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Item 2. Management’s Discussion and Analysis

2022-11-08 compared with 2022-05-05 · 161 added, 305 removed, 156 unchanged (75% of the section changed)

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended March 31, 2022 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended September 30, 2022 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

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

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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 operates under two reportable segments:

North America and International.

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

Hain Celestial's food and beverage brands include Celestial Seasonings ® , Clarks™, Cully & Sully ® , Earth’s Best ® , Ella’s Kitchen ® , Frank Cooper’s ® , Garden of Eatin’ ® , Hain Pure Foods ® , Hartley’s ® , Health Valley ® , Imagine ® , Joya ® , Lima ® , Linda McCartney's ® (under license), MaraNatha ® , Natumi ® , New Covent Garden Soup Co.

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 Cuisine ® .

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

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

(2) strengthen our capabilities;

(3) expand profit margins and cash flow;

and (4) reinvigorate profitable topline growth.

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

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

• we are singularly 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.

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

In fiscal year 2022, the Company announced its “Hain 3.0” long-term strategy, to support the Company’s continued evolution to position the Company to be a global health and wellness company with industry-leading topline growth.

The drivers of growth for Hain 3.0, which the Company intends to fund through productivity initiatives, are:

• Distribution,

• Innovation, and

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 very high-growth categories.

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

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

The categories we have identified are called Growth and Fuel:

• The Growth category includes Turbocharge brands and Targeted Investment brands.

Turbocharge brands are leading-share brands in categories that we believe provide the most opportunity for growth.

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.

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

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

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.

The Simplify brands are subscale declining businesses that have limited long-term potential for the Company, and therefore will be managed 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 targets in the market.

As we continue to simplify and stabilize the organization and consolidate sales into fewer priority categories, 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.

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.

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

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.

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, supply chain and logistics 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, driven by well-publicized industry-wide inflation, supply chain and labor challenges.

The Growth category consists of our brands in snacks, tea, baby, yogurt, plant-based meat, non-dairy beverages and personal care.

• The Fuel brands are stable brands that will be leveraged to fuel investment in the Growth brands.

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

We are establishing the foundation and the tools to deliver Hain 3.0 by stabilizing our business, delivering strong margin improvement and continuing to grow our net sales.

Additionally, as part of Hain 3.0, we plan to 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 expect to manage such brands for profit until they are potentially divested, likely over the course of the next several years.

We see momentum in our Growth brands and believe that we are well-positioned for the long term.

As Hain 3.0 progresses, acquisitions are expected to play a role to help us strengthen our position in our priority categories.

Supply Chain Disruptions and Higher Costs

We continue to experience disruption in our supply chain network, including the supply of certain ingredients, packaging, and other sourced materials, which has resulted in higher costs, including escalating transportation and other supply chain costs.

Both the disruptions and higher costs have resulted in higher inventory levels.

We expect this higher cost environment to continue, although we expect these higher costs to be partially mitigated by pricing actions we have implemented to date and further 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 three months ended March 31, 2022, and we continue to face other challenges and risks arising from the war.

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

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 the quarter ended September 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 energy, fuel, and raw material prices.

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

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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®.

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

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

Discontinued Operations

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 entities comprising the Company’s Tilda operating segment and certain other assets.

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

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

See Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of Form 10-K for additional details.

Comparison of Three Months Ended September 30, 2022 to Three Months Ended September 30, 2021

Consolidated Results

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

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended September 30, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

March 31, 2022 March 31, 2021 Dollars Percentage

September 30, 2022 September 30, 2021 Dollars Percentage

Net sales $ 439,351 100.0% $ 454,903 100.0% $ (15,552) (3.4)%

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Interest and other financing expense, net 7,677 1.7% 1,856 0.4% 5,821 313.6%

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

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

Other income, net (1,790) (0.4)% (788) (0.2)% (1,002) 127.2%

Income from operations before income taxes and equity in net loss (income) of equity-method investees 9,936 2.3% 24,479 5.4% (14,543) (59.4)%

Provision for income taxes 2,631 0.6% 4,542 1.0% (1,911) (42.1)%

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

Equity in net loss of equity-method investees 382 0.1% 526 0.1% (144) (27.4)%

Net income $ 6,923 1.6% $ 19,411 4.3% $ (12,488) (64.3)%

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Diluted net income per common share $ 0.08 $ 0.20 $ (0.12) (60.0)%

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

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

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

Net sales for the three months ended September 30, 2022 were $439.4 million, a decrease of $15.6 million, or 3.4%, as compared to $454.9 million in the three months ended September 30, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $3.8 million, or 0.8%, from the prior year quarter due to a decline in the International reportable segment, partially offset by growth in the North America reportable segment.

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

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

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

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

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

Gross profit for the three months ended September 30, 2022 was $94.3 million, a decrease of $11.1 million, or 10.5%, as compared to the prior year quarter.

Additionally, gross profit margin of 21.5% was lower when compared with 23.2% in the prior year quarter.

The decrease in gross profit was driven primarily by the International reportable segment, mainly due to lower net sales in the United Kingdom and Europe operating segments, higher energy and supply chain costs, as well as under absorption of overhead costs at our manufacturing facilities when compared to the prior year period.

The North America reportable segment had an increase in gross profit mainly driven by top-line sales due to pricing increases and cost improvements driven by higher productivity, partly offset by inflation and lower net sales in the Canada operating segment when compared with the prior year quarter.

Selling, General and Administrative Expenses

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

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

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

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

Selling, general and administrative expenses were $75.0 million for the three months ended September 30, 2022, an increase of $1.0 million, or 1.3%, from $74.0 million for the prior year quarter.

The increase was primarily driven by the North America reportable segment and Corporate, with the United States operating segment accounting for the increase in the North America reportable segment due to the acquisition of THWR.

The increase was partially offset by a decrease in selling expenses primarily in the International reportable segment as well as efficiencies gained from the Company's productivity and transformation initiatives.

Amortization of Acquired Intangible Assets

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

Amortization of acquired intangibles was $2.8 million for the three months ended September 30, 2022, an increase of $0.7 million from $2.1 million in the prior year quarter due to the acquisition of THWR in the second quarter of the prior fiscal year.

Productivity and Transformation Costs

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

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

Productivity and transformation costs were $0.8 million for the three months ended September 30, 2022, a decrease of $3.2 million from $4.0 million in the prior year quarter.

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

Operating Income

Operating income for the three months ended March 31, 2022 was $35.2 million compared to $49.6 million in the prior year quarter as a result of the items described above.

Operating income for the three months ended September 30, 2022 was $15.8 million compared to $25.5 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

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

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

Interest and other financing expense, net totaled $7.7 million for the three months ended September 30, 2022, an increase of $5.8 million, or 313.6%, from $1.9 million in the prior year quarter.

The increase resulted primarily from a higher outstanding debt balance driven primarily by the acquisition of THWR in the second quarter of the prior fiscal year as well as share repurchase activity during fiscal 2022.

The increase is also attributable to higher borrowing rates compared to the prior year quarter.

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

Other (Income) Expense, Net

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

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

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

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

Other Income, Net

Other income, net totaled $1.8 million for the three months ended September 30, 2022, compared to $0.8 million in the prior year quarter.

The change was primarily attributable to higher unrealized foreign currency gains, partially offset by lower gain on sale of business.

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

Income from operations before income taxes and equity in net loss of our equity-method investees for the three months ended September 30, 2022 was $9.9 million compared to $24.5 million in the prior year quarter.

The decrease was due to the items discussed above.

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

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

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

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

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

income tax returns.

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

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

Our income tax expense was $2.6 million for the three months ended September 30, 2022 compared to $4.5 million in the prior year quarter.

The effective income tax rate was an expense of 26.5% and 18.6% for the three months ended September 30, 2022 and 2021, respectively.

The effective income tax rate for the three months ended September 30, 2022 increased due to tax expense related to stock-based compensation and uncertain tax positions.

The effective income tax rate for the three months ended September 30, 2021 was mainly decreased due to the reversal of uncertain tax position accruals based on filing and approval of certain elections by the tax authorities.

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

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended September 30, 2022 was a loss of $0.4 million compared to $0.5 million in the prior year quarter.

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

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

Net income for the three months ended September 30, 2022 was $6.9 million, or $0.08 per diluted share, compared to $19.4 million, or $0.20 per diluted share, in the prior year quarter.

The decrease was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $58.7 million and $73.8 million for the three months ended March 31, 2022 and 2021, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

Our Adjusted EBITDA was $36.0 million and $47.3 million for the three months ended September 30, 2022 and 2021, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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

On a constant currency basis, adjusted EBITDA decreased by $8.7 million, or 18.3%, from $47.3 million for the three months ended September 30, 2021 to $38.6 million for the three months ended September 30, 2022.

Segment Results

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

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended September 30, 2022 and 2021:

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

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North America

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

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

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

Our net sales in the North America reportable segment for the three months ended September 30, 2022 were $288.4 million, an increase of $22.9 million, or 8.6%, from net sales of $265.5 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of the THWR acquisition and divestitures, net sales increased by 3.4%.

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

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

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

The decrease in operating income was mainly driven by inflationary and supply chain challenges, such as continued industry-wide distribution and warehousing cost pressures driven by labor shortages, freight carrier availability and other freight cost issues, as well as lower net sales in the Canada operating segment when compared with the prior year quarter.

I nternational

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

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

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

Operating income in North America for the three months ended September 30, 2022 was $24.4 million, an increase of $7.6 million from $16.8 million in the prior year quarter.

The increase in operating income was mainly driven by top-line sales due to pricing increases and cost improvements driven by higher productivity, partly offset by inflation and lower net sales in the Canada operating segment when compared with the prior year quarter.

International

Our net sales in the International reportable segment for the three months ended September 30, 2022 were $151.0 million, a decrease of $38.4 million, or 20.3%, from net sales of $189.4 million in the prior year quarter.

On a constant currency basis, net sales decreased 6.7% from the prior year quarter primarily due to a decline in sales in the Europe operating segment, partially offset by an increase in sales in the Ella's Kitchen UK and United Kingdom operating segments.

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

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

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

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

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

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

The net sales increase in the United Kingdom operating segment was due to higher sales of private label grocery items.

Operating income in our International reportable segment for the three months ended September 30, 2022 was $7.7 million, a decrease of $16.4 million from operating income of $24.1 million for the three months ended September 30, 2021.

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

Corporate and Other

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

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

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

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

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

Consolidated Results

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

Nine Months Ended Change in

March 31, 2022 March 31, 2021 Dollars Percentage

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

Cost of sales 1,096,367 76.4% 1,140,614 75.1% (44,247) (3.9)%

Gross profit 338,416 23.6% 379,035 24.9% (40,619) (10.7)%

Selling, general and administrative expenses 229,875 16.0% 238,471 15.7% (8,596) (3.6)%

Amortization of acquired intangible assets 7,254 0.5% 6,771 0.4% 483 7.1%

Productivity and transformation costs 8,448 0.6% 10,895 0.7% (2,447) (22.5)%

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

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

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

Interest and other financing expense, net 7,672 0.5% 6,820 0.4% 852 12.5%

Other income, net (10,570) (0.7)% (852) (0.1)% (9,718) *

Income from continuing operations before income taxes and equity in net loss of equity-method investees 95,630 6.7% 59,846 3.9% 35,784 59.8%

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

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

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

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

Net income $ 74,831 5.2% $ 36,879 2.4% $ 37,952 102.9%

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

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

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

Diluted net income per common share $ 0.79 $ 0.36 $ 0.43 119.4%

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

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

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

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

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

Gross profit margin was 23.6% of net sales, compared to 24.9% in the prior year comparable period.

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

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

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

The decrease in gross profit in the Europe and United Kingdom operating segments was due to lower net sales and higher delivery and warehousing costs while the increased gross profit in the Ella's Kitchen UK operating segment was due to higher net sales than the prior year period due to a slow-down in consumer demand for baby food in the prior year period as a result of the COVID-19 pandemic stay-at-home requirements which negatively impacted prior year net sales.

Selling, General and Administrative Expenses

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

The decrease was driven by a decrease in the International and North America reportable segments, partially offset by an increase in Corporate and Other as a result of higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR, advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described in Note 17, Commitments and Contingencies .

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

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

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $7.3 million for the nine months ended March 31, 2022, an increase of $0.5 million from $6.8 million in the prior year comparable period due to the acquisition of THWR in the current fiscal year, partially offset by lower amortization in the current year period as a result of prior year dispositions that occurred in the later part of fiscal 2021.

Productivity and Transformation Costs

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

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

Long-lived Asset and Intangibles Impairment

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

Duri ng the nine months ended March 31, 2021, the Company recognized a pre-tax impairment charge of $57.7 million primarily related to a reduction in the carrying value to the estimated fair value, less costs to sell, for the United Kingdom fruit business (see Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q).

Operating Income

Operating income for the nine months ended March 31, 2022 was $92.7 million compared to $65.8 million in the prior year comparable period as a result of the items described above.

Interest and Other Financing Expense, Net

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

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

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

Other Income, Net

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

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

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

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

The increase was due to the items discussed above.

Provision for Income Taxes

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

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

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

The effective income tax rate from continuing operations for the nine months ended March 31, 2022 was impacted by the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to acquisition of THWR, the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of fiscal year 2021 U.S.

income tax returns.

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

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2022 was $1.4 million compared to $1.0 million in the prior year comparable period.

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

Net Income from Continuing Operations

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

The change was attributable to the factors noted above.

Net Income from Discontinued Operations, Net of Tax

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

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

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

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

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

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $165.2 million and $190.8 million for the nine months ended March 31, 2022 and 2021, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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

Segment Results

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

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

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

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

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

% change 1.8 % (15.0) % n/a (5.6) %

Operating income (loss)

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

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

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

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

Operating income margin

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

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

North America

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

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

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

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

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

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

I nternational

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

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

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

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

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

In addition, the International reportable segment incurred lower selling, general and administrative expenses for the reasons noted above.

Corporate and Other

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

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

Our operating expenses in Corporate and Other for the nine months ended March 31, 2022 were $49.5 million, an increase of $2.0 million, from $47.5 million in the prior year period.

This change was primarily related to higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR and advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described in Note 17, Commitments and Contingencies , partially offset by lower employee-related expenses.

Our operating loss in Corporate and Other for the three months ended September 30, 2022 was $16.3 million, an increase of $0.9 million, from operating loss of $15.4 million for the three months ended September 30, 2021.

This change was primarily due to higher general and administrative expenses mainly on account of higher salaries, wages, and benefits.

Refer to Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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

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

Amended and Restated Credit Agreement

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

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

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

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

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

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

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

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

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

In addition to obligations under the Credit Agreement, we are party to other contractual obligations involving commitments to make payments to third parties, including purchase commitments and lease obligations, which impact our short-term and long-term liquidity and capital resource needs.

See Note 7, Leases

Our cash and cash equivalents balance decreased $13.7 million at September 30, 2022 to $51.8 million as compared to $65.5 million at June 30, 2022.

Our working capital was $336.4 million at September 30, 2022, an increase of $7.4 million from $329.0 million at the end of fiscal 2022.

Additionally, our total debt increased by $10.1 million at September 30, 2022 to $898.8 million as compared to $888.6 million at June 30, 2022 as a result of increased net borrowings to manage working capital.

As of September 30, 2022, $188.2 million was available under the Credit Agreement as compared to $204.0 million available as of June 30, 2022.

The Company was in compliance with all covenants at September 30, 2022.

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

As of March 31, 2022, substantially all of the total cash balance from continuing operations was held outside of the United States.

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

As of September 30, 2022, substantially all of the total cash balance from operations was held outside of the United States.

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

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

As of September 30, 2022, all of our investments were expected to mature in less than three months.

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

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

Nine Months Ended March 31, Change in

Three Months Ended September 30, Change in

(amounts in thousands) 2022 2021 Dollars

Cash flows provided by (used in):

Operating activities from continuing operations $ 99,186 $ 146,517 $ (47,331)

Investing activities from continuing operations (284,271) (25,968) (258,303)

Financing activities from continuing operations 172,858 (110,956) 283,814

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

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

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

This decrease versus the prior period resulted primarily from a reduction of $18.1 million in net income adjusted for non-cash charges in the current period and lower cash generation of $29.2 million from our working capital accounts which was mainly due to a refund of $53.8 million received by the Company in the prior year from Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

Cash used in investing activities from continuing opera tions was $284.3 million for the nine months ended March 31, 2022, an increase of $258.3 million from $26.0 million in the prior year period primarily due to the acquisition of THWR in the current year, partially offset by $10.8 million in proceeds from the sale of assets in the current year, which was primarily related to the sale of undeveloped land plots in Boulder, Colorado .

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

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

Operating Free Cash Flow from Continuing Operations

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

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

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

See the Reconciliation of Non-U.S.

Cash flows (used in) provided by:

Operating activities $ (5,116) $ 37,586 $ (42,702)

Investing activities (6,928) (18,054) 11,126

Financing activities 9,824 (63,515) 73,339

Decrease in cash and cash equivalents (2,220) (43,983) 41,763

Effect of exchange rate changes on cash and cash equivalents (11,498) (2,926) (8,572)

Net decrease in cash and cash equivalents $ (13,718) $ (46,909) $ 33,191

Cash used in operating activities was $5.1 million for the three months ended September 30, 2022, a decrease of $42.7 million from cash provided by operating activities of $37.6 million in the prior year period.

This decrease versus the prior year period resulted primarily from lower cash generation of $31.4 million from our working capital accounts which was mainly due to higher inventory balance and lower accounts payable and reduction of $11.4 million in net income adjusted for non-cash charges in the current period.

Cash used in investing activities was $6.9 million for the three months ended September 30, 2022, a decrease of $11.1 million from $18.1 million in the prior year period primarily due to lower capital expenditure in the current period due to phasing of capital projects.

During the three months ended September 30, 2022, $7.2 million of capital expenditures were incurred on account of capital projects primarily related to the United States and the United Kingdom operating segments.

Cash provided by financing activities was $9.8 million for the three months ended September 30, 2022, an increase in cash provided of $73.3 million compared to $63.5 million of cash used in the prior year period.

The increase in cash provided by financing activities was primarily due to no share repurchases under our repurchase program during the three months ended September 30, 2022.

Operating Free Cash Flows

Our operating free cash flows were negative $12.3 million for the three months ended September 30, 2022, a decrease of $32.1 million from $19.8 million in the three months ended September 30, 2021.

This decrease versus the prior year period resulted primarily from a decrease in cash flows from operations of $42.7 million driven by the reasons explained above.

The decrease was partially offset by $10.6 million due to lower property, plant and equipment purchases in the current period.

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 from our net cash provided by operating activities from continuing operations to operating free cash flow from continuing operations.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash provided by operating activities to operating free cash flows.

Share Repurchase Program

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.

In January 2022, the Company’s Board of Directors authorized the repurchase of up to $200.0 million of the Company’s issued and outstanding common stock.

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

The 2017 and 2021 authorizations have been fully utilized.

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

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

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

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

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

During the nine months

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

During the three months ended September 30, 2022, the Company repurchased no shares under the repurchase program.

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

Reconciliation of Non-U.S.

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GAAP measure and the most directly comparable U.S.

GAAP measure, an explanation of why our management and Board of Directors believe the non-U.S.

GAAP measure, an explanation of why our management and

Board of Directors believe the non-U.S.

GAAP measure provides useful information to investors and any additional purposes for which our management and Board of Directors use the non-U.S.

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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.

To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S.

We believe that net sales adjusted for the impact of foreign currency 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.

To present net sales adjusted for the impact of foreign currency, current period net sales for entities reporting in currencies other than the U.S.

Dollar are translated into U.S.

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

Net Sales - Acquisitions, Divestitures and Discontinued Brands

Net Sales - Adjusted for the Impact of Acquisitions, Divestitures and Discontinued Brands

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

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

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

To present net sales adjusted for the impact of acquisitions, the net sales of an acquired business are excluded from fiscal quarters constituting or falling within the current period and prior period where the applicable fiscal quarter in the prior period did not include the acquired business for the entire quarter.

To present net sales adjusted for the impact of divestitures and discontinued brands, the net sales of a divested business or discontinued brand are excluded from all periods.

A reconciliation between reported net sales and net sales adjusted for the impact of foreign currency, acquisitions, divestitures and discontinued brands is as follows:

(amounts in thousands) North America International Hain Consolidated

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

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

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

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

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

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

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

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

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

Impact of foreign currency exchange — % 3.6 1.5 %

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

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

Net sales - Three months ended September 30, 2022 $ 288,396 $ 150,955 $ 439,351

Acquisitions, divestitures, and discontinued brands (16,006) — (16,006)

Impact of foreign currency exchange 1,068 25,786 26,854

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

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

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended September 30, 2022 $ 273,458 $ 176,741 $ 450,199

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

Divestitures and discontinued brands (949) — (949)

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

Net sales adjusted for divestitures and discontinued brands - Three months ended September 30, 2021 $ 264,576 $ 189,378 $ 453,954

Net sales growth (decline) 8.6 % (20.3) % (3.4) %

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Adjusted EBITDA

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

consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains or losses on sales of assets and businesses, inventory write-downs, impairment of long-lived assets and intangibles and other adjustments.

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

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

executive compensation.

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

Adjusted EBITDA is a non-U.S.

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

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

Three Months Ended September 30,

(amounts in thousands) 2022 2021

Net income $ 6,923 $ 19,411

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

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

Depreciation and amortization 11,970 10,855

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

Equity in net loss of equity-method investees 382 526

Interest expense, net 7,279 1,146

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Stock-based compensation, net 3,994 4,287

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

Unrealized currency gains (1,711) (1,023)

Litigation and related costs

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Transaction and integration costs, net 1,367 (231)

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

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

Impairment charges

Inventory write-down — — (46) 311

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

Gain on sale of assets (40) (446)

Adjusted EBITDA $ 36,029 $ 47,316

Operating Free Cash Flow from Continuing Operations

Adjusted EBITDA - Constant Currency Presentation

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

To present this information for historical periods, current period adjusted EBITDA for entities reporting in currencies other than the U.S.

Dollar are translated into U.S.

Dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year.

A reconciliation between adjusted EBITDA and constant currency adjusted EBITDA is as follows:

(amounts in thousands) Hain Consolidated

Adjusted EBITDA - Three months ended September 30, 2022 $ 36,029

Impact of foreign currency exchange 2,619

Adjusted EBITDA on a constant currency basis - Three months ended September 30, 2022 $ 38,648

Adjusted EBITDA - Three months ended September 30, 2021 $ 47,316

Operating Free Cash Flows

In our internal evaluations, we use the non-U.S.

GAAP financial measure “Operating Free Cash Flow from continuing operations.” The difference between Operating Free Cash Flow from continuing operations and cash flow provided by or used in operating activities from continuing operations, which is the most comparable U.S.

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

Since capital spending is essential to maintaining our operational capabilities, we believe that it is a recurring and

necessary use of cash.

GAAP financial measure “Operating Free Cash Flows.” The difference between Operating Free Cash Flows from continuing operations and cash flows provided by or used in operating activities, which is the most comparable U.S.

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

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

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

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

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 from continuing operations to Operating Free Cash flow from continuing operations is as follows:

Nine Months Ended March 31,

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

We do not consider Operating Free Cash Flows in isolation or as an alternative to financial measures determined in accordance with U.S.

A reconciliation from cash flows (used in) provided by operating activities to Operating Free Cash Flows is as follows:

Three Months Ended September 30,

(amounts in thousands) 2022 2021

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

Net cash (used in) provided by operating activities $ (5,116) $ 37,586

Purchases of property, plant and equipment (7,215) (17,810)

Operating free cash flow from continuing operations $ 65,247 $ 93,455

Off-Balance Sheet Arrangements

At March 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K that have had, or are likely to have, a material current or future effect on our consolidated financial statements.

Operating free cash flows $ (12,331) $ 19,776

We believe that our cash on hand of $51.8 million at September 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.

Critical Accounting Estimates

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however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied.

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

The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to variable consideration, valuation of accounts and chargeback receivable, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets.

The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, from which there have been no material changes.

Recent Accounting Pronouncements

Refer to Note 2, Basis of Presentation , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

There were no recently adopted accounting pronouncements or recently issued accounting pronouncements not yet effective that the Company believes will have a significant impact on its consolidated financial statements.

Certain of our product lines have seasonal fluctuations.

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As such, our results of operations and our cash flows for any particular quarter are not indicative of the results we expect for the full year, and our historical seasonality may not be indicative of future quarterly results of operations.

In recent years, net sales and diluted earnings per share in the first fiscal quarter have typically been the lowest of our four quarters.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis