Hydrofarm(US:HYFM)2025-11-12 11:18Asset Sales and Dispositions - The Company sold assets related to the production of Innovative Growers Equipment for $8,660, retaining proprietary brand and customer relationships[63]. - The IGE Asset Sale resulted in a loss on asset disposition of $11,520 for the three and nine months ended September 30, 2024[64]. - The net cash proceeds from the IGE Asset Sale were approximately $6,300, which were reinvested into capital expenditures and used to prepay against the Term Loan principal[66]. - The Company sold approximately 20 acres of excess land in Goshen, New York, during 2024, with a carrying value of $470, resulting in no estimated gain or loss recorded during that year[17]. Intangible Assets and Amortization - As of September 30, 2025, total intangible assets, net amounted to $358,084, with finite-lived intangible assets valued at $355,283[68]. - The estimated future amortization expense for intangible assets subject to amortization totals $228,395, with $5,932 expected for the period of October 1, 2025, to December 31, 2025[70]. Financial Performance - Basic loss per common share for the three months ended September 30, 2025, was $(3.51), compared to $(2.86) for the same period in 2024[73]. - The Company recorded income tax expense of $125 and $109 for the three and nine months ended September 30, 2025, with effective tax rates of (0.8)% and (0.2)% respectively, differing from the federal statutory rate of 21% due to full valuation allowances in U.S. and foreign jurisdictions[12]. - For the three and nine months ended September 30, 2024, the Company recorded income tax expense of $279 and $865, with effective tax rates of (2.2)% and (1.8)% respectively, also differing from the federal statutory rate of 21% due to similar valuation allowances[13]. Accounts and Inventory - Total accounts receivable, net as of September 30, 2025, was $10,008, down from $14,756 as of December 31, 2024[74]. - Total inventories as of September 30, 2025, were $38,338, a decrease from $50,633 as of December 31, 2024[74]. Lease and Debt Obligations - The Company incurred operating lease costs of $2,410 and $7,209 during the three and nine months ended September 30, 2025, respectively[75]. - Total lease assets decreased from $50,148 million as of December 31, 2024, to $46,301 million as of September 30, 2025, representing a decline of approximately 7.4%[78]. - Total lease liabilities decreased from $53,573 million as of December 31, 2024, to $50,136 million as of September 30, 2025, a reduction of about 6.4%[78]. - The total property, plant, and equipment, net decreased from $37,545 million as of December 31, 2024, to $34,751 million as of September 30, 2025, reflecting a decline of approximately 7.4%[79]. - Total debt decreased from $115,953 million as of December 31, 2024, to $111,780 million as of September 30, 2025, a reduction of approximately 3.7%[84]. - The effective interest rate for the term loan was 10.93% for the three months ended September 30, 2025, with interest expense of $3,153 million[86]. - The company made a prepayment of $4,544 million on the term loan during the second quarter of 2025, reducing the required quarterly installment amounts to zero for the remaining term[89]. - The aggregate future principal payments under long-term debt total $114,547, with $24 due in the last quarter of 2025 and $21 due in each of the years 2026 and 2027[100]. Stock-Based Compensation - The Company granted 211,618 Restricted Stock Units (RSUs) during the nine months ended September 30, 2025, with a weighted average grant date fair value of $4.68[108]. - As of September 30, 2025, there were 214,151 RSUs outstanding, with total unamortized stock-based compensation cost related to unvested RSUs amounting to $737[108]. - The Company recognized $206 and $842 of total stock-based compensation expense for RSUs for the three and nine months ended September 30, 2025, respectively[108]. - The Company had no stock options granted or exercised during the nine months ended September 30, 2025, with 32,612 stock options outstanding and exercisable as of that date[111]. Credit Facilities and Compliance - The Revolving Credit Facility's maximum commitment amount has been reduced from $100,000 to $22,000 as of May 9, 2025[92]. - As of September 30, 2025, the Company had zero borrowed under the facility and could borrow approximately $4 million before needing to comply with a minimum fixed charge coverage ratio of 1.1x[98]. - The Revolving Credit Facility includes various interest rate options, with rates using SOFR as the reference rate plus 1.95%[97]. - The Company is required to maintain a minimum fixed charge coverage ratio of 1.1x if Excess Availability is less than 20% of the Aggregate Revolving Commitment[96]. - As of September 30, 2025, the Company is in compliance with the covenants contained in the Revolving Credit Facility[96]. Other Financial Information - The fair value of cash and cash equivalents was $10,652, down from $26,111 as of December 31, 2024[19]. - The estimated fair value of finance leases was $7,952 as of September 30, 2025, compared to a carrying amount of $8,194[20]. - The Term Loan had an estimated fair value of $114,452 as of September 30, 2025, with a carrying amount of $93,851[20]. - Material cash requirements include anticipated interest payments on long-term debt, finance lease payments, and operating lease payments[167]. - The Company’s critical accounting policies involve significant judgments and assumptions, particularly regarding indefinite lived intangible assets and inventory valuation[168]. Legal and Regulatory Matters - The Company does not expect any material adverse effects from ongoing claims against it and its suppliers[16]. - The One Big Beautiful Bill Act ("OBBBA") was enacted in July 2025, making permanent key elements of the Tax Cuts and Jobs Act of 2017, but the Company does not expect a material impact on its results of operations from this legislation[14].