# B&G Foods, Inc. (BGS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from B&G Foods, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1278027/000155837025001513/bgs-20241228x10k.htm
Accession: 0001558370-25-001513
Filing date: 2025-02-25
Report date: 2024-12-28
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BGS/
All MD&A years: /company/BGS/mda/
Previous year: /company/BGS/mda/fy2023/ (FY 2023)
Next year: /company/BGS/mda/fy2026/ (FY 2026)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A, “Risk Factors,” under the heading “Forward-Looking Statements” before Part I of this report and elsewhere in this report. The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.

General

We manufacture, sell and distribute a diverse portfolio of branded, high quality, shelf-stable and frozen foods and household products, many of which have leading regional or national market shares. In general, we position our branded products to appeal to the consumer desiring a high quality and reasonably priced product. We complement our branded product retail sales with institutional and foodservice sales and private label sales.

Our company has been built upon a successful track record of acquisition-driven growth. Our goal is to continue to increase sales, profitability and cash flows through strategic acquisitions, new product development and organic growth. We intend to implement our growth strategy through the following initiatives: expanding our brand portfolio with disciplined acquisitions of complementary branded businesses, continuing to develop new products and delivering them to market quickly, leveraging our multiple channel sales and distribution system and continuing to focus on higher growth customers and distribution channels.

Since 1996, we have successfully acquired and integrated more than 50 brands or businesses into our company. On May 5, 2022, we acquired the frozen vegetable manufacturing operations of Growers Express, LLC. We refer to this acquisition in this report as the “Yuma acquisition.” This acquisition has been accounted for using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and results of operations of the acquired business are included in our consolidated financial statements from the date of acquisition. This acquisition and the application of the acquisition method of accounting affect comparability between periods.

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More recently, in an attempt to sharpen focus, improve margins and reduce our long-term debt, we have begun reshaping our portfolio through select divestitures. For example, on January 3, 2023, we completed the sale of the Back to Nature business to a subsidiary of Barilla America, Inc. We refer to this divestiture in this report as the “Back to Nature sale” or “Back to Nature divestiture.” On November 8, 2023, we completed the sale of the Green Giant U.S. shelf-stable product line to Seneca Foods Corporation. We refer to this divestiture in this report as the “Green Giant U.S. shelf-stable divestiture.” These divestitures affect comparability between periods. We have also decided to place our frozen and remaining shelf-stable vegetable businesses under strategic review and we are evaluating a possible divestiture of some or all of the assets in our Frozen & Vegetables business unit, either in a single transaction or in a series of transactions.

We are subject to a number of challenges that may adversely affect our businesses. These challenges, which are discussed above before Part I of this report under the heading “Forward-Looking Statements” and in Part I, Item 1A, “Risk Factors” include:

Fluctuations in Commodity Prices and Production and Distribution Costs. We purchase raw materials, including agricultural products, oils, meat, poultry, ingredients and packaging materials from growers, commodity processors, other food companies and packaging suppliers located in U.S. and foreign locations. Raw materials and other input costs, such as fuel and transportation, are subject to fluctuations in price attributable to a number of factors, including climate and weather conditions, supply chain disruptions (including raw material shortages), labor shortages, wars and pandemics. Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns. The cost of raw materials, fuel, labor, distribution and other costs related to our operations can increase from time to time significantly and unexpectedly.

We attempt to manage cost inflation risks by locking in prices through short-term supply contracts and advance commodities purchase agreements and by implementing cost saving measures. We also attempt to offset rising input costs by raising sales prices to our customers. However, increases in the prices we charge our customers may lag behind rising input costs. Competitive pressures also may limit our ability to quickly raise prices in response to rising costs.

We experienced material net cost increases for raw materials during the last several years due to a number of factors. Raw material costs remained elevated in fiscal 2023 and fiscal 2024 and we anticipate that certain raw material costs will remain elevated during fiscal 2025. We are currently locked into our supply and prices for a majority of our most significant raw material commodities into or through the second or third quarter of 2025.

In recent years, we have been negatively impacted by industry-wide increases in the cost of distribution, primarily driven by increased freight rates. We attempt to offset all or a portion of these increases through list price increases, trade spend reductions and cost savings initiatives. Although freight rates began to decline in 2023, freight rates remained elevated during fiscal 2024 and we expect freight rates to remain elevated during fiscal 2025.

We plan to continue managing inflation risk by entering into short-term supply contracts and advance commodities purchase agreements from time to time, and, when necessary, by raising prices. However, to the extent we are unable to avoid or offset any present or future cost increases by locking in our costs, implementing cost saving measures or increasing prices to our customers, our operating results could be materially adversely affected. In addition, if input costs decline, customers may look for price reductions in situations where we have locked into purchases at higher costs. During the past several years, our cost saving measures and sales price increases have not been sufficient to fully offset increases to our raw material, ingredient and packaging and distribution costs.

Consolidation in the Retail Trade and Consequent Inventory Reductions. As customers, such as supermarkets, discounters, e-commerce merchants, warehouse clubs and food distributors, continue to consolidate and grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs. These customers are also reducing their inventories and increasing their emphasis on private label products.

Changing Consumer Preferences and Channel Shifts. Consumers in the market categories in which we compete frequently change their taste preferences, dietary habits and product packaging preferences. In addition, the rapid growth of some channels and changing consumer preferences for these channels, in particular in e-commerce, may impact our current operations or strategies more quickly than we planned for, create consumer price deflation, alter the buying behavior of consumers or disrupt our retail customer relationships. As a result of changing consumer preferences for products and channels, we may need to increase or reallocate spending on existing and new distribution channels and technologies, marketing, advertising and new product innovation to protect or increase revenues, market share and brand

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significance. These expenditures may not be successful, including those related to our e-commerce and other technology-focused efforts, and might not result in trade and consumer acceptance of our efforts. If we are unable to effectively and timely adapt to changes in consumer preferences and channel shifts, our products may lose market share or we may face significant price erosion, and our business, consolidated financial condition, results of operations or liquidity could be materially and adversely affected.

Consumer Concern Regarding Food Safety, Quality and Health. The food industry is subject to consumer concerns regarding the safety and quality of certain food products. If consumers in our principal markets lose confidence in the safety and quality of our food products, even as a result of a product liability claim or a product recall by a food industry competitor, our business could be adversely affected.

Trade and Regulatory Uncertainty. On February 1, 2025, the new U.S. presidential administration announced the imposition of tariffs of up to 25% on imports from Canada and Mexico and 10% on imports from China, and those countries subsequently announced retaliatory tariffs in response. Although the imposition of such tariffs was temporarily paused in the case of Canada and Mexico, the situation is dynamic, rapidly evolving and uncertain. The U.S. has since reinstated full 25% tariffs on steel imports and increased tariffs on aluminum imports to 25%. If allowed to become or remain effective, these or any new or increased tariffs or resultant trade wars could lead to significant increases in the costs of finished goods and raw materials, including finished goods produced at our Green Giant frozen vegetable manufacturing facility in Irapuato, Mexico, certain raw material vegetables we procure in Mexico for production in the United States, and the cost of steel cans and lids used for certain of our products, which could have a material adverse effect on our business, consolidated financial position, results of operation or liquidity. Although most of the Green Giant vegetable products that we sell to customers in Canada are grown and produced in Canada, any retaliatory tariffs imposed by Canada or any “buy Canadian” campaigns in response to U.S. tariffs could have an adverse impact on our sales to customers in Canada for any of our products that are not produced in Canada. In addition, if allowed to become or remain effective, these or any new or increased tariffs could also negatively affect U.S national or regional economies or lead to increased inflation or a recession, which also could have a material adverse effect on our business, consolidated financial position, results of operation or liquidity.

Fluctuations in Currency Exchange Rates. Our foreign sales are primarily to customers in Canada. Our sales to Canada are generally denominated in Canadian dollars and our sales for export to other countries are generally denominated in U.S. dollars. During fiscal 2024 and fiscal 2023, our net sales to customers in Canada represented approximately 7.5% and 7.1%, respectively, of our total net sales. We also purchase certain raw materials from foreign suppliers. For example, we purchase a significant majority of our maple syrup requirements from suppliers in Québec, Canada. These purchases are made in Canadian dollars. A weakening of the U.S. dollar against the Canadian dollar would significantly increase our costs relating to the production of our maple syrup products to the extent we have not purchased Canadian dollars or otherwise entered into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. These increased costs would not be fully offset by the positive impact the change in the relative strength of the Canadian dollar versus the U.S. dollar would have on our net sales in Canada. Our purchases of raw materials from other foreign suppliers are generally denominated in U.S. dollars, with one exception being certain purchases of raw materials in Mexico that are denominated in Mexican pesos. In addition, we operate a frozen vegetable manufacturing facility in Irapuato, Mexico and as a result are exposed to fluctuations in the Mexican peso. A weakening of the U.S. dollar in relation to the Mexican peso would significantly increase our costs relating to the purchase of raw materials and the production of frozen vegetable products to the extent we have not purchased Mexican pesos or otherwise entered into hedging arrangements in advance of the weakening of the U.S. dollar. As a result, certain revenues and expenses have been, and are expected to be, subject to the effect of foreign currency fluctuations, and these fluctuations may have an adverse impact on operating results. For example, our results of operations from our Green Giant frozen operations in Mexico were negatively impacted during fiscal 2023 and fiscal 2024 as a result of the Mexican peso appreciating against the U.S. dollar, and may continue to be negatively impacted during fiscal 2025.

To confront these challenges, we continue to take steps to build the value of our brands, to improve our existing portfolio of products with new product and marketing initiatives, to reduce costs through improved productivity, to address consumer concerns about food safety, quality and health and to favorably manage currency fluctuations.

Critical Accounting Policies; Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States (GAAP) requires our management to make a number of estimates and assumptions relating to the reporting

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of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer promotion expenses; pension benefits; acquisition accounting fair value allocations; the recoverability of goodwill, other intangible assets, property, plant and equipment, and deferred tax assets; and the determination of the useful life of customer relationship and finite-lived trademark intangible assets. Actual results could differ significantly from these estimates and assumptions.

Our significant accounting policies are described more fully in note 2 to our consolidated financial statements included elsewhere in this report. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Segment Reporting

During the first quarter of 2024, we reorganized our reporting structure, leading to a change of our operating and reportable segments. This change stemmed from our recent formation and the evolution of our four business units, which are: Specialty, Meals, Frozen & Vegetables, and Spices & Flavor Solutions. Previously, we had operated under a single operating and reportable segment. See Note 17, “Business Segment Information,” to our consolidated financial statements in Part II, Item 8 of this report for more information about our four business segments.

Revenue Recognition and Trade and Consumer Promotion Expenses

We offer various sales incentive programs to customers and consumers, such as price discounts, in-store display incentives, slotting fees and coupons. The recognition of expense for these programs involves the use of judgment related to performance and redemption estimates. Estimates are made based on historical experience and other factors. Actual expenses may differ if the level of redemption rates and performance vary from our estimates.

The core principle of authoritative guidance from the Financial Accounting Standards Board (FASB) related to the recognition of revenue from contracts with customers is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services.

Long-Lived Assets

Long-lived assets, such as property, plant and equipment, and intangible assets with estimated useful lives are depreciated or amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted net future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted net future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Recoverability of assets held for sale is measured by a comparison of the carrying amount of an asset or asset group to their fair value less estimated costs to sell. Estimating future cash flows and calculating the fair value of assets requires significant estimates and assumptions by management.

Goodwill and Other Intangible Assets

Our total assets include substantial goodwill and indefinite-lived intangible assets (trademarks). Goodwill and indefinite-lived intangible assets are not amortized. As a result, these assets are tested for impairment through qualitative and quantitative assessments at least annually and whenever events or circumstances occur indicating that goodwill or indefinite-lived intangible assets might be impaired. We perform the annual impairment tests as of the last day of each fiscal year. We test our goodwill and indefinite-lived intangible assets by comparing the fair values with the carrying values and recognize a loss for the difference.

The annual goodwill impairment testing is performed by estimating the fair value of each of our four reporting units based on discounted cash flows that reflect certain third-party market value indicators. We estimate the fair value of the indefinite-lived intangible assets primarily using the discounted cash flows method. We also consider other market-based valuation approaches, including market multiples and observable market indicators, to corroborate the results of our discounted cash flow analysis and further support fair value conclusions. These valuation methods reflect certain third-party market value indicators.

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Calculating the fair values of goodwill and indefinite-lived intangible assets for these purposes requires significant estimates and assumptions by management, including future cash flows consistent with management’s expectations, annual sales growth rates, and certain assumptions underlying a discount rate based on available market data. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors to estimate the future levels of sales and cash flows.

As of December 28, 2024, we had $548.2 million of goodwill and $1,117.4 million of indefinite-lived intangible assets recorded in our consolidated balance sheet. Following material impairments we recorded to goodwill and indefinite-lived intangible trademark assets in fiscal 2024, 2023 and 2022, none of our indefinite-lived intangible assets had a book value in excess of their calculated fair values and the percentage excess of the aggregate calculated fair value over the aggregate book value was approximately 308.9%. However, materially different assumptions regarding the future performance of our businesses or discount rates could result in significant additional impairment losses. For example, if future revenues and contributions to our operating results for any of our brands or operating segments, including recently impaired brands and newly acquired brands, deteriorate, at rates in excess of our current projections, we may be required to record additional non-cash impairment charges to certain intangible assets. In addition, any significant decline in our market capitalization or changes in discount rates, even if due to macroeconomic factors, could put pressure on the carrying value of our goodwill or the goodwill of any of our operating segments. A determination that all or a portion of our goodwill or indefinite-lived intangible assets are impaired, although a non-cash charge to operations, could have a material adverse effect on our business, consolidated financial condition and results of operations.

The table below sets forth the book value as of December 28, 2024 of the indefinite-lived trademarks for each of our brands whose net sales equaled or exceeded 3% of our fiscal 2024 or fiscal 2023 net sales and for “all other brands” in the aggregate (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b"],["\u200b","","December 28, 2024"],["Brand:","\u200b","\u200b"],["Crisco","\u200b","$","320,407"],["Dash","\u200b","\u200b","189,000"],["Spices & Seasonings(1)","\u200b","\u200b","65,200"],["Ortega","\u200b","\u200b","32,339"],["Green Giant","\u200b","\u200b","31,660"],["Cream of Wheat","\u200b","","27,000"],["Clabber Girl(2)","\u200b","\u200b","19,600"],["Maple Grove Farms of Vermont","\u200b","","11,627"],["All other brands","\u200b","","420,534"],["Total indefinite-lived trademarks","\u200b","$","1,117,367"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","The spices & seasonings acquisition was completed on November 21, 2016. Includes trademark values for multiple brands acquired as part of the acquisition."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","The Clabber Girl acquisition was completed on May 15, 2019. Includes trademark values for multiple brands acquired as part of the acquisition."]]
[[/GREPCENT_TABLE]]

All assumptions used in our impairment evaluations for goodwill and indefinite-lived intangible assets, such as forecasted growth rates and discount rate, are based on the best available market information and are consistent with our internal forecasts and operating plans. We believe these assumptions to be reasonable, but they are inherently uncertain. These assumptions could be adversely impacted by certain of the risks described in Part I, Item 1A, “Risk Factors,” of this report.

For a further discussion of our annual impairment testing of goodwill and indefinite-lived intangible assets (trademarks) and the material non-cash impairment charges to goodwill and indefinite-lived intangible trademark assets that we recorded in fiscal 2024, 2023 and 2022, see Note 2(g), “Summary of Significant Accounting Policies—Goodwill and Other Intangible Assets” and Note 6, “Goodwill and Other Intangible Assets” to our consolidated financial statements in Part II, Item 8 of this report.

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Income Tax Expense Estimates and Policies

As part of the income tax provision process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax expenses together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe the recovery is not likely, we establish a valuation allowance. Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period, we include such charge in our tax provision, or reduce our tax benefits in our consolidated statements of operations. We use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets.

There are various factors that may cause these tax assumptions to change in the near term, and we may have to record a valuation allowance against our deferred tax assets. We cannot predict whether future U.S. federal, state and international income tax laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes to the U.S. federal, state and international income tax laws and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial statements when new regulations and legislation are enacted. We recognize the benefit of an uncertain tax position that we have taken or expect to take on the income tax returns if it is more likely than not that such tax position will be sustained based upon its technical merits.

See “U.S. Tax Act” below for a discussion of the U.S. Tax Cuts and Jobs Act of 2017, which we refer to as the “U.S. Tax Act,” and the impact it has had, and may have, on our business and financial results.

Pension Expense

We maintain four company-sponsored defined benefit pension plans covering approximately 21.3% of our employees. Our funding policy for company-sponsored defined benefit pension plans is to contribute annually not less than the amount recommended by our actuaries. The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates, employee-related demographic factors, such as turnover, retirement age and mortality, and the rate of salary increases. Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations. Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our pension expenses and obligations. We review pension assumptions regularly and we may from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. We made contributions to our company-sponsored pension plans of $2.5 million in each of fiscal 2024 and fiscal 2023. Changes in interest rates and the market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in fiscal 2025 and beyond.

Our discount rate assumption for our four company-sponsored defined benefit plans changed from 4.75% - 4.81% at December 30, 2023 to 5.41% - 5.50% at December 28, 2024. As a sensitivity measure, a 0.25% decrease or increase in our discount rate would increase or decrease our pension expense by approximately $0.3 million or $0.6 million, respectively. Similarly, a 0.25% decrease or increase in the expected return on pension plan assets would increase or decrease our pension expense by approximately $0.4 million. During fiscal 2025 we expect to make contributions of approximately $2.5 million to our four company-sponsored defined benefit pension plans.

Our withdrawal in 2021 from a multi-employer pension plan relating to a former manufacturing facility requires us to make withdrawal liability payments to the plan of approximately $0.9 million per year for 20 years, which commenced on March 1, 2022. The remaining estimated present value of that liability of $12.3 million is recorded on our consolidated balance sheet as of December 28, 2024.

For a more detailed description about our pension expense, the company-sponsored pension plans to which we contribute, and the multi-employer pension plan withdrawal liability, see Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8 of this report.

Acquisition Accounting

Our consolidated financial statements and results of operations include an acquired business’s operations after the completion of the acquisition. We account for acquired businesses using the acquisition method of accounting, which

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requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Transaction costs are expensed as incurred.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. Accordingly, for significant items, we typically obtain assistance from third-party valuation specialists. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives. All of these judgments and estimates can materially impact our results of operations.

U.S. Tax Act

The Tax Cuts and Jobs Act of 2017, which we refer to as the “U.S. Tax Act,” limits the deduction for net interest expense (including the treatment of depreciation and other deductions in arriving at adjusted taxable income) incurred by a corporate taxpayer to 30% of the taxpayer’s adjusted taxable income. Beginning with fiscal 2022, our adjusted taxable income as computed for purposes of the interest expense deduction limitation is computed after any deduction allowable for depreciation and amortization. As a result, our adjusted taxable income (used to compute the limitation) decreased and we were subject to the interest expense deduction limitation in fiscal 2024 and fiscal 2023, resulting in an increase to taxable income of $110.8 million and $107.7 million, respectively. We expect to continue to be subject to the interest deduction limitation in future years. We have recorded a deferred tax asset of $72.7 million and $46.9 million for fiscal 2024 and fiscal 2023, respectively, related to the interest deduction carryover, without a valuation allowance, as the disallowed interest may be carried forward indefinitely. The increase in our cash taxes resulting from the interest expense deduction limitation was approximately $19.5 million and $25.0 million for fiscal 2024 and fiscal 2023, respectively. We expect to continue to be unable to fully utilize interest expense deductions in fiscal 2025 and future periods, which will negatively impact our cash taxes. In addition, there are various factors that may cause tax assumptions to change in the future, and we may have to record a valuation allowance against these deferred tax assets. See “—Liquidity and Capital Resources—Cash Flows–Cash Income Tax Payments” and Note 10, “Income Taxes,” to our consolidated financial statements in Part II, Item 8 of this report.

The U.S. Treasury issued several regulations supplementing the U.S. Tax Act in 2018, including detailed guidance clarifying the calculation of the mandatory tax on previously unrepatriated earnings, application of the existing foreign tax credit rules to newly created categories and expanding details for application of the base erosion tax on affiliate payments. These regulations are to be applied retroactively and did not materially impact our fiscal 2024 or fiscal 2023 tax rates. See Note 10, “Income Taxes,” to our consolidated financial statements in Part II, Item 8 of this report.

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Results of Operations

The following table sets forth the percentages of net sales represented by selected items for fiscal 2024 and fiscal 2023 reflected in our consolidated statements of operations. The comparisons of financial results are not necessarily indicative of future results:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Fiscal 2024","\u200b","Fiscal 2023"],["Statement of Operations Data:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net sales","","100.0","%","\u200b","100.0","%"],["Cost of goods sold","","78.2","%","\u200b","77.9","%"],["Gross profit","","21.8","%","\u200b","22.1","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating expenses:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Selling, general and administrative expenses","","9.7","%","\u200b","9.5","%"],["Amortization expense","\u200b","1.0","%","\u200b","0.9","%"],["Impairment of goodwill","\u200b","3.7","%","\u200b","\u2014","%"],["Loss on sales of assets","\u200b","\u2014","%","\u200b","6.8","%"],["Impairment of intangible assets","\u200b","16.6","%","\u200b","1.0","%"],["Operating (loss) income","","(9.2)","%","\u200b","3.9","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Other expenses (income):","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest expense, net","","8.1","%","\u200b","7.4","%"],["Other income","\u200b","(0.2)","%","\u200b","(0.2)","%"],["Loss before income tax benefit","","(17.1)","%","\u200b","(3.3)","%"],["Income tax benefit","","(4.1)","%","\u200b","(0.1)","%"],["Net loss","","(13.0)","%","\u200b","(3.2)","%"]]
[[/GREPCENT_TABLE]]

As used in this section, the terms listed below have the following meanings:

Net Sales. Our net sales represents gross sales of products shipped to customers plus amounts charged to customers for shipping and handling, less cash discounts, coupon redemptions, slotting fees and trade promotional spending, including marketing development funds.

Gross Profit. Our gross profit is equal to our net sales less cost of goods sold. The primary components of our cost of goods sold are cost of internally manufactured products, purchases of finished goods from co-packers, a portion of our warehousing expenses plus freight costs to our distribution centers and to our customers.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses include costs related to selling our products, as well as all other general and administrative expenses. Some of these costs include administrative, marketing and internal sales force employee compensation and benefits costs, consumer advertising programs, brokerage costs, a portion of our warehousing expenses, information technology and communication costs, office rent, utilities, supplies, professional services, severance, acquisition/divestiture-related and non-recurring expenses and other general corporate expenses.

Amortization Expense. Amortization expense includes the amortization expense associated with customer relationships, finite-lived trademarks and other intangible assets.

Impairment of Goodwill. Impairment of goodwill includes pre-tax, non-cash impairment charges to goodwill.

Impairment of Intangible Assets. Impairment of intangible assets represents a reduction of the carrying value of intangible assets to fair value when the carrying value of the assets is no longer recoverable.

Net Interest Expense. Net interest expense includes interest relating to our outstanding indebtedness, amortization of bond discount/premium and amortization of deferred debt financing costs (net of interest income).

Other Income. Other income includes the non-service portion of net periodic pension cost and net periodic post-retirement benefit costs.

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Non-GAAP Financial Measures

Certain disclosures in this report include non-GAAP financial measures. A non-GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows.

Base Business Net Sales. Base business net sales is a non-GAAP financial measure used by management to measure operating performance. We define base business net sales as our net sales excluding (1) the net sales of acquisitions until the net sales from such acquisitions are included in both comparable periods and (2) net sales of discontinued or divested brands. The portion of current period net sales attributable to recent acquisitions for which there is no corresponding period in the comparable period of the prior year is excluded. For each acquisition, the excluded period starts at the beginning of the most recent fiscal period being compared and ends on the first anniversary of the acquisition date. For discontinued or divested brands, the entire amount of net sales is excluded from each fiscal period being compared. We have included this financial measure because our management believes it provides useful and comparable trend information regarding the results of our business without the effect of the timing of acquisitions and the effect of discontinued or divested brands.

A reconciliation of net sales to base business net sales for fiscal 2024 and 2023 follows (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Fiscal 2024","","Fiscal 2023"],["Net sales","\u200b","$","1,932,454","\u200b","$","2,062,313"],["Net sales from discontinued or divested brands(1)","\u200b","\u200b","106","\u200b","\u200b","(64,333)"],["Base business net sales","\u200b","$","1,932,560","\u200b","$","1,997,980"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","For fiscal 2023, reflects net sales of the Green Giant U.S. shelf -stable product line, which was divested on November 8, 2023, partially offset by a net credit paid to customers relating to discontinued brands. For fiscal 2024, reflects a net credit paid to customers relating to discontinued and divested brands."]]
[[/GREPCENT_TABLE]]

EBITDA and Adjusted EBITDA. EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating performance. We define EBITDA as net income (loss) before net interest expense, income taxes, and depreciation and amortization. We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third-party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up, and gains and losses on the sale of certain assets); gains and losses on extinguishment of debt; impairment of assets held for sale; impairment of intangible assets; and non-recurring expenses, gains and losses.

Management believes that it is useful to eliminate these items because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement, our senior secured notes indenture and our senior notes indenture contain ratios based on these measures. As a result, reports used by internal management during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity, and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity.

EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income (loss), net income (loss) or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include certain costs and expenses and gains and losses described above. Because not all companies use identical calculations, this presentation of EBITDA

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and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts.

Reconciliations of net loss and net cash provided by operating activities to EBITDA and adjusted EBITDA for fiscal 2024 and fiscal 2023 along with the components of EBITDA and adjusted EBITDA follows (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Fiscal 2024","","Fiscal 2023"],["Net loss","\u200b","$","(251,251)","\u200b","$","(66,198)"],["Income tax benefit","\u200b","\u200b","(79,258)","\u200b","\u200b","(935)"],["Interest expense, net(1)","\u200b","\u200b","157,447","\u200b","\u200b","151,333"],["Depreciation and amortization","\u200b","\u200b","68,614","\u200b","\u200b","69,620"],["EBITDA","\u200b","\u200b","(104,448)","\u200b","\u200b","153,820"],["Acquisition/divestiture-related and non-recurring expenses(2)","\u200b","\u200b","8,938","\u200b","\u200b","5,877"],["Impairment of goodwill(3)","\u200b","\u200b","70,580","\u200b","\u200b","\u2014"],["Loss on sales of assets(4)","\u200b","\u200b","135","\u200b","\u200b","137,798"],["Impairment of property, plant and equipment, net","\u200b","\u200b","208","\u200b","\u200b","\u2014"],["Impairment of intangible assets(5)","\u200b","\u200b","320,000","\u200b","\u200b","20,500"],["Adjusted EBITDA","\u200b","$","295,413","\u200b","$","317,995"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Fiscal 2024","","Fiscal 2023"],["Net cash provided by operating activities","\u200b","$","130,914","\u200b","$","247,759"],["Income tax benefit","\u200b","\u200b","(79,258)","\u200b","\u200b","(935)"],["Interest expense, net(1)","\u200b","\u200b","157,447","\u200b","\u200b","151,333"],["Impairment of goodwill(3)","\u200b","\u200b","(70,580)","\u200b","\u200b","\u2014"],["(Loss) gain on extinguishment of debt(1)","\u200b","\u200b","(2,126)","\u200b","\u200b","911"],["Loss on sales of assets and impairment of property, plant and equipment(4)","\u200b","\u200b","(558)","\u200b","\u200b","(138,523)"],["Deferred income taxes","\u200b","\u200b","99,107","\u200b","\u200b","26,395"],["Amortization of deferred debt financing costs and bond discount/premium","\u200b","\u200b","(5,928)","\u200b","\u200b","(7,510)"],["Share-based compensation expense","\u200b","\u200b","(8,664)","\u200b","\u200b","(7,191)"],["Changes in assets and liabilities, net of effects of business combinations","\u200b","\u200b","(4,802)","\u200b","\u200b","(97,919)"],["Impairment of intangible assets(5)","\u200b","\u200b","(320,000)","\u200b","\u200b","(20,500)"],["EBITDA","\u200b","\u200b","(104,448)","\u200b","\u200b","153,820"],["Acquisition/divestiture-related and non-recurring expenses(2)","\u200b","\u200b","8,938","\u200b","\u200b","5,877"],["Impairment of goodwill(3)","\u200b","\u200b","70,580","\u200b","\u200b","\u2014"],["Loss on sales of assets(4)","\u200b","\u200b","135","\u200b","\u200b","137,798"],["Impairment of property, plant and equipment, net","\u200b","\u200b","208","\u200b","\u200b","\u2014"],["Impairment of intangible assets(5)","\u200b","\u200b","320,000","\u200b","\u200b","20,500"],["Adjusted EBITDA","\u200b","$","295,413","\u200b","$","317,995"]]
[[/GREPCENT_TABLE]]

​

​

​

​

​

Adjusted Net Income and Adjusted Diluted Earnings Per Share. Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures used by management to measure operating performance. We define adjusted net income and adjusted diluted earnings per share as net income (loss) and diluted earnings (loss) per share adjusted for certain items that affect comparability. These non-GAAP financial measures reflect adjustments to net income (loss) and diluted earnings (loss) per share to eliminate the items identified in the reconciliation below. This information is provided in order to allow investors to make meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. Because we cannot predict the timing and amount of these items, management does not consider these items when evaluating our company’s performance or when making decisions regarding allocation of resources.

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A reconciliation of net loss to adjusted net income and adjusted diluted earnings per share for fiscal 2024 and fiscal 2023, along with the components of adjusted net income and adjusted diluted earnings per share, follows (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal 2024","\u200b","Fiscal 2023"],["Net loss","\u200b","$","(251,251)","\u200b","$","(66,198)"],["Loss (gain) on extinguishment of debt(1)","\u200b","\u200b","2,126","\u200b","","(911)"],["Debt financing costs(6)","\u200b","\u200b","1,140","\u200b","\u200b","\u2014"],["Acquisition/divestiture-related and non-recurring expenses(2)","\u200b","\u200b","8,938","\u200b","\u200b","5,877"],["Impairment of goodwill(3)","\u200b","\u200b","70,580","\u200b","\u200b","\u2014"],["Loss on sales of assets(4)","\u200b","\u200b","135","\u200b","\u200b","137,798"],["Accelerated amortization of deferred debt financing costs(7)","\u200b","\u200b","456","\u200b","\u200b","\u2014"],["Impairment of intangible assets(5)","\u200b","\u200b","320,000","\u200b","\u200b","20,500"],["Impairment of property, plant and equipment, net","\u200b","\u200b","208","\u200b","\u200b","\u2014"],["Tax adjustment related to Back to Nature divestiture(8)","\u200b","\u200b","\u2014","\u200b","\u200b","14,736"],["Tax true-ups(9)","\u200b","\u200b","2,282","\u200b","\u200b","\u2014"],["Tax effects of non-GAAP adjustments(10)","\u200b","\u200b","(98,876)","\u200b","\u200b","(37,925)"],["Adjusted net income","\u200b","$","55,738","\u200b","$","73,877"],["Adjusted diluted earnings per share","\u200b","$","0.70","\u200b","$","0.99"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Net interest expense for fiscal 2024 includes a loss on extinguishment of debt of $2.1 million (or $1.6 million, net of tax), $1.3 million of which relates to the refinancing of tranche B term loans and $0.6 million of which relates to the refinancing of revolving credit loans during the third quarter of 2024, and $0.2 million of which relates to the redemption in full of our then remaining outstanding 5.25% senior notes due 2025 during the fourth quarter of 2024."]]
[[/GREPCENT_TABLE]]

Net interest expense for fiscal 2023 was reduced by $0.9 million (or $0.7 million, net of tax) as a result of a net gain on extinguishment of debt related to our 5.25% senior notes due 2025. During fiscal 2023, we repurchased $79.2 million aggregate principal amount of our 5.25% senior notes due 2025 in the open market at discounted repurchase prices and recorded a gain of $1.9 million, net of the accelerated amortization of deferred debt financing costs of $0.3 million. In addition, in October 2023, we redeemed $555.4 million aggregate principal amount of our 5.25% senior notes due 2025 at par and recorded a loss resulting from the accelerated amortization of deferred debt financing costs of $1.0 million.

[[GREPCENT_TABLE]]
[["(2)","Acquisition/divestiture-related and non-recurring expenses primarily include acquisition, integration and divestiture related expenses for prior and potential future acquisitions and divestitures, and non-recurring expenses."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]