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Activity at third-party distribution centers could be disrupted by a number of factors, including labor issues, failure to meet customer standards, natural disasters or financial issues affecting the third-party providers.
−Removed: In particular, the Russia-Ukraine war and recent labor market shortages impacting our industry have created operating challenges in making our products available to customers and consumers, and such challenges may persist.
−Removed: See “The Russia-Ukraine war could continue to cause challenges and create risks for our business.”
If we are unable to manage our supply chain efficiently and ensure that our products are available to meet consumer demand and customer orders, our sales and profitability could be materially adversely impacted.
−Removed: Our future results of operations may be adversely affected by input cost inflation.
+Added: Our future results of operations may be adversely affected by input cost inflation, including with respect to freight and other distribution costs.
Many aspects of our business have been, and may continue to be, directly affected by volatile commodity costs and other inflationary pressures.
−Removed: Our input costs began to increase significantly beginning in the latter part of fiscal 2021.
−Removed: That inflationary environment extended through fiscal 2022, and we expect the inflationary environment to continue throughout fiscal 2023.
Agricultural commodities and ingredients are subject to price volatility which can be caused by commodity market fluctuations, crop yields, seasonal cycles, weather conditions, temperature extremes and natural disasters (including due to the effects of climate change), pest and disease problems, changes in currency exchange rates, imbalances between supply and demand, and government programs and policies among other factors.
−Removed: Volatile fuel costs translate into unpredictable costs for the products and services we receive from our third-party providers including, but not limited to, distribution costs for our products and packaging costs.
+Added: Volatile fuel costs and other factors translate into unpredictable costs for the products and services we receive from our third-party providers including, but not limited to, freight and other distribution costs for our products and packaging costs.
While we seek to offset increased input costs with a combination of price increases to our customers, purchasing strategies, cost savings initiatives and operating efficiencies, we may be unable to fully offset our increased costs or unable to do so in a timely manner.
If we are unable to fully offset such cost increases, our financial results could be materially adversely affected.
−Removed: The Russia-Ukraine war could continue to cause challenges and create risks for our business.
−Removed: Although we have no material assets in Russia, Belarus or Ukraine, our supply chain has been, and may continue to be, adversely impacted by the Russia-Ukraine war, and we continue to face other challenges and risks arising from the war.
−Removed: In particular, the war has added significant costs to existing inflationary pressures through increased fuel and raw material prices and labor costs.
−Removed: Further, beyond increased costs, labor challenges and other factors have led to supply chain disruptions.
−Removed: While, to date, we have been able to identify replacement raw materials where necessary, we have incurred increased costs in doing so.
−Removed: For example, the supply of sunflower oil has become constrained, compelling us to identify and procure alternative oils.
−Removed: The war has also negatively impacted consumer sentiment, particularly in Europe, with some consumers shifting to lower-priced products, which has affected demand for our products.
−Removed: Additionally, we face increased cybersecurity risks, as companies based in the United States and its allied countries have become targets of malicious cyber activity.
−Removed: Although we are continuing to monitor and manage the impacts of the war on our business, the war and the related economic impact could continue to have a material adverse effect on our business and operating results.
Disruption or loss of operations at one or more of our manufacturing facilities could harm our business.
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A disruption of or the loss of operations at one or more of these facilities, which may be caused by disease outbreaks or pandemics, labor issues, natural disasters or governmental actions, could delay or postpone production of our products, which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: Recent labor market shortages have impacted, and may continue to impact, operations at our manufacturing facilities.
+Added: Labor market shortages have impacted, and may continue to impact, operations at our manufacturing facilities.
Loss of one or more of our independent contract manufacturers could adversely affect our business.
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Therefore, if we lose or need to change one or more co-manufacturers or fail to retain co-manufacturers for newly acquired or developed products or brands, production of our products may be delayed or postponed and/or the availability of some of our products may be reduced or eliminated, which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: The COVID-19 pandemic continues to have societal and economic effects that create challenges and uncertainty, and our business and operating results may be adversely affected if we do not manage our business effectively in response.
−Removed: The COVID-19 pandemic continues to contribute to challenging and unprecedented conditions.
−Removed: The impacts of the pandemic could exacerbate conditions in our other risk factors noted in this Item 1A, “Risk Factors.” Challenges exacerbated by the ongoing effects of the pandemic include but are not limited to:
−Removed: • manufacturing and supply chain challenges, including labor market shortages;
−Removed: • a shifting demand environment as a result of changing consumer behaviors amid uncertain economic conditions;
−Removed: • increased costs of operating our business and managing our supply chain.
−Removed: If we are unable to successfully manage our business through the continued challenges and uncertainty related to the COVID-19 pandemic, our business and operating results could be materially adversely affected.
Our growth and continued success depend upon consumer preferences for our products, which could change.
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During an economic downturn, factors such as increased unemployment, decreases in disposable income and declines in consumer confidence could cause a decrease in demand for our overall product set, particularly higher priced better-for-you products.
−Removed: As noted above, other factors can and have adversely impacted consumer demand for our products, including the Russia-Ukraine war, which has prompted consumers, particularly in
−Removed: Europe to shift to lower-priced products, affecting demand for our products.
While we continue to diversify our product offerings, developing new products entails risks, and demand for our products may not continue at current levels or increase in the future.
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In addition, we have other product categories that are subject to evolving consumer preferences.
−Removed: Consumer demand could change based on a number of possible factors, including dietary habits and nutritional values, concerns regarding the health and environmental effects of ingredients and shifts in preference for various product attributes.
+Added: Consumer demand could change based on a number of possible factors, including dietary habits and nutritional values, concerns regarding the health of ingredients and the environmental effects of ingredients and packaging, and shifts in preference for various product attributes.
A significant shift in consumer demand away from our products could reduce the sales of our brands or our market share, both of which could harm our business.
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We rely on independent distributors for a substantial portion of our sales.
−Removed: In our United States operating segment, we rely upon sales made by or through non-affiliated distributors to customers.
+Added: In the United States, we rely upon sales made by or through non-affiliated distributors to customers.
Distributors purchase directly for their own account for resale.
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Our inability to enter into satisfactory distribution agreements may inhibit our ability to implement our business plan or to establish markets necessary to successfully expand the distribution of our products.
−Removed: Our future results of operations may be adversely affected by the availability of natural and organic ingredients.
−Removed: Our ability to ensure a continuing supply of natural and organic ingredients at competitive prices depends on many factors beyond our control, such as the number and size of farms that grow natural and organic crops, climate conditions, increased demand for natural and organic ingredients by our competitors, changes in national and world economic conditions, currency fluctuations and forecasting adequate need of seasonal ingredients.
−Removed: The natural and organic ingredients that we use in the production of our products (including, among others, vegetables, fruits, nuts and grains) are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity, temperature extremes, wildfires, frosts, earthquakes and pestilences.
−Removed: Natural disasters and adverse weather conditions can lower crop yields and reduce crop size and crop quality, which in turn could reduce our supplies of natural and organic ingredients or increase the prices of those ingredients.
−Removed: Such natural disasters and adverse weather conditions can be caused or exacerbated by climate change, and the spate of recent extreme weather events, including historic droughts, heatwaves, extreme cold and flooding , presents an alarming trend.
−Removed: If our supplies of natural and organic ingredients are reduced, we may not be able to find enough supplemental supply sources on favorable terms, if at all, which could impact our ability to supply products to our customers and adversely affect our business, financial condition and results of operations.
−Removed: We also compete with other manufacturers in the procurement of natural and organic product ingredients, which may be less plentiful in the open market than conventional product ingredients.
−Removed: This competition may increase in the future if consumer demand for natural and organic products increases.
−Removed: This could cause our expenses to increase or could limit the amount of products that we can manufacture and sell.
We are subject to risks associated with our international sales and operations, including foreign currency, compliance and trade risks.
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• currency exchange rate fluctuations;
−Removed: • pandemics, such as COVID-19 or the flu, which may adversely affect our workforce as well as our local suppliers and customers;
• varying abilities to enforce intellectual property and contractual rights;
−Removed: • periodic economic downturns and the instability of governments, including default or deterioration in the credit worthiness of local governments, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, public corruption, expropriation and other economic or political uncertainties;
+Added: • periodic economic downturns and the instability of governments, including default or deterioration in the credit worthiness of local governments, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, public corruption, instability in the financial services sector, expropriation and other economic or political uncertainties;
• greater risk of uncollectible accounts and longer collection cycles.
−Removed: We have outsourced certain functions in our North American business to third-party service providers, and any service failures or disruptions related to these outsourcing arrangements could adversely affect our business.
−Removed: We recently completed the process of outsourcing certain functions in our North American business, including order management, billing, accounts receivable and accounts payable, to third-party service providers.
−Removed: We also implemented new procurement technology solutions as part of this initiative.
+Added: Our future results of operations may be adversely affected by the availability of natural and organic ingredients.
+Added: Our ability to ensure a continuing supply of natural and organic ingredients used in certain of our products at competitive prices depends on many factors beyond our control, such as the number and size of farms that grow natural and organic crops, climate conditions, increased demand for natural and organic ingredients by our competitors for these scarce ingredients, climate conditions, global unrest and changes in national and world economic conditions, currency fluctuations and forecasting adequate need of seasonal ingredients.
+Added: The natural and organic ingredients that we use in the production of our products (including, among others, vegetables, fruits, nuts and grains) are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity,
+Added: temperature extremes, wildfires, frosts, earthquakes and pestilences.
+Added: Natural disasters and adverse weather conditions can lower crop yields and reduce crop size and crop quality, which in turn could reduce our supplies of natural and organic ingredients or increase the prices of those ingredients.
+Added: Such natural disasters and adverse weather conditions can be caused or exacerbated by climate change, and the spate of recent extreme weather and climate-related events, including historic droughts, heatwaves, wildfires, extreme cold and flooding, presents an alarming trend.
+Added: If our supplies of natural and organic ingredients are reduced, we may not be able to find enough supplemental supply sources on favorable terms, if at all, which could impact our ability to supply products to our customers and adversely affect our business, financial condition and results of operations.
+Added: We also compete with other manufacturers in the procurement of natural and organic product ingredients, which may be less plentiful in the open market than conventional product ingredients.
+Added: This competition may increase in the future if consumer demand for natural and organic products increases.
+Added: This could cause our expenses to increase or could limit the amount of products that we can manufacture and sell.
+Added: We have outsourced certain functions to third-party service providers, and any service failures or disruptions related to these outsourcing arrangements could adversely affect our business.
+Added: We have outsourced certain business processes in the areas of supply chain, accounting and information technology to managed service providers, globally.
We face risks associated with third parties managing these functions for us.
For example, we have diminished control over the quality and timeliness of the outsourced services, including the cyber security protections implemented by these third parties.
−Removed: As a result of these outsourcing arrangements, we may experience interruptions or delays in our order-to-cash and procure-to-pay processes, loss or theft of sensitive data or other cyber security issues, compliance issues, challenges in maintaining and reporting financial and operational information, and increased costs to remediate any unanticipated issues that arise, any of which could materially and adversely affect our business, financial condition and results of operations.
+Added: As a result of these outsourcing arrangements, we may experience interruptions or delays in our processes, loss or theft of sensitive data or other cyber security issues, compliance issues, challenges in maintaining and reporting financial and operational information, and increased costs to remediate any unanticipated issues that arise, any of which could materially and adversely affect our business, financial condition and results of operations.
We may not be successful in achieving savings and efficiencies from cost reduction initiatives and related strategic initiatives.
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As part of our identification of operating efficiencies, we may continue to seek to dispose of businesses and brands that are less profitable or are otherwise less of a strategic fit within our core portfolio.
−Removed: We may not be successful in fully implementing our productivity plans or realizing our anticipated savings and efficiencies, including potentially as a result of factors outside our control.
+Added: We may not be successful in fully implementing our cost savings plans or realizing our anticipated savings and efficiencies, including potentially as a result of factors outside our control.
Additionally, we may not be able to identify or negotiate divestiture opportunities on terms acceptable to us.
If we are unable to fully realize the anticipated savings and efficiencies of our cost reduction initiatives and related strategic initiatives, our profitability may be materially and adversely impacted.
+Added: The Russia-Ukraine war could continue to cause challenges and create risks for our business.
+Added: Although we have no material assets in Russia, Belarus or Ukraine, our supply chain has been, and may continue to be, adversely impacted by the Russia-Ukraine war.
+Added: In particular, the war has added significant costs to existing inflationary pressures through increased fuel and raw material prices and labor costs.
+Added: Further, beyond increased costs, labor challenges and other factors have led to supply chain disruptions.
+Added: While, to date, we have been able to identify replacement raw materials where necessary, we have incurred increased costs in doing so.
+Added: Although we are continuing to monitor and manage the impacts of the war on our business, the war and the related economic impact could continue to have a material adverse effect on our business and operating results.
Our business, operating results and financial condition may be adversely affected by the failure to successfully execute acquisitions or dispositions or to successfully integrate completed acquisitions.
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These trademark license agreements may not remain in effect or be enforceable, and our license agreements, upon expiration, may not be renewed on acceptable terms or at all.
−Removed: Risks Related to Economic and Political Considerations
+Added: Risks Related to Economic Considerations
+Added: Currency exchange rate fluctuations could adversely affect our consolidated financial results and condition.
+Added: We are subject to risks related to fluctuations in currency exchange rates.
+Added: Our consolidated financial statements are presented in United States Dollars, requiring us to translate our assets, liabilities, revenue and expenses into United States Dollars.
+Added: As a result, changes in the values of currencies may unpredictably and adversely impact our consolidated operating results, our asset and liability balances and our cash flows in our consolidated financial statements even if their value has not changed in their original currency.
Disruptions in the worldwide economy and the financial markets may adversely impact our business and results of operations.
1 unchanged sentence
Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns, which may adversely affect our results of operations.
−Removed: Consumers may also reduce the number of organic and natural
−Removed: products that they purchase where there are conventional alternatives, given that organic and natural products generally have higher retail prices than do their conventional counterparts.
+Added: Consumers may also reduce the number of organic and natural products that they purchase where there are conventional alternatives, given that organic and natural products generally have higher retail prices than do their conventional counterparts.
In addition, consumers may choose to purchase private label products rather than branded products, which generally have lower retail prices than do their branded counterparts.
1 unchanged sentence
Prolonged unfavorable economic conditions may have an adverse effect on any of these factors and, therefore, could adversely impact our sales and profitability.
−Removed: Currency exchange rate fluctuations could adversely affect our consolidated financial results and condition.
−Removed: We are subject to risks related to fluctuations in currency exchange rates.
−Removed: Our consolidated financial statements are presented in United States Dollars, requiring us to translate our assets, liabilities, revenue and expenses into United States Dollars.
−Removed: As a result, changes in the values of currencies may unpredictably and adversely impact our consolidated operating results, our asset and liability balances and our cash flows in our consolidated financial statements even if their value has not changed in their original currency.
−Removed: A significant portion of our business has exposure to continued uncertainty and burdens in the United Kingdom following its exit from the European Union, commonly referred to as “Brexit.”
−Removed: In fiscal years 2022 and 2021, approximately 26% and 31%, respectively, of our consolidated sales were generated in the United Kingdom, which continues to experience economic and market uncertainty following Brexit.
−Removed: Brexit has caused and may continue to cause disruptions to and create uncertainty surrounding our business, including affecting our relationships with our existing and future customers and suppliers, which could have an adverse effect on our business, financial results and operations.
−Removed: In addition to ongoing general market uncertainty caused by Brexit, the importing and exporting of goods and ingredients now involves additional administrative burdens, adding friction and cost to trade between the United Kingdom and member countries of the European Union.
Risks Related to Information Security and Technology
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The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, causing our business and results of operations to suffer.
−Removed: In addition, our information technology systems may be vulnerable to damage or interruption from
−Removed: circumstances beyond our control, including fire, natural disasters, system failures and viruses.
+Added: In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, system failures and viruses.
Any such damage or interruption could have a material adverse effect on our business.
Risks Related to ESG Considerations
+Added: Changing rules, public disclosure regulations and stakeholder expectations on ESG-related matters create a variety of risks for our business.
+Added: Increasingly, regulators, consumers, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
+Added: These changing rules, public disclosure regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased management time and attention spent complying with or meeting such regulations and expectations.
+Added: For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies.
+Added: This rapidly changing environment may result in increased general and administrative expenses.
+Added: We may also communicate certain initiatives and goals regarding environmental matters, diversity and other ESG-related matters.
+Added: These initiatives and goals could be difficult and expensive to implement, and we could be criticized for the accuracy, adequacy or completeness of the disclosure.
+Added: Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
+Added: In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals.
+Added: If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, results of operations and financial condition could be adversely impacted.
Climate change may negatively affect our business and operations.
There is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters.
−Removed: The spate of recent extreme weather events, including historic droughts, heatwaves, extreme cold and flooding , presents an alarming trend.
+Added: The spate of recent extreme weather and climate-related events, including historic droughts, heatwaves, wildfires, extreme cold and flooding , presents an alarming trend.
In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as vegetables, fruits, grains, beans and nuts .
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Risks Related to Litigation, Government Regulation and Compliance
+Added: Pending and future litigation may lead us to incur significant costs.
+Added: We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, the marketing and labeling of products, employment matters, environmental matters, data protection or other aspects of our business as well as any securities class action and stockholder derivative litigation.
+Added: For example, as discussed in Note 17, Commitments and Contingencies , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K, we are currently subject to class actions and derivative complaints arising out of or related to the Company’s prior internal accounting review.
+Added: Certain of our former officers and former members of our Board of Directors, as individual defendants, are also subject to lawsuits related to such accounting review, and we may have an obligation to indemnify them in relation to these matters.
+Added: Additionally, as discussed further in Note 17, we are subject to consumer class actions, and other lawsuits alleging some form of personal injury, relating to our Earth’s Best ® baby food products.
+Added: Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits.
+Added: The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some or all of these legal disputes may result in monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our results of operations and financial condition.
+Added: Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
We may be subject to significant liability should the consumption of any of our products cause illness or physical harm.
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Consequently, we are subject to a heightened risk of legal claims, government investigations and other regulatory enforcement actions.
−Removed: We are subject
−Removed: to extensive regulations in the United States, United Kingdom, Canada, Europe, Asia, including India, and any other countries where we manufacture, distribute and/or sell our products.
+Added: We are subject to extensive regulations in the United States, United Kingdom, Canada, Europe, Asia, including India, and any other countries where we manufacture, distribute and/or sell our products.
Our products are subject to numerous product safety and other laws and regulations relating to the registration and approval, sourcing, manufacturing, storing, labeling, marketing, advertising and distribution of these products.
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Legal claims, government investigations or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could subject us to civil and criminal penalties that could materially and adversely affect our product sales, reputation, financial condition and operating results.
−Removed: In addition, the costs and other effects of defending potential and pending litigation and administrative actions against us may be difficult to determine and could adversely affect our financial condition and operating results.
−Removed: Pending and future litigation may lead us to incur significant costs.
−Removed: We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, the marketing and labeling of products, employment matters, environmental matters, data protection or other aspects of our business as well as any securities class action and stockholder derivative litigation.
−Removed: For example, as discussed in Note 18, Commitments and Contingencies , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K, we are currently subject to class actions and derivative complaints arising out of or related to the Company’s prior internal accounting review.
−Removed: Certain of our former officers and former members of our Board of Directors, as individual defendants, are also subject to lawsuits related to such accounting review, and we may have an obligation to indemnify them in relation to these matters.
−Removed: Additionally, as discussed further in Note 18, we are subject to consumer class actions, and other lawsuits alleging some form of personal injury, relating to our Earth’s Best ® baby food products.
−Removed: Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits.
−Removed: The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some or all of these legal disputes may result in monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our results of operations and financial condition.
−Removed: Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
+Added: In addition, the costs and other effects
+Added: of defending potential and pending litigation and administrative actions against us may be difficult to determine and could adversely affect our financial condition and operating results.
Compliance with data privacy laws may be costly, and non-compliance with such laws may result in significant liability.
−Removed: Many jurisdictions in which the Company operates have laws and regulations relating to data privacy and protection of personal information, including the European Union GDPR and the California Consumer Privacy Act of 2018 (“CCPA”).
−Removed: states have, in recent years, begun to adopt their own omnibus, industry-neutral privacy statutes, such as Colorado, Connecticut, Utah and Virginia.
+Added: Many jurisdictions in which the Company operates have laws and regulations relating to data privacy and protection of personal information, including the European Union GDPR and the California Consumer Privacy Act of 2018 (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”).
+Added: In recent years, other U.S.
+Added: states such as Colorado, Connecticut, Indiana, Iowa, Montana, Tennessee, Utah and Virginia have begun to adopt their own privacy statutes, which may apply to the Company.
Failure to comply with GDPR or CCPA requirements or other data privacy laws could result in litigation, adverse publicity and significant penalties and damages.
−Removed: The law in this area continues to develop, and the changing nature of privacy laws could impact the Company’s processing of personal information related to the Company’s employees, consumers, customers and vendors.
+Added: The law in this area continues to develop, and the changing nature of privacy laws could impact the Company’s processing of personal information related to the Company’s job applicants, employees, consumers, customers and vendors.
The enactment of more restrictive laws, rules or regulations or future enforcement actions or investigations could impact us through increased costs or restrictions on our business, and noncompliance could result in regulatory penalties and significant liability.
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These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.
−Removed: The credit agreement contains restrictive covenants including, with specified exceptions, limitations on our ability to engage in certain business activities, incur debt and liens, make capital expenditures, pay dividends or make other distributions, enter into affiliate transactions, consolidate, merge or acquire or dispose of assets, and make certain investments, acquisitions and loans.
−Removed: The credit agreement also requires us to satisfy certain financial covenants, such as maintaining a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio.
+Added: The credit agreement requires us to satisfy certain financial covenants, such as maintaining a maximum consolidated secured leverage ratio and a minimum consolidated interest coverage ratio.
+Added: The credit agreement also contains restrictive covenants including, with specified exceptions, limitations on our ability to engage in certain business activities, incur debt and liens, make capital expenditures, pay dividends or make other distributions, enter into affiliate transactions, consolidate, merge or acquire or dispose of assets, and make certain investments, acquisitions and loans.
Our ability to comply with these covenants under the credit agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions.
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Any default by us under the credit agreement could have a material adverse effect on our business and financial condition.
−Removed: We may be adversely impacted by the discontinuation of the London Interbank Offered Rate, or LIBOR.
−Removed: We have loans under our credit facility and interest rate swap agreements that are indexed to LIBOR, which is being replaced.
−Removed: While we have sought to reduce future interest rate volatility by entering into floating rate to fixed rate swap agreements with respect to a substantial portion of our outstanding indebtedness, the transition away from LIBOR may nonetheless cause us to incur increased costs and additional risk.
−Removed: Following the transition, interest rates will generally be based on an alternative variable rate specified in the documentation governing our indebtedness or swaps or as otherwise agreed upon.
−Removed: The alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance.
−Removed: Certain risks arise in transitioning contracts to an alternative variable rate.
−Removed: The method of transitioning to an alternative rate may be challenging and may require substantial negotiation with the counterparty to each contract.
−Removed: If a contract is not transitioned to an alternative variable rate, the impact is likely to vary by contract.
Risks Related to Corporate Governance
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As of June 30, 2023, we had goodwill of $938.6 million and trademarks and other intangibles assets of $298.1 million, which in the aggregate represented 55% of our total consolidated assets.
−Removed: The net carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as of the acquisition date (or subsequent impairment date, if applicable).
+Added: The net carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable ass ets and liabilities as of the acquisition date (or subsequent impairment date, if applicable).
The net carrying value of trademarks and other intangibles represents the fair value of trademarks, customer relationships and other acquired intangibles as of the acquisition date (or subsequent impairment date, if applicable), net of accumulated amortization.
1 unchanged sentence
Amortized intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable.
−Removed: 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 (interest rates, etc.),
−Removed: lower than expected sales and profit growth rates, changes in industry Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) multiples, the inability to quickly replace lost co-manufacturing business, or the bankruptcy of a significant customer.
+Added: 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 (interest rates, etc.), lower than expected sales and profit growth rates, changes in industry Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) multiples, the inability to quickly replace lost co-manufacturing business, or the bankruptcy of a significant customer.
We have in the past recorded, and may in the future be required to record, significant charges in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is determined.
−Removed: The incurrence of impairment charges could negatively affect our results of operations and adversely impact our net worth and our consolidated earnings in the period of such charge.
+Added: For example, during fiscal 2023, we recorded aggregate non-cash impairment charges of $174.9 million related to certain trademarks and intangible assets to reduce their carrying value to their estimated fair value.
+Added: The incurrence of additional impairment charges could negatively affect our results of operations and adversely impact our net worth and our consolidated earnings in the period of such charge.
+Added: For further information, see Note 8, Goodwill and Other Intangible Assets , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
Unresolved Staff Comments
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.