What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-08-24 compared with 2022-08-25 · 205 added, 231 removed, 228 unchanged (66% of the section changed)

4 unchanged sentences

Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022, which was filed with the SEC on August 25, 2022 and is available on the SEC’s website at www.sec.gov.

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

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, manufa cturer 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 a leading manufacturer, marketer, and seller of better-for-you brands that inspire healthier living.

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

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

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

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

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

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

(2) strengthen our capabilities;

(3) expand profit margins and cash flow;

and (4) reinvigorate profitable topline growth.

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

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

• we are primarily focused on health and wellness,

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

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

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

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

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

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

• The Turbocharge brands are leading-share brands in what we believe to be very high-growth categories.

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

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

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

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

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

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

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

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

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

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

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

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

Increased Supply Chain Disruptions

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

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

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

Global Economic Environment

Economic conditions during fiscal year 2022 and fiscal year 2023 have been marked by inflationary pressures, rising interest rates and shifts in consumer demand.

• Inflation – The inflationary environment has led to higher costs for ingredients, packaging, energy, transportation and other supply chain components.

We expect this higher than normal 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 may implement.

• Interest Rates – Loans under our credit agreement bear interest at a variable rate, and the interest rate on our outstanding indebtedness has increased as market interest rates have risen significantly starting in the second half of fiscal year 2022.

These higher interest rates, together with a higher outstanding debt balance, have led to an increase in our interest expense, and we expect this high rate environment to continue.

• Consumer Demand – Recent economic conditions have resulted in changes in consumer spending patterns, which have adversely impacted our sales.

During an economic downturn, factors such as increased unemployment, decreases in disposable income and declines in consumer confidence can cause changes in consumer spending behavior.

In particular, economic conditions have prompted some consumers, particularly in Europe, to shift to lower-priced products.

CEO Succession

On November 22, 2022, the Board of Directors (the “Board”) of the Company approved a succession plan pursuant to which the Board appointed Wendy P.

Davidson to the role of President and Chief Executive Officer and as a director on the Board, in each case effective as of January 1, 2023.

As part of the succession plan, Mark L.

Schiller transitioned from his position as President and Chief Executive Officer of the Company effective as of December 31, 2022 (the “Transition Date”).

Schiller remains as a director on the Board following the Transition Date.

New Global Headquarters

We have selected Hoboken, N.J.

to serve as the hub of our global operations.

With Hoboken as the hub, our offices and manufacturing locations in the United States, Canada, Europe, and other international locations will serve as the “spokes” for team members to come together and collaborate for moments that matter.

Our hub and spoke work model enables broader team collaboration and greater connectivity as a global enterprise.

It also provides us the ability to recruit the very best talent, regardless of where they are located.

Hoboken will also serve as the home of our Innovation Experience Center, where team members, customers, and consumers will immerse themselves in our products, explore consumer insights, and create innovative opportunities for the future.

Russia-Ukraine War

Although we have no material assets in Russia, Belarus or Ukraine, our supply chain was adversely impacted by the Russia-Ukraine war during the fiscal year ended June 30, 2022, and we continue to face other challenges and risks arising from the war.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Discontinued Operations

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

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

The Russia-Ukraine war has disrupted our supply chain and increased costs due to higher energy and raw material prices, impacting our operations by leading to labor challenges and supply chain issues.

Although we have found alternative materials, we have incurred increased costs in doing so.

The war also lowered consumer sentiment in Europe, affecting demand.

Results of Operations

8 unchanged sentences

Selling, general and administrative expenses 289,233 16.1 % 300,469 15.9 % (11,236) (3.7) %

Intangibles and long-lived asset impairment 175,501 9.8 % 1,903 0.1 % 173,598 **

Amortization of acquired intangible assets 10,016 0.6 % 10,214 0.5 % (198) (1.9) %

Productivity and transformation costs 7,284 0.4 % 10,174 0.5 % (2,890) (28.4) %

10,174 0.5 % 15,608 0.8 % (5,434) (34.8) %

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

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

Operating income 104,681 5.5 % 107,380 5.4 % (2,699) (2.5) %

Operating (loss) income (85,620) (4.8) % 104,681 5.5 % (190,301) (181.8) %

Interest and other financing expense, net 45,783 2.5 % 12,570 0.7 % 33,213 264.2 %

Other income, net (1,822) (0.1) % (11,380) (0.6) % 9,558 (84.0) %

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

Provision for income taxes 22,716 1.2 % 41,093 2.1 % (18,377) (44.7) %

(Loss) income before income taxes and equity in net loss of equity-method investees (129,581) (7.2) % 103,491 5.5 % (233,072) *

(Benefit) provision for income taxes (14,178) (0.8) % 22,716 1.2 % (36,894) *

Equity in net loss of equity-method

investees 1,134 0.1 % 2,902 0.2 % (1,768) (60.9) %

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

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

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

Net (loss) income $ (116,537) (6.5) % $ 77,873 4.1 % $ (194,410) *

Adjusted EBITDA $ 166,622 9.3 % $ 200,616 10.6 % $ (33,994) (16.9) %

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

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

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

Diluted net (loss) income per common share $ (1.30) $ 0.83 $ (2.13) *

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

** Percentage is not meaningful due to significantly lower number in the comparative period

Net sales in fiscal 2023 were $1.80 billion, a decrease of $95.2 million, or 5.0%, from net sales of $1.89 billion in fiscal 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $51.1 million, or 2.7% from the prior comparable period.

The decrease in net sales was primarily driven by the North America reportable segment.

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

1 unchanged sentence

Gross profit margin was 22.1% of net sales, compared to 22.6% in the prior year.

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

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

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

The decrease in gross profit margin was primarily due to the International reportable segment.

The decrease in the International reportable segment gross profit was mainly due to higher energy and supply chain costs when compared to the prior year.

The decrease in gross margin was partially offset by higher gross margin in the North America reportable segment driven by greater pricing and productivity, partially offset by higher cost of goods.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $289.2 million in fiscal 2023, a decrease of $11.2 million, or 3.7%, from $300.5 million in fiscal 2022.

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

The decrease was partially offset by an increase in the North America reportable segment due to the acquisition of THWR in the United States operating segment as well as an increase in Corporate and Other as a result of higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR, advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described in Note 18, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

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

Amortization of Acquired Intangibles

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

The decrease primarily reflected reduced costs in Corporate and Other and the International reportable segment.

The decrease in the International reportable segment was primarily a result of lower employee-related expenses in the Europe and the United Kingdom, partially offset by higher selling expenses in the United Kingdom.

The decrease in Corporate and Other costs reflected a reduction in transaction costs, including costs in 2022 related to the acquisition of That's How We Roll (“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 a reduction in litigation expenses related to the baby food litigation described in Note 17, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Selling, general and administrative expenses as a percentage of net sales was 16.1% in the twelve months ended June 30, 2023 compared to 15.9% in the prior year, as the reduction in net sales outpaced the reduction in selling, general and administrative expenses attributable to the aforementioned items.

Intangibles and Long-Lived Asset Impairment

During fiscal 2023, the Company recognized an aggregate non-cash impairment charge of $175.5 million, primarily related to the ParmCrisps ® , Thinsters ® , Imagine ® , Joya ® , and Queen Helene ® indefinite-lived trademarks and ParmCrisps ® definite lived customer relationships, which reduced the carrying value of such assets to their estimated fair value.

During fiscal 2022, the Company recognized non-cash impairment charges of $1.9 million.

The fair value of indefinite-lived trademarks and definite-lived customer relationships were determined using the relief from royalty method and multi-period excess earnings method, respectively.

See Note 8, Goodwill and Other Intangible Assets and Note 15, Fair Value Measurements , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets was $10.0 million in fiscal 2023, a decrease of $0.2 million, or 1.9%, from $10.2 million in fiscal 2022, primarily reflecting reduced amortization expenses due to impairment of the ParmCrisps customer relationships recognized in the third quarter of 2023 (see Note 8, Goodwill and Other Intangible Assets , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K), partially offset by an increase in amortization expenses associated with the acquisition of THWR in the second quarter of the prior fiscal year.

Productivity and Transformation Costs

Productivity and transformation costs were $7.3 million in fiscal 2023, a decrease of $2.9 million or 28.4% from $10.2 million in fiscal 2022.

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

Proceeds from Insurance Claims

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

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

Long-Lived Asset and Intangibles Impairment

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

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

Operating Income

Operating income in fiscal 2022 was $104.7 million compared to operating income of $107.4 million in fiscal 2021 due to the items described above.

The decrease was primarily due to the wind down of prior year restructuring costs partially offset by new spending on our strategic plan update.

Operating (Loss) Income

Operating loss in fiscal 2023 was $85.6 million compared to operating income of $104.7 million in fiscal 2022 due to the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $45.8 million in fiscal 2023, an increase of $33.2 million, or 264.2%, from $12.6 million in the prior year.

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

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

The increase resulted primarily from rising interest rates and a higher outstanding debt balance driven primarily by the acquisition of THWR and share repurchase activity during fiscal 2022.

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

Other Income, Net

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

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

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

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

Other income, net totaled $1.8 million in fiscal 2023, a decrease of $9.6 million from $11.4 million in the prior year.

decrease in income was primarily attributable to the recognition of an $8.7 million gain on sale of assets in the prior year related to the sale of undeveloped land plots in Boulder, Colorado.

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

Loss before income taxes and equity in the net loss of our equity-method investees for fiscal 2023 was $129.6 million compared to income of $103.5 million in fiscal 2022.

The decrease was due to the items discussed above.

Provision for Income Taxes

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

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

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

The effective income tax rate from continuing operations for the twelve months ended June 30, 2022 was primarily impacted by reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to the acquisition of THWR (see Note 4, Acquisitions and Dispositions ), the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of prior fiscal year income tax returns.

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

(Benefit) Provision for Income Taxes

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

Our income tax benefit was $14.2 million for fiscal 2023 compared to expense of $22.7 million for fiscal 2022.

The effective income tax rate was 10.9% and 21.9% of pre-tax income for year ended June 30, 2023 and 2022, respectively.

The effective income tax rate for the year ended June 30, 2023 was primarily impacted by establishment of federal valuation allowance against the Company’s tax losses and credits, an increase in the state valuation allowance related to the Company’s state deferred tax assets and state net operating loss carryforwards, an increase related to the sale of Westbrae Natural ® brand (“Westbrae”) and stock-based compensation.

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

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

3 unchanged sentences

See Note 14, Investments , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Net Income from Continuing Operations

N et income fro m continuing operations for fiscal 2022 was $77.9 million compared to net income of $66.1 million for fiscal 2021.

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

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

Net Income from Discontinued Operations, Net of Tax

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

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

See Note 4, Acquisitions and Dispositions , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

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

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

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

Net (Loss) Income

Net loss for fiscal 2023 was $116.5 million compared to net income of $77.9 million for fiscal 2022.

Net loss per diluted share was $1.30 in fiscal 2023 compared to net income per diluted share $0.83 in 2022.

The change was attributable to the factors noted above.

Adjusted EBITDA

4 unchanged sentences

Segment Results

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

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

During the fourth quarter of 2023, we determined that our measure of segment profitability is Adjusted EBITDA of each reportable segment.

Accordingly, our CODM evaluates performance and allocates resources based primarily on Segment Adjusted EBITDA.

Segment Adjusted EBITDA excludes:

net interest expense, (benefit) provision for income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses (gains), certain litigation and related costs, CEO succession 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 on sales of assets, certain inventory write-downs in 2022, intangibles and long-lived asset impairments and other adjustments.

In addition, Segment Adjusted EBITDA does not include Corporate and Other expenses related to the Company’s centralized administrative functions, which do not specifically relate to a reportable segment.

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

We do not allocate amounts below Operating income (loss) to our reportable segments.

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the fiscal years ended June 30, 2023 and 2022:

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

Fiscal 2023 net sales

4 unchanged sentences

% change (2.1) % (9.8) % n/a (5.0) %

Fiscal 2022 operating income (loss)

Fiscal 2023 Adjusted EBITDA

$ 123,443 $ 82,945 $ (39,766) $ 166,622

Fiscal 2021 operating income (loss)

Fiscal 2022 Adjusted EBITDA

$ 122,235 $ 110,073 $ (31,692) $ 200,616

1 unchanged sentence

% change 1.0 % (24.6) % (25.5) % (16.9) %

Fiscal 2022 operating income margin

Fiscal 2023 Adjusted EBITDA margin

10.8 % 12.6 % n/a 9.3 %

Fiscal 2021 operating income margin

Fiscal 2022 Adjusted EBITDA margin

10.5 % 15.1 % n/a 10.6 %

See the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures following the discussion of our results of operations and Note 19, Segment Information , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for a reconciliation of segment Adjusted EBITDA.

North America

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

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

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

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

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

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

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

Our net sales in the North America reportable segment for fiscal 2023 were $1.14 billion, a decrease of $24.0 million, or 2.1%, from net sales of $1.16 billion in fiscal 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 3.8%.

The decrease in net sales was mainly due to lower sales in personal care and tea.

Adjusted EBITDA in fiscal 2023 was $123.4 million, an increase of $1.2 million from $122.2 million in fiscal 2022.

Fiscal 2023 Adjusted EBITDA on a constant currency basis increased 1.5% from the prior year.

The increase was driven by pricing and productivity more than offsetting inflation and volume loss.

Adjusted EBITDA margin was 10.8%, a 35-basis point improvement from the prior year.

Adjusted EBITDA margin on a constant currency basis was 10.8%, a 30-basis point improvement from the prior year.

International

Net sales in the International reportable segment for fiscal 2023 were $657.5 million, a decrease of $71.2 million, or 9.8%, from net sales of $728.7 million in fiscal 2022.

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

The decrease in adjusted net sales was due to a decline in sales in the Europe and United Kingdom operating segments, partially offset by an increase in sales in the Ella's Kitchen UK operating segment.

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

The net sales decrease in the United Kingdom was due to lower sales volume and the impact of shipment halts during the price increase negotiations with certain customers.

The net sales increase in the Ella's Kitchen UK operating segment was due to higher sales coming out of the COVID-19 pandemic, since Ella's Kitchen UK sales were

negatively impacted in the prior year due to a slow-down in consumer demand for baby food as a result of the COVID-19 pandemic stay-at-home requirements.

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

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

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

On a constant currency basis, net sales decreased by 1.0% from fiscal 2022.

The decrease was driven by softness in plant-based categories in Europe, which was partially offset by growth in the United Kingdom.

Adjusted EBITDA in fiscal 2023 was $82.9 million, a decrease of $27.1 million from $110.1 million in fiscal 2022.

Fiscal 2023 Adjusted EBITDA on a constant currency basis decreased 18.3% from the prior year.

The decrease was driven by higher energy and supply chain costs, partially offset by pricing and productivity.

Adjusted EBITDA margin was 12.6%, a 250-basis point decline from the prior year.

Adjusted EBITDA margin on a constant currency basis was 12.5%, a 265-basis point decline from the prior year.

Corporate and Other

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

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

This change was primarily related to higher transaction costs incurred in fiscal year 2022 including costs related to the acquisition of THWR and advisory costs related to the divestiture by affiliates of Engaged Capital, LLC of their shares of the Company's common stock, as well as higher litigation expenses related to the baby food litigation described in Note 18, Commitments and Contingencies , partially offset by lower executive bonus payout related to fiscal 2022.

The increase in Corporate and Other expenses primarily reflected an increase in compensation-related expenses.

Refer to Note 19, Segm ent Information , in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details.

Liquidity and Capital Resources

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

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

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

Amended and Restated Credit Agreement

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

The Credit Agreement provides for senior secured financing of $1.1 billion in the aggregate, consisting of (1) $300.0 million in aggregate principal amount of term loans (the "Term Loans") and (2) an $800.0 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440.0 million U.S.

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”).

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

revolving credit facility and $360.0 million global revolving credit facility) (the “Revolver”).

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

Our cash and cash equivalents balance decreased by $10.4 million at June 30, 2022 to $65.5 million compared to $75.9 million at June 30, 2021.

Our working capital, which excludes assets held for sale, was $329.0 million at June 30, 2022, an increase of $44.2 million from $284.7 million at the end of fiscal 2021.

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

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

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

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

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

The Credit Agreement includes financial covenants that require compliance with a consolidated interest coverage ratio, a consolidated leverage ratio and a consolidated secured leverage ratio.

Prior to the Company entering into the Second Amendment (as defined below), the minimum consolidated interest coverage ratio was 2.75:1.00.

The maximum consolidated leverage ratio is 6.00:1.00.

Prior to Company entering into the Second Amendment, the maximum consolidated secured leverage ratio was 5.00:1.00 through December 31, 2023 or such earlier date as elected by the Company (the “First Amendment Period”).

Following the First Amendment Period, the maximum consolidated secured leverage ratio would have been 4.25:1.00, subject to possible temporary increase following certain corporate acquisitions.

During the First Amendment Period, loans under the Credit Agreement bore interest at (a) the Secured Overnight Financing Rate, plus a credit spread adjustment of 0.10% (as adjusted, “Term SOFR”) plus 2.0% per annum or (b) the Base Rate (as defined in the Credit Agreement) plus 1.0% per annum.

Following the First Amendment Period, loans would have borne interest at rates based on (a) Term SOFR plus a rate ranging from 0.875% to 1.75% per annum or (b) the Base Rate plus a rate ranging from 0% to 0.75% per annum, the relevant rate in each case being the Applicable Rate.

The Applicable Rate following the First Amendment Period would be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at June 30, 2023 was 5.94%.

Additionally, the Credit Agreement contains a Commitment Fee (as defined in the Credit Agreement) 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.

As of June 30, 2023, there were $541.0 million of loans under the Revolver, $288.8 million of Term Loans, and $4.5 million letters of credit outstanding under the Credit Agreement.

As of June 30, 2023, $254.5 million was available under the Credit

Agreement, subject to compliance with the financial covenants, as compared to $204.0 million as of June 30, 2022.

As of June 30, 2023, the Company was in compliance with all associated covenants.

On August 22, 2023, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement.

Pursuant to the Second Amendment, the Company’s maximum consolidated secured leverage ratio was amended to be 5.00 to 1.00 until September 30, 2023, 5.25 to 1.00 until December 31, 2023 and 5.00 to 1.00 until December 31, 2024 (the period of time during which such maximum consolidated secured leverage ratios are in effect, the “Second Amendment Period,” which the Company may elect to end early).

Following the Second Amendment Period, the maximum consolidated secured leverage ratio will be 4.25 to 1.00, subject to possible temporary increase following certain corporate acquisitions.

Pursuant to the Second Amendment, the Company’s minimum interest coverage ratio was amended to be 2.50 to 1.00.

During the Second Amendment Period, loans under the Credit Agreement will bear interest at (a) Term SOFR plus 2.5% per annum or (b) the Base Rate plus 1.5% per annum.

Following the Second Amendment Period, Loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 1.125% to 2.0% per annum or (b) the Base Rate plus a rate ranging from 0.125% to 1.0% per annum, the relevant rate in each case being the Applicable Rate.

The Applicable Rate following the Amendment Period will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement as amended by the Second Amendment.

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

Our cash and cash equivalents balance decreased $12.1 million at June 30, 2023 to $53.4 million as compared to $65.5 million at June 30, 2022.

Our working capital was $358.9 million at June 30, 2023, an increase of $29.9 million from $329.0 million at the end of fiscal 2022.

Additionally, our total debt decreased by $59.9 million at June 30, 2023 to $828.7 million as compared to $888.6 million at June 30, 2022 as a result of $59.5 million of net repayments carried out during the year.

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

As of June 30, 2023, substantially all cash was held outside of the United States.

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

As of June 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.

3 unchanged sentences

Cash flows provided by (used in):

Operating activities from continuing operations $ 80,241 $ 196,759

Investing activities from continuing operations (288,309) (2,364)

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

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

Operating activities $ 66,819 $ 80,241

Investing activities (19,640) (288,309)

Financing activities (63,060) 212,787

Effect of exchange rate changes on cash 3,733 (15,078)

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

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

The decrease in cash provided by operating activities in fiscal 2022 compared to fiscal 2021 resulted primarily from a reduction of $49.6 million in net income adjusted for non-cash charges in the current year and lower cash generation of $66.9 million from our working capital accounts which was mainly due to a refund of $53.8 million received by the Company in the prior year from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

C ash used in investing activities from continuing operations was $288.3 million for the fiscal year ended June 30, 2022, an increase of $285.9 million from $2.4 million in fiscal 2021 primar ily due to the acquisition of THWR in the current year, partially offset by $12.3 million in proceeds from the sale of assets in the current year, which was primarily related to the sale of undeveloped land plots in Boulder, Colorado .

Cash provided by financing activities from continuing operations was $212.8 million for the fiscal year ended June 30, 2022 and included $659.3 million of net borrowings of our Revolver and Term Loans, $410.5 million of share repurchases and $32.7 million of employee shares withheld for taxes.

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

Operating Free Cash Flow from Continuing Operations

Net decrease in cash and cash equivalents $ (12,148) $ (10,359)

Cash provided by operating activities was $66.8 million for the fiscal year ended June 30, 2023, compared to $80.2 million in fiscal 2022.

The decrease in cash provided from operating activities resulted from a $49.4 million reduction in net income adjusted for non-cash charges offset by a $36.0 million reduction in cash used for working capital.

In 2023, we used $27.7 million of cash for working capital, as a reduction in customer accounts receivable was more than offset by pay downs in short-term liabilities.

In 2022, we used $63.7 million of cash for working capital, as we realized slower customer accounts receivable, increased inventory costs and quantities, and paid down short-term liabilities.

C ash used in investing activities was $19.6 million for the fiscal year ended June 30, 2023, a decrease of $268.7 million from $288.3 million in fiscal 2022 primar ily due to the acquisition of THWR in the prior year and lower property, plant and equipment purchases in fiscal 2023 compared to fiscal 2022 due to the completion of certain factory-related productivity enhancements that were placed in service in fiscal 2023.

C ash used in financing activities was $63.1 million for the fiscal year ended June 30, 2023, a decrease of $275.8 million from $212.8 million of cash provided in fiscal 2022.

The decrease in cash provided by financing activities was primarily due to higher borrowings under the Credit Agreement to finance the THWR acquisition, higher share repurchases, and payment of shares withheld for employee payroll taxes during the same period in the prior year.

Operating Free Cash Flows

Our operating free cash flow was $38.9 million for fiscal 2023, a decrease of $1.3 million from fiscal 2022.

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

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

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

Refer to the Reconciliation of Non-U.S.

The decrease in operating free cash flow primarily resulted a decrease in cash flow from operations of $13.4 million driven by the reasons explained above, partially offset by reduction in capital expenditures.

See the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures following the disc ussion of our results of operations for definitions and a reconciliation from our net cash provided by operat ing activities from continuing operations to operating free cash flow from continuing operations.

Capital Expenditures

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

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

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.

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

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.

1 unchanged sentence

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

November 2021, the Company entered into a share repurchase agreement with affiliates of Engaged Capital, LLC (collectively, the “Selling Stockholders”), pursuant to which the Company repurchased 1.7 million shares directly from the Selling Stockholders at a price of $45.00 per share (see Note 21, Related Party Transactions ).

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

During the fiscal year ended June 30, 2023 , the Company did not repurchase any shares under the repurchase program.

As of June 30, 2023, the Company had $173.5 million of remaining authorization under the share repurchase program.

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

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

Reconciliation of Non-U.S.

2 unchanged sentences

We have included in this report measures of financial performance that are not defined by U.S.

Generally Accepted Accounting Principles (“GAAP”).

We believe that these measures provide useful information to investors and include these measures in other communications to investors.

2 unchanged sentences

GAAP measure and the most directly comparable U.S.

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

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

GAAP measure.

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.

GAAP measures.

These non-U.S.

GAAP measures should be viewed in addition to, and not in lieu of, the comparable U.S.

GAAP measure.

GAAP measures.

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.

1 unchanged sentence

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.

1 unchanged sentence

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

A reconciliation between reported and adjusted net sales increase (decrease) in f iscal 2022 is as follows:

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

4 unchanged sentences

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

Divestitures and discontinued brands (35,314) (75,543) (110,857)

Acquisitions, divestitures and discontinued brands (8,109) — (8,109)

Net sales adjusted for divestitures and discontinued brands - Twelve months ended 6/30/22 $ 1,155,023 $ 728,661 $ 1,883,684

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

Net sales decline (2.1) % (9.8) % (5.0) %

Impact of acquisitions, divestitures and discontinued brands (2.3) % — % (1.4) %

Impact of foreign currency exchange 0.6 % 8.8 % 3.7 %

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

Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (3.8) % (1.0) % (2.7) %

Adjusted EBITDA

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

The Company defines Adjusted EBITDA as net (loss) income before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses (gains), certain litigation and related costs, CEO succession 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 on sales of assets, certain inventory write-downs, intangibles and long-lived asset impairment 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.

6 unchanged sentences

In addition, Adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining Adjusted EBITDA.

In order to compensate for these limitations, management presents Adjusted EBITDA in connection with U.S.

In order to compensate for these limitations, management presents.

Adjusted EBITDA in connection with U.S.

GAAP results.

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

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

Fiscal Year Ended June 30,

(Amounts in thousands) 2023 2022

Net income $ 77,873 $ 77,364

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

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

Net (loss) income $ (116,537) $ 77,873

Depreciation and amortization 50,777 46,849

1 unchanged sentence

Interest expense, net 43,936 10,226

Provision for income taxes 22,716 41,093

(Benefit) provision for income taxes (14,178) 22,716

Stock-based compensation, net 14,423 15,611

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

Litigation and related costs

Litigation expenses 7,883 1,587

Proceeds from insurance claims (196) (592)

Unrealized currency losses (gains) 929 (2,259)

Litigation and related costs (a)

(1,369) 7,687

Restructuring activities

CEO succession 5,113 —

Plant closure related costs, net 94 929

Productivity and transformation costs 7,284 8,803

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

Warehouse/manufacturing consolidation and other costs, net 1,026 2,721

Acquisitions, divestitures and other

1 unchanged sentence

Gain on sale of assets (3,529) (9,049)

Gain on sale of businesses — (2,604)

Impairment charges

Inventory write-down — (351)

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

Intangibles and long-lived asset impairment 175,501 1,903

Adjusted EBITDA $ 166,622 $ 200,616

Operating Free Cash Flow from Continuing Operations

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 capital expenditures.

(a) Expenses and items relating to securities class action and baby food litigation.

Adjusted EBITDA - Constant Currency Presentation

The Company provides Adjusted EBITDA and Adjusted EBITDA on a constant currency basis because the Company’s management believes that these presentations provide 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 these measures for reviewing the financial results of the Company as well as a component of performance-based executive compensation.

The Company believes presenting Adjusted EBITDA on a constant currency basis provides useful information to investors because it provides transparency to underlying performance in the Company’s Adjusted EBITDA by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets.

Adjusted EBITDA on a constant currency basis is calculated by translating foreign currencies based on the average foreign exchange rate for the prior year, for each currency.

A reconciliation between Adjusted EBITDA and Adjusted EBITDA on a constant currency basis for fiscal years 2023 and 2022 is as follows:

(Amounts in thousands) Hain Consolidated

Adjusted EBITDA - June 30, 2023 $ 166,622

Impact of foreign currency exchange 7,622

Adjusted EBITDA on a constant currency basis - June 30, 2023 $ 174,244

Adjusted EBITDA - June 30, 2022 $ 200,616

Operating Free Cash Flows

In our internal evaluations, we use the non-GAAP financial measure “Operating Free Cash Flows”.

The difference between Operating Free Cash Flows 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 net cash provided by operating activities to operating free cash flow is as follows:

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

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 provided by operating activities to Operating Free Cash Flows is as follows:

Fiscal Year Ended June 30,

2 unchanged sentences

Purchases of property, plant and equipment (27,879) (39,965)

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

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

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

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

Operating free cash flows $ 38,940 $ 40,276

Contractual Obligations

22 unchanged sentences

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

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

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

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

Valuation of Accounts and Chargeback Receivable

We perform routine credit evaluations on existing and new customers.

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

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

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

Differences between estimated collectible receivables and actual collections are recognized in earnings in the period such differences are determined.

We may not have the same experience with our receivables during different economic conditions, or with changes in business conditions, such as consolidation within the food industry and/or a change in the way we market and sell our products.

Valuation of Long-lived Assets

26 unchanged sentences

As of June 30, 2023, the carrying value of goodwill was $938.6 million.

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

reporting units where a quantitative assessment was performed.

For the fiscal 2023 impairment analysis, the Company performed a quantitative assessment for its reporting units in the United Kingdom, US, Canada and Europe.

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

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

Holding all other assumptions used in the 2023 fair value measurement constant, a 100-basis-point increase in the weighted average cost of capital would not result in the carrying value of the reporting units to be in excess of the fair value.

7 unchanged sentences

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

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

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

During the year ended June 30, 2023, the Company recorded aggregate non-cash impairment charges of $174.9 million related to certain trademarks and intangible assets as discussed in Note 8, Goodwill and Other Intangible Assets , in the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Business Combinations

10 unchanged sentences

For awards that contain a market condition, expense is recognized over the defined or derived service period using a Monte Carlo simulation model.

For restricted stock awards which include performance criteria, compensation expense is recorded when the achievement of the performance criteria is probable and is recognized over the performance and vesting service periods.

Compensation expense is recognized for only that portion of stock-based awards that are expected to vest.

Valuation Allowances for Deferred Tax Assets

5 unchanged sentences

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years.

During fiscal 2023, a valuation allowance was recorded against certain of our United States federal attributes and a majority of state deferred tax assets as a result of significant negative evidence in such jurisdictions.

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

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

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

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

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

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

Recent Accounting Pronouncements

5 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis