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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________ 
FORM 10-Q
___________________________________________ 
(Mark One)
ý☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended MarchDecember 31, 2019
or
¨☐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
___________________________________________ 
hain-20191231_g1.jpg
THE HAIN CELESTIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
___________________________________________ 
Delaware
Delaware22-3240619
(State or other jurisdiction of
incorporation or organization)of incorporation)
(I.R.S. Employer
Identification No.)
1111 Marcus Avenue
Lake Success, New York
11042
(Address of principal executive offices)(Zip Code)

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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareHAINThe NASDAQ Global Select Market

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¨
Large accelerated filerýAccelerated 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

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareHAIN
The NASDAQ® Global Select Market



As of April 30, 2019,January 31, 2020, there were 104,149,062104,384,620 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 InformationPage
Part I - Financial InformationPage
Item 1.
3
4
5
6
8
9
Item 2.
2930
Item 3.
4645
Item 4.
4746
Part II - Other Information
Items 3 4 and 54 are not applicable


Item 1.
4847
Item 1A.
49
Item 2.
49
Item 6.5.
5049
Item 6.
5150
5251


 

1
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Cautionary Note Regarding Forward Looking Information


This Quarterly Report on Form 10-Q for the quarter ended MarchDecember 31, 2019 (the “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections about future events only as of the date of this Quarterly Report on Form 10-Q, and are not statements of historical fact. We make such forward-looking statements pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.


Many of our forward-looking statements include discussions of trends and anticipated developments under the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as the use of “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” and similar expressions, or the negative of those expressions. These forward-looking statements include, among other things, our beliefs or expectations relating to our business strategy, growth strategy, market price, brand portfolio and product performance, the seasonality of our business and our results of operations and financial condition, enhancing internal controls and remediating material weaknesses.condition. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. We undertake no obligation to further update any such statement to reflect new information, the occurrence of future events or circumstances or otherwise.


The forward-looking statements in this filing do not constitute guarantees or promises of future performance. Factors that could cause or contribute to such differences may include, but are not limited to, the impact of competitive products and changes to the competitive environment, changes to consumer preferences, the United Kingdom's exit from the European Union, consolidation of customers or the loss of a significant customer, reliance on independent distributors, general economic and financial market conditions, risks associated with our international sales and operations, including “Brexit”, our ability to manage our supply chain effectively, changesvolatility in raw materials,the cost of commodities, ingredients, freight commodity costs and fuel, our ability to execute and realize cost savings initiatives, including but not limited to, cost reduction initiatives under Project Terra and stock-keeping unit (“SKU”) rationalization plans, the identificationimpact of our debt and remediation of material weaknesses in our internal controls overcredit agreements on our financial reporting,condition and our business, our ability to manage our financial reporting and internal control system processes, potential liabilities due to legal claims, government investigations and other regulatory enforcement actions, costs incurred due to pending and future litigation, the availabilitypotential liability, including in connection with indemnification obligations to our current and former officers and members of key personnel and changes in management team,our Board of Directors that may not be covered by insurance, potential liability if our products cause illness or physical harm, impairments in the carrying value of goodwill or other intangible assets, our ability to identify and complete acquisitions orconsummate divestitures, andour ability to integrate past acquisitions, the availability of organic and natural ingredients, the reputationdisruption of operations at our manufacturing facilities, loss of one or more independent co-packers, disruption of our brands,transportation systems, risks relating to the protection of intellectual property, cybersecurity risks, unanticipated expendituresthe risk of liabilities and claims with respect to environmental matters, the reputation of our brands, our reliance on independent certification for a number of our products and other risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20182019 under the heading “Risk Factors” and Part II,I, Item 1A, “Risk Factors” set forth herein,2 of this Quarterly Report on Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in other reports that we file in the future.







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PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCHDECEMBER 31, 2019 AND JUNE 30, 20182019
(In thousands, except par values)
March 31, June 30,December 31,June 30,
2019 201820192019
ASSETS(Unaudited)  ASSETS(Unaudited)
Current assets:   Current assets:
Cash and cash equivalents$27,562
 $106,557
Cash and cash equivalents$37,024  $31,017  
Restricted cash34,452
 —
Accounts receivable, less allowance for doubtful accounts of $405 and $1,828, respectively256,799
 252,708
Accounts receivable, less allowance for doubtful accounts of $558 and $588, respectivelyAccounts receivable, less allowance for doubtful accounts of $558 and $588, respectively206,583  209,990  
Inventories395,246
 391,525
Inventories283,127  299,341  
Prepaid expenses and other current assets54,786
 59,946
Prepaid expenses and other current assets50,019  51,391  
Current assets of discontinued operations136,181
 240,851
Current assets of discontinued operations—  110,048  
Total current assets905,026
 1,051,587
Total current assets576,753  701,787  
Property, plant and equipment, net331,070
 310,172
Property, plant and equipment, net298,558  287,845  
Goodwill1,016,863
 1,024,136
Goodwill879,705  875,881  
Trademarks and other intangible assets, net475,582
 510,387
Trademarks and other intangible assets, net378,796  380,286  
Investments and joint ventures19,228
 20,725
Investments and joint ventures18,990  18,890  
Operating lease right of use assetsOperating lease right of use assets83,845  —  
Other assets30,502
 29,667
Other assets48,298  58,764  
Noncurrent assets of discontinued operationsNoncurrent assets of discontinued operations—  259,167  
Total assets$2,778,271
 $2,946,674
Total assets$2,284,945  $2,582,620  
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Accounts payable$205,014
 $229,993
Accounts payable$187,376  $219,957  
Accrued expenses and other current liabilities176,400
 116,001
Accrued expenses and other current liabilities123,272  114,265  
Current portion of long-term debt22,522
 26,605
Current portion of long-term debt1,387  17,232  
Current liabilities of discontinued operations15,195
 49,846
Current liabilities of discontinued operations—  31,703  
Total current liabilities419,131
 422,445
Total current liabilities312,035  383,157  
Long-term debt, less current portion729,201
 687,501
Long-term debt, less current portion324,864  613,537  
Deferred income taxes63,619
 86,909
Deferred income taxes35,012  34,757  
Operating lease liabilities, noncurrent portionOperating lease liabilities, noncurrent portion76,726  —  
Other noncurrent liabilities16,528
 12,770
Other noncurrent liabilities15,225  14,489  
Noncurrent liabilities of discontinued operationsNoncurrent liabilities of discontinued operations—  17,361  
Total liabilities1,228,479
 1,209,625
Total liabilities763,862  1,063,301  
Commitments and contingencies (Note 16)
 
Commitments and contingencies (Note 16)
Stockholders’ equity:   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: 108,713 and 108,422 shares, respectively; outstanding: 104,121 and 103,952 shares, respectively1,087
 1,084
Preferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: NaNPreferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: NaN—  —  
Common stock - $.01 par value, authorized 150,000 shares; issued: 109,019 and 108,833 shares, respectively; outstanding:104,362 and 104,219 shares, respectivelyCommon stock - $.01 par value, authorized 150,000 shares; issued: 109,019 and 108,833 shares, respectively; outstanding:104,362 and 104,219 shares, respectively1,091  1,088  
Additional paid-in capital1,154,182
 1,148,196
Additional paid-in capital1,164,618  1,158,257  
Retained earnings708,568
 878,516
Retained earnings586,593  695,017  
Accumulated other comprehensive loss(204,467) (184,240)Accumulated other comprehensive loss(120,197) (225,004) 
1,659,370
 1,843,556
1,632,105  1,629,358  
Less: Treasury stock, at cost, 4,592 and 4,470 shares, respectively(109,578) (106,507)
Less: Treasury stock, at cost, 4,658 and 4,614 shares, respectivelyLess: Treasury stock, at cost, 4,658 and 4,614 shares, respectively(111,022) (110,039) 
Total stockholders’ equity1,549,792
 1,737,049
Total stockholders’ equity1,521,083  1,519,319  
Total liabilities and stockholders’ equity$2,778,271
 $2,946,674
Total liabilities and stockholders’ equity$2,284,945  $2,582,620  
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 NINESIX MONTHS ENDED MARCHDECEMBER 31, 2019 AND 2018
(In thousands, except per share amounts) 
Three Months Ended March 31, Nine Months Ended March 31, Three Months Ended December 31,Six Months Ended December 31,
2019
2018 2019
2018 2019201820192018
Net sales$599,797

$632,720

$1,744,786

$1,838,171
Net sales$506,784  $533,566  $988,860  $1,052,044  
Cost of sales474,528

499,707

1,405,650

1,447,820
Cost of sales401,177  432,215  785,422  861,785  
Gross profit125,269
 133,013
 339,136
 390,351
Gross profit105,607  101,351  203,438  190,259  
Selling, general and administrative expenses87,739

86,063

255,383

258,586
Selling, general and administrative expenses79,078  78,496  159,758  154,473  
Amortization of acquired intangibles3,802

4,713

11,567

13,859
Amortization of acquired intangibles3,189  3,322  6,272  6,681  
Project Terra costs and other9,408

4,831

29,613

13,750
Productivity and transformation costsProductivity and transformation costs12,260  9,872  26,435  20,205  
Chief Executive Officer Succession Plan expense, net455
 —
 30,156
 —
Chief Executive Officer Succession Plan expense, net—  10,148  —  29,701  
Proceeds from insurance claimProceeds from insurance claim—  —  (2,562) —  
Accounting review and remediation costs, net of insurance proceeds—

3,313

4,334

6,406
Accounting review and remediation costs, net of insurance proceeds—  920  —  4,334  
Long-lived asset and intangibles impairment—

4,839

23,709

8,290
Long-lived asset and intangibles impairment1,889  19,473  1,889  23,709  
Operating income (loss)23,865
 29,254
 (15,626) 89,460
Operating income (loss)9,191  (20,880) 11,646  (48,844) 
Interest and other financing expense, net9,390

6,782

25,912

19,543
Interest and other financing expense, net4,737  5,428  11,031  9,742  
Other expense/(income), net1,068
 (1,560) 2,041
 (5,447)
Income (loss) from continuing operations before income taxes and equity in net loss (income) of equity-method investees13,407
 24,032
 (43,579) 75,364
Other expense, netOther expense, net1,244  371  2,572  971  
Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investeesIncome (loss) from continuing operations before income taxes and equity in net loss of equity-method investees3,210  (26,679) (1,957) (59,557) 
Provision (benefit) for income taxes3,114

(1,310)
(1,679)
(11,516)Provision (benefit) for income taxes1,020  5,097  489  (4,869) 
Equity in net loss (income) of equity-method investees205

101

391

(104)
Equity in net loss of equity-method investeesEquity in net loss of equity-method investees338  11  655  186  
Net income (loss) from continuing operations$10,088
 $25,241
 $(42,291) $86,984
Net income (loss) from continuing operations$1,852  $(31,787) $(3,101) $(54,874) 
Net loss from discontinued operations, net of tax(75,925) (12,555) (127,472) (7,349)Net loss from discontinued operations, net of tax(2,816) (34,714) (104,884) (49,052) 
Net (loss) income$(65,837) $12,686
 $(169,763) $79,635
Net lossNet loss$(964) $(66,501) $(107,985) $(103,926) 
       
Net (loss) income per common share:       
Net income (loss) per common share:Net income (loss) per common share:
Basic net income (loss) per common share from continuing operations$0.10
 $0.24
 $(0.41) $0.84
Basic net income (loss) per common share from continuing operations$0.02  $(0.31) $(0.03) $(0.53) 
Basic net loss per common share from discontinued operations(0.73) (0.12) (1.23) (0.07)Basic net loss per common share from discontinued operations(0.03) (0.33) (1.01) (0.47) 
Basic net (loss) income per common share$(0.63) $0.12
 $(1.63) $0.77
Basic net loss per common shareBasic net loss per common share$(0.01) $(0.64) $(1.04) $(1.00) 
       
Diluted net income (loss) per common share from continuing operations$0.10
 $0.24
 $(0.41) $0.83
Diluted net income (loss) per common share from continuing operations$0.02  $(0.31) $(0.03) $(0.53) 
Diluted net loss per common share from discontinued operations(0.73) (0.12) (1.23) (0.07)Diluted net loss per common share from discontinued operations(0.03) (0.33) (1.01) (0.47) 
Diluted net (loss) income per common share$(0.63) $0.12
 $(1.63) $0.76
Diluted net loss per common shareDiluted net loss per common share$(0.01) $(0.64) $(1.04) $(1.00) 
       
Shares used in the calculation of net (loss) income per common share:       
Shares used in the calculation of net income (loss) per common share:Shares used in the calculation of net income (loss) per common share:
Basic104,117

103,918

104,045

103,821
Basic104,318  104,056  104,272  104,009  
Diluted104,334

104,503

104,045

104,473
Diluted104,619  104,056  104,272  104,009  
See notes to consolidated financial statements.



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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)(UNAUDITED)
FOR THE THREE AND NINESIX MONTHS ENDED MARCHDECEMBER 31, 2019 AND 2018
(In thousands)
 Three Months Ended
 March 31, 2019 March 31, 2018
 
Pre-tax
amount
 Tax (expense) benefit After-tax amount 
Pre-tax
amount
 Tax (expense) benefit After-tax amount
Net (loss) income    $(65,837)     $12,686
            
Other comprehensive income:           
Foreign currency translation adjustments$20,934
 $—
 20,934
 $37,868
 $—
 37,868
Change in deferred (losses) gains on cash flow hedging instruments(52) 10
 (42) —
 —
 —
Change in unrealized losses on equity investment—
 —
 —
 (68) (33) (101)
Total other comprehensive income (loss)$20,882
 $10
 $20,892
 $37,800
 $(33) $37,767
            
Total comprehensive (loss) income    $(44,945)     $50,453
            
 Nine Months Ended
 March 31, 2019 March 31, 2018
 
Pre-tax
amount
 Tax (expense) benefit After-tax amount 
Pre-tax
amount
 Tax (expense) benefit After-tax amount
Net (loss) income    $(169,763)     $79,635
            
Other comprehensive (loss) income:           
Foreign currency translation adjustments$(20,533) $—
 (20,533) $80,065
 $—
 80,065
Change in deferred (losses) gains on cash flow hedging instruments(52) 10
 (42) (82) 15
 (67)
Change in unrealized losses on equity investment—
 —
 —
 (70) (33) (103)
Total other comprehensive (loss) income$(20,585) $10
 $(20,575) $79,913
 $(18) $79,895
            
Total comprehensive (loss) income    $(190,338)     $159,530
            
 Three Months Ended
December 31, 2019December 31, 2018
 
Pre-tax
amount
Tax (expense) benefitAfter-tax amount
Pre-tax
amount
Tax (expense) benefitAfter-tax amount
Net loss$(964) $(66,501) 
Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications$48,655  $—  48,655  $(27,948) $—  (27,948) 
Change in deferred gains (losses) on cash flow hedging instruments52  (10) 42  —  —  —  
Total other comprehensive income (loss)$48,707  $(10) $48,697  $(27,948) $—  $(27,948) 
Total comprehensive income (loss)$47,733  $(94,449) 
 Six Months Ended
December 31, 2019December 31, 2018
 Pre-tax
amount		Tax (expense) benefitAfter-tax amountPre-tax
amount		Tax (expense) benefitAfter-tax amount
Net loss$(107,985) $(103,926) 
Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications$9,713  $—  9,713  $(41,467) $—  (41,467) 
Reclassification of currency translation adjustment included in Net loss from discontinued operations, net of tax95,120  —  95,120  —  —  —  
Change in deferred losses on cash flow hedging instruments(26) —  (26) —  —  —  
Total other comprehensive income (loss)$104,807  $—  $104,807  $(41,467) $—  $(41,467) 
Total comprehensive loss$(3,178) $(145,393) 
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 NINESIX MONTHS ENDED MARCHDECEMBER 31, 2019
(In thousands, except par values)


 Common StockAdditional   
Accumulated
Other
 
  AmountPaid-inRetainedTreasury StockComprehensive 
 Sharesat $.01CapitalEarningsSharesAmount(Loss) IncomeTotal
Balance at June 30, 2019  108,833  $1,088  $1,158,257  $695,017  4,614  $(110,039) $(225,004) $1,519,319  
Net loss(107,021) (107,021) 
Cumulative effect of adoption of ASU 2016-02(439) (439) 
Other comprehensive income56,110  56,110  
Issuance of common stock pursuant to stock-based compensation plans40  1  (1) —  
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans17  (312) (312) 
Stock-based compensation expense3,281  3,281  
Balance at September 30, 2019108,873  $1,089  $1,161,537  $587,557  4,631  $(110,351) $(168,894) $1,470,938  
Net loss(964) (964) 
Other comprehensive income48,697  48,697  
Issuance of common stock pursuant to stock-based compensation plans146  2  (2) —  
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans27  (671) (671) 
Stock-based compensation expense3,083  3,083  
Balance at December 31, 2019109,019  $1,091  $1,164,618  $586,593  4,658  $(111,022) $(120,197) $1,521,083  
 Common Stock Additional       
Accumulated
Other
  
   Amount Paid-in Retained Treasury Stock Comprehensive  
 Shares at $.01 Capital Earnings Shares Amount (Loss) Income Total
Balance at June 30, 2018108,422
 $1,084
 $1,148,196
 $878,516
 4,470
 $(106,507) $(184,240) $1,737,049
Net loss      (37,425)       (37,425)
Cumulative effect of adoption of ASU 2016-01      (348)     348
 —
Cumulative effect of adoption of ASU 2014-09      163
       163
Other comprehensive loss
            (13,519) (13,519)
Issuance of common stock pursuant to stock-based compensation plans85
 1
 (1)         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        35
 (979)   (979)
Stock-based compensation expense    135
         135
Balance at September 30, 2018108,507
 $1,085
 $1,148,330
 $840,906
 4,505
 $(107,486) $(197,411) $1,685,424
Net loss      (66,501)       (66,501)
Other comprehensive loss
            (27,948) (27,948)
Issuance of common stock pursuant to stock-based compensation plans184
 2
 (2)         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        79
 (1,943)   (1,943)
Stock-based compensation expense    1,911
         1,911
Balance at December 31, 2018108,691
 $1,087
 $1,150,239
 $774,405
 4,584
 $(109,429) $(225,359) $1,590,943
Net loss      (65,837)       (65,837)
Other comprehensive income            20,892
 20,892
Issuance of common stock pursuant to stock-based compensation plans22
 —
 —
         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        8
 (149)   (149)
Stock-based compensation expense    3,943
         3,943
Balance at March 31, 2019108,713
 $1,087
 $1,154,182
 $708,568
 4,592
 $(109,578) $(204,467) $1,549,792

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 NINESIX MONTHS ENDED MARCHDECEMBER 31, 2018
(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) Income Total
Balance at June 30, 2017107,989
 $1,080
 $1,137,724
 $868,822
 4,287
 $(99,315) $(195,479) $1,712,832
Net income      19,846
       19,846
Other comprehensive income
            33,787
 33,787
Issuance of common stock pursuant to stock-based compensation plans98
 1
 (1)         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        52
 (2,098)   (2,098)
Stock-based compensation expense    3,164
         3,164
Balance at September 30, 2017108,087
 $1,081
 $1,140,887
 $888,668
 4,339
 $(101,413) $(161,692) $1,767,531
Net income      47,103
       47,103
Other comprehensive income
            8,341
 8,341
Issuance of common stock pursuant to stock-based compensation plans284
 3
 (3)         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        114
 (4,587)   (4,587)
Stock-based compensation expense    4,158
         4,158
Balance at December 31, 2017108,371
 $1,084
 $1,145,042
 $935,771
 4,453
 $(106,000) $(153,351) $1,822,546
Net income      12,686
       12,686
Other comprehensive income
            37,767
 37,767
Issuance of common stock pursuant to stock-based compensation plans12
 —
 —
         —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans        5
 (168)   (168)
Stock-based compensation expense    2,936
         2,936
Balance at March 31, 2018108,383
 $1,084
 $1,147,978
 $948,457
 4,458
 $(106,168) $(115,584) $1,875,767
 Common StockAdditional   
Accumulated
Other
 
  AmountPaid-inRetainedTreasury StockComprehensive 
 Sharesat $.01CapitalEarningsSharesAmount(Loss) IncomeTotal
Balance at June 30, 2018  108,422  $1,084  $1,148,196  $878,516  4,470  $(106,507) $(184,240) $1,737,049  
Net loss(37,425) (37,425) 
Cumulative effect of adoption of ASU 2016-01(348) 348  —  
Cumulative effect of adoption of ASU 2014-09163  163  
Other comprehensive loss
(13,519) (13,519) 
Issuance of common stock pursuant to stock-based compensation plans85  1  (1) —  
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans35  (979) (979) 
Stock-based compensation expense135  135  
Balance at September 30, 2018108,507  $1,085  $1,148,330  $840,906  4,505  $(107,486) $(197,411) $1,685,424  
Net loss(66,501) (66,501) 
Other comprehensive loss(27,948) (27,948) 
Issuance of common stock pursuant to stock-based compensation plans184  2  (2) —  
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans79  (1,943) (1,943) 
Stock-based compensation expense1,911  1,911  
Balance at December 31, 2018108,691  $1,087  $1,150,239  $774,405  4,584  $(109,429) $(225,359) $1,590,943  

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 NINESIX MONTHS ENDED MARCHDECEMBER 31, 2019 AND 2018
(In thousands)
Nine Months Ended March 31, Six Months Ended December 31,
2019 2018 20192018
CASH FLOWS FROM OPERATING ACTIVITIES   CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income$(169,763) $79,635
Net lossNet loss$(107,985) $(103,926) 
Net loss from discontinued operations(127,472) (7,349)Net loss from discontinued operations(104,884) (49,052) 
Net (loss) income from continuing operations(42,291) 86,984
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities from continuing operations:   
Net loss from continuing operationsNet loss from continuing operations(3,101) (54,874) 
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities from continuing operations:
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities from continuing operations:
Depreciation and amortization42,074
 45,139
Depreciation and amortization27,142  25,065  
Deferred income taxes(24,653) (30,115)Deferred income taxes(5,155) (22,666) 
Chief Executive Officer Succession Plan expense, net29,727
 —
Chief Executive Officer Succession Plan expense, net—  29,272  
Equity in net loss (income) of equity-method investees391
 (104)
Equity in net loss of equity-method investeesEquity in net loss of equity-method investees655  186  
Stock-based compensation, net5,931
 10,258
Stock-based compensation, net5,820  1,991  
Long-lived asset and intangibles impairment23,709
 8,290
Long-lived asset and intangibles impairment1,889  23,709  
Other non-cash items, net3,703
 (2,025)Other non-cash items, net2,661  1,285  
Increase (decrease) in cash attributable to changes in operating assets and liabilities:   Increase (decrease) in cash attributable to changes in operating assets and liabilities:
Accounts receivable(8,824) (23,998)Accounts receivable7,540  9,540  
Inventories(7,176) (43,355)Inventories9,389  (5,748) 
Other current assets315
 (8,153)Other current assets1,895  (1,528) 
Other assets and liabilities5,248
 5,367
Other assets and liabilities(1,242) 4,594  
Accounts payable and accrued expenses(16,111) 19,082
Accounts payable and accrued expenses(30,345) (10,830) 
Net cash provided by operating activities - continuing operations12,043
 67,370
Net cash provided by (used in) operating activities - continuing operationsNet cash provided by (used in) operating activities - continuing operations17,148  (4) 
CASH FLOWS FROM INVESTING ACTIVITIES   CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(55,892) (48,368)Purchases of property and equipment(29,337) (40,998) 
Acquisitions of businesses, net of cash acquired—
 (13,064)
Other3,863
 124
Proceeds from sale of businesses and otherProceeds from sale of businesses and other13,120  3,863  
Net cash used in investing activities - continuing operations(52,029) (61,308)Net cash used in investing activities - continuing operations(16,217) (37,135) 
CASH FLOWS FROM FINANCING ACTIVITIES   CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under bank revolving credit facility240,000
 45,000
Borrowings under bank revolving credit facility147,000  150,000  
Repayments under bank revolving credit facility(186,791) (355,185)Repayments under bank revolving credit facility(245,500) (137,646) 
Borrowings under term loan—
 299,245
Repayments under term loan(11,250) —
Repayments under term loan(206,250) (7,500) 
Funding of discontinued operations entities(37,451) (17,167)
(Repayments) borrowings of other debt, net(4,770) 3,111
Proceeds from discontinued operations entitiesProceeds from discontinued operations entities309,929  13,550  
Repayments of other debt, netRepayments of other debt, net(501) (601) 
Shares withheld for payment of employee payroll taxes(3,071) (6,853)Shares withheld for payment of employee payroll taxes(984) (2,922) 
Net cash used in financing activities - continuing operations(3,333) (31,849)
Effect of exchange rate changes on cash(1,225) 5,884
Net cash provided by financing activities - continuing operationsNet cash provided by financing activities - continuing operations3,694  14,881  
Effect of exchange rate changes on cash - continuing operationsEffect of exchange rate changes on cash - continuing operations1,382  (1,492) 
CASH FLOWS FROM DISCONTINUED OPERATIONS   CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash used in operating activities(7,339) (11,783)Cash used in operating activities(5,687) (2,859) 
Cash used in investing activities(32,742) (8,531)
Cash provided by financing activities37,299
 17,011
Cash provided by (used in) investing activitiesCash provided by (used in) investing activities301,815  (3,472) 
Cash used in financing activitiesCash used in financing activities(304,100) (4,417) 
Effect of exchange rate changes on cash - discontinued operationsEffect of exchange rate changes on cash - discontinued operations(537) (477) 
Net cash flows used in discontinued operations(2,782) (3,303)Net cash flows used in discontinued operations(8,509) (11,225) 
Net decrease in cash and cash equivalents and restricted cash(47,326) (23,206)Net decrease in cash and cash equivalents and restricted cash(2,502) (34,975) 
Cash and cash equivalents at beginning of period113,018
 146,992
Cash and cash equivalents at beginning of period39,526  113,018  
Cash and cash equivalents and restricted cash at end of period$65,692
 $123,786
Cash and cash equivalents and restricted cash at end of period
$37,024  $78,043  
Less: cash and cash equivalents of discontinued operations(3,678) (6,634)Less: cash and cash equivalents of discontinued operations—  (17,098) 
Cash and cash equivalents and restricted cash of continuing operations at end of period$62,014
 $117,152
Cash and cash equivalents and restricted cash of continuing operations at end of period$37,024  $60,945  
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, 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 Lake Success, New York. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet — To Create and Inspire A Healthier Way of LifeTM and be the 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 8070 countries worldwide.


The Company manufactures, markets, distributes and sells organic and natural products under brand names that are sold as “better-for-you” products, providing consumers with the opportunity to lead A Healthier Way of Life™.  Hain Celestial is a leader in many organic and natural products categories, with many recognized brands in the various market categories it serves, including Almond Dream®, Arrowhead MillsBearitos®, Bearitos®, Better Bean®, BluePrint®, Casbah®, Celestial Seasonings®, Clarks™, Coconut Dream®, Cully & Sully®, Danival®, DeBoles®, Earth’s Best®, Ella’s Kitchen®, Europe’s Best®, Farmhouse Fare™, Frank Cooper’s®, Gale’s®, Garden of Eatin’®, GG UniqueFiber®, Hain Pure Foods®, Hartley’s®, Health Valley®, Imagine®, Johnson’s Juice Co.™, Joya®, Lima®, Linda McCartney® (under license), MaraNatha®, Mary Berry (under license), Natumi®, New Covent Garden Soup Co.®, Orchard House®, Rice Dream®, Robertson’s®, Rudi’s Gluten-Free Bakery™, Rudi’s Organic Bakery®, Sensible Portions®, Spectrum® Organics, Soy Dream®, Sun-Pat®, Sunripe®, SunSpireTerra®, Terra®, The Greek Gods®, Tilda®, Walnut Acres®, Yorkshire Provender®, Yves Veggie Cuisine®and William’s™. The Company’s personal care products are marketed under the Alba Botanica®, Avalon Organics®, Earth’s Best®, JASON®, Live Clean® and Queen Helene® brands.


The Company’s strategy is to focus on simplifying the Company’s portfolio and reinvigorating profitable sales growth through discontinuing uneconomic investment, realigning resources to coincide with individual brand roles, reducing unproductive stock-keeping units (“SKUs”) and brands, and reassessing current pricing architecture. As part of this initiative, the Company reviewed its product portfolio within North America and divided it into “Get Bigger” and “Get Better” brand categories.

The Company’s “Get Bigger” brands represent its strongest brands with higher margins, which compete in categories with strong growth. In order to capitalize on the potential of these brands, the Company began reallocating resources to optimize assortment and increase share of distribution. In addition, the Company will increase its marketing and innovation investments.

The Company’s “Get Better” brands are the brands in which the Company is primarily focused on simplification and expansion of profit. Some of these are low margin, non-strategic brands that add complexity with minimal benefit to the Company’s operations. Accordingly, in fiscal 2019, the Company initiated a SKU rationalization, which included the elimination of approximately 350 low velocity SKUs. The elimination of these SKUs is expected to impact sales growth in the current fiscal year, but is expected to result in expanded profits and a remaining set of core SKUs that will maintain their shelf space in the store.

As part of the Company’s overall strategy, the Company may seek to dispose of businesses and brands that are less profitable or are otherwise less of a strategic fit within our core portfolio. Accordingly, the Company divested of all of its operations of the Hain Pure Protein reportable segment and WestSoy® tofu, seitan and tempeh businesses in the United States in fiscal 2019, the entities comprising its Tilda operating segment and certain other assets of the Tilda business in August 2019 and its Arrowhead Mills® and SunSpire® brands in October 2019.

Productivity and Transformation Costs
As part of the Company’s historical strategic review, it focused on a productivity initiative, which it called “Project Terra.” A key component of this project was the identification of global cost savings and the removal of complexity from the business. In fiscal 2019, the Company announced a new transformation initiative, of which one aspect is to identify additional areas of productivity savings to support sustainable profitable performance.
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Productivity and transformation costs include costs, such as consulting and severance costs, relating to streamlining the Company’s manufacturing plants, co-packers and supply chain, eliminating served categories or brands within those categories, and product rationalization initiatives which are aimed at eliminating slow moving SKUs.  
Discontinued Operations
On August 27, 2019, the Company and Ebro Foods S.A. (the “Purchaser”) entered into, and consummated the transactions contemplated by, an agreement titled, "Agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets" (the “Sale and Purchase Agreement”).

On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business, a component of the Company’s Hain Pure Protein Corporation (“HPPC”) operating segment. On June 28, 2019, the Company completed the sale of the remainder of HPPC and Empire Kosher which included the FreeBird and Empire Kosher businesses. These dispositions were undertaken to reduce complexity in the Company’s operations and simplify the Company’s brand portfolio, in addition to allowing additional flexibility to focus on opportunities for growth and innovation in the Company’s more profitable and faster growing core businesses. Collectively, these dispositions were reported in the aggregate as the Hain Pure Protein reportable segment.

These dispositions represented strategic shifts that had a major impact on the Company’s operations and financial results and therefore, the Company is presenting the operating results and cash flows of the Tilda operating segment and the Hain Pure Protein reportable segment within discontinued operations in the current and prior periods. The assets and liabilities of the Tilda operating segment are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of June 30, 2019. See Note 5, Discontinued Operations, for additional information.

Change in Reportable Segments

Historically, the Company had 3 reportable segments: United States, United Kingdom and Rest of World. Effective July 1, 2019, the Company reassessed its segment reporting structure and as a result, the Canada and Hain Ventures operating segments, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America reportable segment. Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment. Accordingly, the Company now operates under 2 reportable segments: North America and International. Prior period segment information contained herein has been adjusted to reflect the Company’s new operating and reporting structure. See Note 17, Segment Information, for additional information.

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 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.GAAP and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2019 (the “Form 10-K”). The amounts as of and for the periods ended June 30, 20182019 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 three and ninesix months ended MarchDecember 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019.2020. Please refer to the Notes to the Consolidated Financial Statements as of June 30, 20182019 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (the “Form 10-K”) for information not included in these condensed notes.

The Company is presenting the operating results and cash flows of the Hain Pure Protein reportable segment within discontinued operations in the current and prior periods. The assets and liabilities of the Hain Pure Protein reportable segment are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented.


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.



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Significant Accounting Policies
Newly Adopted Accounting Pronouncements

ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance outlines a single, comprehensive model forThe Company's significant accounting for revenue from contracts with customers, providing a single five-step model to be applied to all revenue transactions. The guidance also requires improved disclosures to assist users of the financial statements to better understand the nature, amount, timing and uncertainty of revenue that is recognized. Subsequent to the issuance of ASU 2014-09, the FASB issued various additional ASUs clarifying and amending this new revenue guidance. The Company adopted the new revenue standard on July 1, 2018 using the modified retrospective transition method. The adoption did not materially impact our results of operations or financial position, and, as a result, comparisons of revenues and operating profit between periods were not materially affected by the adoption of ASU 2014-09. The Company recorded a net increase to beginning retained earnings of $163 on July 1, 2018 due to the cumulative impact of adopting ASU 2014-09. Additionally, as our products exhibit similar economic characteristics,policies are sold through similar channels to similar customers and are recognized at a point in time, we have concluded that the Company’s segment disclosuresdescribed in Note 17, Segment Information, are indicative of the level of revenue disaggregation required under ASU 2014-09.

ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10)
In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. We adopted ASU 2016‑01 in the three months ended September 30, 2018, which resulted in a net decrease to beginning retained earnings of $348 on July 1, 2018, representing the accumulated unrealized losses (net of tax) reported in accumulated other comprehensive income (loss) for available-for-sale equity securities on June 30, 2018. We no longer classify equity investments as trading or available-for-sale and will no longer recognize unrealized holding gains and losses on equity securities previously classified as available-for-sale in other comprehensive income (loss) as a result of adoption of ASU 2016-01.

Recently Issued Accounting Pronouncements Not Yet Effective

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842). The amendments in this ASU replace most of the existing U.S. GAAP lease accounting guidance in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The ASU requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB approved amendments to create an optional transition method that will provide an option to use the effective date of ASC 842 as the date of initial application of the transition. Under the new transition method, a reporting entity would initially apply the new lease requirements at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, continue to report comparative periods presented in the financial statements in the period of adoption in accordance with current U.S. GAAP (i.e., ASC 840, Leases) and provide the required disclosures under ASC 840 for all periods presented under current U.S. GAAP. We will adopt the standard effective July 1, 2019.

As part of the Company’s assessment work to-date, the Company has formed an implementation work team to perform a comprehensive evaluation of the impact of the adoption of this guidance, which includes assessing the Company’s lease portfolio, the impact to business processes and internal controls over financial reporting and the related disclosure requirements. Additionally, the Company is implementing lease accounting software to assist in the quantification of the expected impact on the Consolidated Balance Sheet and to facilitate the calculations of the related accounting entries and disclosures, as well as to facilitate accounting, presentation and disclosure for all leases after the initial date of application under the new standard.

While the Company is continuing to assess all potential impacts of the standard, the most significant impact relates to the recognition of new right-of-use assets and lease liabilities on the balance sheet for manufacturing, warehouse and office space operating leases. We believe that all of these leases will continue to be classified as operating leases under the new standard. We expect the accounting for capital leases to remain substantially unchanged.

Refer to Note 2, Summary of Significant Accounting Policies and Practices, in the Notes to the Consolidated Financial Statements as of June 30, 2018 and for the fiscal year then ended included in the Form 10-K10-K. Included herein are certain updates to those policies.
Leases
Effective July 1, 2019, arrangements containing leases are evaluated as an operating or finance lease at lease inception. For operating leases, the Company recognizes an operating right-of-use ("ROU") asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term.

With the exception of certain finance leases, an implicit rate of return is not readily determinable for the Company's leases. For these leases, an incremental borrowing rate is used in determining the present value of lease payments, and is calculated based on information available at the lease commencement date. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow funds on a collateralized basis over a similar term. The Company references market yield curves which are risk-adjusted to approximate a collateralized rate in the currency of the lease. These rates are updated on a quarterly basis for measurement of new lease obligations.
Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of 12 months or less are not recognized on the Company's balance sheet. The Company has elected to separate lease and non-lease components.
Recently Adopted Accounting Pronouncements

The Company adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), effective July 1, 2019, using a modified retrospective approach. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward.
Excluding Tilda, adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities as of July 1, 2019 of $87,414 and $92,982, respectively, with the difference largely due to prepaid and deferred rent that were reclassified to the ROU asset value. In addition, the Company recorded a cumulative-effect adjustment to opening retained earnings of $439 at adoption for the impairment of an abandoned ROU asset for a detailed discussionmanufacturing facility in the United Kingdom that was previously impaired and the remaining lease payments were accounted for under ASC Topic 420, Exit or Disposal Obligations. The standard did not materially affect the Company’s consolidated net income (loss) or cash flows. See Note 8, Leases, for further details.

Recently Issued Accounting Pronouncements Not Yet Effective

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on additional recentlyFinancial Instruments, which requires measurement and recognition of expected versus incurred credit losses for most financial assets. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.


In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurement by removing, modifying or adding certain disclosures. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amended guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

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issued accounting pronouncements not yet adopted by the Company. There has been no change to the statements made in the Form 10-K as of the date of filing of this Form 10-Q.

3. FORMER CHIEF EXECUTIVE OFFICER SUCCESSION PLAN


On June 24, 2018, the Company entered into a Chief Executive Officer (“CEO”) Succession Agreement (the “Succession Agreement”),CEO succession plan, whereby the Company’s former CEO, Irwin D. Simon, agreed to terminate his employment with the Company upon the hiring of a new CEO.

On October 26, 2018, the Company’s Board of Directors appointed Mark L. Schiller as President and CEO succeeding Mr. Simon. In connection with the appointment, on October 26, 2018, the Company and Mr. Schiller entered into an employment agreement, which was approved by the Board, with Mr. Schiller’s employment commencing on November 5, 2018. Accordingly, Mr. Simon’s employment with the Company terminated on November 4, 2018.

Cash Separation Payments

(the “Succession Agreement”). The Succession Agreement providesprovided Mr. Simon with a cash separation payment of $34,295 payable in a single lump sum and cash benefitbenefits continuation costs of $208. These costs were recognized from June 24, 2018 through November 4, 2018.2018, at which time the Company’s new CEO, Mark L. Schiller, commenced his employment. Expense recognized in connection with the agreementthese payments was $9,080 and $33,051 in the ninethree and six months ended MarchDecember 31, 2019, and are included in the Consolidated Statement of Operations as a component of “Chief Executive Officer Succession Plan expense, net.” As of March 31, 2019, the total cash separation payment was held in a rabbi trust, which has been classified as restricted cash and included in accrued expenses and other current liabilities in the Consolidated Balance Sheet.2018. The cash separation payment was paid on May 6, 2019. Additionally, the Succession Agreement allowed for acceleration of vesting of all service-based awards outstanding at the termination of Mr. Simon’s employment. In connection with these accelerations, the Company recognized additional stock-based compensation expense of $429 ratably through November 4, 2018, of which $117 was recognized in the three months ended December 31, 2018. The aforementioned impacts were recorded in Chief Executive Officer Succession Plan expense, net in the Consolidated Statements of Operations.


Consulting AgreementAs further discussed in Note13, Stock-based Compensation and Incentive Performance Plans, in the three months ended September 30, 2018, the Company’s Compensation Committee determined that no awards would be paid or vested pursuant to the 2016-2018 LTIP. Accordingly, the Company recorded a benefit of $5,065 associated with the reversal of previously accrued amounts under the net sales portion of the 2016-2018 LTIP associated with Mr. Simon.


On October 26, 2018, the Company and Mr. Simon entered into a Consulting Agreementconsulting agreement (the “Consulting Agreement”) in order to, among other things, assist Mr. Schiller with his transition as the Company’s incoming CEO. The term of the Consulting Agreement commenced on November 5, 2018 and continued until February 5, 2019. Mr. Simon was entitled to receivereceived an aggregate consulting fee of $975 as compensation for his services during the consulting term, of which $325 and $975$650 was recognized in the Consolidated StatementStatements of Operations as a component of “Chief Executive Officer Succession Plan expense, net” in the three and ninesix months ended MarchDecember 31, 2019, respectively.2018.


4. EARNINGS (LOSS) PER SHARE


The following table sets forth the computation of basic and diluted net income (loss) income per share:
 Three Months Ended December 31,Six Months Ended December 31,
 2019201820192018
Numerator:
Net income (loss) from continuing operations$1,852  $(31,787) $(3,101) $(54,874) 
Net loss from discontinued operations, net of tax(2,816) (34,714) (104,884) (49,052) 
Net loss$(964) $(66,501) $(107,985) $(103,926) 
Denominator:
Basic weighted average shares outstanding104,318  104,056  104,272  104,009  
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units301  —  —  —  
Diluted weighted average shares outstanding104,619  104,056  104,272  104,009  
Basic net income (loss) per common share:
Continuing operations$0.02  $(0.31) $(0.03) $(0.53) 
Discontinued operations(0.03) (0.33) (1.01) (0.47) 
Basic net loss per common share$(0.01) $(0.64) $(1.04) $(1.00) 
Diluted net income (loss) per common share:
Continuing operations$0.02  $(0.31) $(0.03) $(0.53) 
Discontinued operations(0.03) (0.33) (1.01) (0.47) 
Diluted net loss per common share$(0.01) $(0.64) $(1.04) $(1.00) 
12
 Three Months Ended March 31, Nine Months Ended March 31,
 2019
2018 2019 2018
Numerator:       
Net income (loss) from continuing operations$10,088
 $25,241
 $(42,291) $86,984
Net loss from discontinued operations, net of tax(75,925) (12,555) (127,472) (7,349)
Net (loss) income$(65,837) $12,686
 $(169,763) $79,635
        
Denominator:       
Basic weighted average shares outstanding104,117
 103,918
 104,045
 103,821
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units217
 585
 —
 652
Diluted weighted average shares outstanding104,334
 104,503
 104,045
 104,473
        
Basic net (loss) income per common share:       
Continuing operations$0.10
 $0.24
 $(0.41) $0.84
Discontinued operations(0.73) (0.12) (1.23) (0.07)
Basic net (loss) income per common share$(0.63) $0.12
 $(1.63) $0.77
        
Diluted net (loss) income per common share:       
Continuing operations$0.10
 $0.24
 $(0.41) $0.83
Discontinued operations(0.73) (0.12) (1.23) (0.07)
Diluted net (loss) income per common share$(0.63) $0.12
 $(1.63) $0.76
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Basic net income (loss) income per share excludes the dilutive effects of stock options, unvested restricted stock and unvested restricted share units.


Due to our net losslosses in the ninesix months ended MarchDecember 31, 2019 and the three and six months ended December 31, 2018, all common stock equivalents such as stock options and unvested restricted stock awards have been excluded from the computation of diluted net loss per common share because the effect would have been anti-dilutive to the computations.  Diluted earningscomputations in each period. 

There were 485 and 498 restricted stock awards and stock options excluded from our calculation of diluted net income (loss) per share for the three months ended MarchDecember 31, 2019 and the three2018, respectively, as such awards were anti-dilutive. Additionally, there were 2,550 and nine months ended March 31, 2018 includes the dilutive effects of common stock equivalents such as stock options and unvested restricted stock awards.

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There were 3,071 and 3,1171,152 stock-based awards excluded from our diluted net (loss) income per share calculations for the three and nine months ended MarchDecember 31, 2019 and 2018, respectively, as such awards were contingently issuable based on market or performance conditions, and such conditions had not been achieved during the respective periods. Contingently issuable awards excluded were 559 for each of the three and nine months ended March 31, 2018, respectively.


There were 273689 and 621464 restricted stock awards and stock options excluded from our calculation of diluted net (loss) incomeloss per share calculation for the three and ninesix months ended MarchDecember 31, 2019 and 2018, respectively, as such awards were anti-dilutive. Anti-dilutive restricted stockAdditionally, there were 2,745 and 710 stock-based awards excluded from our diluted earnings per share calculation for the three and ninesix months ended March 31, 2018 were de minimis.

There were 110 potential shares of common stock issuable upon exercise of stock options excluded from our diluted net loss per share calculation for the nine months ended MarchDecember 31, 2019 and 2018, respectively, as they were anti-dilutive due to the net loss recorded in the period. No such awards were excluded forcontingently issuable based on market or performance conditions, and such conditions had not been achieved during the three months ended March 31, 2019 and the three and nine months ended March 31, 2018.respective periods.


Share Repurchase Program


On June 21, 2017, the Company's Board of Directors authorized the repurchase of up to $250,000 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 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, including the Company’s historical strategy of pursuing accretive acquisitions. As of MarchDecember 31, 2019, the Company had not repurchased any shares under this program and had $250,000 of remaining capacity under the share repurchase program.


5.  DISCONTINUED OPERATIONS


Sale of Tilda Business

On August 27, 2019, the Company and the Purchaser entered into, and consummated the transactions contemplated by the Sale and Purchase Agreement. Under the Sale and Purchase Agreement, the Company sold the entities comprising its Tilda operating segment (the “Tilda Group Entities”) and certain other assets of the Tilda business to the Purchaser for an aggregate price of $342,000 in cash, subject to customary post-closing adjustments based on the balance sheets of the Tilda business. The other assets sold in the transaction consisted of raw materials, consumables, packaging, and finished and unfinished goods related to the Tilda business held by other Company entities that are not Tilda Group Entities. In January 2020, the Company and the Purchaser agreed to fully resolve all matters relating to post-closing adjustments to the sale price, resulting in a final aggregate sale price of $341,800. The Company used the proceeds from the sale to pay down the remaining outstanding borrowings under its term loan and a portion of its revolving credit facility.

The Sale and Purchase Agreement contains representations, warranties and covenants that are customary for a transaction of this nature. The Company also entered into certain ancillary agreements with the Purchaser and certain of the Tilda Group Entities in connection with the Sale and Purchase Agreement, including a transitional services agreement (the "TSA") pursuant to which the Company and the Purchaser provide transitional services to one another, and business transfer agreements pursuant to which the applicable Tilda Group Entities will transfer certain non-Tilda assets and liabilities in India and the United Arab Emirates to subsidiaries of the Company to be formed in those countries. Additionally, the Company will distribute certain Tilda products in the United States, Canada and Europe through the expiration of the TSA.

The disposition of the Tilda operating segment represented a strategic shift that had a major impact on the Company’s operations and financial results and has been accounted for as discontinued operations.

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The following table presents the major classes of Tilda’s results within “Net loss from discontinued operations, net of tax” in our Consolidated Statements of Operations:
Three Months Ended December 31,Six Months Ended December 31,
2019201820192018
Net sales$2,667  $50,590  $30,399  $92,945  
Cost of sales2,496  37,668  26,648  69,337  
Gross profit
171  12,922  3,751  23,608  
Selling, general and administrative expense246  6,892  5,185  13,172  
Other expense824  537  1,172  1,083  
Interest expense(1)
—  3,391  2,432  6,782  
Translation loss(2)
—  —  95,120  —  
Loss (gain) on sale of discontinued operations3,752  —  (10,170) —  
Net (loss) income from discontinued operations before income taxes(4,651) 2,102  (89,988) 2,571  
(Benefit) provision for income taxes(3)
(1,835) (407) 13,865  76  
Net (loss) income from discontinued operations, net of tax$(2,816) $2,509  $(103,853) $2,495  

(1) Interest expense was allocated to discontinued operations based on borrowings repaid with proceeds from the sale of Tilda.
(2) At the completion of the sale of Tilda, the Company reclassified $95,120 of related cumulative translation losses from Accumulated other comprehensive loss to discontinued operations, net of tax.
(3) Includes a tax (benefit) provision related to the tax gain on the sale of Tilda of $(1,250) and $15,250 for the three and six months ended December 31, 2019, respectively.

Assets and liabilities of discontinued operations associated with Tilda presented in the Consolidated Balance Sheets as of June 30, 2019 are included in the following table:
June 30,
ASSETS2019
Cash and cash equivalents$8,509 
Accounts receivable, less allowance for doubtful accounts26,955 
Inventories65,546 
Prepaid expenses and other current assets9,038 
Total current assets of discontinued operations(1)
110,048 
Property, plant and equipment, net40,516 
Goodwill133,098 
Trademarks and other intangible assets, net84,925 
Other assets628 
Total noncurrent assets of discontinued operations(1)
259,167 
Total assets of discontinued operations$369,215 
LIABILITIES
Accounts payable$18,341 
Accrued expenses and other current liabilities4,675 
Current portion of long-term debt8,687 
Total current liabilities of discontinued operations(1)
31,703 
Deferred tax liabilities17,153 
Other noncurrent liabilities208 
Total noncurrent liabilities of discontinued operations(1)
17,361 
Total liabilities of discontinued operations(1)
$49,064 

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(1) Assets and liabilities from discontinued operations were classified as current and noncurrent at June 30, 2019 as they did not meet the held-for-sale criteria.

Sale of Hain Pure Protein Reportable Segment

In March 2018, the Company’s Board of Directors approved a plan to sell all of the operations of the Hain Pure Protein Corporation (“HPPC”)HPPC operating segment, which included the Plainville Farms and FreeBird businesses, and the EK Holdings, Inc. (“Empire”Empire Kosher” or “Empire”) operating segments,segment, which were reported in the aggregate as the Hain Pure Protein reportable segment. Collectively, these planned dispositions representrepresented a strategic shift that will havehad a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations.

The Company is presenting the operating results and cash flows of Hain Pure Protein within discontinued operations in the current and prior periods. The assets and liabilities of Hain Pure Protein are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented.
Sale of Plainville Farms Business


On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business (a component of HPPC), which included $25,000 in cash to the purchaser, for a nominal purchase price. In addition, the purchaser assumed the current liabilities on the balance sheet of the Plainville Farms business as of the closing date. As a condition to consummating the sale, the Company entered into a Contingent Funding and Earnout Agreement, which providesprovided for the issuance by the Company of an irrevocable stand-by letter of credit (the “Letter of Credit”) of $10,000 which expires nineteen months after issuance. As of June 30, 2019, the purchaser has fully drawn against the Letter of Credit. The Company is entitled to receive an earnout not to exceed, in the aggregate, 120% of the maximum amount that the purchaser draws on the letterLetter of creditCredit at any point from the date of issuance through the expiration of the letterLetter of credit.Credit. Earnout payments are based on a specified percentage of annual free cash flow achieved for all fiscal years ending on or prior to June 30, 2026. If a subsequent change in control of the purchaserPlainville Farms business occurs prior to June 30, 2026, the purchaser will pay the Company 120% of the difference between the amount drawn on the letterLetter of creditCredit less the sum of all earnout payments made prior to such time up to the net proceeds received by the purchaser. At MarchDecember 31, 2019, the Company had not recorded an asset associated with the earnout. As a result
Sale of the disposition, the Company recognized a pre-tax loss on sale of $40,223, or $29,685 net of tax, in the three months ended March 31, 2019 to write down the assetsHPPC and liabilities to the final sales price less costs to sell.

Empire Kosher
On May 8,June 28, 2019, the Company entered intocompleted the sale of the remainder of HPPC and EK Holdings, which included the FreeBird and Empire Kosher businesses. The purchase price, net of estimated customary adjustments based on the closing balance sheet of HPPC, was $77,714. The Company is in the process of finalizing the closing adjustments. The Company used the proceeds from the sale to pay down a definitive agreement to sell allportion of its equity interest in Hain Pure Protein Corporation, which includes the FreeBird™ and Empire® Kosher businesses, for a purchase price of $80,000, subject to adjustments. The transaction is expected to close before June 30, 2019, the end of the Company's fiscal year.outstanding borrowings under its term loan.


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The following table presents the major classes of Hain Pure Protein’s line items constituting theresults within “Net loss from discontinued operations, net of tax” in our Consolidated Statements of Operations:

Three Months Ended December 31,Six Months Ended December 31,
2019201820192018
Net sales$—  $147,181  $—  $260,720  
Cost of sales—  144,682  —  267,796  
Gross profit (loss)—  2,499  —  (7,076) 
Selling, general and administrative expense—  4,750  —  8,992  
Asset impairments—  54,946  —  57,904  
Other expense—  2,478  —  5,195  
Loss on sale of discontinued operations(1)
—  —  1,424  —  
Net loss from discontinued operations before income taxes—  (59,675) (1,424) (79,167) 
Benefit for income taxes—  (22,452) (393) (27,620) 
Net loss from discontinued operations, net of tax$—  $(37,223) $(1,031) $(51,547) 

(1) Primarily relates to preliminary closing balance sheet adjustments.

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 Three Months Ended March 31, Nine Months Ended March 31,
 2019 2018 2019 2018
Net sales$88,729
 $118,198
 $349,449
 $396,227
Cost of sales88,277
 113,629
 356,073
 373,122
Gross profit (loss)
452
 4,569
 (6,624) 23,105
Selling, general and administrative expense4,039
 5,888
 13,031
 14,458
Asset impairments (1)
51,348
 —
 109,252
 —
Other expense2,182
 805
 7,377
 3,258
Loss on sale of discontinued operations40,223
 —
 40,223
 —
Net (loss) income from discontinued operations before income taxes(97,340) (2,124) (176,507) 5,389
(Benefit) provision for income taxes(21,415) 10,431
 (49,035) 12,738
Net loss from discontinued operations, net of tax$(75,925) $(12,555) $(127,472) $(7,349)

Assets andThere were 0 assets or liabilities offrom discontinued operations presented in the Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018 are included in the following table:
 March 31, June 30,
ASSETS2019 2018
Cash and cash equivalents$3,678
 $6,461
Accounts receivable, less allowance for doubtful accounts11,680
 21,616
Inventories31,600
 105,359
Prepaid expenses and other current assets1,906
 5,604
Property, plant and equipment, net49,537
 83,776
Goodwill41,089
 41,089
Trademarks and other intangible assets, net33,762
 51,029
Other assets2,636
 4,381
Deferred tax assets (2)
37,925
 —
Impairments of long-lived assets held for sale(1)
(77,632) (78,464)
Current assets of discontinued operations(3)
$136,181
 $240,851
    
LIABILITIES   
Accounts payable$11,211
 $31,762
Accrued expenses and other current liabilities3,914
 6,880
Deferred tax liabilities (2)
—
 11,111
Other noncurrent liabilities70
 93
Current liabilities of discontinued operations(3)
$15,195
 $49,846

(1) In the nine months ended March 31, 2019 the Company recorded asset impairment charges of $109,252, of which $51,348 was recorded in the third quarter of fiscal 2019 to adjust the carrying value of theassociated with Hain Pure Protein reportable segment to its estimated selling price.

(2) The change in deferred taxes fromat December 31, 2019 or June 30, 2018 to March 31, 2019 was the result of the reversal of the $12,250 deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In addition, deferred taxes were impacted by the tax effect of current period book losses as well as the deferred tax benefit arising from asset impairment charges.2019.


(3) The assets and liabilities of Hain Pure Protein are classified as current on the March 31, 2019 and June 30, 2018 Consolidated Balance Sheets because it is probable that the sale will occur within the three months ended June 30, 2019.

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6. ACQUISITIONS

The Company accounts for acquisitions in accordance with ASC 805, Business Combinations. The results of operations of the acquisitions have been included in the consolidated results from their respective dates of acquisition. The purchase price of each acquisition is allocated to the tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. Acquisitions may include contingent consideration, the fair value of which is estimated on the acquisition date as the present value of the expected contingent payments, determined using weighted probabilities of possible payments. The fair values assigned to identifiable intangible assets acquired were determined primarily by using an income approach which was based on assumptions and estimates made by management. Significant assumptions utilized in the income approach were based on Company-specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill.

The costs related to all acquisitions have been expensed as incurred and are included in “Project Terra costs and other” in the Consolidated Statements of Operations. Acquisition-related costs for the three and nine months ended March 31, 2019 were de minimis. Acquisition-related costs of $8 and $336 were expensed in the three and nine months ended March 31, 2018, respectively. The expenses incurred primarily related to professional fees and other transaction-related costs associated with our recent acquisitions.

Fiscal 2019

There were no acquisitions completed in the nine months ended March 31, 2019.

Fiscal 2018

On December 1, 2017, the Company acquired Clarks UK Limited, (“Clarks”), a leading maple syrup and natural sweetener brand in the United Kingdom. Clarks produces natural sweeteners under the ClarksTM brand, including maple syrup, honey and carob, date and agave syrups, which are sold in leading retailers and used by food service and industrial customers in the United Kingdom. Consideration for the transaction, inclusive of a subsequent working capital adjustment, consisted of cash, net of cash acquired, totaling £9,179 (approximately $12,368 at the transaction date exchange rate). Additionally, contingent consideration of up to a maximum of £1,500 is payable based on the achievement of specified operating results over the 18-month period following completion of the acquisition. Clarks is included in our United Kingdom operating segment. Net sales and income before income taxes attributable to the Clarks acquisition included in our consolidated results represented less than 1% of our consolidated results for the three and nine months ended March 31, 2019 and 2018.


7.    INVENTORIES


Inventories consisted of the following:
December 31,
2019		June 30,
2019
Finished goods$192,587  $199,754  
Raw materials, work-in-progress and packaging90,540  99,587  
$283,127  $299,341  

At each period end, inventory is reviewed to ensure that it is recorded at the lower of cost or net realizable value. During the six months ended December 31, 2019 and the fiscal year ended June 30, 2019, the Company recorded inventory write-downs of $3,916 and $12,381, respectively, in connection with the discontinuance of slow moving SKUs as part of a product rationalization initiative.

 March 31,
2019		 June 30,
2018
Finished goods$235,232
 $231,926
Raw materials, work-in-progress and packaging160,014
 159,599
 $395,246
 $391,525



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8.7. PROPERTY, PLANT AND EQUIPMENT, NET


Property, plant and equipment, net consisted of the following:
December 31,
2019		June 30,
2019
Land$14,323  $14,240  
Buildings and improvements84,883  83,151  
Machinery and equipment290,712  274,554  
Computer hardware and software59,889  48,984  
Furniture and fixtures19,074  17,325  
Leasehold improvements42,026  32,264  
Construction in progress14,345  35,786  
525,252  506,304  
Less: accumulated depreciation and amortization226,694  218,459  
$298,558  $287,845  
 March 31,
2019		 June 30,
2018
Land$28,049
 $28,378
Buildings and improvements95,604
 83,289
Machinery and equipment315,574
 323,348
Computer hardware and software56,168
 54,092
Furniture and fixtures18,624
 17,894
Leasehold improvements31,269
 31,519
Construction in progress30,556
 17,280
 575,844
 555,800
Less: Accumulated depreciation and amortization244,774
 245,628
 $331,070
 $310,172


Depreciation and amortization expense for the three months ended MarchDecember 31, 2019 and 2018 was $8,110$8,024 and $8,212,$6,757, respectively. Such expense for the ninesix months ended MarchDecember 31, 2019 and 2018 was $24,294$15,729 and $24,580,$14,230, respectively.


In the ninesix months ended MarchDecember 31, 2019,2018, the Company recorded $5,809$5,275 of non-cash impairment charges primarily related to the Company’s decision to consolidate manufacturing of certain fruit-based products in the United Kingdom.

Additionally, the Company recorded a $534 non-cash impairment charge to write down the value of certain machinery and equipment used to manufacture certain slow moving SKUs in the United States that were discontinued. There were no0 impairment charges recorded induring the threesix months ended MarchDecember 31, 2019.


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8. 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. A limited number of lease agreements include rental payments adjusted periodically for inflation.
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.
The components of lease expenses for the three and six months ended December 31, 2019 were as follows:
Three Months EndedSix Months Ended
December 31, 2019December 31, 2019
Operating lease expenses$4,800  $9,489  
Finance lease expenses:
Amortization of ROU assets168  448  
Interest on lease liabilities20  41  
Total finance lease expenses188  489  
Variable lease expenses381  1,240  
Short-term lease expenses419  859  
Total lease expenses$5,788  $12,077  

Supplemental balance sheet information related to leases was as follows:
LeasesClassificationDecember 31, 2019
Assets
Operating lease ROU assetsOperating lease right of use assets$83,845 
Finance lease ROU assets, netProperty, plant and equipment, net1,267
Total leased assets$85,112 
Liabilities
Current
OperatingAccrued expenses and other current liabilities$13,567 
FinanceCurrent portion of long-term debt442
Non-current
OperatingOperating lease liabilities, noncurrent portion76,726 
FinanceLong-term debt, less current portion412
Total lease liabilities$91,147 

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Additional information related to leases is as follows:
Six Months Ended
December 31, 2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$8,113 
Operating cash flows from finance leases$12 
Financing cash flows from finance leases$244 
Right-of-use assets obtained in exchange for lease obligations (a):
Operating leases$92,640 
Finance leases$1,131 
Weighted average remaining lease term:
Operating leases8.6 years
Finance leases2.4 years
Weighted average discount rate:
Operating leases2.7 %
Finance leases3.1 %

(a) Right-of-use assets obtained in exchange for lease obligations includes the impact of the adoption of ASU 2016-02 effective July 1, 2019 (see Note 2) and leases which commenced, were modified or terminated during the six months ended December 31, 2019.

Maturities of lease liabilities as of December 31, 2019 were as follows:
Fiscal YearOperating leasesFinance leasesTotal
2020 (remainder of year)$7,555  $238  $7,793  
2021  15,25836915,627  
2022  12,98718413,171  
2023  11,9945412,048  
2024  10,1912710,218  
Thereafter44,398644,404  
Total lease payments102,383878103,261
Less: Imputed interest12,0902412,114  
Total lease liabilities$90,293  $854  $91,147  

The aggregate minimum future lease payments for operating leases at June 30, 2019 were as follows:
Fiscal Year
2020$19,426  
202116,584
202214,218
202313,221
202411,041
Thereafter44,452
$118,942  

At December 31, 2019, the Company had additional leases that had not yet commenced. Obligations under these leases are not material.

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9. GOODWILL AND OTHER INTANGIBLE ASSETS


Goodwill


The following table showsprovides the changes in the carrying amountvalue of goodwill by businessreportable segment:
North AmericaInternationalTotal
Balance as of June 30, 2019 (a)
$612,590  $263,291  $875,881  
  Divestiture(4,357) —  (4,357) 
  Translation and other adjustments, net(32) 8,213  8,181  
Balance as of December 31, 2019 (a)
$608,201  $271,504  $879,705  
 United States United Kingdom Rest of World Total
Balance as of June 30, 2018 (a)
$552,814
 $377,163
 $94,159
 $1,024,136
  Translation and other adjustments, net—
 (5,203) (2,070) (7,273)
Balance as of March 31, 2019 (a)
$552,814
 $371,960
 $92,089
 $1,016,863


(a) The total carrying value of goodwill is reflected net of $134,277 of accumulated impairment charges, of which $97,358 related to the Company’s United Kingdom operating segment, $29,219 related to the Company’s Europe operating segment and $7,700 related to the Company’s former Hain Ventures operating segment, (formerly knownwhose goodwill and accumulated impairment charges were reallocated within the North America reportable segment to the United States and Canada operating segments on a relative fair value basis.

During fiscal 2019, the Company’s reporting units were Hain Pure Personal Care, Grocery and Snacks and Celestial Tea in the United States reportable segment, Hain Daniels, Ella’s Kitchen and Tilda in the United Kingdom reportable segment and Hain Canada, Hain Europe and Hain Ventures within the Rest of World reportable segment. As discussed in Note 17, Segment Information, effective July 1, 2019, the Company changed its segment reporting structure due to changes in how the Company’s Chief Operating Decision Maker (“CODM”) assesses the Company’s performance and allocates resources as a result of a change in the CultivateCompany’s strategy. In connection with these changes, the Company’s reporting units now consist of the United States (as a single reporting unit) and Hain Canada within the North America reportable segment and Hain Daniels, Ella’s Kitchen, Tilda (prior to its sale on August 27, 2019) and Hain Europe within the International reportable segment. The brands constituting the Hain Ventures reporting unit were combined within the United States and Hain Canada reporting units, and its goodwill was reallocated to the United States and Canada operating segment).segments on a relative fair value basis. The Company completed an assessment for potential impairment of the goodwill both prior and subsequent to the aforementioned changes and determined that no impairment indicators were present.


On October 7, 2019, the Company completed the divestiture of its Arrowhead and Sunspire businesses, components of the United States reporting unit, for a purchase price of $13,347 following post-closing adjustments, recognizing a loss on sale of $1,783 during the three and six months ended December 31, 2019. Goodwill of $4,357 was assigned to the divested businesses on a relative fair value basis. An interim impairment analysis was performed for the United States reporting unit both before and after the sale, noting no impairment indicators were present.

Beginning in the third quarter of fiscal 2018,three months ended September 30, 2019, operations of Hain Pure ProteinTilda have been classified as discontinued operations as discussed in Note 5, Discontinued Operations. Therefore, goodwill associated with Hain Pure ProteinTilda is presented as current assetsAssets of discontinued operations in the Consolidated Financial Statements.consolidated financial statements.

The Company performs its annual test for goodwill and indefinite-lived intangible asset impairment as of the first day of the fourth quarter of its fiscal year. In addition, if and when events or circumstances change that would more likely than not reduce the fair value of any of its reporting units or indefinite-life intangible assets below their carrying value, an interim test is performed.
During the three months ended December 31, 2018, the Company updated the forecasted operating results for each of its reporting units based on the most recent financial results. The updated forecasts reflected lower projected short-term revenue growth and profitability than previously expected, primarily in its United States segment. In connection with the preparation of the Consolidated Financial Statements for the period ended December 31, 2018, the Company assessed qualitative and quantitative factors, which included sensitivity analyses, and concluded that it is more likely than not that the fair value of its reporting units exceeded its carrying amount. 

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There were no events or circumstances that warranted an interim impairment test for goodwill during the three months ended March 31, 2019. The Company will continue to monitor impairment indicators and financial results in future periods.


Other Intangible Assets


The following table sets forth Consolidated Balance Sheet informationincludes the gross carrying amount and accumulated amortization, where applicable, for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:goodwill:
December 31,
2019		June 30,
2019
Non-amortized intangible assets:
Trademarks and tradenames (a)
$293,362  $291,199  
Amortized intangible assets:
Other intangibles209,568  204,630  
Less: accumulated amortization(124,134) (115,543) 
Net carrying amount$378,796  $380,286  

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 March 31,
2019		 June 30,
2018
Non-amortized intangible assets:   
Trademarks and tradenames (a)
$364,068
 $385,609
Amortized intangible assets:   
Other intangibles236,333
 239,323
Less: accumulated amortization(124,819) (114,545)
Net carrying amount$475,582
 $510,387
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(a) The gross carrying value of trademarks and tradenames is reflected net of $83,734$85,623 and $65,834$83,734 of accumulated impairment charges at Marchas of December 31, 2019 and at June 30, 2018,2019, respectively.


Indefinite-lived intangible assets, which are not amortized, consist primarily of acquired tradenames and trademarks. Indefinite-lived intangible assets are evaluated on an annual basis in conjunction with the Company’s evaluation of goodwill, or on an interim basis if and when events or circumstances change that would more likely than not reduce the fair value of any of its indefinite-life intangible assets below their carrying value. In assessing fair value, the Company utilizes a “relief from royalty” methodology. This approach involves two steps: (i) estimating the royalty rates for each trademark and (ii) applying these royalty rates to a projected net sales stream and discounting the resulting cash flows to determine fair value. If the carrying value of the indefinite-lived intangible asset exceeds the fair value of the asset, the carrying value is written down to fair value in the period identified. During the three months ended December 31, 2019 and 2018, the Company determined that an indicatorindicators of impairment existed in certain of the Company’s indefinite-lived tradenames. The result of this assessment forCompany performed interim impairment analyses during the second quarter of fiscal 2019 indicatedrespective periods, and determined that the fair value of certain of the Company’s tradenames was below their carrying value, and thereforevalue. During the three months ended December 31, 2019, an impairment charge of $1,889 was recognized in the North America segment. During the three months ended December 31, 2018, an impairment charge of $17,900 was recognized ($11,30015,113 in the United StatesNorth America segment and $2,787 in the United Kingdom segment and $3,813 in the Rest of World)International segment). During the fiscal year ended June 30, 2018, an impairment charge of $5,632 ($5,100 in the Rest of World and $532 in the United Kingdom segment) related to certain of the Company’s tradenames was recognized.
There were no events or circumstances that warranted an interim impairment test for indefinite-lived intangible assets during the three months ended March 31, 2019.


Amortized intangible assets, which are deemed to have a finite life, primarily consist of customer relationships and are amortized over their estimated useful lives of 3 to 25 years. Amortization expense included in continuing operations was as follows:
Three Months Ended December 31,Six Months Ended December 31,
 2019201820192018
Amortization of acquired intangibles$3,189  $3,322  $6,272  $6,681  
 Three Months Ended March 31, Nine Months Ended March 31,
 2019 2018 2019 2018
Amortization of acquired intangibles$3,802
 $4,713
 $11,567
 $13,859



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10. DEBT AND BORROWINGS


Debt and borrowings consisted of the following:
December 31,
2019		June 30,
2019
Revolving credit facility$321,700  $420,575  
Term loan—  206,250  
Less: Unamortized issuance costs—  (1,022) 
Other borrowings4,551  4,966  
326,251  630,769  
Short-term borrowings and current portion of long-term debt1,387  17,232  
Long-term debt, less current portion$324,864  $613,537  
 March 31,
2019		 June 30,
2018
Revolving credit facility$455,206
 $401,852
Term loan285,000
 296,250
Less: Unamortized issuance costs(579) (692)
Tilda short-term borrowing arrangements6,654
 9,338
Other borrowings5,442
 7,358
 751,723
 714,106
Short-term borrowings and current portion of long-term debt22,522
 26,605
Long-term debt, less current portion$729,201
 $687,501


Credit Agreement


On February 6, 2018, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a $1,000,000 revolving credit facility through February 6, 2023 and provides for a $300,000 term loan. Under the Credit Agreement, the revolving credit facility may be increased by an additional uncommitted $400,000, provided certain conditions are met.


Borrowings under the Credit Agreement may be used to provide working capital, finance capital expenditures and permitted acquisitions, refinance certain existing indebtedness and for other lawful corporate purposes. The Credit Agreement provides for multicurrency borrowings in Euros, Pounds Sterlingeuros, pounds sterling and Canadian Dollarsdollars as well as other currencies which may be designated. In addition, certain wholly-owned foreign subsidiaries of the Company may be designated as co-borrowers. The Credit Agreement contains restrictive covenants, which are usual and customary for facilities of its type, and include, with specified exceptions, limitations on the Company’s ability to engage in certain business activities, incur debt, have liens, make capital expenditures, pay dividends or make other distributions, enter into affiliate transactions, consolidate, merge or acquire or dispose of assets, and make certain investments, acquisitions and loans. The Credit Agreement also requires the Company to satisfy certain financial covenants. On the date the Credit Agreement was consummated, these covenants included maintaining a consolidated interest coverage ratio (as defined in the Credit Agreement) of no less than 4.0 to 1.0 and a consolidated leverage ratio (as defined in the Credit Agreement) of no more than 3.5 to 1.0. The consolidated leverage ratio was initially subject to a step-up to 4.0 to 1.0 for the four full fiscal quarters following an acquisition. Obligations under the Credit Agreement are guaranteed by certain existing and future domestic subsidiaries of the Company. As of MarchDecember 31, 2019, there were $455,206 and $285,000$321,700 of borrowings outstanding under the revolving credit facility and term loan, respectively, and $16,224$9,698 letters of credit outstanding under the Credit Agreement.

On November 7, 2018, In the Company amended the Credit Agreement to modify the calculation of the consolidated leverage ratio related to costs associated with CEO succession as well as the Project Terra cost reduction programs.

On February 6,six months ended December 31, 2019, the Company entered into an amendmentused the proceeds from the sale of Tilda, net of transaction costs, to prepay the Credit Agreement, wherebyentire principal amount of term loan outstanding under its allowable consolidated leverage ratio increasedcredit facility and to no more than 4.0 to 1.0 aspartially pay down its revolving credit facility. In connection with the prepayment, the Company wrote off unamortized deferred debt issuance costs of December 31, 2018$973, recorded in Interest and no more than 3.75 to 1.0 as of March 31, 2019 and June 30, 2019. Under the terms of the February 6, 2019 amendment, the consolidated leverage ratio would return to 3.5 to 1.0 beginningother financing expense, net in the period ending September 30, 2019.Consolidated Statements of Operations.


On May 8, 2019, the Company entered into the Third Amendment to the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), whereby, among other things, its allowable consolidated leverage ratio increased to(as defined in the Credit
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Agreement) and interest coverage ratio (as defined in the Credit Agreement) were adjusted. The Company’s allowable consolidated leverage ratio is no more than 5.04.75 to 1.0 from March 31, 2019 to December 31, 2019, no more than 4.754.50 to 1.0 at March 31, 2020, no more than 4.254.0 to 1.0 at June 30, 2020 and no more than 4.03.75 to 1.0 on September 30, 2020 and thereafter. The allowable consolidated leverage ratio for each period will be decreased by 0.25 upon sale of the Company’s remaining Hain Pure Protein business. Additionally, the Company’s required consolidated interest coverage ratio (as defined in the Credit Agreement) was reduced tois no less than 3.0 to 1 through March 31, 2020, no less than 3.75 to 1 through March 31, 2021 and no less than 4.0 to 1 thereafter. As part of the Amended Credit Agreement, HPPC was released from its obligations as a borrower and a guarantor under the Credit Agreement.


The Amended Credit Agreement also required that the Company and the subsidiary guarantors enter into a Security and Pledge Agreement pursuant to which all of the obligations under the Amended Credit Agreement are secured by liens on assets of the

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Company and its material domestic subsidiaries, including stock of each of their direct subsidiaries and intellectual property, subject to agreed upon exceptions.


As of MarchDecember 31, 2019, $528,570 is$668,602 was available under the Amended Credit Agreement, and the Company was in compliance with all associated covenants, as amended by the Amended Credit Agreement.


The Amended Credit Agreement provides that loans will bear interest at rates based on (a) the Eurocurrency Rate, as defined in the Credit Agreement, plus a rate ranging from 0.875% to 2.50% per annum; or (b) the Base Rate, as defined in the Credit Agreement, plus a rate ranging from 0.00% to 1.50% per annum, the relevant rate being the Applicable Rate. The Applicable Rate will be determined in accordance with a leverage-based pricing grid, as set forth in the Amended Credit Agreement. Swing line loans and Global Swing Line loans denominated in U.S. dollars will bear interest at the Base Rate plus the Applicable Rate, and Global Swing Line loans denominated in foreign currencies shall bear interest based on the overnight Eurocurrency Rate for loans denominated in such currency plus the Applicable Rate. The weighted average interest rate on outstanding borrowings under the Amended Credit Agreement at MarchDecember 31, 2019 was 4.30%3.12%. Additionally, the Amended Credit Agreement contains a Commitment Fee, as defined in the Amended Credit Agreement, on the amount unused under the Amended Credit Agreement ranging from 0.20% to 0.45% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid.

The term loan has required installment payments due on the last day of each fiscal quarter commencing June 30, 2018 in an amount equal to $3,750 and can be prepaid in whole or in part without premium or penalty.

Tilda Short-Term Borrowing Arrangements

Tilda, a component of our United Kingdom reportable segment, maintains short-term borrowing arrangements primarily used to fund the purchase of rice from India and other countries. The maximum borrowings permitted under all such arrangements are £52,000. Outstanding borrowings are collateralized by the current assets of Tilda, typically have six-month terms and bear interest at variable rates typically based on LIBOR plus a margin (weighted average interest rate of approximately 3.27% at March 31, 2019). As of March 31, 2019 and June 30, 2018, there were $6,654 and $9,338 of borrowings under these arrangements, respectively.


11. 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. In the first quarter of fiscal 2019, the Company used an estimated annual effective tax rate to calculate its provision for income taxes. For the quarters ended March 31, 2019 and December 31, 2018, theThe Company calculated its effective tax rate on a discrete basis for the six months ended December 31, 2018 due to significant variations in the relationship between tax expense and projected pre-tax income. 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.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation pursuant to the Tax Cuts and Jobs Act (the “Tax Act”), which significantly revised the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense and executive compensation), among other things.

Due to the complexities involved in accounting for the Tax Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 required that the Company include in its financial statements a reasonable estimate of the impact of the Tax Act on earnings to the extent such reasonable estimate has been determined. Pursuant to SAB 118, the Company was allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. As of December 31, 2018, the Company finalized its accounting for the income tax effects of the Tax Act and recorded an additional expense of $8,205 related to its transition tax liability. The net increase in the transition tax was due to the finalization of the Company’s earnings and profits study for our foreign subsidiaries. The adjustment of the Company’s provisional tax expense was recorded as a change in estimate in accordance with SAB No. 118. Despite the completion of the Company’s accounting for the Tax Act under SAB 118, many aspects of the law remain unclear, and we expect ongoing guidance to be issued at both the federal and state levels. There was no new guidance issued in the third quarter of fiscal 2019 that impacted the Company’s liability. The Company will continue to monitor and assess the impact of any new developments.

The Tax Act also includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries. The FASB Staff Q&A Topic No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election either to recognize deferred taxes for temporary differences that are expected to reverse as GILTI in future years or provide

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for the tax expense related to GILTI resulting from those items in the year the tax is incurred. We have elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred. We have computed the impact on our effective tax rate on a discrete basis.


The effective income tax rate from continuing operations was expense of 23.2%31.8% and a benefit of 5.5%19.1% for the three months ended MarchDecember 31, 2019 and March 31, 2018, respectively. The effective income tax rate from continuing operations was expense of 25.0% and a benefit of 3.9% and 15.3%8.2% for the ninesix months ended MarchDecember 31, 2019 and March 31, 2018, respectively. The effective income tax raterates from continuing operations for the three and nine months ended March 31, 2019 wasin all periods were impacted by provisions in the Tax Cuts and Jobs Act including GILTI, finalization of the transition tax liability,(the "Tax Act"), primarily related to Global Intangible Low Taxed Income and limitations on the deductibility of executive compensation. The effective income tax rate wasrates in each period were also impacted by the geographical mix of earnings and state taxes. valuation allowance. During the three months ended December 31, 2018, the Company finalized its accounting for income tax effects of the Tax Act and recorded additional expense related to its transition tax liability.

The effective rateincome tax from discontinued operations was a benefit of $1,835 and expense of $13,472 for the three and ninesix months ended MarchDecember 31, 2018 was primarily impacted by2019, respectively, while the enactment of the Tax Act on December 22, 2017, specifically the revalue of net deferred tax liabilities to the enacted 21% tax rate, repealing the deduction for domestic production activities, inclusion of the transition tax liability estimate and deductibility of executive officers’ compensation. The effective income tax rate from continuing operations for the three and nine months ended March 31, 2018 was also favorably impacted by the geographical mix of earnings, as well as a $3,754 benefit relating to the release of the Company’s domestic uncertain tax position as a result of the expiration of the statute of limitations.

The income tax benefit from discontinued operations was $21,415$22,859 and $49,035$27,544 for the three and ninesix months ended MarchDecember 31, 2019, while the income tax2018, respectively. The expense from discontinued operations was $10,431 and $12,738 for the three and nine months ended March 31, 2018. The benefit for income taxes for the ninesix months ended MarchDecember 31, 2019 was impacted by $15,250 of tax related to the tax gain on the sale of the Tilda Group Entities. The benefit from income taxes for the three and six months ended December 31, 2018 includes the reversal of the $12,250 deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In addition,held-for-sale. Additionally, the three and ninesix month tax benefit is impacted by the tax effect of current period book losses including the loss on the sale of Plainville Farms assets in the third quarter of fiscal 2019 as well as the deferred tax benefit arising from asset impairment charges.
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12.  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)LOSS


The following table presents the changes in accumulated other comprehensive income (loss):loss:
Three Months Ended December 31,Six Months Ended December 31,
2019201820192018
Foreign currency translation adjustments:
Other comprehensive income (loss) before reclassifications (1)
$48,655  $(27,948) $9,713  $(41,467) 
Amounts reclassified into income (2)
—  —  95,120  —  
Deferred gains (losses) on cash flow hedging instruments:
Amounts reclassified into income (3)
42  —  (26) —  
Net change in accumulated other comprehensive loss$48,697  $(27,948) $104,807  $(41,467) 
 Three Months Ended March 31, Nine Months Ended March 31,
 2019 2018 2019 2018
Foreign currency translation adjustments:       
Other comprehensive income (loss) before reclassifications (1)
$20,934
 $37,868
 $(20,533) $80,065
Deferred (losses)/gains on cash flow hedging instruments:       
Other comprehensive (loss) income before reclassifications(42) —
 (42) 39
Amounts reclassified into income (2)
—
 —
 —
 (106)
Unrealized gains/(losses) on equity investment:       
Other comprehensive loss before reclassifications—
 (101) —
 (103)
Net change in accumulated other comprehensive income (loss)$20,892
 $37,767
 $(20,575) $79,895


(1) Foreign currency translation adjustments included intra-entity foreign currency transactions that were of a long-term investment nature and were a net lossgains of $403$613 and a net gainlosses of $670$313 for the three months ended March 31, 2019and 2018,respectively, and a net loss of $875 and a net gain of $1,736 for the nine months ended MarchDecember 31, 2019 and 2018, respectively, and net losses of $250 and $472 for the six months ended December 31, 2019 and 2018, respectively.
(2) Foreign currency translation gains or losses of foreign subsidiaries related to divested businesses are reclassified into income once the liquidation of the respective foreign subsidiaries is substantially complete. At the completion of the sale of Tilda, the Company reclassified $95,120 of translation losses from accumulated comprehensive loss to the Company’s results of discontinued operations.
(3) Amounts reclassified into income for deferred gains (losses)/gains on cash flow hedging instruments are recorded in “CostCost of sales”sales in the Consolidated Statements of Operations and, before taxes, were $132 for$52 and $(26) in the ninethree and six months ended MarchDecember 31, 2018.2019, respectively. There were no0 amounts reclassified into income for deferred (losses)/gains on cash flow hedging instruments forin the three and ninesix months ended March 31, 2019 and for the three months ended MarchDecember 31, 2018.




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13. STOCK-BASED COMPENSATION AND INCENTIVE PERFORMANCE PLANS


The Company has two stockholder-approved plans,1 stockholder approved plan, the Amended and Restated 2002 Long-Term Incentive and Stock Award Plan and the 2000 Directors Stock Plan, under which the Company’s officers, senior management, other key employees, consultants and directors may be granted options to purchase the Company’s common stock or other forms of equity-based awards. The Company also grants shares under its 2019 Equity Inducement Award Program to induce selected individuals to become employees of the Company. The Company maintains a long-term incentive program (the “LTI Plan”). As of December 31, 2019, the LTI Plan consisted of 2 performance-based long-term incentive plans (the “2018-2020 LTIP” and “2019-2021 LTIP”) that provide for performance equity awards that can be earned over defined performance periods. As of December 31, 2018, the Company maintained the 2017-2019 LTIP in addition to a 2016-2018 LTIP that provided for performance equity awards that could have been earned over a three-year performance period. The Company's plans are described in Note 14, 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 December 31,Six Months Ended December 31,
 2019201820192018
Selling, general and administrative expense$3,083  $1,776  $5,820  $1,562  
Chief Executive Officer Succession Plan expense, net—  117  —  429  
Discontinued operations—  18  544  55  
Total compensation cost recognized for stock-based compensation plans$3,083  $1,911  $6,364  $2,046  
Related income tax benefit$297  $256  $670  $295  
  Three Months Ended March 31, Nine Months Ended March 31,
 2019
2018 2019 2018
Selling, general and administrative expense$3,937

$2,936
 $5,502

$10,258
Chief Executive Officer Succession Plan expense, net—
 —
 429
 —
Discontinued operations6
 —
 58
 —
Total compensation cost recognized for stock-based compensation plans$3,943
 $2,936
 $5,989
 $10,258
Related income tax benefit$470
 $971
 $765
 $3,391


InDuring the ninesix months ended MarchDecember 31, 2019,2018, the Company determined that the achievement of the adjusted operating income goals required to be met for Section 162(m) funding were not probable and therefore no awards would be paid or vested
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pursuant to the 2016-2018 LTIP and 2017-2019 LTIP. As such, in the six months ended December 31, 2018, the Company recorded a benefit of $1,867 related to$9,478 associated with the reversal of previously accrued amounts for awards under these plans that were dependent on the achievement of pre-determined performance measures. Of this amount, $5,065 was recorded in Chief Executive Officer Succession Plan expense, associated with the TSR Grant under the 2017-2019 LTIP, as definednet, and discussed further below.$4,413 was recorded to Selling, general and administration expense (including $1,867 of stock-based compensation expense).


Restricted Stock


A summary of the restricted stock and restricted share unit activity for the ninesix months ended MarchDecember 31, 2019 is as follows:
Number of Shares
and Units
Weighted
Average Grant
Date Fair 
Value (per share)
Non-vested restricted stock, restricted share units, and performance units outstanding at June 30, 20192,729  $12.94  
Granted486  $18.43  
Vested(188) $23.31  
Forfeited(1,094) $7.89  
Non-vested restricted stock, restricted share units, and performance units outstanding at December 31, 20191,933  $15.48  
 
Number of Shares
and Units
 
Weighted
Average Grant
Date Fair 
Value (per share)
Non-vested restricted stock, restricted share units, and performance units at June 30, 20181,057
 $22.29
Granted3,470
 $7.13
Vested(291) $26.50
Forfeited(333) $17.68
Non-vested restricted stock, restricted share units, and performance units at March 31, 20193,903
 $8.89


At December 31, 2019 and June 30, 2019, the table above includes a total of 1,318 and 1,964 shares, respectively, that represent the target number of shares that may be earned under non-vested performance equity awards that are eligible to vest at 300% of target depending on the achievement of pre-defined performance criteria. Additionally, at December 31, 2019 and June 30, 2019, the table above includes a total of 29 and 42 shares, respectively, that represent the target number of shares that may be earned under non-vested performance equity awards that are eligible to vest at 150% of target depending on the achievement of pre-defined performance criteria.

Nine Months Ended March 31,Six Months Ended December 31,
2019 201820192018
Fair value of restricted stock and restricted share units granted$24,734
 $14,595
Fair value of restricted stock and restricted share units granted$8,963  $10,073  
Fair value of shares vested$7,725
 $14,622
Fair value of shares vested$4,276  $6,938  
Tax benefit recognized from restricted shares vesting$3,331
 $4,970
Tax (benefit) expense recognized from restricted shares vestingTax (benefit) expense recognized from restricted shares vesting$(58) $2,561  


At MarchDecember 31, 2019, $24,083there was $20,957 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested restricted stock awards waswhich is expected to be recognized over a weighted average period of approximately 2.31.8 years.

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Stock Options


A summary of the stock option activity for the ninesix months ended MarchDecember 31, 2019 is as follows:
Number of Options  
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Life (years)
Aggregate
Intrinsic Value
Options outstanding and exercisable at June 30, 2019122  $2.26  
Exercised—  —  
Options outstanding and exercisable at December 31, 2019122  $2.26  11.5$2,890  
 Number of Options 
Weighted
Average
Exercise
Price
 
Weighted
Average
Contractual
Life (years)
 
Aggregate
Intrinsic Value
Options outstanding and exercisable at June 30, 2018122
 $2.26
    
Exercised—
 —
    
Options outstanding and exercisable at March 31, 2019122
 $2.26
 12.3 $2,544


At MarchDecember 31, 2019, there was no0 unrecognized compensation expense related to stock option awards.


Long-Term Incentive Plan

The Company maintains a long-term incentive program (the “LTI Plan”). The LTI Plan currently consists of four performance-based long-term incentive plans (the “2016-2018 LTIP”, “2017-2019 LTIP”, “2018-2020 LTIP” and “2019-2021 LTIP”) that provide for performance equity awards that can be earned over defined performance periods. Participants in the LTI Plan include certain of the Company’s executive officers and other key executives.

The Compensation Committee administers the LTI Plan and is responsible for, among other items, selecting the specific performance measures for awards and setting the target performance required to receive an award after the completion of the performance period. The Compensation Committee determines the specific payout to the participants. Any such stock-based awards shall be issued pursuant to and be subject to the terms and conditions of the Amended and Restated 2002 Long-Term Incentive and Stock Award Plan, as in effect and as amended from time-to-time, and the 2019 Equity Inducement Award Program, as applicable.

2019-2021 LTIP

Grants Made Pursuant to the Amended and Restated 2002 Long-Term Incentive and Stock Award Plan

On January 24, 2019, upon adoption of the 2019-2021 LTIP, the Compensation Committee granted 912 performance share units (“PSUs”), the achievement of which is dependent upon a defined calculation of relative total shareholder return (“TSR”) over the period from November 6, 2018 to November 6, 2021. The PSUs granted represent 100% of the targeted award, and will vest pursuant to the achievement of pre-established three-year compound annual TSR levels that are aligned with the CEO Inducement Grant. The number of shares actually issued will range from zero to 300% of the shares granted. No PSUs will vest if the three-year compound annual TSR is below 15%. Of the 912 PSUs issued, 451 are subject to a holding period of one year after the vesting date. As such, an illiquidity discount was applied to the grant date fair value for those shares subject to the one year holding period. The total grant date fair value with and without the illiquidity discount was estimated to be $5.99 and $5.26 per share, respectively. The total grant date fair value of this award was $5,132. Total compensation cost related to this PSU award was $432 in the three and nine months ended March 31, 2019.

The Company also issued 156 three-year time-based restricted share units under the 2019-2021 LTIP.

Grants Made Pursuant to the 2019 Equity Inducement Award Program

The primary purpose of the 2019 Equity Inducement Award Program is to further the long term stability and success of the Company by providing a program to reward selected individuals newly hired as employees of the Company with grants of inducement awards. Shares issued under this program are granted outside of the Amended and Restated 2002 Long-Term Incentive and Stock Award Plan.

In the three months ended March 31, 2019, the Compensation Committee granted 926 PSUs to selected individuals hired as employees of the Company, the achievement of which is dependent upon a defined calculation of relative TSR over the period from November 6, 2018 to November 6, 2021. The PSUs granted represent 300% of the targeted award and will vest pursuant to the achievement of pre-established three-year compound annual TSR levels, which are aligned with the CEO Inducement Grant.


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The number of PSUs expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the service period, regardless of the eventual number of PSUs that are earned based upon the market condition, provided that each grantee remains an employee at the end of the performance period. Compensation expense is reversed if at any time during the service period a grantee is no longer an employee. These PSUs are subject to a holding period of one year after the vesting date. As such, an illiquidity discount was applied to the grant date fair value.

Grant DateShares IssuedFair Value Per ShareGrant Date Fair Value
February 19, 2019739
$1.79
$1,324
March 29, 2019187
$3.01
563
Total926
 $1,887

The total number of shares actually issued will range from zero to 926. No PSUs will vest if the three-year compound annual TSR is below 15%.


2018-2020 LTIP

Upon adoption of the 2018-2020 LTIP, the Compensation Committee granted 45 PSUs, the achievement of which is dependent upon a defined calculation of relative TSR over the period from January 24, 2019 to June 30, 2020. The total grant date fair value of this award was estimated to be $18.32 per share, or $819.

2016-2018 and 2017-2019 LTIP

Upon adoption of the 2016-2018 LTIP and 2017-2019 LTIP, the Compensation Committee granted PSUs to each participant, the achievement of which is dependent upon a defined calculation of relative TSR over the period from July 1, 2015 to June 30, 2018 and from July 1, 2017 to June 30, 2019 (the “TSR Grant”), respectively. The grant date fair value for these awards was separately estimated based on a Monte Carlo simulation that calculated the likelihood of goal attainment. Each performance unit translates into one unit of common stock. The TSR Grant represents half of each participant’s target award. The other half of the 2016-2018 LTIP and 2017-2019 LTIP is based on the Company’s achievement of specified net sales growth targets over the respective three-year period. If the targets are achieved, the award in connection with the 2017-2019 LTIP may be paid only in unrestricted shares of the Company’s common stock.

During the three months ended September 30, 2018, in connection with the 2016-2018 LTIP, for the three-year performance period of July 1, 2015 through June 30, 2018, the Compensation Committee determined that the adjusted operating income goal required to be met for Section 162(m) funding was not achieved and determined that no awards would be paid or vested pursuant to the 2016-2018 LTIP. Accordingly, the 223 unvested performance stock unit awards previously granted in connection with the relative TSR portion of the award were forfeited, and amounts accrued relating to the net sales portion of the award were reversed. As such, in the three months ended September 30, 2018, the Company recorded a benefit of $6,482 associated with the reversal of previously accrued amounts under the net sales portion of the 2016-2018 LTIP, of which $5,065 was recorded in Chief Executive Officer Succession Plan expense, net on the Consolidated Statement of Operations.

In connection with the 2017-2019 LTIP, in the three months ended September 30, 2018, the Company determined that the achievement of the adjusted operating income goal required to be met for Section 162(m) funding was not probable. Accordingly, during the three months ended September 30, 2018, the Company recorded benefits of $1,129 and $1,867 associated with the reversal of previously accrued amounts under the portions of the 2017-2019 LTIP that were dependent on the achievement of pre-determined performance measures of net sales and relative TSR, respectively.

Other Grants

In the nine months ended March 31, 2019, the Company granted 201 time-based restricted share units to certain key employees and members of the Company’s Board of Directors that vest primarily over three years. Additionally, the Company issued 101 PSUs to certain key executives vesting over a period of one to two years based upon the achievement of certain market and/or performance based metrics being met.



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CEO Inducement Grant

On November 6, 2018, Mr. Schiller received an award of 1,050 PSUs intended to represent the total three-year long-term incentive opportunity that would have been made in fiscal years 2019 – 2021. The PSUs will vest pursuant to the achievement of pre-established three-year compound annual TSR levels. The number of shares actually issued will range from zero to 1,050. No PSUs will vest if the three-year compound annual TSR is below 15%. This award was granted outside of Amended and Restated 2002 Long-Term Incentive and Stock Award Plan and the 2019 Equity Inducement Award Program.

The number of PSUs expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the three-year service period, regardless of the eventual number of PSUs that are earned based upon the market condition, provided Mr. Schiller remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period Mr. Schiller is no longer an employee, subject to certain termination and change in control eligibility provisions. These PSUs are subject to a holding period of one year after the vesting date. As such, an illiquidity discount was applied to the grant date fair value. The total grant date fair value of the award was estimated to be $7,571, or $7.21 per share.

Total compensation cost related to this award recognized in the three and nine months ended March 31, 2019 was $621 and $1,008, respectively.

The Company also issued 79 three-year time-based restricted share units to Mr. Schiller.

14. INVESTMENTS


Equity method investment

On October 27, 2015, the Company acquired a 14.9%minority equity interest in Chop’t Creative Salad Company LLC, predecessor to Chop't Holdings, LLC (“Chop’t”). Chop’t develops and operates fast-casual, fresh salad restaurants in the Northeast and Mid-Atlantic United States. Chop’t markets and sells certain of the Company’s branded products and provides consumer insight and feedback. The investment is being accounted for as an equity method investment due to the Company’s representation on the Board of Directors of Chop’t. During fiscal 2018, the Company’s ownership interest was reduced to 13.4% due to the distribution of additional ownership interests. Further ownership interest distributions could potentially dilute the Company’s ownership interest to as low as 11.9%. At MarchDecember 31, 2019 and June 30, 2018,2019, the carrying value of the Company’s investment in Chop’t was $14,622$14,287 and $15,524,$14,632, respectively, and is included in the Consolidated Balance Sheets as a component of “InvestmentsInvestments and joint ventures.”



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15. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE


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 by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of MarchDecember 31, 2019: 
Total
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets:
Cash equivalents$3,006  $3,006  $—  $—  
Forward foreign currency contracts374  —  374  —  
Equity investment652  652  —  —  
Total$4,032  $3,658  $374  $—  
Liabilities:
Forward foreign currency contracts$709  $—  $709  $—  
Total$709  $—  $709  $—  
 Total 
Quoted
prices in
active
markets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Assets:       
Rabbi trust investments$34,452
 $34,452
 $—
 $—
Forward foreign currency contracts40
 —
 40
 —
Equity investment661
 661
 —
 —
Contingent consideration, current1,735
 —
 —
 1,735
Total$36,888
 $35,113
 $40
 $1,735
Liabilities:       
Forward foreign currency contracts$702
 $—
 $702
 $—
Contingent consideration, non-current—
 —
 —
 —
Total$702
 $—
 $702
 $—


The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:2019:
Total
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets:
Cash equivalents$44  $44  $—  $—  
Forward foreign currency contracts626  —  626  —  
Equity investment621  621  —  —  
Total$1,291  $665  $626  $—  
Liabilities:
Forward foreign currency contracts$103  $—  $103  $—  
Total$103  $—  $103  $—  
 Total 
Quoted
prices in
active
markets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Assets:       
Cash equivalents$99
 $99
 $—
 $—
Forward foreign currency contracts365
 —
 365
 —
Equity investments692
 692
 —
 —
Total$1,156
 $791
 $365
 $—
Liabilities:       
Forward foreign currency contracts$27
 $—
 $27
 $—
Contingent consideration, non-current1,909
 —
 —
 1,909
Total$1,936
 $—
 $27
 $1,909


The rabbi trust investments consist of cash and mutual funds whose fair value is based on quoted prices in active markets for identical assets, and are designated as Level 1 within the valuation hierarchy. The equity investment consists of the Company’s less than 1% investment in Yeo Hiap Seng Limited, a food and beverage manufacturer and distributor based in Singapore. Fair value is measured using the market approach based on quoted prices. The
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Company utilizes the income approach to measure fair value for its foreign currency forward contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices.

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The Company estimates the original fair value of thepayment related to existing contingent consideration asarrangements was remote. Accordingly, no liability was recorded on the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. The Company reassesses the fair value of contingent payments on a periodic basis. Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of the respective businesses, or changesConsolidated Balance Sheets in the future may result in different estimated amounts.

The following table summarizes the Level 3 activity for the nine months ended March 31, 2019:        
Balance as of June 30, 2018$1,909
Contingent consideration adjustment (a)
(147)
Translation adjustment(27)
Balance as of March 31, 2019$1,735

(a) The change in the fair value of contingent consideration is included in “Project Terra costs and other” in the Company’s Consolidated Statements of Operations.

either period.
There were no transfers of financial instruments between the three levels of fair value hierarchy during the ninesix months ended MarchDecember 31, 2019 and MarchDecember 31, 2018.


The carrying amount of cash and cash equivalents, accounts receivable, net, accounts payable and certain accrued expenses and other current liabilities approximate fair value due to the short-term maturities of these financial instruments. The Company’s debt approximates fair value due to the debt bearing fluctuating market interest rates (See Note 10, Debt and Borrowings).


In addition to the instruments named above, the Company also makes fair value measurements in connection with its interim and annual goodwill and trade nametradename impairment testing. These measurements fall into Level 3 of the fair value hierarchy (See Note 9, Goodwill and Other Intangible Assets).


Derivative Instruments


The Company primarily has exposure to changes in foreign currency exchange rates relating to certain anticipated cash flows and firm commitments from its international operations. The Company may enter into certain derivative financial instruments, when available on a cost-effective basis, to manage such risk. Derivative financial instruments are not used for speculative purposes. The fair value of these derivatives is included in prepaidPrepaid expenses and other current assets and accruedAccrued expenses and other current liabilities in the Consolidated Balance Sheet.Sheets. For derivative instruments that qualify as hedges of probable forecasted cash flows, the effective portion of changes in fair value is temporarily reported in accumulatedAccumulated other comprehensive incomeloss and recognized in earnings when the hedged item affects earnings. Fair value hedges and derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings.


Derivative instruments designated as hedges at inception as hedges are measured for effectiveness at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is not deferred in accumulatedAccumulated other comprehensive (loss) incomeloss and is included in current period results.earnings. The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date or when the hedge is no longer effective. There were no0 discontinued foreign exchange hedges for the three and ninesix months ended MarchDecember 31, 2019 and MarchDecember 31, 2018.


The notional and fair value amountsamount of cash flow hedges at MarchDecember 31, 2019 were $3,920 and $52June 30, 2019 was $10,095 and $2,275, respectively. The fair value of cash flow hedges at December 31, 2019 and June 30, 2019 was $102 of net liabilities respectively. There were no cash flow hedges or fair value hedges outstanding asand $83 of June 30, 2018.net assets, respectively.
The notional amounts of foreign currency exchange contracts not designated as hedges at MarchDecember 31, 2019 and June 30, 20182019 were $54,884$58,746 and $20,986,$41,845, respectively. The fair values of foreign currency exchange contracts not designated as hedges at MarchDecember 31, 2019 and June 30, 20182019 were $610$233 of net liabilities and $338$440 of net assets, respectively.


Gains and losses related to both designated and non-designated foreign currency exchange contracts are recorded in the Company’s Consolidated Statements of Operations based upon the nature of the underlying hedged transaction and were not material for the three and ninesix months ended MarchDecember 31, 2019 and MarchDecember 31, 2018.




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16. COMMITMENTS AND CONTINGENCIES


Securities Class Actions Filed in Federal Court


On August 17, 2016, three3 securities class action complaints were filed in the Eastern District of New York against the Company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The three3 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 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
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Complaints were consolidated under the caption In re The Hain Celestial Group, Inc. Securities Litigation (the “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 namesnamed as defendants the Company and certain of its current and former officers (collectively, the “Defendants”) and assertsasserted 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. Co-Lead Plaintiffs filed an opposition on December 1, 2017 and Defendants filed the reply on January 16, 2018. On April 4, 2018,which the Court requested additional briefing relating to certain aspects of Defendants’ motion to dismiss. In accordance with this request, Lead Plaintiffs submitted their supplemental briefgranted on April 18, 2018, and Defendants submitted an opposition on May 2, 2018. Lead Plaintiffs filed a reply brief on May 9, 2018, and Defendants submitted a sur-reply on May 16, 2018.

On March 29, 2019, the Court granted Defendant’s motion, dismissing the Amended Complaintcase in its entirety, without prejudice to replead. LeadCo-Lead Plaintiffs filed a seconded amended complaintSecond Amended Consolidated Class Action Complaint on May 6, 2019 (the “Second Amended Complaint”). The Second Amended Complaint again names as defendants the Company and certain of its current and 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. Co-Lead Plaintiffs filed an opposition on August 5, 2019, and Defendants submitted a reply on September 3, 2019. This motion is fully briefed, and the parties await a decision.


Stockholder Derivative Complaints Filed in State Court


On September 16, 2016, a stockholder derivative complaint, Paperny v. Heyer, et al. (the “Paperny Complaint”), was filed in New York State Supreme Court in Nassau County against the former Board of Directors and certain former officers of the Company alleging breach of fiduciary duty, unjust enrichment, lack of oversight and corporate waste.  On December 2, 2016 and December 29, 2016, two2 additional stockholder derivative complaints were filed in New York State Supreme Court in Nassau County against the former Board of Directors and certain former officers under the captions Scarola v. Simon (the “Scarola Complaint”) and Shakir v. Simon (the “Shakir Complaint” and, together with the Paperny Complaint and the Scarola Complaint, the “Derivative Complaints”), respectively. Both the Scarola Complaint and the Shakir Complaint allegealleged breach of fiduciary duty, lack of oversight and unjust enrichment. On February 16, 2017, the parties for the Derivative Complaints entered into a stipulation consolidating the matters under the caption In re The Hain Celestial Group (the “Consolidated Derivative Action”) in New York State Supreme Court in Nassau County, ordering the Shakir Complaint as the operative complaint. On November 2, 2017, the parties agreed to stay the Consolidated Derivative Action until April 11, 2018. On April 6, 2018, the parties filed a proposed stipulation agreeingAction. Co-Lead Plaintiffs requested leave to stay the Consolidated Derivative Action until October 4, 2018, which the Court granted on May 3, 2018. On October 9, 2018, the Court further stayed this matter until December 4, 2018file an amended consolidated complaint, and on December 4, 2018 further stayed the matter until January 14, 2019. On January 14, 2019, the Court held a status conference and grantedpartially lifted the stay, ordering Co-Lead Plaintiffs leave to file antheir amended complaint by March 7, 2019, while continuing2019. Co-Lead Plaintiffs filed a Verified Amended Shareholder Derivative Complaint on March 7, 2019. The Court continued the stay aspending a decision on Defendants’ motion to all other aspects ofdismiss in the case. On MarchConsolidated Securities Action (referenced above). After the Court in the Consolidated Securities Action dismissed the Amended Complaint, the Court in the Consolidated Derivative Action ordered Co-Lead Plaintiffs to file a second amended complaint no later than July 8, 2019. Co-Lead Plaintiffs filed a Verified Second Amended Shareholder Derivative Complaint on July 8, 2019 (the “Second Amended Derivative Complaint”). Defendants moved to dismiss the Second Amended Derivative Complaint on August 7, 2019,2019. Co-Lead Plaintiffs filed an amended complaint. The Court heldopposition to Defendants’ motion to dismiss, and Defendants submitted a status conferencereply on March 13, 2019 and continued the stay until a subsequent conference scheduled for May 6,September 20, 2019. At the May 6 conference, the Court indicated that the stay will be lifted, and after a preliminary conference for June 13, 2019, a scheduling order will be enteredThis motion is fully briefed, and the case will proceed.parties await a decision.


Additional Stockholder Class Action and Derivative Complaints Filed in Federal Court


On April 19, 2017 and April 26, 2017, two2 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 allegesalleged that the Company’s former directors and certain former officers made

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materially false and misleading statements in press releases and SEC filings regarding the Company’s business, prospects and financial results. The complaint also allegesalleged 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 Court granted an order to unseal this case and reveal Gary Merenstein as the plaintiff (the “Merenstein Complaint”).


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On August 10, 2017, the 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 iswas rendered on the motion to dismiss the Amended Complaint in the consolidatedConsolidated Securities Class Actions,Action, described above.


AfterOn March 29, 2019, the Court dismissedin 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 Class Actions, theAction filed a 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. The stay is continued through the later of: (a) thirty (30) days after the deadline for plaintiffs to file a second amended complaint in the Securities Class Actions; or, (b) if plaintiffs file a second amended complaint, and Defendants file a motion to dismiss the second amended complaint, thirty (30)30 days after the Court rules on the motion to dismiss the second amended complaintSecond Amended Complaint in the Consolidated Securities Class Actions.Action.


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. While the results of litigation and claims cannot be predicted with certainty, the Company believes the reasonably possible losses of such matters, individually and in the aggregate, are not material. Additionally, the Company believes the probable final outcome of such matters will not have a material adverse effect on the Company’s consolidated results of operations, financial position, cash flows or liquidity.


17. SEGMENT INFORMATION


Beginning inPrior to July 1, 2019, the third quarter of fiscal 2018, the Hain Pure ProteinCompany’s operations were classified as discontinued operations as discussed in “Note 5, Discontinued Operations.” Therefore, segment information presented excludes the results of Hain Pure Protein. As a result, the Company is now managed in seven7 operating segments: the United States, United Kingdom, Tilda, Ella’s Kitchen UK, Europe, Canada and Hain Ventures (formerlyVentures. For segment reporting purposes, based on economic similarity as outlined within Accounting Standards Codification ("ASC") 280, Segment Reporting, the Company elected to combine the United Kingdom, Tilda and Ella’s Kitchen UK operating segments into one reportable segment known as Cultivate).United Kingdom. Additionally, the Canada, Europe and Hain Ventures operating segments were combined as the Rest of World reportable segment. Separately, the United States operating segment comprised its own reportable segment.


The priorEffective July 1, 2019, the Company reassessed its segment reporting structure due to changes in how the Company’s CODM assesses the Company’s performance and allocates resources as a result of a change in the Company’s strategy, which includes creating synergies among the Company’s United States and Canada businesses, as well as among the Company’s international businesses in the United Kingdom and Europe. As a result, the Canada and Hain Ventures operating segments, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America reportable segment. Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment. Accordingly, the Company now operates under 2 reportable segments: North America and International.

Prior period segment information contained below has been adjusted to reflect the Company’s revisednew operating and reporting structure. Additionally, the Tilda operating segment was classified as discontinued operations as discussed in Note 5, Discontinued Operations. Segment information presented herein excludes the results of Tilda for all periods presented.


Net sales and operating income are the primary measures used by the Company’s Chief Operating Decision Maker (“CODM”)CODM to evaluate segment operating performance and to decide how to allocate resources to segments. The CODM is the Company’s Chief Executive Officer.CEO. Expenses related to certain centralized administration functions that are not specifically related to an operating segment are included in Corporate and Other. Corporate and Other expenses are comprised mainly of the compensation and related expenses of certain of the Company’s senior executive officers and other selected employees who perform duties related to the entire enterprise, as well as expenses for certain professional fees, facilities and other items which benefit the Company as a whole. Additionally, certain Project TerraProductivity and transformation costs are included in “CorporateCorporate and Other.” Expenses that are managed centrally, but can be attributed to a segment, such as employee benefits and certain facility costs, are allocated based on reasonable allocation methods. Assets are reviewed byThe Company’s CODM does not use segment asset information to allocate resources or to assess performance of the CODM on a consolidated basissegments and therefore, aretotal segment assets have not reported by operating segment.been disclosed.



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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 December 31,Six Months Ended December 31,
2019201820192018
Net Sales:
North America$280,693  $305,574  $552,394  $596,765  
International226,091  227,992  436,466  455,279  
$506,784  $533,566  $988,860  $1,052,044  
Operating Income (Loss):
North America$20,062  $9,563  $35,194  $14,069  
International12,899  15,153  22,006  20,813  
32,961  24,716  $57,200  $34,882  
Corporate and Other (a)
(23,770) (45,596) (45,554) (83,726) 
$9,191  $(20,880) $11,646  $(48,844) 
 Three Months Ended March 31, Nine Months Ended March 31,
 2019
2018 2019 2018
Net Sales:       
United States$266,445
 $281,052
 $769,585
 $815,013
United Kingdom227,206
 238,321
 671,121
 698,968
Rest of World106,146
 113,347
 304,080
 324,190
 $599,797
 $632,720
 $1,744,786
 $1,838,171
        
Operating Income/(Loss):       
United States$17,099
 $24,974
 $26,449
 $67,696
United Kingdom18,147
 13,863
 36,822
 37,062
Rest of World10,868
 11,059
 27,078
 30,591
 $46,114
 $49,896
 $90,349
 $135,349
Corporate and Other (a)
(22,249) (20,642) (105,975) (45,889)
 $23,865
 $29,254
 $(15,626) $89,460


(a) ForIn addition to general Corporate and Other expenses as described above, for the three months ended MarchDecember 31, 2019, Corporate and Other includes $455$9,835 of Productivity and transformation costs and tradename impairment charges of $1,889 (related to North America). For the three months ended December 31, 2018, Corporate and Other includes $10,148 of Chief Executive Officer Succession Plan expense, net, $5,506 of Productivity and $7,562 of Project Terratransformation costs, and other. For the three months ended March 31, 2018, Corporate and Other includes $4,175 of Project Terra costs and other $3,313 of accounting review and remediation costs.

For the nine months ended March 31, 2019, Corporate and Other includes $30,156 of Chief Executive Officer Succession Plan expense, net, $21,045 of Project Terra costs and other and $4,334 of accounting review and remediation costs. Corporate and Other for the nine months ended March 31, 2019 also includes impairment charges of $17,900 ($11,300 related to the United States segment, $2,787 related to the United Kingdom segment and $3,813 in Rest of World) related to certain of the Company’s tradenames. For the nine months ended March 31, 2018, Corporate and Other included $7,429 of Project Terra costs and other and net expense of $6,406$920 of accounting review and remediation costs, net of insurance proceeds, consistingand tradename impairment charges of $11,406 of costs incurred in$17,900 ($15,113 related to North America; $2,787 related to International).

In addition to general Corporate and Other expenses as described above, for the ninesix months ended MarchDecember 31, 2019, Corporate and Other includes $20,570 of Productivity and transformation costs and tradename impairment charges of $1,889 (related to North America), partially offset by a benefit of $2,562 of proceeds from insurance claim. For the six months ended December 31, 2018, offset byCorporate and Other includes $29,701 of Chief Executive Officer Succession Plan expense, net, $13,483 of Productivity and transformation costs, $4,334 of accounting review and remediation costs, net of insurance proceeds, and tradename impairment charges of $5,000.$17,900 ($15,113 related to North America; $2,787 related to International).


The Company’s long-lived assets, which primarily representCompany's net property, plant and equipment,sales by geographic area wereproduct category are as follows:
 March 31,
2019		 June 30,
2018
United States$115,243
 $99,650
United Kingdom179,226
 174,214
All Other86,331
 86,700
Total$380,800
 $360,564


Three Months Ended December 31,Six Months Ended December 31,
2019201820192018
Grocery$357,972  $380,497  $707,774  $763,094  
Snacks72,274  72,298  148,673  144,139  
Tea39,045  39,586  60,483  61,329  
Personal Care37,493  41,185  71,930  83,482  
Total$506,784  $533,566  $988,860  $1,052,044  

The Company’s net sales by geographic region, which are generally based on the location of the Company’s subsidiary,subsidiaries, were as follows:
Three Months Ended December 31,Six Months Ended December 31,
2019201820192018
United States$242,891  $270,925  $479,225  $525,867  
United Kingdom171,014  178,323  332,595  357,759  
All Other92,879  84,318  177,040  168,418  
Total$506,784  $533,566  $988,860  $1,052,044  
 Three Months Ended March 31, Nine Months Ended March 31,
 2019 2018 2019 2018
United States$279,609
 $296,635
 $807,899
 $860,987
United Kingdom227,206
 238,321
 671,121
 698,968
All Other92,982
 97,764
 265,766
 278,216
Total$599,797
 $632,720
 $1,744,786
 $1,838,171



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The Company’s long-lived assets, which primarily represent net property, plant and equipment, by geographic area were as follows:
December 31,
2019		June 30,
2019
United States$114,592  $115,866  
United Kingdom143,215  132,876  
All Other87,149  87,277  
Total$344,956  $336,019  

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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 MarchDecember 31, 2019 thereto contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.2019. Forward looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading “Cautionary Note Regarding Forward Looking Information” in the introduction of this Form 10-Q.


Overview


The Hain Celestial Group, Inc. (the “Company”), 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 Lake Success, New York. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet — To Create and Inspire A Healthier Way of LifeTM and be the 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 70 countries worldwide.


The Company manufactures, markets, distributes and sells organic and natural products under brand names that are sold as “better-for-you” products, providing consumers with the opportunity to lead A Healthier Way of Life™.  Hain Celestial is a leader in many organic and natural products categories, with many recognized brands in the various market categories it serves, including Almond Dream®, Arrowhead MillsBearitos®, Bearitos®, Better Bean®, BluePrint®, Casbah®, Celestial Seasonings®, Clarks™, Coconut Dream®, Cully & Sully®, Danival®, DeBoles®, Earth’s Best®, Ella’s Kitchen®, Europe’s Best®, Farmhouse Fare™, Frank Cooper’s®, Gale’s®, Garden of Eatin’®, GG UniqueFiber®, Hain Pure Foods®, Hartley’s®, Health Valley®, Imagine®, Johnson’s Juice Co.™, Joya®, Lima®, Linda McCartney® (under license), MaraNatha®, Mary Berry (under license), Natumi®, New Covent Garden Soup Co.®, Orchard House®, Rice Dream®, Robertson’s®, Rudi’s Gluten-Free Bakery™, Rudi’s Organic Bakery®, Sensible Portions®, Spectrum® Organics, Soy Dream®, Sun-Pat®, Sunripe®, SunSpireTerra®, Terra®, The Greek Gods®, Tilda®, Walnut Acres®, Yorkshire Provender®, Yves Veggie Cuisine®and William’s™. The Company’s personal care products are marketed under the Alba Botanica®, Avalon Organics®, Earth’s Best®, JASON®, Live Clean® and Queen Helene® brands.


The Company 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 80 countries worldwide.

Appointment of New CEO

On October 26, 2018,Company’s strategy is to focus on simplifying the Company’s Boardportfolio and reinvigorating profitable sales growth through discontinuing uneconomic investment, realigning resources to coincide with individual brand roles, reducing unproductive stock-keeping units (“SKUs”) and brands, and reassessing current pricing architecture. As part of Directors appointed Mark L. Schiller as President and Chief Executive Officer, succeeding Irwin D. Simon. In connection with the appointment, on October 26, 2018,this initiative, the Company reviewed its product portfolio within North America and Mr. Schiller entereddivided it into an employment agreement,“Get Bigger” and “Get Better” brand categories.

The Company’s “Get Bigger” brands represent its strongest brands with higher margins, which was approved bycompete in categories with strong growth. In order to capitalize on the Board,potential of these brands, the Company began reallocating resources to optimize assortment and increase share of distribution. In addition, the Company will increase its marketing and innovation investments.

The Company’s “Get Better” brands are the brands in which the Company is primarily focused on simplification and expansion of profit. Some of these are low margin, non-strategic brands that add complexity with Mr. Schiller’s employment commencing on November 5, 2018. See Note 3, Chief Executive Officer Succession Plan, minimal benefit to the Company’s operations. Accordingly, in fiscal 2019, the Company initiated a SKU rationalization, which included the elimination of approximately 350 low velocity SKUs. The elimination of these SKUs is expected to impact sales growth in the Notescurrent fiscal year, but is expected to Consolidated Financial Statements includedresult in Item 1expanded profits and a remaining set of this Form 10-Q for additional information.core SKUs that will maintain their shelf space in the store.


Discontinued Operations

In March 2018,As part of the Company’s Boardoverall strategy, the Company may seek to dispose of Directors approvedbusinesses and brands that are less profitable or are otherwise less of a plan to sellstrategic fit within our core portfolio. Accordingly, the Company divested of all of theits operations of the Hain Pure Protein reportable segment and WestSoy® tofu, seitan and tempeh businesses in the United States in fiscal 2019, the entities comprising its Tilda operating segment and certain other assets of the Tilda business in August 2019 and its Arrowhead Mills® and SunSpire® businesses in October 2019.

Productivity and Transformation
As part of the Company’s historical strategic review, it focused on a productivity initiative, which it called “Project Terra.” A key component of this project was the identification of global cost savings and the removal of complexity from the business. In
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fiscal 2019, the Company announced a new transformation initiative, of which one aspect is to identify additional areas of productivity savings to support sustainable profitable performance.
Productivity and transformation costs include costs, such as consulting and severance costs, relating to streamlining the Company’s manufacturing plants, co-packers and supply chain, eliminating served categories or brands within those categories, and product rationalization initiatives which are aimed at eliminating slow moving SKUs.  
Discontinued Operations

On August 27, 2019, the Company and Ebro Foods S.A. (the “Purchaser”) entered into, and consummated the transactions contemplated by, an agreement titled, "Agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets" (the “Sale and Purchase Agreement”). The Company sold the entities comprising its Tilda operating segment and certain other assets of the Tilda business to the Purchaser for an aggregate price of $341.8 million.

On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business, a component of the Company’s Hain Pure Protein Corporation (“HPPC”) operating segment. On June 28, 2019, the Company completed the sale of the remainder of HPPC and EK Holdings, Inc. (“Empire”) operating segments,Empire Kosher which were reported inincluded the aggregate as the Hain Pure Protein reportable segment.FreeBird and Empire Kosher businesses. These dispositions are beingwere undertaken to reduce complexity in the Company’s operations and simplify the Company’s brand portfolio, in addition to allowing additional flexibility to focus on opportunities for growth and innovation in the Company’s more profitable and faster growing core businesses.

Collectively, these dispositions represent awere reported in the aggregate as the Hain Pure Protein reportable segment.

These dispositions represented strategic shiftshifts that will havehad a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations.

On February 15, 2019,therefore, the Company completedis presenting the sale of substantially alloperating results and cash flows of the assets used primarily forTilda operating segment and the Plainville Farms business (a component of HPPC).

On May 8, 2019, the Company entered into a definitive agreement to sell all of its equity interest in Hain Pure Protein Corporation, which includesreportable segment within discontinued operations in the FreeBird™current and Empire® Kosher businesses, for a purchase priceprior periods. The assets and liabilities of $80.0 million, subject to adjustments. The transaction is expected to close beforethe Tilda operating segment are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of June 30, 2019, the end of the Company's fiscal year.2019.




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See Note 5, Discontinued Operations, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information on discontinued operations.


Project TerraChange in Reportable Segments


During fiscal 2016,Historically, the Company commenced a strategic review, referredhad three reportable segments: United States, United Kingdom and Rest of World. Effective July 1, 2019, the Company reassessed its segment reporting structure due to as “Project Terra,” of which a key initiativechanges in how the Company’s Chief Executive Officer (“CEO”), who is the identificationchief operating decision maker, assesses the Company’s performance and allocates resources as a result of global cost savings,a change in the Company’s strategy, which includes creating synergies among the Company’s United States and Canada businesses, as well as removing complexities fromamong the business. Under this plan,Company’s international businesses in the United Kingdom and Europe. As a result, the Canada and Hain Ventures operating segment, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America reportable segment. Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment. Accordingly, the Company aimsnow operates under two reportable segments: North America and International.

Prior period segment information contained herein has been adjusted to achieve $350 million in global savings by fiscal 2020, a portion of which the Company intends to reinvest into its brands. This review includes streamliningreflect the Company’s manufacturing plants, co-packers,new operating and supply chain, in addition to product rationalization initiatives which are aimed at eliminating slow moving stock keeping units (“SKUs”).reporting structure.



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Comparison of Three Months Ended MarchDecember 31, 2019 to Three Months Ended MarchDecember 31, 2018


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 MarchDecember 31, 2019 and 2018 (amounts in thousands, other than percentages, which may not add due to rounding):
 Three Months EndedChange in
 December 31, 2019December 31, 2018DollarsPercentage
Net sales$506,784  100.0%  $533,566  100.0%  $(26,782) (5.0)% 
Cost of sales401,177  79.2%  432,215  81.0%  (31,038) (7.2)% 
Gross profit105,607  20.8%  101,351  19.0%  4,256  4.2%  
Selling, general and administrative expenses79,078  15.6%  78,496  14.7%  582  0.7%  
Amortization of acquired intangibles3,189  0.6%  3,322  0.6%  (133) (4.0)% 
Productivity and transformation costs12,260  2.4%  9,872  1.9%  2,388  24.2%  
Chief Executive Officer Succession Plan expense, net—  —%  10,148  1.9%  (10,148) *  
Accounting review and remediation costs, net of insurance proceeds—  —%  920  0.2%  (920) *  
Long-lived asset and intangibles impairment1,889  0.4%  19,473  3.6%  (17,584) *  
Operating income (loss)9,191  1.8%  (20,880) (3.9)% 30,071  144.0%  
Interest and other financing expense, net4,737  0.9%  5,428  1.0%  (691) (12.7)% 
Other expense, net1,244  0.2%  371  0.1%  873  235.3%  
Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees3,210  0.6%  (26,679) (5.0)% 29,889  112.0%  
Provision for income taxes1,020  0.2%  5,097  1.0%  (4,077) (80.0)% 
Equity in net loss of equity-method investees338  —%  11  —%  327  *  
Net income (loss) from continuing operations$1,852  0.4%  $(31,787) (6.0)% $33,639  105.8%  
Net loss from discontinued operations, net of tax(2,816) (0.6)% (34,714) (6.5)% 31,898  91.9%  
Net loss$(964) (0.2)% $(66,501) (12.5)% $65,537  98.6%  
Adjusted EBITDA$45,047  8.9%  $37,888  7.1%  $7,159  18.9%  
Diluted net income (loss) per common share from continuing operations$0.02  $(0.31) $0.33  106.5%  
Diluted net loss per common share from discontinued operations(0.03) (0.33) 0.30  90.9%  
Diluted net loss per common share$(0.01) $(0.64) $0.63  98.4%  
 Three Months Ended Change in
 March 31, 2019 March 31, 2018 Dollars Percentage
Net sales$599,797
 100.0% $632,720
 100.0% $(32,923) (5.2)%
Cost of sales474,528
 79.1% 499,707
 79.0% (25,179) (5.0)%
Gross profit125,269
 20.9% 133,013
 21.0% (7,744) (5.8)%
Selling, general and administrative expenses87,739
 14.6% 86,063
 13.6% 1,676
 1.9%
Amortization of acquired intangibles3,802
 0.6% 4,713
 0.7% (911) (19.3)%
Project Terra costs and other9,408
 1.6% 4,831
 0.8% 4,577
 94.7%
Chief Executive Officer Succession Plan expense, net455
 0.1% —
 —% 455
 *
Accounting review and remediation costs, net of insurance proceeds—
 — 3,313
 0.5% (3,313) (100.0)%
Long-lived asset and intangibles impairment—
 — 4,839
 0.8% (4,839) (100.0)%
Operating income23,865
 4.0% 29,254
 4.6% (5,389) (18.4)%
Interest and other financing expense, net9,390
 1.6% 6,782
 1.1% 2,608
 38.5%
Other expense/(income), net1,068
 0.2% (1,560) (0.2)% 2,628
 (168.5)%
Income from continuing operations before income taxes and equity in net loss of equity-method investees13,407
 2.2% 24,032
 3.8% (10,625) (44.2)%
Provision (benefit) for income taxes3,114
 0.5% (1,310) (0.2)% 4,424
 (337.7)%
Equity in net loss of equity-method investees205
 —% 101
 —% 104
 103.0%
Net income from continuing operations$10,088
 1.7% $25,241
 4.0% $(15,153) (60.0)%
Net loss from discontinued operations, net of tax$(75,925) (12.7)% $(12,555) (2.0)% $(63,370) (504.7)%
Net (loss) income$(65,837) (11.0)% $12,686
 2.0% $(78,523) (619.0)%
            
Adjusted EBITDA$55,507
 9.3% $73,440
 11.6% $(17,933) (24.4)%
* Percentage is not meaningful


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Net Sales


Net sales for the three months ended MarchDecember 31, 2019 were $599.8$506.8 million, a decrease of $32.9$26.8 million, or 5.2%5.0%, from net sales of $632.7as compared to $533.6 million forin the three months ended MarchDecember 31, 2018. On a constant currency basis, net sales decreased approximately 1.8%4.6% from the prior year quarter. Net sales on a constant currency basis decreased in the United States and Rest of WorldNorth America reportable segments, partially offset by an increase in net sales insegment while the United KingdomInternational reportable segment.segment remained flat. Further details of changes in net sales by segment are provided below.


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Gross Profit


Gross profit for the three months ended MarchDecember 31, 2019 was $125.3$105.6 million, a decreasean increase of $7.7$4.3 million, or 5.8%4.2%, as compared to the prior year quarter. Gross profit margin was 20.9%20.8% of net sales, compared to 21.0%19.0% in the prior year quarter. GrossThe increased profit margin was unfavorably impactedprimarily driven by higherefficient trade spending and promotional investments to drive future period growth. These increased costs were partially offset by Project Terrasupply chain cost reductions in the United States as well as other productivity savings.


Selling, General and Administrative Expenses


Selling, general and administrative expenses were $87.7$79.1 million for the three months ended MarchDecember 31, 2019, an increase of $1.7$0.6 million, or 1.9%0.7%, from $86.1$78.5 million for the prior year quarter. Selling, general and administrative expenses increased primarilyThe increase was due to increased consulting costs in the United States associated with the Fountain of Truth product launchmarketing and e-commerce, as well as increasedadvertising spend and variable compensation costs, including stock-based compensation expense, partially offset by Project Terra savings as well as the impact of foreign exchange rates.a decrease in broker trade funds. Selling, general and administrative expenses as a percentage of net sales was 14.6%15.6% in the three months ended MarchDecember 31, 2019 compared to 13.6%14.7% in the prior year quarter, reflecting an increase of 10090 basis points primarily attributable to the aforementioned items.


Amortization of Acquired Intangibles


Amortization of acquired intangibles was $3.8$3.2 million for the three months ended MarchDecember 31, 2019, a decrease of $0.9$0.1 million from $4.7$3.3 million in the prior year quarter. The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized subsequent to March 31, 2018.quarter as a result of movements in foreign currency.


Project TerraProductivity and Transformation Costs

Productivity and Other

Project Terratransformation costs and other was $9.4were $12.3 million for the three months ended MarchDecember 31, 2019, an increase of $4.6$2.4 million from $4.8$9.9 million in the prior year quarter. The increase was primarily due to increased consulting fees incurred in connection with the Company’s Project Terra strategic review as well asongoing transformation initiatives and increased severance costs for the three months ended March 31, 2019 as compared to the prior year period.costs.


Chief Executive Officer Succession Plan Expense, netNet


Net costs and expenses associated with the Company’s Former Chief Executive Officer Succession Plan were $0.5$10.1 million for the three months ended MarchDecember 31, 2019.2018. There were no comparable expenses in the three months ended MarchDecember 31, 2018.2019. See Note 3, Former Chief Executive Officer Succession Plan, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.


Accounting Review and Remediation Costs, netNet of Insurance Proceeds


Costs and expenses associated with the internal accounting review, remediation and other related matters were $3.3$0.9 million for the three months ended MarchDecember 31, 2018. No such costs were incurred in the three months ended MarchDecember 31, 2019.


Long-lived Asset and Intangibles Impairment


During the three months ended MarchDecember 31, 2019, the Company recorded a pre-tax impairment charge of $1.9 million related to certain tradenames within the Company's North America segment. During the three months ended December 31, 2018, the Company recorded non-casha pre-tax impairment chargescharge of $2.6$17.9 million related to certain tradenames ($15.1 million related to the closure of a manufacturing facility inNorth America segment and $2.8 million related to the United Kingdom and $2.2 million to write down the value of certain machinery and equipment. There were no impairment charges recorded in the three months ended March 31, 2019.


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Operating Income

Operating income for the three months ended March 31, 2019 was $23.9 million compared to $29.3 million in the prior year quarter. The decrease in operating income resulted from the items described above.

InterestInternational segment). See Note 9, Goodwill and Other Financing Expense, net

Interest and other financing expense, net totaled $9.4 million for the three months ended March 31, 2019, an increase of $2.6 million, or 38.5%, from $6.8 million in the prior year quarter. The increase in interest and other financing expense, net resulted primarily from higher interest expense related to our revolving credit facility as a result of higher variable interest rates. See Note 10, Debt and BorrowingsIntangible Assets, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q.

Other Expense/(Income), net

Other expense/(income), net, totaled $1.1 Additionally, in the three months ended December 31, 2018, the Company recorded $1.6 million of expensenon-cash impairment charges primarily related to the write down of the value of certain machinery and equipment.

Operating Income (Loss)

Operating income for the three months ended MarchDecember 31, 2019 was $9.2 million compared to $1.6an operating loss of $20.9 million in the prior year quarter as a result of incomethe items described above.

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Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $4.7 million for the three months ended December 31, 2019, a decrease of $0.7 million, or 12.7%, from $5.4 million in the prior year quarter. IncludedThe decrease resulted primarily from lower interest expense related to our revolving credit facility as a result of lower outstanding debt and lower variable interest rates. See Note 10, Debt and Borrowings, in other expense/(income),the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense, Net

Other expense, net were net unrealized foreign currency losses,totaled $1.2 million for the three months ended December 31, 2019, compared to net unrealized foreign currency gains$0.4 million in the prior year quarter principally duequarter. The increase was primarily attributable to the effectloss on sale of foreign currency movements on the remeasurement of foreign currency denominated loans.Arrowhead and Sunspire businesses.


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


Income (loss) before income taxes and equity in net loss of our equity-method investees for the three months ended MarchDecember 31, 2019 was $13.4income of $3.2 million compared to $24.0a loss of $26.7 million forin the three months ended March 31, 2018.prior year quarter. The decreaseincrease was due to the items discussed above.


Income Taxes


The provision for income taxes includes federal, foreign, state and local income taxes. For the three months ended March 31, 2019, the Company calculated its effective tax rate based on a discrete basis due to significant variations in the relationship between income tax expense and projected pre-tax income. As a result, the actual effective tax rate for the three months ended March 31, 2019 is being utilized. Our income tax expense from continuing operations was $3.1$1.0 million for the three months ended MarchDecember 31, 2019 compared to $1.3$5.1 million of tax benefit in the prior year quarter.


The effective income tax rate from continuing operations was an expense of 23.2%31.8% and 19.1% for the three months ended MarchDecember 31, 2019 compared to a benefit of 5.5% for the three months ended Marchand December 31, 2018.2018, respectively. The effective income tax raterates from continuing operations for the three months ended March 31, 2019 wasall periods were impacted by the provisions in the Tax Cuts and Jobs Act including global intangible low-taxed income(the "Tax Act"), primarily related to Global Intangible Low Taxed Income and limitations on the deductibility of executive compensation. The effective income tax rate wasrates in each period were also negatively impacted by the geographical mix of earnings and state taxes. For an additional discussion onvaluation allowance. During the impactthree months ended December 31, 2018, the Company finalized its accounting for income tax effects of the Tax Act see Note 11, Income Taxes, in the Notesand recorded additional expense related to the Consolidated Financial Statements included in Item 1 of this Form 10-Q.

The effective income tax rate from continuing operations for the three months ended March 31, 2018 was primarily impacted by the enactment of the Tax Act on December 22, 2017, specifically the revalue of net deferred tax liabilities to the enacted 21% tax rate, repealing the deduction for domestic production activities, inclusion of theits transition tax liability estimate and limitation on the deductibility of executive officers’ compensation. The effective income tax rate from continuing operations for the three months ended March 31, 2018 was also favorably impacted by the geographical mix of earnings, as well as a $3.8 million benefit relating to the release of the Company’s domestic uncertain tax position as a result of the expiration of the statute of limitations.liability.

The income tax benefit from discontinued operations was $21.4 million for the three months ended March 31, 2019, compared to income tax expense from discontinued operations of $10.4 million for the three months ended March 31, 2018. The tax benefit in the three months ended March 31, 2019 is impacted by the tax effect of current period book losses including the loss on the sale of Plainville Farms assets in the third quarter of fiscal 2019 as well as the deferred tax benefit arising from asset impairment charges. Income tax expense for the three months ended March 31, 2018 includes a $10.7 million deferred tax liability related to Hain Pure Protein being classified as held for sale.


Our 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.


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Equity in Net Loss of Equity-Method Investees


Our equity in net loss from our equity-method investments for the three months ended MarchDecember 31, 2019 was $0.2$0.3 million compared to $0.1 millionand essentially break even in the three months ended March 31, 2018.prior year quarter. See Note 14, Investments, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.


Net Income (Loss) from Continuing Operations


Net income from continuing operations for the three months ended MarchDecember 31, 2019 was $10.1$1.9 million, or $0.02 per diluted share, compared to $25.2a net loss of $31.8 million, or $0.31 per diluted share, for the three months ended MarchDecember 31, 2018. Net income per diluted share from continuing operations was $0.10 for the three months ended March 31, 2019 compared to $0.24 in the prior year quarter. The decreaseincrease was attributable to the factors noted above.


Net Loss from Discontinued Operations, Net of Tax


Net loss from discontinued operations, net of tax, for the three months ended MarchDecember 31, 2019 was $75.9$2.8 million, or $0.03 per diluted share, compared to $12.6$34.7 million, or $0.33 per diluted share, in the three months ended MarchDecember 31, 2018. Diluted net loss per common share from discontinued operations was $0.73 and $0.12 in

During the three months ended MarchDecember 31, 2019, and 2018, respectively.the Company recognized a $3.8 million adjustment to the sale of Tilda entities relating to post-closing adjustments. Net loss from discontinued operations, net of tax, for the three months ended MarchDecember 31, 20192018 included a loss on sale recorded in connection with the disposition of the Plainville Farms business of $40.2 million and asset impairment charges of $51.3$54.9 million to write-down the net assets of the remainingassociated with our former Hain Pure Protein componentsbusiness.

The income tax benefit from discontinued operations was $1.8 million for the three months ended December 31, 2019 associated with the tax gain on the sale of the Tilda entities and the tax effect of current period book losses. The income tax benefit from discontinued operations of $22.9 million for the three months ended December 31, 2018 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In
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addition, the estimated selling price, less costs to sell,benefit is impacted by the tax effect of current period book losses as discussed inwell as deferred tax benefit arising from asset impairment charges.

See Note 5, Discontinued Operations, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.10-Q for further discussion.


Net (Loss) IncomeLoss


Net loss for the three months ended MarchDecember 31, 2019 was $65.8$1.0 million, or $0.01 per diluted share, compared to net income of $12.7$66.5 million, or $0.64 per diuted share, in the prior year quarter. NetThe reduction in net loss per diluted share was $0.63 in the three months ended March 31, 2019 compared to net income per diluted share of $0.12 in the three months ended March 31, 2018. The decrease was attributable to the factors noted above.


Adjusted EBITDA


Our Adjusted EBITDA was $55.5$45.0 million and $73.4$37.9 million for the three months ended MarchDecember 31, 2019 and 2018, 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.

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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 MarchDecember 31, 2019 and 2018:
(dollars in thousands)North AmericaInternationalCorporate and OtherConsolidated
Net sales
Three months ended 12/31/19$280,693  $226,091  $—  $506,784  
Three months ended 12/31/18305,574  227,992  —  533,566  
$ change$(24,881) $(1,901) n/a  $(26,782) 
% change(8.1)%(0.8)%n/a  (5.0)%
Operating income (loss)
Three months ended 12/31/19$20,062  $12,899  $(23,770) $9,191  
Three months ended 12/31/189,563  15,153  (45,596) (20,880) 
$ change$10,499  $(2,254) $21,826  $30,071  
% change109.8 %(14.9)%47.9 %144.0 %
Operating income (loss) margin
Three months ended 12/31/197.1 %5.7 %n/a  1.8 %
Three months ended 12/31/183.1 %6.6 %n/a  (3.9)%
(dollars in thousands)United States United Kingdom Rest of World Corporate and Other Consolidated
Net sales         
Three months ended 3/31/19$266,445
 $227,206
 $106,146
 $—
 $599,797
Three months ended 3/31/18281,052
 238,321
 113,347
 —
 632,720
$ change$(14,607) $(11,115) $(7,201) n/a
 $(32,923)
% change(5.2)% (4.7)% (6.4)% n/a
 (5.2)%
          
Operating income         
Three months ended 3/31/19$17,099
 $18,147
 $10,868
 $(22,249) $23,865
Three months ended 3/31/1824,974
 13,863
 11,059
 (20,642) 29,254
$ change$(7,875) $4,284
 $(191) $(1,607) $(5,389)
% change(31.5)% 30.9 % (1.7)% (7.8)% (18.4)%
          
Operating income margin         
Three months ended 3/31/196.4 % 8.0 % 10.2 % n/a
 4.0 %
Three months ended 3/31/188.9 % 5.8 % 9.8 % n/a
 4.6 %


North America
United States


Our net sales in the United StatesNorth America reportable segment for the three months ended MarchDecember 31, 2019 were $266.4$280.7 million, a decrease of $14.6$24.9 million, or 5.2%8.1%, from net sales of $281.1$305.6 million forin the three months ended March 31, 2018.prior year quarter. The decrease in net sales was primarily driven by declines in our Pantry and Better-For-You-Baby platforms. In addition, the declines were also driven by the strategic decision to no longer support certain lower margin SKUs in order to reduce complexity and increase gross margins. Operating income in the United StatesNorth America for the three months ended MarchDecember 31, 2019 was $17.1$20.1 million, a decreasean increase of $7.9$10.5 million from operating income of $25.0$9.6 million forin the three months ended March 31, 2018.prior year quarter. The decreaseincrease was driven by efficient trade spending and supply chain cost reductions in operating income was the result of the aforementioned decrease in net sales and increased consulting costs associated with the Fountain of Truth product launch and e-commerce,United States as well as increased variable compensation costs in the three months ended March 31, 2019 compared to the three months ended March 31, 2018, partially offset by Project Terraother productivity savings.


United Kingdom
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International

Our net sales in the United KingdomInternational reportable segment for the three months ended MarchDecember 31, 2019 were $227.2$226.1 million, a decrease of $11.1$1.9 million, or 4.7%0.8%, from net sales of $238.3$228.0 million forin the three months ended March 31, 2018.prior year quarter. On a constant currency basis, net sales increased 1.8%0.1% from the prior year quarter. The net sales increase on a constant currency basis wasquarter primarily due to growth from the Company’s Linda McCartney® and Hartley’s® brands and in our Tildaplant based food and Ella’s Kitchen businesses.beverage products, partially offset by discontinued sales of unprofitable SKUs. Operating income in the United Kingdomour International reportable segment for the three months ended MarchDecember 31, 2019 was $18.1$12.9 million, an increasea decrease of $4.3$2.3 million from $13.9$15.2 million for the three months ended MarchDecember 31, 2018. The increase in operating incomedecrease was primarily due to increased marketing and advertising expense and depreciation related to capital expenditures during the year ended June 30, 2019.

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 efficiencies achieved at Hain Daniels driven by Project Terrasegment. Such Corporate and decreased salesOther expenses are comprised mainly of compensation and marketingrelated 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, facilities, and other items which benefit the Company as a whole. Additionally, Productivity and transformation costs and tradename impairment charges of $9.8 million and $1.9 million, respectively,are included in our Ella’s Kitchen business.


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Rest of World

Our net sales in Rest of World were $106.1 millionCorporate and Other for the three months ended MarchDecember 31, 2019, a decrease2019. Chief Executive Officer Succession Plan expense, net, Productivity and transformation costs and Accounting review and remediation costs, net of $7.2insurance proceeds included within Corporate and Other expenses were $10.1 million, or 6.4%, from net sales of $113.3$5.5 million and $0.9 million, respectively, for the three months ended MarchDecember 31, 2018.

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

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Comparison of Six Months Ended December 31, 2019 to Six Months Ended December 31, 2018

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the six months ended December 31, 2019 and 2018 (amounts in thousands, other than percentages, which may not add due to rounding):
 Six Months EndedChange in
 December 31, 2019December 31, 2018DollarsPercentage
Net sales$988,860  100.0%  $1,052,044  100.0%  $(63,184) (6.0)% 
Cost of sales785,422  79.4%  861,785  81.9%  (76,363) (8.9)% 
Gross profit203,438  20.6%  190,259  18.1%  13,179  6.9%  
Selling, general and administrative expenses159,758  16.2%  154,473  14.7%  5,285  3.4%  
Amortization of acquired intangibles6,272  0.6%  6,681  0.6%  (409) (6.1)% 
Productivity and transformation costs26,435  2.7%  20,205  1.9%  6,230  30.8%  
Chief Executive Officer Succession Plan expense, net—  —%  29,701  2.8%  (29,701) *  
Proceeds from insurance claim(2,562) (0.3)% —  —%  (2,562) *  
Accounting review and remediation costs, net of insurance proceeds—  —%  4,334  0.4%  (4,334) *  
Long-lived asset and intangibles impairment1,889  0.2%  23,709  2.3%  (21,820) *  
Operating income (loss)11,646  1.2%  (48,844) (4.6)% 60,490  123.8%  
Interest and other financing expense, net11,031  1.1%  9,742  0.9%  1,289  13.2%  
Other expense, net2,572  0.3%  971  0.1%  1,601  164.9%  
Loss from continuing operations before income taxes and equity in net loss of equity-method investees(1,957) (0.2)% (59,557) (5.7)% 57,600  96.7%  
Provision (benefit) for income taxes489  —%  (4,869) (0.5)% 5,358  110.0%  
Equity in net loss of equity-method investees655  —%  186  —%  469  252.2%  
Net loss from continuing operations$(3,101) (0.3)% $(54,874) (5.2)% $51,773  94.3%  
Net loss from discontinued operations, net of tax(104,884) (10.6)% (49,052) (4.7)% (55,832) (113.8)% 
Net loss$(107,985) (10.9)% $(103,926) (9.9)% $(4,059) (3.9)% 
Adjusted EBITDA$77,137  7.8%  $66,583  6.3%  $10,554  15.9%  
Diluted net income (loss) per common share from continuing operations$(0.03) $(0.53) $0.50  94.3%  
Diluted net loss per common share from discontinued operations(1.01) (0.47) (0.54) (114.9)% 
Diluted net loss per common share$(1.04) $(1.00) $(0.04) (4.0)% 
* Percentage is not meaningful

Net Sales

Net sales for the six months ended December 31, 2019 were $988.9 million, a decrease of $63.2 million, or 6.0%, from $1.05 billion for the six months ended December 31, 2018. On a constant currency basis, net sales decreased 0.7%approximately 4.7% from the prior year.year period. Net sales on a constant currency basis decreased in both the North America and International reportable segments. Further details of changes in net sales by segment are provided below.

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Gross Profit

Gross profit for the six months ended December 31, 2019 was $203.4 million, an increase of $13.2 million, or 6.9%, as compared to the prior year period. Gross profit margin was 20.6% of net sales, compared to 18.1% in the prior year period. The increased profit margin was primarily driven by efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $159.8 million for the six months ended December 31, 2019, an increase of $5.3 million, or 3.4%, from $154.5 million for the prior year period. The increase was due to increased marketing and advertising spend in the current year period and lower variable compensation costs in the prior year period, including stock-based compensation expense, primarily related to the reversal of previously accrued amounts under certain performance based incentive plans of which achievement was no longer probable. See Note 13, Stock-based Compensation and Incentive Performance Plans, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion. These increases were partially offset by a decrease in broker trade funds in the current year period. Selling, general and administrative expenses as a percentage of net sales was 16.2% in the six months ended December 31, 2019 compared to 14.7% in the prior year period, reflecting an increase of 150 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $6.3 million for the six months ended December 31, 2019, a decrease of $0.4 million from $6.7 million in the prior year period. The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized in periods subsequent to December 31, 2018 and the impact of movements in foreign currency.

Productivity and Transformation Costs

Productivity and transformation costs were $26.4 million for the six months ended December 31, 2019, an increase of $6.2 million from $20.2 million in the prior year period. The increase was primarily due to increased consulting fees incurred in connection with the Company’s ongoing transformation initiatives and increased severance costs for the six months ended December 31, 2019 as compared to the prior year period.

Chief Executive Officer Succession Plan Expense, Net

Net costs and expenses associated with the Company’s Former Chief Executive Officer Succession Plan were $29.7 million for the six months ended December 31, 2018. There were no comparable expenses in the six months ended December 31, 2019. See Note 3, Former Chief Executive Officer Succession Plan, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

Proceeds from Insurance Claim

In July of 2019, the Company received $7.0 million as partial payment from an insurance claim relating to business disruption costs associated with a co-packer. Of this amount $4.5 million was recognized in fiscal 2019 as it relates to reimbursement of costs already incurred. The Company recorded the additional $2.6 million in the six months ended December 31, 2019.

Accounting Review and Remediation Costs, Net of Insurance Proceeds

Costs and expenses associated with the internal accounting review, remediation and other related matters were $4.3 million for the six months ended December 31, 2018. No such costs were incurred in the six months ended December 31, 2019.

Long-lived Asset and Intangibles Impairment

During the six months ended December 31, 2019, the Company recorded a pre-tax impairment charge of $1.9 million related to certain tradenames within the Company's North America segment. During the six months ended December 31, 2018, the Company recorded a pre-tax impairment charge of $17.9 million related to certain tradenames ($15.1 million related to the North America segment and $2.8 million related to the International segment). See Note 9, Goodwill and Other Intangible Assets, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q. Additionally, the Company recorded $5.3 million of non-cash impairment charges primarily related to the Company’s decision to consolidate manufacturing of certain fruit-based products in the United Kingdom.

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Operating Income (Loss)

Operating income for the six months ended December 31, 2019 was $11.6 million compared to an operating loss of $48.8 million in the prior year period. The increase in operating income resulted from the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $11.0 million for the six months ended December 31, 2019, an increase of $1.3 million, or 13.2%, from $9.7 million in the prior year period. The increase resulted primarily from a $0.9 million write-off of deferred financing costs due to the repayment of the Company’s term loan and higher interest expense related to our revolving credit facility as a result of higher variable interest rates on outstanding debt. See Note 10, Debt and Borrowings, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense, Net

Other expense, net, totaled $2.6 million for the six months ended December 31, 2019, compared to $1.0 million in the prior year period. The increase was primarily attributable to the loss on sale of the Arrowhead and Sunspire businesses.

Loss From Continuing Operations Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Loss before income taxes and equity in net loss of our equity-method investees for the six months ended December 31, 2019 was $2.0 million compared to $59.6 million in the prior year period. The reduction in net loss was due to the items discussed above.

Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes. Our income tax expense from continuing operations was $0.5 million for the six months ended December 31, 2019 compared to a benefit of $4.9 million in the prior year period.

The effective income tax rates from continuing operations was expense of 25.0% and a benefit of 8.2% for the six months ended December 31, 2019 and December 31, 2018, respectively. The effective income tax rate for both periods were impacted by provisions in the Tax Cuts and Jobs Act, primarily related to Global Intangible Low Taxed Income and limitations on the deductibility of executive compensation. The effective income tax rates in each period were also impacted by the geographical mix of earnings and state valuation allowance. During the six months ended December 31, 2018, the Company finalized its accounting for income tax effects of the Tax Act and recorded additional expense related to its transition tax liability.

Our 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.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the six months ended December 31, 2019 was $0.7 million compared to $0.2 million in the prior year period. See Note 14, Investments, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net Loss from Continuing Operations

Net loss from continuing operations for the six months ended December 31, 2019 was $3.1 million compared $54.9 million in the prior year period. Net loss per diluted share from continuing operations was $0.03 for the six months ended December 31, 2019 compared to $0.53 in the prior year period. The reduction in net loss was attributable to the factors noted above.

Net Loss from Discontinued Operations, Net of Tax

Net loss from discontinued operations, net of tax, for the six months ended December 31, 2019 was $104.9 million, or $1.01 per diluted share, compared to $49.1 million, or $0.47 per diluted share, in the prior year period.

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Net loss from discontinued operations, net of tax, for the six months ended December 31, 2019 included a reclassification of $95.1 million of cumulative translation losses from Accumulated comprehensive loss related to the Tilda business to discontinued operations. Net loss from discontinued operations, net of tax, for the six months ended December 31, 2018 included asset impairment charges of $57.9 million associated with our former Hain Pure Protein business.

The income tax expense from discontinued operations was $13.5 million for the six months ended December 31, 2019 and is impacted by $15.3 million of tax relating to the tax gain on the sale of the Tilda entities. The income tax benefit from discontinued operations of $27.5 million for the six months ended December 31, 2018 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In addition, the benefit is impacted by the tax effect of current period book losses as well as deferred tax benefit arising from asset impairment charges.

See Note 5, Discontinued Operations, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

Net Loss

Net loss for the six months ended December 31, 2019 was $108.0 million, or $1.04 per diluted share, compared to $103.9 million, or $1.00 per diluted share, in the prior year period. The increase in net loss was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $77.1 million and $66.6 million for the six months ended December 31, 2019 and 2018, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures presented following the discussion of our results of operations.

Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the six months ended December 31, 2019 and 2018:
(dollars in thousands)North AmericaInternationalCorporate and OtherConsolidated
Net sales
Six months ended 12/31/19$552,394  $436,466  $—  $988,860  
Six months ended 12/31/18596,765  455,279  —  1,052,044  
$ change$(44,371) $(18,813) n/a  $(63,184) 
% change(7.4)%(4.1)%n/a  (6.0)%
Operating income (loss)
Six months ended 12/31/19$35,194  $22,006  $(45,554) $11,646  
Six months ended 12/31/1814,069  20,813  (83,726) (48,844) 
$ change$21,125  $1,193  $38,172  $60,490  
% change150.2 %5.7 %45.6 %123.8 %
Operating income (loss) margin
Six months ended 12/31/196.4 %5.0 %n/a  1.2 %
Six months ended 12/31/182.4 %4.6 %n/a  (4.6)%

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North America

Our net sales in the North America reportable segment for the six months ended December 31, 2019 were $552.4 million, a decrease of $44.4 million, or 7.4%, from $596.8 million in the prior year period. The decrease in net sales was primarily driven by declinesthe strategic decision to no longer support certain lower margin SKUs in Canadaorder to reduce complexity and increase gross margins. Operating income in North America for the six months ended December 31, 2019 was $35.2 million, an increase of $21.1 million from $14.1 million in the Company’s Europe’s Best®, Live Clean® prior year period. The increase in operating income was the result of increased gross profit in the United States driven by efficient trade spending and Dream® brands,supply chain cost reductions in the United States as well as other productivity savings, offset in part by growth in our Yves Veggie Cuisine®, Sensible Portions®, Terra® increased marketing and Tilda® brands. Hain Ventures (formerly known as Cultivate)advertising expense.

International

Our net sales in the International reportable segment for the six months ended December 31, 2019 were $436.5 million, a decrease of $18.8 million, or 4.1%, from $455.3 million in the prior year period. On a constant currency basis, net sales decreased 1.2% from the prior year quarter, primarily driven by declines from the Blueprint®, SunSpire® and DeBoles® brands,due to discontinued sales of unprofitable SKUs, partially offset in part by growth in our plant based food and beverage products. Operating income in our International reportable segment for the six months ended December 31, 2019 was $22.0 million, an increase of $1.2 million from $20.8 million in the GG UniqueFiber™ brand. Hain Europe net salesprior year period. Operating income for the six months ended December 31, 2018 was negatively impacted by a long-lived asset impairment of $4.3 million recognized during the period. Excluding the impairment, operating income for the six months ended December 31, 2019 decreased $3.1 million from the prior year quarter, but increased on a constant currency basis,period primarily due to growth fromincreased marketing and advertising expense and depreciation related to capital expenditures during the Company’s Joya® and Natumi® brands and private label sales, offset in part by declines from the Lima®, Danival® and Dream® brands. Operating income in the segment for the three monthsyear ended March 31, 2019 was $10.9 million, a decrease of $0.2 million, from $11.1 million for the three months ended March 31, 2018. The decrease in operating income was primarily due to start-up costs incurred in connection with a new manufacturing facility in Canada.June 30, 2019.


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, facilities, and other items which benefit the Company as a whole. Additionally, Productivity and transformation costs and tradename impairment charges of $20.6 million and $1.9 million, respectively, are included in Corporate and Other for the six months ended December 31, 2019. Chief Executive Officer Succession Plan expense, net, Project TerraProductivity and transformation costs and other, net are included in Corporate and Other and were $0.5 million and $7.6 million, respectively, for the three months ended March 31, 2019. Project Terra costs and other and Accounting review and remediation costs, net of insurance proceeds included within Corporate and Other expenses were $4.2$29.7 million, $13.5 million and $3.3$4.3 million, respectively, for the threesix months ended MarchDecember 31, 2018.


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

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Comparison of Nine Months Ended March 31, 2019 to Nine Months Ended March 31, 2018

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, 2019 and 2018 (amounts in thousands, other than percentages which may not add due to rounding):
 Nine Months Ended Change in
 March 31, 2019 March 31, 2018 Dollars Percentage
Net sales$1,744,786
 100.0% $1,838,171
 100.0% $(93,385) (5.1)%
Cost of sales1,405,650
 80.6% 1,447,820
 78.8% (42,170) (2.9)%
Gross profit339,136
 19.4% 390,351
 21.2% (51,215) (13.1)%
Selling, general and administrative expenses255,383
 14.6% 258,586
 14.1% (3,203) (1.2)%
Amortization of acquired intangibles11,567
 0.7% 13,859
 0.8% (2,292) (16.5)%
Project Terra costs and other29,613
 1.7% 13,750
 0.7% 15,863
 115.4%
Chief Executive Officer Succession Plan expense, net30,156
 1.7% —
 —% 30,156
 *
Accounting review and remediation costs, net of insurance proceeds4,334
 0.2% 6,406
 0.3% (2,072) (32.3)%
Long-lived asset and intangibles impairment23,709
 1.4% 8,290
 0.5% 15,419
 186.0%
Operating (loss) income(15,626) (0.9)% 89,460
 4.9% (105,086) (117.5)%
Interest and other financing expense, net25,912
 1.5% 19,543
 1.1% 6,369
 32.6%
Other expense/(income), net2,041
 0.1% (5,447) (0.3)% 7,488
 (137.5)%
(Loss) income from continuing operations before income taxes and equity in net loss (income) of equity-method investees(43,579) (2.5)% 75,364
 4.1% (118,943) (157.8)%
Benefit for income taxes(1,679) (0.1)% (11,516) (0.6)% 9,837
 (85.4)%
Equity in net loss (income) of equity-method investees391
 —% (104) —% 495
 (476.0)%
Net (loss) income from continuing operations$(42,291) (2.4)% $86,984
 4.7% $(129,275) (148.6)%
Net loss from discontinued operations, net of tax$(127,472) (7.3)% $(7,349) (0.4)% $(120,123) *
Net (loss) income$(169,763) (9.7)% $79,635
 4.3% $(249,398) (313.2)%
           
Adjusted EBITDA$134,433
 7.7% $194,560
 10.6% $(60,127) (30.9)%
* Percentage is not meaningful

Net Sales

Net sales for the nine months ended March 31, 2019 were $1.74 billion, a decrease of $93.4 million, or 5.1%, from net sales of $1.84 billion for the nine months ended March 31, 2018. On a constant currency basis, net sales decreased approximately 3.1% from the prior year period. Net sales decreased across all three of our reportable segments. Further details of changes in net sales by segment are provided below.

Gross Profit

Gross profit for the nine months ended March 31, 2019 was $339.1 million, a decrease of $51.2 million, or 13.1%, as compared to the prior year period. Gross profit margin was 19.4% of net sales, compared to 21.2% in the prior year period. Gross profit was unfavorably impacted by higher trade and promotional investments and increased freight and commodity costs primarily in the United States segment. These increased costs were partially offset by Project Terra cost savings.


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Selling, General and Administrative Expenses

Selling, general and administrative expenses were $255.4 million for the nine months ended March 31, 2019, a decrease of $3.2 million, or 1.2%, from $258.6 million for the prior year. Selling, general and administrative expenses decreased primarily due to a decrease of $2.5 million associated with the reversal of previously accrued amounts under the net sales portion of the 2016-2018 and 2017-2019 LTIPs and a $4.8 million decrease in stock-based compensation expense, which included the reversal of $1.9 million of previously recognized stock-based compensation expense associated with the relative TSR portion of the 2017-2019 LTIP due to specified performance metrics not being attained. See Note 13, Stock-based Compensation and Incentive Performance Plans, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q for further discussion on the aforementioned reversals under the Company’s LTIPs. This decrease was offset in part by higher marketing investment costs in the Company’s international businesses and increased consulting costs in the United States associated with the Fountain of Truth product launch and e-commerce, as well as increased variable compensation costs. Selling, general and administrative expenses as a percentage of net sales was 14.6% in the nine months ended March 31, 2019 and 14.1% in the prior year period, reflecting an increase of 50 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $11.6 million for the nine months ended March 31, 2019, a decrease of $2.3 million from $13.9 million in the prior year period. The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized subsequent to March 31, 2018.

Project Terra Costs and Other

Project Terra costs and other was $29.6 million for the nine months ended March 31, 2019, an increase of $15.9 million from $13.8 million in the prior year period. The increase was primarily due to increased consulting fees incurred in connection with the Company’s Project Terra strategic review as well as increased severance costs for the nine months ended March 31, 2019 as compared to the prior year period. Project Terra costs and other for the nine months ended March 31, 2019 also included $2.1 million in costs associated with the exit of a leased production facility in the United Kingdom.

Chief Executive Officer Succession Plan Expense, net

Net costs and expenses associated with the Company’s Chief Executive Officer Succession Plan were $30.2 million for the nine months ended March 31, 2019. There were no comparable expenses in the nine months ended March 31, 2018. See Note 3, Chief Executive Officer Succession Plan, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q for further discussion.

Accounting Review and Remediation Costs, net of Insurance Proceeds

Costs and expenses associated with the internal accounting review, remediation and other related matters were $4.3 million for the nine months ended March 31, 2019, compared to $6.4 million in the prior year period. Included in accounting review and remediation costs for the nine months ended March 31, 2019 and 2018 were insurance proceeds of $0.2 million and $5.0 million, respectively, related to the reimbursement of costs incurred as part of the internal accounting review and the independent review by the Audit Committee and other related matters.

Long-lived Asset and Intangibles Impairment

In the nine months ended March 31, 2019, the Company recorded a pre-tax impairment charge of $17.9 million ($11.3 million related to the United States, $3.8 million related to Rest of World and $2.8 million related to the United Kingdom segment) related to certain tradenames of the Company. See Note 9, Goodwill and Other Intangible Assets, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q. Additionally, the Company recorded $5.8 million of non-cash impairment charges primarily related to the Company’s decision to consolidate manufacturing of certain fruit-based products in the United Kingdom. During the nine months ended March 31, 2018, the Company recorded a $6.2 million non-cash impairment charge related to the closures of manufacturing facilities in the United Kingdom and United States. Additionally, during the nine months ended March 31, 2018, the Company recorded a $2.1 million non-cash impairment charge to write down the value of certain machinery and equipment.

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Operating (Loss) Income

Operating loss for the nine months ended March 31, 2019 was $15.6 million compared to operating income of $89.5 million in the prior year period. The decrease in operating income resulted from the items described above.

Interest and Other Financing Expense, net

Interest and other financing expense, net totaled $25.9 million for the nine months ended March 31, 2019, an increase of $6.4 million, or 32.6%, from $19.5 million in the prior year period. The increase in interest and other financing expense, net resulted primarily from higher interest expense related to our revolving credit facility as a result of higher variable interest rates. See Note 10, Debt and Borrowings, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q.

Other Expense/(Income), net

Other expense/(income), net totaled $2.0 million of expense for the nine months ended March 31, 2019, compared to $5.4 million of income in the prior year period. Included in other expense/(income), net for the nine months ended March 31, 2019 were net unrealized foreign currency losses, which were higher than the prior year period principally due to the effect of foreign currency movements on the remeasurement of foreign currency denominated loans.

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

Loss from continuing operations before income taxes and equity in net loss (income) of our equity-method investees for the nine months ended March 31, 2019 was $43.6 million compared to income of $75.4 million for the nine months ended March 31, 2018. The decrease was due to the items discussed above.

Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes. For the nine months ended March 31, 2019, the Company calculated its effective tax rate based on a discrete basis due to significant variations in the relationship between income tax expense and projected pre-tax income. As a result, the actual effective tax rate for the nine months ended March 31, 2019 is being utilized. Our income tax expense from continuing operations was a benefit of $1.7 million for the nine months ended March 31, 2019 compared to $11.5 million of tax benefit in the prior year quarter.

The effective income tax rate from continuing operations was a benefit of 3.9% and 15.3% for the nine months ended March 31, 2019 and March 31, 2018, respectively. The effective income tax rate from continuing operations for the nine months ended March 31, 2019 was impacted by the provisions in the Tax Act including global intangible low-taxed income, finalization of the Transition Tax liability, and limitations on the deductibility of executive compensation. The effective income tax rate was also impacted by the geographical mix of earnings and state taxes. For an additional discussion on the impact of the Tax Act, see Note 11, Income Taxes, in the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q.

The effective income tax rate from continuing operations for the nine months ended March 31, 2018 was primarily impacted by the enactment of the Tax Act on December 22, 2017, specifically related to the revalue of net deferred tax liabilities to the enacted 21% tax rate, repealing the deduction for domestic production activities, inclusion of a transition tax liability estimate and the deductibility of executive officers’ compensation. The effective income tax rate from continuing operations for the nine months ended March 31, 2018 was also favorably impacted by the geographical mix of earnings, as well as a $3.8 million benefit relating to the release of the Company’s domestic uncertain tax position as a result of the expiration of the statute of limitations.

The income tax benefit from discontinued operations was $49.0 million for the nine months ended March 31, 2019, compared to income tax expense from discontinued operations of $12.7 million for the nine months ended March 31, 2018. The benefit for income taxes for the nine months ended March 31, 2019 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In addition, the nine month tax benefit is impacted by the tax effect of current period book losses including the loss on the sale of Plainville Farms assets in the third quarter of fiscal 2019 as well as the deferred tax benefit arising from asset impairment charges.

Our 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.


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Equity in Net Loss (Income) of Equity-Method Investees

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2019 was $0.4 million, compared to equity in net income of $0.1 million in the three months ended March 31, 2018. See Note 14, Investments, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q.

Net (Loss) Income from Continuing Operations

Net loss from continuing operations for the nine months ended March 31, 2019 was $42.3 million compared to net income of $87.0 million for the nine months ended March 31, 2018. Net loss per diluted share was $0.41 for the nine months ended March 31, 2019 compared to net income per diluted share of $0.83 in the prior year period. The net loss from continuing operations was attributable to the factors noted above.

Net Loss from Discontinued Operations

Net loss from discontinued operations for the nine months ended March 31, 2019 was $127.5 million compared to $7.3 million in the nine months ended March 31, 2018, or $1.23 and $0.07 net loss per diluted share from discontinued operations, respectively. The increase in net loss from discontinued operations was primarily attributable to asset impairment charges of $109.3 million and a loss on sale in connection with the disposition of the Plainville Farms business of $40.2 million, in each case recorded in the nine months ended March 31, 2019 and as discussed in Note 5, Discontinued Operations, in the Notes to Consolidated Financial Statements included in Item 1 of this Form 10-Q.

Net (Loss) Income

Net loss for the nine months ended March 31, 2019 was $169.8 million compared to net income of $79.6 million in the prior year period. Net loss per diluted share was $1.63 in the nine months ended March 31, 2019 compared to net income per diluted share of $0.76 in the nine months ended March 31, 2018. The decrease was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $134.4 million and $194.6 million for the nine months ended March 31, 2019 and 2018, 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.

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Segment Results

The following table provides a summary of net sales and operating (loss)/income by reportable segment for the nine months ended March 31, 2019 and 2018:
(dollars in thousands)United States United Kingdom Rest of World Corporate and Other Consolidated
Net sales         
Nine months ended 3/31/19$769,585
 $671,121
 $304,080
 $—
 $1,744,786
Nine months ended 3/31/18815,013
 698,968
 324,190
 —
 1,838,171
$ change$(45,428) $(27,847) $(20,110) n/a
 $(93,385)
% change(5.6)% (4.0)% (6.2)% n/a
 (5.1)%
          
Operating (loss)/income         
Nine months ended 3/31/19$26,449
 $36,822
 $27,078
 $(105,975) $(15,626)
Nine months ended 3/31/1867,696
 37,062
 30,591
 (45,889) 89,460
$ change$(41,247) $(240) $(3,513) $(60,086) $(105,086)
% change(60.9)% (0.6)% (11.5)% (130.9)% (117.5)%
          
Operating (loss)/income margin         
Nine months ended 3/31/193.4 % 5.5 % 8.9 % n/a
 (0.9)%
Nine months ended 3/31/188.3 % 5.3 % 9.4 % n/a
 4.9 %

United States

Our net sales in the United States segment for the nine months ended March 31, 2019 were $769.6 million, a decrease of $45.4 million, or 5.6%, from net sales of $815.0 million for the nine months ended March 31, 2018. The decrease in net sales was primarily driven by declines in our Pantry, Better-For-You-Baby, Fresh Living and Tea platforms. In addition, the declines were also driven by the strategic decision to no longer support certain lower margin SKUs in order to reduce complexity and increase gross margins. Operating income in the United States for the nine months ended March 31, 2019 was $26.4 million, a decrease of $41.2 million from operating income of $67.7 million for the nine months ended March 31, 2018. The decrease in operating income was the result of the aforementioned decrease in net sales, higher trade investments to drive future period growth and increased freight and logistics costs, offset in part by Project Terra cost savings.

United Kingdom

Our net sales in the United Kingdom segment for the nine months ended March 31, 2019 were $671.1 million, a decrease of $27.8 million, or 4.0%, from net sales of $699.0 million for the nine months ended March 31, 2018. On a constant currency basis, net sales decreased 0.6% from the prior year. The net sales decrease was primarily due to declines of private label sales and declines in sales of the Company’s Hartley’s®, New Covent Garden Soup Co.®, Cully & Sully® and Johnson’s Juice Co.™ brands, partially offset by growth in the Company’s Tilda and Ella’s Kitchenbusinesses and growth in our Linda McCartney® brand. Operating income in the United Kingdom segment for the nine months ended March 31, 2019 was $36.8 million, a decrease of $0.2 million from $37.1 million for the nine months ended March 31, 2018. The decrease in operating income was primarily due to the aforementioned decrease in sales and a $4.3 million non-cash impairment charge associated with the consolidation of manufacturing of certain fruit-based products in the United Kingdom in the nine months ended March 31, 2019, partially offset by operating efficiencies achieved at Hain Daniels driven by Project Terra.


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Rest of World

Our net sales in Rest of World were $304.1 million for the nine months ended March 31, 2019, a decrease of $20.1 million, or 6.2%, from net sales of $324.2 million for the nine months ended March 31, 2018. On a constant currency basis, net sales decreased 2.6% from the prior year. The decrease in net sales was driven by declines in Canada from the Company’s Europe’s Best® and Dream® brands and private label sales, partially offset by growth in our Yves Veggie Cuisine®, Sensible Portions® and Imagine® brands. Hain Europe net sales decreased from the prior year quarter, primarily driven by declines from the Danival®, Lima® and Dream® brands, offset in part by growth from the Natumi® and Joya® brands and private label sales. Hain Ventures (formerly known as Cultivate) net sales decreased from the prior year, primarily driven by declines from the Blueprint®, SunSpire® and DeBoles® brands, offset in part by growth from the GG UniqueFiber™ brand. Operating income in the segment for the nine months ended March 31, 2019 was $27.1 million, a decrease of $3.5 million, from $30.6 million for the nine months ended March 31, 2018. The decrease in operating income was primarily due to the aforementioned decrease in sales, start-up costs incurred in connection with a new manufacturing facility in Canada and costs associated with the planned closure of a manufacturing facility in the United States due to the Company’s decision to utilize a third-party manufacturer.

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 the 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, facilities, and other items which benefit the Company as a whole. Additionally, Chief Executive Officer Succession Plan expense, net, Project Terra costs and other and accounting review and remediation costs, net are included in Corporate and Other and were $30.2 million, $21.0 million and $4.3 million, respectively, for the nine months ended March 31, 2019. Corporate and Other in the nine months ended March 31, 2019 also includes tradename impairment charges of $17.9 million. Project Terra costs and other and accounting review and remediation costs, net were $7.4 million and $6.4 million, respectively, for the nine months ended March 31, 2018.

Refer to Note 17, Segment Information, in the Notes to Consolidated Financial Statements included in 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 Third Amended and Restated Credit Agreement (as amended, the “Amended Credit Agreement”). As of December 31, 2019, $668.6 million was available under the Amended Credit Agreement, and Amended Credit Agreement (defined below).the Company was in compliance with all associated covenants.


Our cash and cash equivalents balance decreased $79.0increased $6.0 million at MarchDecember 31, 2019 to $27.6$37.0 million as compared to $106.6$31.0 million at June 30, 2018. At March 31, 2019, our restricted cash balance was $34.5 million which was associated with the cash separation payment provided by the Chief Executive Officer Succession Agreement, which was paid on May 6, 2019. Our working capital from continuing operations was $364.9$264.7 million at MarchDecember 31, 2019, a decreasean increase of $73.2$24.4 million from $438.1$240.3 million at the end of fiscal 2018.2019.


Liquidity is affected by many factors, some of which are based on normal ongoing operations of the Company’s business and some of which arise from fluctuations related to global economics and markets. Our cash balances are held in the United States, United Kingdom, Canada, Europe and India. As of MarchDecember 31, 2019, approximately 82.9% ($22.8 million)substantially all of the total cash balance from continuing operations was held outside of the United States. Our cash balance for discontinued operations was $3.7 million and held inStates due to debt repayments made towards our revolving credit facility at the end of the period by the United States at March 31, 2019.operating segment. It is our current intent to indefinitely reinvest our foreign earnings outside the United States. However, we intend to further study changes enacted by the Tax Cuts and Jobs Act, costs of repatriation and the current and future cash needs of foreign operations to determine whether there is an opportunity to repatriate foreign cash balances in the future on a tax-efficient basis.



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We maintain our cash and cash equivalents primarily in money market funds or their equivalent. As of MarchDecember 31, 2019, all of our investments were expected to mature in less than three months. Accordingly, we do not believe that our investments have significant exposure to interest rate risk. Cash provided by (used in) operating, investing and financing activities is summarized below.
Six Months Ended December 31,Change in
(amounts in thousands)2019  2018  Dollars  Percentage  
Cash flows provided by (used in):
Operating activities from continuing operations$17,148  $(4) $17,152  *  
Investing activities from continuing operations(16,217) (37,135) 20,918  56.3%  
Financing activities from continuing operations3,694  14,881  (11,187) (75.2)% 
Effect of exchange rate changes on cash from continuing operations1,382  (1,492) 2,874  192.6%  
Increase (decrease) in cash from continuing operations6,007  (23,750) 29,757  125.3%  
Decrease in cash from discontinued operations(8,509) (11,225) 2,716  24.2%  
Net decrease in cash and cash equivalents and restricted cash$(2,502) $(34,975) $32,473  92.8%  
 Nine Months Ended March 31, Change in
(amounts in thousands)2019
2018 Dollars Percentage
Cash flows provided by (used in):       
Operating activities from continuing operations$12,043
 $67,370
 $(55,327) (82)%
Investing activities from continuing operations(52,029) (61,308) 9,279
 15 %
Financing activities from continuing operations(3,333) (31,849) 28,516
 90 %
Decrease in cash from continuing operations(43,319) (25,787) (17,532) (68)%
Decrease in cash from discontinued operations(2,782) (3,303) 521
 16 %
Effect of exchange rate changes on cash(1,225) 5,884
 (7,109) (121)%
Net decrease in cash and cash equivalents$(47,326) $(23,206) $(24,120) (104)%
* Percentage is not meaningful


Cash provided by operating activities from continuing operations was $12.0$17.1 million for the ninesix months ended MarchDecember 31, 2019, a decreasean increase of $55.3$17.2 million from $67.4 million of cash provided by operating activities from continuing operations for the nine months ended March 31, 2018.prior year period. This decreaseincrease resulted primarily from an increaseimprovement of $79.8$25.9 million in net loss adjusted for non-cash charges offset in part by $24.5and a decrease of $8.8 million of cash provided byused in working capital accounts.accounts, primarily related to a decrease in Accounts payable and accrued expenses.


Cash used in investing activities from continuing operations was $52.0$16.2 million for the ninesix months ended MarchDecember 31, 2019, a decrease of $9.3$20.9 million from $61.3 million of cash used in investing activities from continuing operations for the nine months ended March 31, 2018. Capital expendituresof $37.1 million in the nine months ended March 31, 2019prior year period primarily due to proceeds of $13.8 million from the sale of the Arrowhead and March 31, 2018 were $55.9 millionSunspire businesses and $48.4 million, respectively. In the nine months ended March 31, 2018, cash used in investing activities included a $13.1 million payment for the acquisition of Clarks UK Limited.decreased capital expenditures.


Cash used inprovided by financing activities from continuing operations was $3.3$3.7 million for the ninesix months ended MarchDecember 31, 2019, a decrease of $28.5$11.2 million from $31.8$14.9 million of net cash used in the prior year period. Cash provided by financing activities from continuing operations for the ninesix months ended MarchDecember 31, 2018. The decrease was due2018 included $309.9 million primarily related to netthe proceeds from the sale of Tilda, partially offset by $305.3 million of repayments of $7.8 million on our term loan and revolving credit facility and other debt forfunded primarily through proceeds received from the nine months ended March 31, 2018, compared with net borrowingssale of $37.2 million for the nine months ended March 31, 2019. Additionally, included in the nine months ended March 31, 2019 was $3.1 million related to stock repurchases to satisfy employee payroll tax withholdings and $37.5 million to fund the operations of discontinued operations. Cash used in financing activities from continuing operations in the nine months ended March 31, 2018 included $6.9 million related to stock repurchases to satisfy employee payroll tax withholdings and $17.2 million to fund operations of discontinued operations.Tilda.


Operating Free Cash Flow from Continuing Operations


Our operating free cash flow from continuing operations was negative $43.8$12.2 million for the ninesix months ended MarchDecember 31, 2019, a decreasean improvement of $62.9$28.8 million from negative $41.0 million in the ninesix months ended MarchDecember 31, 2018. This decreaseimprovement resulted primarily from a decreasean improvement of $79.8$25.9 million in net loss adjusted for non-cash charges, and an increasea decrease of $7.5$11.7 million in capital expenditures, offset in part by $24.5and a decrease of $8.8 million of cash provided byused in working capital accounts. We expect that our capital spending for fiscal 20192020 will be approximately $70-$60-$8070 million, and we may incur additional costs in connection with Project Terra. We referongoing productivity and transformation initiatives. See the reader to 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 (used in) operating activities from continuing operations to operating free cash flow from continuing operations.


Credit AgreementShare Repurchase Program


On February 6, 2018,June 21, 2017, the Company’s Board of Directors authorized the repurchase of up to $250 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 entered intorepurchases its shares and the Third Amendedtiming of such repurchases will depend upon market conditions and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a $1,000,000 revolving credit facility through February 6, 2023other corporate considerations. As of December 31, 2019, the Company had not repurchased any shares under this program and provides for a $300,000 term loan. Under the Credit Agreement, the revolving credit facility may be increased by an additional uncommitted $400,000, provided certain conditions are met. Loanshad $250 million of remaining capacity under the Credit Agreement bear interest at a Base Rate or a Eurocurrency Rate (both of which are defined in the Credit Agreement) plus an applicable margin, which is determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement. Borrowings may be used to provide working capital, finance capital expenditures and permitted acquisitions, refinance certain existing indebtedness and for other general corporate purposes.share repurchase program.


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On May 8, 2019, the Company entered into the Third Amendment to the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), whereby, among other things, its allowable consolidated leverage ratio increased to no more than 5.0 to 1.0 from March 31, 2019 to December 31, 2019, no more than 4.75 to 1.0 at March 31, 2020, no more than 4.25 to 1.0 at June 30, 2020 and no more than 4.0 to 1.0 on September 30, 2020 and thereafter. The allowable consolidated leverage ratio for each period will be decreased by 0.25 upon sale of the Company’s remaining Hain Pure Protein business. Additionally, the Company’s required consolidated interest coverage ratio (as defined in the Amended Credit Agreement) was reduced to no less than 3.0 to 1 through March 31, 2020, no less than 3.75 to 1 through March 31, 2021 and no less than 4.0 to 1 thereafter. The Amended Credit Agreement also required that the Company and the subsidiary guarantors enter into a Security and Pledge Agreement pursuant to which all of the obligations under Amended Credit Agreement are secured by liens on assets of the Company and its material domestic subsidiaries, including stock of each of their direct subsidiaries and intellectual property, subject to agreed upon exceptions. Additionally, the Company is now required to maintain a consolidated interest coverage ratio (as defined in the Amended Credit Agreement) of no less than 3.0 to 1 through March 31, 2020, no less than 3.75 to 1 through March 31, 2021 and no less than 4.0 to 1 thereafter. The allowable consolidated leverage ratio will be decreased by 0.25 upon sale of the Company’s remaining Hain Pure Protein business.

The Amended Credit Agreement provides that loans will bear interest at rates based on (a) the Eurocurrency Rate, as defined in the Amended Credit Agreement, plus a rate ranging from 0.875% to 2.50% per annum; or (b) the Base Rate, as defined in the Amended Credit Agreement, plus a rate ranging from 0.00% to 1.50% per annum, the relevant rate being the Applicable Rate. The Applicable Rate will be determined in accordance with a leverage-based pricing grid, as set forth in the Amended Credit Agreement.  Swing line loans and Global Swing Line loans denominated in U.S. dollars will bear interest at the Base Rate plus the Applicable Rate, and Global Swing Line loans denominated in foreign currencies shall bear interest based on the overnight Eurocurrency Rate for loans denominated in such currency plus the Applicable Rate. The weighted average interest rate on outstanding borrowings under the Amended Credit Agreement at March 31, 2019 was 4.30%. Additionally, the Amended Credit Agreement contains a Commitment Fee, as defined in the Amended Credit Agreement, on the amount unused under the Amended Credit Agreement ranging from 0.20% to 0.45% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid. As part of the Amended Credit Agreement, HPPC was released from its obligations as a borrower and a guarantor under the Credit Agreement.

As of March 31, 2019 and June 30, 2018, there were $740.2 million and $698.1 million of borrowings outstanding, respectively, under the Credit Agreement. The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2019 was 4.30%.

Tilda Short-Term Borrowing Arrangements

Tilda maintains short-term borrowing arrangements primarily used to fund the purchase of rice from India and other countries.  The maximum borrowings permitted under all such arrangements are £52.0 million.  Outstanding borrowings are collateralized by the current assets of Tilda, typically have six-month terms and bear interest at variable rates typically based on LIBOR plus a margin (weighted average interest rate of approximately 3.27% at March 31, 2019). As of March 31, 2019 and June 30, 2018, there were $6.7 million and $9.3 million of borrowings under these arrangements, respectively.

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 believesbelieve the non-U.S. GAAP measure provides useful information to investors and any additional purposes for which our management and Board of Directors usesuse 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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Constant Currency Presentation
We believe that this measure 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 this information for historical periods, 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.


A reconciliation between reported and constant currency net sales decrease(decrease) increase is as follows:
(amounts in thousands)North AmericaInternationalHain Consolidated
Net sales - Three months ended 12/31/19$280,693  $226,091  $506,784  
Impact of foreign currency exchange(69) 2,081  2,012  
Net sales on a constant currency basis - Three months ended 12/31/19$280,624  $228,172  $508,796  
Net sales - Three months ended 12/31/18$305,574  $227,992  $533,566  
Net sales (decline) growth on a constant currency basis(8.2)%0.1 %(4.6)%
Net sales - Six months ended 12/31/19$552,394  $436,466  $988,860  
Impact of foreign currency exchange287  13,419  13,706  
Net sales on a constant currency basis - Six months ended 12/31/19$552,681  $449,885  $1,002,566  
Net sales - Six months ended 12/31/18$596,765  $455,279  $1,052,044  
Net sales decline on a constant currency basis(7.4)%(1.2)%(4.7)%
(amounts in thousands)United Kingdom Rest of World Hain Consolidated
Net sales - Three months ended 3/31/19$227,206
 $106,146
 $599,797
Impact of foreign currency exchange15,378
 6,414
 21,792
Net sales on a constant currency basis - Three months ended 3/31/19$242,584
 $112,560
 $621,589
      
Net sales - Three months ended 3/31/18$238,321
 $113,347
 $632,720
Net sales growth on a constant currency basis1.8 % (0.7)% (1.8)%
      
Net sales - Nine months ended 3/31/19$671,121
 $304,080
 $1,744,786
Impact of foreign currency exchange23,897
 11,689
 35,586
Net sales on a constant currency basis - Nine months ended 3/31/19$695,018
 $315,769
 $1,780,372
      
Net sales - Nine months ended 3/31/18$698,968
 $324,190
 $1,838,171
Net sales growth on a constant currency basis(0.6)% (2.6)% (3.1)%


Adjusted EBITDA


Adjusted EBITDA is defined as net income (loss) income before income taxes, net interest expense, depreciation and amortization, impairment of long-lived and intangible assets, equity in the earnings of equity-method investees, stock-based compensation, Project TerraProductivity and transformation costs, and other and other non-recurring items.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.
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.

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A reconciliation of net (loss) incomeloss to Adjusted EBITDA is as follows:
Three Months Ended December 31,Six Months Ended December 31,
(amounts in thousands)2019  2018  2019  2018  
Net loss$(964) $(66,501) $(107,985) $(103,926) 
Net loss from discontinued operations(2,816) (34,714) (104,884) (49,052) 
Net income (loss) from continuing operations1,852  (31,787) (3,101) (54,874) 
Provision (benefit) for income taxes1,020  5,097  489  (4,869) 
Interest expense, net4,000  4,884  8,552  8,688  
Depreciation and amortization13,219  12,205  27,142  25,065  
Equity in net loss of equity-method investees338  11  655  186  
Stock-based compensation, net3,083  1,776  5,820  1,562  
Stock-based compensation expense in connection with Chief Executive Officer Succession Agreement—  117  —  429  
Long-lived asset and intangibles impairment1,889  19,473  1,889  23,709  
Unrealized currency (gains) losses(485) 439  1,199  1,029  
EBITDA$24,916  $12,215  $42,645  $925  
Productivity and transformation costs12,260  9,872  26,435  20,205  
Chief Executive Officer Succession Plan expense, net—  10,031  —  29,272  
Proceeds from insurance claim—  —  (2,562) —  
Accounting review and remediation costs, net of insurance proceeds—  920  —  4,334  
SKU rationalization3,927  1,530  3,916  1,530  
Loss on sale of business1,783  —  1,783  —  
Plant closure related costs1,522  1,490  2,354  3,319  
Warehouse/manufacturing facility start-up costs639  1,708  2,518  6,307  
Litigation and related expenses—  122  48  691  
Adjusted EBITDA$45,047  $37,888  $77,137  $66,583  
 Three Months Ended March 31, Nine Months Ended March 31,
(amounts in thousands)2019
2018 2019 2018
Net (loss) income$(65,837) $12,686
 $(169,763) $79,635
Net loss from discontinued operations(75,925) (12,555) (127,472) (7,349)
Net income (loss) from continuing operations10,088
 25,241
 (42,291) 86,984
        
Provision (benefit) for income taxes3,114
 (1,310) (1,679) (11,516)
Interest expense, net8,677
 6,108
 24,093
 17,535
Depreciation and amortization13,968
 15,074
 42,074
 45,139
Equity in net loss (income) of equity-method investees205
 101
 391
 (104)
Stock-based compensation, net3,937
 2,936
 5,502
 10,258
Stock-based compensation expense in connection with Chief Executive Officer Succession Agreement—
 —
 429
 —
Long-lived asset and intangibles impairment—
 4,839
 23,709
 8,290
Unrealized currency losses/(gains)1,522
 (1,465) 2,551
 (5,170)
EBITDA$41,511
 $51,524
 $54,779
 $151,416
        
Project Terra costs and other9,259
 4,831
 29,464
 13,750
Chief Executive Officer Succession Plan expense, net455
 —
 29,727
 —
Accounting review and remediation costs, net of insurance proceeds—
 3,313
 4,334
 6,406
Warehouse/manufacturing facility start-up costs3,222
 —
 9,529
 1,155
Plant closure related costs184
 3,246
 3,503
 3,946
SKU rationalization505
 4,913
 2,035
 4,913
Litigation and related expenses371
 235
 1,062
 235
Losses on terminated chilled desserts contract—
 2,939
 —
 6,553
Co-packer disruption—
 952
 —
 3,692
Regulated packaging change—
 —
 —
 1,007
Toys "R" Us bad debt—
 897
 —
 897
Machine break-down costs—
 317
 —
 317
Recall and other related costs—
 273
 —
 273
Adjusted EBITDA$55,507
 $73,440
 $134,433
 $194,560

Operating Free Cash Flow from Continuing Operations


In our internal evaluations, we use the non-U.S. GAAP financial measure “operating free cash flow from continuing operations.” The difference between operating free cash flow from continuing operations and cash flow provided by or used in operating activities from continuing operations, which is the most comparable U.S. GAAP financial measure, is that operating free cash flow from continuing operations reflects the impact of capital expenditures. 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 flow from continuing operations 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 flow from continuing operations in isolation or as an alternative to financial measures determined in accordance with U.S. GAAP.


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A reconciliation from Cash flow provided by (used in) operating activities from continuing operations to Operating free cash flow from continuing operations is as follows:
Six Months Ended December 31,
(amounts in thousands)2019  2018  
Cash flow provided by (used in) operating activities - continuing operations$17,148  $(4) 
Purchases of property, plant and equipment(29,337) (40,998) 
Operating Free Cash Flow - continuing operations$(12,189) $(41,002) 

 Nine Months Ended March 31,
(amounts in thousands)2019 2018
Cash flow provided by operating activities from continuing operations$12,043
 $67,370
Purchase of property, plant and equipment(55,892) (48,368)
Operating free cash flow from continuing operations$(43,849) $19,002



Off Balance Sheet Arrangements


At MarchDecember 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K that have had, or are likely to have, a material current or future effect on our consolidated financial statements.


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 revenue recognition, trade promotions and sales incentives, valuation of accounts and chargebacks receivable, accounting for acquisitions, 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, 2018.2019.


Recent Accounting Pronouncements


Refer to Note 2, Basis of Presentation, in the Notes to 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, baking products, hot cereal, hot-eating desserts and soup sales are stronger in colder months, while sales of snack foods, sunscreen and certain of our prepared food and personal care products are stronger in the warmer months. Additionally, due to the nature of our Tilda business, our net sales and earnings may further fluctuate based on the timing of certain holidays throughout the year. 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 for the three and ninesix months ended MarchDecember 31, 2019 from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.2019. 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, 2018.2019.

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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, although the Company continues to work to remediate the material weakness in internal control over financial reporting as described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 and significant progress has been made to date, our CEO and CFO have concluded that the disclosure controls and procedures related to this material weakness were not effective as of MarchDecember 31, 2019.


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

Under applicable SEC rules (Exchange Act Rules 13a-15(c) and 15d-15(c)), management is required to evaluate any changeThere were no changes in our internal controlcontrols over financial reporting that occurred during each fiscal quarter that had materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As explained in greater detail under Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, we have undertaken a broad range of remedial procedures prior to May 9, 2019, the filing date of this report, to address the material weakness in our internal control over financial reporting identified as of June 30, 2018. Our efforts to improve our internal controls are ongoing and focused on organizational enhancements, control design enhancements to rework certain internal control gaps and documentation and training practices. Therefore, while we determined, with the participation of our CEO and CFO, that there have been no changes in our internal control over financial reporting in the three months ended MarchDecember 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, we continue to monitor the operation of these remedial measures through the date of this report.reporting.
For a more comprehensive discussion of the material weakness in internal control over financial reporting identified by management as of June 30, 2018, and the remedial measures undertaken to address this material weakness, investors are encouraged to review Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.



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PART II - OTHER INFORMATION

Item 1.Legal Proceedings


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 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 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 “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 namesnamed as defendants the Company and certain of its current and former officers (collectively, the “Defendants”) and assertsasserted 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. Co-Lead Plaintiffs filed an opposition on December 1, 2017 and Defendants filed the reply on January 16, 2018. On April 4, 2018,which the Court requested additional briefing relating to certain aspects of Defendants’ motion to dismiss. In accordance with this request, Lead Plaintiffs submitted their supplemental briefgranted on April 18, 2018, and Defendants submitted an opposition on May 2, 2018. Lead Plaintiffs filed a reply brief on May 9, 2018, and Defendants submitted a sur-reply on May 16, 2018.

On March 29, 2019, the Court granted Defendants’ motion, dismissing the Amended Complaintcase in its entirety, without prejudice to replead. LeadCo-Lead Plaintiffs filed a seconded amended complaintSecond Amended Consolidated Class Action Complaint on May 6, 2019 (the “Second Amended Complaint”). The Second Amended Complaint again names as defendants the Company and certain of its current and 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. Co-Lead Plaintiffs filed an opposition on August 5, 2019, and Defendants submitted a reply on September 3, 2019. This motion is fully briefed, and the parties await a decision.


Stockholder Derivative Complaints Filed in State Court


On September 16, 2016, a stockholder derivative complaint, Paperny v. Heyer, et al. (the “Paperny Complaint”), was filed in New York State Supreme Court in Nassau County against the former Board of Directors and certain former officers of the Company alleging breach of fiduciary duty, unjust enrichment, lack of oversight and corporate waste. On December 2, 2016 and December 29, 2016, two additional stockholder derivative complaints were filed in New York State Supreme Court in Nassau County against the former Board of Directors and certain former officers under the captions Scarola v. Simon (the “Scarola Complaint”) and Shakir v. Simon (the “Shakir Complaint” and, together with the Paperny Complaint and the Scarola Complaint, the “Derivative Complaints”), respectively. Both the Scarola Complaint and the Shakir Complaint allegealleged breach of fiduciary duty, lack of oversight and unjust enrichment. On February 16, 2017, the parties for the Derivative Complaints entered into a stipulation consolidating the matters under the caption In re The Hain Celestial Group (the “Consolidated Derivative Action”) in New York State Supreme Court in Nassau County, ordering the Shakir Complaint as the operative complaint. On November 2, 2017, the parties agreed to stay the Consolidated Derivative Action until April 11, 2018. On April 6, 2018, the parties filed a proposed stipulation agreeingAction. Co-Lead Plaintiffs requested leave to stay the Consolidated Derivative Action until October 4, 2018, which the Court granted on May 3, 2018. On October 9 ,2018, the Court further stayed this matter until December 4, 2018file an amended consolidated complaint, and on December 4, 2018 further stayed the matter until January 14, 2019. On January 14, 2019, the Court held a status conference and grantedpartially lifted the stay, ordering Co-Lead Plaintiffs leave to file antheir amended complaint by March 7, 2019, while continuing2019. Co-Lead Plaintiffs filed a Verified Amended Shareholder Derivative Complaint on March 7, 2019. The Court continued the stay aspending a decision on Defendants’ motion to all other aspects ofdismiss in the case. On MarchConsolidated Securities Action (referenced above). After the Court in the Consolidated Securities Action dismissed the Amended Complaint, the Court in the Consolidated Derivative Action ordered Co-Lead Plaintiffs to file a second amended complaint no later than July 8, 2019. Co-Lead Plaintiffs filed a Verified Second Amended Shareholder Derivative Complaint on July 8, 2019 (the “Second Amended Derivative Complaint”). Defendants moved to dismiss the Second Amended Derivative Complaint on August 7, 2019,2019. Co-Lead Plaintiffs filed an amended complaint. The Court heldopposition to Defendants’ motion to dismiss, and Defendants submitted a status conferencereply on March 13, 2019 and continued the stay until a subsequent conference scheduled for May 6,September 20, 2019. At the May 6 conference, the Court indicated that the stay will be lifted, and after a preliminary conference for June 13, 2019, a scheduling order will be enteredThis motion is fully briefed, and the case will proceed.parties await a decision.


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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.


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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 allegesalleged 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 allegesalleged 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 Court granted an order to unseal this case and reveal Gary Merenstein as the plaintiff (the “Merenstein Complaint”).


On August 10, 2017, the 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 iswas rendered on the motion to dismiss the Amended Complaint in the consolidatedConsolidated Securities Class Actions,Action, described above.


AfterOn March 29, 2019, the Court dismissedin 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 Class Actions, theAction filed a 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. The stay is continued through the later of: (a) thirty (30) days after the deadline for plaintiffs to file a second amended complaint in the Securities Class Actions; or, (b) if plaintiffs file a second amended complaint, and Defendants file a motion to dismiss the second amended complaint, thirty (30)30 days after the Court rules on the motion to dismiss the second amended complaintSecond Amended Complaint in the Consolidated Securities Class Actions.Action.


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. While the results of litigation and claims cannot be predicted with certainty, the Company believes the reasonably possible losses of such matters, individually and in the aggregate, are not material. Additionally, the Company believes the probable final outcome of such matters will not have a material adverse effect on the Company’s consolidated results of operations, financial position, cash flows or liquidity.


Item 1A.Risk Factors


We have disclosed the risk factors affecting our business, results of operations and financial condition in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018,2019, filed with the SEC on August 29, 2018.2019. There have been no material changes from the risk factors previously disclosed.


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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)
October 1, 2019 - October 31, 20191,921  $20.85  —  250  
November 1, 2019 - November 30, 201916,375  24.33  —  250  
December 1, 2019 - December 31, 20198,991  25.95  —  250  
Total27,287  $24.62  
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, 2019 - January 31, 20196,556
 $18.07
 —
 250
February 1, 2019 - February 28, 2019—
 —
 —
 250
March 1, 2019 - March 31, 20191,368
 22.55
 —
 250
Total7,924
 $18.84
    


(1) Shares surrendered for payment of employee payroll taxes due on shares issued under stockholder-approved stock-based compensation plans.
(2) On June 21, 2017, the Company’s Board of Directors authorized the repurchase of up to $250 million of the Company’s issued and outstanding common stock. Repurchases may be made from time to time in the open market, pursuant to preset trading plans, in private transactions or otherwise. The authorization does not have a stated expiration date. As of December 31, 2019, the Company had not repurchased any shares under this program and had $250 million of remaining capacity under the share repurchase program.




Item 5.  Other Information

Resignation of Director

On February 4, 2020, Roger Meltzer resigned as a member of the Board of Directors (the “Board”) of the Company, effective February 6, 2020. Mr. Meltzer’s decision to resign was due to the ongoing and increasing demands of serving as co-chairman of one of the largest global law firms. Mr. Meltzer’s resignation was not the result of any disagreement with the Company or the Board on any matter relating to the Company’s operations, policies or practices. In connection with Mr. Meltzer’s resignation, the Board approved the acceleration of the vesting of Mr. Meltzer’s unvested restricted stock.

The Company would like to thank Mr. Meltzer for his dedication, guidance and leadership during his 20-year tenure on the Board.

Departure of Executive Officer

Kevin McGahren, the Company’s President, North America, is departing the Company effective February 7, 2020.The position of President, North America will be eliminated and the responsibilities will be transitioned to other executives.In connection with Mr. McGahren’s departure, he is entitled to receive severance of $832,500 pursuant to the terms of his offer letter with the Company. Mr. McGahren’s performance share units under the 2019-2021 LTIP will be forfeited.
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Item 6.  Exhibits

See Exhibit Index immediately preceding the signature page hereto, which is incorporated herein by reference.

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EXHIBIT INDEX

Exhibit
Number
Description
3.1
3.2
3.3
4.1
10.1

10.2

10.3
Form of Inducement Award Agreement under The Hain Celestial Group, Inc. 2019 Equity Inducement Award Program.

10.4
Amended and Restated 2002 Long Term Incentive and Stock Award Plan.
10.5
Form of Performance Unit Agreement with the Company’s executive officers under the Company’s Amended and Restated 2002 Long Term Incentive and Stock Award Plan (2019-2021 Long Term Incentive Plan).
10.6
Offer Letter, dated December 28, 2018,October 31, 2019, between the Company and Christopher Boever.Javier H. Idrovo.
10.710.3
10.831.1
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
32.1
32.2
101101.INSThe following materials fromXBRL Instance Document - the Company’s Quarterly Report on Form 10-Q forinstance document does not appear in the quarter ended March 31, 2019, formatted in eXtensible Business Reporting Language (XBRL): (i)Interactive Data File because its XBRL tags are embedded within the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statement of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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:February 6, 2020THE HAIN CELESTIAL GROUP, INC.
(Registrant)
Date:May 9, 2019/s/    Mark L. Schiller
Mark L. Schiller,

President and

Chief Executive Officer
 
Date:May 9, 2019February 6, 2020/s/   James LangrockJavier H. Idrovo
James Langrock,
Javier H. Idrovo,
Executive Vice President and

Chief Financial Officer







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