HAIN CELESTIAL GROUP INC

Previous wording

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:

Current wording

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

Previous wording

◦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.

Current wording

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.

Previous wording

◦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.

Current wording

Deliver share gain in key platforms where we have the most compelling right to win, through expanded channel reach and acceleration in our innovation pipeline.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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. We continually assess the nature and extent of these potential and evolving impacts on our business, consolidated operational results, liquidity, and capital resources.

Previous wording

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):

Current wording

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):

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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. 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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. 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.

Previous wording

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.

Current wording

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. Adjusted EBITDA margin was 5.4%, a 180-basis point decrease from the prior year period.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

On August 22, 2023, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement (as amended, 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 Company’s obligations under the Credit Agreement are guaranteed by certain existing and future domestic subsidiaries of the Company and are secured by liens on assets of the Company and its material domestic subsidiaries, including the equity interest in each of their direct subsidiaries and intellectual property, subject to agreed-upon exceptions.

Previous wording

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.

Current wording

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”). 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 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. The aforementioned financial covenants are being reported as calculated under the Credit Agreement and not pursuant to U.S. GAAP. Please refer to the Credit Agreement filed as an exhibit to our periodic reports for further information related to the calculation thereof. For risks related to our indebtedness and compliance with these covenants, please refer to the risk factor “Any default under our credit agreement could have significant consequences” set forth in Part I, Item 1A of our most recent annual report on Form 10-K.

Previous wording

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.

Current wording

During the Second Amendment Period, loans under the Credit Agreement 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 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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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. The period-over-period change resulted primarily from a decrease in cash flows from operations of $24.8 million driven by the reasons explained above, partially offset by lower capital expenditures. See Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash (used in) provided by operating activities to free cash flow.

Previous wording

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.

Current wording

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 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.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

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’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.

Previous wording

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:

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

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

Previous wording

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%.

Current wording

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

Previous wording

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.

Current wording

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. The U.S. 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.

Previous wording

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.

Current wording

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. Upon performing the market capitalization reconciliation, we noted a reasonable reconciliation between the sum of the reporting unit fair values and the Company’s market capitalization once adjusted for the impact of corporate costs not allocated to the reporting units. Refer to the critical accounting policies and estimates section included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Previous wording

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.

Current wording

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