Scotts Miracle-Gro(SMG) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended December 28, 2024, were $416.8 million, an increase of 1.6$410.4 million for the same period in 2023[117] - Gross margin as a percentage of net sales improved to 22.7% for the three months ended December 28, 2024, compared to 15.2% for the same period in 2023[119] - The cost of sales decreased to $316.9 million for the three months ended December 28, 2024, down from$354.0 million in the same period in 2023[115] - The net loss for the three months ended December 28, 2024, was $69.5 million, compared to a net loss of$80.5 million for the same period in 2023[115] - For the three months ended December 28, 2024, net loss was $69.5 million, or$1.21 per diluted share, compared to a net loss of $80.5 million, or$1.42 per diluted share for the same period in 2023, driven by higher net sales and lower equity in loss of unconsolidated affiliates[133] - U.S. Consumer segment net sales increased by 11.2% to $340.9 million in the first quarter of fiscal 2025, up from$306.7 million in the first quarter of fiscal 2024, primarily due to a 17.9% increase in sales volume[137] - Hawthorne segment net sales decreased by 35.0% to $52.1 million in the first quarter of fiscal 2025, down from$80.1 million in the first quarter of fiscal 2024, attributed to a 17.4% decline from discontinued sales of other companies' products and a 16.2% decrease in sales volume[139] - Total segment profit (non-GAAP) improved to $8.6 million in the first quarter of fiscal 2025 from a loss of$30.2 million in the first quarter of fiscal 2024, driven by higher net sales and improved gross margin rates[135] Expenses and Charges - Selling, general and administrative expenses increased by $10.0 million, or 8.7$124.8 million for the three months ended December 28, 2024, compared to $114.8 million in 2023[122] - The company recorded total impairment, restructuring, and other charges of$21.7 million for the three months ended December 28, 2024[123] - Interest expense decreased by 21.3% to $33.7 million for the three months ended December 28, 2024, compared to$42.8 million for the same period in 2023, due to lower average borrowings and a decrease in the weighted average interest rate[131] - Corporate expenses increased by 33.8% to $34.8 million in the first quarter of fiscal 2025 from$26.0 million in the first quarter of fiscal 2024, driven by higher short-term variable incentive compensation[142] Cash Flow and Financing - Cash used in operating activities totaled $445.3 million for the three months ended December 28, 2024, an increase of$102.1 million compared to $343.2 million for the same period in 2023, driven by higher inventory production and timing of accounts receivable sales[144] - Cash provided by financing activities was$407.7 million for the three months ended December 28, 2024, compared to $374.2 million for the same period in 2023, reflecting net borrowings on debt instruments of$464.8 million[146] - The company issued $250 million of 5.250$450 million of 4.500% Senior Notes due 2029, $500 million of 4.000$400 million of 4.375% Senior Notes due 2032[158][159][160][161] Assets and Liabilities - Current assets increased to $1,157.6 million as of December 28, 2024, compared to$838.4 million on September 30, 2024[174] - Non-current liabilities increased to $2,927.8 million as of December 28, 2024, from$2,471.6 million on September 30, 2024[174] - As of December 28, 2024, the outstanding payment obligations under the supplier finance program were $27.1 million,$30.8 million, and $12.5 million for the respective dates of December 28, 2024, December 30, 2023, and September 30, 2024[148] - Cash and cash equivalents were$9.8 million, $10.4 million, and$71.6 million as of December 28, 2024, December 30, 2023, and September 30, 2024, respectively[149] Compliance and Legal Matters - The company is involved in various pending judicial and administrative proceedings, which may materially affect future operating results[176] - The company believes it is in substantial compliance with environmental protection laws and regulations, although it is involved in legal actions related to environmental matters[177] - The company has contemplated alternative plans for potential noncompliance, including restructuring activities and discussions with lenders to amend financial covenants[157] Market and Economic Conditions - The company continues to monitor macroeconomic conditions, including elevated interest rates and inflationary pressures, which may impact future performance[114] - Market risks have not changed materially from those disclosed in the 2024 Annual Report[181] - Critical accounting estimates related to revenue recognition and promotional allowances have not changed materially from those disclosed in the 2024 Annual Report[180] Ratios and Coverage - The leverage ratio was 4.52 as of December 28, 2024, with a maximum permitted leverage ratio of 5.50 for the first quarter of fiscal 2025[155] - The fixed charge coverage ratio was 1.38 for the twelve months ended December 28, 2024, exceeding the minimum required ratio of 1.00[155] - The interest coverage ratio was 3.95 for the twelve months ended December 28, 2024, surpassing the minimum required ratio of 2.00[163]