Quick10K

Scotts Miracle-Gro

Price	102.32		EPS	8
Shares	56		P/E	13
MCap	5,761		P/FCF	25
Net Debt	1,647		EBIT	739
TEV	7,408		TEV/EBIT	10
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-04-03	Filed 2021-05-12 Print
10-Q	2021-01-02	Filed 2021-02-10 Print
10-K	2020-09-30	Filed 2020-11-24 Print
10-Q	2020-06-27	Filed 2020-08-05 Print
10-Q	2020-03-28	Filed 2020-05-06 Print
10-Q	2019-12-28	Filed 2020-02-05 Print
10-K	2019-09-30	Filed 2019-11-27 Print
10-Q	2019-06-29	Filed 2019-08-07 Print
10-Q	2019-03-30	Filed 2019-05-08 Print
10-Q	2018-12-29	Filed 2019-02-06 Print
10-K	2018-09-30	Filed 2018-11-29 Print
10-Q	2018-06-30	Filed 2018-08-08 Print
10-Q	2018-03-31	Filed 2018-05-09 Print
10-Q	2017-12-30	Filed 2018-02-08 Print
10-K	2017-09-30	Filed 2017-11-28 Print
10-Q	2017-07-01	Filed 2017-08-10 Print
10-Q	2017-04-01	Filed 2017-05-10 Print
10-Q	2017-02-09	Filed 2017-02-09 Print
10-K	2016-09-30	Filed 2016-11-28 Print
10-Q	2016-07-02	Filed 2016-08-10 Print
10-Q	2016-04-02	Filed 2016-05-11 Print
10-Q	2016-01-02	Filed 2016-02-11 Print
10-K	2015-09-30	Filed 2015-11-24 Print
10-Q	2015-06-27	Filed 2015-08-06 Print
10-Q	2015-03-28	Filed 2015-05-07 Print
10-Q	2014-12-27	Filed 2015-02-05 Print
10-K	2014-09-30	Filed 2014-11-25 Print
10-Q	2014-06-28	Filed 2014-08-07 Print
10-Q	2014-03-29	Filed 2014-05-08 Print
10-Q	2013-12-28	Filed 2014-02-06 Print
10-K	2013-09-30	Filed 2013-11-20 Print
10-Q	2013-06-29	Filed 2013-08-07 Print
10-Q	2013-03-30	Filed 2013-05-07 Print
10-Q	2012-12-29	Filed 2013-02-07 Print
10-K	2012-09-30	Filed 2012-11-20 Print
10-Q	2012-06-30	Filed 2012-08-09 Print
10-Q	2012-03-31	Filed 2012-05-08 Print
10-Q	2011-12-31	Filed 2012-02-08 Print
10-K	2011-09-30	Filed 2011-11-23 Print
10-Q	2011-07-02	Filed 2011-08-10 Print
10-Q	2011-04-02	Filed 2011-05-12 Print
10-Q	2011-01-01	Filed 2011-02-10 Print
10-K	2010-09-30	Filed 2010-11-24 Print
10-Q	2010-07-03	Filed 2010-08-12 Print
10-Q	2010-04-03	Filed 2010-05-13 Print
10-Q	2010-01-02	Filed 2010-02-11 Print

8-K	2020-11-04
8-K	2020-08-25
8-K	2020-07-29
8-K	2020-05-06
8-K	2020-03-02
8-K	2020-01-29
8-K	2020-01-29
8-K	2019-11-06
8-K	2019-10-31
8-K	2019-10-28
8-K	2019-10-15
8-K	2019-08-20
8-K	2019-07-31
8-K	2019-06-20
8-K	2019-05-01
8-K	2019-03-20
8-K	2019-01-30
8-K	2019-01-30
8-K	2018-11-07
8-K	2018-08-22
8-K	2018-07-31
8-K	2018-07-11
8-K	2018-06-05
8-K	2018-05-03
8-K	2018-05-01
8-K	2018-04-17
8-K	2018-01-30
8-K	2018-01-26
8-K	2018-01-19

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Balance Sheet	Income Statement	Cash Flow
CopyHistoryView Assets, Equity	CopyHistoryView Rev, G Profit, Net Income	CopyHistoryView Ops, Inv, Fin

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Scotts Miracle-Gro Company (“Scotts Miracle-Gro” or “Parent”) and its subsidiaries (collectively, together 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 more than 75% of its annual net sales occurring in the second and third fiscal quarters.

The Company follows a 13-week quarterly accounting cycle pursuant to which the first three fiscal quarters end on a Saturday and the fiscal year always ends on September 30. This fiscal calendar convention requires the Company to cycle forward the first three fiscal quarter ends every six years. Fiscal 2021 is impacted by this process and, as a result, the first quarter of fiscal 2021 had five additional days and the fourth quarter of fiscal 2021 will have six fewer days compared to the respective quarters of fiscal 2020. In addition, the second quarter of fiscal 2021 ended six days later than the second quarter of fiscal 2020 and those six days fall within the Company’s peak selling season. The Company’s second quarter of fiscal 2021 ended on April 3, 2021 while the Company’s second quarter of fiscal 2020 ended on March 28, 2020.

Organization and Basis of Presentation

The Company’s unaudited condensed consolidated financial statements for the three and six months ended April 3, 2021 and March 28, 2020 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. On February 26, 2021, the Company acquired the remaining outstanding shares of AeroGrow International, Inc. (“AeroGrow”). Prior to this date, the equity owned by other shareholders was shown as noncontrolling interest in the Condensed Consolidated Balance Sheets, and the other shareholders’ portion of net earnings and other comprehensive income was shown as net (income) loss or comprehensive (income) loss attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss), respectively. 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 should be read in conjunction with Scotts Miracle-Gro’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the “2020 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, 2020 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.

Long-Lived Assets

The Company had non-cash investing activities of $7.9 and $3.7 during the six months ended April 3, 2021 and March 28, 2020, respectively, representing unpaid liabilities to acquire property, plant and equipment.

Statements of Cash Flows

Supplemental cash flow information was as follows:

Copy History

			Six Months Ended
			April 3, 2021						March 28, 2020
Interest paid			$	32.1					$	40.2
Income tax payments			25.1						15.4

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Investment in Unconsolidated Affiliates

Non-marketable equity investments in which the Company has the ability to exercise significant influence, but does not control, are accounted for using the equity method of accounting, with the Company’s proportionate share of the earnings and losses of these entities reflected in the Condensed Consolidated Statements of Operations. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, an impairment loss is recognized in earnings for the amount by which the carrying amount of the investment exceeds its estimated fair value.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held.  The Company adopted this guidance on October 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this guidance on October 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2019, the FASB issued ASU No. 2019-12, “Income taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The provisions are effective for the Company’s financial statements no later than the fiscal year beginning October 1, 2021.  The Company is continuing to assess the impact of the amended guidance.

NOTE 3. ACQUISITIONS AND INVESTMENTS

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NOTE 4. IMPAIRMENT, RESTRUCTURING AND OTHER

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

Copy History

			Three Months Ended												Six Months Ended
			April 3, 2021						March 28, 2020						April 3, 2021						March 28, 2020
Cost of sales—impairment, restructuring and other:
COVID-19 related costs			$	12.3					$	3.1					$	21.0					$	3.1
Restructuring and other charges			0.1						0.3						0.4						0.5
Operating expenses:
COVID-19 related costs			2.6						0.7						3.2						0.7
Restructuring and other charges (recoveries), net			(0.1)						(0.4)						—						(2.9)
Impairment, restructuring and other charges from continuing operations			14.9						3.7						24.6						1.4
Restructuring and other charges (recoveries), net, from discontinued operations			—						(3.1)						—						(3.1)
Total impairment, restructuring and other charges (recoveries)			$	14.9					$	0.6					$	24.6					$	(1.7)

The following table summarizes the activity related to liabilities associated with restructuring and other during the six months ended April 3, 2021:

Copy History

Amounts accrued for restructuring and other at September 30, 2020			$	3.9
Restructuring and other charges from continuing operations			24.6
Payments and other			(25.9)
Amounts accrued for restructuring and other at April 3, 2021			$	2.6

Included in restructuring accruals, as of April 3, 2021, is $1.1 that is classified as long-term. Payments against the long-term accruals will be incurred as the employees covered by the restructuring plan retire or through the passage of time. The remaining amounts accrued will continue to be paid out over the course of the next twelve months.

COVID-19

The World Health Organization recognized COVID-19 as a public health emergency of international concern on January 30, 2020 and as a global pandemic on March 11, 2020. In response to the COVID-19 pandemic, the Company has implemented additional measures intended to both protect the health and safety of its employees and maintain its ability to provide products

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to its customers, including (i) requiring a significant part of its workforce to work from home, (ii) monitoring its employees for COVID-19 symptoms, (iii) making additional personal protective equipment available to its operations team, (iv) requiring all manufacturing and warehousing associates to take their temperatures before beginning a shift, (v) modifying work methods and schedules of its manufacturing and field associates to create distance or add barriers between associates, consumers and others, (vi) expanding cleaning efforts at its operation centers, (vii) modifying attendance policies so that associates may elect to stay home if they have symptoms, (viii) prioritizing production for goods that are more essential to its customers and (ix) implementing an interim premium pay allowance for certain associates in its field sales force or working in manufacturing or distribution centers. During the three and six months ended April 3, 2021, the Company incurred costs of $14.9 and $24.2, respectively, associated with the COVID-19 pandemic primarily related to premium pay. The Company incurred costs of $10.7 and $19.0 in its U.S. Consumer segment, $1.5 and $1.9 in its Hawthorne segment and $0.1 in its Other segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended April 3, 2021, respectively. The Company incurred costs of $2.6 and $3.2 in its U.S. Consumer segment in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended April 3, 2021, respectively. Since the inception of the COVID-19 pandemic, total costs classified within the “Cost of sales—impairment, restructuring and other” and the “Impairment, restructuring and other” lines in the Condensed Consolidated Statements of Operations are $38.4 for the U.S. Consumer segment, $4.5 for the Hawthorne segment and $0.7 for the Other segment.

During the three and six months ended March 28, 2020, the Company incurred costs of $3.8 associated with the COVID-19 pandemic primarily related to premium pay and incremental cleaning costs. The Company incurred costs of $2.6 in its U.S. Consumer segment and $0.5 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 six months ended March 28, 2020. The Company incurred costs of $0.7 in its U.S. Consumer segment in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three and six months ended March 28, 2020.

Project Catalyst

In connection with the acquisition of Sunlight Supply during the third quarter of fiscal 2018, the Company announced the launch of an initiative called Project Catalyst, which is a company-wide restructuring effort to reduce operating costs throughout the U.S. Consumer, Hawthorne and Other segments and drive synergies from acquisitions within the Hawthorne segment. Costs incurred during the three and six months ended April 3, 2021 and March 28, 2020 related to Project Catalyst were not material. Costs incurred to date since the inception of Project Catalyst are $25.1 for the Hawthorne segment, $14.0 for the U.S. Consumer segment, $1.3 for the Other segment and $2.8 for Corporate. Additionally, during the three and six months ended March 28, 2020, the Company received zero and $2.6, respectively, from the final settlement of escrow funds related to a previous acquisition within the Hawthorne segment that was recognized in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations.

NOTE 5. INVENTORIES

    Inventories consisted of the following for each of the periods presented:

Copy History

			April 3, 2021						March 28, 2020						September 30, 2020
Finished goods			$	709.1					$	520.0					$	390.3
Work-in-process			71.7						67.6						164.8
Raw materials			238.4						155.7						66.8
Total inventories			$	1,019.2					$	743.3					$	621.9

    Adjustments to reflect inventories at net realizable values were $21.4 at April 3, 2021, $12.5 at March 28, 2020 and $31.3 at September 30, 2020.

NOTE 6. MARKETING AGREEMENT

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Roundup® business 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.

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 (i) for any reason effective as of September 30, 2022 by delivery of notice of termination to Monsanto on January 15, 2021 (a “Convenience Termination”) or (ii) upon the insolvency or bankruptcy of Monsanto;

•