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Item 9A. Controls and Procedures

2020-08-25 compared with 2019-08-29 · 59 added, 97 removed, 144 unchanged (52% of the section changed)

18 unchanged sentences

Changes in Internal Control over Financial Reporting

The Company concluded that the material weakness identified in the 2018 Form 10-K, surrounding controls over the accumulation, transmission and recording in the general ledger of the physical count results in North America, as well as the documentation evidencing review of certain inventory reserves, has been remediated (the “Remediated Material Weakness”).

During the quarter ended June 30, 2019, the Company completed the implementation of the following remedial measures designed to address the Remediated Material Weakness.

The development of a more comprehensive physical inventory risk and control framework, that resulted in additional internal controls being added to ensure the completeness and accuracy of inventory uploads to the general ledger, which were agreed to final physical count sheets for all locations.

Enhanced communication among operations personnel and the Company-owned and third party locations holding the vast majority of our inventory.

Formal letters of understanding detailing protocols governing the timing, physical count procedures, record keeping requirements and submissions of results were delivered and acknowledged prior to the physical counts being conducted.

Standardization of processes performed by operations personnel to verify completeness and accuracy of information, including formal documentation of variances above established thresholds;

The incorporation of accounting department verification processes to ensure data was completely and accurately reflected in the general ledger.

The Company implemented additional internal controls to ensure and document the completeness and accuracy of all inventory balances when performing the reserve calculations and analysis.

Such controls included enhanced documentation of management’s analysis of forecasted sales of inventory subject to SKU rationalization and the performance of subsequent comparisons of actual inventory movements to forecasts used in the reserve calculations.

Except for the foregoing, there was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the Company’s CEO and CFO, recognizes that the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting cannot prevent or detect all errors and all fraud.

A control system, regardless of how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met.

These inherent limitations include the following:

Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes.

Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

28 unchanged sentences

Other Information

Sale of Tilda Business

On August 27, 2019, the Company and Ebro Foods S.A.

(the “Purchaser”) entered into, and consummated the transactions contemplated by, an agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets (the “Sale and Purchase Agreement”).

Under the Sale and Purchase Agreement, the Company sold the entities comprising its Tilda basmati and specialty rice business (the “Tilda Group Entities”) and certain other assets of the Tilda business to the Purchaser for an aggregate price of $342 million in cash, subject to customary post-closing adjustments based on the balance sheets of the Tilda Group Entities.

The Tilda Group Entities included in the transaction are:

(1) Tilda Limited, a company organized under the laws of England and Wales;

(2) Tilda Rice Limited, a company organized under the laws of England and Wales;

(3) Tilda International DMCC, a company organized under the laws of Dubai, United Arab Emirates;

(4) Tilda Hain India Private Limited, a company organized under the laws of India;

and (5) Brand Associates Limited, a company organized under the laws of the Isle of Man.

The other assets sold in the transaction consist of raw materials, consumables, packaging, and finished and unfinished goods related to the Tilda business held by other Company entities that are not Tilda Group Entities.

The Sale and Purchase Agreement contains representations, warranties and covenants that are customary for a transaction of this nature.

The Company also entered into certain ancillary agreements with the Purchaser and certain of the Tilda Group Entities in connection with the Sale and Purchase Agreement, including a transitional services agreement pursuant to which the Company and the Purchaser will provide transitional services to one another, and business transfer agreements pursuant to which the applicable Tilda Group Entities will transfer certain non-Tilda assets and liabilities in India and the United Arab Emirates to subsidiaries of the Company to be formed in those countries.

The foregoing summary of the Sale and Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Sale and Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Form 10-K and incorporated herein by reference.

Other than with respect to the sale of the Tilda Group Entities, no material relationship exists between the Company and the Purchaser (or any of their affiliates, directors or officers).

The Company’s unaudited pro forma consolidated financial information giving effect to the sale of the Tilda Group Entities is filed as Exhibit 99.1 to this Form 10-K.

Resignation of Chief Accounting Officer

On August 26, 2019, Michael McGuinness, the Company’s Senior Vice President and Chief Accounting Officer, informed the Company of his intention to resign from his position with the Company, effective August 30, 2019, to pursue another opportunity.

James Langrock, the Company’s Executive Vice President and Chief Financial Officer, will assume the responsibilities of principal accounting officer of the Company on an interim basis until the Company names a successor to Mr.

For biographical information regarding Mr.

Langrock, see the Company’s Definitive Proxy Statement for the Company’s 2018 Annual Meeting of Stockholders, filed with the SEC on October 29, 2018.

Not applicable.

Directors, Executive Officers and Corporate Governance

9 unchanged sentences

Exhibits and Financial Statement Schedules

Financial Statements .

(a)(1) Financial Statements .

The following consolidated financial statements of The Hain Celestial Group, Inc.

3 unchanged sentences

Consolidated Statements of Operations - Fiscal Years ended June 30, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income - Fiscal Years ended June 30, 2019, 2018 and 2017

Consolidated Statements of Comprehensive (Loss) Income - Fiscal Years ended June 30, 2020, 2019 and 2018

Consolidated Statements of Stockholders’ Equity - Fiscal Years ended June 30, 2020, 2019 and 2018

1 unchanged sentence

Notes to Consolidated Financial Statements

Financial Statement Schedules .

(a)(2) Financial Statement Schedules .

The following financial statement schedule should be read in conjunction with the consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K.

3 unchanged sentences

Schedule II - Valuation and Qualifying Accounts

Column A Column B Column C Column D Column E

period Charged to

expenses Charged to

other accounts -

9 unchanged sentences

Valuation allowance for deferred tax assets $ 20,712 $ 1,251 $ — $ (1,132) $ 20,831

Amounts above are inclusive our Hain Pure Protein reporting segment classified as discontinued operations

Represents the allowance for doubtful accounts of the business acquired or disposed of during the fiscal year

Amounts written off and changes in exchange rates

Amounts above are inclusive of our Tilda and Hain Pure Protein reporting segments classified as discontinued operations

(i) Represents the allowance for doubtful accounts of the business acquired or disposed of during the fiscal year

(ii) Amounts written off and changes in exchange rates

(a)(3) Exhibits .

3 unchanged sentences

EXHIBIT INDEX

Number Description

Agreement relating to the sale and purchase of the Tilda Group Entities and certain other assets dated August 27, 2019, between the Company and Ebro Foods S.A.

(incorporated by reference to Exhibit 2.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on August 29, 2019).

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of Amendment No.

6 unchanged sentences

1 to the Company’s Registration Statement on Form S-4 filed with the SEC on April 24, 2000).

Description of Registrant’s Securities.

Description of Registrant’s Securities (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on August 29, 2019) .

Third Amended and Restated Credit Agreement, dated February 6, 2018, among the Company, Hain Pure Protein Corporation, certain other wholly-owned Subsidiaries of the Company, Bank of America, N.A., as Administrative Agent, U.S.

5 unchanged sentences

Third Amendment to Third Amended and Restated Credit Agreement, dated May 8, 2019, by and among the Company, certain wholly-owned subsidiaries of the Company party thereto from time to time, the Lenders party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 9, 2019).

Fourth Amendment to Third Amended and Restated Credit Agreement, dated November 6, 2019, by and among the Company, the Lenders party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2019, filed with the SEC on February 6, 2020).

Security and Pledge Agreement, dated May 8, 2019, by and among the Company, certain wholly-owned subsidiaries of the Company party thereto from time to time, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 9, 2019).

The Hain Celestial Group, Inc.

The Hain Group, Inc.

Amen ded and Restated Long Term Incentive and Stock Award Plan (incorporated by reference to Exhibit 10.2.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on August 29, 2019).

Form of Restricted Stock Agreement under The Hain Celestial Group, Inc.

Amended and Restated 2002 Long Term Incentive and Stock Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 7, 2008).

Form of Notice of Grant of Restricted Stock Award under The Hain Celestial Group , Inc.

Amended and Restated 2002 Long Term Incentive and Stock Award Plan (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 7, 2008).

Form of Performance Unit s Agreement under The Hain Celestial Group, Inc.

Amended and Restated 2002 Long Term Incentive and Stock Award Plan (2019-2021 Long Term Incentive Plan) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, filed with the SEC on May 9, 2019).

Form of Restricted Share Units Agreement under The Hain Celestial Group, Inc.

Amended and Restated 2002 Long Term Incentive and Stock Award Plan.

Form of Restricted Stock Agreement under the Company’s Amended and Restated 2002 Long Term Incentive and Stock Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 7, 2008).

Form of Notice of Grant of Restricted Stock Award under the Company’s Amended and Restated 2002 Long Term Incentive and Stock Award Plan (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 7, 2008).

Form of Performance Unit Agreement with the Company’s executive officers under the Company’s Amended and Restated 2002 Long Term Incentive and Stock Award Plan (2019-2021 Long Term Incentive Plan) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, filed with the SEC on May 9, 2019).

Form of Notice of Grant of Restricted Share Units under The Hain Celestial Group, Inc.

Amended and Restated 2002 Long Term Incentive and Stock Award Plan.

The Hain Celestial Group, Inc.

3 unchanged sentences

2019 Equity Inducement Award Program (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-8 filed with the SEC on February 19, 2019).

Form of Inducement Award Agreement under The Hain Celestial Group, Inc.

Form of Performance Units Agreement under The Hain Celestial Group, Inc.

2019 Equity Inducement Award Program (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, filed with the SEC on May 9, 2019).

Form of Restricted Share Units Agreement under The Hain Celestial Group, Inc.

2019 Equity Inducement Award Program.

Form of Notice of Grant of Restricted Share Units under The Hain Celestial Group, Inc.

2019 Equity Inducement Award Program.

The Hain Celestial Group, Inc.

2015-2019 Executive Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 26, 2014).

Amended and Restated Executive Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 1 , 201 9 ).

Employment Agreement, dated as of October 26, 2018, by and between the Company and Mark L.

Schiller (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 29, 2018).

Offer Letter, dated June 22, 2017, between the Company and James M.

Langrock (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017, filed with the SEC on September 13, 2017).

Offer Letter, dated October 31, 2019, between the Company and Javier H.

Idrovo (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2019, filed with the SEC on February 6, 2020).

Offer Letter, dated January 3, 2019, between the Company and Christopher Boever (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, filed with the SEC on May 9, 2019).

Offer Letter, dated May 2, 2019, between the Company and Kevin McGahren.

Employment Agreement between the Company and Irwin D.

Simon, dated July 1, 2003 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003, filed with the SEC on November 14, 2003).