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DEF 14A of Scotts Miracle-Gro Co
Filed Dec 18, 2024 · FY20240001443984-24-000319
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS At the Annual Meeting, four Class III directors will be elected. All four individuals nominated by the Board for election as directors at the Annual Meeting are currently serving as Class III directors — David C. Evans, Adam Hanft, Stephen L. Johnson and Katherine Hagedorn Littlefield. The individuals elected as Class III directors at the Annual Meeting will hold office for a three-year term expiring at the 2028 Annual Meeting and until their respective successors are duly elected and qualified, or until their earlier death, resignation or removal. The individuals designated as proxy holders in the form of proxy intend to vote the Common Shares represented by the proxies received under this solicitation for the Board’s nominees, unless otherwise instructed on the form of proxy or through the telephone or Internet voting procedures. The Board has no reason to believe that any of the nominees will be unable or unwilling to serve as a director of the Company if elected. If any nominee becomes unable to serve or for good cause will not serve as a candidate for election as a director, then the individuals designated as proxy holders reserve full discretion to vote the Common Shares represented by the proxies they hold for the election of the remaining nominees and for the election of any substitute nominee designated by the Board following recommendation by the Governance Committee. The individuals designated as proxy holders cannot vote for more than four nominees for election as Class III directors at the Annual Meeting. The following information, as of December 13, 2024, with respect to the age, principal occupation or employment, other affiliations and business experience of each continuing director or nominee for election as a director, has been furnished to the Company by each such director or nominee.
Class II — Terms to Expire at the 2027 Annual Meeting
| | Peter E. Shumlin, age 68, Director of the Company since 2017 and Lead Independent Director since November 2023 | | | | | Mr. Shumlin is a director at Putney Student Travel which provides educational summer programs for students around the globe. He is also a principal in numerous real estate partnerships specializing in commercial and residential properties. Mr. Shumlin served three terms as the 81st Governor of the State of Vermont, having held office from 2011 to 2017. Prior to serving as Governor, he served two terms in the Vermont House of Representatives and 14 non-consecutive years in the Vermont Senate, serving on the Rules Committee, the Finance Committee, the Transportation Committee, the Appropriations Committee and as Senate President Pro Tempore. Mr. Shumlin’s lengthy public service career provides in-depth knowledge of government, public policy, legal, finance, governance and leadership matters. We believe his unique experience and skill set make him a valuable asset to the Board. Committee Memberships: Compensation; Governance |
NON-EMPLOYEE DIRECTOR COMPENSATION
NON-EMPLOYEE DIRECTOR COMPENSATION This Non-Employee Director Compensation section provides our shareholders with an overview of our board compensation structure and key factors that are considered when determining the structure of our plan. For the 2024 fiscal year, the Company continued its emphasis on preserving its cash to accelerate the paydown of debt to reduce our leverage ratio and maintain compliance with the financial covenants under our credit facility.
NON-EMPLOYEE DIRECTOR COMPENSATION
| The discussion of our non-employee director compensation for the 2024 fiscal year will convey that: •The Board Retainer Returned to a Mix of Cash and Equity Based Compensation for 2024 Calendar Year — For the 2023 calendar year the Company automatically converted the annual cash retainer historically paid to non-employee directors to restricted stock units to preserve its cash. For the 2024 calendar year, the Company returned to its historic mix of cash and equity-based compensation, but provided an inducement for the non-employee directors to elect to defer all of their cash compensation for the 2024 calendar year as further explained below. •Director Compensation Table Reporting — As a result of the automatic conversion of the normal cash retainer to restricted stock units for the 2023 calendar year, the amounts set forth in our director compensation table for the 2024 fiscal year reflect less than a full year’s compensation for certain non-employee directors, as further explained below. |
Benchmarking Non-Employee Director Compensation
Benchmarking Non-Employee Director Compensation The Board believes that non-employee director compensation should be competitive with similarly situated companies and encourage high levels of ownership of Common Shares. To ensure that non-employee director compensation remains competitive, the Board periodically engages an independent outside consultant to conduct a benchmark study. The benchmark study used to establish the overall compensation level for our non-employee directors for the 2022 through 2024 calendar years was conducted by ClearBridge Compensation Group LLC in 2021, which compared each element of non-employee director compensation against the then-current peer group used to benchmark NEO compensation (the “2021 Compensation Peer Group”). Our non-employee director compensation has remained relatively static over that time frame, notwithstanding a temporary change in the 2023 calendar year to convert the annual cash retainer to restricted stock units (“RSUs”), before reverting back to a mix of cash and RSUs for the 2024 calendar year. The current overall compensation for our non-employee directors compares at approximately the 75th percentile of the 2021 Compensation Peer Group, excluding the Lead Independent Director. During the 2024 calendar year, a new benchmark study of our non-employee director compensation was conducted by FW Cook (the “2024 Benchmark Study”), which compared each element of non-employee director compensation against the current peer group used to benchmark NEO compensation (the “2024 Compensation Peer Group”). While the 2024 Benchmark Study was undertaken for the purpose of establishing our non-employee director compensation structure for the 2025 calendar year and future years, the results of the 2024 Benchmark Study showed that the current overall compensation for our non-employee directors is above the 75th percentile of the 2024 Compensation Peer Group, excluding the Lead Independent Director. As such, the Company does not anticipate changes to the non-employee director compensation structure for the 2025 calendar year. For further discussion of the compensation peer group, see the section of this Proxy Statement captioned “Our Compensation Practices — Compensation Peer Group” within the Compensation Discussion and Analysis. Although the Board establishes the non-employee director compensation on a calendar year basis, director compensation amounts are presented on a fiscal year basis in this Proxy Statement, except as otherwise specifically provided.
Non-Employee Director Compensation Structure for 2024
Non-Employee Director Compensation Structure for 2024 The annual Board retainer paid by the Company to the non-employee directors for the 2024 calendar year consisted of a mix of quarterly cash retainer payments and an annual grant of RSUs. The Company does not provide additional compensation for serving as a committee chair, serving as a committee member, or attending Board or committee meetings. The Lead Independent Director receives additional RSUs for serving in that role, as reflected in the table below. The 2024 calendar year compensation structure for non-employee directors breaks down as follows:
Non-Employee Director Compensation Structure for 2024
| | Pay Elements | | Amount | | Annual Board Retainer: (all non-employee directors) | | Cash Retainer ($28,750 per quarter) | $115,000 | | | | RSUs (annual) | $210,000 | | | | Committee Chair/Membership Fees | N/A | | Lead Independent Director: (supplemental compensation) | | Additional RSUs (annual) | $50,000 |
Non-Employee Director Compensation Structure for 2024
To better leverage the collective skills and experience of the Company’s non-employee directors, the Company expects each non-employee director to dedicate significant time beyond Board and committee meetings to Board service. In addition to participating at Board and committee meetings, the Company expects the non-employee directors to spend several days each year “in the field” immersing themselves in the Company’s business to gain additional insights and perspective regarding the Company’s operations, partners, customers and consumers. When determining the structure and overall magnitude of compensation for the non-employee directors, the Board considers the number of Board and committee meetings that are typically held each year, as well as the additional days the Company expects the non-employee directors to immerse in the business. Over the past several years, the engagement of each of our non-employee directors has remained high as our business has continued to face operational and financial challenges, and evolve in complexity. The Company believes its director compensation structure reflects the additional responsibilities that the Company expects each non-employee director to assume, facilitates the rotation of directors among the various Board committees and ensures that the Company continues to provide a competitive level of compensation to its non-employee directors. Given these factors, the Board concluded that the compensation levels for the 2024 calendar year are competitive and appropriately aligned with the time commitment required for service on our Board. In addition to the cash and equity-based compensation elements, non-employee directors also receive reimbursement of all reasonable travel and other expenses for attending Board meetings, Board committee meetings or other Company-related functions. As circumstances permit, we also allow family members to accompany directors on business-related flights on the corporate aircraft. There is no incremental cost to the Company for such allowances.
Aligning Non-Employee Director Compensation and Shareholder Interests
Aligning Non-Employee Director Compensation and Shareholder Interests Our non-employee director compensation program contains several design elements intended to strengthen the alignment between the interests of our non-employee directors and our shareholders:
Aligning Non-Employee Director Compensation and Shareholder Interests
| Design Element | How it Aligns to Shareholder Interests | | •Approximately 2/3 of annual compensation is equity-based | •Significant portion of director pay is directly linked to long-term share price performance | | •Deferred settlement of equity-based compensation | •Mandatory two-year holding period after vesting aligns our directors with a long-term view | | •Mandatory share-based dividend equivalents on equity awards granted to directors | •Dividend equivalents automatically convert to additional shares rather than paid in cash | | •Robust stock ownership guidelines (5x cash retainer) | •Directors must retain 50% of each equity grant until the stock ownership guidelines have been met to ensure that our directors maintain a significant investment in the Company |
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table The following table sets forth the compensation awarded to, or earned by, each of the non-employee directors of the Company during the 2024 fiscal year. Please note that with the exception of Mr. Kingdon, the following table reflects less than a full year’s compensation for Board members who served the entire 2024 fiscal year. For those non-employee directors that served the entire 2024 fiscal year, the table shows: (1) no cash compensation received in the first quarter of the 2024 fiscal year (the last quarter of 2023 calendar year) due to the fact that the 2023 calendar year non-employee director compensation structure delivered all of the non-employee director compensation in the form of RSUs; and (2) the cash compensation amount attributable to the 2024 calendar year non-employee director compensation structure payable for the first three quarters of the 2024 calendar year from January 1, 2024 to September 30, 2024. The 2024 calendar year board compensation structure is discussed in more detail in the section captioned “Non-Employee Director Compensation Structure for 2024.” Since Mr. Kingdon joined the Board halfway through the 2023 calendar year, his calendar 2023 cash retainer was not converted to RSUs. As a result, the table reflects a full year of cash retainer for Mr. Kingdon. Lastly, the table reflects that Ms. Littlefield decided to voluntarily forego all of her compensation for the 2023 and 2024 calendar years. Mr. J. Hagedorn did not receive any additional compensation for his services as a director or as Chairman of the Board. Accordingly, Mr. J. Hagedorn’s compensation is reported in the section captioned “EXECUTIVE COMPENSATION” and is not included in the table below.
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Total ($) | | Edith Avilés | 86,250 | 210,012 | 296,262 | | David C. Evans | 86,250 | 210,012 | 296,262 | | Adam Hanft | 86,250 | 210,012 | 296,262 | | Stephen L. Johnson | 86,250 | 223,004 | 309,254 | | Thomas N. Kelly Jr. | 86,250 | 210,012 | 296,262 | | Mark D. Kingdon | 115,000 | 210,012 | 325,012 | | Katherine Hagedorn Littlefield | — | —(4) | — | | Nancy G. Mistretta | —(5) | —(5) | — | | Brian E. Sandoval | 86,250 | 223,004 | 309,254 | | Peter E. Shumlin | 86,250 | 273,038(6) | 359,288 | | John R. Vines | 86,250 | 210,012 | 296,262 |
Non-Employee Director Compensation Table
(1) Reflects the cash-based retainer earned for services rendered during the 2024 fiscal year, paid at a rate of $28,750 per quarter for the period from January 1, 2024 to September 30, 2024. With respect to Mr. Johnson, Mr. Shumlin and Mr. Sandoval’s elections to defer 100% of their cash-based retainer for the 2024 calendar year, the amount reported reflects cash fees (prior to applying the incremental enhancement for their deferral elections), from January 1, 2024, through September 30, 2024 that were deferred and awarded in the form of fully vested DSUs on February 9, 2024, April 1, 2024 and July 1, 2024. With respect to Mr. Kingdon, the amount reflects the cash-based retainer earned for services rendered during the 2024 fiscal year, paid at a rate of $28,750 per quarter for the period from October 1, 2023 to September 30, 2024. Mr. Kingdon’s board service began on July 13, 2023 and the Board chose to pay Mr. Kingdon a cash-based retainer for the remainder of the 2023 calendar year rather than convert the cash retainer to RSUs. (2) Reflects the aggregate grant date fair value of RSUs granted during the 2024 fiscal year. The grant date fair value of each RSU was determined using the value of the underlying Common Shares on the applicable date of grant and was calculated in accordance with the equity compensation accounting provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation (“FASB ASC Topic 718”), without respect to forfeiture assumptions. With respect to Mr. Johnson, Mr. Shumlin and Mr. Sandoval, amount includes the incremental grant date fair value of the 15% enhancement that was applied to the deferred quarterly cash retainer amount and awarded in the form of fully vested DSUs on February 9, 2024, April 1, 2024 and July 1, 2024. (3) The aggregate number of Common Shares subject to RSUs and related dividend equivalents (including both vested and unvested) and vested DSUs and related dividend equivalents outstanding as of September 30, 2024 was as follows:
Non-Employee Director Compensation Table
| Name | Aggregate Number of Common Shares Subject to Stock Awards Outstanding as of September 30, 2024 | | Edith Avilés | 6,619 | | David C. Evans | 8,383 | | Adam Hanft | 8,383 | | Stephen L. Johnson | 9,990 | | Thomas N. Kelly Jr. | 8,383 | | Mark D. Kingdon | 5,454 | | Katherine Hagedorn Littlefield | 1,764 | | Nancy G. Mistretta | — | | Brian E. Sandoval | 11,227 | | Peter E. Shumlin | 14,018 | | John R. Vines | 9,328 |
Non-Employee Director Compensation Table
(4) Ms. Littlefield decided to voluntarily forgo her non-employee director retainer for the 2023 and 2024 calendar years. (5) Ms. Mistretta did not receive any cash-based retainer or Stock Awards during the 2024 fiscal year as her service on the board ended on January 30, 2024. (6) Reflects an additional grant of $50,000 in RSUs for Mr. Shumlin’s service as the Company’s Lead Independent Director for the 2024 calendar year.
COMPENSATION DISCUSSION AND ANALYSIS
| This CD&A will convey that: •Our executive compensation structure aligns with and supports our business goals and initiatives. The Company continued its priority focus on several enterprise-wide initiatives during the 2024 fiscal year to maximize earnings and cash flow available to pay down debt, with a goal of accelerating the improvement in our leverage ratio under our credit facility . . . and we delivered on these goals. We designed our compensation programs for the 2024 fiscal year to support these initiatives. •The design of our executive compensation practices reflects our strong pay-for-performance philosophy. In fact, our CEO and other NEOs receive about 75% of their target compensation opportunity in variable pay. Long-term incentives are allocated approximately 50% to performance-based shares and 50% to stock options. The incentive payouts received by our NEOs for the 2024 fiscal year, determined pursuant to the Executive Incentive Plan, reflect our financial accomplishments. •We have returned to a three-year performance period for long-term performance unit awards, which represent approximately 50% of the 2024 annual long-term incentive values and are based on achievement of leverage ratio improvements and relative total shareholder return. |
Executive Summary
Executive Summary The Company believes its compensation practices and overall level of executive compensation are competitive when compared with our Compensation Peer Group and reflect fair pay relative to the Company’s financial performance. Our compensation programs align our NEOs’ interests with those of our shareholders by rewarding performance that meets or exceeds the targets the Compensation Committee establishes with the objective of increasing shareholder value. We also recognize that the leadership qualities demonstrated by our NEOs drive business performance and should be rewarded along with financial results. Finally, the Compensation Committee strives to ensure that our executive compensation levels are competitive with similar companies. In short, we pay for performance: our NEOs receive higher incentive payouts when financial targets and leadership objectives are met or exceeded, and lower incentive payouts, or none at all, when financial targets and leadership objectives are not met. For the 2024 fiscal year, the Company continued its priority focus from the 2023 fiscal year of maximizing earnings and cash flow available to pay down debt. This priority focus influenced the design of our compensation programs for the 2024 fiscal year. Due to the Company’s strengthening financial condition, we were able to reverse some of the temporary design measures implemented last year and to return to our historical practices, as explained in this CD&A. The Company made significant progress to maximize earnings and cash flow available to pay down debt during the 2024 fiscal year. Our non-GAAP adjusted earnings, as defined below, improved by over 12% versus the prior year, we exceeded our stated goal of delivering in excess of $1.0 billion in free cash flow between the 2023 and 2024 fiscal years, and we improved our leverage ratio under our credit facility to 4.86x at the end of the 2024 fiscal year versus 6.57x at the end of the 2023 fiscal year. The incentive payouts received by our NEOs for the 2024 fiscal year reflect these accomplishments. The Company believes that the structure of its executive compensation program for the 2024 fiscal year helped the Company continue its momentum to improve our financial strength for the 2024 fiscal year and in the coming years. It is important for our shareholders and other key stakeholders to consider the financial covenant pressures the Company faced, the appropriateness of the Company’s response, and how the Company emerged from the 2024 fiscal year in a position of greater financial stability when evaluating our executive compensation program for the 2024 fiscal year. We believe our compensation approach was responsible, appropriate and in the best interests of our shareholders. PROPOSAL NUMBER 2 — ADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY”),” on page 71 of this Proxy Statement, provides shareholders an opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our NEOs as set forth in this Proxy Statement, a so-called “Say-on-Pay” vote. At our 2024 Annual Meeting of Shareholders held on January 22, 2024, approximately 95% of the votes cast by our shareholders were in favor of our “Say-on-Pay” vote. Accordingly, the Compensation Committee believes that shareholders support our approach to executive compensation. None of the changes to our compensation structure in the 2024 fiscal year were attributable to the “Say-on-Pay” vote, but instead are part of our continuous efforts to evaluate and improve our compensation programs or were in response to our priority focus on maximizing earnings and cash flow to pay down debt as noted above, or both. We are Returning to our Historical Compensation Practices while Continuing to Adapt our Compensation Program to Support the Stabilization of our Business Certain elements of our executive compensation program for the 2024 fiscal year deviate from our historical practices. However, these are temporary adjustments that we believe were necessary, appropriate and instrumental in helping the Company to deliver on its priority focus of maximizing earnings and cash flow to pay down debt. In short, we believe these temporary measures were in the best interests of our shareholders. The primary adjustments that the Compensation Committee made to the elements of our executive compensation program for the 2024 fiscal year are identified below and explained in more detail in this CD&A. Shareholders should note that some of these adjustments are not part of the compensation program approved by the Compensation Committee for the 2025 fiscal year; we intend to return to our historical practices but preserve flexibility in our programs until we are assured that we have returned to a normal state of operations. •We Returned to a Three-Year Performance Period for Long-Term Performance Unit Awards. The performance units granted to our NEOs during the 2024 fiscal year (the “2024 Performance Unit Awards”), reflect a deliberate return to our historical approach of using a three-year performance period for our performance-based long-term incentive awards. This is a change from the 2023 fiscal year, when our NEOs received a Long-Term Incentive grant that was subject to a one-year performance period and a three-year service-based vesting requirement. For additional details on the 2024 Performance Unit Awards, see the section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element).” •We Continued to Convert Certain Cash Compensation to Equity. To maximize earnings and cash flow available to pay down debt, the Compensation Committee continued the measure implemented during the 2023 fiscal year to convert the annual cash-based target incentive opportunity for approximately 180 of our highest paid associates, including our NEOs, to equity in the form of a restricted stock unit award (the “FY24 Equity Incentive Grant”). However, to better correlate the reported pay for our NEOs to actual incentive payout achieved for the 2024 fiscal year, the restricted stock unit grant was made after the final incentive amount was determined for the 2024 fiscal year. For additional details on the FY24 Equity Incentive Grant, see the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element).” •We Continued our Recent Practice of Pulling Forward the Timing of Annual Non-Qualified Stock Option Grants for the 2024 Fiscal Year to Help with Retention. For the 2024 fiscal year, to further promote retention and leadership continuity, the Compensation Committee continued a temporary measure from last year’s compensation program by pulling forward approximately 50% of the 2024 target long-term incentive value for the NEOs, as well as approximately 40 key management employees, that would normally be granted in February 2024 to November 2023 (the “Pull Forward LTI Value”). The Pull Forward LTI Value was granted in the form of non-qualified stock option grants (“NSOs”). For additional details on the Pull Forward LTI Value, see the section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element).”
Executive Compensation Reflects Financial Performance and Fair Target Setting
Executive Compensation Reflects Financial Performance and Fair Target Setting The pre-defined performance goals for the 2024 fiscal year were established by the Compensation Committee to reflect the Company’s optimism coming into the year regarding the potential for meaningful unit growth, including in our most profitable fertilizer and grass seed categories. Based on these factors, the Compensation Committee set what it believed to be reasonable goals for the threshold and target levels of performance and, consistent with past practice, set aggressive goals for the maximum performance level by requiring a 44% growth in earnings over the prior year incentive plan result. Consistent with our executive compensation program design and pay-for-performance philosophy, our compensation program results* for the 2024 fiscal year reflect the Company’s achievement within the range of its predefined financial goals. The Company achieved over 12% growth in Non-GAAP Adjusted EBITDA (defined below) and $582.4 million in Non-GAAP free cash flow (defined below) for the 2024 fiscal year (an increase of almost 33% over prior year). In hindsight, the Compensation Committee believes that the pre-defined performance goals for the 2024 fiscal year were too aggressive because the Company delivered strong year-over-year financial results by historical standards but the program did not deliver a level of payout commensurate with the Company’s achievements. Nonetheless, our NEOs received incentive payouts for the 2024 fiscal year approximating target, which were determined within the structure of the incentive plan. For additional details, see the section captioned, “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element).” ________________________ * Plan results are derived from financial measures that are not calculated in accordance with the U.S. generally accepted accounting principles (“GAAP”). A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures are presented herein. There may be differences between the Company’s reported financial results and the amounts used for purposes of calculating incentive payments under the annual incentive compensation program since the calculations reflect currency translation based on budgeted, rather than actual, exchange rates and other adjustments the Compensation Committee may make based on individual facts and circumstances.
Compensation Design Reflects Key Market Practices
Compensation Design Reflects Key Market Practices We believe our compensation design and practices align our executive compensation with our shareholders’ interests and generally reflect current market practices, including: •Performance-Based Pay: Performance should be the primary driver of compensation decisions. Consistent with this philosophy, an average of approximately 75% of the annual total direct compensation opportunity at target for our NEOs is delivered in the form of variable pay tied to financial and/or share price performance. •No Employment Agreements: The Company does not maintain employment agreements with any of the NEOs. Severance benefits for our CEO are provided under a separate severance agreement, and severance benefits for all other NEOs are generally provided under an executive severance plan. The Company has entered into arbitration agreements with our NEOs and other associates as a means to address certain potential employment issues that may arise. •Limited Executive Perquisites: The Company does not offer cash-based executive perquisites, such as car allowances and financial planning services. •Double-Trigger Change in Control Provisions: Our plans include “double-trigger” change in control provisions for equity-based awards that are assumed or substituted in a change in control transaction or that continue in effect after the transaction if there is an involuntary termination of employment within 24 months after a change in control. We believe that a double-trigger provision is appropriate because it provides protection for our impacted executives while protecting the interests of shareholders. •Clawback Provisions: The Company maintains a Dodd-Frank-compliant executive compensation clawback policy requiring the Company to recover any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure in the event of a required accounting restatement due to material non-compliance with any applicable financial reporting requirement. In addition, all of our equity-based awards and annual incentive awards include provisions that go beyond the statutory Dodd-Frank requirements that are designed to recoup such awards if the recipient of the award violates post-employment covenants or obligations to the Company, or otherwise engages in certain conduct that is detrimental to the Company. •Stock Ownership Guidelines: We require our NEOs to meet stock ownership guidelines. Our stock ownership guidelines are designed to align the interests of each NEO with the long-term interests of the shareholders by ensuring that a material amount of each NEO’s accumulated wealth is maintained in the form of Common Shares. The ownership guidelines, which are competitive with the guidelines maintained by our Compensation Peer Group, are: 10 times base salary for the CEO and 3 times base salary for all other NEOs. •No Repricing or Backdating: We do not reprice underwater stock options or backdate options. •No Excess Benefit Retirement Plan: Our excess benefit plan was frozen effective December 31, 1997 and the only NEO who was enrolled in this plan before it was frozen is our CEO. •Independent Consultants: Our Compensation Committee engages independent consultants to advise with respect to executive compensation levels and practices. The consultants provide no services to management and had no prior relationship with any of our NEOs. •Anti-Hedging Policy: Our Insider Trading Policy prohibits all Company employees, including our NEOs, and members of the Board, from engaging in certain hedging transactions relating to Company securities held by them, including short sales, the purchase of puts, calls or listed options and hedging transactions such as prepaid variable forwards, equity swaps, caps, collars and exchange funds.
Our Compensation Philosophy and Objectives
Our Compensation Philosophy and Objectives Philosophy: Our executive compensation philosophy is based on the following principles: •Our executives’ interests should align with the long-term interests of our shareholders; •Performance should be the primary driver of compensation decisions; •Place greater emphasis on variable pay versus fixed pay; and •Each NEO is benchmarked within a reasonable range of the median of our Compensation Peer Group (the “Competitive Market Range”). While we view the Competitive Market Range as a guide for positioning total compensation levels for our NEOs, our NEOs’ current and historic job performance, unique knowledge of the Company and our business, organizational impact and expected contribution to future success ultimately drive our compensation decisions. Objectives: The culture of our Company is based on a strong bias for action aimed at delivering sustainable results and driving value to our shareholders. Our compensation programs are structured to promote accountability and to promote our business objectives and shareholder alignment by: •Attracting, retaining and motivating high-caliber leadership; •Linking compensation to Company, functional and individual achievements; •Emphasizing pay-for-performance to motivate both short-term and long-term performance for the benefit of shareholders; and •Providing the opportunity for meaningful wealth accumulation over time, tied directly to shareholder value creation. Setting Pay Levels and Pay Mix: The Compensation Committee exercises its discretion to position individual pay levels and pay mix (i.e., how much of the pay opportunity is allocated among base salary, target incentive opportunity and long-term value) relative to the Competitive Market Range based on a subjective assessment of individual facts and circumstances, including: •The relative degree of organizational impact and strategic importance of the role (what we refer to as “role-based pay”); •The executive’s capability, experience, skill level and overall contribution to the success of our business; and •The overall level of personal performance, both historic and current, and the potential to make significant contributions to the Company in the future.
Base Salary (short-term compensation element)
Base Salary (short-term compensation element) Base salary is the primary fixed element of total compensation and serves as the foundation of the total compensation structure, since most of the variable compensation elements are linked directly or indirectly to the base salary level. Base salaries of the NEOs are reviewed on an annual basis. The Compensation Committee exercises its discretion to position individual base salary levels for the NEOs relative to the Competitive Market Range based on a subjective assessment of organizational and individual qualities and characteristics, including the strategic importance of the individual’s job function to the Company, as well as an NEO’s capability, experience, skill level, overall contribution to the success of our business and the potential of the individual to make significant contributions to the Company in the future. While Mr. J. Hagedorn elected to voluntarily forgo approximately 40% of his annual base salary and his Company-paid deferred compensation contributions during the 2023 fiscal year to help the Company maximize earnings and cash flow available to pay down debt, his full salary and deferred compensation was restored for the 2024 fiscal year.
Annual Cash Incentive Compensation (short-term compensation element)
Annual Cash Incentive Compensation (short-term compensation element)
Annual Cash Incentive Compensation (short-term compensation element)
| The Scotts Company LLC Executive Incentive Plan (“EIP”) for the 2024 fiscal year includes, among other things, the following key structural elements: •Designed around earnings and cash flow, the key drivers of shareholder value creation and leverage ratio improvement; •To maximize cash flow available to accelerate the paydown of debt, we converted cash incentive payout opportunity under the EIP to equity, similar to the 2023 fiscal year, and added a modest enhancement to the earned payout amount for converting the cash payout to equity; •Based on the applicable reporting rules, the final earned annual incentive amount for the NEOs is reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table for 2024 Fiscal Year; and •Consistent with our pay-for-performance philosophy, our NEOs achieved incentive payouts for the 2024 fiscal year commensurate with our financial performance that were determined within the structure of the incentive plan. |
Annual Cash Incentive Compensation (short-term compensation element)
The EIP provides annual cash incentive compensation opportunities for our NEOs and other key management employees. For the 2024 fiscal year, the Compensation Committee selected Non-GAAP Adjusted EBITDA and Non-GAAP Free Cash Flow as the financial measures for the enterprise plan (see below), because we believe these performance measures drive shareholder value. But more importantly, these metrics were aligned with the components of the Company’s leverage ratio calculation prescribed by our credit facility, which was at the center of the Company’s key financial goals for the year, as explained in more detail above. Beyond the components selected for determining the payout under the EIP, the Compensation Committee may adjust an NEO’s payout, in its discretion, based on individual facts and circumstances. EIP Business Performance Factors (Enterprise Plan): Payouts based on the Business Performance Factors range from 0% to 250% of the incentive target set by the Compensation Committee. For the 2024 fiscal year, the incentive awards for all of the NEOs other than Mr. C. Hagedorn, whose incentive plan structure is explained below, were based on a combination of Non-GAAP Adjusted EBITDA (75% weighting) and Non-GAAP Free Cash Flow (25% weighting), calculated at the consolidated Company level, as follows: •Non-GAAP Adjusted EBITDA as set forth in our credit facility — This measure is calculated as net income (loss) before interest, taxes, depreciation and amortization as well as certain other items, such as non-recurring or non-cash items affecting net income (loss). This calculation is intended to be consistent with the calculation of that measure as required by the Company's borrowing arrangements. •Non-GAAP Free Cash Flow — This measure is calculated as net cash provided by operating activities minus investments in property, plant and equipment and further adjusted to exclude discontinued operations, certain impairment, restructuring and other one-time charges, subject to further plus or minus adjustments at the discretion of the Compensation Committee based on the facts and circumstances. The Compensation Committee establishes challenging and demanding performance goals for the Business Performance Factors, while responsibly balancing the known risks associated with anticipated business conditions or customer changes. As reflected in the table below: •A threshold payout of 50% of target could be achieved at a Non-GAAP Adjusted EBITDA level of $525.0 million that roughly correlates to the full-year earnings level required to ensure compliance with the leverage ratio requirements under the Company’s credit facility and reflects 8.2% growth in Non-GAAP Adjusted EBITDA (as defined above) over the prior year. The Non-GAAP Free Cash Flow performance goal of $565.0 million reflects the minimum cash flow generation required to achieve the Company’s stated goal of delivering in excess of $1.0 billion in Non-GAAP Free Cash Flow over the 2023 and 2024 fiscal years. •A target payout of 100% of target could be achieved at a Non-GAAP Adjusted EBITDA level of $575.0 million, which reflects 18.5% growth in Non-GAAP Adjusted EBITDA (as defined above) over the prior year, and approximates the midpoint between the level of earnings necessary to maintain compliance with the Company’s credit facility and the Company’s internal operating plan for the 2024 fiscal year. The Non-GAAP Free Cash Flow goal of $600.0 million reflects an increase of $161.8 million versus the prior year. •A maximum payout of 250% of target could be achieved at a Non-GAAP Adjusted EBITDA level of $700.0 million, which reflects 44% growth in Non-GAAP Adjusted EBITDA (as defined above) over the prior year. The Non-GAAP Free Cash Flow goal of $765.0 million reflects an increase of $326.8 million vs. the prior year. The Compensation Committee set the maximum performance goals at levels that it believed to be achievable under optimal business conditions with superior leadership and execution across all levels of the enterprise. The consolidated Company-level performance goals for the EIP Business Performance Factors for the Enterprise Plan and actual performance results for the 2024 fiscal year (with dollars in millions) were:
Annual Cash Incentive Compensation (short-term compensation element)
| | Metric Weighting | Payout Level (in millions) | | | | | | Performance Results* | Weighted Payout % | | Metric | | 50.0% | 100.0% | 150.0% | | 200.0% | 250.0% | | | | Non-GAAP Adjusted EBITDA | 75% | $525.0 | $575.0 | | 600.0 | $650.0 | $700.0 | $544.1 | 69.1% | | Non-GAAP Free Cash Flow | 25% | $565.0 | $600.0 | | 635.0 | $700.0 | $765.0 | $582.4 | 74.9% | | Total | | | | | | | | | 70.5% |
Annual Cash Incentive Compensation (short-term compensation element)
________________________ * The Compensation Committee believes that the performance metrics should not be influenced by currency fluctuations and, therefore, where applicable, the EIP metrics reflect currency translation based on budgeted exchange rates, which is in contrast to actual exchange rates employed for currency conversions used for GAAP reporting. In addition, the Compensation Committee exercises its discretion to adjust the amounts used for purposes of calculating incentive payouts under the EIP based on individual facts and circumstances. As a result, there could be a difference between the Company’s reported financial results and the amounts shown in this Proxy Statement. Reconciliations of Non-GAAP Adjusted EBITDA and Non-GAAP Free Cash Flow to the most directly comparable GAAP measures are presented in the following tables:
Annual Cash Incentive Compensation (short-term compensation element)
| | Year ended September 30, 2024 (in millions) | | Net loss (GAAP) | $(34.9) | | Income tax expense | 11.3 | | Interest expense | 158.8 | | Depreciation | 64.9 | | Amortization | 15.7 | | Impairment, restructuring and other charges | 146.3 | | Equity in loss of unconsolidated affiliates | 68.1 | | Interest income | (0.5) | | Share-based compensation expense | 80.4 | | Other | 34.0 | | Adjusted EBITDA (Non-GAAP) (as defined above) | $544.1 |
Annual Cash Incentive Compensation (short-term compensation element)
| | Year ended September 30, 2024 | | Net cash provided by operating activities (GAAP) | $667.5 | | Investments in property, plant and equipment | (84.0) | | Other | $(1.1) | | Free Cash Flow (Non-GAAP) | $582.4 |
Annual Cash Incentive Compensation (short-term compensation element)
EIP Business Performance Factors (Hawthorne Plan): Payouts based on the Business Performance Factors range from 0% to 250% of the incentive target set by the Compensation Committee. For the 2024 fiscal year, the incentive award for Mr. C. Hagedorn was based on a combination of Hawthorne Non-GAAP Adjusted EBITDA (50% weighting), Enterprise Non-GAAP Adjusted EBITDA (37.5% weighting), and Enterprise Non-GAAP Free Cash Flow (12.5% weighting), calculated as follows: •Hawthorne Non-GAAP Adjusted EBITDA — This measure is calculated as net income (loss) before interest, taxes, depreciation and amortization as well as certain other items, such as non-recurring or non-cash items affecting net income (loss). •Enterprise Non-GAAP Adjusted EBITDA (as set forth in our credit facility) — same as the Non-GAAP Adjusted EBITDA measurement defined above for the Enterprise Plan. •Enterprise Non-GAAP Free Cash Flow — same as the Non-GAAP Adjusted EBITDA measurement defined above for the Enterprise Plan. The Compensation Committee establishes challenging and demanding performance goals for the Hawthorne Business Performance Factors, while responsibly balancing the known risks associated with anticipated business conditions or customer changes. As reflected in the table below: •A threshold payout of 50% of target could be achieved at a Hawthorne Non-GAAP Adjusted EBITDA level of $5.0 million that roughly correlates to the level of Hawthorne earnings that were contemplated to maintain compliance with the leverage ratio requirements under the Company’s credit facility. This level of performance reflects a $46.0 million improvement over the prior year. •A target payout of 100% of target could be achieved at a Hawthorne Non-GAAP Adjusted EBITDA level of $10.0 million, and reflects a $51.0 million improvement over the prior year. •A maximum payout of 250% of target could be achieved at a Hawthorne Non-GAAP Adjusted EBITDA level of $32.5 million and reflects a $73.5 million improvement over the prior year. The Compensation Committee set the maximum performance goals at levels that it believed to be achievable under optimal business conditions with superior leadership and execution across the Hawthorne segment. The performance goals for the EIP Business Performance Factors for the Hawthorne Plan and actual performance results for the 2024 fiscal year (with dollars in millions) were:
Annual Cash Incentive Compensation (short-term compensation element)
| | Metric Weighting | Payout Level (in millions) | | | | | | Performance Results* | Weighted Payout % | | Metric | | 50.0% | 100.0% | 150.0% | | 200.0% | 250.0% | | | | Hawthorne Non-GAAP Adjusted EBITDA | 50.0% | $5.0 | $10.0 | | 17.5 | $25.0 | $32.5 | $6.6 | 66.0% | | Non-GAAP Adjusted EBITDA | 37.5% | $525.0 | $575.0 | | 600.0 | $650.0 | $700.0 | $544.1 | 69.1% | | Non-GAAP Free Cash Flow | 12.5% | $565.0 | $600.0 | | 635.0 | $700.0 | $765.0 | $582.4 | 74.9% | | Total | | | | | | | | | 68.3% |
Annual Cash Incentive Compensation (short-term compensation element)
* The Compensation Committee believes that the performance metrics should not be influenced by currency fluctuations and, therefore, where applicable, the EIP metrics reflect currency translation based on budgeted exchange rates, which is in contrast to actual exchange rates employed for currency conversions used for GAAP reporting. In addition, the Compensation Committee exercises its discretion to adjust the amounts used for purposes of calculating incentive payouts under the EIP based on individual facts and circumstances. As a result, there could be a difference between the Company’s reported financial results for the Hawthorne segment and the amounts shown in this Proxy Statement. A reconciliation of Hawthorne Non-GAAP Adjusted EBITDA to Hawthorne Segment Loss is presented in the following table (further details related to Hawthorne Segment Loss are included in Note 20 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2024 fiscal year):
Annual Cash Incentive Compensation (short-term compensation element)
| | Year ended September 30, 2024 (in millions) | | Hawthorne Segment Loss | $(14.2) | | Depreciation | 5.5 | | Other | 15.3 | | Hawthorne Adjusted EBITDA (Non-GAAP) | $6.6 |
Annual Cash Incentive Compensation (short-term compensation element)
Funding Trigger: Payouts under the EIP for all incentive participants, including the NEOs, are subject to the Company remaining in compliance with the quarterly financial covenant requirements under its credit facility. This requirement was met for the 2024 fiscal year. Personal Performance Factor (“PPF”): To ensure we recognize and reward desired behaviors and not just financial results, the EIP includes a discretionary PPF. The PPF is a multiplier on each NEO’s calculated annual cash incentive payout amount and is intended to reward and motivate our top performers by facilitating a meaningful differentiation of payouts based on personal goal achievement and demonstrated leadership and cultural attributes. The Compensation Committee considers financial results along with a qualitative assessment of effective leadership attributes such as team development and embodiment of the Company’s culture, to determine the PPF multiplier for each NEO, which can range from 50% to 150%, in 5% increments. After applying the PPF, an individual participant could receive a total incentive payout that differs from the payout calculated based solely on achievement of the Business Performance Factors under the EIP. Continued Temporary Measure — Converting Cash Incentive Payout Opportunity to Equity for the 2024 Fiscal Year: To maximize earnings and cash flow available to pay down debt, the Compensation Committee continued the measure implemented during the 2023 fiscal year to convert the annual cash-based target incentive opportunity for approximately 180 of our highest paid associates, including our NEOs, to equity in the form of a restricted stock unit award. However, to better correlate the reported pay for our NEOs to actual incentive payout achieved for the 2024 fiscal year, the restricted stock unit grant was made after the final incentive amount was determined for the 2024 fiscal year. This differs from the approach taken during the 2023 fiscal year, in which the grant was made at the beginning of the fiscal year and which distorted the reported compensation for our NEOs in the Summary Compensation Table for 2023 fiscal year since the fair value of the grant was reportable as compensation even though no payout was ultimately achieved and the grant was subsequently cancelled. For the 2024 fiscal year, the impacted associates were eligible to receive, provided that the pre-defined performance criteria were achieved, a fully vested restricted stock unit grant on November 14, 2024 (the “FY24 Equity Incentive Grant”). The FY24 Equity Incentive Grant had a grant date fair value equal to the actual amount of the incentive payout determined for each recipient for the 2024 fiscal year, plus a modest enhancement for converting the cash payout to equity. The FY24 Equity Incentive Grant resulted in the conversion of potential cash compensation expense to equity compensation expense and helped the Company deliver on its goal of freeing up cash to accelerate the paydown of debt and improve our net leverage ratio for purposes of compliance with our credit facility, because equity compensation expense does not impact the credit facility’s prescribed leverage ratio calculation. The conversion, however, required increased share utilization. NEO Incentive Payouts for 2024 Fiscal Year: After considering the financial performance of the Company, which included growth in Non-GAAP Adjusted EBITDA (as defined above) of over 12% versus prior year, the Company exceeding its commitment to deliver in excess of $1.0 billion in free cash flow over the 2023 and 2024 fiscal years, and accelerating the repayment of debt to bring the Company’s leverage ratio down to 4.86x by the end of the 2024 fiscal year, as well as the exemplary leadership demonstrated by our NEOs, the Compensation Committee awarded the following EIP payouts, inclusive of the PPF adjustment, which generally approximates a target level of payout for the 2024 fiscal year:
Annual Cash Incentive Compensation (short-term compensation element)
| NEO | EIP Payout | | Mr. J. Hagedorn | $2,415,000 | | Mr. Garth | $1,365,625 | | Mr. Baxter | $1,365,625 | | Mr. C. Hagedorn | $672,750 | | Mr. Todorov | $570,544 |
Annual Cash Incentive Compensation (short-term compensation element)
These payouts were determined in accordance with the terms of the EIP for the 2024 fiscal year (the “2024 EIP Payouts”). The resulting 2024 EIP Payouts, which are included in the Summary Compensation Table for 2024 Fiscal Year in the Non-Equity Incentive Plan Compensation column, were converted to equity based on the Company’s closing share price of $74.48 on November 14, 2024 (the incentive payout date for the 2024 fiscal year).
Long-Term Equity-Based Incentive Awards (long-term compensation element)
Long-Term Equity-Based Incentive Awards (long-term compensation element)
Long-Term Equity-Based Incentive Awards (long-term compensation element)
| Key points to understand about our long-term equity-based incentive awards for the 2024 fiscal year: •We continue to have a strong performance-based long-term incentive grant mix by allocating approximately 50% of the 2024 target LTI value for our NEOs to three-year performance-based awards and the remaining 50% to non-qualified stock options, which are subject to share price appreciation; •We continued our recent practice of granting non-qualified stock options in November to help with retention; •We maintained our commitment to reverse the one-year performance period incorporated as a temporary measure during the 2023 fiscal year by returning to our historical practice of using a three-year performance period; and •We temporarily increased the 2024 target LTI value for our NEOs, which is subject to the Company’s future financial and share price performance tied to improving our leverage ratio and relative Total Shareholder Return (“TSR”) performance over a three-year performance period, as well as the requirement for the NEOs to satisfy the future service-based vesting requirements. |
Long-Term Equity-Based Incentive Awards (long-term compensation element)
Long-term incentive compensation is an integral part of total compensation for Company executives and directly ties rewards to performance that creates and enhances shareholder value. Consistent with the Company’s performance-based pay philosophy, the Compensation Committee exercises its discretion to establish individual grant values by positioning the target grant value of individual equity-based incentive awards relative to the Competitive Market Range based on a subjective assessment of organizational and individual qualities and characteristics, including the strategic importance of the individual’s job function to the Company, as well as an NEO’s capability, experience, skill level, overall contribution to the success of our business and the potential of the individual to make significant contributions to the Company in the future. Temporary Measure: Temporary Increase to Target Annual LTI Value for the 2024 Fiscal Year: For the 2024 fiscal year, the Compensation Committee temporarily increased the target annual LTI opportunities for our NEOs to recognize executive contributions during an important and volatile business period, to improve retention and equity holdings, and motivate execution of critical business objectives and relative over-performance. Our NEOs will only achieve this greater incentive opportunity if the Company meets or exceeds certain future financial performance metrics over a three-year performance period (as further described below) and realizes a certain level of long-term share price appreciation. Considering the temporary adjustment, the Compensation Committee approved the following target annual LTI opportunities (the “2024 Target Annual LTI Value”) for each NEO reflected in the table below:
Long-Term Equity-Based Incentive Awards (long-term compensation element)
| NEO | 2024 Target Annual LTI Value(1)(2) | | Mr. J. Hagedorn | $9,150,000 | | Mr. Garth | $3,133,000 | | Mr. Baxter | $2,760,000 | | Mr. C. Hagedorn | $1,877,500 | | Mr. Todorov | $1,150,000 |
Long-Term Equity-Based Incentive Awards (long-term compensation element)
Approximately 50% of the 2024 Target Annual LTI Value granted to the NEOs was performance-based and awarded in performance units, with the remainder granted in non-qualified stock options. (1) Reflects the intended grant value used for purposes of determining the number of options or shares attributed to the individual equity grants. Approximately 50% of the 2024 Target Annual LTI Value granted to the NEOs was performance based and awarded in performance units, with the remainder granted in non-qualified stock options. However, for purposes of reporting the resulting grant date fair value in the Summary Compensation Table for 2024 Fiscal Year, the grant date fair value of the underlying options or shares is determined in accordance with the equity compensation accounting provisions of FASB ASC Topic 718, which differs from the 2024 Target Annual LTI Value reported above primarily due to the fact that the grant date fair value of the portion of performance units that contain a market-based performance condition (“TSR” as discussed below) is estimated using a Monte Carlo simulation model for purposes of FASB ASC Topic 718. (2) The 2024 Target Annual LTI Value includes the following temporary adjustments for each of the NEOs: $3,150,000 for Mr. J. Hagedorn, $1,133,000 for Mr. Garth, $760,000 for Mr. Baxter, $877,500 for Mr. C. Hagedorn and $475,000 for Mr. Todorov. 2024 Performance Unit Awards: The 2024 Performance Unit Awards are structured to reward our NEOs for achieving the predefined performance criteria over the three-year period from October 1, 2023, through September 30, 2026 (the “FY24-FY26 Performance Period”). In addition, all performance units (“PUs”) granted to the NEOs in the 2024 fiscal year are subject to three-year, time-based cliff vesting, with a provision for accelerated vesting in the event of retirement, death or disability, provided the Company achieves the pre-defined performance criteria for the FY24-FY26 Performance Period. Each PU granted to the NEOs in the 2024 fiscal year also includes a dividend equivalent right entitling the NEO to receive an amount in cash equal to the dividends declared and paid by the Company during the period beginning on the grant date and ending on the settlement date. The table below describes the initial payout opportunity prior to modifiers; if actual performance is below the minimum performance level for each metric, no PUs will be achieved even if the service-based vesting requirements are ultimately satisfied:
Long-Term Equity-Based Incentive Awards (long-term compensation element)
| | Metric Weighting | Payout Level | | | | Metric | | 50.0% | 100.0% | 200.0% | | Leverage Ratio Improvement* | 50% | 4.5x | 4.0x | 3.5x | | Relative TSR versus Pre-defined Peer Group** | 50% | 25th Percentile | 50th Percentile | 75th Percentile |
Long-Term Equity-Based Incentive Awards (long-term compensation element)
________________________ * Leverage Ratio Improvement — The Company’s credit facility contains an affirmative covenant regarding the Company’s leverage ratio determined as of the end of each of its fiscal quarters calculated as average total indebtedness, divided by the Company’s Non-GAAP Adjusted EBITDA calculated as set forth in the credit facility. For purposes of this performance metric, the actual leverage ratio achievement as of September 30, 2026 will be compared to the performance goals and a result lower than the defined performance goals will result in a payout. ** Relative TSR versus Pre-defined Peer Group — Measures share price appreciation and dividend yield over the FY24-FY26 Performance Period relative to the TSR Benchmark Group, calculated as the 20-day average closing price as of the day prior to the start of the FY24-FY26 Performance Period divided by the 20-day average closing price at the end of the FY24-FY26 Performance Period (with an adjustment to reflect the fair market value of cumulative dividend shares over the FY24-FY26 Performance Period), minus one. The performance goals established by the Compensation Committee, as reflected in the table above, are intended to be challenging and demanding performance goals to achieve. The performance goals established for the Leverage Ratio Improvement metric require the Company to exceed the leverage ratio requirements under its credit facility (where a lower leverage ratio indicates a lower financial risk and vice-versa). The minimum payout equal to 50% of target requires a leverage ratio equal to the minimum goal of 4.5x, which is the minimum result to ensure covenant compliance. The 100% target payout and 200% maximum payout for the Leverage Ratio Improvement metric reflect the Company’s goal of returning its leverage ratio to its historical levels to create more operating flexibility. The performance goals for the Relative TSR metric reflect a range of relative performance (between the 25th and 75th percentile) that the Compensation Committee believes is reflective of prevalent market practice for evaluating TSR and provides a strong incentive for the Company to become a top performer relative to the TSR Benchmark Group below. The 2024 Performance Unit Awards include additional payout modifiers based on certain pre-defined criteria regarding our leverage ratio and TSR that could raise the maximum weighted payout opportunity for the FY24-FY26 Performance Period to 325% of target if significant over-performance is achieved. However, any payouts above 250% of target will be paid in cash. NEOs will receive an additional 10% of target payout, up to a maximum of 50% of target, for each quarter (excluding the last quarter of the 2026 fiscal year) that our leverage ratio is 3.5x or lower. NEOs will receive an additional 4% of target payout, up to a maximum of 100% — which would equate to the 100th percentile performance — for each whole percentile that TSR exceeds the 75th percentile of a pre-defined peer group of companies (the “TSR Benchmark Group,” defined below). Finally, NEOs will receive an additional 50% of target payout if Hawthorne is separated from the Company through a strategic transaction during the FY24-FY26 Performance Period, and the TSR of the separated entity is above the median for a pre-defined group of publicly traded cannabis companies at the end of the Company’s 2026 fiscal year. If the TSR of the separated entity is the top performer relative to this group at the end of the Company’s 2026 fiscal year, NEOs will receive an additional 100% of target payout. TSR Benchmark Group: The TSR Benchmark Group consists of the following companies as of the date of grant:
Long-Term Equity-Based Incentive Awards (long-term compensation element)
| Company Names (C = Compensation Peer Group; F = Financial Peer Group; B = Member of both groups) | | | | Central Garden & Pet Company (B) | Church & Dwight Co., Inc. (B) | The Clorox Company (B) | | Constellation Brands, Inc. (F) | Edgewell Personal Care Company (C) | Energizer Holdings, Inc. (B) | | FMC Corporation (B) | Griffon Corporation (C) | Helen of Troy Limited (C) | | Herbalife Nutrition Ltd. (B) | Masco Corporation (B) | Newell Brands, Inc. (C) | | Nu Skin Enterprises, Inc. (B) | Prestige Consumer Healthcare Inc. (C) | Reynolds Consumer Products (C) | | Rollins, Inc. (B) | RPM International, Inc. (B) | The J. M. Smucker Company (C) | | Spectrum Brands Holdings, Inc. (B) | The Toro Company (B) | Tupperware Brands Corporation (F) | | Universal Corporation (F) | | |
Long-Term Equity-Based Incentive Awards (long-term compensation element)
2024 Non-Qualified Stock Option Grants: During the 2024 fiscal year, each NEO received a grant of NSOs structured to promote retention and continuity (with a grant date value that approximated 50% of the applicable 2024 Target Annual LTI Value determined for each NEO) and which was pulled forward as explained in the following paragraph. The NSOs align our NEOs interests with those of our shareholders since value realization is dependent on future sustained share price appreciation. The NSOs are subject to three-year time-based cliff vesting, with a provision for accelerated vesting in the event of retirement, death or disability. Continued Temporary Measure: Pulling Forward Timing of Annual NSO Grants for the 2024 Fiscal Year: The Company typically approves equity-based awards at the Compensation Committee meeting in January and the grant date is the second or third trading day following the Company’s first quarter earnings release. However, during the 2024 fiscal year, as part of the Company’s temporary compensation measures discussed above and to further promote retention and leadership continuity, the Compensation Committee pulled forward approximately 50% of the 2024 target long-term incentive value for the NEOs, as well as approximately 40 key management employees, that would normally be granted in February 2024 to November 2023 (the “Pull Forward LTI Value”). The Pull Forward LTI Value was granted in the form of NSOs on November 16, 2023. The Compensation Committee believes that separating the annual LTI grant into two tranches — NSOs in November and PUs in February — further bolsters the Company’s retention objectives because it creates a “stair-step” vesting opportunity for our LTI recipients. Information regarding our equity grant practices, including the determination of exercise price, can be found in the section captioned “Other Executive Compensation Policies, Practices and Guidelines — Practices Regarding Equity-Based Awards.” Disposition of FY22-FY24 Performance Unit Awards: During the 2022 fiscal year, Mr. J. Hagedorn, Mr. C. Hagedorn and Mr. Todorov received performance unit grants representing approximately 50% of their respective target annual LTI value at the time (the “FY22-FY24 Performance Unit Awards”), that were subject to the Company achieving the pre-defined performance criteria for the three-year performance period from FY22-FY24 as indicated in the table below. However, since the Company failed to achieve the minimum level of performance required to trigger a payout, the Compensation Committee cancelled the underlying performance unit awards on October 31, 2024 after certifying the performance results.
Long-Term Equity-Based Incentive Awards (long-term compensation element)
| Metric (with dollars in millions) | Metric Weighting | 50% | 100% | 250% | Actual Performance | Payout % | | Non-GAAP Cumulative Operating Free Cash Flow* | 60% | $1,080.0 | $1,275.0 | $1,600.0 | $1,066.0 | 0% | | Cumulative Net Sales** | 40% | $14,250.0 | $15,000.0 | $16,500.0 | $11,028.0 | 0% |
Long-Term Equity-Based Incentive Awards (long-term compensation element)
________________________ * Non-GAAP Cumulative Operating Cash Flow: Defined as cash provided by operating activities, adjusted to exclude discontinued operations and certain other one-time charges, subject to further adjustments by the Compensation Committee based on individual facts and circumstances. The calculation excludes capital expenditure investments but maintains a working capital management aspect over the performance period. ** Cumulative Net Sales: Defined as Total Company Net Sales aligned with external reporting (defined by GAAP as gross sales minus returns, allowances, and discounts).
Executive Perquisites and Other Benefits (short-term compensation element)
Executive Perquisites and Other Benefits (short-term compensation element) The Company maintains traditional health and welfare benefit plans and The Scotts Company LLC Retirement Savings Plan (the “RSP”), a qualified 401(k) plan, which are generally offered to all employees (subject to basic plan eligibility requirements) and are consistent with the types of benefits offered by other similar corporations. With the exception of a Company-paid annual physical examination and limited personal use of Company aircraft as provided below, none of the NEOs other than the CEO receive executive perquisites or benefits beyond those generally offered to all employees. From time to time, family members of the NEOs are accommodated as passengers on business-related flights on Company aircraft. There is no incremental cost to the Company for this perquisite. All of the NEOs are entitled to limited personal use of Company aircraft at their own expense. Specifically, Mr. J. Hagedorn has an option to purchase up to 150 flight hours per year for personal use at the Company’s incremental direct operating cost per flight hour. Mr. Garth and Mr. Baxter are entitled to purchase up to 50 flight hours per year, and all other NEOs are entitled to purchase up to 25 flight hours per year. There is no incremental cost to the Company for this perquisite other than the partial loss of a tax deduction of certain aircraft-related costs as a result of personal use of Company aircraft. Since Company aircraft are used primarily for business travel, the determination of the direct operating cost per flight hour excludes the fixed costs that do not change based on usage, such as pilots’ salaries, the purchase cost of Company aircraft and the cost of maintenance not related to personal trips. As part of his respective relocation benefits provided in connection with his hiring during the 2023 fiscal year, Mr. Baxter was entitled to limited Company-paid commuting flights on Company aircraft. During the 2024 fiscal year, the Company incurred $9,422 in direct operating costs associated with Mr. Baxter’s commuting flights. The amount has been reported as additional compensation to Mr. Baxter in the All Other Compensation column of the Summary Compensation Table for 2024 Fiscal Year. Mr. Baxter is responsible for the personal income tax consequences of the limited commuting benefit, which has now been discontinued. As an additional perquisite, Mr. J. Hagedorn has access to the services of the Company’s aviation mechanics and pilots in circumstances involving commuting flights on his personal aircraft. Since the Company’s aviation mechanics and pilots are paid on a salary basis, there is no incremental cost to the Company for this perquisite. To the extent Mr. J. Hagedorn utilizes the Company’s aviation mechanics and pilots in connection with non-commuting flights on his personal aircraft, he reimburses the Company for a pro-rata portion of their salaries and fringe benefit costs. For further discussion, see section captioned “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.”
Retirement Plans and Deferred Compensation Benefits (long-term compensation element)
Retirement Plans and Deferred Compensation Benefits (long-term compensation element) Executive Retirement Plan The Scotts Company LLC Executive Retirement Plan (the “ERP”) is a non-qualified deferred compensation plan that provides executives the opportunity to: (1) defer compensation with respect to salary and amounts received in lieu of salary; and (2) defer compensation with respect to any Performance Award (as defined in the ERP). The ERP consists of the following five parts: •Compensation Deferral, which allows continued deferral of up to 75% of salary and amounts received in lieu of salary; •Performance Award Deferral, which allows the deferral of up to 100% of any cash incentive compensation earned under the EIP; •Retention Awards, which reflect the Company’s contribution to the ERP for retention awards; •Supplemental Retirement Awards, which reflect Company directed contributions to the ERP, subject to the approval of the Compensation Committee; and •Crediting of Company matching contributions on qualifying deferrals. The Supplemental Retirement Awards (“SRA”) provide a tax deferred approach to award additional compensation to the NEOs and other key management employees of the Company. The SRA contributions, which are subject to the discretion of the Compensation Committee, are funded on a monthly basis. While the awards are fully vested at the time of contribution, the SRA account balance cannot be distributed to the recipient for a minimum of six months following the termination of employment. During the 2024 fiscal year, the Compensation Committee awarded the following SRAs: •Mr. J. Hagedorn was entitled to receive an annualized SRA contribution of $1.0 million (payable in monthly installments of $83,333), awarded in January 2014 in connection with the negotiation of the severance agreement between The Scotts Company LLC (“Scotts LLC”) and Mr. J. Hagedorn (the “Hagedorn Severance Agreement”). Although Mr. J. Hagedorn had elected to voluntarily forgo a portion of his SRA contribution during the 2023 fiscal year to assist the Company in ensuring compliance with the financial covenants under our credit facility, he received his entire $1.0 million Company SRA contribution for the 2024 fiscal year. None of the other NEOs received SRA contributions during the 2024 fiscal year. The Company matching contributions to the ERP were based on the same contribution formulae as those used for the RSP. Specifically, the Company will match participant contributions at a rate of 200% for the first 3% of eligible earnings contributed to the ERP and 50% for the next 3% of eligible earnings contributed to the ERP. As a result, if a participant contributes at least 6% of their pay to the ERP, the Company matching contribution would be equal to 7.5%. Company matching contributions to the ERP are not funded until the first quarter of the subsequent calendar year, provided the individual is actively employed by the Company as of December 31. All accounts under the ERP are bookkeeping accounts and do not represent claims against specific assets of the Company. Each participant may select one or more investment funds, including a Company stock fund, against which to benchmark such participant’s ERP accounts. The investment options under the ERP are substantially consistent with the investment options permitted under the RSP. Accordingly, there were no above-market or preferential earnings on investments associated with the ERP for any of the NEOs for the 2024 fiscal year. Other Retirement and Deferred Compensation Plans The Scotts Company LLC Excess Benefit Plan for Non Grandfathered Associates (the “Excess Pension Plan”) is an unfunded plan that provides benefits that cannot be provided under The Scotts Company LLC Associates’ Pension Plan (the “Associates’ Pension Plan”) due to specified statutory limits. The Associates’ Pension Plan and related Excess Pension Plan were frozen effective December 31, 1997 and, therefore, no additional benefits have accrued after that date under either plan. However, continued service taken into account for vesting purposes under the Associates’ Pension Plan is recognized with respect to the entitlement to, and the calculation of, subsidized early retirement benefits under the Excess Pension Plan. Based on his tenure, Mr. J. Hagedorn is the only NEO who participates in the Associates’ Pension Plan and the Excess Pension Plan. For further details regarding the Excess Pension Plan, see section captioned “EXECUTIVE COMPENSATION TABLES — Pension Benefits Table.”
Compensation Peer Group
Compensation Peer Group For the purpose of enabling the Company to benchmark our compensation practices, as well as the total compensation packages of our NEOs, the Company uses a customized compensation peer group, established by the Compensation Committee with its independent compensation consultant. The Compensation Committee believes that the companies chosen for the compensation peer group (listed below) reflect the types of highly regarded consumer products-oriented companies with which the Company typically competes to attract and retain executive talent. The following compensation peer group was utilized to benchmark our compensation practices for the 2024 fiscal year:
Compensation Peer Group
| Central Garden & Pet Company | Church & Dwight Co., Inc. | The Clorox Company | | Edgewell Personal Care Company | Energizer Holdings, Inc. | FMC Corporation | | Griffon Corporation | Helen of Troy Limited | Herbalife Nutrition Ltd. | | Masco Corporation | Newell Brands, Inc. | Nu Skin Enterprises, Inc. | | Prestige Consumer Healthcare Inc. | Reynolds Consumer Products | Rollins, Inc. | | RPM International, Inc. | The J. M. Smucker Company | Spectrum Brands Holdings, Inc. | | The Toro Company | | |
Compensation Peer Group
The Compensation Committee believes this compensation peer group reflects the pay practices of the broader consumer products industry and is reflective of the size and complexity of the Company. The compensation peer group includes companies that ranged between $1.1 billion and $8.9 billion of annual revenues at the time they were selected, with a median annual revenue of approximately $3.8 billion. Looking ahead to the 2025 fiscal year, the Compensation Committee made no changes to the Compensation Peer Group and believes that the current Compensation Peer Group continues to reflect the Company’s size and business profile.
Role of Management in Compensation Decisions
Role of Management in Compensation Decisions The Compensation Committee is responsible for establishing performance objectives for our CEO and completing an annual assessment of his performance. Our CEO is responsible for establishing performance objectives and conducting annual performance reviews for all of the other NEOs. The Compensation Committee believes that performance evaluation and goal setting is critical to the overall compensation-setting process because the personal performance level of each NEO is one of the most heavily weighted factors considered by the Compensation Committee when making compensation decisions. In conjunction with the Company’s outside consultants from Willis Towers Watson and Aon Consulting, Inc., management conducts annual market surveys of the base salary levels, short-term incentives and long-term incentives for each of our NEOs, with the goal of helping to ensure that executive compensation levels remain competitive with the benchmark compensation data, which facilitates our ability to retain and motivate key executive talent. The benchmark compensation data provided by Willis Towers Watson and Aon Consulting, Inc. reflects several hundred general industry companies, representing a wide range of annual revenue, who voluntarily participate in the surveys and are not selected by the Company. To account for the wide range of companies included in the surveys, the data is statistically adjusted by the Company’s compensation consultants to more closely reflect the relative size of the Company based on revenue.
Setting Compensation Levels for CEO and Other NEOs
| | | Fixed Elements of Compensation | | | Variable Elements of Compensation | | | | Total Direct Compensation (TDC)(4) | | | | | | | Annual Bonus | | Target Annual Long-Term Incentive Value(3) | | | | | | Base Salary | Other Comp(1) | Fixed % of TDC | Target % | Target $(2) | | Variable % of TDC | | | Mr. J. Hagedorn | 2024 TDC | $1,200,000 | $1,000,000 | 21% | 175% | $2,100,000 | $6,000,000 | 79% | $10,300,000 | | Mr. Garth | 2024 TDC | $950,000 | $— | 23% | 125% | $1,187,500 | $2,000,000 | 77% | $4,137,500 | | Mr. Baxter | 2024 TDC | $950,000 | $— | 23% | 125% | $1,187,500 | $2,000,000 | 77% | $4,137,500 | | Mr. C. Hagedorn | 2024 TDC | $650,000 | $— | 29% | 90% | $585,000 | $1,000,000 | 71% | $2,235,000 | | Mr. Todorov | 2024 TDC | $550,000 | $— | 32% | 90% | $495,000 | $675,000 | 68% | $1,720,000 |
Setting Compensation Levels for CEO and Other NEOs
________________________ (1) Other Compensation reflects the annualized values of the SRA contributions, applicable to Mr. J. Hagedorn, as noted in the section captioned “Elements of Executive Compensation — Retirement Plans and Deferred Compensation Benefits (long-term compensation element).” (2) The Target Annual Bonus amount reported reflects the annualized cash-based target incentive opportunity, which will be paid in equity as described in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element).” (3) Amount excludes the temporary increase to the 2024 Target Annual LTI Value for each NEO. For additional details on the 2024 Target Annual LTI Value and the temporary increase in target annual LTI value, see section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element).” (4) TDC reflects the on-going annualized total direct compensation opportunity at target approved by the Compensation Committee in January 2024. The Compensation Committee believes that each element of total direct compensation reflected above, as well as the overall level of compensation for each of the NEOs, suitably recognizes their personal performance and unique skill sets and is appropriate relative to the Competitive Market Range for their respective roles.
Risk Assessment in Compensation Programs
Risk Assessment in Compensation Programs The Company strives to ensure its compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. To that end, management and the Compensation Committee evaluate the compensation plans and arrangements that represent material sources of variable pay. •Annual cash incentive compensation plans — The Company’s annual incentive compensation program incorporates a funding trigger that conditions payout on meeting the leverage ratio covenants in the Company’s credit facility. This trigger is designed to mitigate the potential risks to the Company and its shareholders resulting from the short- and long-term impacts of noncompliance. •Equity-based compensation plans — The Company generally utilizes a mix of performance-based and service-based equity awards, which helps ensure that management maintains a responsible level of sensitivity to the impact of decision-making on share price. Since the equity-based awards are generally subject to three-year performance criteria, the Company believes the risks of focusing on short-term financial performance or share price increases rather than long-term value creation are mitigated. Based on the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company as a whole and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.
Summary Compensation Table
Summary Compensation Table The following table summarizes the total compensation paid to, awarded to or earned by each of the NEOs for the fiscal years shown. The amounts shown include all forms of compensation provided to the NEOs, including amounts that may have been deferred. Since the table includes equity-based compensation costs and changes in the actuarial present value of the NEOs’ accumulated pension benefits, the total compensation amounts may be greater than the compensation that was actually paid to the NEOs during each of the fiscal years reported.
Summary Compensation Table for 2024 Fiscal Year
Summary Compensation Table for 2024 Fiscal Year
Summary Compensation Table for 2024 Fiscal Year
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(8) | Total ($) | | James Hagedorn Chairman & Chief Executive Officer | 2024 | 1,200,000 | — | 6,050,968 | 4,483,285 | 2,415,000 | 13,061(7) | 1,070,875 | 15,233,189 | | | 2023 | 720,000 | — | 7,881,576 | 2,740,931 | — | —(7) | 652,059 | 11,994,566 | | | 2022 | 1,104,000 | — | 6,000,143 | — | — | —(7) | 1,065,718 | 8,169,861 | | Matthew E. Garth Executive Vice President, Chief Financial Officer & Chief Administrative Officer | 2024 | 950,000 | — | 2,071,913 | 1,535,044 | 1,365,625 | — | 116,903 | 6,039,485 | | | 2023 | 604,167 | 700,000 | 2,782,880 | 638,044 | — | — | 927,510 | 5,652,601 | | Nathan E. Baxter President & Chief Operating Officer | 2024 | 950,000 | — | 1,825,253 | 1,352,291 | 1,365,625 | — | 96,159 | 5,589,328 | | | 2023 | 395,833 | 700,000 | 3,911,473 | 638,041 | — | — | 288,670 | 5,934,017 | | Christopher J. Hagedorn Executive Vice President & Chief of Staff | 2024 | 650,000 | — | 1,241,634 | 919,942 | 672,750 | — | 24,750 | 3,509,076 | | | 2023 | 549,667 | — | 1,792,830 | 456,824 | — | — | 24,375 | 2,823,696 | | | 2022 | 599,833 | — | 1,000,245 | — | — | — | 22,875 | 1,622,953 | | Dimiter Todorov Executive Vice President, Chief Legal Officer & Corporate Secretary | 2024 | 525,000 | — | 760,548 | 563,478 | 570,544 | — | 38,344 | 2,457,914 |
Summary Compensation Table for 2024 Fiscal Year
(1) Reflects the amount of base salary received by each NEO for the applicable fiscal years. Mr. J. Hagedorn elected to voluntarily forgo approximately 40% of his annual base salary for the 2023 fiscal year and he received his full base salary for the 2022 fiscal year and 2024 fiscal year. Due to the timing of pay changes, the amount reported for each NEO may be less than the base salary rate as of the end of each fiscal year. (2) For the 2023 fiscal year, reflects the cash value of the sign-on bonuses paid to Mr. Garth and Mr. Baxter in connection with their respective hiring events in the 2023 fiscal year. The sign-on bonuses were provided to mitigate value Mr. Garth and Mr. Baxter stood to lose by leaving their prior employers. (3) The grant date fair value of the PUs awarded to the NEOs during the 2024 fiscal year was determined using the value of the underlying Common Shares on the date of grant, assuming the underlying applicable performance criteria will be satisfied at target, and were calculated in accordance with the equity compensation accounting provisions of FASB ASC Topic 718, without respect to forfeiture assumptions. Pursuant to applicable SEC Rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of these amounts are included in Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2024 fiscal year. Since the PUs granted contain a market-based performance condition (TSR), the fair value determined in accordance with the equity compensation accounting provisions of FASB ASC Topic 718 is estimated using a Monte Carlo simulation model, resulting in an accounting value which differs from the Adjusted 2024 Target Annual LTI Value reflected in the section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element)” within the CD&A. (4) Reflects the aggregate grant date fair value of NSOs granted to each NEO. The value of the NSOs is determined using a binomial option valuation on the date of the grant computed in accordance with the equity compensation accounting provisions of FASB ASC Topic 718. Pursuant to applicable SEC Rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of the amounts shown are included in Note 12 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2024 fiscal year. (5) Reflects the EIP payouts awarded to the NEOs by the Compensation Committee for the 2024 fiscal year, calculated pursuant to the terms of the EIP. The amounts shown reflect the calculated annual cash-based incentive payout that was subsequently converted to equity in the form of an immediately vested restricted stock unit award for purposes of delivering the payout to each NEO. Additional information regarding the EIP payouts for the 2024 fiscal year is reflected in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element) — Continued Temporary Measure — Converting Cash Incentive Payout Opportunity to Equity for the 2024 Fiscal Year” within the CD&A. (6) Participant account balances in the ERP are credited to one or more benchmark funds that are substantially consistent with the investment options available under the RSP. Accordingly, there are no above-market or preferential earnings on amounts deferred under the ERP. The Associates’ Pension Plan and the Excess Pension Plan were frozen as of December 31, 1997; therefore, no service credits have been earned since that date by Mr. J. Hagedorn, the only NEO eligible for either the Associates’ Pension Plan or the Excess Pension Plan. For additional information, see table below captioned “Pension Benefits at 2024 Fiscal Year-End.” (7) Reflects the actuarial present value of accumulated benefit for the respective fiscal year under both the Associates’ Pension Plan and the Excess Pension Plan for Mr. J. Hagedorn. With respect to the 2024 fiscal year, the accumulated benefit increased for Mr. J. Hagedorn as reflected in the table. However, for both the 2022 and 2023 fiscal years, the accumulated benefit decreased for Mr. J. Hagedorn and, based on applicable SEC guidance, amounts reported in this table cannot be negative. (8) Please see table below captioned “All Other Compensation” for information regarding the components of the “All Other Compensation” column.
Grants of Plan-Based Awards Table
Grants of Plan-Based Awards Table The following table sets forth information concerning equity-based awards made during the 2024 fiscal year as well as the range of potential payouts under the EIP, a non-equity incentive plan, with respect to performance goals for the 2024 fiscal year. Based on the design of our annual cash incentive plan for the 2024 fiscal year and the reporting requirements for the grants of plan-based awards, the following table reflects the range of potential incentive payouts, within the “Payouts Under Non-Equity Incentive Plan Awards” columns, however, for purposes of delivering the payout to each NEO, the final calculated annual cash-based incentive payout was subsequently converted to equity in the form of an immediately vested restricted stock unit award.
Grants of Plan-Based Awards for 2024 Fiscal Year
Grants of Plan-Based Awards for 2024 Fiscal Year
Grants of Plan-Based Awards for 2024 Fiscal Year
| Name | Grant Date(1) | | Payouts Under Non-Equity Incentive Plan Awards (2) | | | Payouts Under Equity Incentive Plan Awards (Common Shares) | | | Stock Awards: Number of Shares of Stock or Units (#) | Number of Shares Underlying Stock Options (#) | Price of Option Awards ($/sh) | Grant Date Fair Value of Stock and Option Awards (#)(4) | | | | Approval Date | Min. ($) | Target ($) | Max. ($) | Min. | Target | Max.(3) | | | | | | James Hagedorn | | | | | | | | | | | | | | NSOs | 11/16/2023 | 11/16/2024 | | | | | | | | 277,947 | 56.87 | 4,483,285 | | PUs | 2/16/2024 | 2/15/2024 | | | | 39,570 | 79,139 | 257,202 | | | | 6,050,968 | | EIP | | | 1,207,500 | 2,415,000 | 5,722,500 | | | | | | | | | Matthew E. Garth | | | | | | | | | | | | | | NSOs | 11/16/2023 | 11/16/2024 | | | | | | | | 79,982 | 56.87 | 1,290,110 | | NSOs | 2/16/2024 | 2/15/2024 | | | | — | | | | 14,935 | 57.81 | 244,934 | | PUs | 2/16/2024 | 2/15/2024 | | | | 13,549 | 27,098 | 88,069 | | | | 2,071,913 | | EIP | | | 682,813 | 1,365,625 | 3,235,938 | | | | | | | | | Nathan E. Baxter | | | | | | | | | | | | | | NSOs | 11/16/2023 | 11/16/2024 | | | | | | | | 68,652 | 56.87 | 1,107,357 | | NSOs | 2/16/2024 | 2/15/2024 | | | | — | | | | 14,935 | 57.81 | 244,934 | | PUs | 2/16/2024 | 2/15/2024 | | | | 11,936 | 23,872 | 77,584 | | | | 1,825,253 | | EIP | | | 682,813 | 1,365,625 | 3,235,938 | | | | | | | | | Christopher J. Hagedorn | | | | | | | | | | | | | | NSOs | 11/16/2023 | 11/16/2024 | | | | | | | | 57,033 | 56.87 | 919,942 | | PUs | 2/16/2024 | 2/15/2024 | | | | 8,120 | 16,239 | 52,777 | | | | 1,241,634 | | EIP | | | 336,375 | 672,750 | 1,594,125 | | | | | | | | | Dimiter Todorov | | | | | | | | | | | | | | NSOs | 11/16/2023 | 11/16/2024 | | | | | | | | 29,618 | 56.87 | 477,738 | | NSOs | 2/16/2024 | 2/15/2024 | | | | — | | | | 5,228 | 57.81 | 85,739 | | PUs | 2/16/2024 | 2/15/2024 | | | | 4,974 | 9,947 | 32,328 | | | | 760,548 | | EIP | | | 271,688 | 543,375 | 1,287,563 | | | | | | | |
Grants of Plan-Based Awards for 2024 Fiscal Year
(1) In general, grant dates are established in accordance with the Company’s grant date protocol, which generally establishes an effective date for all annual long-term incentives as the second or third trading day following the first quarter earnings release, however, the grant dates for NSO awards made during the 2024 fiscal year were established during an open trading window on the day of or the day after the applicable Compensation Committee approval. (2) The amounts reflect an enhancement for converting the cash payout to equity for payouts up to 150% of target that each NEO was eligible to receive based on performance goals set for the EIP Business Performance Factors pursuant to the EIP for the 2024 fiscal year. Incremental incentives above 150% of target would be payable in cash. EIP payouts were converted to equity in the form of an immediately vested restricted stock unit award on November 14, 2024. A detailed description of the performance goals for the EIP Business Performance Factors, and potential incentive award payouts under the EIP is provided in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element)” within the CD&A. (3) The amounts reflect the maximum payout in shares up to 325% for the 2024 Performance Unit Awards. However, for purposes of paying out the 2024 Performance Unit Awards, any payouts above 250% of target will be paid in cash. Therefore, the maximum share amounts included above that may be converted to the equivalent cash value for payouts greater than 250%, up to the maximum payout level of 325% are: Mr. Hagedorn, 59,354; Mr. Garth, 20,324; Mr. Baxter, 17,904; Mr. C. Hagedorn, 12,179; and Mr. Todorov, 7,460. A detailed description of the performance goals and potential award payouts for the 2024 Performance Unit Awards is provided in the section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element)” within the CD&A. (4) The grant date fair value of each PU award, and the binomial value for each NSO award, was determined using the value of the underlying Common Shares on the date of grant listed, and was calculated in accordance with the equity compensation accounting provisions of FASB ASC Topic 718, without respect to forfeiture assumptions. Awards are subject to the following vesting provisions:
Grants of Plan-Based Awards for 2024 Fiscal Year
| Award | Vesting Provision | | NSOs | Three-year cliff vesting requirement | | PUs | Three-year cliff vesting requirement and achievement of the pre-defined performance goals for the applicable three-year performance period |
Outstanding Equity Awards Table
Outstanding Equity Awards Table The following table provides information regarding outstanding equity-based awards as of September 30, 2024.
Outstanding Equity Awards at 2024 Fiscal Year-End
Outstanding Equity Awards at 2024 Fiscal Year-End
Outstanding Equity Awards at 2024 Fiscal Year-End
| | | Option Awards | | | | Stock Awards | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Option Exercise Price ($)(2) | Option Expiration Date | Number of Shares or Units That Have Not Vested (#)(3) | Market Value of Shares or Units That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares or Units That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value Of Unearned Shares or Units That Have Not Vested ($)(7) | | James Hagedorn | 1/30/2015 | 142,733 | | 59.62 | 1/30/2025 | | | | | | | 1/29/2016 | 143,079 | | 64.55 | 1/29/2026 | | | | | | | 2/5/2021 | 39,263 | | 236.53 | 2/5/2031 | | | | | | | 2/4/2022 | | | | | 22,579 | 1,957,599 | —(6) | — | | | 11/4/2022 | 200,507 | 200,507 | 50.40 | 11/4/2032 | | | | | | | 2/3/2023 | | | | | | | 43,759 | 3,793,905 | | | 11/16/2023 | 277,947 | 277,947 | 56.87 | 11/16/2033 | | | | | | | 2/16/2024 | | | | | | | 79,139 | 6,861,351 | | Matthew E. Garth | 12/1/2022 | | | | | 6,790 | 588,693 | | | | | 2/3/2023 | | 28,599 | 82.27 | 2/3/2033 | | | 10,940 | 948,498 | | | 11/16/2023 | | 79,982 | 56.87 | 11/16/2033 | | | | | | | 2/16/2024 | | 14,935 | 57.81 | 2/16/2034 | | | 27,098 | 2,349,397 | | Nathan E. Baxter | 4/28/2023 | | 35,212 | 66.81 | 4/28/2033 | 5,613 | 486,647 | 13,472 | 1,168,022 | | | 9/5/2023 | | | | | 27,448 | 2,379,742 | | | | | 11/16/2023 | | 68,652 | 56.87 | 11/16/2033 | | | | | | | 2/16/2024 | | 14,935 | 57.81 | 2/16/2034 | | | 23,872 | 2,069,702 | | Christopher J. Hagedorn | 1/30/2015 | 3,568 | | 59.62 | 1/30/2025 | | | | | | | 1/29/2016 | 5,857 | | 64.55 | 1/29/2026 | | | | | | | 2/5/2021 | 7,853 | | 236.53 | 2/5/2031 | | | | | | | 2/4/2022 | | | | | 3,764 | 326,339 | —(6) | — | | | 11/4/2022 | | 33,418 | 50.40 | 11/4/2032 | | | | | | | 2/3/2023 | | | | | | | 7,294 | 632,390 | | | 11/16/2023 | | 57,033 | 56.87 | 11/16/2033 | | | | | | | 2/16/2024 | | | | | | | 16,239 | 1,407,921 | | Dimiter Todorov | 2/5/2021 | 1,571 | | 236.53 | 2/5/2031 | | | | | | | 2/4/2022 | | | | | 753 | 65,285 | —(6) | — | | | 11/4/2022 | | 6,684 | 50.40 | 11/4/2032 | 3,020 | 261,834 | | | | | 2/3/2023 | | | | | | | 5,106 | 442,690 | | | 11/16/2023 | | 29,618 | 56.87 | 11/16/2033 | | | | | | | 2/16/2024 | | 5,228 | 57.81 | 2/16/2034 | | | 9,947 | 862,405 |
Outstanding Equity Awards at 2024 Fiscal Year-End
(1) All of the NSOs shown in these two columns have a normal vesting date that is the third anniversary of the grant date shown in the column captioned “Grant Date.” (2) Each NSO was granted with an exercise price equal to the closing price of one Common Share on NYSE on the date of grant. (3) This column shows the aggregate number of RSUs outstanding as of September 30, 2024. The normal vesting date for each award based on the listed grant date is as follows:
Outstanding Equity Awards at 2024 Fiscal Year-End
| Award Type | Grant Date | Normal Vesting Date | Vesting Schedule Notes | | RSUs | 2/4/2022 | 2/4/2025 | Vests on the third anniversary of the grant date | | RSUs | 11/4/2022 | 11/4/2024 | Vests on the second anniversary of the grant date | | RSUs | 12/1/2022 | 12/1/2024 | Vesting on the second anniversary of the grant date | | RSUs | 4/28/2023 | 4/28/2025 | Vesting on the second anniversary of the grant date | | RSUs | 9/5/2023 | 9/5/2026 | Vests on the third anniversary of the grant date | | RSUs | 9/5/2023 | 9/5/2026 | Vests on the third anniversary of the grant date |
Outstanding Equity Awards at 2024 Fiscal Year-End
(4) Reflects the market value of unvested RSUs, computed by multiplying the closing price of our Common Shares on September 30, 2024 of $86.70 by the number of Common Shares underlying such unvested RSUs. (5) This column shows the aggregate number of Common Shares underlying the PUs outstanding as of September 30, 2024. In each case, the number of Common Shares reported reflects actual certified achievement or probable payout based on accounting assumptions as of September 30, 2024 as indicated below:
Outstanding Equity Awards at 2024 Fiscal Year-End
| Award Type | Grant Date | Payout % | Notes | | PUs | 2/4/2022 | 0.0% | PUs were cancelled on October 31, 2024 since the Company failed to achieve the minimum performance required to trigger a payout for the FY22-FY24 performance period | | PUs | 2/3/2023 | 100.0% | Actual performance certified for the 2024 calendar year performance period | | PUs | 4/28/2023 | 100.0% | Actual performance certified for the 2024 calendar year performance period | | PUs | 2/16/2024 | 100.0% | Probable performance for the FY24-FY26 performance period based on year end results as of the 2024 fiscal year end |
Outstanding Equity Awards at 2024 Fiscal Year-End
(6) The following share amounts are not reportable based on the probable payout of 0% for PU awards granted February 4, 2022. The underlying PUs were subsequently cancelled on October 31, 2024 since the Company failed to achieve the minimum performance required to trigger a payout for the FY22-FY24 Performance Period as further detailed in the section captioned “Elements of Executive Compensation — Long-Term Equity-Based Incentive Awards (long-term compensation element)” within the CD&A.
Outstanding Equity Awards at 2024 Fiscal Year-End
| NEO | PU Shares | | Mr. J. Hagedorn | 22,579 | | Mr. C. Hagedorn | 3,764 | | Mr. Todorov | 753 |
Outstanding Equity Awards at 2024 Fiscal Year-End
(7) Reflects the market value of unvested shares as of September 30, 2024 based on the closing stock price of our Common Shares on September 30, 2024 of $86.70. Value reflects actual or probable payout based on accounting assumptions as of September 30, 2024 as indicated in footnote (5).
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table The following table provides information concerning the aggregate amounts realized or received in connection with the exercise or vesting of equity-based awards for each NEO during the 2024 fiscal year.
Option Exercises and Stock Vested for 2024 Fiscal Year
Option Exercises and Stock Vested for 2024 Fiscal Year
Option Exercises and Stock Vested for 2024 Fiscal Year
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(5) | | James Hagedorn | — | — | 10,570(2) | 565,812 | | Matthew E. Garth | — | — | 6,790(3) | 394,839 | | Nathan E. Baxter | — | — | 5,613(4) | 384,266 | | Christopher J. Hagedorn | — | — | 2,114(2) | 113,162 | | Dimiter Todorov | — | — | 423(2) | 22,643 |
Option Exercises and Stock Vested for 2024 Fiscal Year
________________________ (1) There were no option exercises for the 2024 fiscal year. (2) Reflects the number of Common Shares received in connection with the RSUs granted on February 5, 2021 that vested and settled on February 5, 2024 for Mr. J. Hagedorn, Mr. C. Hagedorn and Mr. Todorov. (3) Reflects the number of Common Shares received in connection with the RSUs granted to Mr. Garth in connection with his new hire award granted on December 1, 2022, a pro-rata portion of which vested and settled on December 1, 2023. (4) Reflects the number of Common Shares received in connection with the RSUs granted to Mr. Baxter in connection with his new hire award granted on April 28, 2023, a pro-rata portion of which vested and settled on April 28, 2024. (5) The value realized on the settlement of RSUs described above is calculated by multiplying the number of Common Shares underlying the vested shares or units by the closing price of our Common Shares on the applicable settlement date.
Pension Benefits Table
Pension Benefits Table Scotts LLC maintains the Associates’ Pension Plan, a tax-qualified, non-contributory defined benefit pension plan. Eligibility for and accruals under the Associates’ Pension Plan were frozen as of December 31, 1997. Monthly benefits under the Associates’ Pension Plan upon normal retirement (age 65) are determined under the following formula: (a)(i) 1.5% of the individual’s highest average annual compensation for 60 consecutive months during the 10-year period ending December 31, 1997; times (ii) Years of benefit service through December 31, 1997; reduced by (b)(i) 1.25% of the individual’s primary Social Security benefit (as of December 31, 1997); times (ii) Years of benefit service through December 31, 1997. Compensation includes all gross earnings plus 401(k) contributions and salary reduction contributions for welfare benefits (such as medical, dental, vision and flexible spending accounts), but does not include earnings in connection with foreign service, the value of a Company car or separation or other special allowances. An individual’s primary Social Security benefit is based on the Social Security Act as in effect on December 31, 1997, and assumes constant compensation through age 65 and that the individual will not retire earlier than age 65. No more than 40 years of benefit service are taken into account. For Mr. J. Hagedorn, benefits under the Associates’ Pension Plan are supplemented by benefits under the Excess Pension Plan. The Excess Pension Plan was established October 1, 1993 and was frozen as of December 31, 1997. The Excess Pension Plan provides additional benefits to participants in the Associates’ Pension Plan whose benefits are reduced by limitations imposed under IRC § 415 and § 401(a)(17). Executive officers and certain key employees participating in the Excess Pension Plan will receive, at the time and in the same form as benefits are paid under the Associates’ Pension Plan, additional monthly benefits in an amount which, when added to the benefits paid to each participant under the Associates’ Pension Plan, will equal the benefit amount such participant would have earned but for the limitations imposed by the IRC. The following table shows information related to the Associates’ Pension Plan and the Excess Pension Plan for Mr. J. Hagedorn, the only NEO who participates in either plan. Since both the Associates’ Pension Plan and the Excess Pension Plan were frozen as of December 31, 1997, no further years of credited service have been or may be earned after that date.
Pension Benefits at 2024 Fiscal Year-End
Pension Benefits at 2024 Fiscal Year-End
Pension Benefits at 2024 Fiscal Year-End
| Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | | James Hagedorn | The Scotts Company LLC Associates’ Pension Plan | 9.917 | 238,365 | | | The Scotts Company LLC Excess Benefit Plan For Non Grandfathered Associates | 2.000 | 45,790 | | | Total | | 284,155 |
Pension Benefits at 2024 Fiscal Year-End
________________________ (1) The number of years of credited service shown is the applicable service earned under each respective plan as of December 31, 1997, the date each of the plans were frozen. As a result, no additional benefits will be attributed to years of service after such date. (2) Assumptions used in the calculation of these amounts are included in Note 9 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2024 fiscal year.
Non-Qualified Deferred Compensation Table
Non-Qualified Deferred Compensation Table The ERP is a non-qualified deferred compensation plan that provides executives, including the NEOs, the opportunity to: (1) defer compensation with respect to salary and amounts received in lieu of salary; and (2) defer compensation with respect to any Performance Award (as defined in the ERP). The ERP also includes Company SRA contributions which may be awarded to the NEOs at the discretion of the Compensation Committee. The ERP is an unfunded plan and is subject to the claims of the Company’s general creditors. For additional discussion, see section captioned “Elements of Executive Compensation — Retirement Plans and Deferred Compensation Benefits (long-term compensation element) — Executive Retirement Plan” within the CD&A.
Non-Qualified Deferred Compensation for 2024 Fiscal Year
Non-Qualified Deferred Compensation for 2024 Fiscal Year
Non-Qualified Deferred Compensation for 2024 Fiscal Year
| Name | Executive Contributions in Last Fiscal Year ($)(1) | Company Contributions in Last Fiscal Year ($)(2) | Aggregate Earnings in Last Fiscal Year ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(4) | | James Hagedorn | 56,000 | 1,043,650 | 7,534,146 | (89,132) | 19,181,103 | | Matthew E. Garth | 55,090 | 86,344 | 44,529 | — | 258,010 | | Nathan E. Baxter | 33,875 | — | 2,528 | — | 36,403 | | Christopher J. Hagedorn | — | — | — | — | — | | Dimiter Todorov | 50,542 | 12,750 | 200,498 | — | 925,049 |
Non-Qualified Deferred Compensation for 2024 Fiscal Year
(1) These amounts reflect each NEOs’ contributions to the ERP during the 2024 fiscal year which are also included in base salary amounts reported in the Summary Compensation Table. (2) Reflects Company matching contributions and discretionary SRA contributions made to the ERP with respect to each NEO during the 2024 fiscal year as follows:
Non-Qualified Deferred Compensation for 2024 Fiscal Year
| | ERP Match | SRA Contribution | Total | | James Hagedorn | $43,650 | $1,000,000 | $1,043,650 | | Matthew E. Garth | 86,344 | — | 86,344 | | Nathan E. Baxter | — | — | — | | Christopher J. Hagedorn | — | — | — | | Dimiter Todorov | 12,750 | — | $12,750 |
Non-Qualified Deferred Compensation for 2024 Fiscal Year
Company matching contributions to the ERP for a particular calendar year are not allocated until the first quarter of the subsequent calendar year. As a result, amounts reflected in this column do not include the following estimated Company matching contributions with respect to NEO contributions that were made to the ERP between January 1, 2024 and September 30, 2024: Mr. J. Hagedorn, $41,625; Mr. Garth, $27,563; Mr. Baxter, $27,563; Mr. C. Hagedorn, $0; and Mr. Todorov, $4,125. Mr. J. Hagedorn received his full SRA contribution in the 2024 fiscal year so the amount shown is higher than the corresponding amount received for the 2023 fiscal year when he elected to voluntarily forgo approximately 40% of his SRA contribution. A description of the SRA contributions is set forth in the section captioned “Elements of Executive Compensation — Retirement Plans and Deferred Compensation Benefits (long-term compensation element) — Executive Retirement Plan” within the CD&A. (3) Represents aggregate earnings for the 2024 fiscal year allocated to each NEO’s account in accordance with the ERP. Under the terms of the ERP, each participant has the right to elect investment funds against which amounts allocated to such participant’s account under the ERP will be benchmarked. The investment funds include a Company stock fund and mutual funds that are substantially consistent with the investment options available under the RSP. Because there are no preferential earnings, these amounts are not reflected in the Summary Compensation Table. (4) Includes amounts previously reported as compensation to the NEOs in the Summary Compensation Table for the 2023 and 2022 fiscal years as follows: (a) Mr. J. Hagedorn, $1,671,502; (b) Mr. Garth, $0; (c) Mr. Baxter, $0; (d) Mr. C. Hagedorn, $0; and (e) Mr. Todorov, n/a. The aggregate balances shown for each of the NEOs is fully vested.
CEO PAY RATIO DISCLOSURE
CEO PAY RATIO DISCLOSURE We are providing the following information regarding the relationship of the annual total compensation of our CEO and that of our “median employee,” as required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K. Pursuant to the SEC’s pay ratio rules, the median employee we identified for the 2023 fiscal year is no longer in the same position, therefore we used a similarly compensated “median employee” for the 2024 fiscal year. The decision to use a similarly compensated median employee for the 2024 fiscal year is based on our belief that there have not been changes in our employee population or compensation arrangements that would significantly impact the pay ratio disclosure. For the 2024 fiscal year, our median employee is a heavy equipment operator located in the United States: •The annual total compensation of our median employee, excluding the CEO, was $57,810; •The annual total compensation of our CEO, as reported in the Summary Compensation Table on page 46 of this Proxy Statement, was $15,233,189; and •The ratio of the annual total compensation of our CEO to the annual total compensation of our median employee, excluding the CEO, was 264 to 1. The annual total compensation for our median employee during the 2024 fiscal year was calculated using the same methodology we use for our NEOs, as reported in the Summary Compensation Table on page 46 of this Proxy Statement. We identified our median employee based on our employee population as of September 30, 2023 that consisted of 5,437 employees. In accordance with the SEC’s de minimis exemption, which, depending on our circumstances, allows us to exclude up to 5% of our non-U.S. based employees. Therefore, we excluded 36 employees in China, 37 employees in Mexico and 37 employees in the Netherlands, as they represented less than 5% of our total employee population. Our median employee was identified utilizing calendar year-to-date gross wages (annualized for our non-seasonal associates) plus target cash incentive. For employees working outside of the United States, we converted wages to U.S. dollars using budgeted exchange rates. Note that the SEC’s pay ratio disclosure rules provide reporting companies with a great deal of flexibility in determining the methodology used to identify the median employee and the pay ratio. As such, our methodology may differ materially from the methodology used by other companies to prepare their pay ratio disclosures, which may contribute to a lack of comparability between our pay ratio and the pay ratio reported by other companies, including those within our industry. This information is being provided for compliance purposes. Neither the Compensation Committee nor our management used the CEO pay ratio measure in making compensation decisions.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our CEO and all other NEO’s (“Other NEOs”) and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
PAY VERSUS PERFORMANCE
| | | | | | Value of Initial Fixed $100 Investment based on:(4) | | | | | Year | SCT Total for CEO(1) $ | CAP to CEO (1)(2)(3) $ | Avg. SCT Total for Other NEOs (1) $ | Avg. CAP Paid to Other NEOs (1)(2)(3) $ | TSR $ | S&P 500 Household Products Index TSR $ | Net Income (Loss) ($M) | Non-GAAP Adj. EBITDA as set forth in our credit facility (5) ($M) | | 2024 | 15,233,189 | 35,810,891 | 4,398,951 | 8,951,295 | 64.1 | 132.8 | (34.9) | 544.1 | | 2023 | 11,994,566 | 6,794,634 | 3,983,355 | 2,698,654 | 36.6 | 106.1 | (380.1) | 485.5 | | 2022 | 8,169,861 | (3,411,145) | 1,949,940 | (949,567) | 29.0 | 91.6 | (437.5) | 567.1 | | 2021 | 10,713,912 | 8,226,342 | 2,761,516 | 2,446,250 | 97.0 | 99.9 | 513.4 | 916.5 |
PAY VERSUS PERFORMANCE
________________________ (1) James Hagedorn was our CEO for each year presented. The individuals comprising the Other NEOs for each year presented are listed below.
PAY VERSUS PERFORMANCE
| 2024 | 2023 | 2022 | 2021 | | Matthew E. Garth | Matthew E. Garth | David C. Evans | Cory J. Miller | | Nathan E. Baxter | Nathan E. Baxter | Michael C. Lukemire | Michael C. Lukemire | | Christopher J. Hagedorn | Michael C. Lukemire | Christopher J. Hagedorn | Christopher J. Hagedorn | | Dimiter Todorov | Denise S. Stump | Denise S. Stump | Denise S. Stump | | | David C. Evans | Cory J. Miller | Thomas R. Coleman |
PAY VERSUS PERFORMANCE
(2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote (3) below. (3) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the CEO and the Other NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in row (A) below reflect the amounts attributable to the Change in Pension Value reported in the Summary Compensation Table. Amounts in row (B) below are based on the service cost for services rendered during the listed year. Amounts in row (C) below are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table.
PAY VERSUS PERFORMANCE
| | 2024 | 2023 | 2022 | 2021 | | Summary Compensation Table Total for CEO | $15,233,189 | $11,994,566 | $8,169,861 | $10,713,912 | | - Aggregate change in actuarial present value of pension benefits (A) | (13,061) | — | — | — | | + Service cost of pension benefits (B) | — | — | — | — | | - SCT Stock Awards / SCT Option Awards (C) | (10,534,253) | (10,622,507) | (6,000,143) | (4,901,054) | | + Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year | 23,341,674 | 5,189,014 | 2,019,918 | 2,435,833 | | -/+ Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards | 7,738,202 | (577,472) | (3,953,686) | (1,951,224) | | -/+ Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year | — | — | — | — | | + Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year | 45,140 | 811,033 | (3,647,095) | 1,928,875 | | - Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year | — | — | — | — | | + Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included | — | — | — | — | | Compensation Actually Paid to CEO | $35,810,891 | $6,794,634 | $(3,411,145) | $8,226,342 |
PAY VERSUS PERFORMANCE
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
PAY VERSUS PERFORMANCE
| | 2024 | 2023 | 2022 | 2021 | | Average Summary Compensation Table Total for all Other NEOs | $4,398,951 | $3,983,355 | $1,949,940 | $2,761,516 | | - Aggregate change in actuarial present value of pension benefits (A) | — | — | — | — | | + Service cost of pension benefits (B) | — | — | — | — | | - SCT Stock Awards / SCT Option Awards (C) | (2,567,526) | (2,780,907) | (1,205,150) | (1,007,774) | | + Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year | 5,681,929 | 1,411,361 | 459,236 | 532,710 | | -/+ Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards | 1,397,996 | (52,405) | (1,768,168) | (187,247) | | -/+ Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year | — | — | 20,990 | — | | + Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year | 39,945 | 137,250 | (406,415) | 347,045 | | - Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year | — | — | — | — | | + Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included | — | — | — | — | | Average Compensation Actually Paid to all Other NEOs | $8,951,295 | $2,698,654 | $(949,567) | $2,446,250 |
PAY VERSUS PERFORMANCE
(4) The Peer Group TSR set forth in this table utilizes the S&P 500 Household Products Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in the Company’s Annual Report on Form 10-K for the 2024 fiscal year. The comparison assumes $100 was invested for the period starting September 30, 2020, through the end of the listed year in the Company and in the S&P 500 Household Products Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. (5) For the 2024 fiscal year, we have modified our company selected measure and determined Non-GAAP Adjusted EBITDA as set forth in our credit facility to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our CEO and Other NEOs. This performance measure may not have been the most important financial performance measure for years 2023, 2022 and 2021 and we may determine a different financial performance measure to be the most important financial performance measure in future years. Non-GAAP Adjusted EBITDA as set forth in our credit facility is a non-GAAP financial performance measure, and is calculated as net income (loss) before interest, taxes, depreciation and amortization as well as certain other items, such as non-recurring or non-cash items affecting net income (loss). This calculation is intended to be consistent with the calculation of that measure as required by the Company's borrowing arrangements. See the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation (short-term compensation element) — EIP Business Performance Factors (Enterprise Plan)” within the CD&A, for additional information regarding Non-GAAP Adjusted EBITDA as set forth in our credit facility.
Relationship Between CEO and Other NEO Compensation Actually Paid, Company Total Shareholder Return (“TSR”), and Peer Group TSR
Relationship Between CEO and Other NEO Compensation Actually Paid, Company Total Shareholder Return (“TSR”), and Peer Group TSR The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Other NEOs, and the Company’s cumulative TSR over the four most recently completed fiscal years to that of the S&P 500 Household Products Index over the same period.
Relationship Between CEO and Other NEO Compensation Actually Paid and Net Income
Relationship Between CEO and Other NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Other NEOs, and our Net Income during the four most recently completed fiscal years.
Relationship Between CEO and Other NEO Compensation Actually Paid and Company-Selected Measure
Relationship Between CEO and Other NEO Compensation Actually Paid and Company-Selected Measure The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Other NEOs, and our Company-Selected Measure (Non-GAAP Adjusted EBITDA as set forth in our credit facility) during the four most recently completed fiscal years. Performance Measures Used to Link Company Performance and Compensation Actually Paid to the NEOs. The financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our CEO and other NEOs for 2024 to Company performance are Non-GAAP Adjusted EBITDA as set forth in our credit facility and Non-GAAP Free Cash Flow (these measures are not ranked). See the CD&A for a further description of the metrics used in the Company’s executive compensation program.
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL The Company and its subsidiaries have entered into certain agreements and maintain certain plans that may provide compensation to the NEOs employed by the Company and its subsidiaries in the event of a termination of employment and/or a change in control of the Company and that would provide compensation to the NEOs no longer employed by the Company or its subsidiaries upon termination of employment. Severance Arrangements: None of our NEOs has an employment agreement with the Company. Effective December 11, 2013, Mr. J. Hagedorn entered into the Hagedorn Severance Agreement, which superseded and terminated his then-effective employment agreement. Each of the NEOs currently employed by the Company other than Mr. J. Hagedorn is a participant in the Company’s Executive Severance Plan. The Hagedorn Severance Agreement and the Executive Severance Plan provide for severance and continued compensation and benefit eligibility as summarized in the table below:
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
| | Prior to CIC | | Within 2 Years Following CIC | | | Involuntary Without Cause or Voluntary With Good Reason | Due to Death or Disability | Involuntary Without Cause or Voluntary With Good Reason | | Salary Continuation: | | | | | CEO | 3x base salary (lump sum) | None | 3x base salary (lump sum) | | All Other NEOs | 2x base salary | None | 2x base salary (lump sum) | | Annual Incentive: | | | | | CEO | 3x highest bonus paid in prior 3 years (lump sum) | None | 3x highest bonus paid in prior 3 years (lump sum) | | All Other NEOs | 2x target bonus | None | 2x target bonus plus prorated annual bonus (lump sum) | | Welfare Benefits: | | | | | CEO | Coverage ends and CEO receives lump sum payment equal to the equivalent monthly premiums to continue medical, disability and life insurance for a period of 3 years | None | Coverage ends and CEO receives lump sum payment equal to the equivalent monthly premiums to continue medical, disability and life insurance for a period of 3 years | | All Other NEOs | Coverage ends and NEO receives Benefits Offset Payment for 24 months | None | Coverage ends and NEO receives lump sum payment equal to Benefits Offset Payment for 24 months | | Non-Compete Payments: | | | | | CEO | $3.6 million, payable in $100,000 monthly installments | None | $3.6 million, payable in $100,000 monthly installments | | All Other NEOs | No additional compensation provided | None | No additional compensation provided |
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
Under the Executive Severance Plan, if an NEO terminates their employment voluntarily without Good Reason, other than for retirement, or such NEO’s employment is terminated for Cause, the NEO is not entitled to receive any additional base salary continuation or any other benefits under the Executive Severance Plan. The Company’s specific obligations to each of the NEOs are detailed in the separate tables that follow. Equity-Based Compensation Plans: Grants of NSOs, RSUs and PUs are typically subject to three-year, time-based vesting. However, our equity-based compensation plans generally provide for accelerated vesting (either full or partial) or forfeiture in certain situations, as indicated in the following table. These acceleration and forfeiture provisions apply to all Participants in our equity-based compensation plans.
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
| Termination Due to: | Treatment of Unvested NSOs, RSUs and PUs | | Retirement | NSOs and RSUs vest on date of termination. PUs generally vest on the third anniversary of the grant date and remain subject to the achievement of performance criteria | | Death or Disability | Vest on date of termination | | For Cause | Forfeited on date of termination | | Any Other Reason | Forfeited on date of termination | | Subsequent to Change in Control | Generally vest on date of termination within 24-months following a CIC (“double-trigger”) if the unvested awards are assumed, substituted or continued, as described below |
PAYMENTS ON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
Retirement: A voluntary termination after a participant reaches age 55 with 10 years of service. As of September 30, 2024, Mr. J. Hagedorn is the only NEO that satisfies the requirements for retirement eligibility. Disability: Impairment that qualifies a participant for benefits under the Company’s long-term disability plan or any other long-term disability plan sponsored by the Company. Treatment of Equity Awards Following a Change in Control: Upon a change in control, our Long-Term Incentive Plan generally imposes a “double-trigger” vesting provision, which provides for vesting upon involuntary termination of employment within 24 months after a change in control if (1) equity-based awards are assumed, continued or substituted in the transaction or (2) equity-based awards otherwise continue in effect after the transaction. On the other hand, if the Compensation Committee, after evaluating the facts and circumstances of a change in control event, reasonably concludes that equity-based awards will not be assumed, substituted or continued by the resulting entity, our “responsive” single trigger will take effect and the awards will generally cancel or vest in exchange for a lump sum cash payment. These vesting and forfeiture provisions generally apply to all participants in our Long-Term Incentive Plan. Based on the vesting and forfeiture provisions, the following treatment applies to each equity-based award type subsequent to a CIC: •If awards are assumed, substituted or continued: Following an involuntary termination, without Cause, within 24 months after a change in control of the Company, any conditions on the employee’s rights under, or any restrictions on transfer or exercisability applicable to each replaced or continued award, will be waived or lapse as of the date of termination (i.e., “double-trigger”), •If awards are not substituted or continued: ◦NSOs: Subsequent to a change in control, and only if the unvested NSOs are not substituted or continued, (a) outstanding NSOs will be cancelled and the applicable NEO will receive cash in the amount of, or Common Shares having a fair value equal to, the difference between the change in control price per Common Share and the exercise price per Common Share associated with the cancelled NSO, or (b) the NEO exercises, with the permission of the Compensation Committee, the NEO’s outstanding NSOs within 15 days of the date of the change in control. ◦RSUs: Subsequent to a change in control, and only if the unvested RSUs are not substituted or continued, RSUs will vest in full and all restrictions relating to such awards will lapse. The vested awards will be distributed in (i) a single lump sum cash payment within 30 days following such change in control based on the change in control price, or (ii) at the Compensation Committee’s discretion, in the form of whole Common Shares of the Company or shares of any successor company. ◦PUs: Subsequent to a change in control, and only if the unvested PUs are not substituted or continued, all service-based vesting criteria will be deemed to be satisfied and performance goals associated with outstanding awards will be deemed to have been met on the date of the change in control (as specified in the applicable award agreement), all performance periods will be accelerated to the date of the change in control and all outstanding awards will be distributed in a single lump sum cash payment within 30 days following such change in control based on the change in control price.
Termination of Employment and Change in Control — James Hagedorn
| | Termination Prior to CIC | | Following CIC(1) | | | Executive Benefits and Payments Upon Termination | Involuntary Without Cause or Voluntary With Good Reason | Termination Due to Death or Disability | Involuntary Without Cause or Voluntary With Good Reason | CIC Only | | Compensation(2): | | | | | | Base Salary (3x annual base salary) | $3,600,000 | $— | $3,600,000 | $— | | Bonus Amount(3) | 6,300,000 | — | 6,300,000 | — | | EIP — Pro Rata Payout(4) | 2,100,000 | 2,100,000 | 2,100,000 | — | | Equity-Based Compensation: | | | | | | Stock Options: | | | | | | Unvested and Accelerated(5) | 15,569,563 | 15,569,563 | 15,569,563 | — | | Restricted Stock Units: | | | | | | Unvested and Accelerated(6) | 1,957,599 | 1,957,599 | 1,957,599 | — | | Performance Units: | | | | | | Unvested and Accelerated(7) | 10,655,257 | 10,655,257 | 10,655,257 | — | | Benefits and Perquisites: | | | | | | Health & Welfare Benefits(8) | 67,392 | — | 67,392 | — | | Other Payments: | | | | | | Non-Compete Payments(9) | 3,600,000 | — | 3,600,000 | — | | Total: | $43,849,811 | $30,282,419 | $43,849,811 | $— |
Termination of Employment and Change in Control — Mr. Garth, Mr. Baxter, Mr. C. Hagedorn and Mr. Todorov
| Executive Benefits and Payments Upon Termination | Mr. Garth | Mr. Baxter | Mr. C. Hagedorn | Mr. Todorov | | Compensation(1): | | | | | | Base Salary (2x annual base salary)(2) | $1,900,000 | $1,900,000 | $1,300,000 | $1,100,000 | | EIP — Pro Rata Actual Payout(3) | — | — | — | — | | ESP Bonus Amount (4) | 2,375,000 | 2,375,000 | 1,170,000 | 990,000 | | Equity-Based Compensation: | | | | | | Stock Options: | | | | | | Unvested and Accelerated(5) | — | — | — | — | | Restricted Stock Units: | | | | | | Unvested and Accelerated(6) | 588,693 | 486,647 | — | 250,043 | | Performance Units: | | | | | | Unvested and Accelerated(7) | — | — | — | — | | Benefits and Perquisites: | | | | | | Benefits Offset Payment(8) | 38,187 | 36,922 | 38,177 | 27,332 | | Total: | $4,901,880 | $4,798,569 | $2,508,177 | $2,367,375 |
Subsequent Departure of Mr. Garth Following the 2024 Fiscal Year
| Executive Benefits and Payments Upon Termination | Mr. Garth | Mr. Baxter | Mr. C. Hagedorn | Mr. Todorov | | Compensation(1): | | | | | | Base Salary | $— | $— | $— | $— | | EIP — Pro Rata Actual Payout(2) | 1,187,500 | 1,187,500 | 585,000 | 472,500 | | ESP Bonus Amount | — | — | — | — | | Equity-Based Compensation: | | | | | | Stock Options: | | | | | | Unvested and Accelerated(3) | 2,944,029 | 3,179,728 | 2,914,368 | 1,277,171 | | Restricted Stock Units: | | | | | | Unvested and Accelerated(4) | 588,693 | 2,866,389 | 326,339 | 327,119 | | Performance Units: | | | | | | Unvested and Accelerated(5) | 3,297,895 | 3,237,725 | 2,040,311 | 1,305,095 | | Benefits and Perquisites: | | | | | | Benefits Offset Payment(6) | — | — | — | — | | Total: | $8,018,117 | $10,471,342 | $5,866,018 | $3,381,885 |
Subsequent Departure of Mr. Garth Following the 2024 Fiscal Year
| Executive Benefits and Payments Upon Termination | Mr. Garth | Mr. Baxter | Mr. C. Hagedorn | Mr. Todorov | | Compensation(1): | | | | | | Base Salary (2x annual base salary)(2) | $1,900,000 | $1,900,000 | $1,300,000 | $1,100,000 | | EIP — Pro Rata Actual Payout(3) | 1,187,500 | 1,187,500 | 585,000 | 472,500 | | ESP Bonus Amount (4) | 2,375,000 | 2,375,000 | 1,170,000 | 990,000 | | Equity-Based Compensation: | | | | | | Stock Options: | | | | | | Unvested and Accelerated(5) | 2,944,029 | 3,179,728 | 2,914,368 | 1,277,171 | | Restricted Stock Units: | | | | | | Unvested and Accelerated(6) | 588,693 | 2,866,389 | 326,339 | 65,285 | | Performance Units: | | | | | | Unvested and Accelerated(7) | 3,297,895 | 3,237,725 | 2,040,311 | 1,305,095 | | Benefits and Perquisites: | | | | | | Benefits Offset Payment(8) | 38,187 | 36,922 | 38,177 | 27,332 | | Total: | $12,331,304 | $14,783,264 | $8,374,195 | $5,237,383 |
Subsequent Departure of Mr. Garth Following the 2024 Fiscal Year
| Executive Benefits and Payments Upon Termination | Mr. Garth | Mr. Baxter | Mr. C. Hagedorn | Mr. Todorov | | Compensation(1): | | | | | | Base Salary (2x annual base salary) | $— | $— | $— | $— | | EIP — Pro Rata Actual Payout | — | — | — | — | | ESP Bonus Amount | — | — | — | — | | Equity-Based Compensation: | | | | | | Stock Options: | | | | | | Unvested and Accelerated(2) | — | — | — | — | | Restricted Stock Units: | | | | | | Unvested and Accelerated(2) | — | — | — | — | | Performance Units: | | | | | | Unvested and Accelerated(2) | — | — | — | — | | Benefits and Perquisites: | | | | | | Benefits Offset Payment | — | — | — | — | | Total: | $— | $— | $— | $— |