Hain Celestial Group Inc: Form 10-Q for the period ended Mar 31, 2025

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended March 31, 2025 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading “Forward-Looking Statements” in the introduction of this Form 10-Q.

Overview

The Hain Celestial Group, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”), is a leading global health and wellness company whose purpose is to inspire healthier living for people, communities and the planet through better-for-you brands. For more than 30 years, Hain Celestial has intentionally focused on delivering nutrition and well-being that positively impacts today and tomorrow. Headquartered in Hoboken, N.J., Hain Celestial’s products across snacks, baby & kids, beverages, and meal preparation are marketed and sold in over 70 countries around the world. The Company operates under two reportable segments: North America and International.

Our Company’s leading brands include Garden Veggie Snacks™, Terra® chips, Garden of Eatin’® snacks, Hartley’s® jelly, Earth’s Best® Organic and Ella’s Kitchen® baby and kids foods, Celestial Seasonings® teas, Joya® and Natumi® plant-based beverages, The Greek Gods® yogurt, Cully & Sully®, Yorkshire Provender®, New Covent Garden® and Imagine® soups, among others.

Hain Reimagined Program

During the first quarter of fiscal year 2024, we initiated a multi-year growth, transformation and restructuring program (the “Hain Reimagined Program”) intended to drive shareholder returns. The savings initiatives impact our reportable segments and Corporate and Other. The program is intended to optimize our portfolio, improve underlying profitability and increase our flexibility to invest in targeted growth initiatives, brand building and other capabilities critical to delivering future growth. The Hain Reimagined Program is grounded on four strategic pillars:

• Focus
• Concentrate our portfolio in consumer-centric Better-For-You (“BFY”) platforms: Snacks, Baby & Kids, Beverages, and Meal Preparation. In the third quarter of 2025, we announced that we are exploring strategic options for our personal care business.
• Simplify our footprint, maintaining direct presence in five key markets – United States (“U.S.”), Canada, United Kingdom (“U.K.”), Ireland, and Western Europe – and align our global operating model and footprint, leveraging scale and realizing synergies across the business.
• Grow
• Deliver share gain in key platforms where we have the most compelling right to win, through expanded channel reach and acceleration in our innovation pipeline.
• Build
• Enhance critical capabilities in brand building and effectiveness of marketing spend; expand reach across under-penetrated margin-accretive channels such as away-from-home and omni-channel e-commerce; and enhance our innovation capability to be more leading edge in BFY.
• Fuel
• Drive revenue growth management, working capital management and operational efficiency to fund growth and enhance margins.

Implementation of the Hain Reimagined Program is expected to be completed by the end of the 2027 fiscal year. Cumulative pretax charges associated with the Hain Reimagined Program are expected to be $115 million - $125 million inclusive of potential inventory write-downs of approximately $25 million related to brand/category exits. The balance of cumulative pretax restructuring charges is expected to be $90 million - $100 million comprised of contract termination costs, asset write-downs, employee-related costs and other transformation-related expenses. For the three and nine months ended March 31, 2025, we incurred approximately $7.7 million and $20.4, million respectively, of expenses associated with the Hain Reimagined Program, compared to approximately $9.9 million and $50.2, million respectively, in the corresponding periods of the prior year. Annualized pretax savings are expected to be $130 million - $150 million. As part of the Hain Reimagined Program, the Company completed the sale of three non-core brands during the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025. We initiated actions to consolidate our personal care manufacturing footprint and exit our non-strategic joint venture in India, which were substantially completed in the first quarter of fiscal 2025. The Company also initiated actions to: (i) simplify its distribution footprint in the U.S.; (ii) rationalize certain product categories for greater capacity utilization, cost reduction and margin expansion; and (iii) reduce office space as part of the Focus and Fuel pillars of the Hain Reimagined Program.

Global Economic Environment

The duration and intensity of inflation fluctuations, alterations in consumer shopping and consumption patterns, and shifts in geopolitical events, such as the ongoing Russia-Ukraine conflict, may lead to increased supply chain expenses and other business impacts. Moreover, our industry is anticipating the possibility of increased supply chain challenges, input cost increases and consumer and economic uncertainty as a result of U.S. government tariffs and the imposition of any counter-tariffs. We continually assess the nature and extent of these potential and evolving impacts on our business, consolidated operational results, liquidity, and capital resources.

Comparison of Three Months Ended March 31, 2025 to Three Months Ended March 31, 2024

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended March 31, 2025 and 2024 (dollars in thousands, other than per share amounts and percentages, which may not add due to rounding):

* Percentage is not meaningful due to one or more numbers being negative.

** Percentage is not meaningful due to significantly lower number or nil value in the comparative period.

Net Sales

Net sales for the three months ended March 31, 2025 were $390.4 million, a decrease of $48.0 million, or 11.0%, including an unfavorable impact of $23.3 million, or 4.8%, related to divestitures, discontinued brands and exited product categories and an unfavorable impact of $3.8 million, or 0.9%, from foreign exchange, as compared to the prior year quarter. Organic net sales, defined as net sales adjusted to exclude the impact of foreign exchange, acquisitions, divestitures, discontinued brands and exited product categories, decreased $21.0 million, or 5.3%, from the prior year quarter. The decrease in each of net sales and organic net sales was primarily due to decline in the North America reportable segment. Additionally, the decrease in organic net sales was comprised of a 2.9% decrease in volume/mix and a 2.5% decrease in price primarily reflecting promotional activity. Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross Profit

Gross profit for the three months ended March 31, 2025 was $84.7 million, a decrease of $12.0 million, or 12.4%, as compared to the prior year period. Gross profit margin of 21.7% for the three months ended March 31, 2025 was lower when compared with 22.1% in the prior year period, representing a 40-basis point decrease.

The decrease in gross profit was driven primarily by the North America reportable segment, mainly due to lower sales volume and unfavorable pricing, partially offset by productivity improvements. The International reportable segment also had a decrease in gross profit mainly driven by lower margin due to pricing and product mix, partially offset by higher volume.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $62.9 million for the three months ended March 31, 2025, a decrease of $3.8 million, or 5.7%, from $66.7 million for the prior year quarter. The decrease was primarily due to a reduction in selling expenses.

Goodwill Impairment

As a result of a significant reduction in actual and projected performance and cash flows, as well as a continued decline in the Company’s market capitalization during the three months ended March 31, 2025, the Company completed an interim quantitative impairment test for goodwill for both its U.S. and Canada reporting units within the North America reportable segment as of March 31, 2025. Consequently, the Company recorded aggregate non-cash goodwill impairment charge of $110.3 million within the North America segment related to such reporting units. See Note 9, Goodwill and Other Intangible Assets in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Long-Lived Asset and Intangibles Impairment

During the three months ended March 31, 2025, the Company recorded non-cash impairment charges of $24.0 million, primarily related to the personal care assets held for sale. See Note 4, Assets and Liabilities Held for Sale in the Notes of the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

During the three months ended March 31, 2024, the Company recognized aggregate non-cash impairment charges of $49.4 million primarily related to ParmCrisps®, Thinsters®, and certain North America personal care intangible asset. See Note 9, Goodwill and Other Intangible Assets in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Productivity and Transformation Costs

Productivity and transformation costs were $7.3 million for the three months ended March 31, 2025, an increase of $0.1 million, or 1.6%, from $7.2 million in the prior year quarter. The increase was primarily due to the increase in restructuring costs incurred in connection with the Hain Reimagined Program.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $1.2 million for the three months ended March 31, 2025 compared to $1.3 million for the prior year quarter.

Operating Loss

Operating loss for the three months ended March 31, 2025 was $121.1 million compared to operating loss of $27.9 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $11.9 million for the three months ended March 31, 2025, a decrease of $2.3 million, or 16.0%, from $14.1 million in the prior year quarter. The decrease resulted primarily from a lower outstanding debt balance and a reduction in borrowing rates compared to the prior year quarter. See Note 10, Debt and Borrowings, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $1.2 million for the three months ended March 31, 2025 compared to $0.1 million in the prior year quarter. The increase in net income was primarily comprised of net foreign exchange gains of $1.3 million.

Loss Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Loss before income taxes and equity in net loss of our equity-method investees for the three months ended March 31, 2025 was $134.1 million compared to $42.1 million in the prior year quarter. The increase in the loss before income taxes and equity in net loss of our equity-method investees was due to the items discussed above.

(Benefit) Provision for Income Taxes

The (benefit) provision for income taxes includes federal, foreign, state and local income taxes. Our income tax benefit was $0.5 million for the three months ended March 31, 2025 compared to income tax expense of $5.1 million in the prior year quarter.

The effective income tax rate was a benefit of 0.4% and an expense of 12.1% for the three months ended March 31, 2025 and 2024, respectively. The income tax expense for the three months ended March 31, 2025 reflected foreign tax expense in certain jurisdictions, impairment of goodwill and intangibles and movement in the valuation allowance for both federal and state income taxes. The effective income tax rate for the three months ended March 31, 2024 was impacted by tax expense related to stock-based compensation, global intangible low-taxed income, and limitations on the deductibility of executive compensation.

Equity in Net Loss of Equity-Method Investees

Equity in net loss from our equity-method investments for each of the three months ended March 31, 2025 and March 31, 2024 was a loss of $1.0 million.

Net Loss

Net loss for the three months ended March 31, 2025 was $134.6 million, or $1.49 per diluted share, compared to $48.2 million, or $0.54 per diluted share, in the prior year quarter. The increase in net loss was attributable to the factors noted above.

Adjusted EBITDA

Adjusted EBITDA was $33.6 million and $43.8 million for the three months ended March 31, 2025 and 2024, respectively, as a result of the factors discussed above. See Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net loss to Adjusted EBITDA.

Segment Results

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended March 31, 2025 and 2024:

(Dollars in thousands)

See the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations and Note 18, Segment Information, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a reconciliation of segment Adjusted EBITDA.

North America

Our net sales in the North America reportable segment for the three months ended March 31, 2025 were $222.4 million, a decrease of $45.7 million, or 17.0%, including an unfavorable impact of $22.5 million, or 6.9%, related to divestitures, discontinued brands and exited product categories, as compared to the prior year quarter. Organic net sales decreased $21.7 million, or 9.6%, to $204.4 million from $226.1 million in the prior year quarter.

The decrease in net sales was primarily due to lower sales in the snacks, personal care, and meal preparation categories. The decrease in organic net sales was primarily due to lower sales in the snacks and baby & kids categories. The decrease in the snacks category was driven by lower volume and continued category softness.

Adjusted EBITDA for the three months ended March 31, 2025 was $17.3 million, a decrease of $10.6 million, or 37.9%, from Adjusted EBITDA of $27.9 million in the prior year quarter. The decrease was primarily driven by lower volume/mix and higher trade spend, partially offset by productivity. Adjusted EBITDA margin was 7.8%, a 260-basis point decrease from the prior year period.

International

Our net sales in the International reportable segment for the three months ended March 31, 2025 were $167.9 million, a decrease of $2.3 million, or 1.4%, including an unfavorable impact of $2.3 million, or 0.5%, related to foreign exchange, as compared to the prior year quarter. Organic net sales increased $0.8 million, or 0.5%, to $169.8 million from $169.0 million the prior year quarter.

The decrease in net sales was primarily due to lower sales in the beverage and snacks categories, partially offset by an increase in the meal preparation category. The increase in organic net sales was primarily due to increases in the meal preparation and baby & kids categories and the supply chain recovery from the service issues discussed last quarter, partially offset by lower sales in the beverage and snacks categories. The increase in the meal preparation category was due to continued strong soup performance across brands.

Adjusted EBITDA for the three months ended March 31, 2025 was $22.2 million, a decrease of $2.4 million, or 9.7%, from Adjusted EBITDA of $24.5 million in the prior year quarter. The decrease was primarily driven by inflation and net pricing, inclusive of own label contracts, partially offset by favorable volume/mix. Adjusted EBITDA margin was 13.2%, a 120-basis point decrease from the prior year period.

Corporate and Other

The decrease in Corporate and Other expenses primarily reflected a decrease in consulting charges.

Refer to Note 18, Segment Information, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Comparison of Nine Months Ended March 31, 2025 to Nine Months Ended March 31, 2024

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the nine months ended March 31, 2025 and 2024 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

* Percentage is not meaningful due to one or more numbers being negative.

** Percentage is not meaningful due to significantly lower number or nil value in the comparative period.

Net Sales

Net sales for the nine months ended March 31, 2025 were $1,196.4 million, a decrease of $121.1 million, or 9.2%, including an unfavorable impact of $61.5 million, or 4.2%, related to divestitures, discontinued brands and exited product categories and a favorable impact of $2.8 million, or 0.2%, from foreign exchange, as compared to the prior year period. Organic net sales, defined as net sales adjusted to exclude the impact of foreign exchange, acquisitions, divestitures, discontinued brands and exited product categories, decreased $62.4 million, or 5.2%, from the prior year period. The decrease in each of net sales and organic net sales was primarily due to declines in both the North America and International reportable segments. Additionally, the decrease in organic net sales was comprised of a 3.4% decrease in volume/mix and a 1.9% decrease in price. Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross Profit

Gross profit for the nine months ended March 31, 2025 was $259.7 million, a decrease of $23.1 million, or 8.2%, as compared to the prior year period. The gross profit margin of 21.7% was higher for the nine months ended March 31, 2025, when compared with 21.5% in the prior year period.

The decrease in gross profit was driven primarily by the North America reportable segment, mainly due to lower sales volume and unfavorable product mix, partially offset by productivity improvements. The International reportable segment had a decrease in gross profit mainly due to lower sales volume and unfavorable pricing, partially offset by favorable product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $204.4 million for the nine months ended March 31, 2025, a decrease of $13.4 million, or 6.2%, from $217.8 million for the prior year period. The decrease was primarily due to lower employee-related expenses, broker expenses and professional fees.

Goodwill Impairment

As discussed above, during the nine months ended March 31, 2025, the Company recorded a non-cash goodwill impairment charge of $201.5 million within the North America segment related to its U.S. and Canada reporting units. See Note 9, Goodwill and Other Intangible Assets, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Long-Lived Asset and Intangibles Impairment

During the nine months ended March 31, 2025, the Company recorded a non-cash impairment charge of $42.0 million, primarily related to the personal care assets held for sale and indefinite and definite-lived intangible assets associated with its personal care business. See Note 4, Assets and Liabilities Held for Sale and Note 9, Goodwill and Other Intangible Assets in the Notes of the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q

During the nine months ended March 31, 2024 the Company recognized a $20.7 million charge related to a decline in actual and projected performance and cash flows related to its personal care business in the North America reportable segment. See Note 7, Property, Plant and Equipment, Net, and Note 14, Fair Value Measurements, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. In addition, results for the nine months ended March 31, 2024 also included non-cash impairment charges of $42.2 million primarily related to ParmCrisps® , Thinsters® , and certain North America personal care intangible assets. See Note 9, Goodwill and Other Intangible Assets, and Note 14, Fair Value Measurements, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Productivity and Transformation Costs

Productivity and transformation costs were $16.5 million for the nine months ended March 31, 2025, a decrease of $3.9 million, or 19.3%, from $20.4 million in the prior year period. The decrease primarily reflected a reduction in restructuring costs incurred in connection with the Hain Reimagined Program.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $5.2 million for the nine months ended March 31, 2025, an increase of $0.5 million from $4.7 million in the prior year period.

Operating Loss

Operating loss for the nine months ended March 31, 2025 was $210.0 million compared to $31.0 million in the prior year period as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $38.4 million for the nine months ended March 31, 2025, a decrease of $5.1 million, or 11.7%, from $43.5 million in the prior year period. The decrease resulted primarily from a lower outstanding debt balance and the impact of a reduction in borrowing rates compared to the prior year period. See Note 10, Debt and Borrowings, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense (Income), Net

Other expense, net totaled $2.4 million for the nine months ended March 31, 2025, compared to $0.2 million of other income, net in the prior year period. The change was primarily due to a pretax loss of $3.9 million on the sale of ParmCrisps®, partially offset by a $1.6 million pretax gain on the sale of assets related to the Company’s former Bell, CA production facility.

Loss Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Loss before income taxes and equity in net loss of our equity-method investees was $250.8 million for the nine months ended March 31, 2025, compared to a $74.3 million loss in the prior year period. The increase in the loss before income taxes and equity in net loss of our equity-method investees was due to the items discussed above.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes includes federal, foreign, state and local income taxes. Our income tax provision was $5.7 million for the nine months ended March 31, 2025 compared to income tax benefit of $4.5 million in the prior year comparable period.

The effective income tax rate was an expense of 2.3% and a benefit of 6.1% for the nine months ended March 31, 2025 and 2024, respectively. The income tax provision for the nine months ended March 31, 2025 reflected foreign tax expense in certain jurisdictions, impairment of goodwill and intangibles and movement in the valuation allowance for both federal and state income taxes. The effective income tax rate for the nine months ended March 31, 2024 was impacted by tax expense related to stock-based compensation, global intangible low-taxed income, and limitations on the deductibility of executive compensation.

Equity in Net Loss of Equity-Method Investees

Equity in net loss from our equity-method investments for the nine months ended March 31, 2025 was a loss of $1.7 million compared to a $2.4 million loss in the prior year period.

Net Loss

Net loss for the nine months ended March 31, 2025 was $258.2 million, or $2.87 per diluted share, compared to $72.1 million, or $0.80 per diluted share, in the prior year period. The increase in net loss was attributable to the factors noted above.

Adjusted EBITDA

Adjusted EBITDA was $93.9 million and $115.0 million for the nine months ended March 31, 2025 and 2024, respectively, as a result of the factors discussed above. See Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net loss to Adjusted EBITDA.

Segment Results

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the nine months ended March 31, 2025 and 2024:

(Dollars in thousands)

See the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations and Note 18, Segment Information, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a reconciliation of segment Adjusted EBITDA.

North America

Our net sales in the North America reportable segment for the nine months ended March 31, 2025 were $682.8 million, a decrease of $113.0 million, or 14.2%, including an unfavorable impact of $60.1 million, or 6.4%, related to divestitures, discontinued brands and exited product categories, as compared to the prior year period. Organic net sales decreased $50.4 million, or 7.5%, to $623.8 million from $674.1 million in the prior year period.

The decrease in net sales was primarily due to lower sales in the snacks and personal care categories. The decrease in net sales in the snacks category reflected reduced volume and in-store marketing activation and promotion effectiveness, and the reduction in net sales in the personal care category was mainly due to SKU simplification initiatives and service issues. The decrease in organic net sales was primarily due to lower sales in the snacks category discussed above and, to a lesser extent, reduced volume in the meal preparation category.

Adjusted EBITDA for the nine months ended March 31, 2025 was $55.1 million, a decrease of $22.8 million, or 29.2%, from Adjusted EBITDA of $77.8 million in the prior year period. The decrease was primarily related to reduced gross profit driven by lower volume and unfavorable pricing, partially offset by productivity. Adjusted EBITDA margin was 8.1%, a 170-basis point decrease from the prior year period.

International

Our net sales in the International reportable segment for the nine months ended March 31, 2025 were $513.6 million, a decrease of $8.1 million, or 1.5%, including a favorable impact of $5.3 million or 1.0% related to foreign exchange, as compared to the prior year period. Organic net sales decreased $12.0 million, or 2.3%, to $506.4 million from $518.5 million in the prior year period.

The decrease in both net sales and organic net sales was primarily due to lower sales in the beverage, meal preparation and snacks categories. The decrease in the beverage and snacks categories was due to lower volumes. The decrease in the meal preparation category was due to unfavorable pricing.

Adjusted EBITDA for the nine months ended March 31, 2025 was $65.1 million, a decrease of $2.9 million, or 4.3%, from Adjusted EBITDA of $68.0 million in the prior year period. Adjusted EBITDA margin was 12.7%, a 30-basis point decrease from the prior year period.

Corporate and Other

The decrease in Corporate and Other expenses primarily reflected a decrease in consulting charges primarily offset by employee-related expenses.

Refer to Note 18, Segment Information, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Liquidity and Capital Resources

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Credit Agreement (as defined below). We believe that our cash flows from operations and borrowing capacity under our Credit Agreement will be adequate to meet anticipated operating and other expenditures for the foreseeable future. See Note 10, Debt and Borrowings, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

In addition to obligations under the Credit Agreement, we are party to other contractual obligations involving commitments to make payments to third parties, including purchase commitments and lease obligations, which impact our short-term and long-term liquidity and capital resource needs. See Note 8, Leases.

Credit Agreement

On December 22, 2021, the Company entered into a Fourth Amended and Restated Credit Agreement (as subsequently amended, the “Credit Agreement”). The Credit Agreement originally provided for senior secured financing of $1,100.0 million in the aggregate, consisting of (1) $300.0 million in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800.0 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and was originally comprised of a $440.0 million U.S. revolving credit facility and $360.0 million global revolving credit facility) (the “Revolver”). Both the Revolver and the Term Loans mature on December 22, 2026. The Company’s obligations under the Credit Agreement are guaranteed by certain existing and future domestic subsidiaries of the Company and are secured by liens on assets of the Company and its material domestic subsidiaries, including the equity interest in each of their direct subsidiaries and intellectual property, subject to agreed-upon exceptions.

The Credit Agreement includes financial covenants that require compliance with a consolidated secured leverage ratio, a consolidated leverage ratio and a consolidated interest coverage ratio. On August 22, 2023, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement. Pursuant to the Second Amendment, the Company’s maximum consolidated secured leverage ratio was amended to be 5.00:1.00 until September 30, 2023, 5.25:1.00 until December 31, 2023, 5.00:1.00 until December 31, 2024, and 4.25:1.00 thereafter. See below for a description of the Third Amendment (as defined below), which amended the Company’s maximum consolidated secured leverage ratio commencing with the quarter ending June 30, 2025. Pursuant to the Credit Agreement, the Company’s maximum consolidated leverage ratio is 6.00:1.00 and its minimum interest coverage ratio is 2.50:1.00. As of March 31, 2025, the Company’s consolidated secured leverage ratio, consolidated leverage ratio and consolidated interest coverage ratio were 4.23:1.00, 4.23:1.00 and 3.22:1.00, respectively, and the Company was in compliance with all associated covenants. The aforementioned financial covenants are being reported as calculated under the Credit Agreement and not pursuant to U.S. GAAP. Please refer to the Credit Agreement filed as an exhibit to our periodic reports for further information related to the calculation thereof. For risks related to our indebtedness and compliance with these covenants, please refer to the risk factor “Any default under our credit agreement could have significant consequences” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

From the date of the Second Amendment until the date of the Third Amendment, loans under the Credit Agreement bore interest at (a) the Secured Overnight Financing Rate plus a credit spread adjustment of 0.10% (“Term SOFR”) plus 2.5% per annum or (b) the Base Rate (as defined in the Credit Agreement) plus 1.5% per annum.

On May 5, 2025, the Company entered into a Third Amendment (the “Third Amendment”) to the Credit Agreement. Pursuant to the Third Amendment, the Company’s maximum consolidated secured leverage ratio was amended to be 4.75:1.00 for the quarter ending June 30, 2025 through (and including) the quarter ending March 31, 2026, 4.50:1.00 for the quarter ending June 30, 2026, and 4.25:1.00 for the quarter ending September 30, 2026 and thereafter.

Commencing on the date of the Third Amendment, loans under the Credit Agreement bear interest at (a) Term SOFR plus 3.00% per annum or (b) the Base Rate plus 2.00% per annum.

The Third Amendment also reduced the size of the Revolver from $800.0 million to $700.0 million in the aggregate, with the U.S. revolving credit facility reduced from $440.0 million to $385.0 million and the global revolving credit facility reduced from $360.0 million to $315.0 million.

Excluding the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2025 was 7.36%. The Company uses interest rate swaps to hedge a portion of the interest rate risk related to its outstanding variable rate debt. As of March 31, 2025, the notional amount of the interest rate swaps was $400.0 million with fixed rate payments of 5.10%, which increased to 6.10% on May 5, 2025 in connection with the Third Amendment. Including the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2025 was 6.41%. Additionally, the Credit Agreement contains a commitment fee of 0.25% per annum on the amount unused under the Credit Agreement.

As of March 31, 2025, there were $445.0 million of loans under the Revolver, $264.9 million of Term Loans, and $2.8 million of letters of credit outstanding under the Credit Agreement. As of March 31, 2025, $352.2 million was available under the Credit Agreement, subject to compliance with the financial covenants. As of March 31, 2025, the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance decreased by $9.9 million at March 31, 2025 to $44.4 million as compared to $54.3 million at June 30, 2024. Our working capital was $247.7 million at March 31, 2025, a decrease of $27.9 million from $275.6 million at the end of fiscal 2024. Additionally, our total debt decreased by $35.1 million at March 31, 2025 to $709.0 million as compared to $744.1 million at June 30, 2024 as a result of net repayments carried out during the period.

Our cash balances are held in the U.S., U.K., Canada, Western Europe, the Middle East and India. As of March 31, 2025, substantially all cash was held outside of the U.S.

We maintain our cash and cash equivalents primarily in money market funds or their equivalent. Accordingly, we do not believe that our investments have significant exposure to interest rate risk. Cash provided (used in) by operating, investing and financing activities is summarized below.

(Dollars in thousands)

Cash provided by operating activities was $24.8 million for the nine months ended March 31, 2025, a decrease of $52.2 million from cash provided by operating activities of $77.0 million in the prior year period. This decrease in cash provided by operating activities versus the prior year period resulted primarily from higher cash utilization of $54.1 million for our working capital accounts, which was mainly due to higher inventory and a reduced benefit from accounts payable and accrued expenses, partially offset by an increase in accounts receivable recovery.

Cash used by investing activities was $0.4 million for the nine months ended March 31, 2025, a decrease of $22.9 million from cash used in investing activities of $23.2 million in the prior year period. The decrease in cash used by investing activities was primarily due to an increase in proceeds from asset sales of $12.3 million, primarily related to the sale of ParmCrisps®, and the receipt of a $2.6 million dividend from Hutchison Hain Organic Holdings Limited, a joint venture with HUTCHMED (China) Limited.

Cash used in financing activities was $36.5 million for the nine months ended March 31, 2025, a decrease of $19.6 million compared to $56.1 million in the prior year period. The decrease in cash used in financing activities was primarily due to lower net borrowings during the nine months ended March 31, 2025.

Free Cash Flow

Our free cash flow was $5.7 million for the nine months ended March 31, 2025, a decrease of $46.5 million from free cash flow of $52.2 million in the nine months ended March 31, 2024. The period-over-period change resulted primarily from a decrease in cash flows from operations of $52.2 million driven by the reasons explained above, partially offset by lower capital expenditures. See Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash provided by operating activities to free cash flow.

Share Repurchase Program

In January 2022, the Company’s Board of Directors authorized the repurchase of up to $200.0 million of the Company’s issued and outstanding common stock. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise. The current 2022 authorization does not have a stated expiration date. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations. During the nine months ended March 31, 2025, the Company did not repurchase any shares under the repurchase program. As of March 31, 2025, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures

We have included in this report measures of financial performance that are not defined by U.S. GAAP. We believe that these measures provide useful information to investors and include these measures in other communications to investors.

For each of these non-U.S. GAAP financial measures, we are providing below a reconciliation of the differences between the non-U.S. GAAP measure and the most directly comparable U.S. GAAP measure, an explanation of why our management and Board of Directors believe the non-U.S. GAAP measure provides useful information to investors and any additional purposes for which our management and Board of Directors use the non-U.S. GAAP measures. These non-U.S. GAAP measures should be viewed in addition to, and not in lieu of, the comparable U.S. GAAP measures.

Organic Net Sales

As noted above, we define organic net sales as net sales excluding the impact of acquisitions, divestitures, held for sale businesses, discontinued brands, exited product categories and foreign exchange. To adjust organic net sales for the impact of acquisitions, the net sales of an acquired business are excluded from fiscal quarters constituting or falling within the current period and prior period where the applicable fiscal quarter in the prior period did not include the acquired business for the entire quarter. To adjust organic net sales for the impact of divestitures, held for sale businesses, discontinued brands and exited product categories, the net sales of a divested business, held for sale business, discontinued brand or exited product category are excluded from all periods. To adjust organic net sales for the impact of foreign exchange, current period net sales for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year.

A reconciliation between reported net sales and organic net sales is as follows:

(Dollars in thousands)

Adjusted EBITDA

The Company defines Adjusted EBITDA as net loss before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses, certain litigation expenses, net, plant closure related costs, net, warehouse and manufacturing consolidation and other costs, net, productivity and transformation costs, costs associated with acquisitions, divestitures and other transactions, (gains) losses on sales of assets, goodwill impairment, long-lived asset and intangibles impairment and other adjustments. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation. Adjusted EBITDA is a non-U.S. GAAP measure and may not be comparable to similarly titled measures reported by other companies.

We do not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with U.S. GAAP. The principal limitation of Adjusted EBITDA is that it excludes certain expenses and income that are required by U.S. GAAP to be recorded in our consolidated financial statements. In addition, Adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining Adjusted EBITDA. In order to compensate for these limitations, management presents Adjusted EBITDA in connection with U.S. GAAP results.

A reconciliation of net loss to Adjusted EBITDA is as follows:

(Dollars in thousands)

(a) Expenses and items relating to securities class action and baby food litigation and SEC investigation.

Free Cash Flow

In our internal evaluations, we use the non-GAAP financial measure “Free Cash Flow.” The difference between Free Cash Flow and cash flows used in or provided by operating activities, which is the most comparable U.S. GAAP financial measure, is that Free Cash Flow reflects the impact of purchases of property, plant and equipment (capital spending). Since capital spending is essential to maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider capital spending when evaluating our cash flows provided by or used in operating activities. We view Free Cash Flow as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments. We do not consider Free Cash Flow in isolation or as an alternative to financial measures determined in accordance with U.S. GAAP.

A reconciliation from cash flows provided by operating activities to Free Cash Flow is as follows:

(Dollars in thousands)

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Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies; however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied. The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to variable consideration, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets. The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, from which there have been no material changes. We are providing the below update regarding goodwill.

Goodwill

In each quarter subsequent to our annual impairment assessment, we review events that occur or circumstances that change, including the macroeconomic environment, our business performance and our market capitalization, to determine if a quantitative impairment assessment is necessary. If assumptions are not achieved or market conditions decline, potential impairment charges could result. Impairments to goodwill and other intangible assets may be caused by factors outside our control, such as increasing competitive pricing pressures, changes in discount rates based on changes in cost of capital (i.e., as a result of changes in interest rates or other conditions), lower than expected sales and profit growth rates, changes in industry EBITDA multiples, the inability to quickly replace lost co-manufacturing business, or the bankruptcy of a significant customer, among others.

As of March 31, 2025, the Company performed an assessment of factors to determine whether it was more likely than not that the fair value of each reporting unit within both of the North America and International reportable segments was less than its respective carrying amount, including goodwill. As a result of a significant reduction in actual and projected performance and cash flows, as well as a continued decline in the Company’s market capitalization during the three months ended March 31, 2025, the Company completed an interim quantitative impairment test for goodwill for both its U.S. and Canada reporting units within the North America reportable segment as of March 31, 2025. For the U.K., Western Europe, and Ella’s Kitchen UK reporting units, the Company performed a qualitative evaluation to assess factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The Company concluded that the qualitatively tested reporting units’ estimated fair values exceeded their carrying amounts, while noting a recent decline in performance within the U.K. reporting unit.

During the three months ended March 31, 2025, the Company conducted interim quantitative impairment tests of goodwill for the U.S. and Canada reporting units. The fair values were estimated using a blended approach of the Discounted Cash Flow (“DCF”) method income approach and the Guideline Public Company Methodology (“GPCM”) market approach. As of March 31, 2025, the U.S. reporting unit’s carrying amount exceeded its estimated fair value of $690,000, resulting in the recognition of a non-cash impairment charge of $88,712 to reduce the carrying value of the U.S. reporting unit goodwill to $450,503. Aggregate goodwill impairment charges associated with the U.S. reporting unit were $179,979 for the nine months ended March 31, 2025. The Canada reporting unit’s carrying amount exceeded its estimated fair value of $28,549, resulting in the recognition of a non-cash impairment charge of $21,539 to reduce the carrying value of the Canada reporting unit goodwill to $17,549.

The goodwill related to the U.S., Canada and U.K. reporting units is at risk of potential impairment if the fair value of these reporting units, and their associated assets, decrease in value due to the amount and timing of expected future cash flows, decreased customer demand for products, an inability to execute management’s business strategies, or general market conditions, such as economic downturns, and changes in interest rates, including discount rates. Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company’s estimates. If the Company’s ongoing cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including an unfavorable change in the terminal growth rate or the weighted-average cost of capital, the Company may have to record additional impairment charges in future periods.

As of March 31, 2025, we considered our market capitalization and our net book value and performed a market capitalization reconciliation with the expectation that the market capitalization should reconcile within a reasonable range to the sum of the fair values of the Company's individual reporting units. Upon performing the market capitalization reconciliation, we noted a reasonable reconciliation between the sum of the reporting unit fair values and the Company’s market capitalization once adjusted for the impact of corporate costs not allocated to the reporting units. Refer to the critical accounting policies and estimates section included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Recent Accounting Pronouncements

Refer to Note 2, Basis of Presentation, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Seasonality

Certain of our product lines have seasonal fluctuations. Hot tea, hot-eating desserts and soup sales are stronger in colder months, while sales of snack foods, sunscreen and certain of our personal care products are stronger in the warmer months. As such, our results of operations and our cash flows for any particular quarter are not indicative of the results we expect for the full year, and our historical seasonality may not be indicative of future quarterly results of operations. Historically, net sales and diluted earnings per share in the first fiscal quarter have typically been the lowest of our four quarters.

There have been no significant changes in market risk from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 during the nine months ended March 31, 2025. See the information set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Evaluation of Disclosure Controls and Procedures

Our Interim Chief Executive Officer (“Interim CEO”) and Chief Financial Officer (“CFO”), with the assistance of other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Interim CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on this review, our Interim CEO and CFO have concluded that the disclosure controls and procedures for the Company were effective as of March 31, 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the discussion of the material factors contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on August 27, 2024.