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Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2020-05-07 · 158 added, 318 removed, 176 unchanged (73% 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 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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended September 30, 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, 2020.

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.

The Hain Celestial Group, Inc., a Delaware corporation (collectively, along with its subsidiaries, the “Company,” and herein referred to as “Hain Celestial,” “we,” “us” and “our”), was founded in 1993 and is headquartered in Lake Success, New York.

The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet — To Create and Inspire A Healthier Way of Life TM and be the leading marketer, manufacturer and seller of organic and natural, “better-for-you” products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience.

The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet — To Create and Inspire A Healthier Way of Life TM and be the leading marketer, manufacturer and seller of organic and natural products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience.

The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes.

Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores in over 75 countries worldwide.

The Company manufactures, markets, distributes and sells organic and natural products under brand names that are sold as “better-for-you” products, providing consumers with the opportunity to lead A Healthier Way of Life™.

Hain Celestial is a leader in many organic and natural products categories, with 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.

The Company’s strategy is to focus on simplifying the Company’s portfolio and reinvigorating profitable sales growth through discontinuing uneconomic investment, realigning resources to coincide with individual brand roles, reducing unproductive stock-keeping units (“SKUs”) and brands, and reassessing current pricing architecture.

As part of this initiative, the Company reviewed its product portfolio within North America and divided it into “Get Bigger” and “Get Better” brand categories.

The Company’s “Get Bigger” brands represent its strongest brands with higher margins, which compete in categories with strong growth.

In order to capitalize on the potential of these brands, the Company began reallocating resources to optimize assortment and increase share of distribution.

In addition, the Company will increase its marketing and innovation investments.

The Company’s “Get Better” brands are the brands in which the Company is primarily focused on simplification and expansion of profit.

Some of these are low margin, non-strategic brands that add complexity with minimal benefit to the Company’s operations.

Accordingly, in fiscal 2019, the Company initiated a SKU rationalization, which included the elimination of approximately 350 low velocity SKUs.

The elimination of these SKUs is expected to impact sales growth in the current fiscal year, but is expected to result in expanded profits and a remaining set of core SKUs that will maintain their shelf space in the store.

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

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

The Company manufactures, markets, distributes and sells organic and natural products under brand names 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 ma ny recognized brands in the various market categories it serves, including Celestial Seasonings ® , Clarks™, Cully & Sully ® , Dream ® , Earth’s Best ® , Ella’s Kitchen ® , Farmhouse Fare™, Frank Cooper’s ® , GG UniqueFiber ® , Gale's ® , Garden of Eatin' ® , Hain Pure Foods ® , Hartley’s ® , Health Valley ® , Imagine ® , Joya ® , Lima ® , Linda McCartney ® (under license), MaraNatha ® , Natumi ® , New Covent Garden Soup Co.

® , Orchard House ® , Robertson’s ® , Sensible Portions ® , Spectrum ® , Sun-Pat ® , Sunripe ® , Terra ® , The Greek Gods ® , William’s™, Yorkshire Provender ® and Yves Veggie Cuisine ® .

The Company’s personal care products are marketed under the Alba Botanica ® , Avalon Organics ® , Earth’s Best ® , JASON ® , Live Clean ® , One Step ® and Queen Helene ® brands.

The Company continues to execute the four key pillars of its strategy to:

(1) simplify its portfolio;

(2) strengthen its capabilities;

(3) expand profit margins and cash flow;

and (4) reinvigorate profitable topline growth.

The Company has executed this strategy, with a focus on discontinuing uneconomic investment, realigning resources to coincide with brand importance, reducing unproductive stock-keeping units (“SKUs”) and brands and reassessing current pricing architecture.

As part of this initiative, the Company reviewed its product portfolio within North America and d ivided it into “Get Bigger” and “Get Better” brand categories.

• The Company’s “Get Bigger” brands represent its strongest brands with higher margins, which compete in categories with strong growth potential.

The Company has concentrated its investment in marketing, innovation and other resources to prioritize spending for these brands, in an effort to reinvigorate profitable topline growth, optimize assortment and increase share of distribution.

• The Company’s “Get Better” brands are the brands in which the Company is primarily focused on simplification and expansion of profit margin.

Some of these brands have historically been low margin, non-strategic brands that added complexity with minimal benefit to the Company’s operations.

In addition, 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 its core portfolio.

During fiscal 2019, for example, the Company divested its Hain Pure Protein reportable segment and its WestSoy ® tofu, seitan and tempeh businesses.

In fiscal 2020, the Company divested its Tilda business and its Arrowhead Mills ® , SunSpire ® , Europe's Best ® , Casbah ® , Rudi’s Gluten-Free Bakery ™ , Rudi’s Organic Bakery ® and Fountain of Truth ™ brands.

More recently, the Company divested its Danival ® business in July 2020.

Additionally, in the first quarter of fiscal 2021, the Company began to actively market the sale of the United Kingdom's fruit business, the Orchard House ® Foods Limited business and associated brands, and thus, its assets and liabilities are classified as held for sale in the Company's Consolidated Balance Sheet as of September 30, 2020.

See Note 4, Assets Held for Sale and Discontinued Operations , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information and discussion of this planned divestiture.

The COVID-19 pandemic continues to create 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 that we can supply the products our consumers depend on.

We have been pleased with our preparation and efforts through the pandemic and 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.

To date, 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

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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.

We continue to monitor and comply with all applicable government orders, as some of the jurisdictions in which we do business begin to introduce new lockdowns and restrictions.

We may face additional 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 identified our most important products and secondary sources of supply and manufacturing capabilities for those key products.

We continue to acquire 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.

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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.

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

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

Additionally, deteriorating economic 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.

Overall, the COVID-19 pandemic has resulted in a net increase in overall demand for our products.

Accordingly, to date, our financial position has benefited from the COVID-19 pandemic, albeit to a limited extent.

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.

As of September 30, 2020, we had $702.3 million available under the Amended Credit Agreement.

Business Priorities

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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.

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

In fiscal 2019, the Company announced a strategy that includes as one of its key pillars identifying areas of cost savings and operating efficiencies to expand profit margins and cash flow.

As part of this overall strategy and the key pillar of realizing savings and efficiencies, during fiscal 2020, the Company began the integration of its United States and Canada operations in alignment with the North America reportable segment structure.

In addition, during fiscal 2021, the Company initiated cost reduction programs for its international businesses in the United Kingdom and Europe.

The Company will carry out additional productivity initiatives under this strategy in fiscal 2021.

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

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

The Company sold the entities comprising its Tilda operating segment and certain other assets of the Tilda business to the Purchaser for an aggregate price of $ 341.8 million.

(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.

On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business, a component of the Company’s Hain Pure Protein Corporation (“HPPC”) operating segment.

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

These dispositions represented strategic shifts that had a major impact on the Company’s operations and financial results and therefore, the Company is presenting the operating results and cash flows of the Tilda operating segment and the Hain Pure Protein reportable segment within discontinued operations in the current and prior periods.

The assets and liabilities of the Tilda operating segment are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of June 30, 2019.

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

Change in Reportable Segments

Historically, the Company had three reportable segments:

United States, United Kingdom and Rest of World.

Effective July 1, 2019, the Company reassessed its segment reporting structure due to changes in how the Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker, assesses the Company’s performance and allocates resources as a result of a change in the Company’s strategy, which includes creating synergies among the Company’s United States and Canada businesses, as well as among the Company’s international businesses in the United Kingdom and Europe.

As a result, the Canada and Hain Ventures operating segment, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America reportable segment.

Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment.

Accordingly, the Company now operates under two reportable segments:

North America and International.

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

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

These dispositions represented strategic shifts that had a major impact on the Company’s operations and financial results, and therefore, the Company is presenting the operating results and cash flows of the Tilda operating segment and the Hain Pure Protein reportable segment within discontinued operations in the current and prior peri ods.

Se e Note 4, Assets Held for Sale and Discontinued Operations , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information on discontinued operations.

Comparison of Three Months Ended September 30, 2020 to Three Months Ended September 30, 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 March 31, 2020 and 2019 (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 September 30, 2020 and 2019 (amounts in thousands, other than percentages, which may not add due to rounding):

Three Months Ended Change in

March 31, 2020 March 31, 2019 Dollars Percentage

September 30, 2020 September 30, 2019 Dollars Percentage

Net sales $ 498,627 100.0% $ 482,076 100.0% $ 16,551 3.4%

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Selling, general and administrative expenses 79,152 15.9% 80,680 16.7% (1,528) (1.9)%

Amortization of acquired intangibles 3,174 0.6% 3,265 0.6% (91) (2.8)%

Amortization of acquired intangible assets 2,433 0.5% 3,083 0.6% (650) (21.1)%

Productivity and transformation costs 1,802 0.4% 14,175 2.9% (12,373) (87.3)%

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

Proceeds from insurance claim — —% (2,562) (0.5)% 2,562 *

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

Long-lived asset impairment 32,497 6.5% — —% 32,497 *

Operating income 3,280 0.7% 2,455 0.5% 825 33.6%

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Other (income) expense, net (1,373) (0.3)% 1,328 0.3% (2,701) *

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)%

Income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees 2,200 0.4% (5,167) (1.1)% 7,367 *

Provision (benefit) for income taxes 12,962 2.6% (531) (0.1)% 13,493 *

Equity in net loss of equity-method investees 19 —% 317 —% (298) (94.0)%

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 from continuing operations $ (10,781) (2.2)% $ (4,953) (1.0)% $ (5,828) *

Net income (loss) from discontinued operations, net of tax 11,266 2.3% (102,068) (21.2)% 113,334 *

Net income (loss) $ 485 0.1% $ (107,021) (22.2)% $ 107,506 *

Adjusted EBITDA $ 54,895 11.0% $ 32,090 6.7% $ 22,805 71.1%

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

* Percentage is not meaningful

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.

Diluted net loss per common share from continuing operations $ (0.11) $ (0.05) $ (0.06) *

Diluted net income (loss) per common share from discontinued operations 0.11 (0.98) 1.09 *

Diluted net loss per common share $ — $ (1.03) $ 1.03 *

* Percentage is not meaningful due to one or two numbers being negative.

Net sales for the three months ended September 30, 2020 were $498.6 million, an increase of $16.6 million, or 3.4%, as compared to $482.1 million in the three months ended September 30, 2019.

On a constant currency basis, net sales increased approximately 1.5% 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 March 31, 2020 was $132.4 million, an increase of $19.2 million, or 16.9%, as compared to the prior year quarter.

Net sales on a constant currency basis increased in the North America reportable segment, partially offset by a decrease in the International reportable segment.

Further details of changes in net sales by segment and on a constant currency basis are provided below.

Gross profit for the three months ended September 30, 2020 was $119.2 million, an increase of $21.3 million, or 21.8%, as compared to the prior year quarter.

Gross profit margin was 23.9% of net sales, compared to 20.3% in the prior year quarter.

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.

The increase was driven by cost savings from the Company's productivity and transformation initiatives as well as favorable product mix in both our North America and International reportable segments.

Selling, General and Administrative Expenses

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 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.

Selling, general and administrative expenses were $79.2 million for the three months ended September 30, 2020, a decrease of $1.5 million, or 1.9%, from $80.7 million for the prior year quar ter.

The decrease was due to lower selling expenses incurred in fiscal year 2021 due to efficiencies gained from the Company's productivity and transformation initiatives, partially offset by an increase in marketing and advertising costs.

Selling, general and a dministrative expenses as a percentage of net sales was 15.9% in the three months ended September 30, 2020 compared to 16.7% in the prior year quarter, reflecting a decrease of 80 basis points primarily attributable to the aforementioned items.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.4 million for the three months ended September 30, 2020, a decrease of $0.7 million from $3.1 million in the prior year quarter .

The decrease was due to finite-lived intangibles from historical acquisitions becoming fully amortized or impaired subsequent to the first quarter of fiscal 2020.

Productivity and Transformation Costs

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 $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.

Productivity and transformation costs were $1.8 million for the three months ended September 30, 2020, a decrease of $12.4 million from $14.2 million in the prior year quarter.

The decrease was primarily due to higher consulting fees incurred in connection with the Company’s productivity and transformation initiatives and higher severance costs in the prior year quarter and fewer comparable costs incurred in the current year quarter.

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 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.

Of this amount, $4.5 million was recognized in fiscal 2019 as it related to reimbursement of costs already incurred, with the remaining $2.5 million recognized in the three months ended September 30, 2019.

Long-lived Asset Impairment

During the three months ended September 30, 2020, the Company recognized a pre-tax impairment charge of $32.5 million related to the reserve recorded against the assets of the Company's United Kingdom fruit business (see Note 4, Assets Held for Sale and Discontinued Operations , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q).

There was no impairment charge recorded in the corresponding period in the three months ended September 30, 2019.

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.

Operating income for the three months ended September 30, 2020 was $3.3 million compared to $2.5 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 $4.0 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.

Interest and other financing expense, net totaled $2.5 million for the three months ended September 30, 2020, a decrease of $3.8 million, or 61.0%, from $6.3 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.

See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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.

Other income, net totaled $1.4 million for the three months ended September 30, 2020, compared to expense of $1.3 million in the prior year quarter .

The change from expense to income was primarily attributable to net unrealized foreign currency gains in the first quarter of fiscal 2021 principally due to the effect of foreign currency movements on the remeasurement of foreign currency denominated loans compared to net unrealized foreign currency losses incurred in the prior year quarter.

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 September 30, 2020 was income of $2.2 million compared to a loss of $5.2 million in the prior year quarter.

The increase was due to the items discussed above.

Provision (Benefit) for Income Taxes

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

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.

Our income tax expense from continuing operations was $13.0 million for the three months ended September 30, 2020 compared to an income tax benefit of $0.5 million in the prior year quarter.

The effective income tax rate from continuing operations was an expense of 589.2% and a benefit of 10.3% for the three months ended September 30, 2020 and September 30, 2019, respectively.

The effective income tax rate from continuing operations for the period ended September 30, 2020 was impacted by various discrete items including the tax impact of the United Kingdom fruit business reserve, the enacted change in the United Kingdom's corporate income tax rate to 19% and a legal entity reorganization completed during the quarter ended September 30, 2020.

In addition, the effective income tax rates from continuing operations for the three months ended September 30, 2020 and 2019 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.

In August 2020, the Company received $25.0 million including $1.2 million of interest from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") refund claim filed in July 2020.

The remaining receivable balance of $28.7 million is included in Prepaid expenses and other current assets as of September 30, 2020.

Our effective tax rate may change from period-to-period based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes and tax audit settlements.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended 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 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.

Our equity in net loss from our equity-method investments for the three months ended September 30, 2020 was $19 thousand and $0.3 million in the prior year quarter.

See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net Loss from Continuing Operations

Net loss from continuing operations for the three months ended September 30, 2020 was $10.8 million, or $0.11 per diluted share, compared to $5.0 million, or $0.05 per diluted share, for the three months ended September 30, 2019.

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

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 income (loss) from discontinued operations, net of tax, for the three months ended September 30, 2020 was income of $11.3 million, or $0.11 per diluted share, compared to a loss of $102.1 million, or $0.98 per diluted share, in the three months ended September 30, 2019 .

During the three months ended September 30, 2020, the Company recognized a $11.3 million adjustment to the Tilda business primarily related to the recognition of a deferred tax benefit.

Net loss from discontinued operations, net of tax, for the three months ended September 30, 2019 included a reclassification of $95.1 million of cumulative translation losses from accumulated other comprehensive loss to the Company's results of the Tilda business' discontinued operations.

The income tax

expense from discontinued operations of $15.3 million for the three months ended September 30, 2019 was impacted by $16.5 million of tax related to the tax gain on the sale of the Tilda entities.

See Note 4, Assets Held for Sale and Discontinued Operations , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion.

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.

Net income for the three months ended September 30, 2020 was $0.5 million, or $0.00 per diluted share, compared to a net loss of $107.0 million, or $1.03 per diluted share, in the prior year quarter.

The change from net loss to net income was attributable to the factors noted above.

Adjusted EBITDA

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.

Our Adjusted EBITDA was $54.9 million and $32.1 million for the three months ended September 30, 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 March 31, 2020 and 2019:

The following table provides a summary of net sales and operating income by reportable segment for the three months ended September 30, 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 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 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

Our Corporate and Other category consists of expenses related to the Company’s centralized administrative functions, which do not specifically relate to an operating segment.

Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, facilities, and other items which benefit the Company as a whole.

Additionally, Productivity and transformation costs and tradename impairment charges of $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 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 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)%

Cost of sales 1,206,324 78.2% 1,295,834 81.0% (89,510) (6.9)%

Gross profit 335,833 21.8% 303,467 19.0% 32,366 10.7%

Selling, general and administrative expenses 245,205 15.9% 235,561 14.7% 9,644 4.1%

Amortization of acquired intangibles 9,446 0.6% 9,946 0.6% (500) (5.0)%

Productivity and transformation costs 37,949 2.5% 29,613 1.9% 8,336 28.1%

Chief Executive Officer Succession Plan expense, net — —% 30,156 1.9% (30,156) *

Proceeds from insurance claim (2,962) (0.2)% — —% (2,962) *

Accounting review and remediation costs, net of insurance proceeds — —% 4,334 0.3% (4,334) *

Long-lived asset and intangibles impairment 15,414 1.0% 23,709 1.5% (8,295) (35.0)%

Operating income (loss) 30,781 2.0% (29,852) (1.9)% 60,633 203.1%

Interest and other financing expense, net 15,068 1.0% 15,736 1.0% (668) (4.2)%

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

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%

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 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%

Net loss $ (83,646) (5.4)% $ (169,763) (10.6)% $ 86,117 50.7%

Adjusted EBITDA $ 137,827 8.9% $ 115,719 7.2% $ 22,108 19.1%

Diluted net income (loss) per common share from continuing operations $ 0.21 $ (0.44) $ 0.65 147.7%

Diluted net loss per common share from discontinued operations (1.01) (1.19) 0.18 15.1%

Diluted net loss per common share $ (0.80) $ (1.63) $ 0.83 50.9%

* Percentage is not meaningful

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 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 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 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 $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.

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 $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 $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 $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.

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.

Accounting Review and Remediation Costs, Net of Insurance Proceeds

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

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

Long-lived Asset and Intangibles Impairment

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.

Additionally, the Company recorded $5.3 million of non-cash impairment charges primarily related to the Company’s decision to consolidate manufacturing of certain fruit-based products in the United Kingdom.

Operating Income (Loss)

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 $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 $2.3 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 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 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 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 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 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 $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.

GAAP Measures presented following the discussion of our results of operations.

Segment Results

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

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

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)

% change (4.2) % (2.7) % n/a (3.6) %

Operating income (loss)

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

% change 80.8 % (0.1) % 30.2 % 203.1 %

Operating income (loss) margin

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 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 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 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.

Our net sales in the North America reportable segment for the three months ended September 30, 2020 were $280.7 million, an increase of $9.0 million, or 3.3%, from net sales of $271.7 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 increased at-home food consumption, 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 September 30, 2020 was $33.3 million, an increase of $18.1 million from $15.1 million in the prior year quarter.

The increase was driven by a favorable product mix, lower selling expenses and cost efficiencies gained with the Company's productivity and transformation initiatives.

I nternational

Our net sales in the International reportable segment for the three months ended September 30, 2020 were $218.0 million, an increase of $7.6 million, or 3.6%, from net sales of $210.4 million in the prior year quarter.

On a constant currency basis, net sales decreased 1.1% from the prior year quarter primarily due to decline in the fruit business, partially offset by an increase in overall demand for our products including the growth in our plant based food and beverage products.

Operating loss in our International reportable segment for the three months ended September 30, 2020 was $15.9 million, a decrease of $25.0 million from operating income of $9.1 million for the three months ended September 30, 2019.

The decrease was primarily associated with long-lived asset impairment charges relating to a $32.5 million reserve recorded on the United Kingdom's fruit business, partially offset by the increase in net sales as discussed above.

Corporate and Other

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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.

Our operating loss in Corporate and Other for the three months ended September 30, 2020 was $14.1 million, a decrease in loss of $7.7 million, from $21.8 million.

This change was primarily related to productivity and transformation costs included in Corporate and Other, which for the three months ended September 30, 2020 were $0.8 million, a decrease of $9.9 million, from $10.7 million for the three months ended September 30, 2019.

Additionally, our improvement to operating loss was offset by proceeds from insurance claim included within Corporate and Other expenses that was a benefit of $2.6 million in the three months ended September 30, 2019, with no corresponding benefit in the current quarter.

Refer to Note 18, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Liquidity and Capital Resources

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

As of 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.

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Amended Credit Agreement.

As of September 30, 2020, $702.3 million was available under the Amended Credit Agreement, and the Company was in compliance with all associated covenants.

We believe that our cash flows from operations and borrowing capacity under our Amended Credit Agreement will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

Our cash and cash equivalents balance, including those balances classified as held for sale, decreased $0.5 million at September 30, 2020 to $37.3 million as compared to $37.8 million at June 30, 2020.

Our working capital from continuing operations was $283.7 million at September 30, 2020, an increase of $23.1 million from $260.7 million at the end of fiscal 2020.

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 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 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.

As of September 30, 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 remaining foreign earnings outside the United States.

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

As of March 31, 2020, all of our investments were expected to mature in less than three months.

As of September 30, 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.

Nine Months Ended March 31, Change in

(amounts in thousands) 2020 2019 Dollars Percentage

Three Months Ended September 30, Change in

(amounts in thousands) 2020 2019 Dollars

Cash flows provided by (used in):

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Effect of exchange rate changes on cash from continuing operations 2,500 (892) 3,392

Increase (decrease) in cash from continuing operations 10,532 (30,269) 40,801 134.8%

Decrease in cash from continuing operations (518) (10,495) 9,977

Decrease in cash from discontinued operations — (8,509) 8,509

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.

Net decrease in cash and cash equivalents $ (518) $ (19,004) $ 18,486

Cash provided by operating activities from continuing operations was $40.7 million for the three months ended September 30, 2020, an increase of $44.3 million from cash used in operating activities from continuing operations of $3.6 million in the prior year period.

This increase resulted primarily from an improvement of $27.9 million in net income adjusted for non-cash charges in the current period and greater cash generation of $16.4 million from our working capital accounts.

Cash used in investing activities from continuing operations was $7.7 million for the three months ended September 30, 2020, a decrease of $5.4 million from $13.2 million in the prior year period primarily due to proceeds from sale of businesses and decreased capital expenditures.

Cash used in financing activities from continuing operations was $36.0 million for the three months ended September 30, 2020, a decrease of $43.1 million compared to $7.1 million of cash provided in the prior year period.

Cash used in financing activities from continuing operations for the three months ended September 30, 2020 included $8.0 million of net borrowings of our revolving credit facility and $42.1 million of share repurchases.

Cash provided by financing activities from continuing operations for the three months ended September 30, 2019 included $312.2 million primarily related to the proceeds from the sale of Tilda, partially offset by $304.7 million of net repayments of our term loan and revolving credit facility.

Operating Free Cash Flow from Continuing Operations

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.

Our operating free cash flow from continuing operations was $28.5 million for the three months ended September 30, 2020, an improvement of $45.3 million from negative $16.7 million in the three months ended September 30, 2019.

This improvement resulted primarily from an improvement of $27.9 million in net income adjusted for non-cash charges in the current period and greater cash generation of $16.4 million from our working capital accounts.

See the Reconciliation of Non-U.S.

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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.

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.

During the three months ended September 30, 2020, the Company repurchased 1,281 shares under the program for a total of $42.0 million, excluding commissions, at an average price of $32.81 per share.

As of September 30, 2020, the Company had $147.8 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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Net sales growth on a constant currency basis 3.4 % (1.1) % 1.5 %

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 - 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 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.

Adjusted EBITDA is defined as net income (loss) before income taxes, net interest expense, depreciation and amortization, impairment of long-lived assets, equity in net loss of equity-method investees, stock-based compensation, net, productivity and transformation costs, SKU rationalization and certain inventory write-downs, 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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A reconciliation of net income (loss) to Adjusted EBITDA is as follows:

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

Three Months Ended September 30,

(amounts in thousands) 2020 2019

Net income (loss) $ 485 $ (107,021)

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)

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

Net income (loss) from discontinued operations 11,266 (102,068)

Net loss from continuing operations (10,781) (4,953)

Provision (benefit) for income taxes 12,962 (531)

Interest expense, net 2,154 4,552

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Stock-based compensation, net 4,367 2,737

Stock-based compensation expense in connection with Chief Executive Officer Succession Agreement — — — 429

Long-lived asset and intangibles impairment 13,525 — 15,414 23,709

Long-lived asset impairment 32,497 —

Unrealized currency (gains) losses (1,202) 1,684

Productivity and transformation costs 1,150 14,175

Chief Executive Officer Succession Plan expense, net — 455 — 29,727

Proceeds from insurance claim — (2,562)

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

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

Warehouse/manufacturing consolidation and other costs 390 1,879

Gain on sale of businesses (620) —

SKU rationalization and inventory write-down 204 (11)

Plant closure related costs (6) 832

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GAAP financial measure “Operating Free Cash Flow from continuing operations.” The difference between operating free cash flow from continuing operations and cash flow provided by or used in operating activities from continuing operations, which is the most comparable U.S.

GAAP financial measure, is that Operating Free Cash Flow from continuing operations reflects the impact of capital expenditures.

GAAP financial measure, is that Operating Free Cash Flow from continuing operations reflects the impact of purchases of property, plant and equipment (capital spending).

Since capital spending is essential to maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.

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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,

Three Months Ended September 30,

(amounts in thousands) 2020 2019

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

Cash flow provided by (used in) operating activities from continuing operations $ 40,669 $ (3,581)

Purchases of property, plant and equipment (12,155) (13,164)

Operating Free Cash Flow - continuing operations $ 17,131 $ (36,742)

Operating Free Cash Flow from continuing operations $ 28,514 $ (16,745)

Off Balance Sheet Arrangements

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.

At September 30, 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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however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied.

The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to revenue recognition, trade promotions and sales incentives, valuation of accounts and chargebacks receivable, accounting for acquisitions, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation, and valuation allowances for deferred tax assets.

The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to revenue recognition, trade promotions and sales incentives, valuation of accounts and chargeback receivable, valuation of long-lived assets, goodwill and intangible assets, stock-based compensation and valuation allowances for deferred tax assets.

The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Recent Accounting Pronouncements

Refer to Note 2, Basis of Presentation , in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Refer to Note 2, Basis of Presentation , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Certain of our product lines have seasonal fluctuations.

Hot tea, baking products, hot cereal, hot-eating desserts and soup sales are stronger in colder months, while sales of snack foods, sunscreen and certain of our prepared food and personal care products are stronger in the warmer months.

Hot tea, hot-eating desserts and soup sales are stronger in colder months, while sales of snack foods, sunscreen and certain of our prepared food and personal care products are stronger in the warmer months.

As such, our results of operations and our cash flows for any particular quarter are not indicative of the results we expect for the full year, and our historical seasonality may not be indicative of future quarterly results of operations.

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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