Hain Celestial Reports Third Quarter Fiscal Year 2019 Financial Results

|PR Newswire|About: HAIN

Second Consecutive Quarter of Sequential Margin Improvement

PR Newswire

LAKE SUCCESS, N.Y., May 9, 2019 /PRNewswire/ -- The Hain Celestial Group, Inc. (HAIN) ("Hain Celestial" or the "Company"), a leading organic and natural products company with operations in North America, Europe, Asia and the Middle East providing consumers with A Healthier Way of Life™, today reported financial results for the third quarter ended March 31, 2019. The results contained herein are presented with the Hain Pure Protein operating segment being treated as a discontinued operation.

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"We are encouraged by our third quarter financial results that demonstrate sequential performance improvements in many key areas of our business, and we are on track to achieve our fiscal year 2019 outlook," commented Mark L. Schiller, Hain Celestial's President and Chief Executive Officer. "Our team is in the early innings of executing on our transformational strategic plan to simplify our portfolio, strengthen our core capabilities, reinvigorate profitable top-line growth, and expand margins, return-on-invested-capital and cash flow. We remain committed to delivering consistency in our operational and financial results to drive long-term shareholder value."

FINANCIAL HIGHLIGHTS1

Summary of Third Quarter Results from Continuing Operations2

  • Net sales decreased 5% to $599.8 million compared to the prior year period.
  • Net sales decreased 2% on a constant currency basis compared to the prior year period.
  • When adjusted for Foreign Exchange and Acquisitions, Divestitures and certain other items, including the Project Terra Stock Keeping Unit ("SKU") rationalization3, net sales were flat compared to the prior year period.
  • Gross margin of 20.9%, a 10 basis point decrease over the prior year period and a 130 basis point increase from the second quarter of fiscal 2019.
  • Adjusted gross margin of 21.6%, a 140 basis point decrease over the prior year period and a 130 basis point increase from the second quarter of fiscal 2019.
  • Operating income of $23.9 million compared to $29.3 million in the prior year period and an operating loss of $15.4 million in the second quarter of fiscal 2019.
  • Adjusted operating income of $38.9 million compared to $56.0 million in the prior year period and $29.9 million in the second quarter of fiscal 2019.
  • Net income of $10.1 million compared to $25.2 million in the prior year period and a net loss of $29.3 million in the second quarter of fiscal 2019.
  • Adjusted net income of $21.7 million compared to $38.6 million in prior year period and $15.0 million in the second quarter of fiscal 2019.
  • EBITDA of $41.5 million compared to $51.5 million in the prior year period and $19.2 million in the second quarter of fiscal 2019.
  • EBITDA margin of 6.9%, a 120 basis point decrease compared to the prior year period and 360 basis point increase from the second quarter of fiscal 2019.
  • Adjusted EBITDA of $55.5 million compared to $73.4 million in the prior year period and $44.9 million in the second quarter of fiscal 2019.
  • Adjusted EBITDA margin of 9.3%, a 230 basis point decrease compared to the prior year period and a 160 basis point increase from the second quarter of fiscal 2019.
  • EPS of $0.10 compared to $0.24 in the prior year period and a loss per diluted share of $0.28 in the second quarter of fiscal 2019.
  • Adjusted EPS of $0.21 compared to $0.37 in the prior year period and $0.14 in the second quarter of fiscal 2019.

SEGMENT HIGHLIGHTS FROM CONTINUING OPERATIONS

Hain Celestial United States
Hain Celestial United States third quarter net sales of $266.4 million decreased 5% over the prior year period. When adjusted for Acquisitions, Divestitures and certain other items including the Project Terra SKU rationalization3, net sales decreased 2% over the prior year period. Segment operating income in the third quarter was $17.1 million, a 32% decrease from the prior year period and a 138% increase from the second quarter of fiscal 2019. Adjusted operating income was $21.8 million, a 39% decrease over the prior year period and a 62% increase from the second quarter of fiscal 2019. Segment EBITDA in the third quarter was $20.9 million, a 33% decrease from the prior year period and 70% increase from the second quarter of fiscal 2019. Adjusted EBITDA was $25.5 million, a 48% increase from the second quarter of 2019 and a 36% decrease over the prior year period.

Hain Celestial United Kingdom
Hain Celestial United Kingdom third quarter net sales of $227.2 million decreased 5% over the prior year period.  When adjusted for Foreign Exchange, Acquisitions and Divestitures and certain other items3 net sales increased 3% over the prior year period. The net sales increase compared to the prior year period was driven by 5% growth from Tilda® and 2% growth from Ella's Kitchen®, or 11% and 9% growth, respectively, after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items3. The results for the United Kingdom segment compared to the prior year period also reflected an 8% decline in Hain Daniels, or 1% after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items3, primarily driven by declines from the New Covent Garden Soup Co.®, Cully & Sully®, and Johnson's Juice Co.™ brands and private label sales, offset in part by growth in the Linda McCartney® and Hartley's® brands. Segment operating income was $18.1 million, a 31% increase over the prior year period and a 24% increase from the second quarter of fiscal 2019. Adjusted operating income was $19.1 million, a decrease of 8% over the prior year period and a 6% increase from the second quarter of fiscal 2019.  Segment EBITDA in the third quarter was $25.8 million, a 7% increase from the prior year period and an 18% increase from the second quarter of fiscal 2019. Adjusted EBITDA was $26.7 million, a 6% decrease over the prior year period and 6% increase from the second quarter of 2019.

Rest of World
Rest of World third quarter net sales of $106.1 million decreased 6% over the prior year period. When adjusted for Foreign Exchange, Acquisitions and Divestitures and certain other items3 net sales increased 1% over the prior year period. Net sales for Hain Celestial Canada decreased 6%, or increased 2% compared to the prior year period after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items3, primarily driven by growth from the Sensible Portions® and Yves Veggie Cuisine® brands, offset in part by declines from the Europe's Best®, Live Clean® and Dream® brands. Net sales for Hain Celestial Europe decreased 4%, or increased 4% on a constant currency basis, primarily driven by strong performance from the Joya® and Natumi® brands and private label sales, offset in part by declines from the Lima®, Danival® and Dream® brands. Net sales for Hain Ventures, formerly known as Cultivate Ventures, decreased 16%, or 14% after adjusting for Acquisitions and Divestitures and certain other items3, primarily driven by declines from the BluePrint®, DeBoles® and SunSpire® brands, offset in part by growth from the GG UniqueFiber™ brand. Segment operating income in the third quarter was $10.9 million, a 2% decrease over the prior year period and a 30% increase from the second quarter of fiscal 2019. Adjusted operating income was $11.3 million, an 8% decrease over the prior year period and a 21% increase from the second quarter of fiscal 2019. Segment EBITDA in the third quarter was $14.0 million, a 2% increase from the prior year period and a 21% increase from the second quarter of fiscal 2019. Adjusted EBITDA was $14.4 million, a 4% decrease over the prior year period and a 17% increase from the second quarter of 2019.

Hain Pure Protein Discontinued Operations
As previously disclosed on May 5, 2018, the results of operations, financial position and cash flows related to the operations of the Hain Pure Protein business segment have been moved to discontinued operations in the current and prior periods. On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business and 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. Net sales for Hain Pure Protein in the third quarter were $88.7 million, a decrease of 25% compared to the prior year period. Net loss from discontinued operations, net of tax in the third quarter was $75.9 million and included a $40.0 million non-cash impairment charge and a loss on sale of $29.7 million.

Fiscal Year 2019 Guidance
The Company reiterates its annual guidance for continuing operations for fiscal year 2019:

  • Total net sales of $2.320 billion to $2.350 billion, a decrease of approximately 4% to 6% as compared to fiscal year 2018.
  • Adjusted EBITDA of $185 million to $200 million, a decrease of approximately 22% to 28% as compared to fiscal year 2018.
  • Adjusted EPS of $0.60 to $0.70, a decrease of approximately 40% to 48% as compared to fiscal year 2018.

Guidance, where adjusted, is provided on a non-GAAP basis and excludes acquisition-related expenses; integration charges; restructuring charges, start-up costs, consulting fees and other costs associated with Project Terra; costs associated with the CEO Succession Agreement; unrealized net foreign currency gains or losses, and accounting review and remediation costs and other non-recurring items that may be incurred during the Company's fiscal year 2019, which the Company will continue to identify as it reports its future financial results. Guidance also excludes the impact of any future acquisitions and divestitures.

The Company cannot reconcile its expected Adjusted EBITDA to net income or adjusted earnings per diluted share to earnings per diluted share under "Fiscal Year 2019 Guidance" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time.

1 This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided herein in the tables "Reconciliation of GAAP Results to Non-GAAP Measures."
2 Unless otherwise noted all results included in this press release are from continuing operations.
3 Refer to "Net Sales Growth at Constant Currency and Adjusted for Acquisitions, Divestitures and Other" provided herein.

 

(unaudited and dollars in thousands)

United States

United
Kingdom

Rest of World

Corporate/
Other

Total

Net Sales






Net sales - Three months ended 3/31/19

$266,445

$227,206

$106,146

$            -

$   599,797

Net sales - Three months ended 3/31/18

$281,052

$238,321

$113,347

$            -

$   632,720

% change - FY'19 net sales vs. FY'18 net sales

(5.2)%

(4.7)%

(6.4)%


(5.2)%







Operating income (loss)






Three months ended 3/31/19






Operating income (loss)

$  17,099

$  18,147

$  10,868

$  (22,249)

$     23,865

Non-GAAP adjustments (1)

4,676

976

432

8,955

15,039

Adjusted operating income (loss)

$  21,775

$  19,123

$  11,300

$  (13,294)

$     38,904

Operating income margin

6.4%

8.0%

10.2%


4.0%

Adjusted operating income margin

8.2%

8.4%

10.6%


6.5%







Three months ended 3/31/18






Operating income (loss)

$  24,974

$  13,863

$  11,059

$  (20,642)

$     29,254

Non-GAAP adjustments (1)

10,880

6,895

1,257

7,723

26,755

Adjusted operating income (loss)

$  35,854

$  20,758

$  12,316

$  (12,919)

$     56,009

Operating income margin

8.9%

5.8%

9.8%


4.6%

Adjusted operating income margin

12.8%

8.7%

10.9%


8.9%













(unaudited and dollars in thousands)

United States

United
Kingdom

Rest of World

Corporate/
Other

Total

Net Sales






Net sales - Nine months ended 3/31/19

$769,585

$671,121

$304,080

$            -

$1,744,786

Net sales - Nine months ended 3/31/18

$815,013

$698,968

$324,190

$            -

$1,838,171

% change - FY'19 net sales vs. FY'18 net sales

(5.6)%

(4.0)%

(6.2)%


(5.1)%







Operating income (loss)






Nine months ended 3/31/19






Operating income (loss)

$  26,449

$  36,822

$  27,078

$ (105,975)

$    (15,626)

Non-GAAP adjustments (1)

16,413

11,050

2,731

75,075

105,269

Adjusted operating income (loss)

$  42,862

$  47,872

$  29,809

$  (30,900)

$     89,643

Operating income (loss) margin

3.4%

5.5%

8.9%


(0.9)%

Adjusted operating income margin

5.6%

7.1%

9.8%


5.1%







Nine months ended 3/31/18






Operating income (loss)

$  67,696

$  37,062

$  30,591

$  (45,889)

$     89,460

Non-GAAP adjustments (1)

22,272

12,970

2,123

14,769

52,134

Adjusted operating income (loss)

$  89,968

$  50,032

$  32,714

$  (31,120)

$   141,594

Operating income margin

8.3%

5.3%

9.4%


4.9%

Adjusted operating income margin

11.0%

7.2%

10.1%


7.7%







(1) See accompanying table of "Reconciliation of GAAP Results to Non-GAAP Measures"

 

Webcast Presentation
Hain Celestial will host a conference call and webcast today at 8:30 AM Eastern Time to discuss its results and business outlook. The call will be webcast and available under the Investor Relations section of the Company's website at www.hain.com.

About The Hain Celestial Group, Inc.
The Hain Celestial Group, headquartered in Lake Success, NY, is a leading organic and natural products company with operations in North America, Europe, Asia and the Middle East. Hain Celestial participates in many natural categories with well-known brands that include Almond Dream®, Arrowhead Mills®, Bearitos®, Better Bean®, BluePrint®, Casbah®, Celestial Seasonings®, Clarks™, Coconut Dream®, Cully & Sully®, Danival®, DeBoles®, Earth's Best®, Ella's Kitchen®, Europe's Best®, Farmhouse Fare™, Frank Cooper's®, Gale's®, Garden of Eatin'®, GG UniqueFiber™, Hain Pure Foods®, Hartley's®, Health Valley®, Imagine™, Johnson's Juice Co.™, Joya®, Kosher Valley®, Lima®, Linda McCartney® (under license), MaraNatha®, Mary Berry (under license), Natumi®, New Covent Garden Soup Co.®, Orchard House®, Rice Dream®, Robertson's®, Rudi's Gluten-Free Bakery™, Rudi's Organic Bakery®, Sensible Portions®, Spectrum® Organics, Soy Dream®, Sun-Pat®, Sunripe®, SunSpire®, Terra®, The Greek Gods®, Tilda®, Walnut Acres®, WestSoy®, 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.

Safe Harbor Statement
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictions based on expectations and projections about future events and are not statements of historical fact. You can identify forward-looking statements by the use of forward-looking terminology such as "plan", "continue", "expect", "anticipate", "intend", "predict", "project", "estimate", "likely", "believe", "might", "seek", "may", "will", "remain", "potential", "can", "should", "could", "future" and similar expressions, or the negative of those expressions, or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of the Company's strategic initiatives, including Project Terra, the Company's announced divestiture of its Hain Pure Protein business, the Company's Guidance for Fiscal Year 2019 and our future performance and results of operations.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, levels of activity, performance or achievements of the Company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and may not be able to be realized. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). Such factors, include, among others, the Company's beliefs or expectations relating to the impact of competitive products, changes to the competitive environment, changes to consumer preferences, consolidation of customers, reliance on independent distributors, general economic and financial market conditions, risks associated with our international sales and operations, our ability to manage our supply chain effectively, changes in raw materials, freight, commodity costs and fuel, our ability to execute and realize cost savings initiatives, including, but not limited to, cost reduction initiatives under Project Terra and SKU rationalization plans, the identification and remediation of material weaknesses in our internal controls over financial reporting, our ability to manage our financial reporting and internal control system processes, potential liabilities due to legal claims, government investigations and other regulatory enforcement actions, costs incurred due to pending and future litigation, the availability of key personnel and changes in our management team, potential liability if our products cause illness or physical harm, impairments in the carrying value of goodwill or other intangible assets, our ability to identify and complete acquisitions or divestitures and integrate acquisitions, the availability of organic and natural ingredients, the reputation of our brands, risks relating to the protection of intellectual property, cybersecurity risks, unanticipated expenditures and other risks detailed from time-to-time in the Company's reports filed with the United States Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2018, and our quarterly reports. As a result of the foregoing and other factors, the Company cannot provide any assurance regarding future results, levels of activity and achievements of the Company, and neither the Company nor any person assumes responsibility for the accuracy and completeness of these statements. All forward-looking statements contained herein apply as of the date hereof or as of the date they were made and, except as required by applicable law, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflects changes in underlying assumptions or factors of new methods, future events or other changes.

Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures, including net sales adjusted for the impact of Foreign Exchange, Acquisitions and Divestitures and certain other items, including SKU rationalization, as applicable in each case, adjusted operating income, adjusted gross margin, adjusted net income, adjusted earnings per diluted share, EBITDA, Adjusted EBITDA and operating free cash flow. The reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are presented in the tables "Reconciliation of GAAP Results to Non-GAAP Measures" for the three and nine months ended March 31, 2019 and 2018 and the three months ended December 31, 2018 and in the paragraphs below. Management believes that the non-GAAP financial measures presented provide useful additional information to investors about current trends in the Company's operations and are useful for period-over-period comparisons of operations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read only in connection with the Company's Consolidated Statements of Operations presented in accordance with GAAP.

The Company defines Operating Free Cash Flow as cash provided by or used in operating activities from continuing operations (a GAAP measure) less capital expenditures. The Company views Operating Free Cash Flow as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments.

For the three and nine months ended March 31, 2019 and 2018, Operating Free Cash Flow from continuing operations was calculated as follows:


Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018




(unaudited and dollars in thousands)











Cash flow provided by operating activities - continuing operations

$      13,056


$      38,980


$       12,043


$       67,370

Purchases of property, plant and equipment

(14,353)


(23,683)


(55,892)


(48,368)

Operating Free Cash Flow - continuing operations

$      (1,297)


$      15,297


$      (43,849)


$       19,002

 

The Company's Operating Free Cash Flow from continuing operations was negative $1.3 million for the three months ended March 31, 2019, a decrease of $16.6 million from the three months ended March 31, 2018.  This decrease resulted primarily from a decrease in net income adjusted for non-cash and cash used in working capital accounts, offset in part by a decrease in capital expenditures. The Company's Operating Free Cash Flow from continuing operations was negative $43.8 million for the nine months ended March 31, 2019, a decrease of $62.9 million from the nine months ended March 31, 2018. This decrease resulted primarily from a decrease in net income adjusted for non-cash charges and increased capital expenditures in the current year, offset in part by cash provided by working capital accounts.

The Company believes presenting net sales at constant currency provides useful information to investors because it provides transparency to underlying performance in the Company's consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets. To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

The Company provides net sales adjusted for constant currency, acquisitions and divestitures, and certain other items including SKU rationalization, as applicable in each case, to understand the growth rate of net sales excluding the impact of such items. The Company's management believes net sales adjusted for such items is useful to investors because it enables them to better understand the growth of our business from period-to-period.

The Company defines EBITDA as net (loss) income from continuing operations (a GAAP measure) before income taxes, net interest expense, depreciation and amortization, equity in net loss (income) of equity-method investees, stock-based compensation, net, stock-based compensation expense in connection with the Succession Plan, long-lived asset and intangible impairments and unrealized currency gains and losses. The Company defines segment EBITDA as operating income (a GAAP measure) before depreciation and amortization, stock-based compensation, net and long-lived asset impairments. Adjusted EBITDA is defined as EBITDA before acquisition-related expenses, including integration and restructuring charges, and other non-recurring items. The Company's management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company as well as a component of performance-based executive compensation.

For the three and nine months ended March 31, 2019 and 2018, EBITDA and Adjusted EBITDA from continuing operations was calculated as follows:


Three Months Ended March 31,


Nine Months Ended March 31, 


2019


2018


2019


2018


(unaudited and dollars in thousands)









Net (loss) income

$       (65,837)


$        12,686


$      (169,763)


$         79,635

Net loss from discontinued operations

(75,925)


(12,555)


(127,472)


(7,349)

Net income (loss) from continuing operations

$        10,088


$        25,241


$        (42,291)


$         86,984









Provision (benefit) for income taxes

3,114


(1,310)


(1,679)


(11,516)

Interest expense, net

8,677


6,108


24,093


17,535

Depreciation and amortization

13,968


15,074


42,074


45,139

Equity in net loss (income) of equity-method investees

205


101


391


(104)

Stock-based compensation, net

3,937


2,936


5,502


10,258

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

-


-


429


-

Long-lived asset and intangibles impairment

-


4,839


23,709


8,290

Unrealized currency losses/(gains)

1,522


(1,465)


2,551


(5,170)

EBITDA

$        41,511


$        51,524


$         54,779


$       151,416

















Project Terra costs and other

9,259


4,831


29,464


13,750

Chief Executive Officer Succession Plan expense, net

455


-


29,727


-

Accounting review and remediation costs, net of insurance proceeds

-


3,313


4,334


6,406

Warehouse/manufacturing facility start-up costs

3,222


-


9,529


1,155

Plant closure related costs

184


3,246


3,503


3,946

SKU rationalization

505


4,913


2,035


4,913

Litigation and related expenses

371


235


1,062


235

Losses on terminated chilled desserts contract

-


2,939


-


6,553

Co-packer disruption

-


952


-


3,692

Regulated packaging change

-


-


-


1,007

Toys "R" Us bad debt

-


897


-


897

Machine break-down costs

-


317


-


317

Recall and other related costs

-


273


-


273

Adjusted EBITDA

$        55,507


$        73,440


$       134,433


$       194,560

 

THE HAIN CELESTIAL GROUP, INC.

Consolidated Balance Sheets

 (in thousands) 










 March 31, 


 June 30, 




2019


2018

ASSETS

 (unaudited) 



Current assets:





Cash and cash equivalents

$     27,562


$   106,557


Restricted cash

34,452


-


Accounts receivable, net

256,799


252,708


Inventories

395,246


391,525


Prepaid expenses and other current assets

54,786


59,946


Current assets of discontinued operations

136,181


240,851


Total current assets

905,026


1,051,587

Property, plant and equipment, net

331,070


310,172

Goodwill


1,016,863


1,024,136

Trademarks and other intangible assets, net

475,582


510,387

Investments and joint ventures

19,228


20,725

Other assets

30,502


29,667


Total assets 

$2,778,271


$2,946,674

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:





Accounts payable

$   205,014


$   229,993


Accrued expenses and other current liabilities

176,400


116,001


Current portion of long-term debt

22,522


26,605


Current liabilities of discontinued operations

15,195


49,846


Total current liabilities

419,131


422,445

Long-term debt, less current portion

729,201


687,501

Deferred income taxes 

63,619


86,909

Other noncurrent liabilities

16,528


12,770

Total liabilities

1,228,479


1,209,625

Stockholders' equity:





Common stock

1,087


1,084


Additional paid-in capital

1,154,182


1,148,196


Retained earnings

708,568


878,516


Accumulated other comprehensive loss

(204,467)


(184,240)




1,659,370


1,843,556


Treasury (TSRMF) stock

(109,578)


(106,507)


Total stockholders' equity

1,549,792


1,737,049


Total liabilities and stockholders' equity

$2,778,271


$2,946,674

 

THE HAIN CELESTIAL GROUP, INC.

 Consolidated Statements of Operations 

 (unaudited and in thousands, except per share amounts) 










Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018









Net sales

$     599,797


$         632,720


$   1,744,786


$      1,838,171

Cost of sales

474,528


499,707


1,405,650


1,447,820

Gross profit

125,269


133,013


339,136


390,351

Selling, general and administrative expenses

87,739


86,063


255,383


258,586

Amortization of acquired intangibles

3,802


4,713


11,567


13,859

Project Terra costs and other

9,408


4,831


29,613


13,750

Chief Executive Officer Succession Plan expense, net

455


-


30,156


-

Accounting review and remediation costs, net of insurance proceeds

-


3,313


4,334


6,406

Long-lived asset and intangibles impairment

-


4,839


23,709


8,290

Operating income (loss)

23,865


29,254


(15,626)


89,460

Interest and other financing expense, net

9,390


6,782


25,912


19,543

Other expense/(income), net

1,068


(1,560)


2,041


(5,447)

Income (loss) from continuing operations before income taxes and
equity in net loss (income) of equity-method investees

13,407


24,032


(43,579)


75,364

Provision (benefit) for income taxes

3,114


(1,310)


(1,679)


(11,516)

Equity in net loss (income) of equity-method investees

205


101


391


(104)

   Net income (loss) from continuing operations

$       10,088


$           25,241


$      (42,291)


$           86,984

   Net loss from discontinued operations, net of tax

(75,925)


(12,555)


(127,472)


(7,349)

Net (loss) income

$      (65,837)


$           12,686


$    (169,763)


$           79,635









Net (loss) income per common share:








Basic net income (loss) per common share from continuing operations

$           0.10


$              0.24


$          (0.41)


$              0.84

Basic net loss per common share from discontinued operations

(0.73)


(0.12)


(1.23)


(0.07)

   Basic net (loss) income per common share

$          (0.63)


$              0.12


$          (1.63)


$              0.77









Diluted net income (loss) per common share from continuing operations

$           0.10


$              0.24


$          (0.41)


$              0.83

Diluted net loss per common share from discontinued operations

(0.73)


(0.12)


(1.23)


(0.07)

   Diluted net (loss) income per common share

$          (0.63)


$              0.12


$          (1.63)


$              0.76









Shares used in the calculation of net (loss) income per common share:







Basic

104,117


103,918


104,045


103,821

Diluted

104,334


104,503


104,045


104,473

 

THE HAIN CELESTIAL GROUP, INC.

 Consolidated Statements of Cash Flows  

(unaudited and dollars in thousands)










Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018

CASH FLOWS FROM OPERATING ACTIVITIES








Net (loss) income

$          (65,837)


$           12,686


$        (169,763)


$           79,635

Net loss from discontinued operations

(75,925)


(12,555)


(127,472)


(7,349)

Net income (loss) from continuing operations

10,088


25,241


(42,291)


86,984

Adjustments to reconcile net income (loss) from continuing operations to net cash
provided by operating activities from continuing operations:








Depreciation and amortization

13,968


15,074


42,074


45,139

Deferred income taxes

(1,863)


(1,307)


(24,653)


(30,115)

Chief Executive Officer Succession Plan expense, net

455


-


29,727


-

Equity in net loss (income) of equity-method investees

205


101


391


(104)

Stock-based compensation, net

3,937


2,936


5,931


10,258

Long-lived asset and intangibles impairment

-


4,841


23,709


8,290

Other non-cash items, net

2,418


(265)


3,703


(2,025)

Increase (decrease) in cash attributable to changes in operating assets and liabilities:








Accounts receivable

(15,407)


(7,921)


(8,824)


(23,998)

Inventories

10,296


19,776


(7,176)


(43,355)

Other current assets

2,080


(4,264)


315


(8,153)

Other assets and liabilities

632


108


5,248


5,367

Accounts payable and accrued expenses

(13,753)


(15,340)


(16,111)


19,082

Net cash provided by operating activities - continuing operations

13,056


38,980


12,043


67,370

CASH FLOWS FROM INVESTING ACTIVITIES








Purchases of property and equipment

(14,353)


(23,683)


(55,892)


(48,368)

Acquisitions of businesses, net of cash acquired

-


-


-


(13,064)

Other

-


124


3,863


124

Net cash used in investing activities - continuing operations

(14,353)


(23,559)


(52,029)


(61,308)

CASH FLOWS FROM FINANCING ACTIVITIES








Borrowings under bank revolving credit facility

90,000


10,000


240,000


45,000

Repayments under bank revolving credit facility

(49,145)


(320,185)


(186,791)


(355,185)

Borrowings under term loan

-


299,245


-


299,245

Repayments under term loan

(3,750)


-


(11,250)


-

Funding of discontinued operations entities

(33,455)


(4,409)


(37,451)


(17,167)

(Repayments) borrowings of other debt, net

(13,397)


(10,801)


(4,770)


3,111

Shares withheld for payment of employee payroll taxes

(149)


(168)


(3,071)


(6,853)

Net cash used in financing activities - continuing operations

(9,896)


(26,318)


(3,333)


(31,849)

Effect of exchange rate changes on cash

744


2,119


(1,225)


5,884

CASH FLOWS FROM DISCONTINUED OPERATIONS








Cash used in operating activities

(5,489)


(8,819)


(7,339)


(11,783)

Cash used in investing activities

(29,811)


(2,189)


(32,742)


(8,531)

Cash provided by financing activities

33,398


4,356


37,299


17,011

         Net cash flows used in discontinued operations

(1,902)


(6,652)


(2,782)


(3,303)

Net decrease in cash and cash equivalents and restricted cash

(12,351)


(15,430)


(47,326)


(23,206)

Cash and cash equivalents at beginning of period

78,043


139,216


113,018


146,992

Cash and cash equivalents and restricted cash at end of period

$           65,692


$         123,786


$           65,692


$         123,786

Less: cash and cash equivalents of discontinued operations

(3,678)


(6,634)


(3,678)


(6,634)

Cash and cash equivalents and restricted cash of continuing operations at end of period

$           62,014


$         117,152


$           62,014


$         117,152

 

THE HAIN CELESTIAL GROUP, INC.

 Reconciliation of GAAP Results to Non-GAAP Measures 

 (unaudited and in thousands, except per share amounts) 










Three Months Ended March 31,


2019 GAAP

Adjustments

2019 Adjusted


2018 GAAP

Adjustments

2018 Adjusted









Net sales

$        599,797

-

$         599,797


$        632,720

-

$         632,720

Cost of sales

474,528

(4,153)

470,375


499,707

(12,640)

487,067

Gross profit

125,269

4,153

129,422


133,013

12,640

145,653

Operating expenses (a) 

91,541

(1,023)

90,518


95,615

(5,971)

89,644

Project Terra costs and other

9,408

(9,408)

-


4,831

(4,831)

-

Chief Executive Officer Succession Plan expense, net

455

(455)

-


-

-

-

Accounting review and remediation costs, net of insurance proceeds

-

-

-


3,313

(3,313)

-

Operating income

23,865

15,039

38,904


29,254

26,755

56,009

Interest and other expense (income), net (b) 

10,458

(1,522)

8,936


5,222

1,465

6,687

Provision (benefit) for income taxes

3,114

4,963

8,077


(1,310)

11,946

10,636

   Net income from continuing operations

10,088

11,598

21,686


25,241

13,344

38,585

   Net (loss) income from discontinued operations, net of tax

(75,925)

75,925

-


(12,555)

12,555

-

Net (loss) income

(65,837)

87,523

21,686


12,686

25,899

38,585









Diluted net income per common share from continuing operations

0.10

0.11

0.21


0.24

0.13

0.37

Diluted net (loss) income per common share from discontinued operations

(0.73)

0.73

-


(0.12)

0.12

-

   Diluted net (loss) income per common share

(0.63)

0.84

0.21


0.12

0.25

0.37









Detail of Adjustments:










Three Months Ended
March 31, 2019




Three Months Ended
March 31, 2018


Warehouse/manufacturing facility start-up costs


$                      3,222




$                           -


Plant closure related costs


426




3,246


SKU rationalization


505




4,913


Recall and other related costs


-




273


Machine break-down costs


-




317


Losses on terminated chilled desserts contract


-




2,939


Co-packer disruption


-




952


Cost of sales


4,153




12,640










Gross profit


4,153




12,640










Stock-based compensation acceleration


583




-


Long-lived asset impairment charge associated with plant closure 


-




4,839


Litigation and related expenses


371




235


Plant closure related costs


69




-


Toys "R" Us bad debt


-




897


Operating expenses (a) 


1,023




5,971










Project Terra costs and other


9,408




4,831


Project Terra costs and other


9,408




4,831










Chief Executive Officer Succession Plan expense, net


455




-


Chief Executive Officer Succession Plan expense, net


455




-










Accounting review and remediation costs, net of insurance proceeds


-




3,313


Accounting review and remediation costs, net of insurance proceeds


-




3,313










Operating income


15,039




26,755










Unrealized currency losses/(gains)


1,522




(1,465)


Interest and other expense (income), net (b) 


1,522




(1,465)










Income tax related adjustments


(4,963)




(11,946)


Provision (benefit) for income taxes


(4,963)




(11,946)










  Net income from continuing operations


$                    11,598




$                    13,344










(a)Operating expenses include amortization of acquired intangibles, selling, general, and administrative expenses and long-lived asset and intangibles impairment.

(b)Interest and other expense (income), net includes interest and other financing expenses, net and other expense (income), net.

 

THE HAIN CELESTIAL GROUP, INC.

 Reconciliation of GAAP Results to Non-GAAP Measures 

 (unaudited and in thousands, except per share amounts) 










Nine Months Ended March 31,


2019 GAAP

Adjustments

2019 Adjusted


2018 GAAP

Adjustments

2018 Adjusted









Net sales

$             1,744,786

-

$             1,744,786


$             1,838,171

-

$             1,838,171

Cost of sales

1,405,650

(15,309)

1,390,341


1,447,820

(21,856)

1,425,964

Gross profit

339,136

15,309

354,445


390,351

21,856

412,207

Operating expenses (a) 

290,659

(25,857)

264,802


280,735

(10,122)

270,613

Project Terra costs and other

29,613

(29,613)

-


13,750

(13,750)

-

Chief Executive Officer Succession Plan expense, net

30,156

(30,156)

-


-

-

-

Accounting review and remediation costs, net of insurance proceeds

4,334

(4,334)

-


6,406

(6,406)

-

Operating (loss) income

(15,626)

105,269

89,643


89,460

52,134

141,594

Interest and other expense (income), net (b) 

27,953

(2,551)

25,402


14,096

5,170

19,266

(Benefit) provision for income taxes

(1,679)

19,204

17,525


(11,516)

40,389

28,873

   Net (loss) income from continuing operations

(42,291)

88,616

46,325


86,984

6,575

93,559

   Net (loss) income from discontinued operations, net of tax

(127,472)

127,472

-


(7,349)

7,349

-

Net (loss) income

(169,763)

216,088

46,325


79,635

13,924

93,559









Diluted net (loss) income per common share from continuing operations

(0.41)

0.85

0.45


0.83

0.06

0.90

Diluted net (loss) income per common share from discontinued operations

(1.23)

1.23

-


(0.07)

0.07

-

   Diluted net (loss) income per common share

(1.63)

2.08

0.45


0.76

0.13

0.90









Detail of Adjustments:


















Nine Months Ended
March 31, 2019




Nine Months
Ended March 31, 2018


Warehouse/manufacturing facility start-up costs


$                   9,529




$                   1,155


Plant closure related costs


3,745




3,946


SKU rationalization


2,035




4,913


Recall and other related costs


-




273


Machine break-down costs


-




317


Losses on terminated chilled desserts contract


-




6,553


Co-packer disruption


-




3,692


Regulated packaging change


-




1,007


Cost of sales


15,309




21,856










Gross profit


15,309




21,856










Intangibles impairment


17,900




-


Long-lived asset impairment charge associated with plant closure 


5,809




8,290


Litigation and related expenses


1,062




235


Stock-based compensation acceleration


583




700


Plant closure related costs


503




-


Toys "R" Us bad debt


-




897


Operating expenses (a) 


25,857




10,122










Project Terra costs and other


29,613




13,750


Project Terra costs and other


29,613




13,750










Chief Executive Officer Succession Plan expense, net


30,156




-


Chief Executive Officer Succession Plan expense, net


30,156




-










Accounting review and remediation costs, net of insurance proceeds


4,334




6,406


Accounting review and remediation costs, net of insurance proceeds


4,334




6,406










Operating (loss) income


105,269




52,134










Unrealized currency losses/(gains)


2,551




(5,170)


Interest and other expense (income), net (b) 


2,551




(5,170)










Income tax related adjustments


(19,204)




(40,389)


(Benefit) provision for income taxes


(19,204)




(40,389)










   Net (loss) income from continuing operations


$                  88,616




$                   6,575










(a)Operating expenses include amortization of acquired intangibles, selling, general, and administrative expenses and long-lived asset and intangibles impairment.

(b)Interest and other expense (income), net includes interest and other financing expenses, net and other expense (income), net.

 

THE HAIN CELESTIAL GROUP, INC.





Net Sales Growth at Constant Currency





(unaudited and dollars in thousands)


















Hain
Consolidated


United
Kingdom


Rest of World







 Net sales - Three months ended 3/31/19 

$     599,797


$     227,206


$     106,146







 Impact of foreign currency exchange 

21,792


15,378


6,414







 Net sales on a constant currency basis -
   Three months ended 3/31/19 

$     621,589


$     242,584


$     112,560



















Net sales - Three months ended 3/31/18

$     632,720


$     238,321


$     113,347







Net sales growth on a constant currency basis
   

(1.8)%


1.8%


(0.7)%




















Hain
Consolidated


United
Kingdom


Rest of World







 Net sales - Nine months ended 3/31/19 

$  1,744,786


$     671,121


$     304,080







 Impact of foreign currency exchange 

35,586


23,897


11,689







 Net sales on a constant currency basis -
   Nine months ended 3/31/19 

$  1,780,372


$     695,018


$     315,769



















Net sales - Nine months ended 3/31/18

$  1,838,171


$     698,968


$     324,190







Net sales growth on a constant currency basis
   

(3.1)%


(0.6)%


(2.6)%



















Net Sales Growth at Constant Currency and Adjusted for Acquisitions, Divestitures and Other



















Hain
Consolidated


United States


United
Kingdom


Rest of World





 Net sales on a constant currency basis -
   Three months ended 3/31/19 

$     621,589


$     266,445


$     242,584


$     112,560

















Net sales - Three months ended 3/31/18

$     632,720


$     281,052


$     238,321


$     113,347





Castle contract termination

(2,036)


-


(2,036)


-





Project Terra SKU rationalization

(10,976)


(9,477)


-


(1,499)





 Net sales on a constant currency basis adjusted for
   acquisitions, divestitures and other - Three months ended 3/31/18 

$     619,708


$     271,575


$     236,285


$     111,848





 Net sales growth on a constant currency
   basis adjusted for acquisitions, divestitures and other 

0.3%


(1.9)%


2.7%


0.6%


















Tilda


Hain Daniels


Ella's Kitchen


Hain Celestial
Europe


Hain Celestial
Canada


Hain
Ventures

Net sales growth - Three months ended 3/31/19

4.7%


(8.1)%


2.1%


(4.1)%


(5.9)%


(15.5)%

Impact of foreign currency exchange

6.4%


6.3%


6.9%


7.9%


4.7%


– %

Impact of castle contract termination

– %


1.2%


– %


– %


– %


– %

Impact of Project Terra SKU rationalization

– %


– %


– %


– %


3.1%


1.2%

 Net sales growth on a constant currency basis adjusted for
   acquisitions, divestitures and other - Three months ended 3/31/19 

11.1%


(0.6)%


9.0%


3.8%


1.9%


(14.3)%


























Hain
Consolidated


United States


United
Kingdom


Rest of World





 Net sales on a constant currency basis -
   Nine months ended 3/31/19 

$  1,780,372


$     769,585


$     695,018


$     315,769

















Net sales - Nine months ended 3/31/18

$  1,838,171


$     815,013


$     698,968


$     324,190





Acquisitions

4,335


-


4,335


-





Castle contract termination

(12,359)


-


(12,359)


-





Project Terra SKU rationalization

(32,865)


(28,891)


-


(3,974)





 Net sales on a constant currency basis adjusted for
   acquisitions, divestitures and other - Nine months ended 3/31/18 

$  1,797,282


$     786,122


$     690,944


$     320,216





 Net sales growth on a constant currency
   basis adjusted for acquisitions, divestitures and other 

(0.9)%


(2.1)%


0.6%


(1.4)%


















Tilda


Hain Daniels


Ella's Kitchen


Hain Celestial
Europe


Hain Celestial
Canada


Hain
Ventures

Net sales growth - Nine months ended 3/31/19

3.5%


(6.9)%


3.3%


(1.6)%


(7.9)%


(16.7)%

Impact of foreign currency exchange

3.8%


3.3%


3.6%


4.3%


4.1%


– %

Impact of acquisitions

– %


(0.8)%


– %


– %


– %


– %

Impact of castle contract termination

– %


2.3%


– %


– %


– %


– %

Impact of Project Terra SKU rationalization

– %


– %


– %


– %


2.0%


2.6%

 Net sales growth on a constant currency basis adjusted for
   acquisitions, divestitures and other - Nine months ended 3/31/19 

7.3%


(2.1)%


6.9%


2.7%


(1.8)%


(14.1)%

 

THE HAIN CELESTIAL GROUP, INC.

Segment Information

(unaudited and dollars in thousands)








United
States

United
Kingdom

Rest of World

Corporate/
Other

Total

Net Sales






Net sales - Three months ended 12/31/18

$    259,155

$    225,338

$     99,663

$              -

$    584,156







Operating income (loss)






Three months ended 12/31/18






Operating income (loss)

$       7,180

$     14,655

$       8,374

$    (45,596)

$    (15,387)

Non-GAAP adjustments (1)

6,257

3,429

953

34,624

45,263

Adjusted operating income (loss)

$     13,437

$     18,084

$       9,327

$    (10,972)

$     29,876

Operating income (loss) margin

2.8%

6.5%

8.4%


(2.6)%

Adjusted operating income margin

5.2%

8.0%

9.4%


5.1%







(1) See accompanying table of "Reconciliation of GAAP Results to Non-GAAP Measures"



















Consolidated EBITDA and Adjusted EBITDA

 Three Months Ended December 31, 2018







Net loss

$    (66,501)





Net loss from discontinued operations

(37,223)





Net loss from continuing operations

$    (29,278)











Provision for income taxes

4,690





Interest expense, net

8,247





Depreciation and amortization

13,722





Equity in net loss of equity-method investees

11





Stock-based compensation, net

1,774





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

117





Long-lived asset and intangibles impairment

19,473





Unrealized currency losses

439





EBITDA

$     19,195

















Project Terra costs and other

9,872





Chief Executive Officer Succession Plan expense, net

10,031





Accounting review and remediation costs, net of insurance proceeds

920





Warehouse/manufacturing facility start-up costs

1,708





Plant closure related costs

1,490





SKU rationalization

1,530





Litigation and related expenses

122





Adjusted EBITDA

$     44,868





 

THE HAIN CELESTIAL GROUP, INC.

Segment EBITDA and Adjusted EBITDA

(unaudited and dollars in thousands)







United States








Three Months Ended


March 31, 2019


December 31, 2018


March 31, 2018







Operating Income

$          17,099


$                   7,180


$          24,974







Depreciation and amortization

3,274


3,264


3,871

Long-lived asset impairment

-


1,354


2,282

Other

499


508


206

EBITDA

$          20,872


$                 12,306


$          31,333







Project Terra costs and other

1,246


1,952


1,079

Warehouse/manufacturing facility start-up costs

3,101


1,508


-

Plant closure related costs

26


115


2,084

SKU rationalization

303


1,328


3,712

Co-packer disruption

-


-


826

Toys "R" Us bad debt

-


-


897

Adjusted EBITDA

$          25,548


$                 17,209


$          39,931













United Kingdom








Three Months Ended


March 31, 2019


December 31, 2018


March 31, 2018







Operating Income

$          18,147


$                 14,655


$          13,863







Depreciation and amortization

7,258


7,091


7,822

Long-lived asset impairment

-


62


2,560

Other

371


71


(128)

EBITDA

$          25,776


$                 21,879


$          24,117







Project Terra costs and other

896


2,135


(483)

Plant closure related costs

77


1,232


1,162

Litigation and related expenses

-


10


-

Losses on terminated chilled desserts contract

-


-


2,938

Co-packer disruption

-


-


126

Machine break-down costs

-


-


317

Recall and other related costs

-


-


273

Adjusted EBITDA

$          26,749


$                 25,256


$          28,450













Rest of World








Three Months Ended


March 31, 2019


December 31, 2018


March 31, 2018







Operating Income

$          10,868


$                   8,374


$          11,059







Depreciation and amortization

2,953


2,932


2,830

Long-lived asset impairment

-


156


-

Other

166


96


(190)

EBITDA

$          13,987


$                 11,558


$          13,699







Project Terra costs and other

17


279


57

Warehouse/manufacturing facility start-up costs

121


200


-

Plant closure related costs

93


116


-

SKU rationalization

202


202


1,201

Adjusted EBITDA

$          14,420


$                 12,355


$          14,957

 

THE HAIN CELESTIAL GROUP, INC.



 Reconciliation of GAAP Results to Non-GAAP Measures 



 (unaudited and in thousands, except per share amounts) 










Three Months Ended December 31,




2018 GAAP

Adjustments

2018 Adjusted









Net sales

$          584,156

-

$        584,156



Cost of sales

469,883

(4,294)

465,589



Gross profit

114,273

4,294

118,567



Operating expenses (a) 

108,720

(20,029)

88,691



Project Terra costs and other

9,872

(9,872)

-



Chief Executive Officer Succession Plan expense, net

10,148

(10,148)

-



Accounting review and remediation costs, net of insurance proceeds

920

(920)

-



Operating (loss) income

(15,387)

45,263

29,876



Interest and other expense (income), net (b) 

9,190

(439)

8,751



Provision for income taxes

4,690

1,462

6,152



   Net (loss) income from continuing operations

(29,278)

44,240

14,962



   Net (loss) income from discontinued operations, net of tax

(37,223)

37,223

-



Net (loss) income

(66,501)

81,463

14,962









Diluted net (loss) income per common share from continuing operations

(0.28)

0.43

0.14



Diluted net loss per common share from discontinued operations

(0.36)

0.36

-



   Diluted net (loss) income per common share

(0.64)

0.78

0.14









Detail of Adjustments:








Three Months Ended
December 31, 2018




Warehouse/manufacturing facility start-up costs


$                       1,708




Plant closure related costs


1,056




SKU rationalization


1,530




Cost of sales


4,294










Gross profit


4,294










Intangibles impairment


17,900




Long-lived asset impairment charge associated with plant closure 


1,573




Litigation and related expenses


122




Plant closure related costs


434




Operating expenses (a) 


20,029










Project Terra costs and other


9,872




Project Terra costs and other


9,872










Chief Executive Officer Succession Plan expense, net


10,148




Chief Executive Officer Succession Plan expense, net


10,148










Accounting review and remediation costs, net of insurance proceeds


920




Accounting review and remediation costs, net of insurance proceeds


920










Operating (loss) income


45,263










Unrealized currency losses/(gains)


439




Interest and other expense (income), net (b) 


439










Income tax related adjustments


(1,462)




Provision for income taxes


(1,462)










   Net (loss) income from continuing operations


$                     44,240










(a)Operating expenses include amortization of acquired intangibles, selling, general, and administrative expenses and long-lived asset and intangibles impairment.

(b)Interest and other expense, net includes interest and other financing expenses, net and other expense (income), net.

 

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SOURCE The Hain Celestial Group, Inc.