SEC Filing | The Hain Celestial Group

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hain-20221231

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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 December 31, 2022


☐			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

___________________________________________

https://cdn.kscope.io/fd39dc9f86784cb37cb1a3d043a69266-hain-20221231_g1.jpg

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.)

1111 Marcus Avenue, Lake Success, NY 11042

(Address of principal executive offices, including zip code)

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

Former name, former address and former fiscal year, if changed since last report: N/A

___________________________________________

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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 January 31, 2023, there were 89,417,250 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 - December 31, 202 2 and June 30, 202 2	3
	Consolidated Statements of Operations - Three and six months ended December 31, 202 2 and 202 1	4
	Consolidated Statements of Comprehensive Income - Three and six months ended December 31, 2022 and 2021	5
	Consolidated Statement of Stockholders’ Equity - Three and six months ended December 31, 202 2 and 202 1	6
	Consolidated Statements of Cash Flows - Six months ended December 31, 202 2 and 202 1	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50

	Part II - Other Information

Items 3 and 4 are not applicable
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
Signatures		53

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Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 (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; the discontinuation of LIBOR; challenges and uncertainty resulting from the COVID-19 pandemic; 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)

DECEMBER 31, 2022 AND JUNE 30, 2022

(In thousands, except par values)


	December 31,		June 30,
	2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	43,437	$	65,512
Accounts receivable, less allowance for doubtful accounts of $2,085 and $1,731, respectively	177,058		170,661
Inventories	324,525		308,034
Prepaid expenses and other current assets	58,781		54,079
Assets held for sale	1,500		1,840
Total current assets	605,301		600,126
Property, plant and equipment, net	294,635		297,405
Goodwill	927,078		933,796
Trademarks and other intangible assets, net	470,956		477,533
Investments and joint ventures	13,260		14,456
Operating lease right-of-use assets, net	101,374		114,691
Other assets	25,554		20,377

Total assets	$	2,438,158	$	2,458,384
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	153,677	$	174,765
Accrued expenses and other current liabilities	85,168		86,833
Current portion of long-term debt	7,602		7,705


Total current liabilities	246,447		269,303
Long-term debt, less current portion	870,800		880,938
Deferred income taxes	95,131		95,044
Operating lease liabilities, noncurrent portion	92,587		107,481
Other noncurrent liabilities	24,552		22,450

Total liabilities	1,329,517		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: 111,256 and 111,090 shares, respectively; outstanding: 89,419 and 89,302 shares, respectively	1,113		1,111
Additional paid-in capital	1,210,555		1,203,126
Retained earnings	786,987		769,098
Accumulated other comprehensive loss	(163,346)		(164,482)
	1,835,309		1,808,853
Less: Treasury stock, at cost, 21,837 and 21,788 shares, respectively	(726,668)		(725,685)
Total stockholders’ equity	1,108,641		1,083,168
Total liabilities and stockholders’ equity	$	2,438,158	$	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 SIX MONTHS ENDED DECEMBER 31, 2022 AND 2021

(In thousands, except per share amounts)


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Net sales	$	454,208	$	476,941	$	893,559	$	931,844
Cost of sales	350,351		359,646		695,367		709,131
Gross profit	103,857		117,295		198,192		222,713
Selling, general and administrative expenses	72,357		80,136		147,308		153,929
Amortization of acquired intangible assets	2,785		2,049		5,573		4,144
Productivity and transformation costs	986		2,786		1,759		6,769




Long-lived asset impairment	340		303		340		303
Operating income	27,389		32,021		43,212		57,568
Interest and other financing expense, net	10,812		2,592		18,489		4,448
Other income, net	(1,062)		(9,070)		(2,852)		(9,858)
Income before income taxes and equity in net loss of equity-method investees	17,639		38,499		27,575		62,978
Provision for income taxes	6,357		7,145		8,988		11,687
Equity in net loss of equity-method investees	316		465		698		991


Net income	$	10,966	$	30,889	$	17,889	$	50,300

Net income per common share:


Basic	$	0.12	$	0.33	$	0.20	$	0.53



Diluted	$	0.12	$	0.33	$	0.20	$	0.52

Shares used in the calculation of net income per common share:
Basic	89,380		94,036		89,343		95,579
Diluted	89,578		94,808		89,535		96,123

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2022 AND 2021

(In thousands)


	Three Months Ended
	December 31, 2022						December 31, 2021
	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income					$	10,966					$	30,889

Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications	59,674		—		59,674		(2,143)		—		(2,143)

Change in deferred (losses) gains on cash flow hedging instruments	(2,475)		610		(1,865)		682		(144)		538
Change in deferred gains on fair value hedging instruments	691		(170)		521		—		—		—
Change in deferred (losses) gains on net investment hedging instruments	(6,285)		1,553		(4,732)		1,709		(360)		1,349

Total other comprehensive income (loss)	$	51,605	$	1,993	$	53,598	$	248	$	(504)	$	(256)

Total comprehensive income					$	64,564					$	30,633

	Six Months Ended
	December 31, 2022						December 31, 2021
	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income					$	17,889					$	50,300

Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications	(7,476)		—		(7,476)		(24,948)		—		(24,948)

Change in deferred gains on cash flow hedging instruments	11,755		(3,028)		8,727		726		(153)		573
Change in deferred gains on fair value hedging instruments	418		(100)		318		—		—		—
Change in deferred (losses) gains on net investment hedging instruments	(511)		78		(433)		3,997		(841)		3,156
Total other comprehensive income (loss)	$	4,186	$	(3,050)	$	1,136	$	(20,225)	$	(994)	$	(21,219)

Total comprehensive income					$	19,025					$	29,081

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 SIX MONTHS ENDED DECEMBER 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, 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

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 SIX MONTHS ENDED DECEMBER 31, 2021

(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

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 SIX MONTHS ENDED DECEMBER 31, 2022 AND 2021

(In thousands)


	Six Months Ended December 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	17,889	$	50,300


Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	24,125		21,758
Deferred income taxes	(1,983)		(3,271)

Equity in net loss of equity-method investees	698		991
Stock-based compensation, net	7,429		8,443

Long-lived asset impairment	340		303
Gain on sale of assets	(3,395)		(8,921)
Other non-cash items, net	(2,505)		(1,486)
(Decrease) increase in cash attributable to changes in operating assets and liabilities:
Accounts receivable	(6,536)		12,370
Inventories	(18,629)		2,473
Other current assets	(331)		(5,126)
Other assets and liabilities	4,178		1,776
Accounts payable and accrued expenses	(23,932)		(11,579)
Net cash (used in) provided by operating activities	(2,652)		68,031
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(14,055)		(27,996)
Acquisitions of businesses, net of cash acquired	—		(254,569)
Investments and joint ventures, net	433		(514)
Proceeds from sale of assets	7,608		10,734

Net cash used in investing activities	(6,014)		(272,345)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under bank revolving credit facility	185,000		540,000
Repayments under bank revolving credit facility	(194,750)		(330,000)
Borrowings under term loan	—		300,000


Payments of other debt, net	(159)		(3,185)
Share repurchases	—		(266,933)
Employee shares withheld for taxes	(983)		(31,033)
Net cash (used in) provided by financing activities	(10,892)		208,849
Effect of exchange rate changes on cash	(2,517)		(3,204)






Net (decrease) increase in cash and cash equivalents	(22,075)		1,331
Cash and cash equivalents at beginning of period	65,512		75,871
Cash and cash equivalents at end of period	$	43,437	$	77,202

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 Lake Success, New York. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet. The Company continues to be a leading marketer, 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 in over 75 countries worldwide. The Company operates under two reportable segments: North America and International.

Acquisition

On December 28, 2021, the Company acquired all outstanding stock of Proven Brands, Inc. (and its subsidiary That's How We Roll LLC) and KTB Foods Inc., collectively doing business as "That's How We Roll" ("THWR"), the producer and marketer of ParmCrisps® and Thinsters®. See Note 4, Acquisition and Disposition, for details.

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 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 the six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023. 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

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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 $189,794 and $64,133 during the six months ended December 31, 2022 and 2021, 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.

Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“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 is available for adoption 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 the 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 income per share utilized to calculate earnings per share on the Consolidated Statements of Operations:


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Numerator:


Net income	$	10,966	$	30,889	$	17,889	$	50,300

Denominator:
Basic weighted average shares outstanding	89,380		94,036		89,343		95,579
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units	198		772		192		544
Diluted weighted average shares outstanding	89,578		94,808		89,535		96,123

There were 372 and 316 restricted stock awards excluded from our calculation of diluted net income per share for the three months ended December 31, 2022 and 2021, respectively, as such awards were anti-dilutive. There were 453 and 158 stock-based awards comprised of restricted stock awards and stock options excluded from the calculation of diluted net income per share for the six months ended December 31, 2022 and 2021, respectively, as such awards were anti-dilutive.

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Additionally, 401 and 76 stock-based awards outstanding at December 31, 2022 and 2021, respectively, were excluded from the calculation of diluted net income per share for the three months ended December 31, 2022 and 2021, respectively, as such awards were contingently issuable based on market or performance conditions, and such conditions had not been achieved during the respective periods. Furthermore, 286 and 76 stock-based awards outstanding at December 31, 2022 and 2021, respectively, were excluded from the calculation of diluted net income per share for the six months ended December 31, 2022 and 2021, 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 six months ended December 31, 2022, the Company did not repurchase any shares under the repurchase program. As of December 31, 2022, the Company had $173,514 of remaining authorization under the share repurchase program. During the six months ended December 31, 2021, 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 six months ended December 31, 2021, 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. Of the total consideration, $259,985 was paid with the remaining $200 payable as of December 31, 2022. 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 3.5% of consolidated net sales for the three and six months ended December 31, 2022.

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				Six Months Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Net sales	$	454,208	$	500,349	$	893,559	$	985,544
Net income from operations	$	10,966	$	36,244	$	17,889	$	55,669
Diluted net income per common share from operations	$	0.12	$	0.38	$	0.20	$	0.58

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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 three months ended December 31, 2022, the Company deconsolidated the net assets of Westbrae, primarily consisting of $3,054 of goodwill, and recognized a pre-tax gain on sale of $3,359.

5. INVENTORIES

Inventories consisted of the following:


	December 31, 2022		June 30, 2022
Finished goods	$	194,071	$	202,544
Raw materials, work-in-progress and packaging	130,454		105,490
	$	324,525	$	308,034

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6. PROPERTY, PLANT AND EQUIPMENT, NET

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


	December 31, 2022		June 30, 2022
Land	$	11,177	$	11,216
Buildings and improvements	50,150		51,849
Machinery and equipment	301,240		296,398
Computer hardware and software	64,319		65,680
Furniture and fixtures	21,548		23,522
Leasehold improvements	53,753		54,999
Construction in progress	40,399		27,200
	542,586		530,864
Less: Accumulated depreciation and impairment	247,951		233,459
	$	294,635	$	297,405

Depreciation expense for the three months ended December 31, 2022 and 2021 was $8,195 and $7,244, respectively. Depreciation expense for the six months ended December 31, 2022 and 2021 was $16,262 and $14,652, respectively.

The Company recognized an impairment charge of $340 during the three months ended December 31, 2022 relating to a facility in the United States that is held for sale. The facility had a net carrying value of $1,500 and $1,840 as of December 31, 2022 and June 30, 2022 respectively.

7. LEASES

The Company leases office space, warehouse and distribution facilities, manufacturing equipment and vehicles primarily in North America and Europe. The Company determines if an arrangement is or contains a lease at inception. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company’s lease agreements generally do not contain residual value guarantees or material restrictive covenants.

Some of the Company’s leases contain variable lease payments, which are expensed as incurred unless those payments are based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and included in the measurement of the lease liability; thereafter, changes to lease payments due to rate or index changes are recorded as variable lease expense in the period incurred. The Company does not have any related party leases, and sublease transactions are de minimis.

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The components of lease expenses for the three and six months ended December 31, 2022 were as follows:


	Three Months Ended				Six Months Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Operating lease expenses	$	2,238	$	3,665	$	7,213	$	7,417



Finance lease expenses	71		67		140		137
Variable lease expenses	169		306		349		709
Short-term lease expenses	390		677		886		2,042
Total lease expenses	$	2,868	$	4,715	$	8,588	$	10,305

Supplemental balance sheet information related to leases was as follows:


Leases	Classification	December 31, 2022		June 30, 2022
Assets
Operating lease ROU assets, net	Operating lease right-of-use assets, net	$	101,374	$	114,691

Finance lease ROU assets, net	Property, plant and equipment, net	366		413

Total leased assets		$	101,740	$	115,104

Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	13,448