HAIN CELESTIAL GROUP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 2022 AND JUNE 30, 2022 (In thousands, except par values) September 30, June 30, 2022 2022 ASSETS Current assets: Cash and cash equivalents $ 51,794 $ 65,512 Accounts receivable, less allowance for doubtful accounts of $ 1,910 and $ 1,731 , respectively 172,692 170,661 Inventories 315,882 308,034 Prepaid expenses and other current assets 53,499 54,079 Assets held for sale 1,840 1,840 Total current assets 595,707 600,126 Property, plant and equipment, net 281,540 297,405 Goodwill 912,278 933,796 Trademarks and other intangible assets, net 463,161 477,533 Investments and joint ventures 13,827 14,456 Operating lease right-of-use assets, net 115,517 114,691 Other assets 34,960 20,377 Total assets $ 2,416,990 $ 2,458,384 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 157,916 $ 174,765 Accrued expenses and other current liabilities 91,906 86,833 Current portion of long-term debt 7,657 7,705 Total current liabilities 257,479 269,303 Long-term debt, less current portion 891,123 880,938 Deferred income taxes 97,813 95,044 Operating lease liabilities, noncurrent portion 109,858 107,481 Other noncurrent liabilities 19,322 22,450 Total liabilities 1,375,595 1,375,216 Commitments and contingencies (Note 16) Stockholders’ equity: Preferred stock - $ .01 par value, authorized 5,000 shares; issued and outstanding: none — — Common stock - $ .01 par value, authorized 150,000 shares; issued: 111,114 and 111,090 shares, respectively; outstanding: 89,316 and 89,302 shares, respectively 1,112 1,111 Additional paid-in capital 1,207,120 1,203,126 Retained earnings 776,021 769,098 Accumulated other comprehensive loss ( 216,944 ) ( 164,482 ) 1,767,309 1,808,853 Less: Treasury stock, at cost, 21,798 and 21,788 shares, respectively ( 725,914 ) ( 725,685 ) Total stockholders’ equity 1,041,395 1,083,168 Total liabilities and stockholders’ equity $ 2,416,990 $ 2,458,384 See notes to consolidated financial statements. 3 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (In thousands, except per share amounts) Three Months Ended September 30, 2022 2021 Net sales $ 439,351 $ 454,903 Cost of sales 345,016 349,485 Gross profit 94,335 105,418 Selling, general and administrative expenses 74,951 73,989 Amortization of acquired intangible assets 2,788 2,095 Productivity and transformation costs 773 3,983 Proceeds from insurance claim — ( 196 ) Operating income 15,823 25,547 Interest and other financing expense, net 7,677 1,856 Other income, net ( 1,790 ) ( 788 ) Income from operations before income taxes and equity in net loss of equity-method investees 9,936 24,479 Provision for income taxes 2,631 4,542 Equity in net loss of equity-method investees 382 526 Net income $ 6,923 $ 19,411 Net income per common share: Basic $ 0.08 $ 0.20 Diluted $ 0.08 $ 0.20 Shares used in the calculation of net income per common share: Basic 89,307 97,121 Diluted 89,493 97,438 See notes to consolidated financial statements. 4 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (In thousands) Three Months Ended September 30, 2022 September 30, 2021 Pre-tax amount Tax (expense) benefit After-tax amount Pre-tax amount Tax (expense) benefit After-tax amount Net income $ 6,923 $ 19,411 Other comprehensive loss: Foreign currency translation adjustments before reclassifications ( 67,149 ) — ( 67,149 ) ( 22,805 ) — ( 22,805 ) Change in deferred gains on cash flow hedging instruments 14,231 ( 3,638 ) 10,593 44 ( 9 ) 35 Change in deferred losses on fair value hedging instruments ( 272 ) 69 ( 203 ) — — — Change in deferred gains on net investment hedging instruments 5,773 ( 1,476 ) 4,297 2,287 ( 480 ) 1,807 Total other comprehensive loss $ ( 47,417 ) $ ( 5,045 ) $ ( 52,462 ) $ ( 20,474 ) $ ( 489 ) $ ( 20,963 ) Total comprehensive loss $ ( 45,539 ) $ ( 1,552 ) See notes to consolidated financial statements. 5 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 (In thousands, except par values) Common Stock Additional Accumulated Other Amount Paid-in Retained Treasury Stock Comprehensive Shares at $ .01 Capital Earnings Shares Amount Loss Total Balance at June 30, 2022 111,090 $ 1,111 $ 1,203,126 $ 769,098 21,788 $ ( 725,685 ) $ ( 164,482 ) $ 1,083,168 Net income 6,923 6,923 Other comprehensive loss ( 52,462 ) ( 52,462 ) Issuance of common stock pursuant to stock-based compensation plans 24 1 1 Employee shares withheld for taxes 10 ( 229 ) ( 229 ) Stock-based compensation expense 3,994 3,994 Balance at September 30, 2022 111,114 $ 1,112 $ 1,207,120 $ 776,021 21,798 $ ( 725,914 ) $ ( 216,944 ) $ 1,041,395 See notes to consolidated financial statements. 6 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (In thousands, except par values) Common Stock Additional Accumulated Other Amount Paid-in Retained Treasury Stock Comprehensive Shares at $ .01 Capital Earnings Shares Amount Income (Loss) Total Balance at June 30, 2021 109,507 $ 1,096 $ 1,187,530 $ 691,225 10,438 $ ( 283,957 ) $ ( 73,011 ) $ 1,522,883 Net income 19,411 19,411 Other comprehensive loss ( 20,963 ) ( 20,963 ) Issuance of common stock pursuant to stock-based compensation plans 61 — — — Employee shares withheld for taxes 29 ( 1,175 ) ( 1,175 ) Repurchase of common stock 4,525 ( 175,687 ) ( 175,687 ) Stock-based compensation expense 4,287 4,287 Balance at September 30, 2021 109,568 $ 1,096 $ 1,191,817 $ 710,636 14,992 $ ( 460,819 ) $ ( 93,974 ) $ 1,348,756 See notes to consolidated financial statements. 7 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (In thousands) Three Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,923 $ 19,411 Adjustments to reconcile net income from operations to net cash (used in) provided by operating activities: Depreciation and amortization 11,970 10,855 Deferred income taxes ( 1,497 ) ( 2,105 ) Equity in net loss of equity-method investees 382 526 Stock-based compensation, net 3,994 4,287 Gain on sale of assets ( 60 ) ( 276 ) Other non-cash items, net ( 1,457 ) ( 1,093 ) (Decrease) increase in cash attributable to changes in operating assets and liabilities: Accounts receivable ( 9,589 ) ( 9,443 ) Inventories ( 16,907 ) 2,277 Other current assets 2,541 900 Other assets and liabilities 1,348 ( 1,566 ) Accounts payable and accrued expenses ( 2,764 ) 13,813 Net cash (used in) provided by operating activities ( 5,116 ) 37,586 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment ( 7,215 ) ( 17,810 ) Investments and joint ventures, net 191 ( 408 ) Proceeds from sale of assets 96 164 Net cash used in investing activities ( 6,928 ) ( 18,054 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under bank revolving credit facility 80,000 120,000 Repayments under bank revolving credit facility ( 69,875 ) ( 5,000 ) Payments of other debt, net ( 72 ) ( 237 ) Share repurchases — ( 177,103 ) Employee shares withheld for taxes ( 229 ) ( 1,175 ) Net cash provided by (used in) financing activities 9,824 ( 63,515 ) Effect of exchange rate changes on cash ( 11,498 ) ( 2,926 ) Net decrease in cash and cash equivalents ( 13,718 ) ( 46,909 ) Cash and cash equivalents at beginning of period 65,512 75,871 Cash and cash equivalents at end of period $ 51,794 $ 28,962 See notes to consolidated financial statements. 8 Table of Contents THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except par values and per share data) 1. BUSINESS The Hain Celestial Group, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”), was founded in 1993 and is headquartered in Lake Success, New York. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet. The Company continues to be a leading marketer, manufacturer and seller of organic and natural, “better-for-you” products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience. The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes. 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. Acquisition 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 ® . See Note 4, Acquisition, for details. 2. BASIS OF PRESENTATION The Company’s unaudited consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated companies in which the Company exerts significant influence, but which it does not control, are accounted for under the equity method of accounting. As such, consolidated net income includes the Company's equity in the current earnings or losses of such companies. The Company's unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “Form 10-K”). The amounts as of and for the periods ended June 30, 2022 are derived from the Company’s audited annual financial statements. The unaudited consolidated financial statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair presentation for interim periods. Operating results for the three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023. Please refer to the Notes to the Consolidated Financial Statements as of June 30, 2022 and for the fiscal year then ended included in the Form 10-K for information not included in these condensed notes. All amounts in the unaudited consolidated financial statements, notes and tables have been rounded to the nearest thousand, except par values and per share amounts, unless otherwise indicated. Significant Accounting Policies The Company's significant accounting policies are described in Note 2, Summary of Significant Accounting Policies and Practices , in the Notes to the Consolidated Financial Statements in the Form 10-K. Included herein are certain updates to those policies. Transfer of Financial Assets The Company accounts for transfers of financial assets, such as non-recourse accounts receivable financing arrangements, when the Company has surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred and any other relevant considerations. The Company has non-recourse financing arrangements in which eligible receivables are sold to third-party buyers in exchange for cash. The Company transferred accounts receivable in their entirety to the buyers and satisfied all of the conditions to re port the transfer of financial assets in their entirety as a sale. The principal amount of receivables sold under these arrangements w as $ 83,659 a nd $ 22,889 during the three months ended September 30, 2022 and 2021, 9 Table of Contents respectively. The incremental cost of financing receivables under these arrangements is included in selling, general and administrative expenses on the Company’s Consolidated Statements of Operations. The proceeds from the sale of receivables are included in cash used in operating activities on the Consolidated Statements of Cash Flows. 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net income per share utilized to calculate earnings per share on the Consolidated Statements of Operations: Three Months Ended September 30, 2022 2021 Numerator: Net income $ 6,923 $ 19,411 Denominator: Basic weighted average shares outstanding 89,307 97,121 Effect of dilutive stock options, unvested restricted stock and unvested restricted share units 186 317 Diluted weighted average shares outstanding 89,493 97,438 There were 489 and nil restricted stock awards excluded from our calculation of diluted net income per sha re for the three months ended September 30, 2022 and 2021, respectively, as such awards were anti-dilutive. Additionally, 298 and 1,299 stock-based awards outstanding at September 30, 2022 and 2021, respectively, were excluded from the calculation of diluted net income per share for the three months ended September 30, 2022 and 2021, respectively, as such awards were contingently issuable based on market or performance conditions, and such conditions had not been achieved during the respective periods. Share Repurchase Program In January 2022, the Company's Board of Directors authorized the repurchase of up to $ 200,000 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 current 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. During the three months ended September 30, 2022, the Company did not repurchase any shares under the repurchase program. As of September 30, 2022, the Company had $ 173,514 of remaining authorization under the share repurchase program. During the three months ended September 30, 2021, the Company repurchased 4,525 shares under the repurchase program for a total of $ 175,597 , excluding commissions, at an average price of $ 38.80 per share. Repurchases made during the three months ended September 30, 2021, were made under a previous Board of Directors authorization. 4. ACQUISITION That's How We Roll On December 28, 2021, the Company acquired all outstanding stock of THWR, the producer and marketer of ParmCrisps ® and Thinsters ® , deepening the Company's position in the snacking category. Consideration for the transaction consisted of cash, net of cash acquired, totaling $ 260,424 . Of the total consideration, $ 259,985 was paid with the remaining $ 439 payable as of September 30, 2022. The ac quisition was funded with borrowings under the Credit Agreement (as defined in Note 9, Debt and Borrowings ). Results of THWR are included in the United States operating segment, a component of the North America reportable segment. THWR's net sales included in our consolidated results were 3.6 % of consolidated net sales for the three months ended September 30, 2022. The following table provides unaudited pro forma results of operations had the acquisition been completed at the beginning of fiscal 2022. The pro forma information reflects certain adjustments related to the acquisition but does not reflect any potential operating efficiencies or cost savings that may result from the acquisition. Accordingly, this information has been provided for illustrative 10 Table of Contents purposes only and does not purport to be indicative of the actual results that would have been achieved by the Company for the periods presented or that will be achieved by the combined company in the future. The pro forma information has been adjusted to give effect to items that are directly attributable to the transactions and are expected to have a continuing impact on the combined results. Unaudited supplemental pro forma information Three Months Ended September 30, 2022 September 30, 2021 Net sales $ 439,351 $ 485,196 Net income from operations $ 6,923 $ 19,425 Diluted net income per common share from operations $ 0.08 $ 0.20 The Company's acquisition is described in more detail in Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements in the Form 10-K. 5 . INVENTORIES Inventories consisted of the following: September 30, 2022 June 30, 2022 Finished goods $ 189,757 $ 202,544 Raw materials, work-in-progress, and packaging 126,125 105,490 $ 315,882 $ 308,034 11 Table of Contents 6. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consisted of the following: September 30, 2022 June 30, 2022 Land $ 10,697 $ 11,216 Buildings and improvements 47,370 51,849 Machinery and equipment 285,941 296,398 Computer hardware and software 62,682 65,680 Furniture and fixtures 20,176 23,522 Leasehold improvements 52,521 54,999 Construction in progress 32,780 27,200 512,167 530,864 Less: Accumulated depreciation and impairment 230,627 233,459 $ 281,540 $ 297,405 Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 8,067 and $ 7,408 , respectively. A facility in the United States was held for sale as of September 30, 2022 with a net carrying amount of $ 1,840 . 7. LEASES The Company leases office space, warehouse and distribution facilities, manufacturing equipment and vehicles primarily in North America and Europe. The Company determines if an arrangement is or contains a lease at inception. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company’s lease agreements generally do not contain residual value guarantees or material restrictive covenants. Some of the Company’s leases contain variable lease payments, which are expensed as incurred unless those payments are based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and included in the measurement of the lease liability; thereafter, changes to lease payments due to rate or index changes are recorded as variable lease expense in the period incurred. The Company does not have any related party leases, and sublease transactions are de minimis. 12 Table of Contents The components of lease expenses for the three months ended September 30, 2022 and 2021 were as follows: Three Months Ended September 30, 2022 September 30, 2021 Operating lease expenses $ 4,975 $ 3,752 Finance lease expenses 69 70 Variable lease expenses 180 403 Short-term lease expenses 496 1,365 Total lease expenses $ 5,720 $ 5,590 Supplemental balance sheet information related to leases was as follows: Leases Classification September 30, 2022 June 30, 2022 Assets Operating lease ROU assets, net Operating lease right-of-use assets, net $ 115,517 $ 114,691 Finance lease ROU assets, net Property, plant and equipment, net 387 413 Total leased assets $ 115,904 $ 115,104 Liabilities Current Operating Accrued expenses and other current liabilities $ 12,566 $ 13,154 Finance Current portion of long-term debt 124 149 Non-current Operating Operating lease liabilities, noncurrent portion 109,858 107,481 Finance Long-term debt, less current portion 277 278 Total lease liabilities $ 122,825 $ 121,062 Additional information related to leases is as follows: Three Months Ended September 30, 2022 September 30, 2021 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,968 $ 3,745 Operating cash flows from finance leases $ 4 $ 5 Financing cash flows from finance leases $ 52 $ 60 ROU assets obtained in exchange for lease obligations: Operating leases $ 7,143 $ 319 Finance leases $ 26 $ — Weighted average remaining lease term: Operating leases 10.2 years 9.6 years Finance leases 4.1 years 4.1 years Weighted average discount rate: Operating leases 4.5 % 3.3 % Finance leases 4.3 % 4.2 % 13 Table of Contents Maturities of lease liabilities as of September 30, 2022 were as follows: Fiscal Year Operating leases Finance leases Total 2023 (remainder of year) $ 12,533 $ 115 $ 12,648 2024 17,229 90 17,319 2025 15,378 89 15,467 2026 14,893 68 14,961 2027 14,738 53 14,791 Thereafter 82,318 25 82,343 Total lease payments 157,089 440 157,529 Less: Imputed interest 34,665 39 34,704 Total lease liabilities $ 122,424 $ 401 $ 122,825 8. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The following table provides the changes in the carrying value of goodwill by reportable segment: North America International Total Balance as of June 30, 2022 $ 695,715 $ 238,081 $ 933,796 Translation and other adjustments, net 3,468 ( 24,986 ) ( 21,518 ) Balance as of September 30, 2022 $ 699,183 $ 213,095 $ 912,278 There were no events or circumstances that warranted an interim impairment test for goodwill during the three months ended September 30, 2022 or 2021. Other Intangible Assets The following table includes the gross carrying amount and accumulated amortization, where applicable, for intangible assets, excluding goodwill: September 30, 2022 June 30, 2022 Non-amortized intangible assets: Trademarks and tradenames $ 366,368 $ 379,466 Amortized intangible assets: Other intangibles 195,165 199,448 Less: Accumulated amortization ( 98,372 ) ( 101,381 ) Net amortized intangible assets 96,793 98,067 Net other intangible assets $ 463,161 $ 477,533 There were no events or circumstances that warranted an interim impairment test for indefinite-lived intangible assets during the three months ended September 30, 2022 or 2021. Amortized intangible assets, which are deemed to have a finite life, primarily consist of customer relationships, trademarks and tradenames and are amortized over their estimated useful lives of 7 to 25 years. Amortization expense included in the Consolidated Statements of Operations was as follows: Three Months Ended September 30, 2022 2021 Amortization of acquired intangibles $ 2,788 $ 2,095 Expected amortization expense over the next five fiscal years is as follows: 14 Table of Contents Fiscal Year Ending June 30, 2023 (remainder of year) 2024 2025 2026 2027 Estimated amortization expense $ 8,108 $ 8,679 $ 7,812 $ 7,416 $ 7,319 The weighted average remaining amortization period of amortized intangible assets is 14.2 years. 9. DEBT AND BORROWINGS Debt and borrowings consisted of the following: September 30, 2022 June 30, 2022 Revolving credit facility $ 605,000 $ 593,000 Term loans 294,375 296,250 Less: Unamortized issuance costs ( 1,043 ) ( 1,105 ) Other borrowings (1) 448 498 898,780 888,643 Short-term borrowings and current portion of long-term debt (2) 7,657 7,705 Long-term debt, less current portion $ 891,123 $ 880,938 (1) Includes $ 401 ( June 30, 2022 : $ 427 ) of finance lease obligations as discussed in Note 7, Leases. (2) Includes $ 124 (June 30, 2022: $ 149 ) of short-term finance lease obligations as discussed in Note 7, Leases. Amended and Restated Credit Agreement On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for senior secured financing of $ 1,100,000 in the aggregate, consisting of (1) $ 300,000 in aggregate principal amount of term loans (the "Term Loans") and (2) an $ 800,000 senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $ 440,000 U.S. revolving credit facility and $ 360,000 global revolving credit facility) (the "Revolver"). Both the Revolver and the Term Loans mature on December 22, 2026. As of September 30, 2022, there were $ 605,000 of loans under the Revolver, $ 294,375 of Term Loans, and $ 6,769 letters of credit outstanding under the Credit Agreement. The Credit Agreement provides that loans will bear interest at rates based on (a) the Eurodollar Rate plus a rate ranging from 0.875 % to 1.75 % per annum or (b) the Base Rate plus a rate ranging from 0.00 % to 0.75 % per annum, the relevant rate being the Applicable Rate. The Applicable Rate will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement. Swing Line Loans and Global Swing Line Loans denominated in U.S. Dollars will bear interest at the Base Rate plus the Applicable Rate, and Global Swing Line Loans denominated in foreign currencies shall bear interest based on (a) the Euro Short Term Rate, or €STR, in the case of such loans denominated in Euros plus the Applicable Rate, (b) the Sterling Overnight Index Average Reference Rate, or SONIA, in the case of such loans denominated in Sterling plus the Applicable Rate or (c) the Canadian Prime Rate plus the Applicable Rate. The weighted average interest rate on outstanding borrowings under the Credit Agreement at September 30, 2022 was 4.38 %. Additionally, the Credit Agreement contains a Commitment Fee on the amount unused under the Credit Agreement ranging from 0.15 % to 0.25 % per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid. The Credit Agreement includes financial covenants that require compliance with a consolidated interest coverage ratio, a consolidated secured leverage ratio and a consolidated leverage ratio. The minimum consolidated interest coverage ratio is 2.75 :1.00. The maximum consolidated secured leverage ratio was 5.00 :1.00 through the fiscal quarter ended September 30, 2022; will be 4.50 :1.00 for the fiscal quarters ending December 31, 2022 and March 31, 2023; and will be 4.25 :1.00 thereafter commencing with the fiscal quarter ending June 30, 2023. The maximum consolidated leverage ratio is 6.00 :1.00. As of September 30, 2022, $ 188,231 was available under the Credit Agreement, subject to compliance with the financial covenants. As of September 30, 2022, the Company was in compliance with all associated covenants. In connection with the Credit Agreement, the Company and its material domestic subsidiaries entered into an Amended and Restated Security and Pledge Agreement (the “Security Agreement”), pursuant to which all of the obligations under the Credit Agreement will 15 Table of Contents be secured by liens on assets of the Company and its material domestic subsidiaries, including the equity interests in each of their direct subsidiaries and intellectual property, subject to agreed-upon exceptions. Credit Agreement Issuance Costs Based on the Company's evaluation of the borrowing capacity associated with the creditors participating in the previous facility compared to those in the Credit Agreement, $ 1,762 of the $ 2,036 of unamortized deferred financing costs at December 22, 2021 were deferred and the remaining $ 274 were expensed as a component of Interest and other financing expense, net on our Consolidated Statement of Operations. Additionally, the Company incurred debt issuance costs of approximately $ 2,764 in connection with the Credit Agreement. Of the total $ 4,526 of deferred debt issuance costs, $ 3,292 were associated with the Revolver and are being amortized on a straight-line basis within Other assets on our Consolidated Balance Sheet, and $ 1,234 are being amortized on a straight-line basis, which approximates the effective interest method, as an adjustment to the carrying amount of the Term Loans as a component of Interest and other financing expense, net on our Consolidated Statement of Operations over the term of the Credit Agreement. Maturities of all debt instruments at September 30, 2022, are as follows: Due in Fiscal Year Amount Remainder of 2023 $ 5,597 2024 7,544 2025 7,253 2026 7,253 2027 871,133 Total debt and borrowings $ 898,780 10. INCOME TAXES In general, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability on the effective tax rates from quarter to quarter. The Company’s 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. 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 decreased due to the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes. 16 Table of Contents 11. ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents the changes in accumulated other comprehensive loss (AOCL): Three Months Ended September 30, 2022 2021 Foreign currency translation adjustments: Other comprehensive loss before reclassifications $ ( 67,149 ) $ ( 22,805 ) Deferred gains on cash flow hedging instruments: Amount of gain recognized in AOCL on derivatives (1) 11,360 535 Amount of gain reclassified from AOCL into income (1) ( 767 ) ( 500 ) Deferred gains on fair value hedging instruments: Amount of gain recognized in AOCL on derivatives (1) 1,145 — Amount of gain reclassified from AOCL into income (1) ( 1,348 ) — Deferred gains on net investment hedging instruments: Amount of gain recognized in AOCL on derivatives (1) 4,666 1,910 Amount of gain reclassified from AOCL into income (1) ( 369 ) ( 103 ) Net change in AOCL $ ( 52,462 ) $ ( 20,963 ) (1) See Note 15, Derivatives and Hedging Activities, for the amounts reclassified into income for deferred gains (losses) on cash flow and net investment hedging instruments recorded in the Consolidated Statements of Operations in the three months ended September 30, 2022 and 2021. 12. STOCK-BASED COMPENSATION AND INCENTIVE PERFORMANCE PLANS The Company has a stockholder-approved plan, the Amended and Restated 2002 Long-Term Incentive and Stock Award Plan (the "2002 Plan"), under which the Company’s officers, senior management, other key employees, consultants, and directors may be granted equity-based awards. The Company also grants shares under its 2019 Equity Inducement Award Program (the "2019 Inducement Program") to induce selected individuals to become employees of the Company. The 2002 Plan and 2019 Inducement Program are collectively referred to as the "Stock Award Plans." In conjunction with the Stock Award Plans, the Company maintains a long-term incentive program (the “LTI Program” or "LTIP") that provides for equity awards, including performance and market-based equity awards that can be earned over defined performance periods. The Company's plans are described in Note 13, Stock-Based Compensation and Incentive Performance Plans , in the Notes to the Consolidated Financial Statements in the Form 10-K. Compensation cost and related income tax benefits recognized in the Consolidated Statements of Operations for stock-based compensation plans were as follows: Three Months Ended September 30, 2022 2021 Selling, general and administrative expense $ 3,994 $ 4,287 Related income tax benefit $ 402 $ 273 17 Table of Contents Restricted Stock Awards of restricted stock are either restricted stock awards ("RSAs") or restricted stock units ("RSUs") that are issued at no cost to the recipient. Performance-based or market-based RSUs are issued in the form of performance share units ("PSUs"). A summary of the restricted stock activity (including all RSAs, RSUs and PSUs) for the three months ended September 30, 2022 is as follows: Number of Shares and Units Weighted Average Grant Date Fair Value (per share) Non-vested RSAs, RSUs and PSUs outstanding at June 30, 2022 790 $ 42.44 Granted 924 $ 21.48 Vested ( 24 ) $ 36.15 Forfeited ( 54 ) $ 40.76 Non-vested RSAs, RSUs and PSUs outstanding at September 30, 2022 1,636 $ 30.73 The table above includes a total of 365 shares granted during the three months ended September 30, 2022 that represent the target number of shares that may be earned based on pre-defined market conditions that are eligible to vest ranging from zero to 200 % of target. All such shares relate to the 2023 – 2025 LTIP as further described below. Vested shares during the three months ended September 30, 2022 include a total of 5 shares related to certain performance-based metrics being met and a total of 19 shares related to service-based RSUs. There are market-based PSU awards outstanding under both the 2023 – 2025 LTIP and the 2022 – 2024 LTIP. At September 30, 2022, 365 of such shares were outstanding under the 2023 – 2025 LTIP while 158 shares were outstanding under the 2022 – 2024 LTIP. The fair value of RSAs, RSUs and PSUs granted and of shares vested, and the tax benefit recognized from restricted shares vesting was as follows: Three Months Ended September 30, 2022 2021 Fair value of RSAs, RSUs and PSUs granted $ 19,839 $ 478 Fair value of shares vested $ 576 $ 2,522 Tax benefit recognized from restricted shares vesting $ 78 $ 246 At September 30, 2022 , there was $ 37,613 of unrecognized stock-based compensation expense related to non-vested restricted stock awards which is expected to be recognized over a weighted average period of 2.08 years. 2023-2025 LTIP During the three months ended September 30, 2022, the Company granted market-based PSU awards under the LTI Program with a total target payout of 365 shares of common stock. Vesting is pursuant to a defined calculation of either relative TSR or absolute TSR (as defined) over the period from September 6, 2022 through the earlier of (i) September 6, 2025; (ii) the date the participant’s employment is terminated due to death or Disability (as defined); or (iii) the effective date of a Change in Control (as defined) (the “TSR Performance Period”). Vesting of 245 target shares of the outstanding PSU awards is pursuant to a defined calculation of relative TSR over the TSR Performance Period (the “Relative TSR PSUs”). Vesting of 120 target shares of the outstanding PSU awards is pursuant to the achievement of pre-established three-year compound annual TSR targets over the TSR Performance Period (the “Absolute TSR PSUs”). Total shares eligible to vest for both the Relative TSR PSUs and Absolute TSR PSUs range from zero to 200 % of the target amount. Grant date fair values are calculated using a Monte-Carlo simulation model with grant date fair values per target share and related valuation assumptions as follows: 18 Table of Contents Absolute TSR PSUs Relative TSR PSUs Grant date fair value (per target share) $ 20.18 $ 27.47 Risk-free interest rate 3.54 % 3.54 % Expected dividend yield — — Expected volatility 40.30 % 26.60 % Expected term 3.00 years 3.00 years 13. INVESTMENTS On October 27, 2015, the Company acquired a minority equity interest in Chop’t Creative Salad Company LLC, predecessor to Founders Table Restaurant Group, LLC (“Founders Table”). Founders Table owns and operates the fast-casual restaurant chains Chop't Creative Salad Co. and Dos Toros Taqueria. The investment is being accounted for as an equity method investment due to the Company’s representation on the Board of Directors of Founders Table. At September 30, 2022 and June 30, 2022, the carrying value of the Company’s investment in Founders Table was $ 8,910 and $ 9,491 , respectively, and is included in the Consolidated Balance Sheets as a component of Investments and joint ventures. The Company also holds an investment in Hutchison Hain Organic Holdings Limited, a joint venture with HUTCHMED (China) Limited, accounted for under the equity method of accounting. The carrying value of the investments were $ 4,917 and $ 4,965 as of September 30, 2022 and June 30, 2022, respectively, and is included in the Consolidated Balance Sheets a s a component of Investments and joint ventures. 14. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are: • Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; • Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and • Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The following table presents assets and liabilities measured at fair value on a recurring basis as of September 30, 2022: Total Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Derivative financial instruments $ 25,596 $ — $ 25,596 $ — Equity investment 277 277 — — Total $ 25,873 $ 277 $ 25,596 $ — 19 Table of Contents The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2022: Total Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Derivative financial instruments $ 7,476 $ — $ 7,476 $ — Equity investment 560 560 — — Total $ 8,036 $ 560 $ 7,476 $ — Liabilities: Derivative financial instruments $ 3,184 $ — $ 3,184 $ — Total $ 3,184 $ — $ 3,184 $ — There were no transfers of financial instruments between the three levels of fair value hierarchy during the three months ended September 30, 2022 or 2021. Derivative Instruments The Company uses interest rate swaps to manage its interest rate risk and cross-currency swaps and foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency exchange rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the derivatives held as of September 30, 2022 and June 30, 2022 were classified as Level 2 of the fair value hierarchy. 15. DERIVATIVES AND HEDGING ACTIVITIES Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s receivables and borrowings. Certain of the Company’s foreign operations expose the Company to fluctuations of foreign exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The 20 Table of Contents Company enters into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of its functional currency, the U.S. Dollar. Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not use derivatives for speculative or trading purposes. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the three months ended September 30, 2022 and 2021, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. During the remaining nine months of fiscal 2023, the Company estimates that an additional $ 5,150 will be reclassified as a decrease to interest expense. As of September 30, 2022, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk: Interest Rate Derivative Number of Instruments Notional Amount Interest rate swap 8 $ 630,000 Cash Flow Hedges of Foreign Exchange Risk The Company is exposed to fluctuations in various foreign currencies against its functional currency, the U.S. Dollar. The Company uses foreign currency derivatives including cross-currency swaps to manage its exposure to fluctuations in the USD-EUR exchange rates. Cross-currency swaps involve exchanging fixed-rate interest payments for fixed-rate interest receipts, both of which will occur at the USD-EUR forward exchange rates in effect upon entering into the instrument. The Company, at times, also uses forward contracts to manage its exposure to fluctuations in the GBP-EUR exchange rates. The Company designates these derivatives as cash flow hedges of foreign exchange risk. For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified in the period(s) during which the hedged transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. During the remaining nine months of fiscal 2023, the Company estimates that an additional $ 161 relating to the cross-currency swaps will be reclassified as an increase to interest expense. As of September 30, 2022, the Company had no outstanding foreign currency derivatives that were used to hedge its foreign exchange risk. Net Investment Hedges The Company is exposed to fluctuations in foreign exchange rates on investments it holds in its European foreign entities and their exposure to the Euro. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in the foreign exchange rate on its foreign investment in Europe. Currency forward agreements involve fixing the USD-EUR exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in U.S. Dollars for their fair value at or close to their settlement date. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency- fixed-rate payments over the life of the agreement. 21 Table of Contents For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in accumulated other comprehensive loss as part of the cumulative translation adjustment. Amounts are reclassified out of accumulated other comprehensive loss into earnings when the hedged net investment is either sold or substantially liquidated. As of September 30, 2022, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations: Foreign Currency Derivative Number of Instruments Notional Sold Notional Purchased Cross-currency swap 4 € 100,300 $ 105,804 Fair Value Hedges The Company is exposed to changes in the fair value of certain of its foreign denominated intercompany loans due to changes in foreign exchange spot rates. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in foreign exchange rates affecting gains and losses on intercompany loan principal and interest. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency-fixed-rate payments over the life of the agreement. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in unrealized exchange gains/losses. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company’s accounting policy election. The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction. During the remaining nine months of fiscal 2023, the Company estimates that an additional $ 359 relating to cross currency swaps will be reclassified as a decrease to interest expense. As of September 30, 2022, the Company had the following outstanding foreign currency derivatives that were used to hedge changes in fair value attributable to foreign exchange risk: Foreign Currency Derivative Number of Instruments Notional Sold Notional Purchased Cross-currency swap 1 € 24,700 $ 26,021 As of September 30, 2022 and June 30, 2022, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges: Carrying Amount of the Hedged Asset Cumulative Amount of Fair Value Hedge Adjustment Included in the Carrying Amount of the Hedged Asset September 30, 2022 June 30, 2022 September 30, 2022 June 30, 2022 Intercompany loan receivable $ 24,211 $ 25,899 $ 1,688 $ 122 22 Table of Contents Designated Hedges The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of September 30, 2022: Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments: Interest rate swaps Prepaid expenses and other current assets $ 15,161 Accrued expenses and other current liabilities / Other noncurrent liabilities $ — Cross-currency swaps Prepaid expenses and other current assets 10,435 Other noncurrent liabilities — Total derivatives designated as hedging instruments $ 25,596 $ — The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of June 30, 2022: Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments: Interest rate swaps Prepaid expenses and other current assets $ 4,230 Accrued expenses and other current liabilities / Other noncurrent liabilities $ 3,184 Cross-currency swaps Prepaid expenses and other current assets 3,246 Other noncurrent liabilities — Total derivatives designated as hedging instruments $ 7,476 $ 3,184 The following table presents the pre-tax effect of cash flow hedge accounting on AOCL for the three months ended September 30, 2022 and 2021: Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in AOCL on Derivatives Location of Gain (Loss) Reclassified from AOCL into Income (Expense) Amount of Gain (Loss) Reclassified from AOCL into Income (Expense) Three Months Ended September 30, Three Months Ended September 30, 2022 2021 2022 2021 Interest rate swaps $ 15,262 $ ( 117 ) Interest and other financing expense, net $ 1,146 $ ( 104 ) Cross-currency swaps — 776 Interest and other financing expense, net / Other (income) expense, net ( 115 ) 738 Foreign currency forward contracts — 19 Cost of sales — — Total $ 15,262 $ 678 $ 1,031 $ 634 23 Table of Contents The following table presents the pre-tax effect of the Company’s derivative financial instruments electing cash flow hedge accounting on the Consolidated Statements of Operations for the three months ended of September 30, 2022 and 2021: Location and Amount of Gain (Loss) Recognized in the Consolidated Statements of Operations on Cash Flow Hedging Relationships Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Cost of sales Interest and other financing expense, net Other expense/income, net Cost of sales Interest and other financing expense, net Other expense/income, net The effects of cash flow hedging: Gain (Loss) on cash flow hedging relationships Interest rate swaps Amount of gain (loss) reclassified from AOCL into income $ — $ 1,146 $ — $ — $ ( 104 ) $ — Cross-currency swaps Amount of (loss) gain reclassified from AOCL into income $ — $ ( 115 ) $ — $ — $ 41 $ 697 The following table presents the pre-tax effect of fair value hedge accounting on AOCL for the three months ended September 30, 2022 and 2021: Derivatives in Fair value Hedging Relationships Amount of Gain Recognized in AOCL on Derivatives Location of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing) Three Months Ended September 30, Three Months Ended September 30, 2022 2021 2022 2021 Cross-currency swaps $ 1,539 $ — Interest and other financing expense, net $ 123 $ — Total $ 1,539 $ — $ 123 $ — The following table presents the pre-tax effect of the Company’s derivative financial instruments electing fair value hedge accounting on the Consolidated Statements of Operations as of September 30, 2022 and 2021: Location and Amount of Gain Recognized in the Consolidated Statements of Operations on Fair Value Hedging Relationships Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Cost of sales Interest and other financing expense, net Other expense (income), net Cost of sales Interest and other financing expense, net Other expense (income), net The effects of fair value hedging: Gain on fair value hedging relationships Cross-currency swaps Amount of gain reclassified from AOCL into income $ — $ 123 $ 1,688 $ — $ — $ — 24 Table of Contents The following table presents the pre-tax effect of the Company’s net investment hedges on AOCL and the Consolidated Statements of Operations for the three months ended September 30, 2022 and 2021: Derivatives in Net Investment Hedging Relationships Amount of Gain Recognized in AOCL on Derivatives Location of (Loss) Gain Recognized in Income (Expense) on Derivatives Amount of (Loss) Gain Recognized in Income (Expense) on Derivatives Three Months Ended September 30, Three Months Ended September 30, 2022 2021 2022 2021 Cross-currency swaps $ 6,268 $ 2,417 Interest and other financing expense, net $ ( 495 ) $ 130 Credit-Risk-Related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision providing that upon certain defaults by the Company on any of its indebtedness, the Company could also be declared in default on its derivative obligations. 16. COMMITMENTS AND CONTINGENCIES Securities Class Actions Filed in Federal Court On August 17, 2016, three securities class action complaints were filed in the Eastern District of New York (the "District Court") against the Company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The three complaints are: (1) Flora v. The Hain Celestial Group, Inc., et al. (the “Flora Complaint”); (2) Lynn v. The Hain Celestial Group, Inc., et al. (the “Lynn Complaint”); and (3) Spadola v. The Hain Celestial Group, Inc., et al. (the “Spadola Complaint” and, together with the Flora and Lynn Complaints, the “Securities Complaints”). On June 5, 2017, the District Court issued an order for consolidation, appointment of Co-Lead Plaintiffs and approval of selection of co-lead counsel. Pursuant to this order, the Securities Complaints were consolidated under the caption In re The Hain Celestial Group, Inc. Securities Litigation (the “Consolidated Securities Action”), and Rosewood Funeral Home and Salamon Gimpel were appointed as Co-Lead Plaintiffs. On June 21, 2017, the Company received notice that plaintiff Spadola voluntarily dismissed his claims without prejudice to his ability to participate in the Consolidated Securities Action as an absent class member. The Co-Lead Plaintiffs in the Consolidated Securities Action filed a Consolidated Amended Complaint on August 4, 2017 and a Corrected Consolidated Amended Complaint on September 7, 2017 on behalf of a purported class consisting of all persons who purchased or otherwise acquired Hain Celestial securities between November 5, 2013 and February 10, 2017 (the “Amended Complaint”). The Amended Complaint named as defendants the Company and certain of its former officers (collectively, “Defendants”) and asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly materially false or misleading statements and omissions in public statements, press releases and SEC filings regarding the Company’s business, prospects, financial results and internal controls. Defendants filed a motion to dismiss the Amended Complaint on October 3, 2017 which the District Court granted on March 29, 2019, dismissing the case in its entirety, without prejudice to replead. Co-Lead Plaintiffs filed a Second Amended Consolidated Class Action Complaint on May 6, 2019 (the “Second Amended Complaint”). The Second Amended Complaint again named as defendants the Company and certain of its former officers and asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegations similar to those in the Amended Complaint, including materially false or misleading statements and omissions in public statements, press releases and SEC filings regarding the Company’s business, prospects, financial results, and internal controls. Defendants filed a motion to dismiss the Second Amended Complaint on June 20, 2019. On April 6, 2020, the District Court granted Defendants’ motion to dismiss the Second Amended Complaint in its entirety, with prejudice. Co-Lead Plaintiffs appealed the District Court’s decision dismissing the Second Amended Complaint to the United States Court of Appeals for the Second Circuit (the "Second Circuit"). By decision dated December 17, 2021, the Second Circuit vacated the District Court’s judgment and remanded the case for further proceedings. On April 6, 2022, the District Court issued an order directing the parties to submit position papers outlining their views regarding: (a) the scope of the Court's reconsideration of Defendants’ Motion to Dismiss the Second Amended Complaint; and (b) the appropriate procedure the Court should follow in light of the Second Circuit's opinion. On April 14, 2022, the District Court entered an order setting the schedule for, and determining the scope of, supplemental briefing on Defendants’ Motion to Dismiss the Second Amended Complaint. The parties submitted supplemental briefing between May 12, 2022 and June 23, 2022. In June 2022, the District Court referred Defendants’ Motion to Dismiss the Second Amended Complaint to a United States Magistrate Judge (the “Magistrate Judge”) for a Report and Recommendation. On November 4, 2022, the Magistrate Judge issued a Report and Recommendation recommending that the District Court grant Defendants’ 25 Table of Contents Motion to Dismiss the Second Amended Complaint with prejudice. Any objections by the parties to the Report and Recommendation are due by November 18, 2022. Additional Stockholder Class Action and Derivative Complaints Filed in Federal Court On April 19, 2017 and April 26, 2017, two class action and stockholder derivative complaints were filed in the Eastern District of New York against the former Board of Directors and certain former officers of the Company under the captions Silva v. Simon, et al. (the “Silva Complaint”) and Barnes v. Simon, et al. (the “Barnes Complaint”), respectively. Both the Silva Complaint and the Barnes Complaint allege violation of securities law, breach of fiduciary duty, waste of corporate assets and unjust enrichment. On May 23, 2017, an additional stockholder filed a complaint under seal in the Eastern District of New York against the former Board of Directors and certain former officers of the Company. The complaint alleged that the Company’s former directors and certain former officers made materially false and misleading statements in press releases and SEC filings regarding the Company’s business, prospects and financial results. The complaint also alleged that the Company violated its by-laws and Delaware law by failing to hold its 2016 Annual Stockholders Meeting and includes claims for breach of fiduciary duty, unjust enrichment and corporate waste. On August 9, 2017, the District Court granted an order to unseal this case and reveal Gary Merenstein as the plaintiff (the “Merenstein Complaint”). On August 10, 2017, the District Court granted the parties' stipulation to consolidate the Barnes Complaint, the Silva Complaint and the Merenstein Complaint under the caption In re The Hain Celestial Group, Inc. Stockholder Class and Derivative Litigation (the “Consolidated Stockholder Class and Derivative Action”) and to appoint Robbins Arroyo LLP and Scott+Scott as Co-Lead Counsel, with the Law Offices of Thomas G. Amon as Liaison Counsel for Plaintiffs. On September 14, 2017, a related complaint was filed under the caption Oliver v. Berke, et al. (the “Oliver Complaint”), and on October 6, 2017, the Oliver Complaint was consolidated with the Consolidated Stockholder Class and Derivative Action. The Plaintiffs filed their consolidated amended complaint under seal on October 26, 2017. On December 20, 2017, the parties agreed to stay Defendants’ time to answer, move, or otherwise respond to the consolidated amended complaint through and including 30 days after a decision was rendered on the motion to dismiss the Amended Complaint in the Consolidated Securities Action, described above. On March 29, 2019, the District Court in the Consolidated Securities Action granted Defendants’ motion, dismissing the Amended Complaint in its entirety, without prejudice to replead. Co-Lead Plaintiffs in the Consolidated Securities Action filed the Second Amended Complaint on May 6, 2019. The parties to the Consolidated Stockholder Class and Derivative Action agreed to continue the stay of Defendants’ time to answer, move, or otherwise respond to the consolidated amended complaint through 30 days after a decision on Defendants' motion to dismiss the Second Amended Complaint in the Consolidated Securities Action. On April 6, 2020, the District Court granted Defendants’ motion to dismiss the Second Amended Complaint in the Consolidated Securities Action, with prejudice. Pursuant to the terms of the stay, Defendants in the Consolidated Stockholder Class and Derivative Action had until May 6, 2020 to answer, move, or otherwise respond to the complaint in this matter. This deadline was extended, and Defendants moved to dismiss the Consolidated Stockholder Class and Derivative Action Complaint on June 23, 2020, with Plaintiffs’ opposition due August 7, 2020. On July 24, 2020, Plaintiffs made a stockholder litigation demand on the current Board containing overlapping factual allegations to those set forth in the Consolidated Stockholder Class and Derivative Action. On August 10, 2020, the District Court vacated the briefing schedule on Defendants’ pending motion to dismiss in order to give the Board of Directors time to consider the demand. On each of September 8 and October 8, 2020, the District Court extended its stay of any applicable deadlines for 30 days to give the Board of Directors additional time to complete its evaluation of the demand. On November 3, 2020, Plaintiffs were informed that the Board of Directors had finished investigating and resolved, among other things, that the demand should be rejected. On November 6, 2020, Plaintiffs and Defendants notified the District Court that Plaintiffs were evaluating the rejection of the demand, sought certain additional information and were assessing next steps, and requested that the District Court extend the stay for an additional 30 days, to on or around December 7, 2020. The Parties then filed a number of additional joint status reports, requesting that the District Court continue the stay of applicable deadlines through December 30, 2021. In light of the Second Circuit vacating the District Court’s judgment in the Consolidated Securities Action referenced above and remanding the case for further proceedings, the Parties submitted a joint status report on December 29, 2021 requesting that the District Court continue the temporary stay pending the District Court’s reconsideration of the Defendants’ motion to dismiss the Second Amended Complaint in the Consolidated Securities Action. The District Court has extended the temporary stay through December 30, 2022. 26 Table of Contents Baby Food Litigation Since February 2021, the Company has been named in numerous consumer class actions alleging that the Company’s Earth’s Best baby food products (the “Products”) contain unsafe and undisclosed levels of various naturally occurring heavy metals, namely lead, arsenic, cadmium and mercury. Those actions have now been transferred and consolidated as a single lawsuit in the U.S. District Court for the Eastern District of New York captioned In re Hain Celestial Heavy Metals Baby Food Litigation, Case No. 2:21-cv-678 (the "Consolidated Proceeding"), which generally alleges that the Company violated various state consumer protection laws and asserts other state and common law warranty and unjust enrichment claims related to the alleged failure to disclose the presence of these metals, arguing that consumers would have either not purchased the Products or would have paid less for them had the Company made adequate disclosures. The Court appointed interim class counsel for Plaintiffs in the Consolidated Proceeding, and Plaintiffs filed a Consolidated Amended Class Action Complaint on March 18, 2022. The Company intends to file a motion to dismiss the Consolidated Amended Class Action Complaint, and its motion to dismiss is due on November 7, 2022. One consumer class action is pending in New York Supreme Court, Nassau County. The Company has moved to stay or transfer this case to the Consolidated Proceeding and that motion is pending. The Company denies the allegations in these lawsuits and contends that its baby foods are safe and properly labeled. The claims raised in these lawsuits were brought in the wake of a highly publicized report issued by the U.S. House of Representatives Subcommittee on Economic and Consumer Policy on Oversight and Reform, dated February 4, 2021 (the “House Report”), addressing the presence of heavy metals in baby foods made by certain manufacturers, including the Company. Since the publishing of the House Report, the Company has also received information requests with respect to the advertising and quality of its baby foods from certain governmental authorities, as such authorities investigate the claims made in the House Report. The Company is fully cooperating with these requests and is providing documents and other requested information. The Company has been named in one civil government enforcement action, State of New Mexico ex rel. Balderas v. Nurture, Inc., et al., which was filed by the New Mexico Attorney General against the Company and several other manufacturers based on the alleged presence of heavy metals in their baby food products. The Company and several other manufacturers moved to dismiss the New Mexico Attorney General’s lawsuit, which motion the Court denied. The Company filed its answer to the New Mexico Attorney General’s amended complaint on April 23, 2022. The Company denies the New Mexico Attorney General’s allegations and maintains that its baby foods are safe, properly labeled, and compliant with New Mexico law. In addition to the consumer class actions discussed above, the Company is currently named in five lawsuits in state and federal courts alleging some form of personal injury from the ingestion of the Company’s Products, purportedly due to unsafe and undisclosed levels of various naturally occurring heavy metals. Three of these lawsuits name multiple plaintiffs alleging claims of physical injuries. These lawsuits generally allege injuries related to neurological development disorders such as autism and attention deficit hyperactivity disorder. In the matter, Palmquist et al., v. The Hain Celestial Group, Inc., pending in U.S. District Court, Southern District of Texas, the Court has set a trial date of February 6, 2023, while the Company awaits decisions on dispositive motions. In the matter, NC v. The Hain Celestial Group, et al., pending in Superior Court for the State of California, County of Los Angeles, the Court has set a trial date of May 2, 2023. The Company denies that its Products led to any of the alleged injuries and will defend these cases vigorously. Other In addition to the litigation described above, the Company is and may be a defendant in lawsuits from time to time in the normal course of business. With respect to all litigation and related matters, the Company records a liability when the Company believes it is probable that a liability has been incurred and the amount can be reasonably estimated. For the matters disclosed in this note, if the Company determines that a liability is probable and the loss can be reasonably estimated, the Company discloses the liability recorded. As of the end of the period covered by this report, the Company has not recorded a liability for any of the matters disclosed in this note. It is possible that some matters could require the Company to pay damages, incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report. 17. SEGMENT INFORMATION Our organization structure consists of two geographic based reportable segments: North America and International. Our North America reportable segment consists of the United States and Canada as operating segments. Our International reportable segment is comprised of three operating segments: United Kingdom, Ella’s Kitchen UK, and Europe. This structure is in line with how our Chief Operating Decision Maker (“CODM”) assesses our performance and allocates resources. 27 Table of Contents We use segment net sales and operating income to evaluate performance and to allocate resources. We believe these measures are most relevant in order to analyze segment results and trends. Segment operating income excludes certain general corporate expenses (which are a component of selling, general and administrative expenses), impairment and acquisition related expenses, restructuring, integration, and other charges. The following tables set forth financial information about each of the Company’s reportable segments. Transactions between reportable segments were insignificant for all periods presented. Three Months Ended September 30, 2022 2021 Net Sales: North America $ 288,396 $ 265,525 International 150,955 189,378 $ 439,351 $ 454,903 Operating Income (Loss): North America $ 24,445 $ 16,842 International 7,675 24,069 32,120 40,911 Corporate and Other (a) ( 16,297 ) ( 15,364 ) $ 15,823 $ 25,547 (a) In addition to general Corporate and Other expenses as described above, for the three months ended September 30, 2022, Corporate and Other included $ 94 of Productivity and transformation costs. For the three months ended September 30, 2021, Corporate and Other included $ 2,057 of Productivity and transformation costs. The Company's net sales by product category (1) are as follows: Three Months Ended September 30, 2022 2021 Growth 324,478 333,104 Fuel 95,726 97,254 Simplify 19,147 24,545 Total $ 439,351 $ 454,903 (1) The Growth brands consist of our Turbocharge and Targeted Investment categories, which together are comprised of snacks, tea, baby, yogurt, plant-based meat, non-dairy beverages and personal care. The Fuel brands are pantry brands in categories such as soup, cooking oils and nut butters. The Simplify brands include all other brands. 28 Table of Contents The Company’s net sales by geographic region, which are generally based on the location of the Company’s subsidiaries, were as follows: Three Months Ended September 30, 2022 2021 United States $ 259,508 $ 233,487 United Kingdom 109,160 123,748 All Other 70,683 97,668 Total $ 439,351 $ 454,903 The Company’s long-lived assets, which represent net property, plant and equipment and operating lease right-of-use assets, were as follows by geographic area: September 30, 2022 June 30, 2022 United States $ 186,865 $ 182,038 United Kingdom 121,867 133,213 All Other 88,325 96,845 Total $ 397,057 $ 412,096 29 Table of Contents