Scotts Miracle-Gro Co: Form 10-Q for the period ended Dec 27, 2025

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

This MD&A should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Scotts Miracle-Gro’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Annual Report”) and our condensed consolidated financial statements included in this Form 10-Q.

EXECUTIVE SUMMARY

U.S. Consumer consists of our consumer lawn and garden business in the United States. 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.

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.

Trends Affecting our Business

During the three months ended December 27, 2025, we determined that the Hawthorne business meets the criteria to be classified as held for sale, and we have reclassified the related assets and liabilities as held for sale on the Condensed Consolidated Balance Sheets for all periods presented. We expect the sale of the Hawthorne business to occur within twelve months from the date it met the held for sale criteria. We determined this represents a strategic shift, and therefore, effective in the first quarter of fiscal 2026, we classified our results of operations for all periods presented to reflect the Hawthorne business as a discontinued operation, including the Hawthorne professional horticulture business based in the Netherlands that was sold during the three months ended September 30, 2025. During the three months ended December 27, 2025, we recorded a non-cash pre-tax charge of $104.8 related to a valuation adjustment to recognize the carrying amount of the Hawthorne business at fair value less estimated costs to sell in the “Loss from discontinued operations, net of tax” line on the Condensed Consolidated Statements of Operations.

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 2025 Annual Report.

RESULTS OF OPERATIONS

Unless specifically stated, all discussion herein refers to results from our continuing operations. The following table sets forth the components of earnings as a percentage of net sales for the three months ended December 27, 2025 and December 28, 2024:

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

Net Sales

Net sales for the three months ended December 27, 2025 were $354.4, a decrease of 3.3% from net sales of $366.6 for the three months ended December 28, 2024. Factors contributing to the change in net sales are outlined in the following table:

The decrease in net sales for the three months ended December 27, 2025 as compared to the three months ended December 28, 2024 was primarily driven by:

• lower sales volume in our U.S. Consumer segment driven by fertilizer, grass seed, plant food and controls products, partially offset by higher sales of soils products; and
• decreased net sales associated with the Roundup® marketing agreement;
• partially offset by increased pricing in our U.S. Consumer segment.

Cost of Sales

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

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

The decrease in cost of sales for the three months ended December 27, 2025 as compared to the three months ended December 28, 2024 was primarily driven by:

• lower sales volume in our U.S. Consumer segment;
• lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer segment; and
• a decrease in costs associated with the Roundup® marketing agreement.

Gross Margin

As a percentage of net sales, our gross margin rate was 25.0% and 24.1% for the three months ended December 27, 2025 and December 28, 2024, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:

The increase in gross margin rate for the three months ended December 27, 2025 as compared to the three months ended December 28, 2024 was primarily driven by:

• increased pricing in our U.S. Consumer segment; and
• lower manufacturing costs included within “volume, mix and other” in our U.S. Consumer segment;
• partially offset by unfavorable leverage of fixed costs, included within “volume, mix and other,” driven by lower sales volume in our U.S. Consumer segment.

Selling, General and Administrative Expenses

The following table sets forth the components of selling, general and administrative expenses (“SG&A”):

SG&A decreased $7.5, or 6.6%, during the three months ended December 27, 2025 compared to the three months ended December 28, 2024. Advertising expense increased $3.6, or 20.6%, due to higher media spending in our U.S. Consumer segment. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares for the three months ended December 28, 2024, decreased $5.0, or 42.7%, due to lower long-term incentive compensation expense. Other SG&A decreased $9.3, or 12.1%, driven by lower short-term variable cash incentive compensation expense partially offset by higher marketing spend.

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 Condensed Consolidated Statements of Operations. The following table details impairment, restructuring and other charges for each of the periods presented:

Impairment, restructuring and other charges for the three months ended December 27, 2025 were not material.

During the three months ended December 28, 2024, we incurred executive severance charges of $9.5 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.

During the three months ended December 28, 2024, we incurred 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 an investment in FLUENT.

During fiscal 2022, we began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. As part of this restructuring initiative, we reduced the size of our supply chain network, reduced staffing levels and implemented other cost-reduction initiatives. During the three months ended December 28, 2024, we incurred costs of $1.4 in our U.S. Consumer segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations associated with this restructuring initiative.

Other Expense, net

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 $2.7 and $4.3 for the three months ended December 27, 2025 and December 28, 2024, respectively.

Loss from Operations

Loss from operations was $21.8 for the three months ended December 27, 2025, a decrease of 52.4% compared to $45.8 for the three months ended December 28, 2024. The decrease was primarily driven by a higher gross margin rate, lower impairment, restructuring, and other charges and lower SG&A, partially offset by lower net sales.

Equity in Loss of Unconsolidated Affiliates

Equity in loss of unconsolidated affiliates was $13.1 and $9.9 during the three months ended December 27, 2025 and December 28, 2024, respectively. Equity in loss of unconsolidated affiliates associated with Bonnie Plants, LLC was $10.6 and $9.9 during the three months ended December 27, 2025 and December 28, 2024, 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. Equity in loss of unconsolidated affiliates associated with FLUENT was $2.6 during the three months ended December 27, 2025, which reduced the balance of this investment to zero as of December 27, 2025, and resulted in the discontinuation of equity method recognition of our proportionate share of FLUENT losses.

Interest Expense

Interest expense was $27.2 for the three months ended December 27, 2025, a decrease of 19.8% compared to $33.9 for the three months ended December 28, 2024. The decrease was driven by lower average borrowings of $172.8 and a decrease in our weighted average interest rate, net of the impact of interest rate swaps, of 80 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 Seventh A&R Credit Agreement.

Income Tax Benefit from Continuing Operations

The effective tax rates for the three months ended December 27, 2025 and December 28, 2024 were 24.5% and 27.3%, 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.

Net Loss from Continuing Operations

Net loss from continuing operations was $47.8, or $0.83 per diluted share, for the three months ended December 27, 2025 compared to $66.1, or $1.15 per diluted share, for the three months ended December 28, 2024. The decrease was driven by a higher gross margin rate, lower impairment, restructuring, and other charges, lower SG&A and lower interest expense, partially offset by lower net sales, higher equity in loss of unconsolidated affiliates and lower income tax benefit.

Diluted average common shares used in the diluted net loss per common share from continuing operations calculation for the three months ended December 27, 2025 and December 28, 2024 were 57.9 million and 57.3 million, respectively, which excluded potential common shares of 0.9 million and 1.5 million, respectively, because the effect of their inclusion would be anti-dilutive as we incurred a net loss for the three months ended December 27, 2025 and December 28, 2024. The increase in diluted average common shares was primarily the result of the exercise and issuance of share-based compensation awards.

Loss from Discontinued Operations, net of tax

Loss from discontinued operations, net of tax, associated with our Hawthorne business was $77.2 and $3.4 for the three months ended December 27, 2025 and December 28, 2024, respectively. During the three months ended December 27, 2025, we recorded a non-cash pre-tax charge of $104.8 related to a valuation adjustment to recognize the carrying amount of the Hawthorne business at fair value less estimated costs to sell.

SEGMENT RESULTS

As a result of the classification of the Hawthorne business as a discontinued operation, our reportable segments for the fiscal quarter ended December 27, 2025 differ from prior periods. The prior period amounts have been reclassified to reflect the removal of Hawthorne as a reportable segment. Segment performance is evaluated based on several factors, including income (loss) from continuing operations before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”), which is a non-GAAP financial measure. 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:

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The following table sets forth Segment Profit (Loss) as well as a reconciliation to loss from continuing operations before income taxes, the most directly comparable measure prepared in accordance with GAAP:

U.S. Consumer

U.S. Consumer segment net sales were $328.5 in the first quarter of fiscal 2026, a decrease of 3.6% from first quarter of fiscal 2025 net sales of $340.9. The decrease was driven by lower sales volume of 5.4%, partially offset by increased pricing of 1.8%. Lower sales volume was driven by fertilizer, grass seed, plant food and controls products, partially offset by higher sales of soils products.

U.S. Consumer Segment Profit was $9.0 in the first quarter of fiscal 2026, a decrease from first quarter of fiscal 2025 Segment Profit of $9.8. The decrease was due to lower net sales, partially offset by a higher gross margin rate.

Other

Other segment net sales were $25.9 in the first quarter of fiscal 2026, an increase of 0.8% from the first quarter of fiscal 2025 net sales of $25.7. The increase was driven by increased pricing of 1.6% and favorable foreign exchange rates of 1.2%, partially offset by lower sales volume of 2.0%.

Other segment loss was $1.7 in the first quarter of fiscal 2026, a decrease from first quarter of fiscal 2025 segment loss of $3.1.

Corporate

Corporate expenses were $25.3 in the first quarter of fiscal 2026, a decrease of 25.4% from first quarter of fiscal 2025 expenses of $33.9. The decrease was driven by lower short-term variable incentive compensation expense and lower share-based compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes cash activities:

Operating Activities

Cash used in operating activities totaled $370.4 for the three months ended December 27, 2025, a decrease of $74.9 compared to $445.3 for the three months ended December 28, 2024. This decrease was driven by the timing of inventory production and lower payments to customers related to promotional programs, partially offset by higher short-term variable cash incentive compensation payments.

Investing Activities

Cash used in investing activities totaled $21.8 for the three months ended December 27, 2025, a decrease of $1.5 compared to $23.3 for the three months ended December 28, 2024. Cash used for investments in property, plant and equipment during the first three months of fiscal 2026 and 2025 was $20.0 and $29.3, respectively, driven by the timing of spending on capital projects. During the three months ended December 27, 2025 and December 28, 2024, we had net other investing cash (outflows) inflows of $(1.8) and $6.0, respectively.

Financing Activities

Cash provided by financing activities totaled $366.8 for the three months ended December 27, 2025 compared to $407.7 for the three months ended December 28, 2024. During the three months ended December 27, 2025, we had net borrowings on our debt instruments of $422.5 due to our seasonal working capital build. We also paid dividends of $38.3, financing and issuance fees of $8.6 and repurchased Common Shares for $8.3 (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 28, 2024, we had net borrowings on our debt instruments of $464.8, 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).

Share Repurchases

On December 19, 2025, the Company’s Board of Directors authorized a share repurchase program, with no expiration date, for the repurchase of up to $500.0 of Common Shares. There have been no share repurchases under this authorization as of December 27, 2025.

Accounts Receivable Sales

We are party to a Master Receivables Purchase Agreement, which is uncommitted and expires on September 1, 2026, under which we may sell up to $750.0 of available and eligible outstanding customer accounts receivable generated by sales to five specified customers. 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 27, 2025, December 28, 2024 and September 30, 2025, net receivables derecognized were $220.3, $236.7 and $163.3, respectively. During the three months ended December 27, 2025 and December 28, 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $254.6 and $274.0, respectively, and the total discount recorded on sales was $2.9 and $3.3, 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 were $30.7, $26.7 and $13.9 at December 27, 2025, December 28, 2024 and September 30, 2025, respectively, and are recorded within accounts payable in the Condensed Consolidated Balance Sheets. The associated payments were $68.0 and $72.7 for the three months ended December 27, 2025 and December 28, 2024, respectively, and are classified as operating activities in the Condensed 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, including cash and cash equivalents classified within current assets held for sale, of $11.3, $9.8 and $36.6 as of December 27, 2025, December 28, 2024 and September 30, 2025, respectively, included $7.2, $6.1 and $4.2, respectively, held by controlled foreign corporations. As of December 27, 2025, we maintain our assertion of indefinite reinvestment of the earnings of all material foreign subsidiaries.

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 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 will be available for issuance of letters of credit up to $100.0 and will terminate on November 21, 2030. 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.

At December 27, 2025, we had letters of credit outstanding in the aggregate principal amount of $93.2, and had $979.8 of borrowing availability under the Seventh A&R Credit Agreement. The weighted average interest rates on average borrowings under the credit facilities, excluding the impact of interest rate swaps, were 7.0% and 8.5% for the three months ended December 27, 2025 and December 28, 2024, respectively.

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 Adjusted EBITDA. The maximum permitted leverage ratio is 5.00. Our leverage ratio was 4.03 at December 27, 2025. 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. Our interest coverage ratio was 5.05 at December 27, 2025.

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 with a maturity date of December 15, 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. At December 27, 2025, the $250.0 aggregate principal amount of the 5.250% Senior Notes was reclassified to the “Current portion of debt” line in the Condensed Consolidated Balance Sheets as it is payable within one year. We intend to repay the 5.250% Senior Notes during fiscal 2026 using a combination of cash flow from operations and available borrowing capacity under the Seventh A&R Credit Agreement.

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.

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 December 27, 2025, December 28, 2024 and September 30, 2025 had a maximum total U.S. dollar equivalent notional amount of $450.0. The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at December 27, 2025 are shown in the table below:

(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.

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 the 2025 Annual Report, under “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.”

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.

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.

(a) Includes amounts due from Non-Guarantor subsidiaries of $43.9 and $11.4, respectively.

(a) Includes intercompany income (expense) from Non-Guarantor subsidiaries of $(1.1) and $5.9, respectively.

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.

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 the 2025 Annual Report, under “ITEM 1. BUSINESS — Regulatory Considerations” and “ITEM 3. LEGAL PROCEEDINGS.”

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed 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. Our critical accounting estimates have not changed materially from those disclosed in the 2025 Annual Report.

Management believes that there are no material changes to our quantitative and qualitative disclosures about market risks during the three months ended December 27, 2025 compared to those disclosed in the 2025 Annual Report.

Evaluation of Disclosure Controls and Procedures

The Scotts Miracle-Gro Company (the “Registrant”) maintains “disclosure controls and procedures,” as such term is defined under the Securities Exchange Act of 1934 (the “Exchange Act”) Rule 13a-15(e), that are designed to ensure that information required to be disclosed in the Registrant’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and its principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

With the participation of the principal executive officer and the principal financial officer of the Registrant, the Registrant’s management has evaluated the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the fiscal quarter covered by this Form 10-Q. Based upon that evaluation, the Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures were effective as of December 27, 2025.

Changes in Internal Control Over Financial Reporting

No changes in the Registrant’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the Registrant’s fiscal quarter ended December 27, 2025, that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

The Company’s risk factors, as of December 27, 2025, have not materially changed from those described in Part I, Item 1A of the 2025 Annual Report.

Cautionary Note Regarding Forward-Looking Statements

This Form 10-Q, including the exhibits hereto and the information incorporated by reference herein, contains “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-Q are predictions only and actual results could differ materially from management’s expectations due to a variety of factors, including those described in “ITEM 1A. RISK FACTORS” in the 2025 Annual Report. 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-Q 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.