Scotts Miracle-Gro

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www.scottsmiraclegro.com

14111 Scottslawn Road
Marysville, Ohio 43041
937.644.0011

The Scotts Miracle-Gro Company
2011 Annual Report

 
 
 
 
 
 
 
 
 
leadership TEAM

Jim Hagedorn
Chief Executive Officer and  
Chairman of the Board

Vince Brockman
Executive Vice President,
General Counsel, Corporate Secretary 
and Chief Ethics & Compliance Officer 

Chris Allen
Regional President, 
Southeast

Mike Carbonara
Regional President, 
North

Randy Coleman
Senior Vice President, 
Consumer Finance

Jeff Garascia
Global Strategy Leader

Michel Gasnier
Regional President, 
International

Scott Hendrick
Senior Vice President,  
Chief Technical Officer 
and Chief Information Officer

Barry Sanders
President

Jim Lyski
Executive Vice President,
Chief Marketing Officer

Phil Jones
Regional President, 
West

Jim King
Senior Vice President, 
Investor Relations and 
Corporate Affairs

Peter Korda
Senior Vice President, 
Scotts LawnService

Brian Kura
President, 
Business Development Teams

Mike Lukemire
President,
U.S. Consumer Regions

Dave Evans
Chief Financial Officer and
Executive Vice President, Strategy
and Business Development

Denise Stump
Executive Vice President,  
Global Human Resources

Rich Shank, Ph.D.
Senior Vice President,  
Regulatory & Governmental Affairs
Chief Environmental Officer

Pete Supron
Strategy Principal

Dave Swihart
Senior Vice President, 
Global Supply Chain

Jim Tates
Regional President, Southwest

Jan Valentic
Senior Vice President, 
Regional Marketing

Board of Directors

Alan H. Barry
Former President and Chief Operating Officer
Masco Corporation
Manufacturer of products for  
home improvement and construction
Member of Audit Committee and Finance Committee
Board member since 2009

Joseph P. Flannery
President, Chief Executive Officer
and Chairman of the Board
Uniroyal Holding, Inc.
Investment management company
Member of Compensation & Organization Committee and 
Governance & Nominating Committee
Board member since 1987

James Hagedorn
Chief Executive Officer and Chairman of the Board
The Scotts Miracle-Gro Company
Board member since 1995

Adam Hanft
Founder and Chief Executive Officer
Hanft Projects LLC
Strategic consultancy firm
Member of Governance & Nominating Committee and  
Innovation & Technology Committee
Board member since 2010

The Honorable Stephen L. Johnson
Former Administrator  
U.S. Environmental Protection Agency
Member of Governance & Nominating Committee and 
Innovation & Technology Committee 
Board member since 2010 

William G. Jurgensen
Former Chief Executive Officer
Nationwide Mutual Insurance Company &
Nationwide Financial Services, Inc.
Insurance and financial services provider
Member of Audit Committee and Governance &  
Nominating Committee
Board member since 2009

Thomas N. Kelly Jr.
Former Executive Vice President,
Transition Integration 
Sprint Nextel Corporation
Global communications company
Chair of Compensation & Organization Committee
Board member since 2006

Katherine Hagedorn Littlefield
Chair 
Hagedorn Partnership, L.P.
Private investment partnership
Chair of Innovation & Technology Committee;
Member of Finance Committee
Board member since 2000

Nancy G. Mistretta
Retired Partner
Russell Reynolds Associates
Executive search firm 
Chair of Finance Committee;
Member of Audit Committee
Board member since 2007

Stephanie M. Shern
Former Vice Chairman and
Global Director – Retail and Consumer Products
Ernst & Young LLP
Professional Services Provider
Chair of Audit Committee
Board member since 2003

Carl F. Kohrt, Ph.D.
Former President and Chief Executive Officer
Battelle Memorial Institute
International science and technology firm
Lead Independent Director
Member of Compensation & Organization Committee and 
Innovation & Technology Committee
Board member since 2008

John S. Shiely
Retired Chief Executive Officer
and Chairman of the Board
Briggs & Stratton Corporation
Manufacturer of outdoor power equipment
Chair of Governance & Nominating Committee;
Member of Compensation & Organization Committee
Board member since 2007

The Scotts Miracle-Gro Company
(in millions, except per share data)

Net sales 
Cost of sales 
Gross profit 
Operating expenses, net 
Impairment, restructuring and other charges 
Income from operations 
Interest expense 
Income from continuing operations before taxes 
Income tax expense from continuing operations 
Income from continuing operations 
Diluted income per share from  
     continuing operations 

2011 
  $ 2,835.7 
  1,832.7 
 1,003.0 
  686.8 
69.2 
  247.0 
52.2 
194.8 
72.9 
121.9 

  $ 

2010
$ 2,898.0
  1,822.1
  1,075.9
  688.6
24.2
363.1
43.2
319.9
119.4
$  200.5

  $ 

1.84 

$ 

2.97

Adjusted income from continuing operations 
Adjusted diluted income per share  
     from continuing operations 
Adjusted EBITDA 

  $  182.6 

$  218.8

  $  2.76 
  $  393.0 

$ 
3.24
$  440.1

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®

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dear shareholders

I have always written this letter with a straightforward approach and with 

transparency about our performance. so it would be insincere to adopt a new 

style simply because I didn’t like the outcome. so here are the facts: our financial 

performance in fiscal 2011 was disappointing as sales, gross margin, operating 

profit, earnings per share and cash flow all were lower than we expected.

It’s important to stress, however, that our consumer 
business had a strong performance outside of the 
United states, with overall growth of 7 percent driven 
by strong improvements in Canada and throughout 
europe. and scotts lawnservice reported sales 
growth of 5 percent and operating income growth of 

Jim hagedorn
Chief Executive Officer 
and Chairman of the Board
The Scotts Miracle-Gro Company

That said, I have spent nearly my entire life in or 
around the lawn and garden industry and 2011 may 
have been the single worst lawn and garden season  
I can remember from a weather perspective. Through 
the first half of fiscal 2011, consumer purchases of  
our products in the United states were up about  
15 percent and we were well on our way to another 
record year. But in april and May – the peak weeks of 
the lawn and garden season – poor weather in nearly 
all parts of the U.s. led to dramatically less foot traffic 
at retail and effectively ended our ability  
to achieve our original growth targets.

The other stress on the business was a more 
challenging environment in the mass merchant 
channel. sales were lower in this channel due to 
changes in retail merchandising strategies and a 
more economically stressed consumer.

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Innovative
Products

»	 Miracle-Gro® Expand ‘n Gro™	

Making	gardening	easier	and	more	enjoyable	has	always	been	a	critical	goal	in	
our	approach	to	innovation.	In	2011,	we	began	regional	testing	of	Miracle-Gro®	
Expand	‘n	Gro™,	a	growing	media	product	that	loosens	and	aerates	native	soil	for	
better	plant	growth.	This	small	and	lightweight	bag	is	easy	to	merchandise	and	
to	carry	home,	but	then	expands	up	to	three	times	in	volume	when	a	consumer	
adds	water.	Expand	‘n	Gro	contains	all-natural	fibers	that	help	control	moisture	
by	holding	50	percent	more	water	than	basic	potting	soil	and	then	releasing	it	as	
plants	need	it.	It	also	feeds	plants	for	up	to	six	months.

2

24 percent. additionally, we used our financial flexibility 
to repurchase approximately 7 million shares of 
scottsMiracle-Gro stock while also increasing our 
dividend by 20 percent. Finally, we strengthened our 
capital structure by securing a new long-term credit 
facility and issuing $200 million of senior notes.

on a consolidated basis, company-wide sales for the 
year declined 2 percent to $2.84 billion. The sales 
challenges we faced in the U.s., combined with higher 
commodity costs, led to adjusted income from 
continuing operations of $182.6 million, or $2.76 per 
share. That compares with $218.8 million, or $3.24 
per share, in fiscal 2010.

even with a disappointing result in 2011, we remain 
optimistic about the category and about the potential 
of scottsMiracle-Gro to drive long-term shareholder 
value. Much of our future success will be based on 
the continued evolution of our Consumer First 
business model. and we made important strides in 
this effort over the past year.

We sold our Global Professional business in fiscal 
2011 and began the process of winding down our 
professional seed business in the U.s. By the end of 
fiscal 2012 –and for the first time in decades–our 
entire business portfolio should have a consumer 
orientation. our goal is straightforward: To drive 
category growth by improving our relationship with 
the consumer and by providing them with even better 
products, services and advice to create beautiful and 
healthy landscapes.

as our business model has evolved, we have made a 
variety of important changes. Three years ago, we 
began to establish regional offices throughout the 
U.s. that are designed to improve our business at the 
local level. In fiscal 2011, we continued this process 
when we began operating our last two regional 
offices in suburban Chicago and New York.

Unlike nearly any other consumer product category, 
lawn and garden is a local business. everything from 
the climate, to the length of the growing season,  
as well as the types of plants and pests, varies  
from north to south and east to west. our regional 
presence is helping us address those differences  
and also helping us better compete with local and 
regional players.

The next major step in this effort will be focused on 
our marketing and advertising plans. In fiscal 2012 we 
will increase our investment by up to $40 million. We 
will launch new campaigns, have improved in-store 
communications and take significant steps to improve 
our use of social media. We also are putting programs 
in place that will provide us with improved analytics 
so that we can better measure the effectiveness of 
our efforts and make adjustments along the way.

While this effort should help to drive strong  
year-over-year sales growth, the real focus of this 
investment is for the long-term. We continue to 
believe that our consumer engagement is lower than 
it needs to be and the investments we will make in 
the coming year should help address that gap.

					»				EZ Seed®	

Our	most	successful	innovation	ever,	EZ	Seed®,	continues	to	deliver	great	
performance	to	consumers	while	helping	to	drive	strong	financial	results.	
The	expansion	of	EZ	Seed	into	our	International	markets,	branded	in	most	
countries	as	Patch	Magic®,	has	allowed	us	to	substantially	grow	the	
overall	grass	seed	market	and	also	capture	a	majority	of	that	growth,	thus			
expanding	our	market	share.	The	EZ	Seed	concept	is	a	model	for	our	
future	innovation	efforts.	It	succeeds	at	meeting	a	consumer	need,	
provides	opportunity	for	global	growth	and	also	enhances	our	profitability.

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The changes we are making for 2012 come against  
a backdrop of an economy–and a consumer–that 
remains challenged. For the last several years, we 
have been aggressive in taking price increases to 
offset commodity pressures. however, in 2012, we  
will take a different approach. With price increases 
occurring on so many fronts, we have decided to 
protect the consumer from another year of price 
increases in our category. While we know this decision 
will put pressure on our margins in the near-term, we 
are convinced it is the right decision for the long-term.

This past May marked my 10th anniversary as Ceo  
of scottsMiracle-Gro. Throughout that period, I have 
attempted to strike a balance between managing for 
near-term financial results and the long-term health 
and growth of the business. striking that balance will 
take center stage in fiscal 2012.

The truth is this: Passing on price increases to  
the consumer and stepping back from making 
investments in marketing may have improved our 
near-term financial performance. I recognize that 
some shareholders might have liked that decision. 

But we believe succumbing to these pressures would 
be the wrong long-term strategy. our goal is to grow 
the lawn and garden category and to capture a larger 
portion of the market along the way. We know that 
household penetration rates have room to improve  
and that existing users of our products typically don’t 
apply them with enough frequency or at the 

recommended rates. We also know that innovation in 
this category is critical and that homeowners are 
looking for products that are easier to use and that 
enhance their likelihood of success. and we know that 
advertising in this category works and that our 
relationship with the consumer matters. 

The decisions we’ve made entering fiscal 2012, and 
the changes we have been making to our business in 
the past several years, have been made with these 
facts in mind. our understanding of lawn and garden 
consumers continues to improve. our position as 
leaders in this industry requires us to be bold in 
driving for even further improvement. 

While we have more to accomplish, I am pleased 
with the progress we have been making against our 
Consumer First strategy and I am confident that  
2012 will be a year in which we continue to make 
significant strides.

Thank you for your continued support.

Jim	Hagedorn
Chief Executive Officer 
and Chairman of the Board
The Scotts Miracle-Gro Company
December 2011

»	 Scotts® Snap®	

The	nationwide	rollout	in	fiscal	2012	of	Scotts®	Snap®	marks		
the	biggest	innovation	in	lawn	care	in	years.	Snap	eliminates	the	
need	for	large	bags	of	lawn	food	and	big,	cumbersome	spreaders.	
Consumers	simply	insert	a	Snap®	Pac®	into	the	spreader,	lock	it	in,	
and	go.	There	are	no	complicated	spreader	settings	to	figure	out.	
Instead,	Snap	is	automatically	set	for	the	proper	application		
rate.	Two	years	of	consumer	testing	in	select	markets	has	
demonstrated	a	high	level	of	appeal	for	the	Snap	system.	The	
rollout	in	2012	will	be	supported	with	significant	advertising	as	
well	as	appealing	in-store	merchandising	displays.

4

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended September 30, 2011

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 1-11593

The Scotts Miracle-Gro Company

(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of
incorporation or organization)

14111 Scottslawn Road,
Marysville, Ohio
(Address of principal executive offices)

31-1414921
(I.R.S. Employer
Identification No.)

43041
(Zip Code)

Registrant’s telephone number, including area code:
937-644-0011
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Common Shares, without par value

Name of Each Exchange on Which Registered

New York Stock Exchange

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 Í No ‘
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 ‘ No Í

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 Í No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files). Yes Í No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer Í
Non-accelerated filer ‘ (Do not check if a smaller reporting company)

‘
Accelerated filer
Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í

The aggregate market value of Common Shares (the only common equity of the registrant) held by non-affiliates as of April 1, 2011 (the last

business day of the most recently completed second quarter) was approximately $2,676,710,155.

There were 60,957,452 Common Shares of the registrant outstanding as of November 18, 2011.

Portions of the definitive Proxy Statement for the registrant’s 2012 Annual Meeting of Shareholders are incorporated by reference into

Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE:

ITEM 1. BUSINESS

Company Description and Development of the Business

PART I

The discussion below provides a brief description of the business conducted by The Scotts Miracle-Gro
Company (“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, 2011 (“fiscal
information on recent business developments, see “ITEM 7. MANAGEMENT’S
2011”). For additional
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this
Annual Report on Form 10-K.

We are a leading manufacturer and marketer of branded consumer lawn and garden products. Our products
are marketed under some of the most recognized brand names in the industry, including, in North America,
Scotts® and Turf Builder® lawn and grass seed products, including the Scotts® LawnPro® Annual 4 Step®
Program; Miracle-Gro®, Scotts®, Liquifeed® and Osmocote®1 gardening and landscape products; Ortho®,
Roundup®2 and Home Defense® branded insect control, weed control and rodenticide products; and Scotts® and
Morning Song® wild bird food products. In the United Kingdom, key brands include Miracle-Gro® plant
fertilizers; Weedol® and Pathclear® herbicides; EverGreen® lawn fertilizers; and Levington® gardening and
landscape products. Other significant brands in Europe include KB® and Fertiligène® in France; Celaflor®, Nexa
Lotte® and Substral® in Germany and Austria; and ASEF®, KB® and Substral® in Belgium, the Netherlands and
Luxembourg. We also operate the Scotts LawnService® business, which provides residential and commercial
lawn care, tree and shrub care and limited pest control services in the United States.

Our heritage is tied to the 1995 merger of The Scotts Company, which traces its roots to a company founded
by O.M. Scott in Marysville, Ohio in 1868, and Stern’s Miracle-Gro Products, Inc., which was formed on Long
Island, New York by Horace Hagedorn and Otto Stern in 1951. Scotts Miracle-Gro is an Ohio corporation.

We are dedicated to delivering strong, long-term financial results and outstanding shareholder returns by
providing products of superior quality and value to enhance consumers’ outdoor lawn and garden environments.
During fiscal 2011, we focused on four key initiatives designed to further strengthen our consumer-facing
businesses, bring us closer to the consumer and support our long-term growth objectives:

•

Streamlining our portfolio of businesses to focus on core branded consumer lawn and garden
products — We continued to focus our business on our core branded consumer lawn and garden
products by completing the sale of our Global Professional business during our second quarter of fiscal
2011. The sale of the Global Professional business followed the wind-down of our Smith & Hawken®3
business during our first quarter of the fiscal year ended September 30, 2010 (“fiscal 2010”). In
addition, we are in the process of winding down the remaining portion of our professional seed
business, leaving a portfolio exclusively comprised of consumer-facing businesses.

1 Osmocote® is a registered trademark of Everris International B.V., a subsidiary of Israel Chemicals Ltd.
2 Roundup® is a registered trademark of Monsanto Technology LLC, a company affiliated with Monsanto

Company (“Monsanto”).

3 Smith & Hawken® is a registered trademark of Target Brands, Inc. We sold the Smith & Hawken brand and
certain intellectual property rights related thereto to Target Brands, Inc. on December 30, 2009, and
subsequently changed the name of the subsidiary entity formerly known as Smith & Hawken, Ltd. to Teak 2,
Ltd. References in this Annual Report on Form 10-K to Smith & Hawken refer to the subsidiary entity, not the
brand itself.

2

• Ensuring our financing structure supports our long-term growth and cash utilization strategies — The
second initiative focused on reconfiguring our financing structure to ensure we have sufficient
flexibility to execute our long-term growth and cash utilization strategies:

• We executed a new credit facility during our third quarter of fiscal 2011. Following the issuance
of $200 million aggregate principal amount of 6.625% Senior Notes in our first quarter of fiscal
2011 and the issuance of $200 million aggregate principal amount of 7.25% Senior Notes in our
second quarter of fiscal 2010, the new credit facility brought to completion the successful
transformation of our financing structure from one comprised solely of bank debt with a single
maturity date to one consisting of both bank and bond debt with staggered maturities that come
due in 2016, 2018 and 2020.

• Our revised financing structure provides us with significant freedom to operate within our stated
target leverage ratio of 2.0 - 2.5. Within that target range we have sufficient flexibility to execute
our long-term strategy of investing approximately two-thirds of our operating cash flow in growth
initiatives (equally divided between capital reinvestment and modest acquisitions of additional
consumer-facing brands and businesses) and returning the balance to shareholders.

• During fiscal 2011, our long-term cash utilization strategy resulted in our returning $67.9 million
to shareholders in the form of our quarterly dividend, which we increased by 20% in the fourth
quarter of fiscal 2011, and $358.7 million through repurchases of our common shares pursuant to
our 4-year, $700 million share repurchase program (cumulative purchases under this program total
$383.7 million through September 30, 2011). In addition, we invested $72.7 million in capital
expenditures and $10.9 million in acquisitions within our growing media and Scotts
LawnService® businesses.

• Restructuring our business to improve operational efficiencies and reposition our cost structure —
Having successfully streamlined our business portfolio and reconfigured our financing structure to
support long-term growth, our next initiative focused on ensuring that our internal organizational
model and cost structure are designed to best help us achieve that growth:

• During the second half of fiscal 2011, we undertook a restructuring effort designed to improve
operational efficiencies and the speed with which key decisions are made. This effort centered on
eliminating unnecessary management layers and ensuring that key decision makers have spans of
control appropriate for their roles. We anticipate that
the resulting reduction in force will
ultimately produce $20 – $25 million in annualized savings.

• Another piece of this initiative involves reducing the amount we spend on indirect purchasing and
other non-revenue generating administrative matters. This multi-year effort
involves better
leveraging our scale to competitively bid out the products and services we buy and ultimately
reduce the number of vendors we use across a variety of spending areas. We expect that, over
time, this effort will generate cost savings similar to those realized from the organizational
restructuring.

• The final step in repositioning our cost structure involves re-investing the savings generated by the
organizational restructuring and indirect purchasing efforts back into our business. Through this
initiative, we intend to increase the amount we spend in those areas we believe will help drive the
long-term growth of our consumer business, such as advertising and innovation.

• Continuing to regionalize both our sales and marketing models in order to get closer to the consumer
and accelerate category growth and our manufacturing and distribution networks to further reduce
costs — During fiscal 2011, we continued to invest in the regional sales, marketing, manufacturing and
distribution initiatives that were launched during the fiscal year ended September 30, 2009 (“fiscal
2009”):

• Within the U.S., we operate regional sales and marketing offices in the North, the Southeast, the
Southwest and the West. The regional offices are focused on better understanding and meeting the
needs of consumers at the local level, thereby increasing both the overall participation rate in lawn

3

and garden activities and our market share. Our headquarters in Marysville, Ohio continues to
support the regional offices with programs and services designed to attract more consumers,
enhance support
to retailers, and drive innovation in our products, services, programs and
operations in order to keep consumers engaged in lawn and garden activities and accelerate
category growth.

•

Fiscal 2011 marked year three of a multi-year supply chain initiative to co-join distribution
networks for our lawn fertilizer and growing media products at a number of our growing media
facilities, which are then shipped directly to our retail customers. To date this initiative has helped
eliminate the need for approximately 25% of our third-party warehouse space.

• We continued to regionalize our manufacturing capabilities through the acquisition of an
additional growing media business in Florida, which we anticipate will help further drive cost
savings through a combination of reduced freight and inventory investments. We also completed
our first full year of operations at our second U.S. liquids manufacturing facility, enabling us to
better serve southern U.S. markets.

Business Segments

We divide our business into the following reportable segments:

• Global Consumer

•

Scotts LawnService®

This division of reportable segments is consistent with how the segments report to and are managed by our
senior management. Financial information about these segments for each of the three years ended September 30,
2011 is presented in “NOTE 22. SEGMENT INFORMATION” of the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K. The reportable segments have been revised from prior
periods to reflect the sale of a significant majority of the assets of our previously reported Global Professional
business segment, which is now reported in discontinued operations. See “NOTE 2. DISCONTINUED
OPERATIONS” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K
for additional information regarding the sale of the Global Professional business.

Principal Products and Services

Global Consumer

In our Global Consumer segment, we manufacture and market consumer lawn and garden products in the

following categories:

Lawn Care: The lawn care category is designed to help consumers obtain and enjoy the lawn they
want. In the United States, products within this category include fertilizer products under the Scotts® and
Turf Builder® brand names, grass seed products under the Scotts®, Turf Builder®, EZ Seed®, Water Smart®
and PatchMaster® brand names and lawn-related weed, pest and disease control products primarily under
the Ortho®, Scotts® and Lawn Pro® brand names, including sub-brands such as Weed B Gon® and
GrubEx®. A similar range of products is marketed in Europe under a variety of brands such as EverGreen®,
Fertiligène®, Substral®, Miracle-Gro Patch Magic®, Weedol®, Pathclear®, KB® and Celaflor®. The lawn
care category also includes spreaders and other durables under the Scotts® brand name, including Turf
Builder® EdgeGuard® spreaders, Snap® spreaders, AccuGreen® drop spreaders and Handy Green®II
handheld spreaders.

Gardening and Landscape: The gardening and landscape category is designed to help consumers grow
and enjoy flower and vegetable gardens and beautify landscaped areas. In the United States, products within
this category include a complete line of water soluble plant foods under the Miracle-Gro® brand and
sub-brands such as LiquaFeed®, continuous-release plant foods under the Osmocote® and Shake ‘N Feed®

4

brand names, potting mixes and garden soils under the Miracle-Gro®, Scotts®, Hyponex®, Earthgro® and
SuperSoil® brand names, mulch and decorative groundcover products under the Scotts® brand, including the
Nature Scapes® sub-brand, landscape weed prevention products under the Ortho® brand, plant-related pest
and disease control products under the Ortho® brand, wild bird food and bird feeder products under the
Scotts Songbird Selections®, Morning Song® and Country Pride® brand names, and organic garden products
under the Miracle-Gro Organic Choice®, Scotts® and Whitney Farms® brand names. Internationally, similar
products are marketed under the Miracle-Gro®, Fertiligène®, Substral®, KB®, Celaflor®, ASEF®, Scotts®,
Morning Melodies®, Scotts EcoSense®, Fertiligène Naturen®, Substral Naturen®, KB Naturen®, Carre
Vert® and Miracle-Gro Organic Choice® brand names.

Home Protection: The home protection category is designed to help consumers protect their homes
from pests and maintain external home areas. In the United States, insect control and rodenticide products
are marketed under the Ortho® brand name, including insect control products under the Ortho Max® and
Bug B Gon Max® sub-brands and rodenticide products under the Home Defense Max® sub-brand, weed
control products for hard surfaces (such as patios, sidewalks and driveways) are marketed under the Ortho®
brand name, while non-selective weed control products are marketed under the Roundup® brand name.
Internationally, products within this category are marketed under the Nexa Lotte®, Fertiligène®, KB®,
Home Defence®, Weedol®, Pathclear® and Roundup® brands.

Since 1999, we have served as Monsanto’s exclusive agent for the marketing and distribution of consumer
Roundup® products in the consumer lawn and garden market within the United States and other specified
countries, including Australia, Austria, Belgium, Canada, France, Germany, the Netherlands and the United
Kingdom. Under the terms of the Amended and Restated Exclusive Agency and Marketing Agreement (the
“Marketing Agreement”) between the Company and Monsanto, we are jointly responsible with Monsanto for
developing global consumer and trade marketing programs for consumer Roundup®. We have responsibility for
manufacturing conversion, distribution and logistics, and selling and marketing support for consumer Roundup®.
Monsanto continues to own the consumer Roundup® business and provides significant oversight of the brand. In
addition, Monsanto continues to own and operate the agricultural Roundup® business. For additional details
regarding the Marketing Agreement, see “NOTE 7. MARKETING AGREEMENT” of the Notes to Consolidated
Financial Statements included in this Annual Report on Form 10-K.

Scotts LawnService®

The Scotts LawnService® segment provides residential and commercial lawn care, tree and shrub care and
limited pest control services in the United States through periodic applications of fertilizer and control products.
As of September 30, 2011, Scotts LawnService® had 83 Company-operated locations as well as 88 locations
operated by independent franchisees.

Discontinued Operations

During our second quarter of fiscal 2011 we completed the sale of a significant majority of the assets of our
Global Professional business (excluding the non-European professional seed business, “Global Pro”) to Israel
Chemicals Ltd. (“ICL”). As a result of the then-pending sale, effective in our first quarter of fiscal 2011 we
classified Global Pro as discontinued operations. See “NOTE 2. DISCONTINUED OPERATIONS” of the Notes
to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information
regarding the sale of Global Pro.

Principal Markets and Methods of Distribution

We sell our consumer products primarily to home centers, mass merchandisers, warehouse clubs, large
hardware chains, independent hardware stores, nurseries, garden centers and food and drug stores through both a
direct sales force and our network of brokers and distributors. In addition, during fiscal 2011, we employed
approximately 2,800 full-time and seasonal in-store associates within the U.S. to help our retail partners
merchandise their lawn and garden departments directly to consumers of our products.

5

The majority of shipments to customers are made via common carriers or through distributors in the
United States and through a network of public warehouses and distributors in Europe. We utilize third parties to
manage the primary distribution centers for our Global Consumer business in North America, which are
strategically placed across the United States and Canada. The primary distribution centers for our Global
Consumer business internationally are located in the United Kingdom, France, Germany and Australia and are
also managed by third-party logistics providers. Growing media products are generally shipped direct-to-store
without passing through a distribution center. As discussed in “ITEM 1. BUSINESS — Company Description
and Development of the Business” of this Annual Report on Form 10-K, fiscal 2011 marked year three of our
multi-year plan to co-distribute lawn fertilizer and growing media products directly to our retail customers, which
to date has helped eliminate the need for approximately 25% of our third-party warehouse space.

Raw Materials

We purchase raw materials for our products from various sources. We are subject to market risk as a result
of the fluctuating prices of raw materials such as urea and other fertilizer inputs, resins, diesel, gasoline,
sphagnum peat, grass seed and wild bird food grains. Our objectives surrounding the procurement of these
materials are to ensure continuous supply, to minimize costs and to improve predictability. We seek to achieve
these objectives through negotiation of contracts with favorable terms directly with vendors. When appropriate,
we commit to purchase a certain percentage of our needs in advance of the season to secure pre-determined
prices. We also hedge certain commodities, particularly diesel, gasoline and urea, to improve predictability and
control costs. Sufficient raw materials were available during fiscal 2011.

Trademarks, Patents and Licenses

We consider our trademarks, patents and licenses to be key competitive advantages. We pursue a vigorous
trademark protection strategy consisting of registration and maintenance of key trademarks and proactive
monitoring and enforcement activities to protect against infringement. The Scotts®, Miracle-Gro®, Ortho®,
Scotts LawnService®, Hyponex® and Earthgro® brand names and logos, as well as a number of product
trademarks, including Turf Builder®, Organic Choice®, Home Defense Max® and Weed-B-Gon Max®, are
registered in the United States and/or internationally and are considered material to our business.

In addition, we actively develop and maintain a vast portfolio of utility and design patents covering subject
matter such as fertilizer, chemical and growing media compositions and processes; grass seed varieties; and
mechanical dispensing devices such as applicators, spreaders and sprayers. Our utility patents provide protection
generally extending to 20 years from the date of filing, and many of our patents will continue well into the next
decade. We also hold exclusive and non-exclusive patent licenses and supply arrangements, permitting the use
and sale of additional patented fertilizers, pesticides and mechanical devices. Although our portfolio of patents
and patent licenses is important to our success, no single patent or group of related patents is considered
significant to any of our business segments or the business as a whole.

Seasonality and Backlog

Our business is highly seasonal, with approximately 75% of our annual net sales occurring in our second
and third fiscal quarters combined. Our annual sales are further concentrated in our second and third fiscal
quarters by retailers who rely on our ability to deliver products closer to when consumers buy our products,
thereby reducing retailers’ pre-season inventories.

We anticipate significant orders for the upcoming spring season will start to be received late in the winter
and continue through the spring season. Historically, substantially all orders are received and shipped within the
same fiscal year with minimal carryover of open orders at the end of the fiscal year.

6

Significant Customers

Approximately 89% of our worldwide net sales in fiscal 2011 were made by our Global Consumer segment.
Our three largest customers are reported within the Global Consumer segment and are the only customers that
individually represent more than 10% of reported consolidated net sales. Approximately 30% of our net sales in
fiscal 2011 were made to Home Depot, 18% to Lowe’s and 13% to Walmart. We face strong competition for the
business of these significant customers. The loss of any of these customers or a substantial decrease in the
volume or profitability of our business with any of these customers could have a material effect on our financial
condition, results of operations or cash flows.

Competitive Marketplace

The markets in which we sell our products are highly competitive. In the United States Global Consumer
lawn and garden and pest control markets, our products compete against private-label as well as branded
products. Primary competitors include Spectrum Brands, Bayer AG, Central Garden & Pet Company, Enforcer
Products, Inc., Kellogg Garden Products, Old Castle Retail, Inc. and Lebanon Seaboard Corporation. In addition,
we face competition from regional competitors who compete primarily on the basis of price for commodity
growing media products.

Internationally, we face strong competition in the Global Consumer lawn and garden market, particularly in
Europe. Our competitors in the European Union include Bayer AG, Compo GmbH, Westland Horticulture and a
variety of local companies.

We have the second largest market share position in the fragmented U.S. lawn care service market. We
compete against TruGreen®, a division of ServiceMaster®, which has a substantially larger share of this market
than Scotts LawnService®, as well as numerous regional and local lawn care service operations and national and
regional franchisors.

Research and Development

We continually invest in research and development, both in the laboratory and at the consumer level, to
improve our products, manufacturing processes, packaging and delivery systems. Spending on research and
development was $50.9 million, $47.3 million and $49.8 million in fiscal 2011, fiscal 2010 and fiscal 2009,
respectively, including product registration costs of $14.6 million, $12.1 million and $15 million, respectively. In
addition to the benefits of our own research and development, we actively seek ways to leverage the research and
development activities of our suppliers.

Regulatory Considerations

Local, state, federal and foreign laws and regulations affect the manufacture, sale and application of our
products in several ways. For example, in the United States, all products containing pesticides must comply with
the Federal Insecticide, Fungicide, and Rodenticide Act of 1947, as amended (“FIFRA”), and be registered with
the U.S. Environmental Protection Agency (the “U.S. EPA”) and similar state agencies before they can be sold or
distributed. Fertilizer and growing media products are subject to state and foreign labeling regulations. Our
manufacturing operations are subject to waste, water and air quality permitting and other regulatory requirements
of federal, state and foreign agencies. Our wild bird food business is subject to regulation by the U.S. Food and
Drug Administration and various state regulations. Our grass seed products are regulated by the Federal Seed Act
and various state regulations. Most states require our Scotts LawnService® business locations and/or technicians
to comply with strict licensing requirements prior to applying many of our products. The failure to comply with
any of these laws or regulations could have an adverse effect on our business.

In addition, the use of certain pesticide and fertilizer products is regulated by various local, state, federal and
foreign environmental and public health agencies. These regulations may include requirements that only certified

7

or professional users apply the product or that certain products be used only on certain types of locations (such as
“not for use on sod farms or golf courses”), may require users to post notices on properties to which products
have been or will be applied, may require notification to individuals in the vicinity that products will be applied
in the future or may ban the use of certain ingredients.

State, federal and foreign authorities generally require growing media facilities to obtain permits (sometimes
on an annual basis) in order to harvest peat and to discharge storm water run-off or water pumped from peat
deposits. The permits typically specify the condition in which the property must be left after the peat is fully
harvested, with the residual use typically being natural wetland habitats combined with open water areas. We are
generally required by these permits to limit our harvesting and to restore the property consistent with the
intended residual use. In some locations, these facilities have been required to create water retention ponds to
control the sediment content of discharged water.

For more information regarding how compliance with federal, state, local and foreign laws and regulations
may affect us, see “ITEM 1A. RISK FACTORS—Compliance with environmental and other public health
regulations could increase our costs of doing business or limit our ability to market all of our products” of this
Annual Report on Form 10-K.

FIFRA Compliance, the Corresponding Governmental Investigations and Similar Matters

In April 2008, we became aware that a former associate apparently deliberately circumvented our policies
and U.S. EPA regulations under FIFRA by failing to obtain valid registrations for certain products and/or causing
certain invalid product registration forms to be submitted to regulators. Since that
time, we have been
cooperating with both the U.S. EPA and the U.S. Department of Justice (the “U.S. DOJ”) in related civil and
criminal investigations into our pesticide product registration issues as well as a state civil investigation into
related allegations arising under state pesticide registration laws and regulations.

In late April 2008, in connection with the U.S. EPA’s investigation, we conducted a consumer-level recall
of certain consumer lawn and garden products and a Scotts LawnService® product. Subsequently, the Company
and the U.S. EPA agreed upon a Compliance Review Plan for conducting a comprehensive, independent review
of our product registration records. Pursuant to the Compliance Review Plan, an independent third-party firm,
Quality Associates Incorporated (“QAI”), reviewed substantially all of our U.S. pesticide product registrations
and associated advertisements, some of which were historical in nature and no longer related to sales of our
products. The U.S. EPA investigation and the QAI review process resulted in the temporary suspension of sales
and shipments of certain products. In addition, as the QAI review process or our internal review identified
potential FIFRA registration issues (some of which appear unrelated to the actions of the former associate), we
endeavored to stop selling or distributing the affected products until the issues could be resolved. QAI’s review
of our U.S. pesticide product registrations and associated advertisements is now substantially complete. The
results of the QAI review process did not materially affect our fiscal 2009, fiscal 2010 or fiscal 2011 sales and
are not expected to materially affect our fiscal 2012 sales.

In fiscal 2008, we conducted a voluntary recall of certain of our wild bird food products due to a
formulation issue. Certain wild bird food products had been treated with pest control additives to avoid insect
infestation, especially at retail stores. While the pest control additives had been labeled for use on certain stored
grains that can be processed for human and/or animal consumption, they were not labeled for use on wild bird
food products. In October 2008, the U.S. Food & Drug Administration concluded that the recall had been
completed and that there had been proper disposition of the recalled products. The results of the wild bird food
recall did not materially affect our fiscal 2009, fiscal 2010 or fiscal 2011 financial condition, results of operations
or cash flows.

Settlement discussions relating to potential fines and/or penalties are a frequent outgrowth of governmental
investigations. In that regard, on or about June 30, 2011, we received a Notice of Intent to File Administrative

8

Complaint (“Notice”) from the U.S. EPA Region 5 with respect to the alleged FIFRA violations. The Notice,
which does not set forth a proposed penalty amount, offers us an opportunity to present any information we
believe the U.S. EPA should consider prior to filing the complaint and indicates that the U.S. EPA is prepared to
meet with us to discuss the alleged violations. We made a timely response to the Notice, and communications
between us and the U.S. EPA are underway. We are also engaged in settlement discussions with the U.S. DOJ
regarding its criminal investigation.

In June 2008, the California Department of Pesticide Regulation (“CDPR”) issued a request for information
to the Company relating to products that had been the subject of the April 2008 recall. We cooperated with that
inquiry and reached agreement with CDPR that it would place its investigation on hold pending the completion
of our internal audit. In July 2010, CDPR notified us that it planned to proceed with its investigation independent
of the U.S. EPA and U.S. DOJ, and in March 2011 we received a letter from CDPR offering to settle the matter
without the need for an enforcement proceeding for $245,631. On July 25, 2011, we paid the requested civil
penalty and entered into a Settlement Agreement pursuant to which CDPR agreed not to take further civil or
criminal action with regard to the affected products.

For more information with respect to additional risks and uncertainties that we may face in connection with
the ongoing investigations and for a discussion of the costs and expenses related to the matters discussed above,
see “ITEM 1A. RISK FACTORS—The ongoing governmental investigations regarding our compliance with
FIFRA could adversely affect our financial condition, results of operations or cash flows” of this Annual Report
on Form 10-K and “NOTE 3. PRODUCT REGISTRATION AND RECALL MATTERS” of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.

Other Regulatory Matters

In 2004, we completed negotiations with the Philadelphia District of the U.S. Army Corps of Engineers (the
“Corps”) regarding the terms of site remediation and the resolution of the Corps’ civil penalty demand in
connection with our prior peat harvesting operations at our Lafayette, New Jersey facility. The final consent
decree required us to perform five years of wetland monitoring and to complete additional actions if after five
years the monitoring indicated the wetlands had not developed satisfactorily. As site monitoring activities were
not initiated until the beginning of 2006, the five-year monitoring period extended until December 2010. Having
received notice from the Environmental Defense Section of the U.S. DOJ that the terms of the consent decree had
been satisfied, on January 24, 2011, the United States District Court for the District of New Jersey ordered the
matter closed.

On or about October 28, 2011,

the Pennsylvania Department of Environmental Protection (the
“Department”) sent a letter to EG Systems, Inc., d/b/a Scotts LawnService (“SLS”), a wholly-owned, indirect
subsidiary of Scotts Miracle-Gro, alleging that on June 30 and July 1, 2010, an SLS employee discharged
industrial waste into the waters of the Commonwealth in violation of the Clean Streams Law and the Solid Waste
Management Act. The letter indicated that the Department is willing to accept a civil penalty of $200,000 to
resolve the matter in lieu of a civil penalty action. We are in the process of formulating our response to the
Department.

At September 30, 2011, $3.9 million was accrued for non-FIFRA compliance-related environmental actions,
the majority of which is for site remediation. During fiscal 2011, fiscal 2010 and fiscal 2009, we expensed $2.4
million, $0.5 million and $0.8 million, respectively, for non-FIFRA compliance-related environmental matters.
We had no material capital expenditures during the last three fiscal years related to environmental or regulatory
matters.

9

Employees

As of September 30, 2011, we employed approximately 6,300 employees. During peak sales and production

periods, we employ approximately 9,000 employees, including seasonal and temporary labor.

Financial Information About Geographic Areas

For certain information concerning our international revenues and long-lived assets, see “NOTE 22.
SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K.

General Information

We maintain a website at http://investor.scotts.com (this uniform resource locator, or URL, is an inactive
textual reference only and is not intended to incorporate our website into this Annual Report on Form 10-K). We
file reports with the Securities and Exchange Commission (the “SEC”) and make available, free of charge, on or
through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as well as our proxy and information statements, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC.

ITEM 1A. RISK FACTORS

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, including the exhibits hereto and the information incorporated by
reference herein, as well as our 2011 Annual Report to Shareholders (our “2011 Annual Report”), contains
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties.
Other than statements of historical fact, information regarding activities, events and developments that we expect
or anticipate will or may occur in the future, including, but not limited to, information relating to our future
growth and profitability targets and strategies designed to increase total shareholder value, are forward-looking
statements based on management’s estimates, assumptions and projections. Forward-looking statements also
include, but are not limited to, statements regarding our future economic and financial condition and results of
operations, the plans and objectives of management and our assumptions regarding our performance and such
plans and objectives, as well as the amount and timing of repurchases of Scotts Miracle-Gro common shares.
Forward-looking statements generally can be identified through the use of words such as “guidance,” “outlook,”
“projected,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,”
“anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” and other similar words and variations.

Forward-looking statements contained in this Annual Report on Form 10-K and our 2011 Annual Report are
predictions only and actual results could differ materially from management’s expectations due to a variety of
factors, including those described below. All forward-looking statements attributable to us or persons working on
our behalf are expressly qualified in their entirety by such risk factors.

The forward-looking statements that we make in this Annual Report on Form 10-K and our 2011 Annual
Report are based on management’s current views and assumptions regarding future events and speak only as of
their dates. We disclaim any obligation to update developments of these risk factors or to announce publicly any
revisions to any of the forward-looking statements that we make, or to make corrections to reflect future events
or developments, except as required by the federal securities laws.

10

The ongoing governmental investigations regarding our compliance with FIFRA could adversely affect our
financial condition, results of operations or cash flows.

Our products that contain pesticides must comply with FIFRA and be registered with the U.S. EPA and
similar state agencies before they can be sold or distributed. In April 2008, we became aware that a former
associate apparently deliberately circumvented our policies and U.S. EPA regulations under FIFRA by failing to
obtain valid registrations for certain products and/or causing certain invalid product registration forms to be
submitted to regulators. Since that time, internal and third-party reviews have identified additional potential
pesticide product registration issues (some of which appear unrelated to the actions of the former associate) and
we have been cooperating with both the U.S. EPA and the U.S. DOJ in related civil and criminal investigations
into our pesticide product registration issues as well as a state civil investigation into related allegations arising
under state pesticide registration laws and regulations.

In connection with the registration investigations and FIFRA compliance review process, we have recorded,
and in the future expect to record, charges and costs for estimated retailer inventory returns, consumer returns
and replacement costs, costs to rework existing products, inventory write-downs and legal and professional fees
and costs associated with administration of the registration investigations and FIFRA compliance review process.
Because expected future charges are based on estimates, they may increase as a result of numerous factors, many
of which are beyond our control, including the number and type of legal or regulatory proceedings relating to the
registration investigations and FIFRA compliance review process and regulatory or judicial orders or decrees that
may require us to take certain actions in connection with the registration investigations and FIFRA compliance
review process or to pay civil or criminal fines and/or penalties at the state and/or federal level.

The U.S. EPA, U.S. DOJ and related state investigations continue and may result in future state, federal or
private rights of action as well as judgments, settlements, fines and/or penalties with respect to known or
potential additional product registration issues. At this stage of the investigations, we cannot reasonably estimate
the total scope or magnitude of all possible liabilities that could result from known or potential product
registration issues. Based on the facts and circumstances known to us at this time (including settlement
discussions that have taken place to date), we have established what we believe to be an appropriate reserve.
However, it is possible that any fines and/or penalties with respect to the investigations, as well as any
judgments, litigation costs or other liabilities relating to such known or potential product registration issues,
could exceed the amount of the reserve, possibly materially, and could have an adverse effect on our financial
condition, results of operations or cash flows.

There can be no assurance that the ultimate outcome of the investigations will not result in further action
against us, whether administrative, civil or criminal, by the U.S. EPA, the U.S. DOJ, state regulatory agencies or
private litigants, and any such action, in addition to the costs we have incurred and would continue to incur in
connection therewith, could materially and adversely affect our financial condition, results of operations or cash
flows.

Compliance with environmental and other public health regulations could increase our costs of doing
business or limit our ability to market all of our products.

Local, state, federal and foreign laws and regulations relating to environmental matters affect us in several
ways. In the United States, all products containing pesticides must comply with FIFRA and be registered with the
U.S. EPA and similar state agencies before they can be sold or distributed. The inability to obtain or maintain
such compliance, or the cancellation of any such registration, could have an adverse effect on our business, the
severity of which would depend on the products 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 or reduce these risks. In the European Union (the “EU”), the European Parliament has adopted various
forms of regulation which may substantially restrict or eliminate our ability to market and sell certain of our

11

consumer pesticide products in their current form in the EU. In addition, in Canada, regulations have been
adopted by several provinces that substantially restrict our ability to market and sell certain of our consumer
pesticide products.

Under the Food Quality Protection Act, enacted by the U.S. Congress in 1996, 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 risks from dietary and
non-dietary exposures to pesticides. The pesticides in our products, certain of which may be used on crops
processed into various food products, are typically 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 continuing evaluations.

In addition, the use of certain pesticide and fertilizer products is regulated by various local, state, federal and
foreign environmental and public health agencies. These regulations may include requirements that only certified
or professional users apply the product or that certain products be used only on certain types of locations, may
require users to post notices on properties to which products have been or will be applied, may require
notification to individuals in the vicinity that products will be applied in the future or may ban the use of certain
ingredients. Most states require our Scotts LawnService® business locations and/or technicians to comply with
strict licensing requirements prior to applying many of our products. 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 injury to the environment or to people under all circumstances. The
costs of compliance, remediation or products liability have adversely affected operating results in the past and
could materially adversely affect future quarterly or annual operating results.

The harvesting of peat for our growing media business 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 the United Kingdom, our peat extraction
efforts are also the subject of regulation.

In addition to the regulations already described, local, state, federal and foreign agencies regulate the
disposal, transport, handling and storage of waste, remediation of contaminated sites, air and water discharges
from our facilities, and workplace health and safety.

Under certain environmental laws, we may be liable for the costs of investigation regarding and remediation
of the presence of certain regulated materials, as well as related costs of investigation and remediation of damage
to natural resources, at various properties, including our current and former properties 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 expose us to third-party actions
such as tort suits based on alleged conduct or environmental conditions.

The adequacy of our current non-FIFRA compliance-related environmental reserves 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 all of 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 surrounding 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 or cash
flows.

12

Damage to our reputation could have an adverse effect on our business.

Maintaining our strong reputation with both consumers and our retail customers is a key component in our
success. Product recalls, our inability to ship, sell or transport affected products and the on-going governmental
investigations may harm our reputation and acceptance of our products by our retail customers and consumers,
which may materially and adversely affect our business operations, decrease sales and increase costs.

In addition, perceptions that the products we produce and market are not safe could adversely affect us and
contribute to the risk we will be subjected to legal action. We manufacture and market a variety of products, such
as fertilizers, certain growing media, herbicides and pesticides. On occasion, allegations are made that some of
our products have failed to perform up to expectations or have caused damage or injury to individuals or
property. Based on reports of contamination at a third-party supplier’s vermiculite mine, the public may perceive
that some of our products manufactured in the past using vermiculite are or may be contaminated. Public
perception that our products are not safe, whether justified or not, could impair our reputation, involve us in
litigation, damage our brand names and have a material adverse effect on our business.

Our marketing activities may not be successful.

We invest substantial resources in advertising, consumer promotions and other marketing activities in order
to maintain, extend and expand our brand image. We intend to increase the amount we spend on advertising
activities in fiscal 2012 by as much as $40 million. There can be no assurances that our marketing strategies will
be effective or that increasing the amount we invest in advertising activities will result in a corresponding
increase in sales of our products. If our marketing initiatives are not successful, we will have incurred significant
expenses without the benefit of higher revenues.

Disruptions in availability or increases in the prices of raw materials could adversely affect our results of
operations.

We source many of our commodities and other raw materials on a global basis. The general availability and
price of those raw materials, particularly urea, can be affected by numerous forces beyond our control, including
political instability, trade restrictions and other government regulations, duties and tariffs, price controls, changes
in currency exchange rates and weather.

A significant disruption in the availability of any of our key raw materials could negatively impact our
business. In addition, increases in the prices of key commodities and other raw materials could adversely affect
our ability to manage our cost structure. Market conditions may limit our ability to raise selling prices to offset
increases in our raw material costs. The uniqueness of our technologies can limit our ability to locate or utilize
alternative inputs for certain products. For certain inputs, new sources of supply may have to be qualified under
regulatory standards, which can require additional investment and delay bringing a product to market.

We utilize hedge agreements periodically to fix the prices of a portion of our urea and fuel needs. The hedge
agreements are designed to mitigate the earnings and cash flow fluctuations associated with the costs of urea and
fuel. However, in periods of declining urea and fuel prices the hedge agreements can have the effect of increasing
our expenditures for these raw materials.

Our hedging arrangements expose us to certain counterparty risks.

In addition to commodity hedge agreements, we utilize interest rate swap agreements as a means to hedge
our variable interest rate exposure on debt instruments as well as foreign currency swap contracts to manage the
exchange rate risk associated with certain intercompany loans with foreign subsidiaries. Utilizing these hedge
agreements exposes us to certain counterparty risks. The failure of one or more of these counterparties to fulfill
their obligations under the hedge agreements, whether as a result of weakening financial stability or otherwise,
could adversely affect our financial condition, results of operations or cash flows.

13

Economic conditions could adversely affect our business.

Uncertain global economic conditions could adversely affect our business. Negative global economic trends,
such as decreased consumer and business spending, high unemployment levels, reduced rates of home ownership
and housing starts, high foreclosure rates and declining consumer and business confidence, pose challenges to
our business and could result in declining revenues, profitability and cash flow. Although we continue to devote
significant resources to support our brands, unfavorable economic conditions may negatively affect consumer
demand for our products. Consumers may reduce discretionary spending during periods of economic uncertainty,
which could reduce sales volumes of our products or result in a shift in our product mix from higher margin to
lower margin products.

The highly competitive nature of our markets could adversely affect our ability to maintain or grow
revenues.

Each of our operating segments participates in markets that are highly competitive. Our products compete
against national and regional products and private label products produced by various suppliers. Many of our
competitors sell their products at prices lower than ours. Our most price sensitive customers may trade down to
lower priced products during challenging economic times or if current economic conditions worsen. We compete
primarily on the basis of product innovation, product quality, product performance, value, brand strength, supply
chain competency, field sales support, the strength of our relationships with major retailers and advertising. Some
of our competitors have significant financial resources. The strong competition that we face in all of our markets
may prevent us from achieving our revenue goals, which may have a material adverse effect on our financial
condition, results of operations or cash flows. Our inability to continue to develop and grow brands with leading
market positions, maintain our relationships with key retailers and deliver products on a reliable basis at
competitive prices could have a material adverse effect on us.

We may not successfully develop new products or improve existing products or maintain our effectiveness in
reaching consumers through rapidly evolving communication vehicles.

Our future success depends, in part, upon our ability to improve our existing products and to develop,
manufacture and market new, innovative products to meet evolving consumer needs, as well as our ability to
leverage new mediums such as digital media and social networks to reach existing and potential consumers. We
cannot be certain that we will be successful in the development, manufacturing and marketing of new products or
product innovations which satisfy consumer needs or achieve market acceptance, or that we will develop and
market new products or product innovations in a timely manner. If we fail to successfully develop, manufacture
and market new or enhanced products or develop product innovations, or if we fail to reach existing and potential
consumers, our ability to maintain or grow our market share may be adversely affected, which in turn could
materially adversely affect our business, financial condition and results of operations. In addition,
the
development and introduction of new products and product innovations require substantial research, development
and marketing expenditures, which we may be unable to recoup if such new products or innovations do not
achieve market acceptance.

Many of the products we manufacture and market contain active ingredients that are subject to regulatory
approval. The need to obtain such approval could delay the launch of new products or product innovations that
contain active ingredients or otherwise prevent us from developing and manufacturing certain products and
innovations, further exacerbating the risks to our business.

Because of the concentration of our sales to a small number of retail customers, the loss of one or more of,
or significant reduction in orders from, our top customers could adversely affect our financial results.

Global Consumer net sales represented approximately 89% of our worldwide net sales in fiscal 2011. Our
top three retail customers together accounted for 61% of our fiscal 2011 net sales and 47% of our outstanding

14

accounts receivable as of September 30, 2011. Home Depot, Lowe’s and Walmart represented approximately
30%, 18% and 13%, respectively, of our fiscal 2011 net sales. The loss of, or reduction in orders from, Home
Depot, Lowe’s, Walmart or any other significant customer could have a material adverse effect on our business,
financial condition, results of operations or cash flows, as could customer disputes regarding shipments, fees,
merchandise condition or related matters. 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 or 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 key retailers whose
bargaining strength is strong. 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 customers. In addition, our business may be
negatively affected by changes in the policies of our retailers, such as inventory destocking, limitations on access
to shelf space, price demands and other conditions.

Our reliance on third-party manufacturers could harm our business.

We rely on third-party service providers to manufacture certain of our products. This reliance generates a
number of risks, including decreased control over the production process, which could lead to production delays
or interruptions, and inferior product quality control. In addition, performance problems at these third-party
providers could result in cost overruns, shortages or other problems, which could result in significant customer
dissatisfaction and thereby materially affect our business, financial condition and results of operations.

If one or more of our third-party manufacturers becomes insolvent or unwilling to continue to manufacture
products of acceptable quality, at acceptable costs, in a timely manner, our ability to deliver products to our
customers could be significantly impaired. Substitute manufacturers might not be available or, if available, might
be unwilling or unable to manufacture the products we need on acceptable terms. Moreover, if customer demand
for our products increases, we may be unable to secure sufficient additional capacity from our current third-party
manufacturers, or others, on commercially reasonable terms, or at all.

Our reliance on a limited base of suppliers may result in disruptions to our business and adversely affect
our financial results.

We rely on a limited number of suppliers for certain of our raw materials, product components and other
necessary supplies, including certain of the active ingredients used in our products. If we are unable to maintain
supplier arrangements and relationships, if we are unable to contract with suppliers at the quantity and quality
levels needed for our business, or if any of our key suppliers becomes insolvent or experiences other financial
distress, we could experience disruptions in production, which could have a material adverse effect on our
financial results.

A significant interruption in the operation of our or our suppliers’ facilities could impact our capacity to
produce products and service our customers, which could adversely affect revenues and earnings.

Operations at our and our suppliers’ facilities are subject to disruption for a variety of reasons, including
fire, flooding or other natural disasters, disease outbreaks or pandemics, acts of war, terrorism and work
stoppages. A significant interruption in the operation of our or our suppliers’ facilities could significantly impact
our capacity to produce products and service our retail customers in a timely manner, which could have a
material adverse effect on our revenues, earnings and financial position. This is especially true for those products
that we manufacture at a limited number of facilities, such as our fertilizer and liquid products in both the United
States and Europe.

15

Adverse weather conditions could adversely impact financial results.

Weather conditions in North America and Europe can have a significant impact on the timing of sales in the
spring selling season and overall annual sales. An abnormally wet and/or cold spring throughout North America
or Europe, abnormally dry periods or droughts, and other severe weather conditions or events could adversely
affect fertilizer, pesticide and insecticide sales and, therefore, our financial results.

Our indebtedness could limit our flexibility and adversely affect our financial condition.

As of September 30, 2011, we had $795 million of debt. Our inability to meet restrictive financial and

non-financial covenants associated with that debt could adversely affect our financial condition.

Our ability to make payments on our indebtedness, fund planned capital expenditures and acquisitions, pay
dividends and make share repurchases depends on our ability to generate cash in the future. This, to some extent,
is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond
our control. We cannot assure you that our business will generate sufficient cash flow from operating activities or
that future borrowings will be available to us under our credit facility in amounts sufficient to enable us to pay
our indebtedness or to fund our other liquidity needs.

Our credit facility, the indenture governing our 7.25% Senior Notes due 2018 (the “7.25% Senior Notes”)
and the indenture governing our 6.625% Senior Notes due 2020 (the “6.625% Senior Notes” and, collectively
with the 7.25% Senior Notes, the “Senior Notes”) contain restrictive covenants and cross-default provisions. In
addition, our credit facility requires us to maintain specified financial ratios. Our ability to comply with those
covenants and satisfy those financial ratios can be affected by events beyond our control. A breach of any of
those financial ratio covenants or other covenants could result in a default. Upon the occurrence of such an event
of default, the lenders could elect to declare all of the outstanding indebtedness immediately due and payable and
terminate all commitments to extend further credit. We cannot assure you that our lenders would waive a default
or that we could pay the indebtedness in full if it were accelerated.

Subject to compliance with certain covenants under our credit facility and the indentures governing our
Senior Notes, we may incur additional debt in the future. If we incur additional debt, the risks described above
could intensify.

Our postretirement-related costs and funding requirements could increase as a result of volatility in the
financial markets, changes in interest rates and actuarial assumptions.

We sponsor a number of defined benefit pension plans associated with our U.S. and international
businesses, as well as a postretirement medical plan in the U.S. for certain retired associates and their
dependents. The performance of the financial markets and changes in interest rates impact the funded status of
these plans and cause volatility in our postretirement-related costs and future funding requirements. If the
financial markets do not provide the expected long-term returns on invested assets, we could be required to make
significant pension contributions. Additionally, changes in interest rates and legislation enacted by governmental
authorities can impact the timing and amounts of contribution requirements.

We utilize third-party actuaries to evaluate assumptions used in determining projected benefit obligations
and the fair value of plan assets for our pension and other postretirement benefit plans. In the event we determine
that our assumptions should be revised, such as the discount rate, the expected long-term rate or expected return
on assets, our future pension and postretirement benefit expenses could increase or decrease. The assumptions we
use may differ from actual results, which could have a significant impact on our pension and postretirement
liabilities and related costs and funding requirements.

16

Our international operations make us susceptible to the costs and risks associated with operating
internationally.

We currently operate manufacturing, sales and service facilities outside of the United States, particularly in
Canada, France, the United Kingdom and Germany. In fiscal 2011, international net sales, including Canada,
accounted for approximately 18% of our total net sales. Accordingly, we are subject to risks associated with
operating in foreign countries, including:

•

•

•

•

•

•

•

•

•

•

fluctuations in currency exchange rates;

limitations on the remittance of dividends and other payments by foreign subsidiaries;

additional costs of compliance with local regulations;

historically, in certain countries, higher rates of inflation than in the United States;

changes in the economic conditions or consumer preferences or demand for our products in these
markets;

restrictive actions by multi-national governing bodies, foreign governments or subdivisions thereof;

changes in foreign labor laws and regulations affecting our ability to hire and retain employees;

changes in U.S. and foreign laws regarding trade and investment;

less robust protection of our intellectual property under foreign laws; and

difficulty in obtaining distribution and support for our products.

In addition, our operations outside the United States are subject to the risk of new and different legal and
regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations and
potentially adverse tax consequences. The costs associated with operating our International business could
adversely affect our results of operations, financial condition or cash flows in the future.

Failure of our key information technology systems could adversely impact our ability to conduct business.

We rely on information technology systems in order to conduct business, including communicating with
employees and our key retail customers, ordering and managing materials from suppliers, shipping products to
customers and analyzing and reporting results of operations. While we have taken steps to ensure the security of
our information technology systems, our systems may nevertheless be vulnerable to computer viruses, security
breaches and other disruptions from unauthorized users. If our information technology systems are damaged or
cease to function properly for an extended period of time, whether as a result of a significant cyber incident or
otherwise, our ability to communicate internally as well as with our retail customers could be significantly
impaired, which may adversely impact our business.

We may not be able to adequately protect our intellectual property and other proprietary rights that are
material to our business.

Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names
and other intellectual property rights we own or license, particularly our registered brand names and issued
patents. We have not sought to register every one of our marks either in the United States or in every country in
which they are used. Furthermore, because of the differences in foreign trademark, patent and other intellectual
property or proprietary rights laws, we may not receive the same protection in other countries as we would in the
United States with respect to the registered brand names and issued patents we hold. If we are unable to protect
our intellectual property, proprietary information and/or brand names, we could suffer a material adverse effect
on our business, financial condition or results of operations.

17

Litigation may be necessary to enforce our intellectual property rights and protect our proprietary
information, or to defend against claims by third parties that our products or services infringe their intellectual
property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of
our resources. A successful claim of trademark, patent or other intellectual property infringement against us, or
any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us
from providing certain products or services under our recognized brand names, which could have a material
adverse effect on our business, financial condition or results of operations.

If Monsanto were to terminate the Marketing Agreement for consumer Roundup® products, we would lose
a substantial source of future earnings and overhead expense absorption.

If we were to commit a serious default under the Marketing Agreement with Monsanto for consumer
Roundup® products, Monsanto may have the right to terminate the Marketing Agreement. If Monsanto were to
terminate the Marketing Agreement for cause, we would not be entitled to any termination fee. Monsanto may
also be able to terminate the Marketing Agreement within a given region, including North America, without
paying us a termination fee if unit volume sales to consumers in that region decline: (i) over a cumulative three-
fiscal-year period; or (ii) by more than 5% for each of two consecutive years. If the Marketing Agreement was
terminated for any reason, we would also lose all, or a substantial portion, of the significant source of earnings
and overhead expense absorption the Marketing Agreement provides.

Hagedorn Partnership, L.P. beneficially owns approximately 30% of our common shares and can
significantly influence decisions that require the approval of shareholders.

Hagedorn Partnership, L.P. beneficially owned approximately 30% of our outstanding common shares on a
fully diluted basis as of November 18, 2011. As a result, it has sufficient voting power to significantly influence
the election of directors and the approval of other actions requiring the approval of our shareholders, including
the entering into of certain business combination transactions. In addition, because of the percentage of
ownership and voting concentration in Hagedorn Partnership, L.P., elections of our board of directors will
generally be within the control of Hagedorn Partnership, L.P. While all of our shareholders are entitled to vote on
matters submitted to our shareholders for approval, the concentration of shares and voting control presently lies
with Hagedorn Partnership, L.P. As such, it would be difficult for shareholders to propose and have approved
proposals not supported by Hagedorn Partnership, L.P. Hagedorn Partnership, L.P. may have an interest in our
pursuing transactions that it believes may enhance the value of its equity investment in us, even though such
transactions may involve certain risks.

We may pursue acquisitions, dispositions, investments, dividends, share repurchases and/or other corporate
transactions that we believe will maximize equity returns of our shareholders but may involve risks.

From time to time, we consider opportunities for acquisitions of businesses, product lines or other assets,
potential dispositions and other strategic transactions. For example,
in fiscal 2011 we sold our Global
Professional business and acquired the assets of a growing media operator in Florida. These types of transactions
may involve risks, such as risks of integration of acquired businesses and loss of cash flows and market positions
of disposed businesses, the possibility that anticipated synergies from strategic acquisitions may not materialize,
and the risk that sales of acquired products may not meet expectations.

In addition, if our business performs according to our financial plan, subject to the discretion of our Board
of Directors and to market and other conditions we may, over time, significantly increase the rate of dividends
on, and the amount of repurchases of, our common shares. For example, in the fourth quarter of fiscal 2010 we
doubled the amount of our quarterly cash dividend, and our Board of Directors authorized the repurchase of up to
$500 million of Scotts Miracle-Gro common shares. In fiscal 2011 we increased the amount of our dividend by
an additional 20% and our Board of Directors authorized the repurchase of up to an additional $200 million of
our common shares. We may further increase the rate of dividends on, and the amount of repurchases of, our
common shares in the future.

18

There can be no assurance that we will effect any of these transactions or activities, but, if we do, certain

risks may be increased, possibly materially.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We own or lease numerous facilities throughout the world to support our business operations:

• Global Consumer — We own manufacturing, distribution, research and development and office
facilities in Marysville, Ohio; research facilities in Apopka, Florida and Gervais, Oregon; and
production facilities in Pearl, Mississippi and Fort Madison, Iowa. We lease a spreader and other
durable components manufacturing facility in Temecula, California. In addition, we operate 29 stand-
alone growing media facilities in North America—24 of which are owned by the Company and five of
which are leased. Most of these facilities include production lines, warehouses, offices and field
processing areas. We also lease a fertilizer and growing media manufacturing facility and distribution
center in Orrville, Ohio. We own four production facilities for our wild bird food operations in Indiana,
South Dakota, South Carolina and Texas. We own a grass seed blending and bagging facility in
Albany, Oregon.

We lease facilities for the headquarters of our international business (which also serves as our local
French operations office) in Ecully (Lyon), France. We own a blending and bagging facility for
growing media in Hautmont, France and a plant in Bourth, France that we use for formulating,
blending and packaging plant protection products. We own manufacturing facilities in Howden (East
Yorkshire), Hatfield (South Yorkshire), Gretna Green (Gretna) and Sutton Bridge (Spalding), all in the
United Kingdom. We own three peat extraction facilities in Scotland and we lease land for peat
extraction at two additional locations across the United Kingdom. We lease research and development
facilities in Morance (Rhone), France and Cobbitty (NSW), Australia, and we own a research and
development facility in Levington (Ipswich), United Kingdom.

•

Scotts LawnService® — We lease facilities for each of our 83 Company-operated Scotts LawnService®
locations. The facilities are primarily located in industrial parks.

Our corporate headquarters are located in Marysville, Ohio, where we own or lease approximately
750 acres. We also lease office space for sales, marketing and general operating activities as well as warehouse
space throughout North America and continental Europe as needed. We believe that our facilities are adequate to
serve their intended purposes and that our property leasing arrangements are satisfactory.

ITEM 3. LEGAL PROCEEDINGS

As noted in the discussion in “ITEM 1. BUSINESS—Regulatory Considerations—FIFRA Compliance, the
Corresponding Governmental Investigations and Similar Matters” and “ITEM 1. BUSINESS—Regulatory
Considerations—Other Regulatory Matters” of this Annual Report on Form 10-K, we are involved in several
pending environmental and regulatory matters. We believe that our assessment of contingencies is reasonable
and that related reserves, in the aggregate, are adequate; however, there can be no assurance that the final
resolution of these matters will not have a material effect on our financial condition, results of operations or cash
flows.

FIFRA Compliance, the Corresponding Governmental Investigations and Similar Matters

Information with respect to the ongoing investigations and a discussion of the costs and expenses related to
such matters is hereby incorporated by reference to “NOTE 3. PRODUCT REGISTRATION AND RECALL
MATTERS” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

19

Other Regulatory Matters

On or about October 28, 2011, the Pennsylvania Department of Environmental Protection sent a letter to
SLS alleging that on June 30 and July 1, 2010, an SLS employee discharged industrial waste into the waters of
the Commonwealth in violation of the Clean Streams Law and the Solid Waste Management Act. The letter
indicated that the Department is willing to accept a civil penalty of $200,000 to resolve the matter in lieu of a
civil penalty action. We are in the process of formulating our response to the Department.

Other Pending Significant Legal Proceedings

We have been named as a defendant in a number of cases alleging injuries that the lawsuits claim resulted
from exposure to asbestos-containing products, apparently based on our historic use of vermiculite in certain of
our products. In many of these cases, the complaints are not specific about the plaintiffs’ contacts with us or our
products. None of the claims seek damages from us alone. We believe that the claims against us are without
merit and are vigorously defending against them. It is not currently possible to reasonably estimate a probable
loss, if any, associated with the cases and, accordingly, no accrual or reserves have been recorded in our
consolidated financial statements. We are reviewing agreements and policies that may provide insurance
coverage or indemnity as to these claims and are pursuing coverage under some of these agreements and policies,
although there can be no assurance of the results of these efforts. There can be no assurance that these cases,
whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect
on our financial condition, results of operations or cash flows.

On April 27, 2007, we received a proposed Order On Consent from the New York State Department of
Environmental Conservation (the “Proposed Order”) alleging that, during calendar year 2003, we and James
Hagedorn, individually and as Chairman of the Board and Chief Executive Officer of the Company, unlawfully
donated to a Port Washington, New York youth sports organization 40 bags of Scotts® LawnPro® Annual
Program Step 3 Insect Control Plus Fertilizer which, while federally registered, was allegedly not registered in
the state of New York. The Proposed Order requests penalties totaling $695,000. We have responded in writing
to the New York State Department of Environmental Conservation and are awaiting a response.

We are involved in other lawsuits and claims which arise in the normal course of our business. In our
opinion, these claims individually and in the aggregate are not expected to result in a material effect on our
financial condition, results of operations or cash flows.

ITEM 4.

(REMOVED AND RESERVED)

SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Scotts Miracle-Gro, their positions and, as of November 18, 2011, their ages and

years with Scotts Miracle-Gro (and its predecessors) are set forth below.

Name

Age

Position(s) Held

James Hagedorn . . . . . . . . . . . . . . . .
Barry W. Sanders . . . . . . . . . . . . . . .
David C. Evans . . . . . . . . . . . . . . . . .

56 Chief Executive Officer and Chairman of the Board
47
48 Chief Financial Officer and Executive Vice President,

President

Denise S. Stump . . . . . . . . . . . . . . . .
Vincent C. Brockman . . . . . . . . . . . .

57 Executive Vice President, Global Human Resources
48 Executive Vice President, General Counsel,

Strategy and Business Development

James R. Lyski

. . . . . . . . . . . . . . . . .

48 Executive Vice President, Chief Marketing Officer

Corporate Secretary and Chief Ethics & Compliance
Officer

Years with
Company

24
10
18

11
9

1

20

Executive officers serve at the discretion of the Board of Directors of Scotts Miracle-Gro and pursuant to

employment agreements or other arrangements.

The business experience of each of the individuals listed above during at least the past five years is as

follows:

Mr. Hagedorn was named Chairman of the Board of Scotts Miracle-Gro’s predecessor in January 2003
and named Chief Executive Officer of Scotts Miracle-Gro’s predecessor in May 2001. He also served as
President of Scotts Miracle-Gro (or its predecessor) from November 2006 until October 2008 and from May
2001 until December 2005. Mr. Hagedorn serves on Scotts Miracle-Gro’s Board of Directors, a position he
has held with Scotts Miracle-Gro (or its predecessor) since 1995. Mr. Hagedorn is the brother of Katherine
Hagedorn Littlefield, a director of Scotts Miracle-Gro.

Mr. Sanders was named President of Scotts Miracle-Gro in October 2010. In this position, Mr. Sanders
oversees all business unit and operating functions at the Company. Prior to his election as President,
Mr. Sanders had served as the Company’s Executive Vice President, Global Consumer since June 2010.
Previously, he served as Executive Vice President, North America of Scotts Miracle-Gro from September
2007 until May 2010. He served as Executive Vice President of Global Technology and Operations of
Scotts Miracle-Gro from January to September 2007, where he was responsible for the Company’s supply
chain and information systems, as well as research and development efforts. Before January 2007, he led the
North American and global supply chain organizations as well as the North American sales force.

Mr. Evans was named Chief Financial Officer and Executive Vice President, Strategy and Business
Development of Scotts Miracle-Gro on January 1, 2011. Prior to that, he had served as Executive Vice
President and Chief Financial Officer of Scotts Miracle-Gro since September 2006. From October 2005 to
September 2006, he served as Senior Vice President, Finance and Global Shared Services of The Scotts
Company LLC (“Scotts LLC”).

Ms. Stump has served as Executive Vice President, Global Human Resources of Scotts Miracle-Gro (or

its predecessor) since February 2003.

Mr. Brockman was named Executive Vice President, General Counsel and Corporate Secretary of
Scotts Miracle-Gro in January 2008 and was also named Chief Ethics & Compliance Officer in May 2009.
From April 2006 until January 2008, he served as Chief Ethics & Compliance Officer and Chief
Administrative Officer of Scotts LLC. Prior to April 2006, he had served as Chief Ethics & Compliance
Officer of Scotts LLC (or its predecessor) since 2004.

Mr. Lyski was named Executive Vice President, Chief Marketing Officer of Scotts Miracle-Gro on
April 1, 2011. He had previously served as interim Chief Marketing Officer since February 2011. Prior to
joining Scotts Miracle-Gro, Mr. Lyski served as Executive Vice President, Chief Marketing Officer for
Nationwide Mutual Insurance Company from October 2006 until January 2011, where he was responsible
for corporate strategy, corporate marketing, brand management, advertising and communications. Mr. Lyski
serves as President of the Board of Trustees for the Wexner Center Foundation.

21

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

The common shares of Scotts Miracle-Gro (the “Common Shares”) trade on the New York Stock Exchange
under the symbol “SMG.” The quarterly high and low sale prices for the fiscal years ended September 30, 2011
and 2010 were as follows:

FISCAL 2011
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FISCAL 2010
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale Prices

High

Low

$54.99
$58.74
$60.62
$52.17

$44.14
$46.94
$49.58
$52.56

$49.25
$48.99
$48.52
$39.99

$38.52
$37.50
$42.03
$43.88

A quarterly dividend of $0.125 per Common Share was paid in December, February and June of fiscal 2010.
On August 10, 2010, Scotts Miracle-Gro announced that its Board of Directors had increased the quarterly cash
dividend to $0.25 per Common Share, which was paid in September of fiscal 2010 and December, March and
June of fiscal 2011. On August 8, 2011, Scotts Miracle-Gro announced that its Board of Directors had further
increased the quarterly cash dividend to $0.30 per Common Share, which was first paid in September of fiscal
2011. The payment of future dividends, if any, on the Common Shares will be determined by the Board of
Directors 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 $125 million annually through fiscal 2013 and $150
million annually beginning in fiscal 2014 if our leverage ratio, after giving effect to any such annual dividend
payment, exceeds 2.50. Our leverage ratio was 1.98 at September 30, 2011. See “NOTE 11. DEBT” of the Notes
to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion
regarding the restrictions on dividend payments.

As of November 18, 2011, there were approximately 33,400 shareholders, including holders of record and

our estimate of beneficial holders.

22

The following table shows the purchases of Common Shares made by or on behalf of Scotts Miracle-Gro or
any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as
amended) of Scotts Miracle-Gro for each of the three fiscal months in the quarter ended September 30, 2011:

Period

Total Number
of Common
Shares
Purchased(1)

Average Price
Paid per
Common
Share(2)

July 3 through July 30, 2011 . . . . . . . .
July 31 through August 27, 2011 . . . . .
August 28 through September 30,

840,625
1,152,274

2011 . . . . . . . . . . . . . . . . . . . . . . . . .

971,749

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,964,648

$50.84
$45.13

$46.66

$47.25

Total Number
of Common
Shares Purchased
as Part of Publicly
Announced Plans or
Programs(3)

840,510
1,152,149

Approximate
Dollar Value of
Common Shares
That May Yet
be Purchased
Under the Plans
or Programs(3)

$413,552,023
$361,552,618

970,261

$316,283,996

2,962,920

(1) All of the Common Shares purchased during the quarter were purchased in open market transactions. The
total number of Common Shares purchased during the quarter includes 1,728 Common Shares purchased by
the trustee of the rabbi trust established by the Company as permitted pursuant to the terms of The Scotts
Company LLC Executive Retirement Plan (the “ERP”). The ERP is an unfunded, non-qualified deferred
compensation plan which, among other things, provides eligible employees the opportunity to defer
compensation above specified statutory limits applicable to The Scotts Company LLC Retirement Savings
Plan and with respect to any Executive Management Incentive Pay (as defined in the ERP), Performance
Award (as defined in the ERP) or other bonus awarded to such eligible employees. Pursuant to the terms of
the ERP, each eligible employee has the right to elect an investment fund, including a fund consisting of
Common Shares (the “Scotts Miracle-Gro Common Stock Fund”), against which amounts allocated to such
employee’s account under the ERP, including employer contributions, will be benchmarked (all ERP
accounts are bookkeeping accounts only and do not represent a claim against specific assets of the
Company). Amounts allocated to employee accounts under the ERP represent deferred compensation
obligations of the Company. The Company established the rabbi trust in order to assist the Company in
discharging such deferred compensation obligations. When an eligible employee elects to benchmark some
or all of the amounts allocated to such employee’s account against the Scotts Miracle-Gro Common Stock
Fund, the trustee of the rabbi trust purchases the number of Common Shares equivalent to the amount so
benchmarked. All Common Shares purchased by the trustee are purchased on the open market and are held
in the rabbi trust until such time as they are distributed pursuant to the terms of the ERP. All assets of the
rabbi trust, including any Common Shares purchased by the trustee, remain, at all times, assets of the
Company, subject to the claims of its creditors. The terms of the ERP do not provide for a specified limit on
the number of Common Shares that may be purchased by the trustee of the rabbi trust.

(2) The average price paid per Common Share is calculated on a settlement basis and includes commissions.

(3)

In August 2010, the Scotts Miracle-Gro Board of Directors authorized the repurchase of up to $500 million
of the Common Shares over a four-year period (through September 30, 2014). On May 4, 2011, the Scotts
Miracle-Gro Board of Directors authorized the repurchase of up to an additional $200 million of the
Common Shares, resulting in authority to repurchase up to a total of $700 million of the Common Shares
through September 30, 2014. The dollar amounts in the “Approximate Dollar Value” column reflect the
total $700 million authorized repurchase program.

23

ITEM 6. SELECTED FINANCIAL DATA

Five-Year Summary(1)
For the fiscal year ended September 30,

OPERATING RESULTS:

2011

2010

2009

2008

2007

(In millions, except per share amounts)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,835.7 $2,898.0 $2,746.4 $2,552.0 $2,472.9
878.0
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
284.2
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130.0
Income from continuing operations . . . . . . . . . . . . . . . . .
(16.6)
Income (loss) from discontinued operations . . . . . . . . . . .
113.4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)

1,075.9
363.1
200.5
3.6
204.1

1,003.0
247.0
121.9
46.0
167.9

831.1
125.2
32.0
(42.9)
(10.9)

977.7
260.5
132.6
20.7
153.3

ADJUSTED OPERATING RESULTS(2):

Adjusted operating income . . . . . . . . . . . . . . . . . . . . . . . . $ 337.7 $ 390.3 $ 289.1 $ 267.5 $ 293.0
146.8
Adjusted income from continuing operations . . . . . . . . . .

150.7

123.7

182.6

218.8

FINANCIAL POSITION:

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 523.9 $ 381.3 $ 382.7 $ 414.5 $ 484.5
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.6
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . $ 394.7 $ 381.3 $ 356.6 $ 330.5 $ 350.8
2,277.2
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt to total book capitalization(3)
. . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 795.0 $ 631.7 $ 810.1 $ 999.5 $1,117.8
479.3
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .

58.7% 45.2% 58.1% 69.6% 70.0%

2,164.0

2,052.2

2,156.2

2,220.1

436.7

584.5

764.5

559.8

1.3

1.4

1.3

1.3

CASH FLOWS:

Cash flows from operating activities . . . . . . . . . . . . . . . . . $ 122.1 $ 295.9 $ 264.6 $ 200.9 $ 246.6
54.0
Investments in property, plant and equipment
. . . . . . . . .
Investments in intellectual property . . . . . . . . . . . . . . . . .
—
Investments in acquisitions, including seller note

72.0
3.4

72.7
—

83.4
—

56.1
4.1

payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchases of common shares . . . . . . . . . . . . . . . . . .

7.9
67.9
358.7

0.6
42.6
25.0

10.7
33.4
—

2.7
32.5
—

PER SHARE DATA:

Earnings per common share from continuing operations:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted diluted(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Dividends per common share(4)(5)
Stock price at year-end(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock price range—High(5)
. . . . . . . . . . . . . . . . . . . . . . . .
Stock price range—Low(5) . . . . . . . . . . . . . . . . . . . . . . . . .

1.88 $
1.84
2.76
1.05
44.60
60.62
39.99

3.03 $
2.97
3.24
0.625
51.73
52.56
37.50

2.04 $
2.01
2.28
0.50
42.95
44.25
18.27

0.50 $
0.49
1.89
0.50
23.64
46.90
16.12

21.4
543.6
246.8

1.99
1.94
2.19
8.50
42.75
57.45
40.57

OTHER:

Adjusted EBITDA(6)
Leverage ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest coverage ratio(6)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding . . . . . . . .
Common shares and dilutive potential common

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 393.0 $ 440.1 $ 350.5 $ 318.4 $ 382.6
3.56
1.98
5.37
7.47
65.2
64.7

2.00
9.40
66.3

3.20
6.21
65.0

3.97
3.87
64.5

shares used in diluted EPS calculation . . . . . . . . . . . . .

66.2

67.6

66.1

65.4

67.0

(1) On July 8, 2009, Scotts Miracle-Gro announced that its wholly-owned subsidiary, Smith & Hawken, Ltd.,
had adopted a plan to close the Smith & Hawken business. During our first quarter of fiscal 2010, all

24

Smith & Hawken stores were closed and substantially all operational activities of Smith & Hawken were
discontinued. As a result, effective in our first quarter of fiscal 2010, we classified Smith & Hawken as
discontinued operations in accordance with accounting principles generally accepted in the United States of
America (“GAAP”).

On February 28, 2011, we completed the sale of Global Pro to ICL. In conjunction with the transaction,
Scotts LLC and ICL entered into several product supply agreements which are generally up to five years in
duration, as well as various trademark and technology licensing agreements with varying durations. Our
continuing cash inflows and outflows related to these agreements are not considered to be significant in
relation to the overall cash flows of Global Pro. Furthermore, none of these agreements permit us to
influence the operating or financial policies of Global Pro under the ownership of ICL. Therefore, Global
Pro met the criteria for presentation as discontinued operations. As such, effective in the first quarter of
fiscal 2011, we classified Global Pro as discontinued operations in accordance with GAAP.

The Selected Financial Data has been retrospectively updated to recast Smith & Hawken and Global Pro as
discontinued operations for each period presented.

(2) The Five-Year Summary includes non-GAAP financial measures, as defined in Item 10(e) of SEC
Regulation S-K, of adjusted operating income, adjusted income from continuing operations and adjusted
diluted earnings per share from continuing operations, which exclude costs or gains related to discrete
projects or transactions. Items excluded during the five-year period ended September 30, 2011 consisted of
charges or credits relating to refinancings, impairments, restructurings, product registration and recall
matters, discontinued operations, and other unusual items such as costs or gains related to discrete projects
or transactions that are apart from and not indicative of the results of the operations of the business. The
comparable GAAP measures are reported operating income, reported income from continuing operations
and reported diluted earnings per share from continuing operations. Our management believes that these
non-GAAP measures are the most indicative of our earnings capabilities and that disclosure of these
non-GAAP financial measures therefore provides useful information to investors or other users of the
financial statements, such as lenders. A reconciliation of the non-GAAP to the most directly comparable
GAAP measures is presented in the following tables:

2011

2010

2009

2008

2007

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . . . . . . . . . . . . . .

$247.0
76.1
14.6

(In millions, except per share data)
$260.5
—
28.6

$363.1
18.5
8.7

$125.2
91.2
51.1

$284.2
8.8
—

Adjusted operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$337.7

$390.3

$289.1

$267.5

$293.0

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges, net of tax . . . . . . . . .
Product registration and recall matters, net of tax . . . . . . . . . . . . . .
Debt refinancing charges, net of tax . . . . . . . . . . . . . . . . . . . . . . . .

$121.9
48.7
12.0
—

$200.5
12.7
5.6
—

$132.6
—
18.1
—

$ 32.0
58.4
33.3
—

$130.0
5.4
—
11.4

Adjusted income from continuing operations . . . . . . . . . . . . . . . . .

$182.6

$218.8

$150.7

$123.7

$146.8

Diluted earnings per share from continuing operations . . . . . . . . . .
Impairment, restructuring and other charges, net of tax . . . . . . . . .
Product registration and recall matters, net of tax . . . . . . . . . . . . . .
Debt refinancing charges, net of tax . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.84
0.74
0.18
—

$ 2.97
0.19
0.08
—

$ 2.01
—
0.27
—

$ 0.49
0.89
0.51
—

$ 1.94
0.08
—
0.17

Adjusted diluted earnings per share from continuing operations . . .

$ 2.76

$ 3.24

$ 2.28

$ 1.89

$ 2.19

25

(3) The total debt to total book capitalization percentage is calculated by dividing total debt by total debt plus

shareholders’ equity.

(4) Scotts Miracle-Gro began paying a quarterly dividend of $0.125 per Common Share in the fourth quarter of
fiscal 2005. On August 10, 2010, Scotts Miracle-Gro announced that its Board of Directors had increased
the quarterly cash dividend to $0.25 per Common Share, which was first paid in the fourth quarter of fiscal
2010. On August 8, 2011, Scotts Miracle-Gro announced that its Board of Directors had further increased
the quarterly cash dividend to $0.30 per Common Share, which was first paid in the fourth quarter of fiscal
2011.

(5) Scotts Miracle-Gro paid a special one-time cash dividend of $8.00 per Common Share on March 5, 2007.

Stock prices have not been adjusted for this special one-time cash dividend.

(6) We view our credit facility as material to our ability to fund operations, particularly in light of our
seasonality. Please refer to “ITEM 1A. RISK FACTORS—Our indebtedness could limit our flexibility and
adversely affect our financial condition” of this Annual Report on Form 10-K for a more complete
discussion of the risks associated with our debt and our credit facility and the restrictive covenants therein.
Our ability to generate cash flows sufficient to cover our debt service costs is essential to our ability to
maintain our borrowing capacity. We believe that Adjusted EBITDA provides additional information for
determining our ability to meet debt service requirements. The presentation of Adjusted EBITDA herein is
intended to be consistent with the calculation of that measure as required by our borrowing arrangements,
and used to calculate a leverage ratio (maximum of 3.50 at September 30, 2011) and an interest coverage
ratio (minimum of 3.50 for the year ended September 30, 2011). Our leverage ratio was 1.98 at
September 30, 2011 and our interest coverage ratio was 7.47 for the year ended September 30, 2011.

In accordance with the terms of our credit facility, Adjusted EBITDA is calculated as net income or loss
before interest, taxes, depreciation and amortization as well as certain other items such as the impact of the
cumulative effect of changes in accounting, costs associated with debt refinancing and other non-recurring,
non-cash items affecting net income. In addition, non-recurring cash items affecting net income that are
incurred between April 3, 2011 and June 30, 2012 in an aggregate amount not to exceed $40 million are also
excluded from the determination of Adjusted EBITDA. Our calculation of Adjusted EBITDA does not
represent and should not be considered as an alternative to net income or cash flows from operating
activities as determined by GAAP. We make no representation or assertion that Adjusted EBITDA is
indicative of our cash flows from operating activities or results of operations. We have provided a
reconciliation of Adjusted EBITDA to income from continuing operations solely for the purpose of
complying with SEC regulations and not as an indication that Adjusted EBITDA is a substitute measure for
income from continuing operations.

Interest coverage ratio is calculated as Adjusted EBITDA divided by interest expense, as described in our
credit facility, and excludes costs related to refinancings.

Leverage ratio is calculated as average total indebtedness, as described in our credit facility, relative to
Adjusted EBITDA.

26

A numeric reconciliation of Adjusted EBITDA to income from continuing operations is as follows (in millions):

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense from continuing operations . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax (excluding

Global Pro sale) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefits) from discontinued operations . . . . .
Costs related to refinancings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense from discontinued operations . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment and other charges . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters, non-cash portion . . . . . . . .
Mark-to-market adjustments on derivatives . . . . . . . . . . . . . . . . . . .
Smith & Hawken closure process, non-cash portion . . . . . . . . . . . .

2011

2010

2009

2008

2007

$121.9
72.9

$200.5
119.4

$132.6
75.5

$ 32.0
15.6

$130.0
70.4

6.5
2.6
1.2
51.0
1.7
50.3
11.4
64.3
8.7
0.5
—

3.6
7.2
—
43.2
3.7
48.5
10.9
18.5
1.0
—
(16.4)

20.7
(18.1)
—
52.4
4.0
47.9
12.5
7.4
2.9
—
12.7

(42.9)
11.1
—
77.6
4.6
53.9
16.4
136.8
13.3
—
—

(16.6)
4.3
18.3
65.5
5.2
51.4
16.1
38.0
—
—
—

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$393.0

$440.1

$350.5

$318.4

$382.6

Please refer to “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS—Liquidity and Capital Resources” of this Annual Report on Form 10-K for
a discussion of our credit facility.

27

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The purpose of this discussion is to provide an understanding of our financial condition and results of
operations by focusing on changes in certain key measures from year-to-year. Management’s Discussion and
Analysis (“MD&A”) is divided into the following sections:

• Executive summary

• Results of operations

•

Segment results

• Management’s outlook

• Liquidity and capital resources

• Regulatory matters

• Critical accounting policies and estimates

Executive Summary

We are dedicated to delivering strong, long-term financial results and outstanding shareholder returns by
providing products of superior quality and value to enhance consumers’ outdoor lawn and garden environments.
We are a leading manufacturer and marketer of consumer branded products for lawn and garden care in North
America and Europe. We are Monsanto’s exclusive agent for the marketing and distribution of consumer
Roundup® non-selective herbicide products within the United States and other contractually specified countries.
We have a presence in similar consumer branded products in Australia, the Far East and Latin America. We also
operate Scotts LawnService®, the second largest U.S. lawn care service business. Our operations are divided into
the following reportable segments: Global Consumer and Scotts LawnService®.

On February 28, 2011, we completed the sale of a significant majority of the assets of our Global
Professional business (excluding our non-European professional seed business, “Global Pro”) to Israel Chemicals
Ltd. (“ICL”) for $270 million in an all-cash transaction, subject to certain adjustments, resulting in $270.9
million net proceeds. For additional information regarding the use of proceeds from the sale of Global Pro, see
“NOTE 2. DISCONTINUED OPERATIONS” of the Notes to Consolidated Financial Statements included in this
Annual Report on Form 10-K.

Effective in our first quarter of fiscal 2011, we classified Global Pro as discontinued operations. Prior to
being reported as discontinued operations, Global Pro was included as part of our former Global Professional
business segment. Results for our non-European professional seed business have been classified to Corporate &
Other.

During our first quarter of fiscal 2010, all Smith & Hawken stores were closed and substantially all
operational activities of Smith & Hawken were discontinued. As a result, effective in our first quarter of fiscal
2010, we classified Smith & Hawken as discontinued operations.

As a leading consumer branded lawn and garden company, our product development and marketing efforts
are largely focused on providing innovative and differentiated products and on continually increasing brand and
product awareness to inspire consumers and create retail demand. We have successfully applied this model for a
number of years by focusing on research and development and investing approximately 4 – 5% of our annual net
sales in advertising to support and promote our products and brands. We continually explore new and innovative
ways to communicate with consumers. We believe that we receive a significant return on these expenditures and
anticipate a similar commitment to research and development, advertising and marketing investments in the
future, with the continuing objective of driving category growth and profitably increasing market share.

28

Our sales in any one year are susceptible to weather conditions in the markets in which our products are
sold. For instance, periods of abnormally wet or dry weather can adversely impact sale of certain products, while
increasing demand for other products. We believe that our diversified product line and our broad geographic
diversification reduce this risk, although to a lessor extent in a year where unfavorable weather is geographically
wide-spread and extends across a significant portion of the lawn and garden season. We also believe that weather
conditions in any one year, positive or negative, do not materially alter longer-term category growth trends.

Due to the nature of the lawn and garden business, significant portions of our products ship to our retail
customers during our second and third fiscal quarters, as noted in the chart below. Our annual sales are further
concentrated in the second and third fiscal quarters by retailers who rely on our ability to deliver products closer
to when consumers buy our products, thereby reducing retailers’ pre-season inventories.

Percent of Net Sales from
Continuing Operations by
Quarter

2011

2010

2009

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.1% 8.7% 8.5%
39.9% 36.2% 32.0%
37.3% 40.5% 42.5%
14.7% 14.6% 17.0%

Management focuses on a variety of key indicators and operating metrics to monitor the financial condition
and performance of the continuing operations of our business. These metrics include consumer purchases
(point-of-sale data), market share, category growth, net sales (including unit volume, pricing, product mix and
foreign exchange movements), organic net sales growth (net sales growth excluding the impact of foreign
exchange movements, product recalls and acquisitions), gross profit margins, advertising to net sales ratios,
income from operations, income from continuing operations, net income and earnings per share. To the extent
applicable, these measures are evaluated with and without impairment, restructuring and other charges as well as
product registration and recall matters, which management believes are not indicative of the earnings capabilities
of our businesses. We also focus on measures to optimize cash flow and return on invested capital, including the
management of working capital and capital expenditures.

The Scotts Miracle-Gro Board of Directors has authorized the repurchase of up to $700 million of our
common shares through September 30, 2014. Further, on August 8, 2011, we announced that the Scotts
Miracle-Gro Board of Directors increased our quarterly dividend from $0.25 to $0.30 per common share. The
decisions to increase the amount of cash we intend to return to our shareholders reflect our continued confidence
in the long-term performance of our business, which should allow us to return cash to shareholders while also
investing to sustain and grow our key competitive advantages. During fiscal 2011, we repurchased approximately
6.9 million of our common shares in open market transactions for $358.7 million. From the inception of this
program in the fourth quarter of fiscal 2010 through fiscal 2011 year-end, we have repurchased approximately
7.4 million of our common shares for $383.7 million.

Product Registration and Recall Matters

In April 2008, we became aware that a former associate apparently deliberately circumvented our policies
and U.S. Environmental Protection Agency (“U.S. EPA”) regulations under the Federal Insecticide, Fungicide,
and Rodenticide Act of 1947, as amended (“FIFRA”), by failing to obtain valid registrations for certain products
and/or causing certain invalid product registration forms to be submitted to regulators. Since that time, we have
been cooperating with both the U.S. EPA and the U.S. Department of Justice (the “U.S. DOJ”) in related civil
and criminal investigations into the pesticide product registration issues as well as a state civil investigation into
related allegations arising under state pesticide registration laws and regulations.

In late April 2008, in connection with the U.S. EPA’s investigation, we conducted a consumer-level recall
of certain consumer lawn and garden products and a Scotts LawnService® product. Subsequently, the Company

29

and the U.S. EPA agreed upon a Compliance Review Plan for conducting a comprehensive, independent review
of our product registration records. Pursuant to the Compliance Review Plan, an independent third-party firm,
Quality Associates Incorporated (“QAI”), reviewed substantially all of our U.S. pesticide product registrations
and associated advertisements, some of which were historical in nature and no longer related to sales of our
products. The U.S. EPA investigation and the QAI review process resulted in the temporary suspension of sales
and shipments of certain products. In addition, as the QAI review process or our internal review identified
potential FIFRA registration issues (some of which appear unrelated to the actions of the former associate), we
endeavored to stop selling or distributing the affected products until the issues could be resolved. QAI’s review
of our U.S. pesticide product registrations and associated advertisements is now substantially complete. The
results of the QAI review process did not materially affect our fiscal 2009, fiscal 2010 or fiscal 2011 sales and
are not expected to materially affect our fiscal 2012 sales.

In fiscal 2008, we conducted a voluntary recall of certain of our wild bird food products due to a
formulation issue. Certain wild bird food products had been treated with pest control additives to avoid insect
infestation, especially at retail stores. While the pest control additives had been labeled for use on certain stored
grains that can be processed for human and/or animal consumption, they were not labeled for use on wild bird
food products. In October 2008, the U.S. Food & Drug Administration concluded that the recall had been
completed and that there had been proper disposition of the recalled products. The results of the wild bird food
recall did not materially affect our fiscal 2009, fiscal 2010 or fiscal 2011 financial condition, results of operations
or cash flows.

Settlement discussions relating to potential fines and/or penalties are a frequent outgrowth of governmental
investigations. In that regard, on or about June 30, 2011, we received a Notice of Intent to File Administrative
Complaint (“Notice”) from the U.S. EPA Region 5 with respect to the alleged FIFRA violations. The Notice,
which does not set forth a proposed penalty amount, offers us an opportunity to present any information that we
believe the U.S. EPA should consider prior to filing the complaint and indicates that the U.S. EPA is prepared to
meet with us to discuss the alleged violations. We made a timely response to the Notice and communications
between us and the U.S. EPA are underway. We are also engaged in settlement discussions with the U.S. DOJ
regarding its criminal investigation.

Based on the facts and circumstances known to us at this time (including settlement discussions that have
taken place to date), we have established what we believe to be an appropriate reserve. The U.S. EPA, U.S. DOJ
and related state investigations continue, however, and may result in future state, federal or private rights of
action as well as judgments, settlements, fines and/or penalties with respect to known or potential additional
product registration issues. At this stage of the investigations, we cannot reasonably estimate the total scope or
magnitude of all possible liabilities that could result from known or potential product registration issues. It is
possible that any fines and/or penalties with respect to the investigations, as well as any judgments, litigation
costs or other liabilities relating to such known or potential product registration issues, could exceed the amount
of the reserve, possibly materially, and could have an adverse effect on our financial condition, results of
operations or cash flows.

In June 2008, the California Department of Pesticide Regulation (“CDPR”) issued a request for information
to the Company relating to products that had been the subject of the April 2008 recall. We cooperated with that
inquiry and reached agreement with CDPR that it would place its investigation on hold pending the completion
of our internal audit. In July 2010, CDPR notified us that it planned to proceed with its investigation independent
of the U.S. EPA and U.S. DOJ, and in March 2011 we received a letter from CDPR offering to settle the matter
without the need for an enforcement proceeding for $245,631. On July 25, 2011, we paid the requested civil
penalty and entered into a Settlement Agreement pursuant to which CDPR agreed not to take further civil or
criminal action with regard to the affected products.

As a result of these registration and recall matters, we have recorded charges for affected inventory and
other registration and recall-related costs. The effects of these adjustments, including the reserve noted above,

30

were pre-tax charges of $14.6 million, $8.7 million and $28.6 million for the fiscal years ended September 30,
2011, 2010 and 2009, respectively. We expect that future charges will include costs associated with the rework of
certain finished goods inventories, the potential disposal of certain products and ongoing third-party professional
services related to the U.S. EPA, U.S. DOJ and state investigations. It may also be appropriate to establish
additional reserves as settlement discussions continue or in connection with other actions or potential liabilities
arising in connection with the product registration issues.

We are committed to providing our customers and consumers with products of superior quality and value to
enhance their lawns, gardens and overall outdoor living environments. We believe consumers have come to trust
our brands based on the superior quality and value they deliver, and that trust is highly valued. We also are
committed to conducting business with the highest degree of ethical standards and in adherence to the law. While
we are disappointed in these events, we believe we have made significant progress in addressing the issues and
restoring customer and consumer confidence in our products.

Results of Operations

We classified Global Pro and Smith & Hawken as discontinued operations, for all periods presented,
beginning in our first quarter of fiscal 2011 and our first quarter of fiscal 2010, respectively. As a result, and
unless specifically stated, all discussions regarding results for the fiscal years ended September 30, 2011, 2010
and 2009 reflect results from our continuing operations.

The following table sets forth the components of income and expense as a percentage of net sales for the

fiscal years ended September 30:

2011

2010

2009

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—impairment, restructuring and other charges . . . . .
Cost of sales—product registration and recall matters . . . . . . . . .

100.0% 100.0% 100.0%
62.8
63.9
—
0.6
0.1
0.1

64.0
—
0.4

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.4

37.1

35.6

24.3
2.0
0.4
(0.1)

25.5
24.0
—
0.6
0.6
0.2
(0.2) —

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . .
Income tax expense from continuing operations . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . .

8.8
0.1
1.8

6.9
2.6

4.3
1.6

12.5
—
1.5

11.0
4.1

6.9
0.1

9.5
—
1.9

7.6
2.7

4.9
0.7

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.9%

7.0%

5.6%

31

Net Sales

Consolidated net sales for fiscal 2011 decreased 2.1% to $2.84 billion from $2.90 billion in fiscal 2010. Net
sales for fiscal 2010 increased 5.5% from $2.75 billion in fiscal 2009. Organic net sales, which excludes the
impact of changes in foreign exchange rates and acquisitions, declined 3.1% in fiscal 2011 after growing 4.8% in
fiscal 2010, as outlined in the following table:

Change in net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

(2.1)% 5.5%
(0.1) —
(0.9)

(0.7)

Change in organic net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3.1)% 4.8%

Organic net sales in the Global Consumer segment decreased 5.4% in fiscal 2011, driven by a 6.8%
decrease in organic net sales in U.S. Consumer as a result of poor weather in the peak weeks of the spring and
fall lawn and garden seasons as well as lower sales in the mass merchant retail channel. International Consumer
organic net sales increased 1.1% in fiscal 2011, driven primarily by product innovation. Organic net sales in the
Scotts LawnService® segment increased 5.1% primarily due to improvements in selling effectiveness, higher
customer satisfaction rates and improved customer retention. Corporate & Other had an overall sales increase of
$42.7 million in fiscal 2011, approximately 75% of which was attributable to our new supply agreements with
ICL.

Organic net sales in the Global Consumer segment increased 5.8% in fiscal 2010, driven by a 6.0% increase
in organic net sales in U.S. Consumer solely as a result of unit growth. We believe the U.S. Consumer growth
was partially attributable to increased marketing efforts, continued support of the category by our retail partners
and product innovation. International Consumer organic net sales increased 4.8%, also driven entirely by unit
growth. Organic net sales in the Scotts LawnService® segment declined by 3.0% primarily due to a year-over-
year decline in average customer count.

Gross Profit

As a percentage of net sales, our gross margin rate was 35.4% for fiscal 2011 compared to 37.1% for fiscal
2010. Excluding impairment, restructuring and other charges of $3.2 million and product registration and recall
matters of $18.3 million, the gross margin rate decreased by 110 basis points in fiscal 2011. The decrease in the
gross margin rate was driven by sales growth attributed to the ICL supply agreements at zero margin,
unfavorable sales mix within U.S. Consumer, higher cost consumer promotional programs, increased commodity
costs and reduced leverage of fixed manufacturing and warehousing costs.

As a percentage of net sales, our gross margin rate was 37.1% for fiscal 2010 compared to 35.6% for fiscal
2009. The increase in the gross margin rate was driven by supply chain cost productivity initiatives, lower
average commodity costs, favorable product mix and increased commissions on sales of Roundup® branded
products. Product registration and recall matters unfavorably impacted gross margin rates by 10 and 40 basis
points for fiscal 2010 and fiscal 2009, respectively.

32

Selling, General and Administrative Expenses

The following table shows the major components of Selling, General and Administrative expenses

(“SG&A”) for each of the three years ended September 30, 2011:

Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising as a percentage of net sales . . . . .
Other SG&A . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . .

2011

2010
(In millions, except percentage figures)
$140.8

2009

$125.6

$141.0

5.0%

4.9%

4.6%

$522.1
15.9
9.5

$688.5

$528.6
16.1
9.8

$695.3

$547.8
14.1
11.7

$699.2

Advertising expense for our Global Consumer segment was $130.3 million in fiscal 2011 compared to
$129.8 million in fiscal 2010. This change was driven by a decrease of $2.9 million in U.S. Consumer where
increased funds were directed to consumer promotions, offset by an after foreign exchange impact increase of
$2.5 million in International Consumer. Advertising expense for our Scotts LawnService® segment was
$10.7 million in fiscal 2011 compared to $11.0 million in fiscal 2010.

Advertising expense for our Global Consumer segment was $129.8 million in fiscal 2010 compared to
$111.2 million in fiscal 2009, an increase of $18.6 million, or 16.8%, driven by increased spending in
U.S. Consumer partially offset by lower spending in International Consumer. Advertising expense for our Scotts
LawnService® segment was $11 million in fiscal 2010 compared to $14.4 million in fiscal 2009, a decrease of
$3.4 million, reflecting a shift in spending from advertising to direct selling, which is categorized as Other
SG&A.

In fiscal 2011, Other SG&A spending decreased $6.5 million, or 1.2%, from fiscal 2010. The primary driver
of the decrease was lower variable compensation expense, partially offset by the full year impact associated with
operating two additional regional offices which opened in the second half of fiscal 2010, increased bad debt
expense, and various other expenses including incremental marketing and research and development costs. In
fiscal 2010, Other SG&A spending decreased $19.2 million, or 3.5%, from fiscal 2009, primarily driven by
decreased variable compensation expense and lower research and development spending, which were partially
offset by increased spending in selling and marketing.

The majority of our share-based awards vest over three years, with the associated expense recognized
ratably over the vesting period. In certain cases, such as individuals who are eligible for early retirement based on
the vesting period is shorter than three years. Fiscal 2011 share-based
their age and years of service,
compensation expense was roughly flat to fiscal 2010. The increase in share-based compensation expense in
fiscal 2010 was primarily due to the acceleration of expense for certain employees whose equity awards vested in
fiscal 2010 upon meeting age and service requirements.

Amortization expense was $9.5 million in fiscal 2011, compared to $9.8 million and $11.7 million in fiscal
2010 and fiscal 2009, respectively. The decline in fiscal 2011 was driven by assets that became fully amortized in
fiscal 2011 or fiscal 2010. The decline in fiscal 2010 was driven by assets that became fully amortized in fiscal
2010 or fiscal 2009.

33

Impairment, Restructuring and Other Charges (included in SG&A)

The breakdown of Impairment, Restructuring and Other Charges (included in SG&A) for each of the three

years ended September 30, 2011 is as follows:

Product registration and recall matters . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangible assets impairment . . . . . . . . . . . . . . . . . .

2011

$11.4
38.4
19.4

$69.2

2010
(In millions)
$ 5.7
—
18.5

$24.2

2009

$16.8
—
—

$16.8

Product registration and recall costs were $11.4 million in fiscal 2011, compared to $5.7 million and
$16.8 million in fiscal 2010 and fiscal 2009, respectively. Fiscal 2011 costs include reserves established in
connection with the U.S. EPA and U.S. DOJ investigations, as well as third-party compliance review, legal and
consulting fees. Fiscal 2010 and fiscal 2009 costs primarily related to third-party compliance review, legal and
consulting fees.

In fiscal 2011 we recorded restructuring and other charges of $38.4 million, primarily related to termination
benefits provided to employees who were involuntarily terminated, an early settlement of the contingent
consideration associated with our fiscal 2006 acquisition of Turf-Seed, Inc. and other charges associated with our
investment in Turf-Seed (Europe) Limited.

Our annual impairment testing, which includes goodwill and indefinite-lived intangibles, is performed as of
the first day of our fiscal fourth quarter. Our fourth quarter fiscal 2011 impairment analysis resulted in a non-cash
charge of $19.4 million, primarily attributed to the intangible assets and goodwill associated with our wild bird
food business, including the Morning Song® tradename. Losses generated by this business over the past two
years combined with a revised long-term outlook have negatively impacted the value of this business.

Our fourth quarter fiscal 2010 impairment analysis resulted in a non-cash charge of $18.5 million related to
discontinuing or de-emphasizing certain brands and sub-brands, which is consistent with our business strategy to
increasingly concentrate our advertising and promotional spending on fewer, more significant brands to more
efficiently drive growth.

The impairment analysis for the fourth quarter of fiscal 2009 indicated that no charge for impairment was

required.

Other (Income) Expense, net

Other (income) expense, net, was $1.7 million and $6.7 million of income in fiscal 2011 and fiscal 2010,
respectively, compared to expense of $1.2 million for fiscal 2009. The decrease in fiscal 2011 was primarily due
to the non-recurrence of gains recognized in fiscal 2010 on the sale of property and other miscellaneous asset
disposals. The increase in fiscal 2010 was primarily driven by a gain recorded for the sale of property compared
to a loss recorded on the sale of assets in fiscal 2009.

Income from Operations

Income from operations in fiscal 2011 was $247 million compared to $363.1 million in fiscal 2010, a
decrease of $116.1 million, or 32.0%. Excluding impairment, restructuring and other charges and product
registration and recall costs, income from operations decreased by $52.6 million, or 13.5%, in fiscal 2011,
primarily driven by decreased net sales and lower gross margin rates, partially offset by a decrease in SG&A
spending.

34

Income from operations in fiscal 2010 was $363.1 million compared to $260.5 million in fiscal 2009, an
increase of $102.6 million. Excluding impairment, restructuring and other charges and product registration and
recall costs, income from operations increased by $101.2 million, or 35.0%, in fiscal 2010, primarily driven by
increased net sales, higher gross margin rates and lower variable compensation expense, partially offset by higher
advertising, selling and marketing spending.

Interest Expense and Refinancing Activities

Interest expense in fiscal 2011 was $51 million compared to $43.2 million and $52.4 million in fiscal 2010
and fiscal 2009, respectively. The increase in fiscal 2011 was primarily due to an increase in weighted average
interest rates as a result of our fiscal 2011 refinancing activities, partially offset by a decrease in average
borrowings. Weighted average interest rates increased by approximately 118 basis points in fiscal 2011
compared to fiscal 2010. Excluding the impact of foreign exchange rates, average borrowings decreased by
approximately $87.3 million during fiscal 2011. In fiscal 2011, we also wrote-off $1.2 million of deferred
financing fees as a result of refinancing our credit facility.

The decrease in fiscal 2010 was primarily due to a reduction in average debt outstanding of approximately
$215 million, excluding the impact of foreign exchange rates. Weighted-average interest rates in fiscal 2010 were
essentially flat compared to fiscal 2009.

Income Tax Expense

A reconciliation of the federal corporate income tax rate and the effective tax rate on income from
continuing operations before income taxes for each of the three years ended September 30 is summarized below:

Statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign operations . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit
. . . . . . . . . . . . . . . . . . . .
Change in state NOL and credit carryforwards . . . . . . . . .
Research & Development tax credit . . . . . . . . . . . . . . . . . .
Effect of goodwill impairment and other permanent

differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resolution of prior tax contingencies . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2011

35.0%
(0.4)
2.8
(0.1)
(0.2)

—
0.8
(0.5)

2010

35.0%
(0.2)
2.7
0.1
—

(0.6)
0.3
—

2009

35.0%
(0.3)
2.1
—
(0.5)

(0.8)
1.0
(0.2)

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . .

37.4%

37.3%

36.3%

The effective tax rate for continuing operations was 37.4% for fiscal 2011, compared to 37.3% for fiscal
2010 and 36.3% for fiscal 2009. Excluding reserves established for potential fines and penalties associated with
the FIFRA investigations, the effective tax rate for continuing operations was 36.0% for fiscal 2011. Excluding
the income tax expense related to the disallowance of the Medicare Part D tax deduction, the effective tax rate for
continuing operations was 36.7% for fiscal 2010. Additional factors impacting the fiscal 2010 effective tax rate
were an increase in state tax rates as well as the expiration of the research and development tax credit.

Income and Earnings per Share from Continuing Operations

We reported income from continuing operations of $121.9 million, or $1.84 per diluted share, in fiscal 2011
compared to income from continuing operations of $200.5 million, or $2.97 per diluted share, in fiscal 2010. In

35

fiscal 2011, we incurred costs of $76.1 million relating to impairment, restructuring and other charges, as well as
$14.6 million in costs associated with product registration and recall matters. In fiscal 2010, we incurred
$18.5 million of impairment charges, as well as $8.7 million in costs associated with product registration and
recall matters. Excluding these items, adjusted income from continuing operations was $182.6 million in fiscal
2011 compared to $218.8 million in fiscal 2010, a decrease of $36.2 million, primarily driven by decreased net
sales, lower gross margin rates and higher interest expense, and partially offset by a decrease in SG&A spending.
Diluted weighted-average common shares outstanding decreased from 67.6 million in fiscal 2010 to 66.2 million
in fiscal 2011. The decrease was primarily driven by repurchases of our common shares, partially offset by the
exercise of stock options and by an increase in the number of dilutive equivalent shares. Dilutive equivalent
shares for fiscal 2011 and fiscal 2010 were 1.5 million and 1.3 million, respectively. The increase in equivalent
shares was due to additional equity based grants and an increase in our average share price.

We reported income from continuing operations of $200.5 million, or $2.97 per diluted share, in fiscal 2010
compared to income from continuing operations of $132.6 million, or $2.04 per diluted share, in fiscal 2009.
Fiscal 2010 was unfavorably impacted by $18.5 million of impairment charges, as well as $8.7 million in costs
associated with product registration and recall matters. Fiscal 2009 was unfavorably impacted by $28.6 million
of costs related to product registration and recall matters. Excluding these items, adjusted income from
continuing operations was $218.8 million in fiscal 2010 compared to $150.7 million in fiscal 2009, an increase of
$68.1 million, primarily driven by increased net sales, higher gross margin rates and lower variable compensation
expense, partially offset by increased spending in media, selling and marketing. Diluted weighted-average
common shares outstanding increased from 66.1 million in fiscal 2009 to 67.6 million in fiscal 2010. Diluted
average common shares included 1.3 million and 1.1 million equivalent shares for fiscal 2010 and fiscal 2009,
respectively. The increase in diluted average common shares was driven by an increase in our average share price
and stock option exercises.

Income from Discontinued Operations

In our second quarter of fiscal 2011 we completed the sale of Global Pro to ICL. As a result of the then-
pending sale, effective in the first quarter of fiscal 2011, we began presenting Global Pro as discontinued
operations. Further, in our first quarter of fiscal 2010, we began presenting Smith & Hawken as discontinued
operations. Prior periods have been reclassified to conform to these presentations.

Income from discontinued operations, net of tax, was $46 million, $3.6 million and $20.7 million in fiscal
2011, fiscal 2010 and fiscal 2009, respectively. Fiscal 2011 includes a net after-tax gain of $39.5 million on the
sale of Global Pro to ICL. Fiscal 2010 is comprised of $11.9 million of income relating to Global Pro’s
operations and $18 million from the sale of the Smith & Hawken intellectual property, offset by costs associated
with the final closure activities of Smith & Hawken. In fiscal 2009, the results of Global Pro’s operations
generated $22 million of income, partially offset by losses associated with Smith & Hawken of $1.3 million.

Segment Results

Our continuing operations are divided into the following reportable segments: Global Consumer and Scotts
LawnService®. This division of reportable segments is consistent with how the segments report to and are
managed by the chief operating decision maker of the Company. We have made reclassifications to prior period
segment amounts as a result of the change in our internal organization structure associated with the sale of a
significant majority of our previously reported Global Professional segment, which is now reported in
discontinued operations. Our non-European professional seed business was not part of the sale and is now
included in Corporate & Other, along with revenues and expenses associated with the Company’s supply
agreements with ICL, as well as corporate general and administrative expenses and certain other income/expense
items not allocated to the business segments.

36

We evaluate segment performance based on several factors, including income from continuing operations
before amortization, product registration and recall costs, and impairment, restructuring and other charges.
Management uses this measure of operating profit to gauge segment performance because we believe this
measure is the most indicative of performance trends and the overall earnings potential of each segment.

The following tables present segment information for each of the three years ended September 30:

Net Sales by Segment

2011

2010

2009

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,533.2
235.6

Segment total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roundup® amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters-returns . . . . . . . .

2,768.8
67.7
(0.8)
—

(In millions)
$2,649.7
224.1

2,873.8
25.0
(0.8)
—

$2,485.3
231.1

2,716.4
31.1
(0.8)
(0.3)

Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,835.7

$2,898.0

$2,746.4

Income from Continuing Operations before Income Taxes by Segment

2011

2010

2009

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 425.6
25.9

(In millions)
$ 490.7
21.0

$ 411.8
14.0

Segment total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roundup® amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

451.5
(102.4)
(0.8)
(10.6)
(14.6)
(76.1)
(1.2)
(51.0)

511.7
(110.7)
(0.8)
(9.9)
(8.7)
(18.5)
—
(43.2)

425.8
(124.2)
(0.8)
(11.7)
(28.6)
—
—
(52.4)

Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 194.8

$ 319.9

$ 208.1

Global Consumer

Global Consumer segment net sales declined 4.4% from $2.65 billion in fiscal 2010 to $2.53 billion in fiscal
2011. Organic net sales in the Global Consumer segment decreased 5.4% in fiscal 2011, which includes a
favorable impact from price increases of 1.1%. Organic net sales in the U.S. decreased by 6.8% as a result of
poor weather in the peak weeks of the spring and fall lawn and garden seasons as well as lower sales in the mass
merchant retail channel. Purchases of our products at our largest U.S. retailers (retail point-of-sale, or “POS”)
decreased by 3.6%. The difference between the decline in net sales and retailer POS is primarily attributable to
increased promotional programs through our trade partners and reduced inventories at retail. International
Consumer organic net sales increased 1.1% in fiscal 2011, primarily attributable to unit volume growth as a
result of product innovation and slight increases in net pricing. The increase in International Consumer net sales
was primarily driven by strong growth in Canada and Central Europe.

Global Consumer segment income for fiscal 2011 was $425.6 million, a decrease of $65.1 million, or
13.3%, compared to fiscal 2010. Excluding the impact of foreign exchange movements, segment income

37

decreased by $73.8 million, or 15.1%, from fiscal 2010. The decrease in segment income for fiscal 2011 was
primarily driven by the decrease in net sales, a gross margin rate decline of 60 basis points and an increase in
SG&A expenses. The decreased gross margin rate was primarily the result of unfavorable sales mix, higher
consumer promotional programs, increased commodity costs and reduced leverage of fixed manufacturing and
warehousing costs. The increase in SG&A spending primarily related to costs associated with the full year
impact of operating two additional regional offices which opened in the second half of fiscal 2010, increased
expenses for marketing and research and development activities, partially offset by a decrease in variable
compensation expense.

Global Consumer segment net sales increased 6.4% from $2.49 billion in fiscal 2009 to $2.65 billion in
fiscal 2010. Organic net sales growth for fiscal 2010 was 5.8%, driven by 6.7% unit growth partially offset by
price decreases on certain commodity and private label products, along with aggressive customer-focused
promotional spending. Foreign exchange movements favorably impacted net sales by 0.8% for fiscal 2010.
Within Global Consumer, organic net sales in the United States increased 6.0% for fiscal 2010, which included
7.1% unit growth. POS at our largest U.S. retailers increased 4.7% for fiscal 2010, driven by higher sales in
growing media, Roundup® branded products, plant foods and grass seed. Our grass seed business benefited from
the national launch of our Scotts EZ Seed® product. Organic net sales in International Consumer increased 4.8%
for fiscal 2010, almost entirely as a result of unit growth. The increase in International Consumer net sales was
primarily driven by double-digit sales growth in Canada and the United Kingdom, which both benefited from
new product launches.

Global Consumer segment income for fiscal 2010 was $490.7 million, an increase of $78.9 million, or
19.2%, compared to fiscal 2009. Excluding the impact of foreign exchange movements, segment income
increased by $75 million, or 18.2%, for fiscal 2010. The increase in segment income was primarily driven by the
increase in net sales accompanied by a gross margin rate improvement of 110 basis points for fiscal 2010. The
increased gross margin rate was primarily the result of declines in material costs, favorable product mix and
increased commissions on sales of Roundup® branded products. The improvements in net sales and gross margin
rates were partially offset by increases in SG&A spending, primarily related to strategic investments in
advertising, selling and marketing.

Scotts LawnService®

Scotts LawnService® net sales increased by $11.5 million, or 5.1%, to $235.6 million in fiscal 2011,
primarily due to improved sales efforts, higher customer satisfaction rates and improved customer retention.
Scotts LawnService® segment income increased $4.9 million to $25.9 million in fiscal 2011. The improved
operating results were driven by higher sales and lower SG&A spending, partially offset by a decline in the gross
margin rate as a result of higher fuel and urea costs, investments in mobile technology for service trucks and
higher benefits costs.

Scotts LawnService® net sales decreased by $7.0 million, or 3.0%, to $224.1 million in fiscal 2010,
primarily as a result of the year-over-year decline in average customer count. Despite the decline in net sales,
Scotts LawnService® segment income increased $7.0 million to $21 million in fiscal 2010. The improved
operating results were driven by efficiencies resulting from higher customer counts during its peak third and
fourth quarter selling season, gross margin rate improvement due to lower product and fuel costs and increased
labor productivity, as well as lower SG&A spending.

Corporate & Other

Net sales for Corporate & Other increased $42.7 million to $67.7 million in fiscal 2011, primarily due to our
ICL supply agreements, which commenced shortly after the sale of Global Pro in our second quarter of fiscal

38

2011. Net expense for Corporate & Other decreased by $8.3 million in fiscal 2011, driven by a decline in
variable compensation, offset by severance costs, consulting fees and the non-recurrence of a gain recorded on
the sale of property in fiscal 2010. Net expense for Corporate & Other decreased by $13.5 million in fiscal 2010,
driven by a decline in variable compensation and third-party legal fees, as well as a gain recorded for the sale of
property.

Management’s Outlook

We believe the long-term fundamentals of our business are strong, and our broad strategies for value
accretion remain substantially unchanged. However, in light of the challenges and overall disappointing results of
fiscal 2011, we re-examined our strategies and tactics and determined certain adjustments were required to give
us greater confidence in our ability to increase consumer participation, category growth and our market share. As
we are focused on long-term value creation, we do not expect all of our actions in fiscal 2012 to have short-term
benefits.

The following are general themes that help shape our financial expectations for 2012:

• We expect at least 6 percent organic top line growth in our Global Consumer and Scotts LawnService®
reportable segments on the basis of modest category growth supported by more normal weather relative
to fiscal 2011, increased commitment to marketing and media, innovation and modest net pricing.

• We expect commodity inflation of approximately $80 million, with only about half recovered through
pricing and adjustments to trade programs. We expect a modest benefit from improved product mix as
the unfavorable weather in fiscal 2011 disproportionately impacted our higher margin product
categories.

• We are planning to significantly step up our media and marketing initiatives, with increases in
advertising of up to $40 million. We plan on reinstating some form of variable compensation for over
1,800 associates who participate in incentive programs globally, the majority of whom received no
payout in fiscal 2011. We typically budget $30 to $35 million for this expenditure. Partially offsetting
these increases will be benefits accruing from the fiscal 2011 restructuring programs of about $17
million, as well as savings from other long-term indirect purchasing initiatives.

• We expect interest expense to increase about $10 million based on the combined full year effect of our
new credit facility and the bonds issued last December, as well as a projected increase in average debt
as we work to navigate within our 2.0 to 2.5 times debt leverage objective.

• We expect a benefit from shares repurchased during fiscal 2011. While shares repurchased in fiscal
2011 were influenced by proceeds from the divestiture of Global Pro, we expect to significantly
moderate our share repurchase activity in fiscal 2012 in the context of our broader capital deployment
strategy. Over the longer-term, we plan to target one-third of our operating cash flow for return to
shareholders,
including our dividend, with the remaining two-thirds targeted to fund capital
expenditures for organic as well as acquisitive growth. Absent appropriate acquisition opportunities,
we intend to return excess cash to shareholders, though we will balance this with our objective of
maintaining debt leverage of 2.0 to 2.5 times. We expect our fiscal 2012 fully diluted share count to be
approximately 62.5 million.

• We expect our first quarter fiscal 2012 loss to materially increase versus fiscal 2011. Sales will be
lower as retailers strive to end their fiscal years leaner on inventory, and gross margin rate will be
lower for the reasons described above and as a result of less fully-leveraged fixed manufacturing and
warehousing costs. SG&A in the first quarter will likely be lower than prior year, though not nearly
enough to offset the impacts of lower volume and gross margin rate. In addition, the first quarter will
see a disproportionate amount of the full year increase in interest expense, primarily as a function of
the timing of our fiscal 2011 bond issuance and execution of our new credit facility.

39

For certain information concerning our risk factors, see “ITEM 1A. RISK FACTORS” of this Annual

Report on Form 10-K.

Liquidity and Capital Resources

Operating Activities

Cash provided by operating activities decreased by $173.8 million to $122.1 million in fiscal 2011 from
$295.9 million in fiscal 2010. Excluding the impact of discontinued operations, cash provided by operating
activities decreased by $128.1 million to $181.3 million in fiscal 2011 compared to $309.4 million in fiscal 2010.
Excluding discontinued operations and non-cash operating expenses,
income from continuing operations
decreased by approximately $75 million primarily due to lower net sales and lower gross margin rates. In
addition, operating cash flows were used to support higher working capital for continuing operations, which
increased by approximately $50 million in fiscal 2011. This increase was driven by higher inventories as a result
of lower than anticipated sales and a decline in other current liabilities primarily due to lower variable
compensation accruals.

Cash provided by operating activities increased by $31.3 million from $264.6 million in fiscal 2009 to
$295.9 million in fiscal 2010. Net
income plus non-cash impairment and other charges, share-based
compensation expense, depreciation and amortization increased by $65.1 million, from $233.3 million in fiscal
2009 to $298.4 million in fiscal 2010, driven primarily by higher operating income in our Global Consumer
segment. Fiscal 2010 operating cash flows were favorably impacted by a decrease in inventory reflecting lower
input costs and the elimination of Smith & Hawken inventories. The impact of the decrease in inventory was
partially offset by a corresponding decrease in accounts payable and a decline in other current liabilities primarily
due to lower variable compensation accruals.

The seasonal nature of our operations generally requires cash to fund significant increases in inventories
during the first half of the fiscal year. Receivables and payables also build substantially in the second quarter of
the fiscal year in line with the timing of sales to support our retailers’ spring selling season. These balances
liquidate during the June through September period as the lawn and garden season unwinds. Unlike our core
Global Consumer segment, Scotts LawnService® typically has its highest receivables balance in the fourth
quarter because of the seasonal timing of customer applications and à la carte service revenues.

Investing Activities

Cash provided by investing activities totaled $153.5 million in fiscal 2011, as compared to cash used in
investing activities of $58.9 million for fiscal 2010. Fiscal 2011 investing activities included net cash of $253.6
million provided by the sale of Global Pro. In fiscal 2010, we received cash of $24.5 million for the sale of long-
lived assets, primarily for the intellectual property of Smith & Hawken. Capital spending decreased from $83.4
million in fiscal 2010 to $72.7 million in fiscal 2011. Significant capital projects during fiscal 2011 included a
new growing media plant in Missouri, additional capital for our liquid production facility in Mississippi,
improvements at various other growing media production facilities and investments in information technology.
Further, during fiscal 2011 we completed several acquisitions with total cash paid of $7.6 million.

Cash used in investing activities totaled $58.9 million in fiscal 2010 compared to $83.3 million for fiscal
2009. Capital spending,
increased by $8.0 million from
$75.4 million in fiscal 2009 to $83.4 million in fiscal 2010. The fiscal 2010 increase in capital spending was
largely driven by investments in increased manufacturing capacity for our growing media business,
the
acquisition of a second manufacturing facility for liquid production in the Southeast United States and the
launch of Scotts EZ Seed®.
completion of new production technology to support

including investments in intellectual property,

the national

40

Further, during the first quarter of fiscal 2010, we received $24.5 million related to the sale of long-lived assets,
including the sale of the intellectual property of Smith & Hawken, in addition to the sale of certain property,
plant and equipment.

For the three years ended September 30, 2011, our capital spending was allocated as follows: 41.9% for
expansion and maintenance of Global Consumer productive assets; 31.6% for new productive assets supporting
our Global Consumer segment; 13.3% to expand our information technology and transformation and integration
capabilities; 2.1% for expansion and upgrades of Scotts LawnService® facilities; and 11.1% for Corporate &
Other assets.

Financing Activities

Financing activities used cash of $230.7 million and $216.3 million in fiscal 2011 and fiscal 2010,
respectively. Cash returned to shareholders through Common Share repurchases of $358.7 million and dividends
of $67.9 million were significant elements of cash used in financing activities in fiscal 2011. Net repayments
under our credit facilities were $22 million in fiscal 2011, compared to $370 million in fiscal 2010. Financing
activities in fiscal 2011 also included debt financing and issuance fees of $18.9 million attributable to the
refinancing of our then existing credit facilities in June 2011 and our $200 million bond offering in December
2010, the proceeds of which were used to reduce outstanding borrowings under our then existing credit facilities
and for general corporate purposes. In addition, cash received from the exercise of stock options increased by
$9.0 million in fiscal 2011 compared to fiscal 2010.

Financing activities used cash of $216.3 million and $194 million in fiscal 2010 and fiscal 2009,
respectively. Net repayments primarily under our then existing credit facilities were $370 million in fiscal 2010,
compared to $178 million in fiscal 2009. Financing activities in fiscal 2010 included the issuance of the 7.25%
Senior Notes on January 14, 2010, yielding net proceeds of $198.5 million, which were used to reduce
outstanding borrowings under our then existing credit facilities. The issuance of the 7.25% Senior Notes resulted
in financing and issuance fees of $5.5 million in fiscal 2010. In addition, we began the execution of our share
repurchase program, acquiring nearly $25 million of our Common Shares in the fourth quarter of fiscal 2010.
Furthermore, dividends paid in fiscal 2010 increased by $9.2 million. These increased cash outflows were
partially offset by a $7.7 million increase in cash received from the exercise of stock options compared to fiscal
2009.

Borrowing Arrangements

Our primary sources of liquidity are cash generated by operations and borrowings under our credit
agreement which is guaranteed by substantially all of Scotts Miracle-Gro’s domestic subsidiaries. On June 30,
2011, Scotts Miracle-Gro and certain of its subsidiaries entered into a second amended and restated senior
secured credit facility, providing for revolving loans in the aggregate principal amount of up to $1.7 billion over
a five-year term. Borrowings may be made in various currencies including U.S. dollars, Euros, British pounds,
Australian dollars and Canadian dollars. Under this credit facility, we may request up to an additional $450
million in revolving and/or term commitments, subject to certain specified conditions, including approval from
our lenders. The credit facility replaced our previous senior secured credit facilities, which were comprised of:
(a) a senior secured revolving loan facility in the aggregate principal of up to $1.59 billion and (b) a senior
secured term loan facility totaling $560 million. The previous credit facilities were scheduled to expire in
February 2012.

Under our credit facility, we have the ability to issue letter of credit commitments up to $75 million. At
September 30, 2011, we had letters of credit in the aggregate face amount of $30.4 million outstanding and $1.3
billion of availability under our credit facility. “NOTE 11. DEBT” of the Notes to Consolidated Financial
information regarding our
Statements included in this Annual Report on Form 10-K provides additional
borrowing arrangements.

On January 14, 2010, Scotts Miracle-Gro issued $200 million aggregate principal amount of the 7.25%
Senior Notes, the net proceeds of which were used to reduce outstanding borrowings under our then existing
credit facilities. The 7.25% Senior Notes represent general unsecured senior obligations of Scotts Miracle-Gro,
and were sold to the public at 99.254% of the principal amount thereof, to yield 7.375% to maturity. The 7.25%

41

Senior Notes have interest payment dates of January 15 and July 15, which began on July 15, 2010, and may be
redeemed prior to maturity at applicable redemption premiums. The 7.25% Senior Notes contain usual and
customary incurrence-based covenants, which include, but are not limited to, restrictions on the incurrence of
additional indebtedness, the incurrence of liens and the issuance of certain preferred shares, and the making of
certain distributions, investments and other restricted payments, as well as other usual and customary covenants,
which include, but are not limited to, restrictions on sale and leaseback transactions, restrictions on purchases for
or redemptions of Scotts Miracle-Gro stock and prepayments of subordinated debt, limitations on asset sales and
restrictions on transactions with affiliates. The 7.25% Senior Notes mature on January 15, 2018.

On December 16, 2010, Scotts Miracle-Gro issued $200 million aggregate principal amount of the
6.625% Senior Notes, the net proceeds of which were used to reduce outstanding borrowings under our then
existing credit facilities and for general corporate purposes. The Company sold the 6.625% Senior Notes in a
private placement exempt from the registration requirements under the Securities Act of 1933, as amended. The
6.625% Senior Notes represent general unsecured senior obligations of Scotts Miracle-Gro and rank equal in
right of payment with our existing and future unsecured senior debt, including, without limitation, the 7.25%
Senior Notes. The 6.625% Senior Notes have interest payment dates of June 15 and December 15 of each year,
which began on June 15, 2011, and may be redeemed prior to maturity at applicable redemption premiums. The
6.625% Senior Notes contain usual and customary incurrence-base covenants, as well as other usual and
customary covenants, substantially similar to those contained in the 7.25% Senior Notes. The 6.625% Senior
Notes mature on December 15, 2020.

Substantially all of Scotts Miracle-Gro’s domestic subsidiaries serve as guarantors of both the 7.25% and
the 6.625% Senior Notes. Refer
to “NOTE 24. FINANCIAL INFORMATION FOR SUBSIDIARY
GUARANTORS AND NON-GUARANTORS” of the Notes to Consolidated Financial Statements included in
this Annual Report on Form 10-K for more information regarding the guarantor entities.

At September 30, 2011, we had outstanding interest rate swap agreements with major financial institutions
that effectively converted a portion of our variable-rate debt denominated in U.S. dollars to a fixed rate. Interest
payments made between the effective date and expiration date are hedged by the swap agreements, except as
noted below. The key terms of these swap agreements are shown in the table below.

Notional Amount
(In Millions)

$200
50
150(b)
150(c)
50(b)
100(b)
150(c)
50(d)

Effective
Date (a)

2/14/2007
2/14/2012
2/7/2012
11/16/2009
2/16/2010
2/21/2012
12/20/2011
12/6/2012

Expiration
Date

2/14/2012
2/14/2016
5/7/2016
5/16/2016
5/16/2016
5/23/2016
6/20/2016
9/6/2017

Fixed
Rate

5.20%
3.78%
2.42%
3.26%
3.05%
2.40%
2.61%
2.96%

(a) The effective date refers to the date on which interest payments were, or will be, first hedged by the

(b)

(c)

(d)

applicable swap agreement.
Interest payments made during the three-month period of each year that begins with the month and day of
the effective date are hedged by the swap agreement.
Interest payments made during the six-month period of each year that begins with the month and day of the
effective date are hedged by the swap agreement.
Interest payments made during the nine-month period of each year that begins with the month and day of the
effective date are hedged by the swap agreement.

On September 21, 2011, we entered into a new Master Accounts Receivable Purchase Agreement (the “MARP
Agreement”), with an initial stated termination date of September 21, 2012, or such later date as may be mutually

42

agreed by us and the banks party thereto. The MARP Agreement, which is uncommitted, provides for the
discretionary sale by us, and the discretionary purchase by the banks, on a revolving basis, of accounts receivable
generated by sales to two specified account debtors in an aggregate amount not to exceed $325 million, with debtor
sublimits ranging from $120 million to $250 million. Under the terms of the MARP Agreement, the banks have the
opportunity to purchase those accounts receivable offered by us at a discount (from the agreed base value thereof)
effectively equal to the greater of 7-day or 3-month LIBOR plus 1.05%. The MARP Agreement replaced our
previous Master Accounts Receivable Purchase Agreement, which provided for the discounted sale, on an
uncommitted, revolving basis, of accounts receivable generated by a single specified account debtor, with aggregate
limits not to exceed $80 million and an interest rate that approximated the 7-day LIBOR rate plus 1.25%. The
previous Master Accounts Receivable Purchase Agreement was scheduled to expire on September 30, 2011.

We account for the sale of receivables under the MARP Agreement as short-term debt and continue to carry
the receivables on our Consolidated Balance Sheet, primarily as a result of our right to repurchase receivables
sold. There were no short-term borrowings under the MARP Agreement as of September 30, 2011 and 2010.

As of September 30, 2011, we were in compliance with all debt covenants. Our credit facility contains,
among other obligations, an affirmative covenant regarding our leverage ratio, calculated as indebtedness relative
to our earnings before interest, taxes, depreciation and amortization. Under the terms of the credit facility, the
maximum leverage ratio was 3.50 as of September 30, 2011. Our leverage ratio was 1.98 at September 30, 2011.
Our credit facility also includes an affirmative covenant regarding our interest coverage. Under the terms of the
credit facility, the minimum interest coverage ratio was 3.50 for the twelve months ended September 30, 2011.
Our interest coverage ratio was 7.47 for the twelve months ended September 30, 2011. Please see “ITEM 6.
SELECTED FINANCIAL DATA” of this Annual Report on Form 10-K for further details pertaining to the
calculations of the foregoing ratios.

We continue to monitor our compliance with the leverage ratio, interest coverage ratio and other covenants
contained in the credit facility and, based upon our current operating assumptions, we expect to remain in
compliance with the permissible leverage ratio and interest coverage ratio throughout fiscal 2012. However, an
unanticipated charge to earnings, an increase in debt or other factors could materially affect our ability to remain
in compliance with the financial or other covenants of our credit facility, potentially causing us to have to seek an
amendment or waiver from our lending group which could result in repricing of our credit facility. While we
believe we have good relationships with our banking group, we can provide no assurance that such a request
would be likely to result in a modified or replacement credit facility on reasonable terms, if at all.

In our opinion, cash flows from operations and capital resources will be sufficient to meet debt service,
capital expenditures and working capital needs during fiscal 2012, and thereafter for the foreseeable future.
However, we cannot ensure that our business will generate sufficient cash flow from operations or that future
borrowings will be available under our credit facility in amounts sufficient to pay indebtedness or fund other
liquidity needs. Actual results of operations will depend on numerous factors, many of which are beyond our
control, as further discussed in “ITEM 1A. RISK FACTORS—Our indebtedness could limit our flexibility and
adversely affect our financial condition” of this Annual Report on Form 10-K.

Judicial and Administrative Proceedings

Apart from the proceedings surrounding the FIFRA compliance matters, which are discussed separately, we
are party to various pending judicial and administrative proceedings arising in the ordinary course of business,
including, among others, proceedings based on accidents or product liability claims and alleged violations of
environmental laws. We have reviewed these pending judicial and administrative proceedings, including the
probable outcomes, reasonably anticipated costs and expenses, and the availability and limits of our insurance
coverage, and have established what we believe to be appropriate reserves. We do not believe that any liabilities
that may result from these pending judicial and administrative proceedings are reasonably likely to have a
material effect on our financial condition, results of operations, or cash flows; however, there can be no

43

assurance that future quarterly or annual operating results will not be materially affected by final resolution of
these matters.

Contractual Obligations

The following table summarizes our future cash outflows for contractual obligations as of September 30,

2011 (in millions):

Payments Due by Period

Contractual Cash Obligations

Total

Less Than 1 Year

1-3 Years

4-5 Years

Debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense on debt obligations . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . .
Other, primarily retirement plan obligations . . . . . .

$ 795.0
333.6
194.8
257.1
75.7

Total contractual cash obligations . . . . . . . . . . . . . .

$1,656.2

$

3.2
55.9
45.2
122.7
13.1

$240.1

$

2.1
161.8
97.4
127.8
26.8

$387.7
81.2
18.0
5.4
22.3

$415.9

$514.6

More Than
5 Years

$402.0
34.7
34.2
1.2
13.5

$485.6

We have long-term debt obligations and interest payments due primarily under the 7.25% and 6.625%
Senior Notes and our credit facility. Amounts in the table represent scheduled future maturities of long-term debt
principal for the periods indicated. The interest payment for our credit facility is based on outstanding
borrowings as of September 30, 2011. Actual interest expense will likely be higher due to the seasonality of our
business and associated higher average borrowings.

Purchase obligations primarily represent commitments for materials used in the Company’s manufacturing
processes, as well as commitments for warehouse services, seed and out-sourced information services which
comprise the unconditional purchase obligations disclosed in “NOTE 18. COMMITMENTS” of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.

Other includes actuarially determined retiree benefit payments and pension funding to comply with local
funding requirements. Pension funding requirements beyond fiscal 2012 are based on preliminary estimates using
actuarial assumptions determined as of September 30, 2011. The above table excludes liabilities for unrecognized
tax benefits and insurance accruals as the Company is unable to estimate the timing of the payment for these
items.

Off-Balance Sheet Arrangements

At September 30, 2011, the Company had letters of credit in the aggregate face amount of $30.4 million
outstanding. Further, the Company has residual value guarantees on Scotts LawnService® vehicles and the
corporate aircraft as disclosed in “NOTE 17. OPERATING LEASES” of the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K.

Regulatory Matters

We are subject to local, state, federal and foreign environmental protection laws and regulations with
respect to our business operations and believe we are operating in substantial compliance with, or taking actions
aimed at ensuring compliance with, such laws and regulations. Apart from the proceedings surrounding the
FIFRA compliance matters, which are discussed separately, we are involved in several legal actions with various
including those described in “ITEM 3. LEGAL
governmental agencies related to environmental matters,
PROCEEDINGS” of this Annual Report on Form 10-K and “NOTE 19. CONTINGENCIES” of the Notes to

44

Consolidated Financial Statements included in this Annual Report on Form 10-K. While it is difficult to quantify
the potential financial impact of actions involving these environmental matters, particularly remediation costs at
waste disposal sites and future capital expenditures for environmental control equipment, in the opinion of
management, the ultimate liability arising from such environmental matters, taking into account established
reserves, should not have a material effect on our financial condition, results of operations or cash flows.
However, there can be no assurance that the resolution of these matters will not materially affect our future
quarterly or annual results of operations, financial condition or cash flows. Additional
information on
environmental matters affecting us is provided in “ITEM 1. BUSINESS—Regulatory Considerations” and
“ITEM 3. LEGAL PROCEEDINGS” of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based upon our consolidated
financial statements, which have been prepared in accordance with GAAP. Certain accounting policies are
particularly significant, including those related to revenue recognition, goodwill and intangibles, certain associate
benefits and income taxes. We believe these accounting policies, and others set forth in “NOTE 1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES” of the Notes to Consolidated Financial Statements included in
this Annual Report on Form 10-K, should be reviewed as they are integral to understanding our results of
operations and financial position. Our critical accounting policies are reviewed periodically with the Audit
Committee of the Board of Directors of Scotts Miracle-Gro.

The preparation of financial statements requires management to use judgment and make estimates that affect
the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those related to customer programs and
incentives, product returns, bad debts, inventories, intangible assets, income taxes, restructuring, environmental
matters, contingencies and litigation. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. Although actual results historically have
not deviated significantly from those determined using our estimates, our results of operations or financial
condition could differ, perhaps materially, from these estimates under different assumptions or conditions.

Revenue Recognition and Promotional Allowances

Most of our revenue is derived from the sale of inventory, and we recognize revenue when title and risk of
loss transfer, generally when products are received by the customer. Provisions for payment discounts, product
returns and allowances are recorded as a reduction of sales at the time revenue is recognized based on historical
trends and adjusted periodically as circumstances warrant. Similarly, reserves for uncollectible receivables due
from customers are established based on management’s judgment as to the ultimate collectability of these
balances. We offer sales incentives through various programs, consisting principally of volume rebates,
cooperative advertising, consumer coupons and other trade programs. The cost of these programs is recorded as a
reduction of sales. The recognition of revenues, receivables and trade programs requires the use of estimates.
While we believe these estimates to be reasonable based on the then current facts and circumstances, there can be
no assurance that actual amounts realized will not differ materially from estimated amounts recorded.

Income Taxes

Our annual effective tax rate is established based on our pre-tax income (loss), statutory tax rates and the tax
impacts of items treated differently for tax purposes than for financial reporting purposes. We record income tax
liabilities utilizing known obligations and estimates of potential obligations. A deferred tax asset or liability is
recognized whenever there are future tax effects from existing temporary differences and operating loss and tax
credit carryforwards. Valuation allowances are used to reduce deferred tax assets to the balance that is more
likely than not to be realized. We must make estimates and judgments on future taxable income, considering
feasible tax planning strategies and taking into account existing facts and circumstances, to determine the proper

45

valuation allowances. When we determine that deferred tax assets could be realized in greater or lesser amounts
than recorded, the asset balance and consolidated statement of operations reflect the change in the period such
determination is made. Due to changes in facts and circumstances and the estimates and judgments that are
involved in determining the proper valuation allowances, differences between actual future events and prior
estimates and judgments could result in adjustments to these valuation allowances. We use an estimate of our
annual effective tax rate at each interim period based on the facts and circumstances available at that time, while
the actual effective tax rate is calculated at year-end.

Inventories

Inventories are stated at the lower of cost or market, principally determined by the first-in, first-out method
of accounting, using an average costing approach. Inventories include the cost of raw materials,
labor,
manufacturing overhead and freight and in-bound handling costs incurred to pre-position goods in our warehouse
network. Reserves for excess and obsolete inventory are based on a variety of factors, including product changes
and improvements, changes in active ingredient availability and regulatory acceptance, new product
introductions and estimated future demand. The adequacy of our reserves could be materially affected by
changes in the demand for our products or regulatory actions.

Long-lived Assets, including Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is provided
on the straight-line method and is based on the estimated useful economic lives of the assets. Intangible assets
with finite lives, and therefore subject to amortization, include technology (e.g., patents), customer relationships
and certain tradenames. These intangible assets are being amortized on the straight-line method over periods
typically ranging from 3 to 25 years. The Company reviews long-lived assets whenever circumstances change
such that the indicated recorded value of an asset may not be recoverable and therefore impaired.

Goodwill and Indefinite-lived Intangible Assets

We have significant investments in intangible assets and goodwill. Our annual goodwill and indefinite-lived
intangible asset testing is performed as of the first day of our fiscal fourth quarter or more frequently if
circumstances indicate potential impairment. The review for impairment of intangibles and goodwill is primarily
based on our estimates of discounted future cash flows, which are based upon annual budgets and longer-range
strategic plans. These budgets and plans are used for internal purposes and are also the basis for communication
with outside parties about future business trends. While we believe the assumptions we use to estimate future
cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. As a
result, impairment charges that possibly would have been recognized in earlier periods may not be recognized
until later periods if actual results deviate unfavorably from earlier estimates. An asset’s value is deemed
impaired if the discounted cash flows or earnings projections generated do not substantiate the carrying value of
the asset. The estimation of such amounts requires management to exercise judgment with respect to revenue and
expense growth rates, changes in working capital, future capital expenditure requirements and selection of an
appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted
future operating cash flows or earnings projections and could, therefore, change impairment determinations.

Fair value estimates employed in our annual impairment review of indefinite-lived tradenames and goodwill
were determined using discounted cash flow models involving several assumptions. Changes in our assumptions
to our fair value estimates were:
could materially impact our fair value estimates. Assumptions critical
(i) discount rates used in determining the fair value of the reporting units and tradenames; (ii) royalty rates used
in our tradename valuations; (iii) projected revenue and operating profit growth rates used in the reporting unit
and tradename models; and (iv) projected long-term growth rates used in the derivation of terminal year values.
These and other assumptions are impacted by economic conditions and expectations of management and may
change in the future based on period specific facts and circumstances.

46

Associate Benefits

We sponsor various post-employment benefit plans, including pension plans, both defined contribution
plans and defined benefit plans, and other post-employment benefit (“OPEB”) plans, consisting primarily of
health care for retirees. For accounting purposes, the defined benefit pension and OPEB plans are dependent on a
variety of assumptions to estimate the projected and accumulated benefit obligations and annual expense
determined by actuarial valuations. These assumptions include the following: discount rate; expected salary
increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on
plan assets; and health care cost trend rates.

Assumptions are reviewed annually for appropriateness and updated as necessary. We base the discount rate
assumption on investment yields available at fiscal year-end on high-quality corporate bonds that could be
purchased to effectively settle the pension liabilities. The salary growth assumption reflects our long-term actual
experience, the near-term outlook and assumed inflation. The expected return on plan assets assumption reflects
asset allocation, investment strategy and the views of investment managers regarding the market. Retirement and
mortality rates are based primarily on actual and expected plan experience. The effects of actual results that differ
from our assumptions are accumulated and amortized over future periods.

Changes in the discount rate and investment returns can have a significant effect on the funded status of our
pension plans and shareholders’ equity. We cannot predict these discount rates or investment returns with
certainty and, therefore, cannot determine whether adjustments to our shareholders’ equity for pension-related
activity in subsequent years will be significant. We also cannot predict future investment returns, and therefore
cannot determine whether future pension plan funding requirements could materially affect our financial
condition, results of operations or cash flows.

Insurance and Self-Insurance

We maintain insurance for certain risks, including workers’ compensation, general liability and vehicle
liability, and are self-insured for employee-related health care benefits up to a specified level for individual
claims. We establish reserves for losses based on our claims experience and industry actuarial estimates of the
ultimate loss amount inherent in the claims, including losses for claims incurred but not reported. Our estimate of
self-insured liabilities is subject to change as new events or circumstances develop which might materially
impact the ultimate cost to settle these losses.

Derivative Instruments

In the normal course of business, we are exposed to fluctuations in interest rates, the value of foreign
currencies and the cost of commodities. A variety of financial instruments, including forward and swap contracts,
are used to manage these exposures. Our objective in managing these exposures is to better control these
elements of cost and mitigate the earnings and cash flow volatility associated with changes in the applicable rates
and prices. We have established policies and procedures that encompass risk-management philosophy and
objectives, guidelines for derivative-instrument usage, counterparty credit approval, and the monitoring and
reporting of derivative activity. We do not enter into derivative instruments for the purpose of speculation.

Contingencies

As described more fully in “NOTE 19. CONTINGENCIES” of the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K, we are involved in significant environmental and legal
matters which have a high degree of uncertainty associated with them. We continually assess the likely outcomes
of these matters and the adequacy of reserves, if any, provided for their resolution. There can be no assurance
that the ultimate outcomes of these matters will not differ materially from our current assessment of them, nor
that all matters that may currently be brought against us are known by us at this time.

47

Other Significant Accounting Policies

Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed
above, are also critical to understanding the consolidated financial statements. The Notes to Consolidated
Financial Statements included in this Annual Report on Form 10-K contain additional information related to our
accounting policies, including recent accounting pronouncements, and should be read in conjunction with this
discussion.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As part of our ongoing business, we are exposed to certain market risks, including fluctuations in interest
rates, foreign currency exchange rates and commodity prices. Financial derivative and other instruments are used
to manage these risks. These instruments are not used for speculative purposes.

Interest Rate Risk

We had variable rate debt instruments outstanding at September 30, 2011 and 2010 that are impacted by
changes in interest rates. As a means of managing our interest rate risk on these debt instruments, we entered into
interest rate swap agreements with major financial institutions to effectively convert certain variable-rate debt
obligations to fixed rates.

At September 30, 2011 and 2010, we had outstanding interest rate swap agreements with a total U.S. dollar
equivalent notional value of $900 million and $450 million, respectively. The weighted average fixed rate of
swap agreements outstanding at September 30, 2011 was 3.3%.

The following table summarizes information about our derivative financial instruments and debt instruments
that are sensitive to changes in interest rates as of September 30, 2011 and 2010. For debt instruments, the table
presents principal cash flows and related weighted-average interest rates by expected maturity dates. For interest
rate swap agreements, the table presents expected cash flows based on notional amounts and weighted-average
interest rates by contractual maturity dates. Weighted-average variable rates are based on rates in the yield curve
at September 30, 2011 and 2010. A change in our variable interest rate of 1% for a full twelve-month period
would have a $2.5 million impact on interest expense assuming approximately $250 million of our average fiscal
2011 variable-rate debt had not been hedged via an interest rate swap agreement. The information is presented in
U.S. dollars (in millions):

2011

Long-term debt:

Expected Maturity Date

2012

2013

2014

2015

2016

After

Total

Fair
Value

Fixed rate debt . . . . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . . —
Variable rate debt
Average rate . . . . . . . . . . . . . . . . . . . . . —

. . . . . . . . . . . . . . . . .

$— $— $ — $ — $ — $400.0

$400.0

—

—
—
$— $— $ — $ — $387.2
—

—

—

—

5.2% —

6.9%

$ — $387.2

$404.1
6.9% —
$387.2
5.2% —

Interest rate derivatives:

Interest rate swaps based on

U.S. Dollar, Euro and GBP
LIBOR . . . . . . . . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . .

$(4.9) $— $ — $ — $ (23.9) $ (2.5) $ (31.3) $ (31.3)

5.2% —

—

—

2.8%

3.0%

3.3% —

48

2010

Long-term debt:

. . . . . . . . . . . . . . . . . . .
Fixed rate debt
Average rate . . . . . . . . . . . . . . . . . . . . .
Variable rate debt . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . .

Interest rate derivatives:

Interest rate swaps based on

U.S. Dollar, Euro and GBP
LIBOR . . . . . . . . . . . . . . . . . . . . . . .
Average rate . . . . . . . . . . . . . . . . . . . . .

Expected Maturity Date

2011

2012

2013

2014

2015

After

Total

Fair
Value

$ — $ — $— $— $— $200.0

—
$193.2

—
$220.9

—

—
$— $— $— $ — $414.1

—

$211.0
$200.0
7.25% 7.25% —
$414.1
4.3% —

—

4.3%

4.3% —

—

—

$ — $ (14.1) $— $— $— $ (10.5) $ (24.6) $ (24.6)

—

5.2% —

—

—

3.3%

4.2% —

Excluded from the information provided above are $7.4 million and $17.6 million at September 30, 2011

and 2010, respectively, of miscellaneous debt instruments.

Other Market Risks

Through fiscal 2011, we had transactions that were denominated in currencies other than the currency of the
country of origin. We use foreign currency swap contracts to manage the exchange rate risk associated with
intercompany loans with foreign subsidiaries that are denominated in local currencies. At September 30, 2011,
the notional amount of outstanding foreign currency contracts was $217.9 million with a fair value of
$2.7 million. At September 30, 2010, the notional amount of outstanding foreign currency contracts was
$209.9 million with a negative fair value of $6.6 million.

We are subject to market risk from fluctuating prices of certain raw materials, including urea, resins, diesel,
gasoline, sphagnum peat, grass seed and wild bird food grains. Our objectives surrounding the procurement of
these materials are to ensure continuous supply and to minimize costs. We seek to achieve these objectives
through negotiation of contracts with favorable terms directly with vendors. In addition, we entered into
arrangements to partially mitigate the effect of fluctuating direct and indirect fuel costs on our Global Consumer
and Scotts LawnService® businesses and hedged a portion of our fuel and urea needs for fiscal 2010 and fiscal
2011. We had outstanding contracts for approximately 3,955,000 gallons of fuel with a negative fair value of
$0.9 million at September 30, 2011. We had outstanding contracts for approximately 420,000 gallons of fuel with
a negative fair value of $0.1 million at September 30, 2010. We also had hedging arrangements for 4,500 and
62,000 aggregate tons of urea at September 30, 2011 and 2010, respectively. The fair value of the 4,500
aggregate tons at September 30, 2011 was $0.1 million, while the fair value of the 62,000 aggregate tons at
September 30, 2010 was $1.9 million.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and other information required by this Item are contained in the Consolidated
Financial Statements, Notes to Consolidated Financial Statements and Schedules Supporting the Consolidated
Financial Statements listed in the “Index to Consolidated Financial Statements and Financial Statement
Schedules” on page 57 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

49

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of the principal executive officer and the principal financial officer of The
Scotts Miracle-Gro Company (the “Registrant”), the Registrant’s management has evaluated the effectiveness of
the Registrant’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange
Act of 1934 (the “Exchange Act”)), as of the end of the fiscal year covered by this Annual Report on Form 10-K.
Based upon that evaluation, the Registrant’s principal executive officer and principal financial officer have
concluded that the Registrant’s disclosure controls and procedures were effective as of the end of the fiscal year
covered by this Annual Report on Form 10-K.

Management’s Annual Report on Internal Control Over Financial Reporting

The “Annual Report of Management on Internal Control Over Financial Reporting” required by Item 308(a)

of SEC Regulation S-K is included on page 58 of this Annual Report on Form 10-K.

Attestation Report of Independent Registered Public Accounting Firm

The “Report of

Independent Registered Public Accounting Firm” required by Item 308(b) of

SEC Regulation S-K is included on page 59 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

No changes in the Registrant’s internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) occurred during the Registrant’s fiscal quarter ended September 30, 2011, that have materially
affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

50

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers and Persons Nominated or Chosen to Become Directors or Executive
Officers

The information required by Item 401 of SEC Regulation S-K concerning the directors of Scotts
Miracle-Gro and the nominees for election or re-election as directors of Scotts Miracle-Gro at the Annual
Meeting of Shareholders to be held on January 19, 2012 (the “2012 Annual Meeting”) is incorporated herein by
reference from the disclosure which will be included under the caption “PROPOSAL NUMBER 1—ELECTION
OF DIRECTORS” in Scotts Miracle-Gro’s definitive Proxy Statement relating to the 2012 Annual Meeting
(“Scotts Miracle-Gro’s Definitive Proxy Statement”), which will be filed pursuant to SEC Regulation 14A not
later than 120 days after the end of Scotts Miracle-Gro’s fiscal year ended September 30, 2011.

The information required by Item 401 of SEC Regulation S-K concerning the executive officers of Scotts
Miracle-Gro is
the caption
incorporated herein by reference from the disclosure included under
“SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT” in Part I of this Annual Report
on Form 10-K.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

The information required by Item 405 of SEC Regulation S-K is incorporated herein by reference from the
the caption “SECTION 16(a) BENEFICIAL OWNERSHIP

disclosure which will be included under
REPORTING COMPLIANCE” in Scotts Miracle-Gro’s Definitive Proxy Statement.

Procedures for Recommending Director Nominees

Information concerning the procedures by which shareholders of Scotts Miracle-Gro may recommend
nominees to Scotts Miracle-Gro’s Board of Directors is incorporated herein by reference from the disclosures
which will be included under the captions “CORPORATE GOVERNANCE—Nominations of Directors” and
“MEETINGS AND COMMITTEES OF THE BOARD—Committees of
the Board—Governance and
Nominating Committee” in Scotts Miracle-Gro’s Definitive Proxy Statement. These procedures have not
materially changed from those described in Scotts Miracle-Gro’s definitive Proxy Statement for the 2011 Annual
Meeting of Shareholders held on January 20, 2011.

Audit Committee

The information required by Items 407(d)(4) and 407(d)(5) of SEC Regulation S-K is incorporated herein
by reference from the disclosure which will be included under the caption “MEETINGS AND COMMITTEES
OF THE BOARD—Committees of the Board—Audit Committee” in Scotts Miracle-Gro’s Definitive Proxy
Statement.

Committee Charters; Code of Business Conduct and Ethics; Corporate Governance Guidelines

The Board of Directors of Scotts Miracle-Gro has adopted charters for each of the Audit Committee, the
Governance and Nominating Committee,
the Finance
Committee and the Innovation & Technology Committee, as well as Corporate Governance Guidelines, as
contemplated by the applicable sections of the New York Stock Exchange Listed Company Manual.

the Compensation and Organization Committee,

In accordance with the requirements of Section 303A.10 of the New York Stock Exchange Listed Company
Manual and Item 406 of SEC Regulation S-K, the Board of Directors of Scotts Miracle-Gro has adopted a Code
of Business Conduct and Ethics covering the members of Scotts Miracle-Gro’s Board of Directors and associates

51

(employees) of Scotts Miracle-Gro and its subsidiaries, including, without limitation, Scotts Miracle-Gro’s
principal executive officer, principal financial officer and principal accounting officer. Scotts Miracle-Gro
intends to disclose the following events, if they occur, on its Internet website located at http://investor.scotts.com
within four business days following their occurrence: (A) the date and nature of any amendment to a provision of
Scotts Miracle-Gro’s Code of Business Conduct and Ethics that (i) applies to Scotts Miracle-Gro’s principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions, (ii) relates to any element of the code of ethics definition enumerated in Item 406(b) of SEC
Regulation S-K, and (iii) is not a technical, administrative or other non-substantive amendment; and (B) a
description of any waiver (including the nature of the waiver, the name of the person to whom the waiver was
granted and the date of the waiver), including an implicit waiver, from a provision of the Code of Business
Conduct and Ethics granted to Scotts Miracle-Gro’s principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, that relates to one or more of
the elements of the code of ethics definition enumerated in Item 406(b) of SEC Regulation S-K.

The text of Scotts Miracle-Gro’s Code of Business Conduct and Ethics, Scotts Miracle-Gro’s Corporate
Governance Guidelines, the Audit Committee charter, the Governance and Nominating Committee charter, the
Compensation and Organization Committee charter, the Finance Committee charter and the Innovation &
Technology Committee charter are posted under the “Corporate Governance” link on Scotts Miracle-Gro’s
Internet website located at http://investor.scotts.com. Interested persons and shareholders of Scotts Miracle-Gro
may also obtain copies of each of these documents without charge by writing to The Scotts Miracle-Gro
Company, Attention: Corporate Secretary, 14111 Scottslawn Road, Marysville, Ohio 43041. In addition, a copy
of the Code of Business Conduct and Ethics, as amended on November 2, 2006, is incorporated by reference in
Exhibit 14 to this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 402 of SEC Regulation S-K is incorporated herein by reference from the
disclosures which will be included under the captions “EXECUTIVE COMPENSATION” and “NON-
EMPLOYEE DIRECTOR COMPENSATION” in Scotts Miracle-Gro’s Definitive Proxy Statement.

The information required by Item 407(e)(4) of SEC Regulation S-K is incorporated herein by reference from
the disclosure which will be included under the caption “MEETINGS AND COMMITTEES OF THE BOARD—
Compensation and Organization Committee Interlocks and Insider Participation” in Scotts Miracle-Gro’s
Definitive Proxy Statement.

The information required by Item 407(e)(5) of SEC Regulation S-K is incorporated herein by reference from
the disclosure which will be included under the caption “COMPENSATION COMMITTEE REPORT” in Scotts
Miracle-Gro’s Definitive Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS

Ownership of Common Shares of Scotts Miracle-Gro

The information required by Item 403 of SEC Regulation S-K is incorporated herein by reference from the
disclosure which will be included under the caption “BENEFICIAL OWNERSHIP OF SECURITIES OF THE
COMPANY” in Scotts Miracle-Gro’s Definitive Proxy Statement.

Equity Compensation Plan Information

The information required by Item 201(d) of SEC Regulation S-K is incorporated herein by reference from
the disclosure which will be included under the caption “EQUITY COMPENSATION PLAN INFORMATION”
in Scotts Miracle-Gro’s Definitive Proxy Statement.

52

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

Certain Relationships and Related Person Transactions

The information required by Item 404 of SEC Regulation S-K is incorporated herein by reference from the
disclosures which will be included under the caption “CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS” in Scotts Miracle-Gro’s Definitive Proxy Statement.

Director Independence

The information required by Item 407(a) of SEC Regulation S-K is incorporated herein by reference from
the disclosures which will be included under the captions “CORPORATE GOVERNANCE — Director
Independence” and “MEETINGS AND COMMITTEES OF THE BOARD” in Scotts Miracle-Gro’s Definitive
Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is incorporated herein by reference from the disclosures which will
be included under the captions “AUDIT COMMITTEE MATTERS — Fees of the Independent Registered Public
Accounting Firm” and “AUDIT COMMITTEE MATTERS — Pre-Approval of Services Performed by the
Independent Registered Public Accounting Firm” in Scotts Miracle-Gro’s Definitive Proxy Statement.

53

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

1 and 2. Financial Statements and Financial Statement Schedules:

The response to this portion of Item 15 is submitted as a separate section of this Annual Report on
Form 10-K. Reference is made to the “Index to Consolidated Financial Statements and Financial Statement
Schedules” on page 57 of this Annual Report on Form 10-K.

(b) EXHIBITS

The exhibits listed on the “Index to Exhibits” beginning on page 125 of this Annual Report on Form 10-K
are filed or furnished with this Annual Report on Form 10-K or incorporated herein by reference as noted in the
“Index to Exhibits.”

(c) FINANCIAL STATEMENT SCHEDULES

The financial statement schedule filed with this Annual Report on Form 10-K is submitted in a separate
section hereof. For a description of such financial statement schedules, see “Index to Consolidated Financial
Statements and Financial Statement Schedules” on page 57 of this Annual Report on Form 10-K.

54

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant

has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

THE SCOTTS MIRACLE-GRO COMPANY

By: /s/

James Hagedorn

James Hagedorn, Chief Executive Officer and
Chairman of the Board

Dated: November 23, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by

the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Alan H. Barry*

Alan H. Barry

/s/ David C. Evans

David C. Evans

/s/

Joseph P. Flannery*

Joseph P. Flannery

/s/

James Hagedorn

James Hagedorn

/s/ Adam Hanft*

Adam Hanft

/s/ Stephen L. Johnson*

Stephen L. Johnson

/s/ William G. Jurgensen*

William G. Jurgensen

/s/ Thomas N. Kelly Jr.*

Thomas N. Kelly Jr.

/s/ Carl F. Kohrt, Ph.D.*

Carl F. Kohrt, Ph.D.

Director

November 23, 2011

Chief Financial Officer and
Executive Vice President, Strategy
and Business Development
(Principal Financial Officer and
Principal Accounting Officer)

November 23, 2011

Director

November 23, 2011

Chief Executive Officer, Chairman
of the Board and Director
(Principal Executive Officer)

November 23, 2011

Director

Director

Director

Director

Director

November 23, 2011

November 23, 2011

November 23, 2011

November 23, 2011

November 23, 2011

/s/ Katherine Hagedorn Littlefield*

Director

November 23, 2011

Katherine Hagedorn Littlefield

55

Signature

Title

Date

/s/ Nancy G. Mistretta*

Nancy G. Mistretta

/s/ Stephanie M. Shern*

Stephanie M. Shern

/s/

John S. Shiely*

John S. Shiely

Director

Director

Director

November 23, 2011

November 23, 2011

November 23, 2011

* The undersigned, by signing his name hereto, does hereby sign this Report on behalf of each of the directors of
the Registrant identified above pursuant to Powers of Attorney executed by the directors identified above,
which Powers of Attorney are filed with this Report as exhibits.

By: /s/ David C. Evans

David C. Evans, Attorney-in-Fact

56

THE SCOTTS MIRACLE-GRO COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements of The Scotts Miracle-Gro Company and Subsidiaries:

Annual Report of Management on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the fiscal years ended September 30, 2011, 2010 and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2011, 2010 and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at September 30, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity for the fiscal years ended September 30, 2011, 2010
and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

58
59

61

62
63

64
65

Schedules Supporting the Consolidated Financial Statements:

Schedule II—Valuation and Qualifying Accounts for the fiscal years ended September 30, 2011,

2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

124

All other financial statement schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are omitted because they are not required or are not applicable, or
the required information has been presented in the Consolidated Financial Statements or Notes thereto.

57

ANNUAL REPORT OF MANAGEMENT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

Management

is responsible for establishing and maintaining adequate internal control over financial
reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation
of financial statements for external purposes in accordance with accounting principles generally accepted in the
United States of America. Internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of The Scotts Miracle-Gro Company and our consolidated subsidiaries; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that receipts and
expenditures of The Scotts Miracle-Gro Company and our consolidated subsidiaries are being made only in
accordance with authorizations of management and directors of The Scotts Miracle-Gro Company and our
consolidated subsidiaries, as appropriate; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the assets of The Scotts Miracle-Gro Company and
our consolidated subsidiaries that could have a material effect on our consolidated financial statements.

Management, with the participation of our principal executive officer and principal financial officer,
assessed the effectiveness of our internal control over financial reporting as of September 30, 2011, the end of
our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s
assessment included evaluation of such elements as the design and operating effectiveness of key financial
reporting controls, process documentation, accounting policies and our overall control environment. This
assessment is supported by testing and monitoring performed under the direction of management.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Accordingly, even an effective system of internal control over financial
reporting will provide only reasonable assurance with respect to financial statement preparation.

Based on our assessment, management has concluded that our internal control over financial reporting was
effective as of September 30, 2011, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America. We reviewed the results of
management’s assessment with the Audit Committee of the Board of Directors of The Scotts Miracle-Gro
Company.

Our independent registered public accounting firm, Deloitte & Touche LLP, independently audited our
internal control over financial reporting as of September 30, 2011 and has issued their attestation report which
appears herein.

/s/

James Hagedorn

James Hagedorn
Chief Executive Officer and
Chairman of the Board

/s/ David C. Evans

David C. Evans
Chief Financial Officer and Executive Vice President,
Strategy and Business Development

Dated: November 23, 2011

Dated: November 23, 2011

58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
The Scotts Miracle-Gro Company
Marysville, Ohio

We have audited the accompanying consolidated balance sheets of The Scotts Miracle-Gro Company and
subsidiaries (the “Company”) as of September 30, 2011 and 2010, and the related consolidated statements of
operations, shareholders’ equity, and cash flows for each of the three years in the period ended September 30,
2011. Our audits also included the financial statement schedules listed in the Index to Consolidated Financial
Statements and Financial Statement Schedules. These financial statements and financial statement schedules are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of September 30, 2011 and 2010, and the results of its operations and its cash flows
for each of the three years in the period ended September 30, 2011, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such financial statement schedules,
when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of September 30, 2011, based on the
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated November 23, 2011 expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Columbus, Ohio
November 23, 2011

59

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
The Scotts Miracle-Gro Company
Marysville, Ohio

We have audited the internal control over financial reporting of The Scotts Miracle-Gro Company and
subsidiaries (the “Company”) as of September 30, 2011, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The
Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, which is included in the Annual
Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of,
the company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of September 30, 2011, based on the criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedules as of and for the year
ended September 30, 2011 of the Company and our report dated November 23, 2011 expressed an unqualified
opinion on those financial statements and financial statement schedules.

/s/ Deloitte & Touche LLP

Columbus, Ohio
November 23, 2011

60

THE SCOTTS MIRACLE-GRO COMPANY

Consolidated Statements of Operations
for the fiscal years ended September 30, 2011, 2010 and 2009
(In millions, except per share data)

2011

2010

2009

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—impairment, restructuring and other charges . . . . . . . . . . . . . . . .
Cost of sales—product registration and recall matters . . . . . . . . . . . . . . . . . . . . .

$2,835.7
1,811.2
18.3
3.2

$2,898.0
1,819.1
—
3.0

$2,746.4
1,757.0
—
11.7

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,003.0

1,075.9

977.7

Operating expenses:

Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . . . . . .
Income tax expense from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . .

688.5
57.8
11.4
(1.7)

247.0
1.2
51.0

194.8
72.9

121.9
46.0

695.3
18.5
5.7
(6.7)

363.1
—
43.2

319.9
119.4

200.5
3.6

699.2
—
16.8
1.2

260.5
—
52.4

208.1
75.5

132.6
20.7

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 167.9

$ 204.1

$ 153.3

Basic income per common share:

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted income per common share:

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$

1.88
0.72

2.60

1.84
0.70

2.54

$

$

$

$

3.03
0.05

3.08

2.97
0.05

3.02

$

$

$

$

2.04
0.32

2.36

2.01
0.31

2.32

See Notes to Consolidated Financial Statements.

61

THE SCOTTS MIRACLE-GRO COMPANY

Consolidated Statements of Cash Flows
for the fiscal years ended September 30, 2011, 2010 and 2009
(In millions)

2011

2010

2009

167.9 $

204.1 $

153.3

OPERATING ACTIVITIES

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sale of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of acquired businesses:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . .

INVESTING ACTIVITIES

Proceeds from sale of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business, net of transaction costs . . . . . . . . . . . . . . . . .
Investments in property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration and related payments . . . . . . . . . . . . . . . . . . . . . . . .
Investments in intellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in acquired businesses, net of cash acquired . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . .

FINANCING ACTIVITIES

31.8
1.2
16.0
50.3
11.4
(11.3)
0.8
(93.0)

10.4
(37.8)
(7.6)
6.1
(76.5)
29.1
13.0
10.3
122.1

0.2
253.6
(72.7)
(20.0)
—
(7.6)
153.5

18.5
—
16.4
48.5
10.9
37.7
(22.4)
—

(10.7)
50.8
(3.7)
(31.2)
(24.1)
(0.3)
13.0
(11.6)
295.9

24.5
—
(83.4)
—
—
—
(58.9)

Borrowings under revolving and bank lines of credit and term loans . . . . . . . . . . .
Repayments under revolving and bank lines of credit and term loans . . . . . . . . . . .
Proceeds from issuance of Senior Notes, net of discount
. . . . . . . . . . . . . . . . . . . .
Financing and issuance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on sellers notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment arrangements . . . . . . . . . . . . . . . . .
Cash received from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1,610.1
(1,632.1)
200.0
(18.9)
(67.9)
(358.7)
(0.3)
5.6
31.5
(230.7)
(2.1)
42.8
88.1
130.9 $

1,021.4
(1,391.4)
198.5
(5.5)
(42.6)
(25.0)
(0.6)
6.4
22.5
(216.3)
(3.2)
17.5
70.6
88.1 $

5.1
—
14.5
47.9
12.5
(6.0)
(1.1)
—

7.1
(47.4)
4.7
(17.3)
86.3
(0.3)
36.9
(31.6)
264.6

1.4
—
(72.0)
—
(3.4)
(9.3)
(83.3)

1,558.0
(1,736.0)

—
(0.1)
(33.4)
—
(1.4)
4.1
14.8
(194.0)
(0.4)
(13.1)
83.7
70.6

SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(44.5)
(115.1)

(41.6)
(84.2)

(55.6)
(51.2)

See Notes to Consolidated Financial Statements.

62

THE SCOTTS MIRACLE-GRO COMPANY

Consolidated Balance Sheets
September 30, 2011 and 2010
(In millions, except per share data)

2011

2010

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowances of $12.9 in 2011 and $7.7 in 2010 . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 130.9
323.5
387.0
—
151.1

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

992.5
394.7
309.1
319.6
36.3

$

88.1
350.9
352.9
193.1
133.1

1,118.1
381.3
305.8
330.2
28.6

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,052.2

$2,164.0

Current liabilities:

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current portion of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2
150.0
—
315.4

468.6
791.8
232.0

$ 195.0
141.7
45.3
354.8

736.8
436.7
226.0

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,492.4

1,399.5

Commitments and contingencies (Notes 3, 17, 18 and 19)
Shareholders’ equity:

Common shares and capital in excess of $.01 stated value per share; shares

outstanding of 60.8 in 2011 and 66.8 in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost; 7.5 million shares in 2011 and 1.8 million shares in 2010 . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

427.1
599.2
(388.5)
(78.0)

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

559.8

434.0
499.6
(92.0)
(77.1)

764.5

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,052.2

$2,164.0

See Notes to Consolidated Financial Statements.

63

THE SCOTTS MIRACLE-GRO COMPANY

Consolidated Statements of Shareholders’ Equity
for the fiscal years ended September 30, 2011, 2010 and 2009
(In millions, except per share data)

Common Shares

Shares Amount

Capital in
Excess of
Stated Value

Retained
Earnings

Treasury Shares

Shares Amount

Accumulated
Other
Comprehensive
Income/(loss)

Balance, September 30, 2008 . . . . . . . . . 68.1
Net income . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . .
Loss on derivatives, net of tax of $9.5 . .
Pension and other postretirement

liabilities, net of tax of $6.6 . . . . . . . .

Comprehensive income . . . . . . . . . .
Share-based compensation . . . . . . . . . . .
Dividends declared ($0.50 per share) . . .
Treasury stock issuances . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance, September 30, 2009 . . . . . . . . . 68.1
Net income . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . .
Gain on derivatives, net of tax of $2.9 . .
Pension and other postretirement

liabilities, net of tax of $1.0 . . . . . . . .

Comprehensive income . . . . . . . . . .
Share-based compensation . . . . . . . . . . .
Dividends declared ($0.625 per

share) . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . .
Treasury stock issuances . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance, September 30, 2010 . . . . . . . . . 68.1
Net income . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . .
Loss on derivatives, net of tax of $0.7 . .
Pension and other postretirement

liabilities, net of tax of $6.9 . . . . . . . .

Comprehensive income . . . . . . . . . .
Share-based compensation . . . . . . . . . . .
Dividends declared ($1.05 per share) . . .
Treasury stock purchases . . . . . . . . . . . .
Treasury stock issuances . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.3

$472.1

$216.7
153.3

3.4 $(185.3)

$(67.1)

9.6
(3.2)

(12.1)

14.5

(33.5)
(1.9)

0.3

451.2

(32.5)

337.5
204.1

(1.0)

53.6

2.4

(131.7)

(72.8)

1.0
4.6

Total

$ 436.7
153.3
9.6
(3.2)

(12.1)

147.6
14.5
(32.5)
20.1
(1.9)

584.5
204.1
1.0
4.6

(9.9)

(9.9)

16.4

(34.6)
0.7

(42.0)

0.5
(1.1)

(25.0)
64.7

0.3

433.7

499.6
167.9

1.8

(92.0)

(77.1)

(10.1)
(3.0)

12.2

16.0

(24.3)
1.4

(68.3)

6.9
(1.2)

(358.7)
62.2

199.8
16.4

(42.0)
(25.0)
30.1
0.7

764.5
167.9
(10.1)
(3.0)

12.2

167.0
16.0
(68.3)
(358.7)
37.9
1.4

Balance, September 30, 2011 . . . . . . . . . 68.1

$0.3

$426.8

$599.2

7.5 $(388.5)

$(78.0)

$ 559.8

See Notes to Consolidated Financial Statements.

64

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Scotts Miracle-Gro Company (“Scotts Miracle-Gro” and,

the
“Company”) are engaged in the manufacturing, marketing and sale of branded products for consumer lawn and
garden care. The Company’s primary customers include home centers, mass merchandisers, warehouse clubs,
large hardware chains, independent hardware stores, nurseries, garden centers and food and drug stores. The
Company’s products are sold primarily in North America and the European Union. The Company also operates
the Scotts LawnService® business, which provides residential and commercial lawn care, tree and shrub care and
limited pest control services in the United States.

together with its subsidiaries,

On July 8, 2009, Scotts Miracle-Gro announced its intention to close the Smith & Hawken business by the
end of calendar 2009. During the Company’s first quarter of fiscal 2010, all Smith & Hawken stores were closed
and substantially all operational activities of Smith & Hawken were discontinued. On February 28, 2011, the
Company completed the sale of a significant majority of the assets of its Global Professional business (excluding
the non-European professional seed business, “Global Pro”) to Israel Chemicals Ltd. (“ICL”). As a result of the
then-pending sale, effective in the Company’s first quarter of fiscal 2011, the Company classified Global Pro as
discontinued operations. See “NOTE 2. DISCONTINUED OPERATIONS” for additional details regarding the
wind-down of Smith & Hawken and the sale of Global Pro.

Due to the nature of the consumer lawn and garden business, the majority of sales to customers occur in the
Company’s second and third fiscal quarters. On a combined basis, net sales for the second and third quarters of
the last three fiscal years represented approximately 75% of annual net sales.

Organization and Basis of Presentation

The Company’s consolidated financial statements are presented in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the
accounts of Scotts Miracle-Gro and all wholly-owned and majority-owned subsidiaries. All intercompany
transactions and accounts are 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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Although these estimates are based on management’s best knowledge of current events and actions the
Company may undertake in the future, actual results ultimately may differ from the estimates.

Revenue Recognition

Revenue is recognized when title and risk of loss transfer, which generally occurs when products or services
are received by the customer. Provisions for estimated returns and allowances are recorded at the time revenue is
recognized based on historical rates and are periodically adjusted for known changes in return levels. Outbound
shipping and handling costs are included in cost of sales.

Under the terms of the Amended and Restated Exclusive Agency and Marketing Agreement (the
“Marketing Agreement”) between the Company and Monsanto Company (“Monsanto”), the Company, in its role

65

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as exclusive agent, performs certain functions, primarily manufacturing conversion, distribution and logistics,
and selling and marketing support on behalf of Monsanto in the conduct of the consumer Roundup® business.
The actual costs incurred by the Company on behalf of the consumer Roundup® business are recovered from
Monsanto through the terms of the Marketing Agreement. The reimbursement of costs for which the Company is
considered the primary obligor is included in net sales.

Promotional Allowances

The Company promotes its branded products through, among other things, cooperative advertising programs
with retailers. Retailers may also be offered in-store promotional allowances and rebates based on sales volumes.
Certain products are promoted with direct consumer rebate programs and special purchasing incentives.
Promotion costs (including allowances and rebates) incurred during the year are expensed to interim periods in
relation to revenues and are recorded as a reduction of net sales. Accruals for expected payouts under these
programs are included in the “Other current liabilities” line in the Consolidated Balance Sheets.

Advertising

Advertising costs incurred during the year by our Global Consumer segment are expensed to interim periods
in relation to revenues. All advertising costs, except for external production costs, are expensed within the fiscal
year in which such costs are incurred. External production costs for advertising programs are deferred until the
period in which the advertising is first aired.

Scotts LawnService® promotes its service offerings primarily through direct mail campaigns. External costs
associated with these campaigns that qualify as direct response advertising costs are deferred and recognized as
advertising expense in proportion to revenues over a period not beyond the end of the subsequent calendar year.
Costs that do not qualify as direct response advertising costs are expensed within the fiscal year incurred on a
monthly basis in proportion to net sales. The costs deferred at September 30, 2011 and 2010 were $1.6 million
and $1.5 million, respectively.

Advertising expenses were $141.0 million in fiscal 2011, $140.8 million in fiscal 2010 and $125.6 million

in fiscal 2009.

Research and Development

All costs associated with research and development are charged to expense as incurred. Expenses for fiscal
2011, fiscal 2010 and fiscal 2009 were $50.9 million, $47.3 million and $49.8 million, respectively, including
product registration costs of $14.6 million, $12.1 million and $15.0 million, respectively.

Environmental Costs

The Company recognizes environmental liabilities when conditions requiring remediation are probable and
the amounts can be reasonably estimated. Expenditures which extend the life of the related property or mitigate
or prevent future environmental contamination are capitalized. Environmental liabilities are not discounted or
reduced for possible recoveries from insurance carriers.

Share-Based Compensation Awards

The fair value of awards is expensed over the requisite service period which is typically the vesting period,
generally three years, except in cases where employees are eligible for accelerated vesting based on having

66

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

satisfied retirement requirements relating to age and years of service. Performance-based awards are expensed
over the requisite service period based on achievement of performance criteria. The Company uses a binomial
model to determine the fair value of its option grants. The Company classifies share-based compensation expense
within selling, general and administrative expenses to correspond with the same line item as cash compensation
paid to employees.

Earnings per Common Share

Basic earnings per common share is computed based on the weighted-average number of common shares
outstanding each period. Diluted earnings per common share is computed based on the weighted-average number
of common shares and dilutive potential common shares (stock options, stock appreciation rights, performance
shares, restricted stock and restricted stock unit awards) outstanding each period.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with original maturities of three months or
less to be cash equivalents. The Company maintains cash deposits in banks which from time to time exceed the
insurance available. Management periodically assesses the financial condition of the
amount of deposit
Company’s banks and believes that the risk of any potential credit loss is minimal.

Accounts Receivable and Allowances

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Allowances reflect
the Company’s best estimate of amounts in its existing accounts receivable that may not be collected due to
customer claims or customer inability or unwillingness to pay. The allowance is determined based on a
combination of factors,
including the Company’s risk assessment regarding the credit worthiness of its
customers, historical collection experience and length of time the receivables are past due. Account balances are
charged off against the allowance when the Company believes it is probable the receivable will not be recovered.

Inventories

Inventories are stated at the lower of cost or market, principally determined by the first in, first out method
of accounting, using an average costing approach. Inventories include the cost of raw materials,
labor,
manufacturing overhead and freight and in-bound handling costs incurred to pre-position goods in the
Company’s warehouse network. The Company makes provisions for obsolete or slow-moving inventories as
necessary to properly reflect inventory at the lower of cost or market value. Reserves for excess and obsolete
inventories were $22.0 million and $17.9 million at September 30, 2011 and 2010, respectively.

Long-lived Assets

Property, plant and equipment are stated at cost. Interest capitalized in property, plant and equipment
amounted to $0.1 million, $0.8 million and $0.4 million during fiscal 2011, fiscal 2010 and fiscal 2009,
respectively. Expenditures for maintenance and repairs are charged to expense as incurred. When properties are
retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from
the accounts with the resulting gain or loss being reflected in income from operations.

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THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Depreciation of property, plant and equipment is provided on the straight-line method and is based on the

estimated useful economic lives of the assets as follows:

Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 –25 years
10 –40 years
3 –15 years
6 –10 years
3 – 8 years

Intangible assets with finite lives, and therefore subject to amortization, include technology such as patents,
customer relationships, non-compete agreements and certain tradenames. These intangible assets are being
amortized on the straight-line method over their estimated useful economic lives, which typically range from 3 to
25 years. The Company’s fixed assets and intangible assets subject to amortization are required to be tested for
recoverability whenever events or changes in circumstances indicate that carrying amounts may not be
recoverable. If an evaluation of recoverability was required, the estimated undiscounted future cash flows
associated with the asset would be compared to the asset’s carrying amount to determine if a write-down is
required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the
extent that the carrying amount exceeds fair value and classified as “Impairment, restructuring and other charges”
in the Consolidated Statements of Operations.

The Company had noncash investing activities of $8.7 million and $11.4 million, respectively, representing

unpaid liabilities incurred during fiscal 2011 and fiscal 2010 to acquire property, plant and equipment.

Internal Use Software

The costs of internal use software are expensed or capitalized depending on whether they are incurred in the
preliminary project stage, application development stage or the post-implementation/operation stage. As of
September 30, 2011 and 2010, the Company had $29.6 million and $32.3 million, respectively, in unamortized
capitalized internal use computer software costs. Amortization of these costs was $9.0 million, $8.1 million and
$7.9 million during fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

Goodwill and Indefinite-lived Intangible Assets

reporting units: U.S. Consumer, Wild Bird Food,

Goodwill and indefinite-lived intangible assets are not subject to amortization. Goodwill and indefinite-
lived intangible assets are reviewed for impairment by applying a fair-value based test on an annual basis, as of
the first day of the Company’s fiscal fourth quarter, or more frequently if circumstances indicate impairment may
have occurred. The Company assesses goodwill for impairment by comparing the carrying value of its reporting
units to their respective fair values and reviewing the Company’s market value of invested capital. A reporting
unit is defined as an operating segment or one level below an operating segment. In fiscal 2011, the Company
identified four
International Consumer and Scotts
LawnService®. The Company determines the fair value of its reporting units under the income-based approach
utilizing discounted cash flows and incorporates assumptions it believes marketplace participants would utilize.
The Company also uses a comparative market-based approach using market multiples and other factors to
corroborate the discounted cash flow results used. As permitted by GAAP, if certain criteria are met, the
Company carries forward the fair value of a reporting unit from the previous year. The value of all indefinite-
lived tradenames was determined using a royalty savings methodology similar to that employed when the
associated businesses were acquired but using updated estimates of sales, cash flow and profitability. If it is
determined that an impairment has occurred, an impairment loss is recognized for the amount by which the

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THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carrying value of the asset exceeds its estimated fair value and classified as “Impairment, restructuring and other
charges” in the Consolidated Statements of Operations.

Insurance and Self-Insurance

The Company maintains insurance for certain risks, including workers’ compensation, general liability and
vehicle liability, and is self-insured for employee-related health care benefits up to a specified level for individual
claims. The Company accrues for the expected costs associated with these risks by considering historical claims
experience, demographic factors, severity factors and other relevant information. Costs are recognized in the
period the claim is incurred, and accruals include an actuarially determined estimate of claims incurred but not
yet reported.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and
liabilities are recognized for the anticipated future tax consequences attributable to differences between financial
statement amounts and their respective tax bases. Management reviews the Company’s deferred tax assets to
determine whether their value can be realized based upon available evidence. A valuation allowance is
established when management believes that it is more likely than not that some portion of its deferred tax assets
will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax
provision in the period of change.

The Company establishes a liability for tax return positions in which there is uncertainty as to whether or
not the position will ultimately be sustained. Amounts for uncertain tax positions are adjusted in quarters when
new information becomes available or when positions are effectively settled. The Company recognizes interest
expense and penalties related to these unrecognized tax benefits within income tax expense.

U.S. income tax expense and foreign withholding taxes are provided on unremitted foreign earnings that are
not indefinitely reinvested at the time the earnings are generated. Where foreign earnings are indefinitely
reinvested, no provision for U.S. income or foreign withholding taxes is made. When circumstances change and
the Company determines that some or all of the undistributed earnings will be remitted in the foreseeable future,
the Company accrues an expense in the current period for U.S. income taxes and foreign withholding taxes
attributable to the anticipated remittance.

Translation of Foreign Currencies

For all foreign operations, the functional currency is the local currency. Assets and liabilities of these
operations are translated at the exchange rate in effect at each year-end. Income and expense accounts are
translated at the average rate of exchange prevailing during the year. Translation gains and losses arising from
the use of differing exchange rates from period to period are included in accumulated other comprehensive
income (loss) within shareholders’ equity. Foreign currency transaction gains and losses are included in the
determination of net income and classified as other (income) expense, net.

Derivative Instruments

In the normal course of business, the Company is exposed to fluctuations in interest rates, the value of
foreign currencies and the cost of commodities. A variety of financial instruments, including forward and swap
contracts, are used to manage these exposures. These financial instruments are recognized at fair value on the
balance sheet, and all changes in fair value are recognized in net income or shareholders’ equity through

69

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accumulated other comprehensive income (loss). The Company’s objective in managing these exposures is to
better control these elements of cost and mitigate the earnings and cash flow volatility associated with changes in
the applicable rates and prices.

The Company has established policies and procedures that encompass risk-management philosophy and
objectives, guidelines for derivative-instrument usage, counterparty credit approval, and the monitoring and
reporting of derivative activity. The Company does not enter into derivative instruments for the purpose of
speculation.

The Company formally designates and documents instruments at inception that qualify for hedge accounting
of underlying exposures in accordance with GAAP. The Company formally assesses, both at inception and at
least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes
in cash flows of the related underlying exposure. Fluctuations in the value of these instruments generally are
offset by changes in the cash flows of the underlying exposures being hedged. This offset is driven by the high
degree of effectiveness between the exposure being hedged and the hedging instrument. GAAP requires all
derivative instruments to be recognized as either assets or liabilities at fair value in the Consolidated Balance
Sheets. The Company designates commodity hedges as cash flow hedges of forecasted purchases of commodities
and interest rate swap agreements as cash flow hedges of interest payments on variable rate borrowings. Any
ineffective portion of a change in the fair value of a qualifying instrument is immediately recognized in earnings.
The amounts recorded in earnings related to ineffectiveness of derivative hedges for the years ended
September 30, 2011, 2010 and 2009 were not significant.

RECENT ACCOUNTING PRONOUNCEMENTS

Variable Interest Entities

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance
requiring an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests
give it a controlling financial interest in a variable interest entity. The new guidance also requires enhanced
disclosures that will provide users of financial statements with more transparent information about an enterprise’s
involvement in a variable interest entity. The Company adopted the new guidance on October 1, 2010 and the
adoption did not impact the Company’s financial statements and related disclosures.

Revenue Recognition—Multiple-Element Arrangements

In October 2009, the FASB issued new accounting guidance addressing the accounting for multiple-
deliverable arrangements to enable entities to account for products or services (deliverables) separately rather
than as a combined unit. The provisions establish the accounting and reporting guidance for arrangements under
which the entity will perform multiple revenue-generating activities. Specifically, this guidance addresses how to
separate deliverables and how to measure and allocate arrangement consideration to one or more units of
accounting. The Company adopted the new guidance on October 1, 2010 and the adoption did not impact the
Company’s financial statements and related disclosures.

Fair Value Measurement

In May 2011, the FASB issued amended accounting guidance to improve comparability of fair value
measures between GAAP and the International Financial Reporting Standards. The amended guidance clarifies
how to apply the existing fair value measurement and disclosure requirements. The provisions will be effective
for the Company’s financial statements beginning with the Company’s second quarter of fiscal 2012. The

70

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company is in the process of evaluating the impact that the amended guidance may have on its financial
statements and related disclosures.

Comprehensive Income

In June 2011, the FASB issued amended accounting guidance on the presentation of comprehensive income.
The amended guidance requires that all non-owner changes in stockholders’ equity be presented either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The provisions
will be effective for the Company’s financial statements for the fiscal year beginning October 1, 2012. The
Company is in the process of evaluating the impact that the amended guidance may have on its financial
statements and related disclosures.

Testing for Goodwill Impairment

In September 2011, the FASB issued new accounting guidance which permits an entity to first assess
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than
its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill
impairment test. The entity is not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its carrying value. The guidance will be
effective for the Company’s financial statements beginning with the Company’s second quarter of fiscal 2012.
The Company is in the process of evaluating the impact that the guidance may have on its financial statements
and related disclosures.

NOTE 2. DISCONTINUED OPERATIONS

Global Pro

On February 28, 2011, the Company completed the sale of Global Pro to ICL for $270 million. After agreed
upon adjustments (including post-closing adjustments), the Company received $270.9 million net proceeds, or
$253.6 million after transaction costs. Results from discontinued operations for fiscal 2011 include an after-tax
gain on the sale of Global Pro of $39.5 million, which includes transaction costs.

As required by the indenture governing the Company’s 7.25% Senior Notes due 2018 and the indenture
governing the Company’s 6.625% Senior Notes due 2020, the Company has applied, or intends to apply, an
amount equal to the net proceeds received from the sale of Global Pro to repay indebtedness, acquire equity
interests in certain persons, make capital expenditures, acquire other assets useful in a related business and/or
make investments in certain joint ventures.

The Company’s decision to exit the professional ornamental horticulture, turf and specialty agriculture
markets and sell Global Pro was another step in its strategy to evolve its business portfolio to better leverage
growth opportunities within its core Global Consumer business segment.

In conjunction with the transaction, Scotts LLC and ICL entered into several product supply agreements
which are generally up to five years in duration, as well as various trademark and technology licensing
agreements with varying durations. The purpose of these agreements is to allow each party to continue leveraging
existing production capabilities and intellectual property to meet customer demand for their respective products.
Furthermore, certain transitional services are being provided by Scotts LLC to ICL, the majority of which extend
for a period of six to 12 months from the date of sale. Scotts LLC estimates that it will supply ICL with
approximately $50 million of product, as well as purchase approximately $15 million of materials from ICL,
each on an annualized basis.

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THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s continuing cash inflows and outflows related to these agreements are not considered to be
significant in relation to the overall cash flows of Global Pro. Furthermore, none of these agreements permit the
Company to influence the operating or financial policies of Global Pro under the ownership of ICL. Therefore,
Global Pro met the criteria for presentation as discontinued operations. As such, effective in the first quarter of
fiscal 2011, the Company classified Global Pro as discontinued operations for all periods presented. The Global
Pro results from discontinued operations include an allocation of interest expense relating to the amount of our
then existing credit facilities that was required to be repaid from the sale proceeds.

Smith & Hawken Ltd.

In July 2009, Scotts Miracle-Gro announced that its wholly-owned subsidiary, Smith & Hawken, Ltd., had
adopted a plan to close the Smith & Hawken business. During the Company’s first quarter of fiscal 2010, all
Smith & Hawken stores were closed and substantially all operational activities of Smith & Hawken were
discontinued. As a result, effective in its first quarter of fiscal 2010, the Company classified Smith & Hawken as
discontinued operations.

The Company recorded restructuring and other charges of $18.3 million and $14.7 million in fiscal 2010
and fiscal 2009, respectively, related to the liquidation of the Smith & Hawken business primarily associated
with the termination of retail site lease obligations,
third-party agency fees and severance and benefit
commitments. These charges were partially offset by a gain of approximately $18 million from the sale of the
Smith & Hawken intellectual property on December 30, 2009.

The following table summarizes the results of Global Pro and Smith & Hawken as discontinued operations

for fiscal 2011, fiscal 2010 and fiscal 2009 (in millions):

2011

2010

2009

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88.7 $256.6 $395.2
377.2
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78.1
14.7
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . . . . —
—
Gain on sale of Global Pro business . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Global Pro sale related transaction costs . . . . . . . . . . . . . . . . . . . . . .
(3.3)
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

245.5
18.3
(93.0) —
17.3 —
(0.2)
1.7

(21.6)
3.6

Income from discontinued operations before income taxes . . . . . . . .
Income tax expense (benefit) from discontinued operations . . . . . . .

84.8
38.8

10.8
7.2

2.6
(18.1)

Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . $ 46.0 $

3.6 $ 20.7

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THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The major classes of assets and liabilities of Global Pro recorded as held for sale as of September 30, 2010

were as follows (in millions):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1.0
57.5
50.7
3.4
13.5
67.0

Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$193.1

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11.4
18.7
15.2

Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45.3

NOTE 3. PRODUCT REGISTRATION AND RECALL MATTERS

In April 2008, the Company became aware that a former associate apparently deliberately circumvented the
Company’s policies and U.S. Environmental Protection Agency (“U.S. EPA”) regulations under the Federal
Insecticide, Fungicide, and Rodenticide Act of 1947, as amended (“FIFRA”), by failing to obtain valid
registrations for certain products and/or causing certain invalid product registration forms to be submitted to
regulators. Since that time, the Company has been cooperating with both the U.S. EPA and the U.S. Department
of Justice (the “U.S. DOJ”) in related civil and criminal investigations into the pesticide product registration
issues as well as a state civil investigation into related allegations arising under state pesticide registration laws
and regulations.

In late April 2008, in connection with the U.S. EPA’s investigation, the Company conducted a consumer-
level recall of certain consumer lawn and garden products and a Scotts LawnService® product. Subsequently, the
Company and the U.S. EPA agreed upon a Compliance Review Plan for conducting a comprehensive,
independent review of the Company’s product registration records. Pursuant to the Compliance Review Plan, an
independent
third-party firm, Quality Associates Incorporated (“QAI”), reviewed substantially all of the
Company’s U.S. pesticide product registrations and associated advertisements, some of which were historical in
nature and no longer related to sales of the Company’s products. The U.S. EPA investigation and the QAI review
process resulted in the temporary suspension of sales and shipments of certain products. In addition, as the QAI
review process or the Company’s internal review identified potential FIFRA registration issues (some of which
appear unrelated to the actions of the former associate), the Company endeavored to stop selling or distributing
the affected products until the issues could be resolved. QAI’s review of the Company’s U.S. pesticide product
registrations and associated advertisements is now substantially complete. The results of the QAI review process
did not materially affect the Company’s fiscal 2009, fiscal 2010 or fiscal 2011 sales and are not expected to
materially affect the Company’s fiscal 2012 sales.

In fiscal 2008, the Company conducted a voluntary recall of certain of its wild bird food products due to a
formulation issue. Certain wild bird food products had been treated with pest control additives to avoid insect
infestation, especially at retail stores. While the pest control additives had been labeled for use on certain stored
grains that can be processed for human and/or animal consumption, they were not labeled for use on wild bird
food products. In October 2008, the U.S. Food & Drug Administration concluded that the recall had been
completed and that there had been proper disposition of the recalled products. The results of the wild bird food

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THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recall did not materially affect the Company’s fiscal 2009, fiscal 2010 or fiscal 2011 financial condition, result of
operations or cash flows.

Settlement discussions relating to potential fines and/or penalties are a frequent outgrowth of governmental
investigations. In that regard, on or about June 30, 2011, the Company received a Notice of Intent to File
Administrative Complaint (“Notice”) from the U.S. EPA Region 5 with respect to the alleged FIFRA violations.
The Notice, which does not set forth a proposed penalty amount, offers the Company an opportunity to present
any information that it believes the U.S. EPA should consider prior to filing the complaint and indicates that the
U.S. EPA is prepared to meet with the Company to discuss the alleged violations. The Company made a timely
response to the Notice and communications between the Company and the U.S. EPA are underway. The
Company is also engaged in settlement discussions with the U.S. DOJ regarding its criminal investigation.

Based on the facts and circumstances known to the Company at this time (including settlement discussions
that have taken place to date), the Company has established what it believes to be an appropriate reserve. The
U.S. EPA, U.S. DOJ and related state investigations continue, however, and may result in future state, federal or
private rights of action as well as judgments, settlements, fines and/or penalties with respect to known or
potential additional product registration issues. At
the Company cannot
reasonably estimate the total scope or magnitude of all possible liabilities that could result from known or
potential product registration issues. It
to the
investigations, as well as any judgments, litigation costs or other liabilities relating to such known or potential
product registration issues, could exceed the amount of the reserve, possibly materially, and could have an
adverse effect on the Company’s financial condition, results of operations or cash flows.

is possible that any fines and/or penalties with respect

this stage of the investigations,

In June 2008, the California Department of Pesticide Regulation (“CDPR”) issued a request for information
to the Company relating to products that had been the subject of the April 2008 recall. The Company cooperated
with that inquiry and reached agreement with CDPR that CDPR would place its investigation on hold pending
the completion of the Company’s internal audit. In July 2010, CDPR notified the Company that CDPR planned
to proceed with its investigation independent of the U.S. EPA and U.S. DOJ, and in March 2011, the Company
received a letter from CDPR offering to settle the matter without the need for an enforcement proceeding for
$245,631. On July 25, 2011, the Company paid the requested civil penalty and entered into a Settlement
Agreement pursuant to which CDPR agreed not to take further civil or criminal action with regard to the affected
products.

As a result of these registration and recall matters, the Company has recorded charges for affected inventory
and other registration and recall-related costs. The effects of these adjustments, including the reserve noted
above, were pre-tax charges of $14.6 million, $8.7 million and $28.6 million for the fiscal years ended September
2011, 2010 and 2009, respectively. The Company expects that future charges will include costs associated with
the rework of certain finished goods inventories, the potential disposal of certain products and ongoing third-
party professional services related to the U.S. EPA, U.S. DOJ and state investigations. It may also be appropriate
to establish additional reserves as settlement discussions continue or in connection with other actions or potential
liabilities arising in connection with the product registration issues.

74

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables summarize the impact of the product registration and recall matters on the results of
operations during fiscal 2011, fiscal 2010 and fiscal 2009 and on accrued liabilities and inventory reserves as of
September 30, 2011 and 2010 (in millions):

Net sales—product recalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—product recalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax benefit

Year Ended
September 30,

2011

$ —
—
3.2

(3.2)
11.4

(14.6)
(2.6)

2010

$—
—
3.0

(3.0)
5.7

(8.7)
(3.1)

2009

$ (0.3)
(0.2)
11.7

(11.8)
16.8

(28.6)
(10.3)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(12.0)

$(5.6)

$(18.3)

Reserves at
September 30,
2010

Additional
Costs and
Changes in
Estimates

Inventory reserves . . . . . . . . . . . . . . . . . . . . . . .
Other incremental costs of sales . . . . . . . . . . . .
Other general and administrative costs . . . . . . .

Accrued liabilities and inventory reserves . . . .

$3.0
0.5
0.5

$4.0

$ 1.2
2.0
11.4

$14.6

Reserves
Used

$ (3.8)
(2.2)
(4.1)

$(10.1)

Reserves at
September 30,
2011

$0.4
0.3
7.8

$8.5

NOTE 4. IMPAIRMENT, RESTRUCTURING AND OTHER CHARGES

The following table details impairment, restructuring and other charges and rolls forward the restructuring

and other charges accrued in fiscal 2011, fiscal 2010 and fiscal 2009 (in millions):

Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . .
Other impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment impairments . . . . . . . . . . . . . . . .
Goodwill and intangible asset impairments . . . . . . . . . . . . . . . .

Total impairment, restructuring and other charges . . . . . . . . . . .

Amounts reserved for restructuring and other charges at

beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges in continuing operations . . . . .
Restructuring and other charges in discontinued operations(1)
. .
Payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts reserved for restructuring and other charges at end of

2011

2010

2009

$ 30.8
16.8
9.1
19.4

$ 76.1

$ — $ —
—
—
—

—
—
18.5

$ 18.5

$ —

2011

2010

2009

$ 0.5
47.6
—
(18.5)

$ 14.6
—
18.3
(32.4)

$ 1.1
—
14.7
(1.2)

year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29.6

$ 0.5

$14.6

(1) Restructuring and other charges related to the Company’s Smith & Hawken business. See “NOTE 2.

DISCONTINUED OPERATIONS.”

75

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fiscal 2011

On May 26, 2011, the Company and the former owners of Turf-Seed, Inc. agreed to an early settlement of
the contingent consideration associated with the Company’s fiscal 2006 acquisition of Turf-Seed, Inc.
Concurrently, several other contracts and agreements between the Company and the former owners of Turf-Seed,
Inc. were terminated or amended. The Company agreed to pay a total of $21.3 million to resolve these matters,
resulting in a net charge of $10.3 million after consideration of previously recorded liabilities and other aspects
of the agreements. In the fourth quarter of fiscal 2011, the Company also recorded impairment and other charges
of $6.5 million related to its investment in Turf-Seed (Europe) Limited.

On August 8, 2011, the Company announced a restructuring plan designed to streamline management
decision making and continue the regionalization of the Company’s operating structure, with the objective of
reinvesting the savings generated in innovation and growth initiatives. During fiscal 2011, the Company incurred
$24.2 million in restructuring costs related to termination benefits provided to employees who were involuntarily
terminated and special termination benefits provided to certain employees upon future separation, as well as $2.3
million related to curtailment charges for its U.S. defined benefit pension and U.S. retiree medical plans. The
amounts reserved as of September 30, 2011 will be paid out primarily over the course of fiscal 2012. The
restructuring plan is expected to be completed in the first quarter of fiscal 2012.

In connection with the Company’s annual impairment review, the Company recognized impairment charges
related to the Wild Bird Food reporting unit of $9.1 million for property, plant and equipment, $16.8 million for
intangible assets and $0.3 million for goodwill, based on their respective estimated fair values. Losses generated
by this business over the past two years, combined with a revised long-term outlook have negatively impacted
the value of this business.

In addition, the Company recognized charges of $2.3 million for other intangible asset impairments and $4.3

million for restructuring and other charges.

Fiscal 2010

The Company’s fiscal 2010 impairment review resulted in a charge of $18.5 million related to intangible
assets of certain brands and sub-brands in its Global Consumer segment that have been discontinued or
de-emphasized, consistent with the Company’s business strategy to increasingly concentrate its advertising and
promotional spending on fewer, more significant brands to more efficiently drive growth.

76

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5. GOODWILL AND INTANGIBLE ASSETS, NET

The following table displays a rollforward of the carrying amount of goodwill by reportable segment, as

well as Corporate & Other (in millions):

Balance as of September 30, 2009
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . .

Reclassifications to Assets held for sale . . . . . . . . . . . . . . . .
Foreign currency translation and other . . . . . . . . . . . . . . . . .

Balance as of September 30, 2010
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . .

Acquisitions, net of purchase price adjustments . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of September 30, 2011
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . .

Global
Consumer

Scotts
LawnService®

Corporate &
Other

Total

$274.2
(62.5)

211.7
(29.2)
(0.4)

$244.6
(62.5)

182.1
—
(0.3)

$244.6
(62.8)

$181.8

$123.7
—

123.7
—
—

$123.7
—

123.7
3.6
—

$127.3
—

$127.3

$ 24.6
(24.6)

$422.5
(87.1)

—
—
—

335.4
(29.2)
(0.4)

$ 24.6
(24.6)

$392.9
(87.1)

—
—
—

$ 24.6
(24.6)

$ —

305.8
3.6
(0.3)

$396.5
(87.4)

$309.1

The following table presents intangible assets (in millions):

September 30, 2011

September 30, 2010

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Finite-lived intangible assets:

Technology . . . . . . . . . . . . . . . . . . . . . . . . .
Customer accounts . . . . . . . . . . . . . . . . . . .
Tradenames . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$60.9
83.4
46.5
99.3

$(41.9)
(63.4)
(21.3)
(77.1)

Total finite-lived intangible assets, net . . . .
Indefinite-lived tradenames . . . . . . . . . . . . . . . . .

Total intangible assets, net

. . . . . . . . . . . . .

$53.2
82.5
36.1
99.4

$(40.5)
(48.2)
(12.4)
(73.4)

$ 19.0
20.0
25.2
22.2

86.4
233.2

$319.6

$ 12.7
34.3
23.7
26.0

96.7
233.5

$330.2

Fiscal 2011

In connection with the Company’s annual impairment review, the Company recognized impairment charges
related to the Wild Bird Food reporting unit of $16.8 million for intangible assets and $0.3 million for goodwill,
based on their
in
“NOTE 4. IMPAIRMENT, RESTRUCTURING AND OTHER CHARGES.”

respective estimated fair values. The impairment charges are discussed further

77

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fiscal 2010

The Company’s fiscal 2010 impairment review resulted in a charge of $18.5 million related to intangible
assets of certain brands and sub-brands in its Global Consumer segment. The impairment charges are discussed
further in “NOTE 4. IMPAIRMENT, RESTRUCTURING AND OTHER CHARGES.”

Fiscal 2009

During the fourth quarter of fiscal 2009, the Company completed its annual impairment analysis and

determined that no charge for impairment was required.

Total amortization expense for the years ended September 30, 2011, 2010 and 2009 was $11.4 million,
$10.7 million and $12.5 million, respectively. Amortization expense is estimated to be as follows for the years
ending September 30 (in millions):

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11.3
10.7
10.3
7.6
6.1

NOTE 6. DETAIL OF CERTAIN FINANCIAL STATEMENT ACCOUNTS

September 30,

2011

2010

(In millions)

INVENTORIES:

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 130.7
34.3
222.0

$ 180.9
27.2
144.8

$ 387.0

$ 352.9

PREPAID AND OTHER ASSETS:

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, non-trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 88.1
16.9
46.1

$ 77.1
15.2
40.8

$ 151.1

$ 133.1

PROPERTY, PLANT AND EQUIPMENT, NET:

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70.1
199.9
437.0
42.9
116.9
8.4
30.0

$ 63.3
182.6
406.7
38.3
107.2
8.4
35.9

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

905.2
(510.5)

842.4
(461.1)

$ 394.7

$ 381.3

78

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

OTHER CURRENT LIABILITIES:

Payroll and other compensation accruals . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising and promotional accruals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OTHER NON-CURRENT LIABILITIES:

Accrued pension and postretirement liabilities . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 30,

2011

2010

(In millions)

$ 37.9
132.8
144.7

$315.4

$112.1
65.2
54.7

$232.0

$ 90.4
148.6
115.8

$354.8

$128.5
60.6
36.9

$226.0

September 30,

2011

2010

2009

(In millions)

ACCUMULATED OTHER COMPREHENSIVE LOSS:

Unrecognized loss on derivatives, net of tax of $9.6, $7.9 and

$10.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(15.7)

$(12.7)

$(17.3)

Pension and other postretirement liabilities, net of tax of $33.5,

$40.4 and $35.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .

Foreign currency translation adjustment

(56.9)
(5.4)

(69.1)
4.7

(59.2)
3.7

$(78.0)

$(77.1)

$(72.8)

NOTE 7. MARKETING AGREEMENT

The Company is Monsanto’s exclusive agent for the marketing and distribution of consumer Roundup®
herbicide products (with additional rights to new products containing glyphosate or other similar non-selective
herbicides) in the consumer lawn and garden market within the United States and other specified countries,
including Australia, Austria, Belgium, Canada, France, Germany, the Netherlands and the United Kingdom.
Under the terms of the Marketing Agreement, the Company is entitled to receive an annual commission from
Monsanto as consideration for the performance of the Company’s duties as agent. The annual gross commission
under the Marketing Agreement is calculated as a percentage of the actual earnings before interest and income
taxes (EBIT) of the consumer Roundup® business in the markets covered by the Marketing Agreement and is
based on the achievement of two earnings thresholds, as defined in the Marketing Agreement. The Marketing
Agreement also requires the Company to make annual payments to Monsanto as a contribution against the
overall expenses of the consumer Roundup® business. The annual contribution payment is defined in the
Marketing Agreement as $20 million.

In consideration for the rights granted to the Company under the Marketing Agreement for North America,
the Company was required to pay a marketing fee of $32 million to Monsanto. The Company has deferred this
amount on the basis that the payment will provide a future benefit through commissions that will be earned under
the Marketing Agreement. The economic useful life over which the marketing fee is being amortized is 20 years,
with a remaining amortization period of seven years as of September 30, 2011.

Under the terms of the Marketing Agreement,

the Company performs certain functions, primarily
manufacturing conversion, distribution and logistics, and selling and marketing support, on behalf of Monsanto

79

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in the conduct of the consumer Roundup® business. The actual costs incurred for these activities are charged to
and reimbursed by Monsanto. The Company records costs incurred under the Marketing Agreement for which
the Company is the primary obligor on a gross basis, recognizing such costs in “Cost of sales” and the
reimbursement of these costs in “Net sales,” with no effect on gross profit or net income. The related net sales
and cost of sales were $63.7 million, $65.0 million and $67.8 million for fiscal 2011, fiscal 2010 and fiscal 2009,
respectively.

The gross commission earned under the Marketing Agreement, the contribution payments to Monsanto and
the amortization of the initial marketing fee paid to Monsanto are included in the calculation of net sales in the
Company’s Consolidated Statements of Operations. For fiscal 2011, fiscal 2010 and fiscal 2009, the net amount
earned under the Marketing Agreement was $57.1 million, $70.0 million and $51.4 million, respectively. The
elements of the net commission earned under the Marketing Agreement and included in “Net sales” for each of
the three years in the period ended September 30, 2011 were as follows (in millions):

2011

2010

2009

Gross commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of marketing fee . . . . . . . . . . . . . . . . . . . . . . . . .

$ 77.9
(20.0)
(0.8)

$ 90.8
(20.0)
(0.8)

$ 72.2
(20.0)
(0.8)

Net commission income . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursements associated with Marketing Agreement . . . . .

57.1
63.7

70.0
65.0

51.4
67.8

Total net sales associated with Marketing Agreement . . .

$120.8

$135.0

$119.2

The Marketing Agreement has no definite term except as it relates to the European Union countries (the
“EU term”). The current EU term extends through September 30, 2013, with an automatic renewal period of two
the
to non-renewal only upon the occurrence of certain performance defaults. Thereafter,
years, subject
Marketing Agreement provides that the parties may agree to renew the EU term for an additional three years.

The Marketing Agreement provides Monsanto with the right to terminate the Marketing Agreement upon an
event of default (as defined in the Marketing Agreement) by the Company, a change in control of Monsanto or
the sale of the consumer Roundup® business. The Marketing Agreement provides the Company with the right to
terminate the Marketing Agreement in certain circumstances, including an event of default by Monsanto or the
sale of the consumer Roundup® business. Unless Monsanto terminates the Marketing Agreement due to an event
of default by the Company, Monsanto is required to pay a termination fee to the Company that varies by program
year. The termination fee is calculated as a percentage of the value of the Roundup® business exceeding a certain
threshold, but in no event will the termination fee be less than $16 million. If Monsanto were to terminate the
Marketing Agreement for cause, the Company would not be entitled to any termination fee. Monsanto may also
be able to terminate the Marketing Agreement within a given region, including North America, without paying a
termination fee if unit volume sales to consumers in that region decline: (1) over a cumulative three-fiscal-year
period; or (2) by more than 5% for each of two consecutive years. If the Marketing Agreement was terminated
for any reason, the Company would also lose all, or a substantial portion, of the significant source of earnings
and overhead expense absorption the Marketing Agreement provides.

Under the Marketing Agreement, Monsanto must provide the Company with notice of any proposed sale of
the consumer Roundup® business, allow the Company to participate in the sale process and negotiate in good
faith with the Company with respect to any such proposed sale. In the event the Company acquires the consumer
Roundup® business in such a sale, the Company would receive as a credit against the purchase price the amount
of the termination fee that would have been paid to the Company if Monsanto had exercised its right to terminate

80

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Marketing Agreement in connection with a sale to another party. If Monsanto decides to sell the consumer
Roundup® business to another party, the Company must let Monsanto know whether the Company intends to
terminate the Marketing Agreement and forfeit any right to a termination fee or whether it will agree to continue
to perform under the Marketing Agreement on behalf of the purchaser.

NOTE 8. ACQUISITIONS

During fiscal 2011, the Company completed several acquisitions within its growing media and Scotts
LawnService® businesses that individually and in the aggregate were not significant. The aggregate purchase
price of these acquisitions was $10.9 million. The Consolidated Financial Statements include the results of
operations from these business combinations from the date of each acquisition.

NOTE 9. RETIREMENT PLANS

The Company sponsors a defined contribution 401(k) plan for substantially all U.S. associates. During 2010
and 2009, the Company provided a base contribution equal to 2% of compensation up to 50% of the Social
Security taxable wage base plus 4% of remaining compensation. Associates could also make pretax contributions
from compensation that were matched by the Company at 100% of associates’ initial 3% contribution and 50%
of their remaining contribution up to 5%. Beginning January 1, 2011, the Company stopped providing base
contributions and began matching 150% of associates’ initial 4% contribution and 50% of their remaining
contribution up to 6%. The Company recorded charges of $13.2 million, $14.5 million and $15.3 million under
the plan in fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

The Company sponsors two defined benefit plans for certain U.S. associates. Benefits under these plans
have been frozen and closed to new associates since 1997. The benefits under the primary plan are based on
years of service and the associates’ average final compensation or stated amounts. The Company’s funding
policy, consistent with statutory requirements and tax considerations, is based on actuarial computations using
the Projected Unit Credit method. The second frozen plan is a non-qualified supplemental pension plan. This
plan provides for incremental pension payments so that total pension payments equal amounts that would have
been payable from the Company’s pension plan if it were not for limitations imposed by the income tax
IMPAIRMENT,
regulations.
RESTRUCTURING AND OTHER CHARGES,” the Company recognized a plan curtailment charge of $1.2
million in fiscal 2011 for an increase in the benefit obligation associated with these plans.

restructuring plan discussed in “NOTE 4.

In connection with the

The Company sponsors defined benefit pension plans associated with its international businesses in the
United Kingdom, Germany, France and the Netherlands. These plans generally cover all associates of the
respective businesses, with retirement benefits primarily based on years of service and compensation levels. Two
of the Company’s previously-sponsored international defined benefit plans were transferred to ICL in connection
with the sale of Global Pro on February 28, 2011.

On July 1, 2010, the Company froze its two U.K. defined benefit pension plans and transferred participants
to an amended defined contribution plan. Under the frozen plans, participants are no longer credited for future
service; however, future salary increases will continue to be factored into each participant’s final pension benefit.
As a result of the freeze, the Company measured the unfunded status of the U.K. defined benefit pension plans as
of July 3, 2010. The results of the freeze and remeasurement did not affect the Company’s results of operations
or cash flows, and did not significantly affect the Company’s financial position.

81

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present information about benefit obligations, plan assets, annual expense, assumptions
and other information about the Company’s defined benefit pension plans (in millions). The defined benefit plans
are valued using a September 30 measurement date.

U.S. Defined
Benefit Plans

International
Defined
Benefit Plans

2011

2010

2011

2010

Change in projected benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projected benefit obligation gain due to plan freeze . . . . . . . . . . . . . . . . . . . .
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$106.6
—
4.8
—
3.5
(6.5)
—
1.2
—
—

$101.5
—
5.1
—
6.4
(6.4)
—
—
—
—

$174.6
1.3
8.9
—
(17.5)
(5.9)
—
—
(0.6)
(1.2)

$157.3
1.8
8.4
0.4
19.6
(5.4)
(2.7)
—
(0.5)
(4.3)

Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . .

$109.6

$106.6

$159.6

$174.6

Accumulated benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . .

$109.6

$106.6

$153.2

$169.6

Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gain (loss)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 69.7
3.5
7.6
—
—
(6.5)
—
—

$ 64.2
6.2
5.7
—
—
(6.4)
—
—

$115.8
2.5
8.4
—
(0.4)
(5.9)
(1.1)
(1.1)

$106.0
9.9
7.8
0.4
0.3
(5.4)
(2.1)
(1.1)

Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 74.3

$ 69.7

$118.2

$115.8

Underfunded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (35.3) $ (36.9) $ (41.4) $ (58.8)

Information for pension plans with an accumulated benefit obligation

in excess of plan assets

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$109.6
109.6
74.3

$106.6
106.6
69.7

$159.6
153.2
118.2

$174.6
169.6
115.8

Amounts recognized in the Consolidated Balance Sheets consist of:
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.2) $ (0.2) $ (1.0) $ (0.9)
(57.9)

(40.4)

(35.1)

(36.7)

Total amount accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (35.3) $ (36.9) $ (41.4) $ (58.8)

Amounts recognized in accumulated other comprehensive loss consist of:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 49.6
—

$ 49.4
—

$ 39.3
1.1

$ 51.7
0.7

Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 49.6

$ 49.4

$ 40.4

$ 52.4

82

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

U.S. Defined
Benefit Plans

International
Defined
Benefit Plans

2011

2010

2011

2010

Total change in other comprehensive loss attributable to:
Pension benefit losses during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of pension benefit losses to net income . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

$ 5.1
(4.9)

$ 5.1
(4.3)
—

$10.8
(1.2)
—

$14.6
(1.8)
(0.7)

Total change in other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.2

$ 0.8

$ 9.6

$12.1

Amounts in accumulated other comprehensive loss expected to be

recognized as components of net periodic benefit cost in fiscal 2012 are as
follows:

Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5.1
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Amount to be amortized into net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . .

$ 5.1

$ 0.7
0.1

$ 0.8

Weighted average assumptions used in development of projected benefit

obligation

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.29% 4.66% 5.46% 5.01%
3.5% 3.5%

n/a

n/a

U.S. Defined
Benefit Plans

International
Defined Benefit Plans

2011

2010

2009

2011

2010

2009

Components of net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ — $ 1.3
8.9
(8.4)
1.2

5.6
(5.1)
3.1

5.1
(5.0)
4.3

4.8
(5.1)
4.9

$ 1.8
8.4
(7.3)
1.7

$ 1.8
8.4
(6.4)
2.0

Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.6
4.4
1.1 —

3.6
—

3.0
—

4.6
—

5.8
—

Total benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5.7

$ 4.4

$ 3.6

$ 3.0

$ 4.6

$ 5.8

4.66% 5.23% 6.46% 5.01% 5.46% 6.05%
7.5% 8.0% 8.0% 7.0% 7.1% 7.2%
3.5% 3.8% 4.1%
n/a

n/a

n/a

Weighted average assumptions used in development of net

periodic benefit cost

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . .

83

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other information

U.S. Defined
Benefit Plans

International
Defined
Benefit Plans

Plan asset allocations:

Target for September 30, 2012:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . .

September 30, 2011:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . .

September 30, 2010:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . .

33%
67%

36%
63%
1%

53%
47%
—

60%
40%

53%
41%
6%

56%
43%
1%

Expected company contributions in fiscal 2012 . . . . . . . .

$ 5.1

$ 7.9

Expected future benefit payments:
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 – 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7.0
7.0
7.1
7.2
7.2
36.2

$ 5.9
6.2
6.6
7.4
7.5
45.3

The following tables set forth the fair value of the Company’s pension plan assets (in millions), segregated
by level within the fair value hierarchy (refer to “NOTE 16. FAIR VALUE MEASUREMENTS” for further
discussion of the fair value hierarchy and fair value principles):

September 30, 2011

Quoted Prices in Active
Markets for Identical
Assets (Level 1)

Significant Other
Observable
Inputs (Level 2)

Unobservable
Inputs
(Level 3)

U.S. Defined Benefit Plan Assets
Cash and cash equivalents . . . . . . . . . . .
Mutual funds—equities . . . . . . . . . . . . .
Mutual funds—fixed income . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

International Defined Benefit Plan Assets
Cash and cash equivalents . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . .
Mutual funds—equities . . . . . . . . . . . . .
Mutual funds—fixed income . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.8
26.9
46.6

$74.3

$ 0.4
—
—
—

$ 0.4

84

$ —
—
—

$ —

$ —
2.6
63.1
48.4

$114.1

$—
—
—

$—

$—
3.7
—
—

$ 3.7

Total

$

0.8
26.9
46.6

$ 74.3

$

0.4
6.3
63.1
48.4

$118.2

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

September 30, 2010

Quoted Prices in Active
Markets for Identical
Assets (Level 1)

Significant Other
Observable
Inputs (Level 2)

Unobservable
Inputs
(Level 3)

U.S. Defined Benefit Plan Assets
Cash and cash equivalents . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . .
Mutual funds—equities . . . . . . . . . . . . .
Mutual funds—fixed income . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

International Defined Benefit Plan Assets
Cash and cash equivalents . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . .
Mutual funds—equities . . . . . . . . . . . . .
Mutual funds—fixed income . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.6
3.9
32.7
32.5

$69.7

$ 0.6
—
—
—

$ 0.6

$ —
—
—
—

$ —

$ —
—
65.1
46.0

$111.1

$—
—
—
—

$—

$—
4.1
—
—

$ 4.1

Total

$

0.6
3.9
32.7
32.5

$ 69.7

$

0.6
4.1
65.1
46.0

$115.8

The table below sets forth a summary of changes in the fair value of the Company’s level 3 pension plan

assets (in millions):

Level 3 Assets
Insurance contracts

Balance, September 30, 2009 . . . . . . . . . . . . . . . . . .
Realized gain on plan assets . . . . . . . . . . . . . . . . . . . .
Unrealized gain on plan assets . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . .

Balance, September 30, 2010 . . . . . . . . . . . . . . . . . .
Realized gain on plan assets . . . . . . . . . . . . . . . . . . . .
Unrealized gain on plan assets . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . .
. . .
Purchases, sales, issuances and settlements (net)

$ 3.9
0.2
0.3
(0.3)

4.1
0.2
(0.4)
(0.1)
(0.1)

Balance, September 30, 2011 . . . . . . . . . . . . . . . . . .

$ 3.7

Investment Strategy

Target allocation percentages among various asset classes are maintained based on an individual investment
policy established for each of the various pension plans. Asset allocations are designed to achieve long-term
objectives of return while mitigating against downside risk and considering expected cash requirements
necessary to fund benefit payments. However, the Company cannot predict future investment returns and
therefore cannot determine whether future pension plan funding requirements could materially and adversely
affect its financial condition, results of operations or cash flows.

Basis for Long-Term Rate of Return on Asset Assumptions

The Company’s expected long-term rate of return on asset assumptions are derived from studies conducted
by third parties. The studies include a review of anticipated future long-term performance of individual asset

85

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

classes and consideration of the appropriate asset allocation strategy given the anticipated requirements of the
plans to determine the average rate of earnings expected. While the studies give appropriate consideration to
recent fund performance and historical returns, the assumptions primarily represent expectations about future
rates of return over the long term.

NOTE 10. ASSOCIATE MEDICAL BENEFITS

The Company provides comprehensive major medical benefits to certain of its retired associates and their
dependents. Substantially all of the Company’s domestic associates who were hired before January 1, 1998
become eligible for these benefits if they retire at age 55 or older with more than ten years of service. The retiree
medical plan requires certain minimum contributions from retired associates and includes provisions to limit the
overall cost increases the Company is required to cover. The Company funds its portion of retiree medical
benefits on a pay-as-you-go basis.

The following table sets forth information about the retiree medical plan for domestic associates (in

millions). The retiree medical plan is valued using a September 30 measurement date.

Change in Accumulated Plan Benefit Obligation (APBO)
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid (net of federal subsidy of $0.3 and $0.3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

$ 31.7 $ 31.0
0.5
1.7
0.9
0.5
—
(2.9)

0.5
1.6
0.9
1.9
1.1
(3.3)

Benefit obligation at end of year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 34.4 $ 31.7

Change in plan assets
Fair value of plan assets at beginning of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ —
2.4
0.9
(3.3)

2.7
0.9
(3.6)

Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Unfunded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(34.4) $(31.7)

Amounts recognized in the Consolidated Balance Sheets consist of:
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2.3) $ (2.1)
(29.6)
(32.1)

Total amount accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(34.4) $(31.7)

Amounts recognized in accumulated other comprehensive loss consist of:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3.4 $ 1.4

Total change in other comprehensive loss attributable to:
Benefit losses during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of benefit gains to net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.0 $ 0.6
—

—

Total change in other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.0 $ 0.6

The estimated actuarial gain that will be amortized from accumulated loss into net periodic

benefit cost over the next fiscal year is immaterial

Discount rate used in development of APBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.66% 4.91%

86

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2011

2010

2009

Components of net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.5 $ 0.5 $ 0.4
1.9
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.2)
Amortization of actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

1.6
1.7
1.1 —
—

Total postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.2 $ 2.2 $ 2.1

Discount rate used in development of net periodic benefit cost . . . . . . . . . . .

4.91% 5.50% 7.54%

In connection with the restructuring plan discussed in “NOTE 4. IMPAIRMENT, RESTRUCTURING AND
OTHER CHARGES,” the Company recognized a plan curtailment charge of $1.1 million in fiscal 2011 for an
increase in the benefit obligation associated with its retiree medical plan.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act (the “Act”)
became law. The Act provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a
prescription drug benefit that is at least actuarially equivalent to the benefit established by the Act. The APBO at
September 30, 2011, has been reduced by a deferred actuarial gain in the amount of $0.4 million to reflect the
effect of the subsidy related to benefits attributed to past service. The amortization of the actuarial gain and
reduction of service and interest costs served to reduce net periodic post retirement benefit cost for fiscal 2011,
fiscal 2010 and fiscal 2009 by $1.1 million, $0.5 million and $0.6 million, respectively.

The Company has historically received a federal retiree drug subsidy as it offers retiree prescription drug
coverage that is at a minimum as valuable as Medicare Part D coverage. The Patient Protection and Affordable
Care Act (“PPACA”), which was enacted on March 23, 2010, repealed the existing rule that permitted a tax
deduction for the portion of the drug coverage expense that was offset by the Medicare Part D subsidy received
by the Company. This provision of PPACA was to be effective beginning with the Company’s fiscal 2012 tax
year. On March 30, 2010, a companion bill, the Health Care and Education Reconciliation Act of 2010
(“HCERA”), was enacted. HCERA delayed the effective date of the reduction under PPACA until
the
Company’s fiscal 2014 tax year. As a result of this new legislation, the Company recorded a $1.9 million charge
to tax expense during its second quarter of fiscal 2010 to reduce its deferred tax asset for the portion of the
subsidy that will no longer be deductible when paid after fiscal 2013.

For measurement as of September 30, 2011, management has assumed that health care costs will increase at
an annual rate of 7.25% in fiscal 2011, decreasing 0.25% per year to an ultimate trend of 5.00% in 2020. A 1%
increase in health cost trend rate assumptions would increase the APBO by $1.0 million as of September 30,
2011. A 1% decrease in health cost trend rate assumptions would decrease the APBO by $1.2 million as of
September 30, 2011. A 1% increase or decrease in the same rate would not have a material effect on service or
interest costs.

87

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Estimated Future Benefit Payments

The following benefit payments under the plan are expected to be paid by the Company and the retirees for

the fiscal years indicated (in millions):

Gross
Benefit
Payments

Retiree
Contributions

Medicare
Part D
Subsidy

Net
Company
Payments

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 – 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3.7
4.2
4.5
4.9
5.2
30.0

$ (1.1)
(1.3)
(1.6)
(1.9)
(2.1)
(14.7)

$(0.3)
(0.4)
(0.4)
(0.4)
(0.5)
(3.2)

$ 2.3
2.5
2.5
2.6
2.6
12.1

The Company also provides comprehensive major medical benefits to its associates. The Company is self-
insured for certain health benefits up to $0.3 million per occurrence per individual. The cost of such benefits is
recognized as expense in the period the claim is incurred. This cost was $27.9 million, $27.6 million and
$27.8 million in fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

NOTE 11. DEBT

The components of long-term debt are as follows:

Credit Facilities:

Revolving loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes – 7.25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes – 6.625% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign borrowings (local facilities and term loans)
. . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less current portions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 30,

2011

2010

(In millions)

$387.2
—
200.0
200.0
0.4
0.3
7.1

795.0
3.2

$111.7
302.4
200.0
—
—
10.9
6.7

631.7
195.0

Long term debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$791.8

$436.7

The Company’s debt matures as follows for each of the next five fiscal years and thereafter (in millions):

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3.2
1.1
0.5
0.5
387.7
402.0

$795.0

88

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On June 30, 2011, Scotts Miracle-Gro and certain of its subsidiaries entered into a second amended and
restated senior secured credit facility, providing for revolving loans in the aggregate principal amount of up to
$1.7 billion over a five-year term. Borrowings may be made in various currencies including U.S. dollars, Euros,
British pounds, Australian dollars and Canadian dollars. Under this credit facility, the Company may request up
to an additional $450 million in revolving and/or term commitments, subject to certain specified conditions,
including approval from the Company’s lenders. The credit facility replaced the Company’s previous senior
secured credit facilities, which were comprised of: (a) a senior secured revolving loan facility in the aggregate
principal amount of up to $1.59 billion and (b) a senior secured term loan facility totaling $560 million. The
previous credit facilities were scheduled to expire in February 2012.

The terms of the credit facility provide for customary representations and warranties and affirmative
covenants. The credit facility also contains customary negative covenants setting forth limitations, subject to
negotiated carve-outs on liens; contingent obligations; fundamental changes; acquisitions, investments, loans and
advances; indebtedness; restrictions on subsidiary distributions; transactions with affiliates and officers; sales of
assets; sale and leaseback transactions; changing the Company’s fiscal year end; modifications of certain debt
instruments; negative pledge clauses; entering into new lines of business; and restricted payments, which are
limited to an aggregate of $125 million annually through fiscal 2013 and $150 million annually beginning in
fiscal 2014 if our leverage ratio, after giving effect to any such annual dividend payment, exceeds 2.50. The
credit facility is secured by collateral that includes the capital stock of specified subsidiaries of Scotts Miracle-
Gro, substantially all domestic accounts receivable (exclusive of any “sold” receivables),
inventory and
equipment. The credit facility is guaranteed by substantially all of Scotts Miracle-Gro’s domestic subsidiaries.

Loans made under the credit facility bear interest, at the Company’s election, at a rate per annum equal to
either the ABR or LIBOR rate, (both as defined) plus an applicable margin. Amounts outstanding under the
credit facility at September 30, 2011 were at interest rates based on LIBOR applicable to the borrowed currencies
plus 200 basis points. Under the credit facility, the Company has the ability to issue letter of credit commitments
up to $75 million. At September 30, 2011, the Company had letters of credit in the aggregate face amount of
$30.4 million outstanding, and $1.3 billion of availability under its credit facility.

On January 14, 2010, Scotts Miracle-Gro issued $200 million aggregate principal amount of 7.25% Senior
Notes due 2018 (the “7.25% Senior Notes”). The net proceeds of the offering were used to reduce outstanding
borrowings under the Company’s then existing credit facilities. The 7.25% Senior Notes represent general
unsecured senior obligations of Scotts Miracle-Gro, and were sold to the public at 99.254% of the principal
amount thereof, to yield 7.375% to maturity. The 7.25% Senior Notes have interest payment dates of January 15
and July 15 of each year, which began on July 15, 2010, and may be redeemed prior to maturity at applicable
redemption premiums. The 7.25% Senior Notes contain usual and customary incurrence-based covenants, which
include, but are not limited to, restrictions on the incurrence of additional indebtedness, the incurrence of liens
and the issuance of certain preferred shares, and the making of certain distributions, investments and other
restricted payments, as well as other usual and customary covenants, which include, but are not limited to,
restrictions on sale and leaseback transactions, restrictions on purchases or redemptions of Scotts Miracle-Gro
stock and prepayments of subordinated debt, limitations on asset sales and restrictions on transactions with
affiliates. The 7.25% Senior Notes mature on January 15, 2018.

On December 16, 2010, Scotts Miracle-Gro issued $200 million aggregate principal amount of
6.625% Senior Notes due 2020 (the “6.625% Senior Notes”) in a private placement exempt from the registration
requirements under the Securities Act of 1933, as amended. The net proceeds of the offering were used to repay
outstanding borrowings under the Company’s then existing credit facilities and for general corporate purposes.
The 6.625% Senior Notes represent general unsecured senior obligations of Scotts Miracle-Gro and rank equal in

89

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

right of payment with the Company’s existing and future unsecured senior debt, including, without limitation, the
7.25% Senior Notes. The 6.625% Senior Notes have interest payment dates of June 15 and December 15 of each
year, which began on June 15, 2011, and may be redeemed prior to maturity at applicable redemption premiums.
The 6.625% Senior Notes contain usual and customary incurrence-based covenants, as well as other usual and
customary covenants, substantially similar to those contained in the 7.25% Senior Notes. The 6.625% Senior
Notes mature on December 15, 2020.

Substantially all of Scotts Miracle-Gro’s domestic subsidiaries serve as guarantors of both the 7.25% and
to “NOTE 24. FINANCIAL INFORMATION FOR SUBSIDIARY

the 6.625% Senior Notes. Refer
GUARANTORS AND NON-GUARANTORS” for more information regarding the guarantor entities.

The Company was in compliance with the terms of all debt covenants at September 30, 2011. The credit
facility contains, among other obligations, an affirmative covenant regarding the Company’s leverage ratio,
calculated as average total indebtedness, as described in the Company’s credit facility, relative to the Company’s
EBITDA, as adjusted pursuant to the terms of the credit facility (“Adjusted EBITDA”). Under the terms of the
credit facility, the maximum leverage ratio was 3.50 as of September 30, 2011. The Company’s leverage ratio
was 1.98 at September 30, 2011. The Company’s credit facility also includes an affirmative covenant regarding
its interest coverage ratio. Interest coverage ratio is calculated as Adjusted EBITDA divided by interest expense,
as described in the credit facility, and excludes costs related to refinancings. Under the terms of the credit
facility, the minimum interest coverage ratio was 3.50 for the year ended September 30, 2011. The Company’s
interest coverage ratio was 7.47 for the year ended September 30, 2011. The weighted average interest rates on
average debt were 5.9% and 4.7% for fiscal 2011 and fiscal 2010, respectively.

At September 30, 2011, the Company had outstanding interest rate swap agreements with major financial
institutions that effectively converted a portion of variable-rate debt denominated in U.S. dollars to a fixed rate.
The swap agreements had a total U.S. dollar notional amount of $900 million at September 30, 2011. 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 are
shown in the table below.

Notional Amount
(in millions)

$200
50
150(b)
150(c)
50(b)
100(b)
150(c)
50(d)

Effective
Date (a)

2/14/2007
2/14/2012
2/7/2012
11/16/2009
2/16/2010
2/21/2012
12/20/2011
12/6/2012

Expiration
Date

2/14/2012
2/14/2016
5/7/2016
5/16/2016
5/16/2016
5/23/2016
6/20/2016
9/6/2017

Fixed
Rate

5.20%
3.78%
2.42%
3.26%
3.05%
2.40%
2.61%
2.96%

(a) The effective date refers to the date on which interest payments were, or will be, first hedged by the

(b)

(c)

(d)

applicable swap agreement.
Interest payments made during the three-month period of each year that begins with the month and day of
the effective date are hedged by the swap agreement.
Interest payments made during the six-month period of each year that begins with the month and day of the
effective date are hedged by the swap agreement.
Interest payments made during the nine-month period of each year that begins with the month and day of the
effective date are hedged by the swap agreement.

90

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Master Accounts Receivable Purchase Agreement

On September 21, 2011, the Company entered into a new Master Accounts Receivable Purchase Agreement
(the “MARP Agreement”), with an initial stated termination date of September 21, 2012, or such later date as
may be mutually agreed by the Company and the banks party thereto. The MARP Agreement, which is
uncommitted, provides for the discretionary sale by the Company, and the discretionary purchase by the banks,
on a revolving basis, of accounts receivable generated by sales to two specified account debtors in an aggregate
amount not to exceed $325 million, with debtor sublimits ranging from $120 million to $250 million. Under the
terms of the MARP Agreement, the banks have the opportunity to purchase those accounts receivable offered by
the Company at a discount (from the agreed base value thereof) effectively equal to the greater of 7-day or
3-month LIBOR plus 1.05%. The MARP Agreement replaced the Company’s previous Master Accounts
Receivable Purchase Agreement, which provided for the discounted sale, on an uncommitted, revolving basis, of
accounts receivable generated by a single specified account debtor, with aggregate limits not to exceed $80
million and an interest rate that approximated the 7-day LIBOR rate plus 1.25%. The previous Master Accounts
Receivable Purchase Agreement was scheduled to expire on September 30, 2011.

The Company accounts for the sale of receivables under the MARP Agreement as short-term debt and
continues to carry the receivables on its Consolidated Balance Sheet, primarily as a result of the Company’s right
to repurchase receivables sold. There were no short-term borrowings under the MARP Agreement as of
September 30, 2011 and 2010.

Estimated Fair Values

A description of the methods and assumptions used to estimate the fair values of the Company’s debt

instruments is as follows:

Credit Facility

The interest rate currently available to the Company fluctuates with the applicable LIBOR rate, prime rate

or Federal Funds Effective Rate, and thus the carrying value is a reasonable estimate of fair value.

7.25% Senior Notes

The fair value of the 7.25% Senior Notes can be determined based on the trading of the 7.25% Senior Notes
in the open market. The difference between the carrying value and the fair value of the 7.25% Senior Notes
represents the premium or discount on that date. Based on the trading value on or around September 30, 2011,
the fair value of the 7.25% Senior Notes was approximately $206.0 million.

6.625% Senior Notes

The fair value of the 6.625% Senior Notes can be determined based on the trading of the 6.625% Senior
Notes. The difference between the carrying value and the fair value of the 6.625% Senior Notes represents the
premium or discount on that date. Based on the trading value on or around September 30, 2011, the fair value of
the 6.625% Senior Notes was approximately $198.1 million.

Accounts Receivable Pledged

The interest rate on the short-term debt associated with accounts receivable pledged under the MARP
Agreement fluctuates with the applicable LIBOR rate, and thus the carrying value is a reasonable estimate of fair
value.

91

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated fair values of the Company’s debt instruments are as follows for the fiscal years ended

September 30 (in millions):

Revolving loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes – 7.25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes – 6.625% . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

Carrying
Amount

$387.2
—
200.0
200.0
—
7.1

Fair
Value

$387.2
—
206.0
198.1
—
7.1

Carrying
Amount

$111.7
302.4
200.0
—
10.9
6.7

Fair
Value

$111.7
302.4
211.0
—
10.9
6.7

NOTE 12. SHAREHOLDERS’ EQUITY

At September 30, authorized and issued capital shares consisted of the following:

2011

2010

(In millions)

Preferred shares, no par value:

Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.2 shares
0.0 shares

0.2 shares
0.0 shares

Common shares, no par value, $.01 stated value

per share

Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0 shares
68.1 shares

100.0 shares
68.1 shares

In fiscal 1995, The Scotts Company merged with Stern’s Miracle-Gro Products, Inc. (“Miracle-Gro”). At
September 30, 2011, the former shareholders of Miracle-Gro, including Hagedorn Partnership L.P., owned
approximately 30% of Scotts Miracle-Gro’s outstanding common shares and,
thus, have the ability to
significantly influence the election of directors and other actions requiring the approval of Scotts Miracle-Gro’s
shareholders.

Under the terms of the merger agreement with Miracle-Gro, the former shareholders of Miracle-Gro may
not collectively acquire, directly or indirectly, beneficial ownership of Voting Stock (as that term is defined in
the Miracle-Gro merger agreement) representing more than 49% of the total voting power of the outstanding
Voting Stock, except pursuant to a tender offer for 100% of that total voting power, which tender offer is made at
a price per share which is not less than the market price per share on the last
trading day before the
announcement of the tender offer and is conditioned upon the receipt of at least 50% of the Voting Stock
beneficially owned by shareholders of Scotts Miracle-Gro other than the former shareholders of Miracle-Gro and
their affiliates and associates.

In August 2010, the Scotts Miracle-Gro Board of Directors authorized the repurchase of up to $500 million
of Scotts Miracle-Gro’s common shares (the “Common Shares”) over a four-year period through September 30,
2014. On May 4, 2011, the Scotts Miracle-Gro Board of Directors authorized the repurchase of up to an
additional $200 million of the Common Shares, resulting in authority to repurchase up to a total of $700 million
of the Common Shares through September 30, 2014. The authorization provides the Company with flexibility to
purchase the Common Shares from time to time in open market purchases or through privately negotiated
transactions. All or part of the repurchases may be made under Rule 10b5-1 plans, which the Company may enter

92

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

from time to time and which enable the repurchases to occur on a more regular basis, or pursuant to accelerated
share repurchases. The share repurchase authorization, which expires September 30, 2014, may be suspended or
discontinued at any time, and there can be no guarantee as to the timing or amount of any repurchases. Since the
inception of this program in the fourth quarter of fiscal 2010 through September 30, 2011, Scotts Miracle-Gro
has repurchased approximately 7.4 million Common Shares for $383.7 million to be held in treasury. Scotts
Miracle-Gro repurchased 6.9 million Common Shares in fiscal 2011. Common Shares held in treasury totaling
1.2 million and 1.1 million were reissued in support of share-based compensation awards and employee
purchases under the employee stock purchase plan during fiscal 2011 and fiscal 2010, respectively.

Share-Based Awards

Scotts Miracle-Gro grants share-based awards annually to officers, certain other employees of the Company
and non-employee directors of Scotts Miracle-Gro. The share-based awards typically consist of stock options,
restricted stock, restricted stock units and deferred stock units. Performance-based awards have also been made.
Stock appreciation rights (“SARs”) have been granted, though not in recent years. SARs result in less dilution
than stock options as the SAR holder receives a net share settlement upon exercise. All of these share-based
awards have been made under plans approved by the shareholders. Generally, employee share-based awards
provide for three-year cliff vesting. Vesting for non-employee director awards varies based on the length of
service and age of each director at the time of the award. Vesting of performance-based awards are dependent on
service and achievement of specified performance targets. Share-based awards are forfeited if a holder terminates
employment or service with the Company prior to the vesting date. The Company estimates that 10-15% of its
share-based awards will be forfeited based on an analysis of historical trends. This assumption is re-evaluated on
an annual basis and adjusted as appropriate. Stock options and SAR awards have exercise prices equal to the
market price of the underlying common shares on the date of grant with a term of 10 years. If available, Scotts
Miracle-Gro will typically use treasury shares, or if not available, newly-issued Common Shares, in satisfaction
of its share-based awards.

A maximum of 18 million Common Shares are available for issuance under share-based award plans. At
September 30, 2011, approximately 0.7 million Common Shares were not subject to outstanding awards and
were available to underlie the grant of new share-based awards.

The following is a recap of the share-based awards granted during the periods indicated:

Year Ended September 30,

2011

2010

2009

Employees

Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . .
Performance shares . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance units . . . . . . . . . . . . . . . . . . . . . . . . . . .

429,700
—
65,939
—
53,874

367,600
—
259,353
4,200
—

701,100
243,400
199,262
—
—

Board of Directors

Deferred stock units . . . . . . . . . . . . . . . . . . . . . . . . .

30,296

28,854

33,281

Total share-based awards . . . . . . . . . . . . . . . . . . . . . . . . .

579,809

660,007

1,177,043

Aggregate fair value at grant dates (in millions) . . . . . . . .

$

13.8

$

16.9

$

16.7

93

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total share-based compensation was as follows for the periods indicated (in millions):

Share-based compensation . . . . . . . . . . . . . . . . . . . .
Tax benefit recognized . . . . . . . . . . . . . . . . . . . . . . .

$16.0
6.2

$16.4
6.3

$14.5
5.6

Year Ended September 30,

2011

2010

2009

As of September 30, 2011, total unrecognized compensation cost related to non-vested share-based awards
amounted to $11.9 million. This cost is expected to be recognized over a weighted-average period of 1.9 years.
The tax benefit realized from the tax deductions associated with the exercise of share-based awards and the
vesting of restricted stock totaled $14.2 million for fiscal 2011.

Stock Options/SARs

Aggregate stock option and SARs activity consisted of the following for the year ended September 30, 2011

(options/SARs in millions):

No. of
Options/SARs

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.6
0.4
(1.0)
(0.2)

3.8

2.5

WTD.
Avg.
Exercise
Price

$31.74
51.73
32.72
37.70

33.47

31.26

The following summarizes certain information pertaining to stock option and SAR awards outstanding and

exercisable at September 30, 2011 (options/SARs in millions):

Range of
Exercise Price

$16.80 – $19.82 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20.12 – $21.65 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24.45 – $28.72 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29.01 – $31.62 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33.25 – $37.48 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$37.89 – $38.90 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$40.81 – $51.73 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Awards Outstanding

Awards Exercisable

No. of
Options/
SARs

WTD.
Avg.
Remaining
Life

WTD.
Avg.
Exercise
Price

No. of
Options/
SARS

WTD.
Avg.
Remaining
Life

WTD.
Avg.
Exercise
Price

0.07
4.55
2.41
3.37
4.09
5.61
7.95

5.04

$16.92
21.45
25.74
29.17
35.87
38.59
46.74

$33.47

0.2
0.3
0.4
0.3
0.3
0.9
0.1

2.5

0.07
1.41
2.41
3.23
4.09
5.61
4.64

3.62

$16.92
21.20
25.74
29.12
35.87
38.59
41.59

$31.26

0.2
0.8
0.4
0.3
0.3
0.9
0.9

3.8

94

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The intrinsic value of the stock option and SAR awards outstanding and exercisable at September 30 were

as follows (in millions):

Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

$45.4
33.4

The grant date fair value of stock option awards are estimated using a binomial model and the assumptions
in the following table. Expected market price volatility is based on implied volatilities from traded options on
Scotts Miracle-Gro’s common shares and historical volatility specific to the common shares. Historical data,
including demographic factors impacting historical exercise behavior, is used to estimate stock option exercises
and employee terminations within the valuation model. The risk-free rate for periods within the contractual life
(normally ten years) of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.
The expected life of stock options is based on historical experience and expectations for grants outstanding. The
weighted average assumptions for awards granted are as follows for the periods indicated:

Year Ended September 30,

2011

2010

2009

Expected market price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of stock options in years . . . . . . . . . . . . . . . . . . . . . . . .
Estimated weighted-average fair value per stock option . . . . . . . . . . .

31.9%
2.4%
1.9%
5.97
$14.06

32.1%
2.8%
1.2%
6.00
$12.90

45.3%
3.0%
2.3%
5.93
$ 7.93

The total intrinsic value of stock options exercised was $22.4 million, $25.9 million and $16.1 million
during fiscal 2011, fiscal 2010 and fiscal 2009, respectively. Cash received from the exercise of stock options for
fiscal 2011 was $31.5 million.

Restricted share-based awards

Restricted share-based award activity (including restricted stock, restricted stock units and deferred stock

units) was as follows:

Awards outstanding at September 30, 2008 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Awards outstanding at September 30, 2009 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Awards outstanding at September 30, 2010 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No. of
Shares

371,836
483,843
(114,730)
(33,000)

707,949
288,207
(129,130)
(26,600)

840,426
96,235
(136,355)
(103,400)

Awards outstanding at September 30, 2011 . . . . . . . . . . .

696,906

WTD. Avg.
Grant Date
Fair Value
per Share

$43.91
23.88
39.33
36.27

31.32
41.53
41.15
27.24

33.52
51.99
38.44
32.76

35.22

95

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total fair value of restricted stock vested was $4.6 million, $5.2 million and $4.4 million during fiscal
2011, fiscal 2010 and fiscal 2009, respectively. The total fair value of restricted stock units vested was
$0.6 million, $0.4 million and $0.2 million during fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

Performance-based awards

Performance-based award activity was as follows:

Awards outstanding at September 30, 2008 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Awards outstanding at September 30, 2009 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Awards outstanding at September 30, 2010 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No. of
Units

40,000
—
(5,038)
(4,962)

30,000
4,200
(10,000)
—

24,200
53,874
(35,774)
—

Awards outstanding at September 30, 2011 . . . . . . . . . . . .

42,300

WTD. Avg.
Grant Date
Fair Value
per Unit

$27.98
—
27.98
27.98

27.98
38.76
27.98
—

29.85
51.91
32.57
—

51.73

96

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13. EARNINGS PER COMMON SHARE

The following table presents information necessary to calculate basic and diluted earnings per common
share. Basic earnings per common share are computed by dividing income from continuing operations, income
from discontinued operations or net income by the weighted average number of common shares outstanding.
Diluted earnings per common share are computed by dividing income from continuing operations, income from
discontinued operations or net income by the weighted average number of common shares outstanding plus all
potentially dilutive securities. Stock options with exercise prices greater than the average market price of the
underlying common shares are excluded from the computation of diluted earnings per common share because
they are out-of-the-money and the effect of their inclusion would be anti-dilutive. The number of common shares
covered by out-of-the-money stock options was 0.2 million, 0.2 million and 2.3 million for the years ended
September 30, 2011, 2010 and 2009, respectively.

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2011

2010

2009

(In millions, except per share data)
$132.6
$200.5
$121.9
20.7
3.6
46.0

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$167.9

$204.1

$153.3

BASIC EARNINGS PER COMMON SHARE:

Weighted-average common shares outstanding

during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64.7

66.3

65.0

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . .

$ 1.88
0.72

$ 3.03
0.05

$ 2.04
0.32

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.60

$ 3.08

$ 2.36

DILUTED EARNINGS PER COMMON SHARE:
Weighted-average common shares outstanding

during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . .

64.7
1.5

66.3
1.3

65.0
1.1

Weighted-average number of common shares

outstanding and dilutive potential common shares . . . . . . . . . . .

66.2

67.6

66.1

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . .

$ 1.84
0.70

$ 2.97
0.05

$ 2.01
0.31

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.54

$ 3.02

$ 2.32

97

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14. INCOME TAXES

The provision (benefit) for income taxes allocated to continuing operations consisted of the following (in

millions):

Current:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Current

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2011

2010

2009

$57.3
7.4
5.4

70.1

$ 83.9
7.3
6.3

97.5

2.2
(0.1)
0.7

2.8

20.0
1.3
0.6

21.9

$52.7
3.3
5.1

61.1

13.4
1.0
—

14.4

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$72.9

$119.4

$75.5

The domestic and foreign components of income from continuing operations before income taxes were as

follows (in millions):

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$177.9
16.9

$307.8
12.1

$201.8
6.3

Income from continuing operations before income taxes . . . .

$194.8

$319.9

$208.1

Year Ended September 30,

2011

2010

2009

A reconciliation of the federal corporate income tax rate and the effective tax rate on income from

continuing operations before income taxes is summarized below:

Statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in state NOL and credit carryforwards . . . . . . . . . . . . . . . . . .
Research & Development tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of goodwill impairment and other permanent differences . . . .
Resolution of prior tax contingencies . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2011

2010

2009

35.0% 35.0% 35.0%
(0.2)
(0.4)
2.7
2.8
0.1
(0.1)
—
(0.2)
(0.6)
—
0.3
0.8
—
(0.5)

(0.3)
2.1
—
(0.5)
(0.8)
1.0
(0.2)

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37.4% 37.3% 36.3%

98

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases
of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the
deferred income tax assets and liabilities were as follows (in millions):

DEFERRED TAX ASSETS

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State NOL carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign NOL carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DEFERRED TAX LIABILITIES

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 30,

2011

2010

$ 18.3
70.3
40.7
10.8
1.6
42.7
7.8
10.3
5.7

208.2
(44.3)

163.9

(60.6)
(74.5)
(5.9)

$ 14.6
68.0
47.6
9.3
4.2
40.9
—
9.0
3.9

197.5
(42.3)

155.2

(54.3)
(79.1)
(6.2)

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(141.0)

(139.6)

Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22.9

$ 15.6

The net current and non-current components of deferred income taxes recognized in the Consolidated

Balance Sheets were (in millions):

Net current deferred tax assets (classified with prepaid and other

assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current deferred tax assets held for sale . . . . . . . . . . . . . . . . . . . . . . . .
Net non-current deferred tax liabilities (classified with other

September 30,

2011

2010

$ 88.1
—

$ 77.1
1.5

liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net non-current deferred tax liabilities held for sale . . . . . . . . . . . . . . . . .

(65.2)
—

(60.6)
(2.4)

Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22.9

$ 15.6

GAAP requires that a valuation allowance be placed against a deferred tax asset if it is more likely than not
that the tax benefit associated with the asset will not be realized in the future. As shown in the table above,
valuation allowances were placed against $44.3 million and $42.3 million of deferred tax assets as of
September 30, 2011 and 2010, respectively. Most of these valuation allowances relate to certain foreign net
operating losses, and the remainder relates to certain state net operating losses and a capital loss carryover. Each
of these items is explained more fully below.

99

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has elected to treat certain foreign entities as disregarded entities for U.S. tax purposes, which
results in their net income or loss being recognized currently in the Company’s U.S. tax return. As such, the tax
benefit of net operating losses available for foreign statutory tax purposes has already been recognized for U.S.
purposes. Accordingly, a full valuation allowance is required on the tax benefit of these net operating losses on
global consolidation. The foreign net operating losses of these foreign disregarded entities were $152.8 million at
September 30, 2011, the majority of which have indefinite carryforward periods. The statutory tax benefit of
these net operating loss carryovers, and related full valuation allowances thereon, amounted to $41.5 million and
$39.6 million for the fiscal years ended September 30, 2011 and 2010, respectively.

Foreign net operating losses of certain controlled foreign corporations were $4.7 million as of
September 30, 2011, the majority of which have indefinite carryforward periods. Due to a history of losses in
these entities, a full valuation allowance has also been placed against the statutory tax benefit associated with
these losses amounting to $1.2 million and $1.3 million at September 30, 2011 and 2010, respectively.

State net operating losses were $25.8 million as of September 30, 2011, with carryforward periods ranging
from 5 to 20 years. Any losses not utilized within a specific state’s carryforward period will expire. State net
operating loss carryforwards included $0.4 million and $1.4 million of tax benefits relating to Smith & Hawken
at September 30, 2011 and 2010, respectively. As these losses may only be used against income of Smith &
Hawken, and cannot be used to offset income of the consolidated group, a full valuation allowance has been
recorded against this tax asset.

Tax benefits associated with state tax credits will expire if not utilized and amounted to $0.5 million at both
September 30, 2011 and 2010. No valuation allowance has been placed against these credits as the Company
should fully utilize the credits within their respective carryover periods.

Lastly, regarding valuation allowances, a full valuation allowance has been placed against a capital loss
carryover generated in the current fiscal year related to the worthlessness and related write-off of the Company’s
$3.3 million investment in the stock of Turf-Seed (Europe) Limited. As it is unlikely that the Company will
generate capital gains within the five year carryover period to absorb this capital loss, a full valuation allowance
has been placed against the associated deferred tax asset of $1.2 million.

Deferred taxes have not been provided on unremitted earnings approximating $110.0 million of certain
foreign subsidiaries and foreign corporate joint ventures as such earnings have been indefinitely reinvested.
These foreign entities held cash and cash equivalents of $121.1 million and $78.0 million at September 30, 2011
and 2010, respectively. Our current plans do not demonstrate a need to, nor do we have plans to, repatriate the
retained earnings from these subsidiaries as the earnings are indefinitely reinvested. However, in the future, if we
determine it is necessary to repatriate these funds, or we sell or liquidate any of these subsidiaries, we may be
required to pay associated taxes on the repatriation. We may also be required to withhold foreign taxes depending
on the foreign jurisdiction from which the funds are repatriated. The effective rate of tax on such repatriations
may materially differ from the federal statutory tax rate, thereby having a material impact on tax expense in the
year of repatriation; however, the Company cannot reasonably estimate the amount of such a tax event.

GAAP provides that a tax benefit from an uncertain tax position may be recognized when it is more likely
than not that the position will be sustained upon examination, including resolutions of any related appeals or
litigation processes, based on the technical merits of the position. The amount recognized is measured as the
largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.

The Company had $8.9 million, $7.8 million and $6.2 million of gross unrecognized tax benefits related to
uncertain tax positions at September 30, 2011, 2010 and 2009, respectively. Included in the September 30, 2011,

100

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2010 and 2009 balances were $7.3 million, $6.4 million and $6.4 million, respectively, of unrecognized tax
benefits that, if recognized, would have an impact on the effective tax rate.

A reconciliation of the unrecognized tax benefits for fiscal 2011, fiscal 2010 and fiscal 2009 is as follows

(in millions):

2011

2010

2009

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of the current year . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of the current year
. . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expiration of statutes of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6.2
2.1
2.4
(0.8)
(1.3)

$ 7.8
1.1
1.9
—
(1.2)
(0.6) —
(0.1)

(0.8)

$ 7.2
0.5
1.1
(0.1)
(0.7)
(0.3)
(1.5)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8.9

$ 7.8

$ 6.2

The Company continues to recognize accrued interest and penalties related to unrecognized tax benefits as a
component of the provision for income taxes. As of September 30, 2011, 2010 and 2009, respectively, the
Company had $1.6 million, $1.3 million and $1.2 million accrued for the payment of interest that, if recognized,
would impact the effective tax rate. As of September 30, 2011, 2010 and 2009, respectively, the Company had
$0.7 million, $0.7 million and $0.6 million accrued for the payment of penalties that, if recognized, would impact
the effective tax rate. For the year ended September 30, 2011, the Company recognized a $0.4 million of tax
interest and tax penalties in its statement of operations.

Scotts Miracle-Gro or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and
various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to
examinations by these tax authorities for fiscal years prior to 2008. The Company is currently under examination
by certain foreign and U.S. state and local tax authorities. The Internal Revenue Service has completed its audit
of the Company’s fiscal 2008 tax period which resulted in an immaterial change to tax expense and associated
liability for unrecognized tax benefits. The audit did result in a cash payment due related to foreign tax credits
that was timing in nature only. As such, the cash payment resulted in a corresponding increase of $7.8 million to
a deferred tax asset related to foreign tax credit carrybacks and carryovers that are expected to be fully utilized
within the ten year carryover period. In regard to the local German audit, the tax periods under investigation are
limited to fiscal years 2004 through 2008. In regard to the U.S. state and local audits, the tax periods under
investigation are limited to fiscal years 1997 through 2008. In addition to these aforementioned audits, certain
other tax deficiency notices and refund claims for previous years remain unresolved.

The Company currently anticipates that few of its open and active audits will be resolved in the next
12 months. The Company is unable to make a reasonably reliable estimate as to when or if cash settlements with
taxing authorities may occur. Although audit outcomes and the timing of audit payments are subject to
significant uncertainty, the Company does not anticipate that the resolution of these tax matters or any events
related thereto will result in a material change to its consolidated financial position, results of operations or cash
flows.

Management judgment is required in determining tax provisions and evaluating tax positions. Management
believes its tax positions and related provisions reflected in the consolidated financial statements are fully
supportable and appropriate. The Company established reserves for additional income taxes that may become due

101

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

if the tax positions are challenged and not sustained, and as such, the Company’s tax provision includes the
impact of recording reserves and changes thereto.

NOTE 15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to market risks, such as changes in interest rates, currency exchange rates and
commodity prices. To manage a portion of the volatility related to these exposures, the Company enters into
various financial transactions. The utilization of these financial transactions is governed by policies covering
acceptable counterparty exposure, instrument types and other hedging practices. The Company does not hold or
issue derivative financial instruments for speculative trading purposes.

Exchange Rate Risk Management

The Company periodically uses foreign currency swap contracts to manage the exchange rate risk associated
with intercompany loans with foreign subsidiaries that are denominated in local currencies. At September 30,
2011, the notional amount of outstanding foreign currency swap contracts was $217.9 million, with a fair value
of $2.7 million. At September 30, 2010, the notional amount of outstanding foreign currency swap contracts was
$209.9 million, with a liability position based on a negative fair value of $6.6 million. The fair value of foreign
currency swap contracts is determined based on changes in spot rates. The unrealized loss on the foreign
currency swap contracts approximates the unrealized gain on the intercompany loans recognized by the
Company’s lending subsidiaries. The contracts will mature over the next fiscal year.

Interest Rate Risk Management

The Company enters into interest rate swap agreements as a means to hedge its variable interest rate risk on
debt instruments. The fair values are reflected in the Company’s Consolidated Balance Sheets. Net amounts to be
received or paid under the swap agreements are reflected as adjustments to interest expense. Since the interest
rate swap agreements have been designated as hedging instruments, unrealized gains or losses resulting from
adjusting these swaps to fair value are recorded as elements of accumulated other comprehensive loss (“AOCI”)
within the Consolidated Balance Sheets. The fair value of the swap agreements is determined based on the
present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the
valuation date.

At September 30, 2011 and 2010, the Company had outstanding interest rate swap agreements with major
financial institutions that effectively converted a portion of the Company’s variable-rate debt to a fixed rate. The
swap agreements had a total U.S. dollar equivalent notional amount of $900.0 million and $450.0 million at
September 30, 2011 and 2010, respectively. Refer to “NOTE 11. DEBT” for the terms of the swap agreements
outstanding at September 30, 2011. Included in the AOCI balance at September 30, 2011 is a loss of $6.6 million
related to interest rate swap agreements that is expected to be reclassified to earnings during the next 12 months,
consistent with the timing of the underlying hedged transactions.

Commodity Price Risk Management

The Company had outstanding hedging arrangements at September 30, 2011 designed to fix the price of a
portion of its projected future urea requirements. The contracts are designated as hedges of the Company’s
exposure to future cash flow fluctuations associated with the cost of urea. The objective of the hedges is to
mitigate the earnings and cash flow volatility attributable to the risk of changing prices. Unrealized gains or
losses in the fair value of these contracts are recorded to the AOCI component of shareholders’ equity. Realized
gains or losses remain as a component of AOCI until the related inventory is sold. Upon sale of the underlying

102

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

inventory, the gain or loss is reclassified to cost of sales. Included in the AOCI balance at September 30, 2011
was a gain of $1.1 million related to urea derivatives that is expected to be reclassified to earnings during the
next 12 months, consistent with the timing of the underlying hedged transactions.

Periodically, the Company also uses derivatives to partially mitigate the effect of fluctuating diesel and
gasoline costs on operating results. Any such derivatives that do not qualify for hedge accounting treatment in
accordance with GAAP are recorded at fair value, with unrealized gains and losses on open contracts and
realized gains or losses on settled contracts recorded as an element of cost of sales. Unrealized gains or losses in
the fair value of derivative contracts that do qualify for hedge accounting are recorded in other comprehensive
income (expense), except for any ineffective portion of the change in fair value, which is immediately recorded
in earnings. For the effective portion of the change in fair value, realized gains or losses remain as a component
of AOCI until the related fuel is consumed. Upon consumption of the fuel, the gain or loss is reclassified to cost
of sales. Included in the AOCI balance at September 30, 2011 was a loss of $0.2 million related to fuel
derivatives that is expected to be reclassified to earnings during the next 12 months, consistent with the timing of
the underlying hedged transactions.

As of September 30, 2011 and 2010, the Company had the following outstanding commodity contracts that

were entered into to hedge forecasted purchases:

Commodity

2011

2010

Urea . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Diesel

4,500 tons
3,955,000 gallons

62,000 tons
420,000 gallons

Fair Values of Derivative Instruments

The following table summarizes the fair values of the Company’s derivative instruments and the respective
lines in which they were recorded in the Consolidated Balance Sheets as of September 30, 2011 and 2010 (in
millions):

Derivatives Designated As Hedging Instruments

Balance Sheet Location

Assets / (Liabilities)

Interest rate swap agreements . . . . . . . . . . . . . . . . . . . Other current liabilities

Other liabilities

Commodity hedging instruments . . . . . . . . . . . . . . . . Prepaid and other assets
Other current liabilities

Total derivatives designated as hedging instruments . . . . .

Derivatives Not Designated As Hedging Instruments(1)

Foreign currency swap contracts . . . . . . . . . . . . . . . . Prepaid and other assets
Other current liabilities
Commodity hedging instruments . . . . . . . . . . . . . . . . Other current liabilities

Total derivatives not designated as hedging

instruments(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

Fair Value

$(10.7) $(12.1)
(12.5)
(17.4)
0.1
1.9
(0.3) —

$(28.3) $(22.7)

$ 2.7 $ —

(6.6)

—
(0.5) —

$ 2.2 $ (6.6)

$(26.1) $(29.3)

(1) See discussion above for additional

information regarding the Company’s purpose for entering into

derivatives not designated as hedging instruments and its overall risk management strategy.

103

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to “NOTE 16. FAIR VALUE MEASUREMENTS” for the Company’s fair value measurements of

derivative instruments as they relate to the valuation hierarchy.

The effect of derivative instruments, net of tax, on AOCI and the Consolidated Statements of Operations for

the years ended September 30, 2011 and 2010 was as follows (in millions):

Derivatives in Cash Flow Hedging Relationships

Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . .
Commodity hedging instruments . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount of Gain/(Loss)
Recognized in AOCI

Year Ended

2011

2010

$(14.5)
1.5

$(13.0)

$(17.6)
2.8

$(14.8)

Derivatives in Cash Flow
Hedging Relationships

Location of Gain/(Loss)
Reclassified From AOCI Into Earnings

Interest rate swap agreements . . . . . . . . . . . .
Commodity hedging instruments . . . . . . . . . . Cost of sales

Interest expense

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivatives not Designated As
Hedging Instruments

Location of Gain/(Loss)
Recognized in Income

Foreign currency swap contracts . . . . . . . . . .
Commodity hedging instruments . . . . . . . . . . Cost of sales

Interest expense

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount of Gain/(Loss)
Reclassified From
AOCI Into Earnings

Year Ended

2011

$(12.6)
2.6

$(10.0)

2010

$(17.1)
(2.3)

$(19.4)

Amount of Gain/(Loss)
Recognized in Earnings

Year Ended

2011

$6.1
1.5

$7.6

2010

$(14.4)
(0.7)

$(15.1)

NOTE 16. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs
used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and
minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets; quoted prices for similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities. This includes pricing models, discounted cash flow methodologies and
similar techniques that use significant unobservable inputs.

104

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following describes the valuation methodologies used for financial assets and liabilities measured at fair

value on a recurring basis, as well as the general classification within the valuation hierarchy.

Derivatives

Derivatives consist of foreign currency,

interest rate and commodity derivative instruments. Foreign
currency swap contracts are valued using observable forward rates in commonly quoted intervals for the full term
of the contracts. Interest rate swap agreements are valued based on the present value of the estimated future net
cash flows using implied rates in the applicable yield curve as of the valuation date. Commodity contracts are
measured using observable commodity exchange prices in active markets.

These derivative instruments are classified within Level 2 of the valuation hierarchy and are included within
other assets and other liabilities in our Consolidated Balance Sheets, except for derivative instruments expected
to be settled within the next 12 months, which are included within prepaid and other assets and other current
liabilities.

Cash equivalents

Cash equivalents consist of highly liquid investments purchased with a maturity of three months or less. The

carrying value of these cash equivalents approximates fair value due to their short-term maturities.

Other

Other financial assets consist of investment securities in non-qualified retirement plan assets. These

securities are valued using observable market prices in active markets.

The following table presents the Company’s financial assets and liabilities measured at fair value on a

recurring basis at September 30, 2011 (in millions):

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total

Assets
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives

Commodity hedging instruments . . . . . . . . .
Foreign currency swap contracts . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities
Derivatives

Interest rate swap agreements . . . . . . . . . . . .
Commodity hedging instruments . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$83.6

—
—
6.3

$89.9

$ —
—

$ —

105

$ —

$ —

$ 83.6

0.1
2.7
—

—
—
—

0.1
2.7
6.3

$ 2.8

$ —

$ 92.7

$(28.1)
(0.8)

$(28.9)

$ —
—

$ —

$(28.1)
(0.8)

$(28.9)

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following presents the Company’s non-financial assets and liabilities measured at fair value on a
non-recurring basis at September 30, 2011 (in millions) and describes the valuation methodologies used for
non-financial assets and liabilities measured at fair value, as well as the general classification within the
valuation hierarchy:

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Assets of Wild Bird Food . . . . . . . . . . . . . . . . . . .
Other tradenames . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in Turf-Seed (Europe) Limited . . . . . .

$ —
$ —
$ —

$ —
$ —
$ —

$ 4.8
$ 2.9
$ —

Total
Losses

$26.2
$ 2.3
$ 6.5

Certain property, plant and equipment, tradenames, goodwill and other long-lived assets were written down
to their fair value, resulting in an impairment charge of $34.9 million, which was included in earnings for the
period. The value of the property, plant and equipment was determined using the cost approach, which is a
valuation technique based on the amounts that currently would be required to replace the service capacity of the
respective assets (often referred to as current replacement cost). The value of the tradenames was determined
using a royalty savings methodology similar to that employed when the associated businesses were acquired but
using updated estimates of sales, cash flow and profitability. The value of the goodwill was determined under the
income-based approach utilizing discounted cash flows and assumptions the Company believes marketplace
participants would utilize. The investment in Turf-Seed (Europe) Limited was determined to be fully impaired
based on the estimated future cash flows associated with this entity in relation to the carrying value of the
investment.

The following table presents the Company’s financial assets and liabilities measured at fair value on a

recurring basis at September 30, 2010 (in millions):

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total

Assets
Derivatives

Commodity hedging

instruments . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . .

Liabilities
Derivatives

Interest rate swap

agreements . . . . . . . . . . . .

Foreign currency swap

contracts . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . .

$ —
6.5

$ 6.5

$ —

—

$ —

106

$ 1.9
—

$ 1.9

$(24.6)

(6.6)

$(31.2)

$ —
—

$ —

$ —

—

$ —

$ 1.9
6.5

$ 8.4

$(24.6)

(6.6)

$(31.2)

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following presents the Company’s non-financial assets and liabilities measured at fair value on a
non-recurring basis at September 30, 2010 (in millions) and describes the valuation methodologies used for
non-financial assets and liabilities measured at fair value, as well as the general classification within the
valuation hierarchy:

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Tradenames . . . . . . . . . . . . . . . . . .

$ —

$ —

$257.2

Total
Losses

$18.5

Certain intangible assets held and used were written down to their fair value, resulting in an impairment
charge of $18.5 million, which was included in earnings for the period. The value of the indefinite-lived
tradenames was determined using a royalty savings methodology similar to that employed when the associated
businesses were acquired but using updated estimates of sales, cash flow and profitability.

NOTE 17. OPERATING LEASES

The Company leases certain property and equipment from third parties under various non-cancelable
operating lease agreements. Certain lease agreements contain renewal and purchase options. The lease
agreements generally require that the Company pay taxes, insurance and maintenance expenses related to the
leased assets. Future minimum lease payments for non-cancelable operating leases at September 30, 2011, were
as follows (in millions):

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45.2
37.3
36.1
24.0
18.0
34.2

Total future minimum lease payments . . . . . . . . . . . . . . . . . . . .

$194.8

The Company also leases certain vehicles (primarily cars and light trucks) under agreements that are
cancelable after the first year, but typically continue on a month-to-month basis until canceled by the Company.
The vehicle leases and certain other non-cancelable operating leases contain residual value guarantees that create
a contingent obligation on the part of the Company to compensate the lessor if the leased asset cannot be sold for
an amount in excess of a specified minimum value at the conclusion of the lease term. If all such vehicle leases
had been canceled as of September 30, 2011, the Company’s residual value guarantee would have approximated
$5.9 million.

Other residual value guarantee amounts that apply at the conclusion of non-cancelable lease terms are as

follows:

Scotts LawnService® vehicles . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Corporate aircraft

$15.9 million
$12.8 million

2013
2012

Amount of
Guarantee

Lease
Termination Date

107

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Rent expense for fiscal 2011, fiscal 2010 and fiscal 2009 totaled $67.3 million, $65.4 million and

$62.8 million, respectively.

NOTE 18. COMMITMENTS

The Company has the following unconditional purchase obligations due during each of the next five fiscal

years that have not been recognized on the Consolidated Balance Sheet at September 30, 2011 (in millions):

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$122.7
80.0
23.9
23.9
5.4
1.2

$257.1

Purchase obligations primarily represent commitments for materials used in the Company’s manufacturing

processes, as well as commitments for warehouse services, grass seed and out-sourced information services.

In addition,

the Company leases certain property and equipment from third parties under various
non-cancelable operating lease agreements. Future minimum lease payments for non-cancelable operating leases
not included above are included in “NOTE 17. OPERATING LEASES.”

NOTE 19. CONTINGENCIES

Management regularly evaluates the Company’s contingencies, including various lawsuits and claims which
arise in the normal course of business, product and general liabilities, workers’ compensation, property losses
and other liabilities for which the Company is self-insured or retains a high exposure limit. Self-insurance
reserves are established based on actuarial loss estimates for specific individual claims plus actuarially estimated
amounts for incurred but not reported claims and adverse development factors applied to existing claims. Legal
costs incurred in connection with the resolution of claims, lawsuits and other contingencies are expensed as
incurred. In the opinion of management, its assessment of contingencies is reasonable and related reserves, in the
aggregate, are adequate; however, there can be no assurance that final resolution of these matters will not have a
material effect on the Company’s financial condition, results of operations or cash flows. The following are the
more significant of the Company’s identified contingencies:

FIFRA Compliance and the Corresponding Governmental Investigations

For a description of the Company’s ongoing FIFRA compliance efforts and the corresponding governmental

investigations, see “NOTE 3. PRODUCT REGISTRATION AND RECALL MATTERS.”

Other Regulatory Matters

At September 30, 2011, $3.9 million was accrued in the “Other liabilities” line in the Consolidated Balance
Sheet for non-FIFRA compliance-related environmental actions, the majority of which is for site remediation.
The amounts accrued are believed to be adequate to cover such known environmental exposures based on current
facts and estimates of likely outcomes. Although it is reasonably possible that the costs to resolve such known
environmental exposures will exceed the amounts accrued, any variation from accrued amounts is not expected
to be material.

108

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other

The Company has been named as a defendant in a number of cases alleging injuries that the lawsuits claim
resulted from exposure to asbestos-containing products, apparently based on the Company’s historic use of
vermiculite in certain of its products. The complaints in these cases are not specific about the plaintiffs’ contacts
with the Company or its products. The Company in each case is one of numerous defendants and none of the
claims seek damages from the Company alone. The Company believes that the claims against it are without merit
and is vigorously defending against them. It is not currently possible to reasonably estimate a probable loss, if
any, associated with these cases and, accordingly, no reserves have been recorded in the Company’s
Consolidated Financial Statements. The Company is reviewing agreements and policies that may provide
insurance coverage or indemnity as to these claims and is pursuing coverage under some of these agreements and
policies, although there can be no assurance of the results of these efforts. There can be no assurance that these
cases, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material
effect on the Company’s financial condition, results of operations or cash flows.

On April 27, 2007, the Company received a proposed Order On Consent from the New York State
Department of Environmental Conservation (the “Proposed Order”) alleging that, during calendar year 2003, the
Company and James Hagedorn, individually and as Chairman of the Board and Chief Executive Officer of the
Company, unlawfully donated to a Port Washington, New York youth sports organization forty bags of Scotts®
LawnPro Annual Program Step 3 Insect Control Plus Fertilizer which, while federally registered, was allegedly
not registered in the state of New York. The Proposed Order requests penalties totaling $695,000. The Company
has responded in writing to the New York State Department of Environmental Conservation with respect to the
Proposed Order and is awaiting a response.

The Company is involved in other lawsuits and claims which arise in the normal course of business. These
claims individually and in the aggregate are not expected to result in a material effect on the Company’s financial
condition, results of operations or cash flows.

NOTE 20. CONCENTRATIONS OF CREDIT RISK

Financial

instruments which potentially subject

the Company to concentration of credit risk consist
principally of trade accounts receivable. The Company sells its consumer products to a wide variety of retailers,
including home centers, mass merchandisers, warehouse clubs, large hardware chains, independent hardware
stores, nurseries, garden centers and food and drug stores. Concentrations of accounts receivable at September 30
were as follows:

Due from customers geographically located in North America . . . . . . . . . . . . . . . . .
Applicable to the Global Consumer business . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable primarily to Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . .

Top 3 customers as a percent of total North America Consumer accounts

2011

2010

77% 76%
89% 89%
11% 11%

receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69% 75%

The remainder of the Company’s accounts receivable at September 30, 2011 and 2010 were generated from
customers located outside of North America, primarily retailers, distributors and nurseries in Europe. No
concentrations of these customers or individual customers within this group accounted for more than 10% of the
Company’s accounts receivable at either balance sheet date.

The Company’s three largest customers are reported within the Global Consumer segment and are the only
customers that individually represent more than 10% of reported consolidated net sales for each of the last three

109

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fiscal years. These three customers accounted for the following percentages of consolidated net sales for the
fiscal years ended September 30:

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29.7%
29.9%
29.4%

18.0%
18.0%
17.0%

13.0%
15.8%
16.3%

Largest
Customer

2nd Largest
Customer

3rd Largest
Customer

NOTE 21. OTHER (INCOME) EXPENSE

Other (income) expense consisted of the following for the fiscal years ended September 30 (in millions):

2011

2010

2009

Royalty income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from peat transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net

$(4.8)
—
(0.3)
1.4
2.0

$(4.1)

$(4.5)
(0.9) —
(0.5)
0.3
(1.1)

(0.6)
—
5.9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(1.7)

$(6.7)

$ 1.2

NOTE 22. SEGMENT INFORMATION

its business

The Company divides

into the following segments—Global Consumer and Scotts
LawnService®. This division of reportable segments is consistent with how the segments report to and are
managed by the chief operating decision maker of the Company. The Company has made reclassifications to
prior period segment amounts as a result of the change in internal organization structure associated with the sale
of a significant majority of its previously reported Global Professional business segment, which is now reported
in discontinued operations. For additional information regarding the sale, refer to “NOTE 2. DISCONTINUED
OPERATIONS.”

The Global Consumer segment consists of the U.S. Consumer and International Consumer business groups.
The business groups comprising this segment manufacture, market and sell dry, granular slow-release lawn
fertilizers, combination lawn fertilizer and control products, grass seed, spreaders, water-soluble, liquid and
continuous release garden and indoor plant foods, plant care products, potting, garden and lawn soils, mulches
and other growing media products, wild bird food, pesticide and rodenticide products. Products are marketed to
mass merchandisers, home centers, large hardware chains, warehouse clubs, distributors, garden centers and
grocers in the United States, Canada, Europe, Latin America and Australia.

The Scotts LawnService® segment provides residential and commercial lawn fertilization, disease and insect
control and other related services such as core aeration, tree and shrub fertilization and limited pest control
services through Company-owned branches and independent franchisees in the United States.

Segment performance is evaluated based on several factors, including income from continuing operations
before amortization, product registration and recall costs, and impairment, restructuring and other charges, which
is not a GAAP measure. Senior management of the Company uses this measure of operating profit to gauge
segment performance because the Company believes this measure is the most indicative of performance trends
and the overall earnings potential of each segment. Total assets reported for the Company’s operating segments

110

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

include the intangible assets for the acquired businesses within those segments. The accounting policies of the
segments are the same as those described in the “NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.”

Corporate & Other consists of the Company’s non-European professional seed business and revenues and
expenses associated with the Company’s supply agreements with ICL, as well as corporate, general and
administrative expenses and certain other income/expense items not allocated to the business segments.
Corporate & Other assets primarily include deferred financing and debt issuance costs and corporate intangible
assets, as well as deferred tax assets. For capital expenditures and total assets, Corporate & Other also includes
Smith & Hawken, which is classified as discontinued operations on the Consolidated Statements of Operations.

The following table presents summarized financial information concerning the Company’s reportable

segments for fiscal years ended September 30 (in millions):

2011

2010

2009

Net sales:

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,533.2
235.6

$2,649.7
224.1

$2,485.3
231.1

Segment total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roundup® amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters—returns . . . . . . . . . . . . . . . . . . . . . .

2,768.8
67.7
(0.8)
—

2,873.8
25.0
(0.8)
—

2,716.4
31.1
(0.8)
(0.3)

Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,835.7

$2,898.0

$2,746.4

Income from continuing operations before income taxes:

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 425.6
25.9

$ 490.7
21.0

$ 411.8
14.0

Segment total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roundup® amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

451.5
(102.4)
(0.8)
(10.6)
(14.6)
(76.1)
(1.2)
(51.0)

511.7
(110.7)
(0.8)
(9.9)
(8.7)
(18.5)
—
(43.2)

425.8
(124.2)
(0.8)
(11.7)
(28.6)
—
—
(52.4)

Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 194.8

$ 319.9

$ 208.1

Depreciation & amortization:

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital expenditures:

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$

$

$

43.6
3.4
13.8

60.8

59.0
3.0
8.1

$

$

$

41.0
3.8
11.9

56.7

72.2
1.5
9.2

$

70.1

$

82.9

$

39.7
4.9
12.3

56.9

62.6
1.8
9.2

73.6

111

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total assets:

Global Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scotts LawnService® . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

$1,552.4
184.3
315.5
—

$1,458.4
177.7
334.8
193.1

$2,052.2

$2,164.0

The following table presents net sales and long-lived assets (property, plant and equipment and finite-lived

intangibles) by geographic area for fiscal 2011, fiscal 2010 and fiscal 2009 (in millions):

2011

2010

2009

Net sales:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International

$2,330.4
505.3

$2,425.5
472.5

$2,314.3
432.1

$2,835.7

$2,898.0

$2,746.4

Long-lived assets:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International

$ 411.3
69.8

$ 404.4
73.6

$ 347.4
83.4

$ 481.1

$ 478.0

$ 430.8

112

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 23. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations for fiscal 2011 and fiscal 2010

(in millions, except per share data).

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter Full Year

FISCAL 2011
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $230.2 $1,129.6 $1,058.7 $417.2 $2,835.7
1,003.0
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121.9
Income (loss) from continuing operations . . . . . . . . . . . . . . . . .
46.0
Income (loss) from discontinued operations, net of tax . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167.9
Basic earnings (loss) per common share:

400.1
111.7
(0.1)
111.6

49.1
(66.7)
(1.2)
(67.9)

91.1
(71.7)
18.3
(53.4)

462.7
148.6
29.0
177.6

Income (loss) from continuing operations . . . . . . . . . . . . . $ (1.00) $
Income (loss) from discontinued operations, net of tax . . .

(0.02)

2.26 $
0.44

1.73 $ (1.16) $
—

0.30

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.02) $

2.70 $

1.73 $ (0.86) $

Common shares used in basic EPS calculation . . . . . . . . . . . . .

66.3

65.8

64.5

62.0

Diluted earnings (loss) per common share:

Income (loss) from continuing operations . . . . . . . . . . . . . $ (1.00) $
Income (loss) from discontinued operations, net of tax . . .

(0.02)

2.20 $
0.43

1.69 $ (1.16) $
—

0.30

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.02) $

2.63 $

1.69 $ (0.86) $

1.88
0.72

2.60

64.7

1.84
0.70

2.54

Common shares and dilutive potential common shares used in

diluted EPS calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66.3

67.6

66.2

62.0

66.2

FISCAL 2010
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $252.4 $1,050.7 $1,172.6 $422.3 $2,898.0
1,075.9
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200.5
Income (loss) from continuing operations . . . . . . . . . . . . . . . . .
3.6
Income (loss) from discontinued operations, net of tax . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204.1
Basic earnings (loss) per common share:

126.3
(33.1)
0.5
(32.6)

52.8
(50.1)
(7.6)
(57.7)

481.8
169.5
6.4
175.9

415.0
114.2
4.3
118.5

Income (loss) from continuing operations . . . . . . . . . . . . . $ (0.76) $
Income (loss) from discontinued operations, net of tax . . .

(0.12)

1.72 $
0.07

2.55 $ (0.50) $
0.10

0.01

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.88) $

1.79 $

2.65 $ (0.49) $

Common shares used in basic EPS calculation . . . . . . . . . . . . .

65.9

66.2

66.5

66.5

Diluted earnings (loss) per common share:

Income (loss) from continuing operations . . . . . . . . . . . . . $ (0.76) $
Income (loss) from discontinued operations, net of tax . . .

(0.12)

1.69 $
0.07

2.50 $ (0.50) $
0.09

0.01

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.88) $

1.76 $

2.59 $ (0.49) $

3.03
0.05

3.08

66.3

2.97
0.05

3.02

Common shares and dilutive potential common shares used in

diluted EPS calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65.9

67.4

67.9

66.5

67.6

Common share equivalents, such as share-based awards, are excluded from the diluted loss per common
share calculation in periods where there is a loss from continuing operations because the effect of their inclusion
would be anti-dilutive.

113

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s business is highly seasonal, with approximately 75% of net sales occurring in the second

and third fiscal quarters.

Unusual

impairment,
items during fiscal 2011 consisted of product registration and recall charges,
restructuring and other charges, and costs related to refinancing. These items are reflected in the quarterly
financial information as follows: first quarter product registration and recall charges of $1.7 million; second
quarter product registration and recall charges of $2.5 million; third quarter product registration and recall
charges of $6.8 million, and impairment, restructuring and other charges of $13.8 million; fourth quarter product
registration and recall charges of $3.6 million and impairment, restructuring and other charges of $62.3 million.
Unusual items in discontinued operations consisted of the sale of Global Pro to ICL resulting in an after-tax gain
of $39.5 million, which included transaction costs. During the fourth quarter of 2011, an out-of-period
adjustment of approximately $13.6 million was recorded to correct the tax provision recognized for discontinued
operations in the second quarter of 2011. Management believes the amount was not material individually or in
the aggregate to current or prior interim periods. In addition, in the fourth quarter of fiscal 2011, the Company
recorded an adjustment of $5.0 million as a change in estimate on the tax due on the gain on sale of Global Pro.

Unusual items during fiscal 2010 consisted of impairment and product registration and recall charges. These
items are reflected in the quarterly financial information as follows: first quarter product registration and recall
charges of $2.6 million; second quarter product registration and recall charges of $1.7 million; third quarter
product registration and recall charges of $1.5 million; and fourth quarter impairment charges of $18.5 million
and product registration and recall charges of $2.9 million. Unusual items in discontinued operations consisted of
Smith & Hawken restructuring and other charges of $17.1 million in the first quarter, offset by a gain of
approximately $18 million from the sale of Smith & Hawken intellectual property; restructuring and other
charges of $1.9 million in the second quarter; restructuring and other charges of $0.3 million in the third quarter;
and restructuring and other charges of $(1.0) million in the fourth quarter.

NOTE 24. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-
GUARANTORS

The 7.25% and 6.625% Senior Notes (collectively, the “Senior Notes”) issued by Scotts Miracle-Gro on
January 14, 2010 and December 16, 2010, respectively, are guaranteed by certain of its domestic subsidiaries
and, therefore, the Company has disclosed condensed, consolidating financial information in accordance with
SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities
Registered or Being Registered. The following 100% directly or indirectly owned subsidiaries fully and
unconditionally guarantee the Senior Notes on a joint and several basis: EG Systems, Inc., dba Scotts
LawnService®; Gutwein & Co.,
Inc.; OMS
Investments, Inc.; Rod McLellan Company; Sanford Scientific, Inc.; Scotts Temecula Operations, LLC; Scotts
Manufacturing Company; Scotts Products Co.; Scotts Professional Products Co.; Scotts-Sierra Investments, Inc.;
SMG Brands, Inc.; SMG Growing Media, Inc.; Swiss Farms Products, Inc.; and The Scotts Company LLC
(collectively, the “Guarantors”). SMG Brands, Inc. was added as a Guarantor of the Senior Notes on September
28, 2011. Accordingly, SMG Brands, Inc. has been classified as a Guarantor for all periods presented in the
condensed, consolidating financial information accompanying this Note 24.

Inc.; Hyponex Corporation; Miracle-Gro Lawn Products,

The following information presents condensed, consolidating Statements of Operations and Statements of
Cash Flows for each of the three years in the period ended September 30, 2011, and condensed, consolidating
Balance Sheets as of September 30, 2011 and 2010. The consolidating financial information presents, in separate
columns, financial information for: Scotts Miracle-Gro on a Parent-only basis, carrying its investment in
subsidiaries under the equity method; Guarantors on a combined basis, carrying investments in subsidiaries

114

THE SCOTTS MIRACLE-GRO COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

which do not guarantee the debt (collectively, the “Non-Guarantors”) under the equity method; Non-Guarantors
on a combined basis; and eliminating entries. The eliminating entries primarily reflect intercompany transactions,
such as interest expense, accounts receivable and payable, short and long-term debt, and the elimination of equity
investments and income in subsidiaries. Because the Parent is obligated to pay the unpaid principal amount and
interest on all amounts borrowed by the Guarantors or Non-Guarantors under the credit facility (and was
obligated to pay the unpaid principal amount and interest on all amounts borrowed by the Guarantors and Non-
Guarantors under the previous senior secured five-year revolving loan facility), the borrowings and related
interest expense for the loans outstanding of the Guarantors and Non-Guarantors are also presented in the
accompanying Parent-only financial information, and are then eliminated.

115

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Operations
for the fiscal year ended September 30, 2011
(in millions)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $2,312.6
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 1,465.1
Cost of sales - impairment, restructuring and other

$523.1
346.1

$ —
—

$2,835.7
1,811.2

Parent

Subsidiary
Guarantors

Non-

Guarantors Eliminations Consolidated

17.3
3.2

1.0
—

827.0

176.0

charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales - product registration and recall matters . . .

Gross profit
Operating expenses:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling, general and administrative . . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . . .
Product registration and recall matters . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net

—
—

—

—
—
—
—

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Other non-operating income . . . . . . . . . . . . . . . . . . . . . . .
Costs related to refinancing . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(186.8)
(19.4)
1.2
48.1

526.1
54.3
11.4
(1.3)

236.5
(41.6)
—
—
20.0

Income from continuing operations before income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156.9

258.1

Income tax (benefit) expense from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11.0)

80.8

Income from continuing operations . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax . .

167.9
—

177.3
9.5

162.4
3.5
—
(0.4)

10.5
—
—
—
2.3

8.2

3.1

5.1
36.5

—
—

—

—
—
—
—

—
228.4
19.4
—
(19.4)

18.3
3.2

1,003.0

688.5
57.8
11.4
(1.7)

247.0
—
—
1.2
51.0

(228.4)

194.8

—

(228.4)
—

72.9

121.9
46.0

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167.9 $ 186.8

$ 41.6

$(228.4)

$ 167.9

116

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Cash Flows
for the fiscal year ended September 30, 2011
(in millions)

NET CASH (USED IN) PROVIDED BY OPERATING

ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (10.5) $ 84.0

$ 48.6

$ —

$

122.1

Parent

Subsidiary
Guarantors

Non-

Guarantors Eliminations Consolidated

INVESTING ACTIVITIES

Proceeds from sale of long-lived assets . . . . . . . . .
Proceeds from sale of business, net of transaction

costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in property, plant and equipment
. . . .
Contingent consideration and related payments . . .
Investments in acquired businesses, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by investing activities . . . .

—

—
—
—

—

—

0.2

—

158.7
(64.5)
(20.0)

(7.6)

66.8

94.9
(8.2)
—

—

86.7

FINANCING ACTIVITIES

Borrowings under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . . .

—

908.2

701.9

Repayments under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of Senior Notes . . . . . . . . .
Financing and issuance fees . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common shares . . . . . . . . . . . . . . . . . .
Payments on seller notes . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from exercise of stock options . . . . .
Intercompany financing . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing

(302.4)
200.0
(18.9)
(67.9)
(358.7)
—

—
31.5
526.9

(660.8)
—
—
—
—
(0.3)

5.6
—
(404.3)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.5

(151.6)

Effect of exchange rate changes on cash . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . .
Cash and cash equivalents, beginning of period . . . . . . .

—

—
—

—

(0.8)
5.1

(668.9)
—
—
—
—
—

—
—
(122.6)

(89.6)

(2.1)

43.6
83.0

—

—
—
—

—

—

—

—
—
—
—
—
—

—
—
—

—

—

—
—

0.2

253.6
(72.7)
(20.0)

(7.6)

153.5

1,610.1

(1,632.1)
200.0
(18.9)
(67.9)
(358.7)
(0.3)

5.6
31.5
—

(230.7)

(2.1)

42.8
88.1

Cash and cash equivalents, end of period . . . . . . . . . . . . $ — $

4.3

$ 126.6

$ —

$

130.9

117

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Balance Sheet
As of September 30, 2011
(in millions)

Parent

Subsidiary
Guarantors

Non-
Guarantors

Eliminations Consolidated

ASSETS

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . .

$ — $
—
—
—

Total current assets . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment in subsidiaries . . . . . . . . . . . . . . . .
Intercompany assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—
—
33.1
794.3
553.7

4.3
248.2
313.7
107.9

674.1
347.3
308.4
270.3
13.3
—
115.4

$ 126.6
75.3
73.3
43.2

$ — $ 130.9
323.5
387.0
151.1

—
—
—

318.4
47.4
0.7
49.3
27.6
—
—

—
—
—
—
(37.7)
(794.3)
(669.1)

992.5
394.7
309.1
319.6
36.3
—
—

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,381.1

$1,728.8

$ 443.4

$(1,501.1)

$2,052.2

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of debt
. . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . .

$ — $
—
17.2

Total current liabilities . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment in subsidiaries . . . . . . . . . . . . . . . .
Intercompany liabilities . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2
787.2
16.9
—
—

821.3
559.8

2.8
103.9
202.5

309.2
261.3
205.6
328.7
—

$

0.4
46.1
95.7

142.2
130.5
47.2
—
281.9

$ — $
—
—

—
(387.2)
(37.7)
(328.7)
(281.9)

3.2
150.0
315.4

468.6
791.8
232.0
—
—

1,104.8
624.0

601.8
(158.4)

(1,035.5)
(465.6)

1,492.4
559.8

Total liabilities and shareholders’ equity . . .

$1,381.1

$1,728.8

$ 443.4

$(1,501.1)

$2,052.2

118

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Operations
for the fiscal year ended September 30, 2010
(in millions)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales — product registration and recall

matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Selling, general and administrative . . . . . . . . . . . . .
Impairment, restructuring and other charges . . . . . .
Product registration and recall matters . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—
—
—
—

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Other non-operating income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(212.5)
(24.0)
37.7

Income from continuing operations before income

Parent

Subsidiary
Guarantors

Non-

Guarantors Eliminations Consolidated

$ — $2,429.2
— 1,502.8

$468.8
316.3

$ —
—

$2,898.0
1,819.1

3.0

—

923.4

152.5

576.9
18.2
5.7
(5.8)

328.4
(21.9)
—
24.8

118.4
0.3
—
(0.9)

34.7
—
—
4.7

—

—

—
—
—
—

—
234.4
24.0
(24.0)

3.0

1,075.9

695.3
18.5
5.7
(6.7)

363.1
—
—
43.2

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

198.8

325.5

30.0

(234.4)

319.9

Income tax (benefit) expense from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5.3)

Income from continuing operations . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . .

204.1
—

113.0

212.5
—

11.7

18.3
3.6

—

(234.4)
—

119.4

200.5
3.6

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 204.1 $ 212.5

$ 21.9

$(234.4)

$ 204.1

119

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Cash Flows
for the fiscal year ended September 30, 2010
(in millions)

NET CASH (USED IN) PROVIDED BY

OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . .

$

(5.2) $ 272.2

$ 28.9

$ —

$

295.9

Parent

Subsidiary
Guarantors

Non-
Guarantors

Eliminations Consolidated

INVESTING ACTIVITIES

Proceeds from sale of long-lived assets . . . . . . . .
. . .
Investments in property, plant and equipment

Net cash provided by (used in) investing

activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

FINANCING ACTIVITIES

Borrowings under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . .

Repayments under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . .

Proceeds from issuance of Senior Notes, net of

discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing and issuance fees . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common shares . . . . . . . . . . . . . . . . .
Payments on seller notes . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from exercise of stock options . . . .
Intercompany financing . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing

activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash . . . . . . . . . . . .

Net (decrease) increase in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . .

—
—

—

—

—

198.5
(5.5)
(42.6)
(25.0)
—

—
22.5
(142.7)

5.2

—

—
—

5.8
(74.5)

18.7
(8.9)

(68.7)

9.8

593.5

427.9

(851.6)

(539.8)

—
—
—
—
(0.6)

6.4
—
47.4

—
—
—
—
—

—
—
95.3

(204.9)

—

(16.6)

(3.2)

(1.4)
6.5

18.9
64.1

—
—

—

—

—

—
—
—
—
—

—
—
—

—

—

—
—

Cash and cash equivalents, end of period . . . . . . . . . . .

$ — $

5.1

$ 83.0

$ —

$

24.5
(83.4)

(58.9)

1,021.4

(1,391.4)

198.5
(5.5)
(42.6)
(25.0)
(0.6)

6.4
22.5
—

(216.3)

(3.2)

17.5
70.6

88.1

120

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Balance Sheet
As of September 30, 2010
(in millions)

Parent

Subsidiary
Guarantors

Non-
Guarantors

Eliminations Consolidated

ASSETS

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other assets . . . . . . . . . . . . . . . . . . . .

$ — $
—
—
—
—

Total current assets . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment in subsidiaries . . . . . . . . . . . . . . . .
Intercompany assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—
—
13.9
932.5
337.3

5.1
265.5
287.7
—
97.9

656.2
334.7
305.1
275.2
16.1
—
—

$ 83.0
85.4
65.2
193.1
35.2

461.9
46.6
0.7
55.0
41.1
—
—

$ — $
—
—
—
—

88.1
350.9
352.9
193.1
133.1

—
—
—
—
(42.5)
(932.5)
(337.3)

1,118.1
381.3
305.8
330.2
28.6
—
—

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,283.7

$1,587.3

$605.3

$(1,312.3)

$2,164.0

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

. . . . . . . . . . . . . . . . . . . .
Current portion of debt
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . .

$ 193.2
—
—
3.6

$

Total current liabilities . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment in subsidiaries . . . . . . . . . . . . . . . .
Intercompany liabilities . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .

196.8
318.8
3.6
—
—

519.2
764.5

1.8
92.2
—
249.1

343.1
25.5
200.9
98.5
88.3

756.3
831.0

$ —
49.5
45.3
102.1

196.9
102.1
64.0
—
239.3

602.3
3.0

$ — $ 195.0
141.7
45.3
354.8

—
—
—

—
(9.7)
(42.5)
(98.5)
(327.6)

(478.3)
(834.0)

736.8
436.7
226.0
—
—

1,399.5
764.5

Total liabilities and shareholders’ equity . . .

$1,283.7

$1,587.3

$605.3

$(1,312.3)

$2,164.0

121

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Operations
for the fiscal year ended September 30, 2009
(in millions)

Parent

Subsidiary
Guarantors

Non-

Guarantors Eliminations Consolidated

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales - product registration and recall matters . . .

$ — $2,316.2
— 1,460.7
11.7
—

$430.2
296.3
—

$ —
—
—

$2,746.4
1,757.0
11.7

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Selling, general and administrative . . . . . . . . . . . . .
Product registration and recall matters . . . . . . . . . . .
Other expense (income), net . . . . . . . . . . . . . . . . . . .

—

—
—
—

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Other non-operating income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(155.1)
(33.6)
36.3

843.8

133.9

564.4
16.8
3.5

259.1
(15.4)
—
38.9

134.8
—
(2.3)

1.4
—
—
10.8

—

—
—
—

—
170.5
33.6
(33.6)

977.7

699.2
16.8
1.2

260.5
—
—
52.4

Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax (benefit) expense from continuing

152.4

235.6

(9.4)

(170.5)

208.1

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.9)

Income (loss) from continuing operations . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . .

153.3
—

80.5

155.1
—

(4.1)

(5.3)
20.7

—

(170.5)
—

75.5

132.6
20.7

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 153.3 $ 155.1

$ 15.4

$(170.5)

$ 153.3

122

THE SCOTTS MIRACLE-GRO COMPANY
Condensed, Consolidating Statement of Cash Flows
for the fiscal year ended September 30, 2009
(in millions)

NET CASH PROVIDED BY OPERATING

ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 18.6

$

210.7

$ 35.3

$—

$

264.6

Parent

Subsidiary
Guarantors

Non-
Guarantors

Eliminations Consolidated

INVESTING ACTIVITIES

Proceeds from sale of long-lived assets . . . . . . . . .
Investments in property, plant and equipment . . . .
Investments in intellectual property . . . . . . . . . . . .
Investments in acquired businesses, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . .

—
—
—

—

—

1.4
(54.3)
(3.4)

—
(17.7)
—

—

(9.3)

(56.3)

(27.0)

FINANCING ACTIVITIES

Borrowings under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . .

—

1,181.5

376.5

Repayments under revolving and bank lines of

credit and term loans . . . . . . . . . . . . . . . . . . . . .
Financing and issuance fees . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on seller notes . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from exercise of stock options . . . .
Intercompany financing . . . . . . . . . . . . . . . . . . . . .

—
—
(33.4)
—

(1,314.9)
(0.1)
—
(1.4)

(421.1)
—
—
—

—
14.8
—

4.1
—
(21.1)

—
—
21.1

Net cash used in financing activities . . . . . . .

(18.6)

(151.9)

(23.5)

—
—
—

—

—

—

—
—
—
—

—
—
—

—

—

—
—

1.4
(72.0)
(3.4)

(9.3)

(83.3)

1,558.0

(1,736.0)
(0.1)
(33.4)
(1.4)

4.1
14.8
—

(194.0)

(0.4)

(13.1)
83.7

(0.4)

(15.6)
79.7

$ 64.1

$—

$

70.6

Effect of exchange rate changes on cash . . . . . . . . . . . .

Net (decrease) increase in cash and cash equivalents . .
Cash and cash equivalents, beginning of period . . . . . .

—

—
—

Cash and cash equivalents, end of period . . . . . . . . . . .

$ — $

—

2.5
4.0

6.5

123

Schedule II—Valuation and Qualifying Accounts
for the fiscal year ended September 30, 2011

Column A

Classification

Column B Column C Column D

Column E

Column F

Balance
at
Beginning
of Period

Reserves
Acquired

Additions
Charged
to
Expense

Deductions
Credited
and
Write-Offs

Balance
at End of
Period

(In millions)

Valuation and qualifying accounts deducted from the

assets to which they apply:

Inventory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve—product recalls . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Income tax valuation allowance . . . . . . . . . . . . . . . . . . .

$14.4
3.5
7.7
42.3

$—
—
0.1
—

$ 9.0
3.2
9.5
(2.0)

$(2.1)
(6.0)
(4.4)
4.0

$21.3
0.7
12.9
44.3

Schedule II—Valuation and Qualifying Accounts
for the fiscal year ended September 30, 2010

Column A

Classification

Column B Column C Column D

Column E

Column F

Balance
at
Beginning
of Period

Reserves
Acquired

Additions
Charged
to
Expense

Deductions
Credited
and
Write-Offs

Balance
at End of
Period

(In millions)

Valuation and qualifying accounts deducted from the

assets to which they apply:

Inventory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve—product recalls . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Income tax valuation allowance . . . . . . . . . . . . . . . . . . .

$21.3
8.3
7.5
43.1

$—
—
—
—

$8.4
0.8
4.6
0.5

$(15.3)
(5.6)
(4.4)
(1.3)

$14.4
3.5
7.7
42.3

Schedule II—Valuation and Qualifying Accounts
for the fiscal year ended September 30, 2009

Column A

Classification

Column B Column C Column D

Column E

Column F

Balance
at
Beginning
of Period

Reserves
Acquired

Additions
Charged
to
Expense

Deductions
Credited
and
Write-Offs

Balance
at End of
Period

(In millions)

Valuation and qualifying accounts deducted from the

assets to which they apply:

Inventory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve—product recalls . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Income tax valuation allowance . . . . . . . . . . . . . . . . . . . .

$15.0
8.7
7.0
65.8

$—
—
—
—

$12.8
2.9
6.7
1.8

$ (6.5)
(3.3)
(6.2)
(24.5)

$21.3
8.3
7.5
43.1

124

The Scotts Miracle-Gro Company

Index to Exhibits

Exhibit
No.

3.1(a)

Description

Location

Initial Articles of Incorporation of The Scotts
Miracle-Gro Company as filed with the Ohio
Secretary of State on November 22, 2004

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Miracle-Gro
Company, (the “Registrant”) filed March 24, 2005
(File No. 1-11593) [Exhibit 3.1]

3.1(b) Certificate of Amendment by Shareholders to
Articles of Incorporation of The Scotts Miracle-
Gro Company as filed with the Ohio Secretary of
State on March 18, 2005

3.2

Code of Regulations of The Scotts Miracle-Gro
Company

4.1(a)

Indenture, dated January 14, 2010, among The
Scotts Miracle-Gro Company, the guarantors from
time to time party thereto and U.S. Bank National
Association, as trustee

4.1(b) First Supplemental Indenture, dated January 14,
2010, among The Scotts Miracle-Gro Company,
the subsidiary guarantors named therein and U.S.
Bank National Association, as trustee

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
March 24, 2005 (File No. 1-11593) [Exhibit 3.2]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
March 24, 2005 (File No. 1-11593) [Exhibit 3.3]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
January 14, 2010 (File No. 1-11593) [Exhibit 4.1]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
January 14, 2010 (File No. 1-11593) [Exhibit 4.2]

reference

to

4.1(c)

2011,

Second Supplemental Indenture, dated September
28,
among The Scotts Miracle-Gro
Company, the subsidiary guarantors named therein
and U.S. Bank National Association, as trustee

*

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
January 14, 2010 (File No. 1-11593) [Included in
Exhibit 4.2]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
December 16, 2010 (File No. 1-11593) [Exhibit
4.1]

reference

to

4.1(d) Form of 7.25% Senior Notes due 2018

4.2(a)

Indenture, dated as of December 16, 2010, by and
among The Scotts Miracle-Gro Company,
the
Guarantors (as defined therein) and U.S. Bank
National Association, as trustee

125

Exhibit
No.

Description

Location

4.2(b) First Supplemental

Indenture,

of
September 28, 2011, by and among The Scotts
Miracle-Gro Company, the Guarantors (as defined
therein) and U.S. Bank National Association, as
trustee

dated

as

4.2(c) Form of 6.625% Senior Notes due 2020

4.2(d) Registration Rights Agreement, dated as of
December 16, 2010, by and among The Scotts
Miracle-Gro Company,
the guarantors named
therein and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as representative of
the several
initial purchasers named therein

*

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
December 16, 2010 (File No. 1-11593) [Included
in Exhibit 4.1]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
December 16, 2010 (File No. 1-11593) [Exhibit
4.3]

reference

to

4.3

Agreement to furnish copies of instruments and
agreements defining rights of holders of long-term
debt

*

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Company, a
Delaware corporation, filed June 2, 1995 (File No.
0-19768) [Exhibit 2(b)]

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Company, an
Ohio corporation, filed October 5, 1999 (File No.
1-13292) [Exhibit 2]

10.1(a) Amended and Restated Agreement and Plan of
Merger, dated as of May 19, 1995, among Stern’s
Miracle-Gro Products,
Inc., Stern’s Nurseries,
Inc., Miracle-Gro Lawn Products Inc., Miracle-
Gro Products Limited, Hagedorn Partnership,
L.P.,
of Hagedorn
Partnership, L.P., Horace Hagedorn, Community
and John Kenlon, The Scotts
Funds,
Company and ZYX Corporation

partners

general

Inc.,

the

10.1(b) First Amendment

to Amended and Restated
Agreement and Plan of Merger, made and entered
into as of October 1, 1999, among The Scotts
Company, Scotts’ Miracle-Gro Products, Inc. (as
successor
to ZYX Corporation and Stern’s
Miracle-Gro Products, Inc.), Miracle-Gro Lawn
Inc., Miracle-Gro Products Limited,
Products
Hagedorn Partnership, L.P., Community Funds,
Inc., Horace Hagedorn and John Kenlon, and
James Hagedorn, Katherine Hagedorn Littlefield,
Paul Hagedorn, Peter Hagedorn, Robert Hagedorn
and Susan Hagedorn

126

Exhibit
No.

10.2

Description

Location

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
July 1, 2011 (File No. 1-11593) [Exhibit 4.1]

reference

to

Restated

the Subsidiary Borrowers

Second Amended
Credit
and
Agreement, dated as of June 30, 2011, by and
among The Scotts Miracle-Gro Company as the
“Borrower”
(as
defined in the Second Amended and Restated
Credit Agreement); the several banks and other
financial institutions from time to time parties to
the Second Amended and Restated Credit
Agreement (the “Lenders”); Bank of America,
N.A., as Syndication Agent; Cobank, ACB, BNP
Paribas, Credit Agricole Corporate
and
Investment Bank, Rabobank Nederland, Citizens
Bank of Pennsylvania, The Bank of Nova Scotia
and Wells Fargo Bank, N.A., as Documentation
Agents; and JPMorgan Chase Bank, N.A., as
Administrative Agent

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
July 1, 2011 (File No. 1-11593) [Exhibit 4.2]

reference

to

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2007 (File
No. 1-11593) [Exhibit 10(d)(4)]

reference

to

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Company, an
Ohio corporation, filed November 19, 2004 (File
No. 1-11593) [Exhibit 10.7]

herein

the
by
Incorporated
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2007 (File
No. 1-11593) [Exhibit 10(j)(3)]

reference

to

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Company, an
Ohio corporation, filed November 19, 2004 (File
No. 1-11593) [Exhibit 10.9]

10.3

Second Amended and Restated Guarantee and
Collateral Agreement, dated as of June 30, 2011,
made by The Scotts Miracle-Gro Company, each
domestic Subsidiary Borrower under the Second
Amended and Restated Credit Agreement, and
certain of its and their domestic subsidiaries, in
favor of
JPMorgan Chase Bank, N.A., as
Administrative Agent

10.4(a)†

The Scotts Miracle-Gro Company Amended and
Restated 1996 Stock Option Plan (effective as of
October 30, 2007)

10.4(b)†

Specimen form of Stock Option Agreement for
Non-Qualified
to
Stock Options
employees under The Scotts Company 1996
Stock Option Plan (now known as The Scotts
Miracle-Gro Company Amended and Restated
1996 Stock Option Plan)

granted

10.5(a)†

The Scotts Miracle-Gro Company Amended and
Restated 2003 Stock Option and Incentive Equity
Plan (effective as of October 30, 2007)

to

evidence

10.5(b)(i) Specimen form of Award Agreement
grants
used

for
Directors
of
Nonqualified Stock Options made under The
Scotts Company
and
Incentive Equity Plan (now known as The Scotts
Miracle-Gro Company Amended and Restated
2003 Stock Option and Incentive Equity Plan)
[2003 version]

2003 Stock Option

127

Exhibit
No.

10.5(b)(ii)

10.5(c)(i)†

Description

Location

used

evidence

for
Specimen form of Award Agreement
Directors
of
grants
to
Nonqualified Stock Options made under The
Scotts Miracle-Gro Company 2003 Stock
Option and Incentive Equity Plan (now known
as The Scotts Miracle-Gro Company Amended
and Restated 2003 Stock Option and Incentive
Equity Plan) [post-2003 version]

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2005 (File
No. 1-11593) [Exhibit 10(v)]

reference

to

Incorporated herein by reference to the Current
Report on Form 8-K of The Scotts Company, an
Ohio corporation, filed November 19, 2004 (File
No. 1-11593) [Exhibit 10.8]

Specimen form of Award Agreement
for
Nondirectors used to evidence grants of
Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted
Stock and Performance Stock made under The
Scotts Company 2003 Stock Option and
Incentive Equity Plan (now known as The Scotts
Miracle-Gro Company Amended and Restated
2003 Stock Option and Incentive Equity Plan)
[pre-December 1, 2004 version]

herein

the
by
Incorporated
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2005 (File
No. 1-11593) [Exhibit 10(u)]

reference

to

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2007 (File
No. 1-11593) [Exhibit 10(r)(2)]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended April 3, 2010 (File
No. 1-11593) [Exhibit 10.1]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
February 2, 2006 (File No. 1-11593) [Exhibit
10.3]

reference

to

10.5(c)(ii)† Specimen form of Award Agreement

for
Nondirectors used to evidence grants of
Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted
Stock and Performance Shares made under The
Scotts Miracle-Gro Company 2003 Stock
Option and Incentive Equity Plan (now known
as The Scotts Miracle-Gro Company Amended
and Restated 2003 Stock Option and Incentive
Equity Plan) [effective December 1, 2004]

10.6(a)(i)†

The Scotts Miracle-Gro Company Amended and
Restated
2006 Long-Term Incentive Plan
(effective as of October 30, 2007)

10.6(a)(ii)† First Amendment

to The Scotts Miracle-Gro
Company Amended and Restated 2006 Long-
Term Incentive Plan (effective as of January 20,
2010)

10.6(b)

Specimen form of Award Agreement
for
Nonemployee Directors used to evidence grants
of Time-Based Nonqualified Stock Options
which may be made under The Scotts Miracle-
Gro Company 2006 Long-Term Incentive Plan
(now known as The Scotts Miracle-Gro
2006
Company Amended
Long-Term Incentive Plan)

and Restated

128

Exhibit
No.

10.6(c)(i)

Description

Location

Specimen form of Deferred Stock Unit Award
Agreement
for Nonemployee Directors (with
Related Dividend Equivalents) used to evidence
grants of Deferred Stock Units made under The
Scotts Miracle-Gro Company Amended and
Restated
2006 Long-Term Incentive Plan
(February 4, 2008 through January 22, 2009
version)

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended December 29, 2007
(File No. 1-11593) [Exhibit 10(m)]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended March 28, 2009 (File
No. 1-11593) [Exhibit 10.1]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended January 2, 2010 (File
No. 1-11593) [Exhibit 10.1]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended January 1, 2011 (File
No. 1-11593) [Exhibit 10.4]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2005
(File No. 1-11593) [Exhibit 10(b)]

reference

to

10.6(c)(ii) Specimen form of Deferred Stock Unit Award
Agreement
for Nonemployee Directors (with
Related Dividend Equivalents) used to evidence
grants of Deferred Stock Units which may be
made under The Scotts Miracle-Gro Company
Amended
2006 Long-Term
Incentive Plan (post-January 22, 2009 version)

and Restated

10.6(d)(i)

Specimen form of Deferred Stock Unit Award
Agreement
for Nonemployee Directors (with
Related Dividend Equivalents) used to evidence
grants of Deferred Stock Units made under The
Scotts Miracle-Gro Company Amended and
Restated
2006 Long-Term Incentive Plan
(Deferral of Cash Retainer — January 22, 2010
through January 20, 2011 version)

10.6(d)(ii) Specimen form of Deferred Stock Unit Award
Agreement
for Nonemployee Directors (with
Related Dividend Equivalents) used to evidence
grants of Deferred Stock Units which may be
made under The Scotts Miracle-Gro Company
Amended
2006 Long-Term
Incentive Plan (Deferral of Cash Retainer —
post-January 20, 2011 version)

and Restated

10.6(e)†

Shares, Nonqualified

Specimen form of Award Agreement used to
evidence grants of Restricted Stock Units,
Performance
Stock
Incentive Stock Options, Restricted
Options,
Stock and Stock Appreciation Rights made
under The Scotts Miracle-Gro Company 2006
Long-Term Incentive Plan (now known as The
Scotts Miracle-Gro Company Amended and
Restated 2006 Long-Term Incentive Plan)
[pre-October 30, 2007 version]

129

Exhibit
No.

10.6(f)†

10.6(g)†

10.6(h)(i)†

10.6(h)(ii)†

Description

Location

for Employees

Specimen form of Restricted Stock Unit Award
Agreement
(with Related
Dividend Equivalents) used to evidence grants
of Restricted Stock Units which may be made
under The Scotts Miracle-Gro Company
Amended
2006 Long-Term
Incentive Plan (effective January 20, 2010)

and Restated

for Employees

Specimen form of Performance Unit Award
Agreement
(with Related
Dividend Equivalents) used to evidence grants
of Performance Units which may be made
under The Scotts Miracle-Gro Company
Amended
2006 Long-Term
Incentive Plan (effective January 21, 2011)

and Restated

Specimen form of Nonqualified Stock Option
Award Agreement
for Employees used to
evidence grants of Nonqualified Stock Options
made under The Scotts Miracle-Gro Company
2006 Long-Term Incentive Plan (now known as
The Scotts Miracle-Gro Company Amended
and Restated 2006 Long-Term Incentive Plan)
[October 30, 2007 through October 8, 2008
version]

Specimen form of Nonqualified Stock Option
Award Agreement
for Employees used to
evidence grants of Nonqualified Stock Options
made under The Scotts Miracle-Gro Company
Amended
2006 Long-Term
Incentive Plan (October 9, 2008 through
January 19, 2010 version)

and Restated

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended January 2, 2010 (File
No. 1-11593) [Exhibit 10.2]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
January 26, 2011 (File No. 1-11593) [Exhibit
10.1]

reference

to

herein

the
by
Incorporated
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2007 (File
No. 1-11593) [Exhibit 10(t)(3)]

reference

to

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2008 (File
No. 1-11593) [Exhibit 10.7(f)(ii)]

reference

to

10.6(h)(iii)† Specimen form of Nonqualified Stock Option
Award Agreement
for Employees used to
evidence grants of Nonqualified Stock Options
which may be made under The Scotts Miracle-
Gro Company Amended and Restated 2006
Long-Term Incentive Plan (post-January 19,
2010 version)

10.7(a)(i)†

The Scotts Company LLC Amended and
Restated Executive/Management Incentive Plan
(approved on November 7, 2007 and effective
as of October 30, 2007)

10.7(a)(ii)† Amendment

to The Scotts Company LLC
Amended and Restated Executive/Management
Incentive Plan (effective as of November 5,
2008) [amended the name of the plan to be The
Scotts Company LLC Amended and Restated
Executive Incentive Plan]

130

herein

the
by
Incorporated
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended January 2, 2010 (File
No. 1-11593) [Exhibit 10.4]

reference

to

herein

the
by
Incorporated
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2007 (File
No. 1-11593) [Exhibit 10(b)(2)]

reference

to

herein

the
by
Incorporated
Registrant’s Current Report on Form 8-K filed
November 12, 2008 (File No. 1-11593) [Exhibit
10.2]

reference

to

Exhibit
No.

10.7(b)(i)†

Description

Location

Specimen form of Employee Confidentiality,
Noncompetition, Nonsolicitation Agreement for
employees participating in The Scotts Company
Executive/Management
Incentive Plan (now
known as The Scotts Company LLC Amended
and Restated Executive Incentive Plan) [2005
version]

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2008 (File
No. 1-11593) [Exhibit 10.2(b)(i)]

reference

to

10.7(b)(ii)† Specimen form of Employee Confidentiality,
Noncompetition, Nonsolicitation Agreement for
employees participating in The Scotts Company
Incentive Plan
LLC Executive/Management
(now known as The Scotts Company LLC
Amended and Restated Executive Incentive
Plan) [post-2005 version]

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended July 1, 2006 (File
No. 1-11593) [Exhibit 10.1]

reference

to

10.7(c)†

10.8(a)†

10.8(b)†

Executive Officers of The Scotts Miracle-Gro
Company who are parties to form of Employee
Confidentiality, Noncompetition, Nonsolicitation
Agreement for employees participating in The
Scotts Company LLC Amended and Restated
Executive Incentive Plan

*

The Scotts Company LLC Executive Retirement
Plan, As Amended and Restated as of January 1,
2011 (executed December 22, 2010)

between

Form of Executive Retirement Plan Retention
Scotts
Award Agreement
Company LLC and each of David C. Evans,
Barry W. Sanders, Denise S. Stump and Vincent
C. Brockman (entered into on November 4,
2008)

The

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended January 1, 2011 (File
No. 1-11593) [Exhibit 10.3]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
October 15, 2008 (File No. 1-11593) [Exhibit
10.2]

reference

to

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended April 3, 2010 (File
No. 1-11593) [Exhibit 10.7]

reference

to

Incorporated herein by reference to the Annual
Report on Form 10-K of The Scotts Company,
an Ohio corporation, for the fiscal year ended
September 30, 1995 (File No. 1-11593) [Exhibit
10(p)]

10.9

Summary of Compensation for Nonemployee
Directors of The Scotts Miracle-Gro Company
(effective as of January 22, 2010)

10.10(a)†

Employment Agreement, dated as of May 19,
1995, between The Scotts Company and James
Hagedorn

131

Exhibit
No.

Description

Location

10.10(b)† Amendments to Employment Agreement by and
among The Scotts Miracle-Gro Company, The
Scotts Company LLC and James Hagedorn,
effective as of October 1, 2008 (executed by
Mr. Hagedorn on December 22, 2008 and on
behalf of The Scotts Miracle-Gro Company and
The Scotts Company LLC by Denise Stump on
December 22, 2008 and Vincent C. Brockman on
December 30, 2008)

10.11†

Separation Agreement
and Release of All
Claims, effective as of November 3, 2010, by
and between The Scotts Company LLC and Mark
R. Baker
(executed by Mr. Baker as of
October 28, 2010 and on behalf of The Scotts
Company LLC on November 3, 2010)

10.12(a)† The Scotts Company LLC Executive Severance

Plan, adopted on May 4, 2011

10.12(b)† Form of Tier 1 Participation Agreement under
The Scotts Company LLC Executive Severance
Plan

herein

Incorporated
the
by
Registrant’s Quarterly Report on Form 10-Q for
the quarterly period ended December 27, 2008
(File No. 1-11593) [Exhibit 10.16]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
1-11593)
November
[Exhibit 10.1]

(File No.

reference

2010

to

5,

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
May 10, 2011 (File No. 1-11593) [Exhibit 10.1]

reference

to

herein

the
by
Incorporated
Registrant’s Current Report on Form 8-K filed
May 10, 2011 (File No. 1-11593) [Exhibit 10.2]

reference

to

10.12(c)† Executive Officers of The Scotts Miracle-Gro
Company who are parties to form of Tier 1
Participation Agreement
under The Scotts
Company LLC Executive Severance Plan

*

10.13(a) Amended and Restated Exclusive Agency and
effective
Agreement,
of
Marketing
September
between Monsanto
1998,
30,
Company and The Scotts Company LLC (as
successor to The Scotts Company)

as

herein

the
by
Incorporated
Registrant’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2005 (File No.
1-11593) [Exhibit 10(x)]

reference

to

10.13(b)

10.13(c)

10.14

Letter Agreement, dated March 10, 2005,
amending the Amended and Restated Exclusive
Agency and Marketing Agreement, dated as of
between Monsanto
September
Company and The Scotts Company LLC (as
successor to The Scotts Company)

1998,

30,

Letter Agreement, dated March 28, 2008,
amending the Amended and Restated Exclusive
Agency and Marketing Agreement, dated as of
September
between Monsanto
Company and The Scotts Company LLC

1998,

30,

Purchase Agreement, dated as of December 13,
2010, among The Scotts Miracle-Gro Company,
the subsidiary guarantors named therein and
Merrill Lynch,
Fenner & Smith
Incorporated, as representative of the several
initial purchasers named therein

Pierce,

132

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2009 (File No.
1-11593) [Exhibit 10.17(b)]

reference

to

herein

Incorporated
the
by
Registrant’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2008 (File No.
1-11593) [Exhibit 10.18(b)]

reference

to

herein

the
by
Incorporated
Registrant’s Current Report on Form 8-K filed
December
1-11593)
[Exhibit 10.1]

(File No.

reference

2010

16,

to

Exhibit
No.

10.15

10.16

12

14

21

23

24

31.1

31.2

32

Description

Location

Share and Business Sale Agreement, dated as of
February 23, 2011, by and among The Scotts
Company LLC, as Seller, each of the Share
Sellers
(as defined
therein), Israel Chemicals Ltd., as Purchaser,
each of the Share Purchasers and Business
Purchasers (as defined therein) and The Scotts
Miracle-Gro Company, as Seller Guarantor

and Business Sellers

Accounts

Receivable

Master
Purchase
Agreement, dated as of September 21, 2011, by
and among The Scotts Miracle-Gro Company,
The Scotts Company LLC, The Bank of Nova
Scotia, Suntrust Bank, Mizuho Corporate Bank,
Ltd.
and Crédit Agricole Corporate &
Investment Bank, as Administrative Agent and
as a Bank

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
March 1, 2011 (File No. 1-11593) [Exhibit
10.1]

reference

to

herein

Incorporated
the
by
Registrant’s Current Report on Form 8-K filed
September 21, 2011 (File No. 1-11593) [Exhibit
10.1]

reference

to

Computation of Ratio of Earnings to Fixed
Charges

*

Code of Business Conduct and Ethics of The
Scotts Miracle-Gro Company, as amended on
November 2, 2006

Subsidiaries
Company

of The

Scotts Miracle-Gro

Consent of
Accounting Firm — Deloitte & Touche LLP

Independent Registered Public

Powers of Attorney of Executive Officers and
Directors of The Scotts Miracle-Gro Company

13a-14(a)/15d-14(a)
Rule
(Principal Executive Officer)

Rule
(Principal Financial Officer)

13a-14(a)/15d-14(a)

Certifications

Certifications

Section 1350 Certifications (Principal Executive
Officer and Principal Financial Officer)

101.INS** XBRL Instance Document

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL

Taxonomy

Extension Calculation

Linkbase

101.DEF** XBRL

Taxonomy

Extension Definition

Linkbase

101.LAB** XBRL Taxonomy Extension Label Linkbase

133

herein

the
by
Incorporated
Registrant’s Current Report on Form 8-K filed
November 8, 2006 (File No. 1-11593) [Exhibit
14]

reference

to

*

*

*

*

*

*

*

*

*

*

*

Exhibit
No.

Description

Location

101.PRE** XBRL Taxonomy Extension

Presentation

*

Linkbase

Filed or furnished herewith.

*
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or
Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

† Management contract, compensatory plan or arrangement.

134

Rule 13a-14(a)/15d-14(a) Certifications
(Principal Executive Officer)

CERTIFICATIONS

Exhibit 31.1

I, James Hagedorn, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Scotts Miracle-Gro Company for the fiscal year

ended September 30, 2011;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

/s/ James Hagedorn

By:
Printed Name: James Hagedorn
Title:

Chief Executive Officer and
Chairman of the Board

Dated: November 23, 2011

Rule 13a-14(a)/15d-14(a) Certifications
(Principal Financial Officer)

CERTIFICATIONS

Exhibit 31.2

I, David C. Evans, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Scotts Miracle-Gro Company for the fiscal year

ended September 30, 2011;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

/s/ David C. Evans

By:
Printed Name: David C. Evans
Title:

Chief Financial Officer and Executive
Vice President, Strategy and Business
Development

Dated: November 23, 2011

SECTION 1350 CERTIFICATIONS*

Exhibit 32

In connection with the Annual Report on Form 10-K of The Scotts Miracle-Gro Company (the “Company”) for
the fiscal year ended September 30, 2011 as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), the undersigned, James Hagedorn, Chief Executive Officer and Chairman of the Board of
the Company, and David C. Evans, Chief Financial Officer and Executive Vice President, Strategy and Business
Development of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of

1934, as amended; and

2) The information contained in the Report fairly presents, in all material respects, the consolidated

financial condition and results of operations of the Company and its subsidiaries.

/s/ James Hagedorn

James Hagedorn
Chief Executive Officer and
Chairman of the Board

/s/ David C. Evans

David C. Evans
Chief Financial Officer
President, Strategy and Business Development

and Executive Vice

November 23, 2011

November 23, 2011

* THESE CERTIFICATIONS ARE BEING FURNISHED AS REQUIRED BY RULE 13a-14(b) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”), AND
SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE, AND SHALL NOT BE
DEEMED “FILED” FOR PURPOSES OF SECTION 18 OF THE EXCHANGE ACT OR OTHERWISE
SUBJECT TO THE LIABILITY OF THAT SECTION. THESE CERTIFICATIONS SHALL NOT BE
DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY FILING UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY INCORPORATES THESE CERTIFICATIONS BY REFERENCE.

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

SHAREHOLDER InformatIon

World Headquarters
14111 Scottslawn Road
Marysville, Ohio 43041  
(937) 644-0011  

www.scotts.com

Annual Meeting
The annual meeting of shareholders 
will be held at The Berger Learning Center,  
14111 Scottslawn Road, Marysville, Ohio 43041, 
on Thursday, January 19, 2012 at 9:00 a.m. (EST).

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
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0856     

Shareholder and Investor 
Relations Contact
Jim King
Senior Vice President,  
Investor Relations & Corporate Affairs

The Scotts Miracle-Gro Company
14111 Scottslawn Road
Marysville, Ohio 43041    
(937) 644-0011 

Dividends
The Scotts Miracle-Gro Company began paying 
a quarterly cash dividend of $0.125 per share 
in the fourth quarter of fiscal 2005. On August 
10, 2010, The Scotts Miracle-Gro Company 
announced that its Board of Directors had 
increased the quarterly cash dividend to $0.25 
per share, which was first paid to shareholders 
in the fourth quarter of fiscal 2010. On August 
8, 2011, The Scotts Miracle-Gro Company  
announced that its Board of Directors had  
further increased the quarterly cash dividend  
to $0.30 per share, which was first paid to 
shareholders in the fourth quarter of fiscal 2011.

The payment of future dividends, if any, on 
common shares will be determined by the 
Board of Directors of The Scotts Miracle-Gro 
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 $125 million annually through 
fiscal 2013 and $150 million annually beginning 
in fiscal 2014 if the Company’s leverage ratio 
exceeds 2.50.

Stock Price Performance
See chart at right for stock price 
performance. The Scotts Miracle-Gro  
Company common shares have been 
publicly traded since January 31, 1992. 

Shareholders
As of November 28, 2011, there were  
approximately 33,500 shareholders, including 
holders of record and The Scotts Miracle-Gro 
Company’s estimate of beneficial holders.

Publications for Shareholders
In addition to this 2011 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 our Investor  
Relations Web site at http://investor.scotts.com 
or by writing to:

The Scotts Miracle-Gro Company
Attention: Investor Relations
14111 Scottslawn Road
Marysville, Ohio 43041     

Stock Price Range
Fiscal year ended 
September 30, 2011 

First Quarter 
Second Quarter 
Third Quarter 
Fourth Quarter 

High 

Low

$54.99 
$58.74 
$60.62 
$52.17 

$49.25 
$48.99
$48.52
$39.99

Fiscal year ended 
September 30, 2010 

High 

Low

First Quarter 
Second Quarter 
Third Quarter 
Fourth Quarter 

$44.14 
$46.94 
$49.58 
$52.56 

$38.52
$37.50
$42.03
$43.88 

Safe Harbor Statement under the Private 
Securities Litigation Reform Act of 1995: 
Statements contained in this 2011 Annual 
Report, other than statements of historical fact, 
which address activities, events and develop-
ments 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 materially from  
the forward-looking information in this 2011 
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 2011 Annual Report is readily available  
in the Company’s Annual Report on Form 10-K 
for the fiscal year ended September 30, 2011, 
which is filed with the Securities and  
Exchange Commission.  

Comparison of 5-Year Cumulative Total Return*
Among The Scotts Miracle-Gro Company, The Russell 2000 Index and The S&P Household Products Index 

The Scotts Miracle-Gro Company 

Russell 2000 

S&P Household Products Index

$160

$140 

$120 

$100 

$80 

$60

$40

$20

$0

9/06 

9/07 

9/08 

9/09 

9/10  

9/11  

*$100 invested on 9/30/06 in stock or index, including  
  reinvestment of dividends. Fiscal year ending September 30. 

leadership TEAM

Jim Hagedorn
Chief Executive Officer and  
Chairman of the Board

Vince Brockman
Executive Vice President,
General Counsel, Corporate Secretary 
and Chief Ethics & Compliance Officer 

Chris Allen
Regional President, 
Southeast

Mike Carbonara
Regional President, 
North

Randy Coleman
Senior Vice President, 
Consumer Finance

Jeff Garascia
Global Strategy Leader

Michel Gasnier
Regional President, 
International

Scott Hendrick
Senior Vice President,  
Chief Technical Officer 
and Chief Information Officer

Barry Sanders
President

Jim Lyski
Executive Vice President,
Chief Marketing Officer

Phil Jones
Regional President, 
West

Jim King
Senior Vice President, 
Investor Relations and 
Corporate Affairs

Peter Korda
Senior Vice President, 
Scotts LawnService

Brian Kura
President, 
Business Development Teams

Mike Lukemire
President,
U.S. Consumer Regions

Dave Evans
Chief Financial Officer and
Executive Vice President, Strategy
and Business Development

Denise Stump
Executive Vice President,  
Global Human Resources

Rich Shank, Ph.D.
Senior Vice President,  
Regulatory & Governmental Affairs
Chief Environmental Officer

Pete Supron
Strategy Principal

Dave Swihart
Senior Vice President, 
Global Supply Chain

Jim Tates
Regional President, Southwest

Jan Valentic
Senior Vice President, 
Regional Marketing

Board of Directors

Alan H. Barry
Former President and Chief Operating Officer
Masco Corporation
Manufacturer of products for  
home improvement and construction
Member of Audit Committee and Finance Committee
Board member since 2009

Joseph P. Flannery
President, Chief Executive Officer
and Chairman of the Board
Uniroyal Holding, Inc.
Investment management company
Member of Compensation & Organization Committee and 
Governance & Nominating Committee
Board member since 1987

James Hagedorn
Chief Executive Officer and Chairman of the Board
The Scotts Miracle-Gro Company
Board member since 1995

Adam Hanft
Founder and Chief Executive Officer
Hanft Projects LLC
Strategic consultancy firm
Member of Governance & Nominating Committee and  
Innovation & Technology Committee
Board member since 2010

The Honorable Stephen L. Johnson
Former Administrator  
U.S. Environmental Protection Agency
Member of Governance & Nominating Committee and 
Innovation & Technology Committee 
Board member since 2010 

William G. Jurgensen
Former Chief Executive Officer
Nationwide Mutual Insurance Company &
Nationwide Financial Services, Inc.
Insurance and financial services provider
Member of Audit Committee and Governance &  
Nominating Committee
Board member since 2009

Thomas N. Kelly Jr.
Former Executive Vice President,
Transition Integration 
Sprint Nextel Corporation
Global communications company
Chair of Compensation & Organization Committee
Board member since 2006

Katherine Hagedorn Littlefield
Chair 
Hagedorn Partnership, L.P.
Private investment partnership
Chair of Innovation & Technology Committee;
Member of Finance Committee
Board member since 2000

Nancy G. Mistretta
Retired Partner
Russell Reynolds Associates
Executive search firm 
Chair of Finance Committee;
Member of Audit Committee
Board member since 2007

Stephanie M. Shern
Former Vice Chairman and
Global Director – Retail and Consumer Products
Ernst & Young LLP
Professional Services Provider
Chair of Audit Committee
Board member since 2003

Carl F. Kohrt, Ph.D.
Former President and Chief Executive Officer
Battelle Memorial Institute
International science and technology firm
Lead Independent Director
Member of Compensation & Organization Committee and 
Innovation & Technology Committee
Board member since 2008

John S. Shiely
Retired Chief Executive Officer
and Chairman of the Board
Briggs & Stratton Corporation
Manufacturer of outdoor power equipment
Chair of Governance & Nominating Committee;
Member of Compensation & Organization Committee
Board member since 2007

The Scotts Miracle-Gro Company
(in millions, except per share data)

Net sales 
Cost of sales 
Gross profit 
Operating expenses, net 
Impairment, restructuring and other charges 
Income from operations 
Interest expense 
Income from continuing operations before taxes 
Income tax expense from continuing operations 
Income from continuing operations 
Diluted income per share from  
     continuing operations 

2011 
  $ 2,835.7 
  1,832.7 
 1,003.0 
  686.8 
69.2 
  247.0 
52.2 
194.8 
72.9 
121.9 

  $ 

2010
$ 2,898.0
  1,822.1
  1,075.9
  688.6
24.2
363.1
43.2
319.9
119.4
$  200.5

  $ 

1.84 

$ 

2.97

Adjusted income from continuing operations 
Adjusted diluted income per share  
     from continuing operations 
Adjusted EBITDA 

  $  182.6 

$  218.8

  $  2.76 
  $  393.0 

$ 
3.24
$  440.1

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www.scottsmiraclegro.com

14111 Scottslawn Road
Marysville, Ohio 43041
937.644.0011

The Scotts Miracle-Gro Company
2011 Annual Report