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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2022-02-03 · 196 added, 195 removed, 265 unchanged (60% 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 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.

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 March 31, 2022 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.

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The Company manufactures, markets, distributes and sells organic and natural products under brand names providing consumers with the opportunity to lead A Healthier Way of Life ® .

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.

Hain Celestial's food and beverage brands include Celestial Seasonings ® , Clarks™, Cully & Sully ® , Earth’s Best ® , Ella’s Kitchen ® , Frank Cooper’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.

® , 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.

Hain Celestial’s personal care brands include Alba Botanica ® , Avalon Organics ® , JASON ® , Live Clean ® , and Queen Helene ® .

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

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The pandemic-driven demand for our products has subsided as effective vaccines have become available, governments have eased safety measures and consumer purchasing behaviors have started to return to pre-pandemic norms.

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 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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• 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.

Russia-Ukraine War

Although we have no material assets in Russia, Belarus or Ukraine, our supply chain was adversely impacted by the Russia-Ukraine war during the three months ended March 31, 2022, and we continue to face other challenges and risks arising from the war.

In particular, the war has added significant costs to existing inflationary pressures through increased fuel and raw material prices and labor costs.

Further, beyond increased costs, labor challenges and other factors have led to supply chain disruptions.

While, to date, we have been able to identify replacement raw materials where necessary, we have incurred increased costs in doing so.

For example, the supply of sunflower oil has become constrained, compelling us to identify and procure alternative oils.

The war has also negatively impacted consumer sentiment, particularly in Europe, with some consumers shifting to lower-priced products, which has somewhat affected demand for our products.

Additionally, we face increased cybersecurity risks, as companies based in the United States and its allied countries have become targets of malicious cyber activity.

While we are continuing to monitor and manage the impacts of the war on our business, the extent to which the Russia-Ukraine war and the related economic impact may affect our financial condition or results of operations remains uncertain.

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

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

Comparison of Three Months Ended March 31, 2022 to Three Months Ended March 31, 2021

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 December 31, 2021 and 2020 (amounts in thousands, other than per share data and 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 March 31, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

December 31, 2021 December 31, 2020 Dollars Percentage

March 31, 2022 March 31, 2021 Dollars Percentage

Net sales $ 502,939 100.0% $ 492,604 100.0% $ 10,335 2.1%

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Productivity and transformation costs 1,679 0.3% 4,451 0.9% (2,772) (62.3)%

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

Proceeds from insurance claim — —% (592) (0.1)% 592 *

Operating income 35,164 7.0% 49,577 10.1% (14,413) (29.1)%

Interest and other financing expense, net 3,224 0.6% 2,030 0.4% 1,194 58.8%

Other income, net (9,070) (1.9)% (1,045) (0.2)% (8,025) *

Income from continuing operations before income taxes and equity in net loss of equity-method investees 38,499 8.1% 11,665 2.2% 26,834 230.0%

Other (income) expense, net (712) (0.1)% 1,566 0.3% (2,278) *

Income from continuing operations before income taxes and equity in net loss (income) of equity-method investees 32,652 6.5% 45,981 9.3% (13,329) (29.0)%

Provision for income taxes 7,738 1.5% 11,797 2.4% (4,059) (34.4)%

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

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)%

Equity in net loss (income) of equity-method investees 383 0.1% (70) —% 453 *

Net income $ 24,531 4.9% $ 34,254 7.0% $ (9,723) (28.4)%

Adjusted EBITDA $ 58,669 11.7% $ 73,752 15.0% $ (15,083) (20.5)%

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 $ 0.27 $ 0.34 $ (0.07) (20.6)%

* 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.

Net sales for the three months ended March 31, 2022 were $502.9 million, an increase of $10.3 million, or 2.1%, as compared to $492.6 million in the three months ended March 31, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales increased approximately $7.2 million, or 1.5%, from the prior year quarter driven by growth in the North America reportable segment offset by a decline in 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 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.

Gross profit for the three months ended March 31, 2022 was $115.7 million, a decrease of $14.2 million, or 10.9%, as compared to the prior year quarter.

Additionally, gross profit margin of 23.0% was lower when compared with the prior year quarter.

The decrease in gross profit was driven primarily by the International reportable segment, mainly due to lower net sales in the United Kingdom and Europe operating segments, 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.

The North America reportable segment also had a decrease in gross profit mainly due to 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.

Selling, General and Administrative Expenses

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.

Selling, general and administrative expenses were $75.8 million for the three months ended March 31, 2022, an increase of $1.4 million, or 1.9%, from $74.3 million for th e prior year quarter.

The increase was primarily driven by the North America reportable segment offset in part by the International reportable segment and Corporate and Other.

The United States operating segment accounted for the increase in the North America reportable segment due to the acquisition of THWR.

The increase was partially offset by a decrease in people-related expenses as well as efficiencies gained from the Company's productivity and transformation initiatives.

Amortization of Acquired Intangible Assets

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.

Amortization of acquired intangibles was $3.1 million for the three months ended March 31, 2022, an increase of $1.0 million from $2.1 million in the prior year quarter due to the acquisition of THWR in the current fiscal year, partially offset by lower amortization expense in the current year period as a result of prior year dispositions that occurred in the later part of fiscal 2021.

Productivity and Transformation Costs

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 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).

Productivity and transformation costs were $1.7 million for the three months ended March 31, 2022, a decrease of $2.8 million from $4.5 million in the prior year quarter.

The decrease was primarily d ue to reduced spending related to productivity and transformation initiatives as the current transformation effort approaches its conclusion.

Operating Income

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.

Operating income for the three months ended March 31, 2022 was $35.2 million compared to $49.6 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 $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.

Interest and other financing expense, net totaled $3.2 million for the three months ended March 31, 2022, an increase of $1.2 million, or 58.8%, from $2.0 million in the prior year quarter.

T he increase resulted primarily from a higher outstanding debt balance driven primarily by the acquisition of THWR in the prior quarter as well as 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 $9.1 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 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.

Other (Income) Expense, Net

Other income, net totaled $0.7 million for the three months ended March 31, 2022, compared to other expense, net totaling $1.6 million in the prior year quarter.

The change to income from expense was primarily attributable to a loss on the sale of the Fruit business, which occurred in the prior year quarter with no comparable loss in the current year quarter.

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

Income from continuing operations before income taxes and equity in net loss (income) of our equity-method investees for the three months ended March 31, 2022 was $32.7 million compared to $46.0 million in the prior year quarter.

The decrease 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 $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 December 31, 2021 was $0.5 million and $1.1 million in the prior year quarter.

Our income tax expense from continuing operations was $7.7 million for the three months ended March 31, 2022 compared to an income tax expense of $11.8 million in the prior year quarter.

The effective income tax rate from continuing operations was an expense of 23.7% and 25.7% for the three months ended March 31, 2022 and 2021, respectively.

The effective income t ax rate from continuing operations for the three months ended March 31, 2022 was impacted by deductions related to stock-based compensation and the finalization of fiscal year 2021 income tax returns.

The effective income tax rate from continuing operations for the three months ended March 31, 2021 was impacted by various discrete items including the finalization of fiscal year 2020 U.S.

income tax returns.

Equity in Net Loss (Income) of Equity-Method Investees

Our equity in net loss (income) from our equity-method investments for the three months ended March 31, 2022 was a loss of $0.4 million and income of $0.1 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 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

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.

Net income for the three months ended March 31, 2022 was $24.5 million, or $0.27 per diluted share, compared to $34.3 million, or $0.34 per diluted share, in the prior year quarter.

The decrease was attributable to the factors noted above.

Adjusted EBITDA

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.

Our Adjusted EBITDA was $58.7 million and $73.8 million for the three months ended March 31, 2022 and 2021, 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 (loss) by reportable segment for the three months ended December 31, 2021 and 2020:

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended March 31, 2022 and 2021:

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

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% change (27.8) % (31.6) % (30.1) % (29.1) %

Operating income (loss) margin

Operating income margin

Three months ended 3/31/22 8.8 % 10.3 % n/a 7.0 %

Three months ended 3/31/21 13.7 % 13.1 % n/a 10.1 %

* 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 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).

Our net sales in the North America reportable segment for the three months ended March 31, 2022 were $325.7 million, an increase of $38.2 million, or 13.3%, from net sales of $287.5 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of an acquisition, net sales increased by 8.5%.

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

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

Operating income in North America for the three months ended March 31, 2022 was $28.5 million, a decrease of $11.0 million from $39.5 million in the prior year quarter.

The decrease in operating income 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.

I nternational

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.

Our net sales in the International reportable segment for the three months ended March 31, 2022 were $177.2 million, a decrease of $27.9 million, or 13.6%, from net sales of $205.1 million in the prior year quarter.

Foreign exchange and divestitures reduced net sales for the three months ended March 31, 2022.

On a constant currency basis, adjusted for the impact of divestitures, net sal es decreased 8.2% from the prior year quarter primarily due to a decline in sales in the Europe and United Kingdom operating segments, partially offset by an increase in sales in the Ella's Kitchen UK operating segment.

The net sales decrease in the Europe operating segment was primarily due to the loss of a large non-dairy co-manufacturing customer.

The net sales decrease in the United Kingdom was due to lower sales in plant-based, soup and puddings resulting from lower total store sales and the impact of shipment halts during the price increase negotiations with certain customers.

The net sales increase in the Ella's Kitchen UK operating segment was due to higher sales coming out of the COVID-19 pandemic, since Ella's Kitchen UK sales were negatively impacted in the prior year quarter due to a slow-down in consumer demand for baby food as a result of the COVID-19 pandemic stay-at-home requirements and sales pull back in the second quarter of the prior year due to Brexit (e.g.

the sales were made the second quarter of the prior year rather than the third quarter of the prior year).

Operating income in our International report able segment for the three months ended March 31, 2022 was $18.3 million, a decrease of $8.5 million from operating income of $26.8 million for the three months ended March 31, 2021.

Operating income was lower in the current quarter when compared to the prior year quarter mainly due to lower gross profit resulting from a decline in sales, as well as higher energy and supply chain costs.

Corporate and Other

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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.

Our operating loss in Corporate and Other for the three months ended March 31, 2022 was $11.7 million , a decrease of $5.0 million, from operating loss of $16.7 million for the three months ended March 31, 2021.

This change was primarily due to lower employee-related expenses, partially offset by higher baby food litigation 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

Comparison of Nine Months Ended March 31, 2022 to Nine Months Ended March 31, 2021

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

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the nine months ended March 31, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Nine Months Ended Change in

March 31, 2022 March 31, 2021 Dollars Percentage

Net sales $ 1,434,783 100.0% $ 1,519,649 100.0% $ (84,866) (5.6)%

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Proceeds from insurance claim (196) —% (592) —% (396) *

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

Long-lived asset and intangibles impairment 303 —% 57,676 3.8% (57,373) (99.5)%

Operating income 92,732 6.5% 65,814 4.3% 27,710 42.1%

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Provision for income taxes 19,425 1.4% 33,197 2.2% (13,772) (41.5)%

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 *

Equity in net loss of equity-method investments 1,374 0.1% 1,025 0.1% 349 34.0%

Net income from continuing operations $ 74,831 5.2% $ 25,624 1.7% $ 49,207 192.0%

Net income from discontinued operations, net of tax — —% 11,255 0.7% (11,255) (100.0)%

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Adjusted EBITDA 165,249 11.5% 190,838 12.6% $ (25,589) (13.4)%

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

Diluted net income per common share from continuing operations $ 0.79 $ 0.25 $ 0.54 216.0%

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

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* 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.

Net sales for the nine months ended March 31, 2022 were $1,434.8 million, a decrease of $84.9 million, or 5.6%, as compared to $1,519.6 million in the nine months ended March 31, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $4.3 million, or 0.3%, from the prior comparable period driven by the International reportable segment, partially offset by the North America reportable segment.

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 for the nine months ended March 31, 2022 was $338.4 million, a decrease of $40.6 million, or 10.7%, as compared to the prior year comparable period.

Gross profit margin was 23.6% of net sales, compared to 24.9% 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.

The decrease in gross profit was driven primarily by the North America reportable segment as a result of both the United States and Canada operating segments which were impacted by 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.

Additionally, the decrease in gross profit was due to lower net sales in the Canada operating segment when compared with the prior year period.

The International reportable segment gross profit also decreased due to both the United Kingdom and Europe operating segments partially offset by increased gross profit in the Ella's Kitchen UK operating segment.

The decrease in gross profit in the Europe and United Kingdom operating segments was due to lower net sales and higher delivery and warehousing costs while the increased gross profit in the Ella's Kitchen UK operating segment was due to 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 the COVID-19 pandemic stay-at-home requirements which negatively impacted prior year net sales.

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.

Selling, general and administrative expense s were $229.9 million for the nine months ended March 31, 2022, a decrease of $8.6 million, or 3.6%, from $238.5 million for the prior year comparable period.

The decrease was driven by a decrease in the International and North America 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, 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 in Note 17, Commitments and Contingencies .

The decrease in the International reportable segment was primarily due to (1) the sale of the Fruit business in the third quarter of the prior year with no comparable selling, general and administrative expenses in the current year, (2) lower broker commissions in the Europe operating segment, and (3) lower people-related expenses.

The decrease in the North America reportable segment was primarily due to lower people-related expenses.

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.

Amortization of acquired intangibles was $7.3 million for the nine months ended March 31, 2022, an increase of $0.5 million from $6.8 million in the prior year comparable period due to the acquisition of THWR in the current fiscal year, partially offset by lower amortization in the current year period as a result of 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).

Productivity and transformation costs were $8.4 million for the nine months ended March 31, 2022, a decrease of $2.4 million from $10.9 million in the prior year comparable period.

The decrease was primarily d ue to reduced spending related to productivity and transformation initiatives as the current transformation effort approaches its conclusion.

Long-lived Asset and Intangibles Impairment

During the nine months ended March 31, 2022 , the Company recognized a pre-tax impairment charge of $0.3 million related to a facility in the United Kingdom.

Duri ng the nine months ended March 31, 2021, 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.

Operating income for the nine months ended March 31, 2022 was $92.7 million compared to $65.8 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.

Interest and other financing expense, net totaled $7.7 million for the nine months ended March 31, 2022, an increase of $0.9 million, or 12.5%, from $6.8 million in the prior year comparable period.

The increase resulted primarily due to higher outstanding debt balances driven primarily by the THWR acquisition and share repurchase activity, partially offset by lower variable interest rates applied to borrowings outstanding under the Company's revolving credit facility.

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.

Other i ncome, net totaled $10.6 million for the nine months ended March 31, 2022, compared to $0.9 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.

Income from continuing operations before income taxes and equity in net loss of our equity-method investees for the nine months ended March 31, 2022 was income of $95.6 million compared to $59.8 million in the prior year comparable period.

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 $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.

Our income tax expense from continuing operations was $19.4 million for the nine months ended March 31, 2022 compared to $33.2 million in the prior year comparable period.

The effective income tax rate from continuing operations was an expense of 20.3% and 55.5% for the nine months ended March 31, 2022 and 2021, respectively.

The effective income tax rate from continuing operations for the nine months ended March 31, 2022 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, the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of fiscal year 2021 U.S.

income tax returns.

The effective income tax rate from continuing operations for the nine months ended March 31, 2021 was negatively impacted by various discrete items including the tax impact of the United Kingdom fruit business reserve, the legal entity reorganization and the U.K.

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.

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2022 was $1.4 million compared to $1.0 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 Continuing Operations

Net income from continuing operations for the nine months ended March 31, 2022 was $74.8 million, or $0.79 per diluted share, compared to net income of $25.6 million, or $0.25 per diluted share, for the nine months ended March 31, 2021.

The change 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.

Net income from discontinued operations, net of tax, for the nine months ended March 31, 2021 was $11.3 million, or $0.11 per diluted share.

During the nine months ended March 31, 2021, the Company recognized an $11.3 million adjustment to the Tilda business primarily related to the recognition of a deferred tax benefit.

There was no comparable line item for the nine months ended March 31, 2022.

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.

Net income for the nine months ended March 31, 2022 was $74.8 million, or $0.79 per diluted share, compared to $36.9 million, or $0.36 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.

Our Adjusted EBITDA was $165.2 million and $190.8 million for the nine months ended March 31, 2022 and 2021, 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 six months ended December 31, 2021 and 2020:

The following table provides a summary of net sales and operating income by reportable segment for the nine months ended March 31, 2022 and 2021:

(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

Nine months ended 3/31/22 $ 866,281 $ 568,502 $ — $ 1,434,783

Nine months ended 3/31/21 850,780 668,869 — 1,519,649

$ change $ 15,501 $ (100,367) n/a $ (84,866)

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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

Nine months ended 3/31/22 $ 72,530 $ 69,740 $ (49,538) $ 92,732

Nine months ended 3/31/21 105,188 8,144 (47,518) 65,814

$ change $ (32,658) $ 61,596 $ (2,020) $ 26,918

% change (31.0) % 756.3 % 4.3 % 40.9 %

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.

Operating income margin

Nine months ended 3/31/22 8.4 % 12.3 % n/a 6.5 %

Nine months ended 3/31/21 12.4 % 1.2 % n/a 4.3 %

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.

Our net sales in the North America reportable segment for the nine months ended March 31, 2022 were $866.3 million, an increase of $15.5 million, or 1.8%, from net sales of $850.8 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued b rands, net sales increased by 2.6% due to increased sales in the United States operating segment as a result of stronger sales in certain snack products and baby food in the current year period partially offset by decreased sales in the Canada operating segment.

Operating income in North America for the nine months ended March 31, 2022 was $72.5 million, a decrease of $32.7 million from $105.2 million in the prior year comparable period.

The decrease was mainly driven by 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.

and lower sales in the 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 marketing and people-related expense.

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.

Our net sales in the International reportable segment for the nine months ended March 31, 2022 were $568.5 million, a decrease of $100.4 million, or 15.0%, from net sales of $668.9 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of dives titures and discontinued brands, net sales decreased 4.4% from the prior year comparable period mainly due to lower sales in the Europe and United Kingdom operating segments, partially offset by higher sales in the Ella's Kitchen UK operating segment.

Ella's Kitchen UK net sales improved during the nine months ended March 31, 2022 compared to the prior year period due to a slow-down in consumer demand for baby food in the prior year period as a result of the COVID-19 pandemic stay-at-home requirements which negatively impacted prior year net sales.

Operating income in our International reportable segment for the nine months ended March 31, 2022 was $69.7 million, an increase of $61.6 million from operating income of $8.1 million for the nine months ended March 31, 2021.

The increase mainly reflected 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 for the reasons noted above.

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.

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.

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 enterpris e 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 nine months ended March 31, 2022 were $49.5 million, an increase of $2.0 million, from $47.5 million in the prior year period.

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 in Note 17, Commitments and Contingencies , partially offset by lower employee-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.

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 (as defined below) will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Credit Agreement (as defined below).

We believe that our cash flows from operations and borrowing capacity under our Credit Agreement 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").

The Credit Agreement provides for senior secured financing of $1,100.0 million in the aggregate, consisting of (1) $300.0 million in aggregate principal amount of term loans (the "Term Loans") and (2) an $800.0 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440.0 million U.S.

revolving credit facility and $360.0 million 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.

Our cash and cash equivalents balance decreased $18.1 million at March 31, 2022 to $57.8 million as compared to $75.9 million at June 30, 2021.

Our working capital from continuing operations was $273.6 million at March 31, 2022, a decrease of $11.1 million from $284.7 million at the end of fiscal 2021.

Additionally, our total de bt increased by $604.5 million at March 31, 2022 to $835.5 million as compared to $231.0 million at June 30, 2021 as a result of increased net borrowings to support the THWR acquisition and the share repurchases carried out during the period.

As of March 31, 2022, $253.1 million was available under the Credit Agreement as compared to $763.6 million available as of June 30, 2021 under the predecessor agreement to the Credit Agreement .

The Company was in compliance with all covenants at March 31, 2022.

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

As of March 31, 2022, 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 December 31, 2021, all of our investments were expected to mature in less than three months.

As of March 31, 2022, 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) operating, investing and financing activities is summarized below.

Six Months Ended December 31, Change in

Nine Months Ended March 31, Change in

(amounts in thousands) 2022 2021 Dollars

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Effect of exchange rate changes on cash from continuing operations (5,836) 5,650 (11,486)

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.

Net (decrease) increase in cash and cash equivalents $ (18,063) $ 15,243 $ (33,306)

Cash provided by operating activities from continuing operations was $99.2 million for the nine months ended March 31, 2022, a decrease of $47.3 million from cash provided by operating activities from continuing operations of $146.5 million in the prior year period.

This decrease versus the prior period resulted primarily from a reduction of $18.1 million in net income adjusted for non-cash charges in the current period and lower cash generation of $29.2 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 opera tions was $284.3 million for the nine months ended March 31, 2022, an increase of $258.3 million from $26.0 million in the prior year period primarily due to the acquisition of THWR in the current year, partially offset by $10.8 million in proceeds from the sale of assets in the current year, which was primarily related to the sale of undeveloped land plots in Boulder, Colorado .

Cash provided by financing activities from continuing operations was $172.9 million for the nine months ended March 31, 2022, an increase in cash provided of $283.8 million compared to $111.0 million of cash used in the prior year period.

The increase in c ash provided by f inancing activities was primarily due to higher borrowings under the Credit Agreement to finance the THWR acquisition, partially offset by higher repayments under the revolver, higher share repurchases and payment of shares withheld for employee payroll taxes during the nine months ended March 31, 2022.

Operating Free Cash Flow from Continuing Operations

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.

Our operating free cash flow from continuing operations was $65.2 million for the nine months ended March 31, 2022, a decrease of $28.2 million from $93.5 million in the nine months ended March 31, 2021.

This decrease versus prior year resulted primarily from a decrease in cash flow from operations of $47.3 million driven by the reasons explained above.

Additionally, the decrease was due to a $19.1 million reduction in property, plant and equipment purchases in the current period.

See the Reconciliation of Non-U.S.

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Share Repurchase Program

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.

In June 2017, August 2021 and January 2022, the Company’s Board of Directors authorized the repurchase of up to $250.0 million, $300.0 million and $200.0 million of the Company’s issued and outstanding common stock, respectively.

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

The authorization does not have a stated expiration date.

The 2017 and 2021 authorizations have been fully utilized.

The current 2022 authorization does not have a stated expiration date.

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

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.

During the nine months ended March 31, 2022, the Company repurchased 10.1 million shares under the repurchase program, inclusive of the shares repurchased from the Selling Stockholders, for a total of $395.8 million, excluding commissions, at an average price of $39.09 per share.

As of March 31, 2022, the Company had $186.6 million of remaining authorization under the share repurchase program.

During the nine months

ended March 31, 2021, the Company repurchased 2.4 million shares under the repurchase program for a total of $80.3 million, excluding commissions, at an average price of $33.33 per share.

Reconciliation of Non-U.S.

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GAAP measures.

Constant Currency Presentation

Net Sales - Constant Currency Presentation

We believe that this measure provides useful information to investors because it provides transparency to underlying performance in our consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given the volatility in foreign currency exchange markets.

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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.

Acquisitions, Divestitures and Discontinued Brands

Net Sales - 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.

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(amounts in thousands) North America International Hain Consolidated

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

Net sales - Three months ended March 31, 2022 $ 325,742 $ 177,197 $ 502,939

Acquisitions, divestitures and discontinued brands (25,232) — (25,232)

Impact of foreign currency exchange 30 7,301 7,331

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

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2022 $ 300,540 $ 184,498 $ 485,038

Net sales - Three months ended March 31, 2021 $ 287,500 $ 205,104 $ 492,604

Divestitures and discontinued brands (10,562) (4,224) (14,786)

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) %

Net sales adjusted for divestitures and discontinued brands - Three months ended March 31, 2021 $ 276,938 $ 200,880 $ 477,818

Net sales growth (decline) 13.3 % (13.6) % 2.1 %

Impact of acquisitions, divestitures and discontinued brands (4.8) % 1.8 % (2.1) %

Impact of foreign currency exchange — % 3.6 1.5 %

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

Net sales growth (decline) on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands 8.5 % (8.2) % 1.5 %

Net sales - Nine months ended March 31, 2022 $ 866,281 $ 568,502 $ 1,434,783

Acquisitions, divestitures and discontinued brands (25,759) — (25,759)

Impact of foreign currency exchange (2,697) (1,067) (3,764)

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

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2022 $ 837,825 $ 567,435 $ 1,405,260

Net sales - Nine months ended March 31, 2021 $ 850,780 $ 668,869 $ 1,519,649

Divestitures and discontinued brands (34,536) (75,511) (110,047)

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) %

Net sales adjusted for divestitures and discontinued brands - Nine months ended March 31, 2021 $ 816,244 $ 593,358 $ 1,409,602

Net sales growth (decline) 1.8 % (15.0) % (5.6) %

Impact of acquisitions, divestitures and discontinued brands 1.1 % 10.8 % 5.5 %

Impact of foreign currency exchange (0.3) % (0.2) % (0.2) %

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

Net sales growth (decline) on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands 2.6 % (4.4) % (0.3) %

Adjusted EBITDA

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.

Adjusted EBITDA is defined as net income before net interest expense, income taxes, depreciation and amortization, equity in net loss (income) of equity-method investees, stock-based compensation, net, 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 assets and intangibles 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.

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GAAP results.

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

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

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

Three Months Ended March 31, Nine Months Ended March 31,

(amounts in thousands) 2022 2021 2022 2021

Net income $ 24,531 $ 34,254 $ 74,831 $ 36,879

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)

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

Net income from continuing operations $ 24,531 $ 34,254 $ 74,831 $ 25,624

Depreciation and amortization 12,638 12,814 34,396 37,768

Equity in net loss of equity-method investees 465 1,076 991 1,095

Equity in net loss (income) of equity-method investees 383 (70) 1,374 1,025

Interest expense, net 2,846 1,327 5,677 4,781

Provision for income taxes 7,738 11,797 19,425 33,197

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

Stock-based compensation, net 3,846 3,698 12,289 11,888

Unrealized currency (gains) losses (594) 442 (2,097) (535)

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Warehouse/manufacturing consolidation and other costs 94 3,598 2,632 7,313

Acquisitions and divestitures

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

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

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

Acquisitions, divestitures and other

Transaction and integration costs, net 3,419 102 12,151 1,476

Loss (gain) on sale of assets 55 — (9,047) —

Loss on sale of businesses — 1,904 1,293

Impairment charges

Inventory write-down — — (46) 311

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

Long-lived asset and intangibles impairment — — 303 57,676

Adjusted EBITDA $ 58,669 $ 73,752 $ 165,249 $ 190,838

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GAAP financial measure, is that Operating Free Cash Flow from continuing operations reflects the impact of purchases of property, plant and equipment (capital spending).

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.

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.

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:

Six Months Ended December 31,

Nine Months Ended March 31,

(amounts in thousands) 2022 2021

Cash flow provided by operating activities from continuing operations $ 68,031 $ 104,530

Net cash provided by operating activities from continuing operations $ 99,186 $ 146,517

Purchases of property, plant and equipment (33,939) (53,062)

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Off-Balance Sheet Arrangements

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.

At March 31, 2022, 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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The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to revenue recognition, trade promotions and sales incentives, valuation of accounts and chargeback receivable, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets.

The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Recent Accounting Pronouncements

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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