THE HAIN CELESTIAL GROUP, INC.

Index


			Part I - Financial Information	Page

Item 1.			~~Part I -~~ Financial ~~Information~~Statements	~~Page~~

~~Item 1.~~	~~Financial Statements~~
	Consolidated Balance Sheets - ~~September 30,~~December 31 , 2019 and June 30, 2019	3
			Consolidated Statements of Operations - Three an d si x months ended ~~September 30,~~December 31 , 2019 and 2018	4
			Consolidated Statements of Comprehensive I ncome (Loss) ~~Income~~ - Three and six months ended ~~September 30,~~December 31 , 2019 and 2018	5
			Consolidated Statement of Stockholders’ Equity - Three an d six months ended ~~September 30,~~D ecember 31 , 2019 and 2018	6
			Consolidated Statements of Cash Flows - ~~Three~~Six months ended ~~September 30,~~December 31 , 2019 and 2018	8
			Notes to Consolidated Financial Statements	9
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	3130
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	4245
Item 4.			Controls and Procedures	4346

			Part II - Other Information

Items 3 4 and 54 are not applicable
Item 1.			Legal Proceedings	4447
Item 1A.			Risk Factors	4649
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4649
Item 6.5.			~~Exhibits~~Other Information	4749
Item 6.			Exhibits	50
Signatures				4851

Table of Contents

Cautionary Note Regarding Forward Looking Information

This Quarterly Report on Form 10-Q for the quarter ended ~~September 30,~~December 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. 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, ~~political uncertainty in~~ the United ~~Kingdom and the negotiation of its~~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, our ability to manage our supply chain effectively, volatility in the cost of commodities, ingredients, freight and fuel, our ability to execute and realize cost savings initiatives, including stock-keeping unit (“SKU”) rationalization plans, the impact of our debt and our credit agreements on our financial 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, potential liability, including in connection with indemnification obligations to our current and former officers and members of 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 consummate divestitures, our ability to integrate past acquisitions, the availability of organic ingredients, disruption of operations at our manufacturing facilities, loss of one or more independent co-packers, disruption of our transportation systems, risks relating to the protection of intellectual property, the 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, 2019 ~~(the “Form 10-K”)~~ under the heading “Risk Factors” and Part I, Item 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.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~SEPTEMBER 30,~~DECEMBER 31, 2019 AND JUNE 30, 2019

(In thousands, except par values)

September 30, June 30,
2019 2019
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 20,522
$ 31,017
Accounts receivable, less allowance for doubtful accounts of $558 and $588, respectively 206,478
209,990
Inventories 301,351
299,341
Prepaid expenses and other current assets 36,508
51,391
Current assets of discontinued operations —
110,048
Total current assets 564,859
701,787
Property, plant and equipment, net 288,104
287,845
Goodwill 867,071
875,881
Trademarks and other intangible assets, net 370,379
380,286
Investments and joint ventures 18,463
18,890
Operating lease right of use assets 81,830
—
Other assets 45,727
58,764
Noncurrent assets of discontinued operations —
259,167
Total assets $ 2,236,433
$ 2,582,620
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 189,441
$ 219,957
Accrued expenses and other current liabilities 128,296
114,265
Current portion of long-term debt 2,223
17,232
Current liabilities of discontinued operations —
31,703
Total current liabilities 319,960
383,157
Long-term debt, less current portion 323,386
613,537
Deferred income taxes 33,685
34,757
Operating lease liabilities, noncurrent portion 74,249
—
Other noncurrent liabilities 14,215
14,489
Noncurrent liabilities of discontinued operations —
17,361
Total liabilities 765,495
1,063,301
Commitments and contingencies (Note 16)

Stockholders’ equity:
Preferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: none —
—
Common stock - $.01 par value, authorized 150,000 shares; issued: 108,873 and 108,833 shares, respectively; outstanding: 104,242 and 104,219 shares, respectively 1,089
1,088
Additional paid-in capital 1,161,537
1,158,257
Retained earnings 587,557
695,017
Accumulated other comprehensive loss (168,894 ) (225,004 )
1,581,289
1,629,358
Less: Treasury stock, at cost, 4,631 and 4,614 shares, respectively (110,351 ) (110,039 )
Total stockholders’ equity 1,470,938
1,519,319
Total liabilities and stockholders’ equity $ 2,236,433
$ 2,582,620


	December 31,		June 30,
	2019		2019
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	37,024	$	31,017
Accounts receivable, less allowance for doubtful accounts of $558 and $588, respectively	206,583		209,990
Inventories	283,127		299,341
Prepaid expenses and other current assets	50,019		51,391
Current assets of discontinued operations	—		110,048
Total current assets	576,753		701,787
Property, plant and equipment, net	298,558		287,845
Goodwill	879,705		875,881
Trademarks and other intangible assets, net	378,796		380,286
Investments and joint ventures	18,990		18,890
Operating lease right of use assets	83,845		—
Other assets	48,298		58,764
Noncurrent assets of discontinued operations	—		259,167
Total assets	$	2,284,945	$	2,582,620
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	187,376	$	219,957
Accrued expenses and other current liabilities	123,272		114,265
Current portion of long-term debt	1,387		17,232

Current liabilities of discontinued operations	—		31,703
Total current liabilities	312,035		383,157
Long-term debt, less current portion	324,864		613,537
Deferred income taxes	35,012		34,757
Operating lease liabilities, noncurrent portion	76,726		—
Other noncurrent liabilities	15,225		14,489
Noncurrent liabilities of discontinued operations	—		17,361
Total liabilities	763,862		1,063,301
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred 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, respectively	1,091		1,088
Additional paid-in capital	1,164,618		1,158,257
Retained earnings	586,593		695,017
Accumulated other comprehensive loss	(120,197)		(225,004)
	1,632,105		1,629,358
Less: Treasury stock, at cost, 4,658 and 4,614 shares, respectively	(111,022)		(110,039)
Total stockholders’ equity	1,521,083		1,519,319
Total liabilities and stockholders’ equity	$	2,284,945	$	2,582,620

See notes to consolidated financial statements.

Table of Contents

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2019 AND 2018

(In thousands, except per share amounts)

Three Months Ended September 30,
2019
2018
Net sales $ 482,076

$ 518,478
Cost of sales 384,245

429,570
Gross profit 97,831
88,908
Selling, general and administrative expenses 80,680

75,977
Amortization of acquired intangibles 3,083

3,359
Productivity and transformation costs 14,175

10,333
Chief Executive Officer Succession Plan expense, net —
19,553
Proceeds from insurance claim (2,562 ) —
Accounting review and remediation costs —

3,414
Long-lived asset impairment —

4,236
Operating income (loss) 2,455
(27,964 )
Interest and other financing expense, net 6,294

4,314
Other expense, net 1,328
600
Loss from continuing operations before income taxes and equity in net loss of equity-method investees (5,167 ) (32,878 )
Benefit for income taxes (531 )
(9,966 )
Equity in net loss of equity-method investees 317

175
Net loss from continuing operations $ (4,953 ) $ (23,087 )
Net loss from discontinued operations, net of tax (102,068 ) (14,338 )
Net loss $ (107,021 ) $ (37,425 )

Net loss per common share:
Basic net loss per common share from continuing operations $ (0.05 ) $ (0.22 )
Basic net loss per common share from discontinued operations (0.98 ) (0.14 )
Basic net loss income per common share $ (1.03 ) $ (0.36 )

Diluted net loss per common share from continuing operations $ (0.05 ) $ (0.22 )
Diluted net loss per common share from discontinued operations (0.98 ) (0.14 )
Diluted loss per common share $ (1.03 ) $ (0.36 )

Shares used in the calculation of net loss per common share:
Basic 104,225

103,962
Diluted 104,225

103,962


	Three Months Ended December 31,						Six Months Ended December 31,
	2019		2018		2019		2018
Net sales	$	506,784	$	533,566	$	988,860	$	1,052,044
Cost of sales	401,177		432,215		785,422		861,785
Gross profit	105,607		101,351		203,438		190,259
Selling, general and administrative expenses	79,078		78,496		159,758		154,473
Amortization of acquired intangibles	3,189		3,322		6,272		6,681
Productivity and transformation costs	12,260		9,872		26,435		20,205
Chief Executive Officer Succession Plan expense, net	—		10,148		—		29,701
Proceeds from insurance claim	—		—		(2,562)		—
Accounting review and remediation costs, net of insurance proceeds	—		920		—		4,334
Long-lived asset and intangibles impairment	1,889		19,473		1,889		23,709
Operating income (loss)	9,191		(20,880)		11,646		(48,844)
Interest and other financing expense, net	4,737		5,428		11,031		9,742
Other expense, net	1,244		371		2,572		971
Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees	3,210		(26,679)		(1,957)		(59,557)
Provision (benefit) for income taxes	1,020		5,097		489		(4,869)
Equity in net loss of equity-method investees	338		11		655		186
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)

Net income (loss) per common share:
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	(0.03)		(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 from continuing operations	$	0.02	$	(0.31)	$	(0.03)	$	(0.53)
Diluted net loss per common share from discontinued operations	(0.03)		(0.33)		(1.01)		(0.47)
Diluted net loss per common share	$	(0.01)	$	(0.64)	$	(1.04)	$	(1.00)

Shares used in the calculation of net income (loss) per common share:
Basic	104,318		104,056		104,272		104,009
Diluted	104,619		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 SIX MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2019 AND 2018

(In thousands)


																		Three Months Ended
																		December 31, 2019										December 31, 2018
																		Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net loss																	Net loss					$	(964)					$	(66,501)

Other comprehensive income (loss):																	Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications																	Foreign currency translation adjustments before reclassifications	$	48,655	$	—	48,655		$	(27,948)	$	—	(27,948)

Change in deferred gains (losses) on cash flow hedging instruments																	Change in deferred gains (losses) on cash flow hedging instruments	52		(10)		42		—		—		—

Total other comprehensive income (loss)																	Total other comprehensive income (loss)	$	48,707	$	(10)	$	48,697	$	(27,948)	$	—	$	(27,948)

Total comprehensive income (loss)																	Total comprehensive income (loss)					$	47,733					$	(94,449)

	Three Months Ended																	Six Months Ended
	September 30, 2019								September 30, 2018									December 31, 2019										December 31, 2018
	Pre-tax amount			Tax (expense) benefit		After-tax amount			Pre-tax amount			Tax (expense) benefit		After-tax amount				Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Net loss						$	(107,021	)						$	(37,425	)	Net loss					$	(107,985)					$	(103,926)

Other comprehensive income (loss):																	Other comprehensive income (loss):
Foreign currency translation adjustments before reclassifications	$	(38,942	)	$	—	(38,942		)	$	(13,519	)	$	—	(13,519		)	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 tax	95,120			—		95,120			—			—		—			Reclassification of currency translation adjustment included in Net loss from discontinued operations, net of tax	95,120		—		95,120		—		—		—
Change in deferred (losses) gains on cash flow hedging instruments	(78		)	10		(68		)	—			—		—
Change in deferred losses on cash flow hedging instruments																	Change in deferred losses on cash flow hedging instruments	(26)		—		(26)		—		—		—

Total other comprehensive income (loss)	$	56,100		$	10	$	56,110		$	(13,519	)	$	—	$	(13,519	)	Total other comprehensive income (loss)	$	104,807	$	—	$	104,807	$	(41,467)	$	—	$	(41,467)

Total comprehensive loss						$	(50,911	)						$	(50,944	)	Total comprehensive loss					$	(3,178)					$	(145,393)

See notes to consolidated financial statements.

Table of Contents

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2019

(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, 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 income											56,110		56,110
Issuance of common stock pursuant to stock-based compensation plans	40	1		(1)									—

Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans								17	(312)				(312)
Stock-based compensation expense				3,281									3,281
Balance at September 30, 2019	108,873	$	1,089	$	1,161,537	$	587,557	4,631	$	(110,351)	$	(168,894)	$	1,470,938
Net loss						(964)							(964)

Other comprehensive income											48,697		48,697
Issuance of common stock pursuant to stock-based compensation plans	146	2		(2)									—

Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans								27	(671)				(671)
Stock-based compensation expense				3,083									3,083
Balance at December 31, 2019	109,019	$	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, 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 income 56,110
56,110
Issuance of common stock pursuant to stock-based compensation plans 40
1
(1 ) —
Shares withheld for payment of employee payroll taxes due on shares issued under stock-based compensation plans 17
(312 ) (312 )
Stock-based compensation expense 3,281
3,281
Balance at September 30, 2019 108,873
$ 1,089
$ 1,161,537
$ 587,557
4,631
$ (110,351 ) $ (168,894 ) $ 1,470,938

See notes to consolidated financial statements.

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THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 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, 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 2014-09						163							163
Other comprehensive loss											(13,519)		(13,519)
Issuance of common stock pursuant to stock-based compensation plans	85	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, 2018	108,507	$	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 plans	184	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, 2018	108,691	$	1,087	$	1,150,239	$	774,405	4,584	$	(109,429)	$	(225,359)	$	1,590,943

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, 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 2014-09 163
163
Other comprehensive loss
(13,519 ) (13,519 )
Issuance of common stock pursuant to stock-based compensation plans 85
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, 2018 108,507
$ 1,085
$ 1,148,330
$ 840,906
4,505
$ (107,486 ) $ (197,411 ) $ 1,685,424

See notes to consolidated financial statements.

Table of Contents

THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE ~~THREE~~SIX MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2019 AND 2018

(In thousands)


	Three Months Ended September 30,							Six Months Ended December 31,
	2019			2018				2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES							CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(107,021	)	$	(37,425	)	Net loss	$	(107,985)	$	(103,926)
Net loss from discontinued operations	(102,068		)	(14,338		)	Net loss from discontinued operations	(104,884)		(49,052)
Net loss from continuing operations	(4,953		)	(23,087		)	Net loss from continuing operations	(3,101)		(54,874)
Adjustments to reconcile net loss from continuing operations to net cash 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:							Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities from continuing operations:
Depreciation and amortization	13,923			12,860			Depreciation and amortization	27,142		25,065
Deferred income taxes	(4,404		)	(13,218		)	Deferred income taxes	(5,155)		(22,666)
Chief Executive Officer Succession Plan expense, net	—			19,241			Chief Executive Officer Succession Plan expense, net	—		29,272
Equity in net loss of equity-method investees	317			175			Equity in net loss of equity-method investees	655		186
Stock-based compensation, net	2,737			98			Stock-based compensation, net	5,820		1,991
Long-lived asset impairment	—			4,236
Long-lived asset and intangibles impairment							Long-lived asset and intangibles impairment	1,889		23,709
Other non-cash items, net	1,764			841			Other non-cash items, net	2,661		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	(853		)	3,766			Accounts receivable	7,540		9,540
Inventories	(5,507		)	(18,640		)	Inventories	9,389		(5,748)
Other current assets	14,223			3			Other current assets	1,895		(1,528)
Other assets and liabilities	144			(32		)	Other assets and liabilities	(1,242)		4,594
Accounts payable and accrued expenses	(20,972		)	(5,813		)	Accounts payable and accrued expenses	(30,345)		(10,830)
Net cash used in operating activities - continuing operations	(3,581		)	(19,570		)
Net cash provided by (used in) operating activities - continuing operations							Net cash provided by (used in) operating activities - continuing operations	17,148		(4)
CASH FLOWS FROM INVESTING ACTIVITIES							CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(13,164		)	(22,261		)	Purchases of property and equipment	(29,337)		(40,998)
Other	—			(652		)

Proceeds from sale of businesses and other							Proceeds from sale of businesses and other	13,120		3,863
Net cash used in investing activities - continuing operations	(13,164		)	(22,913		)	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 facility	80,000			70,000			Borrowings under bank revolving credit facility	147,000		150,000
Repayments under bank revolving credit facility	(178,500		)	(60,000		)	Repayments under bank revolving credit facility	(245,500)		(137,646)

Repayments under term loan	(206,250		)	(3,750		)	Repayments under term loan	(206,250)		(7,500)
Proceeds from (funding of) discontinued operations entities	312,195			(3,111		)
Borrowings (repayments) of other debt, net	9			(776		)
Proceeds from discontinued operations entities							Proceeds from discontinued operations entities	309,929		13,550
Repayments of other debt, net							Repayments of other debt, net	(501)		(601)
Shares withheld for payment of employee payroll taxes	(312		)	(979		)	Shares withheld for payment of employee payroll taxes	(984)		(2,922)
Net cash provided by financing activities - continuing operations	7,142			1,384			Net cash provided by financing activities - continuing operations	3,694		14,881
Effect of exchange rate changes on cash - continuing operations	(892		)	(670		)	Effect of exchange rate changes on cash - continuing operations	1,382		(1,492)
CASH FLOWS FROM DISCONTINUED OPERATIONS							CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash used in operating activities	(8,026		)	(14,587		)	Cash used in operating activities	(5,687)		(2,859)
Cash provided by (used in) investing activities	306,420			(1,921		)	Cash provided by (used in) investing activities	301,815		(3,472)
Cash (used in) provided by financing activities	(306,366		)	5,548
Cash used in financing activities							Cash used in financing activities	(304,100)		(4,417)
Effect of exchange rate changes on cash - discontinued operations	(537		)	(390		)	Effect of exchange rate changes on cash - discontinued operations	(537)		(477)
Net cash flows used in discontinued operations	(8,509		)	(11,350		)	Net cash flows used in discontinued operations	(8,509)		(11,225)
Net decrease in cash and cash equivalents	(19,004		)	(53,119		)
Net decrease in cash and cash equivalents and restricted cash							Net decrease in cash and cash equivalents and restricted cash	(2,502)		(34,975)
Cash and cash equivalents at beginning of period	39,526			113,018			Cash and cash equivalents at beginning of period	39,526		113,018
Cash and cash equivalents at end of period	$	20,522		$	59,899
Cash and cash equivalents and restricted cash at end of period							Cash and cash equivalents and restricted cash at end of period	$	37,024	$	78,043
Less: cash and cash equivalents of discontinued operations	—			(16,974		)	Less: cash and cash equivalents of discontinued operations	—		(17,098)
Cash and cash equivalents of continuing operations at end of period	$	20,522		$	42,925
Cash and cash equivalents and restricted cash of continuing operations at end of period							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 Life^TM 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^®, 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^®, Terra^®, The Greek Gods^®, 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 onin August ~~27,~~ 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. ~~This review has included~~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 ~~continues~~transformation costs include costs, such as consulting and severance costs, relating to ~~include~~ 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.

~~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 associated with these initiatives, which primarily include consulting and severance costs, as well as costs to dispose of businesses and brands that are less profitable or are otherwise less of a strategic fit within our core portfolio.

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~~agreement titled, "Agreement relating to the sale and purchase of the Tilda Group Entities and certain other ~~assets~~assets" (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. This disposition 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.

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 ~~which~~ were reported in the aggregate as the Hain Pure Protein reportable ~~segment~~segment.

These dispositions represented a strategic ~~shift~~shifts that had a major impact on the Company’s operations and financial results and ~~have been accounted for as discontinued operations.~~

~~The~~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 ~~Sheets for all periods presented.~~

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 ~~due to changes in how the Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker, 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 ~~segment,~~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, 2019 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 six months ended ~~September 30,~~December 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2020. Please refer to the Notes to the Consolidated Financial Statements as of June 30, 2019 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, 2019 (the “Form 10-K”)~~ for information not included in these condensed notes.

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

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~~Newly Adopted~~Significant Accounting ~~Pronouncements~~

Policies

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 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 Company adopted the standard as of July 1, 2019, using a modified retrospective approach.

~~Except for the accounting policy for leases appearing below, implemented as a result of adopting Topic 842, there have been no material changes in our~~The Company's significant accounting policies ~~during the three months ended September 30, 2019, as compared to the significant accounting policies~~are described in Note 2, Summary of Significant Accounting Policies and Practices, in the Notes to the Consolidated Financial Statements ~~as of June 30, 2019 and for the fiscal year then ended included~~ in the Form 10-K. Included herein are certain updates to those policies.

~~Under Topic 842, we determine if~~Leases

Effective July 1, 2019, arrangements containing leases are evaluated as an ~~arrangement is a~~operating or finance lease at lease inception. ~~Operating lease assets are presented as~~For operating ~~lease right of use (“ROU”~~leases, the Company recognizes an operating right-of-use ("ROU") assets, and corresponding operating lease liabilities are presented within accrued expenses and other current liabilities (current portions), and as operating lease liabilities, noncurrent portion, on our Consolidated Balance Sheet. Finance lease assets are included in property and equipment, net and corresponding finance lease liabilities are included within current portion of long-term debt and long-term debt, less current portion, on our Consolidated Balance Sheet.

~~Operating lease ROU assets~~asset and operating lease ~~liabilities are recognized~~liability at lease commencement based on the present value of ~~the remaining~~ lease payments over the lease ~~term at commencement date. Our~~term.

With the exception of certain finance leases, ~~do not provide~~ an implicit ~~interest rate. We calculate~~rate of return is not readily determinable for the Company's leases. For these leases, an incremental borrowing rate ~~to reflect~~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 ~~rate that we~~the Company would have to pay to borrow funds on a ~~fully~~ collateralized basis ~~an amount equal to the lease payments in a similar economic environment~~ over a similar term. The ~~operating~~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 ~~ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.~~ obligations.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. ~~Lease expense for minimum lease payments is~~Leases with an initial term of 12 months or less are not recognized on ~~a straight-line basis over~~ the ~~lease term.~~

Company's balance sheet. The Company has elected to separate lease and non-lease components. Additionally, 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 updates are recorded as variable lease expense in the period incurred.

Recently Adopted Accounting Pronouncements

The Company ~~has elected not to recognize ROU assets and lease liabilities for short-term leases that have~~adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), effective July 1, 2019, using a ~~term of 12 months or less and has elected to utilize~~modified retrospective approach. As permitted by the ~~practical expedient permitted under the transition~~new guidance, of not reassessing whether existing contracts contain leases and carrying forward the historical classification of leases. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition, the Company ~~does not have any related party leases and sublease transactions are de minimis.~~elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward.

~~Adoption~~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 ~~$89,475~~$87,414 and ~~$94,997,~~$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 ~~at the effective date~~ for a manufacturing 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 Financial 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.

~~Refer~~In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to ~~Note 2,~~ ~~Summary of Significant Accounting Policies and Practices~~the Disclosure Requirements for Fair Value Measurement, inwhich modifies the ~~Notes to~~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 ~~Consolidated Financial Statements as of June 30, 2019 and for the fiscal year then ended included in the Form 10-K for a detailed discussion~~impact that this standard will have on ~~additional recently 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.~~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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3. FORMER CHIEF EXECUTIVE OFFICER SUCCESSION PLAN

On June 24, 2018, the Company entered into a 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 (the “Succession Agreement”).

The Succession Agreement provided Mr. Simon with a cash separation payment of $34,295 payable in a single lump sum and cash benefits continuation costs of $208. These costs were recognized from June 24, 2018 through November 4, 2018, at which time the Company’s new CEO, ~~Mr.~~Mark L. Schiller, commenced his employment. Expense recognized in connection with these payments was ~~$23,971~~$9,080 and $33,051 in the three and six months ended ~~September 30,~~December 31, 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 ~~$470~~$429 ratably through November 4, 2018, of which ~~$312~~$117 was recognized in the three months ended ~~September 30, 2018~~December 31, 2018. The aforementioned impacts were recorded in Chief Executive Officer Succession Plan expense, net in the Consolidated ~~Statement~~Statements of Operations.

As 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 agreement (the “Consulting Agreement”) in order to, among other things, assist Mr. Schiller with his transition as the Company’s incoming CEO. The ~~aforementioned impacts were recorded~~term of the Consulting Agreement commenced on November 5, 2018 and continued until February 5, 2019. Mr. Simon received an aggregate consulting fee of $975 as compensation for his services during the consulting term, of which $650 was recognized in ~~Chief~~the Consolidated Statements of Operations as a component of “Chief Executive Officer Succession Plan expense, ~~net on~~net” in the ~~Consolidated Statement of Operations.~~three and six months ended December 31, 2018.

4. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net ~~loss~~income (loss) per share:


	Three Months Ended December 31,						Six Months Ended December 31,
	2019		2018		2019		2018
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 outstanding	104,318		104,056		104,272		104,009
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units	301		—		—		—
Diluted weighted average shares outstanding	104,619		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)

Three Months Ended September 30,
2019
2018
Numerator:
Net loss from continuing operations $ (4,953 ) $ (23,087 )
Net loss from discontinued operations, net of tax (102,068 ) (14,338 )
Net loss $ (107,021 ) $ (37,425 )

Denominator:
Basic weighted average shares outstanding 104,225
103,962
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units —
—
Diluted weighted average shares outstanding 104,225
103,962

Basic net loss per common share:
Continuing operations $ (0.05 ) $ (0.22 )
Discontinued operations (0.98 ) (0.14 )
Basic net loss per common share $ (1.03 ) $ (0.36 )

Diluted net loss per common share:
Continuing operations $ (0.05 ) $ (0.22 )
Discontinued operations (0.98 ) (0.14 )
Diluted net loss per common share $ (1.03 ) $ (0.36 )

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Basic net ~~loss~~income (loss) per share excludes the dilutive effects of stock options, unvested restricted stock and unvested restricted share units.

Due to our net losses in the ~~three~~six months ended ~~September 30,~~December 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 in each period.

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There were ~~2,910~~485 and ~~267 stock-based~~498 restricted stock awards and stock options excluded from our calculation of diluted net ~~loss~~income (loss) per share ~~calculations~~ for the three months ended ~~September 30,~~December 31, 2019 and 2018, respectively, as such awards were anti-dilutive. Additionally, there were 2,550 and 1,152 stock-based awards excluded for the three months ended December 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.

There were ~~677~~689 and ~~317~~464 restricted stock awards and stock options excluded from our calculation of diluted net loss per share ~~calculation~~ for the ~~three~~six months ended ~~September 30,~~December 31, 2019 and 2018, respectively, as such awards were anti-dilutive.

~~There~~ Additionally, there were ~~109~~2,745 and ~~112 potential shares of common stock issuable upon exercise of stock options~~710 stock-based awards excluded ~~from our diluted net loss per share calculation~~ for the ~~three~~six months ended ~~September 30,~~December 31, 2019 and 2018, respectively, as ~~they~~such awards were ~~anti-dilutive due to~~contingently issuable based on market or performance conditions, and such conditions had not been achieved during the ~~net loss recorded in the period.~~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 ~~September 30,~~December 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 ~~an Agreement relating to~~ the ~~sale and purchase of the Tilda Group Entities and certain other assets (the “Sale~~Sale and Purchase ~~Agreement”).~~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 ~~(the “Tilda Group Entities”)~~ 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 which are still in process of being finalized.~~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 ~~will~~ 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 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 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 ~~line items constituting the~~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,
	2019		2018		2019		2018
Net sales	$	2,667	$	50,590	$	30,399	$	92,945
Cost of sales	2,496		37,668		26,648		69,337
Gross profit	171		12,922		3,751		23,608
Selling, general and administrative expense	246		6,892		5,185		13,172

Other expense	824		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 operations	3,752		—		(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

Three Months Ended September 30,
2019 2018
Net sales $ 27,732
$ 42,355
Cost of sales 24,152
31,669
Gross profit
3,580
10,686
Selling, general and administrative expense 4,939
6,280
Other expense 348
546
Interest expense⁽¹⁾
2,432
3,391
Translation loss⁽²⁾
95,120
—
Gain on sale of discontinued operations (13,922 ) —
Net (loss) income from discontinued operations before income taxes (85,337 ) 469
Provision for income taxes⁽³⁾
15,700
483
Net loss from discontinued operations, net of tax $ (101,037 ) $ (14 )

(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 ~~the~~ Tilda, ~~business,~~ the Company reclassified $95,120 of related cumulative translation losses from ~~accumulated~~Accumulated other comprehensive loss to ~~the Company’s results~~discontinued operations, net of ~~its Tilda business’ discontinued operations.~~tax.

(3) Includes ~~$16,500 of~~a tax ~~expense~~(benefit) provision related to the tax gain on the sale of ~~Tilda.~~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,
ASSETS	2019
Cash and cash equivalents	$	8,509
Accounts receivable, less allowance for doubtful accounts	26,955
Inventories	65,546
Prepaid expenses and other current assets	9,038
Total current assets of discontinued operations⁽¹⁾	110,048
Property, plant and equipment, net	40,516
Goodwill	133,098
Trademarks and other intangible assets, net	84,925
Other assets	628
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 liabilities	4,675
Current portion of long-term debt	8,687
Total current liabilities of discontinued operations⁽¹⁾	31,703
Deferred tax liabilities	17,153
Other noncurrent liabilities	208
Total noncurrent liabilities of discontinued operations⁽¹⁾	17,361
Total liabilities of discontinued operations⁽¹⁾	$	49,064

June 30,
ASSETS 2019
Cash and cash equivalents $ 8,509
Accounts receivable, less allowance for doubtful accounts 26,955
Inventories 65,546
Prepaid expenses and other current assets 9,038
Total current assets of discontinued operations⁽¹⁾
110,048
Property, plant and equipment, net 40,516
Goodwill 133,098
Trademarks and other intangible assets, net 84,925
Other assets 628
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 liabilities 4,675
Current portion of long-term debt 8,687
Total current liabilities of discontinued operations⁽¹⁾
31,703
Deferred tax liabilities 17,153
Other noncurrent liabilities 208
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 Kosher” or “Empire”) operating segment, which were reported in the aggregate as the Hain Pure Protein reportable segment. Collectively, these dispositions represented a strategic shift that had 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.

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 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 provided for the issuance by the Company of an irrevocable stand-by letter of credit (the ~~“letter~~“Letter of ~~credit”~~Credit”) of $10,000 which expires nineteen months after issuance. As of June 30, 2019, the purchaser has fully drawn against the ~~letter~~Letter of ~~credit.~~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 ~~letter~~Letter of ~~credit~~Credit at any point from the date of issuance through the expiration of the ~~letter~~Letter 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 Plainville Farms business occurs prior to June 30, 2026, the purchaser will pay the Company 120% of the difference between the amount drawn on the ~~letter~~Letter of ~~credit~~Credit less the sum of all earnout payments made prior to such time up to the net proceeds received by the purchaser. At ~~September 30,~~December 31, 2019, the Company had not recorded an asset associated with the earnout.

Sale of HPPC and Empire Kosher

On June 28, 2019, the Company completed 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 ~~still~~ in the process of finalizing the closing adjustments. The Company used the proceeds from the sale to pay down a portion of its outstanding borrowings under its term loan.

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

Three Months Ended September 30,
2019 2018
Net sales $ —
$ 113,539
Cost of sales —
123,114
Gross loss —
(9,575 )
Selling, general and administrative expense —
4,243
Other expense —
5,674
Loss on sale of discontinued operations⁽¹⁾
1,424
—
Net loss from discontinued operations before income taxes (1,424 ) (19,492 )
Benefit for income taxes (393 ) (5,168 )
Net loss from discontinued operations, net of tax $ (1,031 ) $ (14,324 )


	Three Months Ended December 31,								Six Months Ended December 31,
			2019			2018		2019			2018
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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There were 0 assets or liabilities from discontinued operations associated with Hain Pure Protein at ~~September 30,~~December 31, 2019 or June 30, 2019.

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6. INVENTORIES

Inventories consisted of the following:


	December 31, 2019		June 30, 2019
Finished goods	$	192,587	$	199,754
Raw materials, work-in-progress and packaging	90,540		99,587
	$	283,127	$	299,341

September 30,
2019 June 30,
2019
Finished goods $ 208,132
$ 200,487
Raw materials, work-in-progress and packaging 93,219
98,854
$ 301,351
$ 299,341

At each period end, inventory is reviewed to ensure that it is recorded at the lower of cost or net realizable value. InDuring 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.

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 improvements	84,883		83,151
Machinery and equipment	290,712		274,554
Computer hardware and software	59,889		48,984
Furniture and fixtures	19,074		17,325
Leasehold improvements	42,026		32,264
Construction in progress	14,345		35,786
	525,252		506,304
Less: accumulated depreciation and amortization	226,694		218,459
	$	298,558	$	287,845

September 30,
2019 June 30,
2019
Land $ 14,012
$ 14,240
Buildings and improvements 82,124
83,151
Machinery and equipment 289,363
274,554
Computer hardware and software 57,412
48,984
Furniture and fixtures 18,141
17,325
Leasehold improvements 40,738
32,264
Construction in progress 8,979
35,786
510,769
506,304
Less: Accumulated depreciation and amortization 222,665
218,459
$ 288,104
$ 287,845

Depreciation and amortization expense for the three months ended ~~September 30,~~December 31, 2019 and 2018 was ~~$7,705~~$8,024 and ~~$7,280,~~$6,757, respectively. Such expense for the six months ended December 31, 2019 and 2018 was $15,729 and $14,230, respectively.

In the ~~three~~six months ended ~~September 30,~~December 31, 2018, the Company recorded ~~$4,236~~$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 0 impairment charges recorded induring the ~~three~~six months ended ~~September 30,~~December 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 ~~agreement~~arrangement is or contains a lease at inception. ~~Leases with an initial term of 12 months or less are not recorded on the balance sheet.~~

Companies are required to use the rate implicit in the lease whenever that rate is readily determinable and if the interest rate is not readily determinable, then a lessee may use its incremental borrowing rate. As the Company’s leases typically do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement in determining the present value of lease payments.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date.

~~Table of Contents~~

~~The lease~~Lease terms ~~determined by the Company~~ may include options to extend or terminate the lease when it is reasonably certain that itthe Company will exercise that option. ~~A limited number of the Company’s lease agreements include rental payments adjusted periodically for inflation.~~ 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.

~~The Company has elected to separate lease and non-lease components. Additionally, some~~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 ~~updates~~changes are recorded as ~~rent~~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 ~~September 30,~~December 31, 2019 were as follows:


	Three Months Ended		Six Months Ended
	December 31, 2019		December 31, 2019
Operating lease expenses	$	4,800	$	9,489
Finance lease expenses:
Amortization of ROU assets	168		448
Interest on lease liabilities	20		41
Total finance lease expenses	188		489
Variable lease expenses	381		1,240
Short-term lease expenses	419		859
Total lease expenses	$	5,788	$	12,077

Three Months Ended
September 30, 2019
Operating lease expenses $ 4,689
Finance lease expenses:
Amortization of ROU assets 280
Interest on lease liabilities 21
Total finance lease expenses 301
Variable lease expenses 859
Short-term lease expenses 440
Total lease expenses $ 6,289

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Supplemental balance sheet information related to leases ~~were~~was as follows:

Leases Classification September 30, 2019
Assets
Operating lease ROU assets Operating lease right of use assets $ 81,830
Finance lease ROU assets, net Property, plant and equipment, net 1,271
Total leased assets $ 83,101

Liabilities
Current
Operating Accrued expenses and other current liabilities $ 13,687
Finance Current portion of long-term debt 369
Non-current
Operating Operating lease liabilities, noncurrent portion $ 74,249
Finance Long-term debt, less current portion 380
Total lease liabilities $ 88,685

Leases

Classification

December 31, 2019

Assets

Operating lease ROU assets

Operating lease right of use assets

83,845

Finance lease ROU assets, net

Property, plant and equipment, net

1,267

Total leased assets

85,112

Liabilities

Current

Operating

Accrued expenses and other current liabilities

13,567

Finance

Current portion of long-term debt

442

Non-current

Operating

Operating lease liabilities, noncurrent portion

76,726

Finance

Long-term debt, less current portion

412

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 leases	8.6 years
Finance leases	2.4 years
Weighted average discount rate:
Operating leases	2.7		%
Finance leases	3.1		%

Three Months Ended
September 30, 2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 3,735
Operating cash flows from finance leases 6
Financing cash flows from finance leases 119
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 86,213
Finance leases 948
Weighted average remaining lease terms
Operating leases 8.9 years
Finance leases 2.3 years
Weighted average discount rates
Operating leases 3.2 %
Finance leases 2.2 %

^(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 ~~September~~December 31, 2019 were as follows:


Fiscal Year	Operating leases		Finance leases		Total
2020 (remainder of year)	$	7,555	$	238	$	7,793
2021	15,258		369		15,627
2022	12,987		184		13,171
2023	11,994		54		12,048
2024	10,191		27		10,218
Thereafter	44,398		6		44,404
Total lease payments	102,383		878		103,261
Less: Imputed interest	12,090		24		12,114
Total lease liabilities	$	90,293	$	854	$	91,147

The aggregate minimum future lease payments for operating leases at June 30, 2019 were as follows:


	Operating leases		Finance leases		Total
2019 (remainder of year)	$	11,335	$	273	$	11,608
Fiscal Year							Fiscal Year
2020	13,947		314		14,261		2020	$	19,426
2021	11,787		139		11,926		2021	16,584
2022	10,905		36		10,941		2022	14,218
2023	9,185		9		9,194		2023	13,221
2024							2024	11,041
Thereafter	38,538		0		38,538		Thereafter	44,452
Total lease payments	95,697		771		96,468
Less: Imputed interest	7,761		22		7,783
Total lease liabilities	$	87,936	$	749	$	88,685
								$	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 ~~shows~~provides the changes in the carrying ~~amount~~value of goodwill by ~~business~~reportable segment:


	North America		International		Total
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

North America International Total
Balance as of June 30, 2019 ^(a)
$ 612,590
$ 263,291
$ 875,881
Translation and other adjustments, net (279 ) (8,531 ) (8,810 )
Balance as of September 30, 2019^(a)
$ 612,311
$ 254,760
$ 867,071

(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, whose 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.

~~Beginning in the three months ended September 30, 2019, operations of Tilda have been classified as discontinued operations as discussed in Note 5,~~ ~~Discontinued Operations. Therefore, goodwill associated with Tilda is presented as assets of discontinued operations in the 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.

The Company completed its annual goodwill impairment analysis in the fourth quarter of fiscal year 2019, in conjunction with its budgeting and forecasting process for fiscal year 2020, and concluded that no indicators of impairment existed at any of its reporting units.

During fiscal 2019, the Company’s ~~goodwill~~ 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 Company’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 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 ~~existed.~~indicators were present.

~~Other than~~On October 7, 2019, the ~~assessment~~Company completed the divestiture of ~~goodwill associated with~~its Arrowhead and Sunspire businesses, components of the ~~changes in our~~United States reporting ~~units, there were 0 events or circumstances that warranted an~~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 ~~test~~analysis was performed for ~~goodwill during~~the United States reporting unit both before and after the sale, noting no impairment indicators were present.

Beginning in the three months ended September 30, ~~2019.~~2019, operations of Tilda have been classified as discontinued operations as discussed in Note 5, Discontinued Operations. Therefore, goodwill associated with Tilda is presented as Assets of discontinued operations in the consolidated financial statements.

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Other Intangible Assets

The following table ~~sets forth Consolidated Balance Sheet information~~includes 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 intangibles	209,568		204,630
Less: accumulated amortization	(124,134)		(115,543)
Net carrying amount	$	378,796	$	380,286

September 30,
2019 June 30,
2019
Non-amortized intangible assets:
Trademarks and tradenames ^(a)
$ 286,848
$ 291,199
Amortized intangible assets:
Other intangibles 199,783
204,630
Less: accumulated amortization (116,252 ) (115,543 )
Net carrying amount $ 370,379
$ 380,286

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(a) The gross carrying value of trademarks and tradenames is reflected net of $85,623 and $83,734 of accumulated impairment ~~charges.~~charges as of December 31, 2019 and June 30, 2019, respectively.

~~There were 0 events or circumstances that warranted an interim impairment test for indefinite-lived intangible assets during~~

During the three months ended ~~September 30, 2019.~~December 31, 2019 and 2018, the Company determined that indicators of impairment existed in certain of the Company’s indefinite-lived tradenames. The Company performed interim impairment analyses during the respective periods, and determined that the fair value of certain of the Company’s tradenames was below their carrying value. 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 ($15,113 in the North America segment and $2,787 in the International segment).

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,
	2019		2018		2019		2018
Amortization of acquired intangibles	$	3,189	$	3,322	$	6,272	$	6,681

Three Months Ended September 30,
2019 2018
Amortization of acquired intangibles $ 3,083
$ 3,359

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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 Kingdom	143,215		132,876
All Other	87,149		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 ~~September 30,~~December 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, 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., 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. The Company continues to~~tenet — To Create and Inspire A Healthier Way of Life^TM and be athe 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.

Productivity and Transformation

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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.

~~Table of Contents~~

~~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.~~

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~~agreement titled, "Agreement relating to the sale and purchase of the Tilda Group Entities and certain other ~~assets~~assets" (the “Sale and Purchase Agreement”). ~~Under the Sale and Purchase Agreement, the~~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. This disposition 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.$341.8 million.

These dispositions represented a strategic ~~shift~~shifts that had a major impact on the Company’s operations and financial results and ~~have been accounted for as discontinued operations.~~

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.

Change in Reportable Segments

Historically, the Company had three reportable segments: United States, United Kingdom and Rest of World. Effective July 1, 2019, the Company reassessed its segment reporting structure due to changes in how the Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker, 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 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 now operates under two 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.

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Comparison of Three Months Ended ~~September 30,~~December 31, 2019 to Three Months Ended ~~September 30,~~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 three months ended ~~September 30,~~December 31, 2019 and 2018 (amounts in thousands, other than percentages, which may not add due to rounding):


	Three Months Ended								Change in					Three Months Ended										Change in
	September 30, 2019				September 30, 2018				Dollars			Percentage		December 31, 2019					December 31, 2018				Dollars	Percentage
Net sales	$	482,076		100.0%	$	518,478		100.0%	$	(36,402	)	(7.0)%	Net sales	$	506,784	100.0%	$	533,566	100.0%	$	(26,782)	(5.0)%
Cost of sales	384,245			79.7%	429,570			82.9%	(45,325		)	(10.6)%	Cost of sales	401,177		79.2%	432,215		81.0%	(31,038)		(7.2)%
Gross profit	97,831			20.3%	88,908			17.1%	8,923			10.0%	Gross profit	105,607		20.8%	101,351		19.0%	4,256		4.2%
Selling, general and administrative expenses	80,680			16.7%	75,977			14.7%	4,703			6.2%	Selling, general and administrative expenses	79,078		15.6%	78,496		14.7%	582		0.7%
Amortization of acquired intangibles	3,083			0.6%	3,359			0.6%	(276		)	(8.2)%	Amortization of acquired intangibles	3,189		0.6%	3,322		0.6%	(133)		(4.0)%
Productivity and transformation costs	14,175			2.9%	10,333			2.0%	3,842			37.2%	Productivity and transformation costs	12,260		2.4%	9,872		1.9%	2,388		24.2%
Chief Executive Officer Succession Plan expense, net	—			—%	19,553			3.8%	(19,553		)	*	Chief Executive Officer Succession Plan expense, net	—		—%	10,148		1.9%	(10,148)		*
Proceeds from insurance claim	(2,562		)	(0.5)%	—			—%	(2,562		)	*
Accounting review and remediation costs	—			—%	3,414			0.7%	(3,414		)	*
Long-lived asset impairment	—			—%	4,236			0.8%	(4,236		)	*
Accounting review and remediation costs, net of insurance proceeds													Accounting review and remediation costs, net of insurance proceeds	—		—%	920		0.2%	(920)		*
Long-lived asset and intangibles impairment													Long-lived asset and intangibles impairment	1,889		0.4%	19,473		3.6%	(17,584)		*
Operating income (loss)	2,455			0.5%	(27,964		)	(5.4)%	30,419			(108.8)%	Operating income (loss)	9,191		1.8%	(20,880)		(3.9)%	30,071		144.0%
Interest and other financing expense, net	6,294			1.3%	4,314			0.8%	1,980			45.9%	Interest and other financing expense, net	4,737		0.9%	5,428		1.0%	(691)		(12.7)%
Other expense, net	1,328			0.3%	600			0.1%	728			121.3%	Other expense, net	1,244		0.2%	371		0.1%	873		235.3%
Loss from continuing operations before income taxes and equity in net loss of equity-method investees	(5,167		)	(1.1)%	(32,878		)	(6.3)%	27,711			(84.3)%
Benefit for income taxes	(531		)	(0.1)%	(9,966		)	(1.9)%	9,435			(94.7)%
Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees													Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees	3,210		0.6%	(26,679)		(5.0)%	29,889		112.0%
Provision for income taxes													Provision for income taxes	1,020		0.2%	5,097		1.0%	(4,077)		(80.0)%
Equity in net loss of equity-method investees	317			—%	175			—%	142			81.1%	Equity in net loss of equity-method investees	338		—%	11		—%	327		*
Net loss from continuing operations	$	(4,953	)	(1.0)%	$	(23,087	)	(4.5)%	$	18,134		(78.5)%
Net income (loss) from continuing operations													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	(102,068		)	(21.2)%	(14,338		)	(2.8)%	(87,730		)	(611.9)%	Net loss from discontinued operations, net of tax	(2,816)		(0.6)%	(34,714)		(6.5)%	31,898		91.9%
Net loss	$	(107,021	)	(22.2)%	$	(37,425	)	(7.2)%	$	(69,596	)	186.0%	Net loss	$	(964)	(0.2)%	$	(66,501)	(12.5)%	$	65,537	98.6%

Adjusted EBITDA	$	32,090		6.7%	$	28,694		5.5%	$	3,396		11.8%	Adjusted EBITDA	$	45,047	8.9%	$	37,888	7.1%	$	7,159	18.9%
Diluted net income (loss) per common share from continuing operations													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													Diluted net loss per common share from discontinued operations	(0.03)			(0.33)			0.30		90.9%
Diluted net loss per common share													Diluted net loss per common share	$	(0.01)		$	(0.64)		$	0.63	98.4%

* Percentage is not meaningful

Net Sales

Net sales for the three months ended ~~September 30,~~December 31, 2019 were ~~$482.1~~$506.8 million, a decrease of ~~$36.4~~$26.8 million, or ~~7.0%~~5.0%, ~~from net sales of $518.5~~as compared to $533.6 million ~~for~~in the three months ended ~~September 30,~~December 31, 2018. On a constant currency basis, net sales decreased approximately ~~4.8%~~4.6% from the prior year quarter. Net sales on a constant currency basis decreased in the North America reportable segment while the International reportable 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 December 31, 2019 was $105.6 million, an increase of $4.3 million, or 4.2%, as compared to the prior year quarter. Gross profit margin was 20.8% of net sales, compared to 19.0% in the prior year quarter. 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 $79.1 million for the three months ended December 31, 2019, an increase of $0.6 million, or 0.7%, from $78.5 million for the prior year quarter. The increase was due to increased marketing and advertising spend and variable compensation costs, including stock-based compensation expense, partially offset by a decrease in broker trade funds. Selling, general and administrative expenses as a percentage of net sales was 15.6% in the three months ended December 31, 2019 compared to 14.7% in the prior year quarter, reflecting an increase of 90 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $3.2 million for the three months ended December 31, 2019, a decrease of $0.1 million from $3.3 million in the prior year quarter as a result of movements in foreign currency.

Productivity and Transformation Costs

Productivity and transformation costs were $12.3 million for the three months ended December 31, 2019, an increase of $2.4 million from $9.9 million in the prior year quarter. The increase was primarily due to increased consulting fees incurred in connection with the Company’s ongoing transformation initiatives and increased severance costs.

Chief Executive Officer Succession Plan Expense, Net

Net costs and expenses associated with the Company’s Former Chief Executive Officer Succession Plan were $10.1 million for the three months ended December 31, 2018. There were no comparable expenses in the three 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.

Accounting Review and Remediation Costs, Net of Insurance Proceeds

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

Long-lived Asset and Intangibles Impairment

During the three 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 three 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, in the three months ended December 31, 2018, the Company recorded $1.6 million of non-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 December 31, 2019 was $9.2 million compared to an operating loss of $20.9 million in the prior year quarter as a result of the items described above.

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Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $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. The 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 the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense, Net

Other expense, net totaled $1.2 million for the three months ended December 31, 2019, compared to $0.4 million in the prior year quarter. The increase was primarily attributable to the loss on sale of the 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 December 31, 2019 was income of $3.2 million compared to a loss of $26.7 million in the prior year quarter. The increase 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 $1.0 million for the three months ended December 31, 2019 compared to $5.1 million in the prior year quarter.

The effective income tax rate from continuing operations was expense of 31.8% and 19.1% for the three months ended December 31, 2019 and December 31, 2018, respectively. The effective income tax rates from continuing operations for all periods were impacted by provisions in the Tax Cuts and Jobs Act (the "Tax 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 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.

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 three months ended December 31, 2019 was $0.3 million and essentially break even in the 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 December 31, 2019 was $1.9 million, or $0.02 per diluted share, compared to a net loss of $31.8 million, or $0.31 per diluted share, for the three months ended December 31, 2018. The increase 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 December 31, 2019 was $2.8 million, or $0.03 per diluted share, compared to $34.7 million, or $0.33 per diluted share, in the three months ended December 31, 2018.

During the three months ended December 31, 2019, 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 December 31, 2018 included asset impairment charges of $54.9 million associated with our former Hain Pure Protein business.

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 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 three months ended December 31, 2019 was $1.0 million, or $0.01 per diluted share, compared to $66.5 million, or $0.64 per diuted share, in the prior year quarter. The reduction in net loss was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $45.0 million and $37.9 million for the three 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 (loss) by reportable segment for the three months ended December 31, 2019 and 2018:


(dollars in thousands)	North America			International			Corporate and Other			Consolidated
Net sales
Three months ended 12/31/19	$	280,693		$	226,091		$	—		$	506,784
Three months ended 12/31/18	305,574			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 12/31/18	9,563			15,153			(45,596)			(20,880)
$ change	$	10,499		$	(2,254)		$	21,826		$	30,071
% change	109.8		%	(14.9)		%	47.9		%	144.0		%

Operating income (loss) margin
Three months ended 12/31/19	7.1		%	5.7		%	n/a			1.8		%
Three months ended 12/31/18	3.1		%	6.6		%	n/a			(3.9)		%

North America

Our net sales in the North America reportable segment for the three months ended December 31, 2019 were $280.7 million, a decrease of $24.9 million, or 8.1%, from net sales of $305.6 million in the prior year quarter. The decrease in net sales was primarily 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 North America for the three months ended December 31, 2019 was $20.1 million, an increase of $10.5 million from $9.6 million in the prior year quarter. The increase was driven by efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings.

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International

Our net sales in the International reportable segment for the three months ended December 31, 2019 were $226.1 million, a decrease of $1.9 million, or 0.8%, from $228.0 million in the prior year quarter. On a constant currency basis, net sales increased 0.1% from the prior year quarter primarily due to growth in our plant based food and beverage products, partially offset by discontinued sales of unprofitable SKUs. Operating income in our International reportable segment for the three months ended December 31, 2019 was $12.9 million, a decrease of $2.3 million from $15.2 million for the three months ended December 31, 2018. The decrease 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 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 $9.8 million and $1.9 million, respectively,are included in Corporate and Other for the three months ended December 31, 2019. Chief Executive Officer Succession Plan expense, net, Productivity and transformation costs and Accounting review and remediation costs, net of insurance proceeds included within Corporate and Other expenses were $10.1 million, $5.5 million and $0.9 million, respectively, for the three months ended December 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 Ended										Change in
	December 31, 2019					December 31, 2018				Dollars	Percentage
Net sales	$	988,860	100.0%	$	1,052,044	100.0%	$	(63,184)	(6.0)%
Cost of sales	785,422		79.4%	861,785		81.9%	(76,363)		(8.9)%
Gross profit	203,438		20.6%	190,259		18.1%	13,179		6.9%
Selling, general and administrative expenses	159,758		16.2%	154,473		14.7%	5,285		3.4%
Amortization of acquired intangibles	6,272		0.6%	6,681		0.6%	(409)		(6.1)%
Productivity and transformation costs	26,435		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 impairment	1,889		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, net	11,031		1.1%	9,742		0.9%	1,289		13.2%
Other expense, net	2,572		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 taxes	489		—%	(4,869)		(0.5)%	5,358		110.0%
Equity in net loss of equity-method investees	655		—%	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 approximately 4.7% from the prior 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 ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$97.8~~$203.4 million, an increase of ~~$8.9~~$13.2 million, or ~~10.0%~~6.9%, as compared to the prior year ~~quarter.~~period. Gross profit margin was ~~20.3%~~20.6% of net sales, compared to ~~17.1%~~18.1% in the prior year ~~quarter.~~period. The increased profit margin was primarily driven by efficient trade spending and supply chain ~~efficiencies~~cost reductions in ~~North America.~~the United States as well as other productivity savings.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses were ~~$80.7~~$159.8 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, an increase of ~~$4.7~~$5.3 million, or ~~6.2%~~3.4%, from ~~$76.0~~$154.5 million for the prior year ~~quarter. Selling, general~~period. The increase was due to increased marketing and ~~administrative expenses were~~advertising spend in the current year period and lower variable compensation costs in the prior year ~~quarter due to lower variable compensation costs,~~period, including stock-based compensation expense, primarily related to the reversal of previously accrued amounts under ~~its 2016-2018 and 2017-2019 LTIPs due to specified~~certain performance ~~metrics not being attained.~~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 ~~16.7%~~16.2% in the ~~three~~six months ended ~~September 30,~~December 31, 2019 compared to 14.7% in the prior year ~~quarter,~~period, reflecting an increase of ~~200~~150 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was ~~$3.1~~$6.3 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, a decrease of ~~$0.3~~$0.4 million from ~~$3.4~~$6.7 million in the prior year ~~quarter.~~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 ~~$14.2~~$26.4 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, an increase of ~~$3.8~~$6.2 million from ~~$10.3~~$20.2 million in the prior year ~~quarter.~~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 ~~three~~six months ended ~~September 30,~~December 31, 2019 as compared to the prior year period.

Chief Executive Officer Succession Plan Expense, ~~net~~Net

Net costs and expenses associated with the Company’s Former Chief Executive Officer Succession Plan were ~~$19.6~~$29.7 million for the ~~three~~six months ended ~~September 30,~~December 31, 2018. There were no comparable expenses in the ~~three~~six months ended ~~September 30,~~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 ~~three~~six months ended ~~September 30,~~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 ~~$3.4~~$4.3 million for the ~~three~~six months ended ~~September 30,~~December 31, 2018. No such costs were incurred in the ~~three~~six months ended ~~September 30,~~December 31, 2019.

Long-lived Asset and Intangibles Impairment

During the ~~three~~six months ended ~~September 30,~~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 ~~non-cash~~a pre-tax impairment ~~charges~~charge of ~~$4.2~~$17.9 million related to certain tradenames ($15.1 million related to the ~~closure~~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 athis 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 ~~facility~~of certain fruit-based products in the United Kingdom. ~~There were no impairment charges recorded in the three months ended September 30, 2019.~~

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Operating Income ~~(loss)~~(Loss)

Operating income for the ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$2.5~~$11.6 million compared to an operating loss of ~~$28.0~~$48.8 million in the prior year ~~quarter.~~period. The increase in operating income resulted from the items described above.

Interest and Other Financing Expense, ~~net~~Net

Interest and other financing expense, net totaled ~~$6.3~~$11.0 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, an increase of ~~$2.0~~$1.3 million, or ~~45.9%~~13.2%, from ~~$4.3~~$9.7 million in the prior year ~~quarter.~~period. The increase ~~in interest and other financing expense, net~~ 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 and a $0.9 million write-off of deferred financing costs due to the repayment of the Company’s term loan.~~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.

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Other Expense, ~~net~~Net

Other expense, net, totaled ~~$1.3~~$2.6 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, compared to ~~$0.6~~$1.0 million in the prior year ~~quarter.~~period. The increase iswas primarily attributable to ~~higher net unrealized foreign currency losses principally due to~~ the ~~effect~~loss on sale of ~~foreign currency movements on~~ the ~~remeasurement of foreign currency denominated loans.~~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 ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$5.2~~$2.0 million compared to ~~$32.9~~$59.6 million ~~for~~in the ~~three months ended September 30, 2018.~~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 ~~benefit~~expense from continuing operations was $0.5 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019 compared to a ~~tax~~ benefit of ~~$10.0~~$4.9 million in the prior year ~~quarter.~~period.

The effective income tax ~~benefit~~rates from continuing operations was ~~10.3%~~expense of 25.0% and a benefit of ~~30.3%~~8.2% for the ~~three~~six months ended ~~September 30,~~December 31, 2019 and ~~September 30,~~December 31, 2018, respectively. The effective income tax rate ~~from continuing operations~~ for ~~the three months ended September 30, 2019 and 2018~~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 ~~fiscal 2019,~~the six months ended December 31, 2018, the Company finalized its accounting for income tax effects of the Tax Act and recorded ~~a partial valuation allowance against certain state deferred~~additional expense related to its transition tax assets and state net operating loss carryforwards as it is not more likely than not that the state tax attributes will be realized. The Company continues to maintain this valuation allowance as of September 30, 2019.liability.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$0.3~~$0.7 million compared to $0.2 million in the ~~three months ended September 30, 2018.~~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 ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$5.0~~$3.1 million compared ~~to net loss of$23.1~~$54.9 million ~~for~~in the ~~three months ended September 30, 2018.~~prior year period. Net loss per diluted share from continuing operations was ~~$0.05~~$0.03 for the ~~three~~six months ended ~~September 30,~~December 31, 2019 compared to ~~net loss per diluted share of $0.22~~$0.53 in the prior year ~~quarter.~~period. The ~~decreased~~reduction in net loss was attributable to the factors noted above.

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Net Loss from Discontinued Operations, Net of Tax

Net loss from discontinued operations, net of tax, for the ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$102.1~~$104.9 million, or $1.01 per diluted share, compared to ~~$14.3~~$49.1 million, or $0.47 per diluted share, in the ~~three months ended September 30, 2018. Diluted net loss per common share from discontinued operations was $0.98 and $0.14 in the three months ended September 30, 2019 and 2018, respectively.~~prior year period.

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Net loss from discontinued operations, net of tax, for the ~~three~~six months ended ~~September 30,~~December 31, 2019 included a reclassification of $95.1 million of cumulative translation losses from ~~accumulated~~Accumulated comprehensive loss related to the ~~Company’s results of the~~ Tilda ~~business’~~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 ~~$15.3~~$13.5 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019 compared to an income tax benefit from discontinued operations of $4.7 million for the three months ended September 30, 2018. The expense for income taxes for the three months ended September 30, 2019 wasand is impacted by ~~$16.5~~$15.3 million of tax ~~related~~relating to the tax gain on the sale of the Tilda entities. The income tax benefit ~~for the three months ended September 30, 2018 was the result of book losses in the period.~~

~~Net loss~~ from discontinued operations of $27.5 million for the ~~three~~six months ended ~~September 30,~~December 31, 2018 ~~was primarily due~~includes the reversal of the $12.3 million deferred tax liability previously recorded related to ~~a net loss of $14.3 million associated with our former~~ Hain Pure Protein ~~business.~~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 ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$107.0~~$108.0 million, or $1.04 per diluted share, compared to ~~net loss of $37.4~~$103.9 million, or $1.00 per diluted share, in the prior year ~~quarter. Net loss per diluted share was $1.03~~period. The increase in ~~the three months ended September 30, 2019 compared to~~ net loss ~~per diluted share of $0.36 in the three months ended September 30, 2018. The decrease~~ was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was ~~$32.1~~$77.1 million and ~~$28.7~~$66.6 million for the ~~three~~six months ended ~~September 30,~~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.

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Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the ~~three~~six months ended ~~September 30,~~December 31, 2019 and 2018:


(dollars in thousands)	North America			International			Corporate and Other			Consolidated
Net sales
Six months ended 12/31/19	$	552,394		$	436,466		$	—		$	988,860
Six months ended 12/31/18	596,765			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 12/31/18	14,069			20,813			(83,726)			(48,844)
$ change	$	21,125		$	1,193		$	38,172		$	60,490
% change	150.2		%	5.7		%	45.6		%	123.8		%

Operating income (loss) margin
Six months ended 12/31/19	6.4		%	5.0		%	n/a			1.2		%
Six months ended 12/31/18	2.4		%	4.6		%	n/a			(4.6)		%

(dollars in thousands) North America International Corporate and Other Consolidated
Net sales
Three months ended 9/30/19 $ 271,701
$ 210,375
$ —
$ 482,076
Three months ended 9/30/18 291,191
227,287
—
518,478
$ change $ (19,490 ) $ (16,912 ) n/a
$ (36,402 )
% change (6.7 )% (7.4 )% n/a
(7.0 )%

Operating income (loss)
Three months ended 9/30/19 $ 15,132
$ 9,107
$ (21,784 ) $ 2,455
Three months ended 9/30/18 4,506
5,660
(38,130 ) (27,964 )
$ change $ 10,626
$ 3,447
$ 16,346
$ 30,419
% change 235.8 % 60.9 % 42.9 % 108.8 %

Operating income (loss) margin
Three months ended 9/30/19 5.6 % 4.3 % n/a
0.5 %
Three months ended 9/30/18 1.5 % 2.5 % n/a
(5.4 )%

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North America

Our net sales in the North America reportable segment for the ~~three~~six months ended ~~September 30,~~December 31, 2019 were ~~$271.7~~$552.4 million, a decrease of ~~$19.5~~$44.4 million, or ~~6.7%~~7.4%, from ~~net sales of $291.2~~$596.8 million ~~for~~in the ~~three months ended September 30, 2018.~~prior year period. The decrease in net sales was primarily 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 North America for the ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$15.1~~$35.2 million, an increase of ~~$10.6~~$21.1 million from ~~operating income of $4.5~~$14.1 million ~~for~~in the ~~three months ended September 30, 2018.~~prior year period. The increase in operating income was the result of increased gross profit in the United States ~~as a result of~~driven by efficient trade spending and supply chain ~~efficiencies and reduced uneconomic trade and promotional spend,~~cost reductions in the United States as well as other productivity savings, offset in part by increased marketing and advertising expense.

International

Our net sales in the International reportable segment for the ~~three~~six months ended ~~September 30,~~December 31, 2019 were ~~$210.4~~$436.5 million, a decrease of ~~$16.9~~$18.8 million, or ~~7.4%~~4.1%, from ~~net sales of $227.3~~$455.3 million ~~for~~in the ~~three months ended September 30, 2018.~~prior year period. On a constant currency basis, net sales decreased ~~2.5%~~1.2% from the prior year ~~quarter. The net sales decrease on a constant currency basis was~~ primarily due to discontinued sales of unprofitable SKUs, partially offset by growth in our plant based food and beverage products. Operating income in our International reportable segment for the ~~three~~six months ended ~~September 30,~~December 31, 2019 was ~~$9.1~~$22.0 million, an increase of ~~$3.4~~$1.2 million from ~~$5.7~~$20.8 million in the prior year period. Operating income for the ~~three~~six months ended ~~September 30, 2018. The increase in~~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 ~~was~~for the six months ended December 31, 2019 decreased $3.1 million from the prior year period primarily due to ~~operating efficiencies achieved at Hain Daniels driven by ongoing productivity and transformation initiatives and a decrease in~~increased marketing and advertising expense ~~in both~~and depreciation related to capital expenditures during the ~~Hain Daniels and Ella’s Kitchen operating segments.~~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 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 ~~$10.7~~$20.6 million and $1.9 million, respectively, are included in Corporate and Other for the ~~three~~six months ended ~~September 30,~~December 31, 2019. Chief Executive Officer Succession Plan expense, net, Productivity and transformation costs and Accounting review and remediation costs, net of insurance proceeds included within Corporate and Other expenses were ~~$19.6~~$29.7 million, ~~$8.0~~$13.5 million and ~~$3.4~~$4.3 million, respectively, for the ~~three~~six months ended ~~September 30,~~December 31, 2018.

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

Liquidity and Capital Resources

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our 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, ~~(defined below).~~and the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance ~~decreased $10.5~~increased $6.0 million at ~~September 30,~~December 31, 2019 to ~~$20.5~~$37.0 million as compared to $31.0 million at June 30, 2019. Our working capital from continuing operations was ~~$244.9~~$264.7 million at ~~September 30,~~December 31, 2019, an increase of ~~$4.6~~$24.4 million from $240.3 million at the end of fiscal 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 ~~September 30,~~December 31, 2019, substantially all of the total cash balance from continuing operations was held outside of the United States due to debt repayments made towards our revolving credit facility at the end of the period by the United States 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 ~~September 30,~~December 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 operations	3,694		14,881		(11,187)		(75.2)%
Effect of exchange rate changes on cash from continuing operations	1,382		(1,492)		2,874		192.6%
Increase (decrease) in cash from continuing operations	6,007		(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%

Three Months Ended September 30, Change in
(amounts in thousands) 2019
2018 Dollars Percentage
Cash flows provided by (used in):
Operating activities from continuing operations $ (3,581 ) $ (19,570 ) $ 15,989
81.7 %
Investing activities from continuing operations (13,164 ) (22,913 ) 9,749
42.5 %
Financing activities from continuing operations 7,142
1,384
5,758
416.0 %
Effect of exchange rate changes on cash from continuing operations (892 ) (670 ) (222 ) (33.1 )%
Decrease in cash from continuing operations (10,495 ) (41,769 ) 31,274
74.9 %
Decrease in cash from discontinued operations (8,509 ) (11,350 ) 2,841
25.0 %
Net decrease in cash and cash equivalents $ (19,004 ) $ (53,119 ) $ 34,115
64.2 %
* Percentage is not meaningful

Cash ~~used in~~provided by operating activities from continuing operations was ~~$3.6~~$17.1 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, ~~a decrease~~an increase of ~~$16.0~~$17.2 million from ~~$19.6 million of cash used in operating activities from continuing operations for~~ the ~~three months ended September 30, 2018.~~prior year period. This ~~decrease~~increase resulted primarily from an improvement of ~~$8.2~~$25.9 million in net loss adjusted for non-cash charges and a decrease of ~~$7.8~~$8.8 million of cash used 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 ~~$13.2~~$16.2 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, a decrease of ~~$9.7~~$20.9 million from ~~$22.9 million of~~ cash used of $37.1 million in ~~investing activities from continuing operations for~~ the ~~three months ended September 30, 2018~~prior year period primarily due to proceeds of $13.8 million from the sale of the Arrowhead and Sunspire businesses and decreased capital expenditures.

Cash provided by financing activities from continuing operations was ~~$7.1~~$3.7 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, ~~an increase~~a decrease of ~~$5.8~~$11.2 million from ~~$1.4~~$14.9 million ~~for~~in the ~~three months ended September 30, 2018.~~prior year period. Cash provided by financing activities from continuing operations for the six months ended December 31, 2018 included ~~$312.2~~$309.9 million primarily related to the proceeds from the sale of Tilda, partially offset by ~~$304.7~~$305.3 million of repayments of our term loan and revolving credit facility funded primarily through proceeds received from the sale of Tilda.

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Operating Free Cash Flow from Continuing Operations

Our operating free cash flow from continuing operations was negative ~~$16.7~~$12.2 million for the ~~three~~six months ended ~~September 30,~~December 31, 2019, an improvement of ~~$25.1~~$28.8 million from negative ~~$41.8~~$41.0 million in the ~~three~~six months ended ~~September 30,~~December 31, 2018. This improvement resulted primarily from ~~a decrease of $9.1 million in capital expenditures,~~ an improvement of ~~$8.2~~$25.9 million in net loss adjusted for non-cash charges, a decrease of $11.7 million in capital expenditures, and a decrease of ~~$7.8~~$8.8 million of cash used in working capital accounts. We expect that our capital spending for fiscal 2020 will be approximately ~~$70-~~$60-$8070 million, and we may incur additional costs in connection with ongoing productivity and transformation initiatives. ~~We refer the reader to~~See the Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash ~~used in~~provided by (used in) operating activities from continuing operations to operating free cash flow from continuing operations.

~~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 $1.0 billion revolving credit facility through February 6, 2023 and provides for a $0.3 million term loan. Under the Credit Agreement, the revolving credit facility may be increased by an additional uncommitted $0.4 million, 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 Sterling and Canadian Dollars 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. Obligations under the Credit Agreement are guaranteed by certain existing and future domestic subsidiaries of the Company. As of September 30, 2019, there were $321.0 million of borrowings outstanding under the revolving credit facility and $9.7 million letters of credit outstanding under the Credit Agreement.

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 (as defined in the Credit Agreement) and interest coverage ratio (as defined in the Credit Agreement) were adjusted. The Company’s allowable consolidated leverage ratio is no more than 4.75 to 1.0 from March 31, 2019 to December 31, 2019, no more than 4.50 to 1.0 at March 31, 2020, no more than 4.0 to 1.0 at June 30, 2020 and no more than 3.75 to 1.0 on September 30, 2020 and thereafter. Additionally, the Company’s required consolidated interest coverage ratio is 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 the 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.

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 September 30, 2019 was 4.09%. 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.

In the three months ended September 30, 2019, the Company used the proceeds from the sale of Tilda, net of transaction costs, to prepay the entire principal amount of term loan outstanding under the Amended Credit Agreement and to partially pay down the revolving credit facility. See Note 5, ~~Discontinued Operations, in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for information on the sale of Tilda.~~

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~~As of September 30, 2019, $669.3 million is available under the Amended Credit Agreement, and the Company was in compliance with all associated covenants, as amended by the Amended Credit Agreement.~~

Share Repurchase Program

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 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. As of ~~September 30,~~December 31, 2019, the Company had not repurchased any shares under this program and had ~~$250.0~~$250 million of remaining capacity under the share repurchase program.

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

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

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

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 America			International			Hain 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 exchange	287			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) North America International Hain Consolidated
Net sales - Three months ended 9/30/19 $ 271,701
$ 210,375
$ 482,076
Impact of foreign currency exchange 356
11,338
11,694
Net sales on a constant currency basis - Three months ended 9/30/19 $ 272,057
$ 221,713
$ 493,770

Net sales - Three months ended 9/30/18 $ 291,191
$ 227,287
$ 518,478
Net sales decline on a constant currency basis (6.6 )% (2.5 )% (4.8 )%

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, Productivity and transformation costs, 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.

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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 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 operations	1,852		(31,787)		(3,101)		(54,874)

Provision (benefit) for income taxes	1,020		5,097		489		(4,869)
Interest expense, net	4,000		4,884		8,552		8,688
Depreciation and amortization	13,219		12,205		27,142		25,065
Equity in net loss of equity-method investees	338		11		655		186
Stock-based compensation, net	3,083		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 impairment	1,889		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 costs	12,260		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 rationalization	3,927		1,530		3,916		1,530
Loss on sale of business	1,783		—		1,783		—
Plant closure related costs	1,522		1,490		2,354		3,319
Warehouse/manufacturing facility start-up costs	639		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 September 30,
(amounts in thousands) 2019
2018
Net loss $ (107,021 ) $ (37,425 )
Net loss from discontinued operations (102,068 ) (14,338 )
Net loss from continuing operations (4,953 ) (23,087 )

Benefit for income taxes (531 ) (9,966 )
Interest expense, net 4,552
3,804
Depreciation and amortization 13,923
12,860
Equity in net loss of equity-method investees 317
175
Stock-based compensation, net 2,737
(214 )
Stock-based compensation expense in connection with Chief Executive Officer Succession Agreement —
312
Long-lived asset impairment —
4,236
Unrealized currency losses 1,684
590
EBITDA $ 17,729
$ (11,290 )

Productivity and transformation costs 14,175
10,333
Chief Executive Officer Succession Plan expense, net —
19,241
Proceeds from insurance claims (2,562 ) —
Accounting review and remediation costs —
3,414
Warehouse/manufacturing facility start-up costs 1,879
4,599
SKU rationalization (11 ) —
Plant closure related costs 832
1,828
Litigation and related expenses 48
569
Adjusted EBITDA $ 32,090
$ 28,694

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 ~~used in~~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)

Three Months Ended September 30,
(amounts in thousands) 2019 2018
Net cash used in operating activities - continuing operations $ (3,581 ) $ (19,570 )
Purchase of property, plant and equipment (13,164 ) (22,261 )
Operating free cash flow from continuing operations $ (16,745 ) $ (41,831 )

Off Balance Sheet Arrangements

At ~~September 30,~~December 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, 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. 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 six months ended ~~September 30,~~December 31, 2019 from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 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, 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, our CEO and CFO have concluded that the disclosure controls and procedures were effective as of ~~September 30,~~December 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

~~As discussed in Note 2,~~ ~~Basis of Presentation,~~ in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, the Company implemented the new lease standard under ASC 842 as of July 1, 2019. In connection with these changes, the Company implemented certain modifications to internal controls over financial reporting, including the documentation of the policy regarding the new accounting for leases, implementation of processes to address various judgments and assessments necessary during the life of a lease, as well as implementing new controls to capture the expanded disclosures required under ASC 842.

~~Except as described above, there~~There were no ~~other~~ changes in ~~the Company’s~~our internal controls over financial reporting that occurred during the three months ended ~~September 30,~~December 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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 named as defendants the Company and certain of its ~~current and~~ former officers (collectively, “Defendants”) and asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly materially false or misleading statements and omissions in public statements, press releases and SEC filings regarding the Company’s business, prospects, financial results and internal controls. Defendants filed a motion to dismiss the Amended Complaint on October 3, 2017 which the Court granted on March 29, 2019, dismissing the case in its entirety, without prejudice to replead. Co-Lead Plaintiffs filed a Second Amended Consolidated Class Action Complaint on May 6, 2019 (the “Second Amended Complaint”). The Second Amended Complaint again 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 alleged 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. Co-Lead Plaintiffs requested leave to file an amended consolidated complaint, and on January 14, 2019, the Court partially lifted the stay, ordering Co-Lead Plaintiffs to file their amended complaint by March 7, 2019. Co-Lead Plaintiffs filed a Verified Amended Shareholder Derivative Complaint on March 7, 2019. The Court continued the stay pending a decision on Defendants’ motion to dismiss in the Consolidated 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. Co-Lead Plaintiffs filed an opposition to Defendants’ motion to dismiss, and Defendants submitted a reply on September 20, 2019. This motion is fully briefed, and the 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.

On May 23, 2017, an additional stockholder filed a complaint under seal in the Eastern District of New York against the former Board of Directors and certain former officers of the Company. The complaint alleged that the Company’s former directors and certain former officers made materially false and misleading statements in press releases and SEC filings regarding the Company’s business, prospects and financial results. The complaint also alleged that the Company violated its by-laws and Delaware law by failing to hold its 2016 Annual Stockholders Meeting and includes claims for breach of fiduciary duty, unjust enrichment and corporate waste. On August 9, 2017, the 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 was rendered on the motion to dismiss the Amended Complaint in the Consolidated Securities Action, described above.

On March 29, 2019, the Court in the Consolidated Securities Action granted Defendants’ motion, dismissing the Amended Complaint in its entirety, without prejudice to replead. Co-Lead Plaintiffs in the Consolidated Securities Action filed 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 30 days after the Court rules on the motion to dismiss the Second Amended Complaint in the Consolidated Securities 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, 2019, filed with the SEC on August 29, 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, 2019	1,921	$	20.85	—	250
November 1, 2019 - November 30, 2019	16,375	24.33		—	250
December 1, 2019 - December 31, 2019	8,991	25.95		—	250
Total	27,287	$	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)
July 1, 2019 - July 31, 2019 —
$ —
—
250
August 1, 2019 - August 31, 2019 13,130
18.18
—
250
September 1, 2019 - September 30, 2019 3,423
21.32
—
250
Total 16,553
$ 18.83

(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 ~~September 30,~~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

~~Table of Contents~~



Exhibit Number		Description

~~2.1~~3.1		Agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets dated August 27, 2019, between the Company and Ebro Foods S.A. (incorporated by reference to Exhibit 2.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on August 29, 2019).

~~3.1~~	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of Amendment No. 1 to the Company’s Registration Statement on Form S-4 filed with the SEC on April 24, 2000).

3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2(b) of the Company’s Current Report on Form 8-K filed with the SEC on November 26, 2014).

3.3		Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2018).

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

10.1		~~The Hain Celestial Group, Inc.~~Fourth Amendment to Third Amended and Restated ~~Executive Incentive Plan (incorporated~~Credit Agreement, dated November 6, 2019, by ~~reference to Exhibit 10.1~~and among the Company, the Lenders party thereto and Bank of ~~the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2019.~~America, N.A., as administrative agent.

10.2		~~Separation Agreement,~~Offer Letter, dated ~~August 30,~~October 31, 2019, between the Company and ~~Denise Faltischek.~~Javier H. Idrovo.

~~31.1~~10.3		Separation Agreement, dated as of December 31, 2019, between the Company and James M. Langrock.

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

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

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

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

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

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

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, 2020	~~THE HAIN CELESTIAL GROUP, INC.~~
		~~(Registrant)~~

~~Date:~~	~~November 7, 2019~~	/s/ Mark L. Schiller
				Mark L. Schiller, President and Chief Executive Officer



Date:	~~November 7, 2019~~February 6, 2020	/s/ ~~James Langrock~~Javier H. Idrovo
		~~James Langrock,~~Javier H. Idrovo, Executive Vice President and Chief Financial Officer



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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	HAIN	The NASDAQ^® Global Select Market


	December 31, 2019		June 30, 2019
Revolving credit facility	$	321,700	$	420,575
Term loan	—		206,250
Less: Unamortized issuance costs	—		(1,022)
Other borrowings	4,551		4,966
	326,251		630,769
Short-term borrowings and current portion of long-term debt	1,387		17,232
Long-term debt, less current portion	$	324,864	$	613,537



	September 30, 2019		June 30, 2019
Revolving credit facility	$	320,963	$	420,575
Term loan	—		206,250
Less: Unamortized issuance costs	—		(1,022		)
Other borrowings	4,646		4,966
	325,609		630,769
Short-term borrowings and current portion of long-term debt	2,223		17,232
Long-term debt, less current portion	$	323,386	$	613,537


	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, 2019	2,729	$	12.94
Granted	486	$	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, 2019	1,933	$	15.48



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



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



	September 30,			June 30,
	2019			2019
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	20,522		$	31,017
Accounts receivable, less allowance for doubtful accounts of $558 and $588, respectively	206,478			209,990
Inventories	301,351			299,341
Prepaid expenses and other current assets	36,508			51,391
Current assets of discontinued operations	—			110,048
Total current assets	564,859			701,787
Property, plant and equipment, net	288,104			287,845
Goodwill	867,071			875,881
Trademarks and other intangible assets, net	370,379			380,286
Investments and joint ventures	18,463			18,890
Operating lease right of use assets	81,830			—
Other assets	45,727			58,764
Noncurrent assets of discontinued operations	—			259,167
Total assets	$	2,236,433		$	2,582,620
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	189,441		$	219,957
Accrued expenses and other current liabilities	128,296			114,265
Current portion of long-term debt	2,223			17,232
Current liabilities of discontinued operations	—			31,703
Total current liabilities	319,960			383,157
Long-term debt, less current portion	323,386			613,537
Deferred income taxes	33,685			34,757
Operating lease liabilities, noncurrent portion	74,249			—
Other noncurrent liabilities	14,215			14,489
Noncurrent liabilities of discontinued operations	—			17,361
Total liabilities	765,495			1,063,301
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: none	—			—
Common stock - $.01 par value, authorized 150,000 shares; issued: 108,873 and 108,833 shares, respectively; outstanding: 104,242 and 104,219 shares, respectively	1,089			1,088
Additional paid-in capital	1,161,537			1,158,257
Retained earnings	587,557			695,017
Accumulated other comprehensive loss	(168,894		)	(225,004		)
	1,581,289			1,629,358
Less: Treasury stock, at cost, 4,631 and 4,614 shares, respectively	(110,351		)	(110,039		)
Total stockholders’ equity	1,470,938			1,519,319
Total liabilities and stockholders’ equity	$	2,236,433		$	2,582,620


	Number of Options	Weighted Average Exercise Price		Weighted Average Contractual Life (years)	Aggregate Intrinsic Value
Options outstanding and exercisable at June 30, 2019	122	$	2.26
Exercised	—	—
Options outstanding and exercisable at December 31, 2019	122	$	2.26	11.5	$	2,890


	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 contracts	374		—		374		—
Equity investment	652		652		—		—
Total	$	4,032	$	3,658	$	374	$	—
Liabilities:
Forward foreign currency contracts	$	709	$	—	$	709	$	—
Total	$	709	$	—	$	709	$	—