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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

5. ACQUISITIONS

We account for acquisitions using the acquisition method of accounting. The results of operations of the acquisitions have been included in our consolidated results from their respective dates of acquisition. We allocate the purchase price of each acquisition to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill.

Fiscal 2011

On July 2, 2010, we acquired substantially all of the assets and business of 3 Greek Gods, L.L.C.LLC (“Greek Gods”), including The Greek Gods brand of Greek-style yogurt products, and assumed certain liabilities for cash consideration of $16.3 million, 242,185 shares of the Company’s common stock, valued at $4.8 million, plus up to $25.8 million of additional contingent consideration based upon the achievement of specified operating results in fiscal 2011 and 2012. The Company recorded $22.9 million as the fair value of the contingent consideration at the acquisition date, which is included in other noncurrent liabilities. Greek Gods develops, produces, markets and sells The Greek Gods brand of Greek-style yogurt products into various sales channels. The acquisition of The Greek Gods brand expandsexpanded our refrigerated product offerings.

The following table summarizes the consideration paid for the Greek Gods acquisition and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

The purchase price allocationfor the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based upon a provisional valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. Any change in theon their estimated fair value ofvalues at the net assets, prior to the finalization of the more detailed analyses, but not to exceed one year from the date of acquisition will change the amount of the purchase price allocable to goodwill.date. The fair values assigned to identifiable intangible assets acquired were based on assumptions and estimates made by management. Identifiable intangible assets acquired consisted of customer relationships and trade names. The trade name intangible relates to “The Greek Gods” brand name, which has an indefinite life, and therefore, is not amortized. The customer relationship intangible asset is being amortized on a straight-line basis over its estimated useful life. Significant assumptions utilized in the income approach were based on company specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of $23.7 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized, including entry into the yogurt category and use of our existing infrastructure to expand sales of the acquired business products. The goodwill is expected to be deductible for tax purposes.

The Company is required to reassess the fair value of the contingent consideration on a periodic basis. During the six months ended December 31, 2010, we increased our liability for contingent consideration and recorded an additional expense of $0.4 million, based on our current projection.

Acquisition costs related to Greek Gods have been expensed as incurred and are included in “Acquisition related expenses and restructuring charges” in the Condensed Consolidated Statement of Operations.Income. Total acquisition related costs of approximately $0.8$1.3 million were expensed in the threesix months ended September 30, 2010.December 31, 2010, including the aforementioned $0.4 million of contingent consideration.

Fiscal 2010

On June 15, 2010, we acquired substantially all of the assets and business of World Gourmet Marketing, L.L.C. (“World Gourmet”), including its Sensible Portions brand snack products and assumed certain liabilities for cash consideration of $50.9 million, 1,558,442 shares of the Company’s common stock, valued at $35.4 million, plus up to $30.0 million of

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additional contingent consideration based upon the achievement of specified operating results in fiscal 2011, of which the Company recorded $26.6 million as the fair value at the acquisition date. We reassessed the fair value of the contingent consideration at December 31, 2010, which resulted in no change to the carrying value of the liability. During the quarter ended September 30, 2010, the Company completed its analysis of the fair values at the date of acquisition which resulted in a reallocation of $7.0 million from identified intangible assets to goodwill.

On June 15, 2010, we also acquired Churchill Food Products Limited (“Churchill”), a manufacturer and distributor of food-to-go products in the United Kingdom. The acquisition of Churchill was completed for cash consideration of £1.3 million (approximately $1.9 million based on the transaction date exchange rate) plus up to £1.8 million (approximately $2.8 million) of additional contingent consideration based upon the achievement of specified operating results in fiscal 2011 and 2012, of which the Company recorded £1.3 million (approximately $2.0 million) as the fair value at the acquisition date. We reassessed the fair value of the contingent consideration at December 31, 2010, which resulted in no change to the carrying value of the liability.

The following table provides unaudited pro forma results of operations for the three months and six months ended September 30,December 31, 2009 as if all of the above acquisitions had been completed at the beginning of that fiscal year. The following pro forma combined results of operations have been provided for illustrative purposes only, and do not purport to be indicative of the actual results that

would have been achieved by the Company for the periods presented or that will be achieved by the combined company in the future. The pro forma information has been adjusted to give effect to items that are directly attributable to the transactions and are expected to have a continuing impact on the combined results. The adjustments include amortization expense associated with acquired identifiable intangible assets, interest expense associated with bank borrowings to fund the acquisitions and elimination of transactions costs incurred in fiscal 2011 that are directly related to the transactions and do not have a continuing impact on operating results.

This information has not been adjusted to reflect any changes in the operations of the businesses subsequent to its acquisition by us. Changes in operations of the acquired businesses include, but are not limited to, discontinuation of products, integration of systems and personnel, changes in trade practices, application of our credit policies, changes in manufacturing processes or locations, and changes in marketing and advertising programs. Had any of these changes been implemented by the former managements of the businesses acquired prior to acquisition by us, the sales and net income information might have been materially different than the actual results achieved and from the pro forma information provided. In management’s opinion, these unaudited pro forma results of operations are not intended to represent or to be indicative of the actual results that would have occurred had the acquisitions been consummated at the beginning of the period presented or of future operations of the combined companies under our management.

6. INVENTORIES

Inventories consisted of the following:

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

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8.	GOODWILL AND OTHER INTANGIBLE ASSETS

8. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company performs its annual goodwill impairment test on the first day of its fiscal fourth quarter. 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 below its carrying value, an interim test is performed.

Changes in the carrying amount of goodwill for the threesix months ended September 30,December 31, 2010 were as follows:

The addition to goodwill in the threesix months ended September 30,December 31, 2010 of $23.7 million related to the acquisition of the assets and business of 3 Greek Gods L.L.C.LLC During the threesix months ended September 30,December 31, 2010, we also reallocated $7.0 million preliminarily allocated to other intangibles related to the acquisition of the assets and business of World Gourmet Marketing L.L.C. to goodwill, based on our completed analysis of the fair values at acquisition date.

At September 30,December 31, 2010, included in trademarks and other intangible assets are approximately $31.7$30.2 million of intangible assets deemed to have a finite life, which are being amortized over their estimated useful lives. The following table reflects the components of trademarks and other intangible assets:

Amortization of intangible assets with finite lives amounted to $1.6$3.0 million in the threesix months ended September 30,December 31, 2010. The expected aggregate amortization expense in each of the next five fiscal years is $6.2$6.0 million in 2011, $5.4 million in 2012, $4.0$4.6 million in 2013, $3.2$3.8 million in 2014 and $2.9$3.5 million in 2015.

9. SENIOR NOTES AND CREDIT FACILITY

We have outstanding $150 million in aggregate principal amount of 10 year senior notes due May 2, 2016, which were issued in a private placement. The notes bear interest at 5.98%, payable semi-annually on November 2^nd and May 2^nd. We also have a credit agreement which provides us with a $400 million revolving credit facility (the “Credit Agreement”) expiring in July 2015. The Credit Agreement provides for an uncommitted $100 million accordion feature, under which the facility may be increased to $500 million, provided certain conditions are met. The Credit Agreement and the notes are

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guaranteed by substantially all of our current and future direct and indirect domestic subsidiaries. Loans under the Credit Agreement bear interest at a base rate (greater of the applicable prime rate or Federal Funds Rate plus an applicable margin) or, at our option, the reserve adjusted LIBOR rate plus an applicable margin. As of September 30,December 31, 2010, there were $107.6$90.0 million of borrowings outstanding under the Credit Agreement. We are required by the terms of the Credit Agreement and the notes to comply with customary affirmative and negative covenants for facilities and notes of this nature.

10. INCOME TAXES

The Company’s effective income tax rate was 44.5% for the threesix months ended September 30, 2010.December 31, 2010 and December 31, 2009 was 41.5% and 37.2%, respectively. The effective tax rate for the first quartersix months of fiscal 2011 was higher than the rate in the comparable period of the prior year primarily as a result of the losses incurred in the United Kingdom for which no tax benefits are currently being recorded. Until an appropriate level of profitability is attained, we expect to continue to record and maintain a valuation allowance on our net deferred tax assets related to future United Kingdom tax benefits. If the Company is able to realize any of these deferred tax assets in the future, the provision for income taxes will be reduced by a release of the corresponding valuation allowance. The fiscal 2011 and 2010 effective income tax rates differed from the U.S. federal statutory rate primarily due to the items noted previously,United Kingdom losses, as well as the effect of state income taxes and the mix of pretax earnings by jurisdiction. There were no material changes in unrecognized tax benefits during the first threesix months of fiscal 2011.

11. STOCK BASED COMPENSATION

We have various stock based compensation programs under which awards, including stock options, restricted stock, and restricted stock units, may be granted to employees, consultants and non-employee directors.

During the threesix months ended September 30,December 31, 2010, 4,000270,824 shares of restricted stock and restricted stock units were granted with an estimated grant date value of $0.1$7.1 million. Included in this grant were 183,449 restricted shares and restricted stock units granted under the Company’s 2011-2012 Long-term Incentive Plan, 122,841 of which are subject to the achievement of minimum performance goals established under that plan (see “Long-Term Incentive Plan,” below). There were no stock options granted.granted during the six month period.

The Company recorded stock based compensation expense of $2.2 million for the three months ended December 31, 2010 and $1.7 million for the three months ended September 30, 2010December 31, 2009 and $1.6$3.9 million for the threesix months ended September 30,December 31, 2010 and $3.3 million for the six months ended December 31, 2009 in selling, general, and administrative expenses in its condensed consolidated statementsCondensed Consolidated Statements of operations.Income. At September 30,December 31, 2010, there was $8.5$12.3 million of unrecognized stock based compensation expense, net of estimated forfeitures, which will be recognized over a weighted average period of approximately 1.61.8 years.

Stock Options

A summary of our stock option plans’ activity for the threesix months ended September 30,December 31, 2010 is as follows:

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price on the last day of trading in the threesix month period ended September 30,December 31, 2010 and the exercise price) that would have been received by the option holders had all options been exercised on September 30,December 31, 2010. This value will change based on the fair market value of the Company’s common stock. During the first threesix months of fiscal year 2011, the cash received from stock option exercises was $0.6$2.2 million. The intrinsic value of the stock options exercised was $1.4 million and the tax benefit expected to be realized from the tax deductions for stock options exercised were not significantwas $0.5 million for the threesix months ended September 30,December 31, 2010.

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Restricted Stock

Non-vested restricted stock awards at September 30,December 31, 2010 and activities during the threesix months then ended were as follows:

At September 30,December 31, 2010, $4.6$8.9 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.41.8 years.

There were 7,319,0008,439,348 shares of Common Stock reserved for future issuance in connection with stock based awards as of September 30,December 31, 2010.

12. RESTRUCTURING AND OTHER CHARGESLong-Term Incentive Plan

The Company adopted, beginning in fiscal 2010, a long-term incentive program, (the “LTI Plan”). The LTI Plan currently consists of two-year performance-based long-term incentive plans (currently, the “2010-2011 LTIP” and the “2011-2012 LTIP”) that provide for a combination of equity grants and performance awards that can be earned over each two year period. Participants in the LTI Plan include our executive officers, including the Chief Executive Officer, and certain other key executives.

The Compensation Committee administers the LTI Plan and is responsible for, among other items, establishing the target values of awards to participants and selecting the specific performance factors for such awards. At the end of each performance period, the Compensation Committee determines, at its sole discretion, the specific payout to each participant. Such awards may be paid in cash and/or shares of the Company at the discretion of the Compensation Committee.

Upon the adoption of each two year plan, the Compensation Committee granted an initial award to each participant in the form of equity-based instruments (either restricted stock or stock options), for a portion of the individual target awards. These grants are subject to time vesting requirements, and a portion of the 2011-2012 LTIP related grant are also subject to the achievement of the minimum performance goals. These initial grants are being expensed over the vesting period on a straight-line basis. The payment of the actual awards earned, if any, will be reduced by the value of this initial grant. The Company has determined that the achievement of certain of the performance goals was probable and, accordingly, recorded approximately $3.0 million and $3.7 million of expense in addition to the stock based compensation expense for the three months and six months ended December 31, 2010, related to these awards. There was no additional expense recorded in the prior year. It is the Company’s expectation that such awards will be settled in cash, and therefore the impact of these awards have been excluded from the diluted EPS calculation.

The Company periodically assesses its operations to ensure that they are efficient, aligned with market conditions and responsive to customer needs.

In connection with our acquisition of Churchill Food Products Ltd, in June 2010 (see Note 5) we recorded employee termination and exit costs of approximately $0.6 million. In the threesix months ended September 30,December 31, 2010, we recorded an additional $0.2$0.3 million of employee termination costs, included in “Acquisition related expenses and restructuring charges” on the Condensed Consolidated Statement of Operations.Income.

During fiscal 2010 we initiated a plan to consolidate the production of our fresh food-to-go products in the United Kingdom

into our Luton facility. We recorded costs of $1.8$2.9 million for the threesix months ended September 30,December 31, 2009 related to this plan, including $1.4$2.6 million for severance and benefits and $0.4$0.3 million of other exit costs.

The following table summarizes the changes in the liability for these reorganization and restructuring activities as of September 30,December 31, 2010:

13. EQUITY INVESTMENTS

At September 30,December 31, 2010, the Company owned a 48.7% equity interest in the Hain Pure Protein joint venture. This investment is accounted for under the equity method of accounting (see Note 2)1). The carrying value of our investment in HPP of $25.5$26.0 million and advances to HPP of $20.3$17.5 million are included in “Investment in and advances to equity-method investee.” The Company provided advances to HPP to finance its operations prior to its deconsolidation at the end of fiscal 2009. As a result of the deconsolidation and HPP simultaneously entering into a separate credit agreement, the Company

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and HPP entered into a subordination agreement covering the outstanding advances. The subordination agreement allows for prepayments of the advances based on HPP meeting certain conditions under its separate credit facility. HPP repaid $3.0 million of the advances in the quarter ended December 31, 2010. The balance of the advances are due no later than December 31, 2012.

In October 2009, the Company formed a joint venture, Hutchison Hain Organic Holdings Limited (“HHO”), with Hutchison China Meditech Ltd. (“Chi-Med”), a majority owned subsidiary of Hutchison Whampoa Limited, to market and distribute co-branded infant and toddler feeding products and market and distribute selected Hain Celestial brands in Hong Kong, China and other markets. The Company’s investment in its 50% share of the joint venture totaled approximately $0.1 million. In addition, the Company and Chi-Med each advanced $1.8 million to the joint venture for working capital needs during the quarter ended December 31, 2010. Voting control of the joint venture is shared 50/50equally between the Company and Chi-Med, although, in the event of a deadlock, Chi-Med has the ability to cast the deciding vote. The investment is being accounted for under the equity method of accounting. For the threesix months ended September 30,December 31, 2010, the joint venture’s results of operations were not significant.

Available-For-Sale Securities

The Company has a less than 1% equity ownership interest in Yeo Hiap Seng Limited (“YHS”), a Singapore based natural food and beverage company listed on the Singapore Exchange, which is accounted for as an available-for-sale security. The fair valuesvalue of this security were $6.4was $6.7 million at September 30,December 31, 2010 and $6.2 million at June 30, 2010. The fair value of this investment is included in “Other assets” in the Company’s condensed consolidated balance sheets. During the second quarter of fiscal 2010, the Company determined that an other-than-temporary decline in the fair value of YHS occurred based upon various factors including the near-term prospects of YHS, the length of time the investment was in an unrealized loss position, and publicly available information about the industry and geographic region in which YHS operates and, accordingly recorded a loss of $1.2 million on the write-down of this investment.

14. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

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

The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of September 30,December 31, 2010:

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The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2010: