falsedesktopSMG2021-01-02000154638021000009{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\nEmerging growth company\t☐\t\t\n", "q10k_tbl_1": "THE SCOTTS MIRACLE-GRO COMPANY INDEX\t\t\n\t\tPAGE NO.\nPART I. FINANCIAL INFORMATION:\t\t\nItem 1.\tFinancial Statements (Unaudited)\t\n\tCondensed Consolidated Statements of Operations - Three months ended January 2 2021 and December 28 2019\t3\n\tCondensed Consolidated Statements of Comprehensive Income (Loss) - Three months ended January 2 2021 and December 28 2019\t4\n\tCondensed Consolidated Statements of Cash Flows - Three months ended January 2 2021 and December 28 2019\t5\n\tCondensed Consolidated Balance Sheets - January 2 2021 December 28 2019 and September 30 2020\t6\n\tNotes to Condensed Consolidated Financial Statements\t7\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t23\nItem 3.\tQuantitative and Qualitative Disclosures about Market Risk\t35\nItem 4.\tControls and Procedures\t35\nPART II. OTHER INFORMATION:\t\t\nItem 1.\tLegal Proceedings\t36\nItem 1A.\tRisk Factors\t36\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t36\nItem 3.\tDefaults Upon Senior Securities\t37\nItem 4.\tMine Safety Disclosures\t37\nItem 5.\tOther Information\t37\nItem 6.\tExhibits\t37\nIndex to Exhibits\t\t38\nSignatures\t\t39\n", "q10k_tbl_2": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nNet sales\t748.6\t365.8\t\t\t\t\t\t\nCost of sales\t548.8\t311.3\t\t\t\t\t\t\nCost of sales-impairment restructuring and other\t9.0\t0.3\t\t\t\t\t\t\nGross profit\t190.8\t54.2\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\nSelling general and administrative\t156.7\t119.8\t\t\t\t\t\t\nImpairment restructuring and other\t0.7\t(2.5)\t\t\t\t\t\t\nOther income net\t(0.6)\t(0.5)\t\t\t\t\t\t\nIncome (loss) from operations\t34.0\t(62.6)\t\t\t\t\t\t\nCosts related to refinancing\t0\t15.1\t\t\t\t\t\t\nInterest expense\t16.1\t20.0\t\t\t\t\t\t\nOther non-operating income net\t(15.2)\t(2.6)\t\t\t\t\t\t\nIncome (loss) from continuing operations before income taxes\t33.1\t(95.1)\t\t\t\t\t\t\nIncome tax expense (benefit) from continuing operations\t7.9\t(23.8)\t\t\t\t\t\t\nIncome (loss) from continuing operations\t25.2\t(71.3)\t\t\t\t\t\t\nIncome (loss) from discontinued operations net of tax\t0\t0\t\t\t\t\t\t\nNet income (loss)\t25.2\t(71.3)\t\t\t\t\t\t\nNet income attributable to noncontrolling interest\t(0.8)\t(0.1)\t\t\t\t\t\t\nNet income (loss) attributable to controlling interest\t24.4\t(71.4)\t\t\t\t\t\t\nBasic income (loss) per common share:\t\t\t\t\t\t\t\t\nIncome (loss) from continuing operations\t0.44\t(1.28)\t\t\t\t\t\t\nIncome (loss) from discontinued operations\t0\t0\t\t\t\t\t\t\nBasic net income (loss) per common share\t0.44\t(1.28)\t\t\t\t\t\t\nWeighted-average common shares outstanding during the period\t55.7\t55.8\t\t\t\t\t\t\nDiluted income (loss) per common share:\t\t\t\t\t\t\t\t\nIncome (loss) from continuing operations\t0.43\t(1.28)\t\t\t\t\t\t\nIncome (loss) from discontinued operations\t0\t0\t\t\t\t\t\t\nDiluted net income (loss) per common share\t0.43\t(1.28)\t\t\t\t\t\t\nWeighted-average common shares outstanding during the period plus dilutive potential common shares\t57.1\t55.8\t\t\t\t\t\t\n", "q10k_tbl_3": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nNet income (loss)\t25.2\t(71.3)\t\t\t\t\t\t\nOther comprehensive income (loss):\t\t\t\t\t\t\t\t\nNet foreign currency translation adjustment\t12.4\t4.6\t\t\t\t\t\t\nNet unrealized gain (loss) on derivative instruments net of tax\t2.5\t(1.4)\t\t\t\t\t\t\nReclassification of net unrealized losses on derivative instruments to net income net of tax\t1.9\t0.8\t\t\t\t\t\t\nPension and other post-retirement benefit adjustments net of tax\t(1.2)\t(1.1)\t\t\t\t\t\t\nTotal other comprehensive income\t15.6\t2.9\t\t\t\t\t\t\nComprehensive income (loss)\t40.8\t(68.4)\t\t\t\t\t\t\nComprehensive income attributable to noncontrolling interest\t(0.8)\t(0.1)\t\t\t\t\t\t\nComprehensive income (loss) attributable to controlling interest\t40.0\t(68.5)\t\t\t\t\t\t\n", "q10k_tbl_4": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\nOPERATING ACTIVITIES\t\t\nNet income (loss)\t25.2\t(71.3)\nAdjustments to reconcile net income (loss) to net cash used in operating activities:\t\t\nCosts related to refinancing\t0\t15.1\nShare-based compensation expense\t8.2\t7.0\nDepreciation\t15.7\t14.8\nAmortization\t7.4\t7.6\nDeferred taxes\t(1.8)\t(2.1)\nOther\t(12.5)\t0\nChanges in assets and liabilities net of acquired businesses:\t\t\nAccounts receivable\t1.1\t72.9\nInventories\t(442.8)\t(324.7)\nPrepaid and other assets\t(10.2)\t(26.8)\nAccounts payable\t126.8\t114.2\nOther current liabilities\t(125.7)\t(115.7)\nRestructuring and other\t(0.7)\t(2.3)\nOther non-current items\t(11.3)\t(6.5)\nOther net\t(0.1)\t(0.4)\nNet cash used in operating activities\t(420.7)\t(318.2)\nINVESTING ACTIVITIES\t\t\nInvestments in property plant and equipment\t(34.6)\t(21.9)\nInvestments in loans receivable\t0\t(2.5)\nInvestments in unconsolidated affiliates\t(100.7)\t0\nPayment for acquisitions net of cash acquired\t(10.0)\t0\nOther investing net\t(2.9)\t(1.3)\nNet cash used in investing activities\t(148.2)\t(25.7)\nFINANCING ACTIVITIES\t\t\nBorrowings under revolving and bank lines of credit and term loans\t712.9\t465.7\nRepayments under revolving and bank lines of credit and term loans\t(67.5)\t(112.8)\nProceeds from issuance of 4.500% Senior Notes\t0\t450.0\nRepayment of 6.000% Senior Notes\t0\t(400.0)\nFinancing and issuance fees\t0\t(18.6)\nDividends paid\t(34.6)\t(32.4)\nPurchase of Common Shares\t(38.4)\t0\nPayments on seller notes\t0\t(0.5)\nCash received from exercise of stock options\t1.1\t0.9\nNet cash provided by financing activities\t573.5\t352.3\nEffect of exchange rate changes on cash\t0.3\t0.2\nNet increase in cash and cash equivalents\t4.9\t8.6\nCash and cash equivalents at beginning of period\t16.6\t18.8\nCash and cash equivalents at end of period\t21.5\t27.4\n", "q10k_tbl_5": "\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nASSETS\t\t\t\nCurrent assets:\t\t\t\nCash and cash equivalents\t21.5\t27.4\t16.6\nAccounts receivable less allowances of $6.8 $4.2 and $7.5 respectively\t346.6\t192.7\t474.8\nAccounts receivable pledged\t151.1\t43.3\t22.3\nInventories\t1068.3\t866.1\t621.9\nPrepaid and other current assets\t92.0\t203.3\t81.0\nTotal current assets\t1679.5\t1332.8\t1216.6\nInvestment in unconsolidated affiliates\t202.9\t0\t0\nProperty plant and equipment net of accumulated depreciation of $698.8 $642.2 and $682.1 respectively\t560.9\t545.4\t560.0\nGoodwill\t548.9\t540.9\t544.1\nIntangible assets net\t685.4\t701.7\t679.2\nOther assets\t323.1\t335.2\t380.6\nTotal assets\t4000.7\t3456.0\t3380.5\nLIABILITIES AND EQUITY\t\t\t\nCurrent liabilities:\t\t\t\nCurrent portion of debt\t188.0\t93.8\t66.4\nAccounts payable\t498.9\t309.4\t391.0\nOther current liabilities\t367.6\t206.5\t493.0\nTotal current liabilities\t1054.5\t609.7\t950.4\nLong-term debt\t1979.8\t1969.9\t1455.1\nOther liabilities\t287.4\t247.1\t272.1\nTotal liabilities\t3321.7\t2826.7\t2677.6\nCommitments and contingencies (Note 10)\t\t\t\nEquity:\t\t\t\nCommon shares and capital in excess of $0.01 stated value per share; shares outstanding of 55.6 55.8 and 55.8 respectively\t490.5\t448.9\t482.5\nRetained earnings\t1224.4\t1169.8\t1235.6\nTreasury shares at cost; 12.6 12.4 and 12.4 shares respectively\t(958.8)\t(903.1)\t(921.8)\nAccumulated other comprehensive loss\t(83.5)\t(91.0)\t(99.1)\nTotal equity-controlling interest\t672.6\t624.6\t697.2\nNoncontrolling interest\t6.4\t4.7\t5.7\nTotal equity\t679.0\t629.3\t702.9\nTotal liabilities and equity\t4000.7\t3456.0\t3380.5\n", "q10k_tbl_6": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\nInterest paid\t23.0\t28.1\nIncome tax payments (refunds)\t0.2\t(2.1)\n", "q10k_tbl_7": "\tTHREE MONTHS ENDED\t\n\t\tJANUARY 2 2021\t\t\t\tDECEMBER 28 2019\t\t\nCost of sales-impairment restructuring and other:\t\t\t\t\t\t\t\t\nCOVID-19 related costs\t\t8.7\t\t\t\t0\t\t\nRestructuring and other charges\t\t0.3\t\t\t\t0.3\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\nCOVID-19 related costs\t\t0.6\t\t\t\t0\t\t\nRestructuring and other charges (recoveries) net\t\t0.1\t\t\t\t(2.5)\t\t\nTotal impairment restructuring and other charges (recoveries)\t\t9.7\t\t\t\t(2.2)\t\t\n", "q10k_tbl_8": "Amounts accrued for restructuring and other at September 30 2020\t3.9\nRestructuring and other charges from continuing operations\t9.7\nPayments and other\t(10.4)\nAmounts accrued for restructuring and other at January 2 2021\t3.2\n", "q10k_tbl_9": "\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nFinished goods\t768.4\t609.2\t390.3\nWork-in-process\t84.0\t79.1\t164.8\nRaw materials\t215.9\t177.8\t66.8\nTotal inventories\t1068.3\t866.1\t621.9\n", "q10k_tbl_10": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nGross commission\t7.7\t0\t\t\t\t\t\t\nContribution expenses\t(4.5)\t(4.5)\t\t\t\t\t\t\nNet commission\t3.2\t(4.5)\t\t\t\t\t\t\nReimbursements associated with Roundup® marketing agreement\t14.0\t13.4\t\t\t\t\t\t\nTotal net sales associated with Roundup® marketing agreement\t17.2\t8.9\t\t\t\t\t\t\n", "q10k_tbl_11": "\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nCredit Facilities:\t\t\t\nRevolving loans\t599.6\t537.1\t64.0\nTerm loans\t700.0\t750.0\t710.0\nSenior Notes - 5.250%\t250.0\t250.0\t250.0\nSenior Notes - 4.500%\t450.0\t450.0\t450.0\nReceivables facility\t136.0\t39.0\t20.0\nFinance lease obligations\t34.8\t36.9\t36.1\nOther\t6.8\t11.5\t1.1\nTotal debt\t2177.2\t2074.5\t1531.2\nLess current portions\t188.0\t93.8\t66.4\nLess unamortized debt issuance costs\t9.4\t10.8\t9.7\nLong-term debt\t1979.8\t1969.9\t1455.1\n", "q10k_tbl_12": "Notional Amount\t\tEffective Date (a)\tExpiration Date\tFixed Rate\n200\t(b)\t11/7/2018\t6/7/2021\t2.87%\n100\t\t11/7/2018\t7/7/2021\t2.96%\n200\t\t11/7/2018\t10/7/2021\t2.98%\n100\t\t12/21/2020\t6/20/2023\t1.36%\n300\t(b)\t1/7/2021\t6/7/2023\t1.34%\n200\t\t10/7/2021\t6/7/2023\t1.37%\n200\t(b)\t1/20/2022\t6/20/2024\t0.58%\n200\t\t6/7/2023\t6/8/2026\t0.85%\n", "q10k_tbl_13": "\tCommon Shares and Capital in Excess of Stated Value\tRetained Earnings\tTreasury Shares\tAccumulated Other Comprehensive Loss\tTotal Equity - Controlling Interest\tNoncontrolling Interest\tTotal Equity\nBalance at September 30 2020\t482.5\t1235.6\t(921.8)\t(99.1)\t697.2\t5.7\t702.9\nNet income (loss)\t0\t24.4\t0\t0\t24.4\t0.8\t25.2\nOther comprehensive income (loss)\t0\t0\t0\t15.6\t15.6\t0\t15.6\nShare-based compensation\t8.2\t0\t0\t0\t8.2\t0\t8.2\nDividends declared ($0.62 per share)\t0\t(35.7)\t0\t0\t(35.7)\t0\t(35.7)\nTreasury share purchases\t0\t0\t(38.4)\t0\t(38.4)\t0\t(38.4)\nTreasury share issuances\t(0.1)\t0\t1.3\t0\t1.2\t0\t1.2\nBalance at January 2 2021\t490.5\t1224.4\t(958.8)\t(83.5)\t672.6\t6.4\t679.0\n", "q10k_tbl_14": "\tCommon Shares and Capital in Excess of Stated Value\tRetained Earnings\tTreasury Shares\tAccumulated Other Comprehensive Loss\tTotal Equity - Controlling Interest\tNoncontrolling Interest\tTotal Equity\nBalance at September 30 2019\t442.2\t1274.7\t(904.3)\t(93.9)\t718.7\t4.5\t723.2\nNet income (loss)\t0\t(71.4)\t0\t0\t(71.4)\t0.1\t(71.3)\nOther comprehensive income (loss)\t0\t0\t0\t2.9\t2.9\t0\t2.9\nShare-based compensation\t7.0\t0\t0\t0\t7.0\t0\t7.0\nDividends declared ($0.58 per share)\t0\t(33.5)\t0\t0\t(33.5)\t0\t(33.5)\nTreasury share issuances\t(0.3)\t0\t1.2\t0\t0.9\t0\t0.9\nBalance at December 28 2019\t448.9\t1169.8\t(903.1)\t(91.0)\t624.6\t4.7\t629.3\n", "q10k_tbl_15": "\tForeign Currency Translation Adjustments\tNet Unrealized Gain (Loss) On Derivative Instruments\tNet Unrealized Gain (Loss) in Pension and Other Post-Retirement Benefits\tAccumulated Other Comprehensive Income (Loss)\nBalance at September 30 2020\t(6.2)\t(15.1)\t(77.8)\t(99.1)\nOther comprehensive income (loss) before reclassifications\t12.4\t3.4\t0\t15.8\nAmounts reclassified from accumulated other comprehensive net income (loss)\t0\t2.6\t(1.6)\t1.0\nIncome tax benefit (expense)\t0\t(1.6)\t0.4\t(1.2)\nNet current period other comprehensive income (loss)\t12.4\t4.4\t(1.2)\t15.6\nBalance at January 2 2021\t6.2\t(10.7)\t(79.0)\t(83.5)\n", "q10k_tbl_16": "\tForeign Currency Translation Adjustments\tNet Unrealized Gain (Loss) On Derivative Instruments\tNet Unrealized Gain (Loss) in Pension and Other Post-Retirement Benefits\tAccumulated Other Comprehensive Income (Loss)\nBalance at September 30 2019\t(17.4)\t(8.1)\t(68.4)\t(93.9)\nOther comprehensive income (loss) before reclassifications\t4.6\t(1.9)\t0\t2.7\nAmounts reclassified from accumulated other comprehensive net income (loss)\t0\t1.1\t(1.4)\t(0.3)\nIncome tax benefit (expense)\t0\t0.2\t0.3\t0.5\nNet current period other comprehensive income (loss)\t4.6\t(0.6)\t(1.1)\t2.9\nBalance at December 28 2019\t(12.8)\t(8.7)\t(69.5)\t(91.0)\n", "q10k_tbl_17": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\nEmployees\t\t\nRestricted stock units\t1687\t4066\nNon-Employee Directors\t\t\nRestricted and deferred stock units\t595\t976\nTotal share-based awards\t2282\t5042\nAggregate fair value at grant dates\t0.3\t0.5\n", "q10k_tbl_18": "COMMODITY\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nUrea\t40500 tons\t45500 tons\t76500 tons\nResin\t4000000 pounds\t11000000 pounds\t9100000 pounds\nDiesel\t4704000 gallons\t4368000 gallons\t5838000 gallons\nHeating Oil\t2100000 gallons\t1344000 gallons\t2142000 gallons\n", "q10k_tbl_19": "\t\tASSETS / (LIABILITIES)\t\t\nDERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS\tBALANCE SHEET LOCATION\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nInterest rate swap agreements\tOther current liabilities\t(9.4)\t(5.4)\t(10.4)\n\tOther liabilities\t(7.9)\t(3.8)\t(9.7)\nCommodity hedging instruments\tPrepaid and other current assets\t2.1\t0\t0.9\n\tOther current liabilities\t0\t(1.6)\t(0.7)\nTotal derivatives designated as hedging instruments\t\t(15.2)\t(10.8)\t(19.9)\nDERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS\tBALANCE SHEET LOCATION\t\t\t\nCurrency forward contracts\tPrepaid and other current assets\t0\t0\t0.5\n\tOther current liabilities\t(6.6)\t(2.2)\t(1.9)\nCommodity hedging instruments\tPrepaid and other current assets\t0.4\t0.1\t0\n\tOther current liabilities\t0\t0\t(0.9)\nTotal derivatives not designated as hedging instruments\t\t(6.2)\t(2.1)\t(2.3)\nTotal derivatives\t\t(21.4)\t(12.9)\t(22.2)\n", "q10k_tbl_20": "DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS\t\tAMOUNT OF GAIN / (LOSS) RECOGNIZED IN AOCL\t\t\n\tTHREE MONTHS ENDED\t\t\t\t\t\t\n\tJANUARY 2 2021\t\tDECEMBER 28 2019\t\t\t\t\t\t\t\t\t\t\nInterest rate swap agreements\t\t0.3\t\t0.4\t\t\t\t\t\t\t\t\t\t\t\t\nCommodity hedging instruments\t\t2.2\t\t(1.8)\t\t\t\t\t\t\t\t\t\t\t\t\nTotal\t\t2.5\t\t(1.4)\t\t\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_21": "DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS\tRECLASSIFIED FROM AOCL INTO STATEMENT OF OPERATIONS\tAMOUNT OF GAIN / (LOSS)\t\nTHREE MONTHS ENDED\t\t\nJANUARY 2 2021\tDECEMBER 28 2019\t\t\nInterest rate swap agreements\tInterest expense\t(1.8)\t(0.8)\t\t\t\t\t\t\t\t\t\t\t\t\nCommodity hedging instruments\tCost of sales\t(0.1)\t0\t\t\t\t\t\t\t\t\t\t\t\t\nTotal\t\t(1.9)\t(0.8)\t\t\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_22": "DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS\tRECOGNIZED IN STATEMENT OF OPERATIONS\tAMOUNT OF GAIN / (LOSS)\t\nTHREE MONTHS ENDED\t\t\nJANUARY 2 2021\tDECEMBER 28 2019\t\t\nCurrency forward contracts\tOther income / expense net\t(8.0)\t(4.8)\t\t\t\t\t\t\t\t\t\t\t\t\nCommodity hedging instruments\tCost of sales\t0.7\t0.5\t\t\t\t\t\t\t\t\t\t\t\t\nTotal\t\t(7.3)\t(4.3)\t\t\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_23": "\t\tJANUARY 2 2021\t\tDECEMBER 28 2019\t\tSEPTEMBER 30 2020\t\n\tFAIR VALUE HIERARCHY LEVEL\tCARRYING AMOUNT\tESTIMATED FAIR VALUE\tCARRYING AMOUNT\tESTIMATED FAIR VALUE\tCARRYING AMOUNT\tESTIMATED FAIR VALUE\nAssets:\t\t\t\t\t\t\t\nCash equivalents\tLevel 1\t3.3\t3.3\t2.4\t2.4\t2.4\t2.4\nOther\t\t\t\t\t\t\t\nInvestment securities in non-qualified retirement plan assets\tLevel 1\t38.7\t38.7\t25.2\t25.2\t29.8\t29.8\nBonnie Option\tLevel 3\t0\t0\t11.3\t11.3\t23.3\t23.3\nLiabilities:\t\t\t\t\t\t\t\nDebt instruments\t\t\t\t\t\t\t\nCredit facilities - revolving loans\tLevel 2\t599.6\t599.6\t537.1\t537.1\t64.0\t64.0\nCredit facilities - term loans\tLevel 2\t700.0\t700.0\t750.0\t750.0\t710.0\t710.0\nSenior Notes - 4.500%\tLevel 2\t450.0\t484.9\t450.0\t459.6\t450.0\t476.4\nSenior Notes - 5.250%\tLevel 2\t250.0\t263.4\t250.0\t267.5\t250.0\t266.6\nReceivables facility\tLevel 2\t136.0\t136.0\t39.0\t39.0\t20.0\t20.0\nOther debt\tLevel 2\t6.8\t6.8\t11.5\t11.5\t1.1\t1.1\n", "q10k_tbl_24": "\tBALANCE SHEET LOCATION\tJANUARY 2 2021\tDECEMBER 28 2019\tSEPTEMBER 30 2020\nOperating leases:\t\t\t\t\nRight-of-use assets\tOther assets\t169.6\t129.5\t156.0\nCurrent lease liabilities\tOther current liabilities\t52.9\t45.0\t47.5\nNon-current lease liabilities\tOther liabilities\t122.9\t88.9\t113.3\nTotal operating lease liabilities\t\t175.8\t133.9\t160.8\nFinance leases:\t\t\t\t\nRight-of-use assets\tProperty plant and equipment net\t33.3\t36.3\t34.7\nCurrent lease liabilities\tCurrent portion of debt\t5.2\t4.5\t5.2\nNon-current lease liabilities\tLong-term debt\t29.6\t32.4\t30.9\nTotal finance lease liabilities\t\t34.8\t36.9\t36.1\n", "q10k_tbl_25": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nOperating lease cost (a)\t15.4\t13.1\t\t\t\t\t\t\nVariable lease cost\t3.1\t2.3\t\t\t\t\t\t\nFinance lease cost\t\t\t\t\t\t\t\t\nAmortization of right-of-use assets\t1.5\t0.9\t\t\t\t\t\t\nInterest on lease liabilities\t0.4\t0.3\t\t\t\t\t\t\nTotal finance lease cost\t1.9\t1.2\t\t\t\t\t\t\n", "q10k_tbl_26": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nCash paid for amounts included in the measurement of lease liabilities:\t\t\t\t\t\t\t\t\nOperating cash flows from operating leases net\t13.9\t13.4\t\t\t\t\t\t\nOperating cash flows from finance leases\t0.4\t0.3\t\t\t\t\t\t\nFinancing cash flows from finance leases\t1.3\t0.4\t\t\t\t\t\t\nRight-of-use assets obtained in exchange for lease obligations:\t\t\t\t\t\t\t\t\nOperating leases\t25.6\t11.0\t\t\t\t\t\t\nFinance leases\t0\t11.9\t\t\t\t\t\t\n", "q10k_tbl_27": "Year\tOPERATING LEASES\tFINANCE LEASES\n2021 (remainder of the year)\t45.0\t4.9\n2022\t48.6\t6.5\n2023\t33.2\t6.6\n2024\t24.8\t6.6\n2025\t18.7\t2.4\nThereafter\t21.3\t14.8\nTotal lease payments\t191.6\t41.8\nLess: Imputed interest\t(15.8)\t(7.0)\nTotal lease liabilities\t175.8\t34.8\n", "q10k_tbl_28": "\tTHREE MONTHS ENDED\t\n\t\tJANUARY 2 2021\t\t\t\tDECEMBER 28 2019\t\t\nNet sales:\t\t\t\t\t\t\t\t\nU.S. Consumer\t\t408.2\t\t\t\t165.5\t\t\nHawthorne\t\t309.4\t\t\t\t180.7\t\t\nOther\t\t31.0\t\t\t\t19.6\t\t\nConsolidated\t\t748.6\t\t\t\t365.8\t\t\nSegment Profit (Loss):\t\t\t\t\t\t\t\t\nU.S. Consumer\t\t45.3\t\t\t\t(40.1)\t\t\nHawthorne\t\t40.4\t\t\t\t12.5\t\t\nOther\t\t0\t\t\t\t(3.5)\t\t\nTotal Segment Profit (Loss)\t\t85.7\t\t\t\t(31.1)\t\t\nCorporate\t\t(34.6)\t\t\t\t(26.1)\t\t\nIntangible asset amortization\t\t(7.4)\t\t\t\t(7.6)\t\t\nImpairment restructuring and other\t\t(9.7)\t\t\t\t2.2\t\t\nCosts related to refinancing\t\t0\t\t\t\t(15.1)\t\t\nInterest expense\t\t(16.1)\t\t\t\t(20.0)\t\t\nOther non-operating income net\t\t15.2\t\t\t\t2.6\t\t\nIncome (loss) from continuing operations before income taxes\t\t33.1\t\t\t\t(95.1)\t\t\n", "q10k_tbl_29": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nU.S. Consumer:\t\t\t\t\t\t\t\t\nGrowing media and mulch\t90.0\t44.8\t\t\t\t\t\t\nLawn care\t166.0\t50.8\t\t\t\t\t\t\nControls\t62.5\t28.8\t\t\t\t\t\t\nRoundup® marketing agreement\t17.3\t8.9\t\t\t\t\t\t\nOther primarily gardening\t72.4\t32.2\t\t\t\t\t\t\nHawthorne:\t\t\t\t\t\t\t\t\nLighting\t115.3\t60.8\t\t\t\t\t\t\nNutrients\t56.9\t37.6\t\t\t\t\t\t\nGrowing media\t35.6\t25.5\t\t\t\t\t\t\nOther primarily hardware and growing environments\t101.6\t56.8\t\t\t\t\t\t\nOther:\t\t\t\t\t\t\t\t\nGrowing media\t16.8\t11.2\t\t\t\t\t\t\nLawn care\t4.8\t3.4\t\t\t\t\t\t\nOther primarily gardening and controls\t9.4\t5.0\t\t\t\t\t\t\nTotal net sales\t748.6\t365.8\t\t\t\t\t\t\n", "q10k_tbl_30": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nNet sales:\t\t\t\t\t\t\t\t\nUnited States\t680.5\t320.4\t\t\t\t\t\t\nInternational\t68.1\t45.4\t\t\t\t\t\t\n\t748.6\t365.8\t\t\t\t\t\t\n", "q10k_tbl_31": "\tPercent of Net Sales from Continuing Operations by Quarter\t\t\n\t2020\t2019\t2018\nFirst Quarter\t8.9%\t9.4%\t8.3%\nSecond Quarter\t33.5%\t37.7%\t38.1%\nThird Quarter\t36.1%\t37.1%\t37.3%\nFourth Quarter\t21.5%\t15.8%\t16.3%\n", "q10k_tbl_32": "\tJANUARY 2 2021\t% OF NET SALES\tDECEMBER 28 2019\t% OF NET SALES\nNet sales\t748.6\t100.0%\t365.8\t100.0%\nCost of sales\t548.8\t73.3\t311.3\t85.1\nCost of sales-impairment restructuring and other\t9.0\t1.2\t0.3\t0.1\nGross profit\t190.8\t25.5\t54.2\t14.8\nOperating expenses:\t\t\t\t\nSelling general and administrative\t156.7\t20.9\t119.8\t32.8\nImpairment restructuring and other\t0.7\t0.1\t(2.5)\t(0.7)\nOther income net\t(0.6)\t(0.1)\t(0.5)\t(0.1)\nIncome (loss) from operations\t34.0\t4.5\t(62.6)\t(17.1)\nCosts related to refinancing\t0\t0\t15.1\t4.1\nInterest expense\t16.1\t2.2\t20.0\t5.5\nOther non-operating income net\t(15.2)\t(2.0)\t(2.6)\t(0.7)\nIncome (loss) from continuing operations before income taxes\t33.1\t4.4\t(95.1)\t(26.0)\nIncome tax expense (benefit) from continuing operations\t7.9\t1.1\t(23.8)\t(6.5)\nIncome (loss) from continuing operations\t25.2\t3.4\t(71.3)\t(19.5)\nIncome (loss) from discontinued operations net of tax\t0\t0\t0\t0\nNet income (loss)\t25.2\t3.4%\t(71.3)\t(19.5)%\n", "q10k_tbl_33": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nMaterials\t312.1\t164.8\t\t\t\t\t\t\nManufacturing labor and overhead\t114.6\t69.5\t\t\t\t\t\t\nDistribution and warehousing\t108.1\t63.6\t\t\t\t\t\t\nCosts associated with Roundup® marketing agreement\t14.0\t13.4\t\t\t\t\t\t\nCost of sales\t548.8\t311.3\t\t\t\t\t\t\nCost of sales-impairment restructuring and other\t9.0\t0.3\t\t\t\t\t\t\n\t557.8\t311.6\t\t\t\t\t\t\n", "q10k_tbl_34": "\tTHREE MONTHS ENDED\n\tJANUARY 2 2021\nVolume product mix and other\t229.4\nMaterial cost changes\t5.7\nForeign exchange rates\t1.8\nCosts associated with Roundup® marketing agreement\t0.6\n\t237.5\nImpairment restructuring and other\t8.7\nChange in cost of sales\t246.2\n", "q10k_tbl_35": "\tTHREE MONTHS ENDED\n\tJANUARY 2 2021\nVolume product mix and other\t10.4%\nPricing\t1.4\nRoundup® commissions and reimbursements\t0.8\nMaterial costs\t(0.8)\n\t11.8%\nImpairment restructuring and other\t(1.1)\nChange in gross profit rate\t10.7%\n", "q10k_tbl_36": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nAdvertising\t26.7\t10.8\t\t\t\t\t\t\nResearch and development\t10.3\t9.2\t\t\t\t\t\t\nShare-based compensation\t8.2\t7.0\t\t\t\t\t\t\nAmortization of intangibles\t7.3\t7.5\t\t\t\t\t\t\nOther selling general and administrative\t104.2\t85.3\t\t\t\t\t\t\n\t156.7\t119.8\t\t\t\t\t\t\n", "q10k_tbl_37": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nCost of sales-impairment restructuring and other:\t\t\t\t\t\t\t\t\nCOVID-19 related costs\t8.7\t0\t\t\t\t\t\t\nRestructuring and other charges\t0.3\t0.3\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\nCOVID-19 related costs\t0.6\t0\t\t\t\t\t\t\nRestructuring and other charges (recoveries) net\t0.1\t(2.5)\t\t\t\t\t\t\nTotal impairment restructuring and other charges (recoveries)\t9.7\t(2.2)\t\t\t\t\t\t\n", "q10k_tbl_38": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nU.S. Consumer\t408.2\t165.5\t\t\t\t\t\t\nHawthorne\t309.4\t180.7\t\t\t\t\t\t\nOther\t31.0\t19.6\t\t\t\t\t\t\nConsolidated\t748.6\t365.8\t\t\t\t\t\t\n", "q10k_tbl_39": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\t\t\t\t\t\t\nU.S. Consumer\t45.3\t(40.1)\t\t\t\t\t\t\nHawthorne\t40.4\t12.5\t\t\t\t\t\t\nOther\t0\t(3.5)\t\t\t\t\t\t\nTotal Segment Profit (Loss) (Non-GAAP)\t85.7\t(31.1)\t\t\t\t\t\t\nCorporate\t(34.6)\t(26.1)\t\t\t\t\t\t\nIntangible asset amortization\t(7.4)\t(7.6)\t\t\t\t\t\t\nImpairment restructuring and other\t(9.7)\t2.2\t\t\t\t\t\t\nCosts related to refinancing\t0\t(15.1)\t\t\t\t\t\t\nInterest expense\t(16.1)\t(20.0)\t\t\t\t\t\t\nOther non-operating income net\t15.2\t2.6\t\t\t\t\t\t\nIncome (loss) from continuing operations before income taxes (GAAP)\t33.1\t(95.1)\t\t\t\t\t\t\n", "q10k_tbl_40": "\tTHREE MONTHS ENDED\t\n\tJANUARY 2 2021\tDECEMBER 28 2019\nNet cash used in operating activities\t(420.7)\t(318.2)\nNet cash used in investing activities\t(148.2)\t(25.7)\nNet cash provided by financing activities\t573.5\t352.3\n", "q10k_tbl_41": "Notional Amount\t\tEffective Date (a)\tExpiration Date\tFixed Rate\n200\t(b)\t11/7/2018\t6/7/2021\t2.87%\n100\t\t11/7/2018\t7/7/2021\t2.96%\n200\t\t11/7/2018\t10/7/2021\t2.98%\n100\t\t12/21/2020\t6/20/2023\t1.36%\n300\t(b)\t1/7/2021\t6/7/2023\t1.34%\n200\t\t10/7/2021\t6/7/2023\t1.37%\n200\t(b)\t1/20/2022\t6/20/2024\t0.58%\n200\t\t6/7/2023\t6/8/2026\t0.85%\n", "q10k_tbl_42": "\tJANUARY 2 2021\tSEPTEMBER 30 2020\nCurrent assets\t1483.1\t1062.5\nNoncurrent assets (a)\t1993.7\t1853.8\nCurrent liabilities\t965.6\t872.1\nNoncurrent liabilities\t2207.1\t1695.7\n", "q10k_tbl_43": "\tTHREE MONTHS ENDED\tYEAR ENDED\n\tJANUARY 2 2021\tSEPTEMBER 30 2020\nNet sales\t642.3\t3713.4\nGross profit\t166.0\t1255.5\nIncome from continuing operations (a)\t21.3\t360.4\nNet income\t21.3\t360.5\nNet income attributable to controlling interest\t21.3\t360.5\n", "q10k_tbl_44": "Period\tTotal Number of Common Shares Purchased(1)\tAverage Price Paid per Common Share(2)\tTotal Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs(3)\tApproximate Dollar Value of Common Shares That May Yet be Purchased Under the Plans or Programs(3)\nOctober 1 2020 through October 31 2020\t724\t153.91\t0\t750000000\nNovember 1 2020 through November 28 2020\t98579\t168.93\t97679\t733497967\nNovember 29 2020 through January 2 2021\t120765\t181.08\t118999\t711954191\nTotal\t220068\t175.55\t216678\t\n", "q10k_tbl_45": "\t\tIncorporated by Reference\t\t\t\nExhibit No.\tDescription\tForm\tExhibit\tFiling Date\tFiled Herewith\n10.1\tSeparation Agreement and Release of All Claims effective as of January 22 2021 by and between The Scotts Company LLC and Thomas Randal Coleman\t8-K\t10.1\tJanuary 28 2021\t\n21\tSubsidiaries of The Scotts Miracle-Gro Company\t\t\t\tX\n22\tGuarantor Subsidiaries\t\t\t\tX\n31.1\tRule 13a-14(a)/15d-14(a) Certifications (Principal Executive Officer)\t\t\t\tX\n31.2\tRule 13a-14(a)/15d-14(a) Certifications (Principal Financial Officer)\t\t\t\tX\n32\tSection 1350 Certifications (Principal Executive Officer and Principal Financial Officer)\t\t\t\tX\n101.SCH\tXBRL Taxonomy Extension Schema\t\t\t\tX\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase\t\t\t\tX\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase\t\t\t\tX\n101.LAB\tXBRL Taxonomy Extension Label Linkbase\t\t\t\tX\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase\t\t\t\tX\n104\tCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\t\t\t\tX\n"}{"bs": "q10k_tbl_5", "is": "q10k_tbl_2", "cf": "q10k_tbl_4"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 2021
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,Ohio43041
(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 February 5, 2021, there were 55,703,094 Common Shares outstanding.
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” 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 ends 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 first quarter of fiscal 2021 ended on January 2, 2021 while the Company’s first quarter of fiscal 2020 ended on December 28, 2019.
Organization and Basis of Presentation
The Company’s unaudited condensed consolidated financial statements for the three months ended January 2, 2021 and December 28, 2019 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. AeroGrow International, Inc. (“AeroGrow”), in which the Company has a controlling interest, is consolidated, with the equity owned by other shareholders shown as noncontrolling interest in the Condensed Consolidated Balance Sheets, and the other shareholders’ portion of net earnings and other comprehensive income 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 $6.3 and $2.7 during the three months ended January 2, 2021 and December 28, 2019, respectively, representing unpaid liabilities to acquire property, plant and equipment.
Statements of Cash Flows
Supplemental cash flow information was as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
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 2. DISCONTINUED OPERATIONS
International Business
Prior to August 31, 2017, the Company operated consumer lawn and garden businesses located in Australia, Austria, Belgium, Luxembourg, Czech Republic, France, Germany, Poland and the United Kingdom (the “International Business”). On August 31, 2017, the Company completed the sale of the International Business. As a result, effective in its fourth quarter of fiscal 2017, the Company classified its results of operations for all periods presented to reflect the International Business as a discontinued operation. The sale proceeds were net of seller financing provided by the Company in the form of a $29.7 loan for seven years bearing interest at 5% for the first three years, with annual 2.5% increases thereafter. The seller financing loan receivable is recorded in the “Other assets” line in the Consolidated Balance Sheets as of January 2, 2021. The transaction also included contingent consideration with a maximum payout of $23.8 and an initial fair value of $18.2, the payment of which depends on the achievement of certain performance criteria by the International Business following the closing of the transaction through fiscal 2020. The Company has not yet established whether the International Business has achieved the performance criteria for fiscal 2020 and the recorded contingent consideration, which is based upon the best information available to the Company, will be adjusted once the results are determined. If the Company determines that the International Business has not achieved the performance criteria, the Company would be required to record a charge of approximately $18.7in the “Income (loss) from discontinued operations, net of tax” line in the Condensed Consolidated Statements of Operations to write-off the contingent consideration receivable.
NOTE 3. ACQUISITIONS AND INVESTMENTS
On December 31, 2020, pursuant to the terms of the Contribution and Unit Purchase Agreement between the Company and Alabama Farmers Cooperative, Inc. (“AFC”), the Company acquired a 50% equity interest in the Bonnie Plants business of planting, growing, developing, manufacturing, distributing, marketing, and selling live plants, plant food, fertilizer and potting soil through a newly formed joint venture with AFC (“Bonnie Plants, LLC”) in exchange for a cash payment of $100.7, as well as non-cash investing activities that included forgiveness of the Company’s outstanding loan receivable with AFC and surrender of the Company’s options to increase its economic interest in the Bonnie Plants business. The Company’s loan
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
receivable with AFC, which was previously recognized in the “Other assets” line in the Condensed Consolidated Balance Sheets, had a carrying value of $66.4 on December 31, 2020 and the Company recognized a gain of $12.5 during the three months ended January 2, 2021 to write-up the value of the loan to its closing date fair value of $78.9 in the “Other non-operating income, net” line in the Condensed Consolidated Statements of Operations. The Company’s options to increase its economic interest in the Bonnie Plants business were previously recognized in the “Other assets” line in the Condensed Consolidated Balance Sheets and had an estimated fair value of $23.3 on December 31, 2020. The Company’s interest in Bonnie Plants, LLC had an initial fair value of $202.9 and is recorded in the “Investment in unconsolidated affiliates” line in the Condensed Consolidated Balance Sheets. The Company’s interest is accounted for using the equity method of accounting, with the Company’s proportionate share of Bonnie Plants, LLC earnings subsequent to December 31, 2020 reflected in the Condensed Consolidated Statements of Operations. The estimated fair value of the loan receivable with AFC was determined using an income-based approach, which includes market participant expectations of cash flows over the remaining useful life discounted to present value using an appropriate discount rate. The fair value estimate utilized significant unobservable inputs and thus represents a Level 3 nonrecurring fair value measurement.
On November 11, 2020, the Company entered into an agreement and plan of merger to acquire the remaining outstanding shares of AeroGrow for cash consideration of $3.00 per share, or approximately $20.1. The closing of the merger is expected to occur during the second quarter of fiscal 2021 and is subject to, among other conditions, the approval of the merger agreement by a majority of the outstanding shares of AeroGrow entitled to vote. SMG Growing Media, Inc., a wholly-owned subsidiary of Scotts Miracle-Gro, is the holder of 80.5% of the outstanding shares of AeroGrow.
NOTE 4. 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
JANUARY 2, 2021
DECEMBER 28, 2019
Cost of sales—impairment, restructuring and other:
COVID-19 related costs
$
8.7
$
—
Restructuring and other charges
0.3
0.3
Operating expenses:
COVID-19 related costs
0.6
—
Restructuring and other charges (recoveries), net
0.1
(2.5)
Total impairment, restructuring and other charges (recoveries)
$
9.7
$
(2.2)
The following table summarizes the activity related to liabilities associated with restructuring and other, excluding insurance reimbursement recoveries, during the three months ended January 2, 2021:
Amounts accrued for restructuring and other at September 30, 2020
$
3.9
Restructuring and other charges from continuing operations
9.7
Payments and other
(10.4)
Amounts accrued for restructuring and other at January 2, 2021
$
3.2
Included in restructuring accruals, as of January 2, 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 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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
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 months ended January 2, 2021, the Company incurred costs of $9.3 associated with the COVID-19 pandemic primarily related to premium pay. The Company incurred costs of $8.3 in its U.S. Consumer segment and $0.4 in its Hawthorne segment in the “Cost of sales—impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three months ended January 2, 2021. The Company incurred costs of $0.6 in its U.S. Consumer segment in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations during the three months ended January 2, 2021. 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 $25.1 for the U.S. Consumer segment, $3.0 for the Hawthorne segment and $0.6 for the Other segment.
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 months ended January 2, 2021 and December 28, 2019 related to Project Catalyst were not material. Costs incurred to date since the inception of Project Catalyst are $25.1 for the Hawthorne segment, $13.9 for the U.S. Consumer segment, $1.3 for the Other segment and $2.8 for Corporate. Additionally, during the three months ended December 28, 2019, the Company received $2.6 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:
JANUARY 2, 2021
DECEMBER 28, 2019
SEPTEMBER 30, 2020
Finished goods
$
768.4
$
609.2
$
390.3
Work-in-process
84.0
79.1
164.8
Raw materials
215.9
177.8
66.8
Total inventories
$
1,068.3
$
866.1
$
621.9
Adjustments to reflect inventories at net realizable values were $23.9 at January 2, 2021, $11.4 at December 28, 2019 and $31.3 at September 30, 2020.
NOTE 6. MARKETING AGREEMENT
The Scotts Company LLC (“Scotts LLC”) is the exclusive agent of Monsanto Company, a subsidiary of Bayer AG (“Monsanto”), for the marketing and distribution of certain of Monsanto’s consumer Roundup® branded products in the United States and certain other specified countries. Effective August 1, 2019, the Company entered into the Third Amended and Restated Exclusive Agency and Marketing Agreement (the “Third Restated Agreement”) which amended, among other things, the provisions of the Second Amended and Restated Exclusive Agency and Marketing Agreement (the “Restated Marketing Agreement”) relating to commissions, contributions, noncompetition, and termination. The annual commission payable under the Third Restated Agreement is equal to 50% of the actual earnings before interest and income taxes of Monsanto’s consumer 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;
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
•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.
On January 15, 2021, the Company declined to exercise its Convenience Termination right.
The termination fee structure requires Monsanto to pay a termination fee to the Company in an amount equal to (i) $175.0 upon a Convenience Termination, which the Company declined to exercise, (ii) $375.0 upon a Brand Decommissioning Termination, and (iii) 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).
In connection with the signing of the Third Restated Agreement, the Company also entered into the Brand Extension Agreement Asset Purchase Agreement (the “BEA Purchase Agreement”). The BEA Purchase Agreement provides for the sale by the Company to Monsanto of specified assets related to, among other things, the development, manufacture, production, advertising, marketing, promotion, distribution, importation, exportation, offer for sale and sale of specified Roundup® branded products sold outside the non-selective weedkiller category within the residential lawn and garden market. The consideration paid by Monsanto was $112.0 plus the value of finished goods inventory of $3.5. This consideration was recorded in the “Prepaid and other current assets” line in the Consolidated Balance Sheets until it was received by the Company on January 13, 2020. The carrying value of the assets sold included the brand extension agreement intangible asset with a carrying value of $111.7.
The elements of the net commission and reimbursements earned under the Restated Marketing Agreement and Third Restated Agreement and included in the “Net sales” line in the Condensed Consolidated Statements of Operations are as follows:
THREE MONTHS ENDED
JANUARY 2, 2021
DECEMBER 28, 2019
Gross commission
$
7.7
$
—
Contribution expenses
(4.5)
(4.5)
Net commission
3.2
(4.5)
Reimbursements associated with Roundup® marketing agreement
14.0
13.4
Total net sales associated with Roundup® marketing agreement
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
Credit Facilities
On July 5, 2018, the Company entered into a fifth amended and restated credit agreement (the “Fifth 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 $2,300.0, comprised of a revolving credit facility of $1,500.0 and a term loan in the original principal amount of $800.0 (the “Fifth A&R Credit Facilities”).
At January 2, 2021, the Company had letters of credit outstanding in the aggregate principal amount of $19.8, and $880.6 of borrowing availability under the Fifth A&R Credit Agreement. The weighted average interest rates on average borrowings under the Fifth A&R Credit Agreement were 2.1% and 3.9% for the three months ended January 2, 2021 and December 28, 2019, respectively.
The Fifth A&R Credit Agreement contains, among other obligations, an affirmative covenant regarding the Company’s leverage ratio on the last day of each quarter calculated as average total indebtedness, divided by the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted pursuant to the terms of the Fifth A&R Credit Agreement (“Adjusted EBITDA”). The maximum leverage ratio is 4.50. The Company’s leverage ratio was 2.26 at January 2, 2021. The Fifth A&R Credit Agreement also contains an affirmative covenant regarding the Company’s interest coverage ratio determined as of the end of each of its fiscal quarters. The interest coverage ratio is calculated as Adjusted EBITDA divided by interest expense, as described in the Fifth A&R Credit Agreement, and excludes costs related to refinancings. The minimum interest coverage ratio was 3.00 for the twelve months ended January 2, 2021. The Company’s interest coverage ratio was 11.84 for the twelve months ended January 2, 2021.
The Fifth A&R Credit Agreement allows the Company to make unlimited restricted payments (as defined in the Fifth A&R Credit Agreement), including dividend payments and repurchases of the common shares of Scotts Miracle-Gro (“Common Shares”), as long as the leverage ratio resulting from the making of such restricted payments is 4.00 or less. Otherwise, the Company may make further restricted payments in an aggregate amount for each fiscal year not to exceed $225.0.
Senior Notes
On December 15, 2016, Scotts Miracle-Gro issued $250.0 aggregate principal amount of 5.250% Senior Notes due 2026 (the “5.250% Senior Notes”). 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. Substantially all of Scotts Miracle-Gro’s directly and indirectly owned domestic subsidiaries serve as guarantors of the 5.250% Senior Notes.
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 net proceeds of the offering were used to redeem all of the Company’s outstanding 6.000% Senior Notes due 2023 (the “6.000% Senior Notes”) and for general corporate purposes. 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. All of Scotts Miracle-Gro’s domestic subsidiaries that serve as guarantors of the 5.250% Senior Notes also serve as guarantors of the 4.500% Senior Notes.
On October 23, 2019, Scotts Miracle-Gro redeemed all of its outstanding 6.000% Senior Notes for a redemption price of $412.5, comprised of $0.5 of accrued and unpaid interest, $12.0 of redemption premium, and $400.0 for outstanding principal amount. The $12.0 redemption premium was recognized in the “Costs related to refinancing” line on the Condensed Consolidated Statements of Operations during the first quarter of fiscal 2020. Additionally, the Company had $3.1 in unamortized bond issuance costs associated with the 6.000% Senior Notes, which were written-off during the first quarter of fiscal 2020 and were recognized in the “Costs related to refinancing” line in the Condensed Consolidated Statements of Operations.
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 annually (the “Framework Agreement” and, together with the Repurchase Agreement, the “Receivables Facility”). Under the Receivables Facility, the Company may sell a portfolio of available and eligible outstanding customer accounts receivable to the purchasers and simultaneously agree to repurchase the receivables on a weekly basis. The eligible accounts receivable consist of accounts receivable generated by sales to three specified customers. The eligible amount of customer accounts receivables which may be sold under the Receivables
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)
(Dollars in millions, except per share data)
Facility is $400.0 and the commitment amount during the seasonal commitment period beginning on February 26, 2021 and ending on June 18, 2021 is $160.0. The Receivables Facility expires on August 20, 2021.
The Company accounts for the sale of receivables under the Receivables Facility as short-term debt and continues to carry the receivables on its Condensed Consolidated Balance Sheets, primarily as a result of the Company’s requirement to repurchase receivables sold. As of January 2, 2021 and December 28, 2019, there were $136.0 and $39.0, respectively, in borrowings on receivables pledged as collateral under the Receivables Facility, and the carrying value of the receivables pledged as collateral was $151.1 and $43.3, respectively.
Interest Rate Swap Agreements
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. The swap agreements had a maximum total U.S. dollar equivalent notional amount of $600.0, $850.0 and $600.0 at January 2, 2021, December 28, 2019 and September 30, 2020, respectively. Interest payments made between the effective date and expiration date are hedged by the swap agreements, except as noted below.
The notional amount, effective date, expiration date and rate of each of these swap agreements outstanding at January 2, 2021 are shown in the table below:
Notional Amount
Effective Date (a)
Expiration Date
Fixed Rate
$
200
(b)
11/7/2018
6/7/2021
2.87
%
100
11/7/2018
7/7/2021
2.96
%
200
11/7/2018
10/7/2021
2.98
%
100
12/21/2020
6/20/2023
1.36
%
300
(b)
1/7/2021
6/7/2023
1.34
%
200
10/7/2021
6/7/2023
1.37
%
200
(b)
1/20/2022
6/20/2024
0.58
%
200
6/7/2023
6/8/2026
0.85
%
(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 were 3.8% and 4.5% for the three months ended January 2, 2021 and December 28, 2019, respectively.
NOTE 8. EQUITY
The following tables provide a summary of the changes in total equity, equity attributable to controlling interest, and equity attributable to noncontrolling interests 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 - Controlling Interest
Noncontrolling Interest
Total Equity
Balance at September 30, 2020
$
482.5
$
1,235.6
$
(921.8)
$
(99.1)
$
697.2
$
5.7
$
702.9
Net income (loss)
—
24.4
—
—
24.4
0.8
25.2
Other comprehensive income (loss)
—
—
—
15.6
15.6
—
15.6
Share-based compensation
8.2
—
—
—
8.2
—
8.2
Dividends declared ($0.62 per share)
—
(35.7)
—
—
(35.7)
—
(35.7)
Treasury share purchases
—
—
(38.4)
—
(38.4)
—
(38.4)
Treasury share issuances
(0.1)
—
1.3
—
1.2
—
1.2
Balance at January 2, 2021
$
490.5
$
1,224.4
$
(958.8)
$
(83.5)
$
672.6
$
6.4
$
679.0
The sum of the components may not equal due to rounding.