Scotts Miracle Gro : 2021 Annual Report

The Scotts Miracle-Gro Company

2021 Annual Report

SHAREHOLDER INFORMATION

World Headquarters

14111 Scottslawn Road Marysville, Ohio 43041 [phone]

www.scottsmiraclegro.com

Annual Meeting

The annual meeting of shareholders will be held on Monday, January 24, 2022, at 9 a.m. EST. The annual meeting will be a virtual meeting and shareholders will be able to participate, vote and submit questions during the virtual meeting.

NYSE Symbol

The common shares of The Scotts Miracle-Gro Company trade on the New York Stock Exchange under the symbol SMG.

Transfer Agent and Registrar

EQ Shareowner Services

P.O. Box 64874

St. Paul, MN 55164-0874

Shareholder and Investor

Relations Contact

Jim King

Executive Vice President,

Chief Communications Officer

The Scotts Miracle-Gro Company

14111 Scottslawn Road

Marysville, Ohio 43041

[phone]

Dividends

The Scotts Miracle-Gro Company began paying dividends in 2005. On July 29, 2020, the Company announced that its Board of Directors had increased the quarterly cash dividend to $0.62 per share, which was first paid to shareholders in the fourth quarter of fiscal 2020. On July 30, 2021, the Company announced that its Board of Directors had increased the quarterly cash dividend to $0.66 per share, which was first paid to shareholders in the fourth quarter of fiscal 2021.

The payment of future dividends, if any, on common shares will be determined by the Board of Directors of the Company 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. The Company's credit facility restricts future dividend payments to an aggregate of $225 million if the Company's leverage ratio, after giving effect to any such annual dividend payment, exceeds 4.00. The Company's leverage ratio was 2.70 as of September 30, 2021. For further discussion regarding the restrictions on dividend payments, see "NOTE

12. DEBT" of the Notes to Consolidated Financial Statements included in the Company's 2021 Annual Report on Form 10-K.

Stock Price Performance

See page 25 for stock price performance. The Scotts Miracle-Gro Company's common shares have been publicly traded since January 31, 1992.

Publications for Shareholders

In addition to this 2021 Annual Report, The Scotts Miracle-Gro Company informs Shareholders about the Company through its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form 8-K and its Notice of Annual Meeting of Shareholders and Proxy Statement.

Copies of any of these documents may be obtained without charge on the Company's investor relations website at

http:// investor.scotts.com or by writing to:

The Scotts Miracle-Gro Company

Attention: Investor Relations

14111 Scottslawn Road

Marysville, Ohio 43041

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements contained in this 2021 Annual Report, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company's management, the Company's assumptions regarding such performance and plans, as well as the amount and timing of repurchases of the Company's common shares are "forward-looking statements" within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. Actual results could differ

Shareholders

As of November 19, 2021, there were approximately 282,000 shareholders, including holders of record and the Company's estimate of beneficial holders.

materially from the forward-looking information in this 2021 Annual Report due to a variety of factors. Additional detailed information concerning a number of the important factors that could cause actual results to differ materially from the forward-looking information contained in this 2021 Annual Report is readily available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021, which is filed with the Securities and Exchange Commission.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________

Form 10-K

_____________________________________

(Mark One)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2021

OR

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

For the transition period fromto

	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				(I.R.S. Employer
incorporation or organization)				Identification No.)
	14111 Scottslawn Road, Marysville, Ohio 43041
	(Address of principal executive offices) (Zip Code)
	Registrant's telephone number, including area code:
	[phone]
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
Securities registered pursuant to Section 12(g) of the Act:
	None
______________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes þ	No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	Yes o	No þ

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 þ	No o

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):

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. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial

reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.	☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ

The aggregate market value of Common Shares (the only common equity of the registrant) held by non-affiliates (for this purpose, executive officers and directors of the registrant are considered affiliates) as of April 2, 2021 (the last business day of the most recently completed second quarter) was approximately $10,247,688,750.

There were 55,155,114 Common Shares of the registrant outstanding as of November 19, 2021.

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DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement for the registrant's 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended September 30, 2021.

The Scotts Miracle-Gro Company

Annual Report on Form 10-K

For the Fiscal Year Ended September 30, 2021

Table of Contents

Part I	Item 1.	Business
	Item 1A.	Risk Factors
	Item 1B.	Unresolved Staff Comments
	Item 2.	Properties
	Item 3.	Legal Proceedings
	Item 4.	Mine Safety Disclosure
	Supplemental Item	Executive Officers of the Registrant
Part II	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
	Item 6.	Selected Financial Data
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of
	Operations
	Item 7A.	Quantitative And Qualitative Disclosures About Market Risk
	Item 8.	Financial Statements and Supplementary Data
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial
	Disclosure
	Item 9A.	Controls and Procedures
	Item 9B.	Other Information
Part III	Item 10.	Directors, Executive Officers, and Corporate Governance
	Item 11.	Executive Compensation
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related
	Stockholder Matters
	Item 13.	Certain Relationships and Related Transactions, and Director Independence
	Item 14.	Principal Accounting Fees and Services
Part IV	Item 15.	Exhibits, Financial Statement Schedules
	Item 16.	Form 10-K Summary
		Signatures
		Index to Exhibits

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109

PART I

ITEM 1. BUSINESS

Company Description and Development of the Business

The discussion below describes the business conducted by The Scotts Miracle-Gro Company, an Ohio corporation ("Scotts Miracle-Gro" and, together with its subsidiaries, the "Company," "we" or "us"), including general developments in the Company's business during the fiscal year ended September 30, 2021 ("fiscal 2021"). For additional information on recent business developments, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" of this Annual Report on Form 10-K ("Form 10-K").

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 grass seed products; Miracle-Gro® soil, plant food and insecticide, LiquaFeed® plant food and Osmocote®1 gardening and landscape products; and Ortho®, Home Defense® and Tomcat® branded insect control, weed control and rodent control products. We are the exclusive agent of the Monsanto Company, a subsidiary of Bayer AG ("Monsanto"), for the marketing and distribution of certain of Monsanto's consumer Roundup®2 branded products within the United States and certain other specified countries. We also have a presence in similar branded consumer products in China. In addition, we own a 50% equity interest in Bonnie Plants, LLC, a joint venture with Alabama Farmers Cooperative, Inc. ("AFC"), focused on planting, growing, developing, manufacturing, distributing, marketing, and selling live plants, plant food, fertilizer and potting soil.

Through our Hawthorne segment, we are the leading manufacturer, marketer and distributor of lighting, nutrients, growing media, growing environments and hardware products for indoor and hydroponic gardening in North America. Our key brands include General Hydroponics®, Gavita®, Botanicare®, Agrolux®, Can-Filters®, Sun System®, Gro Pro®, Mother Earth®, Hurricane®, Grower's Edge® and Hydro-Logic®.

Scotts Miracle-Gro traces its heritage to a company founded by O.M. Scott in Marysville, Ohio in 1868. In the mid-1900s, we became widely known for the development of quality lawn fertilizers and grass seeds that led to the creation of a new industry - consumer lawn care. In the 1990s, we significantly expanded our product offering with three leading brands in the U.S. home lawn and garden industry. In fiscal 1995, through a merger with Stern's Miracle-Gro Products, Inc., which was founded by Horace Hagedorn and Otto Stern in Long Island, New York in 1951, we acquired the Miracle-Gro® brand, the industry leader in water-soluble garden plant foods. In fiscal 1999, we acquired the Ortho® brand in the United States and obtained exclusive rights to market Monsanto's consumer Roundup® brand within the United States and other contractually specified countries, thereby adding industry-leading weed, pest and disease control products to our portfolio. Today, the Scotts®, Turf Builder®, Miracle-Gro®, Ortho® and Roundup® brands make us the most widely recognized company in the consumer lawn and garden industry in the United States. Our Hawthorne segment is the leading manufacturer, marketer and distributor of indoor and hydroponic gardening products in North America.

Business Segments

We divide our business into the following reportable segments:

• U.S. Consumer
• Hawthorne
• Other

U.S. Consumer consists of our consumer lawn and garden business located in the United States. Hawthorne consists of our indoor and hydroponic gardening business. Other primarily consists of our consumer lawn and garden business outside the United States. This division of reportable segments is consistent with how the segments report to and are managed by our Chief Executive Officer (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. Financial information about these segments for each of the three fiscal years ended September 30, 2021, 2020 and 2019 is presented in "NOTE 21. SEGMENT INFORMATION" of the Notes to Consolidated Financial Statements included in this Form 10-K.

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• Osmocote® is a registered trademark of Everris International B.V., a subsidiary of Israel Chemicals Ltd.

• Roundup® is a registered trademark of Monsanto Technology LLC, a company affiliated with Monsanto Company.

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