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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-05-09 · 153 added, 298 removed, 138 unchanged (77% of the section changed)

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended March 31, 2023 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended September 30, 2023 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

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

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 Boulder, Colorado.

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 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 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.

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.

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

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

Hain Reimagined Program

During the first quarter of fiscal year 2024, we initiated a multi-year growth and transformation program (the “Hain Reimagined Program”) to drive shareholder returns.

The savings initiatives are expected to impact our reportable segments and Corporate and Other.

The program is intended to optimize our portfolio, improve underlying profitability and increase our flexibility to invest in targeted growth initiatives, brand building and other capabilities critical to delivering future growth.

Hain Reimagined is grounded on four strategic pillars:

▪ Concentrate our portfolio in five consumer-centric Better-For-You (“BFY”) platforms:

Snacks, Baby & Kids, Beverages, Meal Preparation, and Personal Care.

▪ Simplify our footprint, maintaining direct presence in five key markets – United States, Canada, UK, Ireland, and Europe – and align our global operating model and footprint, leveraging scale and realizing synergies across the business.

▪ Deliver share gain in key platforms where we have the most compelling right to win, through expanded channel reach and acceleration in its innovation pipeline.

▪ Enhance critical capabilities in brand building and effectiveness of marketing spend;

expand reach across under-penetrated margin-accretive channels such as away-from-home and omni-channel e-commerce;

and enhance our innovation capability to be more leading edge in BFY.

▪ Drive revenue growth management, working capital management and operational efficiency to fund growth and enhance margins.

Cumulative pretax charges are expected to be $115 million - $125 million inclusive of potential inventory reductions of approximately $25 million related to brand/category exits.

The balance of cumulative pretax restructuring charges is expected to be $90 million - $100 million comprised of contract termination costs, asset write-downs, employee-related costs and other transformation-related expenses.

Annualized pretax savings are expected to be $130 million - $150 million.

Global Economic Environment

Economic conditions during fiscal year 2022 and the first nine months of 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 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, has 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 has had an impact on 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.

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

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 second half of fiscal year 2022 and the first nine months of fiscal year 2023 and we continue to face other challenges and risks arising from the war.

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

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.

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 in the future remains uncertain.

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.

Comparison of Three Months Ended March 31, 2023 to Three Months Ended March 31, 2022

The duration and intensity of inflation fluctuations, the possibility of an impending recession, alterations in consumer shopping and consumption patterns, and shifts in geopolitical events, such as the ongoing Russia-Ukraine conflict and the recent Gaza Strip conflict, may lead to increased supply chain expenses, higher inflation, and other business impacts.

We continually assess the nature and extent of these potential and evolving impacts on our business, consolidated operational results, liquidity, and capital resources.

Comparison of Three Months Ended September 30, 2023 to Three Months Ended September 30, 2022

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended March 31, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended September 30, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

March 31, 2023 March 31, 2022 Dollars Percentage

September 30, 2023 September 30, 2022 Dollars Percentage

Net sales $ 425,029 100.0% $ 439,351 100.0% $ (14,322) (3.3)%

2 unchanged sentences

Selling, general and administrative expenses 77,169 18.2% 74,951 17.1% 2,218 3.0%

Intangibles and long-lived asset impairment 156,583 34.4% — —% 156,583 *

Amortization of acquired intangible assets 2,842 0.6% 3,110 0.6% (268) (8.6)%

Productivity and transformation costs 6,403 1.5% 773 0.2% 5,630 728.3%

Amortization of acquired intangible assets 1,955 0.5% 2,788 0.6% (833) (29.9)%

Long-lived asset impairment 694 0.2% — —% 694 100.0%

Operating (loss) income (2,278) (0.5)% 15,823 3.6% (18,101) *

Interest and other financing expense, net 13,244 3.1% 7,677 1.7% 5,567 72.5%

Other expense (income), net 439 0.1% (712) (0.1)% 1,151 (161.7)%

(Loss) income before income taxes and equity in net loss of equity-method investees (154,786) (34.0)% 32,652 6.5% (187,438) (574.0)%

Other income, net (265) (0.1)% (1,790) (0.4)% 1,525 (85.2)%

(Loss) income from operations before income taxes and equity in net loss (income) of equity-method investees (15,257) (3.6)% 9,936 2.3% (25,193) *

(Benefit) provision for income taxes (5,379) (1.3)% 2,631 0.6% (8,010) *

4 unchanged sentences

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

Net sales for the three months ended March 31, 2023 were $455.2 million, a decrease of $47.7 million, or 9.5%, as compared to $502.9 million in the three months ended March 31, 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $28.9 million, or 5.8%, from the prior year quarter driven by both the North America and International reportable segments.

Net sales for the three months ended September 30, 2023 were $425.0 million, a decrease of $14.3 million, or 3.3%, as compared to $439.4 million in the three months ended September 30, 2022.

Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $12.6 million, or 2.9%, from the prior year quarter due to a decline in the North America reportable segment, partially offset by growth in the International reportable segment.

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

Gross profit for the three months ended March 31, 2023 was $97.5 million, a decrease of $18.2 million, or 15.8%, as compared to the prior year quarter.

Gross profit for the three months ended September 30, 2023 was $83.9 million, a decrease of $10.4 million, or 11.0%, as compared to the prior year quarter.

Additionally, gross profit margin of 19.7% was lower when compared with 21.5% in the prior year quarter.

The decrease in gross profit was driven primarily by the North America reportable segment as a result of lower net sales, changes in sales mix of high margin products and inflation.

The International reportable segment also had a decrease in gross profit mainly resulting from lower net sales in the Europe operating segment, change in sales mix of high margin products and higher energy and supply chain costs when compared to the prior year period.

The decrease in gross profit was driven primarily by the North America reportable segment, mainly due to lower sales volume as well as by inflation, partially offset by pricing and productivity.

The International reportable segment had an increase in gross profit mainly driven by higher net sales due to pricing, partially offset by inflation.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $75.0 million for the three months ended March 31, 2023, a decrease of $0.7 million, or 0.9%, from $75.8 million for the prior year quarter.

The decrease was driven by lower marketing costs as well as efficiencies gained from the Company's productivity and transformation initiatives, partially offset by higher labor-related expenses primarily in Corporate.

Intangibles and long-lived asset impairment

During the three months ended March 31, 2023, the Company recognized an aggregate impairment charge of $156.6 million, primarily related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value.

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

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.8 million for the three months ended March 31, 2023, a decrease of $0.3 million from $3.1 million in the prior year quarter due to complete amortization of certain acquired intangible assets primarily in the Europe and the United Kingdom operating segments when compared with the prior year quarter.

Selling, general and administrative expenses were $77.2 million for the three months ended September 30, 2023, an increase of $2.2 million, or 3.0%, from $75.0 million for the prior year quarter.

The increase was due to higher selling expenses and employee-related expenses.

Productivity and Transformation Costs

Productivity and transformation costs were $3.9 million for the three months ended March 31, 2023, an increase of $2.3 million from $1.7 million in the prior year quarter.

The increase was primarily due to increased spending related to productivity and transformation strategy consulting costs as a part of the Company’s strategic plan update.

Productivity and transformation costs were $6.4 million for the three months ended September 30, 2023, an increase of $5.6 million from $0.8 million in the prior year quarter.

The increase was primarily due to restructuring costs incurred in connection with the Hain Reimagined Program.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.0 million for the three months ended September 30, 2023, a decrease of $0.8 million from $2.8 million in the prior year quarter, primarily reflecting reduced amortization expenses due to impairment of the ParmCrisps customer relationships recognized in the third quarter of fiscal 2023.

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

Long-Lived Asset Impairment

During the three months ended September 30, 2023, the Company recognized a non-cash impairment charge of $0.7 million related to certain equipment in North America.

Operating (Loss) Income

Operating loss for the three months ended March 31, 2023 was $140.9 million compared to income of $35.2 million in the prior year quarter as a result of the items described above.

Operating loss for the three months ended September 30, 2023 was $2.3 million compared to operating income of $15.8 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $13.4 million for the three months ended March 31, 2023, an increase of $10.2 million, or 316.3%, from $3.2 million in the prior year quarter.

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.

Interest and other financing expense, net totaled $13.2 million for the three months ended September 30, 2023, an increase of $5.6 million, or 72.5%, from $7.7 million in the prior year quarter.

The increase resulted primarily due to higher borrowing rates, partially offset by lower outstanding debt balance compared to the prior year quarter.

See Note 8, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense (Income), Net

Other expense, net totaled $0.4 million for the three months ended March 31, 2023, compared to income of $0.7 million in the prior year quarter.

The decrease in income was primarily attributable to the recognition of foreign exchange gain in the prior year quarter compared to foreign exchange loss in the current quarter.

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

Loss before income taxes and equity in net loss of our equity-method investees for the three months ended March 31, 2023 was $154.8 million compared to income of $32.7 million in the prior year quarter.

Other Income, Net

Other income, net totaled $0.3 million for the three months ended September 30, 2023, compared to $1.8 million in the prior year quarter.

The decrease was primarily attributable to lower unrealized foreign currency gains.

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

Loss from operations before income taxes and equity in net loss of our equity-method investees for the three months ended September 30, 2023 was $15.3 million compared to income of $9.9 million in the prior year quarter.

The decrease was due to the items discussed above.

(Benefit) Provision for Income Taxes

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

Our income tax benefit was $39.6 million for the three months ended March 31, 2023 compared to income tax expense of $7.7 million in the prior year quarter.

The effective income tax rate was a benefit of 25.6% and an expense of 23.7% for the three months ended March 31, 2023 and 2022, respectively.

The effective income tax rate for the three months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, stock-based compensation and changes in uncertain tax positions.

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

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

Our income tax benefit was $5.4 million for the three months ended September 30, 2023 compared to expense of $2.6 million in the prior year quarter.

The effective income tax rate was a benefit of 35.3% and an expense of 26.5% for the three months ended September 30, 2023 and 2022, respectively.

The effective income tax rate for the three months ended September 30, 2023 increased due to tax expense related to stock-based compensation, global intangible low-taxed income (“GILTI”), and limitations on the deductibility of executive compensation.

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

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended March 31, 2023 was $0.5 million and $0.4 million in the prior year quarter.

Our equity in net loss from our equity-method investments for the three months ended September 30, 2023 was a loss of $0.5 million compared to $0.4 million in the prior year quarter.

See Note 12, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net (Loss) Income

Net loss for the three months ended March 31, 2023 was $115.7 million, or $1.29 per diluted share, compared to net income of $24.5 million, or $0.27 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Net loss for the three months ended September 30, 2023 was $10.4 million, or $0.12 per diluted share, compared to net income of $6.9 million, or $0.08 per diluted share, in the prior year quarter.

The decrease was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $37.3 million and $58.7 million for the three months ended March 31, 2023 and 2022, respectively, as a result of the factors discuss ed above, and the adjustments described in the Reconciliation of Non-U.S.

Our Adjusted EBITDA was $24.1 million and $36.0 million for the three months ended September 30, 2023 and 2022, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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

On a constant currency basis, Adjusted EBITDA decreased by $19.3 million, or 33.0%, from $58.7 million for the three months ended March 31, 2022 to $39.3 million for the three months ended March 31, 2023.

Segment Results

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended March 31, 2023 and 2022:

Our organizational structure consists of two geographic based reportable segments:

North America and International, which are also the operating segments.

This structure is in line with how the Company’s Chief Operating Decision Maker (“CODM”) assesses the Company’s performance and allocates resources.

The Company uses segment net sales and segment Adjusted EBITDA in order to analyze segment results and trends.

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, plant closure related costs-net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, costs associated with divestitures and other transactions, loss (gain) on sale of assets, 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 (loss) income to our reportable segments.

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended September 30, 2023 and 2022:

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

3 unchanged sentences

% change (9.8) % 9.3 % n/a (3.3) %

Operating (loss) income

Three months ended 3/31/23 (a)

$ (136,127) $ 13,604 $ (18,403) $ (140,926)

Adjusted EBITDA

Three months ended 9/30/23 $ 18,727 $ 17,438 $ (12,075) $ 24,090

Three months ended 9/30/22 30,781 14,947 (9,699) 36,029

$ change $ (12,054) $ 2,491 $ (2,376) $ (11,939)

% change (39.2) % 16.7 % 24.5 % (33.1) %

Operating (loss) income margin

Adjusted EBITDA margin

Three months ended 9/30/23 7.2 % 10.6 % n/a 5.7 %

Three months ended 9/30/22 10.7 % 9.9 % n/a 8.2 %

(a) North America operating loss includes non-cash impairment charges of $156,298 related to ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® customer relationships (see Note 8, Goodwill and Other Intangible Assets).

North America

Our net sales in the North America reportable segment for the three months ended March 31, 2023 were $286.6 million, a decrease of $39.1 million, or 12.0%, from net sales of $325.7 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 10.8%.

In the United States operating segment, adjusted sales were lower compared to the prior year quarter mainly due to lower sales in snacks, personal care and tea, partially offset by higher sales in yogurt.

The net sales decrease within snacks was substantially driven by reduced distribution and customer promotions associated with the ParmCrisps ® brand.

Similar trends were noted in the Canada operating segment.

Operating loss in North America for the three months ended March 31, 2023 was $136.1 million, a decrease of $164.7 million compared to operating income of $28.5 million in the prior year quarter.

The decrease was mainly driven by aggregate non-cash impairment charges of $156.3 million related to the ParmCrisps ® and Thinsters ® intangible assets and lower net sales in the United States operating segment, partially offset by cost improvements due to higher productivity.

International

Our net sales in the International reportable segment for the three months ended March 31, 2023 were $168.6 million, a decrease of $8.6 million, or 4.9%, from net sales of $177.2 million in the prior year quarter.

On a constant currency basis, net sales increased 3.5% from the prior year quarter primarily due to an increase in sales in the United Kingdom operating segment, partially offset by softness in plant-based categories in the rest of Europe.

Operating income in our International reportable segment for the three months ended March 31, 2023 was $13.6 million, a decrease of $4.7 million from $18.3 million for the three months ended March 31, 2022.

Operating income was lower in the current quarter when compared to the prior year quarter mainly due to increased energy and input costs and volume mix, partially offset by improved pricing and productivity.

Corporate and Other

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

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

Our operating loss in Corporate and Other for the three months ended March 31, 2023 was $18.4 million, an increase of $6.7 million, from $11.7 million for the three months ended March 31, 2022.

This change was primarily due to higher strategic consulting charges and employee related expenses.

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

Comparison of Nine Months Ended March 31, 2023 to Nine Months Ended March 31, 2022

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the nine months ended March 31, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Nine Months Ended Change in

March 31, 2023 March 31, 2022 Dollars Percentage

Net sales $ 1,348,802 100.0% $ 1,434,783 100.0% $ (85,981) (6.0)%

Cost of sales 1,053,131 78.1% 1,096,367 76.4% (43,236) (3.9)%

Gross profit 295,671 21.9% 338,416 23.6% (42,745) (12.6)%

Selling, general and administrative expenses 222,355 16.5% 229,679 16.0% (7,324) (3.2)%

Intangibles and long-lived asset impairment 156,923 11.6% 303 —% 156,620 **

Amortization of acquired intangible assets 8,415 0.6% 7,254 0.5% 1,161 16.0%

Productivity and transformation costs 5,692 0.4% 8,448 0.6% (2,756) (32.6)%

Operating (loss) income (97,714) (7.2)% 92,732 6.5% (190,446) *

Interest and other financing expense, net 31,910 2.4% 7,672 0.5% 24,238 315.9%

Other income, net (2,413) (0.2)% (10,570) (0.7)% 8,157 (77.2)%

(Loss) income before income taxes and equity in net loss of equity-method investees (127,211) (9.4)% 95,630 6.7% (222,841) *

(Benefit) provision for income taxes (30,599) (2.3)% 19,425 1.4% (50,024) *

Equity in net loss of equity-method investees 1,226 0.1% 1,374 0.1% (148) (10.8)%

Net (loss) income $ (97,838) (7.3)% $ 74,831 5.2% $ (172,669) *

Adjusted EBITDA $ 123,106 9.1% $ 165,249 11.5% $ (42,143) (25.5)%

Diluted net (loss) income per common share $ (1.09) $ 0.79 $ (1.88) *

* 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 for the nine months ended March 31, 2023 were $1,348.8 million, a decrease of $86.0 million, or 6.0%, as compared to $1,434.8 million in the nine months ended March 31, 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $44.2 million, or 3.1%, from the prior comparable period primarily driven by International reportable segment.

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

Gross profit for the nine months ended March 31, 2023 was $295.7 million, a decrease of $42.7 million, or 12.6%, as compared to the prior year comparable period.

Gross profit margin was 21.9% of net sales, compared to 23.6% in the prior year comparable period.

The decrease in gross profit was driven primarily by the International reportable segment mainly due to lower net sales in the Europe and United Kingdom operating segments and higher energy and supply chain costs when compared to the prior year period.

The North America reportable segment gross profit remained relatively flat due to pricing increases and cost improvements driven by higher productivity, partially offset by inflation and lower net sales in the Canada operating segment when compared with the prior year comparable period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $222.4 million for the nine months ended March 31, 2023, a decrease of $7.3 million, or 3.2%, from $229.7 million for the prior year comparable period.

The decrease was primarily driven by reductions in the United States and the United Kingdom operating segments.

The decrease reflected reduced broker fees and sales related expenses primarily in the United States operating segment and lower marketing costs, as well as efficiencies gained from the Company's productivity and transformation initiatives.

Intangibles and long-lived asset impairment

During the nine months ended March 31, 2023, the Company recognized aggregate impairment charge of $156.9 million , an increase of $156.6 million from $0.3 million in the prior year comparable period, related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value.

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

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $8.4 million for the nine months ended March 31, 2023, an increase of $1.2 million from $7.3 million in the prior year comparable period due to the acquisition of THWR in the second quarter of the prior fiscal year.

Productivity and Transformation Costs

Productivity and transformation costs were $5.7 million for the nine months ended March 31, 2023, a decrease of $2.8 million from $8.4 million in the prior year comparable period.

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

Operating (Loss) Income

Operating loss for the nine months ended March 31, 2023 was $97.7 million compared to income of $92.7 million in the prior year comparable period as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $31.9 million for the nine months ended March 31, 2023, an increase of $24.2 million, or 315.9%, from $7.7 million in the prior year comparable period.

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

Interest and other financing expense was also impacted by higher interest rates compared to the prior comparable period.

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

Other Income, Net

Other income, net totaled $2.4 million for the nine months ended March 31, 2023, compared to $10.6 million in the prior year comparable period.

The decrease in income was primarily attributable to the recognition of an $8.7 million gain on sale of assets in the prior year period 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 net loss of our equity-method investees for the nine months ended March 31, 2023 was $127.2 million compared to income of $95.6 million in the prior year comparable period.

The decrease was due to the items discussed above.

(Benefit) Provision for Income Taxes

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

Our income tax benefit was $30.6 million for the nine months ended March 31, 2023 compared to expense of $19.4 million in the prior year comparable period.

The effective income tax rate was a benefit of 24.1% and expense of 20.3% for the nine months ended March 31, 2023 and 2022, respectively.

The effective income tax rate for the nine months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, gain on the sale of Westbrae (See Note 4, Acquisition and Disposition , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q), an operating lease modification during the second quarter, severance with respect to our former CEO (as part of the limitation on the deductibility of executive compensation), stock-based compensation and changes in uncertain tax positions.

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

income tax returns.

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

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2023 was $1.2 million compared to $1.4 million in the prior year comparable period.

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

Net (Loss) Income

Net loss for the nine months ended March 31, 2023 was $97.8 million, or $(1.09) per diluted share, compared to income of $74.8 million, or $0.79 per diluted share, in the prior year comparable period.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $123.1 million and $165.2 million for the nine months ended March 31, 2023 and 2022, respectively, as a result of the factors discussed above, and the adjustments described in the Reconciliation of Non-U.S.

See the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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

On a constant currency basis, Adjusted EBITDA decreased by $34.5 million, or 20.9%, from $165.2 million for the nine months ended March 31, 2022 to $130.7 million for the nine months ended March 31, 2023.

Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the nine months ended March 31, 2023 and 2022:

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

Nine months ended 3/31/23 $ 857,406 $ 491,396 $ — $ 1,348,802

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

$ change $ (8,875) $ (77,106) n/a $ (85,981)

% change (1.0) % (13.6) % n/a (6.0) %

Operating (loss) income

Nine months ended 3/31/23 (a)

$ (79,420) $ 33,219 $ (51,513) $ (97,714)

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

$ change $ (151,950) $ (36,521) $ (1,975) $ (190,446)

% change (209.5) % (52.4) % 4.0 % (205.4) %

Operating (loss) income margin

Nine months ended 3/31/23 (9.3) % 6.8 % n/a (7.2) %

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

GAAP Measures following the discussion of our results of operations and Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a reconciliation of segment Adjusted EBITDA.

North America

Our net sales in the North America reportable segment for the nine months ended March 31, 2023 were $857.4 million, a decrease of $8.9 million, or 1.0%, from net sales of $866.3 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 3.7% due to decreased sales in the Canada operating segment due to lower sales in personal care product categories and reduced club distribution and programming for certain brands, partially offset by increased sales in the United States operating segment due to stronger sales in snacks.

Operating loss in North America for the nine months ended March 31, 2023 was $79.4 million, compared to operating income of $72.5 million in the prior year comparable period.

The decrease was mainly driven by ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships impairment charges and lower net sales in the Canada operating segment, partially offset by cost improvements due to higher productivity.

Our net sales in the North America reportable segment for the three months ended September 30, 2023 were $260.1 million, a decrease of $28.3 million, or 9.8%, from net sales of $288.4 million in the prior year quarter.

The decrease in net sales was primarily due to lower sales in baby/kids category on account of continued industry-wide challenges in organic formula supply, as well as by a decline in personal care primarily reflecting the timing shift of a sun care program and a decline in snacks associated with the optimization of promotional activity for Terra ® .

Adjusted EBITDA for the three months ended September 30, 2023 was $18.7 million, a decrease of $12.1 million, or 39.2%, from Adjusted EBITDA of $30.8 million in the prior year quarter.

The decrease was primarily driven by reduced gross profit reflecting inflation as well as by lower sales discussed above and an increase in certain inventory obsolescence reserves.

Adjusted EBITDA margin was 7.2%, a 350-basis point decrease from the prior year period.

International

Our net sales in the International reportable segment for the nine months ended March 31, 2023 were $491.4 million, a decrease of $77.1 million, or 13.6%, from net sales of $568.5 million in the prior year comparable period.

On a constant currency basis, net sales decreased 2.3% from the prior year comparable period mainly due to lower sales in the Europe and United Kingdom operating segments, particularly in relation to plant-based categories and snacks, and the impact of the loss of a large non-dairy co-manufacturing customer in the second half of the prior fiscal year.

Operating income in our International reportable segment for the nine months ended March 31, 2023 was $33.2 million, a decrease of $36.5 million from $69.7 million for the nine months ended March 31, 2022.

Operating income was lower in the current period when compared to the prior year comparable period mainly due to lower gross profit resulting from a decline in sales and higher energy and supply chain costs, partially offset by lower delivery and warehouse costs due to improved utilization of warehouse space and efficiencies.

Net sales in the International reportable segment for the three months ended September 30, 2023 were $165.0 million, an increase of $14.0 million, or 9.3%, from net sales of $151.0 million in the prior year quarter.

The increase in net sales was mainly driven by growth in meal preparation and beverages categories.

Adjusted EBITDA for the three months ended September 30, 2023 was $17.4 million, an increase of $2.5 million, or 16.7%, from Adjusted EBITDA of $14.9 million in the prior year quarter.

The increase was primarily driven by an increase in gross profit reflecting higher pricing, partially offset by the above-noted increase in selling, general and administrative expenses.

Adjusted EBITDA margin was 10.6%, a 70-basis point increase from the prior year period.

Corporate and Other

Our operating loss in Corporate and Other for the nine months ended March 31, 2023 was $51.5 million, an increase of $2.0 million, from $49.5 million in the prior year period.

This change was primarily due to higher general and administrative expenses mainly related to increased salaries, wages, and benefits.

The increase in Corporate and Other expenses primarily reflected an increase in consulting charges.

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

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

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

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

See Note 8, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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 6, 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 (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”).

On August 22, 2023, the Company entered into a Second Amendment (the “Second Amendment”) to the 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 million in the aggregate, consisting of (1) $300 million in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440 million U.S.

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

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.

The minimum consolidated interest coverage ratio is 2.75:1.00.

The maximum consolidated leverage ratio is 6.00:1.00.

Through December 31, 2023 or such earlier date as elected by the Company (the “Amendment Period”), the maximum consolidated secured leverage ratio is 5.00:1.00.

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

During the Amendment Period, loans under the Credit Agreement will bear 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 Amendment Period, loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 0.875% to 1.750% per annum or (b) the Base Rate plus a rate ranging from 0.00% to 0.750% 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.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2023 was 5.90%.

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 Second 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.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at September 30, 2023 was 7.86%.

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 March 31, 2023, there were $567.0 million of loans under the Revolver , $290.6 million of Term Loans, and $4.1 million let ters of credit outstanding under the Credit Agreement.

As of March 31, 2023, $228.9 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 March 31, 2023, the Company was in compliance with all associated covenants.

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.

Pursuant to the Second Amendment, the Company’s maximum consolidated secured leverage ratio was amended to be 5.00:1.00 until September 30, 2023, 5.25:1.00 until December 31, 2023 and 5.00:1.00 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 4.25:1.00, 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 2.50:1.00.

As of September 30, 2023, there were $530,000 of loans under the Revolver, $286,875 of Term Loans, and $4,468 of letters of credit outstanding under the Credit Agreement.

As of September 30, 2023, $265,532 was available under the Credit Agreement, subject to compliance with the financial covenants.

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

See Note 6, 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 $21.8 million at March 31, 2023 to $43.7 million as compared to $65.5 million at June 30, 2022.

Our working capital was $348.1 million at March 31, 2023, an increase of $19.1 million from $329.0 million at the end of fiscal 2022.

Additionally, our total debt decreased by $32.1 million at March 31, 2023 to $856.6 million as compared to $888.6 million at June 30, 2022 as a result of $31.6 million of net repayments carried out during the period.

Our cash and cash equivalents balance decreased $15.1 million at September 30, 2023 to $38.3 million as compared to $53.4 million at June 30, 2023.

Our working capital was $319.2 million at September 30, 2023, a decrease of $39.8 million from $358.9 million at the end of fiscal 2023.

Additionally, our total debt decreased by $13.8 million at September 30, 2023 to $815.0 million as compared to $828.7 million at June 30, 2023 as a result of $12.9 million of net repayments carried out during the period.

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

As of March 31, 2023, substantially all cash was held outside of the United States.

As of September 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.

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

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

Nine Months Ended March 31, Change in

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

Three Months Ended September 30, Change in

(amounts in thousands) 2023 2022 Dollars

3 unchanged sentences

Financing activities (17,584) 9,824 (27,408)

Effect of exchange rate changes on cash (104) (5,836) 5,732

Decrease in cash and cash equivalents (9,203) (2,220) (6,983)

Effect of exchange rate changes on cash and cash equivalents (5,881) (11,498) 5,617

Net decrease in cash and cash equivalents $ (15,084) $ (13,718) $ (1,366)

Cash provided by operating activities was $26.3 million for the nine months ended March 31, 2023, a decrease of $72.9 million from cash provided by operating activities of $99.2 million in the prior year period.

This decrease versus the prior period resulted primarily from a reduction of $60.5 million in net income adjusted for non-cash charges in the current period and higher cash utilization of $12.3 million from our working capital accounts primarily due to a higher account receivable balance due to timing of cash receipts, partially offset by a reduction in the change in other current assets.

Cash used in investing activities was $13.2 million for the nine months ended March 31, 2023, a decrease of $271.0 million from $284.3 million in the prior year period primarily due to the acquisition of THWR in the same period of the prior year.

Cash used in financing activities was $34.8 million for the nine months ended March 31, 2023, a decrease of $207.7 million compared to $172.9 million of cash provided in the prior year period.

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

Operating Free Cash Flows

Operating free cash flows were $4.9 million for the nine months ended March 31, 2023, a decrease of $60.4 million from $65.2 million provided by operating free cash flows in the nine months ended March 31, 2022.

This decrease versus the prior year period resulted primarily from a decrease in cash flow from operations of $72.9 million driven by the reasons explained above, partially offset by reduction in capital expenditures.

See the Reconciliation of Non-U.S.

Cash provided by operating activities was $14.0 million for the three months ended September 30, 2023, an increase of $19.1 million from cash used in operating activities of $5.1 million in the prior year period.

This increase versus the prior year period resulted primarily from higher cash generation of $44.3 million from our working capital accounts which was mainly due to our accounts payable optimization initiatives, focused inventory management, and an improvement in accounts receivable recovery, partially offset by reduction of $25.2 million in net income adjusted for non-cash charges in the current period.

Cash used in investing activities was $5.6 million for the three months ended September 30, 2023, a decrease of $1.3 million from $6.9 million in the prior year period primarily due to lower capital expenditures in the current period due to phasing of capital projects.

During the three months ended September 30, 2023, $6.9 million of capital expenditures were incurred primarily related to operational improvements in the United States and the United Kingdom segments.

We expect capital expenditures to be approximately $50.0 million for fiscal year 2024.

Cash used in financing activities was $17.6 million for the three months ended September 30, 2023, a decrease of $27.4 million compared to $9.8 million of cash provided by financing activities in the prior year period.

The increase in cash used in financing activities was primarily due to higher net debt repayment during the three months ended September 30, 2023.

Free Cash Flow

Our free cash flow was $7.1 million for the three months ended September 30, 2023, an increase of $19.5 million from negative free cash flow of $12.3 million in the three months ended September 30, 2022.

This increase versus the prior year period resulted primarily from an increase in cash flows from operations of $19.1 million driven by the reasons explained above.

See Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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

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

Share Repurchase Program

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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 nine months ended March 31, 2023, the Company did not repurchase any shares under the repurchase program.

As of March 31, 2023, the Company had $173.5 million of remaining authorization under the share repurchase program.

During the three months ended September 30, 2023, the Company repurchased no shares under the repurchase program.

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

Reconciliation of Non-U.S.

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GAAP measures.

Net Sales - Constant Currency Presentation

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.

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

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 - 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.

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

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

GAAP financial measures.

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.

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.

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

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:

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

(amounts in thousands) North America International Hain Consolidated

Net sales - Three months ended March 31, 2023 $ 286,649 $ 168,594 $ 455,243

Acquisitions, divestitures and discontinued brands (163) — (163)

Impact of foreign currency exchange 1,881 14,760 16,641

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2023 $ 288,367 $ 183,354 $ 471,721

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

Acquisitions, divestitures and discontinued brands (2,311) — (2,311)

Net sales adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2022 $ 323,431 $ 177,197 $ 500,628

Net sales decline (12.0) % (4.9) % (9.5) %

Impact of acquisitions, divestitures and discontinued brands 0.6 % — % 0.4 %

Impact of foreign currency exchange 0.6 % 8.4 3.3 %

Net sales (decline) growth on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (10.8) % 3.5 % (5.8) %

Net sales - Nine months ended March 31, 2023 $ 857,406 $ 491,396 $ 1,348,802

Acquisitions, divestitures and discontinued brands (34,663) — (34,663)

Impact of foreign currency exchange 5,024 64,266 69,290

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2023 $ 827,767 $ 555,662 $ 1,383,429

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

Acquisitions, divestitures and discontinued brands (7,142) — (7,142)

Net sales adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2022 $ 859,139 $ 568,502 $ 1,427,641

Net sales decline (1.0) % (13.6) % (6.0) %

Impact of acquisitions, divestitures and discontinued brands (3.3) % — % (1.9) %

Impact of foreign currency exchange 0.6 % 11.3 % 4.8 %

Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (3.7) % (2.3) % (3.1) %

Net sales - Three months ended September 30, 2023 $ 260,054 $ 164,975 $ 425,029

Divestitures and discontinued brands 8 — 8

Net sales adjusted for divestitures and discontinued brands - Three months ended September 30, 2023 $ 260,062 $ 164,975 $ 425,037

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

Divestitures and discontinued brands (1,762) — (1,762)

Net sales adjusted for divestitures and discontinued brands - Three months ended September 30, 2022 $ 286,634 $ 150,955 $ 437,589

Net sales (decline) growth (9.8) % 9.3 % (3.3) %

Impact of divestitures and discontinued brands 0.5 % — % 0.4 %

Net sales (decline) growth adjusted for divestitures and discontinued brands (9.3) % 9.3 % (2.9) %

Adjusted EBITDA

The Company defines Adjusted EBITDA as net 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 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, 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, 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.

9 unchanged sentences

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

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

Three Months Ended September 30,

(amounts in thousands) 2023 2022

7 unchanged sentences

Litigation and related costs

Certain litigation expenses, net (a)

(1,582) 2,005 3,363 5,389

Litigation expenses (a)

Restructuring activities

CEO succession — — 5,113 —

Plant closure related costs, net 1,841 (2)

Productivity and transformation costs 6,403 773

Warehouse/manufacturing consolidation and other costs, net 2,871 94 899 2,632

Acquisitions, divestitures and other

Transaction and integration costs, net 118 1,367

(Gain) loss on sale of assets (134) 55 (3,529) (9,047)

Loss (gain) on sale of assets 62 (40)

Impairment charges

Inventory write-down — — — (46)

Intangibles and long-lived asset impairment 156,583 — 156,923 303

Long-lived asset impairment 694 —

Adjusted EBITDA $ 24,090 $ 36,029

(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.

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the three months ended March 31, 2023 and 2022 is as follows:

(amounts in thousands) Hain Consolidated

Adjusted EBITDA - Three months ended March 31, 2023 $ 37,260

Impact of foreign currency exchange 2,067

Adjusted EBITDA on a constant currency basis - Three months ended March 31, 2023 $ 39,327

Adjusted EBITDA - Three months ended March 31, 2022 $ 58,669

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the nine months ended March 31, 2023 and 2022 is as follows:

(amounts in thousands) Hain Consolidated

Adjusted EBITDA - Nine months ended March 31, 2023 $ 123,106

Impact of foreign currency exchange 7,594

Adjusted EBITDA on a constant currency basis - Nine months ended March 31, 2023 $ 130,700

Adjusted EBITDA - Nine months ended March 31, 2022 $ 165,249

Operating Free Cash Flows

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

GAAP financial measure “Operating Free Cash Flows” The difference between Operating Free Cash Flows and cash flow 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).

Free Cash Flow

In our internal evaluations, we use the non-GAAP financial measure “Free Cash Flow.” The difference between Free Cash Flow and cash flows provided by or used in operating activities, which is the most comparable U.S.

GAAP financial measure, is that Free Cash Flow 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 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:

Nine Months Ended March 31,

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

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

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

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

Three Months Ended September 30,

(amounts in thousands) 2023 2022

Net cash provided by operating activities $ 26,309 $ 99,186

Net cash provided by (used in) operating activities $ 14,030 $ (5,116)

Purchases of property, plant and equipment (6,906) (7,215)

Operating free cash flows $ 4,875 $ 65,247

Free cash flow $ 7,124 $ (12,331)

Critical Accounting Estimates

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

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

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

The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, from which there have been no material changes.

Recent Accounting Pronouncements

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

There were no recently adopted accounting pronouncements or recently issued accounting pronouncements not yet effective that we believe will have a significant impact on our consolidated financial statements.

Certain of our product lines have seasonal fluctuations.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis