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Item 2. Management’s Discussion and Analysis

2022-02-03 compared with 2021-11-09 · 256 added, 119 removed, 204 unchanged (65% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended September 30, 2021 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended December 31, 2021 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Forward looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading “Forward-Looking Statements” in the introduction of this Form 10-Q.

The Hain Celestial Group, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”), was founded in 1993 and is headquartered in Lake Success, New York.

The Hain Celestial Group, Inc., a Delaware corporation (collectively, along with its subsidiaries, the “Company,” and herein referred to as “Hain Celestial,” “we,” “us” and “our”), was founded in 1993 and is headquartered in Lake Success, New York.

The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet.

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Hain Celestial is a leader in many organic and natural products categories, with ma ny recognized brands in the various market categories it serves, including Celestial Seasonings ® , Clarks™, Cully & Sully ® , Earth’s Best ® , Ella’s Kitchen ® , Frank Cooper’s ® , Gale’s ® , Garden of Eatin’ ® , Hain Pure Foods ® , Hartley’s ® , Health Valley ® , Imagine ® , Joya ® , Lima ® , Linda McCartney's ® (under license), MaraNatha ® , Natumi ® , New Covent Garden Soup Co.

® , Robertson’s ® , Rose's ® (under license), Sensible Portions ® , Spectrum ® , Sun-Pat ® , Terra ® , The Greek Gods ® , Yorkshire Provender ® and Yves Veggie Cuisine ® .

® , ParmCrisps ® , Robertson’s ® , Rose's ® (under license), Sensible Portions ® , Spectrum ® , Sun-Pat ® , Terra ® , The Greek Gods ® , Thinsters ® , Yorkshire Provender ® and Yves Veggie Cuisine ® .

The Company’s personal care products are marketed under the Alba Botanica ® , Avalon Organics ® , JASON ® , Live Clean ® , and Queen Helene ® brands.

Since fiscal 2019, we have been executing the four key pillars of our strategy—(1) simplify our portfolio;

Our previous strategy, which we refer to as Hain 2.0, was executed under four key pillars—(1) simplify our portfolio;

(2) strengthen our capabilities;

(3) expand profit margins and cash flow; and (4) reinvigorate profitable top line growth—which we refer to as Hain 2.0.

This strategy, which is on schedule to be completed ahead of our planned timeline, has laid the foundation for Hain 3.0, our vision and strategy for the next several years, which is about building a global healthy food and beverage company with industry-leading top line growth.

(3) expand profit margins and cash flow;

and (4) reinvigorate profitable topline growth.

This strategy has laid the foundation for Hain 3.0, our vision and strategy for the next several years, which is about building a global healthy food and beverage company with industry-leading top line growth.

We believe Hain 3.0 positions us as an advantaged and differentiated company, as compared to others in the food industry for several reasons:

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We have re-segmented the brand portfolio with a more global view to where we have the most growth potential.

As a result, we are migrating from a strategy focused on rejuvenating North America behind a construct of “Get Bigger" and "Get Better” brand categories to one that focuses on growing global brands in categories where we think we have the most potential.

The categories we have identified are called Turbocharge Growth, Targeted Investment, and Fuel:

• The Turbocharge Growth brands are leading-share brands in very high-growth categories.

The Turbocharge Growth brands are made up of plant-based meat and non-dairy beverages as well as snacks.

As a result, we have migrated from a strategy focused on rejuvenating North America behind a construct of “Get Bigger" and "Get Better” brand categories to one that focuses on growing global brands in categories where we think we have the most potential.

The categories we have identified are called Turbocharge, Targeted Investment, and Fuel:

• The Turbocharge brands are leading-share brands in very high-growth categories.

The Turbocharge brands are made up of plant-based meat and non-dairy beverages as well as snacks.

Our meat and dairy alternatives are concentrated outside the United States, while the snacks businesses include brands both within the United States and in International.

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In contrast with Hain 2.0, baby is now one of our growth focus areas, due to its strong brands, scale, profitability, and growth prospects.

• The Fuel brands are stable brands that will be leveraged to fuel investment in the Turbocharge Growth and Targeted Investment categories.

• The Fuel brands are stable brands that will be leveraged to fuel investment in the Turbocharge and Targeted Investment categories.

Fuel brands are made up of premium pantry brands with scale, in categories such as soup, cooking oils and nut butters.

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As a result, net sales were lower in the third and fourth quarters of fiscal 2021 compared to the third and fourth quarters of fiscal 2020, respectively.

Further, net sales in the first quarter of fiscal 2022 were lower than our net sales during the first quarter of fiscal 2021 as a result of normalizing consumer demand, among other factors as described more fully below under the heading " Comparison of Three Months Ended September 30, 2021 to Three Months Ended September 30, 2020 ."

Further, net sales in the second quarter of fiscal 2022 were lower than our net sales during the second quarter of fiscal 2021 as a result of normalizing consumer demand, among other factors as described more fully herein.

The pandemic and the measures being taken by governments, businesses and consumers to limit the spread of COVID-19 have led to operational challenges in our business and may result in broader and longer-term challenges and uncertainty that we will need to manage successfully.

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• an uncertain future demand environment as a result of changing consumer behaviors amid uncertain economic conditions;

• increased costs of operating our business and managing our supply chain during a global pandemic.

• increased costs of operating our business and managing our supply chain during a global pandemic, driven by well-publicized industry-wide inflation, supply chain and labor challenges.

On December 28, 2021, the Company acquired all outstanding stock of Proven Brands, Inc.

(and its subsidiary That's How We Roll LLC) and KTB Foods Inc., collectively doing business as "That's How We Roll" ("THWR"), the producer and marketer of ParmCrisps® and Thinsters®.

The acquisition of these two fast-growing, better-for-you brands deepens the Company's position in the snacking category and represents a significant step in establishing the Company as a high-growth, global healthy food company.

See Note 4, Acquisitions and Dispositions, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional details.

Discontinued Operations

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The Company's dispositions are described in more detail in Note 5, Dispositions , in the Notes to the Consolidated Financial Statements in the Form 10-K.

Comparison of Three Months Ended September 30, 2021 to Three Months Ended September 30, 2020

Comparison of Three Months Ended December 31, 2021 to Three Months Ended December 31, 2020

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended September 30, 2021 and 2020 (amounts in thousands, other than percentages, which may not add due to rounding):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended December 31, 2021 and 2020 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

September 30, 2021 September 30, 2020 Dollars Percentage

December 31, 2021 December 31, 2020 Dollars Percentage

Net sales $ 476,941 100.0% $ 528,418 100.0% $ (51,477) (9.7)%

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Productivity and transformation costs 2,786 0.6% 5,011 0.9% (2,225) (44.4)%

Proceeds from insurance claim (196) —% — —% (196) *

Long-lived asset impairment 303 0.1% 25,179 4.8% (24,876) (98.8)%

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Equity in net loss of equity-method investees 465 0.1% 1,076 0.2% (611) (56.8)%

Net income (loss) from continuing operations $ 19,411 4.3% $ (10,781) (2.2)% $ 30,192 *

Net income from discontinued operations, net of tax — —% 11,266 2.3% (11,266) (100.0)%

Net income from continuing operations $ 30,889 6.5% $ 2,151 0.4% $ 28,738 1,336.0%

Net loss from discontinued operations, net of tax — —% (11) —% 11 (100.0)%

Net income $ 30,889 6.5% $ 2,140 0.4% $ 28,749 1,343.4%

Adjusted EBITDA $ 59,264 12.4% $ 62,191 11.8% $ (2,927) (4.7)%

Diluted net income (loss) per common share from continuing operations $ 0.20 $ (0.11) $ 0.31 *

Diluted net income per common share from continuing operations $ 0.33 $ 0.02 $ 0.31 1,550.0%

Diluted net income per common share from discontinued operations — — — —%

Diluted net income per common share $ 0.33 $ 0.02 $ 0.31 1,550.0%

* Percentage is not meaningful due to a comparison of a positive figure and a negative figure.

Net sales for the three months ended September 30, 2021 were $454.9 million, a decrease of $43.7 million, or 8.8%, as compared to $498.6 million in the three months ended September 30, 2020.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased approximately $0.6 million and 0.1% from the prior year quarter driven by the North America reportable segment.

* Percentage is not meaningful due to one or more numbers being negative.

Net sales for the three months ended December 31, 2021 were $476.9 million, a decrease of $51.5 million, or 9.7%, as compared to $528.4 million in the three months ended December 31, 2020.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $10.9 million, or 2.2%, from the prior year quarter driven by the International reportable segment.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the three months ended September 30, 2021 was $105.4 million, a decrease of $13.7 million, or 11.5%, as comp ared to the prior year quarter.

Gross profit margin was 23.2% of net sales, compared to 23.9% in the prior year quarter.

The gross profit decrease was driven primarily by our North America reportable segment, and mostly by the United States operating segment, as a result of lower net sales when compared with the prior year period as well as higher delivery and warehouse expenses.

The decrease in the North America reportable segment was offset in part by an increase in the International reportable segment, due to the performance of the two UK operating segments.

The Ella's Kitchen UK operating segment had higher net sales than the prior year quarter due to COVID-driven consumer demand issues in the prior year period which negatively impacted prior year net sales as well as lower cost of sales in the current year due to cost savings, partially offset by higher delivery and warehouse expense in the current year.

The other UK operating segment, Hain United Kingdom, delivered improved gross margins versus prior year driven by the implementation of productivity initiatives and the divestiture of the low gross margin fruit business.

Gross profit for the three months ended December 31, 2021 was $117.3 million, a decrease of $12.7 million, or 9.7%, as compared to the prior year quarter.

Gross profit margin of 24.6% was consistent with the prior year quarter.

The decrease in gross profit was driven primarily by the North America reportable segment which experienced inflationary and supply chain challenges, such as continued industry-wide distribution and warehousing cost pressures driven by labor shortages, freight carrier availability and other freight cost issues, as well as lower net sales in the Canada operating segment when compared with the prior year period.

The International reportable segment also had a decrease in gross profit mainly due to lower net sales in the Europe operating segment, as well as higher energy and supply chain costs when compared to the prior year period, partially offset by higher net sales in the Ella's Kitchen UK operating segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $74.0 million for the three months ended September 30, 2021, a decrease of $5.5 million, or 7.0%, from $79.5 million for the prior year quar ter.

The decrease occurred primarily in the United States and Europe operating segments.

The decrease in the United States operating segment was primarily due to lower marketing expenses in the current year.

The decrease in the Europe operating segment was due to lower broker commissions.

Selling, general and administrative expenses were $80.1 million for the three months ended December 31, 2021, a decrease of $4.5 million, or 5.3%, from $84.6 million for the prior year quarter.

The decrease was primarily driven by a decrease in labor-related expenses as well as efficiencies gained from the Company's productivity and transformation initiatives.

Marketing costs were reduced compared to the prior year quarter to avoid driving excess demand given the industry-wide supply challenges being faced.

These decreases were partially offset by higher transaction costs incurred in fiscal year 2022, including costs related to the acquisition of THWR and advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described above.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.1 million for the three months ended September 30, 2021, a decrease of $0.3 million from $2.4 million in the prior year quarter due to prior year dispositions that occurred in the later part of fiscal 2021 .

Amortization of acquired intangibles was $2.0 million for the three months ended December 31, 2021, a decrease of $0.1 million from $2.2 million in the prior year quarter due to prior year dispositions that occurred in the later part of fiscal 2021.

Productivity and Transformation Costs

Productivity and transformation costs were $4.0 million for the three months ended September 30, 2021 , an increase of $2.6 million from $1.4 million in the prior year quarter.

The increase was primarily due to a $1.6 million increase related to costs incurred for consulting fees related to supply chain optimization and other productivity and transformation initiatives.

Productivity and transformation costs were $2.8 million for the three months ended December 31, 2021, a decrease of $2.2 million from $5.0 million in the prior year quarter.

The decrease was primarily due to reduced spending in consulting fees related to supply chain optimization as the current transformation effort approaches expiration.

Long-lived Asset Impairment

During the three months ended September 30, 2020, the Company recognized a pre-tax impairment charge of $32.5 million related to the reserve recorded against the assets of the Company's United Kingdom fruit business (see Note 4, Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q).

There was no impairment charge recorded in the corresponding period in the three months ended September 30, 2021.

During the three months ended December 31, 2021, the Company recognized a pre-tax impairment charge of $0.3 million related to a facility in the United Kingdom.

During the three months ended December 31, 2020, the Company recognized a pre-tax impairment charge of $25.2 million primarily related to a reduction in the carrying value to the estimated fair value, less costs to sell, for the United Kingdom Fruit business (see Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q).

Operating Income

Operating income for the three months ended September 30, 2021 was $25.5 million compared to $3.3 million in the prior year quarter as a result of the items described above.

Operating income for the three months ended December 31, 2021 was $32.0 million compared to $13.0 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $1.9 million for the three months ended September 30, 2021, a decrease of $0.6 million, or 24.3%, from $2.5 million in the prior year quarter.

The decrease resulted primarily from lower variable interest rates applied to borrowings outstanding under our revolving credit facility.

Interest and other financing expense, net totaled $2.6 million for the three months ended December 31, 2021, an increase of $0.3 million, or 10.9%, from $2.3 million in the prior year quarter.

The increase resulted primarily from a higher outstanding debt balance driven primarily by share repurchase activity.

See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $0.8 million for the three months ended September 30, 2021, compared to $1.4 million in the prior year quarter.

The change was primarily attributable to a lower gain on sale of business and higher realized foreign currency losses in the current year.

Other income, net totaled $9.1 million for the three months ended December 31, 2021, compared to $1.0 million in the prior year quarter.

The increase in income was primarily attributable to the gain on sale of assets related to the sale of undeveloped land plots in Boulder, Colorado resulting in a gain of $8.7 million with no comparable gain in the prior year quarter.

Income from Continuing Operations Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Income before income taxes and equity in net loss of our equity-method investees for the three months ended September 30, 2021 wa s $24.5 million compared to $2.2 million in the prior year quarter.

Income from continuing operations before income taxes and equity in net loss of our equity-method investees for the three months ended December 31, 2021 was $38.5 million compared to $11.7 million in the prior year quarter.

The increase was due to the items discussed above.

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The provision for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense from continuing operations was $4.5 million for the three months ended September 30, 2021 compared to an income tax expense of $13.0 million in the prior year quarter.

The effective income tax rate from continuing operations was expense of 18.6% and 589.2% for the three months ended September 30, 2021 and 2020 , respectively.

Lower effective income tax rate relative to our statutory tax rates for the current quarter is mainly due to the reversal of uncertain tax position accruals based on filing and approval of certain elections by the tax authorities.

In addition, t he effective income tax rates from continuing operations for the three months ended September 30, 2021 and 2020 were negatively impacted by provisions in the Tax Cuts and Jobs Act (the "Tax Act"), primarily related to Global Intangible Low Taxed Income ("GILTI") and limitations on the deductibility of executive compensation.

Furthermore, the effective income tax rate from continuing operations for the three months ended September 30, 2020 was negatively impacted by various discrete items including the tax impact of the United Kingdom fruit business reserve, the legal entity reorganization, and the UK rate change .

The effective income tax rates in each period were also impacted by the geographical mix of earnings and state valuation allowance.

Our income tax expense from continuing operations was $7.1 million for the three months ended December 31, 2021 compared to an income tax expense of $8.4 million in the prior year quarter.

The effective income tax rate from continuing operations was an expense of 18.6% and 72.3% for the three months ended December 31, 2021 and 2020, respectively.

The effective income tax rate from continuing operations for the three months ended December 31, 2021 was impacted by deductions related to stock-based compensation, non-deductible transaction costs related to the acquisition of THWR and the reversal of a valuation allowance due to the utilization of a capital loss carryover.

The effective income tax rate from continuing operations for the three months ended December 31, 2020 was negatively impacted by various discrete items including the tax impact of the United Kingdom fruit business reserve, the legal entity reorganization and the UK rate change.

Our effective tax rate may change from period-to-period based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes and tax audit settlements.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended September 30, 2021 was $0.5 million and less than $0.1 million in the prior year quarter.

Our equity in net loss from our equity-method investments for the three months ended December 31, 2021 was $0.5 million and $1.1 million in the prior year quarter.

See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net Income (Loss) from Continuing Operations

Net income from continuing operations for the three months ended September 30, 2021 was $19.4 million, or $0.20 per diluted share, compared to net loss of $10.8 million, or $0.11 per diluted share, for the three months ended September 30, 2020.

The change to income from loss was attributable to the factors noted above.

Net Income from Continuing Operations

Net income from continuing operations for the three months ended December 31, 2021 was $30.9 million, or $0.33 per diluted share, compared to net income of $2.2 million, or $0.02 per diluted share, for the three months ended December 31, 2020.

The increase in net income was attributable to the factors noted above.

Net Income from Discontinued Operations, Net of Tax

Net income from discontinued operations, net of tax, for the three months ended September 30, 2020 was $11.3 million, or $0.11 per diluted share .

During the three months ended September 30, 2020, the Company recognized a $11.3 million adjustment to the Tilda business primarily related to the recognition of a deferred tax benefit.

See Note 4, Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

Net income for the three months ended September 30, 2021 was $19.4 million, or $0.20 per diluted share, compared to $0.5 million, or $0.00 per diluted share, in the prior year quarter.

See Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

Net income for the three months ended December 31, 2021 was $30.9 million, or $0.33 per diluted share, compared to $2.1 million, or $0.02 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $47.3 million and $54.9 million for the three months ended September 30, 2021 and 2020, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

Our Adjusted EBITDA was $59.3 million and $62.2 million for the three months ended December 31, 2021 and 2020, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the three months ended September 30, 2021 and 2020:

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended December 31, 2021 and 2020:

(dollars in thousands) North America International Corporate and Other Consolidated

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Three months ended 12/31/20 11.5 % (1.1) % n/a 2.5 %

* Percentage is not meaningful due to a comparison of a positive figure and a negative figure.

* Percentage is not meaningful due to one or more numbers being negative.

North America

Our net sales in the North America reportable segment for the three months ended September 30, 2021 were $265.5 million, a decrease of $15.1 million, or 5.4%, from net sales of $280.7 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased 1.3%.

In the United States operating segment sales decreased due to sales normalization in the current year, given last year's COVID impact which positively impacted prior year sales, offset in part by stronger sales in tea, baby food and certain snack products in the current year.

In the Canada operating segment sales decreased primarily due to lower hand sanitizer sales in the current year.

Operating income in North America for the three months ended September 30, 2021 was $16.8 million, a decrease of $16.4 million from $33.3 million in the prior year quarter.

The decrease was driven by lower sales in the current year when compared with the prior year period and higher cost of goods sold largely because of an increase in delivery and warehouse expenses, partially offset by lower selling, general and administrative expenses.

Our net sales in the North America reportable segment for the three months ended December 31, 2021 were $275.0 million, a decrease of $7.6 million, or 2.7%, from net sales of $282.6 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales increased by 0.5%.

In the United States operating segment, adjusted sales were higher compared to the prior year quarter mainly due to stronger sales in snacks, partially offset by lower sales in personal care, tea and other product categories.

In the Canada operating segment, adjusted sales decreased compared to the prior year quarter primarily due to lower sales in meat-free and personal care product categories.

Operating income in North America for the three months ended December 31, 2021 was $27.2 million, a decrease of $5.3 million from $32.4 million in the prior year quarter.

The decrease was mainly driven by inflationary and supply chain challenges, such as continued industry-wide distribution and warehousing cost pressures driven by labor shortages, freight carrier availability and other freight cost issues, as well as lower net sales in the Canada operating segment when compared with the prior year quarter, partially offset by lower selling, general and administrative expenses (mainly driven by lower labor-related costs and marketing expenses).

I nternational

Our net sales in the International reportable segment for the three months ended September 30, 2021 were $189.4 million, a decrease of $28.6 million, or 13.1%, from net sales of $218.0 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales increased 1.6% from the prior year quarter due to the performance of the two UK operating segments.

Ella's Kitchen UK benefited from improved demand given the COVID impact on baby food consumption in the prior year.

Hain United Kingdom benefited from higher soup sales versus prior year.

Operating income in our International reportable segment for the three months ended September 30, 2021 was $24.1 million, an increase of $40.0 million from operating loss of $15.9 million for the three months ended September 30, 2020.

The increase reflects lower costs in the current year from productivity initiatives and non-recurring impairment charges associated with the fruit business impairment that was recognized in the prior year.

Our net sales in the International reportable segment for the three months ended December 31, 2021 were $201.9 million, a decrease of $43.9 million, or 17.9%, from net sales of $245.8 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased 5.8% from the prior year quarter primarily due to a decline in sales in the Europe operating segments, partially offset by an increase in sales in the Ella's Kitchen UK operating segment.

Operating income in our International reportable segment for the three months ended December 31, 2021 was $27.4 million, an increase of $30.1 million from operating loss of $2.7 million for the three months ended December 31, 2020.

The increase mainly reflected non-recurring impairment charges associated with the fruit business impairment that was recognized in the prior year quarter with no such charge in the current quarter.

In addition, operating income was higher in current quarter compared to prior year quarter due to lower selling, general and administrative expenses (mainly driven by lower labor-related costs and marketing expenses) partially offset by lower gross profit due to a decline in sales, as well as higher energy and supply chain costs, when compared to the prior year quarter.

Corporate and Other

Our Corporate and Other category consists of expenses related to the Company’s centralized administrative functions, which do not specifically relate to an operating segment.

Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, facilities, and other items which benefit the Company as a whole.

Our operating loss in Corporate and Other for the three months ended September 30, 2021 was $15.4 million, an increase of $1.3 million, from operating loss of $14.1 million for the three months ended September 30, 2020.

This change was primarily related to productivity and transformation costs included in Corporate and Other of $2.1 million for the three months ended September 30, 2021, an increase of $1.3 million from $0.8 million for the three months ended September 30, 2020 primarily due to higher consulting costs.

Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, acquisition and divestiture transaction costs, facilities, and other items which benefit the Company as a whole.

Our operating loss in Corporate and Other for the three months ended December 31, 2021 was $22.5 million, an increase of $5.8 million, from operating loss of $16.7 million for the three months ended December 31, 2020.

This change was primarily related to higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR and advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described above, partially offset by lower labor-related expenses.

Refer to Note 18, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Comparison of Six Months Ended December 31, 2021 to Six Months Ended December 31, 2020

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the six months ended December 31, 2021 and 2020 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Six Months Ended Change in

December 31, 2021 December 31, 2020 Dollars Percentage

Net sales $ 931,844 100.0% $ 1,027,045 100.0% $ (95,201) (9.3)%

Cost of sales 709,131 76.1% 777,916 75.7% (68,785) (8.8)%

Gross profit 222,713 23.9% 249,129 24.3% (26,416) (10.6)%

Selling, general and administrative expenses 154,125 16.5% 164,146 16.0% (10,021) (6.1)%

Amortization of acquired intangible assets 4,144 0.4% 4,626 0.5% (482) (10.4)%

Productivity and transformation costs 6,769 0.7% 6,444 0.6% 325 5.0%

Proceeds from insurance claim (196) —% — —% (196) *

Long-lived asset impairment 303 —% 57,676 5.6% (57,373) (99.5)%

Operating income 57,568 6.2% 16,237 1.6% 41,331 254.5%

Interest and other financing expense, net 4,448 0.5% 4,790 0.5% (342) (7.1)%

Other income, net (9,858) (1.1)% (2,418) (0.2)% (7,440) *

Income from continuing operations before income taxes and equity in net loss of equity-method investees 62,978 6.8% 13,865 1.3% 49,113 354.2%

Provision for income taxes 11,687 1.3% 21,400 2.1% (9,713) (45.4)%

Equity in net loss of equity-method investees 991 0.1% 1,095 0.1% (104) (9.5)%

Net income (loss) from continuing operations $ 50,300 5.4% $ (8,630) (0.8)% $ 58,930 *

Net income from discontinued operations, net of tax — —% 11,255 1.1% (11,255) (100.0)%

Net income $ 50,300 5.4% $ 2,625 0.3% $ 47,675 1,816.2%

Adjusted EBITDA 106,580 11.4% 117,086 11.4% $ (10,506) (9.0)%

Diluted net income (loss) per common share from continuing operations $ 0.52 $ (0.09) $ 0.61 *

Diluted net income per common share from discontinued operations $ — 0.11 (0.11) (100.0)%

Diluted net income per common share $ 0.52 $ 0.02 $ 0.50 2,500.0%

* Percentage is not meaningful due to one or more numbers being negative.

Net sales for the six months ended December 31, 2021 were $931.8 million, a decrease of $95.2 million, or 9.3%, as compared to $1,027.0 million in the six months ended December 31, 2020.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $11.6 million, or 1.2%, from the prior comparable period driven by both the North America and International reportable segments.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the six months ended December 31, 2021 was $222.7 million, a decrease of $26.4 million, or 10.6%, as compared to the prior year comparable period.

Gross profit margin was 23.9% of net sales, compared to 24.3% in the prior year comparable period.

The decrease in gross profit was driven primarily by the North America reportable segment as a result of lower net sales in both the United States and Canada operating segments when compared with the prior year period as well as higher costs associated with inflationary and supply chain challenges, such as continued industry-wide distribution and warehousing cost pressures driven by labor shortages, freight carrier availability and other freight cost issues.

The decrease in the North America reportable segment gross profit was offset in part by an increase in the International reportable segment.

The International reportable segment increase was primarily due to the Ella's Kitchen UK operating segment having higher net sales than the prior year period due to a slow-down in consumer demand for baby food in the prior year period as a result of COVID stay-at-home requirements which negatively impacted prior year net sales.

Despite a net sales decrease, the Hain United Kingdom operating segment also showed gross profit growth versus the prior year comparable period driven by an improvement in gross margin as the divested low-margin fruit business no longer impacted profitability in the current quarter.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $154.1 million for the six months ended December 31, 2021, a decrease of $10.0 million, or 6.1%, from $164.1 million for the prior year comparable period.

The decrease was driven by decreases in the North America and International reportable segments, partially offset by an increase in Corporate and Other as a result of higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR and advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described above.

The decrease in the North America and International reportable segments was primarily a result of 1) lower labor-related expenses, 2) decreased marketing costs in the United States and Canada operating segments and 3) lower broker commissions in the Europe operating segment.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $4.1 million for the six months ended December 31, 2021, a decrease of $0.5 million from $4.6 million in the prior year comparable period due to prior year dispositions that occurred in the later part of fiscal 2021.

Productivity and Transformation Costs

Productivity and transformation costs were $6.8 million for the six months ended December 31, 2021, an increase of $0.3 million from $6.4 million in the prior year comparable period.

The increase was primarily due to higher consulting fees related to supply chain optimization and other productivity and transformation initiatives.

Long-lived Asset Impairment

During the six months ended December 31, 2021, the Company recognized a pre-tax impairment charge of $0.3 million related to a facility in the United Kingdom.

During the six months ended December 31, 2020, the Company recognized a pre-tax impairment charge of $57.7 million primarily related to a reduction in the carrying value to the estimated fair value, less costs to sell, for the United Kingdom fruit business (see Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q).

Operating Income

Operating income for the six months ended December 31, 2021 was $57.6 million compared to $16.2 million in the prior year comparable period as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $4.4 million for the six months ended December 31, 2021, a decrease of $0.3 million, or 7.1%, from $4.8 million in the prior year comparable period.

The decrease resulted primarily from lower variable interest rates applied to borrowings outstanding under the Company's revolving credit facility, partially offset by increases as a result of a higher outstanding debt balances driven primarily by share repurchase activity.

See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $9.9 million for the six months ended December 31, 2021, compared to $2.4 million in the prior year comparable period.

Income from Continuing Operations Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Income from continuing operations before income taxes and equity in net loss of our equity-method investees for the six months ended December 31, 2021 was income of $63.0 million compared to $13.9 million in the prior year comparable period.

The increase was due to the items discussed above.

Provision for Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense from continuing operations was $11.7 million for the six months ended December 31, 2021 compared to $21.4 million in the prior year comparable period.

The effective income tax rate from continuing operations was an expense of 18.6% and 154.3% for the six months ended December 31, 2021 and 2020, respectively.

The effective income tax rate from continuing operations for the six months ended December 31, 2021 was impacted by the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock based compensation, non-deductible transaction costs related to acquisition of THWR and the reversal of a valuation allowance due to the utilization of a capital loss carryover.

The effective income tax rate from continuing operations for the six months ended December 31, 2020 was negatively impacted by various discrete items including the tax impact of the United Kingdom fruit business reserve, the legal entity reorganization and the UK rate change.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the six months ended December 31, 2021 was $1.0 million compared to $1.1 million in the prior year comparable period.

See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net Income (Loss) from Continuing Operations

Net income from continuing operations for the six months ended December 31, 2021 was $50.3 million, or $0.52 per diluted share, compared to net loss of $8.6 million, or $0.09 per diluted share, for the six months ended December 31, 2020.

The change to income from loss was attributable to the factors noted above.

Net Income from Discontinued Operations, Net of Tax

Net income from discontinued operations, net of tax, for the six months ended December 31, 2020 was $11.3 million, or $0.11 per diluted share.

During the six months ended December 31, 2020, the Company recognized an $11.3 million adjustment to the Tilda business primarily related to the recognition of a deferred tax benefit.

See Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion

Net income for the six months ended December 31, 2021 was $50.3 million, or $0.52 per diluted share, compared to $2.6 million, or $0.02 per diluted share, in the prior year comparable period.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $106.6 million and $117.1 million for the six months ended December 31, 2021 and 2020, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures presented following the discussion of our results of operations.

Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the six months ended December 31, 2021 and 2020:

(dollars in thousands) North America International Corporate and Other Consolidated

Six months ended 12/31/21 $ 540,539 $ 391,305 $ — $ 931,844

Six months ended 12/31/20 563,280 463,765 — 1,027,045

$ change $ (22,741) $ (72,460) n/a $ (95,201)

% change (4.0) % (15.6) % n/a (9.3) %

Operating income (loss)

Six months ended 12/31/21 $ 44,004 $ 51,437 $ (37,873) $ 57,568

Six months ended 12/31/20 65,696 (18,630) (30,829) 16,237

$ change $ (21,692) $ 70,067 $ (7,044) $ 41,331

% change (33.0) % * 22.8 % 254.5 %

Operating income (loss) margin

Six months ended 12/31/21 8.1 % 13.1 % n/a 6.2 %

Six months ended 12/31/20 11.7 % (4.0) % n/a 1.6 %

* Percentage is not meaningful due to one or more numbers being negative.

North America

Our net sales in the North America reportable segment for the six months ended December 31, 2021 were $540.5 million, a decrease of $22.7 million, or 4.0%, from net sales of $563.3 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 0.4% due to decreased sales in the Canada operating segment, partially offset by increased sales in the United States operating segment due to stronger sales in certain snack products, tea and baby food in the current year period.

Operating income in North America for the six months ended December 31, 2021 was $44.0 million, a decrease of $21.7 million from $65.7 million in the prior year comparable period.

The decrease was mainly driven by 1) higher cost of goods sold in the United States operating segment largely because of inflationary and supply chain challenges, such as continued industry-wide distribution and warehousing cost pressures driven by labor shortages, freight carrier availability and other freight cost issues;

and 2) lower sales in Canada operating segment, partially offset by lower selling, general and administrative expenses in both the United States and Canada operating segments.

Lower selling, general and administrative expenses were mainly due to lower labor-related costs and marketing expenses.

I nternational

Our net sales in the International reportable segment for the six months ended December 31, 2021 were $391.3 million, a decrease of $72.5 million, or 15.6%, from net sales of $463.8 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased 2.4% from the prior year comparable period mainly due to lower sales in the Europe operating segment, partially offset by higher sales in the Ella's Kitchen UK and Hain United Kingdom operating segments.

Operating income in our International reportable segment for the six months ended December 31, 2021 was $51.4 million, an increase of $70.1 million from operating loss of $18.6 million for the six months ended December 31, 2020.

The increase mainly reflects non-recurring charges associated with the fruit business impairment that was recognized in the prior year period.

In addition, the International reportable segment incurred lower selling, general and administrative expenses mainly driven by lower labor-related costs when compared to the prior year period.

Corporate and Other

Our Corporate and Other category consists of expenses related to the Company’s centralized administrative functions, which do not specifically relate to an operating segment.

Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, acquisition and divestiture transaction costs, facilities, and other items which benefit the Company as a whole.

Our operating expenses in Corporate and Other for the six months ended December 31, 2021 were $37.9 million, an increase of $7.0 million, from $30.8 million in the prior year period.

Refer to Note 18, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Liquidity and Capital Resources

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our amended Credit Agreement.

We believe that our cash flows from operations and borrowing capacity under our Amended Credit Agreement will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

Our cash and cash equivalents balance decreased $46.9 million at September 30, 2021 to $29.0 million as co mpared to $75.9 million at June 30, 2021.

Our working capital from continuing operations was $232.3 million at September 30, 2021, a decrease of $52.4 million from $284.7 million at the end of fiscal 2021 as we continued to reduce product inventories.

Additionally, our long-term debt increased $114.9 million at September 30, 2021 to $345.4 million as compared to $230.5 million at June 30, 2021 as a result of $120.0 million of additional borrowings to support the share repurchases carried out in the quarter offset by $5.0 million of repayments.

As of September 30, 2021, $648.6 million was available under the Amended Credit Agreement as compared with $763.6 million as of June 30, 2021, and the Company was in compliance with all associated covenants.

We believe that our cash flows from operations and borrowing capacity under our amended Credit Agreement (as defined below) will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

Amended and Restated Credit Agreement

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”).

The Credit Agreement provides for senior secured financing of $1,100,000 in the aggregate, consisting of (1) $300,000 in aggregate principal amount of term loans (the "Term Loans") and (2) an $800,000 senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440,000 U.S.

revolving credit facility and $360,000 global revolving credit facility) (the "Revolver").

Both the Revolver and the Term Loans mature on December 22, 2026.

Our cash and cash equivalents balance increased $1.3 million at December 31, 2021 to $77.2 million as compared to $75.9 million at June 30, 2021.

Our working capital from continuing operations was $277.9 million at December 31, 2021, a decrease of $6.8 million from $284.7 million at the end of fiscal 2021.

Additionally, our total debt increased by $508.4 million at December 31, 2021 to $739.4 million as compared to $231.0 million at June 30, 2021 as a result of $510.0 million of net additional borrowings to support the THWR acquisition and the share repurchases carried out during the period.

As of December 31, 2021, $353.2 million was available under the amended Credit Agreement as compared to $763.6 million as of June 30, 2021.

The Company was in compliance with all covenants at December 31, 2021.

Liquidity is affected by many factors, some of which are based on normal ongoing operations of the Company’s business and some of which arise from fluctuations related to global economics and markets.

Our cash balances are held in the United States, United Kingdom, Canada, Europe, Middle East and India.

As of September 30, 2021, substantially all of the total cash balance from continuing operations was held outside of the United States.

As of December 31, 2021, substantially all of the total cash balance from continuing operations was held outside of the United States.

It is our current intent to indefinitely reinvest our remaining foreign earnings outside the United States.

We maintain our cash and cash equivalents primarily in money market funds or their equivalent.

As of September 30, 2021, all of our investments were expected to mature in less than three months.

As of December 31, 2021, all of our investments were expected to mature in less than three months.

Accordingly, we do not believe that our investments have significant exposure to interest rate risk.

Cash provided by (used in) oper ating, investing and financing activities is summarized below.

Three Months Ended September 30, Change in

Cash provided by (used in) operating, investing and financing activities is summarized below.

Six Months Ended December 31, Change in

(amounts in thousands) 2021 2020 Dollars

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Effect of exchange rate changes on cash from continuing operations (3,204) 5,734 (8,938)

Net decrease in cash and cash equivalents $ (46,909) $ (518) $ (46,391)

Ca sh provided by operating activities from continuing operations was $37.6 million for the three months ended September 30, 2021, a decrease of $3.1 million from cash provided by operating activities from continuing operations of $40.7 million in the prior year period.

This decrease versus the prior period resulted primarily f rom a reduction of $5.7 million in lower net income adjusted for non-cash charges netted by higher cash generation of $2.6 million from our working capital accounts.

Cas h used in investing activities from continuing operations was $18.1 million for the three months ended September 30, 2021, an increase of $10.3 million from $7.7 million in the prior year period primarily due to increased capital expenditures.

Cas h used in fi nancing activities from continuing operations was $63.5 million for the three months ended September 30, 2021, an increase of $27.6 million compared to $36.0 million of cash used in the prior year period and the increase is primarily due to share repurchases.

Net increase in cash and cash equivalents $ 1,331 $ 22,850 $ (21,519)

Cash provided by operating activities from continuing operations was $68.0 million for the six months ended December 31, 2021, a decrease of $36.5 million from cash provided by operating activities from continuing operations of $104.5 million in the prior year period.

This decrease versus the prior period resulted primarily from a reduction of $13.5 million in lower net income adjusted for non-cash charges in the current period and lower cash generation of $23.0 million from our working capital accounts which was mainly due to a refund of $53.8 million received by the Company in the prior year from Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

Cash used in investing activities from continuing operations was $272.3 million for the six months ended December 31, 2021, an increase of $247.1 million from $25.2 million in the prior year period primarily due to the acquisition of THWR in the current year, partially offset by $10.7 million in proceeds from the sale of assets.

Cash provided by financing activities from continuing operations was $208.8 million for the six months ended December 31, 2021, an increase in cash provided of $271.0 million compared to $62.2 million of cash used in the prior year period.

The increase in cash provided by financing activities is primarily due to higher borrowings under the Credit Agreement to finance the THWR acquisition, higher share repurchases and payment of shares withheld for employee payroll taxes during the six months ended December 31, 2021.

Operating Free Cash Flow from Continuing Operations

Our operating free cash flow from continuing operations was $19.8 million f or the three months ended September 30, 2021, a decrease of $8.7 million from $28.5 million in the three months ended September 30, 2020.

This decrease versus prior year resulted from a decrease in cash flow from operations of $3.1 million driven by the reasons explained above and higher capital expenditures of $5.7 million.

Our operating free cash flow from continuing operations was $40.0 million for the six months ended December 31, 2021, a decrease of $34.8 million from $74.9 million in the six months ended December 31, 2020.

This decrease versus prior year resulted primarily from a decrease in cash flow from operations of $36.5 million driven by the reasons explained above.

See the Reconciliation of Non-U.S.

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In June 2017 and August 2021, the Company’s Board of Directors authorized the repurchase of up to $250.0 million and $300.0 million of the Company’s issued and outstanding common stock, respectively.

Share repurchases under the 2021 authorization commenced in August 2021, after the 2017 authorization was fully utilized.

Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise.

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The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

During the three months ended September 30, 2021, the Company repurchased 4.525 million shares under the repurchase program for a total of $175.6 million, excluding commissions, at an average price of $38.80 per share.

As of September 30, 2021, the Company had $206.8 million of remaining authorization under the share repurchase program.

During the three months ended September 30, 2020, the Company repurchased 1.281 million shares under the repurchase program for a total of $42.0 million, excluding commissions, at an average price of $32.81 per share.

In November 2021, the Company entered into a share repurchase agreement with affiliates of Engaged Capital, LLC (collectively, the “Selling Stockholders”), pursuant to which the Company repurchased 1.7 million shares directly from the Selling Stockholders at a price of $45.00 per share .

During the six months ended December 31, 2021, the Company repurchased 6,552 shares under the repurchase program, inclusive of the shares repurchased from the Selling Stockholders, for a total of $265.4 million, excluding commissions, at an average price of $40.50 per share.

As of December 31, 2021, the Company had $117.0 million of remaining authorization under the share repurchase program.

During the six months ended December 31, 2020, the Company repurchased 2,204 shares under the repurchase program for a total of $71.7 million, excluding commissions, at an average price of $32.53 per share.

In January 2022, the

Company's Board of Directors authorized the repurchase of up to an additional $200 million of shares, which will commence after the 2021 authorization is fully utilized.

Reconciliation of Non-U.S.

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As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

Divestitures and Discontinued Brands

We also exclude the impact of divestitures and discontinued brands when comparing net sales to prior periods, which results in the presentation of certain non-U.S.

Acquisitions, Divestitures and Discontinued Brands

We also exclude the impact of acquisitions, divestitures and discontinued brands when comparing net sales to prior periods, which results in the presentation of certain non-U.S.

GAAP financial measures.

The Company's management believes that excluding the impact of divestitures and discontinued brands when presenting period-over-period results of net sales aids in comparability.

The Company's management believes that excluding the impact of acquisitions, divestitures and discontinued brands when presenting period-over-period results of net sales aids in comparability.

A reconciliation between reported and constant currency net sales increase (decrease) is as follows:

(amounts in thousands) North America International Hain Consolidated

Net sales - Three months ended September 30, 2021 $ 265,525 $ 189,378 $ 454,903

Net sales - Three months ended December 31, 2021 $ 275,014 $ 201,927 $ 476,941

Acquisitions, divestitures and discontinued brands (349) — (349)

Impact of foreign currency exchange (1,008) (99) (1,107)

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended December 31, 2021 $ 273,657 $ 201,828 $ 475,485

Net sales - Three months ended December 31, 2020 $ 282,612 $ 245,806 $ 528,418

Divestitures and discontinued brands (10,353) (31,657) (42,010)

Net sales adjusted for divestitures and discontinued brands - Three months ended December 31, 2020 $ 272,259 $ 214,149 $ 486,408

Net sales decline (2.7) % (17.9) % (9.7) %

Impact of acquisitions, divestitures and discontinued brands 3.6 % 12.1 % 7.7 %

Impact of foreign currency exchange (0.4) % — (0.2) %

Net sales on a constant currency basis adjusted for divestitures and discontinued brands - Three months ended September 30, 2021 $ 263,628 $ 181,109 $ 444,737

Net sales - Three months ended September 30, 2020 $ 280,668 $ 217,959 $ 498,627

Net sales growth (decline) on a constant currency basis adjusted for divestitures and discontinued brands 0.5 % (5.8) % (2.2) %

Net sales - Six months ended December 31, 2021 $ 540,539 $ 391,305 $ 931,844

Acquisitions, divestitures and discontinued brands (527) — (527)

Impact of foreign currency exchange (2,727) (8,368) (11,095)

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Six months ended December 31, 2021 $ 537,285 $ 382,937 $ 920,222

Net sales - Six months ended December 31, 2020 $ 563,280 $ 463,765 $ 1,027,045

Divestitures and discontinued brands (23,974) (71,287) (95,261)

Net sales adjusted for divestitures and discontinued brands $ 267,047 $ 178,329 $ 445,376

Net sales adjusted for divestitures and discontinued brands - Six months ended December 31, 2020 $ 539,306 $ 392,478 $ 931,784

Net sales decline (4.0) % (15.6) % (9.3) %

Impact of divestitures and discontinued brands 4.7 % 18.5 % 10.7 %

Impact of acquisitions, divestitures and discontinued brands 4.1 % 15.0 % 9.1 %

Impact of foreign currency exchange (0.5) % (1.8) % (1.1) %

Net sales (decline) growth on a constant currency basis adjusted for divestitures and discontinued brands (1.3) % 1.6 % (0.1) %

Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (0.4) % (2.4) % (1.2) %

Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss) before income taxes, net interest expense, depreciation and amortization, impairment charges, equity in net loss of equity-method investees, stock-based compensation, restructuring activities, litigation and related expenses, acquisitions and divestitures, unrealized currency gains and losses and other adjustments.

Adjusted EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation and amortization, impairment charges, equity in net loss of equity-method investees, stock-based compensation, unrealized currency gains and losses, litigation and related costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains or losses on sales of assets and businesses, inventory write-downs, impairment of long-lived asset and other adjustments.

The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition.

In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation.

In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based

executive compensation.

Adjusted EBITDA is a non-U.S.

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A reconciliation of net income (loss) to Adjusted EBITDA is as follows:

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(amounts in thousands) 2021 2020 2021 2020

Net income $ 30,889 $ 2,140 $ 50,300 $ 2,625

Net income from discontinued operations — 11,266

Net (loss) income from discontinued operations, net of tax — (11) — 11,255

Net income (loss) from continuing operations $ 30,889 $ 2,151 $ 50,300 $ (8,630)

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Stock-based compensation 4,156 3,823 8,443 8,190

Unrealized currency gains (1,023) (1,202)

Litigation & related costs

Unrealized currency (gains) losses (480) 225 (1,503) (977)

Litigation and related costs

Litigation expenses 1,624 — 3,580 —

1 unchanged sentence

Restructuring activities

Plant closure related costs 996 (6)

Plant closure related costs, net (183) 2 813 (4)

Productivity and transformation costs 2,247 4,358 5,451 5,139

Warehouse/manufacturing consolidation and other costs 249 3,325 2,538 3,715

Acquisitions & divestitures

Acquisitions & divestitures transaction costs, net (231) 369

Acquisitions and divestitures

Transaction costs, net 8,963 1,005 8,732 1,374

Gain on sale of assets (8,656) — (9,102) —

Gain on sale of businesses — (620)

Loss (gain) on sale of businesses — 9 — (611)

Impairment charges

SKU rationalization and inventory write-down — 204

Inventory write-down (46) 107 (46) 311

Long-lived asset impairment 303 25,179 303 57,676

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Since capital spending is essential to maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.

As such, we believe investors should also consider capital spending when evaluating our cash provided by or used in operating activities.

As such, we believe investors should also consider capital spending when evaluating our cash provided

by or used in operating activities.

We view Operating Free Cash Flow from continuing operations as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments.

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A reconciliation from cash flow provided by operating activities from continuing operations to Operating Free Cash flow from continuing operations is as follows:

Three Months Ended September 30,

Six Months Ended December 31,

(amounts in thousands) 2021 2020

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Off-Balance Sheet Arrangements

At September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K that have had, or are likely to have, a material current or future effect on our consolidated financial statements.

At December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K that have had, or are likely to have, a material current or future effect on our consolidated financial statements.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis