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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2024-02-07 · 225 added, 161 removed, 254 unchanged (60% 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 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.

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, 2024 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 Gre ek 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 ® , 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.

During the first quarter of fiscal year 2024, we initiated a multi-year growth, transformation and restructuring 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:

Hain Reimagined Program 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.

◦ Simplify our footprint, maintaining direct presence in five key markets – United States, Canada, UK, Ireland, and Western 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.

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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.

For the three and nine months ended March 31, 2024, we incurred approximately $10 million and $50 million, respectively, of expenses associated with the Company’s restructuring program.

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

As part of the Hain Reimagined Program, we initiated actions to consolidate our personal care manufacturing footprint and rationalize certain product categories for greater capacity utilization, cost reduction and margin expansion.

The Company also simplified its distribution footprint in the U.S.

and initiated actions to exit its non-strategic joint venture in India as part of the Focus and Fuel pillars of Hain Reimagined Program.

Implementation of the Hain Reimagined Program is expected to be completed by the end of the 2027 fiscal year.

Global Economic Environment

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.

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 continuing 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 December 31, 2023 to Three Months Ended December 31, 2022

Comparison of Three Months Ended March 31, 2024 to Three Months Ended March 31, 2023

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 December 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 March 31, 2024 and 2023 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

December 31, 2023 December 31, 2022 Dollars Percentage

March 31, 2024 March 31, 2023 Dollars Percentage

Net sales $ 438,358 100.0% $ 455,243 100.0% $ (16,885) (3.7)%

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Selling, general and administrative expenses 66,716 15.2% 75,047 16.5% (8,331) (11.1)%

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

Intangibles and long-lived asset impairment 49,426 11.3% 156,583 34.4% (107,157) (68.4)%

Productivity and transformation costs 7,175 1.6% 3,933 0.9% 3,242 82.4%

Amortization of acquired intangible assets 1,255 0.3% 2,842 0.6% (1,587) (55.8)%

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

Operating loss (27,901) (6.4)% (140,926) (31.0)% 113,025 (80.2)%

Interest and other financing expense, net 14,127 3.2% 13,421 2.9% 706 5.3%

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

(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) *

Other expense, net 100 —% 439 0.1% (339) (77.2)%

Loss before income taxes and equity in net loss of equity-method investees (42,128) (9.6)% (154,786) (34.0)% 112,658 (72.8)%

Provision (benefit) for income taxes 5,100 1.2% (39,587) (8.7)% 44,687 *

Equity in net loss of equity-method investees 966 0.2% 528 0.1% 438 83.0%

Net (loss) income $ (13,535) (3.0)% $ 10,966 2.4% $ (24,501) *

Net loss $ (48,194) (11.0)% $ (115,727) (25.4)% $ 67,533 (58.4)%

Adjusted EBITDA $ 43,762 10.0% $ 37,260 8.2% $ 6,502 17.5%

Diluted net (loss) income per common share $ (0.15) $ 0.12 $ (0.27) *

Diluted net loss per common share $ (0.54) $ (1.29) $ 0.75 (58.1)%

* 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 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.

Net sales for the three months ended March 31, 2024 were $438.4 million, a decrease of $16.9 million, or 3.7%, as compared to $455.2 million for the three months ended March 31, 2023.

Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $17.0 million, or 3.7%, from the prior year quarter 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 $5.8 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 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.

Gross profit for the three months ended March 31, 2024 was $96.7 million, a decrease of $0.8 million, or 0.8%, as compared to the prior year quarter.

Gross profit margin of 22.1% was slightly higher when compared with 21.4% 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 and recognition of charges in the three months ended March 31, 2024 associated with the consolidation of facilities, partially offset by improvements in pricing and productivity.

Gross profit in the International reportable segment increased for the three months ended March 31, 2024 compared to the prior year quarter mainly driven by lower cost of goods sold due to lower inflation and better prices on key commodities.

Selling, General and Administrative 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.

Selling, general and administrative expenses were $66.7 million for the three months ended March 31, 2024, a decrease of $8.3 million, or 11.1%, from $75.0 million for the prior year quarter.

The decrease was primarily due to a decrease in employee compensation-related expenses.

Intangibles and long-lived asset impairment

During the three months ended March 31, 2024, the Company recognized a non-cash impairment charge of $49.4 million primarily related to ParmCrisps ® , Thinsters ® , and certain North America personal care intangible asset impairment charges.

During the three months ended March 31, 2023, the Company recognized an aggregate non-cash 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 amount of such assets to their estimated fair value.

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.

Productivity and Transformation Costs

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.

Productivity and transformation costs were $7.2 million for the three months ended March 31, 2024, an increase of $3.2 million from $3.9 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, including reorganization of global functions and related personnel resource requirements and rationalizing our sourcing and supply chain processes.

Amortization of Acquired Intangible Assets

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.

Amortization of acquired intangible assets was $1.3 million for the three months ended March 31, 2024, a decrease of $1.6 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.

Operating (Loss) Income

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.

Operating Loss

Operating loss for the three months ended March 31, 2024 was $27.9 million compared to $140.9 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 $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.

Interest and other financing expense, net totaled $14.1 million for the three months ended March 31, 2024, an increase of $0.7 million, or 5.3%, from $13.4 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 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.

Other Expense, Net

Other expense, net was $0.1 million for the three months ended March 31, 2024, compared to $0.4 million in the prior year quarter.

The decrease in other expense, net was primarily attributable to lower foreign currency losses.

Loss 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, 2024 was $42.1 million compared to $154.8 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 $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.

Provision (benefit) for Income Taxes

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

Our income tax expense was $5.1 million for the three months ended March 31, 2024 compared to a benefit of $39.6 million in the prior year quarter.

The effective income tax rate was an expense of 12.1% and a benefit of 25.6% for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate for the three months ended March 31, 2024 was impacted by an increase in the federal and state valuation allowance, 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 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 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 December 31, 2023 was $0.9 million and $0.3 million in the prior year quarter.

Our equity in net loss from our equity-method investments for the three months ended March 31, 2024 and 2023 was $1.0 million and $0.5 million, respectively.

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 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.

Net loss for the three months ended March 31, 2024 was $48.2 million, or $0.54 per diluted share, compared to $115.7 million, or $1.29 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Adjusted EBITDA

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.

Our Adjusted EBITDA was $43.8 million and $37.3 million for the three months ended March 31, 2024 and 2023, 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 (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.

net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses, certain litigation and related costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, net, costs associated with acquisitions, divestitures and other transactions, (gain) loss on sale of assets, inventory write-downs related to exited categories, intangibles and long-lived asset impairments and other adjustments.

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

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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 December 31, 2023 and 2022:

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the three months ended March 31, 2024 and 2023:

(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 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.

Our net sales in the North America reportable segment for the three months ended March 31, 2024 were $268.1 million, a decrease of $18.5 million, or 6.5%, from net sales of $286.6 million in the prior year quarter.

The decrease in net sales was primarily due to lower sales in the personal care category on account of distribution losses and lower sales in the baby/kids category due to continued challenges in organic formula supply, partially offset by growth in the beverages category.

Adjusted EBITDA for the three months ended March 31, 2024 was $27.9 million, an increase of $0.7 million, or 2.5%, from Adjusted EBITDA of $27.2 million in the prior year quarter.

The increase in Adjusted EBITDA reflected lower selling, general and administrative expenses primarily associated with reduced compensation-related costs and operating-model savings, partially offset by reduced gross profit reflecting lower sales volume and the impact of inflation.

Adjusted EBITDA margin was 10.4%, a 90-basis point increase from the prior year period.

International

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.

Net sales in the International reportable segment for the three months ended March 31, 2024 were $170.3 million, an increase of $1.7 million, or 1.0%, from net sales of $168.6 million in the prior year quarter.

The net sales increase was mainly driven by growth in the beverages category due to pricing and strong private label performance, partially offset by a decline in the meal preparation category.

The increase also reflected 3.4% 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 for the three months ended March 31, 2024 was $24.5 million, an increase of $3.3 million, or 15.4%, from Adjusted EBITDA of $21.3 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.

Adjusted EBITDA margin was 14.4%, 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.

The decrease in Corporate and Other expenses primarily reflected a reduction in compensation-related expenses.

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

Comparison of Six Months Ended December 31, 2023 to Six Months Ended December 31, 2022

Comparison of Nine Months Ended March 31, 2024 to Nine Months Ended March 31, 2023

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

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, 2024 and 2023 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Nine Months Ended Change in

March 31, 2024 March 31, 2023 Dollars Percentage

Net sales $ 1,317,487 100.0% $ 1,348,802 100.0% $ (31,315) (2.3)%

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Selling, general and administrative expenses 217,837 16.5% 222,355 16.5% (4,518) (2.0)%

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

Intangibles and long-lived asset impairment 70,786 5.4% 156,923 11.6% (86,137) (54.9)%

Productivity and transformation costs 20,447 1.6% 5,692 0.4% 14,755 259.2%

Amortization of acquired intangible assets 4,719 0.4% 8,415 0.6% (3,696) (43.9)%

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

Operating loss (30,960) (2.3)% (97,714) (7.2)% 66,754 (68.3)%

Interest and other financing expense, net 43,509 3.3% 31,910 2.4% 11,599 36.3%

Other income, net (207) —% (2,413) (0.2)% 2,206 (91.4)%

(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) *

Loss before income taxes and equity in net loss of equity-method investees (74,262) (5.6)% (127,211) (9.4)% 52,949 (41.6)%

Benefit for income taxes (4,528) (0.3)% (30,599) (2.3)% 26,071 (85.2)%

Equity in net loss of equity-method investees 2,371 0.2% 1,226 0.1% 1,145 93.4%

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

Net loss $ (72,105) (5.5)% $ (97,838) (7.3)% $ 25,733 (26.3)%

Adjusted EBITDA $ 114,978 8.7% $ 123,106 9.1% $ (8,128) (6.6)%

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.

Diluted net loss per common share $ (0.80) $ (1.09) $ 0.29 (26.6)%

Net sales for the nine months ended March 31, 2024 were $1,317.5 million, a decrease of $31.3 million, or 2.3%, as compared to $1,348.8 million for the nine months ended March 31, 2023.

Net sales, adjusted for the impact of divestitures and discontinued brands, decreased approximately $28.5 million, or 2.1%, from the prior comparable period due to a decline in the North America reportable segment, partially offset by growth in the International reportable segment.

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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 for the nine months ended March 31, 2024 was $282.8 million, a decrease of $12.8 million, or 4.3%, as compared to the prior year comparable period.

Gross profit margin was 21.5% of net sales, compared to 21.9% 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.

Gross profit in the International reportable segment increased during the nine months ended March 31, 2024 compared to the prior year period, 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.

Selling, general and administrative expenses were $217.8 million for the nine months ended March 31, 2024, a decrease of $4.5 million, or 2.0%, from $222.4 million for the prior year comparable period.

The decrease was primarily due to lower employee compensation-related expenses.

Intangibles and long-lived asset impairment

During the nine months ended March 31, 2024, the Company recognized aggregate impairment charges of $70.8 million, a decrease of $86.1 million from $156.9 million in the prior year comparable period.

The decrease was due to higher impairment charges related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, recorded in the prior year comparable period.

Results for the nine months ended March 31, 2024 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.

In addition, results for the nine months ended March 31, 2024 also included non-cash impairment charges of $42.2 million primarily related to ParmCrisps ® , Thinsters ® , and certain North America personal care intangible assets.

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.

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.

Productivity and transformation costs were $20.4 million for the nine months ended March 31, 2024, an increase of $14.8 million from $5.7 million in the prior year comparable period.

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.

Amortization of acquired intangibles was $4.7 million for the nine months ended March 31, 2024, a decrease of $3.7 million from $8.4 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.

Operating Loss

Operating loss for the nine months ended March 31, 2024 was $31.0 million compared to $97.7 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 $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.

Interest and other financing expense, net totaled $43.5 million for the nine months ended March 31, 2024, an increase of $11.6 million, or 36.3%, from $31.9 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.

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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.

Other income, net totaled $0.2 million for the nine months ended March 31, 2024, compared to $2.4 million in the prior year comparable period.

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

Loss 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, 2024 was $74.3 million compared to $127.2 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.

Benefit for Income Taxes

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

Our income tax benefit was $4.5 million for the nine months ended March 31, 2024 compared to $30.6 million in the prior year comparable period.

The effective income tax rate was a benefit of 6.1% and 24.1% for the nine months ended March 31, 2024 and 2023, respectively.

The effective income tax rate for the nine months ended March 31, 2024 was impacted by an increase in the federal and state valuation allowance, tax expense related to stock-based compensation, GILTI, and limitations on the deductibility of executive compensation.

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, an operating lease modification during the second quarter of fiscal 2023, 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 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.

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2024 was $2.4 million compared to $1.2 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.

Net loss for the nine months ended March 31, 2024 was $72.1 million, or $0.80 per diluted share, compared to $97.8 million, or $1.09 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.

Our Adjusted EBITDA was $115.0 million and $123.1 million for the nine months ended March 31, 2024 and 2023, 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 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:

The following table provides a summary of net sales and Adjusted EBITDA by reportable segment for the nine months ended March 31, 2024 and 2023:

(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

Nine months ended 03/31/24 $ 795,832 $ 521,655 $ — $ 1,317,487

Nine months ended 03/31/23 857,406 491,396 — 1,348,802

$ change $ (61,574) $ 30,259 n/a $ (31,315)

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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

Nine months ended 03/31/24 $ 77,828 $ 67,953 $ (30,803) $ 114,978

Nine months ended 03/31/23 96,484 55,458 (28,836) 123,106

$ change $ (18,656) $ 12,495 $ (1,967) $ (8,128)

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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 %

Nine months ended 03/31/24 9.8 % 13.0 % n/a 8.7 %

Nine months ended 03/31/23 11.3 % 11.3 % n/a 9.1 %

See the Reconciliation of Non-U.S.

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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.

Our net sales in the North America reportable segment for the nine months ended March 31, 2024 were $795.8 million, a decrease of $61.6 million, or 7.2%, from net sales of $857.4 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 personal care and meal preparation categories on account of distribution losses as well as lower sales in the snacks category.

Adjusted EBITDA for the nine months ended March 31, 2024 was $77.8 million, a decrease of $18.7 million, or 19.3%, from Adjusted EBITDA of $96.5 million in the prior year comparable period.

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

Adjusted EBITDA margin was 9.8%, a 150-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.

Net sales in the International reportable segment for the nine months ended March 31, 2024 were $521.7 million, an increase of $30.3 million, or 6.2%, from net sales of $491.4 million in the prior year comparable period.

The increase reflected 5.6% 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.

Adjusted EBITDA for the nine months ended March 31, 2024 was $68.0 million, an increase of $12.5 million, or 22.5%, from Adjusted EBITDA of $55.5 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.

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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 secured leverage ratio, a consolidated leverage ratio and a consolidated interest coverage 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 Credit Agreement, the Company ’ s maximum consolidated leverage ratio is 6.00:1.00.

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

As of March 31, 2024, the Company’s consolidated secured leverage ratio, consolidated leverage ratio and consolidated interest coverage ratio were 3.85:1.00, 3.85:1.00 and 3.49:1.00, respectively, and the Company was in compliance with all associated covenants.

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.

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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 December 31, 2023 was 7.90%.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2024 was 8.10%.

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.

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.

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 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.

As of March 31, 2024, there were $496,000 of loans under the Revolver, $283,125 of Term Loans, and $3,188 letters of credit outstanding under the Credit Agreement.

As of March 31, 2024, $300,812 was available under the Credit Agreement, subject to compliance with the financial 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 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 December 31, 2023, substantially all cash was held outside of the United States.

Our cash and cash equivalents balance decreased $3.8 million at March 31, 2024 to $49.5 million as compared to $53.4 million at June 30, 2023.

Our working capital was $299.6 million at March 31, 2024, a decrease of $59.3 million from $358.9 million at the end of fiscal 2023.

Additionally, our total debt decreased by $51.2 million at March 31, 2024 to $777.5 million as compared to $828.7 million at June 30, 2023 as a result of $50.6 million of net repayments carried out during the period.

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

As of March 31, 2024, 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.

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

Six Months Ended December 31, Change in

Nine Months Ended March 31, Change in

(amounts in thousands) 2024 2023 Dollars

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Effect of exchange rate changes on cash (1,425) (104) (1,321)

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.

Net decrease in cash and cash equivalents $ (3,815) $ (21,830) $ 18,015

Cash provided by operating activities was $77.0 million for the nine months ended March 31, 2024, an increase of $50.7 million from $26.3 million in the prior year period.

This increase versus the prior period resulted primarily from higher cash generation of $81.9 million from our working capital accounts, which was driven by 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 $31.2 million in net loss adjusted for non-cash charges in the current period.

Cash used in investing activities was $23.2 million for the nine months ended March 31, 2024, an increase of $10.0 million from $13.2 million in the prior year period primarily due to higher capital expenditure in the current period by $3.3 million on account of phasing of capital projects and receipt of $7.5 million of proceeds from the divestiture of Westbrae during the prior year period ended March 31, 2023.

Cash used in financing activities was $56.1 million for the nine months ended March 31, 2024, an increase of $21.3 million compared to $34.8 million in the prior year period.

The increase in cash used in financing activities was primarily due to higher net debt repayment during the nine months ended March 31, 2024.

Free Cash Flow

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.

Our free cash flow was $52.2 million for the nine months ended March 31, 2024, an increase of $47.3 million from $4.9 million in the nine months ended March 31, 2023.

This increase versus the prior year period resulted primarily from an increase in cash flows from operations of $50.7 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 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.

During the nine months ended March 31, 2024, the Company repurchased no shares under the repurchase program.

As of March 31, 2024, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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(amounts in thousands) North America International Hain Consolidated

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

Net sales - Three months ended March 31, 2024 $ 268,107 $ 170,251 $ 438,358

Divestitures and discontinued brands (307) — (307)

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

Net sales adjusted for divestitures and discontinued brands - Three months ended March 31, 2024 $ 267,800 $ 170,251 $ 438,051

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

Divestitures and discontinued brands (163) — (163)

Net sales adjusted for divestitures and discontinued brands - Three months ended March 31, 2023 $ 286,486 $ 168,594 $ 455,080

Net sales (decline) growth (6.5) % 1.0 % (3.7) %

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Net sales (decline) growth adjusted for divestitures and discontinued brands (6.5) % 1.0 % (3.7) %

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

Net sales - Nine months ended March 31, 2024 $ 795,832 $ 521,655 $ 1,317,487

Divestitures and discontinued brands (299) — (299)

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

Net sales adjusted for divestitures and discontinued brands - Nine months ended March 31, 2024 $ 795,533 $ 521,655 $ 1,317,188

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

Divestitures and discontinued brands (3,073) — (3,073)

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

Net sales adjusted for divestitures and discontinued brands - Nine months ended March 31, 2023 $ 854,333 $ 491,396 $ 1,345,729

Net sales (decline) growth (7.2) % 6.2 % (2.3) %

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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 related to exited categories, intangibles and 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, net, costs associated with acquisitions, divestitures and other transactions, (gains) losses on sales of assets, 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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GAAP results.

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

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

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

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

(amounts in thousands) 2024 2023 2024 2023

Net (loss) income $ (13,535) $ 10,966 $ (23,911) $ 17,889

Net loss $ (48,194) $ (115,727) $ (72,105) $ (97,838)

Depreciation and amortization 10,858 13,784 34,360 37,909

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Interest expense, net 13,322 12,924 41,278 30,582

(Benefit) provision for income taxes (4,249) 6,357 (9,628) 8,988

Provision (benefit) for income taxes 5,100 (39,587) (4,528) (30,599)

Stock-based compensation, net 3,017 3,228 10,135 10,657

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

Unrealized currency losses 250 202 91 651

Certain litigation expenses, net (a)

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Impairment charges

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

Intangibles and long-lived asset impairment 49,426 156,583 70,786 156,923

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

Adjusted EBITDA $ 43,762 $ 37,260 $ 114,978 $ 123,106

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

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

Free Cash Flow

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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:

Six Months Ended December 31,

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

Nine Months Ended March 31,

(amounts in thousands) 2024 2023

Net cash provided by (used in) operating activities $ 34,685 $ (2,652)

Net cash provided by operating activities $ 76,959 $ 26,309

Purchases of property, plant and equipment (24,769) (21,434)

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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.

Goodwill is not amortized but rather is tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable.

Goodwill is tested for impairment at the reporting unit level.

A reporting unit represents an operating segment or a component of an operating segment.

Goodwill is tested for impairment by either performing a qualitative evaluation or a two-step quantitative test.

The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

We may elect not to perform the qualitative assessment for some or all reporting units and perform a two-step quantitative impairment test.

The estimate of the fair values of our reporting units are based on the best information available as of the date of the assessment.

We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain.

We generally use a blended analysis of the present value of discounted cash flows and the market valuation approach.

The discounted cash flow model uses the present values of estimated future cash flows.

Considerable management judgment is necessary to evaluate the impact of operating and external economic factors in estimating our future cash flows.

The assumptions we use in our evaluations include projections of growth rates and profitability, our estimated working capital needs, as well as our weighted average cost of capital.

The market valuation approach indicates the fair value of a reporting unit based on a comparison to comparable publicly traded firms in similar businesses.

Estimates used in the market value approach include the identification of similar companies with comparable business factors.

These key assumptions are inherently uncertain and require a high degree of estimation and are subject to change based on, among others, industry and geopolitical conditions, our ability to navigate changing macroeconomic conditions and trends and the timing and success of strategic initiatives.

Changes in economic and operating conditions impacting the assumptions we made could result in additional goodwill impairment in future periods.

If the carrying amount of the reporting unit exceeds fair value, goodwill is considered impaired.

A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

In each quarter subsequent to our annual impairment assessment, we review events that occur or circumstances that change, including the macroeconomic environment, our business performance and our market capitalization, to determine if a quantitative impairment assessment is necessary.

If assumptions are not achieved or market conditions decline, potential impairment charges could result.

Impairments to goodwill and other intangible assets may be caused by factors outside our control, such as increasing competitive pricing pressures, changes in discount rates based on changes in cost of capital (i.e., as a result of changes in interest rates or other conditions), lower than expected sales and profit growth rates, changes in industry EBITDA multiples, the inability to quickly replace lost co-manufacturing business, or the bankruptcy of a significant customer.

As a result of indicators of impairment which included significant decline in the Company’s market capitalization and impairment charges recorded during the three months ended March 31, 2024 within the United States (U.S.) reporting unit as noted in Note 8, Goodwill and Other Intangible Assets and Note 6, Property, Plant and Equipment, Net , the Company completed an interim impairment test of all reporting units.

For United Kingdom, Western Europe, Canada, and Ella's Kitchen UK, the Company performed a qualitative evaluation to assess factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill.

The Company concluded that the qualitatively tested reporting units estimated fair values exceeded their carrying amounts.

Three of these reporting units (United Kingdom, Western Europe and Canada) were quantitatively tested in fiscal 2023 and as of the last quantitative testing date, their estimated fair values exceeded their respective carrying amounts by more than 17.7%.

During the three months ended March 31, 2024, the Company completed an interim quantitative impairment test of goodwill in the U.S.

reporting unit and concluded that the reporting unit’s estimated fair value exceeded its carrying amount.

The fair value of the reporting unit was estimated utilizing a blended approach which included an income approach utilizing the Discounted Cash Flows (“DCF”) Method and the Guideline Public Company Methodology (“GPCM”), a market-based approach.

(Amounts in thousands, other than percentage)

Reporting Unit Fair Value Carrying Amount Dollars Percentage

United States (U.S.) $ 990,000 $ 941,277 $ 48,723 5.2 %

The United States reporting unit is at risk of impairment in the event of significant unfavorable changes in assumptions, including forecasted future cash flows based on execution of strategic initiatives for increasing revenue, as well as discount rates and other macroeconomic factors.

We monitor our reporting units at risk of impairment for interim impairment indicators and believe that the estimates and assumptions used in the calculations are reasonable as of March 31, 2024.

We performed qualitative procedures related to our other four reporting units, noting that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount as of March 31, 2024 .

Should the fair value of any of our reporting units fall below its carrying amount because of reduced operating performance, market declines including a deterioration of the macroeconomic factors, changes in the discount rate, or other adverse conditions, goodwill impairment charges may be necessary in future periods.

We performed a sensitivity test and noted that an increase in the U.S.

weighted average cost of capital (“WACC”) by 1 percentage point, holding other assumptions constant, would not result in recognition of an impairment charge.

The calculation of the U.S.

reporting unit WACC included a number of subjective inputs, including a company-specific risk premium of 4.0% to account for the riskiness of the assumed revenue growth and margin improvement within the financial forecasts used in the DCF Method.

We performed a market capitalization reconciliation with the expectation that the market capitalization should reconcile within a reasonable range of the sum of the fair values of the individual reporting units.

Such reconciliation often includes both qualitative and quantitative assessments as is the case with the Company’s reporting units as of March 31, 2024 .

When an entity performs a qualitative assessment for some reporting units but proceeds to a quantitative assessment for others, reconciling the overall market capitalization to the aggregate fair value of reporting units can be challenging and requires significant judgment.

There is no requirement to determine the fair value of reporting units for which only a qualitative impairment test is performed.

Therefore, when performing an overall comparison to market capitalization, we included the current year fair value for reporting units for which a quantitative measurement was performed, and we estimated the fair value for the reporting units for which qualitative assessments were performed using a reasonable methodology.

Upon performing the market capitalization reconciliation, we noted a reasonable reconciliation between the sum of the reporting unit fair values and the Company ’ s market capitalization once adjusted for the impact of corporate costs not allocated to the reporting units.

Indefinite-Lived Intangible Assets

The Company performs an indefinite-lived asset impairment test annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

In accordance with ASC 350, we may first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test.

If an entity elects to perform a qualitative assessment, it first shall assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired.

One procedure we perform during interim periods to determine whether indicators of impairment are present includes a comparison of net sales used in the most recent quantitative impairment tests to forecasted net sales for the same fiscal year (or balance of the fiscal year when performing an interim review) in order to identify brands for which the current fiscal year net sales are expected to be lower than the forecasted fiscal year net sales per the latest quantitative test.

The performance of these brands is then reviewed by management to determine if the shortfall to forecasted net sales was related to events and circumstances that are expected to be temporary in nature, or if it was caused by more pervasive issue that could serve as in impairment indicator (e.g., loss of key customers, discontinuance of certain product categories within a brand, etc.).

We use this risk-based approach to determine which brands we would quantitatively test for impairment, whether as part of fiscal year annual impairment testing or an interim period test.

During the third quarter of 2024, we qualitatively assessed our indefinite-lived intangible assets for impairment and determined that the indefinite-lived tradenames for certain North America personal care tradenames (namely, Alba Botanica ® , Avalon Organics ® , and JASON ® ), ParmCrisps ® and Thinsters ® should be quantitatively tested.

The Company’s 2024 interim impairment testing resulted in the recognition of impairment charges for the following indefinite-lived tradenames, and other intangible assets:

ParmCrisps ® , Thinsters ® and certain North America personal care tradenames.

During the three months ended March 31, 2024, as a result of further expected decline in the actual and projected performance and cash flows, the Company completed an interim quantitative impairment test of indefinite-lived trademarks associated with certain North America personal care brands, as noted in Note 8, Goodwill and Other Intangible Assets.

The Company recorded impairment charges and reduced the carrying amount of such intangible assets to their estimated fair value of $13,000.

These intangible assets have an increased risk of future impairment due to the potential risk of failure on the execution of the Company ’ s strategy and associated impact on the assumptions utilized in developing its fair value estimate as of March 31, 2024.

Further, during the three months ended March 31, 2024, the Company, noted that two of its plant-based beverage brands:

Happy™ and Joya ® have risk of future impairment due to declining sales on account of changing consumer preference to switch from branded to private label products.

The assets are part of the International reportable segment and have a remaining aggregate carrying amount of $6,150 as of March 31, 2024.

Recent Accounting Pronouncements

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Item 2. Management’s Discussion and Analysis