HAIN CELESTIAL GROUP INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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, 2024 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2023. 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, along with its subsidiaries, the “Company,” and herein referred to as “Hain Celestial,” “we,” “us” and “our”), was founded in 1993. The Company is a leading manufacturer, marketer, and seller of better-for-you brands that inspire healthier living. The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes. Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores worldwide. The Company’s food and beverage brands include Celestial Seasonings ® , Clarks™, Cully & Sully ® , Earth’s Best ® , Ella’s Kitchen ® , Frank Cooper’s ® , Garden of Eatin’ ® , Garden Veggie™, Hartley’s ® , Health Valley ® , Imagine ® , Joya ® , Lima ® , Linda McCartney’s ® (under license), MaraNatha ® , Natumi ® , New Covent Garden Soup Co. ® , ParmCrisps ® , Robertson’s ® , Rose’s ® (under license), Sensible Portions ® , Spectrum ® , Sun-Pat ® , Terra ® , The Gre ek Gods ® , Yorkshire Provender ® and Yves Veggie Cuisine ® . The Company’s personal care brands include Alba Botanica ® , Avalon Organics ® , JASON ® , Live Clean ® and Queen Helene ® . 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”) to drive shareholder returns. The savings initiatives are expected to 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. Hain Reimagined Program is grounded on four strategic pillars: • Focus ◦ Concentrate our portfolio in five consumer-centric Better-For-You (“BFY”) platforms: Snacks, Baby & Kids, Beverages, Meal Preparation, and Personal Care. ◦ Simplify our footprint, maintaining direct presence in five key markets – United States, Canada, UK, 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 its 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. Cumulative pretax charges are expected to be $115 million - $125 million inclusive of potential inventory reductions 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, 2024, we incurred approximately $10 million and $50 million, respectively, of expenses associated with the Company’s restructuring program. Annualized pretax savings are expected to be $130 million - $150 million. As part of the Hain Reimagined Program, we initiated actions to consolidate our personal care manufacturing footprint and rationalize certain product categories for greater capacity utilization, cost reduction and margin expansion. The Company also simplified its distribution footprint in the U.S. and initiated actions to exit its non-strategic joint venture in India as part of the Focus and Fuel pillars of Hain Reimagined Program. Implementation of the Hain Reimagined Program is expected to be completed by the end of the 2027 fiscal year. 37 Table of Contents Global Economic Environment The duration and intensity of inflation fluctuations, the possibility of an impending recession, alterations in consumer shopping and consumption patterns, and shifts in geopolitical events, such as the ongoing Russia-Ukraine conflict and the continuing Gaza Strip conflict, may lead to increased supply chain expenses, higher inflation, and other business impacts. 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, 2024 to Three Months Ended March 31, 2023 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, 2024 and 2023 (amounts in thousands, other than per share data and percentages, which may not add due to rounding): Three Months Ended Change in March 31, 2024 March 31, 2023 Dollars Percentage Net sales $ 438,358 100.0% $ 455,243 100.0% $ (16,885) (3.7)% Cost of sales 341,687 77.9% 357,764 78.6% (16,077) (4.5)% Gross profit 96,671 22.1% 97,479 21.4% (808) (0.8)% Selling, general and administrative expenses 66,716 15.2% 75,047 16.5% (8,331) (11.1)% Intangibles and long-lived asset impairment 49,426 11.3% 156,583 34.4% (107,157) (68.4)% Productivity and transformation costs 7,175 1.6% 3,933 0.9% 3,242 82.4% Amortization of acquired intangible assets 1,255 0.3% 2,842 0.6% (1,587) (55.8)% Operating loss (27,901) (6.4)% (140,926) (31.0)% 113,025 (80.2)% Interest and other financing expense, net 14,127 3.2% 13,421 2.9% 706 5.3% Other expense, net 100 —% 439 0.1% (339) (77.2)% Loss before income taxes and equity in net loss of equity-method investees (42,128) (9.6)% (154,786) (34.0)% 112,658 (72.8)% Provision (benefit) for income taxes 5,100 1.2% (39,587) (8.7)% 44,687 * Equity in net loss of equity-method investees 966 0.2% 528 0.1% 438 83.0% Net loss $ (48,194) (11.0)% $ (115,727) (25.4)% $ 67,533 (58.4)% Adjusted EBITDA $ 43,762 10.0% $ 37,260 8.2% $ 6,502 17.5% Diluted net loss per common share $ (0.54) $ (1.29) $ 0.75 (58.1)% * Percentage is not meaningful due to one or more numbers being negative. Net Sales Net sales for the three months ended March 31, 2024 were $438.4 million, a decrease of $16.9 million, or 3.7%, as compared to $455.2 million for the three months ended March 31, 2023. Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $17.0 million, or 3.7%, from the prior year quarter due to a decline in the North America reportable segment, partially offset by growth in the International reportable segment. The effect of fluctuations in foreign currency exchange rates increased net sales by $5.8 million. Further details of changes in net sales by segment are provided below in the Segment Results section. 38 Table of Contents Gross Profit Gross profit for the three months ended March 31, 2024 was $96.7 million, a decrease of $0.8 million, or 0.8%, as compared to the prior year quarter. Gross profit margin of 22.1% was slightly higher when compared with 21.4% in the prior year quarter. The decrease in gross profit was driven primarily by the North America reportable segment, mainly due to lower sales volume and recognition of charges in the three months ended March 31, 2024 associated with the consolidation of facilities, partially offset by improvements in pricing and productivity. Gross profit in the International reportable segment increased for the three months ended March 31, 2024 compared to the prior year quarter mainly driven by lower cost of goods sold due to lower inflation and better prices on key commodities. Selling, General and Administrative Expenses Selling, general and administrative expenses were $66.7 million for the three months ended March 31, 2024, a decrease of $8.3 million, or 11.1%, from $75.0 million for the prior year quarter. The decrease was primarily due to a decrease in employee compensation-related expenses. Intangibles and long-lived asset impairment During the three months ended March 31, 2024, the Company recognized a non-cash impairment charge of $49.4 million primarily related to ParmCrisps ® , Thinsters ® , and certain North America personal care intangible asset impairment charges. During the three months ended March 31, 2023, the Company recognized an aggregate non-cash impairment charge of $156.6 million, primarily related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, which reduced the carrying amount of such assets to their estimated fair value. See Note 8, 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 $7.2 million for the three months ended March 31, 2024, an increase of $3.2 million from $3.9 million in the prior year quarter. The increase was primarily due to the recognition of restructuring costs incurred in connection with the Hain Reimagined Program, including reorganization of global functions and related personnel resource requirements and rationalizing our sourcing and supply chain processes. Amortization of Acquired Intangible Assets Amortization of acquired intangible assets was $1.3 million for the three months ended March 31, 2024, a decrease of $1.6 million from $2.8 million in the prior year quarter, primarily reflecting reduced amortization expenses due to impairment of the ParmCrisps ® customer relationships recognized in the third quarter of fiscal 2023. See Note 8, Goodwill and Other Intangible Assets , in the Notes to the Consolidated Financial Statements included in Item 8 of the Form 10-K. Operating Loss Operating loss for the three months ended March 31, 2024 was $27.9 million compared to $140.9 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 $14.1 million for the three months ended March 31, 2024, an increase of $0.7 million, or 5.3%, from $13.4 million in the prior year quarter. The increase resulted primarily from higher borrowing rates, partially offset by a lower outstanding debt balance compared to the prior year quarter. See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Other Expense, Net Other expense, net was $0.1 million for the three months ended March 31, 2024, compared to $0.4 million in the prior year quarter. The decrease in other expense, net was primarily attributable to lower foreign currency losses. 39 Table of Contents 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, 2024 was $42.1 million compared to $154.8 million in the prior year quarter. The change 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 expense was $5.1 million for the three months ended March 31, 2024 compared to a benefit of $39.6 million in the prior year quarter. The effective income tax rate was an expense of 12.1% and a benefit of 25.6% for the three months ended March 31, 2024 and 2023, respectively. The effective income tax rate for the three months ended March 31, 2024 was impacted by an increase in the federal and state valuation allowance, tax expense related to stock-based compensation, global intangible low-taxed income (“GILTI”), and limitations on the deductibility of executive compensation. The effective income tax rate for the three months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, stock-based compensation and changes in uncertain tax positions. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes. Equity in Net Loss of Equity-Method Investees Our equity in net loss from our equity-method investments for the three months ended March 31, 2024 and 2023 was $1.0 million and $0.5 million, respectively. See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Net Loss Net loss for the three months ended March 31, 2024 was $48.2 million, or $0.54 per diluted share, compared to $115.7 million, or $1.29 per diluted share, in the prior year quarter. The change was attributable to the factors noted above. Adjusted EBITDA Our Adjusted EBITDA was $43.8 million and $37.3 million for the three months ended March 31, 2024 and 2023, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures presented following the discussion of our results of operations. 40 Table of Contents Segment Results Our organizational structure consists of two geographic based reportable segments: North America and International, which are also the operating segments. This structure is in line with how the Company’s Chief Operating Decision Maker (“CODM”) assesses the Company’s performance and allocates resources. The Company uses segment net sales and segment Adjusted EBITDA in order to analyze segment results and trends. Segment Adjusted EBITDA excludes: 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 and related costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, net, costs associated with acquisitions, divestitures and other transactions, (gain) loss on sale of assets, inventory write-downs related to exited categories, intangibles and long-lived asset impairments and other adjustments. In addition, Segment Adjusted EBITDA does not include Corporate and Other expenses related to the Company’s centralized administrative functions, which do not specifically relate to a reportable segment. Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise, litigation expense and expenses for certain professional fees, facilities, and other items which benefit the Company as a whole. We do not allocate amounts below operating (loss) income to our reportable segments. The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended March 31, 2024 and 2023: (dollars in thousands) North America International Corporate and Other Consolidated Net sales Three months ended 03/31/24 $ 268,107 $ 170,251 $ — $ 438,358 Three months ended 03/31/23 286,649 168,594 — 455,243 $ change $ (18,542) $ 1,657 n/a $ (16,885) % change (6.5) % 1.0 % n/a (3.7) % Adjusted EBITDA Three months ended 03/31/24 $ 27,883 $ 24,547 $ (8,668) $ 43,762 Three months ended 03/31/23 27,193 21,269 (11,202) 37,260 $ change $ 690 $ 3,278 $ 2,534 $ 6,502 % change 2.5 % 15.4 % 22.6 % 17.5 % Adjusted EBITDA margin Three months ended 03/31/24 10.4 % 14.4 % n/a 10.0 % Three months ended 03/31/23 9.5 % 12.6 % n/a 8.2 % 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, 2024 were $268.1 million, a decrease of $18.5 million, or 6.5%, from net sales of $286.6 million in the prior year quarter. The decrease in net sales was primarily due to lower sales in the personal care category on account of distribution losses and lower sales in the baby/kids category due to continued challenges in organic formula supply, partially offset by growth in the beverages category. Adjusted EBITDA for the three months ended March 31, 2024 was $27.9 million, an increase of $0.7 million, or 2.5%, from Adjusted EBITDA of $27.2 million in the prior year quarter. The increase in Adjusted EBITDA reflected lower selling, general and administrative expenses primarily associated with reduced compensation-related costs and operating-model savings, partially offset by reduced gross profit reflecting lower sales volume and the impact of inflation. Adjusted EBITDA margin was 10.4%, a 90-basis point increase from the prior year period. 41 Table of Contents International Net sales in the International reportable segment for the three months ended March 31, 2024 were $170.3 million, an increase of $1.7 million, or 1.0%, from net sales of $168.6 million in the prior year quarter. The net sales increase was mainly driven by growth in the beverages category due to pricing and strong private label performance, partially offset by a decline in the meal preparation category. The increase also reflected 3.4% of growth from the favorable impact of foreign exchange. Adjusted EBITDA for the three months ended March 31, 2024 was $24.5 million, an increase of $3.3 million, or 15.4%, from Adjusted EBITDA of $21.3 million in the prior year quarter. The increase was primarily driven by an increase in gross profit reflecting higher net sales due to pricing, partially offset by lower volumes. Adjusted EBITDA margin was 14.4%, a 180-basis point increase from the prior year period. Corporate and Other The decrease in Corporate and Other expenses primarily reflected a reduction in compensation-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. 42 Table of Contents Comparison of Nine Months Ended March 31, 2024 to Nine Months Ended March 31, 2023 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, 2024 and 2023 (amounts in thousands, other than per share data and percentages, which may not add due to rounding): Nine Months Ended Change in March 31, 2024 March 31, 2023 Dollars Percentage Net sales $ 1,317,487 100.0% $ 1,348,802 100.0% $ (31,315) (2.3)% Cost of sales 1,034,658 78.5% 1,053,131 78.1% (18,473) (1.8)% Gross profit 282,829 21.5% 295,671 21.9% (12,842) (4.3)% Selling, general and administrative expenses 217,837 16.5% 222,355 16.5% (4,518) (2.0)% Intangibles and long-lived asset impairment 70,786 5.4% 156,923 11.6% (86,137) (54.9)% Productivity and transformation costs 20,447 1.6% 5,692 0.4% 14,755 259.2% Amortization of acquired intangible assets 4,719 0.4% 8,415 0.6% (3,696) (43.9)% Operating loss (30,960) (2.3)% (97,714) (7.2)% 66,754 (68.3)% Interest and other financing expense, net 43,509 3.3% 31,910 2.4% 11,599 36.3% Other income, net (207) —% (2,413) (0.2)% 2,206 (91.4)% Loss before income taxes and equity in net loss of equity-method investees (74,262) (5.6)% (127,211) (9.4)% 52,949 (41.6)% Benefit for income taxes (4,528) (0.3)% (30,599) (2.3)% 26,071 (85.2)% Equity in net loss of equity-method investees 2,371 0.2% 1,226 0.1% 1,145 93.4% Net loss $ (72,105) (5.5)% $ (97,838) (7.3)% $ 25,733 (26.3)% Adjusted EBITDA $ 114,978 8.7% $ 123,106 9.1% $ (8,128) (6.6)% Diluted net loss per common share $ (0.80) $ (1.09) $ 0.29 (26.6)% Net Sales Net sales for the nine months ended March 31, 2024 were $1,317.5 million, a decrease of $31.3 million, or 2.3%, as compared to $1,348.8 million for the nine months ended March 31, 2023. Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $28.5 million, or 2.1%, from the prior comparable period due to a decline in the North America reportable segment, partially offset by growth in the International reportable segment. The effect of fluctuations in foreign currency exchange rates increased net sales by $26.6 million. 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, 2024 was $282.8 million, a decrease of $12.8 million, or 4.3%, as compared to the prior year comparable period. Gross profit margin was 21.5% of net sales, compared to 21.9% in the prior year comparable period. The decrease in gross profit was driven primarily by the North America reportable segment, mainly due to lower sales volume as well as by inflation, partially offset by pricing and productivity. Gross profit in the International reportable segment increased during the nine months ended March 31, 2024 compared to the prior year period, mainly driven by higher net sales due to pricing. 43 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses were $217.8 million for the nine months ended March 31, 2024, a decrease of $4.5 million, or 2.0%, from $222.4 million for the prior year comparable period. The decrease was primarily due to lower employee compensation-related expenses. Intangibles and long-lived asset impairment During the nine months ended March 31, 2024, the Company recognized aggregate impairment charges of $70.8 million, a decrease of $86.1 million from $156.9 million in the prior year comparable period. The decrease was due to higher impairment charges related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, recorded in the prior year comparable period. Results for the nine months ended March 31, 2024 included the recognition of a $20.7 million charge related to a decline in actual and projected performance and cash flows related to an asset group primarily comprised of certain production assets in the North America reportable segment. See Note 6, 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 8, 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 $20.4 million for the nine months ended March 31, 2024, an increase of $14.8 million from $5.7 million in the prior year comparable period. The increase was primarily due to the recognition of restructuring costs incurred in connection with the Hain Reimagined Program, including reorganization of global functions and related personnel resource requirements and rationalizing our sourcing and supply chain processes. Amortization of Acquired Intangible Assets Amortization of acquired intangibles was $4.7 million for the nine months ended March 31, 2024, a decrease of $3.7 million from $8.4 million in the prior year comparable period, primarily reflecting reduced amortization expenses due to impairment of the ParmCrisps ® customer relationships recognized in the third quarter of fiscal 2023. See Note 8, Goodwill and Other Intangible Assets , in the Notes to the Consolidated Financial Statements included in Item 8 of the Form 10-K. Operating Loss Operating loss for the nine months ended March 31, 2024 was $31.0 million compared to $97.7 million in the prior year comparable period as a result of the items described above. Interest and Other Financing Expense, Net Interest and other financing expense, net totaled $43.5 million for the nine months ended March 31, 2024, an increase of $11.6 million, or 36.3%, from $31.9 million in the prior year comparable period. The increase resulted primarily from higher borrowing rates, partially offset by a lower outstanding debt balance compared to the prior year comparable period. See Note 9, 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 $0.2 million for the nine months ended March 31, 2024, compared to $2.4 million in the prior year comparable period. The decrease in other income, net was primarily attributable to lower foreign currency gains. 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 nine months ended March 31, 2024 was $74.3 million compared to $127.2 million in the prior year comparable period. The decrease was due to the items discussed above. 44 Table of Contents Benefit for Income Taxes The benefit for income taxes includes federal, foreign, state and local income taxes. Our income tax benefit was $4.5 million for the nine months ended March 31, 2024 compared to $30.6 million in the prior year comparable period. The effective income tax rate was a benefit of 6.1% and 24.1% for the nine months ended March 31, 2024 and 2023, respectively. The effective income tax rate for the nine months ended March 31, 2024 was impacted by an increase in the federal and state valuation allowance, tax expense related to stock-based compensation, GILTI, and limitations on the deductibility of executive compensation. The effective income tax rate for the nine months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, gain on the sale of Westbrae, an operating lease modification during the second quarter of fiscal 2023, severance with respect to our former CEO (as part of the limitation on the deductibility of executive compensation), stock-based compensation and changes in uncertain tax positions. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes. Equity in Net Loss of Equity-Method Investees Our equity in net loss from our equity-method investments for the nine months ended March 31, 2024 was $2.4 million compared to $1.2 million in the prior year comparable period. See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Net Loss Net loss for the nine months ended March 31, 2024 was $72.1 million, or $0.80 per diluted share, compared to $97.8 million, or $1.09 per diluted share, in the prior year comparable period. The change was attributable to the factors noted above. Adjusted EBITDA Our Adjusted EBITDA was $115.0 million and $123.1 million for the nine months ended March 31, 2024 and 2023, respectively, as a result of the factors discussed above, and the adjustments described in the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures presented following the discussion of our results of operations. 45 Table of Contents Segment Results The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the nine months ended March 31, 2024 and 2023: (dollars in thousands) North America International Corporate and Other Consolidated Net sales Nine months ended 03/31/24 $ 795,832 $ 521,655 $ — $ 1,317,487 Nine months ended 03/31/23 857,406 491,396 — 1,348,802 $ change $ (61,574) $ 30,259 n/a $ (31,315) % change (7.2) % 6.2 % n/a (2.3) % Adjusted EBITDA Nine months ended 03/31/24 $ 77,828 $ 67,953 $ (30,803) $ 114,978 Nine months ended 03/31/23 96,484 55,458 (28,836) 123,106 $ change $ (18,656) $ 12,495 $ (1,967) $ (8,128) % change (19.3) % 22.5 % (6.8) % (6.6) % Adjusted EBITDA margin Nine months ended 03/31/24 9.8 % 13.0 % n/a 8.7 % Nine months ended 03/31/23 11.3 % 11.3 % n/a 9.1 % 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, 2024 were $795.8 million, a decrease of $61.6 million, or 7.2%, from net sales of $857.4 million in the prior year comparable period. The decrease in net sales was primarily due to lower sales in the baby/kids category on account of continued industry-wide challenges in organic formula supply, a decline in the personal care and meal preparation categories on account of distribution losses as well as lower sales in the snacks category. Adjusted EBITDA for the nine months ended March 31, 2024 was $77.8 million, a decrease of $18.7 million, or 19.3%, from Adjusted EBITDA of $96.5 million in the prior year comparable period. The decrease was primarily driven by reduced gross profit reflecting the reduction in net sales discussed above and inflation, partially offset by improvements in productivity. Adjusted EBITDA margin was 9.8%, a 150-basis point decrease from the prior year period. International Net sales in the International reportable segment for the nine months ended March 31, 2024 were $521.7 million, an increase of $30.3 million, or 6.2%, from net sales of $491.4 million in the prior year comparable period. The increase reflected 5.6% of growth from the favorable impact of foreign currency exchange rates. The remainder of the net sales increase was mainly driven by growth in the meal preparation and beverages categories due to pricing and strong private label performance. Adjusted EBITDA for the nine months ended March 31, 2024 was $68.0 million, an increase of $12.5 million, or 22.5%, from Adjusted EBITDA of $55.5 million in the prior year comparable period. The increase was primarily driven by an increase in gross profit reflecting higher net sales due to pricing, partially offset by inflation and an increase in selling, general and administrative expenses primarily due to increase in employee compensation-related expenses. Adjusted EBITDA margin was 13.0%, a 170-basis point increase from the prior year period. 46 Table of Contents Corporate and Other The increase in Corporate and Other expenses primarily reflected an increase 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. 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 9, 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 7, Leases . Amended and Restated Credit Agreement On August 22, 2023, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”). The Credit Agreement provides for senior secured financing of $1,100 million in the aggregate, consisting of (1) $300 million in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440 million U.S. revolving credit facility and $360 million global revolving credit facility) (the “Revolver”). Both the Revolver and the Term Loans mature on December 22, 2026. 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. 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 and 5.00:1.00 until December 31, 2024 (the period of time during which such maximum consolidated secured leverage ratios are in effect, the “Second Amendment Period,” which the Company may elect to end early). Following the Second Amendment Period, the maximum consolidated secured leverage ratio will be 4.25:1.00, subject to possible temporary increase following certain corporate acquisitions. Pursuant to the Credit Agreement, the Company ’ s maximum consolidated leverage ratio is 6.00:1.00. Pursuant to the Second Amendment, the Company’s minimum interest coverage ratio was amended to be 2.50:1.00. As of March 31, 2024, the Company’s consolidated secured leverage ratio, consolidated leverage ratio and consolidated interest coverage ratio were 3.85:1.00, 3.85:1.00 and 3.49:1.00, respectively, and the Company was in compliance with all associated covenants. During the Second Amendment Period, loans under the Credit Agreement will bear interest at (a) Term SOFR plus 2.5% per annum or (b) the Base Rate plus 1.5% per annum. Following the Second Amendment Period, Loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 1.125% to 2.0% per annum or (b) the Base Rate plus a rate ranging from 0.125% to 1.0% per annum, the relevant rate in each case being the Applicable Rate. The Applicable Rate following the Second Amendment Period will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement as amended by the Second Amendment. The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2024 was 8.10%. Additionally, the Credit Agreement contains a Commitment Fee (as defined in the Credit Agreement) on the amount unused under the Credit Agreement ranging from 0.15% to 0.25% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid. As of March 31, 2024, there were $496,000 of loans under the Revolver, $283,125 of Term Loans, and $3,188 letters of credit outstanding under the Credit Agreement. As of March 31, 2024, $300,812 was available under the Credit Agreement, subject to compliance with the financial covenants. 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 7, Leases , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. 47 Table of Contents Our cash and cash equivalents balance decreased $3.8 million at March 31, 2024 to $49.5 million as compared to $53.4 million at June 30, 2023. Our working capital was $299.6 million at March 31, 2024, a decrease of $59.3 million from $358.9 million at the end of fiscal 2023. Additionally, our total debt decreased by $51.2 million at March 31, 2024 to $777.5 million as compared to $828.7 million at June 30, 2023 as a result of $50.6 million of net repayments carried out during the period. Our cash balances are held in the United States, United Kingdom, Canada, Western Europe, the Middle East and India. As of March 31, 2024, substantially all cash was held outside of the United States. 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 (used in) provided by operating, investing and financing activities is summarized below. Nine Months Ended March 31, Change in (amounts in thousands) 2024 2023 Dollars Cash flows provided by (used in): Operating activities $ 76,959 $ 26,309 $ 50,650 Investing activities (23,249) (13,243) (10,006) Financing activities (56,100) (34,792) (21,308) Effect of exchange rate changes on cash (1,425) (104) (1,321) Net decrease in cash and cash equivalents $ (3,815) $ (21,830) $ 18,015 Cash provided by operating activities was $77.0 million for the nine months ended March 31, 2024, an increase of $50.7 million from $26.3 million in the prior year period. This increase versus the prior period resulted primarily from higher cash generation of $81.9 million from our working capital accounts, which was driven by our accounts payable optimization initiatives and focused inventory management, partially offset by a reduction in accounts receivable recovery. The increase was also partially offset by a reduction of $31.2 million in net loss adjusted for non-cash charges in the current period. Cash used in investing activities was $23.2 million for the nine months ended March 31, 2024, an increase of $10.0 million from $13.2 million in the prior year period primarily due to higher capital expenditure in the current period by $3.3 million on account of phasing of capital projects and receipt of $7.5 million of proceeds from the divestiture of Westbrae during the prior year period ended March 31, 2023. Cash used in financing activities was $56.1 million for the nine months ended March 31, 2024, an increase of $21.3 million compared to $34.8 million in the prior year period. The increase in cash used in financing activities was primarily due to higher net debt repayment during the nine months ended March 31, 2024. Free Cash Flow Our free cash flow was $52.2 million for the nine months ended March 31, 2024, an increase of $47.3 million from $4.9 million in the nine months ended March 31, 2023. This increase versus the prior year period resulted primarily from an increase in cash flows from operations of $50.7 million driven by the reasons explained 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 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, 2024, the Company repurchased no shares under the repurchase program. As of March 31, 2024, the Company had $173.5 million of remaining authorization under the share repurchase program. 48 Table of Contents 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. Net Sales - Adjusted for the Impact of Divestitures and Discontinued Brands We exclude the impact of divestitures and discontinued brands when comparing net sales to prior periods, which results in the presentation of certain non-U.S. GAAP financial measures. The Company’s management believes that excluding the impact of divestitures and discontinued brands when presenting period-over-period results of net sales aids in comparability. To present net sales adjusted for the impact of divestitures and discontinued brands, the net sales of a divested business or discontinued brand are excluded from all periods. A reconciliation between reported net sales and net sales adjusted for the impact of divestitures and discontinued brands is as follows: (amounts in thousands) North America International Hain Consolidated Net sales - Three months ended March 31, 2024 $ 268,107 $ 170,251 $ 438,358 Divestitures and discontinued brands (307) — (307) Net sales adjusted for divestitures and discontinued brands - Three months ended March 31, 2024 $ 267,800 $ 170,251 $ 438,051 Net sales - Three months ended March 31, 2023 $ 286,649 $ 168,594 $ 455,243 Divestitures and discontinued brands (163) — (163) Net sales adjusted for divestitures and discontinued brands - Three months ended March 31, 2023 $ 286,486 $ 168,594 $ 455,080 Net sales (decline) growth (6.5) % 1.0 % (3.7) % Impact of divestitures and discontinued brands — % — % — % Net sales (decline) growth adjusted for divestitures and discontinued brands (6.5) % 1.0 % (3.7) % Net sales - Nine months ended March 31, 2024 $ 795,832 $ 521,655 $ 1,317,487 Divestitures and discontinued brands (299) — (299) Net sales adjusted for divestitures and discontinued brands - Nine months ended March 31, 2024 $ 795,533 $ 521,655 $ 1,317,188 Net sales - Nine months ended March 31, 2023 $ 857,406 $ 491,396 $ 1,348,802 Divestitures and discontinued brands (3,073) — (3,073) Net sales adjusted for divestitures and discontinued brands - Nine months ended March 31, 2023 $ 854,333 $ 491,396 $ 1,345,729 Net sales (decline) growth (7.2) % 6.2 % (2.3) % Impact of divestitures and discontinued brands 0.3 % — % 0.2 % Net sales (decline) growth adjusted for divestitures and discontinued brands (6.9) % 6.2 % (2.1) % 49 Table of Contents Adjusted EBITDA The Company defines Adjusted EBITDA as net income before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses (gains), certain litigation and related costs, CEO succession costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, net, costs associated with acquisitions, divestitures and other transactions, (gains) losses on sales of assets, inventory write-downs related to exited categories, intangibles and long-lived asset 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: Three Months Ended March 31, Nine Months Ended March 31, (amounts in thousands) 2024 2023 2024 2023 Net loss $ (48,194) $ (115,727) $ (72,105) $ (97,838) Depreciation and amortization 10,858 13,784 34,360 37,909 Equity in net loss of equity-method investees 966 528 2,371 1,226 Interest expense, net 13,322 12,924 41,278 30,582 Provision (benefit) for income taxes 5,100 (39,587) (4,528) (30,599) Stock-based compensation, net 3,017 3,228 10,135 10,657 Unrealized currency losses 250 202 91 651 Certain litigation expenses, net (a) 458 (1,582) 4,073 3,363 Restructuring activities Productivity and transformation costs 7,175 3,933 20,447 5,692 Plant closure related costs, net 1,145 22 5,288 73 Warehouse/manufacturing consolidation and other costs, net 184 2,871 995 899 CEO succession — — — 5,113 Acquisitions, divestitures and other Transaction and integration costs, net 55 215 282 1,984 (Gain) loss on sale of assets — (134) 62 (3,529) Impairment charges Intangibles and long-lived asset impairment 49,426 156,583 70,786 156,923 Inventory write-downs related to exited categories — — 1,443 — Adjusted EBITDA $ 43,762 $ 37,260 $ 114,978 $ 123,106 (a) Expenses and items relating to securities class action, baby food litigation, and SEC investigation. 50 Table of Contents 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 provided by or used in 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: Nine Months Ended March 31, (amounts in thousands) 2024 2023 Net cash provided by operating activities $ 76,959 $ 26,309 Purchases of property, plant and equipment (24,769) (21,434) Free Cash Flow $ 52,190 $ 4,875 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, 2023, from which there have been no material changes, except for the items noted below. Goodwill Goodwill is not amortized but rather is tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable. Goodwill is tested for impairment at the reporting unit level. A reporting unit represents an operating segment or a component of an operating segment. Goodwill is tested for impairment by either performing a qualitative evaluation or a two-step quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect not to perform the qualitative assessment for some or all reporting units and perform a two-step quantitative impairment test. The estimate of the fair values of our reporting units are based on the best information available as of the date of the assessment. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. We generally use a blended analysis of the present value of discounted cash flows and the market valuation approach. The discounted cash flow model uses the present values of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and external economic factors in estimating our future cash flows. The assumptions we use in our evaluations include projections of growth rates and profitability, our estimated working capital needs, as well as our weighted average cost of capital. The market valuation approach indicates the fair value of a reporting unit based on a comparison to comparable publicly traded firms in similar businesses. Estimates used in the market value approach include the identification of similar companies with comparable business factors. These key assumptions are inherently uncertain and require a high degree of estimation and are subject to change based on, among others, industry and geopolitical conditions, our ability to navigate changing macroeconomic conditions and trends and the timing and success of strategic initiatives. Changes in economic and operating conditions impacting the assumptions we made could result in additional goodwill impairment in future periods. If the carrying amount of the reporting unit exceeds fair value, goodwill is considered impaired. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. 51 Table of Contents 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. As a result of indicators of impairment which included significant decline in the Company’s market capitalization and impairment charges recorded during the three months ended March 31, 2024 within the United States (U.S.) reporting unit as noted in Note 8, Goodwill and Other Intangible Assets and Note 6, Property, Plant and Equipment, Net , the Company completed an interim impairment test of all reporting units. For United Kingdom, Western Europe, Canada, and Ella's Kitchen UK, 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. Three of these reporting units (United Kingdom, Western Europe and Canada) were quantitatively tested in fiscal 2023 and as of the last quantitative testing date, their estimated fair values exceeded their respective carrying amounts by more than 17.7%. During the three months ended March 31, 2024, the Company completed an interim quantitative impairment test of goodwill in the U.S. reporting unit and concluded that the reporting unit’s estimated fair value exceeded its carrying amount. The fair value of the reporting unit was estimated utilizing a blended approach which included an income approach utilizing the Discounted Cash Flows (“DCF”) Method and the Guideline Public Company Methodology (“GPCM”), a market-based approach. (Amounts in thousands, other than percentage) Headroom Reporting Unit Fair Value Carrying Amount Dollars Percentage United States (U.S.) $ 990,000 $ 941,277 $ 48,723 5.2 % The United States reporting unit is at risk of impairment in the event of significant unfavorable changes in assumptions, including forecasted future cash flows based on execution of strategic initiatives for increasing revenue, as well as discount rates and other macroeconomic factors. We monitor our reporting units at risk of impairment for interim impairment indicators and believe that the estimates and assumptions used in the calculations are reasonable as of March 31, 2024. We performed qualitative procedures related to our other four reporting units, noting that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount as of March 31, 2024 . Should the fair value of any of our reporting units fall below its carrying amount because of reduced operating performance, market declines including a deterioration of the macroeconomic factors, changes in the discount rate, or other adverse conditions, goodwill impairment charges may be necessary in future periods. We performed a sensitivity test and noted that an increase in the U.S. weighted average cost of capital (“WACC”) by 1 percentage point, holding other assumptions constant, would not result in recognition of an impairment charge. The calculation of the U.S. reporting unit WACC included a number of subjective inputs, including a company-specific risk premium of 4.0% to account for the riskiness of the assumed revenue growth and margin improvement within the financial forecasts used in the DCF Method. We performed a market capitalization reconciliation with the expectation that the market capitalization should reconcile within a reasonable range of the sum of the fair values of the individual reporting units. Such reconciliation often includes both qualitative and quantitative assessments as is the case with the Company’s reporting units as of March 31, 2024 . When an entity performs a qualitative assessment for some reporting units but proceeds to a quantitative assessment for others, reconciling the overall market capitalization to the aggregate fair value of reporting units can be challenging and requires significant judgment. There is no requirement to determine the fair value of reporting units for which only a qualitative impairment test is performed. Therefore, when performing an overall comparison to market capitalization, we included the current year fair value for reporting units for which a quantitative measurement was performed, and we estimated the fair value for the reporting units for which qualitative assessments were performed using a reasonable methodology. 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. 52 Table of Contents Indefinite-Lived Intangible Assets The Company performs an indefinite-lived asset impairment test annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In accordance with ASC 350, we may first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. If an entity elects to perform a qualitative assessment, it first shall assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired. One procedure we perform during interim periods to determine whether indicators of impairment are present includes a comparison of net sales used in the most recent quantitative impairment tests to forecasted net sales for the same fiscal year (or balance of the fiscal year when performing an interim review) in order to identify brands for which the current fiscal year net sales are expected to be lower than the forecasted fiscal year net sales per the latest quantitative test. The performance of these brands is then reviewed by management to determine if the shortfall to forecasted net sales was related to events and circumstances that are expected to be temporary in nature, or if it was caused by more pervasive issue that could serve as in impairment indicator (e.g., loss of key customers, discontinuance of certain product categories within a brand, etc.). We use this risk-based approach to determine which brands we would quantitatively test for impairment, whether as part of fiscal year annual impairment testing or an interim period test. During the third quarter of 2024, we qualitatively assessed our indefinite-lived intangible assets for impairment and determined that the indefinite-lived tradenames for certain North America personal care tradenames (namely, Alba Botanica ® , Avalon Organics ® , and JASON ® ), ParmCrisps ® and Thinsters ® should be quantitatively tested. The Company’s 2024 interim impairment testing resulted in the recognition of impairment charges for the following indefinite-lived tradenames, and other intangible assets: ParmCrisps ® , Thinsters ® and certain North America personal care tradenames. During the three months ended March 31, 2024, as a result of further expected decline in the actual and projected performance and cash flows, the Company completed an interim quantitative impairment test of indefinite-lived trademarks associated with certain North America personal care brands, as noted in Note 8, Goodwill and Other Intangible Assets. The Company recorded impairment charges and reduced the carrying amount of such intangible assets to their estimated fair value of $13,000. These intangible assets have an increased risk of future impairment due to the potential risk of failure on the execution of the Company ’ s strategy and associated impact on the assumptions utilized in developing its fair value estimate as of March 31, 2024. Further, during the three months ended March 31, 2024, the Company, noted that two of its plant-based beverage brands: Happy™ and Joya ® have risk of future impairment due to declining sales on account of changing consumer preference to switch from branded to private label products. The assets are part of the International reportable segment and have a remaining aggregate carrying amount of $6,150 as of March 31, 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. In recent years, net sales and diluted earnings per share in the first fiscal quarter have typically been the lowest of our four quarters.