HYDROFARM HOLDINGS GROUP, INC.
For the period ended Mar 31, 2025. Filed May 13, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 13, 2025
HYFM$0.82+12.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001628280-24-046008
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-13.
0001628280-25-024915
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 69 current paragraphs.
30 unchanged; 31 reworded; 8 added; 11 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
We are closely monitoring the recent tariff and trade policy actions changes taken by the United States and foreign governments. The situation remains fluid due to the rapidly changing global trade environment, and we are evaluating the potential implications of these actions on our business including net sales and profitability. High tariffs on imported products from China, or new tariffs from other countries, could impact the cost of certain products and may negatively impact the Company's 2025 financial performance. For additional information, see the risk factors in our 2024 Annual Report, including the risk entitled “Potential tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.”
Current report
We began a Restructuring Plan in 2022, and undertook significant actions to streamline operations, reduce costs and improve efficiencies. The major initiatives of the first phase of the Restructuring Plan included (i) narrowing our product and brand portfolio and (ii) the relocation and consolidation of certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach. We completed the first phase of the Restructuring Plan during the year ended December 31, 2023.
Current report
As a result of the continued adverse market conditions, we implemented a second phase of the Restructuring Plan in 2023. The second phase is complete as of March 31, 2025 and it included U.S. manufacturing facility consolidations, in particular with respect to production of certain durable equipment products. Restructuring activities included termination and disposal costs associated with inventory, facilities, and headcount reductions, and non-cash charges consisting of fixed asset and inventory write-downs. Total costs incurred relating to this second phase of the Restructuring Plan, from its commencement in 2023 through March 31, 2025, were (i) $9.7 million of non-cash charges relating primarily to inventory markdowns, and (ii) $2.0 million of cash charges relating primarily to the consolidation of U.S. manufacturing facilities.
Current report
We continue to evaluate our product portfolio and supply chain, in order to improve efficiency, lower our costs and reduce footprint. We are also evaluating other opportunities to sell excess owned land to supplement our cash position and potential contract manufacturing or other outsourcing arrangements. Depending on the length and severity of the industry and market conditions, including the fluid and complex international tariff situation, impacting our business, it is possible we may execute additional restructuring plan actions.
Current report
Gross profit for the three months ended March 31, 2025, was $6.9 million, a decrease of $4.0 million, or 37.1%, compared to the same period in 2024. Our gross profit margin percentage decreased to 17.0% for the three months ended March 31, 2025, from 20.2% in the same period in 2024. Gross profit and gross profit margin for the three months ended March 31, 2025, decreased as a result of lower net sales and due to selling a lower proportion of proprietary brand products.
Current report
Net cash used in operating activities was $2.3 million for the three months ended March 31, 2024. Consistent with historical seasonal trends, we utilized cash from operating activities in the first quarter to fund our working capital. The $1.3 million net reduction in working capital was primarily driven by a $5.7 million increase of accounts receivable and a $2.0 million decrease of lease liabilities, partially offset by a $4.2 million increase of accounts payable and accrued expenses and other current liabilities and a $2.2 million decrease of inventory. During the three months ended March 31, 2024, we paid $4.7 million in cash interest.
Current report
Subsequent event - Revolving Credit Facility Seventh Amendment
Current report
On May 9, 2025, we entered into the Seventh Amendment to the Revolving Credit Facility, pursuant to which the maturity date of the Revolving Credit Facility was extended from June 30, 2026 to June 30, 2027, the maximum commitment amount under the Revolving Credit Facility was reduced from $35,000 to $22,000, and certain other changes were made, including the addition of a $2,000 availability block, an increase of the cash dominion trigger from less than 10% of availability to less than 50% of availability and an increase of the fixed charge ratio trigger from less than 10% excess availability to less than 20% of excess availability.
Removed paragraphs (11)
Previous report
In 2022, we undertook the following major initiatives in connection the first phase of our previously disclosed restructuring plan (the "Restructuring Plan"): (i) narrowing our product and brand portfolio, including removing approximately one-third of all products and one-fifth of all brands relating to our primary product portfolio, which excluded our garden center business in Canada, and (ii) relocating and consolidating certain manufacturing and distribution centers, including headcount reductions and reorganization to drive a solution based approach, focusing commercial sales on competencies and product assortment gained from our recent acquisitions. Total costs incurred relating to this first phase of the Restructuring Plan from its commencement in 2022 to its completion in 2023, were (i) $6.4 million relating primarily to inventory markdowns, and (ii) $3.4 million relating primarily to the relocation and termination of certain facilities in Canada.
Previous report
As a result of the continued adverse market conditions, in the third quarter of 2023 we began a second phase of the Restructuring Plan which included U.S. manufacturing facility consolidations, in particular with respect to our production of certain durable equipment products. In 2023, we recorded $9.2 million of restructuring charges for the second phase. These charges primarily related to estimated non-cash raw material inventory write-downs as we reduced our capacity and facility space, given the change in customer demand for these products. These restructuring charges were primarily recorded within Cost of goods sold on the condensed consolidated statements of operations.
Previous report
We maintain an allowance for excess and obsolete inventory that is based upon assumptions about future demand and market conditions. While we believe our estimates of charges relating to our Restructuring Plan, long-lived assets, inventory obsolescence, and accounts receivable allowances are reasonable, it is possible that we may incur additional charges in the future and actual results may differ significantly from these estimates and assumptions. Depending on the length and severity of the industry and market conditions impacting our business, it is possible we may execute additional restructuring plan actions and incur future associated charges, and we may not be able to realize the full extent of our anticipated cost savings.
Previous report
Net sales for the three months ended September 30, 2024, were $44.0 million, a decrease of $10.2 million, or 18.8% compared to the same period in 2023. Net sales for the nine months ended September 30, 2024, were $153.0 million, a decrease of $26.4 million, or 14.7% compared to the same period in 2023.
Previous report
Gross profit for the three months ended September 30, 2024, was $8.5 million, an increase of $5.2 million, or 157.4%, compared to the same period in 2023. Gross profit for the nine months ended September 30, 2024, was $30.3 million, an increase of $1.1 million, or 3.9%, compared to the same period in 2023. Our gross profit margin percentage increased to 19.4% for the three months ended September 30, 2024, from 6.1% in the same period in 2023. Our gross profit margin percentage increased to 19.8% for the nine months ended September 30, 2024, from 16.3% in the same period in 2023.
Previous report
Gross profit and gross profit margin for the three and nine months ended September 30, 2024, increased primarily due to $6.9 million and $7.8 million of decreases in restructuring charges, respectively, from the prior year period. Additionally, gross profit increased during the three and nine months ended September 30, 2024 due to selling a higher proportion of proprietary brand products, as well as improved productivity. These increases more than offset the impact of lower net sales.
Previous report
SG&A expenses for the three months ended September 30, 2024, were $17.6 million, a decrease of $2.0 million, or 10.2% compared to the same period in 2023. SG&A expenses for the nine months ended September 30, 2024, were $55.8 million, a decrease of $11.6 million, or 17.2% compared to the same period in 2023.
Previous report
The $11.6 million decrease in SG&A expenses for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to lower expenses in several areas, including as a result of our cost saving and restructuring initiatives: (i) a $3.6 million decrease in facility costs, (ii) a $2.5 million decrease in salaries and benefits, (iii) a $1.8 million decrease in stock-based compensation, (iv) a $1.5 million decrease in professional fees and outside services, and (v) a $1.5 million decrease in insurance costs, along with other expense reductions in multiple areas.
Previous report
Loss on asset disposition
Previous report
As previously described, we entered into a Purchase Agreement with CM Fabrication, LLC to sell assets relating to the production of durable equipment products for $8.7 million. The Asset Sale closed during the second quarter of 2024, and we sold or disposed of inventories and other assets. We recorded a Loss on asset disposition of $11.5 million for the nine months ended September 30, 2024. Refer to Note 3 –Restructuring and asset dispositions for a further description of the Asset Sale.
Previous report
Net cash from operating activities was $8.6 million for the nine months ended September 30, 2023, driven by positive cash from operating activities in the second and third quarters. The net cash from operating activities was primarily due to a $11.7 million net cash inflow from a reduction in working capital, partially offset by a reported net loss of $49.6 million less non-cash items of $46.6 million. The net reduction in working capital was primarily driven by decreases of inventories of $22.6 million and prepaid expenses and other current assets of $1.2 million, partially offset by decreases of $7.0 million of lease liabilities and $4.4 million of accrued expenses and other current liabilities.
Reworded paragraphs (31)
Previous wording
We are a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"), including grow lights, climate control solutions, growing media and nutrients, as well as a broad portfolio of innovative and proprietary branded products. We primarily serve the U.S. and Canadian markets, and believe we are one of the leading companies in these markets in an otherwise fragmented industry. For over 40 years, we have helped growers make growing easier and more productive. Our mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency, and speed in their grow projects.
Current wording
We are a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"), including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative, proprietary branded products. We primarily serve the U.S. and Canadian markets, and believe we are one of the leading companies in these markets in an otherwise fragmented industry. For over 40 years, we have helped growers make growing easier and more productive. Our mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency, and speed in their grow projects.
Previous wording
Hydroponics is the farming of plants using soilless growing media and often artificial lighting in a controlled indoor or greenhouse environment. Hydroponics is the primary category of CEA and we use the terms CEA and hydroponics interchangeably. Our products are used to grow, farm, and cultivate cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables including temperature, humidity, CO 2, light intensity spectrum, nutrient concentration and pH. Through CEA, growers are able to be more efficient with physical space, water and resources, while enjoying year-round and more rapid grow cycles as well as more predictable and abundant grow yields, when compared to other traditional growing methods.
Current wording
Hydroponics is the farming of plants using soilless grow media and often artificial lighting in a controlled indoor or greenhouse environment. Hydroponics is the primary category of CEA and we use the terms CEA and hydroponics interchangeably. Our products are used to grow, farm, and cultivate cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables including temperature, humidity, CO 2, light intensity spectrum, nutrient concentration and pH. Through CEA, growers are able to be more efficient with physical space, water and resources, while enjoying year-round and more rapid grow cycles as well as more predictable and abundant grow yields, when compared to other traditional growing methods.
Previous wording
We have experienced adverse financial results which we believe is primarily a result of an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation. The extent these market conditions will continue to negatively impact our business and results of operations is uncertain and difficult to predict at this time. We believe COVID-19 may have provided a positive demand impact for the Company in 2020 and 2021 from shelter-in-place orders in the United States, a possible negative supply chain impact from workforce disruption at international and domestic suppliers, and a possible negative growth rate impact in 2022 and 2023 due to agricultural oversupply initiated during the height of COVID-related shelter-in-place orders in 2020 and 2021.
Current wording
We have experienced adverse financial results which we believe are primarily a result of an agricultural oversupply impacting our market and resulting in a decrease in indoor and outdoor cultivation. The extent these market conditions will continue to negatively impact our business and results of operations is uncertain and difficult to predict at this time. We believe COVID-19 may have provided a positive demand impact for the Company in 2020 and 2021 from shelter-in-place orders in the United States, a possible negative supply chain impact from workforce disruption at international and domestic suppliers, and a possible negative growth rate impact in the periods since due to agricultural oversupply initiated during the height of COVID-19 related shelter-in-place orders in 2020 and 2021. In addition, we believe demand for our products has been negatively impacted by the extended period to enact reform of U.S. federal regulations, including cannabis rescheduling, which have been slow to develop and possibly leading cannabis operators to reduce investments in our products, particularly durable goods. In addition, we believe our financial results have been negatively impacted by hydroponic retail store closings and, in some cases, associated accounts receivable allowances.
Previous wording
In 2024, we evaluated alternatives to maximize the recovery value of our assets and the cost structure associated with manufacturing our IGE branded durable equipment products. In the second quarter of 2024, we entered into the Purchase Agreement with the Buyer to sell the inventories, and property, plant and equipment associated with our IGE branded products for approximately $8.7 million, while retaining our proprietary brand and customer relationships. In connection with the Asset Sale, we entered into an exclusive supply agreement with the Buyer, pursuant to which the Buyer provides contract manufacturing and we continue to sell our proprietary branded durable products, which include horticulture benches, racking and LED lighting systems. As a result of the Asset Sale and new contract manufacturing arrangement, we expect improved profitability on future IGE branded product sales from an anticipated decrease in fixed costs. The Asset Sale closed on May 31, 2024 and we sold or disposed of approximately $11.6 million of inventories, $3.7 million of property, plant and equipment, and technology intangible assets of $2.6 million. In connection with the Asset Sale, we terminated and paid-off the facility operating lease for $1.3 million and certain equipment finance leases for $0.7 million. We recorded a loss on asset disposition of approximately $11.5 million on the condensed consolidated statements of operations for the nine months ended September 30, 2024.
Current wording
In 2024, we entered into the Purchase Agreement with the Buyer to sell the inventories, and property, plant and equipment associated with our IGE branded products for approximately $8.7 million, while retaining our proprietary brand and customer relationships. In connection with the Asset Sale, we entered into an exclusive supply agreement with the Buyer, pursuant to which the Buyer provides contract manufacturing and we continue to sell our proprietary branded durable products, which include horticulture benches, racking and LED lighting systems. After completion of the Asset Sale and the aforementioned restructuring actions, we have now consolidated our manufacturing operations into two U.S. locations and our peat moss harvesting and processing operation in Canada.
Previous wording
During the three and nine months ended September 30, 2024, we continued to execute further restructuring actions, including consolidation of other U.S. manufacturing facilities, and outsourcing certain distribution center locations to reduce costs and further consolidate our facility footprint. These actions resulted in restructuring charges of $0.7 million and $1.7 million for the three and nine months ended September 30, 2024, respectively, including termination and disposal costs associated with inventory, facilities and headcount reductions. After completion of the Asset Sale and the aforementioned restructuring actions, we have now consolidated our manufacturing operations into two U.S. locations and our peat moss harvesting and processing operation in Canada. We are evaluating other opportunities to sell excess owned land to supplement our cash position and potential contract manufacturing or other outsourcing arrangements. We estimate additional charges associated with completing the second phase of our Restructuring Plan may approximate $1.0 million. We anticipate the second phase of our Restructuring Plan and the related actions described above may result in annual cost savings of over $2.0 million. The amounts we will ultimately realize or disburse in connection with the Restructuring Plan could differ materially from our estimates, and we may incur additional non-cash charges in future periods depending on our ability to execute asset sales or pursue other alternatives. We may not be able to realize the full extent of our anticipated cost savings if industry conditions persist and net sales volumes worsen.
Current wording
Additionally, the amount we will ultimately realize as benefits associated with our Restructuring Plan could differ materially from our estimates, and we may incur additional non-cash charges in future periods depending on our ability to execute asset sales or pursue other alternatives. We may not be able to realize the full extent of anticipated cost savings if industry conditions persist and net sales volumes worsen.
Previous wording
Results of Operations—Comparison of three and nine months ended September 30, 2024 and 2023
Current wording
Results of Operations—Comparison of three months ended March 31, 2025 and 2024
Previous wording
The following table sets forth our unaudited interim condensed consolidated statements of operations for the three and nine months ended September 30, 2024, and 2023, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):
Current wording
The following table sets forth our unaudited interim condensed consolidated statements of operations for the three months ended March 31, 2025, and 2024, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):
Previous wording
The 18.8% decrease in net sales for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a 13.7% decline in volume/mix of products sold and a 4.9% decrease in price. The decrease in volume/mix of products sold was primarily related to the aforementioned oversupply in the cannabis industry. The 14.7% decrease in net sales for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a 11.3% decline in volume/mix of products sold and a 3.3% decrease in price. The decrease in volume/mix of products sold was primarily related to the aforementioned oversupply in the cannabis industry.
Current wording
Net sales for the three months ended March 31, 2025, were $40.5 million, a decrease of $13.6 million, or 25.2% compared to the same period in 2024. The 25.2% decrease in net sales for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to a 22.6% reduction in volume and mix of products sold and a 1.8% decrease in price. This decline was largely driven by the previously mentioned oversupply in the cannabis industry.
Previous wording
SG&A expenses decreased $2.0 million for the three months ended September 30, 2024, as compared to the same period in 2023. The decrease was due to lower expenses in several areas, including as a result of our cost saving and restructuring initiatives: (i) a $0.9 million decrease in facility costs, (ii) a $0.6 million decrease in employee compensation costs, including stock-based compensation and salaries and benefits, and (iii) a $0.4 million decrease in insurance, along with other expense reductions in multiple areas including professional fees and outside services.
Current wording
SG&A expenses for the three months ended March 31, 2025, were $17.9 million, a decrease of $1.8 million, or 9.0% compared to the same period in 2024. The decrease was due to lower expenses, primarily a result of our cost saving and restructuring initiatives, as follows: (i) a $1.3 million decrease in employee compensation costs, including stock-based compensation and salaries and benefits, and (ii) a $0.5 million decrease in facility costs.
Previous wording
Interest expense for the three months ended September 30, 2024, was $3.9 million, which is a slight decrease from $4.0 million of interest expense recorded in the same period in the prior year. Interest expense for the nine months ended September 30, 2024, was $11.7 million, an increase of $0.2 million compared to the same period in the prior year. The decrease for the three months ended September 30, 2024 was due to lower debt outstanding due to principal repayments, partially offset by higher variable interest rates on our Term Loan. The increase during nine months ended September 30, 2024, was primarily due to higher variable interest rates on our Term Loan, partially offset by lower debt outstanding due to principal repayments.
Current wording
Interest expense for the three months ended March 31, 2025, was $3.4 million, a decrease from $3.9 million of interest expense recorded in the same period in the prior year. The decrease for the three months ended March 31, 2025 was primarily due to lower debt outstanding due to principal repayments and lower variable interest rates on our Term Loan.
Previous wording
Other income, net for the three months ended September 30, 2024, was $0.1 million, a decrease of $0.3 million compared to $0.4 million during the same period in the prior year. Other income, net for the nine months ended September 30, 2024, was $0.4 million, an increase of $0.4 million compared to less than $0.1 million during the same period in the prior year. Other income, net for the three and nine months ended September 30, 2024, was primarily driven by interest income and foreign currency exchange gains.
Current wording
Other income, net for the three months ended March 31, 2025, was $0.1 million, a decrease compared to $0.2 million during the same period in the prior year. Other income, net for the three months ended March 31, 2025, was primarily driven by interest income.
Previous wording
We recorded income tax expense of $0.3 million and $0.9 million for the three and nine months ended September 30, 2024, respectively, representing an effective tax rate of (2.2)% and (1.8)%, respectively. Our effective tax rate for the nine months ended September 30, 2024, differs from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax expense for the three and nine months ended September 30, 2024, was primarily due to foreign taxes in certain jurisdictions and U.S. state taxes.
Current wording
We recorded income tax expense of $0.1 million for the three months ended March 31, 2025, representing an effective tax rate of (0.6)%. Our effective tax rate for the three months ended March 31, 2025, differs from the federal statutory rate of 21% primarily due to U.S. and foreign jurisdictions in full valuation allowance. The income tax expense for the three months ended March 31, 2025, was primarily due to foreign taxes in certain jurisdictions and U.S. state taxes.
Previous wording
We recorded income tax expense of $0.1 million for the three months ended September 30, 2023, representing an effective tax rate of (0.4)%. We recorded an income tax benefit of $0.1 million for the nine months ended September 30, 2023, representing an effective income tax rate of 0.2%. Our effective tax rate for the nine months ended September 30, 2023, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions. The income tax expense and benefit for the three and nine months ended September 30, 2023, respectively, was primarily due to minor foreign tax items in certain jurisdictions.
Current wording
We recorded income tax expense of $0.2 million for the three months ended March 31, 2024, representing an effective tax rate of (1.6)%. Our effective tax rate for the three months ended March 31, 2024, differs from the federal statutory rate of 21% primarily due to maintaining a full valuation allowance against our net deferred tax assets in the United States and most foreign jurisdictions. The income tax expense for the three months ended March 31, 2024, was primarily due to U.S. state taxes and foreign taxes in certain jurisdictions.
Previous wording
Comparison of the nine months ended September 30, 2024, and September 30, 2023
Current wording
Comparison of the three months ended March 31, 2025, and March 31, 2024
Previous wording
The following table summarizes our cash flows for the nine months ended September 30, 2024, and 2023 (amounts in thousands):
Current wording
The following table summarizes our cash flows for the three months ended March 31, 2025, and 2024 (amounts in thousands):
Previous wording
Net cash used in operating activities was $3.0 million for the nine months ended September 30, 2024. The net cash usage was primarily due to a $0.8 million net cash inflow from a reduction in working capital, offset by a net loss of $49.2 million, less net non-cash items of $45.4 million. The $0.8 million net reduction in working capital was primarily comprised of a $8.9 million decrease of inventories, a $0.8 million decrease in accounts receivable, and a $0.8 million decrease of prepaid expenses and other current assets, partially offset by a $7.1 million decrease of lease liabilities and a $2.3 million decrease in accounts payable. As described in Note 3 –Restructuring and asset dispositions, in connection with the Asset Sale, we estimated the amount of cash proceeds associated with the sale of inventories as $5.0 million and classified the amount within net cash from operating activities. In addition, the Company paid cash of $1.3 million to terminate the facility operating lease in connection with the Asset Sale.
Current wording
Net cash used in operating activities was $11.8 million for the three months ended March 31, 2025. The net cash usage was primarily due to a $14.4 million net loss and an $8.3 million net cash outflow from an increase in working capital, partially offset by net non-cash items of $10.9 million. The $8.3 million net increase in working capital was primarily comprised of a $6.8 million increase in accounts receivable, a $3.2 million decrease in accrued expenses and other current liabilities, and a $1.8 million decrease of lease liabilities, partially offset by a $3.8 million decrease in accounts payable. During the three months ended March 31, 2025, we paid $5.2 million in cash interest.
Previous wording
Net cash from investing activities was $1.5 million for the nine months ended September 30, 2024, and net cash used in investing activities was $4.1 million for the nine months ended September 30, 2023. We received cash proceeds from the Asset Sale associated with the sale of property, plant and equipment of $3.7 million during the second quarter of 2024, along with other cash from investing activities of $0.4 million. These cash proceeds were partially offset by $2.6 million of capital expenditures of property, plant and equipment. The net cash used in investing activities for the nine months ended September 30, 2023, was primarily due to capital expenditures of property, plant and equipment. The capital expenditures of property, plant and equipment in 2024 and 2023 primarily relate to investments in our peat moss harvesting operation in Canada.
Current wording
Net cash used in investing activities was $0.2 million for the three months ended March 31, 2025, compared to $1.4 million for the three months ended March 31, 2024. The net cash used in investing activities for both periods was primarily due to capital expenditures of property, plant and equipment.
Previous wording
Net cash used in financing activities was $4.3 million for the nine months ended September 30, 2024, primarily driven by (i) $2.9 million of Term Loan repayments relating to required quarterly payments of principal and prepayments made in conjunction with the Sale-Leaseback Transaction, and (ii) finance lease principal payments of $1.3 million which included approximately $0.7 million relating to equipment finance lease payments made in connection with the Asset Sale.
Current wording
Net cash used in financing activities was $0.4 million for the three months ended March 31, 2025, primarily driven by (i) $0.3 million of Term Loan repayments relating to required quarterly payments of principal, and (ii) finance lease principal payments of $0.1 million.
Previous wording
Net cash from financing activities was $6.6 million for the nine months ended September 30, 2023, primarily driven by $8.6 million of proceeds from the Sale-Leaseback Transaction. In addition, we paid $0.9 million on the Term Loan relating to required quarterly payments of principal.
Current wording
Net cash used in financing activities was $2.4 million for the three months ended March 31, 2024, primarily driven by $2.0 million of Term Loan repayments relating to required quarterly payments of principal and prepayments made under the Term Loan's reinvestment provision from a sale-leaseback transaction that closed in January 2023.
Previous wording
Our ability to make investments in our business, service our debt and maintain liquidity will depend upon our ability to generate excess operating cash flows through our operating subsidiaries. We believe that our cash flows from operating activities, combined with current cash levels and borrowing availability under the Revolving Credit Facility, will be adequate to support our ongoing operations, to fund debt service requirements, capital expenditures, lease obligations and working capital needs through the next twelve months of operations. However, we cannot guarantee that our business will generate sufficient cash flow from operating activities or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other working capital needs. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Item 1A. Risk Factors included in this Quarterly Report on Form 10-Q and in our 2023 Annual Report.
Current wording
Our ability to make investments in our business, service our debt and maintain liquidity will primarily depend upon our ability to generate excess operating cash flows through our operating subsidiaries. We believe that our cash flows from operating activities, combined with current cash levels and borrowing availability under the Revolving Credit Facility, will be adequate to support our ongoing operations, to fund debt service requirements, capital expenditures, lease obligations and working capital needs through the next twelve months of operations. However, we cannot guarantee that our business will generate sufficient cash flow from operating activities or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other working capital needs. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Item 1A. Risk Factors included in this Quarterly Report on Form 10-Q and in our 2024 Annual Report.
Previous wording
As further described in Note 3 –Restructuring and asset dispositions, we closed on an Asset Sale and received gross proceeds of $8.7 million during the three months ended June 30, 2024. In accordance with the Company’s Term Loan, the net proceeds, approximately $6.3 million, from the Asset Sale transaction are required to be reinvested into certain permitted investments, such as capital expenditures, or offered to prepay Term Loan principal. The Company intends to reinvest the net proceeds from the Asset Sale into certain permitted investments, such as capital expenditures, in accordance with provisions of the Term Loan.
Current wording
As further described in Note 3 –Restructuring and Asset Sales and Note 10 –Debt, we closed on the Asset Sale, whereby, in accordance with our Term Loan, the net proceeds, approximately $6.3 million, are required to be reinvested into certain permitted investments, such as capital expenditures or permitted acquisitions/ investments, or offered to prepay Term Loan principal. As of March 31, 2025, in accordance with this provision, we have estimated the total reinvestments and believe it is probable that an offer to prepay may be made in an estimated amount of $4.6 million. The amount we may offer to prepay is uncertain and based on future activity. The estimated amount has been classified as current debt on our condensed consolidated balance sheet. Refer to further discussion below, relating to Term Loan reinvestment provisions regarding the net cash proceeds of the Asset Sale.
Previous wording
If necessary, we believe that we could supplement our cash position through additional sale-leasebacks, asset sales and equity financing. During the second quarter of 2024, we entered into an agreement to sell a portion of the excess owned land at our Goshen, New York location, and are evaluating other opportunities to sell excess owned land to supplement our cash position. We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions refer enced in our Term Loan and Revolving Credit Facility, such as subjecting the Company to make mandatory prepayments.
Current wording
If necessary, we believe that we could supplement our cash position through additional asset sales or divestiture of one or more of our brands or lines of business. During 2024, we sold a portion of the excess owned land at our Goshen, New York location, and are evaluating other opportunities to sell excess owned land to supplement our cash position. We believe it is prudent to be prepared if required and, accordingly, continue to be engaged in the process of evaluating and preparing to implement one or more of the aforementioned activities. Any potential such event may be subject to provisions refer enced in our Term Loan and Revolving Credit Facility, such as subjecting us to make mandatory prepayments.
Previous wording
On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a$125 million senior secured term loan (the "Term Loan"). The Term Loan was amended by Amendment No. 1 effective as of June 27, 2023, to replace the LIBOR referenced rates with SOFR referenced rates. Pursuant to Amendment No. 1, any Term Loan that constitutes a Eurodollar Rate Loan that is outstanding as of the Amendment No. 1 closing date shall continue until the end of the applicable interest period for such Eurodollar Rate Loan and the provisions of the Term Loan applicable thereto shall continue and remain in effect (notwithstanding the occurrence of the Amendment No. 1 closing date) until the end of the applicable interest period for such Eurodollar Rate Loan, after which such provisions shall have had no further force or effect. Such Eurodollar Rate Loan shall subsequently either be an ABR Loan or a Term Benchmark Loan. The ABR Loans shall bear interest at the Alternate Base Rate (with a 2.0% floor) plus 4.50%, and Term Benchmark Loans shall bear interest at the Adjusted Term SOFR Rate (with a 1.0% floor) plus 5.50%. As of the date of filling this Quarterly Report on Form 10-Q, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 have not changed from the credit spreads in the original Term Loan. The Term Loan matures on October 25, 2028.
Current wording
On October 25, 2021, we and certain of our direct and indirect subsidiaries entered into the Term Loan with JPMorgan Chase Bank, N.A., as administrative agent for the lenders, pursuant to which we borrowed a$125 million senior secured term loan (the "Term Loan"). The Term Loan was amended by Amendment No. 1 effective as of June 27, 2023, to replace the LIBOR referenced rates with SOFR referenced rates. Pursuant to Amendment No. 1, any Term Loan that constitutes a Eurodollar Rate Loan that is outstanding as of the Amendment No. 1 closing date shall continue until the end of the applicable interest period for such Eurodollar Rate Loan and the provisions of the Term Loan applicable thereto shall continue and remain in effect (notwithstanding the occurrence of the Amendment No. 1 closing date) until the end of the applicable interest period for such Eurodollar Rate Loan, after which such provisions shall have had no further force or effect. Such Eurodollar Rate Loan shall subsequently either be an ABR Loan or a Term Benchmark Loan. The ABR Loans shall bear interest at the Alternate Base Rate (with a 2.0% floor) plus 4.50%, and Term Benchmark Loans shall bear interest at the Adjusted Term SOFR Rate (with a 1.0% floor) plus 5.50%. As of the date of filing this Quarterly Report on Form 10-Q, the ABR Loan and Term Benchmark Loan credit spreads of 4.50% and 5.50%, respectively, within the Amendment No. 1 have not changed from the credit spreads in the original Term Loan. The Term Loan matures on October 25, 2028.
Previous wording
The principal amounts of the Term Loan are scheduled to be repaid in consecutive quarterly installments in amounts equal to 0.25% of the original principal amount of the Term Loan on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date of October 25, 2028.
Current wording
The principal amounts of the Term Loan are scheduled to be repaid in consecutive quarterly installments in amounts equal to 0.25% of the original principal amount of the Term Loan on the last day of each fiscal quarter commencing March 31, 2022, with the balance of the Term Loan payable on the Maturity Date.
Previous wording
We are also required to make mandatory prepayments in the event of (i) achieving certain excess cash flow criteria, including the achievement and maintenance of a specific leverage ratio, (ii) certain asset sales that are collateral, or (iii) upon the issuance, offering, or placement of new debt obligations. As described in Note 7 –Leases, we received net cash proceeds in January 2023 from the Sale-Leaseback Transaction and are subject to a provision whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures. This provision of the Term Loan includes (i) cash investments made within a one-year period from the Sale-Leaseback Transaction, and (ii) investments which are contractually committed within one-year of the Sale-Leaseback Transaction, and paid within 180 days after entering into such contractual commitment. The amount of any net cash proceeds which are not reinvested would require us to make an offer to prepay the corresponding amount on the Term Loan in 2024. In accordance with this provision, we classified $1.7 million as current debt on our consolidated balance sheet as of December 31, 2023, and prepaid the Term Loan in this amount during the three months ended March 31, 2024. As of September 30, 2024, we have satisfied this provision through a combination of payments made pursuant to the contractual commitments and an additional $0.3 million repayment of the Term Loan. The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan.
Current wording
We are also required to make mandatory prepayments in the event of (i) achieving certain excess cash flow criteria, including the achievement and maintenance of a specific leverage ratio, (ii) certain asset sales that are collateral, or (iii) upon the issuance, offering, or placement of new debt obligations. As described in Note 3 –Restructuring and Asset Sales and Note 10 –Debt, we received net cash proceeds of approximately $6.3 million in May 2024 from the Asset Sale and are subject to a provision whereby such net cash proceeds can be reinvested into certain investments, such as capital expenditures. This provision of the Term Loan includes (i) cash investments made within a one-year period from the Asset Sale, and (ii) investments which are contractually committed within one-year of the Asset Sale, and paid within 180 days after entering into such contractual commitment. The amount of any net cash proceeds which are not reinvested would require us to make an offer to prepay the corresponding amount on the Term Loan in 2025. As of March 31, 2025, in accordance with this provision, we have estimated the total reinvestments and believe it is probable that an offer to prepay may be made in an estimated amount of $4.6 million. The amount we may offer to prepay is uncertain and based on future activity. The estimated amount has been classified as current debt on our condensed consolidated balance sheet. The foregoing description of the reinvestment provision does not purport to be complete and is qualified in its entirety by reference to the provisions of the Term Loan.
Previous wording
As of September 30, 2024, and December 31, 2023, the outstanding principal balance on the Term Loan was $119.6 million and $122.5 million, respectively.
Current wording
As of March 31, 2025, and December 31, 2024, the outstanding principal balance on the Term Loan was $119.0 million and $119.3 million, respectively.
Previous wording
On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Facility (the "Revolving Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million. The Revolving Credit Facility was amended by the First Amendment dated August 31, 2021, which increased the revolving line of credit by an additional $50 million for an aggregate borrowing limit of $100 million. The Revolving Credit Facility was further amended by the Second Amendment dated October 25, 2021 which, among other things, permitted the incurrence of the Term Loan and made certain other changes including subordinating its liens on non-working capital assets to the obligations under the Term Loan. The Revolving Credit Facility was further amended by the Third Amendment and Joinder dated August 23, 2022, pursuant to which several previously acquired subsidiaries became parties to the Revolving Credit Facility and granted liens on their assets. On December 22, 2022, we entered into the Fourth Amendment pursuant to which a sale-leaseback transaction was permitted, and certain other changes were made, including a reduction of the maximum commitment amount under the Revolving Credit Facility from $100 million to $75 million and transitioning the LIBOR based rates to SOFR based rates. On March 31, 2023, we and certain of our subsidiaries entered into the Fifth Amendment, pursuant to which the maturity date was extended to June 30, 2026, the maximum commitment amount under the Revolving Credit Facility was reduced to $55 million, and the interest rate on borrowings was revised to various spreads, based on our fixed charge coverage ratio. On November 1, 2024, the Company and certain of its subsidiaries entered into the Sixth Amendment to the Revolving Credit Facility pursuant to which the maximum commitment amount was reduced to $35 million.
Current wording
On March 29, 2021, we and certain of our subsidiaries entered into the Revolving Credit Facility (the "Revolving Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender for a revolving line of credit up to $50 million. The Revolving Credit Facility was amended by the First Amendment dated August 31, 2021, which increased the revolving line of credit by an additional $50 million for an aggregate borrowing limit of $100 million. The Revolving Credit Facility was further amended by the Second Amendment dated October 25, 2021 which, among other things, permitted the incurrence of the Term Loan and made certain other changes including subordinating its liens on non-working capital assets to the obligations under the Term Loan. The Revolving Credit Facility was further amended by the Third Amendment and Joinder dated August 23, 2022, pursuant to which several previously acquired subsidiaries became parties to the Revolving Credit Facility and granted liens on their assets. On December 22, 2022, we entered into the Fourth Amendment to the Revolving Credit Facility pursuant to which a sale-leaseback transaction was permitted, and certain other changes were made, including a reduction of the maximum commitment amount under the Revolving Credit Facility from $100 million to $75 million and transitioning the LIBOR based rates to SOFR based rates. On March 31, 2023, we and certain of our subsidiaries entered into the Fifth Amendment to the Revolving Credit Facility, pursuant to which the maturity date was extended to June 30, 2026, the maximum commitment amount under the Revolving Credit Facility was reduced to $55 million, and the interest rate on borrowings was revised to various spreads, based on our fixed charge coverage ratio. On November 1, 2024, we and certain of our subsidiaries entered into the Sixth Amendment to the Revolving Credit Facility pursuant to which the maximum commitment amount was reduced to $35 million.
Previous wording
The Revolving Credit Facility maintains certain reporting requirements, affirmative covenants, negative covenants and financial covenants. A certain financial covenant becomes applicable in the event that our excess availability under the Revolving Credit Facility is less than an amount equal to 10% of the Aggregate Revolving Commitment ($55 million as of September 30, 2024) and would require us to maintain a minimum fixed charge coverage ratio of 1.1x on a rolling twelve-month basis.
Current wording
The Revolving Credit Facility maintains certain reporting requirements, affirmative covenants, negative covenants and financial covenants. A certain financial covenant becomes applicable in the event that our excess availability under the Revolving Credit Facility is less than an amount equal to 10% of the Aggregate Revolving Commitment ($35 million as of March 31, 2025) and would require us to maintain a minimum fixed charge coverage ratio of 1.1x on a rolling twelve-month basis.
Previous wording
In order to consummate permitted acquisitions or to make restricted payments, we would be required to comply with a higher fixed charge coverage ratio of 1.15x, but no such acquisitions or payments are currently contemplated.
Current wording
In order to consummate permitted acquisitions or to make restricted payments, we would be required to comply with a higher fixed charge coverage ratio of 1.15x, but no such acquisitions or payments are currently contemplated. We received a consent from JPMorgan Chase Bank, N.A., as administrative agent, to permit the cash settlement of fractional shares in connection with the reverse stock split, which is described further in Note 2 –Basis of Presentation and Significant Accounting Policies.
Previous wording
The cash and cash equivalents balances of $24.4 million and $30.3 million at September 30, 2024, and December 31, 2023, respectively, included $11.2 million and $8.5 million, respectively, held by foreign subsidiaries.
Current wording
The cash and cash equivalents balances of $13.7 million and $26.1 million at March 31, 2025, and December 31, 2024, respectively, included $8.3 million and $11.9 million, respectively, held by foreign subsidiaries.
Previous wording
Our material cash requirements include (i) principal repayments and anticipated interest payments on our long-term debt, (ii) finance lease payments, (iii) operating lease payments, and (iv) balances subject to the Term Loan reinvestment provision, as well as other purchase obligations to support our operations. Variable rates on our Term Loan are subject to change as further described in Item 3. Quantitative and Qualitative Disclosures About Market Risk. Refer to Item 1. Financial Statements, Note 10 –Debt, Note 7 –Leases, and Note 14 –Commitments and Contingencies for details relating to our material cash requirements for debt, our leasing arrangements, including future maturities of our operating lease liabilities, and purchase obligations, respectively. From time to time in the normal course of business, we will enter into agreements with suppliers which provide favorable pricing in return for a commitment to purchase minimum amounts of inventory over a defined time period.
Current wording
Our estimated material cash requirements include (i) principal repayments and anticipated interest payments on our long-term debt, (ii) finance lease payments, (iii) operating lease payments, and (iv) balances subject to the Term Loan reinvestment provision, as well as other purchase obligations to support our operations. Variable rates on our Term Loan are subject to change as further described in Item 3. Quantitative and Qualitative Disclosures About Market Risk. Refer to Item 1. Financial Statements, Note 10 –Debt, Note 7 –Leases, and Note 14 –Commitments and Contingencies for details relating to our material cash requirements for debt, our leasing arrangements, including future maturities of our operating lease liabilities, and purchase obligations, respectively. From time to time in the normal course of business, we will enter into agreements with suppliers which provide favorable pricing in return for a commitment to purchase minimum amounts of inventory over a defined time period.