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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________
FORM 10-Q
_________________________________
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the transition period from to
Commission File Number: 001-11593
____________________________________
The Scotts Miracle-Gro Company
(Exact name of registrant as specified in its charter)
____________________________________________

Ohio |  | 31-1414921
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

14111 Scottslawn Road, Marysville, Ohio 43041
(Address of principal executive offices) (Zip Code)
(937) 644-0011
(Registrant’s telephone number, including area code)
_____________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Shares, $0.01 stated value |  | SMG |  | NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☒ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
Emerging growth company |  | ☐ |  |  |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes | ☐ | No | ☒

As of August 2, 2024, there were 56,821,100 common shares outstanding.
1

Table of Contents

THE SCOTTS MIRACLE-GRO COMPANY INDEX
|  | PAGE NO.
PART I. FINANCIAL INFORMATION: |
Item 1. | Financial Statements (Unaudited) |
| Condensed Consolidated Statements of Operations — Three and nine months ended June 29, 2024 and July 1, 2023 | 3
| Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and nine months ended June 29, 2024 and July 1, 2023 | 4
| Condensed Consolidated Statements of Cash Flows — Nine months ended June 29, 2024 and July 1, 2023 | 5
| Condensed Consolidated Balance Sheets — June 29, 2024, July 1, 2023 and September 30, 2023 | 6
| Notes to Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 44
Item 4. | Controls and Procedures | 44
PART II. OTHER INFORMATION: |
Item 1. | Legal Proceedings | 45
Item 1A. | Risk Factors | 45
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 46
Item 3. | Defaults Upon Senior Securities | 46
Item 4. | Mine Safety Disclosures | 46
Item 5. | Other Information | 46
Item 6. | Exhibits | 46
Index to Exhibits | 47
Signatures | 48

2

Table of Contents
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Statements of Operations
(In millions, except per share data)
(Unaudited)

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Net sales | $ | 1,202.2 |  |  | $ | 1,118.7 |  |  | $ | 3,138.0 |  |  | $ | 3,176.8 |
Cost of sales | 850.6 |  |  | 880.1 |  |  | 2,191.4 |  |  | 2,300.7 |
Cost of sales—impairment, restructuring and other | (2.5) |  |  | 32.7 |  |  | 66.6 |  |  | 161.8 |
Gross margin | 354.1 |  |  | 205.9 |  |  | 880.0 |  |  | 714.3 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 147.9 |  |  | 128.5 |  |  | 441.4 |  |  | 443.3 |
Impairment, restructuring and other | (0.8) |  |  | 1.7 |  |  | (5.9) |  |  | 32.0 |
Other (income) expense, net | 6.9 |  |  | (1.6) |  |  | 19.6 |  |  | (2.7) |
Income from operations | 200.1 |  |  | 77.3 |  |  | 424.9 |  |  | 241.7 |
Equity in (income) loss of unconsolidated affiliates | (23.0) |  |  | (22.2) |  |  | 6.5 |  |  | (3.5) |
Interest expense | 38.8 |  |  | 47.1 |  |  | 125.6 |  |  | 138.1 |
Other non-operating (income) expense, net | 1.3 |  |  | 0.4 |  |  | 4.2 |  |  | (0.2) |
Income before income taxes | 183.0 |  |  | 52.0 |  |  | 288.6 |  |  | 107.3 |
Income tax expense | 50.9 |  |  | 8.3 |  |  | 79.5 |  |  | 19.0 |
Net income | $ | 132.1 |  |  | $ | 43.7 |  |  | $ | 209.1 |  |  | $ | 88.3 |
Basic net income per common share | $ | 2.33 |  |  | $ | 0.78 |  |  | $ | 3.69 |  |  | $ | 1.58 |
Diluted net income per common share | $ | 2.28 |  |  | $ | 0.77 |  |  | $ | 3.64 |  |  | $ | 1.57 |
Weighted-average common shares outstanding during the period | 56.8 |  |  | 56.2 |  |  | 56.7 |  |  | 55.9 |
Weighted-average common shares outstanding during the period plus dilutive potential common shares | 58.0 |  |  | 56.6 |  |  | 57.5 |  |  | 56.3 |

See Notes to Condensed Consolidated Financial Statements.
3

Contents
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)

| Three Months Ended |  | Nine Months Ended |  |
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023 |  |  |  |
Net income | $ | 132.1 |  |  | $ | 43.7 |  |  | $ | 209.1 |  |  | $ | 88.3 |  |  |  |  |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net foreign currency translation adjustment | (1.3) |  |  | 2.7 |  |  | (0.8) |  |  | 10.9 |  |  |  |  |
Net unrealized gain (loss) on derivative instruments, net of tax | 1.2 |  |  | 7.2 |  |  | (0.9) |  |  | (2.4) |  |  |  |  |
Reclassification of net unrealized gain on derivative instruments to net income, net of tax | (3.8) |  |  | (3.2) |  |  | (6.2) |  |  | (15.1) |  |  |  |  |
Net unrealized gain (loss) on securities, net of tax | 5.1 |  |  | 0.5 |  |  | 3.6 |  |  | (25.5) |  |  |  |  |
Pension and other post-retirement benefit adjustments, net of tax | 0.6 |  |  | (0.6) |  |  | 0.2 |  |  | (3.8) |  |  |  |  |
Total other comprehensive income (loss) | 1.8 |  |  | 6.6 |  |  | (4.1) |  |  | (35.9) |  |  |  |  |
Comprehensive income | $ | 133.9 |  |  | $ | 50.3 |  |  | $ | 205.0 |  |  | $ | 52.4 |  |  |  |  |

See Notes to Condensed Consolidated Financial Statements.
4

Contents
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)

| Nine Months Ended
| June 29, 2024 |  | July 1, 2023
OPERATING ACTIVITIES |  |  |
Net income | $ | 209.1 |  |  | $ | 88.3 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |
Impairment, restructuring and other | 6.4 |  |  | 50.0 |
Share-based compensation expense | 65.7 |  |  | 52.7 |
Depreciation | 48.8 |  |  | 49.6 |
Amortization | 11.8 |  |  | 20.8 |
Deferred taxes | 62.0 |  |  | (5.9) |
Equity in (income) loss of unconsolidated affiliates | 6.5 |  |  | (3.5) |
Changes in assets and liabilities, net of acquisitions: |  |  |
Accounts receivable | (200.8) |  |  | (775.9) |
Inventories | 273.4 |  |  | 448.6 |
Prepaid and other current assets | 6.2 |  |  | (0.7) |
Accounts payable | 73.1 |  |  | (35.7) |
Other current liabilities | (3.2) |  |  | 112.5 |
Other non-current items | (10.2) |  |  | (8.1) |
Other, net | 0.2 |  |  | 3.0 |
Net cash provided by (used in) operating activities | 549.0 |  |  | (4.3) |
INVESTING ACTIVITIES |  |  |
Investments in property, plant and equipment | (67.4) |  |  | (73.8) |
Proceeds from loans receivable | — |  |  | 37.0 |
Investments in unconsolidated affiliates | (21.4) |  |  | — |
Other investing, net | 8.8 |  |  | (7.8) |
Net cash used in investing activities | (80.0) |  |  | (44.6) |
FINANCING ACTIVITIES |  |  |
Borrowings under revolving and bank lines of credit and term loans | 648.5 |  |  | 1,296.4 |
Repayments under revolving and bank lines of credit and term loans | (776.4) |  |  | (1,183.8) |
Dividends paid | (113.7) |  |  | (112.0) |
Purchase of Common Shares | (5.0) |  |  | (9.3) |
Cash received from exercise of stock options | 2.4 |  |  | 1.7 |
Other financing, net | 23.1 |  |  | (4.0) |
Net cash used in financing activities | (221.1) |  |  | (11.0) |
Effect of exchange rate changes on cash | 0.1 |  |  | 0.5 |
Net increase (decrease) in cash and cash equivalents | 248.0 |  |  | (59.4) |
Cash and cash equivalents at beginning of period | 31.9 |  |  | 86.8 |
Cash and cash equivalents at end of period | $ | 279.9 |  |  | $ | 27.4 |

See Notes to Condensed Consolidated Financial Statements.
5

Contents
THE SCOTTS MIRACLE-GRO COMPANY
Condensed Consolidated Balance Sheets
(In millions, except per share data)
(Unaudited)

| June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
ASSETS
Current assets: |  |  |  |  |
Cash and cash equivalents | $ | 279.9 |  |  | $ | 27.4 |  |  | $ | 31.9 |
Accounts receivable, less allowances of $12.7, $22.3 and $15.1, respectively | 504.6 |  |  | 717.7 |  |  | 304.2 |
Accounts receivable pledged | — |  |  | 442.2 |  |  | — |
Inventories | 606.8 |  |  | 884.9 |  |  | 880.3 |
Prepaid and other current assets | 147.1 |  |  | 178.8 |  |  | 181.4 |
Total current assets | 1,538.4 |  |  | 2,251.0 |  |  | 1,397.8 |
Investment in unconsolidated affiliates | 106.8 |  |  | 196.5 |  |  | 91.9 |
Property, plant and equipment, net of accumulated depreciation of $805.6, $805.3 and $765.4, respectively | 599.0 |  |  | 590.3 |  |  | 610.3 |
Goodwill | 243.9 |  |  | 254.5 |  |  | 243.9 |
Intangible assets, net | 424.9 |  |  | 560.2 |  |  | 436.7 |
Other assets | 576.3 |  |  | 601.9 |  |  | 633.1 |
Total assets | $ | 3,489.3 |  |  | $ | 4,454.4 |  |  | $ | 3,413.7 |
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities: |  |  |  |  |
Current portion of debt | $ | 52.9 |  |  | $ | 450.7 |  |  | $ | 52.3 |
Accounts payable | 316.7 |  |  | 365.7 |  |  | 271.2 |
Other current liabilities | 484.8 |  |  | 512.7 |  |  | 450.2 |
Total current liabilities | 854.4 |  |  | 1,329.1 |  |  | 773.7 |
Long-term debt | 2,436.4 |  |  | 2,628.8 |  |  | 2,557.4 |
Other liabilities | 344.7 |  |  | 361.7 |  |  | 349.9 |
Total liabilities | 3,635.5 |  |  | 4,319.6 |  |  | 3,681.0 |
Commitments and contingencies (Note 10) |  |  |  |  |
Equity (deficit): |  |  |  |  |
Common shares and capital in excess of $0.01 stated value per share; shares outstanding of 56.8, 56.1 and 56.5, respectively | 360.6 |  |  | 350.5 |  |  | 353.1 |
Retained earnings | 585.8 |  |  | 996.8 |  |  | 490.9 |
Treasury shares, at cost; 11.4, 12.0 and 11.6 shares, respectively | (975.7) |  |  | (1,032.0) |  |  | (998.5) |
Accumulated other comprehensive loss | (116.9) |  |  | (180.5) |  |  | (112.8) |
Total equity (deficit) | (146.2) |  |  | 134.8 |  |  | (267.3) |
Total liabilities and equity (deficit) | $ | 3,489.3 |  |  | $ | 4,454.4 |  |  | $ | 3,413.7 |

See Notes to Condensed Consolidated Financial Statements.
6

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
| (Dollars in millions, except per share data) |

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Scotts Miracle-Gro Company (“Scotts Miracle-Gro”) and its subsidiaries (collectively, with Scotts Miracle-Gro, the “Company”) are engaged in the manufacturing, marketing and sale of products for lawn and garden care and indoor and hydroponic gardening. The Company’s products are sold in North America, Europe and Asia.
The Company’s North America consumer lawn and garden business is highly seasonal, with approximately 75% of its annual net sales occurring in the second and third fiscal quarters. The Company’s Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of growing patterns in North America during the second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during the third and fourth fiscal quarters.
Organization and Basis of Presentation
The Company’s unaudited condensed consolidated financial statements for the three and nine months ended June 29, 2024 and July 1, 2023 are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements include the accounts of Scotts Miracle-Gro and its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation. The Company’s consolidation criteria are based on majority ownership (as evidenced by a majority voting interest in the entity) and an objective evaluation and determination of effective management control. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of each acquisition or up to the date of disposal, respectively. In the opinion of management, interim results reflect all normal and recurring adjustments and are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, this Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2024 (this “Form 10-Q”) should be read in conjunction with Scotts Miracle-Gro’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Annual Report”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.
The Company’s Condensed Consolidated Balance Sheet at September 30, 2023 has been derived from the Company’s audited Consolidated Balance Sheet at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
Accounts Receivable
On October 27, 2023, the Company entered into a Master Receivables Purchase Agreement (the “Master Receivables Purchase Agreement”), under which it may sell up to $600.0 of available and eligible outstanding customer accounts receivable generated by sales to four specified customers. The agreement is uncommitted and has an initial term that expires October 25, 2024, unless earlier terminated by the purchaser. The receivable sales are non-recourse to the Company, other than with respect to (i) repurchase and indemnification obligations for any violations by the Company of its respective representations or obligations as seller or servicer and (ii) certain repurchase and payment obligations arising from any dilution of, or dispute with respect to, any purchased receivables that arise after the sale of such purchased receivables to the purchaser not contemplated in the applicable purchase price of such purchased receivable. The recourse obligations of the Company that may arise from time to time are supported by standby letters of credit of $70.0. Transactions under this 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. The Company records the discount on sales in the “Other (income) expense, net” line in the Condensed Consolidated Statements of Operations. At June 29, 2024, net receivables of $477.3 were derecognized. During the three and nine months ended June 29, 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $724.5 and $1,680.0, respectively, and the total discount recorded on sales was $8.7 and $21.6, respectively.
7

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Supplier Finance Program
The Company has an agreement to provide a supplier finance program which facilitates participating suppliers’ ability to finance payment obligations of the Company with a designated third-party financial institution. Participating suppliers may, at their sole discretion, elect to finance payment obligations of the Company prior to their scheduled due dates at a discounted price to the participating financial institution. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under this arrangement. The payment terms that the Company negotiates with its suppliers are consistent, regardless of whether a supplier participates in the program. The Company’s current payment terms with a majority of its suppliers generally range from 30 to 60 days, which the Company deems to be commercially reasonable. The Company’s outstanding payment obligations under its supplier finance program were $22.8, $16.6 and $18.3 at June 29, 2024, July 1, 2023 and September 30, 2023, respectively, and are recorded within accounts payable in the Condensed Consolidated Balance Sheets. The associated payments were $218.6 and $157.6 for the nine months ended June 29, 2024 and July 1, 2023, respectively, and are classified as operating activities in the Condensed Consolidated Statements of Cash Flows.
Long-Lived Assets
The Company had non-cash investing activities of $4.5 and $7.6 during the nine months ended June 29, 2024 and July 1, 2023, respectively, representing unpaid liabilities to acquire property, plant and equipment.
Statements of Cash Flows
Supplemental cash flow information was as follows:

| Nine Months Ended
| June 29, 2024 |  | July 1, 2023
Interest paid | $ | 131.6 |  |  | $ | 143.3 |
Income taxes paid (refunded), net | 3.7 |  |  | (15.4) |

Cash flow from operating activities for the nine months ended July 1, 2023 was impacted by 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 Company also received proceeds of $37.0 during the nine months ended July 1, 2023 related to the payoff of seller financing that the Company provided in connection with a fiscal 2017 divestiture, which was classified as an investing activity in the Condensed Consolidated Statements of Cash Flows.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04, “Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires disclosure of the key terms of outstanding supplier finance programs and a roll-forward of the related obligations. ASU No. 2022-04 is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted the ASU as of October 1, 2023. The adoption relates to disclosures only and does not have any impact on the Company’s consolidated financial position, results of operations or cash flows.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker that are included within each reported measure of segment profit or loss, and also requires all annual disclosures currently required by Topic 280 to be included in interim periods. ASU No. 2023-07 is to be applied retrospectively for all periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company’s disclosures.
8

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU primarily requires enhanced disclosures and disaggregation of income tax information by jurisdiction in the annual income tax reconciliation and quantitative and qualitative disclosures regarding income taxes paid. ASU No. 2023-09 is to be applied prospectively, with the option to apply the standard retrospectively, effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company’s disclosures.
NOTE 2. INVESTMENT IN UNCONSOLIDATED AFFILIATES
On December 31, 2020, the Company acquired a 50% equity interest in Bonnie Plants, LLC, a joint venture with Alabama Farmers Cooperative, Inc. (“AFC”) focused on planting, growing, developing, distributing, marketing and selling live plants. During the three months ended December 31, 2022, the Company and AFC amended the joint venture agreement to allow AFC to make an additional equity contribution to Bonnie Plants, LLC, and, as a result of this contribution by AFC, the Company’s equity interest in Bonnie Plants, LLC was reduced to 45%. On November 7, 2023, the Company purchased an additional 5% equity interest in Bonnie Plants, LLC from AFC for $21.4, which restored its total equity interest back to 50%. The Company’s interest is accounted for using the equity method of accounting, with the Company’s proportionate share of Bonnie Plants, LLC earnings reflected in the Condensed Consolidated Statements of Operations.
During the three and nine months ended June 29, 2024, the Company recorded equity in (income) loss of unconsolidated affiliates associated with Bonnie Plants, LLC of ($23.0) and $6.5, respectively, as compared to ($22.2) and ($3.5) during the three and nine months ended July 1, 2023, respectively. During the three and nine months ended June 29, 2024, the Company recorded a pre-tax impairment charge of $0.0 and $10.4, respectively, associated with its investment in Bonnie Plants, LLC in the “Equity in (income) loss of unconsolidated affiliates” line in the Condensed Consolidated Statements of Operations.
NOTE 3. 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 (recoveries) for each of the periods presented:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Cost of sales—impairment, restructuring and other: |  |  |  |  |  |  |
Restructuring and other charges (recoveries), net | $ | (4.8) |  |  | $ | 28.6 |  |  | $ | 59.3 |  |  | $ | 134.3 |
Right-of-use asset impairments | 2.3 |  |  | 3.7 |  |  | 3.3 |  |  | 19.1 |
Property, plant and equipment impairments | — |  |  | 0.5 |  |  | 4.1 |  |  | 8.4 |
Operating expenses—impairment, restructuring and other: |  |  |  |  |  |  |
Restructuring and other charges (recoveries), net | (0.8) |  |  | 1.7 |  |  | (5.9) |  |  | 32.0 |
Total impairment, restructuring and other charges (recoveries), net | $ | (3.3) |  |  | $ | 34.5 |  |  | $ | 60.8 |  |  | $ | 193.8 |

The following table summarizes the activity related to liabilities associated with restructuring activities during the nine months ended June 29, 2024:

Amounts accrued at September 30, 2023 | $ | 40.5 |
Restructuring charges | 6.7 |
Payments | (24.2) |
Amounts accrued at June 29, 2024 | $ | 23.0 |

As of June 29, 2024, restructuring accruals include $7.3 that is classified as long-term.
9

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

During fiscal 2022, the Company began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. These changes and initiatives include reducing the size of the supply chain network, reducing staffing levels and implementing other cost-reduction initiatives. During the second quarter of fiscal 2024, the Company commenced plans to close additional Hawthorne distribution centers. The Company has also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce its on hand inventory to align with the reduced network capacity. During the three months ended June 29, 2024, the Company recorded net recoveries associated with this restructuring initiative that were not material. During the nine months ended June 29, 2024, the Company incurred costs of $69.7 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. The Company incurred costs of $3.7 in its U.S. Consumer segment and $62.9 in its Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the nine months ended June 29, 2024. The Company recorded recoveries of $1.2 in its U.S. Consumer segment, and incurred costs of $1.0 in its Hawthorne segment, $0.8 in its Other segment and $2.4 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the nine months ended June 29, 2024. Costs incurred from the inception of this restructuring initiative through June 29, 2024 were $288.3 for the Hawthorne segment, $48.1 for the U.S. Consumer segment, $2.3 for the Other segment and $25.1 for Corporate.
During the three and nine months ended July 1, 2023, the Company incurred costs of $34.5 and $185.8, 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. The Company incurred costs of $7.1 and $8.2 in its U.S. Consumer segment and $25.7 and $152.6 in its Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and nine months ended July 1, 2023, respectively. The Company incurred costs of $1.9 and $20.1 in its Hawthorne segment and $0.0 and $4.5 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and nine months ended July 1, 2023, respectively.
During the three and nine months ended June 29, 2024, the Company 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.
NOTE 4. INVENTORIES
Inventories consisted of the following for each of the periods presented:

| June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Finished goods | $ | 281.3 |  |  | $ | 534.4 |  |  | $ | 506.2 |
Raw materials | 250.8 |  |  | 271.3 |  |  | 272.5 |
Work-in-process | 74.7 |  |  | 79.2 |  |  | 101.6 |
Total inventories, net | $ | 606.8 |  |  | $ | 884.9 |  |  | $ | 880.3 |

NOTE 5. MARKETING AGREEMENT
The Scotts Company LLC (“Scotts LLC”) is the exclusive agent of Monsanto Company (“Monsanto”), a subsidiary of Bayer AG, for the marketing and distribution of certain of Monsanto’s consumer Roundup® branded products in the United States and certain other specified countries. The annual commission payable under the Third Amended and Restated Exclusive Agency and Marketing Agreement (the “Third Restated Agreement”) is equal to 50% of the actual earnings before interest and income taxes of Monsanto’s consumer Roundup® business for each program year in the markets covered by the Third Restated Agreement (“Program EBIT”). The Third Restated Agreement also requires the Company to make annual payments of $18.0 to Monsanto as a contribution against the overall expenses of its consumer Roundup® business, subject to reduction pursuant to the Third Restated Agreement for any program year in which the Program EBIT does not equal or exceed $36.0.
10

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Unless Monsanto terminates the Third Restated Agreement due to an event of default by the Company, termination rights under the Third Restated Agreement include the following:
•The Company may terminate the Third Restated Agreement upon the insolvency or bankruptcy of Monsanto;
•Monsanto may terminate the Third Restated Agreement in the event that Monsanto decides 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 Termination”); and
•Each party may terminate the Third Restated Agreement if Program EBIT falls below $50.0 and, in such case, no termination fee would be payable to either party.
The termination fee structure requires Monsanto to pay a termination fee to the Company in an amount equal to (i) $375.0 upon a Brand Decommissioning Termination, and (ii) the greater of $175.0 or four times an amount equal to the average of the Program EBIT for the three program years before the year of termination, minus $186.4, if Monsanto or its successor terminates the Third Restated Agreement as a result of a Roundup Sale or Change of Control of Monsanto (each, as defined in the Third Restated Agreement).
The elements of the net commission and reimbursements earned under the Third Restated Agreement and included in the “Net sales” line in the Condensed Consolidated Statements of Operations are as follows:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Gross commission | $ | 31.5 |  |  | $ | 12.3 |  |  | $ | 80.9 |  |  | $ | 70.9 |
Contribution expenses | (4.5) |  |  | (4.5) |  |  | (13.5) |  |  | (13.5) |
Net commission | 27.0 |  |  | 7.8 |  |  | 67.4 |  |  | 57.4 |
Reimbursements associated with Roundup® marketing agreement | 27.4 |  |  | 23.5 |  |  | 75.5 |  |  | 65.9 |
Total net sales associated with Roundup® marketing agreement | $ | 54.4 |  |  | $ | 31.3 |  |  | $ | 142.9 |  |  | $ | 123.3 |

NOTE 6. DEBT
The components of debt are as follows:

| June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Credit Facilities: |  |  |  |  |
Revolving loans | $ | — |  |  | $ | 145.1 |  |  | $ | 88.3 |
Term loans | 887.5 |  |  | 937.5 |  |  | 925.0 |
Senior Notes due 2031 – 4.000% | 500.0 |  |  | 500.0 |  |  | 500.0 |
Senior Notes due 2032 – 4.375% | 400.0 |  |  | 400.0 |  |  | 400.0 |
Senior Notes due 2029 – 4.500% | 450.0 |  |  | 450.0 |  |  | 450.0 |
Senior Notes due 2026 – 5.250% | 250.0 |  |  | 250.0 |  |  | 250.0 |
Receivables facility | — |  |  | 398.0 |  |  | — |
Finance lease obligations | 19.7 |  |  | 17.4 |  |  | 16.9 |
Other | — |  |  | 0.8 |  |  | 0.4 |
Total debt | 2,507.2 |  |  | 3,098.8 |  |  | 2,630.6 |
Less current portions | 52.9 |  |  | 450.7 |  |  | 52.3 |
Less unamortized debt issuance costs | 17.9 |  |  | 19.3 |  |  | 20.9 |
Long-term debt | $ | 2,436.4 |  |  | $ | 2,628.8 |  |  | $ | 2,557.4 |

11

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Credit Facilities
On April 8, 2022, the Company entered into a sixth amended and restated credit agreement (the “Sixth A&R Credit Agreement”), providing the Company and certain of its subsidiaries with five-year senior secured loan facilities in the aggregate principal amount of $2,500.0, 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 Facilities”). 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.
Under the terms of the Sixth A&R Credit Agreement, loans bear interest, at the Company’s 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.
On June 8, 2022, the Company entered into Amendment No. 1 to the Sixth A&R Credit Agreement (“Amendment No. 1”). Amendment No. 1 increased the maximum permitted leverage ratio for the quarterly leverage covenant until April 1, 2024. Amendment No. 1 also increased the interest rate applicable to borrowings under the revolving credit facility by 35 bps and the term loan facility by 50 bps, and increased the annual facility fee rate on the revolving credit facility by 15 bps, in each case, when the Company’s quarterly-tested leverage ratio exceeded 4.75.
On July 31, 2023, the Company entered into Amendment No. 2 to the Sixth A&R Credit Agreement (“Amendment No. 2”). Amendment No. 2 (i) reduces the revolving loan commitments by $250.0; (ii) increases the maximum permitted leverage ratio for the quarterly leverage covenant until the earlier of (a) October 1, 2025 and (b) subject to certain conditions specified in Amendment No. 2, the termination by the Company of such adjustment (such period, the “Leverage Adjustment Period”); (iii) replaces the interest coverage covenant with a fixed charge coverage covenant; (iv) increases the interest rate applicable to borrowings under the revolving credit facility and the term loan facility by 25 bps for each existing pricing tier and adds a pricing tier applicable to periods when the leverage ratio exceeds 6.00; (v) limits the amount of certain incremental investments, loans and advances to $25.0 during the Leverage Adjustment Period; and (vi) adds the Company’s intellectual property (subject to certain exceptions) as collateral to secure its obligations under the Sixth A&R Credit Agreement. Additionally, Amendment No. 2 limits the Company’s ability to declare or pay any discretionary dividends, distributions or other restricted payments during the Leverage Adjustment Period to only the payment of (i) regularly scheduled cash dividends to holders of its Common Shares in an aggregate amount not to exceed $225.0 per fiscal year and (ii) other dividends, distributions or other restricted payments in an aggregate amount not to exceed $25.0. Amendment No. 2 also subjects the Company’s ability to make certain investments to pro forma compliance with certain leverage levels specified in Amendment No. 2. Pursuant to Amendment No. 2, the Sixth A&R Credit Agreement is secured by (i) a perfected first priority security interest in all of the accounts receivable, inventory, equipment and intellectual property (subject to certain exceptions) of Scotts Miracle-Gro and certain of its domestic subsidiaries and (ii) the pledge of all of the capital stock of certain of Scotts Miracle-Gro’s domestic subsidiaries and a portion of the capital stock of certain of its foreign subsidiaries.
At June 29, 2024, the Company had letters of credit outstanding in the aggregate principal amount of $78.0, and had $1,172.0 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 9.0% and 7.3% for the nine months ended June 29, 2024 and July 1, 2023, respectively.
On August 6, 2024, the Company used available cash on hand to make a repayment on the term loan of the Sixth A&R Credit Agreement in the amount of $200.0, which was applied to the outstanding principal amount.
12

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

The Sixth A&R Credit Agreement contains, among other obligations, an affirmative covenant regarding the Company’s leverage ratio determined as of the end of each of its fiscal quarters, calculated as average total indebtedness, divided by the Company’s earnings before interest, taxes, depreciation and amortization, as adjusted pursuant to the terms of Amendment No. 2 (“Adjusted EBITDA”). Pursuant to Amendment No. 2, the maximum permitted leverage ratio is (i) 6.50 for the third quarter of fiscal 2024, (ii) 6.00 for the fourth quarter of fiscal 2024, (iii) 5.50 for the first quarter of fiscal 2025, (iv) 5.25 for the second quarter of fiscal 2025, (v) 5.00 for the third quarter of fiscal 2025, (vi) 4.75 for the fourth quarter of fiscal 2025 and (vii) 4.50 for the first quarter of fiscal 2026 and thereafter. The Company’s leverage ratio was 5.46 at June 29, 2024. Pursuant to Amendment No. 2, the Sixth A&R Credit Agreement also contains an affirmative covenant regarding the Company’s fixed charge coverage ratio determined as of the end of each of its 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 (i) 0.75 for the third quarter of fiscal 2024 and (ii) 1.00 for the fourth quarter of fiscal 2024 and thereafter. The Company’s fixed charge coverage ratio was 1.15 for the twelve months ended June 29, 2024.
As of June 29, 2024, the Company was in compliance with all applicable covenants in the agreements governing its debt. Based on the Company’s projections of its financial performance for the twelve-month period subsequent to the date of the filing of this Form 10-Q, the Company expects to remain in compliance with the financial covenants under the Sixth A&R Credit Agreement. However, the Company’s assessment of its ability to meet its 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, as defined below, and cause the Senior Notes to become due and payable at that time. As of June 29, 2024, the Company’s indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,487.5. The Company does not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.
As part of its contingency planning to address potential future circumstances that could result in noncompliance, the Company has contemplated alternative plans including additional restructuring activities to reduce operating expenses and certain cash management strategies that are within the Company’s control. Additionally, the Company has contemplated alternative plans that are subject to market conditions and not in the Company’s control, including, among others, discussions with its lenders to amend the terms of its financial covenants under the Sixth A&R Credit Agreement and generating cash by completing other financing transactions, which may include issuing equity. There is no assurance that the Company will be successful in implementing these alternative plans.
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”). The 5.250% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with the Company’s existing and future unsecured senior debt. The 5.250% Senior Notes have interest payment dates of June 15 and December 15 of each year.
On October 22, 2019, Scotts Miracle-Gro issued $450.0 aggregate principal amount of 4.500% Senior Notes due 2029 (the “4.500% Senior Notes”). The 4.500% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with the Company’s 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”). The 4.000% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with the Company’s 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”). The 4.375% Senior Notes represent general unsecured senior obligations and rank equal in right of payment with the Company’s 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.
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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

The Senior Notes contain an affirmative covenant regarding the Company’s interest coverage ratio determined as of the end of each of its fiscal quarters, calculated as Adjusted EBITDA divided by interest expense excluding costs related to refinancings. The minimum required interest coverage ratio is 2.00. The Company’s interest coverage ratio was 3.15 for the twelve months ended June 29, 2024.
Receivables Facility
On April 7, 2017, the Company entered into 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 the Company 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 and the commitment amount during the seasonal commitment period that began on February 24, 2023 and ended on June 16, 2023 was $160.0. The Receivables Facility expired on August 18, 2023.
The sale of receivables under the Receivables Facility was accounted for as short-term debt and the Company continued to carry the receivables on its Condensed Consolidated Balance Sheets, primarily as a result of its requirement to repurchase receivables sold. As of July 1, 2023, there were $398.0 in borrowings on receivables pledged as collateral under the Receivables Facility, and the carrying value of the receivables pledged as collateral was $442.2.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements with major financial institutions that effectively convert a portion of the Company’s 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 June 29, 2024, July 1, 2023 and September 30, 2023 had a maximum total U.S. dollar equivalent notional amount of $500.0, $600.0 and $600.0, respectively. The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at June 29, 2024 are shown in the table below:

Notional Amount ($) |  | Effective Date (a) |  | Expiration Date |  | Fixed Rate
200 |  |  | 6/7/2023 |  | 6/8/2026 |  | 0.80 | %
150 |  |  | 6/7/2023 |  | 4/7/2027 |  | 3.37 | %
50 |  |  | 6/7/2023 |  | 4/7/2027 |  | 3.34 | %
100 |  | (b) | 11/20/2023 |  | 3/22/2027 |  | 4.74 | %
150 |  | (b) | 9/20/2024 |  | 9/20/2029 |  | 4.25 | %

(a)The effective date refers to the date on which interest payments are first hedged by the applicable swap agreement.
(b)Notional amount adjusts in accordance with a specified seasonal schedule. This represents the maximum notional amount at any point in time.
Weighted Average Interest Rate
The weighted average interest rates on the Company’s debt, including the impact of interest rate swaps, were 5.9% and 5.3% for the nine months ended June 29, 2024 and July 1, 2023, respectively.
14

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

NOTE 7. EQUITY (DEFICIT)
The following tables provide a summary of the changes in equity (deficit) for each of the periods indicated:

| Common Shares and Capital in Excess of Stated Value |  | Retained Earnings |  | Treasury Shares |  | Accumulated Other Comprehensive Loss |  |  |  |  |  | Total Equity (Deficit)
Balance at September 30, 2023 | $ | 353.1 |  |  | $ | 490.9 |  |  | $ | (998.5) |  |  | $ | (112.8) |  |  |  |  |  |  | $ | (267.3) |
Net income (loss) | — |  |  | (80.5) |  |  | — |  |  | — |  |  |  |  |  |  | (80.5) |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | (8.9) |  |  |  |  |  |  | (8.9) |
Share-based compensation | 11.7 |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 11.7 |
Dividends declared ($0.66 per share) | — |  |  | (38.0) |  |  | — |  |  | — |  |  |  |  |  |  | (38.0) |
Treasury share purchases | — |  |  | — |  |  | (3.1) |  |  | — |  |  |  |  |  |  | (3.1) |
Treasury share issuances | (15.2) |  |  | — |  |  | 15.9 |  |  | — |  |  |  |  |  |  | 0.7 |
Balance at December 30, 2023 | 349.6 |  |  | 372.4 |  |  | (985.7) |  |  | (121.7) |  |  |  |  |  |  | (385.4) |
Net income (loss) | — |  |  | 157.5 |  |  | — |  |  | — |  |  |  |  |  |  | 157.5 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 3.0 |  |  |  |  |  |  | 3.0 |
Share-based compensation | 12.4 |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 12.4 |
Dividends declared ($0.66 per share) | — |  |  | (38.1) |  |  | — |  |  | — |  |  |  |  |  |  | (38.1) |
Treasury share purchases | — |  |  | — |  |  | (1.7) |  |  | — |  |  |  |  |  |  | (1.7) |
Treasury share issuances | (8.3) |  |  | — |  |  | 9.6 |  |  | — |  |  |  |  |  |  | 1.3 |
Balance at March 30, 2024 | 353.7 |  |  | 491.8 |  |  | (977.8) |  |  | (118.6) |  |  |  |  |  |  | (250.9) |
Net income (loss) | — |  |  | 132.1 |  |  | — |  |  | — |  |  |  |  |  |  | 132.1 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 1.8 |  |  |  |  |  |  | 1.8 |
Share-based compensation | 8.3 |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 8.3 |
Dividends declared ($0.66 per share) | — |  |  | (38.1) |  |  | — |  |  | — |  |  |  |  |  |  | (38.1) |
Treasury share purchases | — |  |  | — |  |  | (0.2) |  |  | — |  |  |  |  |  |  | (0.2) |
Treasury share issuances | (1.4) |  |  | — |  |  | 2.2 |  |  | — |  |  |  |  |  |  | 0.8 |
Balance at June 29, 2024 | $ | 360.6 |  |  | $ | 585.8 |  |  | $ | (975.7) |  |  | $ | (116.9) |  |  |  |  |  |  | $ | (146.2) |

The sum of the components may not equal due to rounding.
15

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

| Common Shares and Capital in Excess of Stated Value |  | Retained Earnings |  | Treasury Shares |  | Accumulated Other Comprehensive Loss |  |  |  |  |  | Total Equity (Deficit)
Balance at September 30, 2022 | $ | 364.0 |  |  | $ | 1,020.1 |  |  | $ | (1,091.8) |  |  | $ | (144.6) |  |  |  |  |  |  | $ | 147.7 |
Net income (loss) | — |  |  | (64.7) |  |  | — |  |  | — |  |  |  |  |  |  | (64.7) |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | (24.6) |  |  |  |  |  |  | (24.6) |
Share-based compensation | 20.8 |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 20.8 |
Dividends declared ($0.66 per share) | — |  |  | (37.5) |  |  | — |  |  | — |  |  |  |  |  |  | (37.5) |
Treasury share purchases | — |  |  | — |  |  | (0.8) |  |  | — |  |  |  |  |  |  | (0.8) |
Treasury share issuances | (17.2) |  |  | — |  |  | 35.9 |  |  | — |  |  |  |  |  |  | 18.7 |
Balance at December 31, 2022 | 367.6 |  |  | 917.9 |  |  | (1,056.7) |  |  | (169.3) |  |  |  |  |  |  | 59.5 |
Net income (loss) | — |  |  | 109.4 |  |  | — |  |  | — |  |  |  |  |  |  | 109.4 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | (17.8) |  |  |  |  |  |  | (17.8) |
Share-based compensation | 37.2 |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 37.2 |
Dividends declared ($0.66 per share) | — |  |  | (37.0) |  |  | — |  |  | — |  |  |  |  |  |  | (37.0) |
Treasury share purchases | — |  |  | — |  |  | (5.6) |  |  | — |  |  |  |  |  |  | (5.6) |
Treasury share issuances | (30.4) |  |  | — |  |  | 22.3 |  |  | — |  |  |  |  |  |  | (8.1) |
Balance at April 1, 2023 | 374.3 |  |  | 990.3 |  |  | (1,040.0) |  |  | (187.1) |  |  |  |  |  |  | 137.5 |
Net income (loss) | — |  |  | 43.7 |  |  | — |  |  | — |  |  |  |  |  |  | 43.7 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 6.6 |  |  |  |  |  |  | 6.6 |
Share-based compensation | (5.8) |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | (5.8) |
Dividends declared ($0.66 per share) | — |  |  | (37.2) |  |  | — |  |  | — |  |  |  |  |  |  | (37.2) |
Treasury share purchases | — |  |  | — |  |  | (2.8) |  |  | — |  |  |  |  |  |  | (2.8) |
Treasury share issuances | (18.0) |  |  | — |  |  | 10.8 |  |  | — |  |  |  |  |  |  | (7.2) |
Balance at July 1, 2023 | $ | 350.5 |  |  | $ | 996.8 |  |  | $ | (1,032.0) |  |  | $ | (180.5) |  |  |  |  |  |  | $ | 134.8 |

The sum of the components may not equal due to rounding.
16

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss (“AOCL”) by component were as follows for each of the periods indicated:

|  | Three Months Ended
|  | Foreign Currency Translation Adjustments |  | Net Unrealized Gain (Loss) On Derivative Instruments |  | Net Unrealized Gain (Loss) On Securities |  | Pension and Other Post-Retirement Benefit Adjustments |  | Accumulated Other Comprehensive Income (Loss)
Balance at March 30, 2024 |  | $ | (21.4) |  |  | $ | 15.7 |  |  | $ | (40.1) |  |  | $ | (72.9) |  |  | $ | (118.6) |
Other comprehensive income (loss) before reclassifications |  | (1.3) |  |  | 1.6 |  |  | 5.1 |  |  | — |  |  | 5.4 |
Amounts reclassified from accumulated other comprehensive net income (loss) |  | — |  |  | (5.1) |  |  | — |  |  | 0.8 |  |  | (4.3) |
Income tax benefit (expense) |  | — |  |  | 0.9 |  |  | — |  |  | (0.2) |  |  | 0.7 |
Net current period other comprehensive income (loss) |  | (1.3) |  |  | (2.6) |  |  | 5.1 |  |  | 0.6 |  |  | 1.8 |
Balance at June 29, 2024 |  | $ | (22.6) |  |  | $ | 13.1 |  |  | $ | (35.0) |  |  | $ | (72.3) |  |  | $ | (116.9) |
Balance at April 1, 2023 |  | $ | (20.7) |  |  | $ | 11.8 |  |  | $ | (105.7) |  |  | $ | (72.6) |  |  | $ | (187.1) |
Other comprehensive income (loss) before reclassifications |  | 2.7 |  |  | 9.7 |  |  | 0.6 |  |  | — |  |  | 13.0 |
Amounts reclassified from accumulated other comprehensive net income (loss) |  | — |  |  | (4.3) |  |  | — |  |  | (0.8) |  |  | (5.1) |
Income tax benefit (expense) |  | — |  |  | (1.4) |  |  | (0.1) |  |  | 0.2 |  |  | (1.3) |
Net current period other comprehensive income (loss) |  | 2.7 |  |  | 4.0 |  |  | 0.5 |  |  | (0.6) |  |  | 6.6 |
Balance at July 1, 2023 |  | $ | (18.0) |  |  | $ | 15.8 |  |  | $ | (105.2) |  |  | $ | (73.2) |  |  | $ | (180.5) |

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

|  | Nine Months Ended
|  | Foreign Currency Translation Adjustments |  | Net Unrealized Gain (Loss) On Derivative Instruments |  | Net Unrealized Gain (Loss) On Securities |  | Pension and Other Post-Retirement Benefit Adjustments |  | Accumulated Other Comprehensive Income (Loss)
Balance at September 30, 2023 |  | $ | (21.9) |  |  | $ | 20.1 |  |  | $ | (38.6) |  |  | $ | (72.4) |  |  | $ | (112.8) |
Other comprehensive income (loss) before reclassifications |  | (0.8) |  |  | (1.2) |  |  | 3.6 |  |  | — |  |  | 1.6 |
Amounts reclassified from accumulated other comprehensive net income (loss) |  | — |  |  | (8.3) |  |  | — |  |  | 0.3 |  |  | (8.0) |
Income tax benefit (expense) |  | — |  |  | 2.4 |  |  | — |  |  | (0.1) |  |  | 2.3 |
Net current period other comprehensive income (loss) |  | (0.8) |  |  | (7.1) |  |  | 3.6 |  |  | 0.2 |  |  | (4.1) |
Balance at June 29, 2024 |  | $ | (22.6) |  |  | $ | 13.1 |  |  | $ | (35.0) |  |  | $ | (72.3) |  |  | $ | (116.9) |
Balance at September 30, 2022 |  | $ | (28.9) |  |  | $ | 33.3 |  |  | $ | (79.7) |  |  | $ | (69.3) |  |  | $ | (144.6) |
Other comprehensive income (loss) before reclassifications |  | 10.9 |  |  | (3.2) |  |  | (33.5) |  |  | — |  |  | (25.8) |
Amounts reclassified from accumulated other comprehensive net income (loss) |  | — |  |  | (20.3) |  |  | — |  |  | (5.1) |  |  | (25.4) |
Income tax benefit (expense) |  | — |  |  | 5.9 |  |  | 8.0 |  |  | 1.3 |  |  | 15.2 |
Net current period other comprehensive income (loss) |  | 10.9 |  |  | (17.5) |  |  | (25.5) |  |  | (3.8) |  |  | (35.9) |
Balance at July 1, 2023 |  | $ | (18.0) |  |  | $ | 15.8 |  |  | $ | (105.2) |  |  | $ | (73.2) |  |  | $ | (180.5) |

The sum of the components may not equal due to rounding.
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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Share-Based Awards
Total share-based compensation was as follows for each of the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Share-based compensation | $ | 21.0 |  |  | $ | (5.8) |  |  | $ | 65.0 |  |  | $ | 52.2 |
Related tax benefit recognized | 4.5 |  |  | 0.6 |  |  | 11.7 |  |  | 11.4 |

During the three months ended July 1, 2023, a cumulative adjustment was recognized to share-based compensation expense for certain performance-based award units to reflect management’s assessment of a lower probability of achievement of performance goals.
Performance-based awards
For fiscal 2024, the Company is granting short-term equity incentive compensation awards to certain employees in the form of performance-based units in lieu of cash-based annual incentive awards. These awards will be granted on or near the incentive payout date, subject to certain performance conditions and a service requirement. The number of performance-based units that the Company will ultimately issue to participating employees will be determined based on a target payout amount for each employee adjusted up or down based on actual performance compared to the performance conditions, and then converted into a variable number of performance-based award units based on the fair value of the Company’s Common Shares on the grant date. The awards are classified as liability awards and, as of June 29, 2024, the Company had accrued $14.0 in the “Other current liabilities” line in the Condensed Consolidated Balance Sheets associated with these awards. As of June 29, 2024, there was $5.9 of total unrecognized pre-tax compensation cost related to these nonvested performance-based awards that is expected to be recognized over the remainder of fiscal 2024.
NOTE 8. EARNINGS PER COMMON SHARE
The following table presents information necessary to calculate basic and diluted net income per Common Share for the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Net income | $ | 132.1 |  |  | $ | 43.7 |  |  | $ | 209.1 |  |  | $ | 88.3 |
Basic net income per common share |  |  |  |  |  |  |
Weighted-average common shares outstanding during the period | 56.8 |  |  | 56.2 |  |  | 56.7 |  |  | 55.9 |
Basic net income per common share | $ | 2.33 |  |  | $ | 0.78 |  |  | $ | 3.69 |  |  | $ | 1.58 |
Diluted net income per common share |  |  |  |  |  |  |
Weighted-average common shares outstanding during the period | 56.8 |  |  | 56.2 |  |  | 56.7 |  |  | 55.9 |
Dilutive potential common shares | 1.2 |  |  | 0.4 |  |  | 0.8 |  |  | 0.4 |
Weighted-average common shares outstanding during the period plus dilutive potential common shares | 58.0 |  |  | 56.6 |  |  | 57.5 |  |  | 56.3 |
Diluted net income per common share | $ | 2.28 |  |  | $ | 0.77 |  |  | $ | 3.64 |  |  | $ | 1.57 |
Antidilutive stock options outstanding | 0.2 |  | 0.2 |  |  | 0.4 |  |  | 0.4 |

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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

NOTE 9. INCOME TAXES
The effective tax rates for the nine months ended June 29, 2024 and July 1, 2023 were 27.5% and 17.7%, respectively. The effective tax rate used for interim reporting purposes is based on management’s best estimate of factors impacting the effective tax rate for the full fiscal year and includes the impact of discrete items recognized in the quarter. 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.
Scotts Miracle-Gro or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Subject to the following exceptions, the Company is no longer subject to examination by these tax authorities for fiscal years prior to 2020. There are currently no ongoing audits with respect to the U.S. federal jurisdiction. With respect to the foreign jurisdictions, a Canadian audit covering fiscal years 2020 through 2021 is in process. The Company is currently under examination by certain U.S. state and local tax authorities covering various periods from fiscal years 2014 through 2022. In addition to the aforementioned audits, certain other tax deficiency notices and refund claims for previous years remain unresolved.
The Company currently anticipates that few of its open and active audits will be resolved within the next twelve months. The Company is unable to make a reasonably reliable estimate as to when or if cash settlements with taxing authorities may occur. Although the outcomes of such examinations and the timing of any payments required upon the conclusion of such examinations are subject to significant uncertainty, the Company does not anticipate that the resolution of these tax matters or any events related thereto will result in a material change to its consolidated financial position, results of operations or cash flows.
NOTE 10. CONTINGENCIES
Management regularly evaluates the Company’s contingencies, including various judicial and administrative proceedings and claims arising in the ordinary course of business, including product and general liabilities, workers’ compensation, property losses and other liabilities for which the Company is self-insured or retains a high exposure limit. Self-insurance accruals are established based on actuarial loss estimates for specific individual claims plus actuarially estimated amounts for incurred but not reported claims and adverse development factors applied to existing claims. Legal costs incurred in connection with the resolution of claims, lawsuits and other contingencies generally are expensed as incurred. In the opinion of management, the 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 the Company’s financial condition, results of operations or cash flows.
Regulatory Matters
At June 29, 2024, the Company had recorded liabilities of $2.5 for environmental actions, the majority of which are for site remediation. The Company believes that the amounts accrued are adequate to cover such known environmental exposures based on current facts and estimates of likely outcomes. Although it is reasonably possible that the costs to resolve such known environmental exposures will exceed the amounts accrued, any variation from accrued amounts is not expected to be material.
Other
The Company has been named as a defendant in a number of cases alleging injuries that the lawsuits claim resulted from exposure to asbestos-containing products, apparently based on the Company’s historic use of vermiculite in certain of its products. In many of these cases, the complaints are not specific about the plaintiffs’ contacts with the Company or its products. The cases vary, but complaints in these cases generally seek unspecified monetary damages (actual, compensatory, consequential and punitive) from multiple defendants. The Company believes that the claims against it are without merit and is vigorously defending against them. No accruals have been recorded in the Company’s condensed consolidated financial statements as the likelihood of a loss is not probable at this time; and the Company does not believe a reasonably possible loss would be material to, nor does it expect the ultimate resolution of these cases will have a material adverse effect on, the Company’s financial condition, results of operations or cash flows. There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company’s financial condition, results of operations or cash flows.
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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

On June 6, 2024, a purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03132) on behalf of a proposed class of purchasers of the Company’s Common Shares between November 3, 2021, and August 1, 2023. On July 26, 2024, another purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03766) on behalf of a proposed class of purchasers of the Company’s Common Shares between June 2, 2021, and August 1, 2023. These lawsuits, which will likely be consolidated with any subsequently filed lawsuits alleging similar facts, assert claims under Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act against the Company and certain of its current and former officers based on alleged misstatements about the Company’s inventories, sales and business prospects. The actions seek, among other things, unspecified monetary damages, reasonable costs and expenses and equitable/injunctive or other relief as deemed appropriate by the Court. The Company believes that the claims asserted are without merit and intends to vigorously defend the actions.
On July 3, 2024, a purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03636), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors. On July 30, 2024, another purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 1:24-cv-00402), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors. These lawsuits, which will likely be consolidated with any subsequently filed lawsuits alleging similar facts, include allegations that generally mirror those asserted in the securities lawsuits described above and assert claims for breaches of fiduciary duties and unjust enrichment, as well as abuse of control, gross mismanagement, waste of corporate assets, violations under Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act, and contribution under Sections 10(b) and 21D of the Securities Exchange Act. The actions seek a judgment in favor of the Company for damages in an unspecified amount, disgorgement, interest, and costs and expenses, including attorneys’ and experts’ fees.
The Company is involved in other lawsuits and claims which arise in the normal course of business. These claims individually and in the aggregate are not expected to result in a material effect on the Company’s financial condition, results of operations or cash flows.
NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. To manage a portion of the volatility related to these exposures, the Company enters into various financial transactions. The utilization of these financial transactions is governed by policies covering acceptable counterparty exposure, instrument types and other hedging practices. The Company does not hold or issue derivative financial instruments for speculative trading purposes.
Exchange Rate Risk Management
The Company uses currency forward contracts to manage the exchange rate risk associated with intercompany loans and certain other balances denominated in foreign currencies. Currency forward contracts are valued using observable forward rates in commonly quoted intervals for the full term of the contracts. The notional amount of outstanding currency forward contracts was $182.6, $121.7 and $123.1 at June 29, 2024, July 1, 2023 and September 30, 2023, respectively. Contracts outstanding at June 29, 2024 will mature over the next fiscal quarter.
Interest Rate Risk Management
The Company enters into interest rate swap agreements as a means to hedge its variable interest rate risk on debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. The Company has outstanding interest rate swap agreements with major financial institutions that effectively convert a portion of the Company’s variable-rate debt to a fixed rate. Interest rate swap agreements are valued based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. Swap agreements that were hedging interest payments as of June 29, 2024, July 1, 2023 and September 30, 2023 had a maximum total U.S. dollar equivalent notional amount of $500.0, $600.0 and $600.0, respectively. Refer to “NOTE 6. DEBT” for the terms of the swap agreements outstanding at June 29, 2024. Included in the AOCL balance at June 29, 2024 was a gain of $8.6 related to interest rate swap agreements that is expected to be reclassified to earnings during the next twelve months, consistent with the timing of the underlying hedged transactions.
20

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Commodity Price Risk Management
The Company enters into hedging arrangements designed to fix the price of a portion of its projected future urea and diesel requirements. Commodity contracts are valued using observable commodity exchange prices in active markets. Included in the AOCL balance at June 29, 2024 was a gain of $0.1 related to commodity hedges that is expected to be reclassified to earnings during the next twelve months, consistent with the timing of the underlying hedged transactions.
The Company had the following outstanding commodity contracts that were entered into to hedge forecasted purchases:

Commodity |  | June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Urea |  | 33,000 tons |  | 51,000 tons |  | 52,500 tons
Diesel |  | 462,000 gallons |  | 2,268,000 gallons |  | 1,974,000 gallons
Heating Oil |  | 84,000 gallons |  | 1,008,000 gallons |  | 966,000 gallons

Fair Values of Derivative Instruments
The fair values of the Company’s derivative instruments, which represent Level 2 fair value measurements, were as follows:

|  |  |  | Assets / (Liabilities)
Derivatives Designated as Hedging Instruments |  | Balance Sheet Location |  | June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Interest rate swap agreements |  | Prepaid and other current assets |  | $ | 11.8 |  |  | $ | 16.3 |  |  | $ | 16.7 |
|  | Other assets |  | 8.2 |  |  | 13.1 |  |  | 14.7 |
|  | Other liabilities |  | (1.8) |  |  | — |  |  | — |
Commodity hedging instruments |  | Prepaid and other current assets |  | — |  |  | — |  |  | 2.3 |
|  | Other current liabilities |  | — |  |  | (0.9) |  |  | — |
Total derivatives designated as hedging instruments |  | $ | 18.2 |  |  | $ | 28.5 |  |  | $ | 33.7 |
Derivatives Not Designated as Hedging Instruments |  | Balance Sheet Location |  |  |  |  |  |
Currency forward contracts |  | Prepaid and other current assets |  | $ | — |  |  | $ | — |  |  | $ | 5.6 |
|  | Other current liabilities |  | (1.9) |  |  | (2.0) |  |  | — |
Commodity hedging instruments |  | Prepaid and other current assets |  | — |  |  | — |  |  | 0.9 |
|  | Other current liabilities |  | — |  |  | (0.4) |  |  | — |
Total derivatives not designated as hedging instruments |  | (1.9) |  |  | (2.4) |  |  | 6.5 |
Total derivatives |  | $ | 16.3 |  |  | $ | 26.1 |  |  | $ | 40.2 |

The effect of derivative instruments on AOCL, net of tax, and the Condensed Consolidated Statements of Operations for each of the periods presented was as follows:

Derivatives in Cash Flow Hedging Relationships |  | Amount of Gain / (Loss) Recognized in AOCL
| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Interest rate swap agreements |  | $ | 1.2 |  |  | $ | 8.0 |  |  | $ | 0.6 |  |  | $ | 7.3 |
Commodity hedging instruments |  | — |  |  | (0.8) |  |  | (1.5) |  |  | (9.7) |
Total |  | $ | 1.2 |  |  | $ | 7.2 |  |  | $ | (0.9) |  |  | $ | (2.4) |

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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Derivatives in Cash Flow Hedging Relationships |  | Reclassified from AOCL into Statement of Operations |  | Amount of Gain / (Loss)
Three Months Ended |  | Nine Months Ended
June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Interest rate swap agreements |  | Interest expense |  | $ | 3.7 |  |  | $ | 3.9 |  |  | $ | 10.4 |  |  | $ | 9.0 |
Commodity hedging instruments |  | Cost of sales |  | 0.1 |  |  | (0.7) |  |  | (4.2) |  |  | 6.1 |
Total |  | $ | 3.8 |  |  | $ | 3.2 |  |  | $ | 6.2 |  |  | $ | 15.1 |

Derivatives Not Designated as Hedging Instruments |  | Recognized in Statement of Operations |  | Amount of Gain / (Loss)
Three Months Ended |  | Nine Months Ended
June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Currency forward contracts |  | Other income / expense, net |  | $ | (0.1) |  |  | $ | (2.9) |  |  | $ | (3.6) |  |  | $ | (19.5) |
Commodity hedging instruments |  | Cost of sales |  | (0.5) |  |  | (1.0) |  |  | (1.9) |  |  | (0.1) |
Total |  | $ | (0.6) |  |  | $ | (3.9) |  |  | $ | (5.5) |  |  | $ | (19.6) |

NOTE 12. FAIR VALUE MEASUREMENTS
The following table summarizes the fair value of the Company’s assets and liabilities for which disclosure of fair value is required:

|  | Fair Value Hierarchy Level |  | June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
|  |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | Level 1 |  | $ | 245.0 |  |  | $ | 245.0 |  |  | $ | 2.7 |  |  | $ | 2.7 |  |  | $ | 1.2 |  |  | $ | 1.2 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities in non-qualified retirement plan assets |  | Level 1 |  | 32.3 |  |  | 32.3 |  |  | 41.0 |  |  | 41.0 |  |  | 36.3 |  |  | 36.3 |
Convertible debt investments |  | Level 3 |  | 89.7 |  |  | 89.7 |  |  | 86.5 |  |  | 86.5 |  |  | 85.8 |  |  | 85.8 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit facilities – revolving loans |  | Level 2 |  | — |  |  | — |  |  | 145.1 |  |  | 145.1 |  |  | 88.3 |  |  | 88.3 |
Credit facilities – term loans |  | Level 2 |  | 887.5 |  |  | 887.5 |  |  | 937.5 |  |  | 937.5 |  |  | 925.0 |  |  | 925.0 |
Senior Notes due 2031 – 4.000% |  | Level 2 |  | 500.0 |  |  | 431.3 |  |  | 500.0 |  |  | 392.5 |  |  | 500.0 |  |  | 380.0 |
Senior Notes due 2032 – 4.375% |  | Level 2 |  | 400.0 |  |  | 344.5 |  |  | 400.0 |  |  | 316.0 |  |  | 400.0 |  |  | 304.0 |
Senior Notes due 2029 – 4.500% |  | Level 2 |  | 450.0 |  |  | 409.5 |  |  | 450.0 |  |  | 389.3 |  |  | 450.0 |  |  | 366.8 |
Senior Notes due 2026 – 5.250% |  | Level 2 |  | 250.0 |  |  | 243.1 |  |  | 250.0 |  |  | 236.9 |  |  | 250.0 |  |  | 233.1 |
Receivables facility |  | Level 2 |  | — |  |  | — |  |  | 398.0 |  |  | 398.0 |  |  | — |  |  | — |
Other debt |  | Level 2 |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |  |  | 0.4 |  |  | 0.4 |

22

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Changes in the balance of Level 3 convertible debt investments carried at fair value are presented below. There were no transfers into or out of Level 3.

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Fair value at beginning of period | $ | 84.5 |  |  | $ | 84.8 |  |  | $ | 85.8 |  |  | $ | 117.0 |
Total realized / unrealized gains included in net earnings | 0.1 |  |  | 1.1 |  |  | 0.3 |  |  | 3.0 |
Total realized / unrealized gains (losses) included in OCI | 5.1 |  |  | 0.6 |  |  | 3.6 |  | (33.5) |
Fair value at end of period | $ | 89.7 |  |  | $ | 86.5 |  |  | $ | 89.7 |  |  | $ | 86.5 |

The amortized cost basis of convertible debt investments was $226.1, $225.0, and $225.8 at June 29, 2024, July 1, 2023, and September 30, 2023, respectively. At June 29, 2024, July 1, 2023, and September 30, 2023, gross unrealized losses on convertible debt investments were $136.3, $138.5, and $140.0 respectively, and there were no gross unrealized gains. These investments have been in a continuous unrealized loss position for greater than 12 months as of June 29, 2024. The allowance for expected credit losses was $101.3, $0.0 and $101.3 at June 29, 2024, July 1, 2023 and September 30, 2023, respectively. At June 29, 2024, the period until scheduled maturity of the Company’s convertible debt investments was between 3.2 years and 5.2 years.
Convertible debt investments include, among other minority non-equity investments, a six-year convertible note issued to the Company’s wholly-owned subsidiary, The Hawthorne Collective, Inc. (“THC”), by Toronto-based RIV Capital Inc. (“RIV Capital”) (CSE: RIV) (OTC: CNPOF). On May 30, 2024, RIV Capital and Cansortium Inc. (“Cansortium”) (CSE: TIUM.U) (OTCQB: CNTMF) announced they have entered into a definitive agreement pursuant to which Cansortium will acquire all of the issued and outstanding common shares of RIV Capital in exchange for Cansortium shares (the “Transaction”). The closing of the Transaction is subject to various conditions, including shareholder and court approvals, the receipt of all required regulatory approvals, and the exchange of THC’s existing convertible debt investment in RIV Capital for a new class of non-voting exchangeable shares of Cansortium. These exchangeable shares would be convertible, at THC’s discretion, into approximately 23% of the common shares of Cansortium on a pro forma basis as of the closing of the Transaction. Upon the receipt of required shareholder approvals and the completion of certain conditions to closing of the Transaction, the Company may be required to remeasure its convertible debt investment at the fair value of the Cansortium non-voting exchangeable shares expected to be received, which, based on market conditions as of June 29, 2024, would result in the recognition of a non-cash, pre-tax other-than-temporary impairment charge of approximately $70.0 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.
NOTE 13. LEASES
The Company leases certain property and equipment from third parties under various non-cancelable lease agreements, including industrial, commercial and office properties and equipment that support the management, manufacturing, distribution and research and development of products marketed and sold by the Company. The lease agreements generally require that the Company pay taxes, insurance and maintenance expenses related to the leased assets. At June 29, 2024, the Company had entered into operating leases that were yet to commence with a combined total expected lease liability of $25.2. From time to time, the Company will sublease portions of its facilities, resulting in sublease income. Sublease income and the related cash flows were not material to the condensed consolidated financial statements for the three and nine months ended June 29, 2024 and July 1, 2023.
The Company leases certain vehicles (primarily cars and light trucks) under agreements that are cancellable after the first year, but typically continue on a month-to-month basis until canceled by the Company. The vehicle leases and certain other non-cancelable operating leases contain residual value guarantees that create a contingent obligation on the part of the Company to compensate the lessor if the leased asset cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. If all such vehicle leases had been canceled as of June 29, 2024, the Company’s residual value guarantee would have approximated $5.2.
23

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Supplemental balance sheet information related to the Company’s leases was as follows:

| Balance Sheet Location |  | June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Operating leases: |  |  |  |  |  |  |
Right-of-use assets | Other assets |  | $ | 276.8 |  |  | $ | 266.2 |  |  | $ | 262.6 |
Current lease liabilities | Other current liabilities |  | 73.9 |  |  | 77.7 |  |  | 76.4 |
Non-current lease liabilities | Other liabilities |  | 228.1 |  |  | 216.4 |  |  | 220.1 |
Total operating lease liabilities |  | $ | 302.0 |  |  | $ | 294.1 |  |  | $ | 296.5 |
Finance leases: |  |  |  |  |  |  |
Right-of-use assets | Property, plant and equipment, net |  | $ | 17.1 |  |  | $ | 15.2 |  |  | $ | 14.5 |
Current lease liabilities | Current portion of debt |  | 2.9 |  |  | 1.9 |  |  | 1.9 |
Non-current lease liabilities | Long-term debt |  | 16.8 |  |  | 15.5 |  |  | 15.0 |
Total finance lease liabilities |  | $ | 19.7 |  |  | $ | 17.4 |  |  | $ | 16.9 |

Components of lease cost were as follows:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Operating lease cost (a) | $ | 21.5 |  |  | $ | 22.0 |  |  | $ | 63.8 |  |  | $ | 68.1 |
Variable lease cost | 7.6 |  |  | 6.7 |  |  | 23.4 |  |  | 20.3 |
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets | 0.6 |  |  | 0.5 |  |  | 1.8 |  |  | 2.5 |
Interest on lease liabilities | 0.2 |  |  | 0.2 |  |  | 0.6 |  |  | 0.6 |
Total finance lease cost | $ | 0.8 |  |  | $ | 0.7 |  |  | $ | 2.4 |  |  | $ | 3.1 |

(a)Operating lease cost includes amortization of right-of-use assets of $17.5 and $52.2 for the three and nine months ended June 29, 2024, respectively, and $20.1 and $62.9 for the three and nine months ended July 1, 2023, respectively. Short-term lease expense is excluded from operating lease cost and is not material.
Supplemental cash flow information and non-cash activity related to the Company’s leases were as follows:

|  |  | Nine Months Ended
|  |  |  |  | June 29, 2024 |  | July 1, 2023
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |
Operating cash flows from operating leases, net |  |  |  |  | $ | 74.5 |  |  | $ | 69.8 |
Operating cash flows from finance leases |  |  |  |  | 0.6 |  |  | 0.6 |
Financing cash flows from finance leases |  |  |  |  | 1.6 |  |  | 2.2 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |  |
Operating leases |  |  |  |  | $ | 65.2 |  |  | $ | 67.6 |
Finance leases |  |  |  |  | 4.5 |  |  | — |

24

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

Weighted-average remaining lease term and discount rate for the Company’s leases were as follows:

| June 29, 2024 |  | July 1, 2023 |  | September 30, 2023
Weighted-average remaining lease term (in years): |  |  |  |  |
Operating leases | 5.3 |  | 4.6 |  | 5.4
Finance leases | 8.0 |  | 9.6 |  | 9.5
Weighted-average discount rate: |  |  |  |  |
Operating leases | 5.9 | % |  | 4.1 | % |  | 5.2 | %
Finance leases | 4.8 | % |  | 4.4 | % |  | 4.4 | %

Maturities of lease liabilities by fiscal year for the Company’s leases as of June 29, 2024 were as follows:

Year |  | Operating Leases |  | Finance Leases
2024 (remainder of the year) |  | $ | 24.0 |  |  | $ | 0.9 |
2025 |  | 86.9 |  |  | 3.7 |
2026 |  | 71.0 |  |  | 3.3 |
2027 |  | 47.0 |  |  | 2.9 |
2028 |  | 36.9 |  |  | 2.5 |
Thereafter |  | 88.3 |  |  | 10.5 |
Total lease payments |  | 354.1 |  |  | 23.8 |
Less: Imputed interest |  | (52.1) |  |  | (4.1) |
Total lease liabilities |  | $ | 302.0 |  |  | $ | 19.7 |

NOTE 14. SEGMENT INFORMATION
The Company divides its operations into three reportable segments: U.S. Consumer, Hawthorne and Other. U.S. Consumer consists of the Company’s consumer lawn and garden business in the United States. Hawthorne consists of the Company’s indoor and hydroponic gardening business. Other primarily consists of the Company’s consumer lawn and garden business in Canada. This identification of reportable segments is consistent with how the segments report to and are managed by the chief operating decision maker of the Company. In addition, Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the business segments.
The performance of each reportable segment is evaluated based on several factors, including income (loss) before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”). Senior management uses Segment Profit (Loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.
25

Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

The following tables present financial information for the Company’s reportable segments for the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Net Sales: |  |  |  |  |  |  |
U.S. Consumer | $ | 1,017.5 |  |  | $ | 916.4 |  |  | $ | 2,704.0 |  |  | $ | 2,642.7 |
Hawthorne | 67.7 |  |  | 93.4 |  |  | 214.2 |  |  | 317.6 |
Other | 117.0 |  |  | 108.9 |  |  | 219.8 |  |  | 216.5 |
Consolidated | $ | 1,202.2 |  |  | $ | 1,118.7 |  |  | $ | 3,138.0 |  |  | $ | 3,176.8 |
Segment Profit (Loss): |  |  |  |  |  |  |
U.S. Consumer | $ | 210.3 |  |  | $ | 124.8 |  |  | $ | 580.5 |  |  | $ | 553.5 |
Hawthorne | 3.8 |  |  | (8.7) |  |  | (9.2) |  |  | (41.7) |
Other | 11.7 |  |  | 5.8 |  |  | 13.0 |  |  | 21.8 |
Total Segment Profit | 225.8 |  |  | 121.9 |  |  | 584.3 |  |  | 533.6 |
Corporate | (25.1) |  |  | (3.4) |  |  | (86.8) |  |  | (77.4) |
Intangible asset amortization | (3.9) |  |  | (6.7) |  |  | (11.8) |  |  | (20.8) |
Impairment, restructuring and other | 3.3 |  |  | (34.5) |  |  | (60.8) |  |  | (193.7) |
Equity in income (loss) of unconsolidated affiliates | 23.0 |  |  | 22.2 |  |  | (6.5) |  |  | 3.5 |
Interest expense | (38.8) |  |  | (47.1) |  |  | (125.6) |  |  | (138.1) |
Other non-operating income (expense), net | (1.3) |  |  | (0.4) |  |  | (4.2) |  |  | 0.2 |
Income before income taxes | $ | 183.0 |  |  | $ | 52.0 |  |  | $ | 288.6 |  |  | $ | 107.3 |

The following table presents net sales by product category for the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
U.S. Consumer: |  |  |  |  |  |  |
Growing media and mulch | $ | 568.5 |  |  | $ | 552.9 |  |  | $ | 1,232.0 |  |  | $ | 1,167.2 |
Lawn care | 203.5 |  |  | 165.0 |  |  | 832.1 |  |  | 844.7 |
Controls | 134.5 |  |  | 113.7 |  |  | 325.0 |  |  | 306.5 |
Roundup® marketing agreement | 53.6 |  |  | 30.7 |  |  | 141.6 |  |  | 121.7 |
Other, primarily gardening | 57.4 |  |  | 54.1 |  |  | 173.3 |  |  | 202.6 |
Hawthorne: |  |  |  |  |  |  |
Nutrients | 27.2 |  |  | 27.3 |  |  | 68.4 |  |  | 74.5 |
Lighting | 12.7 |  |  | 20.7 |  |  | 60.7 |  |  | 89.1 |
Growing media | 9.4 |  |  | 17.3 |  |  | 30.8 |  |  | 53.6 |
Growing environments | 7.0 |  |  | 13.1 |  |  | 24.8 |  |  | 54.6 |
Other, primarily hardware | 11.4 |  |  | 15.0 |  |  | 29.5 |  |  | 45.8 |
Other: |  |  |  |  |  |  |
Growing media | 46.7 |  |  | 44.3 |  |  | 83.2 |  |  | 84.6 |
Lawn care | 39.9 |  |  | 37.0 |  |  | 73.7 |  |  | 69.3 |
Other, primarily gardening and controls | 30.4 |  |  | 27.6 |  |  | 62.9 |  |  | 62.6 |
Total net sales | $ | 1,202.2 |  |  | $ | 1,118.7 |  |  | $ | 3,138.0 |  |  | $ | 3,176.8 |

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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued) |
| (Dollars in millions, except per share data) |

The following table presents net sales by geographic area for the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Net sales: |  |  |  |  |  |  |
United States | $ | 1,083.6 |  |  | $ | 1,008.3 |  |  | $ | 2,891.1 |  |  | $ | 2,920.5 |
International | 118.6 |  |  | 110.4 |  |  | 246.9 |  |  | 256.3 |
| $ | 1,202.2 |  |  | $ | 1,118.7 |  |  | $ | 3,138.0 |  |  | $ | 3,176.8 |

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| (Dollars in millions, except per share data) |

ITEM 2. 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
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, 2023 (the “2023 Annual Report”) and our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
EXECUTIVE SUMMARY
Our operations are divided into three reportable segments: U.S. Consumer, Hawthorne and Other. U.S. Consumer consists of our consumer lawn and garden business in the United States. Hawthorne consists of our indoor and hydroponic gardening business. Other primarily consists of our consumer lawn and garden business in Canada. This division of reportable segments is consistent with how the segments report to and are managed by our chief operating decision maker. In addition, Corporate consists of general and administrative expenses and certain other income and expense items not allocated to the business segments. See “SEGMENT RESULTS” below for additional information regarding our evaluation of segment performance.
Through our U.S. Consumer and Other segments, we are the leading manufacturer and marketer of branded consumer lawn and garden products in North America. Our products are marketed under some of the most recognized brand names in the industry. Our key consumer lawn and garden brands include Scotts® and Turf Builder® lawn fertilizer and Scotts® grass seed products; Miracle-Gro® soil, plant food and gardening products; Ortho® herbicide and pesticide products; and Tomcat® rodent control and animal repellent products. 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 key brands include General Hydroponics®, Gavita®, Botanicare®, Agrolux®, Gro Pro®, Mother Earth®, Grower’s Edge®, HydroLogic Purification System® and Cyco®.
Due to the seasonal nature of the consumer lawn and garden business, significant portions of our U.S. Consumer and Other segment sales ship to our retail customers during our second and third fiscal quarters, as noted in the following table. Our annual net sales are further concentrated in the second and third fiscal quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products. Our Hawthorne segment is also impacted by seasonal sales patterns for certain product categories due to the timing of growing patterns in North America during our second and third fiscal quarters, and the timing of certain controlled agricultural lighting project sales during our third and fourth fiscal quarters.

| Percent of Net Sales from Continuing Operations by Quarter
| 2023 |  | 2022 |  | 2021
First Quarter | 14.8 | % |  | 14.4 | % |  | 15.2 | %
Second Quarter | 43.2 | % |  | 42.8 | % |  | 37.1 | %
Third Quarter | 31.5 | % |  | 30.2 | % |  | 32.7 | %
Fourth Quarter | 10.5 | % |  | 12.6 | % |  | 15.0 | %

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| (Dollars in millions, except per share data) |

Recent Events
During fiscal 2022, we began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. These changes and initiatives include reducing the size of our supply chain network, reducing staffing levels and implementing other cost-reduction initiatives. During the second quarter of fiscal 2024, we commenced plans to close additional Hawthorne distribution centers. We have also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce our on hand inventory to align with the reduced network capacity. We expect these efforts to deliver run-rate annualized savings of at least $300.0, nearly all of which is expected to be realized by the end of fiscal 2024. The restructuring initiative is expected to improve our gross margin rate and decrease SG&A. During the three months ended June 29, 2024, we recorded net recoveries associated with this restructuring initiative that were not material. During the nine months ended June 29, 2024, we incurred costs of $66.6 in the “Cost of sales—impairment, restructuring and other” line and $3.0 in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations associated with this restructuring initiative primarily related to inventory write-down charges, employee termination benefits, facility closure costs and impairment of right-of-use assets and property, plant and equipment. Costs incurred from the inception of this restructuring initiative through June 29, 2024 were $363.8.
During the three and nine months ended June 29, 2024, our Hawthorne segment continued to experience adverse financial results primarily due to decreased sales volume. The decrease in sales volume is attributable to an oversupply of cannabis, which significantly decreased cannabis wholesale prices and indoor and outdoor cannabis cultivation. The oversupply has been driven by increased licensing activity across the U.S., significant capital investment in the cannabis production marketplace over the past several years, inconsistent enforcement of regulations and the market impacts of the COVID-19 pandemic. We expect that the oversupply of cannabis will continue to adversely impact our Hawthorne segment. If the oversupply of cannabis persists longer, or is more significant than we expect, our results of operations could be materially and adversely impacted for a longer period and to a greater extent than we currently anticipate.
During fiscal 2024, our Hawthorne segment announced a strategic partnership with BFG Supply (“BFG”), a leading national horticultural and agricultural product distributor, under which BFG will distribute Hawthorne’s proprietary Signature brand cultivation supplies and solutions. Our Hawthorne segment also announced it is discontinuing the distribution of other companies’ products and shifting 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 decrease the sales volume of our Hawthorne segment in future periods, but will enable continued optimization of its operations and improvement of its profitability.
During the three and nine months ended June 29, 2024, we continued to experience the impacts of cost inflation and uncertain macroeconomic and geopolitical conditions (including the ongoing conflicts in Ukraine and the Middle East), resulting in persistently high manufacturing costs, higher interest rates and volatile commodity costs. Higher costs over the past several years required us to implement significant price increases across our business in fiscal 2022 and fiscal 2023, and we have implemented targeted price reductions on certain products during fiscal 2024. We expect inflationary headwinds, volatile commodity costs and elevated interest rates to continue. The impact that these trends will continue to have on our operational and financial performance will depend on future developments, including inflationary, macroeconomic and geopolitical conditions, and their potential impact on consumer behavior, which are difficult to predict.
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| (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 for the three months ended June 29, 2024 and July 1, 2023:

| June 29, 2024 |  | % Of Net Sales |  | July 1, 2023 |  | % Of Net Sales
Net sales | $ | 1,202.2 |  |  | 100.0 | % |  | $ | 1,118.7 |  |  | 100.0 | %
Cost of sales | 850.6 |  |  | 70.8 |  |  | 880.1 |  |  | 78.7 |
Cost of sales—impairment, restructuring and other | (2.5) |  |  | (0.2) |  |  | 32.7 |  |  | 2.9 |
Gross margin | 354.1 |  |  | 29.5 |  |  | 205.9 |  |  | 18.4 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 147.9 |  |  | 12.3 |  |  | 128.5 |  |  | 11.5 |
Impairment, restructuring and other | (0.8) |  |  | (0.1) |  |  | 1.7 |  |  | 0.2 |
Other (income) expense, net | 6.9 |  |  | 0.6 |  |  | (1.6) |  |  | (0.1) |
Income from operations | 200.1 |  |  | 16.6 |  |  | 77.3 |  |  | 6.9 |
Equity in (income) loss of unconsolidated affiliates | (23.0) |  |  | (1.9) |  |  | (22.2) |  |  | (2.0) |
Interest expense | 38.8 |  |  | 3.2 |  |  | 47.1 |  |  | 4.2 |
Other non-operating (income) expense, net | 1.3 |  |  | 0.1 |  |  | 0.4 |  |  | — |
Income before income taxes | 183.0 |  |  | 15.2 |  |  | 52.0 |  |  | 4.6 |
Income tax expense | 50.9 |  |  | 4.2 |  |  | 8.3 |  |  | 0.7 |
Net income | $ | 132.1 |  |  | 11.0 | % |  | $ | 43.7 |  |  | 3.9 | %

The sum of the components may not equal due to rounding.
The following table sets forth the components of earnings as a percentage of net sales for the nine months ended June 29, 2024 and July 1, 2023:

| June 29, 2024 |  | % Of Net Sales |  | July 1, 2023 |  | % Of Net Sales
Net sales | $ | 3,138.0 |  |  | 100.0 | % |  | $ | 3,176.8 |  |  | 100.0 | %
Cost of sales | 2,191.4 |  |  | 69.8 |  |  | 2,300.7 |  |  | 72.4 |
Cost of sales—impairment, restructuring and other | 66.6 |  |  | 2.1 |  |  | 161.8 |  |  | 5.1 |
Gross margin | 880.0 |  |  | 28.0 |  |  | 714.3 |  |  | 22.5 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 441.4 |  |  | 14.1 |  |  | 443.3 |  |  | 14.0 |
Impairment, restructuring and other | (5.9) |  |  | (0.2) |  |  | 32.0 |  |  | 1.0 |
Other (income) expense, net | 19.6 |  |  | 0.6 |  |  | (2.7) |  |  | (0.1) |
Income from operations | 424.9 |  |  | 13.5 |  |  | 241.7 |  |  | 7.6 |
Equity in (income) loss of unconsolidated affiliates | 6.5 |  |  | 0.2 |  |  | (3.5) |  |  | (0.1) |
Interest expense | 125.6 |  |  | 4.0 |  |  | 138.1 |  |  | 4.3 |
Other non-operating (income) expense, net | 4.2 |  |  | 0.1 |  |  | (0.2) |  |  | — |
Income before income taxes | 288.6 |  |  | 9.2 |  |  | 107.3 |  |  | 3.4 |
Income tax expense | 79.5 |  |  | 2.5 |  |  | 19.0 |  |  | 0.6 |
Net income | $ | 209.1 |  |  | 6.7 | % |  | $ | 88.3 |  |  | 2.8 | %

The sum of the components may not equal due to rounding.
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| (Dollars in millions, except per share data) |

Net Sales
Net sales for the three months ended June 29, 2024 were $1,202.2, an increase of 7.5% from net sales of $1,118.7 for the three months ended July 1, 2023. Net sales for the nine months ended June 29, 2024 were $3,138.0, a decrease of 1.2% from net sales of $3,176.8 for the nine months ended July 1, 2023. Factors contributing to the change in net sales are outlined in the following table:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | June 29, 2024
Pricing | 0.7 | % |  | (1.1) | %
Volume and mix | 6.9 |  |  | (0.1) |
Foreign exchange rates | (0.1) |  |  | — |
Change in net sales | 7.5 | % |  | (1.2) | %

The increase in net sales for the three months ended June 29, 2024 as compared to the three months ended July 1, 2023 was primarily driven by:
•increased sales volume, comprised of the net impact of higher volume in our U.S. Consumer segment driven by fertilizer, mulch, controls and plant food products, partially offset by lower volume in our Hawthorne segment driven by the discontinuation of sales of other companies’ products;
•increased pricing in our U.S. Consumer and Hawthorne segments; and
•increased net sales associated with the Roundup® marketing agreement.
The decrease in net sales for the nine months ended June 29, 2024 as compared to the nine months ended July 1, 2023 was primarily driven by:
•decreased pricing in our U.S. Consumer and Hawthorne segments; and
•decreased sales volume, comprised of the net impact of lower volume in our Hawthorne segment driven by all product categories and the discontinuation of sales of other companies’ products, partially offset by higher volume in our U.S. Consumer segment driven by mulch and controls products;
•partially offset by increased net sales associated with the Roundup® marketing agreement.
Cost of Sales
The following table shows the major components of cost of sales for the periods indicated:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Materials | $ | 445.6 |  |  | $ | 484.0 |  |  | $ | 1,172.0 |  |  | $ | 1,298.0 |
Manufacturing labor and overhead | 208.1 |  |  | 193.3 |  |  | 513.3 |  |  | 462.2 |
Distribution and warehousing | 169.5 |  |  | 179.3 |  |  | 430.6 |  |  | 474.6 |
Costs associated with Roundup® marketing agreement | 27.4 |  |  | 23.5 |  |  | 75.5 |  |  | 65.9 |
Cost of sales | 850.6 |  |  | 880.1 |  |  | 2,191.4 |  |  | 2,300.7 |
Cost of sales—impairment, restructuring and other | (2.5) |  |  | 32.7 |  |  | 66.6 |  |  | 161.8 |
| $ | 848.1 |  |  | $ | 912.8 |  |  | $ | 2,258.0 |  |  | $ | 2,462.5 |

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| (Dollars in millions, except per share data) |

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

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | June 29, 2024
Volume, mix and other | $ | (8.1) |  |  | $ | (97.2) |
Material cost changes | (24.0) |  |  | (21.1) |
Foreign exchange rates | (1.3) |  |  | (0.6) |
Costs associated with Roundup® marketing agreement | 3.9 |  |  | 9.6 |
| (29.5) |  |  | (109.3) |
Impairment, restructuring and other | (35.2) |  |  | (95.2) |
Change in cost of sales | $ | (64.7) |  |  | $ | (204.5) |

The decrease in cost of sales for the three months ended June 29, 2024 as compared to the three months ended July 1, 2023 was primarily driven by:
•lower material costs in our U.S. Consumer segment;
•lower warehousing and transportation costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments;
•inventory write-down charges incurred during the three months ended July 1, 2023 associated with our U.S. Consumer segment that were included within “volume, mix and other;” and
•a decrease in impairment, restructuring and other charges;
•partially offset by increased sales volume in our U.S. Consumer segment.
The decrease in cost of sales for the nine months ended June 29, 2024 as compared to the nine months ended July 1, 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;
•inventory write-down charges incurred during the nine months ended July 1, 2023 associated with our U.S. Consumer segment that were included within “volume, mix and other;” and
•a decrease in impairment, restructuring and other charges;
•partially offset by an increase in costs associated with the Roundup® marketing agreement.
Gross Margin
As a percentage of net sales, our gross margin rate was 29.5% and 18.4% for the three months ended June 29, 2024 and July 1, 2023, respectively, and was 28.0% and 22.5% for the nine months ended June 29, 2024 and July 1, 2023, respectively. Factors contributing to the change in gross margin rate are outlined in the following table:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | June 29, 2024
Volume, mix and other | 4.3 | % |  | 2.6 | %
Material costs | 2.0 |  |  | 0.7 |
Roundup® commissions and reimbursements | 1.1 |  |  | 0.1 |
Pricing | 0.5 |  |  | (0.8) |
| 7.9 | % |  | 2.6 | %
Impairment, restructuring and other | 3.2 |  |  | 2.9 |
Change in gross margin rate | 11.1 | % |  | 5.5 | %

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| (Dollars in millions, except per share data) |

The increase in gross margin rate for the three months ended June 29, 2024 as compared to the three months ended July 1, 2023 was primarily driven by:
•lower material costs in our U.S. Consumer segment;
•lower warehousing and transportation costs included within “volume, mix and other” in our U.S. Consumer and Hawthorne segments;
•inventory write-down charges incurred during the three months ended July 1, 2023 associated with our U.S. Consumer segment that were included within “volume, mix and other;”
•higher commission associated with the Roundup® marketing agreement;
•increased pricing in our U.S. Consumer and Hawthorne segments; and
•a decrease in impairment, restructuring and other charges;
•partially offset by unfavorable leverage of fixed costs driven by lower sales in our Hawthorne segment.
The increase in gross margin rate for the nine months ended June 29, 2024 as compared to the nine months ended July 1, 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;
•inventory write-down charges incurred during the three months ended July 1, 2023 associated with our U.S. Consumer segment that were included within “volume, mix and other;” and
•a decrease in impairment, restructuring and other charges;
•partially offset by decreased pricing in our U.S. Consumer and Hawthorne segments; and
•unfavorable leverage of fixed costs driven by lower sales in our Hawthorne segment.
Selling, General and Administrative Expenses
The following table sets forth the components of selling, general and administrative expenses (“SG&A”):

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Advertising | $ | 46.4 |  |  | $ | 46.6 |  |  | $ | 125.7 |  |  | $ | 114.4 |
Share-based compensation | 13.6 |  |  | (13.5) |  |  | 45.2 |  |  | 34.0 |
Research and development | 8.6 |  |  | 9.0 |  |  | 25.2 |  |  | 26.2 |
Amortization of intangibles | 3.5 |  |  | 6.0 |  |  | 10.4 |  |  | 18.9 |
Other selling, general and administrative | 75.8 |  |  | 80.4 |  |  | 234.9 |  |  | 249.8 |
| $ | 147.9 |  |  | $ | 128.5 |  |  | $ | 441.4 |  |  | $ | 443.3 |

SG&A increased $19.4, or 15.1%, during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023. Share-based compensation expense, which excludes certain advertising expenses paid for in Common Shares, increased $27.1, or 200.7%, 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 $2.5, or 41.7%, driven by the impairment of certain Hawthorne segment intangible assets during fiscal 2023. Other SG&A decreased $4.6, or 5.7%, driven by reductions in staffing levels and other cost-reduction initiatives.
SG&A decreased $1.9, or 0.4%, during the nine months ended June 29, 2024 as compared to the nine months ended July 1, 2023. Advertising expense increased $11.3, or 9.9%, 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, increased $11.2, or 32.9%, 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 $8.5, or 45.0%, driven by the impairment of certain Hawthorne segment intangible assets during fiscal 2023. Other SG&A decreased $14.9, or 6.0%, driven by reductions in staffing levels and other cost-reduction initiatives.
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| (Dollars in millions, except per share data) |

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 (recoveries) for each of the periods presented:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
Cost of sales—impairment, restructuring and other: |  |  |  |  |  |  |
Restructuring and other charges (recoveries), net | $ | (4.8) |  |  | $ | 28.6 |  |  | $ | 59.3 |  |  | $ | 134.3 |
Right-of-use asset impairments | 2.3 |  |  | 3.7 |  |  | 3.3 |  |  | 19.1 |
Property, plant and equipment impairments | — |  |  | 0.5 |  |  | 4.1 |  |  | 8.4 |
Operating expenses—impairment, restructuring and other: |  |  |  |  |  |  |
Restructuring and other charges (recoveries), net | (0.8) |  |  | 1.7 |  |  | (5.9) |  |  | 32.0 |
Total impairment, restructuring and other charges (recoveries), net | $ | (3.3) |  |  | $ | 34.5 |  |  | $ | 60.8 |  |  | $ | 193.8 |

During fiscal 2022, we began implementing a series of Company-wide organizational changes and initiatives intended to create operational and management-level efficiencies. These changes and initiatives include reducing the size of our supply chain network, reducing staffing levels and implementing other cost-reduction initiatives. During the second quarter of fiscal 2024, we commenced plans to close additional Hawthorne distribution centers. We have also accelerated the reduction of certain Hawthorne inventory, primarily lighting, growing environments and hardware products, to reduce our on hand inventory to align with the reduced network capacity. During the three months ended June 29, 2024, we recorded net recoveries associated with this restructuring initiative that were not material. During the nine months ended June 29, 2024, we incurred costs of $69.7 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 $3.7 in our U.S. Consumer segment and $62.9 in our Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the nine months ended June 29, 2024. We recorded recoveries of $1.2 in our U.S. Consumer segment, and incurred costs of $1.0 in our Hawthorne segment, $0.8 in our Other segment and $2.4 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the nine months ended June 29, 2024. Costs incurred from the inception of this restructuring initiative through June 29, 2024 were $288.3 for our Hawthorne segment, $48.1 for our U.S. Consumer segment, $2.3 for our Other segment and $25.1 for Corporate.
During the three and nine months ended July 1, 2023, we incurred costs of $34.5 and $185.8, 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 incurred costs of $7.1 and $8.2 in our U.S. Consumer segment and $25.7 and $152.6 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 nine months ended July 1, 2023, respectively. We incurred costs of $1.9 and $20.1 in our Hawthorne segment and $0.0 and $4.5 at Corporate in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and nine months ended July 1, 2023, respectively.
During the three and nine months ended June 29, 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.
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 $6.9 and $(1.6) for the three months ended June 29, 2024 and July 1, 2023, respectively; and was $19.6 and $(2.7) for the nine months ended June 29, 2024 and July 1, 2023, respectively. The increase in expense was primarily due to the discount on sales of accounts receivable under the Master Receivables Purchase Agreement.
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| (Dollars in millions, except per share data) |

Income from Operations
Income from operations was $200.1 for the three months ended June 29, 2024, an increase of 158.9% as compared to $77.3 for the three months ended July 1, 2023; and was $424.9 for the nine months ended June 29, 2024, an increase of 75.8% as compared to $241.7 for the nine months ended July 1, 2023. For the three months ended June 29, 2024, the increase was primarily due to higher net sales, lower impairment, restructuring and other charges and a higher gross margin rate, partially offset by higher SG&A and higher other expense. For the nine months ended June 29, 2024, the increase was primarily due to lower impairment, restructuring and other charges and a higher gross margin rate, partially offset by higher other expense and lower net sales.
Equity in (Income) Loss of Unconsolidated Affiliates
Equity in (income) loss of unconsolidated affiliates associated with Bonnie Plants, LLC was $(23.0) and $(22.2) for the three months ended June 29, 2024 and July 1, 2023, respectively; and was $6.5 and $(3.5) for the nine months ended June 29, 2024 and July 1, 2023, respectively. During the three and nine months ended June 29, 2024, equity in (income) 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.
Interest Expense
Interest expense was $38.8 for the three months ended June 29, 2024, a decrease of 17.6% as compared to $47.1 for the three months ended July 1, 2023; and was $125.6 for the nine months ended June 29, 2024, a decrease of 9.1% as compared to $138.1 for the nine months ended July 1, 2023. For the three months ended June 29, 2024, the decrease was driven by lower average borrowings of $711.5, partially offset by an increase in our weighted average interest rate, net of the impact of interest rate swaps, of 20 basis points. For the nine months ended June 29, 2024, the decrease was driven by lower average borrowings of $591.6, partially offset by an increase 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 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
The effective tax rates for the nine months ended June 29, 2024 and July 1, 2023 were 27.5% and 17.7%, 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 Income
Net income was $132.1, or $2.28 per diluted share, for the three months ended June 29, 2024 as compared to $43.7, or $0.77 per diluted share, for the three months ended July 1, 2023. The increase was driven by higher net sales, lower impairment, restructuring and other charges, a higher gross margin rate and lower interest expense, partially offset by higher SG&A, higher other expense and higher income tax expense.
Diluted average common shares used in the diluted net income per common share calculation for the three months ended June 29, 2024 and July 1, 2023 were 58.0 million and 56.6 million, respectively, which included dilutive potential Common Shares of 1.2 million and 0.4 million, respectively. The increase in diluted average common shares was primarily the result of the exercise and issuance of share-based compensation awards.
Net income was $209.1, or $3.64 per diluted share, for the nine months ended June 29, 2024 as compared to $88.3, or $1.57 per diluted share, for the nine months ended July 1, 2023. The increase was driven by lower impairment, restructuring and other charges, a higher gross margin rate and lower interest expense, partially offset by lower net sales, higher other expense, higher equity in loss of unconsolidated affiliates and higher income tax expense.
Diluted average common shares used in the diluted net income per common share calculation for the nine months ended June 29, 2024 and July 1, 2023 were 57.5 million and 56.3 million, respectively, which included dilutive potential Common Shares of 0.8 million and 0.4 million, respectively. The increase in diluted average common shares was primarily the result of the exercise and issuance of share-based compensation awards.
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| (Dollars in millions, except per share data) |

SEGMENT RESULTS
The performance of each reportable segment is evaluated based on several factors, including income (loss) before income taxes, amortization, impairment, restructuring and other charges (“Segment Profit (Loss)”), which is a non-GAAP financial measure. Senior management uses Segment Profit (Loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment.
The following table sets forth net sales by segment:

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
U.S. Consumer | $ | 1,017.5 |  |  | $ | 916.4 |  |  | $ | 2,704.0 |  |  | $ | 2,642.7 |
Hawthorne | 67.7 |  |  | 93.4 |  |  | 214.2 |  |  | 317.6 |
Other | 117.0 |  |  | 108.9 |  |  | 219.8 |  |  | 216.5 |
Consolidated | $ | 1,202.2 |  |  | $ | 1,118.7 |  |  | $ | 3,138.0 |  |  | $ | 3,176.8 |

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

| Three Months Ended |  | Nine Months Ended
| June 29, 2024 |  | July 1, 2023 |  | June 29, 2024 |  | July 1, 2023
U.S. Consumer | $ | 210.3 |  |  | $ | 124.8 |  |  | $ | 580.5 |  |  | $ | 553.5 |
Hawthorne | 3.8 |  |  | (8.7) |  |  | (9.2) |  |  | (41.7) |
Other | 11.7 |  |  | 5.8 |  |  | 13.0 |  |  | 21.8 |
Total Segment Profit (Non-GAAP) | 225.8 |  |  | 121.9 |  |  | 584.3 |  |  | 533.6 |
Corporate | (25.1) |  |  | (3.4) |  |  | (86.8) |  |  | (77.4) |
Intangible asset amortization | (3.9) |  |  | (6.7) |  |  | (11.8) |  |  | (20.8) |
Impairment, restructuring and other | 3.3 |  |  | (34.5) |  |  | (60.8) |  |  | (193.7) |
Equity in income (loss) of unconsolidated affiliates | 23.0 |  |  | 22.2 |  |  | (6.5) |  |  | 3.5 |
Interest expense | (38.8) |  |  | (47.1) |  |  | (125.6) |  |  | (138.1) |
Other non-operating income (expense), net | (1.3) |  |  | (0.4) |  |  | (4.2) |  |  | 0.2 |
Income before income taxes (GAAP) | $ | 183.0 |  |  | $ | 52.0 |  |  | $ | 288.6 |  |  | $ | 107.3 |

U.S. Consumer
U.S. Consumer segment net sales were $1,017.5 in the third quarter of fiscal 2024, an increase of 11.0% from third quarter of fiscal 2023 net sales of $916.4; and were $2,704.0 for the first nine months of fiscal 2024, an increase of 2.3% from the first nine months of fiscal 2023 net sales of $2,642.7. For the third quarter of fiscal 2024, the increase was driven by higher sales volume of 10.4% and increased pricing of 0.6%. For the nine months ended June 29, 2024, the increase was driven by higher sales volume of 3.3%, partially offset by decreased pricing of 1.0%. The increase in sales volume for the third quarter of fiscal 2024 was driven by fertilizer, mulch, controls and plant food products as well as increased net sales associated with the Roundup® marketing agreement. The increase in sales volume for the nine months ended June 29, 2024 was driven by mulch and controls products as well as increased net sales associated with the Roundup® marketing agreement.
U.S. Consumer Segment Profit was $210.3 in the third quarter of fiscal 2024, an increase of 68.5% from third quarter of fiscal 2023 Segment Profit of $124.8; and Segment Profit was $580.5 for the first nine months of fiscal 2024, an increase of 4.9% from the first nine months of fiscal 2023 Segment Profit of $553.5. For the three and nine months ended June 29, 2024, the increase was primarily due to higher net sales and a higher gross margin rate, partially offset by higher SG&A driven by advertising and higher other expense driven by the discount on sales of accounts receivable.
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| (Dollars in millions, except per share data) |

Hawthorne
Hawthorne segment net sales were $67.7 in the third quarter of fiscal 2024, a decrease of 27.5% from third quarter of fiscal 2023 net sales of $93.4; and were $214.2 for the first nine months of fiscal 2024, a decrease of 32.6% from the first nine months of fiscal 2023 net sales of $317.6. For the third quarter of fiscal 2024, the decrease was driven by lower sales volume of 30.1%, partially offset by increased pricing of 2.7%. For the nine months ended June 29, 2024, the decrease was driven by lower sales volume and decreased pricing of 30.9% and 2.1%, respectively, partially offset by favorable foreign exchange rates of 0.4%. The decrease in sales volume for the three months ended June 29, 2024 was driven by the discontinuation of sales of other companies’ products. The decrease in sales volume for the nine months ended June 29, 2024 was driven by all product categories and the impact of the discontinuation of sales of other companies’ products.
Hawthorne Segment Profit was $3.8 in the third quarter of fiscal 2024 as compared to Segment Loss of $8.7 for the third quarter of fiscal 2023; and Segment Loss was $9.2 for the first nine months of fiscal 2024 as compared to $41.7 for the first nine months of fiscal 2023. For the three and nine months ended June 29, 2024, 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 $117.0 in the third quarter of fiscal 2024, an increase of 7.4% from third quarter of fiscal 2023 net sales of $108.9; and were $219.8 for the first nine months of fiscal 2024, an increase of 1.5% from the first nine months of fiscal 2023 net sales of $216.5. For the third quarter of fiscal 2024, the increase was driven by higher sales volume of 9.3%, partially offset by unfavorable foreign exchange rates and decreased pricing of 1.3% and 0.6%, respectively. For the nine months ended June 29, 2024, the increase was driven by higher sales volume of 2.9%, partially offset by decreased pricing and unfavorable foreign exchange rates of 0.7% and 0.7%, respectively.
Other Segment Profit was $11.7 in the third quarter of fiscal 2024, an increase of 101.7% from third quarter of fiscal 2023 Segment Profit of $5.8; and Segment Profit was $13.0 for the first nine months of fiscal 2024, a decrease of 40.4% from the first nine months of fiscal 2023 Segment Profit of $21.8. For the three months ended June 29, 2024, the increase was driven by higher net sales, a higher gross margin rate and lower SG&A. For the nine months ended June 29, 2024, the decrease was driven by a lower gross margin rate and higher SG&A, partially offset by higher net sales.
Corporate
Corporate expenses were $25.1 in the third quarter of fiscal 2024 as compared to $3.4 for the third quarter of fiscal 2023; and were $86.8 for the first nine months of fiscal 2024, an increase of 12.1% from the first nine months of fiscal 2023 expenses of $77.4. For the three and nine months ended June 29, 2024, 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:

| Nine Months Ended
| June 29, 2024 |  | July 1, 2023
Net cash provided by (used in) operating activities | $ | 549.0 |  |  | $ | (4.3) |
Net cash used in investing activities | (80.0) |  |  | (44.6) |
Net cash used in financing activities | (221.1) |  |  | (11.0) |

Operating Activities
Cash provided by operating activities totaled $549.0 for the nine months ended June 29, 2024 as compared to cash used in operating activities of $4.3 for the nine months ended July 1, 2023. This increase was driven by lower accounts receivable, higher gross margin and accounts payable timing, 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.
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| (Dollars in millions, except per share data) |

Investing Activities
Cash used in investing activities totaled $80.0 for the nine months ended June 29, 2024 as compared to $44.6 for the nine months ended July 1, 2023. Cash used for investments in property, plant and equipment during the first nine months of fiscal 2024 and 2023 was $67.4 and $73.8, respectively. During the nine months ended June 29, 2024, we acquired an additional equity interest in Bonnie Plants, LLC for $21.4. We also had other investing cash inflows of $8.8 for the nine months ended June 29, 2024 primarily associated with currency forward contracts. During the nine months ended July 1, 2023, we received proceeds of $37.0 related to the payoff of seller financing that we provided in connection with a fiscal 2017 divestiture. In addition, we had other investing cash outflows of $7.8 during the nine months ended July 1, 2023 primarily associated with currency forward contracts.
Financing Activities
Cash used in financing activities totaled $221.1 for the nine months ended June 29, 2024 as compared to $11.0 for the nine months ended July 1, 2023. During the nine months ended June 29, 2024, we had net repayments under our credit facilities of $127.9 and paid dividends of $113.7. In addition, we had other financing cash inflows of $23.1 during the nine months ended June 29, 2024 related to collections of previously sold accounts receivable not yet submitted to the buyer. During the nine months ended July 1, 2023, we had net borrowings under our credit facilities of $112.6 and paid dividends of $112.0. During the nine months ended June 29, 2024 and July 1, 2023, we repurchased Common Shares for $5.0 and $9.3, respectively (which includes cash paid to tax authorities to satisfy statutory income tax withholding obligations related to share-based compensation).
Accounts Receivable Sales
On October 27, 2023, we entered into the Master Receivables Purchase Agreement under which we may sell up to $600.0 of available and eligible outstanding customer accounts receivable generated by sales to four specified customers. The agreement is uncommitted and has an initial term that expires October 25, 2024, unless earlier terminated by the purchaser. Transactions under this 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 (income) expense, net” line in the Condensed Consolidated Statements of Operations. At June 29, 2024, net receivables of $477.3 were derecognized. During the three and nine months ended June 29, 2024, proceeds from the sale of receivables under the Master Receivables Purchase Agreement totaled $724.5 and $1,680.0, respectively, and the total discount recorded on sales was $8.7 and $21.6, 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 were $22.8, $16.6 and $18.3 at June 29, 2024, July 1, 2023 and September 30, 2023, respectively, and are recorded within accounts payable in the Condensed Consolidated Balance Sheets. The associated payments were $218.6 and $157.6 for the nine months ended June 29, 2024 and July 1, 2023, 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 of $279.9, $27.4 and $31.9 as of June 29, 2024, July 1, 2023 and September 30, 2023, respectively, included $30.4, $17.7 and $26.6, respectively, held by controlled foreign corporations. As of June 29, 2024, 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, 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.
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.
On June 8, 2022, we entered into Amendment No. 1 to the Sixth A&R Credit Agreement. Amendment No. 1 increased the maximum permitted leverage ratio for the quarterly leverage covenant until April 1, 2024. Amendment No. 1 also increased the interest rate applicable to borrowings under the revolving credit facility by 35 bps and the term loan facility by 50 bps, and increased the annual facility fee rate on the revolving credit facility by 15 bps, in each case, when our quarterly-tested leverage ratio exceeded 4.75.
On July 31, 2023, we entered into Amendment No. 2 to the Sixth A&R Credit Agreement. Amendment No. 2 (i) reduces the revolving loan commitments by $250.0; (ii) increases the maximum permitted leverage ratio for the quarterly leverage covenant during the Leverage Adjustment Period; (iii) replaces the interest coverage covenant with a fixed charge coverage covenant; (iv) increases the interest rate applicable to borrowings under the revolving credit facility and the term loan facility by 25 bps for each existing pricing tier and adds a pricing tier applicable to periods when the leverage ratio exceeds 6.00; (v) limits the amount of certain incremental investments, loans and advances to $25.0 during the Leverage Adjustment Period; and (vi) adds our intellectual property (subject to certain exceptions) as collateral to secure our obligations under the Sixth A&R Credit Agreement. Additionally, Amendment No. 2 limits our ability to declare or pay any discretionary dividends, distributions or other restricted payments during the Leverage Adjustment Period to only the payment of (i) regularly scheduled cash dividends to holders of our Common Shares in an aggregate amount not to exceed $225.0 per fiscal year and (ii) other dividends, distributions or other restricted payments in an aggregate amount not to exceed $25.0. Amendment No. 2 also subjects our ability to make certain investments to pro forma compliance with certain leverage levels specified in Amendment No. 2. Pursuant to Amendment No. 2, the Sixth A&R Credit Agreement is secured by (i) a perfected first priority security interest in all of the accounts receivable, inventory, equipment and intellectual property (subject to certain exceptions) of Scotts Miracle-Gro and certain of its domestic subsidiaries and (ii) the pledge of all of the capital stock of certain of Scotts Miracle-Gro’s domestic subsidiaries and a portion of the capital stock of certain of its foreign subsidiaries.
At June 29, 2024, we had letters of credit outstanding in the aggregate principal amount of $78.0, and had $1,172.0 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 9.0% and 7.3% for the nine months ended June 29, 2024 and July 1, 2023, respectively.
On August 6, 2024, the Company used available cash on hand to make a repayment on the term loan of the Sixth A&R Credit Agreement in the amount of $200.0, which was applied to outstanding principal amount.
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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) 6.50 for the third quarter of fiscal 2024, (ii) 6.00 for the fourth quarter of fiscal 2024, (iii) 5.50 for the first quarter of fiscal 2025, (iv) 5.25 for the second quarter of fiscal 2025, (v) 5.00 for the third quarter of fiscal 2025, (vi) 4.75 for the fourth quarter of fiscal 2025 and (vii) 4.50 for the first quarter of fiscal 2026 and thereafter. Our leverage ratio was 5.46 at June 29, 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 (i) 0.75 for the third quarter of fiscal 2024 and (ii) 1.00 for the fourth quarter of fiscal 2024 and thereafter. Our fixed charge coverage ratio was 1.15 for the twelve months ended June 29, 2024.
As of June 29, 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 June 29, 2024, our indebtedness under the Sixth A&R Credit Agreement and Senior Notes was $2,487.5. We do not have sufficient cash on hand or available liquidity that can be utilized to repay these outstanding amounts in the event of default.
As part of our contingency planning to address potential future circumstances that could result in noncompliance, we have contemplated alternative plans including additional restructuring activities to reduce operating expenses and certain cash management strategies that are within our control. Additionally, we have contemplated alternative plans that are subject to market conditions and not in our control, including, among others, discussions with our lenders to amend the terms of our financial covenants under the Sixth A&R Credit Agreement and generating cash by completing other financing transactions, which may include issuing equity. There is no assurance that we will be successful in implementing these alternative plans.
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.
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 3.15 for the twelve months ended June 29, 2024.
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Receivables Facility
We also maintained a 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 and the commitment amount during the seasonal commitment period that began on February 24, 2023 and ended on June 16, 2023 was $160.0. The 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 Condensed Consolidated Balance Sheets, primarily as a result of our requirement to repurchase receivables sold. As of July 1, 2023, there were $398.0 in borrowings on receivables pledged as collateral under the Receivables Facility, and the carrying value of the receivables pledged as collateral was $442.2.
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 June 29, 2024, July 1, 2023 and September 30, 2023 had a maximum total U.S. dollar equivalent notional amount of $500.0, $600.0 and $600.0, respectively. The notional amount, effective date, expiration date and rate of each of the swap agreements outstanding at June 29, 2024 are shown in the table below:

Notional Amount ($) |  | Effective Date (a) |  | Expiration Date |  | Fixed Rate
200 |  |  | 6/7/2023 |  | 6/8/2026 |  | 0.80 | %
150 |  |  | 6/7/2023 |  | 4/7/2027 |  | 3.37 | %
50 |  |  | 6/7/2023 |  | 4/7/2027 |  | 3.34 | %
100 |  | (b) | 11/20/2023 |  | 3/22/2027 |  | 4.74 | %
150 |  | (b) | 9/20/2024 |  | 9/20/2029 |  | 4.25 | %

(a)The effective date refers to the date on which interest payments are first hedged by the applicable swap agreement.
(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. Our actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in the 2023 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.”
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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 (collectively, the “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 Sixth A&R Credit Agreement, except a release by or as a result of the repayment of the Sixth A&R Credit Agreement; or (vi) if the Guarantor ceases to be a “restricted subsidiary” and the Guarantor is not otherwise required to provide a guarantee of the Senior Notes pursuant to the applicable indenture.
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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Contents | THE SCOTTS MIRACLE-GRO COMPANY |
| (Dollars in millions, except per share data) |

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.

| June 29, 2024 |  | September 30, 2023 |  |
Current assets | $ | 1,338.2 |  |  | $ | 1,212.0 |  |  |
Non-current assets (a) | 1,909.3 |  |  | 1,911.2 |  |  |
Current liabilities | 767.7 |  |  | 683.9 |  |  |
Non-current liabilities | 2,747.1 |  |  | 2,833.3 |  |  |

(a)Includes amounts due from Non-Guarantor subsidiaries of $100.5 and $26.2, respectively.

| Nine Months Ended |  | Year Ended
| June 29, 2024 |  | September 30, 2023
Net sales | $ | 2,891.3 |  |  | $ | 3,203.3 |
Gross margin | 836.2 |  |  | 642.7 |
Net income (loss) (a) | 213.8 |  |  | (333.2) |

(a)Includes intercompany income (expense) from Non-Guarantor subsidiaries of $13.1 and $(12.1), respectively.
Judicial and Administrative Proceedings
We are party to various pending judicial and administrative proceedings arising in the ordinary course of business, including, among others, proceedings based on accidents or product liability claims and alleged violations of environmental laws. 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 that the related accruals are adequate, both individually and in the aggregate; however, there can be no assurance that future quarterly or annual operating results will not be materially affected by these proceedings, whether as a result of adverse outcomes or as a result of significant defense costs.
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 2023 Annual Report, under “ITEM 1. BUSINESS — Regulatory Considerations” and “ITEM 3. LEGAL PROCEEDINGS.”
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements 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 and on various other sources that we believe to be reasonable under the circumstances. Certain accounting estimates are particularly significant, including those related to revenue recognition, income taxes and goodwill and intangible assets. Our critical accounting estimates are reviewed periodically with the Audit Committee of the Board of Directors of Scotts Miracle-Gro. Our critical accounting estimates have not changed materially from those disclosed in the 2023 Annual Report.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks have not changed materially from those disclosed in the 2023 Annual Report.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Scotts Miracle-Gro Company (the “Registrant”) maintains “disclosure controls and procedures,” as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in the Registrant’s Securities 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 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 Securities Exchange Act, as amended (the “Securities Exchange Act”)) as of the end of the fiscal quarter covered by this Quarterly Report on 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 June 29, 2024.
Changes in Internal Control Over Financial Reporting
In addition, there were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the Registrant’s fiscal quarter ended June 29, 2024 that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 6, 2024, a purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03132) on behalf of a proposed class of purchasers of the Company’s Common Shares between November 3, 2021, and August 1, 2023. On July 26, 2024, another purported shareholder filed a lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03766) on behalf of a proposed class of purchasers of the Company’s Common Shares between June 2, 2021, and August 1, 2023. These lawsuits, which will likely be consolidated with any subsequently filed lawsuits alleging similar facts, assert claims under Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act against the Company and certain of its current and former officers based on alleged misstatements about the Company’s inventories, sales and business prospects. The actions seek, among other things, unspecified monetary damages, reasonable costs and expenses and equitable/injunctive or other relief as deemed appropriate by the Court. The Company believes that the claims asserted are without merit and intends to vigorously defend the actions.
On July 3, 2024, a purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 2:24-cv-03636), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors. On July 30, 2024, another purported shareholder filed a shareholder derivative lawsuit in the United States District Court for the Southern District of Ohio (Case No. 1:24-cv-00402), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors. These lawsuits, which likely will be consolidated with any subsequently filed lawsuits alleging similar facts, include allegations that generally mirror those asserted in the securities lawsuits described above and assert claims for breaches of fiduciary duties and unjust enrichment, as well as abuse of control, gross mismanagement, waste of corporate assets, violations under Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act, and contribution under Sections 10(b) and 21D of the Securities Exchange Act. The actions seek a judgment in favor of the Company for damages in an unspecified amount, disgorgement, interest, and costs and expenses, including attorneys’ and experts’ fees.
ITEM 1A. RISK FACTORS
The Company’s risk factors, as of June 29, 2024, have not materially changed from those described in Part I, Item 1A of the 2023 Annual Report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on 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 Securities Exchange Act, as amended, 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 our 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 Quarterly Report on 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 2023 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.
The forward-looking statements that we make in this Quarterly Report on 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 the federal securities laws.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The payment of future dividends, if any, on the Common Shares will be determined by the Board of Directors in light of conditions then existing, including the Company’s earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors. Amendment No. 2 to the Sixth A&R Credit Agreement limits the Company’s ability to declare or pay any discretionary dividends, distributions or other restricted payments during the Leverage Adjustment Period to only the payment of (i) regularly scheduled cash dividends to holders of its Common Shares in an aggregate amount not to exceed $225.0 million per fiscal year and (ii) other dividends, distributions or other restricted payments in an aggregate amount not to exceed $25.0 million.
The following table shows the purchases of Common Shares made by or on behalf of Scotts Miracle-Gro or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act) of Scotts Miracle-Gro for each of the three fiscal months in the quarter ended June 29, 2024:

Period | Total Number of Common Shares Purchased (1) |  | Average Price Paid per Common Share (2) |  | Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (3) |  | Approximate Dollar Value of Common Shares That May Yet be Purchased Under the Plans or Programs (3)
March 31, 2024 through April 27, 2024 | 1,242 |  |  | $ | 67.64 |  |  | — |  |  | N/A
April 28, 2024 through May 25, 2024 | — |  |  | $ | — |  |  | — |  |  | N/A
May 26, 2024 through June 29, 2024 | 4,791 |  |  | $ | 66.91 |  |  | — |  |  | N/A
Total | 6,033 |  |  | $ | 67.06 |  |  | — |  |  |

(1)All of the Common Shares purchased during the third quarter of fiscal 2024 were purchased in open market transactions. The Common Shares purchased during the quarter consisted of 6,033 Common Shares purchased by the trustee of the rabbi trust established by the Company as permitted pursuant to the terms of The Scotts Company LLC Executive Retirement Plan.
(2)The average price paid per Common Share is calculated on a settlement basis and includes commissions.
(3)On February 6, 2020, the Company announced a repurchase program allowing for repurchases of up to $750.0 million of Common Shares from April 30, 2020 through March 25, 2023. The program expired on March 25, 2023 and, as of June 29, 2024, the Company does not have an active repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the third quarter of fiscal 2024, no director or officer (as defined in Rule 16a-1 of the Securities Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangement or non Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).
ITEM 6. EXHIBITS
See Index to Exhibits at page 47 for a list of the exhibits included herewith.
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THE SCOTTS MIRACLE-GRO COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 29, 2024
INDEX TO EXHIBITS

|  |  |  | Incorporated by Reference |  |
Exhibit No. |  | Description |  | Form |  | Exhibit |  | Filing Date |  | Filed Herewith
10 |  | Amendment No. 3, dated June 11, 2024, to Sixth Amended and Restated Credit Agreement dated as of April 8, 2022, by and between The Scotts Miracle-Gro Company, The Scotts Company LLC, Scotts Canada Ltd., as Borrowers, the other Loan Parties party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent |  |  |  |  |  |  |  | X
21 |  | Subsidiaries of The Scotts Miracle-Gro Company |  |  |  |  |  |  |  | X
22 |  | Guarantor Subsidiaries |  |  |  |  |  |  |  | X
31.1 |  | Rule 13a-14(a)/15d-14(a) Certifications (Principal Executive Officer) |  |  |  |  |  |  |  | X
31.2 |  | Rule 13a-14(a)/15d-14(a) Certifications (Principal Financial Officer) |  |  |  |  |  |  |  | X
32 |  | Section 1350 Certifications (Principal Executive Officer and Principal Financial Officer) |  |  |  |  |  |  |  | X
101.SCH |  | XBRL Taxonomy Extension Schema |  |  |  |  |  |  |  | X
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase |  |  |  |  |  |  |  | X
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase |  |  |  |  |  |  |  | X
101.LAB |  | XBRL Taxonomy Extension Label Linkbase |  |  |  |  |  |  |  | X
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase |  |  |  |  |  |  |  | X
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  |  |  |  |  | X

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | THE SCOTTS MIRACLE-GRO COMPANY
Date: August 7, 2024 |  | /s/ MATTHEW E. GARTH
|  | Printed Name: Matthew E. Garth
|  | Title: Executive Vice President, Chief Financial Officer & Chief Administrative Officer

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