Scotts Miracle-Gro Company (SMG) Risk Analysis

Our payment of quarterly cash dividends on and repurchase of our Common Shares pursuant to a stock repurchase program are subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, credit facility provisions and other factors. Prior to fiscal 2022, we generally increased the cash dividends on our Common Shares as well as engaged in share repurchase activity. Since fiscal 2022, we have not changed the dividend amount nor have we engaged in share repurchase activity outside of our compensation programs. As of September 30, 2025, we do not have a board authorized share repurchase program. We may maintain, or increase or decrease (including eliminating) the amount of cash dividends on, and increase or decrease the amount of repurchases of, our Common Shares in the future. Any decision by us regarding the payment of quarterly cash dividends or repurchases of our Common Shares could cause the market price of our Common Shares to decline. A failure to pay dividends, an inability to resume increases of our cash dividends or an inability to begin repurchasing Common Shares at historical levels could result in a lower market valuation of our Common Shares.

As of September 30, 2025, we had $2,119.7 million of debt and $1,166.9 million in available borrowings under the sixth amended and restated credit agreement (the "Sixth A&R Credit Agreement"), which was in effect during the entirety of fiscal 2025. On November 21, 2025, the Company entered into a seventh amended and restated credit agreement (the "Seventh A&R Credit Agreement"), which replaced the Sixth A&R Credit Agreement. Our inability to meet restrictive financial and non-financial covenants associated with our debt, or to generate sufficient cash flow to repay maturing debt, could adversely affect our financial condition. For example, our debt level could: - make it more difficult for us to satisfy our obligations with respect to our indebtedness;- make us more vulnerable to general adverse economic and industry conditions;- require us to dedicate a substantial portion of cash flows from operating activities to payments on our indebtedness, which would reduce the cash flows available to fund working capital, capital expenditures, advertising, research and development efforts, dividends, Common Share repurchases and other general corporate activities;- limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;- limit our ability to borrow additional funds;- expose us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates; and - place us at a competitive disadvantage compared to our competitors that have less debt. Our ability to make payments on or to refinance our indebtedness (including, for example, our 5.250% Senior Notes due 2026 (the "5.250% Senior Notes")), fund planned capital expenditures and acquisitions, pay dividends and repurchase our Common Shares will depend on our ability to generate cash in the future which, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot provide any assurance that our business will generate sufficient cash flow from operating activities or that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. The Sixth A&R Credit Agreement, Seventh A&R Credit Agreement and the indentures governing our 5.250% Senior Notes, our 4.500% Senior Notes due 2029 (the "4.500% Senior Notes"), our 4.000% Senior Notes due 2031 (the "4.000% Senior Notes") and our 4.375% Senior Notes due 2032 (the "4.375% Senior Notes" and, collectively with the 5.250% Senior Notes, the 4.500% Senior Notes and the 4.000% Senior Notes, the "Senior Notes") contain restrictive covenants and cross-default provisions. For example, under the Sixth A&R Credit Agreement, the maximum permitted leverage ratio was 4.75 for the fourth quarter of fiscal 2025. Our leverage ratio was 4.10 at September 30, 2025. In addition, the Sixth A&R Credit Agreement contained a fixed charge coverage ratio covenant which set the minimum permitted fixed charge coverage ratio at 1.00. Our fixed charge coverage ratio was 1.42 for the twelve months ended September 30, 2025. Under the Seventh A&R Credit Agreement, the maximum permitted leverage ratio is 5.00 for the first quarter of fiscal 2026 and thereafter. The Seventh A&R Credit Agreement also contains a minimum interest coverage ratio of (i) 3.00 for each of the fiscal quarters within fiscal 2026, (ii) 3.25 for each of the fiscal quarters within fiscal 2027 and (iii) 3.50 for fiscal quarters thereafter. The Senior Notes contain an independently calculated interest coverage ratio covenant which sets the minimum permitted interest coverage ratio at 2.00. Our interest coverage ratio was 4.78 for the twelve months ended September 30, 2025. A breach of any of the financial ratio covenants or other covenants in the Seventh A&R Credit Agreement or Senior Notes could result in a default and/or a cross default under the Seventh A&R Credit Agreement or Senior Notes, as applicable. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, and could cease making further loans and institute foreclosure proceedings against our assets. We cannot provide any assurance that the holders of such indebtedness would waive a default or that we would have the resources to pay the accelerated indebtedness in full. Subject to compliance with certain covenants under the Seventh A&R Credit Agreement and the indentures governing the Senior Notes, we may incur additional debt in the future. If we incur additional debt, the risks described above could intensify.

Uncertainty surrounding legislation, regulation and government policy at the U.S. federal level may impact the U.S. and global economies, international trade and relations, unemployment rates, energy prices, tariffs, immigration, taxes, inflation and the general U.S. regulatory environment, among other things. Although we cannot predict the impact, if any, of these changes, they could negatively affect our financial condition, results of operations and cash flows.

Laws and regulations relating to environmental matters affect us in several ways. All pesticide products sold in the United States must comply with FIFRA and most must be registered with the U.S. EPA and similar state agencies. Our inability to obtain or maintain such registrations, or the cancellation of any such registration of our products, could have an adverse effect on our business, the severity of which would depend on a variety of factors, including the product(s) involved, whether another product could be substituted and whether our competitors were similarly affected. We attempt to anticipate regulatory developments and maintain registrations of, and access to, substitute active ingredients, but there can be no assurance that we will be able to avoid these risks. For example, there are indications that federal agencies in the U.S. may take more restrictive positions on pesticides. In addition, several provinces in Canada have adopted regulations that substantially restrict our ability to market and sell certain consumer pesticide products. Under the Food Quality Protection Act, food-use pesticides are evaluated to determine whether there is reasonable certainty that no harm will result from the cumulative effects of pesticide exposures. Under this Act, the U.S. EPA is evaluating the cumulative and aggregate risks from dietary and non-dietary exposures to pesticides. The pesticides in our products, certain of which may be also used on crops processed into various food products, are manufactured by independent third parties and continue to be evaluated by the U.S. EPA as part of this exposure risk assessment. The U.S. EPA or the third-party registrant may decide that a pesticide we use in our products will be limited or made unavailable to us. We cannot predict the outcome or the severity of the effect of these continuing evaluations. In addition, the use of certain fertilizer and pesticide products is regulated by various environmental and public health agencies. These regulations may, among other things, limit or ban the use of certain ingredients contained in such products or require (i) that only certified or professional users apply the product, (ii) that certain products be used only on certain types of locations, (iii) users to post notices on properties to which products have been or will be applied and/or (iv) notification to individuals in the vicinity that products will be applied in the future. Even if we are able to comply with all such regulations and obtain all necessary registrations and licenses, we cannot provide assurance that our products, particularly pesticide products, will not cause or be alleged to cause injury to the environment or to people under all circumstances, particularly when used improperly or contrary to instructions. The costs of compliance, remediation or products liability have adversely affected operating results in the past and could adversely affect our financial condition, results of operations and cash flows. Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business. For example, we are subject to regulations relating to our harvesting of peat for our growing media business which has come under increasing regulatory and environmental scrutiny. In the United States, state regulations frequently require us to limit our harvesting and to restore the property to an agreed-upon condition. In some locations, we have been required to create water retention ponds to control the sediment content of discharged water. In Canada, our peat extraction efforts are also the subject of regulation. In addition to the laws and regulations already described, various governmental agencies regulate the disposal, transport, handling and storage of waste, the remediation of contaminated sites, air and water discharges from our facilities and workplace health and safety. Under certain environmental laws and regulations, we may be liable for the costs of investigation and remediation of the presence of certain regulated materials or damage to natural resources, at various properties, including current and former properties we have owned or operated, as well as offsite waste handling or disposal sites that we have used. Liability may be imposed upon us without regard to whether we knew of or caused the presence of such materials and, under certain circumstances, on a joint and several basis. There can be no assurances that the presence of such regulated materials at any such locations, or locations that we may acquire in the future, will not result in liability to us under such laws or regulations or expose us to third-party actions such as tort suits based on alleged conduct or environmental conditions. Regulatory agencies around the world have been establishing programs and restrictions relating to preventing the release of PFAS into the air, drinking water systems and food supply and to expand cleanup efforts to remediate the impacts of PFAS pollution. In 2021, the federal government announced a multi-agency plan to address PFAS contamination nationwide. Further, in April 2024, the U.S. EPA designated PFOA and PFOS, including their salts and structural isomers – as hazardous substances under section 102(a) of CERCLA, which could have wide-ranging impact on companies across industries. Further, many states have taken independent action to address PFAS ranging from appropriation bills for funding research to complete bans on any PFAS-containing products. Complicating this patchwork of state regulation is that various jurisdictions define PFAS differently with some definitions being comparatively broad. It is possible, therefore, that some of these actions will have an impact – direct or indirect – on our business. Packaging has also become subject to increased governmental scrutiny. Several states in the U.S. have enacted legislation to reduce single use plastics and establish extended producer responsibility programs, which are designed to bolster the recycling industry by transferring the cost of packaging disposal to the manufacturers. Extended producer responsibility programs typically include targets and reporting responsibilities for, among other things, post-consumer recycling usage, compostable packaging, material reduction and refill strategies. Similar extended producer responsibility programs are active in several Canadian provinces. The adequacy of our current non-FIFRA compliance-related environmental accruals and future provisions depends upon our operating in substantial compliance with applicable environmental and public health laws and regulations, as well as the assumptions that we have both identified the significant sites that must be remediated and that there are no significant conditions of potential contamination that are unknown to us. A significant change in the facts and circumstances underlying these assumptions or in current enforcement policies or requirements, or a finding that we are not in substantial compliance with applicable environmental and public health laws and regulations, could have a material adverse effect on future environmental capital expenditures and other environmental expenses, as well as our financial condition, results of operations and cash flows.

Our top two retail customers, The Home Depot and Lowe's, together accounted for 52% of our fiscal 2025 net sales and 25% of our outstanding accounts receivable as of September 30, 2025. The loss of, or reduction in orders from, any major customer for any reason (including, for example, changes in a retailer's strategy, reduction in inventories of our products that they maintain, claims or allegations that our products or products we market on behalf of third parties are unsafe, a decline in consumer demand, regulatory, legal or other external pressures or a change in marketing strategy), and customer disputes regarding shipments, fees, merchandise condition or related matters could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our inability to collect accounts receivable from one of our major customers, or a significant deterioration in the financial condition of one of these customers, including a bankruptcy filing or a liquidation, could also have a material adverse effect on our financial condition, results of operations and cash flows. We do not have long-term sales agreements with, or other contractual assurances as to future sales to, any of our major retail customers. In addition, continued consolidation in the retail industry has resulted in an increasingly concentrated retail base, and as a result, we are significantly dependent upon sales to key retailers who have significant bargaining strength. To the extent such concentration continues to occur, our net sales and income from operations may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments involving our relationship with, one or more of our key customers. In addition, our business may be negatively affected by changes in the policies of our retailers, such as inventory reductions, limitations on access to shelf space, price demands and other conditions.

We invest substantial resources in advertising, consumer promotions and other marketing activities to maintain and expand our brand image. There can be no assurances that our marketing strategies will be effective or that the amount we invest in marketing activities will result in a corresponding increase in sales of our products. If our marketing initiatives are unsuccessful, including our ability to leverage digital media and social networks to reach existing and potential customers, we will have incurred significant expenses without the benefit of higher revenues.

In the future, we may need new or additional financing to provide liquidity to conduct our operations, expand our business or refinance existing indebtedness. Any sustained weakness in general economic conditions and/or U.S. or global capital markets could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and we may also rely in the future, on access to financial markets as a source of liquidity for working capital requirements, acquisitions and general corporate purposes. Our access to funds under the Seventh A&R Credit Agreement depends on the ability of the lenders that are parties to that facility to meet their funding commitments. Moreover, the obligations of the lenders under the Seventh A&R Credit Agreement are several and not joint and, as a result, a funding default by one lender does not need to be made up by the others. Longer term volatility in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions or reduced alternatives could adversely affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

Our operations depend on our ability to protect our infrastructure against damage from catastrophe, natural disaster or severe weather, as well as events resulting from unauthorized security breach, power loss, telecommunications failure, act of war, terrorist attack, pandemic or other events that could have a significant disruptive effect on our operations. Further, the development of artificial intelligence is creating more sophisticated avenues to disrupt operational systems. We have disaster recovery and business continuity plans in place that are ready to be executed if we encounter a disruptive event. However, we cannot be certain that our plans, or those of third-party service providers we rely on, will be successful in the event of a disaster. If our disaster recovery or business continuity plans are unsuccessful in a disaster recovery scenario, we could potentially experience material adverse impacts including loss of data, damage to important facilities, disruption to our operations, regulatory intervention, reputational harm and loss of customers.