DISCONTINUED OPERATIONS

In March 2018, the Company’s Board of Directors approved a plan to sell all of the operations of the Hain Pure Protein Corporation (“HPPC”) and EK Holdings, Inc. (“Empire”) operating segments, which were reported in the aggregate as the Hain Pure Protein reportable segment. Collectively, these planned dispositions represent a strategic shift that will have a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations.

The Company is presenting the operating results and cash flows of Hain Pure Protein within discontinued operations in the current and prior periods. The assets and liabilities of Hain Pure Protein are presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented.

Sale of Plainville Farms Business

On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business (a component of HPPC), which included $25,000 in cash to the purchaser, for a nominal purchase price. In addition, the purchaser assumed the current liabilities on the balance sheet of the Plainville Farms business as of the closing date. As a condition to consummating the sale, the Company entered into a Contingent Funding and Earnout Agreement, which provides for the issuance by the Company of an irrevocable stand-by letter of credit of $10,000 which expires nineteen months after issuance. The Company is entitled to receive an earnout not to exceed, in the aggregate, 120% of the maximum amount that the purchaser draws on the letter of credit at any point from the date of issuance through the expiration of the letter of credit. Earnout payments are based on a specified percentage of annual free cash flow achieved for all fiscal years ending on or prior to June 30, 2026. If a change in control of the purchaser occurs prior to June 30, 2026, the purchaser will pay the Company 120% of the difference between the amount drawn on the letter of credit less the sum of all earnout payments made prior to such time up to the net proceeds received by the purchaser. At March 31, 2019, the Company had not recorded an asset associated with the earnout. As a result of the disposition, the Company recognized a pre-tax loss on sale of $40,223, or $29,685 net of tax, in the three months ended March 31, 2019 to write down the assets and liabilities to the final sales price less costs to sell.

On May 8, 2019, the Company entered into a definitive agreement to sell all of its equity interest in Hain Pure Protein Corporation, which includes the FreeBird™ and Empire® Kosher businesses, for a purchase price of $80,000, subject to adjustments. The transaction is expected to close before June 30, 2019, the end of the Company's fiscal year.

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



	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018
Net sales	$	88,729		$	118,198		$	349,449		$	396,227
Cost of sales	88,277			113,629			356,073			373,122
Gross profit (loss)	452			4,569			(6,624		)	23,105
Selling, general and administrative expense	4,039			5,888			13,031			14,458
Asset impairments ⁽¹⁾	51,348			—			109,252			—
Other expense	2,182			805			7,377			3,258
Loss on sale of discontinued operations	40,223			—			40,223			—
Net (loss) income from discontinued operations before income taxes	(97,340		)	(2,124		)	(176,507		)	5,389
(Benefit) provision for income taxes	(21,415		)	10,431			(49,035		)	12,738
Net loss from discontinued operations, net of tax	$	(75,925	)	$	(12,555	)	$	(127,472	)	$	(7,349	)

Assets and liabilities of discontinued operations presented in the Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018 are included in the following table:



	March 31,			June 30,
ASSETS	2019			2018
Cash and cash equivalents	$	3,678		$	6,461
Accounts receivable, less allowance for doubtful accounts	11,680			21,616
Inventories	31,600			105,359
Prepaid expenses and other current assets	1,906			5,604
Property, plant and equipment, net	49,537			83,776
Goodwill	41,089			41,089
Trademarks and other intangible assets, net	33,762			51,029
Other assets	2,636			4,381
Deferred tax assets ⁽²⁾	37,925			—
Impairments of long-lived assets held for sale⁽¹⁾	(77,632		)	(78,464		)
Current assets of discontinued operations⁽³⁾	$	136,181		$	240,851

LIABILITIES
Accounts payable	$	11,211		$	31,762
Accrued expenses and other current liabilities	3,914			6,880
Deferred tax liabilities ⁽²⁾	—			11,111
Other noncurrent liabilities	70			93
Current liabilities of discontinued operations⁽³⁾	$	15,195		$	49,846

(1) In the nine months ended March 31, 2019 the Company recorded asset impairment charges of $109,252, of which $51,348 was recorded in the third quarter of fiscal 2019 to adjust the carrying value of the Hain Pure Protein reportable segment to its estimated selling price.

(2) The change in deferred taxes from June 30, 2018 to March 31, 2019 was the result of the reversal of the $12,250 deferred tax liability previously recorded related to Hain Pure Protein being classified as held for sale. In addition, deferred taxes were impacted by the tax effect of current period book losses as well as the deferred tax benefit arising from asset impairment charges.

(3) The assets and liabilities of Hain Pure Protein are classified as current on the March 31, 2019 and June 30, 2018 Consolidated Balance Sheets because it is probable that the sale will occur within the three months ended June 30, 2019.