SCOTTS MIRACLE-GRO CO

Previous wording

During the three months ended December 28, 2024, 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 and reduced indoor and outdoor cannabis cultivation. The oversupply has been driven by increased licensing activity across the U.S. and significant capital investment in the cannabis production marketplace over the past several years, as well as inconsistent enforcement of regulations. 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.

Current wording

During the three and six months ended March 29, 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 and reduced indoor and outdoor cannabis cultivation. The oversupply has been driven by increased licensing activity across the U.S. and significant capital investment in the cannabis production marketplace over the past several years, as well as inconsistent enforcement of regulations. 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.

Previous wording

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, including General Hydroponics®, Gavita®, Botanicare®, Gro Pro®, Mother Earth®, Grower’s Edge®, HydroLogic Purification System®and CYCO®. We expect the discontinuation of sales of other companies’ products will result in lower sales volume when compared to historical periods, but will enable continued optimization of Hawthorne’s operations and improvement of its profitability.

Current wording

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, including General Hydroponics®, Gavita®, Botanicare®, Gro Pro®, Mother Earth®, Grower’s Edge®, HydroLogic Purification System®and CYCO®. 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.

Previous wording

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. 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. For more information about factors that could impact our business, refer to “ITEM 1A. RISK FACTORS” in the 2024 Annual Report.

Current wording

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. For more information about factors that could impact our business, refer to “ITEM 1A. RISK FACTORS” in the 2024 Annual Report.

Previous wording

Net sales for the three months ended December 28, 2024 were $416.8, an increase of 1.6% from net sales of $410.4 for the three months ended December 30, 2023. Factors contributing to the change in net sales are outlined in the following table:

Current wording

Net sales for the three months ended March 29, 2025 were $1,421.0, a decrease of 6.8% from net sales of $1,525.4 for the three months ended March 30, 2024. Net sales for the six months ended March 29, 2025 were $1,837.8, a decrease of 5.1% from net sales of $1,935.8 for the six months ended March 30, 2024. Factors contributing to the change in net sales are outlined in the following table:

Previous wording

•partially offset by other decreases of 7.9% 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; and

Current wording

•other decreases of 1.1% 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; and

Previous wording

•increased sales volume of 10.5%, comprised of the net impact of higher volume in our U.S. Consumer segment driven by soils, controls and plant food products, partially offset by lower volume in our Hawthorne segment driven by lighting, growing environment, growing media and hardware products; and

Current wording

•decreased sales volume in our Hawthorne segment driven by all product categories;

Previous wording

As a percentage of net sales, our gross margin rate was 22.7% and 15.2% for the three months ended December 28, 2024 and December 30, 2023, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:

Current wording

As a percentage of net sales, our gross margin rate was 38.6% and 30.4% for the three months ended March 29, 2025 and March 30, 2024, respectively, and was 35.0% and 27.2% for the six months ended March 29, 2025 and March 30, 2024, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:

Previous wording

The increase in gross margin rate for the three months ended December 28, 2024 as compared to the three months ended December 30, 2023 was primarily driven by:

Current wording

The increase in gross margin rate for the three and six months ended March 29, 2025 as compared to the three and six months ended March 30, 2024 was primarily driven by:

Previous wording

•favorable leverage of fixed costs, included within “volume, mix and other,” driven by higher sales volume in our U.S. Consumer segment; and

Current wording

•unfavorable leverage of fixed costs, included within “volume, mix and other” driven by lower sales volume.

Previous wording

SG&A increased $10.0, or 8.7%, during the three months ended December 28, 2024 compared to the three months ended December 30, 2023. Other SG&A increased $11.9, or 16.5%, driven by higher short-term variable cash incentive compensation expense and other associate-related costs.

Current wording

SG&A increased $9.6, or 5.4%, during the three months ended March 29, 2025 compared to the three months ended March 30, 2024. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, decreased $4.7, or 25.8%, primarily due to lower long-term incentive compensation expense. Other SG&A increased $13.6, or 15.7%, driven by higher short-term variable cash incentive compensation expense and other associate-related costs.

Previous wording

During the three months ended December 28, 2024, we recorded a non-cash loss of $7.0 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital for non-voting exchangeable shares of Cansortium.

Current wording

During the three and six months ended March 29, 2025, we incurred a non-cash loss of $0.0 and $7.0, respectively, in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations related to the exchange of our convertible debt investment in RIV Capital for non-voting exchangeable shares of Fluent. Refer to “NOTE 2. INVESTMENT IN UNCONSOLIDATED AFFILIATES” for further details.

Previous wording

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 the three months ended December 28, 2024, we incurred costs of $1.4 in our U.S. Consumer segment and $3.7 in our Hawthorne segment associated with this restructuring initiative in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations. During the three months ended December 30, 2023, we recorded recoveries of $3.7 associated with this restructuring initiative, primarily related to the sale of certain previously-reserved inventory at amounts in excess of estimated net realizable value, partially offset by employee termination benefits and facility closure costs. We incurred costs of $2.0 in our U.S. Consumer segment and recorded recoveries of $7.7 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three months ended December 30, 2023. We recorded recoveries of $0.8 in our U.S. Consumer segment and incurred costs of $0.3 in our Hawthorne segment and $2.4 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three months ended December 30, 2023. Costs incurred since the inception of this restructuring initiative through December 28, 2024 were $300.9 for our Hawthorne segment, $59.8 for our U.S. Consumer segment, $2.9 for our Other segment and $25.1 for Corporate.

Current wording

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. We incurred costs of $2.3 and $3.7 in our U.S. Consumer segment and $1.4 and $5.1 in our Hawthorne segment associated with this restructuring initiative in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended March 29, 2025, respectively. During the three and six months ended March 30, 2024, we incurred costs of $77.0 and $73.2, respectively, 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 recorded recoveries of $0.5 and incurred costs of $1.4 in our U.S. Consumer segment and incurred costs of $75.4 and $67.8 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended March 30, 2024, respectively. We recorded recoveries of $0.1 and $0.9 in our U.S. Consumer segment and incurred costs of $1.9 and $2.3 in our Hawthorne segment and $0.0 and $2.4 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended March 30, 2024, respectively. Costs incurred since the inception of this restructuring initiative through March 29, 2025 were $302.3 for our Hawthorne segment, $62.0 for our U.S. Consumer segment, $2.9 for our Other segment and $25.1 for Corporate.

Previous wording

During the three months ended December 30, 2023, we recorded a gain of $12.1 in the “Impairment, restructuring and other” line in the Condensed 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 Condensed Consolidated Statements of Cash Flows.

Current wording

During the three and six months ended March 30, 2024, we recorded a gain of $0.0 and $12.1, respectively, in the “Impairment, restructuring and other” line in the Condensed 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 Condensed Consolidated Statements of Cash Flows.

Previous wording

Other expense is comprised of activities such as the discount on sales of accounts receivable under the Master Receivables Purchase Agreement, royalty income from the licensing of certain of our brand names and foreign exchange transaction gains and losses. Other expense was $4.5 and $1.8 for the three months ended December 28, 2024 and December 30, 2023, respectively. The increase in expense during the three months ended December 28, 2024 was primarily due to higher sales of accounts receivable under the Master Receivables Purchase Agreement.

Current wording

Other expense is comprised of activities such as the discount on sales of accounts receivable under the Master Receivables Purchase Agreement, royalty income from the licensing of certain of our brand names and foreign exchange transaction gains and losses. Other expense was $4.2 and $10.8 for the three months ended March 29, 2025 and March 30, 2024, respectively; and was $8.7 and $12.6 for the six months ended March 29, 2025 and March 30, 2024, respectively. The decrease in expense was primarily due to lower discount on sales of accounts receivable under the Master Receivables Purchase Agreement.

Previous wording

Loss from operations was $51.0 for the three months ended December 28, 2024, an increase of 7.8% compared to $47.3 for the three months ended December 30, 2023. The increase was primarily driven by higher impairment, restructuring and other charges, higher SG&A and higher other expense, partially offset by higher net sales and an increase in gross margin rate.

Current wording

Income from operations was $344.7 for the three months ended March 29, 2025, an increase of 26.7% compared to $272.1 for the three months ended March 30, 2024; and was $293.7 for the six months ended March 29, 2025, an increase of 30.6% compared to $224.8 for the six months ended March 30, 2024. For the three and six months ended March 29, 2025, the increase was primarily driven by a higher gross margin rate, lower impairment, restructuring and other charges and lower other expense, partially offset by lower net sales and higher SG&A.

Previous wording

Equity in loss of unconsolidated affiliates associated with Bonnie Plants, LLC was $9.9 and $22.5 during the three months ended December 28, 2024 and December 30, 2023, respectively. We anticipated a net loss for Bonnie Plants, LLC in the first quarter due to the seasonal nature of its business, in which sales are heavily weighted to the spring and summer selling periods. During the three months ended December 30, 2023, equity in loss of unconsolidated affiliates also included a pre-tax impairment charge of $10.4 associated with our investment in Bonnie Plants, LLC.

Current wording

Equity in loss of unconsolidated affiliates was $5.9 and $7.0 for the three months ended March 29, 2025 and March 30, 2024, respectively; and was $15.8 and $29.5 for the six months ended March 29, 2025 and March 30, 2024, respectively. We anticipated a net loss for Bonnie Plants, LLC for the three and six months ended March 29, 2025 due to the seasonal nature of its business, in which sales are heavily weighted to the spring and summer selling periods during our third fiscal quarter. During the three and six months ended March 30, 2024, equity in loss of unconsolidated affiliates also included a pre-tax impairment charge of $0.0 and $10.4, respectively, associated with our investment in Bonnie Plants, LLC.

Previous wording

Interest expense was $33.7 for the three months ended December 28, 2024, a decrease of 21.3% compared to $42.8 for the three months ended December 30, 2023. The decrease was driven by lower average borrowings of $390.1 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 as well as higher sales of accounts receivable under the amended Master Receivables Purchase Agreement. The decrease in our weighted average interest rate was primarily driven by lower borrowing rates under the Sixth A&R Credit Agreement.

Current wording

Interest expense was $36.6 for the three months ended March 29, 2025, a decrease of 17.0% compared to $44.1 for the three months ended March 30, 2024; and was $70.3 for the six months ended March 29, 2025, a decrease of 19.0% compared to $86.8 for the six months ended March 30, 2024. For the three months ended March 29, 2025, the decrease was driven by lower average borrowings of $346.4 and a decrease in our weighted average interest rate, net of the impact of interest rate swaps, of 40 basis points. For the six months ended March 29, 2025, the decrease was driven by lower average borrowings of $367.8 and a decrease 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. The decrease in our weighted average interest rate was primarily driven by lower borrowing rates under the Sixth A&R Credit Agreement.

Previous wording

The effective tax rates for the three months ended December 28, 2024 and December 30, 2023 were 27.5% and 29.5%, respectively. The effective tax rate used for interim purposes is based on our best estimate of factors impacting the effective tax rate for the full fiscal year. Factors affecting the estimated effective tax rate include assumptions as to income by jurisdiction (domestic and foreign), the availability and utilization of tax credits and the existence of elements of income and expense that may not be taxable or deductible. The estimated effective tax rate is subject to revision in later interim periods and at fiscal year-end as facts and circumstances change during the course of the fiscal year. There can be no assurance that the effective tax rate estimated for interim financial reporting purposes will approximate the effective tax rate determined at fiscal year-end.

Current wording

The effective tax rates for the six months ended March 29, 2025 and March 30, 2024 were 27.8% and 27.1%, respectively. The effective tax rate used for interim purposes is based on our best estimate of factors impacting the effective tax rate for the full fiscal year. Factors affecting the estimated effective tax rate include assumptions as to income by jurisdiction (domestic and foreign), the availability and utilization of tax credits and the existence of elements of income and expense that may not be taxable or deductible. The estimated effective tax rate is subject to revision in later interim periods and at fiscal year-end as facts and circumstances change during the course of the fiscal year. There can be no assurance that the effective tax rate estimated for interim financial reporting purposes will approximate the effective tax rate determined at fiscal year-end.

Previous wording

Diluted average Common Shares used in the diluted net loss per common share calculation for the three months ended December 28, 2024 and December 30, 2023 were 57.3 million and 56.7 million, respectively, which excluded potential Common Shares of 1.5 million and 0.5 million, respectively, because the effect of their inclusion would be anti-dilutive as we incurred a net loss for the three months ended December 28, 2024 and December 30, 2023. The increase in diluted average Common Shares was primarily the result of the exercise and issuance of share-based compensation awards.

Current wording

Diluted average Common Shares used in the diluted net income per common share calculation for the three months ended March 29, 2025 and March 30, 2024 were 58.4 million and 57.4 million, respectively, which included dilutive potential Common Shares of 0.8 million and 0.6 million, respectively. The increase in diluted average Common Shares was primarily the result of the exercise and issuance of share-based compensation awards.

Previous wording

Net loss was $69.5, or $1.21 per diluted share, for the three months ended December 28, 2024 compared to $80.5, or $1.42 per diluted share, for the three months ended December 30, 2023. The decrease was driven by higher net sales, an increase in gross margin rate, lower equity in loss of unconsolidated affiliates and lower interest expense, partially offset by higher impairment, restructuring and other charges, higher SG&A, higher other expense and lower income tax benefit.

Current wording

Net income was $148.0, or $2.53 per diluted share, for the six months ended March 29, 2025 compared to $77.0, or $1.34 per diluted share, for the six months ended March 30, 2024. The increase was driven by a higher gross margin rate, lower impairment, restructuring and other charges, lower equity in loss of unconsolidated affiliates, lower other expense and lower interest expense, partially offset by lower net sales, higher SG&A and higher income tax expense.

Previous wording

The following table sets forth Segment Profit (Loss) as well as a reconciliation to loss before income taxes, the most directly comparable GAAP measure:

Current wording

The following table sets forth Segment Profit (Loss) as well as a reconciliation to income before income taxes, the most directly comparable GAAP measure:

Previous wording

Hawthorne Segment Profit was $1.7 in the first quarter of fiscal 2025, an increase from first quarter of fiscal 2024 Segment Loss of $9.7. The increase was driven by a higher gross margin rate and lower SG&A, partially offset by lower net sales.

Current wording

Hawthorne Segment Loss was $0.9 in the second quarter of fiscal 2025 compared to Segment Loss of $3.4 for the second quarter of fiscal 2024; and Hawthorne Segment Profit was $0.7 for the first six months of fiscal 2025 compared to Segment Loss of $13.0 for the first six months of fiscal 2024. For the three and six months ended March 29, 2025, the improvement was driven by a higher gross margin rate and lower SG&A, partially offset by lower net sales.

Previous wording

Corporate expenses were $34.8 in the first quarter of fiscal 2025, an increase of 33.8% from first quarter of fiscal 2024 expenses of $26.0. The increase was driven by higher short-term variable incentive compensation expense and other associate-related costs.

Current wording

Corporate expenses were $34.8 in the second quarter of fiscal 2025 as compared to $35.7 for the second quarter of fiscal 2024; and were $69.5 for the first six months of fiscal 2025, an increase of 12.6% from the first six months of fiscal 2024 expenses of $61.7. For the six months ended March 29, 2025, the increase was primarily driven by higher short-term variable incentive compensation expense and other associate-related costs.

Previous wording

Cash used in operating activities totaled $445.3 for the three months ended December 28, 2024, an increase of $102.1 compared to $343.2 for the three months ended December 30, 2023. This increase 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 is driven by the fact that the Master Receivable Purchasing Agreement was first entered into during the three months ended December 30, 2023.

Current wording

Cash used in operating activities totaled $257.2 for the six months ended March 29, 2025 compared to $39.0 for the six months ended March 30, 2024. This increase 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 is driven by the entry into the Master Receivable Purchasing Agreement during the six months ended March 30, 2024.

Previous wording

Cash used in investing activities totaled $23.3 for the three months ended December 28, 2024, a decrease of $29.9 compared to $53.2 for the three months ended December 30, 2023. Cash used for investments in property, plant and equipment during the first three months of fiscal 2025 and 2024 was $29.3 and $37.9, respectively, driven by the timing of spending on capital projects. During the three months ended December 30, 2023, we acquired an additional equity interest in Bonnie Plants, LLC for $21.4. During the three months ended December 28, 2024 and December 30, 2023, we had other investing cash inflows of $6.0 and $6.1, respectively, primarily associated with currency forward contracts.

Current wording

Cash used in investing activities totaled $34.7 for the six months ended March 29, 2025 compared to $71.1 for the six months ended March 30, 2024. Cash used for investments in property, plant and equipment during the first six months of fiscal 2025 and 2024 was $37.6 and $54.2, respectively, driven by the timing of spending on capital projects. During the six months ended March 29, 2025 and March 30, 2024, we had other investing cash inflows of $2.9 and $4.5, respectively, primarily associated with currency forward contracts. During the six months ended March 30, 2024, we acquired an additional equity interest in Bonnie Plants, LLC for $21.4.

Previous wording

Cash provided by financing activities totaled $407.7 for the three months ended December 28, 2024 compared to $374.2 for the three months ended December 30, 2023. During the three months ended December 28, 2024, we had net borrowings on our debt instruments of $464.8 due to our seasonal working capital build. We also paid dividends of $39.2 and repurchased Common Shares for $15.6 (which represents cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation). During the three months ended December 30, 2023, we had net borrowings on our debt instruments of $410.2, paid dividends of $37.4 and repurchased Common Shares for $3.1 (which represents cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation).

Current wording

Cash provided by financing activities totaled $237.9 for the six months ended March 29, 2025 compared to $142.8 for the six months ended March 30, 2024. During the six months ended March 29, 2025, we had net borrowings under our credit facilities of $321.2 due to our seasonal working capital build, paid dividends of $78.0 and received cash from the exercise of stock options of $10.0 (which also includes amounts received from employee purchases under the employee stock purchase plan). During the six months ended March 30, 2024, we had net borrowings under our credit facilities of $205.0 and paid dividends of $76.2. During the six months ended March 29, 2025 and March 30, 2024, we repurchased Common Shares for $18.3 and $4.9, respectively (which includes cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation). In addition, during the six months ended March 29, 2025 and March 30, 2024 we had other financing cash inflows of $3.0 and $17.2, respectively, primarily related to collections of previously sold accounts receivable not yet submitted to the buyer.

Previous wording

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. The agreement is uncommitted and expires on September 1, 2025. Transactions under the Master Receivables Purchase Agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed 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 Condensed Consolidated Statements of Cash Flows. We record the discount on sales in the “Other expense, net” line in the Condensed Consolidated Statements of Operations. At December 28, 2024, December 30, 2023 and September 30, 2024, net receivables derecognized were $236.7, $140.1 and $186.6, respectively. During the three months ended December 28, 2024 and December 30, 2023, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $274.0 and $199.6, respectively, and the total discount recorded on sales was $3.3 and $2.2, respectively.

Current wording

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. The agreement is uncommitted and expires on September 1, 2025. Transactions under the Master Receivables Purchase Agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed 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 Condensed Consolidated Statements of Cash Flows. We record the discount on sales in the “Other expense, net” line in the Condensed Consolidated Statements of Operations. At March 29, 2025, March 30, 2024 and September 30, 2024, net receivables derecognized were $598.2, $582.8 and $186.6, respectively. During the three months ended March 29, 2025 and March 30, 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $748.2 and $758.2, respectively, and the total discount recorded on sales was $7.9 and $10.7, respectively. During the six months ended March 29, 2025 and March 30, 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $1,022.2 and $955.5, respectively, and the total discount recorded on sales was $11.2 and $12.9, respectively.

Previous wording

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 were $27.1, $30.8 and $12.5 at December 28, 2024, December 30, 2023 and September 30, 2024, respectively, and are recorded within accounts payable in the Condensed Consolidated Balance Sheets. The associated payments were $73.6 and $69.8 for the three months ended December 28, 2024 and December 30, 2023, respectively, and are classified as operating activities in the Condensed Consolidated Statements of Cash Flows.

Current wording

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 were $32.5, $38.5 and $12.5 at March 29, 2025, March 30, 2024 and September 30, 2024, respectively, and are recorded within accounts payable in the Condensed Consolidated Balance Sheets. The associated payments were $155.4 and $153.0 for the six months ended March 29, 2025 and March 30, 2024, respectively, and are classified as operating activities in the Condensed Consolidated Statements of Cash Flows.

Previous wording

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 $9.8, $10.4 and $71.6 as of December 28, 2024, December 30, 2023 and September 30, 2024, respectively, included $6.1, $4.0 and $15.9, respectively, held by controlled foreign corporations. As of December 28, 2024, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.

Current wording

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 $16.9, $65.1 and $71.6 as of March 29, 2025, March 30, 2024 and September 30, 2024, respectively, included $9.4, $7.9 and $15.9, respectively, held by controlled foreign corporations. As of March 29, 2025, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.

Previous wording

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, providing 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. The Sixth A&R Credit Agreement will terminate on April 8, 2027. The Sixth A&R Credit Facilities are available for the issuance of letters of credit up to $100.0. The terms of the Sixth A&R Credit Agreement include customary representations and warranties, affirmative and negative covenants, financial covenants, and events of default.

Current wording

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, providing 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. The Sixth A&R Credit Agreement will terminate on April 8, 2027. The Sixth A&R Credit Facilities are available for the issuance of letters of credit of up to $100.0. The terms of the Sixth A&R Credit Agreement include customary representations and warranties, affirmative and negative covenants, financial covenants, and events of default.

Previous wording

Under the terms of the Sixth A&R Credit Agreement, loans bear interest, at our election, at a rate per annum equal to either (i) the Alternate Base Rate plus the Applicable Spread (each, as defined in the Sixth A&R Credit Agreement) or (ii) the Adjusted Term SOFR Rate for the Interest Period in effect for such borrowing plus the Applicable Spread (all as defined in the Sixth A&R Credit Agreement). Swingline Loans bear interest at the applicable Swingline Rate set forth in the Sixth A&R Credit Agreement. Interest rates for other select non-U.S. dollar borrowings, including borrowings denominated in euro, Pounds Sterling and Canadian dollars, are based on separate interest rate indices, as set forth in the Sixth A&R Credit Agreement.

Current wording

Under the terms of the Sixth A&R Credit Agreement, loans bear interest, at our election, at a rate per annum equal to either (i) the Alternate Base Rate plus the Applicable Spread (all, as defined in the Sixth A&R Credit Agreement) or (ii) the Adjusted Term SOFR Rate for the Interest Period in effect for such borrowing plus the Applicable Spread (all as defined in the Sixth A&R Credit Agreement). Swingline Loans bear interest at the applicable Swingline Rate set forth in the Sixth A&R Credit Agreement. Interest rates for other select non-U.S. dollar borrowings, including borrowings denominated in euro, Pounds Sterling and Canadian dollars, are based on separate interest rate indices, as set forth in the Sixth A&R Credit Agreement.

Previous wording

At December 28, 2024, we had letters of credit outstanding in the aggregate principal amount of $83.1, and had $691.3 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 8.5% and 9.1% for the three months ended December 28, 2024 and December 30, 2023, respectively.

Current wording

At March 29, 2025, we had letters of credit outstanding in the aggregate principal amount of $83.1, and had $821.9 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 7.8% and 8.9% for the six months ended March 29, 2025 and March 30, 2024, respectively.

Previous wording

The Sixth 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 Adjusted EBITDA. Pursuant to Amendment No. 2, the maximum permitted leverage ratio is (i) 5.50 for the first quarter of fiscal 2025, (ii) 5.25 for the second quarter of fiscal 2025, (iii) 5.00 for the third quarter of fiscal 2025, (iv) 4.75 for the fourth quarter of fiscal 2025 and (v) 4.50 for the first quarter of fiscal 2026 and thereafter. Our leverage ratio was 4.52 at December 28, 2024. Pursuant to Amendment No. 2, the Sixth A&R Credit Agreement also contains an affirmative covenant regarding our fixed charge coverage ratio determined as of the end of each of our fiscal quarters, calculated as Adjusted EBITDA minus capital expenditures and expense for taxes paid in cash, divided by the sum of interest expense plus restricted payments, as described in Amendment No. 2. The minimum required fixed charge coverage ratio is 1.00. Our fixed charge coverage ratio was 1.38 for the twelve months ended December 28, 2024.

Current wording

The Sixth 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 Adjusted EBITDA. Pursuant to Amendment No. 2, the maximum permitted leverage ratio is (i) 5.25 for the second quarter of fiscal 2025, (ii) 5.00 for the third quarter of fiscal 2025, (iii) 4.75 for the fourth quarter of fiscal 2025 and (iv) 4.50 for the first quarter of fiscal 2026 and thereafter. Our leverage ratio was 4.41 at March 29, 2025. Pursuant to Amendment No. 2, the Sixth A&R Credit Agreement also contains an affirmative covenant regarding our fixed charge coverage ratio determined as of the end of each of our fiscal quarters, calculated as Adjusted EBITDA minus capital expenditures and expense for taxes paid in cash, divided by the sum of interest expense plus restricted payments, as described in Amendment No. 2. The minimum required fixed charge coverage ratio is 1.00. Our fixed charge coverage ratio was 1.45 for the twelve months ended March 29, 2025.

Previous wording

As of December 28, 2024, we were in compliance with all applicable covenants in the agreements governing our debt. Based on our projections of financial performance for the twelve-month period subsequent to the date of the filing of this Form 10-Q, we expect to remain in compliance with the financial covenants under the Sixth A&R Credit Agreement. However, our assessment of our ability to meet our future obligations is inherently subjective, judgment-based, and susceptible to change based on future events. A covenant violation may result in an event of default. Such a default would allow the lenders under the Sixth A&R Credit Agreement to accelerate the maturity of the indebtedness thereunder and would also implicate cross-default provisions under the Senior Notes and cause the Senior Notes to become due and payable at that time. As of December 28, 2024, our indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,688.1. We do not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.

Current wording

As of March 29, 2025, we were in compliance with all applicable covenants in the agreements governing our debt. Based on our projections of financial performance for the twelve-month period subsequent to the date of the filing of this Form 10-Q, we expect to remain in compliance with the financial covenants under the Sixth A&R Credit Agreement. However, our assessment of our ability to meet our future obligations is inherently subjective, judgment-based, and susceptible to change based on future events. A covenant violation may result in an event of default. Such a default would allow the lenders under the Sixth A&R Credit Agreement to accelerate the maturity of the indebtedness thereunder and would also implicate cross-default provisions under the Senior Notes and cause the Senior Notes to become due and payable at that time. As of March 29, 2025, our indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,545.0. We do not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.

Previous wording

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 3.95 for the twelve months ended December 28, 2024.

Current wording

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 4.17 for the twelve months ended March 29, 2025.

Previous wording

(a)Includes amounts due from Non-Guarantor subsidiaries of $61.6 and $49.5, respectively.

Current wording

(a)Includes amounts due from Non-Guarantor subsidiaries of $82.2 and $49.5, respectively.

Previous wording

(a)Includes intercompany income (expense) from Non-Guarantor subsidiaries of $(0.4) and $12.5, respectively.

Current wording

(a)Includes intercompany income from Non-Guarantor subsidiaries of $4.0 and $12.5, respectively.