ITEM 1A. RISK FACTORS
Risks Related to our Business and Industry
We primarily depend on third-party manufacturers to produce the products we sell. If these third-party manufacturers are unable to produce our products in sufficient quantities to meet customer demand, our business and results of operations may be materially adversely impacted. In addition, if we are unable to maintain these manufacturing relationships or are unable to successfully transfer manufacturing to another third-party or our own manufacturing facility, we may be unable to meet customer demand, and our business and sales could suffer.
Many of our products are produced by a limited number of third-party manufacturers. Our ability to retain our current manufacturing relationships or engage in and successfully transition to new relationships or to our own manufacturing facilities is critical to our ability to deliver quality products to our customers in a timely manner. Certain of the Company's manufacturers, including third party and our own facilities, are currently having, and have had in the past, difficulty meeting demand, which is and has caused shortages of our products, particularly eye care products. These shortages negatively impacted our results of operations in fiscal 2026 and 2025, and we expect further shortages may have a negative impact on our sales and customer relationships and result in loss of shelf space/digital rank and higher costs. In some cases, we have identified additional third-party manufacturing to supply us with quantities of the product for which we are experiencing shortages, but these additions may not manufacture product in time to fully supplement the long-term forecasted demand. In addition, any failure by our third-party manufacturers to comply with applicable regulatory requirements, including FDA or other governmental standards, could result in product quality issues, regulatory action, product recalls or reputational harm.
In the event that our primary third-party manufacturers are unable or unwilling to ship products to us in a timely manner, we would have to rely on secondary manufacturing relationships or, to the extent unavailable, identify and qualify new manufacturing relationships. Because of the unique manufacturing requirements of certain products, the Company may be unable to timely identify or qualify new suppliers or at the quantities, quality and price levels needed. In addition, identifying alternative manufacturers without adequate lead times may involve additional manufacturing expense or delay in production. In some instances, we may seek to transfer the manufacture of certain products to our own facilities, which may result in additional manufacturing expense, delay in production, additional regulatory requirements and other disruptions to our business. In general, the consequences of not securing adequate, high quality and timely supplies of merchandise has negatively impacted inventory levels, which has adversely impacted our sales, could damage our reputation and result in customers, and could have a material effect on our financial condition and results of operations if such continue.
Certain of our manufacturers who produce products for us have experienced cash flow shortages, and we have provided both prepayments and short-term loans to these suppliers to ensure continuous supply. Following the full transfer of product supply to other manufacturers, one supplier to which we extended a short-term loan discontinued operations and did not repay the loan. As a result, we wrote off the loan of approximately $10.3 million in fiscal 2026. If any other suppliers cease operations or are otherwise unable to continue to supply products to us, or to repay their indebtedness, our results of operations and financial condition would be adversely impacted.
At March 31, 2026, we had relationships with 95 third-party manufacturers. Of those, we had long-term contracts with 18 manufacturers that produced items that accounted for approximately 60% of gross sales for 2026, compared to 16 manufacturers with long-term contracts that accounted for approximately 58% of gross sales in 2025. This level of concentration increases our exposure to operational, financial and strategic risks associated with such manufacturers. One of our suppliers, a privately owned pharmaceutical manufacturer with whom we have a long-term supply agreement, produced products that accounted for more than 10% of our gross revenues during 2026, 2025 and 2024. This manufacturer accounted for approximately 21%, respectively, of our gross revenues in 2026 and 2025 and 20% of our gross sales revenues in 2024, while we accounted for a significant portion of their gross revenues over that time period. No other single third-party supplier produces products that account for 10% or more of our gross revenues. The fact that we do not have long-term contracts with certain manufacturers also means that they could cease manufacturing our products at any time and for any reason or initiate costly price increases, which could have a material adverse effect on our business and results of operations. Although we are continually in the process of negotiating long-term contracts with certain key manufacturers, we may not be able to reach a timely agreement on acceptable terms, which could have a material effect on our business and results of operations. In addition, even if we do enter into long-term contracts with certain manufacturers, our manufacturers may increase prices under the terms of our existing contracts if they experience increases in input costs, which could have a material impact on our results of operations and financial condition.
Price increases for raw materials, packaging, labor, energy and transportation costs, and other manufacturer, logistics provider or distributor demands, could continue to have an adverse impact on our margins.
The costs to manufacture and distribute our products are subject to fluctuation based on a variety of factors. Volatility and increases in commodity raw material (e.g. resins) and packaging component prices, labor, energy and transportation costs, and other input costs, including as a result of supply chain issues, shortages or tariffs, could significantly affect our profit margin and could have a material adverse impact on our financial condition and results of operations if our raw material suppliers, third-party manufacturers, logistics providers or distributors pass along those costs to us. Certain product categories have been impacted by higher inflation due to, among other things, increased transportation costs due to the U.S. war with Iran, the continuing impacts of labor shortages, global supply chain disruptions and the uncertain economic and geopolitical environment, including tariffs, which has negatively impacted our gross margin. Although the impact of these increased costs has not had a material adverse effect on our results of operations or financial condition to date, further input cost increases could have such a material impact.
In this economic environment, the manufacturers we use have increased, and may continue to increase, the cost to us of many of the products we purchase, which has impacted and could continue to adversely affect our margins in the event we are unable to pass along these increased costs to our customers or identify and qualify new manufacturers. There may be a delay or inability to fully offset such cost increases through pricing actions due to competitive dynamics, customer resistance, or contractual limitations. If we are unable to increase the price for our products to our customers or achieve cost savings in a rising cost environment, any such cost increases would likely further reduce our gross margins and could have a material adverse effect on our financial condition and results of operations. If we increase the price of our products in order to maintain our current gross margins for our products, the increase may adversely affect demand for, and sales of, our products, especially if consumers shift to lower-priced alternatives or private label products in response to tariff-driven or inflationary price increases, which could have a material effect on our financial condition and results of operations. We believe that certain of our products could have absorbing further near-term price increases without potentially impacting market share, which would have a related impact on our revenues.
Volatility in or worsening of economic conditions from high inflation, economic policy, tariffs, increased unemployment, geopolitical conflicts, public health issues and other factors beyond our control could reduce consumer spending, which could adversely impact demand for our products and our results of operations and financial condition.
Our financial performance depends on the stability of conditions that impact consumer spending. Adverse conditions or volatility in financial markets or the economy, including high interest rates, inflation from rising costs, tariffs, unemployment, bank failures, reductions in government assistance and the lack of consumer financing, could adversely impact consumer confidence and reduce disposable income, resulting in reduced consumer spending on our products. Geopolitical developments, including conflicts in the Middle East, disruptions to global shipping routes, and related increases in fuel and transportation costs, may further exacerbate these pressures. Existing volatility in the global economy, including from geopolitical conflicts, supply chain issues and rising costs, has not materially impacted consumer spending on our products, but further worsening of these conditions could have a material impact on our results of operations and financial condition.
The high level of competition in our industry, much of which comes from competitors with greater resources, could adversely affect our business, financial condition and results of operations.
The business of selling brand name consumer products in the OTC health and personal care market is highly competitive. This market includes numerous manufacturers, distributors, marketers and retailers that actively compete for consumers’ business both in the United States and abroad. Many of these competitors are larger and have substantially greater resources than we do, and they may therefore have the ability to spend more aggressively on research and development and advertising and marketing, and may be able to respond more effectively to changing business and economic conditions, including in connection with inflation or recessionary conditions.
Certain of our product lines that account for a large percentage of our sales have a smaller market share relative to our competitors. In some cases, we may have a number one market position but still have a relatively small share of the overall market. Alternatively, we may hold a number two market position but have a substantially smaller share of the market versus the number one competitor. See “Part I, Item 1. Business - Major Brands” of this Annual Report on Form 10-K for information regarding market share.
We compete for consumers’ attention based on a number of factors, including brand recognition, product quality, performance, value to consumers, price and product availability at the retail level. Advertising, marketing, merchandising and packaging and the timing of new product introductions and line extensions also have a significant impact on consumer buying decisions and, as a result, on our market share and our sales. Our markets are highly sensitive to the introduction of new products, which may
rapidly capture a significant share of the market. New product innovations by our competitors, or our failure to develop new products, the failure of a new product launch by the Company, or the obsolescence of one or more of our products, could have a material adverse effect on our business, financial condition and results of operations. If our advertising, marketing and promotional programs are not effective, our sales may decline.
The structure and quality of our sales force, as well as sell-through of our products, affect in-store and our e-commerce product position, wall display space and inventory levels for retail sale. If we are unable to maintain our current distribution network, product offerings for retail sale, inventory levels and in-store and online positioning of our products, our sales and operating results could be adversely affected.
In addition, competitors may attempt to gain market share by offering products at prices at or below those typically offered by us. The introduction or expansion of store brand products that compete with our products at a lower price point has and could impact our sales and results of operations. Some of our products compete directly with widely advertised, promoted and merchandised brands within each product category, as well as with retailers, including drugstores, convenience stores and specialty stores, that are increasingly offering private labels and generic non-branded products, which are typically sold at lower prices. Consumer demand for lower-cost alternatives could increase, particularly in response to macroeconomic pressures. These trends could be exacerbated by rising costs, including tariffs, trade restrictions, export controls and sanctions, as well as ongoing geopolitical tensions, including conflicts in the Middle East and other regions, and other economic conditions that shift consumer demand to lower-priced products, as well as supply chain issues that result in reduced availability for our products. Competitive pricing may require us to reduce prices, which may result in lost revenue or a reduction of our profit margins. Future price adjustments by our competitors or our inability to react with price adjustments of our own could result in a of market share, which could have a material effect on our financial condition and results of operations.
We depend on a limited number of customers with whom we have no long-term agreements for a large portion of our gross revenues, and the loss of one or more of these customers or changes in their strategies and policies could reduce our gross revenues and have a material adverse effect on our financial condition and results of operations.
During 2026, Walmart and Amazon, which accounted for approximately 20% and 15%, respectively, of our gross revenues, were our only customers that accounted for more than 10% of our gross revenues. We expect that for future periods, our top ten customers, including Walmart and Amazon, in the aggregate, will continue to account for a large and potentially increasing portion of our sales. Our sales through e-commerce platforms are also subject to risks associated with platform policies, fee structures, fulfillment requirements, and algorithmic changes, which are outside of our control and may adversely impact our sales and margins. The loss of favorable positioning on these platforms could significantly reduce product visibility and sales. Many of our customers have sought to obtain lower pricing, better terms, additional trade spend, more strict logistics requirements or other changes to the customer-supplier relationship. If we are unable to effectively respond to the demands of our customers, these customers could reduce their purchases of our products and increase their purchases of products from competitors. Reductions in inventory by our customers, the loss of one or more of our top customers, including as a result of consolidation in the retail industry, or any significant decrease in sales to these customers based on changes in their strategies or policies, such as a reduction in the number of brands they carry, the amount of shelf space or positioning they dedicate to store brand products or to our particular products, or a significant reduction in our online positioning, could reduce our sales and have a material effect on our financial condition and results of operations. In addition, many retailers have implemented inventory management strategies that include reductions in the amount of inventory they carry and related reductions in retail space and may continue such efforts in the future.
Our business is based primarily upon individual sales orders. We typically do not enter into long-term contracts with our customers. Accordingly, our customers could cease buying products or reduce the number of items they buy from us at any time and for any reason. The fact that we do not have long-term contracts with our customers means that we have no recourse in the event a customer no longer wants to purchase products from us or reduces the number of items purchased. If a significant number of our smaller customers, or any of our significant customers, elect not to purchase products from us or materially reduce the quantity of products they purchase from us, our financial condition and results of operations could be materially adversely affected.
Disruption in our third-party distribution center or our manufacturing facilities may prevent us from meeting customer demand, and our sales and financial condition may materially suffer as a result.
Our product distribution in the United States is managed by a third-party through one primary distribution center in Clayton, Indiana. We also operate three manufacturing facilities in the United States, Canada and Australia, which manufacture products representing 21% of our gross revenues. A natural disaster, such as tornado, earthquake, flood, or fire at our distribution center or our own or a third-party manufacturing facility could damage our inventory and/or materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. In addition, a serious disruption caused by performance or
contractual issues with our third-party distribution manager, cybersecurity incidents affecting our logistics providers or systems, or labor shortages or contagious disease outbreaks or other public health emergencies at our distribution center or manufacturing facilities could also materially impact our product distribution. Any disruption could result in increased costs, expense and/or shipping times, and could harm our reputation and cause us to incur customer fees and penalties. We could also incur significantly higher costs and experience longer lead times should we be required to replace our distribution center, the third-party distribution manager or our manufacturing facilities. As part of our recent acquisition of our Arnprior Ontario, Canada facility from our primary Clear Eyes supplier, we have committed to a long-term investment including a number of plant enhancements and capital investments, which may at times negatively impact production in the short-term but improve production over time. As a result, any serious disruption could have a material effect on our business, financial condition and results of operations.
Any future outbreak of other highly infectious diseases or public health emergencies could have a material adverse impact on our results of operations and financial condition.
Our sales are impacted by consumer spending levels, the availability of our products at retail stores or for online purchase and our ability to manufacture and distribute products to our customers and consumers in an effective and efficient manner. Our sales are also impacted by demand for our products depending on consumers’ activities, lifestyles and financial resources.
We could experience adverse impacts from public health emergencies in a number of ways, including, but not limited to, the following:
• supply chain delays or disruptions due to closed supplier facilities or distribution centers, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas;
• shutdown of our manufacturing facilities due to illness or government order;
• reduced consumer demand for certain of our products as a result of any related economic downturn or restrictions on in-person purchases;
• change in demand for or availability of our products as a result of retailers or distributors modifying their restocking, fulfillment, or shipping practices in reaction to public health emergencies;
• decrease in our ability to develop innovative products due to reprioritization of suppliers and/or retailers;
• increase in working capital needs and/or an increase in trade accounts receivable write-offs as a result of related increased financial pressures on our suppliers or customers;
• impairment in the carrying value of goodwill or intangible assets or a change in the useful life of finite-lived intangible assets from sustained related changes in consumer purchasing behaviors, government restrictions, or financial results;
• increase in raw material and other input costs resulting from related labor shortages, supply chain disruptions and market volatility; and
• fluctuation in foreign currency exchange rates or interest rates resulting from market uncertainties.
The extent to which a pandemic, and any related economic downturn, could affect our business, results of operations and financial condition depends on developments that are highly uncertain and cannot be predicted, including the severity and duration of any outbreak and recovery period, the availability, acceptance and efficacy of vaccines, future actions taken by governmental authorities and other third parties in response to a pandemic and the impact on our customers, employees and suppliers, distributors and other service providers. Moreover, the effects of a pandemic could exacerbate the other risks described in this “Risk Factors” section of this Annual Report on Form 10-K.
Consumption trends for our products may not correlate to our results of operations.
We regularly review and may disclose certain consumption levels to provide an indication of the strength of our expected results of operations. Total company consumption is based on U.S. domestic IRI multi-outlet + C-store retail sales for the relevant period, retail sales from other third parties for certain e-commerce sales in North America, Australia consumption based on IMS data and other international net revenues as a proxy for consumption. Our calculation of consumption levels may not accurately reflect actual retail consumption given limitations of tracked data, and consumption levels could significantly differ from reported revenues.
Product liability claims and product recalls and related negative publicity could adversely affect our sales and operating results.
We are dependent on consumers’ perception of the safety and quality of our products. Negative consumer perception may arise from product liability claims and product recalls, regardless of whether such claims or recalls involve us or our products. The mere publication of information asserting concerns about the safety of our products or the ingredients used in our products could have a material adverse effect on our business and results of operations. We believe our products are safe and effective when used in accordance with label directions. However, adverse publicity about ingredients used in our products may discourage consumers from buying our products containing those ingredients, which would have an adverse impact on our sales.
From time to time we are subject to various product liability claims. Claims could be based on allegations that, among other things, our products contain contaminants, include inadequate instructions or warnings regarding their use, or include inadequate warnings concerning side effects and interactions with other substances. For example, we previously acquired a low sales volume talcum-based product as part of a larger acquisition, which was subsequently discontinued in 2017. The product has been identified in a small number of lawsuits along with other talcum-based products and their manufacturers alleging contamination of the products. To date, most claims against our discontinued product have been voluntarily dismissed and none have resulted in a material loss to the Company. Whether or not , product liability could result in publicity that could affect the reputation of our brands and our sales and financial condition. Additionally, we may be required to pay for or caused by our products, which could impact our financial condition. We could also be required for a variety of reasons to initiate product , which we have done on several occasions. Any product could have a material effect on our business, financial condition and results of operations.
Although we have supply and manufacturing agreements with certain of our third-party manufacturers, which explicitly outline the allocation of product liability risk with respect to the products these manufacturers produce, some of our other products are manufactured on a purchase order basis. To the extent we rely on purchase orders to govern our commercial relationships with suppliers, we have not specifically negotiated the allocation of risk for product liability obligations. Instead, we typically rely on implied warranties from the suppliers with respect to these products. We may have difficulty enforcing these implied warranties, and we may be required to bear all or a significant portion of any product liability obligations rather than transferring this risk to our third-party manufacturers.
In addition, although we maintain, and require our suppliers and third-party manufacturers to maintain, product liability insurance coverage, potential product liability claims may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which could have a material adverse effect on our financial condition. In addition, in the future we may not be able to obtain adequate product liability insurance coverage or we may be required to pay higher premiums and accept higher deductibles in order to secure adequate product liability insurance coverage.
Risks Related to Acquisitions and Product Development
Our inability to successfully identify, negotiate, complete and integrate suitable acquisition candidates and to obtain necessary financing could have an adverse impact on our growth and our financial condition and results of operations.
Achievement of our strategic objectives includes the acquisition, or potentially the disposition, of certain brands or product lines, and these acquisitions and dispositions may not be successful.
The majority of our historical growth has been driven by acquiring other brands and companies. At any given time, we may be engaged in discussions with respect to possible acquisitions that are intended to enhance our product portfolio, enable us to realize cost savings, and further diversify our category, customer and channel focus. Our ability to successfully grow through acquisitions depends on our ability to identify, negotiate, complete and integrate suitable acquisition candidates and to obtain any necessary financing. However, we may not be able to identify and successfully negotiate suitable strategic acquisitions at attractive valuations, obtain financing for future acquisitions on satisfactory terms, or otherwise complete future acquisitions. All acquisitions entail various risks such that after completing an acquisition, we may also experience:
• Difficulties in integrating any acquired companies, suppliers, personnel and products into our existing business;
• Difficulties in realizing the benefits of the acquired company or products, including expected returns, margins, synergies and profitability, which can also result in subsequent impairments to the book value of the acquired assets;
• Higher costs of integration than we anticipated;
• Exposure to unexpected liabilities of the acquired business;
• Difficulties in retaining key employees of the acquired business who are necessary to operate the business;
• Difficulties in maintaining uniform standards, controls, procedures and policies throughout our acquired companies; or
• Adverse customer or stockholder reaction to the acquisition and/or the associated debt.
As a result, any acquisitions we pursue or complete could adversely impact our financial condition and results from operations. In addition, any acquisition could adversely affect our operating results as a result of higher interest costs from any acquisition-related debt and higher amortization expenses related to the acquired intangible assets.
In the event that we decide to divest of a brand or product line, we may encounter difficulty finding, or be unable to find, a buyer on acceptable terms in a timely manner.
Additionally, the pursuit of acquisitions and divestitures could also divert management's attention from our business operations and result in a delay in our efforts to achieve our strategic objectives.
If new products and product line extensions do not gain widespread customer acceptance or are otherwise discontinued, our financial performance could be impacted.
The Company's future performance and growth depends on our ability to successfully develop and introduce new products and product line extensions. The successful development and introduction of new products involves substantial research, development, marketing and promotional expenditures, which the Company may not be able to recover if the new products do not gain widespread market acceptance. New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks. These risks include product development or launch delays, competitor actions, regulatory approval hurdles and the failure of new products and line extensions to achieve anticipated levels of market acceptance. A negative outcome in any of these risks could adversely impact our results of operations and financial condition.
Regulatory Risks
Regulatory matters governing our industry could have a significant negative effect on our sales and operating costs.
In both the United States and in our foreign markets, our operations are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints exist at the federal, state and local levels in the United States and at analogous levels of government in foreign jurisdictions.
In particular, the formulation, manufacturing, packaging, labeling, distribution, importation, marketing, sale and storage of our products are subject to extensive regulation by various U.S. federal agencies, including the FDA, FTC and CPSC, the EPA and by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed, stored and sold. The FDC Act and FDA regulations require that the manufacturing processes of our facilities and third-party manufacturers of U.S. products must also comply with the FDA’s cGMPs. The FDA inspects our facilities and those of our third-party manufacturers periodically to determine if we and our third-party manufacturers are complying with cGMPs. The health regulatory bodies of other countries have their own regulations and standards, which may impose additional requirements beyond the U.S. FDA cGMPs.
Heightened regulatory activity and expectations worldwide, particularly for sterile eye care products, have contributed to ongoing manufacturing disruptions and capacity constraints across the industry. These conditions have impacted, and we expect they will continue to impact for the foreseeable future, the availability of sterile eye care products, which has and may continue to adversely affect our net revenues, product mix, customer service levels, and our ability to fully meet demand in affected categories. While we continue to pursue alternate sources of supply where feasible, qualification, validation and regulatory readiness activities can require significant time and resources and may not fully mitigate near-term constraints. In fiscal 2026, we acquired a sterile eye care manufacturing facility and expect to make investments to enhance quality systems, expand capabilities and improve the consistency and reliability of supply over the long term. The timing and extent of any improvements will depend on the successful execution of these initiatives, including equipment upgrades, process improvements, staffing, and completion of required validations and regulatory activities. Accordingly, while we believe these investments position us to supply over time, sustained is expected to be a multi-step process and may not alleviate current or near-term supply .
In addition, our and our suppliers’ operations are subject to the oversight of the Occupational Safety and Health Administration and some suppliers by the National Labor Relations Board. Our activities are also regulated by various agencies of the states, localities and foreign countries in which our products and their constituent materials and components are manufactured and sold. We have successfully moved the manufacture of certain of our more highly regulated products to our own manufacturing facilities, which will subject our facility to increased regulatory requirements and scrutiny with respect to both our existing and new operations there.
If we or our third-party manufacturers or distributors fail to comply with applicable regulations, we could become subject to enforcement actions, significant penalties or claims, which could materially adversely affect our business, financial condition and results of operations. In addition, we or our third-party manufacturers or distributors could be required to:
• Suspend manufacturing operations;
• Modify product formulations or manufacturing processes;
• Suspend the sale or require a recall of non-compliant products; or
• Change product labeling, packaging, distribution, storage, marketing, or advertising, or take other corrective action.
The adoption of new regulations or changes in the interpretation of existing regulations may result in significant compliance costs or the cessation of product sales and may adversely affect the marketing of our products, which could have a material adverse effect on our financial condition and results of operations.
In addition, our or our third-party manufacturers' or distributors' failure to comply with FDA, FTC, EPA or any other federal and state regulations, or with similar regulations in foreign markets, that cover our product registrations, product claims or advertising, including direct claims and advertising by us, may result in enforcement actions and imposition of penalties, litigation by private parties, or otherwise materially adversely affect the distribution and sale of our products, which could have a material adverse effect on our business, financial condition and results of operations.
Regulatory authorities, including the Federal Trade Commission, have increasingly focused on the substantiation of marketing and advertising claims and have commenced enforcement actions against companies for failures to adequately substantiate such claims. As a result, we may face increased scrutiny of our marketing practices, and any determination that our claims are not adequately supported could result in enforcement actions, including fines, injunctions, product relabeling or other corrective measures, as well as increased risk of private litigation, which could adversely affect our business, financial condition and results of operations.
We face risks associated with doing business internationally .
Approximately 16% of our total 2026 revenues were attributable to our international business. We generally rely on brokers and distributors for the sale of our products in foreign countries. In addition, some of our third-party manufacturers are located outside the United States. Risks of doing business internationally include, but are not limited to, the following:
• Political instability or declining economic conditions in the countries or regions where we operate or rely on third-party manufacturers or suppliers, which could adversely affect sales of our products in these countries or regions or our ability to obtain adequate supply of our products;
• Geopolitical conflict that disrupts global trade routes and shipping;
• Currency controls that restrict or prohibit the payment of funds or the repatriation of earnings to the United States;
• Fluctuating foreign exchange rates and tariffs that result in unfavorable increases in the price of our products or cause increases in the cost of certain products purchased from our foreign third-party manufacturers;
• Requirements under laws and regulations concerning ethical business practices;
• Trade restrictions and exchange controls;
• Difficulties in staffing and managing international operations;
• Difficulty protecting our intellectual property rights and avoiding diversion of our products in these markets; and
• Increased costs of compliance with general business and tax regulations in these countries or regions.
Our operations are dependent on foreign distributors and sales agents for compliance and adherence to foreign laws and regulations that we may not be familiar with, and we cannot be certain that these distributors and sales agents will adhere to such laws and regulations or adhere to our business practices and policies. Any violation of laws and regulations by foreign distributors or sales agents or a failure of foreign distributors or sales agents to comply with applicable business practices and policies could result in legal or regulatory sanctions or potentially damage our reputation. Although we require by contract that our distributors maintain strict compliance with all applicable laws, and have the right to terminate those relationships should we determine a distributor is in material non-compliance, we cannot ensure that our foreign distributors and sales agents will steadfastly comply with all such laws. If we fail to manage these risks effectively, we may not be able to continue our international operations, and our business, financial condition and results of operations may be materially adversely affected.
We are subject to increasing focus on environmental and sustainability issues.
While we seek to maintain sustainable operations that are both operationally and financially beneficial to our business, and contribute to the health and wellness of the communities in which we operate, we may experience reduced demand for our products and loss of customers if we do not meet their expectations, which could result in a material adverse effect on our financial condition and results of operations. Land use, water use, carbon emissions, deforestation, recyclability or recoverability of packaging, plastic waste, ingredients and other sustainability concerns remain key topics with federal, state and local governments, non-governmental organizations, our customers, consumers and investors. These evolving priorities have resulted, and may continue to result, in new or more stringent laws, regulations and requirements, including emerging extended producer responsibility (“EPR”) regimes relating to the lifecycle management of packaging and certain product components. EPR requirements, which are being adopted in various jurisdictions in which we operate, generally shift responsibility for the collection, recycling, disposal and reporting of packaging materials to producers such as us. These requirements are evolving and vary by jurisdiction and may require us to join and fund producer responsibility organizations, implement new data tracking and reporting systems, modify packaging designs, or make changes to our supply chain and product offerings. Compliance with these and other sustainability-related regulations may result in increased costs, including fees, capital expenditures and administrative , and may our operations. In addition, we could also revenue if our consumers change brands, our customers to buy our products, or investors choose not to invest in our debt or common stock if we do not meet their sustainability expectations. For example, since 2020, some of our major customers requested that we respond to various questionnaires to evaluate our sustainability efforts. Efforts to meet these standards could impact our costs resulting in reduced profits, and to meet our customers’ expectations could impact our sales and business reputation.
Risks Related to Intellectual Property
If we are unable to protect our intellectual property rights, our ability to compete effectively in the market for our products could be negatively impacted.
The market for our products depends to a significant extent upon the goodwill associated with our trademarks, tradenames and patents. Our trademarks and tradenames convey that the products we sell are “brand name” products. We believe consumers ascribe value to our brands, some of which are over 100 years old. We own or exclusively license the material trademarks, tradenames and patents used in connection with the manufacturing, packaging, marketing and sale of our products. These rights prevent our competitors or new entrants to the market from using our valuable brand names and technologies. Therefore, trademark, tradename and patent protection is critical to our business. Although most of our material intellectual property is registered in the United States and in applicable foreign countries, we may not be successful in asserting protection of our intellectual property. In addition, third parties may assert claims against our intellectual property rights, and we may not be able to successfully resolve those claims, which would cause us to the right to use the intellectual property subject to those . If we were to the right to use one or more of our intellectual property rights, the of such right could have a material effect on our financial condition and results of operations.
In addition, other parties may infringe our intellectual property rights, including through e-commerce channels, digital marketplaces or unauthorized online sales, which may be more difficult to monitor and enforce, and may thereby dilute the value of our brands in the marketplace. Brand dilution could cause confusion in the marketplace and adversely affect the value that consumers associate with our brands, which could negatively impact our business and sales. Furthermore, from time to time, we may be involved in litigation in which we are enforcing or defending our intellectual property rights, including proceedings involving trademark infringement, counterfeiting or unauthorized distribution, which could require us to incur substantial fees and expenses and have a material adverse effect on our financial condition and results of operations.
We depend on third parties for intellectual property relating to some of the products we sell, and our inability to maintain or enter into future license agreements may result in our failure to meet customer demand, which would adversely affect our business, operating results and financial condition.
We have licenses or manufacturing agreements with third parties that own intellectual property (e.g., formulae, copyrights, trademarks, trade dress, patents and other technology) used in the manufacture and sale of certain of our products. In the event that any such license or manufacturing agreement expires or is otherwise terminated, we will lose the right to use the intellectual property covered by such license or agreement. Similarly, our rights could be reduced if the applicable licensor or third-party manufacturer fails to maintain or protect the licensed intellectual property, because, in such event, our competitors could obtain the right to use the intellectual property without restriction. If either of these intellectual property losses were to occur, we might not be able to develop or obtain replacement intellectual property at all or in a timely or cost-effective manner. Additionally, any modified products may not be well-received by customers. The consequences of losing the right to use or having reduced rights to such intellectual property could negatively impact our business and sales due to our to meet consumer demand for the affected products or require us to incur costs for the development of new or different intellectual property, either of which could have a material effect on our business, financial condition and results of operations. In addition, development of replacement products may be time-consuming and ultimately may not be feasible. Further, with licensors or third-party manufacturers regarding intellectual property rights, including ownership or scope of use, could result in or the of rights necessary to continue to market certain products.
Virtually all of our assets consist of goodwill and intangible assets and are subject to impairment risk.
As our financial statements indicate, the majority of our assets consist of goodwill and intangible assets, principally the trademarks, tradenames and patents that we have acquired. On an annual basis, and otherwise when there is evidence that events or changes in circumstances indicate that the carrying value of intangible assets might not be recoverable, we assess the potential impairment of our goodwill and other intangible assets. If any of our brands sustain significant or prolonged declines in revenues or profitability or performance not in line with our expectations, the carrying value may no longer be recoverable, in which case a non-cash impairment charge may be recorded. In addition, unfavorable changes in economic factors used to estimate fair value of certain brands (including the discount rate) could indicate that the fair value no longer exceeds the carrying value. For example, if the Company’s brand performance is weaker than projections used in valuation calculations, the value of such brands may become impaired. In the event that such analysis would result in the fair value being lower than the carrying value, we would be required to record an charge. A significant charge in our financial statements would impact our financial condition and results of operations. We have recorded charges resulting from changes in our long-term assumptions for certain brands, including the discount rate, future revenue growth, expected inflationary pressures and other long-term estimates. However, sustained or significant future in revenue, , distribution, other changes in expected operating results and/or changes in economic factors used to estimate fair value of certain brands (including the discount rate) could indicate that the fair value no longer exceeds the carrying value, in which case a non-cash charge may be recorded in future periods. Should the value of those assets or other assets become further or our financial condition be materially affected in any way, our intangible assets that could be sold to repay our liabilities would be reduced. As a result, our creditors and investors may not be to recoup the amount of the indebtedness that they have extended to us or the amount they have invested in us.
Risks Related to Cybersecurity and Technology
We rely significantly on information technology. Any inadequacy, interruption, theft or loss of data, malicious attack, integration failure, failure to maintain the security, confidentiality or privacy of sensitive data residing on our systems or other security failure of that technology could harm our ability to effectively operate our business and damage the reputation of our brands.
We rely extensively on our information technology systems, networks and digital platforms, many of which are managed by third-party service providers, to manage the data, communications and business processes for all of our functions, including our marketing, sales (including e-commerce), manufacturing, logistics, customer service, accounting and administrative functions. These systems include programs and processes relating to internal communications and communications with other parties, ordering and managing materials from suppliers, converting materials to finished products, marketing and selling products to customers (including through e-commerce channels), customer order entry and order fulfillment, shipping product to customers, billing customers and receiving and applying payment, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal and tax requirements, collecting and storing customer, consumer, employee, investor and other stakeholder information and personal data and other processes necessary to manage the Company's business. As a result, we are exposed to cybersecurity risks both within our own systems and across our third-party ecosystem and supply chain.
We and certain of our suppliers and customers have faced, and likely will continue to face evolving cybersecurity threats, including ransomware, malware, denial-of-service attacks, credential theft, business email compromise, phishing, social engineering (including AI-enabled impersonation), supply chain attacks and other attempts to gain unauthorized access to our systems, networks, devices and data. These threats may be directed at our information technology environment or at third parties that provide technology or operational services to us, such as cloud service providers, ERP or other enterprise application providers, customer/retailer ordering interfaces, payment processors, marketing or data analytics vendors, contract manufacturers and third-party logistics providers. Because we rely on these third parties and data connections to operate key processes, a cybersecurity incident could also result from a compromise of, or disruption to, a third-party’s systems even if our own systems are not directly compromised. A cybersecurity incident could, among other things, disrupt the availability of systems used for order processing, forecasting, manufacturing planning, distribution, invoicing, treasury operations or financial reporting; shipments; reduce product availability; result in chargebacks or from customers; and cause us to incur significant costs related to containment, , remediation, restoration of data and systems, and protective measures. While we do not believe prior have had a material impact on our business, future attacks including as a result of in third-party systems or supply chain cyber risks, could result in a information security , related and regulatory inquiries, reputational and of management attention, any of which could have a material impact on our business, results of operations or financial condition.
Increased information technology security threats and more sophisticated computer crime, including advanced persistent threats, pose a potential risk to the security of the information technology systems, networks and services of the Company, its customers and business partners, as well as the confidentiality, availability and integrity of the data of the Company, its customers and business partners. As a result, the Company's information technology systems, networks or service providers could be damaged or cease to function properly or the Company could suffer a loss or disclosure of business, personal or stakeholder information, due to any number of causes, including system disruptions, catastrophic events, power outages, cyber-attacks and security breaches. To help guard against these risks, the Company provides quarterly employee security training and maintains a compliance program with updated security policies to help evaluate and address potential and attacks. However, these measures may not be in or mitigating all cybersecurity .
In addition, to manage these risks, the Company has conducted regular security audits by an outside firm based on the National Institute of Standards and Technology ("NIST") standards to address any potential service interruptions or vulnerabilities. Management regularly reports to the Company’s Board on information security risks and audit results. The Company has implemented a comprehensive Cybersecurity Incident Response Plan designed to promptly identify, assess, and respond to potential cybersecurity threats and incidents. This plan includes a structured escalation matrix that defines incident severity levels and corresponding response protocols. In accordance with the plan, material cybersecurity matters are escalated to the Audit Committee of the Board of Directors. Further, the Company has implemented continuity and recovery plans in the event of a disruption. However, if these plans do not provide effective protection, the Company may suffer in its ability to manage or conduct its operations, including in all of the Company’s functions described above, which may affect its business and results of operations. While we maintain cybersecurity insurance, such coverage may not be available on acceptable terms in the future, may not cover all types of , may be subject to deductibles, exclusions or coverage , and may be to cover the full extent of costs, liabilities or business . The Company may need to expend additional resources in the future to continue to protect , or to address caused by, any business or data security .
In addition, a cybersecurity incident could result in unauthorized access to, or disclosure of, confidential or proprietary information, including personal information relating to employees, customers or consumers, which could subject us to notification obligations, litigation (including putative class actions), contractual claims and regulatory enforcement under privacy, data protection and other laws. These events could give rise to unwanted media attention, damage our reputation, damage our customer, consumer or user relationships, and result in lost sales, fines, lawsuits, remediation costs, or otherwise adversely impact the Company's results of operations and financial condition. We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach. We are also subject to evolving federal, state and international cybersecurity and privacy requirements and, a cybersecurity could require us to make public disclosures, including under SEC rules (such as reporting requirements for material cybersecurity ), which could increase the risk of , regulatory and reputational . For additional information regarding our cybersecurity risk management, strategy and governance, see Item 1C. “Cybersecurity.”
Risks Related to Artificial Intelligence
The use of artificial intelligence technologies presents operational, legal and regulatory risks.
The rapid evolution and growing adoption of artificial intelligence ("AI") and machine learning technologies present emerging risks to the security of our information, as well as the information of our customers and business partners. As with cybersecurity risks, the use of AI by our employees, or by our customers and business partners, could result in the loss or
unauthorized disclosure of sensitive information or the generation of inaccurate, biased or unintended outputs that could impact business decisions, customer interactions or regulatory compliance.
The legal, regulatory and ethical landscapes around the use of AI technologies, including generative AI, are rapidly evolving and uncertain, including in relation to the areas of intellectual property, cybersecurity and privacy and data protection. These developments may result in new or expanded legal and compliance obligations and could impose significant operational or compliance burdens on our business. In addition, the use of AI technologies may create risks relating to the ownership, protection or enforceability of our intellectual property, or result in claims that we have infringed the intellectual property rights of third parties.
In addition to our existing business continuity and incident response plans, which are designed to address cybersecurity incidents, the Company has implemented an internal AI policy. This policy restricts the use of AI technologies by requiring employees to obtain prior approval from the Company’s AI Technology Governance Committee, in order to evaluate any potential security, compliance, or operational risks. Nonetheless, the use of AI by our employees, suppliers and customers could expose our confidential information or those of our stakeholders, which could have a material adverse impact on our business reputation, result in regulatory action or legal liability.
As we evaluate and potentially expand the use of AI technologies in our operations, including in tools used by employees or customer-facing applications, we may face additional risks, including those described above, as well as increased compliance costs and operational complexity.
Risks Related to Data Privacy
We are subject to complex and evolving data privacy, data protection and data security laws, and failure to comply could result in significant costs, liabilities and operational restrictions.
As we conduct our operations, we move data across national borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security. The scope of the laws that may be applicable to us is often uncertain and may be conflicting. Numerous local, municipal, state, federal and international law and regulations address privacy and security including but not limited to the California Online Privacy Protection Act, the Personal Information Protection and Electronic Documents Act, and the California Consumer Privacy Act.
These privacy and security laws and regulations change frequently, and new legislation continues to be introduced. As of January 1, 2026, comprehensive privacy laws are in effect in 20 U.S. states, complicating our privacy compliance obligations through the introduction of increasingly disparate privacy requirements across the various U.S. jurisdictions in which we operate. In Europe, the European Union’s ("EU") General Data Protection Regulation (the “GDPR”) greatly increases the jurisdictional reach of EU law and adds a broad array of requirements for handling personal data, including the public disclosure of significant data breaches. In addition, it is important to note that many countries are following the EU in producing a broad omnibus law in relation to privacy protection.
Compliance with these evolving requirements may necessitate significant operational changes and could impose substantial and increasing costs over time. Any failure to comply could result in regulatory investigations, significant fines, penalties or restrictions on our ability to process or transfer data across jurisdictions, and reputational harm.
Risks Related to our Financing
Our current indebtedness could adversely affect our financial condition and we may incur substantially more debt in the future.
At March 31, 2026, our total indebtedness, including current maturities, was approximately $1.0 billion and assuming the closing conditions are met related to our agreement to acquire certain brands in the first half of fiscal 2027, that total will increase to approximately $2.2 billion.
Our indebtedness could:
• Increase our vulnerability to general adverse economic and industry conditions;
• Require us to dedicate a substantial portion of our cash flow from operations toward repayment of our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, investments and other general corporate purposes;
• Limit our ability to fund additional acquisitions;
• Limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;
• Place us at a competitive disadvantage compared to our competitors that have less debt; and
• Limit, among other things, our ability to borrow additional funds on favorable terms or at all.
The terms of the indentures governing our 3.750% senior notes due April 1, 2031 (the "2021 Senior Notes") and our 5.125% senior unsecured notes due January 15, 2028 (the "2019 Senior Notes"), and the credit agreement governing our revolving credit facility, allow us to issue and incur additional debt only upon satisfaction of the conditions set forth in those respective agreements. If new debt is added to current debt levels, the related risks described above could increase.
At March 31, 2026, we had $182.9 million of borrowing capacity available under our revolving credit facility to support our operating activities. We currently have no balance on our revolving credit facility, but future borrowings would be subject to variability in interest rates which could limit our ability to fund working capital, capital expenditures and acquisitions.
Our capital structure and ability to engage in strategic transactions is limited in significant respects by the restrictive covenants in our revolving credit facility and the indentures governing our senior notes.
Our revolving credit facility and the indentures governing our senior notes impose restrictions that could impede our ability to enter into certain corporate transactions, as well as increase our vulnerability to adverse economic and industry conditions, by limiting our flexibility in planning for, and reacting to, changes in our business and industry. These restrictions limit our ability to, among other things:
• Borrow money or issue guarantees;
• Pay dividends, repurchase stock from, or make other restricted payments to, stockholders;
• Make investments or acquisitions;
• Use assets as security in other transactions;
• Sell assets or merge with or into other companies;
• Enter into transactions with affiliates; and
• Sell stock in our subsidiaries.
Our ability to engage in these types of transactions is generally limited by the terms of the revolving credit facility and the indentures governing the senior notes, even if we believe that a specific transaction would positively contribute to our future growth, operating results or profitability.
In addition, our revolving credit facility requires us to maintain certain fixed charge ratios. Although we believe we can continue to meet and/or maintain the financial covenants contained in our credit agreement, our ability to do so may be affected by events outside our control. Covenants in our revolving credit facility also require us to use 100% of the proceeds we receive from non-permitted debt issuances or certain issuances of refinancing debt to repay outstanding borrowings under our senior credit facility. Any failure by us to comply with the terms and conditions of the credit agreement and the indentures governing the senior notes could result in an event of default, which may allow our creditors to accelerate our debt and therefore have a material adverse effect on our financial condition.
The senior credit facility and the indentures governing the senior notes contain cross-default provisions that could result in the acceleration of all of our indebtedness.
The revolving credit facility and the indentures governing the senior notes contain provisions that allow the respective creditors to declare all outstanding borrowings under one agreement to be immediately due and payable as a result of a default under another agreement. Failure to make a payment required by the indentures governing the senior notes may lead to an event of default under the indentures governing the senior notes and any outstanding balance under the revolving credit facility. If the debt under the revolving credit facility and indentures governing the senior notes were accelerated, the aggregate amount immediately due and payable as of March 31, 2026 would have been approximately $1.0 billion. We presently do not have sufficient liquidity to repay these borrowings in the event they were to be accelerated, and we may not have sufficient liquidity in the future to do so. Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness. At March 31, 2026, the book value of our current assets was $431.5 million. Although the book value of our total assets was $3,494.3 million, approximately $2,880.7 million was in the form of intangible assets, including goodwill of $581.1 million, a significant portion of which may not be available to satisfy our creditors in the event our debt is accelerated.
Any failure to comply with the restrictions of any of our current or subsequent financing agreements may result in an event of default. Such default may allow the creditors to accelerate the related debt, as well as any other debt to which the cross-acceleration or cross-default provisions apply. In addition, the lenders may be able to terminate any commitments they had made to supply us with additional funding. As a result, any default by us under our credit agreement, indentures governing the senior notes or any other financing agreement could have a material adverse effect on our financial condition.
General Risk Factors
Litigation may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of, and from time to time in the ordinary course of business we are involved in, litigation by employees, customers, consumers, suppliers, competitors, regulators, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend current and future litigation may be significant. There may also be adverse publicity associated with litigation that could decrease customer or consumer acceptance of our products, regardless of whether the allegations are valid or whether we are ultimately found liable. For example, although our marketing is evidence-based, consumers and competitors may , and have in the past , certain of our marketing by , among other things, and advertising with respect to certain of our products. Such could result in our having to pay monetary or limit our ability to maintain current marketing . Conversely, we have, and may be required in the future to, initiate others to protect the value of our intellectual property and the related goodwill or enforce an agreement or contract that has been . These matters may be time consuming and expensive, but may be necessary to protect our assets and realize the benefits of the agreements and contracts that we have negotiated. As a result, may affect our business, financial condition and results of operations.
We depend on our key personnel, and the loss of the services provided by any of our executive officers or other key employees could harm our business and results of operations.
Our success depends to a significant degree upon the continued contributions of our senior management. These employees may voluntarily terminate their employment with us at any time. We may not be able to successfully retain existing personnel or identify, hire and integrate new personnel. While we believe we have developed depth and experience among our key personnel, our business may be adversely affected if one or more of these key individuals were to leave or were to experience serious illness, become disabled, or pass away. We do not maintain any key-man or similar insurance policies covering any of our senior management or key personnel.
Provisions in our amended and restated certificate of incorporation and Delaware law may discourage potential acquirers of our Company, which could adversely affect the value of our securities.
Our amended and restated certificate of incorporation provides that our Board of Directors is authorized to issue from time to time, without further stockholder approval, up to five million shares of preferred stock in one or more series of preferred stock issuances. Our Board of Directors may establish the number of shares to be included in each series of preferred stock and determine, as applicable, the voting and other powers, designations, preferences, rights, qualifications, limitations and restrictions for such series of preferred stock. The shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change in control of the Company without further action by our stockholders. The shares of preferred stock may be
issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights and by the creation of class or series voting rights.
Our amended and restated certificate of incorporation, as amended, contains additional provisions that may have the effect of making it more difficult for a third-party to acquire or attempt to acquire control of our Company. In addition, we are subject to certain provisions of Delaware law that limit, in some cases, our ability to engage in certain business combinations with significant stockholders.
These provisions, either alone, or in combination with each other, give our current directors and executive officers the ability to significantly influence the outcome of a proposed acquisition of the Company. These provisions would apply even if an acquisition or other significant corporate transaction was considered beneficial by some of our stockholders. If a change in control or change in management is delayed or prevented by these provisions, the market price of our outstanding securities could be adversely impacted.
Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns or a determination of tax jurisdiction could adversely affect our results.
Our provision for income taxes is subject to volatility and could be adversely affected by several factors, some of which are outside of our control, including:
• Changes in the income allocation methods for state taxes, and the determination of which states or countries have jurisdiction to tax our Company;
• An increase in non-deductible expenses for tax purposes, including certain stock-based compensation, executive compensation and impairment of goodwill;
• Transfer pricing adjustments;
• Tax assessments resulting from tax audits or any related tax interest or penalties that could significantly affect our income tax provision for the period in which the settlement takes place;
• Tax liabilities from acquired businesses;
• Changes in accounting principles; and
• Changes in tax laws or related interpretations, accounting standards, regulations and interpretations in multiple tax jurisdictions in which we operate.
Significant judgment is required to determine the recognition and measurement of the attributes prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740. As a multinational corporation, we conduct our business in several countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. Our effective tax rate is dependent upon the availability of tax credits and carryforwards. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax rate.
In addition, we may be subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities. If tax authorities challenge the relative mix of our U.S., state and international income, or successfully assert the jurisdiction to tax our earnings, our future effective income tax rates could be adversely affected.
