LAKE SUCCESS, N.Y., June 22, 2017 /PRNewswire/ -- The Hain Celestial Group, Inc. (NASDAQ: HAIN) ("Hain Celestial" or the "Company"), a leading organic and natural products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life™, today announced the completion of its internal accounting review and audit process for its fiscal year ended June 30, 2016.  In connection with the completion of its internal accounting review, the Company has concluded that its previously-issued consolidated financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States. Today, the Company will file its Annual Report on Form 10-K for the fiscal year ended June 30, 2016 (the "Form 10-K"), which includes immaterial revisions to its results for fiscal years 2016, 2015 and 2014, as well as its Quarterly Reports on Form 10-Q for the first three quarters of its fiscal year 2017.  Upon the filing of these outstanding reports, the Company will be current with all of its reporting obligations with the Securities and Exchange Commission.

"The accounting review is complete, and we are pleased to report our financial results, which reflect no material changes to any prior reported periods. We have also implemented greater and more effective internal controls and enhanced oversight for our financial reporting and business units. The changes we are announcing today strengthen Hain Celestial globally on a go-forward basis," said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial. "We appreciate the efforts of our employees and the support of our customers, lenders and stockholders throughout this process."

Irwin Simon continued, "We have made significant progress to build upon our strategic plan, Project Terra, identifying substantial cost-savings, enhancing customer-centric, go-to market initiatives and fueling innovation to improve our performance. Our team is energized and focused on the continued execution of our strategic initiatives as we position our business for long-term growth, success and enhanced shareholder value."

Financial Highlights¹ 
For the first nine months of fiscal year 2017, the Company reported:

• Net sales of $2.1 billion, relatively flat on a year-over-year basis, or a 4% increase on a constant currency basis. Net sales were impacted by $96.2 million from foreign exchange rate movements versus the prior year period.
• Hain Celestial United States net sales of $882.3 million, a decrease of 6% on a year-over-year basis reflecting the impact of inventory realignment at certain customers and product rationalization of $55 million. 
• Hain Celestial United Kingdom net sales of $573.5 million, a 3% increase, or an 18% increase on a constant currency basis, compared to the prior year period.
• Hain Pure Protein net sales of $387.4 million, a 2% increase over the prior year period.
• Hain Celestial Canada net sales of $111.2 million, an 8% increase.
• Hain Celestial Europe net sales of $127.8 million, a 15% increase. 
• Net income of $67.1 million; adjusted net income of $82.7 million.
• EBITDA of $157.2 million compared to $278.5 million in the prior year period; adjusted EBITDA of $189.8 million compared to $287.8 million in the prior year period.
• Operating income of $102.2 million, or 4.8% of net sales; adjusted operating income of $134.8 million, or 6.3% of net sales.
• Earnings per diluted share of $0.64; adjusted earnings per diluted share of $0.79. Foreign currencies impacted reported earnings results by $0.09 per diluted share.
• Operating cash flow of $148.0 million.

For fiscal year 2016, the Company reported:

• Net sales of $2.9 billion, an 11% increase or 13% on a constant currency basis, compared to fiscal 2015 net sales of $2.6 billion. Net sales were impacted by $69.2 million in foreign exchange rate movements versus the prior year.
• Net income of $47.4 million; adjusted net income of $192.9 million.
• EBITDA of $361.5 million compared to $311.9 million in fiscal 2015; adjusted EBITDA of $379.1 million compared to $371.7 million in fiscal 2015.
• Operating income of $150.4 million, adjusted operating income $305.5 million.
• Included in the Company's fiscal 2016 results was a non-cash impairment charge of $124.2 million, which included a goodwill impairment charge of $84.5 million related to the Hain Daniels reporting unit within the United Kingdom segment as well as a trademark impairment charge of $39.7 million, which relates to trademarks in both the United Kingdom and United States segments.
• Earnings per diluted share of $0.46, adjusted earnings per diluted share of $1.85. Foreign currencies impacted reported earnings results by $0.04 per diluted share.
• Operating cash flow of $206.6 million, an increase of 11.4% compared to fiscal 2015.

Update on Strategic Plan
The Company continues to execute on its strategic plan, which expands upon Project Terra announced in fiscal 2016, to drive long-term growth and profitability. These initiatives to drive net sales growth and margin expansion include:

• Investing in top brands and capabilities to grow globally;
• Expanding Project Terra cost-savings programs, which are expected to deliver $350 million in total cost savings through fiscal 2020 including annual productivity;
• Building a global management team with deep sector and operating expertise–including key hires in marketing, sales, and operations–to drive innovation and distribution expansion, as well as
• Pursuing a capital allocation strategy that includes a new $250 million share repurchase authorization.

¹ This press release includes certain non‐GAAP financial measures, referred to as "adjusted", 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.

Fourth Quarter and Full Fiscal 2017 Guidance
The Company provided the following fourth quarter and full fiscal 2017 guidance expectations:

 

For the fourth quarter of fiscal 2017, the Company's projected net sales reflects an estimate of approximately 1% year-over-year decline in U.S. dollars and approximately 4% year-over-year growth on a constant currency basis.

Irwin Simon concluded, "We have continued to make significant progress across key areas of our business, and while our financial results were impacted by a challenging operating environment during the first three quarters of 2017, we believe that we have reached an inflection point in the fourth quarter, with the Company well-positioned for long-term growth and profitability."

Guidance is provided on a non-GAAP or adjusted basis, which excludes acquisition-related expenses, integration and restructuring charges, start-up costs, unrealized net foreign currency gains or losses, reserves for litigation matters and other non-recurring items that have been or may be incurred during the Company's fiscal year 2017, which the Company will continue to identify as it reports its future financial results. Guidance excludes the impact of any future acquisitions.

The Company has not reconciled its expected Adjusted EBITDA to net income or Adjusted EPS to earnings per share under "Fourth Quarter and Full Fiscal 2017 Guidance" and "Fiscal Year 2018 Outlook" because it has not finalized calculations for several factors necessary to provide the reconciliations, including net income, interest expense and income tax expense. In addition, 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.

Initial Fiscal Year 2018 Outlook
The Company also announced the following financial targets:

• Total net sales growth of 4% to 6%
• Adjusted EBITDA of $350 million to $375 million.

Appoints Lead Director
Effective May 23, 2017, the Company's Board of Directors appointed Andrew R. Heyer, a Director since 2012 and Chairperson of the Audit Committee, as Lead Independent Director.

Announces New Chief Financial Officer
In a separate press release today, the Company announced that James Langrock has been appointed as Executive Vice President and Chief Financial Officer, effective June 23, 2017.

Returning Capital to Shareholders
The Company's Board of Directors has authorized the repurchase of up to $250 million of the Company's issued and outstanding common stock.  The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations including the Company's historical strategy of pursuing accretive acquisitions.

Segment Results
For fiscal 2016, the Company's operations were managed into the following reportable segments: United States, United Kingdom, Hain Pure Protein and Rest of World (comprised of Canada and Continental Europe).

For fiscal 2017, changes in the Company's internal management and reporting structure resulted in a change in operating segments. Certain brands previously included within the United States operating segment were moved to the new Cultivate operating segment, which is now included in the Rest of World reportable segment.

 

Accounting Review
As previously announced on August 15, 2016, during the fourth quarter of fiscal year 2016, Hain Celestial identified the practice of granting additional concessions to certain distributors in the United States and commenced an internal accounting review in order to (i) determine whether the revenue associated with those concessions was accounted for in the correct period and (ii) evaluate the Company's internal control over financial reporting. The Audit Committee of its Board of Directors separately conducted an independent review of these matters and retained independent counsel to assist in their review. The comprehensive review concluded there was no evidence of intentional wrongdoing in connection with the preparation of the Company's financial statements. Although the initial focus of the Company's internal accounting review pertained to the evaluation of the timing of the recognition of the revenue associated with the practice of granting additional concessions to certain distributors, the Company subsequently expanded its internal accounting review and performed an analysis of previously-issued financial statements in order to identify and assess other potential errors. Based upon this review, the Company identified certain immaterial errors relating to its previously-issued financial statements which resulted in revisions to its previously-issued financial statements, as disclosed in its Form 10-K. 

The revisions made were immaterial to the Company's consolidated financial statements for the aforementioned periods and had no effect on the validity of the underlying transactions. In addition, the revisions made had no impact on cash flows or cash balances.  Furthermore, the Company's independent auditor has maintained its previously issued opinion with respect to the financial results for the aforementioned periods.

In addition, the Company has enhanced its internal control over financial reporting, as further detailed in the Company's Form 10-K.

Revised Results
The Company identified immaterial accounting revisions for the fiscal years 2014 and 2015 and the first nine months of fiscal 2016. Please refer to accompanying tables "Consolidated Statements of Income – Fiscal 2016" and "Consolidated Statements of Income – Fiscal 2015," as well as the Company's Form 10-K, for a summary of the revisions.

Webcast and Accompanying Presentation
Hain Celestial will host a conference call and webcast today at 8:00 AM Eastern Time to discuss its results and business outlook. The webcast and accompanying presentation are 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 (Nasdaq: HAIN), headquartered in Lake Success, NY, is a leading organic and natural products company with operations in North America, Europe and India. Hain Celestial participates in many natural categories with well-known brands that include Celestial Seasonings^®, Earth's Best^®, Ella's Kitchen^®, Terra^®, Garden of Eatin'^®, Sensible Portions^®, Health Valley^®, Arrowhead Mills^®, MaraNatha^®, SunSpire^®, DeBoles^®, Casbah^®, Rudi's Organic Bakery^®, Hain Pure Foods^®, Spectrum^®, Spectrum Essentials^®, Imagine^®, Almond Dream^®, Rice Dream^®, Soy Dream^®, WestSoy^®, The Greek Gods^®, BluePrint^®, FreeBird^®, Plainville Farms^®, Empire^®, Kosher Valley^®, Yves Veggie Cuisine^®, Europe's Best^®, Cully & Sully^®, New Covent Garden Soup Co.^®, Yorkshire Provender™, Johnson's Juice Co.^®, Farmhouse Fare^®, Hartley's^®, Sun-Pat^®, Gale's^®, Robertson's^®, Frank Cooper's^®, Linda McCartney^®, Lima^®, Danival^®, Joya^®, Natumi^®, GG UniqueFiber^®, Tilda^®, JASON^®, Avalon Organics^®, Alba Botanica^®, Live Clean^® and Queen Helene^®. Hain Celestial has been providing A Healthier Way of Life™ since 1993. For more information, visit www.hain.com.

Safe Harbor Statement
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of 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 facts. You can also identify forward-looking statements by discussions of guidance for the remainder of the fourth quarter of fiscal year 2017 and the fiscal year 2018 outlook, strategy, plans or intentions related to our capital resources, performance and results of operations. Such 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 (i) the Company's guidance for the Fourth Quarter of 2017 and Fiscal Year 2018 Outlook; (ii) the Company's strategic plan and execution against such plan and (iii) the Company's ability to deliver significant shareholder value creation; and the other risks detailed from time-to-time in the Company's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2016, and our quarterly reports.  As a result of the foregoing and other factors, no assurance can be given as to the 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 excluding the impact of foreign currency (defined below), adjusted operating income, adjusted net income, adjusted earnings per diluted share, adjusted EBITDA (defined below) and operating free cash flow (defined below). 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 months and nine months ended March 31, 2017 and 2016 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 Income presented in accordance with GAAP.

The Company defines Operating Free Cash Flow as cash provided from or used in operating activities (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 nine months ended March 31, 2017 and 2016, operating free cash flow was calculated as follows:

 

The Company's operating cash flow was $148.0 million for the nine months ended March 31, 2017, an increase of 12.2% from the nine months ended March 31, 2016.  The Company's operating free cash flow was $103.8 million for the nine months ended March 31, 2017, an increase of 40.7% from the nine months ended March 31, 2016. 

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 year-to-year 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 defines adjusted EBITDA as net income (a GAAP measure) before income taxes, net interest expense, depreciation and amortization, impairment of long lived assets, equity in the earnings of non-consolidated affiliates, stock based compensation, acquisition-related expenses, including integration and restructuring charges, and other non-recurring items. 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. In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation.

For the nine months ended March 31, 2017 and 2016 and the twelve months ended June 30, 2016 and 2015, adjusted EBITDA was calculated as follows:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE The Hain Celestial Group, Inc.

James Langrock/Mary Anthes, The Hain Celestial Group, Inc., 516-587-5060