent, regardless of whether a supplier participates in the program. Our current payment terms with a majority of our suppliers generally range from 30 to 60 days, which we deem to be commercially reasonable. Our outstanding payment obligations under our supplier finance program are recorded within accounts payable in the Consolidated Balance Sheets and the associated payments are classified as operating activities in the Consolidated Statements of Cash Flows.

Cash and Cash Equivalents

Our cash and cash equivalents were held in cash depository accounts with major financial institutions around the world or invested in high quality, short-term liquid investments having original maturities of three months or less. The cash and cash equivalents balances of $36.6 and $71.6 at September 30, 2025 and 2024, respectively, included $4.2 and $15.9, respectively, held by controlled foreign corporations. As of September 30, 2025, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.

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Borrowing Agreements

Credit Facilities

Our primary sources of liquidity are cash generated by operations and borrowings under our credit facilities, which are guaranteed by substantially all of Scotts Miracle-Gro’s domestic subsidiaries. On April 8, 2022, we entered into the Sixth A&R Credit Agreement, which provided the Company and certain of its subsidiaries with five-year senior secured loan facilities in the aggregate principal amount of $2,500.0, comprised of a revolving credit facility of $1,500.0 and a term loan in the original principal amount of $1,000.0.

At September 30, 2025, we had letters of credit outstanding in the aggregate principal amount of $83.1, and had $1,166.9 of borrowing availability under the Sixth A&R Credit Agreement. The weighted average interest rates on average borrowings under the credit facilities, excluding the impact of interest rate swaps, were 7.9%, 9.1% and 7.6% for fiscal 2025, fiscal 2024 and fiscal 2023, respectively.

During fiscal 2025 and fiscal 2024, we used available cash on hand to make prepayments on the term loan of the Sixth A&R Credit Agreement in the amount of $75.0 and $250.0, respectively, which was applied to the outstanding principal amount.

The Sixth A&R Credit Agreement, as amended on June 8, 2022 and July 31, 2023, contained, among other obligations, an affirmative covenant regarding our leverage ratio determined as of the end of each of our fiscal quarters. The maximum permitted leverage ratio was 4.75 for the fourth quarter of fiscal 2025. Our leverage ratio was 4.10 at September 30, 2025. The Sixth A&R Credit Agreement also contained an affirmative covenant regarding our fixed charge coverage ratio determined as of the end of each of our fiscal quarters. The minimum required fixed charge coverage ratio was 1.00. Our fixed charge coverage ratio was 1.42 for the twelve months ended September 30, 2025.

On November 21, 2025, we entered into the Seventh 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 $2,000.0, comprised of a revolving credit facility of $1,500.0 and a term loan in the original principal amount of $500.0. The Seventh A&R Credit Agreement also provides us with the right to seek additional committed credit under the agreement in an aggregate amount of up to $500.0 plus an unlimited additional amount, subject to certain specified financial and other conditions. The Seventh A&R Credit Agreement replaces the Sixth A&R Credit Agreement and will terminate on November 21, 2030. The Seventh A&R Credit Agreement will be available for issuance of letters of credit up to $100.0. The terms of the Seventh A&R Credit Agreement include customary representations and warranties, affirmative and negative covenants, financial covenants and events of default.

Borrowings under the Seventh A&R Credit Agreement bear interest at variable rates derived from the prevailing U.S. Prime Rate, Federal Reserve Bank of New York Rate, Secured Overnight Financing Rate, Euro Interbank Offered Rate, Canadian Prime Rate or Canadian Overnight Repo Rate Average (all as defined in the Seventh A&R Credit Agreement), based on our election, plus a spread that depends on our quarterly-tested leverage ratio.

The Seventh A&R Credit Agreement contains, among other obligations, an affirmative covenant regarding our leverage ratio determined as of the end of each of our fiscal quarters, calculated as average total indebtedness, divided by our EBITDA, as adjusted pursuant to the terms of the Seventh A&R Credit Agreement (“Adjusted EBITDA”). The maximum permitted leverage ratio is 5.00 for the first quarter of fiscal 2026 and thereafter. The Seventh A&R Credit Agreement also contains 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, as described in the Seventh A&R Credit Agreement. The minimum required interest coverage ratio is (i) 3.00 for each of the fiscal quarters within fiscal 2026, (ii) 3.25 for each of the fiscal quarters within fiscal 2027 and (iii) 3.50 for fiscal quarters thereafter.

The Seventh A&R Credit Agreement allows us to make unlimited restricted payments (as defined in the Seventh A&R Credit Agreement), including dividend payments on, and repurchases of, Common Shares, as long as the leverage ratio resulting from the making of such restricted payments is 4.00 or less. Otherwise, we are limited to restricted payments in an aggregate amount for each fiscal year not to exceed $225.0.

Senior Notes

On December 15, 2016, Scotts Miracle-Gro issued $250.0 aggregate principal amount of 5.250% Senior Notes due 2026. 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.

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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 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 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. 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.

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 4.78 for the twelve months ended September 30, 2025.

Receivables Facility

We also maintained a Master Repurchase Agreement (including the annexes thereto, the “Repurchase Agreement”) and a Master Framework Agreement, as amended (the “Framework Agreement” and, together with the Repurchase Agreement, the “Receivables Facility”) under which we could sell a portfolio of available and eligible outstanding customer accounts receivable to the purchasers subject to agreeing to repurchase the receivables on a weekly basis. 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. 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.

Interest Rate Swap Agreements

We enter into interest rate swap agreements with major financial institutions that effectively convert a portion of our variable-rate debt to a fixed rate. Interest payments made between the effective date and expiration date are hedged by the swap agreements. Swap agreements that were hedging interest payments as of September 30, 2025 and 2024 had a maximum total U.S. dollar equivalent notional amount of $450.0. During fiscal 2024, we terminated an interest rate swap agreement in exchange for a cash payment of $11.0. The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at September 30, 2025 are shown in the table below:

Notional

Amount ($)

Effective

Date (a)

Expiration

Date

Fixed

Rate

(a) The effective date refers to the date on which interest payments are first hedged by the applicable swap agreement.

(b) Notional amount adjusts in accordance with a specified seasonal schedule. This represents the maximum notional amount at any point in time.

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Availability and Use of Cash

We believe that our cash flows from operations and borrowings under our agreements described herein will be sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future. However, we cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other liquidity needs. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in “ITEM 1A. RISK FACTORS — Risks Related to Our M&A, Lending and Financing Activities — Our indebtedness could limit our flexibility and adversely affect our financial condition ” of this Form 10-K.

Financial Disclosures About Guarantors and Issuers of Guaranteed Securities

The 5.250% Senior Notes, 4.500% Senior Notes, 4.000% Senior Notes and 4.375% Senior Notes were issued by Scotts Miracle-Gro on December 15, 2016, October 22, 2019, March 17, 2021 and August 13, 2021, respectively. 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 Seventh A&R Credit Agreement, except a release by or as a result of the repayment of the Seventh 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.

Our foreign subsidiaries and certain of our domestic subsidiaries are not guarantors (collectively, the “Non-Guarantors”) of the Senior Notes. 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. In the event of a bankruptcy, insolvency, liquidation or reorganization of any of the Non-Guarantors, holders of their indebtedness, including their trade creditors and other obligations, will be entitled to payment of their claims from the assets of the Non-Guarantors before any assets are made available for distribution to Scotts Miracle-Gro or the Guarantors. 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. In certain circumstances, the court could void the guarantee, subordinate the amounts owing under the guarantee, or take other actions detrimental to the holders of the Senior Notes.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is satisfied. A court would likely find that a Guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent such Guarantor did not obtain a reasonably equivalent benefit from the issuance of the Senior Notes.

The measure of insolvency varies depending upon the law of the jurisdiction that is being applied. Regardless of the measure being applied, a court could determine that a Guarantor was insolvent on the date the guarantee was issued, so that payments to the holders of the Senior Notes would constitute a preference, fraudulent transfer or conveyances on other grounds. If a guarantee is voided as a fraudulent conveyance or is found to be unenforceable for any other reason, the holders of the Senior Notes will not have a claim against the Guarantor.

Each guarantee contains a provision intended to limit the Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance. However, there can be no assurance as to what standard a court will apply in making a determination of the maximum liability of each Guarantor. Moreover, this provision may not be effective to protect the guarantees from being voided under fraudulent conveyance laws. There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished.

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The following tables present summarized financial information on a combined basis for Scotts Miracle-Gro and the Guarantors. 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, 2025

Current assets

Non-current assets (a)

Current liabilities

Non-current liabilities

(a) Includes amounts due from Non-Guarantor subsidiaries of $11.4.

Year Ended

September 30, 2025

Net sales

Gross margin

Net income (a)

(a) Includes intercompany income from Non-Guarantor subsidiaries of $5.7.

Judicial and Administrative Proceedings

We are party to various pending judicial and administrative proceedings and claims arising in the ordinary course of business relating to, among others, product and general liabilities, workers’ compensation, property losses and other liabilities for which we are self-insured or retain a high exposure limit. We have reviewed these pending judicial and administrative proceedings, including the probable outcomes, reasonably anticipated costs and expenses, and the availability and limits of our insurance coverage, and have established what we believe to be appropriate accruals. We believe that our assessment of contingencies is reasonable and related accruals are adequate, both individually and in the aggregate; however, there can be no assurance that final resolution of these matters will not have a material effect on our financial condition, results of operations or cash flows.

Contractual Obligations

The following table summarizes our future cash outflows for contractual obligations as of September 30, 2025:

Payments Due by Period

Contractual Cash Obligations

Total

Less Than 1 Year

1-3 Years

3-5 Years

More Than

5 Years

Debt obligations

Interest expense on debt obligations

Finance lease obligations

Operating lease obligations

Purchase obligations

Other, primarily retirement plan obligations

Total contractual cash obligations

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. 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, 2025. Actual interest expense will likely be higher due to the seasonality of our business and associated higher average borrowings.

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 17. COMMITMENTS” of the Notes to Consolidated Financial Statements included in this Form 10-K.

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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, 2025. These amounts represent expected payments through 2035. 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 8. RETIREMENT PLANS” and “NOTE 9. ASSOCIATE MEDICAL BENEFITS” of the Notes to Consolidated Financial Statements included in this Form 10-K). 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.

Regulatory Matters

We are subject to local, state, federal and foreign environmental protection laws and regulations with respect to our business operations and believe we are operating in substantial compliance, or taking actions aimed at ensuring compliance with, such laws and regulations. We are involved in several legal actions with various governmental agencies related to environmental matters. While it is difficult to quantify the potential financial impact of actions involving these environmental matters, particularly remediation costs at waste disposal sites and future capital expenditures for environmental control equipment, in the opinion of management, the ultimate liability arising from such environmental matters, taking into account established accruals, is not expected to have a material effect on our financial condition, results of operations or cash flows. However, there can be no assurance that the resolution of these matters will not materially affect our future quarterly or annual results of operations, financial condition or cash flows. Additional information on environmental matters affecting us is provided in “ITEM 1. BUSINESS — Regulatory Considerations” and “ITEM 3. LEGAL PROCEEDINGS” of this Form 10-K.

Critical Accounting Estimates

Our audited consolidated financial statements have been prepared in accordance with GAAP. The preparation of financial statements and related disclosures in accordance with GAAP requires management to use judgment and make estimates that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. By their nature, these judgments are subject to uncertainty. We base our estimates on historical experience, current trends and other factors that we believe to be relevant under the circumstances at the time the estimate was made. Certain accounting estimates are particularly significant, including those related to revenue recognition and promotional allowances, income taxes and goodwill and indefinite-lived intangible assets.

We believe that our estimates, assumptions and judgments are reasonable in that they were based on information available when the estimates, assumptions and judgments were made. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from those implied by our assumptions and estimates.

The Audit Committee of the Board of Directors of Scotts Miracle-Gro reviews our critical accounting estimates on an ongoing basis, including those related to revenue recognition and promotional allowances, income taxes and goodwill and indefinite-lived intangible assets.

Revenue Recognition and Promotional Allowances

Our revenue is primarily generated from sales of branded and private label lawn and garden care and indoor and hydroponic gardening finished products. Product sales are recognized at a point in time when control of products transfers to customers and we have no further obligation to provide services related to such products. Sales are typically recognized when products are delivered to or picked up by the customer. We are generally the principal in a transaction and, therefore, primarily record revenue on a gross basis. Revenue for product sales is recorded net of sales returns and allowances. 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.

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Our promotional programs primarily include rebates based on sales volumes, in-store promotional allowances, cooperative advertising programs, direct consumer rebate programs and special purchasing incentives. The cost of promotional programs is estimated considering all reasonably available information, including current expectations and historical experience. Promotional costs (including allowances and rebates) incurred during the year are expensed to interim periods in relation to revenues and are recorded as a reduction of net sales. Provisions for estimated returns and allowances are recorded at the time revenue is recognized based on historical rates and are periodically adjusted for known changes in return levels. Shipping and handling costs are accounted for as contract fulfillment costs and included in the “Cost of sales” line in the Consolidated Statements of Operations. We exclude from revenue any amounts collected from customers for sales or other taxes.

Income Taxes

Our annual effective tax rate is established based on our pre-tax income (loss), statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. We record income tax liabilities utilizing known obligations and estimates of potential obligations. A deferred tax asset or liability is recognized whenever there are future tax effects from existing temporary differences and operating loss and tax credit carryforwards. Valuation allowances are used to reduce deferred tax assets to the balances that are more likely than not to be realized. In determining whether a valuation allowance is warranted, we take into account many factors, including the specific tax jurisdiction, both historical and projected future earnings, carryback and carryforward periods and tax planning strategies. Many of the judgments made in adjusting valuation allowances involve assumptions and estimates that are highly subjective. When we determine that deferred tax assets could be realized in greater or lesser amounts than recorded, the asset balance and Consolidated Statements of Operations reflect the change in the period such determination is made. Due to changes in facts and circumstances and the estimates and judgments involved in determining the proper valuation allowances, differences between actual future events and prior estimates and judgments could result in adjustments to these valuation allowances.

We also establish a liability for tax return positions in which there is uncertainty as to whether or not the position will ultimately be sustained. These uncertain tax positions are adjusted as a result of changes in factors such as tax legislation, interpretations of laws by courts, rulings by tax authorities, new audit developments, changes in estimates and the expiration of the statute of limitations. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled. Many of the judgments made in adjusting uncertain tax positions involve assumptions and estimates regarding audit outcomes and the timing of audit settlements, which are often uncertain and subject to change.

Goodwill and Indefinite-Lived Intangible Assets

We have significant investments in intangible assets and goodwill. We perform our annual goodwill and indefinite-lived intangible asset testing as of the first day of our fiscal fourth quarter or more frequently if circumstances indicate potential impairment. In our evaluation of impairment for goodwill and indefinite-lived intangible assets, we perform either a qualitative or quantitative evaluation for each of our reporting units and indefinite-lived intangible assets. Factors considered in the qualitative test include operating results as well as new events and circumstances impacting the operations or cash flows of the reporting unit or indefinite-lived intangible assets. For the quantitative test, the review for impairment of goodwill and indefinite-lived intangible assets is based on an income-based approach, including the relief-from-royalty method for indefinite-lived trade names. If it is determined that an impairment has occurred, an impairment loss is recognized in earnings for the amount by which the carrying value of the reporting unit or intangible asset exceeds its estimated fair value.

Under the income-based approach, we determine fair value using a discounted cash flow approach that requires significant judgment with respect to revenue and profitability growth rates, based upon annual budgets and longer-range strategic plans, and the selection of an appropriate discount rate. These budgets and plans are used for internal purposes and are also the basis for communication with outside parties about future business trends. Fair value estimates employed in our annual impairment review of indefinite-lived intangible assets and goodwill were determined using models involving several assumptions. 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. These and other assumptions are impacted by economic conditions and expectations of management and may change in the future based on period specific facts and circumstances. While we believe the assumptions we used to estimate future cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. As a result, impairment charges that possibly would have been recognized in earlier periods may not be recognized until later periods if actual results deviate unfavorably from earlier estimates. The use of different assumptions would increase or decrease discounted cash flows or earnings projections and, therefore, could change impairment determinations.

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At September 30, 2025, goodwill totaled $243.9, all of which was associated with our U.S. Consumer segment. Based on the results of the annual quantitative evaluation for fiscal 2025, the fair value of our U.S. Consumer segment reporting unit substantially exceeded its carrying value. A 100 basis point change in the discount rate would not have resulted in an impairment for this reporting unit.

At September 30, 2025, indefinite-lived intangible assets consisted of trade names of $168.2 and the Roundup ® marketing agreement amendment of $155.7, all of which were associated with our U.S. Consumer segment. Based on the results of the annual quantitative evaluation for fiscal 2025, 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.

Other Significant Accounting Policies

Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding the consolidated financial statements. The Notes to Consolidated Financial Statements included in this Form 10-K contain additional information related to our accounting policies, including recent accounting pronouncements, and should be read in conjunction with this discussion.

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