Scotts Miracle-Gro(SMG) - 2024 Q4 - Annual Report

Company Overview - Scotts Miracle-Gro is the leading manufacturer and marketer of branded consumer lawn and garden products in North America, with key brands including Scotts, Miracle-Gro, and Ortho[6]. - The U.S. Consumer segment consists of the consumer lawn and garden business in the United States, while the Hawthorne segment focuses on indoor and hydroponic gardening[7]. - The competitive marketplace includes primary competitors such as Spectrum Brands and Central Garden & Pet Company, along with various regional competitors[20]. Financial Performance - The company reported research and development spending of $34.6 million in fiscal 2024, down from$ 35.7 million in fiscal 2023 and $45.3 million in fiscal 2022[23]. - Approximately 75% of annual net sales for the North America consumer lawn and garden business occur in the second and third fiscal quarters combined[18]. - The Home Depot and Lowe's are the two largest customers, each representing more than 10% of reported consolidated net sales[19]. - There were no material acquisitions or divestitures during fiscal 2024 or fiscal 2023[12]. Employee and Leadership Development - As of September 30, 2024, the company employed approximately 5,300 associates, with a peak workforce of about 7,100 during fiscal 2024[29]. - The company has implemented a leadership development framework for its people leaders in fiscal 2024, focusing on leader accountabilities and critical skill training[34]. - The company has enhanced its benefits to provide more comprehensive mental health support in response to feedback from the Associate Experience Survey[35]. - The company has established employee resource groups (ERGs) to foster diversity and inclusion within the workplace[33]. Environmental and Corporate Responsibility - The company accrued$ 2.6 million for environmental matters as of September 30, 2024, with expenses of $0.1 million,$ 0.4 million, and $0.2 million for fiscal 2024, 2023, and 2022 respectively[27]. - The company published its annual Corporate Responsibility Report in fiscal 2024, aligning with the Global Reporting Initiative Standards and the Sustainability Accounting Standards Board's Chemicals industry standard[39]. - The company has a comprehensive Environmental Health and Safety (EHS) management system to protect team members and manage health and safety risks[36]. Risk Management - The company is exposed to market risks, including fluctuations in interest rates, foreign currency exchange rates, and commodity prices, and uses financial derivatives to manage these risks[237]. - As of September 30, 2024, the company has outstanding interest rate swap agreements with a maximum total notional amount of$ 450.0 million, down from $600.0 million in 2023[238]. - The average variable interest rate for the company's debt is 7.5% for fiscal 2024, consistent with the previous year[238]. - A 100 basis point change in the variable interest rate would impact interest expense by$ 5.8 million, assuming average unhedged variable interest rate borrowing levels of $575.0 million during fiscal 2024[238]. - The company's fixed-rate debt totals$ 1,350.0 million with an average rate of 4.4% as of September 30, 2024[238]. - The total variable rate debt is $625.0 million, with an average rate of 7.5%[238]. - The company is exposed to market risks from fluctuations in foreign currency exchange rates and prices of raw materials such as urea and natural gas[239]. - Miscellaneous debt instruments amount to$ 0.0 million and finance lease obligations are $17.8 million as of September 30, 2024[238]. - The average rate for interest rate swaps is 3.9%[238]. - The company reported finance lease obligations of$ 16.9 million in 2023[238]. Regulatory Matters - The company is subject to various regulatory proceedings, none of which are expected to be material to its business[27]. Financial Reporting - The financial statements and supplementary data are included in the Consolidated Financial Statements section of the Form 10-K[241].