UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2019
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THE HAIN CELESTIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware | 0-22818 | 22-3240619 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1111 Marcus Avenue, Lake Success, NY 11042
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (516) 587-5000
Former name or former address, if changed since last report: N/A
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.01 per share | HAIN | The NASDAQ® Global Select Market | ||
Item 2.02 Results of Operations and Financial Condition
On May 9, 2019, The Hain Celestial Group, Inc. issued a press release announcing financial results for its third quarter ended March 31, 2019.
The information contained in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. The press release is attached hereto as Exhibit 99.1 and is incorporated into this Item 2.02 by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits. The following exhibits are furnished herewith:
Exhibit No. | Description | |
99.1 | Press Release of The Hain Celestial Group, Inc. dated May 9, 2019 | |
EXHIBIT INDEX
Exhibit No. | Description | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 9, 2019
THE HAIN CELESTIAL GROUP, INC. (Registrant) | |
By: | /s/ James Langrock |
Name: | James Langrock |
Title: | Executive Vice President and Chief Financial Officer |
Exhibit 99.1
Hain Celestial Reports Third Quarter Fiscal Year 2019 Financial Results
Transformational Strategic Plan Gaining Traction as Company Reiterates Fiscal Year Guidance
Second Consecutive Quarter of Sequential Margin Improvement
Lake Success, NY, May 9, 2019-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, 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.
“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. |
The Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
• | 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. |
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.
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.
Contact:
James Langrock / Katie Turner
The Hain Celestial Group, Inc.
516-587-5000
The Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
(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"
The Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
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 (Nasdaq: HAIN), 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
The Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
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 Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
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:
The Hain Celestial Group, Inc. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
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. • 1111 Marcus Avenue • Lake Success, NY 11042
516-587-5000 • www.hain.com
THE HAIN CELESTIAL GROUP, INC. | |||||||
Consolidated Balance Sheets | |||||||
(in thousands) | |||||||
March 31, | June 30, | ||||||
2019 | 2018 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
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 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 | |||
9
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 | |||||||||||
10
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 | |||||||
11
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 | ||||||||||
(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.
12
THE HAIN CELESTIAL GROUP, INC. | |||||||
Reconciliation of GAAP Results to Non-GAAP Measures | |||||||
(unaudited and dollars in thousands) | |||||||
Detail of Adjustments: | |||||||
Three Months Ended March 31, | |||||||
2019 | 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.
13
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 | ||||||||||
(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.
14
THE HAIN CELESTIAL GROUP, INC. | |||||||
Reconciliation of GAAP Results to Non-GAAP Measures | |||||||
(unaudited and dollars in thousands) | |||||||
Detail of Adjustments: | |||||||
Nine Months Ended March 31, | |||||||
2019 | 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.
15
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 | )% | |||||
16
THE HAIN CELESTIAL GROUP, INC. | |||||||||||||||||||||
Net Sales Growth at Constant Currency | |||||||||||||||||||||
(unaudited and dollars in thousands) | |||||||||||||||||||||
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 | )% | |||||||||
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THE HAIN CELESTIAL GROUP, INC. | |||||||||||||||||||||
Net Sales Growth at Constant Currency | |||||||||||||||||||||
(unaudited and dollars in thousands) | |||||||||||||||||||||
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 - 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 | )% | |||||||||
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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 expense | 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 | |
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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 and intangibles 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 and intangibles 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 and intangibles 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 | |||||
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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) income per common share from discontinued operations | (0.36 | ) | 0.36 | — | ||||
Diluted net (loss) income per common share | (0.64 | ) | 0.78 | 0.14 | ||||
(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.
21
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 income (loss) 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 (income), net includes interest and other financing expenses, net and other expense (income), net.
22