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Item 2. Management’s Discussion and Analysis

2020-05-07 compared with 2020-02-06 · 221 added, 179 removed, 273 unchanged (59% of the section changed)

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 December 31, 2019 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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended March 31, 2020 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.

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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™.

Hain Celestial is a leader in many organic and natural products categories, with ma ny recognized brands in the various market categories it serves, including Almond Dream ® , Bearitos ® , Better Bean ® , BluePrint ® , Celestial Seasonings ® , Clarks™, Coconut Dream ® , Cully & Sully ® , Danival ® , DeBoles ® , Earth’s Best ® , Ella’s Kitchen ® , 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 ® , 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.

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As part of the Company’s overall strategy, the Company may seek to dispose of businesses and brands that are less profitable or are otherwise less of a strategic fit within our core portfolio.

Accordingly, the Company divested of all of its operations of the Hain Pure Protein reportable segment and WestSoy® tofu, seitan and tempeh businesses in the United States in fiscal 2019, the entities comprising its Tilda operating segment and certain other assets of the Tilda business in August 2019 and its Arrowhead Mills® and SunSpire® businesses in October 2019.

Accordingly, the Company divested of all of its operations of the Hain Pure Protein reportable segment and WestSoy® tofu, seitan and tempeh businesses in the United States in fiscal 2019, the entities comprising its Tilda operating segment and certain other assets of the Tilda business in August 2019, its Arrowhead Mills® and SunSpire® brands in October 2019, and its Europe's Best® and Casbah® brands in March 2020.

The COVID-19 pandemic has created challenging and unprecedented conditions, and we are committed to supporting the global response to the crisis.

We are proud of our employees who are giving extraordinary effort under difficult circumstances to ensure we can supply the products our consumers depend on.

We are pleased with our preparation and efforts through the

early stages of the pandemic, and we believe we are well positioned for the future as we continue to navigate the crisis and prepare for an eventual return to a more normal operating environment.

We have successfully implemented contingency plans overseen by crisis management teams to monitor the evolving needs of our business.

While we have managed the pandemic well with minimal disruption to our business thus far, the impact of the pandemic on our future consolidated results of operations is uncertain.

We discuss the actual and potential impact of the COVID-19 pandemic on our business below as well as in Part II, Item 1A, Risk Factors of this Form 10-Q.

Employee and Consumer Health and Safety Precautions

From the outset of the pandemic, our first priority has been the well-being of our employees and consumers.

We were early adopters of guidance from global health authorities for preventing the spread of COVID-19, and we have consistently met or exceeded government guidelines for addressing the health and safety of our employees, including global travel restrictions, prohibitions against visitors, social distancing requirements, the use of thermal temperature scanners, and the provision of personal protective equipment to our employees.

We have also enabled the use of new technology to allow many of our office-based employees to work from home effectively.

While these important actions and initiatives have led to some increased costs, the overall costs have not been material to our financial results and have been more than offset by the overall increase in our net sales due to increased consumer demand.

Manufacturing Facilities and Supply Chain Challenges

We have experienced temporary disruptions at certain of our manufacturing facilities due to an abundance of caution and our early adoption of best practices for addressing instances of an employee contracting COVID-19.

We are proud of our efforts to ensure the health and safety of our employees and consumers, and these temporary disruptions have not had a material impact on our operations to date.

We continue to monitor and comply with all applicable government orders, as many of the jurisdictions in which we do business begin to transition to the next phase of re-opening and a more normal operating environment.

We are facing, and will continue to face, significant operational challenges in manufacturing our products and making them available to customers and consumers as a result of the COVID-19 pandemic.

Shelter-in-place and social distancing behaviors, which are being mandated or encouraged by governments and practiced by businesses and individuals, create challenges for our manufacturing employees as well as for third parties on which we rely to make our products available to consumers.

These third parties include our suppliers, contract manufacturers, distributors, logistics providers and other business partners, as well as the retailers that ultimately sell our products to consumers.

We have experienced some increased volatility in the cost of ingredients and increased logistics-related costs to manage our supply chain through the pandemic.

To date, these increased costs have not had a material impact on our financial results.

We believe our planning has us well positioned to continue to manage these supply chain challenges.

When certain European countries were among the first regions impacted by COVID-19, we learned the nature and scope of the resulting supply disruptions and how to prepare for them.

We made the decision to identify our most important products and secondary sources of supply and manufacturing capabilities for those key products.

We acquired extra raw materials, supplemented our inventory levels and added temporary labor to support our extra manufacturing and health and safety initiatives.

We also consolidated product shipping orders to more efficiently meet the increased customer and consumer demand.

The framework for these supply chain measures remains in place to continue to meet any further surges in demand.

Consumer Demand

To date, shelter-in-place and social distancing behaviors have resulted in increased overall demand for our products, most notably in our grocery, snacks, tea and certain personal care product categories.

Other product offerings, such as sun care products and the food service component of our European fruit business, have been adversely impacted due to changed consumer behavior and priorities.

While we have experienced a net increase in the overall demand for our products during the early phases of the COVID-19 pandemic, the duration of that increased demand environment is uncertain.

Additionally, deteriorating economic and political conditions arising from the COVID-19 pandemic could adversely affect future demand for our products.

Factors such as increased unemployment, decreases in disposable income and declines in consumer confidence could cause a decrease in demand for our overall product set, particularly higher priced products.

Our Financial Position

The COVID-19 pandemic has not negatively impacted our operations to date.

Accordingly, we do not expect our financial position to be materially impacted by the COVID-19 pandemic.

We finance our operations 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 March 31, 2020, we had $628.1 million available under the Amended Credit Agreement.

Business Priorities

While the current environment has caused us to delay certain planned innovation and productivity initiatives, our business strategy of simplifying our portfolio and reinvigorating profitable sales growth remains unchanged.

Financial Impact on Third Parties and Equity Investments

The economic fallout from the COVID-19 pandemic will impact third parties with which we conduct business, including our suppliers, contract manufacturers, distributors, logistics providers and other business partners.

Deteriorating economic conditions could jeopardize the viability of some third parties and our business relationships with them and could cause us to incur losses or increased costs in our dealings with those third parties.

We have taken measures to minimize the impact of hardships faced by individual business partners, including by identifying secondary sources of supply and manufacturing capabilities.

Productivity and Transformation

As part of the Company’s historical strategic review, it focused on a productivity initiative, which it called “Project Terra.” A key component of this project was the identification of global cost savings and the removal of complexity from the business.

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.

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.

Productivity and transformation costs include costs, such as consulting and severance costs, relating to streamlining the Company’s manufacturing plants, co-packers and supply chain, eliminating served categories or brands within those categories, and product rationalization initiatives which are aimed at eliminating slow moving SKUs.

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Prior period segment information contained herein has been adjusted to reflect the Company’s new operating and reporting structure.

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

Comparison of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019

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 December 31, 2019 and 2018 (amounts in thousands, other than percentages, which may not add due to rounding):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended March 31, 2020 and 2019 (amounts in thousands, other than percentages, which may not add due to rounding):

Three Months Ended Change in

December 31, 2019 December 31, 2018 Dollars Percentage

March 31, 2020 March 31, 2019 Dollars Percentage

Net sales $ 553,297 100.0% $ 547,257 100.0% $ 6,040 1.1%

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Chief Executive Officer Succession Plan expense, net — —% 455 0.1% (455) *

Accounting review and remediation costs, net of insurance proceeds — —% 920 0.2% (920) *

Proceeds from insurance claim (400) (0.1)% — —% (400) *

Long-lived asset and intangibles impairment 13,525 2.4% — —% 13,525 *

Operating income (loss) 9,191 1.8% (20,880) (3.9)% 30,071 144.0%

Operating income 19,135 3.5% 18,992 3.5% 143 0.8%

Interest and other financing expense, net 4,037 0.7% 5,994 1.1% (1,957) (32.6)%

Other expense, net 1,244 0.2% 371 0.1% 873 235.3%

Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees 3,210 0.6% (26,679) (5.0)% 29,889 112.0%

Provision for income taxes 1,020 0.2% 5,097 1.0% (4,077) (80.0)%

Other (income) expense, net (260) —% 1,067 0.2% (1,327) (124.4)%

Income from continuing operations before income taxes and equity in net loss of equity-method investees 15,358 2.8% 11,931 2.2% 3,427 28.7%

(Benefit) provision for income taxes (10,242) (1.9)% 2,943 0.5% (13,185) (448.0)%

Equity in net loss of equity-method investees 564 —% 205 —% 359 175.1%

Net income (loss) from continuing operations $ 1,852 0.4% $ (31,787) (6.0)% $ 33,639 105.8%

Net income from continuing operations $ 25,036 4.5% $ 8,783 1.6% $ 16,253 185.1%

Net loss from discontinued operations, net of tax (697) (0.1)% (74,620) (13.6)% 73,923 99.1%

Net loss $ (964) (0.2)% $ (66,501) (12.5)% $ 65,537 98.6%

Net income (loss) $ 24,339 4.4% $ (65,837) (12.0)% $ 90,176 137.0%

Adjusted EBITDA $ 60,690 11.0% $ 49,137 9.0% $ 11,553 23.5%

Diluted net income (loss) per common share from continuing operations $ 0.02 $ (0.31) $ 0.33 106.5%

Diluted net income per common share from continuing operations $ 0.24 $ 0.08 $ 0.16 200.0%

Diluted net loss per common share from discontinued operations (0.01) (0.72) 0.71 98.6%

Diluted net loss per common share $ (0.01) $ (0.64) $ 0.63 98.4%

Diluted net income (loss) per common share $ 0.23 $ (0.63) $ 0.86 136.5%

* Percentage is not meaningful

Net sales for the three months ended December 31, 2019 were $506.8 million, a decrease of $26.8 million, or 5.0%, as compared to $533.6 million in the three months ended December 31, 2018.

On a constant currency basis, net sales decreased approximately 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.

Net sales for the three months ended March 31, 2020 were $553.3 million, an increase of $6.0 million, or 1.1%, as compared to $547.3 million in the three months ended March 31, 2019.

On a constant currency basis, net sales increased approximately 2.1% from the prior year quarter.

Net sales on a constant currency basis increased in both the North America and International reportable segments.

Further details of changes in net sales by segment are provided below.

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 for the three months ended March 31, 2020 was $132.4 million, an increase of $19.2 million, or 16.9%, as compared to the prior year quarter.

Gross profit margin was 23.9% of net sales, compared to 20.7% 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.

The increased profit margin was favorably impacted by the product mix and supply chain efficiencies primarily in the United States, partially offset by unfavorable foreign currency impacts of $1.3 million.

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.

Selling, general and administrative expenses were $85.4 million for the three months ended March 31, 2020, an increase of $4.4 million, or 5.4%, from $81.1 million for the prior year quarter.

The increase was due to increased variable compensation and marketing costs.

Selling, general and administrative expenses as a percentage of net sales was 15.4% in the three months ended March 31, 2020 compared to 14.8% in the prior year quarter, reflecting an increase of 60 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.

Amortization of acquired intangibles was $3.2 million for the three months ended March 31, 2020, a decrease of $0.1 million from $3.3 million in the prior year quarter primarily resulting from 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.

Productivity and transformation costs were $11.5 million for the three months ended March 31, 2020, an increase of $2.1 million from $9.4 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.

Net costs and expenses associated with the Company’s former Chief Executive Officer Succession Plan were $0.5 million for the three months ended March 31, 2019.

There were no comparable expenses in the three months ended March 31, 2020.

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.

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, with the remaining $2.5 million recognized in the nine months ended March 31, 2020.

The Company recorded an additional $0.4 million of proceeds during the nine months ended March 31, 2020.

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.

During the three months ended March 31, 2020, the Company recorded a pre-tax impairment charge of $2.1 million related to certain tradenames within the Company's North America segment and $5.5 million related to certain tradenames within the Company's International segment.

Additionally, in the three months ended March 31, 2020, the Company recorded a $5.9 million non-cash impairment charge primarily related to a write-down of certain machinery and equipment in the United States and Europe used to manufacture certain slow moving SKUs.

Operating Income

Operating income for the three months ended March 31, 2020 was $19.1 million compared to $19.0 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $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.

Interest and other financing expense, net totaled $4.0 million for the three months ended March 31, 2020, a decrease of $2.0 million, or 32.6%, from $6.0 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.

Other (Income) Expense, Net

Other income, net totaled $0.3 million for the three months ended March 31, 2020, compared to expense of $1.1 million in the prior year quarter.

The increase was primarily attributable to higher net unrealized foreign currency gains principally due to the effect of foreign currency movements on the remeasurement of foreign currency denominated loans.

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

Income before income taxes and equity in net loss of our equity-method investees for the three months ended March 31, 2020 was $15.4 million compared to $11.9 million in the prior year quarter.

The increase was due to the items discussed above.

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.

Our income tax benefit from continuing operations was $10.2 million for the three months ended March 31, 2020 compared to income tax expense of $2.9 million in the prior year quarter.

The effective income tax rate from continuing operations was a benefit of 66.7% and expense of 24.7% for the three months ended March 31, 2020 and March 31, 2019, respectively.

The effective income tax rate from continuing operations for the period ended March 31, 2020 was impacted by provisions of the CARES Act.

For an additional discussion on the impact of the CARES Act, see Note 11, Income Taxes , in the Notes to the Consolidated Financial Statements included in item 1 of this Form 10-Q.

The effective income tax 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.

The effective income tax rates in each period were also impacted by the geographical mix of earnings.

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.

Our equity in net loss from our equity-method investments for the three months ended March 31, 2020 was $0.6 million and $0.2 million 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.

Net Income from Continuing Operations

Net income from continuing operations for the three months ended March 31, 2020 was $25.0 million, or $0.24 per diluted share, compared to $8.8 million, or $0.08 per diluted share, for the three months ended March 31, 2019.

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.

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.

Net Income (Loss) from Discontinued Operations, Net of Tax

Net loss from discontinued operations, net of tax, for the three months ended March 31, 2020 was $0.7 million, or $0.01 per diluted share, compared to $74.6 million, or $0.72 per diluted share, in the three months ended March 31, 2019.

During the three months ended March 31, 2020, the Company recognized a $0.5 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 March 31, 2019 included asset impairment charges of $51.3 million associated with our former Hain Pure Protein business.

The income tax benefit from discontinued operations was $1.6 million for the three months ended March 31, 2020 associated with the tax gain on the sale of the Tilda and Hain Pure Protein entities and the tax effect of current period book losses.

The income tax benefit from discontinued operations of $21.2 million for the three months ended March 31, 2019 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale.

In addition, the 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 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.

Net Income (Loss)

Net income for the three months ended March 31, 2020 was $24.3 million, or $0.23 per diluted share, compared to a net loss of $65.8 million, or $0.63 per diluted share, in the prior year quarter.

The increase 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.

Our Adjusted EBITDA was $60.7 million and $49.1 million for the three months ended March 31, 2020 and 2019, 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.

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Segment Results

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended December 31, 2019 and 2018:

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended March 31, 2020 and 2019:

(dollars in thousands) North America International Corporate and Other Consolidated

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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.

Our net sales in the North America reportable segment for the three months ended March 31, 2020 were $320.4 million, an increase of $6.1 million, or 1.9%, from net sales of $314.3 million in the prior year quarter.

The increase in net sales was primarily driven by an increase in overall demand for our products as a result of pantry loading in reaction to the COVID-19 pandemic, most notably in our snacks, tea and certain personal care product categories, partially offset by brand divestitures and 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 March 31, 2020 was $28.9 million, an increase of $7.5 million from $21.4 million in the prior year quarter.

The increase was driven by a favorable product mix and supply chain efficiencies, partially offset by long-lived asset impairment charges and increased severance costs.

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.

Our net sales in the International reportable segment for the three months ended March 31, 2020 were $232.9 million, essentially flat compared to the prior year quarter.

On a constant currency basis, net sales increased 2.2% from the prior year quarter primarily due to an increase in overall demand for our products as a result of pantry loading in reaction to COVID-19 and growth in our plant based food and beverage products, partially offset by reductions in certain fruit-based products.

Operating income in our International reportable segment for the three months ended March 31, 2020 was $18.7 million, a decrease of $1.2 million from $19.9 million for the three months ended March 31, 2019.

The decrease was primarily associated with long-lived asset impairment charges, partially offset by supply chain efficiencies.

Corporate and Other

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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.

Additionally, Productivity and transformation costs and tradename impairment charges of $5.6 million and $7.7 million, respectively, are included in Corporate and Other for the three months ended March 31, 2020.

Chief Executive Officer Succession Plan expense, net and Productivity and transformation costs, net of insurance proceeds included within Corporate and Other expenses were $0.5 million and $7.6 million, respectively, for the three months ended March 31, 2019.

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

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

Comparison of Nine Months Ended March 31, 2020 to Nine Months Ended March 31, 2019

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

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the nine months ended March 31, 2020 and 2019 (amounts in thousands, other than percentages, which may not add due to rounding):

Nine Months Ended Change in

March 31, 2020 March 31, 2019 Dollars Percentage

Net sales $ 1,542,157 100.0% $ 1,599,301 100.0% $ (57,144) (3.6)%

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Other expense, net 2,312 0.1% 2,038 0.1% 274 13.4%

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

13,401 0.9% (47,626) (3.0)% 61,027 128.1%

Provision (benefit) for income taxes 489 —% (4,869) (0.5)% 5,358 110.0%

Benefit for income taxes (9,753) (0.6)% (1,926) (0.1)% (7,827) (406.4)%

Equity in net loss of equity-method investees

1,219 —% 391 —% 828 211.8%

Net loss from continuing operations $ (3,101) (0.3)% $ (54,874) (5.2)% $ 51,773 94.3%

Net income (loss) from continuing operations $ 21,935 1.4% $ (46,091) (2.9)% $ 68,026 147.6%

Net loss from discontinued operations, net of tax (105,581) (6.8)% (123,672) (7.7)% 18,091 14.6%

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* Percentage is not meaningful

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.

Net sales for the nine months ended March 31, 2020 were $1.54 billion, a decrease of $57.1 million, or 3.6%, from $1.60 billion for the nine months ended March 31, 2019.

On a constant currency basis, net sales decreased approximately 2.4% from the prior year period.

Net sales on a constant currency basis decreased in both the North America and International reportable segments.

Net sales on a constant currency basis decreased in the North America reportable segment and were essentially flat in the International reportable segment.

Further details of changes in net sales by segment are provided below.

Gross profit for the six months ended December 31, 2019 was $203.4 million, an increase of $13.2 million, or 6.9%, as compared to the prior year period.

Gross profit for the nine months ended March 31, 2020 was $335.8 million, an increase of $32.4 million, or 10.7%, as compared to the prior year period.

Gross profit margin was 21.8% of net sales, compared to 19.0% in the prior year period.

The increased profit margin was primarily driven by efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings.

The increased profit margin was primarily driven by a favorable product mix and supply chain efficiencies primarily in the United States, partially offset by unfavorable foreign currency impacts of $3.7 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $159.8 million for the six months ended December 31, 2019, an increase of $5.3 million, or 3.4%, from $154.5 million for the prior year period.

Selling, general and administrative expenses were $245.2 million for the nine months ended March 31, 2020, an increase of $9.6 million, or 4.1%, from $235.6 million for the prior year period.

The increase was due to increased marketing and advertising spend in the current year period and lower variable compensation costs in the prior year period, including stock-based compensation expense, primarily related to the reversal of previously accrued amounts under certain performance based incentive plans of which achievement was no longer probable.

See Note 13, Stock-based Compensation and Incentive Performance Plans , in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

These increases were partially offset by a decrease in broker trade funds in the current year period.

Selling, general and administrative expenses as a percentage of net sales was 16.2% in the six months ended December 31, 2019 compared to 14.7% in the prior year period, reflecting an increase of 150 basis points primarily attributable to the aforementioned items.

Selling, general and administrative expenses as a percentage of net sales was 15.9% in the nine months ended March 31, 2020 compared to 14.7% in the prior year period, reflecting an increase of 120 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangibles

Amortization of acquired intangibles was $6.3 million for the six months ended December 31, 2019, a decrease of $0.4 million from $6.7 million in the prior year period.

The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized in periods subsequent to December 31, 2018 and the impact of movements in foreign currency.

Amortization of acquired intangibles was $9.4 million for the nine months ended March 31, 2020, a decrease of $0.5 million from $9.9 million in the prior year period.

The decrease was due to finite-lived intangibles from certain historical acquisitions becoming fully amortized in periods subsequent to March 31, 2019 and the impact of movements in foreign currency.

Productivity and Transformation Costs

Productivity and transformation costs were $26.4 million for the six months ended December 31, 2019, an increase of $6.2 million from $20.2 million in the prior year period.

The increase was primarily due to increased consulting fees incurred in connection with the Company’s ongoing transformation initiatives and increased severance costs for the six months ended December 31, 2019 as compared to the prior year period.

Productivity and transformation costs were $37.9 million for the nine months ended March 31, 2020, an increase of $8.3 million from $29.6 million in the prior year period.

The increase was primarily due to increased consulting fees incurred in connection with the Company’s ongoing transformation initiatives and increased severance costs for the nine months ended March 31, 2020 as compared to the prior year period.

Chief Executive Officer Succession Plan Expense, Net

Net costs and expenses associated with the Company’s Former Chief Executive Officer Succession Plan were $29.7 million for the six months ended December 31, 2018.

There were no comparable expenses in the six months ended December 31, 2019.

Net costs and expenses associated with the Company’s former Chief Executive Officer Succession Plan were $30.2 million for the nine months ended March 31, 2019.

There were no comparable expenses in the nine months ended March 31, 2020.

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.

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In July of 2019, the Company received $7.0 million as partial payment from an insurance claim relating to business disruption costs associated with a co-packer.

Of this amount $4.5 million was recognized in fiscal 2019 as it relates to reimbursement of costs already incurred.

The Company recorded the additional $2.6 million in the six months ended December 31, 2019.

Of this amount, $4.5 million was recognized in fiscal 2019 as it relates to reimbursement of costs already incurred, with the remaining $2.5 million recognized in the nine months ended March 31, 2020.

The Company recorded an additional $0.4 million of proceeds during the nine months ended March 31, 2020.

Accounting Review and Remediation Costs, Net of Insurance Proceeds

Costs and expenses associated with the internal accounting review, remediation and other related matters were $4.3 million for the six months ended December 31, 2018.

No such costs were incurred in the six months ended December 31, 2019.

Costs and expenses associated with the internal accounting review, remediation and other related matters were $4.3 million for the nine months ended March 31, 2019.

No such costs were incurred in the nine months ended March 31, 2020.

Long-lived Asset and Intangibles Impairment

During the six months ended December 31, 2019, the Company recorded a pre-tax impairment charge of $1.9 million related to certain tradenames within the Company's North America segment.

During the six months ended December 31, 2018, the Company recorded a pre-tax impairment charge of $17.9 million related to certain tradenames ($15.1 million related to the North America segment and $2.8 million related to the International segment).

During the nine months ended March 31, 2020, the Company recorded a pre-tax impairment charge of $4.0 million related to certain tradenames within the Company's North America segment and $5.5 million related to certain tradenames within the Company's International segment.

Additionally, during the nine months ended March 31, 2020, the Company recorded a $5.9 million non-cash impairment charge primarily related to a write-down of certain machinery and equipment in the United States and Europe used to manufacture certain slow moving or low margin SKUs.

During the nine months ended March 31, 2019, 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.

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Operating Income (Loss)

Operating income for the six months ended December 31, 2019 was $11.6 million compared to an operating loss of $48.8 million in the prior year period.

Operating income for the nine months ended March 31, 2020 was $30.8 million compared to an operating loss of $29.9 million in the prior year period.

The increase in operating income resulted from the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $11.0 million for the six months ended December 31, 2019, an increase of $1.3 million, or 13.2%, from $9.7 million in the prior year period.

The increase resulted primarily from a $0.9 million write-off of deferred financing costs due to the repayment of the Company’s term loan and higher interest expense related to our revolving credit facility as a result of higher variable interest rates on outstanding debt.

Interest and other financing expense, net totaled $15.1 million for the nine months ended March 31, 2020, a decrease of $0.7 million, or 4.2%, from $15.7 million in the prior year period.

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, offset in part by a $0.9 million write-off of deferred financing costs due to the repayment of the Company’s term loan.

See Note 10, Debt and Borrowings , in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Expense, Net

Other expense, net, totaled $2.6 million for the six months ended December 31, 2019, compared to $1.0 million in the prior year period.

The increase was primarily attributable to the loss on sale of the Arrowhead and Sunspire businesses.

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

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

The reduction in net loss was due to the items discussed above.

Other expense, net, totaled $2.3 million for the nine months ended March 31, 2020, compared to $2.0 million in the prior year period.

The increase was primarily attributable to the loss on sale of the Arrowhead and SunSpire businesses during the second quarter, partially offset by higher net unrealized foreign currency gains principally due to the effect of foreign currency movements on the remeasurement of foreign currency denominated loans and the gain on sale of the Europe's Best business.

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

Income before income taxes and equity in net loss of our equity-method investees for the nine months ended March 31, 2020 was $13.4 million compared to a loss of $47.6 million in the prior year period.

The increase was due to the items discussed above.

The provision for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense from continuing operations was $0.5 million for the six months ended December 31, 2019 compared to a benefit of $4.9 million in the prior year period.

The effective income tax rates from continuing operations was expense of 25.0% and a benefit of 8.2% for the six months ended December 31, 2019 and December 31, 2018, respectively.

The effective income tax rate for both periods were impacted by provisions in the Tax Cuts and Jobs Act, primarily related to Global Intangible Low Taxed Income and limitations on the deductibility of executive compensation.

The effective income tax rates in each period were also impacted by the geographical mix of earnings and state valuation allowance.

During the six months ended December 31, 2018, the Company finalized its accounting for income tax effects of the Tax Act and recorded additional expense related to its transition tax liability.

Our income tax benefit from continuing operations was $9.8 million for the nine months ended March 31, 2020 compared to a benefit of $1.9 million in the prior year period.

The effective income tax rates from continuing operations was a benefit of 72.8% and a benefit of 4.0% for the nine months ended March 31, 2020 and March 31, 2019, respectively.

The effective income tax rate from continuing operations for the period ended March 31, 2020 was impacted by provisions of the CARES Act.

For an additional discussion on the impact of the CARES Act, see Note 11, Income Taxes , in the Notes to the Consolidated Financial statements included in item 1 of this Form 10-Q.

The effective income tax rates from continuing operations for all periods were impacted by provisions in 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.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the six months ended December 31, 2019 was $0.7 million compared to $0.2 million in the prior year period.

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2020 was $1.2 million compared to $0.4 million in the prior year period.

See Note 14, Investments , in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net Loss from Continuing Operations

Net loss from continuing operations for the six months ended December 31, 2019 was $3.1 million compared $54.9 million in the prior year period.

Net loss per diluted share from continuing operations was $0.03 for the six months ended December 31, 2019 compared to $0.53 in the prior year period.

The reduction in net loss was attributable to the factors noted above.

Net Income (Loss) from Continuing Operations

Net income from continuing operations for the nine months ended March 31, 2020 was $21.9 million compared to net loss of $46.1 million in the prior year period.

Net income per diluted share from continuing operations was $0.21 for the nine months ended March 31, 2020 compared to net loss per diluted share of $0.44 in the prior year period.

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 six months ended December 31, 2019 was $104.9 million, or $1.01 per diluted share, compared to $49.1 million, or $0.47 per diluted share, in the prior year period.

Net loss from discontinued operations, net of tax, for the six months ended December 31, 2019 included a reclassification of $95.1 million of cumulative translation losses from Accumulated comprehensive loss related to the Tilda business to discontinued operations.

Net loss from discontinued operations, net of tax, for the six months ended December 31, 2018 included asset impairment charges of $57.9 million associated with our former Hain Pure Protein business.

The income tax expense from discontinued operations was $13.5 million for the six months ended December 31, 2019 and is impacted by $15.3 million of tax relating to the tax gain on the sale of the Tilda entities.

The income tax benefit from discontinued operations of $27.5 million for the six months ended December 31, 2018 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale.

Net loss from discontinued operations, net of tax, for the nine months ended March 31, 2020 was $105.6 million, or $1.01 per diluted share, compared to $123.7 million, or $1.19 per diluted share, in the prior year period.

Net loss from discontinued operations, net of tax, for the nine months ended March 31, 2020 included a reclassification of $95.1 million of cumulative translation losses from Accumulated comprehensive loss related to the Tilda business to discontinued operations.

Net loss from discontinued operations, net of tax, for the nine months ended March 31, 2019 included asset impairment charges of $109.3 million associated with our former Hain Pure Protein business.

The income tax expense from discontinued operations was $11.8 million for the nine months ended March 31, 2020 and is impacted by $14.5 million of tax relating to the tax gain on the sale of the Tilda entities.

The income tax benefit from discontinued operations of $48.8 million for the nine months ended March 31, 2019 includes the reversal of the $12.3 million deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale.

In addition, the 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 for the six months ended December 31, 2019 was $108.0 million, or $1.04 per diluted share, compared to $103.9 million, or $1.00 per diluted share, in the prior year period.

The increase in net loss was attributable to the factors noted above.

Net loss for the nine months ended March 31, 2020 was $83.6 million, or $0.80 per diluted share, compared to $169.8 million, or $1.63 per diluted share, in the prior year period.

The decrease in net loss was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $77.1 million and $66.6 million for the six months ended December 31, 2019 and 2018, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

Our Adjusted EBITDA was $137.8 million and $115.7 million for the nine months ended March 31, 2020 and 2019, 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.

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Segment Results

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

The following table provides a summary of net sales and operating income (loss) by reportable segment for the nine months ended March 31, 2020 and 2019:

(dollars in thousands) North America International Corporate and Other Consolidated

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

Nine months ended 3/31/20 $ 872,834 $ 669,323 $ — $ 1,542,157

Nine months ended 3/31/19 911,086 688,215 — 1,599,301

$ change $ (38,252) $ (18,892) n/a $ (57,144)

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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)

Nine months ended 3/31/20 $ 64,067 $ 40,666 $ (73,952) $ 30,781

Nine months ended 3/31/19 35,427 40,696 (105,975) (29,852)

$ change $ 28,640 $ (30) $ 32,023 $ 60,633

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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) %

Nine months ended 3/31/20 7.3 % 6.1 % n/a 2.0 %

Nine months ended 3/31/19 3.9 % 5.9 % n/a (1.9) %

North America

Our net sales in the North America reportable segment for the six months ended December 31, 2019 were $552.4 million, a decrease of $44.4 million, or 7.4%, from $596.8 million in the prior year period.

The decrease in net sales was primarily driven by 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 six months ended December 31, 2019 was $35.2 million, an increase of $21.1 million from $14.1 million in the prior year period.

The increase in operating income was the result of increased gross profit in the United States driven by efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings, offset in part by increased marketing and advertising expense.

Our net sales in the North America reportable segment for the nine months ended March 31, 2020 were $872.8 million, a decrease of $38.3 million, or 4.2%, from $911.1 million in the 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, partially offset by increased overall demand for our products as a result of pantry loading in reaction to the COVID-19 pandemic during the third quarter of 2020.

Operating income in North America for the nine months ended March 31, 2020 was $64.1 million, an increase of $28.6 million from $35.4 million in the prior year period.

The increase in operating income was the result of increased gross profit in the United States driven by a favorable product mix, efficient trade spending and supply chain cost reductions in the United States as well as other productivity savings, offset in part by increased marketing and advertising expense and variable compensation.

International

Our net sales in the International reportable segment for the six months ended December 31, 2019 were $436.5 million, a decrease of $18.8 million, or 4.1%, from $455.3 million in the prior year period.

Our net sales in the International reportable segment for the nine months ended March 31, 2020 were $669.3 million, a decrease of $18.9 million, or 2.7%, from $688.2 million in the prior year period.

On a constant currency basis, net sales decreased 0.1% from the prior year 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 six months ended December 31, 2019 was $22.0 million, an increase of $1.2 million from $20.8 million in the prior year period.

Operating income for the six months ended December 31, 2018 was negatively impacted by a long-lived asset impairment of $4.3 million recognized during the period.

Excluding the impairment, operating income for the six months ended December 31, 2019 decreased $3.1 million from the prior year period primarily due to increased marketing and advertising expense and depreciation related to capital expenditures during the year ended June 30, 2019.

Operating income in our International reportable segment for the nine months ended March 31, 2020 was $40.7 million, essentially flat when compared to the prior year period.

Excluding the impact of foreign currency movements of $1.1 million, operating income increased 2.9% for the nine months ended March 31, 2020, compared to the prior year period, due to increased gross profit driven by a favorable product mix and pantry loading in reaction to COVID-19 in Europe, partially offset by reductions in certain fruit-based products.

Corporate and Other

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Additionally, Productivity and transformation costs and tradename impairment charges of $20.6 million and $1.9 million, respectively, are included in Corporate and Other for the six months ended December 31, 2019.

Chief Executive Officer Succession Plan expense, net, Productivity and transformation costs and Accounting review and remediation costs, net of insurance proceeds included within Corporate and Other expenses were $29.7 million, $13.5 million and $4.3 million, respectively, for the six months ended December 31, 2018.

Additionally, Productivity and transformation costs, tradename impairment charges, and proceeds from insurance claim included within Corporate and Other expenses were $26.1 million, $9.5 million, and $3.0 million, respectively, for the nine months ended March 31, 2020.

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 $30.2 million, $21.0 million and $4.3 million, respectively, for the nine months ended March 31, 2019.

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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We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Third Amended and Restated Credit Agreement (as amended, the “Amended Credit Agreement”).

As of December 31, 2019, $668.6 million was available under the Amended Credit Agreement, and the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance increased $6.0 million at December 31, 2019 to $37.0 million as compared to $31.0 million at June 30, 2019.

Our working capital from continuing operations was $264.7 million at December 31, 2019, an increase of $24.4 million from $240.3 million at the end of fiscal 2019.

As of March 31, 2020, $628.1 million was available under the Amended Credit Agreement, and the Company was in compliance with all associated covenants.

Our cash and cash equivalents balance increased $10.5 million at March 31, 2020 to $41.5 million as compared to $31.0 million at June 30, 2019.

Our working capital from continuing operations was $301.8 million at March 31, 2020, an increase of $61.5 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 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.

As of March 31, 2020, 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.

However, we intend to further study changes enacted by the Tax 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.

We maintain our cash and cash equivalents primarily in money market funds or their equivalent.

As of December 31, 2019, all of our investments were expected to mature in less than three months.

As of March 31, 2020, 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

Nine Months Ended March 31, Change in

(amounts in thousands) 2020 2019 Dollars Percentage

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Decrease in cash from discontinued operations (8,509) (17,057) 8,548 50.1%

Net decrease in cash and cash equivalents and restricted cash $ (2,502) $ (34,975) $ 32,473 92.8%

* Percentage is not meaningful

Cash provided by operating activities from continuing operations was $17.1 million for the six months ended December 31, 2019, an increase of $17.2 million from the prior year period.

This increase resulted primarily from an improvement of $25.9 million in net loss adjusted for non-cash charges and a decrease of $8.8 million of cash used in working capital accounts, primarily related to a decrease in Accounts payable and accrued expenses.

Cash used in investing activities from continuing operations was $16.2 million for the six months ended December 31, 2019, a decrease of $20.9 million from cash used of $37.1 million in the 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 $3.7 million for the six months ended December 31, 2019, a decrease of $11.2 million from $14.9 million in the prior year period.

Cash provided by financing activities from continuing operations for the six months ended December 31, 2018 included $309.9 million primarily related to the proceeds from the sale of Tilda, partially offset by $305.3 million of repayments of our term loan and revolving credit facility funded primarily through proceeds received from the sale of Tilda.

Net increase (decrease) in cash and cash equivalents and restricted cash $ 2,023 $ (47,326) $ 49,349 104.3%

Cash provided by operating activities from continuing operations was $64.1 million for the nine months ended March 31, 2020, an increase of $45.8 million from the prior year period.

This increase resulted primarily from an improvement of $51.1 million in net income adjusted for non-cash charges and a decrease of $5.4 million of cash used in working capital accounts.

Cash used in investing activities from continuing operations was $32.5 million for the nine months ended March 31, 2020, a decrease of $18.7 million from $51.2 million in the prior year period primarily due to proceeds of $15.1 million from brand divestitures and decreased capital expenditures.

Cash used in financing activities from continuing operations was $18.9 million for the nine months ended March 31, 2020, a decrease of $22.3 million from cash provided by of $3.4 million in the prior year period.

Cash used in financing activities from continuing operations for the nine months ended March 31, 2019 included $263.8 million of net repayments of our term loan and revolving credit facility funded primarily through proceeds received from the sale of Tilda and $57.4 million of share repurchases, offset in part by $305.2 million primarily related to the proceeds from the sale of Tilda.

Operating Free Cash Flow from Continuing Operations

Our operating free cash flow from continuing operations was negative $12.2 million for the six months ended December 31, 2019, an improvement of $28.8 million from negative $41.0 million in the six months ended December 31, 2018.

This improvement resulted primarily from an improvement of $25.9 million in net loss adjusted for non-cash charges, a decrease of $11.7 million in capital expenditures, and a decrease of $8.8 million of cash used in working capital accounts.

We expect that our capital spending for fiscal 2020 will be approximately $60-$70 million, and we may incur additional costs in connection with ongoing productivity and transformation initiatives.

Our operating free cash flow from continuing operations was $17.1 million for the nine months ended March 31, 2020, an improvement of $53.9 million from negative $36.7 million in the nine months ended March 31, 2019.

This improvement resulted primarily from an improvement of $51.1 million in net income adjusted for non-cash charges, a decrease of $5.4 million of cash used in working capital accounts and a decrease of $8.1 million in capital expenditures.

See the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash provided by (used in) operating activities from continuing operations to operating free cash flow from continuing operations.

GAAP Measures following the discussion of our results of operations for definitions and a reconciliation from our net cash provided by operating activities from continuing operations to operating free cash flow from continuing operations.

Share Repurchase Program

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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 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.

During the three and nine months ended March 31, 2020, the Company repurchased 2,439 shares under the program for a total of $57.4 million, excluding commissions, at an average price of $23.52 per share.

As of March 31, 2020, the Company had $192.6 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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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) increase is as follows:

A reconciliation between reported and constant currency net sales increase (decrease) is as follows:

(amounts in thousands) North America International Hain Consolidated

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Net sales - Three months ended 3/31/19 $ 314,321 $ 232,936 $ 547,257

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

Net sales growth on a constant currency basis 2.1 % 2.2 % 2.1 %

Net sales - Nine months ended 3/31/20 $ 872,834 $ 669,323 $ 1,542,157

Impact of foreign currency exchange 764 18,515 19,279

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 on a constant currency basis - Nine months ended 3/31/20 $ 873,598 $ 687,838 $ 1,561,436

Net sales - Nine months ended 3/31/19 $ 911,086 $ 688,215 $ 1,599,301

Net sales decline on a constant currency basis (4.1) % (0.1) % (2.4) %

Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss) 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 adjustments.

Adjusted EBITDA is defined as net income (loss) before income taxes, net interest expense, depreciation and amortization, impairment of long-lived and intangible assets, equity in net loss of equity-method investees, stock-based compensation, net, stock-based compensation in connection with the Company's former CEO Succession Plan, productivity and transformation costs, SKU rationalization and certain inventory writedowns, unrealized currency gains and losses, and other adjustments.

The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition.

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GAAP results.

A reconciliation of net loss to Adjusted EBITDA is as follows:

Three Months Ended December 31, Six Months Ended December 31,

A reconciliation of net income (loss) to Adjusted EBITDA is as follows:

Three Months Ended March 31, Nine Months Ended March 31,

(amounts in thousands) 2020 2019 2020 2019

Net loss $ (964) $ (66,501) $ (107,985) $ (103,926)

Net income (loss) $ 24,339 $ (65,837) $ (83,646) $ (169,763)

Net loss from discontinued operations (697) (74,620) (105,581) (123,672)

Net income (loss) from continuing operations 25,036 8,783 21,935 (46,091)

Provision (benefit) for income taxes 1,020 5,097 489 (4,869)

(Benefit) provision for income taxes (10,242) 2,943 (9,753) (1,926)

Interest expense, net 3,332 5,278 11,884 13,966

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Unrealized currency (gains) losses (1,011) 1,522 188 2,551

EBITDA $ 24,916 $ 12,215 $ 42,645 $ 925

Productivity and transformation costs 10,967 9,259 37,402 29,464

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Accounting review and remediation costs, net of insurance proceeds — — — 4,334

SKU rationalization 3,927 1,530 3,916 1,530

Warehouse/manufacturing facility start-up costs 537 3,222 3,055 9,529

Loss on sale of business 332 — 2,115 —

SKU rationalization and inventory writedown 1,362 505 5,278 2,035

Plant closure related costs — 184 2,354 3,502

Warehouse/manufacturing facility start-up costs 639 1,708 2,518 6,307

Litigation and related expenses — 371 48 1,062

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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.

A reconciliation from Cash flow provided by (used in) operating activities from continuing operations to Operating free cash flow from continuing operations is as follows:

Six Months Ended December 31,

A reconciliation from Cash flow provided by operating activities from continuing operations to Operating Free Cash flow from continuing operations is as follows:

Nine Months Ended March 31,

(amounts in thousands) 2020 2019

Cash flow provided by (used in) operating activities - continuing operations $ 17,148 $ (4)

Cash flow provided by operating activities - continuing operations $ 64,092 $ 18,331

Purchases of property, plant and equipment (46,961) (55,073)

1 unchanged sentence

Off Balance Sheet Arrangements

At 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.

At March 31, 2020, 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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis