What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-10 compared with 2024-11-07 · 250 added, 106 removed, 217 unchanged (62% of the section changed)

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 September 30, 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, 2024.

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 December 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, 2024.

Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading “Forward-Looking Statements” in the introduction of this Form 10-Q.

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Snacks, Baby & Kids, Beverages, Meal Preparation, and Personal Care.

In the third quarter of 2025, the Company announced that it was exploring strategic options for its Personal Care business.

o Simplify our footprint, maintaining direct presence in five key markets – United States (“U.S.”), Canada, United Kingdom (“U.K.”), Ireland, and Western Europe – and align our global operating model and footprint, leveraging scale and realizing synergies across the business.

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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 months ended September 30, 2024, we incurred approximately $5 million of expenses associated with the Hain Reimagined Program, compared to $10 million in the prior year

For the three and six months ended December 31, 2024, we

incurred approximately $7.3 million and $12.7 million respectively, of expenses associated with the Hain Reimagined Program, compared to approximately $30.6 million and $40.4 million respectively, in the corresponding periods of the prior year.

Annualized pretax savings are expected to be $130 million - $150 million.

As part of the Hain Reimagined Program, the Company completed the sale of three non-core brands during the fourth quarter of fiscal 2024 and first quarter of fiscal 2025.

As part of the Hain Reimagined Program, the Company completed the sale of three non-core brands during the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025.

We initiated actions to consolidate our personal care manufacturing footprint, which were substantially completed in the first quarter of fiscal 2025.

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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, may lead to increased supply chain expenses, and other business impacts.

The duration and intensity of inflation fluctuations, alterations in consumer shopping and consumption patterns, shifts in geopolitical events, such as the ongoing Russia-Ukraine conflict, and the imposition of tariffs or other changes to trade policy, may lead to increased supply chain expenses, 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 September 30, 2024 to Three Months Ended September 30, 2023

Comparison of Three Months Ended December 31, 2024 to Three Months Ended December 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 September 30, 2024 and 2023 (dollars in thousands, other than per share amounts and percentages, which may not add due to rounding):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended December 31, 2024 and 2023 (dollars in thousands, other than per share amounts and percentages, which may not add due to rounding):

Three Months Ended

September 30, 2024

September 30, 2023

December 31, 2024

December 31, 2023

Cost of sales

Selling, general and administrative expenses

Goodwill impairment

Intangibles and long-lived asset impairment

Productivity and transformation costs

Amortization of acquired intangible assets

Long-lived asset impairment

Operating income (loss)

Operating loss

Interest and other financing expense, net

Other expense (income), net

Other income, net

Loss before income taxes and equity in net loss of equity-method investees

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

Net sales for the three months ended September 30, 2024 were $394.6 million, a decrease of $30.4 million, or 7.2%, including an unfavorable impact of $13.1 million or 2.9% related to divestitures, discontinued brands and exited product categories and a favorable impact of $3.3 million or 0.8% from foreign exchange, as compared to the prior year quarter.

Net sales for the three months ended December 31, 2024 were $411.5 million, a decrease of $42.6 million, or 9.4%, including an unfavorable impact of $16.3 million or 3.3% related to divestitures, discontinued brands and exited product categories and a favorable impact of $3.1 million or 0.7% from foreign exchange, as compared to the prior year quarter.

Organic net sales, defined as net sales adjusted to exclude the impact of foreign exchange, acquisitions, divestitures, discontinued brands and exited product categories, decreased $29.4 million, or 6.8%, from the prior year quarter.

Additionally, the decrease in organic net sales was comprised of a 4% decrease in volume/mix and a 1% decrease in price.

The decrease in each of net sales and organic net sales was primarily due to declines in both the North America and International reportable segments.

The decrease in each of net sales and organic net sales was primarily due to decline in the North America reportable segment.

Additionally, the decrease in organic net sales was comprised of a 5% decrease in volume/mix and a 2% decrease in price primarily reflecting promotional activity.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the three months ended September 30, 2024 was $81.6 million, a decrease of $2.3 million, or 2.8%, as compared to the prior year quarter.

However, gross profit margin of 20.7% for the three months ended September 30, 2024 was higher when compared with 19.7% 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, partially offset by favorable product mix and productivity improvements.

The International reportable segment had an increase in gross profit mainly driven by higher margin due to productivity and improved promotional efficiency, partially offset by lower volume.

Gross profit for the three months ended December 31, 2024 was $93.5 million, a decrease of $8.8 million, or 8.6%, as compared to the prior year quarter.

Gross profit margin of 22.7% for the three months ended December 31, 2024, however, was higher when compared with 22.5% in the prior year quarter.

The decrease in gross profit was driven by both the North America and International reportable segments, mainly due to lower sales volume and unfavorable product mix, partially offset by productivity improvements.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $71.3 million for the three months ended September 30, 2024, a decrease of $5.8 million, or 7.6%, from $77.2 million for the prior year quarter.

The decrease was primarily due to lower marketing and advertising expense and employee-related expenses.

Selling, general and administrative expenses were $70.2 million for the three months ended December 31, 2024, a decrease of $3.8 million, or 5.1%, from $74.0 million for the prior year quarter.

The decrease was primarily due to lower employee-related expenses.

Goodwill Impairment

As a result of the continued decline in the Company’s market capitalization and the recognition of significant intangible asset impairment charges within the reporting units in its North America reportable segment during the three months ended December 31, 2024, the Company completed an interim quantitative impairment test for goodwill for both its U.S.

and Canada reporting units within the North America reportable segment as of December 31, 2024.

Consequently, during the three months ended December 31, 2024, the Company recorded a non-cash goodwill impairment charge of $91.3 million within the North America segment related to its U.S.

reporting unit.

See Note 8, Goodwill and Intangible Assets in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Intangibles and Long-Lived Asset Impairment

During the three months ended December 31, 2024, the Company recorded a non-cash impairment charge of $15.7 million within its North America segment related to the indefinite and definite lived intangible assets associated with its personal care brands (namely, Avalon Organics ® , JASON ® , and Live Clean ® ) and $2.3 million related to an asset group primarily comprised of certain production assets in the North America reportable segment.

During the three months ended December 31, 2023, the Company recognized a non-cash impairment charge of $20.7 million related to an asset group primarily comprised of certain production assets in the North America reportable segments.

See Note 6 , Property, Plant and Equipment, Net , and Note 13 , Financial Instruments Measured at Fair Value, in the Notes of the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Productivity and Transformation Costs

Productivity and transformation costs were $5.0 million for the three months ended September 30, 2024, a decrease of $1.4 million, or 21.6%, from $6.4 million in the prior year quarter.

The decrease was primarily due to lower restructuring costs incurred in connection with the Hain Reimagined Program.

Productivity and transformation costs were $4.2 million for the three months ended December 31, 2024, a decrease of $2.7 million, or 39.0%, from $6.9 million in the prior year quarter.

The decrease was primarily due to reduced restructuring costs incurred in connection with the Hain Reimagined Program.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.2 million for the three months ended September 30, 2024, an increase of $0.2 million from $2.0 million in the prior year quarter.

Long-Lived Asset Impairment

During the three months ended September 30, 2023, the Company recognized a non-cash impairment charge of $0.7 million related to certain equipment in North America.

Operating Income (Loss)

Operating income for the three months ended September 30, 2024 was $3.1 million compared to an operating loss of $2.3 million in the prior year quarter as a result of the items described above.

Amortization of acquired intangibles was $1.8 million for the three months ended December 31, 2024, an increase of $0.3 million from $1.5 million in the prior year quarter.

Operating Loss

Operating loss for the three months ended December 31, 2024 was $91.9 million compared to $0.8 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 $13.7 million for the three months ended September 30, 2024, an increase of $0.5 million, or 3.8%, from $13.2 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.

Interest and other financing expense, net totaled $12.8 million for the three months ended December 31, 2024, a decrease of $3.3 million, or 20.7%, from $16.1 million in the prior year quarter.

The decrease resulted primarily from a lower outstanding debt balance and a reduction in borrowing rates compared to the prior year quarter.

See Note 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 (Income), Net

Other expense, net totaled $5.3 million for the three months ended September 30, 2024, compared to $0.3 million of other income, net in the prior year quarter.

The change primarily reflected the recognition of a $3.9 million pretax loss on the sale of the ParmCrisps ® business in the first quarter of 2024 and higher net unrealized foreign currency losses.

Other Income, Net

Other income, net totaled $4.0 million for the three months ended December 31, 2024 and was primarily comprised of net foreign exchange gains of $2.4 million and the recognition of a $1.6 million pretax gain on the sale of assets related to the Company’s former Bell, CA production facility .

Other income, net was not significant for the three months ended December 31, 2023.

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 September 30, 2024 was $16.0 million compared to $15.3 million in the prior year quarter.

The increase in the loss before income taxes and equity in net loss of our equity-method investees was due to the items discussed above.

Loss before income taxes and equity in net loss of our equity-method investees for the three months ended December 31, 2024 was $100.7 million compared to $16.9 million in the prior year quarter.

The decrease in the loss before income taxes and equity in net loss of our equity-method investees was due to the items discussed above.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense was $3.5 million for the three months ended September 30, 2024 compared to benefit of $5.4 million in the prior year quarter.

The effective income tax rate was an expense of 22.0% and a benefit of 35.3% for the three months ended September 30, 2024 and 2023, respectively.

The income tax expense for the three months ended September 30, 2024 reflected foreign tax expense in certain jurisdictions and an increase in the valuation allowance for both federal and state income taxes.

Our income tax expense was $2.7 million for the three months ended December 31, 2024 compared to income tax benefit of $4.2 million in the prior year quarter.

The effective income tax rate was an expense of 2.7% and a benefit of 25.2% for the three months ended December 31, 2024 and 2023, respectively.

The income tax expense for the three months ended December 31, 2024 reflected foreign tax expense in certain jurisdictions, impairment of goodwill and personal care intangibles and movement in the valuation allowance for both federal and state income taxes.

The effective income tax rate for the three months ended December 31, 2023 was impacted by tax expense related to stock-based compensation, global intangible low-taxed income (“GILTI”), and limitations on the deductibility of executive compensation.

Equity in Net Loss of Equity-Method Investees

Equity in net loss from our equity-method investments for the three months ended September 30, 2024 was a loss of $0.2 million compared to a $0.5 million loss in the prior year quarter.

Net loss for the three months ended September 30, 2024 was $19.7 million, or $0.22 per diluted share, compared to $10.4 million, or $0.12 per diluted share, in the prior year quarter.

The increase in net loss was attributable to the factors noted above.

Equity in net loss from our equity-method investments for the three months ended December 31, 2024 was a loss of $0.6 million compared to a $0.9 million loss in the prior year quarter.

Net loss for the three months ended December 31, 2024 was $104.0 million, or $1.15 per diluted share, compared to $13.5 million, or $0.15 per diluted share, in the prior year quarter.

The decrease in net loss was attributable to the factors noted above.

Adjusted EBITDA

Adjusted EBITDA was $22.4 million and $24.1 million for the three months ended September 30, 2024 and 2023, respectively, as a result of the factors discussed above.

Adjusted EBITDA was $37.9 million and $47.1 million for the three months ended December 31, 2024 and 2023, respectively, as a result of the factors discussed above.

See Reconciliation of Non-U.S.

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Segment Results

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended September 30, 2024 and 2023:

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended December 31, 2024 and 2023:

(Dollars in thousands)

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North America

Our net sales in the North America reportable segment for the three months ended September 30, 2024 were $231.1 million, a decrease of $28.9 million, or 11.1%, including an unfavorable impact of $12.9 million or 4.4% related to divestitures, discontinued brands and exited product categories, as compared to the prior year quarter.

Our net sales in the North America reportable segment for the three months ended December 31, 2024 were $229.3 million, a decrease of $38.4 million, or 14.3%, including an unfavorable impact of $16.2 million or 5.3% related to divestitures, discontinued brands and exited product categories, as compared to the prior year quarter.

Organic net sales decreased $21.5 million, or 8.7% to $225.6 million from $247.1 million in the prior year quarter.

The decrease in each of net sales and organic net sales was primarily due to lower sales in the snacks category, as expected, due to the timing shift of a promotional event that was held in the first quarter of last fiscal year into the third quarter of the current fiscal year, as well as by a decline in the meal preparation category, partially offset by growth in the beverages category.

Adjusted EBITDA for the three months ended September 30, 2024 was $12.5 million, a decrease of $6.3 million, or 33.5%, from Adjusted EBITDA of $18.7 million in the prior year quarter.

The decrease was primarily driven by lower volume and inflation, partially offset by productivity.

The decrease in net sales was primarily due to lower sales in the snacks, personal care, and meal preparation categories.

The decrease in organic net sales was primarily due to lower sales in the snacks and personal care categories.

The decrease in the snacks category was driven by in-store marketing activation and promotion effectiveness, while the decrease in the personal care category was due to SKU simplification initiatives.

Adjusted EBITDA for the three months ended December 31, 2024 was $25.3 million, a decrease of $5.9 million, or 18.9%, from Adjusted EBITDA of $31.2 million in the prior year quarter.

The decrease resulted primarily from pricing due to higher trade spend and deleverage on lower volume, partially offset by productivity.

Adjusted EBITDA margin was 11.0%, a 70-basis point decrease from the prior year period.

International

Our net sales in the International reportable segment for the three months ended September 30, 2024 were $163.5 million, a decrease of $1.5 million, or 0.9%, including a favorable impact of $3.9 million or 2.3% related to foreign exchange, as compared to the prior year quarter.

Our net sales in the International reportable segment for the three months ended December 31, 2024 were $182.2 million, a decrease of $4.2 million, or 2.3%, including a favorable impact of $3.8 million or 2.1% related to foreign exchange, as compared to the prior year quarter.

Organic net sales decreased $7.9 million or 4.2% to $178.2 million from $186.1 million the prior year quarter.

The decrease in net sales was primarily due to lower sales in the beverages and baby & kids categories on account of lower branded sales.

The decrease in organic net sales was primarily due to lower sales in the meal preparation and baby & kids categories.

The decrease in the meal preparation category was due to short-term softness in private label spreads and drizzles, partially offset by strong soup performance across brands.

Baby & kids category net sales were lower due to lower branded sales.

Adjusted EBITDA for the three months ended September 30, 2024 was $20.4 million, an increase of $2.9 million, or 16.8%, from Adjusted EBITDA of $17.4 million in the prior year quarter.

The increase was primarily driven by an increase in gross

profit reflecting improved margin associated with productivity improvements and improved promotional efficiency, partially offset by lower volume and a decrease in selling, general and administrative expenses.

Adjusted EBITDA margin was 12.5%, a 190-basis point increase from the prior year period.

The decrease in net sales was primarily due to lower sales in the meal preparation, and snacks categories, partially offset by an increase in the baby & kids category.

The decrease in organic net sales was primarily due to lower sales in the meal preparation category and short-term service challenges.

The decrease in the meal preparation category was due to short-term softness in private label spreads and drizzles, partially offset by growth in yogurt and continued strong soup performance across brands.

Adjusted EBITDA for the three months ended December 31, 2024 was $22.5 million, a decrease of $3.4 million, or 13.3%, from Adjusted EBITDA of $26.0 million in the prior year quarter.

The decrease was primarily driven by a decrease in gross profit reflecting lower volume and product mix, partially offset by productivity.

Adjusted EBITDA margin was 12.4%, a 150-basis point decrease from the prior year period.

Corporate and Other

Corporate and Other expenses remained relatively flat compared to the prior year period.

Refer to Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Comparison of Six Months Ended December 31, 2024 to Six Months Ended December 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 six months ended December 31, 2024 and 2023 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Six Months Ended

December 31, 2024

December 31, 2023

Cost of sales

Selling, general and administrative expenses

Goodwill impairment

Intangibles and long-lived asset impairment

Productivity and transformation costs

Amortization of acquired intangible assets

Operating loss

Interest and other financing expense, net

Other expense (income), net

Loss before income taxes and equity in net loss of equity-method investees

Provision (benefit) for income taxes

Equity in net loss of equity-method investees

Adjusted EBITDA

Diluted net loss per common share

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

Net sales for the six months ended December 31, 2024 were $806.1 million, a decrease of $73.0 million, or 8.3%, including an unfavorable impact of $29.4 million or 3.0% related to divestitures, discontinued brands and exited product categories and a favorable impact of $6.4 million or 0.7% from foreign exchange, as compared to the prior year period.

The decrease in each of net sales and organic net sales was primarily due to decline in the North America reportable segments.

Additionally, the decrease in organic net sales was comprised of a 4.3% decrease in volume/mix and a 1.6% decrease in price primarily reflecting promotional activity.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the six months ended December 31, 2024 was $175.1 million, a decrease of $11.1 million, or 6.0%, as compared to the prior year period.

Gross profit margin of 21.7% for the six months ended December 31, 2024, however, was higher when compared with 21.2% in the prior year period.

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

The International reportable segment had a decrease in gross profit mainly due to increased promotional activity and product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $141.5 million for the six months ended December 31, 2024, a decrease of $9.6 million, or 6.5%, from $151.1 million for the prior year period.

The decrease was primarily due to lower employee-related expenses and marketing and advertising expense.

Goodwill Impairment

As discussed above, during the six months ended December 31, 2024, the Company recorded a non-cash goodwill impairment charge of $91.3 million within the North America segment related to its U.S.

reporting unit.

See Note 8, Goodwill and Intangible Assets , in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Intangibles and Long-Lived Asset Impairment

During the six months ended December 31, 2024, the Company recognized a non-cash impairment charge of $15.7 million in the North America segment related to the indefinite and definite-lived intangible assets associated with its personal care business (namely, Avalon Organics ® , JASON ® , and Live Clean ® ) and $2.3 million related to an asset group primarily comprised of certain production assets in the North America reportable segment.

During the six months ended December 31, 2023, the Company recognized a non-cash impairment charge of $20.7 million related to an asset group primarily comprised of certain production assets in the North America reportable segments.

Productivity and Transformation Costs

Productivity and transformation costs were $9.2 million for the six months ended December 31, 2024, a decrease of $4.1 million, or 30.6%, from $13.3 million in the prior year period.

The decrease primarily reflected a reduction in restructuring costs incurred in connection with the Hain Reimagined Program.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $3.9 million for the six months ended December 31, 2024, an increase of $0.4 million from $3.5 million in the prior year period.

Operating Loss

Operating loss for the six months ended December 31, 2024 was $88.8 million compared to $3.1 million in the prior year period as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $26.5 million for the six months ended December 31, 2024, a decrease of $2.8 million, or 9.7%, from $29.4 million in the prior year period.

The decrease resulted primarily from a lower outstanding debt balance and impact of a reduction in borrowing rates compared to the prior year 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 Expense (Income), Net

Other expense, net totaled $1.3 million for the six months ended December 31, 2024, compared to $0.3 million of other income, net in the prior year period.

The change was primarily due to pretax loss of $3.9 million on the sale of ParmCrisps ® , partially offset by a $1.6 million pretax gain on the sale of assets related to the Company’s former Bell, CA production facility and $0.8 million of foreign exchange 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 was $116.6 million for the six months ended December 31, 2024, compared to a $32.1 million loss in the prior year period.

The decrease in the loss before income taxes and equity in net loss of our equity-method investees was due to the items discussed above.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense was $6.3 million for the six months ended December 31, 2024 compared to income tax benefit of $9.6 million in the prior year comparable period.

The effective income tax rate was an expense of 5.4% and a benefit of 30.0% for the six months ended December 31, 2024 and 2023, respectively.

The income tax expense for the six months ended December 31, 2024 reflected foreign tax expense in certain jurisdictions, impairment of goodwill and personal care intangibles and movement in the valuation allowance for both federal and state income taxes.

The effective income tax rate for the six months ended December 31, 2023 was impacted by tax expense related to stock-based compensation, GILTI, and limitations on the deductibility of executive compensation.

Equity in Net Loss of Equity-Method Investees

Equity in net loss from our equity-method investments for the six months ended December 31, 2024 was a loss of $0.7 million compared to a $1.4 million loss in the prior year period.

Net loss for the six months ended December 31, 2024 was $123.6 million, or $1.37 per diluted share, compared to $23.9 million, or $0.27 per diluted share, in the prior year period.

The decrease in net loss was attributable to the factors noted above.

Adjusted EBITDA

Adjusted EBITDA was $60.3 million and $71.2 million for the six months ended December 31, 2024 and 2023, respectively, as a result of the factors discussed above.

See Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net loss to Adjusted EBITDA.

Segment Results

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the six months ended December 31, 2024 and 2023:

(Dollars in thousands)

International

Six months ended 12/31/24

Six months ended 12/31/23

Adjusted EBITDA

Six months ended 12/31/24

Six months ended 12/31/23

Adjusted EBITDA margin

Six months ended 12/31/24

Six months ended 12/31/23

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 17, 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 six months ended December 31, 2024 were $460.4 million, a decrease of $67.3 million, or 12.8%, including an unfavorable impact of $29.0 million or 5.0% related to divestitures, discontinued brands and exited product categories, as compared to the prior year quarter.

Organic net sales decreased $37.0 million, or 7.6% to $449.2 million from $486.2 million in the prior year quarter.

The decrease in each of net sales and organic net sales was primarily due to lower sales in the snacks and personal care categories.

The decrease in net sales in the snacks category was primarily due to in-store marketing activation and promotion effectiveness while the personal care category net sales decline was primarily driven by SKU simplification initiatives.

Adjusted EBITDA for the six months ended December 31, 2024 was $37.8 million, a decrease of $12.1 million, or 24.4%, from Adjusted EBITDA of $49.9 million in the prior year quarter.

The decrease was primarily related to reduced gross profit driven by lower volume partially offset by productivity.

Adjusted EBITDA margin was 8.2%, a 130-basis point decrease from the prior year period.

International

Our net sales in the International reportable segment for the six months ended December 31, 2024 were $345.7 million, a decrease of $5.8 million, or 1.6%, including a favorable impact of $7.7 million or 2.2% related to foreign exchange, as compared to the prior year quarter.

Organic net sales decreased $13.0 million or 3.7% to $337.6 million from $350.6 million the prior year quarter.

The decrease in both net sales and organic net sales was primarily due to lower sales in the meal preparation and snacks categories.

The decrease in the meal preparation category was due to supply issues and short-term softness in private label spreads and drizzles, partially offset by growth in yogurt and continued strong soup performance across brands.

The decrease in the snacks category was due to lower volumes.

Adjusted EBITDA for the six months ended December 31, 2024 was $42.9 million, a slight decrease of $0.5 million, or 1.2%, from Adjusted EBITDA of $43.4 million in the prior year quarter.

Adjusted EBITDA margin was 12.4% for both the six months ended December 31, 2024 and 2023.

Corporate and Other

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

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Pursuant to the Second Amendment, the Company’s minimum interest coverage ratio was amended to be 2.50:1.00.

As of September 30, 2024, the Company’s consolidated secured leverage ratio, consolidated leverage ratio and consolidated interest coverage ratio were 3.87:1.00, 3.87:1.00 and 3.26:1.00, respectively, and the Company was in compliance with all associated covenants.

As of December 31, 2024, the Company’s consolidated secured leverage ratio, consolidated leverage ratio and consolidated interest coverage ratio were 4.06:1.00, 4.06:1.00 and 3.25:1.00, respectively, and the Company was in compliance with all associated covenants.

The aforementioned financial covenants are being reported as calculated under the Credit Agreement and not pursuant to U.S.

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Period is determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement as amended by the Second Amendment.

Excluding the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at September 30, 2024 was 7.76%.

During fiscal 2022, the Company used interest rate swaps to hedge a portion of the interest rate risk related its outstanding variable rate debt.

As of September 30, 2024, the notional amount of the interest rate swaps was $400 million with fixed rate payments of 5.60%.

Including the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at September 30, 2024 was 6.56%.

Excluding the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at December 31, 2024 was 7.61%.

The Company uses interest rate swaps to hedge a portion of the interest rate risk related its outstanding variable rate debt.

As of December 31, 2024, the notional amount of the interest rate swaps was $400 million with fixed rate payments of 5.60%.

Including the impact of hedges, the weighted average interest rate on outstanding borrowings under the Credit Agreement at December 31, 2024 was 6.55%.

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 September 30, 2024, there were $473,000 of loans under the Revolver, $268,675 of Term Loans, and $3,247 of letters of credit outstanding under the Credit Agreement.

As of September 30, 2024, $323,753 was available under the Credit Agreement, subject to compliance with the financial covenants.

As of September 30, 2024, the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance increased by $2.5 million at September 30, 2024 to $56.9 million as compared to $54.3 million at June 30, 2024.

Our working capital was $283.3 million at September 30, 2024, an increase of $7.8 million from $275.6 million at the end of fiscal 2024.

Additionally, our total debt decreased by $3.7 million at September 30, 2024 to $740.4 million as compared to $744.1 million at June 30, 2024 as a result of net repayments carried out during the period.

As of December 31, 2024, there were $463,000 of loans under the Revolver, $266,800 of Term Loans, and $2,775 of letters of credit outstanding under the Credit Agreement.

As of December 31, 2024, $334,225 was available under the Credit Agreement, subject to compliance with the financial covenants.

As of December 31, 2024, the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance increased by $1.9 million at December 31, 2024 to $56.2 million as compared to $54.3 million at June 30, 2024.

Our working capital was $259.2 million at December 31, 2024, a decrease of $16.4 million from $275.6 million at the end of fiscal 2024.

Additionally, our total debt decreased by $15.4 million at December 31, 2024 to $728.6 million as compared to $744.1 million at June 30, 2024 as a result of net repayments carried out during the period.

Our cash balances are held in the U.S., U.K., Canada, Western Europe, the Middle East and India.

As of September 30, 2024, substantially all cash was held outside of the U.S.

As of December 31, 2024, substantially all cash was held outside of the U.S.

We maintain our cash and cash equivalents primarily in money market funds or their equivalent.

Accordingly, we do not believe that our investments have significant exposure to interest rate risk.

Cash (used in) provided by operating, investing and financing activities is summarized below.

Three Months Ended September 30,

Cash provided (used in) by operating, investing and financing activities is summarized below.

Six Months Ended December 31,

(Dollars in thousands)

Cash flows (used in) provided by:

Cash flows provided by (used in):

Operating activities

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Effect of exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents

Cash used in operating activities was $10.8 million for the three months ended September 30, 2024, a decrease of $24.8 million from cash provided by operating activities of $14.0 million in the prior year period.

This increase in cash used in operating activities versus the prior year period resulted primarily from higher cash utilization of $28.9 million for our working capital accounts which was mainly due to lower accounts payable and accrued expenses of $22.8 million, primarily reflecting timing of payments to suppliers in North America and cash restructuring charges, partially offset by focused inventory management, which generated year-over-year improvement of $9.7 million as well as a reduction of $4.1 million in net loss adjusted for non-cash charges.

Cash provided by investing activities was $6.3 million for the three months ended September 30, 2024, an increase of $12.0 million from cash used in investing activities of $5.6 million in the prior year period primarily due to an increase in proceeds from asset sales of $10.8 million and lower capital expenditures in the current period due to phasing of capital projects.

During the three months ended September 30, 2024, $5.8 million of capital expenditures were incurred primarily related to operational improvements in the United States and United Kingdom.

We expect capital expenditures to be approximately $50 million for fiscal year 2025.

Cash used in financing activities was $4.2 million for the three months ended September 30, 2024, a decrease of $13.4 million compared to $17.6 million in the prior year period.

The decrease in cash used in financing activities was primarily due to lower net debt repayment during the three months ended September 30, 2024.

Net increase in cash and cash equivalents

Cash provided by operating activities was $20.1 million for the six months ended December 31, 2024, a decrease of $14.6 million from cash provided by operating activities of $34.7 million in the prior year period.

This decrease in cash provided by operating activities versus the prior year period resulted primarily from higher cash utilization of $16.8 million for our working capital accounts which was mainly due to lower accounts payable and accrued expenses of $24.8 million, primarily reflecting timing of payments to suppliers in North America and cash restructuring charges, partially offset by an increase in accounts receivable recovery.

Cash provided by investing activities was $4.2 million for the six months ended December 31, 2024, an increase of $15.6 million from cash used in investing activities of 11.4 million in the prior year period.

The increase in cash provided by investing activities was primarily due to an increase in proceeds from asset sales of $12.4 million, primarily related to the sale of ParmCrisps ® , and the receipt of a $2.6 million dividend from Hutchison Hain Organic Holdings Limited, a joint venture with HUTCHMED (China) Limited.

Cash used in financing activities was $17.1 million for the six months ended December 31, 2024, a decrease of $7.0 million compared to $24.1 million in the prior year period.

The decrease in cash used in financing activities was primarily due to lower net borrowings during the six months ended December 31, 2024.

Free Cash Flow

Our free cash flow was negative $16.5 million for the three months ended September 30, 2024, a decrease of $23.7 million from free cash flow of $7.1 million in the three months ended September 30, 2023.

Our free cash flow was $8.0 million for the six months ended December 31, 2024, a decrease of $14.0 million from free cash flow of $22.0 million in the six months ended December 31, 2023.

The period-over-period change resulted primarily from a decrease in cash flows from operations of $14.6 million driven by the reasons explained above, partially offset by lower capital expenditures.

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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 (used in) provided by operating activities to free cash flow.

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

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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 three months ended September 30, 2024, the Company did not repurchase any shares under the repurchase program.

As of September 30, 2024, the Company had $173.5 million of remaining authorization under the share repurchase program.

During the six months ended December 31, 2024, the Company did not repurchase any shares under the repurchase program.

As of December 31, 2024, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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International

Net sales - Three months ended September 30, 2024

Divestitures, discontinued brands and exited product categories

Net sales - Three months ended December 31, 2024

Impact of divestitures, discontinued brands and exited product categories

Impact of foreign currency exchange

Organic net sales - Three months ended September 30, 2024

Net sales - Three months ended September 30, 2023

Divestitures, discontinued brands and exited product categories

Organic net sales - Three months ended September 30, 2023

Organic net sales - Three months ended December 31, 2024

Net sales - Three months ended December 31, 2023

Impact of divestitures, discontinued brands and exited product categories

Organic net sales - Three months ended December 31, 2023

Net sales decline

2 unchanged sentences

Organic net sales decline

Net sales - Six months ended December 31, 2024

Impact of divestitures, discontinued brands and exited product categories

Impact of foreign currency exchange

Organic net sales - Six months ended December 31, 2024

Net sales - Six months ended December 31, 2023

Impact of divestitures, discontinued brands and exited product categories

Organic net sales - Six months ended December 31, 2023

Net sales decline

Impact of divestitures, discontinued brands and exited product categories

Impact of foreign currency exchange

Organic net sales decline

Adjusted EBITDA

The Company defines Adjusted EBITDA as net loss before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses, certain litigation expenses, net, plant closure related costs, net, productivity and transformation costs, costs associated with acquisitions, divestitures and other transactions, loss on sale of assets, long-lived asset impairment and other adjustments.

The Company defines Adjusted EBITDA as net loss before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses, certain litigation expenses, net, plant closure related costs, net, productivity and transformation costs, costs associated with acquisitions, divestitures and other transactions, (gain) loss on sale of assets, impairment of goodwill, intangibles and long-lived assets 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.

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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 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.

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

Three Months Ended September 30,

Three Months Ended December 31,

Six Months Ended December 31,

(Dollars in thousands)

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Stock-based compensation, net

Unrealized currency losses

Unrealized currency gains

Certain litigation expenses, net (a)

2 unchanged sentences

Plant closure related costs, net

Warehouse/manufacturing consolidation and other costs, net

Acquisitions, divestitures and other

Loss on sale of assets

(Gain) Loss on sale of assets

Transaction and integration costs, net

Impairment charges

Long-lived asset impairment

Goodwill impairment

Intangibles and long-lived asset impairment

Adjusted EBITDA

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We do not consider Free Cash Flow in isolation or as an alternative to financial measures determined in accordance with U.S.

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

Three Months Ended September 30,

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

Six Months Ended December 31,

(Dollars in thousands)

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Purchases of property, plant and equipment

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Impairments to goodwill and other intangible assets may be caused by factors outside our control, such as increasing competitive pricing pressures, changes in discount rates based on changes in cost of capital (i.e., as a result of changes in interest rates or other conditions), lower than expected sales and profit growth rates, changes in industry EBITDA multiples, the inability to quickly replace lost co-manufacturing business, or the bankruptcy of a significant customer, among others.

As of September 30, 2024, we performed an assessment of factors to determine whether it was more likely than not that the fair value of our reporting units was less than its carrying amount, including goodwill.

We concluded that were no events or circumstances that warranted an interim quantitative impairment test for goodwill during the three months ended September 30, 2024.

As of September 30, 2024, goodwill associated with the U.S.

reporting unit had a carrying value of $633,774.

reporting unit is at risk of impairment in the event of unfavorable changes in assumptions, including forecasted future cashflows 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.

As of September 30, 2024, we considered our market capitalization and our net book value and performed a market capitalization reconciliation with the expectation that the market capitalization should reconcile within a reasonable range to the sum of the fair values of the Company's individual reporting units.

As of December 31, 2024, we performed an assessment of factors to determine whether it was more likely than not that the fair value of our reporting units within both of the North America and International reportable segments was less than its respective carrying amount, including goodwill.

We concluded that, due to the continued decline in the Company’s market capitalization and the recognition of significant intangible asset impairment charges within the reporting units in its North America reportable segment during the three months ended December 31, 2024, an interim quantitative impairment test for goodwill for both its U.S.

and Canada reporting units was warranted.

For the United Kingdom, Western Europe, and Ella’s Kitchen UK reporting units, the Company performed a qualitative evaluation to assess factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill.

The Company concluded that the qualitatively tested reporting units estimated fair values exceeded their carrying amounts.

During the three months ended December 31, 2024, the Company conducted interim quantitative impairment tests of goodwill for both the U.S.

and Canada reporting units.

The fair values were estimated using a blended approach of the DCF income approach and the GPCM market approach.

As of December 31, 2024, the U.S.

reporting unit’s carrying amount exceeded its estimated fair value of $800,000, resulting in a non-cash impairment charge of $91,267 to reduce the carrying value of the U.S.

reporting unit goodwill from $633,774 to $542,507.

The goodwill related to the U.S.

reporting unit remains at risk of potential impairment if the fair value of this reporting unit, and its associated assets, decrease in value due to the amount and timing of expected future cash flows, decreased customer demand for products, an inability to execute management’s business strategies, or general market conditions, such as economic downturns, and changes in interest rates, including discount rates.

Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company’s estimates.

If the Company’s ongoing cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including an unfavorable change in the terminal growth rate or the weighted-average cost of capital, the Company may have to record additional impairment charges in future periods.

The Canada reporting unit’s estimated fair value significantly exceeded its carrying amount as of December 31, 2024, indicating no risk of potential impairment.

As of December 31, 2024, goodwill associated with the Canada reporting unit had a carrying value of $46,501.

See Note 8, Goodwill and Other Intangible Assets , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

As of December 31, 2024, we considered our market capitalization and our net book value and performed a market capitalization reconciliation with the expectation that the market capitalization should reconcile within a reasonable range to the sum of the fair values of the Company's individual reporting units.

Upon performing the market capitalization reconciliation, we noted a reasonable reconciliation between the sum of the reporting unit fair values and the Company’s market capitalization once adjusted for the impact of corporate costs not allocated to the reporting units.

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Our disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Based on this review, our CEO and CFO have concluded that the disclosure controls and procedures for the Company were effective as of September 30, 2024.

Based on this review, our CEO and CFO have concluded that the disclosure controls and procedures for the Company were effective as of December 31, 2024.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal controls over financial reporting that occurred during the three months ended December 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis