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Item 2. Management’s Discussion and Analysis

2024-02-07 compared with 2023-11-07 · 206 added, 82 removed, 209 unchanged (58% 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 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.

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 December 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, 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.

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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 ® .

® , ParmCrisps ® , Robertson’s ® , Rose’s ® (under license), Sensible Portions ® , Spectrum ® , Sun-Pat ® , Terra ® , The Gre ek 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 ® .

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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.

For the three and six months ended December 31, 2023, we incurred approximately $31 million and $40 million, respectively, of expenses associated with the Company’s restructuring program.

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

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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

Comparison of Three Months Ended December 31, 2023 to Three Months Ended December 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 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):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended December 31, 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

September 30, 2023 September 30, 2022 Dollars Percentage

December 31, 2023 December 31, 2022 Dollars Percentage

Net sales $ 454,100 100.0% $ 454,208 100.0% $ (108) —%

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Selling, general and administrative expenses 73,952 16.3% 72,357 15.9% 1,595 2.2%

Long-lived asset impairment 20,666 4.6% 340 0.1% 20,326 **

Productivity and transformation costs 6,869 1.5% 986 0.2% 5,883 596.7%

Amortization of acquired intangible assets 1,509 0.3% 2,785 0.6% (1,276) (45.8)%

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

Operating (loss) income (781) (0.2)% 27,389 6.0% (28,170) (102.9)%

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Other income, net (42) —% (1,062) (0.2)% 1,020 (96.0)%

(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) *

(Loss) income before income taxes and equity in net loss of equity-method investees (16,877) (3.7)% 17,639 3.9% (34,516) *

(Benefit) provision for income taxes (4,249) (0.9)% 6,357 1.4% (10,606) *

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

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.

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

Net sales for the three months ended December 31, 2023 were $454.1 million, a decrease of $0.1 million, or flat, as compared to $454.2 million for the three months ended December 31, 2022.

Net sales, adjusted for the impact of divestitures and discontinued brands, increased approximately $1.0 million, or 0.2%, from the prior year quarter due to growth in the International reportable segment, mostly offset by a decline in the North America reportable segment.

The effect of fluctuations in foreign currency exchange rates increased net sales by $10.0 million.

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

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, 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.

Gross profit for the three months ended December 31, 2023 was $102.2 million, a decrease of $1.6 million, or 1.6%, as compared to the prior year quarter.

Additionally, gross profit margin of 22.5% was slightly lower when compared with 22.9% in the prior year quarter.

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 and recognition of charges in the three months ended December 31, 2023 associated with the consolidation of facilities, partially offset by improvements in pricing and productivity.

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

Selling, General and Administrative Expenses

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.

Selling, general and administrative expenses were $74.0 million for the three months ended December 31, 2023, an increase of $1.6 million, or 2.2%, from $72.4 million for the prior year quarter.

The increase was primarily due to higher marketing expenses and an increase in employee compensation-related expenses.

Long-lived asset impairment

During the three months ended December 31, 2023, the Company recognized a non-cash impairment charge of $20.7 million due to a decline in actual and projected performance and cash flows related to an asset group primarily comprised of certain production assets in the North America reportable segment.

See Note 6, Property, Plant and Equipment, Net, 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.

Productivity and Transformation Costs

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.

Productivity and transformation costs were $6.9 million for the three months ended December 31, 2023, an increase of $5.9 million from $1.0 million in the prior year quarter.

The increase was primarily due to the recognition of 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.

Amortization of acquired intangibles was $1.5 million for the three months ended December 31, 2023, a decrease of $1.3 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 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.

Operating loss for the three months ended December 31, 2023 was $0.8 million compared to operating income of $27.4 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 $13.2 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.

Interest and other financing expense, net totaled $16.1 million for the three months ended December 31, 2023, an increase of $5.3 million, or 49.3%, from $10.8 million in the prior year quarter.

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

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

Other Income, 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.

Other income, net was not significant for the three months ended December 31, 2023, compared to income of $1.1 million in the prior year quarter.

The decrease in other income, net was primarily attributable to lower unrealized foreign currency gains.

(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 December 31, 2023 was $16.9 million compared to income of $17.6 million in the prior year quarter.

The change was due to the items discussed above.

(Benefit) Provision for Income Taxes

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.

Our income tax benefit was $4.2 million for the three months ended December 31, 2023 compared to income tax expense of $6.4 million in the prior year quarter.

The effective income tax rate was a benefit of 25.2% and an expense of 36.0% for the three months ended December 31, 2023 and 2022, respectively.

The effective income tax rate for the three months ended December 31, 2023 was impacted by 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 rate for the three months ended December 31, 2022 was impacted by the gain on the sale of Westbrae Natural® brand (“Westbrae”), 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 uncertain tax positions.

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

Equity in Net Loss of Equity-Method Investees

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

Our equity in net loss from our equity-method investments for the three months ended December 31, 2023 was $0.9 million and $0.3 million in the prior year quarter.

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

Net (Loss) Income

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.

Net loss for the three months ended December 31, 2023 was $13.5 million, or $0.15 per diluted share, compared to net income of $11.0 million, or $0.12 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Adjusted EBITDA

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.

Our Adjusted EBITDA was $47.1 million and $49.8 million for the three months ended December 31, 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.

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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.

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 (gains) losses, 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, (gain) loss on sale of assets, certain inventory write-downs related to exited categories, 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.

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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:

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended December 31, 2023 and 2022:

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

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North America

Our net sales in the North America reportable segment for the three months ended 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.

Our net sales in the North America reportable segment for the three months ended December 31, 2023 were $267.7 million, a decrease of $14.7 million, or 5.2%, from net sales of $282.4 million in the prior year quarter.

The decrease in net sales was primarily due to lower sales in the baby/kids category on account of continued industry-wide challenges in organic formula supply, as well as by a decline in the snacks category as we shifted our promotional strategy and optimized our channel mix for improved trade efficiency and profitability, partially offset by growth in the beverages category.

Adjusted EBITDA for the three months ended December 31, 2023 was $31.2 million, a decrease of $7.3 million, or 18.9%, from Adjusted EBITDA of $38.5 million in the prior year quarter.

The decrease was primarily driven by reduced gross profit reflecting lower sales volume and the impact of inflation, partially offset by improvements in productivity.

The decline in Adjusted EBITDA also reflected higher selling, general and administrative expenses primarily associated with increased marketing investments.

Adjusted EBITDA margin was 11.7%, a 190-basis point decrease from the prior year period.

International

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.

Net sales in the International reportable segment for the three months ended December 31, 2023 were $186.4 million, an increase of $14.6 million, or 8.5%, from net sales of $171.8 million in the prior year quarter.

The net sales increase was mainly driven by growth in the meal preparation and beverages categories due to pricing and strong private label performance.

The increase also reflected 5.8% of growth from the favorable impact of foreign exchange.

Adjusted EBITDA for the three months ended December 31, 2023 was $26.0 million, an increase of $6.7 million, or 35.0%, from Adjusted EBITDA of $19.2 million in the prior year quarter.

The increase was primarily driven by an increase in gross profit reflecting higher net sales due to pricing, partially offset by lower volumes and inflation.

Adjusted EBITDA margin was 13.9%, a 270-basis point increase from the prior year period.

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

Comparison of Six Months Ended December 31, 2023 to Six Months Ended December 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 six months ended December 31, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Six Months Ended Change in

December 31, 2023 December 31, 2022 Dollars Percentage

Net sales $ 879,129 100.0% $ 893,559 100.0% $ (14,430) (1.6)%

Cost of sales 692,971 78.8% 695,367 77.8% (2,396) (0.3)%

Gross profit 186,158 21.2% 198,192 22.2% (12,034) (6.1)%

Selling, general and administrative expenses 151,121 17.2% 147,308 16.5% 3,813 2.6%

Long-lived asset impairment 21,360 2.4% 340 —% 21,020 **

Productivity and transformation costs 13,272 1.5% 1,759 0.2% 11,513 654.5%

Amortization of acquired intangible assets 3,464 0.4% 5,573 0.6% (2,109) (37.8)%

Operating (loss) income (3,059) (0.3)% 43,212 4.8% (46,271) *

Interest and other financing expense, net 29,382 3.3% 18,489 2.1% 10,893 58.9%

Other income, net (307) —% (2,852) (0.3)% 2,545 (89.2)%

(Loss) income before income taxes and equity in net loss of equity-method investees (32,134) (3.7)% 27,575 3.1% (59,709) *

(Benefit) provision for income taxes (9,628) (1.1)% 8,988 1.0% (18,616) *

Equity in net loss of equity-method investees 1,405 0.2% 698 0.1% 707 101.3%

Net (loss) income $ (23,911) (2.7)% $ 17,889 2.0% $ (41,800) *

Adjusted EBITDA $ 71,216 8.1% $ 85,846 9.6% $ (14,630) (17.0)%

Diluted net (loss) income per common share $ (0.27) $ 0.20 $ (0.47) *

* 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 six months ended December 31, 2023 were $879.1 million, a decrease of $14.4 million, or 1.6%, as compared to $893.6 million for the six months ended December 31, 2022.

Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $11.5 million, or 1.3%, from the prior comparable period due to a decline in the North America reportable segment, partially offset by growth in the International reportable segment.

The effect of fluctuations in foreign currency exchange rates increased net sales by $20.8 million.

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

Gross profit for the six months ended December 31, 2023 was $186.2 million, a decrease of $12.0 million, or 6.1%, as compared to the prior year comparable period.

Gross profit margin was 21.2% of net sales, compared to 22.2% in the prior year comparable 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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $151.1 million for the six months ended December 31, 2023, an increase of $3.8 million, or 2.6%, from $147.3 million for the prior year comparable period.

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

Long-lived asset impairment

During the six months ended December 31, 2023, the Company recognized aggregate impairment charges of $21.4 million, an increase of $21.0 million from $0.3 million in the prior year comparable period.

Results for the six months ended December 31, 2023 included the recognition of a $20.7 million charge related to a decline in actual and projected performance and cash flows related to an asset group primarily comprised of certain production assets in the North America reportable segment.

See Note 6, Property, Plant and Equipment, Net, 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.

Productivity and Transformation Costs

Productivity and transformation costs were $13.3 million for the six months ended December 31, 2023, an increase of $11.5 million from $1.8 million in the prior year comparable period.

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

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $3.5 million for the six months ended December 31, 2023, a decrease of $2.1 million from $5.6 million in the prior year comparable period, 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.

Operating (Loss) Income

Operating loss for the six months ended December 31, 2023 was $3.1 million compared to operating income of $43.2 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 $29.4 million for the six months ended December 31, 2023, an increase of $10.9 million, or 58.9%, from $18.5 million in the prior year comparable period.

The increase resulted primarily from higher borrowing rates, partially offset by a lower outstanding debt balance compared to the prior year 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 $0.3 million for the six months ended December 31, 2023, compared to $2.9 million in the prior year comparable period.

The decrease in other income, net was primarily attributable to lower unrealized foreign currency gains.

(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 six months ended December 31, 2023 was $32.1 million compared to income of $27.6 million in the prior year comparable period.

The decrease was due to the items discussed above.

(Benefit) Provision for Income Taxes

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

Our income tax benefit was $9.6 million for the six months ended December 31, 2023 compared to income tax expense of $9.0 million in the prior year comparable period.

The effective income tax rate was a benefit of 30.0% and an expense of 32.6% for the six months ended December 31, 2023 and 2022, respectively.

The effective income tax rate for the six months ended December 31, 2023 was impacted by tax expense related to stock-based compensation, GILTI, and limitations on the deductibility of executive compensation.

The effective income tax rate for the six months ended December 31, 2022 was impacted by the gain on sale of Westbrae, 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 uncertain tax positions.

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 six months ended December 31, 2023 was $1.4 million compared to $0.7 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 six months ended December 31, 2023 was $23.9 million, or $0.27 per diluted share, compared to income of $17.9 million, or $0.20 per diluted share, in the prior year comparable period.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $71.2 million and $85.8 million for the six months ended December 31, 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.

Segment Results

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the six months ended December 31, 2023 and 2022:

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

Six months ended 12/31/23 $ 527,725 $ 351,404 $ — $ 879,129

Six months ended 12/31/22 570,757 322,802 — 893,559

$ change $ (43,032) $ 28,602 n/a $ (14,430)

% change (7.5) % 8.9 % n/a (1.6) %

Adjusted EBITDA

Six months ended 12/31/23 $ 49,945 $ 43,407 $ (22,136) $ 71,216

Six months ended 12/31/22 69,291 34,189 (17,634) 85,846

$ change $ (19,346) $ 9,218 $ (4,502) $ (14,630)

% change (27.9) % 27.0 % (25.5) % (17.0) %

Adjusted EBITDA margin

Six months ended 12/31/23 9.5 % 12.4 % n/a 8.1 %

Six months ended 12/31/22 12.1 % 10.6 % n/a 9.6 %

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 18, 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 six months ended December 31, 2023 were $527.7 million, a decrease of $43.0 million, or 7.5%, from net sales of $570.8 million in the prior year comparable period.

The decrease in net sales was primarily due to lower sales in the baby/kids category on account of continued industry-wide challenges in organic formula supply, a decline in the snacks category associated with more focused promotional activities and an optimized channel strategy as well as lower sales in the meal preparation and personal care categories.

Adjusted EBITDA for the six months ended December 31, 2023 was $49.9 million, a decrease of $19.3 million, or 27.9%, from Adjusted EBITDA of $69.3 million in the prior year comparable period.

The decrease was primarily driven by reduced gross profit reflecting the reduction in net sales discussed above, inflation and an increase in certain inventory obsolescence reserves, partially offset by improvements in productivity.

The decline in Adjusted EBITDA also reflected higher selling, general and administrative expenses primarily associated with increased marketing investments.

Adjusted EBITDA margin was 9.5%, a 260-basis point decrease from the prior year period.

International

Net sales in the International reportable segment for the six months ended December 31, 2023 were $351.4 million, an increase of $28.6 million, or 8.9%, from net sales of $322.8 million in the prior year comparable period.

The increase reflected 6.7% of growth from the favorable impact of foreign currency exchange rates.

The remainder of the net sales increase was mainly driven by growth in the meal preparation and beverages categories due to pricing and strong private label performance.

Adjusted EBITDA for the six months ended December 31, 2023 was $43.4 million, an increase of $9.2 million, or 27.0%, from Adjusted EBITDA of $34.2 million in the prior year comparable period.

The increase was primarily driven by an increase in gross profit reflecting higher net sales due to pricing, partially offset by inflation and an increase in selling, general and administrative expenses primarily due to increase in employee compensation-related expenses.

Adjusted EBITDA margin was 12.4%, a 180-basis point increase from the prior year period.

Corporate and Other

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

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

Liquidity and Capital Resources

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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%.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at December 31, 2023 was 7.90%.

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.

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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.

As of December 31, 2023, there were $526,000 of loans under the Revolver , $285,000 of Term Loans, and $3,188 let ters of credit outstanding under the Credit Agreement.

As of December 31, 2023, $270,812 was available under the Credit Agreement, subject to compliance with the financial covenants.

As of December 31, 2023, the Company was in compliance with all associated covenants.

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 $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 and cash equivalents balance increased $0.3 million at December 31, 2023 to $53.7 million as compared to $53.4 million at June 30, 2023.

Our working capital was $332.0 million at December 31, 2023, a decrease of $27.0 million from $358.9 million at the end of fiscal 2023.

Additionally, our total debt decreased by $19.5 million at December 31, 2023 to $809.2 million as compared to $828.7 million at June 30, 2023 as a result of $18.8 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 September 30, 2023, substantially all cash was held outside of the United States.

As of December 31, 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 provided by (used in) operating, investing and financing activities is summarized below.

Three Months Ended September 30, Change in

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

Six Months Ended December 31, Change in

(amounts in thousands) 2023 2022 Dollars

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Financing activities (24,093) (10,892) (13,201)

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 $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.

Effect of exchange rate changes on cash 1,119 (2,517) 3,636

Net increase (decrease) in cash and cash equivalents $ 308 $ (22,075) $ 22,383

Cash provided by operating activities was $34.7 million for the six months ended December 31, 2023, an increase of $37.3 million from cash used in operating activities of $2.7 million in the prior year period.

This increase versus the prior period resulted primarily from higher cash generation of $66.2 million from our working capital accounts which was mainly due to our accounts payable optimization initiatives and focused inventory management, partially offset by a reduction in accounts receivable recovery.

The increase was also partially offset by a reduction of $28.9 million in net income adjusted for non-cash charges in the current period.

Cash used in investing activities was $11.4 million for the six months ended December 31, 2023, an increase of $5.4 million from $6.0 million in the prior year period primarily due to the receipt of $7.5 million of proceeds from the divestiture of Westbrae during the six months ended December 31, 2022.

Cash used in financing activities was $24.1 million for the six months ended December 31, 2023, an increase of $13.2 million compared to $10.9 million in the prior year period.

The increase in cash used in financing activities was primarily due to higher debt repayment during the six months ended December 31, 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.

Our free cash flow was $22.0 million for the six months ended December 31, 2023, an increase of $38.7 million from negative free cash flow of $16.7 million in the six months ended December 31, 2022.

This increase versus the prior year period resulted primarily from an increase in cash flows from operations of $37.3 million driven by the reasons explained above.

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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 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.

During the six months ended December 31, 2023, the Company repurchased no shares under the repurchase program.

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

Reconciliation of Non-U.S.

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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.

We 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.

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(amounts in thousands) North America International Hain Consolidated

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

Net sales - Three months ended December 31, 2023 $ 267,671 $ 186,429 $ 454,100

Net sales adjusted for divestitures and discontinued brands - Three months ended December 31, 2023 $ 267,671 $ 186,429 $ 454,100

Net sales - Three months ended December 31, 2022 $ 282,361 $ 171,847 $ 454,208

Divestitures and discontinued brands (1,148) — (1,148)

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

Net sales adjusted for divestitures and discontinued brands - Three months ended December 31, 2022 $ 281,213 $ 171,847 $ 453,060

Net sales (decline) growth (5.2) % 8.5 % — %

Impact of divestitures and discontinued brands 0.4 % — % 0.2 %

Net sales (decline) growth adjusted for divestitures and discontinued brands (4.8) % 8.5 % 0.2 %

Net sales - Six months ended December 31, 2023 $ 527,725 $ 351,404 $ 879,129

Divestitures and discontinued brands 8 — 8

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

Net sales adjusted for divestitures and discontinued brands - Six months ended December 31, 2023 $ 527,733 $ 351,404 $ 879,137

Net sales - Six months ended December 31, 2022 $ 570,757 $ 322,802 $ 893,559

Divestitures and discontinued brands (2,910) — (2,910)

Net sales adjusted for divestitures and discontinued brands - Six months ended December 31, 2022 $ 567,847 $ 322,802 $ 890,649

Net sales (decline) growth (7.5) % 8.9 % (1.6) %

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Adjusted EBITDA

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 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 related to exited categories, 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.

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(amounts in thousands) 2023 2022 2023 2022

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Stock-based compensation, net 3,376 3,435 7,118 7,429

Unrealized currency losses (gains) 35 (1,711)

Litigation and related costs

Litigation expenses (a)

Unrealized currency (gains) losses (194) 2,160 (159) 449

Certain litigation expenses, net (a)

2,091 2,482 3,615 4,945

Restructuring activities

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

Productivity and transformation costs 6,869 986 13,272 1,759

Plant closure related costs, net 2,302 53 4,143 51

Warehouse/manufacturing consolidation and other costs, net 811 (1,972) 811 (1,972)

CEO succession — 5,113 — 5,113

Acquisitions, divestitures and other

Transaction and integration costs, net 109 402 227 1,769

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

(Gain) loss on sale of assets — (3,355) 62 (3,395)

Impairment charges

Long-lived asset impairment 20,666 340 21,360 340

Inventory write-downs related to exited categories 1,443 — 1,443 —

Adjusted EBITDA $ 47,126 $ 49,817 $ 71,216 $ 85,846

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

Three Months Ended September 30,

Six Months Ended December 31,

(amounts in thousands) 2023 2022

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Recent Accounting Pronouncements

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.

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.

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