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Item 7. Management’s Discussion and Analysis

2022-08-25 compared with 2021-08-26 · 205 added, 415 removed, 254 unchanged (71% 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 Item 1A and the Consolidated Financial Statements and the related notes thereto for the period ended June 30, 2021 included in Item 8 of this Form 10-K.

Forward-looking statements in this Form 10-K are qualified by the cautionary statement included under the sub-heading, “Cautionary Note Regarding Forward Looking Information,” at the beginning of this Form 10-K.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) should be read in conjunction with Item 1A and the Consolidated Financial Statements and the related notes thereto for the period ended June 30, 2022 included in Item 8 of this Form 10-K.

Forward-looking statements in this Form 10-K are qualified by the cautionary statement included under the heading, “Forward-Looking Statements” at the beginning of this Form 10-K.

This MD&A generally discusses fiscal 2022 and fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021.

Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020 that are not included in this Form 10-K can be found in “Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021, which was filed with the SEC on August 26, 2021 and is available on the SEC’s website at www.sec.gov.

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.

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Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores in over 75 countries worldwide.

The Company manufactures, markets, distributes and sells organic and natural products under brand names that are sold as “better-for-you” products, providing consumers with the opportunity to lead A Healthier Way of Life ® .

Hain Celestial is a leader in many organic and natural product categories, with many 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 Cuisi ne ® .

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

The Company continues to execute the four key pillars of its strategy to:

(1) simplify its portfolio;

(2) strengthen its capabilities;

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

The Company’s food and beverage brands include Celestial Seasonings ® , Clarks™, Cully & Sully ® , Earth’s Best ® , Ella’s Kitchen ® , Frank Cooper’s ® , Garden of Eatin’ ® , 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 Cuisi ne ® .

The Company’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;

(2) strengthen our capabilities;

(3) expand profit margins and cash flow;

and (4) reinvigorate profitable topline growth.

The Company has executed this strategy, with a focus on discontinuing uneconomic investment, realigning resources to coincide with brand importance, reducing unproductive stock-keeping units (“SKUs”) and brands and reassessing current pricing architecture.

As part of this initiative, the Company reviewed its product portfolio within North America and d ivided it into “Get Bigger” and “Get Better” brand categories.

The Company’s “Get Bigger” brands represent its strongest brands with higher margins, which compete in categories with strong growth potential.

The Company has concentrated its investment in marketing, innovation and other resources to prioritize spending for these brands, in an effort to reinvigorate profitable topline growth, optimize assortment and increase share of distribution.

The Company’s “Get Better” brands are the brands in which the Company is primarily focused on simplification and expansion of profit margin.

Some of these brands have historically been low margin, non-strategic brands that added complexity with minimal benefit to the Company’s operations.

As part of the Company’s overall strategy, the Company may seek to dispose of businesses and brands that are less profitable or are otherwise less of a strategic fit within our core portfolio.

During fiscal 2019, the Company divested its Hain Pure Protein reportable segment and its WestSoy ® tofu, seitan and tempeh businesses.

In fiscal 2020, the Company divested its Tilda business and its Arrowhead Mills ® , SunSpire ® , Europe's Best ® , Casbah ® , Rudi’s Gluten-Free Bakery™, Rudi’s Organic Bakery ® and Fountain of Truth™ brands.

In fiscal 2021, the Company divested its Danival ® business, its United Kingdom fruit and fruit juice businesses (“Fruit”), primarily consisting of the Orchard House ® Foods Limited business and associated brands, and its WestSoy ® , Dream ® and GG UniqueFiber ® brands.

The COVID-19 pandemic has resulted in a net increase in overall demand for our products.

The impact was particularly pronounced during the early stages of the pandemic as consumers reacted to stay-at-home measures and the uncertainty of the pandemic.

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.

Our net sales during the third quarter of fiscal 2020 through the second quarter of fiscal 2021 benefited from pandemic-driven demand, and 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.

Despite normalizing consumer demand in recent quarters, the pandemic continues to create near-term and longer-term challenges and uncertainty as we continue our commitment to supporting the global response to the crisis.

Effective vaccines for COVID-19 have not yet allowed a return to normal economic activity and business operations, and the presence of new variants and increasing case figures in many countries create additional uncertainty about the duration and extent of the impact from the pandemic.

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.

Such challenges include but are not limited to:

• manufacturing and supply chain challenges resulting from health and safety precautions among our employees and the general population as well as macroeconomic factors resulting from the pandemic, including labor market shortages;

• 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.

Productivity and Transformation Initiatives

One of the key pillars of the Company’s strategy seeks to identify areas of operating efficiencies and cost savings to expand profit margins and cash flow.

In furtherance of this key pillar, we have undertaken multiple productivity and transformation initiatives, including (1) consolidating certain of the Company’s manufacturing plants, (2) implementing broader supply chain operational improvements, (3) integrating the operations of our U.S.

and Canadian businesses, (4) product rationalization initiatives which are aimed at eliminating slow moving SKUs and (5) outsourcing certain functions in our North American business, including order management, billing, accounts receivable and accounts payable, to third-party service providers and the associated implementation of new procurement technology solutions.

We incur costs as part of these productivity and transformation initiatives with the objective of obtaining longer term operating efficiencies and cost savings.

The costs include consulting and severance costs, moving and shut-down costs and other costs associated with carrying out the initiatives.

The Company will continue to carry out the existing productivity initiatives as well as additional initiatives under this strategy in fiscal 2022.

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:

• we are primarily focused on health and wellness,

• we are a global company in high-growth categories with opportunities for expansion in existing and new channels and geographies,

• we have unique and advantaged brands with strong points of difference, and

• given our size, small wins can drive material incremental growth.

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

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 what we believe to be very high-growth categories.

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

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

• The Targeted Investment brands are made up of leading-share brands in lower-growth categories.

To date, we have demonstrated our ability to drive market share and reinvigorate these categories, and we expect that we can continue to do this in the future.

The Targeted Investment brands are made up of tea, baby, yogurt, and personal care products.

• 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.

We refer to the Turbocharge brands and Targeted Investment brands together as our Growth brands.

Additionally, as part of Hain 3.0, we will continue to simplify our brand portfolio as we continue to identify brands that are declining and have low margins, which we refer to as Simplify brands.

We view Simplify brands to be subscale declining businesses that have limited long-term potential for the Company, and therefore will manage such brands for profit until they are potentially divested, likely over the course of the next several years.

Acquisitions are expected to play a role in Hain 3.0, and part of our capital allocation strategy is focused on actively looking for appropriate targets in the market.

As we continue to simplify and stabilize the organization and consolidate sales into fewer priority categories, we believe we are well-positioned and expect to make targeted acquisitions supported by our borrowing capacity to help us further strengthen our position in those categories.

Increased Supply Chain Disruptions

During fiscal year 2022, we experienced increased disruption in our supply chain network, including the supply of certain ingredients, packaging, and other sourced materials, which has resulted in higher than expected inflation, including escalating transportation and other supply chain costs.

We expect these inflationary cost increases to continue, although we expect they will be partially mitigated by pricing actions implemented in fiscal year 2022 and the pricing actions that we plan to implement in fiscal year 2023.

It is possible that more significant disruptions to our supply chain could occur.

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 fiscal year ended June 30, 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.

The COVID-19 pandemic continues to contribute to challenging and unprecedented conditions.

Challenges exacerbated by the ongoing effects of the pandemic include but are not limited to:

• manufacturing and supply chain challenges, including labor market shortages;

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

• increased costs of operating our business and managing our supply chain.

If we are unable to successfully manage our business through the continued challenges and uncertainty related to the COVID-19 pandemic, our business and operating results could be materially adversely affected.

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®.

We believe the acquisit ion 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 II, Item 8 of this Form 10-K for additional details.

Discontinued Operations

On August 27, 2019, the Company and Ebro Foods S.A.

(the “Purchaser”) entered into, and consummated the transactions contemplated by, an agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets.

The Company sold the entities comprising its Tilda operating segment and certain other assets of the Tilda business to the Purchaser for an aggregate price of $341.8 million.

On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business, a component of the Company’s Hain Pure Protein Corporation (“HPPC”) operating segment.

On June 28, 2019, the Company completed the sale of the remainder of HPPC and Empire Kosher which included the FreeBird and Empire Kosher businesses.

These dispositions were undertaken to reduce complexity in the Company’s operations and simplify the Company’s brand portfolio, in addition to allowing additional flexibility to focus on opportunities for growth and innovation in the Company’s more profitable and faster growing core businesses.

Collectively, these dispositions were reported in the aggregate as the Hain Pure Protein reportable segment.

These dispositions represented strategic shifts that had a major impact on the Company’s operations and financial results and therefore, the Company is presenting the operating results and cash flows of the Tilda operating segment and the Hain Pure Protein reportable segment within discontinued operations in the current and prior periods.

See Note 5, Dispositions, in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.

(the “Purchaser”) entered into, and consummated the transactions contemplated by, an agreement relating to the sale and purchase of the entities comprising the Company’s Tilda operating segment and certain other assets of the Tilda business.

Results of Operations

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Selling, general and administrative expenses 300,665 15.9 % 302,368 15.3 % (1,703) (0.6) %

Amortization of acquired intangibles 8,931 0.5 % 11,638 0.6 % (2,707) (23.3) %

Amortization of acquired intangible assets 10,214 0.5 % 8,931 0.5 % 1,283 14.4 %

Productivity and transformation costs

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Proceeds from insurance claims (196) — % (592) — % 396 (66.9)%

Goodwill impairment — — % 394 — % (394) (100.0) %

Long-lived asset and intangibles impairment 1,903 0.1 % 57,920 2.9 % (56,017) (96.7) %

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Interest and other financing expense, net 12,570 0.7 % 8,654 0.4 % 3,916 45.3 %

Other (income) expense, net (10,067) (0.5) % 3,956 0.2 % (14,023) *

Other income, net (11,380) (0.6) % (10,067) (0.5) % (1,313) 13.0%

Income from continuing operations before income taxes and equity in net loss of equity-method investees 103,491 5.5 % 108,793 5.5 % (5,302) (4.9) %

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Net income from continuing operations $ 77,873 4.1 % $ 66,109 3.4 % $ 11,764 17.8 %

Net income (loss) from discontinued operations, net of tax 11,255 0.6 % (106,041) (5.2) % 117,296 *

Net income (loss) $ 77,364 3.9 % $ (80,407) (3.9) % $ 157,771 *

Net income from discontinued operations, net of tax — — % 11,255 0.6 % (11,255) (100.0)%

Net income $ 77,873 4.1 % $ 77,364 3.9 % $ 509 0.7%

Adjusted EBITDA $ 200,616 10.6 % $ 258,938 13.1 % $ (58,322) (22.5) %

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

Net sales in fiscal 2021 w ere $1.97 billion, a decrease of $83.6 million, or 4.1%, from net sales of $2.05 billion in fiscal 2020 as a result of a decrease in sales in both the North America and the International reportable segments.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased approximately 0.6% from the prior comparable period.

On an adjusted basis, net sales decreased in the North America reportable segment and was partially offset by an increase in the International reportable segment.

Net sales in fiscal 2022 w ere $1.89 billion, a decrease of $78.5 million, or 4.0%, from net sales of $1.97 billion in fiscal 2021 as a result of a decrease in sales in the International reportable segment partially offset by an increase in sales in the North America reportable segment.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately 0.4% from the prior comparable period.

On an adjusted basis, net sales decreased in the International reportable segment, which was partially offset by an increase in the North America reportable segment.

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

Gross profit in fiscal 2021 w as $491.6 million, an increase of $25.8 million, or 5.5%, from gross profit of $465.8 million in fiscal 2020.

Gross profit in fiscal 2022 w as $427.4 million, a decrease of $64.2 million, or 13.1%, from gross profit of $491.6 million in fiscal 2021.

Gross profit margin was 22.6% of net sales, compared to 25.0% in the prior year.

The increase in gross profit margin was mainly driven by the International reportable segment as a result of lower costs of goods sold stemming from the Fruit business divestiture in the current fiscal year, lower trade spend and cost savings due to supply chain efficiencies which resulted in a lower cost of sales as a percentage of revenue.

In addition, the gross profit margin improved in the North America reportable segment as a result of our productivity and transformation initiatives.

The decrease in gross profit margin was due to both the North America and International reportable segments.

The North America reportable segment 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.

The decrease in the International reportable segment was mainly due to lower net sales in the United Kingdom and Europe operating segments, coupled with higher energy and supply chain costs when compared to the prior year, 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 $300.7 million in fiscal 2022, a decrease of $1.7 million, or 0.6%, from $302.4 million in fiscal 2021.

The decrease was mainly due to reduced expenses in the North America reportable segment in the amount of $26.9 million.

The decrease in the North America reportable segment was due to (1) lower broker trade expense which was a result of lower net sales, (2) lower salaries and benefits which was primarily a result of the reorganization which resulted in headcount reductions that occurred throughout fiscal 2020 for which we are now seeing the benefits, (3) headcount reductions due to divestitures, (4) lower marketing expense due to a decrease in consumer advertising and public relations, (5) lower bonus expense, and (6) lower outside service expense.

Selling, general and a dministrative expenses as a percentage of net sal es was 15.2% in the twelve months ended June 30, 2021 compared to 15.8% in the prior year, attributable to th e aforementioned items.

The decrease was mainly due to the International reportable segment as a result of lower people-related expenses in the Europe and United Kingdom operating segments, partially offset by higher selling expenses in the Ella’s Kitchen UK operating segment.

The decrease was partially offset by an increase in the North America reportable segment due to the acquisition of THWR in the United States operating segment as well as 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 18, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Selling, general and administrative expenses as a percentage of net sales was 15.9% in the twelve months ended June 30, 2022 compared to 15.3% in the prior year, attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $8.9 million in fiscal 2021, a decrease of $2.7 million, or 23.3%, from $11.6 million in fiscal 2020.

The decrease was due to the elimination of the United Kingdom Fruit business intangible amortization since the first quarter of fiscal 2021 and finite-lived intangibles from historical acquisitions becoming fully amortized or impaired during fiscal year 2020, partially offset by amortization as a result of certain indefinite-lived intangibles reclassified to finite-lived intangibles during the first quarter of fiscal 2021.

Amortization of acquired intangibles was $10.2 million in fiscal 2022, an increase of $1.3 million, or 14.4%, from $8.9 million in fiscal 2021 due to the acquisition of THWR in the current fiscal year, partially offset by lower amortization expense in the current year as a result of prior year dispositions that occurred in the latter part of fiscal 2021.

Productivity and Transformation Costs

Productivity and transformation costs were $10.2 million in fiscal 2022, a decrease of $5.4 million or 34.8% from $15.6 million in fiscal 2021.

The decrease was due to lower consulting fees, severance costs, and other costs incurred in connection with the Company’s productivity and transformation initiatives in fiscal 2021.

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

Proceeds from Insurance Claims

During fiscal year 2021, the Company received $0.6 million as payment from an insurance claim related to a litigation described in Note 19, Commitments and Contingencies .

In July of 2019, the Company received $7.0 million as partial payment from an insurance claim relating to business disruption costs associated with a co-packer.

Of this amount, $4.5 million was recognized in fiscal 2019 as it related to reimbursement of costs already incurred, with the remaining $2.5 million recognized in the first quarter of fiscal 2020.

During fiscal 2021, the Company received $0.6 million as payment from an insurance claim related to a litigation described in Note 18, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K .

During fiscal year 2022, the Company received $0.2 million as payment from an insurance claim.

Long-Lived Asset and Intangibles Impairment

During fiscal year 2021, the Company recorded a pre-tax impairment cha rge of $57.9 million, of which $56.1 million related to the reserve recorded against the assets of the Company's United Kingdom Fruit business (see Note 5, Dispositions , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K) and $1.6 million related to impairment of property, plant and equipment and other non-current assets.

During fiscal year 2020, the Company recorded a pre-tax impairment charge of $27.5 million of which (1) $9.5 million ($4.0 million related to the North America reportable segment and $5.5 million related to the International reportable segment) related to certain tradenames of the Company, (2) $4.5 million related to customer relationships of certain brand divestitures within the North America reportable segment and (3) $12.3 million related to a write-down of certain machinery and equipment in the United States and Europe used to manufacture certain slow moving or low margin SKUs and the write-down of buildings, machinery and equipment related to the sale of our Danival business.

During fiscal 2022, the Company recorded an impairment of $1.6 million related to an indefinite-lived intangible asset as described in Note 8, Goodwill and Other Intangible Assets, in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

During fiscal 2021, the Company recorded a pre-tax impairment cha rge of $57.9 million , of which $56.1 million related to the reserve recorded against the assets of the Company's United Kingdom Fruit business (see Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K) and $1.6 million related to impairment of property, plant and equipment and other non-current assets.

Operating Income

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Interest and Other Financing Expense, Net

Interest and other financing expense , net totaled $8.7 million in fiscal 2021, a decrease of $9.6 million, or 52.6%, from $18.3 million in the prior year.

The decrease resulted primarily from lower interest expense in fiscal 2021 from lower outstanding debt and lower variable interest rates on the portion of the debt not hedged by derivatives.

Interest and other financing expense , net totaled $12.6 million in fiscal 2022, an increase of $3.9 million, or 45.3%, from $8.7 million in the prior year.

The increase resulted primarily from a higher outstanding debt balance driven primarily by the acquisition of THWR in the current fiscal year as well as share repurchase activity and an increase in interest rates.

See N ote 10, Deb t and Borrowings , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Other (Income) Expense, Net

Other income, net totaled $10.1 million in fiscal 2021, an increase of $14.0 million from other expense, net of $4.0 million in the prior year.

The change from expense to income was primarily attributable to a gain on sale of assets and businesses in fiscal 2021 of $11.1 million and a $2.8 million gain primarily related to foreign currency movements on the remeasurement of foreign currency balances in fiscal 2021 compared with respective losses in fiscal 2020.

Other Income, Net

Other income, net totaled $11.4 million in fiscal 2022, an increase of $1.3 million from $10.1 million in the prior year.

The change was primarily attributable to a higher gain on sale of assets in the current year than in the prior year.

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

Income before income taxes and equity in the net loss of our equity-method investees for fiscal 2022 was $103.5 million compared to $108.8 million in fiscal 2021.

The increase was due to the items discussed above.

The decrease was due to the items discussed above.

Provision for Income Taxes

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Our income tax expense from continuing operations was $22.7 million and $41.1 million for fiscal 2022 and 2021, respectively.

On March 27, 2020, H.R.

748, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into legislation which included business tax provisions that impacted taxes related to 2018, 2019 and 2020.

Under the CARES Act, the Company carried back net operating losses generated in the June 30, 2019 tax year for five years, resulting in a net income tax benefit of $11.2 million.

The $11.2 million income tax benefit represents the federal rate differential between 35% and 21%, net of a reserve under Accounting Standard Codification (“ASC”) 740-10 and excludes the indirect tax benefit of $6.7 million related to discontinued operations.

The Company recorded a tax refund receivable of $52.5 million which was included as a component of Prepaid expenses and other current assets on the Consolidated Balance Sheet as of June 30, 2020.

The Company received the tax refund, along with $1.3 million of interest, during fiscal year 2021.

The effective income tax rate from continuing operations was 21.9% and 37.8% of pre-tax income for the twelve months ended June 30, 2022 and 2021, respectively.

The effective income tax rate from continuing operations for the twelve months ended June 30, 2022 was primarily impacted by 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 the acquisition of THWR (see Note 4, Acquisitions and Dispositions ), the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of prior fiscal year income tax returns.

The effective income tax rate from continuing operations for the twelve months ended June 30, 2021 was primarily impacted by various discrete items including the tax impact of the Fruit business impairment and disposal, and the enacted change in the United Kingdom’s corporate income tax rate from 19% to 25%.

The effective income tax rate from continuing operations for the twelve months ended June 30, 2020 was primarily impacted by the geographical mix of earnings, state taxes, provisions in the CARES Act, global intangible low-taxed income (“GILTI”) and limitations on the deductibility of executive compensation.

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.

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Net income per diluted share was $0.83 in fiscal 2022 compared to net income per diluted share of $0.65 in fiscal 2021.

The increase was attributable to the factors noted above.

Net Income (Loss) from Discontinued Operations, Net of Tax

Net income (loss) from discontinued operations, net of tax, for fiscal 2021 was income of $11.3 million, or $0.11 per diluted share, compared with a net loss of $106.0 million or $1.02 per diluted share for fiscal 2020.

During the twelve months ended June 30, 2021, the Company recognized a $11.3 million adjustment to the Tilda business primarily related to the recognition of a deferred tax benefit.

Net loss from discontinued operations, net of tax, for the twelve months ended June 30, 2020 included a reclassification of $95.1 million of cumulative translation losses from Accumulated other comprehensive loss related to the Tilda business' discontinued operations.

The income tax expense from discontinued operations of $13.5 million for the twelve months ended June 30, 2020 was impacted by $15.3 million of tax related to the tax gain on the sale of the Tilda entities.

See Note 5, Dispositions , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Net Income (Loss)

Net income for fiscal 2021 was $77.4 million compared to net loss of $80.4 million for fiscal 2020.

Net income per diluted share was $0.76 in fiscal 2021 compared to net loss per diluted share of $0.77 in 2020.

The change was attributable to the factors noted above.

The increase was attributable to the factors noted above as well as the year-over-year reduction in outstanding shares.

Net Income from Discontinued Operations, Net of Tax

Net income from discontinued operations, net of tax, was nil for fiscal 2022 and $11.3 million or $0.11 per diluted share for fiscal 2021.

During the twelve months ended June 30, 2021, 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 Consolidated Financial Statements included in Item 8 of this Form 10-K.

Net income for fiscal 2022 was $77.9 million compared to $77.4 million for fiscal 2021.

Net income per diluted share was $0.83 in fiscal 2022 compared to $0.76 in 2021.

The change was attributable to the factors noted above as well as the year-over-year reduction in shares.

Adjusted EBITDA

2 unchanged sentences

GAAP Financial Measures to U.S.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net income (loss) to Adjusted EBITDA.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net income to Adjusted EBITDA.

Segment Results

18 unchanged sentences

North America

Our net sales in the North America reportable segment for fiscal 2021 were $1.10 billion, a decrease of $67.4 million, or 5.7%, from net sales of $1.17 billion in fiscal 2020.

On a constant currency basis, adjusted for the impact of divestitures and discontinued brands, net sales decreased by 1.7%.

The decrease of 1.7% was mainly due to lower sales in the current year compared to the prior year driven by higher at-home food consumption and hand sanitizer purchases in the prior year as a result of stay-at-home orders at the beginning of the COVID-19 pandemic.

Additionally, the Company had a large program with a wholesale club in fiscal 2020 which did not recur in fiscal 2021.

Further, sales were lower in the current year due to the impact of the prior year SKU rationalization, which reduced or eliminated sales related to those SKUs in the current year.

The decrease was partially offset by an increase in snacks and tea in fiscal 2021 compared with fiscal 2020.

Operating income in North America in fiscal 2021 was $129.0 million, an increase of $33.1 million, or 34.5%, from $95.9 million in fiscal 2020.

The increase was driven by a favorable product mix, lower selling, general and administrative expenses and supply chain cost efficiencies gained with the Company's productivity and transformation initiatives, partially offset by lower net sales in 2021.

Our net sales in the North America reportable segment for fiscal 2022 were $1.16 billion, an increase of $59.0 million, or 5.3%, from net sales of $1.10 billion in fiscal 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales increased by 3.5%.

The increase of 3.5% was mainly due to price increases that occurred in the latter half of the fiscal year as well as stronger sales in snacks, baby, personal care and other product categories in the United States operating segment.

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

O perating income in North America in fiscal 2022 was $93.7 million, a decrease of $35.3 million, or 27.3%, from $129.0 million in fiscal 2021.

The decrease was 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;

this is partially offset by incremental operating income generated by THWR, which was acquired in the current fiscal year.

International

Net sales in the International reportable segment for fiscal 2022 were $728.7 million, a decrease of $137.5 million, or 15.9%, from net sales of $866.2 million in fiscal 2021 .

On a constant currency basis, and adjusted for the impact of divestitures and discontinued brands, net sales increased by 0.8% from fiscal 2020 .

The increase in adjusted net sales was due to sustained demand from the prior year with additional growth in the current year from our plant-based food and beverage products.

Opera ting income in our International reportable segment for fiscal 2021 was $38.0 million, a decrease of $17.3 million, or 31.3%, from $55.3 million in fiscal 2020.

The decrease in operating income was mainly due to an impairment loss recorded for the Fruit business amounting to $56.0 million, partially offset by improved gross profit of $28.0 million mainly due to product mix and benefits realized from our productivity initiatives in fiscal 2021 when compared with fiscal 2020.

On a constant currency basis, and adjusted for the impact of divestitures and discontinued brands, net sales decreased by 5.6% from fiscal 2021 .

The decrease in adjusted net sales was 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 volume 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 due to a slow-down in consumer demand for baby food as a result of the COVID-19 pandemic stay-at-home requirements.

Operating income in our International reportable segment in fiscal 2022 was $79.1 million, an increase of $41.0 million from operating income of $38.0 million in fiscal 2021 .

The increase mainly reflected non-recurring charges associated with the Fruit business impairment that were 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.

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 Corporate and Other expenses for fiscal 2021 were $59.7 million, a decrease of $35.6 million or 37.3% , from $95.2 million in fiscal 2020 .

This change was primarily related to a decrease in productivity and transformation costs included in Corporate and Other, which were $10.6 million for fiscal 2021 , a decrease of $22.1 million, from $32.7 million for fiscal 2020 .

Additionally, included in fiscal 2020 was a tradename impairment charge of $9.5 million which did not recur in fiscal 2021.

These decreases were offset in part by additional retirement plan expense of $1.1 million in fiscal 2021 as a result of a higher employer match into the defined contribution plan.

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, litigation expense and expenses for certain professional fees, facilities, and other items which benefit the Company as a whole.

Our Corporate and Other expenses for fiscal 2022 were $68.1 million, an increase of $8.5 million, or 14.2%, from $59.7 million in fiscal 2021.

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 18, Commitments and Contingencies , partially offset by lower executive bonus payout related to fiscal 2022.

Refer to Note 20, Segm ent Information , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details.

Comparison of Fiscal Year Ended June 30, 2020 to Fiscal Year Ended June 30, 2019

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the fiscal years ended June 30, 2020 and 2019 (amounts in thousands, other than percentages which may not add due to rounding):

Fiscal Year Ended June 30, Change in

2020 2019 Dollars Percentage

Net sales $ 2,053,903 100.0 % $ 2,104,606 100.0 % $ (50,703) (2.4) %

Cost of sales 1,588,133 77.3 % 1,706,109 81.1 % (117,976) (6.9) %

Gross profit 465,770 22.7 % 398,497 18.9 % 67,273 16.9 %

Selling, general and administrative expenses 324,376 15.8 % 314,000 14.9 % 10,376 3.3 %

Amortization of acquired intangibles 11,638 0.6 % 13,134 0.6 % (1,496) (11.4) %

Productivity and transformation costs

48,789 2.4 % 40,107 1.9 % 8,682 21.6 %

Former Chief Executive Officer Succession Plan expense, net — — % 30,156 1.4 % (30,156) (100.0) %

Proceeds from insurance claim (2,962) (0.1) % (4,460) (0.2) % 1,498 (33.6) %

Accounting review and remediation costs, net of insurance proceeds — — % 4,334 0.2 % (4,334) (100.0) %

Goodwill impairment

394 — % — — % 394 *

Long-lived asset and intangibles impairment

27,493 1.3 % 33,719 1.6 % (6,226) (18.5) %

Operating income (loss) 56,042 2.7 % (32,493) (1.5) % 88,535 (272.5) %

Interest and other financing expense, net 18,258 0.9 % 22,517 1.1 % (4,259) (18.9) %

Other expense, net 3,956 0.2 % 994 — % 2,962 298.0 %

Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees 33,828 1.6 % (56,004) (2.7) % 89,832 (160.4) %

Provision (benefit) for income taxes 6,205 0.3 % (3,232) (0.2) % 9,437 (292.0) %

Equity in net loss of equity-method investees 1,989 0.1 % 655 — % 1,334 203.7 %

Net income (loss) from continuing operations $ 25,634 1.2 % $ (53,427) (2.5) % $ 79,061 (148.0) %

Net loss from discontinued operations, net of tax (106,041) (5.2) % (129,887) (6.2) % 23,846 (18.4) %

Net loss $ (80,407) (3.9) % $ (183,314) (8.7) % $ 102,907 (56.1) %

Adjusted EBITDA $199,993 9.7 % $165,112 7.8 % $ 34,881 21.1 %

* Percentage is not meaningful due to a comparison of a positive figure and a negative figure or due to the baseline figure being zero.

Net sales in fiscal 2020 were $2.05 billion, a decrease of $50.7 million, or 2.4%, from net sales of $2.10 billion in fiscal 2019.

Foreign currency exchange rates negatively impacted net sales by $27.5 million as compared to the prior year.

On a constant currency basis, net sales decreased approximately 1.1% from the prior year.

Net sales decreased across both our North America and International reportable segments, primarily driven by the strategic decision to no longer support certain lower margin and unprofitable SKUs, a reduction in net sales in relation to divested brands and a decline in our United Kingdom Fruit business as a result of the impacts from the COVID-19 pandemic.

Further details of changes in net sales by segment are provided below.

Gross profit in fiscal 2020 was $465.8 million, an increase of $67.3 million, or 16.9%, from gross profit of $398.5 million in fiscal 2019.

Gross profit margin was 22.7%, an increase of 380 basis points from the prior year.

This increase was driven by a

favorable product mix as well as cost savings from the Company’s productivity and transformation initiatives.

The year-over-year increase was further due to an inventory write-down of $12.4 million in fiscal 2019, which did not recur in fiscal 2020, in connection with the discontinuance of slow moving SKUs primarily in the United States as part of a product rationalization initiative and increased freight and commodity costs in fiscal 2019 primarily in the United States operating segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $324.4 million in fiscal 2020, an increase of $10.4 million, or 3.3%, from $314.0 million in fiscal 2019.

Selling, general and administrative expenses increased primarily due to higher marketing and advertising spend as well as higher variable compensation costs in fiscal 2020.

Variable compensation costs include stock-based compensation expense, which was higher in fiscal 2020 primarily due to the reversal in the prior year of previously accrued amounts under certain performance-based incentive plans of which achievement was no longer probable.

See Note 14, Stock-based Compensation and Incentive Performance Plans , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for further discussion.

Selling, general and administrative expenses as a percentage of net sales was 15.8% in fiscal 2020 and 14.9% in the prior year, an increase of 90 basis points, primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $11.6 million in fiscal 2020, a decrease of $1.5 million, or 11.4%, from $13.1 million in fiscal 2019.

The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized subsequent to June 30, 2019 as well as impairment of certain finite-lived intangibles taken during fiscal year 2020.

Productivity and Transformation Costs

Productivity and transformation costs were $48.8 million in fiscal 2020, an increase of $8.7 million from $40.1 million in fiscal 2019.

The increase was primarily due to increased North America integration costs incurred in connection with the Company’s productivity and transformation initiative as well as increased severance costs in fiscal year 2020 as compared to the prior year.

Former Chief Executive Officer Succession Plan Expense, Net

On June 24, 2018, the Company entered into a succession plan, whereby the Company’s former CEO, Irwin D.

Simon, agreed to terminate his employment with the Company upon the hiring of a new CEO.

Net costs and expenses associated with the Company’s former Chief Executive Officer succession plan were $30.2 million in fiscal 2019 compared with no expense incurred in fiscal year 2020.

See Note 3, Former Chief Executive Officer Succession Plan , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Proceeds from Insurance Claims

In July of 2019, the Company received $7.0 million as partial payment from an insurance claim relating to business disruption costs associated with a co-packer.

Of this amount, $4.5 million was recognized in fiscal 2019 as it related to reimbursement of costs already incurred, with the remaining $2.5 million recorded in the first quarter of fiscal 2020.

The Company recorded an additional $0.5 million in the first quarter of fiscal 2020.

Accounting Review and Remediation Costs, Net of Insurance Proceeds

Costs and expenses associated with the internal accounting review, remediation and other related matters were $4.3 million in fiscal 2019, compared to no expense incurred in fiscal 2020.

Included in accounting review and remediation costs for fiscal 2019 were insurance proceeds of $0.2 million related to the reimbursement of costs incurred as part of the internal accounting review and the independent review by the Audit Committee and other related matters.

Long-lived Asset and Intangibles Impairment

During fiscal 2020, the Company recorded $27.5 million of long-lived asset and intangibles impairment charges.

This included a pre-tax impairment charge of $9.5 million ($4.0 million related to the North America reportable segment and $5.5 million related to the International reportable segment) related to certain tradenames of the Company.

The Company also recorded $4.5 million of pre-tax impairment charges relating to customer relationships of certain brand divestitures within the North America reportable segment.

Additionally, during fiscal 2020, the Company recorded a $12.3 million non-cash impairment charge primarily related to a write-down of certain machinery and equipment in the United States and Europe used to manufacture certain slow moving or low margin SKUs and the write-down of buildings, machinery and equipment related to the sale of our Danival business.

During fiscal 2019, the Company recorded $33.7 million of long-lived asset and intangibles impairment charges.

This included a pre-tax impairment charge of $17.9 million ( $15.1 million related to the North America reportable segment and $2.8 million related to the International reportable segment) related to certain tradenames of the Company.

Additionally, the Company recorded $6.1 million of non-cash impairment charges primarily related to the Company’s decision to consolidate manufacturing of certain fruit-based products in the United Kingdom.

Moreover, the Company recorded a $9.7 million non-cash impairment charge to write down the value of certain machinery and equipment no longer in use in the United States and United Kingdom, some of which was used to manufacture certain slow moving SKUs that were discontinued.

See Not e 7, Property, Plant and Equipment, Net and Note 9, G oodwill and Other Intangible Assets , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for details regarding the aforementioned impairment charges.

Operating Income (Loss)

Operating income in fiscal 2020 was $56.0 million compared to operating loss of $32.5 million in fiscal 2019.

The increase from operating loss to operating income in fiscal 2020 resulted from the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $18.3 million in fiscal 2020, a decrease of $4.3 million, or 18.9%, from $22.5 million in the prior year.

The decrease in interest and other financing expense, net resulted primarily from lower interest expense related to our revolving credit facility as a result of lower variable interest rates and a lower balance of borrowings outstanding during fiscal year 2020 compared to fiscal year 2019.

See Note 11, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Other Expense, Net

Other expense, net totaled $4.0 million in fiscal 2020, an increase of $3.0 million from $1.0 million in the prior year.

The increase in the fiscal year ended June 30, 2020 resulted from losses related to the sale of the Arrowhead, SunSpire and Rudi’s businesses, partially offset by higher net unrealized foreign currency gains due to the effect of foreign currency movements on the remeasurement of foreign currency denominated loans.

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

Income before income taxes and equity in the net loss of our equity-method investees for fiscal 2020 was $33.8 million compared to loss of $56.0 million in fiscal 2019.

The increase was due to the items discussed above.

Provision (Benefit) for Income Taxes

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

Our income tax from continuing operations was an expense of $6.2 million and a benefit of $3.2 million for fiscal 2020 and 2019 , respectively.

On March 27, 2020, H.R.

748, the CARES Act was signed into legislation which includes business tax provisions that impacted taxes related to 2018, 2019 and 2020.

Some of the significant tax law changes in accordance with the CARES Act were to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five-year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, provide for the acceleration of depreciation expense from 2018 and forward on qualified improvement property, and accelerate the ability to claim refunds of Alternative Minimum Tax (“AMT”) credit carryforwards.

The Company carried

back net operating losses generated in the June 30, 2019 tax year for five years, resulting in a net income tax benefit of $11.2 million.

The $11.2 million income tax benefit represents the federal rate differential between 35% and 21%, net of a reserve under ASC 740-10 and excludes the indirect tax benefit of $6.7 million related to discontinued operations.

The Company recorded a tax refund receivable of $52.5 million which was included as a component of Prepaid expenses and other current assets on the Consolidated Balance Sheet as of June 30, 2020.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation pursuant to the Tax Cuts and Jobs Act (the “Tax Act”), which significantly revised the ongoing U.S.

corporate income tax law by lowering the U.S.

federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense and executive compensation), among other things.

In accordance with SAB No.

118, the SEC's staff accounting bulletin issued to address complexities involved in accounting for the Tax Act, the Company finalized the tax effects of the Tax Act during fiscal 2019.

The Company recorded additional tax expense of $6.8 million related to its transition tax liability due to finalizing the Company’s foreign earnings and profits study.

The net increase reflected newly issued tax laws, regulations, and notices from the U.S.

Department of Treasury and Internal Revenue Service tax authorities.

The adjustment of the Company’s provisional tax expense was recorded as a change in estimate in accordance with SAB No.

The Tax Act also includes a provision to tax GILTI of foreign subsidiaries.

The Financial Accounting Standards Board (“FASB”) Staff Q&A Topic No.

5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election either to recognize deferred taxes for temporary differences that are expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred.

The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred.

The Company has computed the impact on our effective tax rate on a discrete basis.

The effective income tax rate from continuing operations was expense of 18.3% and a benefit of 5.8% of pre-tax income for the twelve months ended June 30, 2020 and 2019, respectively.

The effective income tax rate from continuing operations for the twelve months ended June 30, 2020 was primarily impacted by the geographical mix of earnings, state taxes, provisions in the CARES Act, GILTI and limitations on the deductibility of executive compensation.

The effective income tax rate from continuing operations for the twelve months ended June 30, 2019 was primarily impacted by the Tax Act’s lowering of the corporate tax rate, the geographical mix of earnings, state taxes, GILTI, finalization of the transition tax liability, and limitations on the deductibility of executive compensation.

The effective income tax rate was also impacted by a net increase in the Company’s valuation allowance primarily related to the Company’s state deferred tax assets and state net operating loss carryforwards.

See Note 12, Income Taxes , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.

Equity in Net Loss of Equity-Method Investees

Our equity in the net loss from our equity method investments for fiscal 2020 was $2.0 million compared to equity in net loss of $0.7 million for fiscal 2019.

See Note 15, Investments , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Net Income (Loss) from Continuing Operations

Net income from continuing operations for fiscal 2020 was $25.6 million compared to net loss of $53.4 million for fiscal 2019.

Net income per diluted share was $0.25 in fiscal 2020 compared to net loss per diluted share of $0.51 in fiscal 2019.

The decrease was attributable to the factors noted above.

Net Loss from Discontinued Operations

Net loss from discontinued operations for fiscal 2020 and 2019 was $106.0 million and $129.9 million, respectively, or $1.02 and $1.25 per diluted share, respectively.

The net loss from discontinued operations for fiscal 2020 included a reclassification of $95.1 million of cum ulative translation losses from Accumulated comprehensive loss related to the Tilda business to discontinued operations, while in fiscal 2019 net loss from discontinued operations was primarily attributable to asset impairment charges of $109.3 million and losses on sale in connection with the disposition of the Plainville Farms and HPPC businesses of $40.2 million and $0.6 million, respectively.

See Note 5, Dispositions , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Net loss for fiscal 2020 was $80.4 million compared to net loss of $183.3 million for fiscal 2019.

Net loss per diluted share was $0.77 in fiscal 2020 compared to net loss per diluted share of $1.76 in 2019.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our consolidated Adjusted EBITDA was $200.0 million and $165.1 million for fiscal 2020 and 2019, respectively, as a result of the factors discussed above.

See Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation of our net loss to Adjusted EBITDA.

Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the fiscal years ended June 30, 2020 and 2019:

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

Fiscal 2020 net sales $ 1,171,478 $ 882,425 $ — $ 2,053,903

Fiscal 2019 net sales $ 1,195,979 $ 908,627 $ — $ 2,104,606

$ change $ (24,501) $ (26,202) n/a $ (50,703)

% change (2.0) % (2.9) % n/a (2.4) %

Fiscal 2020 operating income (loss) $ 95,934 $ 55,333 $ (95,225) $ 56,042

Fiscal 2019 operating income (loss) $ 32,682 $ 58,808 $ (123,983) $ (32,493)

$ change $ 63,252 $ (3,475) $ 28,758 $ 88,535

% change 193.5 % (5.9) % 23.2 % (272.5) %

Fiscal 2020 operating income (loss) margin 8.2 % 6.3 % n/a 2.7 %

Fiscal 2019 operating income (loss) margin 2.7 % 6.5 % n/a (1.5) %

North America

Our net sales in the North America reportable segment in fiscal 2020 were $1.17 billion, a decrease of $24.5 million, or 2.0%, from net sales of $1.20 billion in fiscal 2019.

The decrease in net sales was primarily driven by the strategic decision to no longer support certain lower margin SKUs in order to reduce complexity and increase gross margins as well as a reduction in net sales in relation to divested brands such as our Rudi’s business, Arrowhead Mills ® , Europe’s Best ® and WestSoy ® , partially offset by increased overall demand for our products in reaction to the COVID-19 pandemic during the second half of fiscal 2020.

Operating income in North America in fiscal 2020 was $95.9 million, an increase of $63.3 million, or 193.5%, from $32.7 million in fiscal 2019.

The increase in operating income was the result of increased gross profit in the United States driven by a favorable product mix due to our efforts under the “Get Bigger” and “Get Better” strategy for our brands, efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings, offset in part by increased marketing and advertising expense and variable compensation.

International

Our net sales in the International reportable segment in fiscal 2020 were $882.4 million, an decrease of $26.2 million, or 2.9%, from net sales of $908.6 million in fiscal 2019.

On a constant currency basis, net sales decreased 0.1% from the prior year primarily due to a decline in our United Kingdom Fruit business as a result of impacts from the COVID-19 pandemic and discontinued sales of unprofitable SKUs, partially offset by growth in our plant-based food and beverage products.

Operating income in our International reportable segment for fiscal 2020 was $55.3 million, a decrease of $3.5 million, or 5.9%, from $58.8 million in fiscal 2019.

Excluding the impact of foreign currency movements of $1.8 million, operating income decreased 2.8% for fiscal 2020, compared to the prior year, due to reductions in sales of certain fruit-based products and non-cash impairment charges primarily related to a write-down of certain machinery and equipment in Europe, offset in part by increased gross profit driven by a favorable product mix and increased overall demand for our products in reaction to COVID-19 in Europe.

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.

Corporate and Other expenses are comprised mainly of the 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.

Additionally, productivity and transformation costs, tradename impairment charges and proceeds from insurance claim included within Corporate and Other expenses were $32.7 million, $9.5 million and $3.0 million, respectively, for the fiscal year ended June 30, 2020.

Former Chief Executive Officer Succession Plan expense, net, Productivity and transformation costs and Accounting review and remediation costs, net of insurance proceeds included within Corporate and Other expenses were $30.2 million, $28.4 million and $4.3 million, respectively, for the fiscal year ended June 30, 2019.

Refer to Note 21, Segment Information , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details.

Liquidity and Capital Resources

1 unchanged sentence

See Note 10 , Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Our cash and cash equivalents balance increased by $38.1 million at June 30, 2021 to $75.9 million compared to $37.8 million at June 30, 2020.

Our working capital, which excludes current assets and current liabilities of discontinued operations, was $284.7 million at June 30, 2021, an increase of $28.9 million from $255.9 million at the end of fiscal 2020.

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 $1.1 billion 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 decreased by $10.4 million at June 30, 2022 to $65.5 million compared to $75.9 million at June 30, 2021.

Our working capital, which excludes assets held for sale, was $329.0 million at June 30, 2022, an increase of $44.2 million from $284.7 million at the end of fiscal 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 June 30, 2021, all of the Company’s total cash balance was held outside of the United States.

The Company historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested.

To achieve its cash management objectives, during the fourth quarter of fiscal 2020, the Company reversed its reinvestment assertion for certain international locations representing $93.4 million of undistributed earnings of our foreign subsidiaries .

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

The Company continues to reinvest $809.2 million of undistributed earnings of its foreign subsidiaries and may be subject to additional foreign withholding taxes and U.S.

state income taxes if it reverses its indefinite reinvestment assertion on these foreign earnings in the future.

All other outside basis differences not related to earnings were impractical to account for a t this point in time and are currently considered as being permanent in duration.

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

8 unchanged sentences

Financing activities from continuing operations 212,787 (162,443)

Increase (decrease) in cash from continuing operations 31,952 7,320 (52,160)

Decrease in cash from discontinued operations — (8,509) (19,809)

Increase in cash from continuing operations 4,719 31,952

Effect of exchange rate changes on cash (15,078) 6,148

Net increase (decrease) in cash and cash equivalents $ 38,100 $ (1,755) $ (73,491)

Cash provided by oper ating activities from continuing operations was $196.8 million for the fiscal year ended June 30, 2021, compared to $156.9 million in fiscal 2020 and $39.3 million in fiscal 2019.

Th e increase in cash provided by o perating activities in fiscal 2021 compared to fiscal 2020 resulted primarily from an improvement of $32.8 million in net income adjusted for non-cash charges and due to an increase of $7.0 million of cash provided by working capital accounts.

The increase in cash provided by operating activities in fiscal 2020 compared to fiscal 2019 resulted primarily from an improvement of $141.5 million in net income adjusted for non-cash charges, offset in part by an increase of $23.9 million of cash used in working capital accounts.

The increase in working capital in fiscal 2020 was mainly due to a tax refund receivable of $52.5 million (included as a component of Other current assets in the Consolidated Statement of Cash Flows) resulting from carryback of net operating losses (“NOLs”) under the CARES Act.

C ash used in investing activities from continuing operations was $2.4 million for the fiscal year ended June 30, 2021, a decrease of $42.8 million from $45.1 million in fiscal 2020 primar ily due to proceeds of $10.4 million and $58.8 million from the sale of assets and businesses, respectively, partially offset by increased capital expenditures.

Cash used in investing activities from continuing operations was $45.1 million for fiscal 2020, a decrease of $23.5 million from $68.6 million in fiscal 2019 primarily due to proceeds of $15.8 million from brand divestitures and other investing activities and decreased capital expenditures.

Cash used in financing activities from continuing operations was $162.4 million for the fiscal year ended June 30, 2021 and included $50.0 million of net repayments of our revolving credit facility and $106.1 million of share repurchases.

C ash used in financing activities from continuing operations was $104.5 million for fiscal 2020 and primarily included net repayments of $345.9 million on our term loan and revolving credit facility and $60.2 million of share repurchases offset in part by proceeds of $305.6 million from discontinued operations primarily related to the sale of Tilda.

Net (decrease) increase in cash and cash equivalents $ (10,359) $ 38,100

Cash provided by operating activities from continuing operations was $80.2 million for the fiscal year ended June 30, 2022, compared to $196.8 million in fiscal 2021.

The decrease in cash provided by operating activities in fiscal 2022 compared to fiscal 2021 resulted primarily from a reduction of $49.6 million in net income adjusted for non-cash charges in the current year and lower cash generation of $66.9 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 the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

C ash used in investing activities from continuing operations was $288.3 million for the fiscal year ended June 30, 2022, an increase of $285.9 million from $2.4 million in fiscal 2021 primar ily due to the acquisition of THWR in the current year, partially offset by $12.3 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 $212.8 million for the fiscal year ended June 30, 2022 and included $659.3 million of net borrowings of our Revolver and Term Loans, $410.5 million of share repurchases and $32.7 million of employee shares withheld for taxes.

C ash used in financing activities from continuing operations was $162.4 million for fiscal 2021 and primarily included net repayments of $50.0 million on our revolving credit facility, $106.1 million of share repurchases and $4.3 million of employee shares withheld for taxes.

Operating Free Cash Flow from Continuing Operations

Our operating free cash flow was $125.2 million for the fiscal year ended June 30, 2021, an increase of $29.2 million from the fiscal year ended June 30, 2020.

The increase in operating free cash flow primarily resulted from an improvement in net income adjusted for non-cash items of $32.8 million and cash provided within working capital accounts of $7.0 million partially offset by an increase in our capital expenditures of $10.7 million.

Our operating free cash flow was $40.3 million for fiscal 2022, a decrease of $84.9 million from fiscal 2021.

The decrease in operating free cash flow primarily resulted from lower net income adjusted for non-cash items of $49.6 million and cash used within working capital accounts of $66.9 million, due to a tax refund receivable of $52.5 million that was received in fiscal 2021;

the receivable resulted from the carryback of net operating losses (“NOLs”) under the CARES Act.

This was partially offset by a decrease in our capital expenditures of $31.6 million.

Refer to the Reconciliation of Non-U.S.

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Capital Expenditures

During fiscal 2021, our aggregate capital expenditur es used in continuing operations were $71.6 million.

We expect to spend approximately 3% to 4% of net sales for capital projects in fiscal 2022.

During fiscal 2022, our aggre gate capital expenditures used in continuing operations were $40.0 million, which was lower than expected primarily due to supply chain challenges and labor availability.

We expect to spend approximat ely 3% of net sales for capital projects in fiscal 2023.

Share Repurchase Program

On June 21, 2017, the Company's Board of Directors authorized the repurchase of up to $250.0 million of the Company’s issued and outstanding common stock.

As of June 30, 2021, the Company had $82.4 million of remaining authorization under the 2017 authorization .

During the fiscal year ended June 30, 2021, the Company repurchased 3.1 million shares under the repurchase program for a total of $107.4 million, excluding commissions, at an average price of $34.87 per share.

During the fiscal year ended June 30, 2020, the Company repurchased 2.6 million shares under the repurchase program for a total of $60.2 million, excluding commissions, at an average price of $23.59 per share.

The Company did not repurchase any shares under this program in fiscal 2019.

In August 2021, the Company announced that its Board of Directors approved an additional $300 million share repurchase authorization.

Share repurchases under the 2021 authorization will commence after the 2017 authorization is fully utilized, at the Company’s discretion.

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 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.

Share repurchases under each of the 2021 and 2022 authorizations commenced after the previous authorizations were 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.

The authorizations do not have a stated expiration date.

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.

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 (see Note 21, Related Party Transactions ).

During fiscal 2022, the Company repurchased 10.6 million shares under the repurchase program, inclusive of the shares repurchased from the Selling Stockholders, for a total of $408.9 million, excluding commissions, at an average price of $38.48 per share.

As of June 30, 2022, the Company had $173.5 million of remaining authorization under the share repurchase program.

During fiscal 2021, the Company repurchased 3.1 million shares under the repurchase program for a total of $107.4 million, excluding commissions, at an average price of $34.87 per share.

Of that amount, $1.4 million is included in accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheet as of June 30, 2021 pending settlement of trade.

Reconciliation of Non-U.S.

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GAAP measure.

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.

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.

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.

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.

A reconciliation between reported and adjusted net sales decrease in f iscal 2021 is as follows:

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 adjusted net sales increase (decrease) in f iscal 2022 is as follows:

(amounts in thousands) North America International Hain Consolidated

Net sales - Twelve months ended 6/30/22 $ 1,163,132 $ 728,661 $ 1,891,793

Divestitures and discontinued brands (4,630) (5,052) (9,682)

Acquisitions, divestitures and discontinued brands (55,393) — (55,393)

Impact of foreign currency exchange (1,454) 17,318 15,864

Net sales on a constant currency basis adjusted for divestitures and discontinued brands - Twelve months ended 6/30/21 $ 1,093,415 $ 805,898 $ 1,899,313

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Twelve months ended 6/30/22 $ 1,106,285 $ 745,979 $ 1,852,264

Net sales - Twelve months ended 6/30/21 $ 1,104,128 $ 866,174 $ 1,970,302

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Net sales adjusted for divestitures and discontinued brands - Twelve months ended 6/30/21 $ 1,068,814 $ 790,631 $ 1,859,445

Net sales decline (5.7) % (1.8) % (4.1) %

Impact of divestitures and discontinued brands 4.5 % 8.9 % 6.5 %

Impact of foreign currency exchange (0.5) % (6.3) % (3.0) %

Net sales (decline) growth on a constant currency basis adjusted for divestitures and discontinued brands (1.7) % 0.8 % (0.6) %

A reconciliation between reported and constant currency net sales decrease in fiscal 2020 is as follows:

(amounts in thousands) North America International Hain Consolidated

Net sales - Twelve months ended 6/30/20 $ 1,171,478 $ 882,425 $ 2,053,903

Divestitures and discontinued brands (59,671) (83,173) (142,844)

Impact of foreign currency exchange 2,227 25,244 27,471

Net sales on a constant currency basis adjusted for divestitures and discontinued brands - Twelve months ended 6/30/20 $ 1,114,034 $ 824,496 $ 1,938,530

Net sales - Twelve months ended 6/30/19 $ 1,195,979 $ 908,627 $ 2,104,606

Divestitures and discontinued brands (110,531) (118,647) (229,178)

SKU rationalization (41,885) (8,372) (50,257)

Net sales adjusted for divestitures, discontinued brands and SKU rationalization $ 1,043,563 $ 781,608 $ 1,825,171

Net sales decline (2.0) % (2.9) % (2.4) %

Impact of divestitures and discontinued brands 5.0 % 4.7 % 4.9 %

Impact of SKU rationalization 3.6 % 0.9 % 2.4 %

Net sales increase (decrease) 5.3 % (15.9) % (4.0) %

Impact of acquisitions, divestitures and discontinued brands (1.7) % 8.3 % 2.8 %

Impact of foreign currency exchange (0.1) % 2.0 % 0.8 %

Net sales growth on a constant currency basis adjusted for divestitures, discontinued brands and SKU rationalization 6.8 % 5.5 % 6.2 %

Net sales increase (decrease) on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands 3.5 % (5.6) % (0.4) %

Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss) before income taxes, net interest expense, depreciation and amortization, impairment of long-lived and intangible assets, equity in the earnings of equity-method investees, stock-based compensation, productivity and transformation costs, and other non-recurring items.

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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(amounts in thousands) 2022 2021

Net income (loss) $ 77,364 $ (80,407) $ (183,314)

Net income (loss) from discontinued operations 11,255 (106,041) (129,887)

Net income (loss) from continuing operations $ 66,109 $ 25,634 $ (53,427)

Provision (benefit) for income taxes 41,093 6,205 (3,232)

Interest expense, net 5,880 14,351 19,450

Net income $ 77,873 $ 77,364

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

Net income from continuing operations $ 77,873 $ 66,109

Depreciation and amortization 46,849 49,569

Equity in net loss of equity-method investees 2,902 1,591

Interest expense, net 10,226 5,880

Provision for income taxes 22,716 41,093

Stock-based compensation, net 15,611 15,659

Stock-based compensation expense in connection with Former Chief Executive Officer Succession Plan — — 429

Goodwill impairment — 394 —

Long-lived asset and intangibles impairment

57,920 27,493 33,719

Unrealized currency losses (gains)

752 543 (850)

Productivity and transformation costs

15,863 47,596 39,958

Former Chief Executive Officer Succession Plan expense, net — — 29,727

Unrealized currency (gains) losses (2,259) 752

Litigation and related costs

Litigation expenses 7,883 1,587

Proceeds from insurance claims (196) (592)

Accounting review and remediation costs, net of insurance proceeds — — 4,334

SKU rationalization and inventory write-down (421) 4,175 12,381

Restructuring activities

Plant closure related costs, net 929 58

Productivity and transformation costs 8,803 12,572

Warehouse/manufacturing consolidation and other costs 2,721 11,374

Acquisitions, divestitures and other

Transaction and integration costs, net 14,055 3,291

Gain on sale of assets (9,049) (4,900)

(Gain) loss on sale of business (2,604) 3,564 (534)

Warehouse/manufacturing facility start-up costs 11,374 3,440 17,636

Plant closure related costs 58 2,357 4,734

Litigation and related expenses 1,587 48 1,517

Realized currency loss on repayment of international loans — — 2,706

Gain on sale of businesses — (2,604)

Impairment charges

Inventory write-down (351) (421)

Long-lived asset and intangible impairments 1,903 57,920

Adjusted EBITDA $ 200,616 $ 258,938

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We do not consider operating free cash flow from continuing operations in isolation or as an alternative to financial measures determined in accordance with U.S.

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

A reconciliation from net cash provided by operating activities to operating free cash flow is as follows:

Fiscal Year Ended June 30,

(amounts in thousands) 2022 2021

Cash flow provided by operating activities from continuing operations $ 196,759 $ 156,914 $ 39,333

Purchase of property, plant and equipment (71,553) (60,893) (75,792)

Operating free cash flow provided by (used in) continuing operations $ 125,206 $ 96,021 $ (36,459)

Contractual Obligations

Obligations for all debt instruments, finance and operating leases and other contractual obligations as of June 30, 2021 are as follows:

Payments Due by Period

(amounts in thousands) Total Less than 1 year 1-3 years 3-5 years 5+ years

Long-term debt obligations (1)

$ 237,479 $ 4,618 $ 232,678 $ 107 $ 76

Operating lease obligations (2)

115,797 13,592 27,363 22,227 52,615

Finance lease obligations (2)

610 235 192 107 76

Purchase obligations (3)

234,579 202,768 31,811 — —

Other long term liabilities 467 350 117 — —

Total contractual obligations $ 588,932 $ 221,563 $ 292,161 $ 22,441 $ 52,767

(1) Including principal and interest.

(2) Including interest.

(3) Excludes amounts that may be payable upon termination to co-packers as we are not able to reasonably estimate such amounts.

Net cash provided by operating activities $ 80,241 $ 196,759

Purchases of property, plant and equipment (39,965) (71,553)

Operating free cash flow $ 40,276 $ 125,206

As of June 30, 2022, we had non-current unrecognized tax benefits of $21.9 million for which we are not able to reasonably estimate the timing of future cash flows.

As a result, this amount has not been included in the table above.

We believe that our cash on hand of $75.9 million at June 30, 2021 as well as projected cash flows from operations and availability under our Amended Credit Agreement are sufficient to fund our working capital needs in the ordinary course of business, anticipated fiscal 2022 capital expenditures and other expected cash requirements for at least the next 12 months.

Off Balance Sheet Arrangements

At June 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.

We believe that our cash on hand of $65.5 million at June 30, 2022 as well as projected cash flows from operations and availability under our Credit Agreement are sufficient to fund our working capital needs in the ordinary course of business, anticipated fiscal 2023 capital expenditures and other expected cash requirements for at least the next 12 months.

Contractual Obligations

We are party to contractual obligations involving commitments to make payments to third parties, which impact our short-term and long-term liquidity and capital resource needs.

Our contractual obligations primarily consist of long-term debt and related interest payments, purchase commitments and operating leases.

See Note 7, Leases , and Note 10, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Critical Accounting Estimates

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Our critical accounting policies, including our methodology for estimates made and assumptions used, are as follows:

Revenue Recognition

The Company sells its products through specialty and natural food distributors, supermarkets, natural foods stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience st ores in over 80 cou ntries worldwide.

T he majority of our revenue contracts represent a single performance obligation related to the fulfillment of customer orders for the purchase of our products.

We recognize revenue as performance obligations are fulfilled when control passes to our customers.

Our customer contracts typically contain standard terms and conditions.

In instances where formal written contracts are not in place we consider the customer purchase orders to be contracts based on the criteria outlined in ASC 606, Revenue from Contracts with Customers .

Payment terms and conditions vary by customer and are based on the billing schedule established in our contracts or purchase orders with customers, but we generally provide credit terms to customers ranging from 15-60 days;

therefore, we have determined that our contracts do not include a significant financing component.

Sales to customers generally do not include more than one performance obligation.

When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price.

The standalone selling price for each distinct good is generally determined by directly observable data.

We have determined that we satisfy our performance obligations related to our customer contracts at a point in time, as opposed to over time, and, accordingly, revenue is recognized at a point in time.

Therefore, we do not have any contract balances with our customers recorded on our Consolidated Balance Sheets.

Sales includes shipping and handling charges billed to the customer and are reported net of discounts, trade promotions and sales incentives, consumer coupon programs and other costs, including estimated allowances for returns, allowances and discounts associated with aged or potentially unsalable product, and prompt pay discounts.

Shipping and handling costs are accounted for as a fulfillment activity of our promise to transfer products to our customers and are included in cost of sales line item on the Consolidated Statements of Operations.

Variable Consideration

In addition to fixed contract consideration, many of our contracts include some form of variable consideration.

We offer various trade promotions and sales incentive programs to customers and consumers, such as price discounts, slotting fees, in-store display incentives, cooperative advertising programs, new product introduction fees and coupons.

The expenses associated with these programs are accounted for as reductions to the transaction price of our products and are therefore deducted from our sales to determine reported net sales.

In addition to fixed contract consideration, many of the Company’s contracts include some form of variable consideration.

The Company offers various trade promotions and sales incentive programs to customers and consumers, such as price discounts, slotting fees, in-store display incentives, cooperative advertising programs, new product introduction fees and coupons.

The expenses associated with these programs are accounted for as reductions to the transaction price of products and are therefore deducted from sales to determine reported net sales.

Trade promotions and sales incentive accruals are subject to significant management estimates and assumptions.

The critical assumptions used in estimating the accruals for trade promotions and sales incentives include management’s estimate of expected levels of performance and redemption rates.

Management exercises judgment in developing these assumptions.

The critical assumptions used in estimating the accruals for trade promotions and sales incentives include the Company’s estimate of expected levels of performance and redemption rates.

The Company exercises judgment in developing these assumptions.

These assumptions are based upon historical performance of the retailer or distributor customers with similar types of promotions adjusted for current trends.

The Company regularly reviews and revises, when deemed necessary, estimates of costs to the Company for these promotions and incentives based on what has been incurred by the customers.

The terms of most of our promotion and incentive arrangements do not exceed a year and therefore do not require highly uncertain long-term estimates.

The terms of most of the promotion and incentive arrangements do not exceed a year and therefore do not require highly uncertain long-term estimates.

Settlement of these liabilities typically occurs in subsequent periods primarily through an authorization process for deductions taken by a customer from amounts otherwise due to the Company.

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Actual expenses may differ if the level of redemption rates and performance were to vary from estimates.

During the year ended June 30, 2022, the Company revised its estimates for trade promotion expense incurred in the prior year based on new information that was not available at the time that the June 30, 2021 accrual was established.

This change in estimate was due to unique circumstances, such as the implementation of bracket pricing in North America and less expense incurred from retail resets, both leading to lower-than-expected customer deductions on the outstanding promotional accrual.

This change in estimate caused an increase in net sales of 0.2%.

Valuation of Accounts and Chargeback Receivable

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We apply reserves for delinquent or uncollectible trade receivables based on a specific identification methodology and also apply an additional reserve based on the experience we have with our trade receivables ag ing categories.

As credit losses have been within our expectations in recent years and as no customers represented more than 10% of accounts receivable, net at June 30, 2021, we believe there is no significant or unusual credit exposure at this time.

As credit losses have been within our expectations in recent years and as only one customer represented more than 10% of accounts receivable, net at June 30, 2022, we believe there is no significant or unusual credit exposure at this time.

Based on cash collection history and other statistical analysis, we estimate the amount of unauthorized deductions that our customers have taken that we expect will be collectible and repaid in the near future and record a chargeback receivable.

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As of June 30, 2022, the carrying value of goodwill was $933.8 million.

For the fiscal 2021 impairment analysis, the Company performed the qualitative assessment for all of its reporting units with the exception of the Hain U.S.

and Hain Canada reporting units where a quantitative assessment was performed.

For the fiscal 2022 impairment analysis, the Company performed the qualitative assessment for all of its reporting units with the exception of the United Kingdom and Europe

reporting units where a quantitative assessment was performed.

The estimated fair value of each reporting unit exceeded its carrying value based on the analysis performed.

For the Hain U.S.

and Hain Canada reporting units, the quantitative analysis was performed, and it was found that the estimated fair value of the reporting unit exceeded its carrying value by 110% and 230%, respectively.

For the United Kingdom and Europe reporting units, the quantitative analysis was performed.

Holding all other assumptions used in the 2022 fair value measurement constant, a 100-basis-point increase in the weighted average cost of capital would not result in the carrying value of the reporting units to be in excess of the fair value.

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(i) estimating the royalty rates for each trademark and (ii) applying these royalty rates to a projected net sales stream and discounting the resulting cash flows to determine fair value.

If the carrying value of the indefinite-lived intangible assets exceeds the fair value of the asset, the carrying value is written down to fair value in the period identified.

The result of the annual assessment for the year ended June 30, 2021 indicated that the fair value of the Company’s tradenames exceeded their carrying values and no indicators of impairment were present.

During the second and third quarters of fiscal 2020, the Company determined that indicators of impairment existed in certain of the Company’s indefinite-lived tradenames in association with the sale or discontinuation of certain businesses and brands.

The Company performed interim impairment analyses during the year, and determined that the fair value of certain of the Company’s tradenames was below their carrying value, and therefore an impairment charge of $9.5 million was recognized ( $4.0 million in the North America reportable segment and $5.5 million in the International reportable segment ).

For the fiscal year ended June 30, 2019, a tradename impairment charge of $17.9 million was recognized ( $15.1 million in the North America reportable segment and $2.8 million in the International reportable segment).

If the carrying value of the indefinite-lived intangible assets exceeds the fair value of the assets, the carrying value is written down to fair value in the period identified.

The result of the annual assessment for the year ended June 30, 2022 indicated that the fair value of the Company’s tradenames exceeded their carrying values and no indicators of impairment with one exception that is discussed in Note 8, Goodwill and Other Intangible Assets , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

See also Note 8, Goodwill and Other Intangible Assets , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K, for additional information.

Business Combinations

During the year ended June 30, 2022, the Company completed the acquisition of THWR for total consideration of $260.4 million, net of cash acquired.

The transaction was accounted for under the acquisition method of accounting whereby the total purchase price was allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities.

Accounting for the acquisition of THWR required estimation in determining the fair value of identified intangible assets for acquired customer relationships and tradenames.

Estimation was utilized as it relates to inputs to the valuation techniques used to measure the fair value of these intangible assets as well as the sensitivity of the respective fair values to the underlying assumptions.

The significant assumptions used to estimate the fair value of the acquired intangible assets included discount rates, revenue growth rates, and operating margins.

These assumptions are forward-looking and could be affected by future economic and market conditions.

Stock-based Compensation

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We have deferred tax assets related to foreign net operating losses, primarily in the United Kingdom and to a lesser extent in Belgium, against which we have recorded valuation allowances.

The losses in the United Kingdom were recorded prior to the acquisition of Daniels.

Under current tax law in these jurisdictions, our carryforward losses have no expiration.

During fiscal 2020 and 2019, we recorded a valuation allowance against a majority of our state deferred tax assets and state net operating loss carryforwards as it was not more likely than not that the state tax attributes will be realized.

During fiscal 2020, we recorded a valuation allowance against a majority of our state deferred tax assets and state net operating loss carryforwards as it was not more likely than not that the state tax attributes will be realized.

In fiscal 2021, the Company had positive results in the United States and, thus, state-level taxable income.

This resulted in an expected utilization of certain of the state deferred tax assets which were previously reserved.

Valuation allowances reversed were based on this positive evidence, in addition to other positive evidence, which justified the release of an additional amount of the state.

valuation allowance.

Valuation allowances reversed were based on this positive evidence, in addition to other positive evidence, which justified the release of an additional amount of the state valuation allowance.

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-K

Item 7. Management’s Discussion and Analysis