HAIN CELESTIAL GROUP INC - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q

___________________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023


☐			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File No. 0-22818

___________________________________________

THE HAIN CELESTIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

___________________________________________


Delaware						22-3240619
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)

4600 Sleepytime Drive, Boulder, CO 80301

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (516) 587-5000

1111 Marcus Avenue, Lake Success, NY 11042

(Former name, former address and former fiscal year, if changed since last report)

___________________________________________

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Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	HAIN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ý

As of May 3, 2023, there were 89,443,996 shares outstanding of the registrant’s Common Stock, par value $.01 per share.

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THE HAIN CELESTIAL GROUP, INC.

Index


	Part I - Financial Information	Page

Item 1.	Financial Statements
	Consolidated Balance Sheets - March 31, 202 3 and June 30, 2022	3
	Consolidated Statements of Operations - Three and nine months ended March 31, 2023 and 2022	4
	Consolidated Statements of Comprehensive (Loss) Income - Three and nine months ended March 31, 2023 and 2022	5
	Consolidated Statement of Stockholders’ Equity - Three and nine months ended March 31, 2023 and 2022	6
	Consolidated Statements of Cash Flows - Nine months ended March 31, 2023 and 2022	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52

	Part II - Other Information

Items 3 and 4 are not applicable.
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 5.	Other Information	55
Item 6.	Exhibits	55
Signatures		56

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Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form 10-Q”) contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties, and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of The Hain Celestial Group, Inc. (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”) may differ materially from those expressed or implied by such forward-looking statements. The words “believe,” “expect,” “anticipate,” “may,” “should,” “plan,” “intend,” “potential,” “will” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, among other things, our beliefs or expectations relating to our future performance, results of operations and financial condition; foreign exchange and inflation rates; our strategic initiatives, our business strategy, our supply chain, including the availability and pricing of raw materials, our brand portfolio, pricing actions and product performance; current or future macroeconomic trends; and future corporate acquisitions or dispositions.

Risks and uncertainties that may cause actual results to differ materially from forward-looking statements include: challenges and uncertainty resulting from the impact of competition; our ability to manage our supply chain effectively; input cost inflation, including with respect to freight and other distribution costs; foreign currency exchange risk; risks arising from the Russia-Ukraine war; disruption of operations at our manufacturing facilities; reliance on independent contract manufacturers; changes to consumer preferences; customer concentration; reliance on independent distributors; the availability of natural and organic ingredients; risks associated with operating internationally; pending and future litigation, including litigation relating to Earth’s Best® baby food products; risks associated with outsourcing arrangements; our ability to execute our cost reduction initiatives and related strategic initiatives; our ability to identify and complete acquisitions or divestitures and our level of success in integrating acquisitions; our reliance on independent certification for a number of our products; the reputation of our Company and our brands; our ability to use and protect trademarks; general economic conditions; the United Kingdom’s exit from the European Union; cybersecurity incidents; disruptions to information technology systems; the impact of climate change; liabilities, claims or regulatory change with respect to environmental matters; potential liability if our products cause illness or physical harm; the highly regulated environment in which we operate; compliance with data privacy laws; compliance with our credit agreement; our ability to issue preferred stock; the adequacy of our insurance coverage; impairments in the carrying value of goodwill or other intangible assets; and other risks and matters described in our most recent Annual Report on Form 10-K, this Form 10-Q and other reports that we file in the future.

We undertake no obligation to update forward-looking statements to reflect actual results or changes in assumptions or circumstances, except as required by applicable law.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MARCH 31, 2023 AND JUNE 30, 2022

(In thousands, except par values)


	March 31,		June 30,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	43,682	$	65,512
Accounts receivable, less allowance for doubtful accounts of $3,229 and $1,731, respectively	179,114		170,661
Inventories	316,345		308,034
Prepaid expenses and other current assets	58,719		54,079
Assets held for sale	1,250		1,840
Total current assets	599,110		600,126
Property, plant and equipment, net	296,433		297,405
Goodwill	931,729		933,796
Trademarks and other intangible assets, net	314,536		477,533
Investments and joint ventures	12,720		14,456
Operating lease right-of-use assets, net	98,306		114,691
Other assets	19,990		20,377

Total assets	$	2,272,824	$	2,458,384
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	146,340	$	174,765
Accrued expenses and other current liabilities	95,841		86,833
Current portion of long-term debt	7,575		7,705


Total current liabilities	249,756		269,303
Long-term debt, less current portion	848,982		880,938
Deferred income taxes	51,155		95,044
Operating lease liabilities, noncurrent portion	91,885		107,481
Other noncurrent liabilities	24,571		22,450

Total liabilities	1,266,349		1,375,216
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: none	—		—
Common stock - $.01 par value, authorized 150,000 shares; issued: 111,263 and 111,090 shares, respectively; outstanding: 89,423 and 89,302 shares, respectively	1,113		1,111
Additional paid-in capital	1,213,783		1,203,126
Retained earnings	671,260		769,098
Accumulated other comprehensive loss	(152,945)		(164,482)
	1,733,211		1,808,853
Less: Treasury stock, at cost, 21,840 and 21,788 shares, respectively	(726,736)		(725,685)
Total stockholders’ equity	1,006,475		1,083,168
Total liabilities and stockholders’ equity	$	2,272,824	$	2,458,384

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022

(In thousands, except per share amounts)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Net sales	$	455,243	$	502,939	$	1,348,802	$	1,434,783
Cost of sales	357,764		387,236		1,053,131		1,096,367
Gross profit	97,479		115,703		295,671		338,416
Selling, general and administrative expenses	75,047		75,750		222,355		229,679
Intangibles and long-lived asset impairment	156,583		—		156,923		303

Amortization of acquired intangible assets	2,842		3,110		8,415		7,254
Productivity and transformation costs	3,933		1,679		5,692		8,448





Operating (loss) income	(140,926)		35,164		(97,714)		92,732
Interest and other financing expense, net	13,421		3,224		31,910		7,672
Other expense (income), net	439		(712)		(2,413)		(10,570)
(Loss) income before income taxes and equity in net loss of equity-method investees	(154,786)		32,652		(127,211)		95,630
(Benefit) provision for income taxes	(39,587)		7,738		(30,599)		19,425
Equity in net loss of equity-method investees	528		383		1,226		1,374


Net (loss) income	$	(115,727)	$	24,531	$	(97,838)	$	74,831

Net (loss) income per common share:


Basic	$	(1.29)	$	0.27	$	(1.09)	$	0.80



Diluted	$	(1.29)	$	0.27	$	(1.09)	$	0.79

Shares used in the calculation of net (loss) income per common share:
Basic	89,421		91,139		89,369		94,099
Diluted	89,421		91,310		89,369		94,519

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022

(In thousands)


	Three Months Ended
	March 31, 2023						March 31, 2022
	Pretax amount		Tax (expense) benefit		After-tax amount		Pretax amount		Tax (expense) benefit		After-tax amount
Net (loss) income					$	(115,727)					$	24,531

Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications	$	15,250	$	—	15,250		$	(18,701)	$	—	(18,701)

Change in deferred (losses) gains on cash flow hedging instruments	(6,031)		1,521		(4,510)		1,841		(387)		1,454
Change in deferred gains on fair value hedging instruments	172		(43)		129		—		—		—
Change in deferred (losses) gains on net investment hedging instruments	(628)		160		(468)		1,426		(299)		1,127

Total other comprehensive income (loss)	$	8,763	$	1,638	$	10,401	$	(15,434)	$	(686)	$	(16,120)

Total comprehensive (loss) income					$	(105,326)					$	8,411

	Nine Months Ended
	March 31, 2023						March 31, 2022
	Pretax amount		Tax (expense) benefit		After-tax amount		Pretax amount		Tax (expense) benefit		After-tax amount
Net (loss) income					$	(97,838)					$	74,831

Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications	$	7,774	$	—	7,774		$	(43,649)	$	—	(43,649)

Change in deferred gains on cash flow hedging instruments	5,724		(1,506)		4,218		2,567		(540)		2,027
Change in deferred gains on fair value hedging instruments	591		(145)		446		—		—		—
Change in deferred (losses) gains on net investment hedging instruments	(1,139)		238		(901)		5,423		(1,140)		4,283
Total other comprehensive income (loss)	$	12,950	$	(1,413)	$	11,537	$	(35,659)	$	(1,680)	$	(37,339)

Total comprehensive (loss) income					$	(86,301)					$	37,492

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023

(In thousands, except par values)


	Common Stock			Additional							Accumulated Other
		Amount		Paid-in		Retained		Treasury Stock			Comprehensive
	Shares	at $.01		Capital		Earnings		Shares	Amount		Loss		Total
Balance at June 30, 2022	111,090	$	1,111	$	1,203,126	$	769,098	21,788	$	(725,685)	$	(164,482)	$	1,083,168
Net income						6,923							6,923

Other comprehensive loss											(52,462)		(52,462)
Issuance of common stock pursuant to stock-based compensation plans	24	1											1

Employee shares withheld for taxes								10	(229)				(229)

Stock-based compensation expense				3,994									3,994
Balance at September 30, 2022	111,114	$	1,112	$	1,207,120	$	776,021	21,798	$	(725,914)	$	(216,944)	$	1,041,395
Net income						10,966							10,966

Other comprehensive income											53,598		53,598
Issuance of common stock pursuant to stock-based compensation plans	142	1											1

Employee shares withheld for taxes								39	(754)				(754)

Stock-based compensation expense				3,435									3,435
Balance at December 31, 2022	111,256	$	1,113	$	1,210,555	$	786,987	21,837	$	(726,668)	$	(163,346)	$	1,108,641
Net loss						(115,727)							(115,727)

Other comprehensive income											10,401		10,401
Issuance of common stock pursuant to stock-based compensation plans	7												—

Employee shares withheld for taxes								3	(68)				(68)

Stock-based compensation expense				3,228									3,228
Balance at March 31, 2023	111,263	$	1,113	$	1,213,783	$	671,260	21,840	$	(726,736)	$	(152,945)	$	1,006,475

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022

(In thousands, except par values)


	Common Stock			Additional							Accumulated Other
		Amount		Paid-in		Retained		Treasury Stock			Comprehensive
	Shares	at $.01		Capital		Earnings		Shares	Amount		Loss		Total
Balance at June 30, 2021	109,507	$	1,096	$	1,187,530	$	691,225	10,438	$	(283,957)	$	(73,011)	$	1,522,883
Net income						19,411							19,411


Other comprehensive loss											(20,963)		(20,963)
Issuance of common stock pursuant to stock-based compensation plans	61	—		—									—

Employee shares withheld for taxes								29	(1,175)				(1,175)
Repurchase of common stock								4,525	(175,687)				(175,687)
Stock-based compensation expense				4,287									4,287
Balance at September 30, 2021	109,568	$	1,096	$	1,191,817	$	710,636	14,992	$	(460,819)	$	(93,974)	$	1,348,756
Net income						30,889							30,889


Other comprehensive loss											(256)		(256)
Issuance of common stock pursuant to stock-based compensation plans	1,436	14		(14)									—

Employee shares withheld for taxes								654	(29,858)				(29,858)
Repurchase of common stock								2,027	(89,831)				(89,831)
Stock-based compensation expense				4,156									4,156
Balance at December 31, 2021	111,004	$	1,110	$	1,195,959	$	741,525	17,673	$	(580,508)	$	(94,230)	$	1,263,856
Net income						24,531							24,531
Other comprehensive loss											(16,120)		(16,120)
Issuance of common stock pursuant to stock-based compensation plans	83	1		(1)									—
Employee shares withheld for taxes								40	(1,597)				(1,597)
Repurchase of common stock								3,574	(130,472)				(130,472)
Stock-based compensation expense				3,846									3,846
Balance at March 31, 2022	111,087	$	1,111	$	1,199,804	$	766,056	21,287	$	(712,577)	$	(110,350)	$	1,144,044

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED MARCH 31, 2023 AND 2022

(In thousands)


	Nine Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(97,838)	$	74,831


Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	37,909		34,396
Deferred income taxes	(44,809)		7,374

Equity in net loss of equity-method investees	1,226		1,374
Stock-based compensation, net	10,657		12,289

Intangibles and long-lived asset impairment	156,923		303
Gain on sale of assets	(3,529)		(8,869)
Other non-cash items, net	(1,526)		(2,155)
(Decrease) increase in cash attributable to changes in operating assets and liabilities:
Accounts receivable	(7,926)		14,150
Inventories	(8,534)		(4,371)
Other current assets	455		(10,996)
Other assets and liabilities	3,496		(2,705)
Accounts payable and accrued expenses	(20,195)		(16,435)
Net cash provided by operating activities	26,309		99,186
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(21,434)		(33,939)
Acquisitions of businesses, net of cash acquired	—		(260,474)
Investments and joint ventures, net	433		(614)
Proceeds from sale of assets	7,758		10,756

Net cash used in investing activities	(13,243)		(284,271)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under bank revolving credit facility	275,000		678,000
Repayments under bank revolving credit facility	(301,000)		(370,000)
Borrowings under term loan	—		300,000
Repayments under term loan	(5,625)		(1,875)

Payments of other debt, net	(2,116)		(3,232)
Share repurchases	—		(397,405)
Employee shares withheld for taxes	(1,051)		(32,630)
Net cash (used in) provided by financing activities	(34,792)		172,858
Effect of exchange rate changes on cash	(104)		(5,836)






Net decrease in cash and cash equivalents	(21,830)		(18,063)
Cash and cash equivalents at beginning of period	65,512		75,871
Cash and cash equivalents at end of period	$	43,682	$	57,808

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except par values and per share data)

1. BUSINESS

The Hain Celestial Group, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”), was founded in 1993 and is headquartered in Boulder, Colorado. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet. The Company continues to be a leading marketer, manufacturer, and seller of organic and natural, “better-for-you” products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience. The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes. Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug, and convenience stores worldwide. The Company operates under two reportable segments: North America and International.

2. BASIS OF PRESENTATION

The Company’s unaudited consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated companies in which the Company exerts significant influence, but which it does not control, are accounted for under the equity method of accounting. As such, consolidated net (loss) income includes the Company's equity in the current earnings or losses of such companies.

The Company's unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “Form 10-K”). The amounts as of and for the periods ended June 30, 2022 are derived from the Company’s audited annual financial statements. The unaudited consolidated financial statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair presentation for interim periods. Operating results for interim periods are not necessarily indicative of the results for the full year. Please refer to the Notes to the Consolidated Financial Statements as of June 30, 2022 and for the fiscal year then ended included in the Form 10-K for information not included in these condensed notes.

All amounts in the unaudited consolidated financial statements, notes and tables have been rounded to the nearest thousand, except par values and per share amounts, unless otherwise indicated.

Reclassifications

Certain prior year amounts have been reclassified to conform with current year presentation.

Significant Accounting Policies

The Company's significant accounting policies are described in Note 2, Summary of Significant Accounting Policies and Practices, in the Notes to the Consolidated Financial Statements in the Form 10-K. Included herein are certain updates to those policies.

Transfer of Financial Assets

The Company accounts for transfers of financial assets, such as non-recourse accounts receivable financing arrangements, when the Company has surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred and any other relevant considerations. The Company has non-recourse financing arrangements in which eligible receivables are sold to third-party buyers in exchange for cash. The Company transferred accounts receivable in their entirety to the buyers and satisfied all of the conditions to report the transfer of financial assets in their entirety as a sale. The principal amount of receivables sold under these arrangements was $290,856 and $112,607 during the nine months ended March 31, 2023 and 2022, respectively. The incremental cost of financing receivables under these arrangements is included in selling, general and administrative expenses on the Company’s Consolidated Statements of Operations. The proceeds from the sale of receivables are included in cash used in operating activities on the Consolidated Statements of Cash Flows.

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Recently Issued and Adopted Accounting Pronouncements

In March 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method which would allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits This ASU is effective for fiscal years beginning after December 15, 2023. This standard will not have any impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The guidance allows for companies to: (1) account for certain contract modifications as a continuation of the existing contract without additional analysis; (2) continue hedge accounting when certain critical terms of a hedging relationship change and assess effectiveness in ways that disregard certain potential sources of ineffectiveness; and (3) make a one-time sale and/or transfer of certain debt securities from held-to-maturity to available-for-sale or trading. This ASU was adopted by the Company and applies prospectively to contract modifications and hedging relationships. ASU 2020-04 is currently effective and may be applied prospectively to contract modifications made on or before December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends certain provisions of Topic 848 to December 31, 2024.

ASU 2020-04 allows for different elections to be made at different points in time and the timing of those elections will be documented as applicable. For the avoidance of doubt, the Company intends to reassess its elections of optional expedients and exceptions included within ASU 2020-04 related to its hedging activities and will document the election of these items on a quarterly basis or when changes/additions are necessary.

During fiscal year 2023, the Company adopted hedge accounting expedients related to probability of forecasted transactions to assert probability of the hedged interest (payments/receipts) regardless of any expected modification in terms related to reference rate reform. The Company has also adopted the Secured Overnight Financing Rate (“SOFR”) as the alternative reference rate to replace LIBOR with respect to the Company’s long-term debt. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company is continuing to assess the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

3. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net (loss) income per share utilized to calculate (loss) earnings per share on the Consolidated Statements of Operations:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Numerator:


Net (loss) income	$	(115,727)	$	24,531	$	(97,838)	$	74,831

Denominator:
Basic weighted average shares outstanding	89,421		91,139		89,369		94,099
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units(1)	—		171		—		420
Diluted weighted average shares outstanding	89,421		91,310		89,369		94,519

(1)Due to a loss from operations, common stock equivalents are excluded from the calculation of diluted weighted average shares outstanding for the three and nine months ended March 31, 2023, respectively, as the impact would be anti-dilutive.

There were 329 and 508 restricted stock awards excluded from our calculation of diluted net (loss) income per share for the three months ended March 31, 2023 and 2022, respectively, as such awards were anti-dilutive. There were 524 and 275 stock-based awards comprised of restricted stock awards and stock options excluded from the calculation of diluted net (loss) income per share for the nine months ended March 31, 2023 and 2022, respectively, as such awards were anti-dilutive.

Additionally, 399 and 231 stock-based awards outstanding at March 31, 2023 and 2022, respectively, were excluded from the calculation of diluted net (loss) income per share for the three months ended March 31, 2023 and 2022, respectively, as such awards

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were contingently issuable based on market or performance conditions, and such conditions had not been achieved during the respective periods. Furthermore, 366 and 541 stock-based awards outstanding at March 31, 2023 and 2022, respectively, were excluded from the calculation of diluted net (loss) income per share for the nine months ended March 31, 2023 and 2022, respectively, as such awards were contingently issuable based on market or performance conditions, and such conditions had not been achieved during the respective periods.

Share Repurchase Program

In January 2022, the Company's Board of Directors (the "Board") authorized the repurchase of up to $200,000 of the Company’s issued and outstanding common stock. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise. The current authorization does not have a stated expiration date. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations. During the nine months ended March 31, 2023, the Company did not repurchase any shares under the repurchase program. As of March 31, 2023, the Company had $173,514 of remaining authorization under the share repurchase program. In addition, during the nine months ended March 31, 2022, the Company repurchased 6,552 shares under the repurchase program for a total of $265,420 excluding commissions, at an average price of $40.50 per share. Repurchases made during the nine months ended March 31, 2022, were made under a previous Board authorization.

4. ACQUISITION AND DISPOSITION

Acquisition

That's How We Roll

On December 28, 2021, the Company acquired all outstanding stock of THWR, the producer and marketer of ParmCrisps® and Thinsters®, deepening the Company's position in the snacking category. Consideration for the transaction consisted of cash, net of cash acquired, totaling $260,185. The acquisition was funded with borrowings under the Credit Agreement (as defined in Note 9, Debt and Borrowings).

During the three months ended December 31, 2022 the Company finalized the purchase price allocation and recognized a measurement period adjustment of $794 to acquired deferred tax assets, with a related impact to goodwill. Results of THWR are included in the United States operating segment, a component of the North America reportable segment. THWR's net sales included in our consolidated results were 2.2% and 3.08% of consolidated net sales for the three and nine months ended March 31, 2023 respectively.

The following table provides unaudited pro forma results of operations had the acquisition been completed at the beginning of fiscal 2022. The pro forma information reflects certain adjustments related to the acquisition but does not reflect any potential operating efficiencies or cost savings that may result from the acquisition. Accordingly, this information has been provided for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by the Company for the periods presented or that will be achieved by the combined company in the future. The pro forma information has been adjusted to give effect to items that are directly attributable to the transactions and are expected to have a continuing impact on the combined results.



	Unaudited supplemental pro forma information
	Three Months Ended		Nine Months Ended
	March 31, 2022		March 31, 2022
Net sales	$	502,939	$	1,488,483
Net income from operations(1)	$	26,970	$	81,415
Diluted net (loss) income per common share from operations	$	0.30	$	0.86

(1)The pro forma adjustments include the elimination of transaction costs totaling $5,103 from the nine months ended March 31, 2022. Additionally, the pro forma adjustments include the elimination of integration costs and a fair value inventory adjustment totaling $1,500 and $1,800, respectively, for the three and nine months ended March 31, 2022.

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The Company's acquisition is described in more detail in Note 4, Acquisitions and Dispositions, in the Notes to the Consolidated Financial Statements in the Form 10-K.

Disposition

Westbrae Natural®

On December 15, 2022, the Company completed the divestiture of its Westbrae Natural® brand (Westbrae) for total cash consideration of $7,498. The sale of Westbrae is consistent with the Company’s portfolio simplification process. Westbrae operated out of the United States and was part of the Company’s North America reportable segment. During the nine months ended March 31, 2023, the Company deconsolidated the net assets of Westbrae, primarily consisting of $3,054 of goodwill, and recognized a pretax gain on sale of $3,488.

5. INVENTORIES

Inventories consisted of the following:


	March 31, 2023		June 30, 2022
Finished goods	$	194,858	$	202,544
Raw materials, work-in-progress and packaging	121,487		105,490
	$	316,345	$	308,034

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6. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:


	March 31, 2023		June 30, 2022
Land	$	11,293	$	11,216
Buildings and improvements	50,818		51,849
Machinery and equipment	317,883		296,398
Computer hardware and software	65,065		65,680
Furniture and fixtures	19,762		23,522
Leasehold improvements	48,757		54,999
Construction in progress	32,070		27,200
	545,648		530,864
Less: Accumulated depreciation and impairment	249,215		233,459
	$	296,433	$	297,405

Depreciation expense for the three months ended March 31, 2023 and 2022 was $9,649 and $8,292, respectively. Depreciation expense for the nine months ended March 31, 2023 and 2022 was $25,911 and $22,944, respectively.

The Company recognized impairment charges of $244 and $584 during the three and nine months ended March 31, 2023 respectively, relating to a facility in the United States that is held for sale. The facility had a net carrying value of $1,250 and $1,840 as of March 31, 2023 and June 30, 2022, respectively.

During the nine months ended March 31, 2022, the Company recognized a non-cash impairment charge of $303 relating to a facility in the United Kingdom.

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7. LEASES

The components of lease expenses for the three and nine months ended March 31, 2023 were as follows:


	Three Months Ended				Nine Months Ended
	March 31, 2023		March 31, 2022		March 31, 2023		March 31, 2022
Operating lease expenses	$	6,657	$	4,155	$	13,869	$	11,572



Finance lease expenses	48		50		188		187
Variable lease expenses	207		129		556		838
Short-term lease expenses	726		813		1,612		2,855
Total lease expenses	$	7,638	$	5,147	$	16,225	$	15,452

Supplemental balance sheet information related to leases was as follows:


Leases	Classification	March 31, 2023		June 30, 2022
Assets
Operating lease ROU assets, net	Operating lease right-of-use assets, net	$	98,306	$	114,691

Finance lease ROU assets, net	Property, plant and equipment, net	312		413

Total leased assets		$	98,618	$	115,104

Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	10,827	$	13,154

Finance	Current portion of long-term debt	84		149

Non-current
Operating	Operating lease liabilities, noncurrent portion	91,885		107,481
Finance	Long-term debt, less current portion	243		278
Total lease liabilities		$	103,039	$	121,062

Additional information related to leases is as follows:


	Nine Months Ended
	March 31, 2023			March 31, 2022
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	12,299		$	11,632
Operating cash flows from finance leases	$	12		$	16
Financing cash flows from finance leases	$	137		$	182
ROU assets obtained in exchange for lease obligations:
Operating leases(1)	$	(2,740)		$	8,198
Finance leases	$	60		$	251


Weighted average remaining lease term:
Operating leases	10.5 years			9.0 years
Finance leases	4.1 years			4.2 years
Weighted average discount rate:
Operating leases	4.7		%	3.3		%
Finance leases	4.5		%	4.0		%

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(1) Includes adjustment for modification of an operating lease during the nine months ended March 31, 2023 which resulted in a reduction of ROU assets and lease liabilities of $13,876 and $17,244 respectively, and recognition of a gain of $3,368 related to the modification.

Maturities of lease liabilities as of March 31, 2023 were as follows:


Fiscal Year	Operating leases		Finance leases		Total
2023 (remainder of year)	$	3,818	$	25	$	3,843
2024	15,038		95		15,133
2025	12,755		93		12,848
2026	12,072		68		12,140
2027	11,772		53		11,825
Thereafter	77,724		25		77,749
Total lease payments	133,179		359		133,538
Less: Imputed interest	30,467		32		30,499
Total lease liabilities	$	102,712	$	327	$	103,039

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8. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table provides changes in the carrying value of goodwill by reportable segment:


	North America		International		Total
Balance as of June 30, 2022	$	695,715	$	238,081	$	933,796
Acquisition(1)	(794)		—		(794)
Divestiture(2)	(3,054)		—		(3,054)


Translation and other adjustments, net	4,364		(2,583)		1,781
Balance as of March 31, 2023	$	696,231	$	235,498	$	931,729

(1) During the nine months ended March 31, 2023, the Company finalized purchase accounting related to THWR resulting in a $794 reduction to goodwill. See Note 4, Acquisition and Disposition.

(2) During the nine months ended March 31, 2023, the Company completed the divestiture of Westbrae, a component of the United States reporting unit. Goodwill of $3,054 was assigned to the divested businesses on a relative fair value basis.

As a result of the same factors triggering the interim impairment tests for the ParmCrisps® and Thinsters® trademarks and other intangible assets discussed below, the Company completed an interim impairment test of goodwill in the U.S. reporting unit during the three months ended March 31, 2023 and concluded that the reporting unit’s estimated fair value exceeded its carrying amount. The fair value of the reporting unit was estimated using an income approach that utilized a discounted cash flow model.

Other Intangible Assets

The following table includes the gross carrying amount and accumulated amortization, where applicable, for intangible assets, excluding goodwill:


	March 31, 2023		June 30, 2022
Non-amortized intangible assets:
Trademarks and tradenames(1)	$	266,445	$	379,466
Amortized intangible assets:
Other intangibles(2)	159,027		199,448
Less: Accumulated amortization	(110,936)		(101,381)
Net amortized intangible assets	48,091		98,067
Net other intangible assets	$	314,536	$	477,533

(1) The gross carrying value of trademarks and trade names is reflected net of $205,373 and $94,873 of accumulated impairment charges as of March 31, 2023 and June 30, 2022, respectively.

(2) The reduction in carrying value of other intangible assets as of March 31, 2023 reflected a non-cash impairment charge of $45,798 recognized in the third quarter of 2023.

During the three months ended March 31, 2023, as a result of a decline in actual and projected performance and cash flows of the ParmCrisps® and Thinsters® brands, the Company determined that interim impairment tests of these indefinite-lived trademarks were required to be performed. During the three months ended March 31, 2023, the Company recorded non-cash impairment charges of $102,000 and $8,500 for the ParmCrisps® and Thinsters® trademarks, respectively, to reduce the carrying value of such intangible assets to their estimated fair value. The fair value was determined using the relief from royalty method, and impairment charges were recorded within intangibles and long-lived asset impairment on the Consolidated Statements of Operations. The assets are part of the North America reportable segment and have a remaining aggregate carrying value of $12,500 as of March 31, 2023.

As a result of the same factors triggering the interim impairment tests for the ParmCrisps® and Thinsters® trademarks discussed above, the Company completed interim impairment tests of the ParmCrisps® and Thinsters® asset groups, which were primarily comprised of amortizable customer relationships. The Company determined that the ParmCrisps® asset group’s carrying amount exceeded the estimated fair value. During the three months ended March 31, 2023, the Company recorded non-cash impairment charges of $45,798 to reduce the carrying value of the ParmCrisps® customer relationships, the primary asset in the asset group, to their estimated fair

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value. Impairment charges were recorded within intangibles and long-lived asset impairment on the Consolidated Statements of Operations. The fair value of the Thinsters® asset group exceeded its carrying amount. The assets are part of the North America reportable segment and have a remaining aggregate carrying value of $19,767 as of March 31, 2023.

Amortized intangible assets, which are deemed to have a finite life, primarily consist of customer relationships, trademarks and tradenames and are amortized over their estimated useful lives of 7 to 25 years. Amortization expense included in the Consolidated Statements of Operations was as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Amortization of acquired intangibles	$	2,842	$	3,110	$	8,415	$	7,255

Expected amortization expense over the next five fiscal years is as follows:


	Fiscal Year Ending June 30,
	2023 (remainder of year)		2024		2025		2026		2027
Estimated amortization expense	$	2,036	$	6,298	$	5,245	$	4,762	$	4,073

The weighted average remaining amortization period of amortized intangible assets is 8.4 years.

9. DEBT AND BORROWINGS

Debt and borrowings consisted of the following:


	March 31, 2023		June 30, 2022
Revolving credit facility	$	567,000	$	593,000
Term loans	290,625		296,250
Less: Unamortized issuance costs	(1,401)		(1,105)
Other borrowings(1)	333		498
	856,557		888,643
Short-term borrowings and current portion of long-term debt(2)	7,575		7,705
Long-term debt, less current portion	$	848,982	$	880,938

(1) Includes $327 (June 30, 2022: $427) of finance lease obligations as discussed in Note 7, Leases.

(2) Includes $84 (June 30, 2022: $149) of short-term finance lease obligations as discussed in Note 7, Leases.

Amended and Restated Credit Agreement

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”). The Credit Agreement provides for senior secured financing of $1,100,000 in the aggregate, consisting of (1) $300,000 in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800,000 senior secured revolving credit facility (which includes borrowing capacity available for letters of credit and is comprised of a $440,000 U.S. revolving credit facility and $360,000 global revolving credit facility) (the “Revolver”). Both the Revolver and the Term Loans mature on December 22, 2026.

The Credit Agreement includes financial covenants that require compliance with a consolidated interest coverage ratio, a consolidated leverage ratio and a consolidated secured leverage ratio. The minimum consolidated interest coverage ratio is 2.75:1.00. The maximum consolidated leverage ratio is 6.00:1.00. Through December 31, 2023 or such earlier date as elected by the Company (the “Amendment Period”), the maximum consolidated secured leverage ratio is 5.00:1.00. Following the Amendment Period, the maximum consolidated secured leverage ratio will be 4.25:1.00, subject to possible temporary increase following certain corporate acquisitions.

During the Amendment Period, loans under the Credit Agreement will bear interest at (a) Term SOFR, plus a credit spread adjustment of 0.10% (as adjusted, “Term SOFR”) plus 2.0% per annum or (b) the Base Rate (as defined in the Credit Agreement) plus 1.0% per annum. Following the Amendment Period, loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 0.875%

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to 1.750% per annum or (b) the Base Rate plus a rate ranging from 0.00% to 0.750% per annum, the relevant rate in each case being the Applicable Rate. The Applicable Rate following the Amendment Period will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement. The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2023 was 5.90%. Additionally, the Credit Agreement contains a Commitment Fee (as defined in the Credit Agreement) on the amount unused under the Credit Agreement ranging from 0.15% to 0.25% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid.

As of March 31, 2023, there were $567,000 of loans under the Revolver, $290,625 of Term Loans, and $4,054 of letters of credit outstanding under the Credit Agreement. As of March 31, 2023, $228,946 was available under the Credit Agreement, subject to compliance with the financial covenants. As of March 31, 2023, the Company was in compliance with all associated covenants.

Credit Agreement Issuance Costs

In connection with the First Amendment to its Credit Agreement during the second quarter of fiscal year 2023, the Company incurred debt issuance costs of approximately $1,987, of which $1,916 was deferred. Of the total deferred costs, $1,396 were associated with the Revolver and are being amortized on a straight-line basis within Other assets on our Consolidated Balance Sheets, and $520 are being amortized on a straight-line basis, which approximates the effective interest method, as an adjustment to the carrying amount of the Term Loans as a component of Interest and other financing expense, net over the term of the Credit Agreement.

10. INCOME TAXES

In general, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability on the effective tax rates from quarter to quarter. The Company’s effective tax rate may change from period-to-period based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes and tax audit settlements.

The effective income tax rate was a benefit of 25.6% and an expense of 23.7% for the three months ended March 31, 2023 and 2022, respectively. The effective income tax rate was a benefit of 24.1% and an expense of 20.3% for the nine months ended March 31, 2023 and 2022, respectively. The effective income tax rate for the nine months ended March 31, 2023 was impacted by ParmCrisps® and Thinsters® trademarks and ParmCrisps® asset group impairment charges (See Note 8, Goodwill and Other Intangible Assets), gain on the 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 changes in uncertain tax positions. The effective income tax rate for the nine months ended March 31, 2022 was impacted by the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to the acquisition of THWR (see Note 4, Acquisition and Disposition), the reversal of a valuation allowance due to the utilization of a capital loss carryover and the finalization of fiscal year 2021 U.S. income tax returns. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes.

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11. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss (AOCL):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Foreign currency translation adjustments:
Other comprehensive income (loss) income before reclassifications	$	15,250	$	(18,701)	$	7,774	$	(43,649)

Deferred (losses) gains on cash flow hedging instruments:

Amount of (loss) gain recognized in AOCL on derivatives (1)	(3,190)		2,007		7,718		3,544
Amount of gain reclassified from AOCL into income (1)	(1,320)		(553)		(3,500)		(1,517)
Deferred (losses) gains on fair value hedging instruments:
Amount of (loss) gain recognized in AOCL on derivatives (1)	(28)		—		50		—
Amount of loss reclassified from AOCL into expense (1)	157		—		396		—
Deferred (losses) gains on net investment hedging instruments:

Amount of (loss) gain recognized in AOCL on derivatives (1)	(108)		1,240		201		4,610
Amount of gain reclassified from AOCL into income (1)	(360)		(113)		(1,102)		(327)
Net change in AOCL	$	10,401	$	(16,120)	$	11,537	$	(37,339)

(1)See Note 15, Derivatives and Hedging Activities, for the amounts reclassified into income for deferred gains (losses) on cash flow hedging instruments recorded in the Consolidated Statements of Operations in the three and nine months ended March 31, 2023 and 2022.

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12. STOCK-BASED COMPENSATION AND INCENTIVE PERFORMANCE PLANS

Under the Company's Amended and Restated 2002 Long-Term Incentive and Stock Award Plan (the "2002 Plan"), the Company historically granted equity-based awards to its officers, senior management, other key employees, consultants, and directors. The Company currently utilizes a stockholder-approved plan, The Hain Celestial Group, Inc. 2022 Long Term Incentive and Stock Award Plan (the “2022 Plan”) which was approved at the Company’s 2022 Annual Meeting of Stockholders held on November 17, 2022. The 2022 Plan permits the Company to continue making equity-based and other incentive awards in a manner intended to properly incentivize its employees, directors, consultants and other service providers by aligning their interests with the interests of the Company’s stockholders. The Company also historically granted shares under its 2019 Equity Inducement Award Program (the "2019 Inducement Program") to induce selected individuals to become employees of the Company. The 2002 Plan, the 2022 Plan and the 2019 Inducement Program are collectively referred to as the "Stock Award Plans." In conjunction with the Stock Award Plans, the Company maintains a long-term incentive program (the “LTI Program” or "LTIP") that provides for equity awards, including performance and market-based equity awards that can be earned over defined performance periods. The Company's LTIP plans, with the exception of the 2023 - 2025 LTIP described below, are described in Note 13, Stock-Based Compensation and Incentive Performance Plans, in the Notes to the Consolidated Financial Statements in the Form 10-K.

Compensation cost and related income tax benefits recognized in the Consolidated Statements of Operations for stock-based compensation plans were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Selling, general and administrative expense	$	3,228	$	3,846	$	10,657	$	12,289



Related income tax benefit	$	464	$	438	$	1,417	$	1,145

Restricted Stock

Awards of restricted stock are either restricted stock awards ("RSAs") or restricted stock units ("RSUs") that are issued at no cost to the recipient. Performance-based or market-based RSUs are issued in the form of performance share units ("PSUs"). A summary of the restricted stock activity (including all RSAs, RSUs and PSUs) for the nine months ended March 31, 2023 is as follows:


	Number of Shares and Units	Weighted Average Grant Date Fair Value (per share)
Non-vested RSAs, RSUs and PSUs outstanding at June 30, 2022	790	$	42.44
Granted	1,189	$	20.64
Vested	(173)	$	38.70
Forfeited	(465)	$	33.53
Non-vested RSAs, RSUs and PSUs outstanding at March 31, 2023	1,341	$	26.68

The table above includes a total of 420 shares granted during the nine months ended March 31, 2023 that represent the target number of shares that may be earned based on pre-defined market conditions that are eligible to vest ranging from zero to 200% of target. All such shares relate to the 2023 – 2025 LTIP as further described below. Vested shares during the nine months ended March 31, 2023 include a total of 5 shares related to certain performance-based metrics being met and a total of 168 shares related to service-based RSUs. There are market-based PSU awards outstanding under both the 2023 – 2025 LTIP and the 2022 – 2024 LTIP. At March 31, 2023, 321 of such shares were outstanding under the 2023 – 2025 LTIP while 68 shares were outstanding under the 2022 – 2024 LTIP.

The fair value of RSAs, RSUs and PSUs granted and of shares vested, and the tax benefit recognized from restricted shares vesting was as follows:

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	Nine Months Ended March 31,
	2023		2022
Fair value of RSAs, RSUs and PSUs granted	$	24,560	$	37,005
Fair value of shares vested	$	3,467	$	71,285
Tax benefit recognized from restricted shares vesting	$	520	$	3,643

At March 31, 2023, there was $22,478 of unrecognized stock-based compensation expense related to non-vested restricted stock awards which is expected to be recognized over a weighted average period of 1.8 years.

2023-2025 LTIP

During the nine months ended March 31, 2023, the Company granted market-based PSU awards under the LTI Program with a total target payout of 420 shares of common stock. Such PSU awards (the "Absolute TSR PSUs") will vest, if at all, pursuant to a defined calculation of either relative TSR or absolute TSR (as defined) over the period from September 6, 2022 through the earlier of (i) September 6, 2025; (ii) the date the participant’s employment is terminated due to death or Disability (as defined); or (iii) the effective date of a Change in Control (as defined) (the “TSR Performance Period”). Vesting of 281 target shares of the outstanding PSU awards is pursuant to a defined calculation of relative TSR over the TSR Performance Period (the “Relative TSR PSUs”). Vesting of 139 target shares of the outstanding PSU awards is pursuant to the achievement of pre-established three-year compound annual TSR targets over the TSR Performance Period (the “Absolute TSR PSUs”). Total shares eligible to vest for both the Relative TSR PSUs and Absolute TSR PSUs range from zero to 200% of the target amount. Grant date fair values are calculated using a Monte-Carlo simulation model with grant date fair values per target share and related valuation assumptions as follows, except for shares granted after December 31, 2022:


	Absolute TSR PSUs		Relative TSR PSUs
Grant date fair value (per target share)	$20.18		$27.47
Risk-free interest rate	3.54	%	3.54	%
Expected dividend yield	—		—
Expected volatility	40.30	%	26.60	%
Expected term	3.00 years		3.00 years

CEO Succession

On November 22, 2022, the Board approved a succession plan pursuant to which the Board appointed Wendy P. Davidson to the role of President and Chief Executive Officer and as a director on the Board, in each case effective as of January 1, 2023 (the “Start Date”).

On the Start Date, Ms. Davidson received the following awards under the 2023-2025 LTIP: 36 Relative TSR PSUs (at target), 18 Absolute TSR PSUs (at target) and 36 RSUs. The Relative TSR PSUs and Absolute TSR PSUs have the same TSR Performance Period, performance goals and beginning stock price as those applicable to awards granted to other employees under the 2023-2025 LTIP. The RSUs will vest in one-third (1/3) installments on each of September 6, 2023, 2024 and 2025. Additionally, in recognition of the compensation Ms. Davidson forfeited by leaving her former employer, on the Start Date Ms. Davidson also received a one-time make-whole RSU award of 95 RSUs that will vest in one-third (1/3) installments on each of the first, second and third anniversaries of the Start Date. Grant date fair values were calculated using a Monte-Carlo simulation model with grant date fair values per target share and related valuation assumptions as follows:


	Absolute TSR PSUs			Relative TSR PSUs
Grant date fair value (per target share)	$	13.84		$	19.54
Risk-free interest rate	4.28		%	4.28		%
Expected dividend yield	—			—
Expected volatility	40.70		%	28.20		%
Expected term	3.00 years			3.00 years

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As part of the succession plan, Mark L. Schiller transitioned from his position as President and Chief Executive Officer of the Company effective as of December 31, 2022 (the “Transition Date”). Mr. Schiller remains a director on the Board following the Transition Date. As of the Transition Date, certain of Mr. Schiller's stock-based compensation awards were modified and others were forfeited. Additionally, Mr. Schiller will receive severance totaling $4,725, paid in installments over a two-year period following the Transition Date. Severance, including payroll taxes and other costs, was recognized during the nine months ended March 31, 2023, and unpaid amounts are accrued at March 31, 2023.

13. INVESTMENTS

On October 27, 2015, the Company acquired a minority equity interest in Chop’t Creative Salad Company LLC, predecessor to Founders Table Restaurant Group, LLC (“Founders Table”). Founders Table owns and operates the fast-casual restaurant chains Chop't Creative Salad Co. and Dos Toros Taqueria. The investment is being accounted for as an equity method investment due to the Company’s representation on the Board of Directors of Founders Table. At March 31, 2023 and June 30, 2022, the carrying value of the Company’s investment in Founders Table was $7,788 and $9,491, respectively, and is included in the Consolidated Balance Sheets as a component of Investments and joint ventures.

The Company also holds an investment in Hutchison Hain Organic Holdings Limited, a joint venture with HUTCHMED (China) Limited, accounted for under the equity method of accounting. The carrying value of the remaining investments were $4,932 and $4,965 as of March 31, 2023 and June 30, 2022, respectively, and is included in the Consolidated Balance Sheets as a component of Investments and joint ventures.

14. FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

•Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

•Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table presents assets and liabilities measured at fair value on a recurring basis as of March 31, 2023:


	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:

Derivative financial instruments	$	8,858	$	—	$	8,858	$	—




Liabilities:
Derivative financial instruments	$	540	$	—	$	540	$	—

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The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2022:


	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:

Derivative financial instruments	$	7,476	$	—	$	7,476	$	—
Equity investment	560		560		—		—
Total	$	8,036	$	560	$	7,476	$	—
Liabilities:
Derivative financial instruments	3,184		—		3,184		—

Total	$	3,184	$	—	$	3,184	$	—

There were no transfers of financial instruments between the three levels of fair value hierarchy during the nine months ended March 31, 2023 or 2022.

Derivative Instruments

The Company uses interest rate swaps to manage its interest rate risk and cross-currency swaps and foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency exchange rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the derivatives held as of March 31, 2023 and June 30, 2022 were classified as Level 2 within the fair value hierarchy.

Nonrecurring Fair Value Measurements

The Company measures certain non-financial assets at fair value on a nonrecurring basis including goodwill, intangible assets, property and equipment and right-of-use lease assets. These assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition or purchase subject to changes in value only for foreign currency translation. Periodically, these assets are tested for impairment by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these assets were to become impaired, the Company would recognize an impairment expense equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. For indefinite-lived intangible assets, the relief from royalty approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates in the category of intellectual property, discount rates and other variables. Fair value measurements of reporting units are estimated using an income approach involving discounted cash flow models that contain certain Level 3 inputs requiring significant management judgment, including projections of economic conditions, customer demand and changes in competition, revenue growth rates, gross profit margins, operating margins, capital expenditures, working capital requirements, terminal growth rates and discount rates. Fair value measurements of the reporting units associated with our goodwill balances and our indefinite-lived intangible assets are estimated at least annually in the fourth quarter of each fiscal year for purposes of impairment testing if a quantitative

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analysis is performed. The Company bases its fair value estimates on assumptions its management believes to be reasonable, but which are unpredictable and inherently uncertain.

During the three months ended March 31, 2023, the Company recorded non-cash impairment charges of $102,000 and $8,500 for the ParmCrisps® and Thinsters® trademarks, respectively. Due to the same factors triggering the interim impairment tests for the ParmCrisps® and Thinsters® trademarks, the Company completed an interim impairment test of the ParmCrisps® and Thinsters® asset group and recorded a non-cash impairment charges of $45,798 for the ParmCrisps® asset group (see Note 8, Goodwill and Other Intangible Assets). As of March 31, 2023, THWR intangible assets were classified as Level 3 assets measured at fair value on a nonrecurring basis with estimated fair value of $32,267.

15. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s receivables and borrowings.

Certain of the Company’s foreign operations expose the Company to fluctuations of foreign exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of its functional currency, the U.S. Dollar.

Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not use derivatives for speculative or trading purposes.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the three and nine months ended March 31, 2023, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCL and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. During the remaining three months of fiscal 2023, the Company estimates that an additional $1,873 will be reclassified as a decrease to interest expense.

As of March 31, 2023, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:


Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swap	4	$400,000

Cash Flow Hedges of Foreign Exchange Risk

The Company is exposed to fluctuations in various foreign currencies against its functional currency, the U.S. Dollar. The Company uses foreign currency derivatives including cross-currency swaps to manage its exposure to fluctuations in the USD-EUR exchange rates. Cross-currency swaps involve exchanging fixed-rate interest payments for fixed-rate interest receipts,

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both of which will occur at the USD-EUR forward exchange rates in effect upon entering into the instrument. The Company, at times, also uses forward contracts to manage its exposure to fluctuations in the GBP-EUR exchange rates. The Company designates these derivatives as cash flow hedges of foreign exchange risks.

For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in AOCL and subsequently reclassified in the period(s) during which the hedged transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. During the remaining three months of fiscal 2023, the Company estimates that no amount relating to cross-currency swaps will be reclassified to interest expense.

As of March 31, 2023, the Company had no outstanding foreign currency derivatives that were used to hedge its foreign exchange risks.

Net Investment Hedges

The Company is exposed to fluctuations in foreign exchange rates on investments it holds in its European foreign entities and their exposure to the Euro. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in the foreign exchange rate on its foreign investment in Europe. Currency forward agreements involve fixing the USD-EUR exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in U.S. Dollars for their fair value at or close to their settlement date. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency- fixed-rate payments over the life of the agreement.

For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in accumulated other comprehensive loss as part of the cumulative translation adjustment. Amounts are reclassified out of accumulated other comprehensive loss into earnings when the hedged net investment is either sold or substantially liquidated.

As of March 31, 2023, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations:


Foreign Currency Derivative	Number of Instruments	Notional Sold	Notional Purchased
Cross-currency swap	4	€100,300	$105,804

Fair Value Hedges

The Company is exposed to changes in the fair value of certain of its foreign denominated intercompany loans due to changes in foreign exchange spot rates. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in foreign exchange rates affecting gains and losses on intercompany loan principal and interest. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency-fixed-rate payments over the life of the agreement.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest and other financing expense, net.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company’s accounting policy election. The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction. During the remaining three months of fiscal 2023, the Company estimates that an additional $121 relating to cross currency swaps will be reclassified as a decrease to interest expense.

As of March 31, 2023, the Company had the following outstanding foreign currency derivatives that were used to hedge changes in fair value attributable to foreign exchange risk:


Foreign Currency Derivative	Number of Instruments	Notional Sold	Notional Purchased
Cross-currency swap	1	€24,700	$26,021

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As of March 31, 2023 and June 30, 2022, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:


	Carrying Amount of the Hedged Asset				Cumulative Amount of Fair Value Hedge Adjustment Included in the Carrying Amount of the Hedged Asset

	March 31, 2023		June 30, 2022		March 31, 2023		June 30, 2022
Intercompany loan receivable	$	26,772	$	25,899	$	751	$	122

Designated Hedges

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of March 31, 2023:


	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Prepaid expenses and other current assets	$	6,217	Accrued expenses and other current liabilities	$	—
Interest rate swaps	Other noncurrent assets	277		Other noncurrent liabilities	—
Cross-currency swaps	Prepaid expenses and other current assets	2,364		Accrued expenses and other current liabilities	—
Cross-currency swaps	Other noncurrent assets	—		Other noncurrent liabilities	540

Total derivatives designated as hedging instruments		$	8,858		$	540

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of June 30, 2022:


	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Prepaid expenses and other current assets	$	4,230	Accrued expenses and other current liabilities	$	—
Interest rate swaps	Other noncurrent assets	—		Other noncurrent liabilities	3,184
Cross-currency swaps	Prepaid expenses and other current assets	2,400		Accrued expenses and other current liabilities	—
Cross-currency swaps	Other noncurrent assets	846		Other noncurrent liabilities	—

Total derivatives designated as hedging instruments		$	7,476		$	3,184

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The following table presents the pretax effect of cash flow hedge accounting on AOCL and Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022:


Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in AOCL on Derivatives				Location of Gain (Loss) Reclassified from AOCL into Income (Expense)	Amount of Gain (Loss) Reclassified from AOCL into Income (Expense)
	Three Months Ended March 31,					Three Months Ended March 31,
	2023		2022			2023		2022
Interest rate swaps	$	(4,285)	$	2,023	Interest and other financing expense, net	$	1,792	$	(64)
Cross-currency swaps	—		503		Interest and other financing expense, net / Other expense (income), net	(46)		683
Foreign currency forward contracts	—		15		Cost of sales	—		81
Total	$	(4,285)	$	2,541		$	1,746	$	700

The following table presents the pretax effect of cash flow hedge accounting on AOCL and Consolidated Statements of Operations for the nine months ended March 31, 2023 and 2022:


Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in AOCL on Derivatives				Location of Gain (Loss) Reclassified from AOCL into Income (Expense)	Amount of Gain (Loss) Reclassified from AOCL into Income (Expense)
	Nine Months Ended March 31,					Nine Months Ended March 31,
	2023		2022			2023		2022
Interest rate swaps	$	10,295	$	2,678	Interest and other financing expense, net	$	4,927	$	(273)
Cross-currency swaps	—		1,872		Interest and other financing expense, net / Other expense (income), net	(276)		2,085
Foreign currency forward contracts	80		(64)		Cost of sales	—		107
Total	$	10,375	$	4,486		$	4,651	$	1,919

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The following table presents the pretax effect of the Company’s derivative financial instruments electing cash flow hedge accounting on the Consolidated Statements of Operations for the three months ended of March 31, 2023 and 2022:


				Location and Amount of Gain (Loss) Recognized in the Consolidated Statement of Operations on Cash Flow Hedging Relationships
				Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
				Cost of sales		Interest and other financing expense, net		Other expense/income, net		Cost of sales		Interest and other financing expense, net		Other expense/income, net
The effects of cash flow hedging:
	Gain (loss) on cash flow hedging relationships
		Interest rate swaps
			Amount of gain (loss) reclassified from AOCL into income	$	—	$	1,792	$	—	$	—	$	(64)	$	—

		Cross-currency swaps
			Amount of (loss) gain reclassified from AOCL into income	$	—	$	(46)	$	—	$	—	$	46	$	637

		Foreign currency forward contracts
			Amount of gain reclassified from AOCL into income	$	—	$	—	$	—	$	81	$	—	$	—


				Location and Amount of Gain (Loss) Recognized in the Consolidated Statement of Operations on Cash Flow Hedging Relationships
				Nine Months Ended March 31, 2023						Nine Months Ended March 31, 2022
				Cost of sales		Interest and other financing expense, net		Other expense (income), net		Cost of sales		Interest and other financing expense, net		Other expense (income), net
The effects of cash flow hedging:
	Gain (loss) on cash flow hedging relationships
		Interest rate swaps
			Amount of gain (loss) reclassified from AOCL into income	$	—	$	4,088	$	—	$	—	$	(273)	$	—

		Cross-currency swaps
			Amount of (loss) gain reclassified from AOCL into income	$	—	$	(276)	$	—	$	—	$	131	$	1,954

		Foreign currency forward contracts
			Amount of gain reclassified from AOCL into income	$	—	$	—	$	—	$	107	$	—	$	—

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The following table presents the pretax effect of fair value hedge accounting on AOCL and Consolidated Statements of Operations as of the three months ended March 31, 2023 and 2022:


Derivatives in Fair Value Hedging Relationships	Amount of Loss Recognized in AOCL on Derivatives				Location of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing)	Amount of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,					Three Months Ended March 31,
	2023		2022			2023		2022

Cross-currency swaps	$	(38)	$	—	Interest and other financing expense, net / Other expense (income), net	$	121	$	—

The following table presents the pretax effect of fair value hedge accounting on AOCL and Consolidated Statements of Operations as of the nine months ended March 31, 2023 and 2022:


Derivatives in Fair Value Hedging Relationships	Amount of Gain Recognized in AOCL on Derivatives				Location of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing)	Amount of Gain Reclassified from AOCL into Income on Derivatives (Amount Excluded from Effectiveness Testing)
	Nine Months Ended March 31,					Nine Months Ended March 31,
	2023		2022			2023		2022

Cross-currency swaps	$	85	$	—	Interest and other financing expense, net / Other expense (income), net	$	367	$	—

The following table presents the pretax effect of the Company’s derivative financial instruments electing fair value hedge accounting on the Consolidated Statements of Operations for the three months ended of March 31, 2023 and 2022:


				Location and Amount of Gain (Loss) Recognized in the Consolidated Statement of Operations on Fair Value Hedging Relationships
				Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
				Cost of sales		Interest and other financing expense, net		Other expense/income, net		Cost of sales		Interest and other financing expense, net		Other expense/income, net
The effects of fair value hedging:
	Gain (loss) on fair value hedging relationships



		Cross-currency swaps
			Amount of loss reclassified from AOCL into income	$	—	$	(210)	$	—	$	—	$	—	$	—

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				Location and Amount of Gain (Loss) Recognized in the Consolidated Statement of Operations on Fair Value Hedging Relationships
				Nine Months Ended March 31, 2023						Nine Months Ended March 31, 2022
				Cost of sales		Interest and other financing expense, net		Other expense (income), net		Cost of sales		Interest and other financing expense, net		Other expense (income), net
The effects of fair value hedging:
	Gain (loss) on fair value hedging relationships



		Cross-currency swaps
			Amount of loss reclassified from AOCL into income	$	—	$	(506)	$	—	$	—	$	—	$	—

The following table presents the pretax effect of the Company’s net investment hedges on AOCL and the Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022:


Derivatives in Net Investment Hedging Relationships	Amount of (Loss) Gain Recognized in AOCL on Derivatives				Location of (Loss) Gain Recognized in (Expense) Income on Derivatives	Amount of Gain (Loss) Recognized in Income (Expense) on Derivatives
	Three Months Ended March 31,					Three Months Ended March 31,
	2023		2022			2023		2022
Cross-currency swaps	$	(144)	$	1,569	Interest and other financing expense, net	$	484	$	143

The following table presents the pretax effect of the Company’s net investment hedges on AOCL and the Consolidated Statements of Operations for the nine months ended March 31, 2023 and 2022:


Derivatives in Net Investment Hedging Relationships	Amount of Gain Recognized in AOCL on Derivatives				Location of (Loss) Gain Recognized in (Expense) Income on Derivatives	Amount of (Loss) Gain Recognized in (Expense) Income on Derivatives
	Nine Months Ended March 31,					Nine Months Ended March 31,
	2023		2022			2023		2022
Cross-currency swaps	$	335	$	5,836	Interest and other financing expense, net	$	1,474	$	413

Credit-Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a cross-default provision upon certain defaults by the Company on any of its indebtedness.

16. COMMITMENTS AND CONTINGENCIES

Securities Class Actions Filed in Federal Court

On August 17, 2016, three securities class action complaints were filed in the Eastern District of New York (the "District Court") against the Company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The three complaints are: (1) Flora v. The Hain Celestial Group, Inc., et al. (the “Flora Complaint”); (2) Lynn v. The Hain Celestial Group, Inc., et al. (the “Lynn Complaint”); and (3) Spadola v. The Hain Celestial Group, Inc., et al. (the “Spadola Complaint” and, together with the Flora and Lynn Complaints, the “Securities Complaints”). On June 5, 2017, the District Court issued an order for consolidation, appointment of Co-Lead Plaintiffs and approval of selection of co-lead counsel. Pursuant to this order, the Securities Complaints were consolidated under the caption In re The Hain Celestial Group, Inc. Securities Litigation (the

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“Consolidated Securities Action”), and Rosewood Funeral Home and Salamon Gimpel were appointed as Co-Lead Plaintiffs. On June 21, 2017, the Company received notice that plaintiff Spadola voluntarily dismissed his claims without prejudice to his ability to participate in the Consolidated Securities Action as an absent class member. The Co-Lead Plaintiffs in the Consolidated Securities Action filed a Consolidated Amended Complaint on August 4, 2017 and a Corrected Consolidated Amended Complaint on September 7, 2017 on behalf of a purported class consisting of all persons who purchased or otherwise acquired Hain Celestial securities between November 5, 2013 and February 10, 2017 (the “Amended Complaint”). The Amended Complaint named as defendants the Company and certain of its former officers (collectively, “Defendants”) and asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly materially false or misleading statements and omissions in public statements, press releases and SEC filings regarding the Company’s business, prospects, financial results and internal controls. Defendants filed a motion to dismiss the Amended Complaint on October 3, 2017 which the District Court granted on March 29, 2019, dismissing the case in its entirety, without prejudice to replead. Co-Lead Plaintiffs filed a Second Amended Consolidated Class Action Complaint on May 6, 2019 (the “Second Amended Complaint”). The Second Amended Complaint again named as defendants the Company and certain of its former officers and asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegations similar to those in the Amended Complaint, including materially false or misleading statements and omissions in public statements, press releases and SEC filings regarding the Company’s business, prospects, financial results, and internal controls. Defendants filed a motion to dismiss the Second Amended Complaint on June 20, 2019. On April 6, 2020, the District Court granted Defendants’ motion to dismiss the Second Amended Complaint in its entirety, with prejudice. Co-Lead Plaintiffs appealed the District Court’s decision dismissing the Second Amended Complaint to the United States Court of Appeals for the Second Circuit (the "Second Circuit"). By decision dated December 17, 2021, the Second Circuit vacated the District Court’s judgment and remanded the case for further proceedings. On April 6, 2022, the District Court issued an order directing the parties to submit position papers outlining their views regarding: (a) the scope of the Court's reconsideration of Defendants’ Motion to Dismiss the Second Amended Complaint; and (b) the appropriate procedure the Court should follow in light of the Second Circuit's opinion. On April 14, 2022, the District Court entered an order setting the schedule for, and determining the scope of, supplemental briefing on Defendants’ Motion to Dismiss the Second Amended Complaint. The parties submitted supplemental briefing between May 12, 2022 and June 23, 2022. In June 2022, the District Court referred Defendants’ Motion to Dismiss the Second Amended Complaint to a United States Magistrate Judge (the “Magistrate Judge”) for a Report and Recommendation. On November 4, 2022, the Magistrate Judge issued a Report and Recommendation recommending that the District Court grant Defendants’ Motion to Dismiss the Second Amended Complaint with prejudice. Plaintiffs filed Objections to Magistrate Judge’s November 4, 2022 Report and Recommendation on December 7, 2022, and Defendants filed their Opposition to Plaintiffs’ Objections to Magistrate Judge’s November 4, 2022 Report and Recommendation on January 9, 2023. The Parties await a decision from the District Court on Defendants’ Motion to Dismiss the Second Amended Complaint.

Additional Stockholder Class Action and Derivative Complaints Filed in Federal Court

On April 19, 2017 and April 26, 2017, two class action and stockholder derivative complaints were filed in the Eastern District of New York against the former Board of Directors and certain former officers of the Company under the captions Silva v. Simon, et al. (the “Silva Complaint”) and Barnes v. Simon, et al. (the “Barnes Complaint”), respectively. Both the Silva Complaint and the Barnes Complaint allege violation of securities law, breach of fiduciary duty, waste of corporate assets and unjust enrichment.

On May 23, 2017, an additional stockholder filed a complaint under seal in the Eastern District of New York against the former Board of Directors and certain former officers of the Company. The complaint alleged that the Company’s former directors and certain former officers made materially false and misleading statements in press releases and SEC filings regarding the Company’s business, prospects and financial results. The complaint also alleged that the Company violated its by-laws and Delaware law by failing to hold its 2016 Annual Stockholders Meeting and includes claims for breach of fiduciary duty, unjust enrichment and corporate waste. On August 9, 2017, the District Court granted an order to unseal this case and reveal Gary Merenstein as the plaintiff (the “Merenstein Complaint”).

On August 10, 2017, the District Court granted the parties' stipulation to consolidate the Barnes Complaint, the Silva Complaint and the Merenstein Complaint under the caption In re The Hain Celestial Group, Inc. Stockholder Class and Derivative Litigation (the “Consolidated Stockholder Class and Derivative Action”) and to appoint Robbins Arroyo LLP and Scott+Scott as Co-Lead Counsel, with the Law Offices of Thomas G. Amon as Liaison Counsel for Plaintiffs. On September 14, 2017, a related complaint was filed under the caption Oliver v. Berke, et al. (the “Oliver Complaint”), and on October 6, 2017, the Oliver Complaint was consolidated with the Consolidated Stockholder Class and Derivative Action. The Plaintiffs filed their consolidated amended complaint under seal on October 26, 2017. On December 20, 2017, the parties agreed to stay Defendants’ time to answer, move, or otherwise respond to the consolidated amended complaint through and including 30 days after a decision was rendered on the motion to dismiss the Amended Complaint in the Consolidated Securities Action, described above.

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On March 29, 2019, the District Court in the Consolidated Securities Action granted Defendants’ motion, dismissing the Amended Complaint in its entirety, without prejudice to replead. Co-Lead Plaintiffs in the Consolidated Securities Action filed the Second Amended Complaint on May 6, 2019. The parties to the Consolidated Stockholder Class and Derivative Action agreed to continue the stay of Defendants’ time to answer, move, or otherwise respond to the consolidated amended complaint through 30 days after a decision on Defendants' motion to dismiss the Second Amended Complaint in the Consolidated Securities Action.

On April 6, 2020, the District Court granted Defendants’ motion to dismiss the Second Amended Complaint in the Consolidated Securities Action, with prejudice. Pursuant to the terms of the stay, Defendants in the Consolidated Stockholder Class and Derivative Action had until May 6, 2020 to answer, move, or otherwise respond to the complaint in this matter. This deadline was extended, and Defendants moved to dismiss the Consolidated Stockholder Class and Derivative Action Complaint on June 23, 2020, with Plaintiffs’ opposition due August 7, 2020.

On July 24, 2020, Plaintiffs made a stockholder litigation demand on the current Board containing overlapping factual allegations to those set forth in the Consolidated Stockholder Class and Derivative Action. On August 10, 2020, the District Court vacated the briefing schedule on Defendants’ pending motion to dismiss in order to give the Board of Directors time to consider the demand. On each of September 8 and October 8, 2020, the District Court extended its stay of any applicable deadlines for 30 days to give the Board of Directors additional time to complete its evaluation of the demand. On November 3, 2020, Plaintiffs were informed that the Board of Directors had finished investigating and resolved, among other things, that the demand should be rejected. On November 6, 2020, Plaintiffs and Defendants notified the District Court that Plaintiffs were evaluating the rejection of the demand, sought certain additional information and were assessing next steps, and requested that the District Court extend the stay for an additional 30 days, to on or around December 7, 2020. The Parties then filed a number of additional joint status reports, requesting that the District Court continue the stay of applicable deadlines through December 30, 2021. In light of the Second Circuit vacating the District Court’s judgment in the Consolidated Securities Action referenced above and remanding the case for further proceedings, the Parties submitted a joint status report on December 29, 2021 requesting that the District Court continue the temporary stay pending the District Court’s reconsideration of the Defendants’ motion to dismiss the Second Amended Complaint in the Consolidated Securities Action. The District Court has extended the temporary stay through September 5, 2023.

Baby Food Litigation

Since February 2021, the Company has been named in numerous consumer class actions alleging that the Company’s Earth’s Best® baby food products (the “Products”) contain unsafe and undisclosed levels of various naturally occurring heavy metals, namely lead, arsenic, cadmium and mercury. Those actions have now been transferred and consolidated as a single lawsuit in the U.S. District Court for the Eastern District of New York captioned In re Hain Celestial Heavy Metals Baby Food Litigation, Case No. 2:21-cv-678 (the "Consolidated Proceeding"), which generally alleges that the Company violated various state consumer protection laws and asserts other state and common law warranty and unjust enrichment claims related to the alleged failure to disclose the presence of these metals, arguing that consumers would have either not purchased the Products or would have paid less for them had the Company made adequate disclosures. The Court appointed interim class counsel for Plaintiffs in the Consolidated Proceeding, and Plaintiffs filed a Consolidated Amended Class Action Complaint on March 18, 2022. The Company filed a motion to dismiss the Consolidated Class Action Complaint on November 7, 2022. The plaintiffs filed their opposition on December 22, 2022, and the Company filed its reply brief on January 20, 2023. The Court scheduled a status conference for May 9, 2023 to address the status of the case, including the Company’s pending motion to dismiss. One consumer class action is pending in New York Supreme Court, Nassau County, which the court has stayed in deference to the Consolidated Proceeding. The Company denies the allegations in these lawsuits and contends that its baby foods are safe and properly labeled.

The claims raised in these lawsuits were brought in the wake of a highly publicized report issued by the U.S. House of Representatives Subcommittee on Economic and Consumer Policy on Oversight and Reform, dated February 4, 2021 (the “House Report”), addressing the presence of heavy metals in baby foods made by certain manufacturers, including the Company. Since the publishing of the House Report, the Company has also received information requests with respect to the advertising and quality of its baby foods from certain governmental authorities, as such authorities investigate the claims made in the House Report. The Company is fully cooperating with these requests and is providing documents and other requested information. The Company has been named in one civil government enforcement action, State of New Mexico ex rel. Balderas v. Nurture, Inc., et al., which was filed by the New Mexico Attorney General against the Company and several other manufacturers based on the alleged presence of heavy metals in their baby food products. The Company and several other manufacturers moved to dismiss the New Mexico Attorney General’s lawsuit, which motion the Court denied. The Company filed its answer to the New Mexico Attorney General’s amended complaint on April 23, 2022. The Company denies the New

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Mexico Attorney General’s allegations and maintains that its baby foods are safe, properly labeled, and compliant with New Mexico law.

In addition to the consumer class actions discussed above, the Company is currently named in seven lawsuits in state and federal courts alleging some form of personal injury from the ingestion of the Company’s Products, purportedly due to unsafe and undisclosed levels of various naturally occurring heavy metals. These lawsuits generally allege injuries related to neurological development disorders such as autism and attention deficit hyperactivity disorder.

•In the matter, Palmquist et al. v. The Hain Celestial Group, Inc., a jury trial commenced on February 6, 2023 in the U.S. District Court, Southern District of Texas. The Company moved for Directed Verdict at the close of Plaintiffs’ case. The Court granted the Company’s motion, finding no liability for the Company. The Court entered Final Judgment in the Company's favor on March 3, 2023. On April 3, 2023, Plaintiffs filed their Notice of Appeal in the Fifth Circuit. Plaintiffs will have 40 days after the Fifth Circuit receives the District Court record within which to file their appellate brief, barring any extensions.

•In the matter, NC v. The Hain Celestial Group, et al., pending in Superior Court for the State of California, County of Los Angeles, discovery has closed and the Court has set a trial date of October 4, 2023.

•There are currently two Nevada state court cases pending in Clark County District Court. The cases, Benitez v. Beech-Nut Nutrition Company, Inc., et al. and Buenaventura v. Beech-Nut Nutrition Company, Inc., et al., have been consolidated for the purposes of discovery only. In Benitez, the Court issued a scheduling order in September 2022. Pursuant to this Order, discovery will close on March 7, 2024 and the case is set for trial starting on July 29, 2024. The parties have engaged in limited discovery. There has been no further activity in the Buenaventura case.

•In Watkins v. Plum, PBC, et al., currently pending in the United States District Court for the Eastern District of Louisiana, the Court has set the case for trial beginning on August 28, 2023. The parties have agreed to ask the Court to move the trial date to no earlier than March 2024 and have started to engage in discovery.

•On January 9, 2023, Plaintiffs in P.A. et al. v. Hain Celestial Group, Inc., et al. filed their First Amended Complaint in the Circuit Court of the First Circuit, State of Hawai’i. On March 8, 2023, the Company filed its Answer to Plaintiff’s First Amended Complaint. The case is set for trial starting on January 23, 2025.

•On February 3, 2023, Plaintiff in Pourdanesh v. Hain Celestial Group, Inc. et al. filed his Complaint in the Superior Court for the State of California, County of Los Angeles. Plaintiff served his Complaint on the Company on March 28, 2023. Following a meet and confer with Plaintiff’s counsel, Plaintiff has agreed to file an Amended Complaint identifying the products at issue. The case is stayed until the Initial Status Conference on May 17, 2023.

The Company denies that its Products led to any of the alleged injuries and will defend these cases vigorously. That said, additional lawsuits may be filed against the Company in the future, asserting similar or different legal theories and seeking similar or different types of damages and relief. Such lawsuits may be resolved in a manner adverse to us, and we may incur substantial costs or damages not covered by our insurance, which could have a material adverse effect on our financial condition and business.

Other

In addition to the litigation described above, the Company is and may be a defendant in lawsuits from time to time in the normal course of business.

With respect to all litigation and related matters, the Company records a liability when the Company believes it is probable that a liability has been incurred and the amount can be reasonably estimated. As of the end of the period covered by this report, the Company has not recorded a liability for any of the matters disclosed in this note. It is possible that some matters could require the Company to pay damages, incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report.

17. SEGMENT INFORMATION

Our organization structure consists of two geographic-based reportable segments: North America and International. Our North America reportable segment consists of the United States and Canada as operating segments. Our International reportable segment is comprised of three operating segments: United Kingdom, Ella’s Kitchen UK, and Europe. This structure is in line with how our Chief Operating Decision Maker, the Company's Chief Executive Officer, assesses our performance and allocates resources.

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The Company uses segment net sales and operating income to evaluate performance and to allocate resources. The Company believes these measures are most relevant in order to analyze segment results and trends. Segment operating income excludes certain general corporate expenses (which are a component of selling, general and administrative expenses) and acquisition related expenses, restructuring, integration, and other charges.

The following tables set forth financial information about each of the Company’s reportable segments. Transactions between reportable segments were insignificant for all periods presented.


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Net Sales:
North America	$	286,649	$	325,742	$	857,406	$	866,281
International	168,594		177,197		491,396		568,502

	$	455,243	$	502,939	$	1,348,802	$	1,434,783

Operating (Loss) Income:
North America(a)	$	(136,127)	$	28,526	$	(79,420)	$	72,530
International	13,604		18,303		33,219		69,740
	(122,523)		46,829		(46,201)		142,270
Corporate and Other(b)	(18,403)		(11,665)		(51,513)		(49,538)
	$	(140,926)	$	35,164	$	(97,714)	$	92,732

(a) North America operating loss includes non-cash impairment charges of $156,298 related to ParmCrisps® and Thinsters® trademarks and ParmCrisps® customer relationships for the three and nine months ended March 31, 2023 (see Note 8, Goodwill and Other Intangible Assets).

(b) In addition to general Corporate and Other expenses as described above, for the three and nine months ended March 31, 2023, Corporate and Other included $2,603 and $3,133 of Productivity and transformation costs, respectively. For the three and nine months ended March 31, 2022, Corporate and Other included $218 and $3,228 of Productivity and transformation costs, respectively.

The Company’s net sales by geographic region, which are generally based on the location of the Company’s subsidiaries, were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
United States	$	259,468	$	295,152	$	774,032	$	772,548
United Kingdom	122,069		124,029		354,808		387,129
All Other	73,706		83,758		219,962		275,106
Total	$	455,243	$	502,939	$	1,348,802	$	1,434,783

The Company’s long-lived assets, which represent net property, plant and equipment and operating lease right-of-use assets, were as follows by geographic area:


	March 31, 2023		June 30, 2022
United States	$	165,470	$	182,038
United Kingdom	132,831		133,213
All Other	96,438		96,845
Total	$	394,739	$	412,096

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

The Hain Celestial Group, Inc., a Delaware corporation (collectively, along with its subsidiaries, the “Company,” and herein referred to as “Hain Celestial,” “we,” “us” and “our”), was founded in 1993 and is headquartered in Boulder, Colorado. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet. The Company continues to be a leading marketer, manufacturer and seller of organic and natural, “better-for-you” products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience. The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes. Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores worldwide.

The Company manufactures, markets, distributes, and sells organic and natural products, providing consumers with the opportunity to lead A Healthier Way of Life®. The Company’s food and beverage brands include Celestial Seasonings®, Clarks™, Cully & Sully®, Earth’s Best®, Ella’s Kitchen®, Frank Cooper’s®, Garden of Eatin’®, Hartley’s®, Health Valley®, Imagine®, Joya®, Lima®, Linda McCartney’s® (under license), MaraNatha®, Natumi®, New Covent Garden Soup Co.®, ParmCrisps®, Robertson’s®, Rose’s® (under license), Sensible Portions®, Spectrum®, Sun-Pat®, Terra®, The Greek Gods®, Thinsters®, Yorkshire Provender® and Yves Veggie Cuisine®. The Company’s personal care brands include Alba Botanica®, Avalon Organics®, JASON®, Live Clean® and Queen Helene®.

Global Economic Environment

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

•Inflation – The inflationary environment has led to higher costs for ingredients, packaging, energy, transportation and other supply chain components. We expect this higher cost environment to continue, although we expect these higher costs to be partially mitigated by pricing actions we have implemented to date and further pricing actions that we may implement.

•Interest Rates – Loans under our credit agreement bear interest at a variable rate, and the interest rate on our outstanding indebtedness has increased as market interest rates have risen significantly starting in the second half of fiscal year 2022. These higher interest rates, together with a higher outstanding debt balance, has led to an increase in our interest expense and we expect this high rate environment to continue.

•Consumer Demand – Recent economic conditions have resulted in changes in consumer spending patterns, which has had an impact on our sales. During an economic downturn, factors such as increased unemployment, decreases in disposable income and declines in consumer confidence can cause changes in consumer spending behavior. Economic conditions have prompted some consumers, particularly in Europe, to shift to lower-priced products.

Russia-Ukraine War

Although we have no material assets in Russia, Belarus or Ukraine, our supply chain was adversely impacted by the Russia-Ukraine war during the second half of fiscal year 2022 and the first nine months of fiscal year 2023 and we continue to face other challenges and risks arising from the war. In particular, the war has added significant costs to existing inflationary pressures through increased energy and raw material prices. Further, beyond increased costs, labor challenges and other factors have led to supply chain disruptions. While, to date, we have been able to identify replacement raw materials where necessary, we have incurred increased costs in doing so. The war has also negatively impacted consumer sentiment, particularly in Europe, with some consumers shifting to lower-priced products, which has somewhat affected demand for our products. Additionally, we face increased cybersecurity risks, as companies based in the United States and its allied countries have become targets of malicious cyber activity. While we are continuing to monitor and manage the impacts of the war on our business, the extent to which the Russia-Ukraine war and the related economic impact may affect our financial condition or results of operations in the future remains uncertain.

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CEO Succession

On November 22, 2022, the Board of Directors (the "Board") of the Company approved a succession plan pursuant to which the Board appointed Wendy P. Davidson to the role of President and Chief Executive Officer and as a director on the Board, in each case effective as of January 1, 2023. As part of the succession plan, Mark L. Schiller transitioned from his position as President and Chief Executive Officer of the Company effective as of December 31, 2022 (the “Transition Date”). Mr. Schiller remains as a director on the Board following the Transition Date.

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

Consolidated Results

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


	Three Months Ended						Change in
	March 31, 2023			March 31, 2022			Dollars		Percentage
Net sales	$	455,243	100.0%	$	502,939	100.0%	$	(47,696)	(9.5)%
Cost of sales	357,764		78.6%	387,236		77.0%	(29,472)		(7.6)%
Gross profit	97,479		21.4%	115,703		23.0%	(18,224)		(15.8)%
Selling, general and administrative expenses	75,047		16.5%	75,750		15.1%	(703)		(0.9)%
Intangibles and long-lived asset impairment	156,583		34.4%	—		—%	156,583		*

Amortization of acquired intangible assets	2,842		0.6%	3,110		0.6%	(268)		(8.6)%
Productivity and transformation costs	3,933		0.9%	1,679		0.3%	2,254		134.2%





Operating (loss) income	(140,926)		(31.0)%	35,164		7.0%	(176,090)		(500.8)%
Interest and other financing expense, net	13,421		2.9%	3,224		0.6%	10,197		316.3%
Other expense (income), net	439		0.1%	(712)		(0.1)%	1,151		(161.7)%
(Loss) income before income taxes and equity in net loss of equity-method investees	(154,786)		(34.0)%	32,652		6.5%	(187,438)		(574.0)%
(Benefit) provision for income taxes	(39,587)		(8.7)%	7,738		1.5%	(47,325)		(611.6)%
Equity in net loss of equity-method investees	528		0.1%	383		0.1%	145		37.9%


Net (loss) income	$	(115,727)	(25.4)%	$	24,531	4.9%	$	(140,258)	(571.8)%

Adjusted EBITDA	$	37,260	8.2%	$	58,669	11.7%	$	(21,409)	(36.5)%


Diluted net (loss) income per common share	$	(1.29)		$	0.27		$	(1.56)	*

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

Net Sales

Net sales for the three months ended March 31, 2023 were $455.2 million, a decrease of $47.7 million, or 9.5%, as compared to $502.9 million in the three months ended March 31, 2022. On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $28.9 million, or 5.8%, from the prior year quarter driven by both the North America and International reportable segments. Further details of changes in net sales by segment are provided below in the Segment Results section.

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Gross Profit

Gross profit for the three months ended March 31, 2023 was $97.5 million, a decrease of $18.2 million, or 15.8%, as compared to the prior year quarter. Additionally, gross profit margin of 21.4% was lower when compared with 23.0% in the prior year quarter. The decrease in gross profit was driven primarily by the North America reportable segment as a result of lower net sales, changes in sales mix of high margin products and inflation. The International reportable segment also had a decrease in gross profit mainly resulting from lower net sales in the Europe operating segment, change in sales mix of high margin products and higher energy and supply chain costs when compared to the prior year period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $75.0 million for the three months ended March 31, 2023, a decrease of $0.7 million, or 0.9%, from $75.8 million for the prior year quarter. The decrease was driven by lower marketing costs as well as efficiencies gained from the Company's productivity and transformation initiatives, partially offset by higher labor-related expenses primarily in Corporate.

Intangibles and long-lived asset impairment

During the three months ended March 31, 2023, the Company recognized an aggregate impairment charge of $156.6 million, primarily related to the ParmCrisps® and Thinsters® indefinite-lived trademarks and ParmCrisps® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value. The fair value of indefinite-lived trademarks and definite-lived customer relationships were determined using the relief from royalty method and multi-period excess earnings method, respectively. See Note 8, Goodwill and Other Intangible Assets and Note 14, Fair Value Measurements, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Amortization of Acquired Intangible Assets

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

Productivity and Transformation Costs

Productivity and transformation costs were $3.9 million for the three months ended March 31, 2023, an increase of $2.3 million from $1.7 million in the prior year quarter. The increase was primarily due to increased spending related to productivity and transformation strategy consulting costs as a part of the Company’s strategic plan update.

Operating Loss (Income)

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

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $13.4 million for the three months ended March 31, 2023, an increase of $10.2 million, or 316.3%, from $3.2 million in the prior year quarter. The increase resulted primarily from rising interest rates and a higher outstanding debt balance driven primarily by the acquisition of THWR and share repurchase activity during fiscal 2022. 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 Expense (Income), Net

Other expense, net totaled $0.4 million for the three months ended March 31, 2023, compared to income of $0.7 million in the prior year quarter. The decrease in income was primarily attributable to the recognition of foreign exchange gain in the prior year quarter compared to foreign exchange loss in the current quarter.

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

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

(Benefit) Provision for Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes. Our income tax benefit was $39.6 million for the three months ended March 31, 2023 compared to income tax expense of $7.7 million in the prior year quarter.

The effective income tax rate was a benefit of 25.6% and an expense of 23.7% for the three months ended March 31, 2023 and 2022, respectively. The effective income tax rate for the three months ended March 31, 2023 was impacted by ParmCrisps® and Thinsters® trademarks and ParmCrisps® asset group impairment charges, stock-based compensation and changes in uncertain tax positions. The effective income tax rate for the three months ended March 31, 2022 was impacted by deductions related to stock-based compensation and the finalization of fiscal year 2021 income tax returns. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended March 31, 2023 was $0.5 million and $0.4 million in the prior year quarter. 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 March 31, 2023 was $115.7 million, or $1.29 per diluted share, compared to net income of $24.5 million, or $0.27 per diluted share, in the prior year quarter. The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $37.3 million and $58.7 million for the three months ended March 31, 2023 and 2022, respectively, as a result of the factors discussed above, and the adjustments described in the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures presented following the discussion of our results of operations. On a constant currency basis, Adjusted EBITDA decreased by $19.3 million, or 33.0%, from $58.7 million for the three months ended March 31, 2022 to $39.3 million for the three months ended March 31, 2023.

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Segment Results

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


(dollars in thousands)	North America			International			Corporate and Other			Consolidated
Net sales
Three months ended 3/31/23	$	286,649		$	168,594		$	—		$	455,243
Three months ended 3/31/22	325,742			177,197			—			502,939
$ change	$	(39,093)		$	(8,603)		n/a			$	(47,696)
% change	(12.0)		%	(4.9)		%	n/a			(9.5)		%

Operating (loss) income
Three months ended 3/31/23(a)	$	(136,127)		$	13,604		$	(18,403)		$	(140,926)
Three months ended 3/31/22	28,526			18,303			(11,665)			35,164
$ change	$	(164,653)		$	(4,699)		$	(6,738)		$	(176,090)
% change	(577.2)		%	(25.7)		%	57.8		%	(500.8)		%

Operating (loss) income margin
Three months ended 3/31/23	(47.5)		%	8.1		%	n/a			(31.0)		%
Three months ended 3/31/22	8.8		%	10.3		%	n/a			7.0		%

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

North America

Our net sales in the North America reportable segment for the three months ended March 31, 2023 were $286.6 million, a decrease of $39.1 million, or 12.0%, from net sales of $325.7 million in the prior year quarter. On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 10.8%. In the United States operating segment, adjusted sales were lower compared to the prior year quarter mainly due to lower sales in snacks, personal care and tea, partially offset by higher sales in yogurt. The net sales decrease within snacks was substantially driven by reduced distribution and customer promotions associated with the ParmCrisps® brand. Similar trends were noted in the Canada operating segment. Operating loss in North America for the three months ended March 31, 2023 was $136.1 million, a decrease of $164.7 million compared to operating income of $28.5 million in the prior year quarter. The decrease was mainly driven by aggregate non-cash impairment charges of $156.3 million related to the ParmCrisps® and Thinsters® intangible assets and lower net sales in the United States operating segment, partially offset by cost improvements due to higher productivity.

International

Our net sales in the International reportable segment for the three months ended March 31, 2023 were $168.6 million, a decrease of $8.6 million, or 4.9%, from net sales of $177.2 million in the prior year quarter. On a constant currency basis, net sales increased 3.5% from the prior year quarter primarily due to an increase in sales in the United Kingdom operating segment, partially offset by softness in plant-based categories in the rest of Europe. Operating income in our International reportable segment for the three months ended March 31, 2023 was $13.6 million, a decrease of $4.7 million from $18.3 million for the three months ended March 31, 2022. Operating income was lower in the current quarter when compared to the prior year quarter mainly due to increased energy and input costs and volume mix, partially offset by improved pricing and productivity.

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Corporate and Other

Our Corporate and Other category consists of expenses related to the Company’s centralized administrative functions, which do not specifically relate to an operating segment. Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, acquisition and divestiture transaction costs, facilities, and other items which benefit the Company as a whole. Our operating loss in Corporate and Other for the three months ended March 31, 2023 was $18.4 million, an increase of $6.7 million, from $11.7 million for the three months ended March 31, 2022. This change was primarily due to higher strategic consulting charges and employee related expenses.

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

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

Consolidated Results

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


	Nine Months Ended						Change in
	March 31, 2023			March 31, 2022			Dollars		Percentage
Net sales	$	1,348,802	100.0%	$	1,434,783	100.0%	$	(85,981)	(6.0)%
Cost of sales	1,053,131		78.1%	1,096,367		76.4%	(43,236)		(3.9)%
Gross profit	295,671		21.9%	338,416		23.6%	(42,745)		(12.6)%
Selling, general and administrative expenses	222,355		16.5%	229,679		16.0%	(7,324)		(3.2)%
Intangibles and long-lived asset impairment	156,923		11.6%	303		—%	156,620		**
Amortization of acquired intangible assets	8,415		0.6%	7,254		0.5%	1,161		16.0%
Productivity and transformation costs	5,692		0.4%	8,448		0.6%	(2,756)		(32.6)%





Operating (loss) income	(97,714)		(7.2)%	92,732		6.5%	(190,446)		*
Interest and other financing expense, net	31,910		2.4%	7,672		0.5%	24,238		315.9%
Other income, net	(2,413)		(0.2)%	(10,570)		(0.7)%	8,157		(77.2)%
(Loss) income before income taxes and equity in net loss of equity-method investees	(127,211)		(9.4)%	95,630		6.7%	(222,841)		*
(Benefit) provision for income taxes	(30,599)		(2.3)%	19,425		1.4%	(50,024)		*
Equity in net loss of equity-method investees	1,226		0.1%	1,374		0.1%	(148)		(10.8)%


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

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


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

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

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

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Net Sales

Net sales for the nine months ended March 31, 2023 were $1,348.8 million, a decrease of $86.0 million, or 6.0%, as compared to $1,434.8 million in the nine months ended March 31, 2022. On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $44.2 million, or 3.1%, from the prior comparable period primarily driven by International reportable segment. Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross Profit

Gross profit for the nine months ended March 31, 2023 was $295.7 million, a decrease of $42.7 million, or 12.6%, as compared to the prior year comparable period. Gross profit margin was 21.9% of net sales, compared to 23.6% in the prior year comparable period. The decrease in gross profit was driven primarily by the International reportable segment mainly due to lower net sales in the Europe and United Kingdom operating segments and higher energy and supply chain costs when compared to the prior year period. The North America reportable segment gross profit remained relatively flat due to pricing increases and cost improvements driven by higher productivity, partially offset by inflation and lower net sales in the Canada operating segment when compared with the prior year comparable period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $222.4 million for the nine months ended March 31, 2023, a decrease of $7.3 million, or 3.2%, from $229.7 million for the prior year comparable period. The decrease was primarily driven by reductions in the United States and the United Kingdom operating segments. The decrease reflected reduced broker fees and sales related expenses primarily in the United States operating segment and lower marketing costs, as well as efficiencies gained from the Company's productivity and transformation initiatives.

Intangibles and long-lived asset impairment

During the nine months ended March 31, 2023, the Company recognized aggregate impairment charge of $156.9 million , an increase of $156.6 million from $0.3 million in the prior year comparable period, related to the ParmCrisps® and Thinsters® indefinite-lived trademarks and ParmCrisps® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value. The fair value of indefinite-lived trademarks and definite-lived customer relationships were determined using the relief from royalty method and multi-period excess earnings method, respectively. See Note 8, Goodwill and Other Intangible Assets and Note 14, Fair Value Measurements, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Amortization of Acquired Intangible Assets

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

Productivity and Transformation Costs

Productivity and transformation costs were $5.7 million for the nine months ended March 31, 2023, a decrease of $2.8 million from $8.4 million in the prior year comparable period. The decrease was primarily due to wind down of prior year restructuring costs partially offset by new spending on our strategic plan update.

Operating (Loss) Income

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

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Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $31.9 million for the nine months ended March 31, 2023, an increase of $24.2 million, or 315.9%, from $7.7 million in the prior year comparable period. The increase resulted primarily from a higher outstanding debt balance driven primarily by the acquisition of THWR in the second quarter of the prior fiscal year as well as share repurchase activity during fiscal 2022. Interest and other financing expense was also impacted by higher interest rates compared to the prior comparable period. See Note 9, Debt and Borrowings, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $2.4 million for the nine months ended March 31, 2023, compared to $10.6 million in the prior year comparable period. The decrease in income was primarily attributable to the recognition of an $8.7 million gain on sale of assets in the prior year period related to the sale of undeveloped land plots in Boulder, Colorado.

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

Loss before income taxes and equity in net loss of our equity-method investees for the nine months ended March 31, 2023 was $127.2 million compared to income of $95.6 million in the prior year comparable period. The decrease was due to the items discussed above.

(Benefit) Provision for Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes. Our income tax benefit was $30.6 million for the nine months ended March 31, 2023 compared to expense of $19.4 million in the prior year comparable period. The effective income tax rate was a benefit of 24.1% and expense of 20.3% for the nine months ended March 31, 2023 and 2022, respectively.

The effective income tax rate for the nine months ended March 31, 2023 was impacted by ParmCrisps® and Thinsters® trademarks and ParmCrisps® asset group impairment charges, gain on the sale of Westbrae (See Note 4, Acquisition and Disposition, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q), an operating lease modification during the second quarter, severance with respect to our former CEO (as part of the limitation on the deductibility of executive compensation), stock-based compensation and changes in uncertain tax positions. The effective income tax rate for the nine months ended March 31, 2022 was impacted by the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to acquisition of THWR, the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of fiscal year 2021 U.S. income tax returns. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2023 was $1.2 million compared to $1.4 million in the prior year comparable period. See Note 13, Investments, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net (Loss) Income

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

Adjusted EBITDA

Our Adjusted EBITDA was $123.1 million and $165.2 million for the nine months ended March 31, 2023 and 2022, respectively, as a result of the factors discussed above, and the adjustments described in the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures presented following the discussion of our results of operations. On a constant currency basis, Adjusted EBITDA decreased by $34.5 million, or 20.9%, from $165.2 million for the nine months ended March 31, 2022 to $130.7 million for the nine months ended March 31, 2023.

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Segment Results

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


(dollars in thousands)	North America			International			Corporate and Other			Consolidated
Net sales
Nine months ended 3/31/23	$	857,406		$	491,396		$	—		$	1,348,802
Nine months ended 3/31/22	866,281			568,502			—			1,434,783
$ change	$	(8,875)		$	(77,106)		n/a			$	(85,981)
% change	(1.0)		%	(13.6)		%	n/a			(6.0)		%

Operating (loss) income
Nine months ended 3/31/23(a)	$	(79,420)		$	33,219		$	(51,513)		$	(97,714)
Nine months ended 3/31/22	72,530			69,740			(49,538)			92,732
$ change	$	(151,950)		$	(36,521)		$	(1,975)		$	(190,446)
% change	(209.5)		%	(52.4)		%	4.0		%	(205.4)		%

Operating (loss) income margin
Nine months ended 3/31/23	(9.3)		%	6.8		%	n/a			(7.2)		%
Nine months ended 3/31/22	8.4		%	12.3		%	n/a			6.5		%

North America

Our net sales in the North America reportable segment for the nine months ended March 31, 2023 were $857.4 million, a decrease of $8.9 million, or 1.0%, from net sales of $866.3 million in the prior year comparable period. On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 3.7% due to decreased sales in the Canada operating segment due to lower sales in personal care product categories and reduced club distribution and programming for certain brands, partially offset by increased sales in the United States operating segment due to stronger sales in snacks. Operating loss in North America for the nine months ended March 31, 2023 was $79.4 million, compared to operating income of $72.5 million in the prior year comparable period. The decrease was mainly driven by ParmCrisps® and Thinsters® indefinite-lived trademarks and ParmCrisps® definite-lived customer relationships impairment charges and lower net sales in the Canada operating segment, partially offset by cost improvements due to higher productivity.

International

Our net sales in the International reportable segment for the nine months ended March 31, 2023 were $491.4 million, a decrease of $77.1 million, or 13.6%, from net sales of $568.5 million in the prior year comparable period. On a constant currency basis, net sales decreased 2.3% from the prior year comparable period mainly due to lower sales in the Europe and United Kingdom operating segments, particularly in relation to plant-based categories and snacks, and the impact of the loss of a large non-dairy co-manufacturing customer in the second half of the prior fiscal year. Operating income in our International reportable segment for the nine months ended March 31, 2023 was $33.2 million, a decrease of $36.5 million from $69.7 million for the nine months ended March 31, 2022. Operating income was lower in the current period when compared to the prior year comparable period mainly due to lower gross profit resulting from a decline in sales and higher energy and supply chain costs, partially offset by lower delivery and warehouse costs due to improved utilization of warehouse space and efficiencies.

Corporate and Other

Our operating loss in Corporate and Other for the nine months ended March 31, 2023 was $51.5 million, an increase of $2.0 million, from $49.5 million in the prior year period. This change was primarily due to higher general and administrative expenses mainly related to increased salaries, wages, and benefits.

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

Liquidity and Capital Resources

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Credit Agreement (as defined below). We believe that our cash flows from operations and borrowing capacity under our Credit Agreement (as defined below) will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

Amended and Restated Credit Agreement

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”). The Credit Agreement provides for senior secured financing of $1,100.0 million in the aggregate, consisting of (1) $300.0 million in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800.0 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440.0 million U.S. revolving credit facility and $360.0 million global revolving credit facility) (the “Revolver”). Both the Revolver and the Term Loans mature on December 22, 2026.

During the Amendment Period, loans under the Credit Agreement will bear interest at (a) the Secured Overnight Financing Rate, plus a credit spread adjustment of 0.10% (as adjusted, “Term SOFR”) plus 2.0% per annum or (b) the Base Rate (as defined in the Credit Agreement) plus 1.0% per annum. Following the Amendment Period, loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 0.875% to 1.750% per annum or (b) the Base Rate plus a rate ranging from 0.00% to 0.750% per annum, the relevant rate in each case being the Applicable Rate. The Applicable Rate following the Amendment Period will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement. The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2023 was 5.90%. Additionally, the Credit Agreement contains a Commitment Fee (as defined in the Credit Agreement) on the amount unused under the Credit Agreement ranging from 0.15% to 0.25% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid.

As of March 31, 2023, there were $567.0 million of loans under the Revolver, $290.6 million of Term Loans, and $4.1 million letters of credit outstanding under the Credit Agreement. As of March 31, 2023, $228.9 million was available under the Credit Agreement, subject to compliance with the financial covenants, as compared to $204.0 million as of June 30, 2022. As of March 31, 2023, the Company was in compliance with all associated covenants.

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 $21.8 million at March 31, 2023 to $43.7 million as compared to $65.5 million at June 30, 2022. Our working capital was $348.1 million at March 31, 2023, an increase of $19.1 million from $329.0 million at the end of fiscal 2022. Additionally, our total debt decreased by $32.1 million at March 31, 2023 to $856.6 million as compared to $888.6 million at June 30, 2022 as a result of $31.6 million of net repayments carried out during the period.

Our cash balances are held in the United States, United Kingdom, Canada, Europe, the Middle East and India. As of March 31, 2023, substantially all cash was held outside of the United States.

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We maintain our cash and cash equivalents primarily in money market funds or their equivalent. Accordingly, we do not believe that our investments have significant exposure to interest rate risk. Cash (used in) provided by operating, investing and financing activities is summarized below.


	Nine Months Ended March 31,				Change in
(amounts in thousands)	2023		2022		Dollars
Cash flows provided by (used in):
Operating activities	$	26,309	$	99,186	$	(72,877)
Investing activities	(13,243)		(284,271)		271,028
Financing activities	(34,792)		172,858		(207,650)
Effect of exchange rate changes on cash	(104)		(5,836)		5,732


Net decrease in cash and cash equivalents	$	(21,830)	$	(18,063)	$	(3,767)

Cash provided by operating activities was $26.3 million for the nine months ended March 31, 2023, a decrease of $72.9 million from cash provided by operating activities of $99.2 million in the prior year period. This decrease versus the prior period resulted primarily from a reduction of $60.5 million in net income adjusted for non-cash charges in the current period and higher cash utilization of $12.3 million from our working capital accounts primarily due to a higher account receivable balance due to timing of cash receipts, partially offset by a reduction in the change in other current assets.

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

Cash used in financing activities was $34.8 million for the nine months ended March 31, 2023, a decrease of $207.7 million compared to $172.9 million of cash provided in the prior year period. The decrease in cash provided by financing activities is primarily due to higher borrowings under the Credit Agreement to finance the THWR acquisition, higher share repurchases, and payment of shares withheld for employee payroll taxes during the same period in the prior year.

Operating Free Cash Flows

Operating free cash flows were $4.9 million for the nine months ended March 31, 2023, a decrease of $60.4 million from $65.2 million provided by operating free cash flows in the nine months ended March 31, 2022. This decrease versus the prior year period resulted primarily from a decrease in cash flow from operations of $72.9 million driven by the reasons explained above, partially offset by reduction in capital expenditures. See the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash provided by operating activities to operating free cash flows.

Share Repurchase Program

In January 2022, the Company’s Board of Directors authorized the repurchase of up to $200.0 million of the Company’s issued and outstanding common stock. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise. The current 2022 authorization does not have a stated expiration date. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations. During the nine months ended March 31, 2023, the Company did not repurchase any shares under the repurchase program. As of March 31, 2023, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures

We have included in this report measures of financial performance that are not defined by U.S. GAAP. We believe that these measures provide useful information to investors and include these measures in other communications to investors.

For each of these non-U.S. GAAP financial measures, we are providing below a reconciliation of the differences between the non-U.S. GAAP measure and the most directly comparable U.S. GAAP measure, an explanation of why our management and Board of Directors believe the non-U.S. GAAP measure provides useful information to investors and any additional purposes for which our management and Board of Directors use the non-U.S. GAAP measures. These non-U.S. GAAP measures should be viewed in addition to, and not in lieu of, the comparable U.S. GAAP measures.

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Net Sales - Constant Currency Presentation

We believe that net sales adjusted for the impact of foreign currency provides useful information to investors because it provides transparency to underlying performance in our consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given the volatility in foreign currency exchange markets. To present net sales adjusted for the impact of foreign currency, current period net sales for entities reporting in currencies other than the U.S. Dollar are translated into U.S. Dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

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

We also exclude the impact of acquisitions, divestitures and discontinued brands when comparing net sales to prior periods, which results in the presentation of certain non-U.S. GAAP financial measures. The Company's management believes that excluding the impact of acquisitions, divestitures and discontinued brands when presenting period-over-period results of net sales aids in comparability.

To present net sales adjusted for the impact of acquisitions, the net sales of an acquired business are excluded from fiscal quarters constituting or falling within the current period and prior period where the applicable fiscal quarter in the prior period did not include the acquired business for the entire quarter. To present net sales adjusted for the impact of divestitures and discontinued brands, the net sales of a divested business or discontinued brand are excluded from all periods.

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

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(amounts in thousands)	North America			International			Hain Consolidated
Net sales - Three months ended March 31, 2023	$	286,649		$	168,594		$	455,243
Acquisitions, divestitures and discontinued brands	(163)			—			(163)
Impact of foreign currency exchange	1,881			14,760			16,641
Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2023	$	288,367		$	183,354		$	471,721

Net sales - Three months ended March 31, 2022	$	325,742		$	177,197		$	502,939
Acquisitions, divestitures and discontinued brands	(2,311)			—			(2,311)
Net sales adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2022	$	323,431		$	177,197		$	500,628

Net sales decline	(12.0)		%	(4.9)		%	(9.5)		%
Impact of acquisitions, divestitures and discontinued brands	0.6		%	—		%	0.4		%
Impact of foreign currency exchange	0.6		%	8.4			3.3		%
Net sales (decline) growth on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands	(10.8)		%	3.5		%	(5.8)		%

Net sales - Nine months ended March 31, 2023	$	857,406		$	491,396		$	1,348,802
Acquisitions, divestitures and discontinued brands	(34,663)			—			(34,663)
Impact of foreign currency exchange	5,024			64,266			69,290
Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2023	$	827,767		$	555,662		$	1,383,429

Net sales - Nine months ended March 31, 2022	$	866,281		$	568,502		$	1,434,783
Acquisitions, divestitures and discontinued brands	(7,142)			—			(7,142)
Net sales adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2022	$	859,139		$	568,502		$	1,427,641

Net sales decline	(1.0)		%	(13.6)		%	(6.0)		%
Impact of acquisitions, divestitures and discontinued brands	(3.3)		%	—		%	(1.9)		%
Impact of foreign currency exchange	0.6		%	11.3		%	4.8		%
Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands	(3.7)		%	(2.3)		%	(3.1)		%

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses (gains), certain litigation and related costs, CEO succession costs, plant closure related costs-net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains on sales of assets, certain inventory write-downs, intangibles and long-lived asset impairment and other adjustments. The Company’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. In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation. Adjusted EBITDA is a non-U.S. GAAP measure and may not be comparable to similarly titled measures reported by other companies.

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We do not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with U.S. GAAP. The principal limitation of Adjusted EBITDA is that it excludes certain expenses and income that are required by U.S. GAAP to be recorded in our consolidated financial statements. In addition, Adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining Adjusted EBITDA. In order to compensate for these limitations, management presents Adjusted EBITDA in connection with U.S. GAAP results. A reconciliation of net (loss) income to Adjusted EBITDA is as follows:

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	Three Months Ended March 31,				Nine Months Ended March 31,
(amounts in thousands)	2023		2022		2023		2022
Net (loss) income	$	(115,727)	$	24,531	$	(97,838)	$	74,831



Depreciation and amortization	13,784		12,638		37,909		34,396
Equity in net loss of equity-method investees	528		383		1,226		1,374
Interest expense, net	12,924		2,846		30,582		5,677
(Benefit) provision for income taxes	(39,587)		7,738		(30,599)		19,425
Stock-based compensation, net	3,228		3,846		10,657		12,289
Unrealized currency losses (gains)	202		(594)		651		(2,097)
Litigation and related costs
Certain litigation expenses, net(a)	(1,582)		2,005		3,363		5,389


Restructuring activities
CEO succession	—		—		5,113		—
Plant closure related costs, net	22		82		73		895
Productivity and transformation costs	3,933		1,626		5,692		7,077
Warehouse/manufacturing consolidation and other costs, net	2,871		94		899		2,632
Acquisitions, divestitures and other
Transaction and integration costs, net	215		3,419		1,984		12,151
(Gain) loss on sale of assets	(134)		55		(3,529)		(9,047)

Impairment charges
Inventory write-down	—		—		—		(46)
Intangibles and long-lived asset impairment	156,583		—		156,923		303
Adjusted EBITDA	$	37,260	$	58,669	$	123,106	$	165,249

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

Adjusted EBITDA - Constant Currency Presentation

The Company provides Adjusted EBITDA and Adjusted EBITDA on a constant currency basis because the Company’s management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company as well as a component of performance-based executive compensation. The Company believes presenting Adjusted EBITDA on a constant currency basis provides useful information to investors because it provides transparency to underlying performance in the Company’s Adjusted EBITDA by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets.

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


(amounts in thousands)	Hain Consolidated
Adjusted EBITDA - Three months ended March 31, 2023	$	37,260
Impact of foreign currency exchange	2,067
Adjusted EBITDA on a constant currency basis - Three months ended March 31, 2023	$	39,327

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

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


(amounts in thousands)	Hain Consolidated
Adjusted EBITDA - Nine months ended March 31, 2023	$	123,106
Impact of foreign currency exchange	7,594
Adjusted EBITDA on a constant currency basis - Nine months ended March 31, 2023	$	130,700

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

Operating Free Cash Flows

In our internal evaluations, we use the non-U.S. GAAP financial measure “Operating Free Cash Flows” The difference between Operating Free Cash Flows and cash flow provided by or used in operating activities, which is the most comparable U.S. GAAP financial measure, is that Operating Free Cash Flows reflects the impact of purchases of property, plant and equipment (capital spending). Since capital spending is essential to maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider capital spending when evaluating our cash provided by or used in operating activities. We view Operating Free Cash Flows as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments. We do not consider Operating Free Cash Flows in isolation or as an alternative to financial measures determined in accordance with U.S. GAAP.

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


	Nine Months Ended March 31,
(amounts in thousands)	2023		2022
Net cash provided by operating activities	$	26,309	$	99,186
Purchases of property, plant and equipment	(21,434)		(33,939)
Operating free cash flows	$	4,875	$	65,247

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Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies; however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied. The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to variable consideration, valuation of accounts and chargeback receivable, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets. The 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, 2022 from which there have been no material changes.

Recent Accounting Pronouncements

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

Seasonality

Certain of our product lines have seasonal fluctuations. Hot tea, hot-eating desserts and soup sales are stronger in colder months, while sales of snack foods, sunscreen and certain of our personal care products are stronger in the warmer months. As such, our results of operations and our cash flows for any particular quarter are not indicative of the results we expect for the full year, and our historical seasonality may not be indicative of future quarterly results of operations. In recent years, net sales and diluted earnings per share in the first fiscal quarter have typically been the lowest of our four quarters.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in market risk from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 during the nine months ended March 31, 2023. See the information set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are intended to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on this review, our CEO and CFO have concluded that the disclosure controls and procedures for the Company were effective as of March 31, 2023.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect every misstatement. An evaluation of effectiveness is subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may decrease over time.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information called for by this item is incorporated herein by reference to Note 16, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes from the discussion of the material factors that make an investment in the Company speculative or risky contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on August 25, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The table below sets forth information regarding repurchases by the Company of its common stock during the periods indicated.


Period	(a) Total number of shares purchased (1)	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans	(d) Maximum number of shares that may yet be purchased under the plans (in millions of dollars) (2)
January 1, 2023 - January 31, 2023	—	$	—	—	$	173.5
February 1, 2023 - February 28, 2023	(3,260)	(20.48)		—	$	173.5
March 1, 2023 - March 31, 2023	—	—		—	$	173.5
Total	(3,260)	$	(20.48)	—

(1) Consists of shares surrendered for payment of employee payroll taxes due on shares issued under stock-based compensation plans.

(2) In January 2022, the Company's Board of Directors authorized the repurchase of up to $200 million of the Company’s issued and outstanding common stock. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise. The authorization does not have a stated expiration date. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions, and other corporate considerations. During the quarter ended March 31, 2023, the Company did not repurchase any shares under the repurchase program. As of March 31, 2023, the Company had $173.5 million of remaining authorization under the share repurchase program.

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Item 5. Other Information

Amended and Restated By-Laws

On May 8, 2023, the Board of Directors (the “Board”) of the Company approved an amendment and restatement of the Company’s By-Laws (as amended and restated, the “By-Laws”), effective May 8, 2023, as set forth below.

Advance Notice Amendment

The By-Laws were primarily amended to establish informational, timing and procedural requirements for stockholders intending to submit a proposal or director nomination at either an annual or special meeting of stockholders, including:

•for a stockholder to properly bring a nomination or other business before an annual meeting of stockholders, the stockholder must generally provide notice to the Company’s Secretary not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting of stockholders;

•the stockholder’s notice must provide certain information or other documentation about the stockholder and, if applicable, specified information related to the stockholder’s director nominee or to the other business brought by the stockholder; and

•in light of the adoption of Rule 14a-19 of the Securities Exchange Act of 1934, as amended, to provide for universal proxies, the By-Laws require stockholders relying on the universal proxy rule to make certain representations to the Company, certify compliance with the universal proxy rule and submit director nominee questionnaires to the Company’s Secretary.

Administrative Amendments

The By-Laws were also amended to incorporate certain administrative amendments, including to (i) conform the Company’s meeting notice provision with the applicable Delaware statute, (ii) incorporate a new Delaware law provision related to notices of adjournments, including with respect to remote meetings of stockholders, and (iii) remove the requirement that the Company provide a list of stockholders at stockholder meetings in line with Delaware law updates. Moreover, the By-Laws provide that any stockholder soliciting proxies from other stockholders must use a proxy card color other than white, which color is reserved for the exclusive use by the Board.

The foregoing description is qualified in its entirety by reference to the By-Laws, which are attached hereto as Exhibit 3.2 and incorporated herein by reference.

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Item 6. Exhibits


Exhibit Number						Description

3.1						Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the SEC on August 26, 2021).

3.2						Amended and Restated By-Laws.

3.3						Amended and Restated By-Laws, marked to show amendments effective as of May 8, 2023.

4.1						Specimen of common stock certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the Company’s Registration Statement on Form S-4 filed with the SEC on April 24, 2000).

10.1*						Restricted Share Unit Agreement under The Hain Celestial Group, Inc. 2022 Long Term Incentive and Stock Award Plan – Wendy P. Davidson (2023-2025 LTIP).

10.2*						Performance Share Unit Agreement under The Hain Celestial Group, Inc. 2022 Long Term Incentive and Stock Award Plan – Wendy P. Davidson (2023-2025 LTIP; Relative Total Shareholder Return).

10.3*						Performance Share Unit Agreement under The Hain Celestial Group, Inc. 2022 Long Term Incentive and Stock Award Plan – Wendy P. Davidson (2023-2025 LTIP; Absolute Total Shareholder Return).

10.4*						Restricted Share Unit Agreement under The Hain Celestial Group, Inc. 2022 Long Term Incentive and Stock Award Plan – Wendy P. Davidson (Make-Whole RSU Award).

10.5*						Separation Agreement, dated as of February 6, 2023, between the Company and David J. Karch.











31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1						Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Indicates management contract or compensatory plan or arrangement.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		THE HAIN CELESTIAL GROUP, INC.
		(Registrant)

Date:	May 9, 2023	/s/ Wendy P. Davidson
		Wendy P. Davidson, President and Chief Executive Officer


Date:	May 9, 2023	/s/ Christopher J. Bellairs
		Christopher J. Bellairs, Executive Vice President and Chief Financial Officer (Principal Financial Officer)


Date:	May 9, 2023	/s/ Michael J. Ragusa
		Michael J. Ragusa, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)