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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-Q
___________________________________________
(Mark One) | | | | | |
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2022
or | | | | | |
☐ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from to
Commission File No. 0-22818
___________________________________________
THE HAIN CELESTIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
___________________________________________ | | | | | | | | |
Delaware | | 22-3240619 |
(State or other jurisdiction of incorporation) | | (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, former address and former fiscal year, if changed since last report: N/A
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $.01 per share | HAIN | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | | Accelerated filer | ¨ | | |
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Non-accelerated filer | ¨ | | Smaller reporting company | ☐ | 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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
As of April 29, 2022, there were 89,797,463 shares outstanding of the registrant’s Common Stock, par value $.01 per share.
THE HAIN CELESTIAL GROUP, INC.
Index
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| Part I - Financial Information | Page |
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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| Part II - Other Information | |
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Items 3 and 4 are not applicable | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 5. | | |
Item 6. | | |
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Forward-Looking Statements
This Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Form 10-Q”) contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of The Hain Celestial Group, Inc. (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”) may differ materially from those expressed or implied by such forward-looking statements. The words “believe,” “expect,” “anticipate,” “may,” “should,” “plan,” “intend,” “potential,” “will” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, among other things, our beliefs or expectations relating to our future performance, results of operations and financial condition; our strategic initiatives, business strategy, supply chain, brand portfolio and product performance; the COVID-19 pandemic; the success of our pricing negotiations; current or future macroeconomic trends; and future corporate acquisitions or dispositions.
Risks and uncertainties that may cause actual results to differ materially from forward-looking statements include: challenges and uncertainty resulting from the impact of competition; challenges and uncertainty resulting from the COVID-19 pandemic; our ability to manage our supply chain effectively; supply chain disruptions, cybersecurity risks and other risks arising from the war in Ukraine; disruption of operations at our manufacturing facilities; reliance on independent contract manufacturers; changes to consumer preferences; customer concentration; reliance on independent distributors; the availability of organic ingredients; risks associated with our international sales and operations; risks associated with outsourcing arrangements; our ability to execute our cost reduction initiatives and related strategic initiatives; our ability to identify and complete acquisitions or divestitures and our level of success in integrating acquisitions; our reliance on independent certification for a number of our products; the reputation of our Company and our brands; our ability to use and protect trademarks; general economic conditions; input cost inflation; the United Kingdom’s exit from the European Union; cybersecurity incidents; disruptions to information technology systems; the impact of climate change; liabilities, claims or regulatory change with respect to environmental matters; potential liability if our products cause illness or physical harm; the highly regulated environment in which we operate; pending and future litigation; compliance with data privacy laws; compliance with our credit agreement; the discontinuation of LIBOR; our ability to issue preferred stock; the adequacy of our insurance coverage; impairments in the carrying value of goodwill or other intangible assets; and other risks and matters described in our most recent Annual Report on Form 10-K, this Form 10-Q and our other filings from time to time with the U.S. Securities and Exchange Commission.
We undertake no obligation to update forward-looking statements to reflect actual results or changes in assumptions or circumstances, except as required by applicable law.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 2022 AND JUNE 30, 2021
(In thousands, except par values) | | | | | | | | | | | |
| March 31, | | June 30, |
| 2022 | | 2021 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 57,808 | | | $ | 75,871 | |
Accounts receivable, less allowance for doubtful accounts of $1,137 and $1,314, respectively | 158,734 | | | 174,066 | |
Inventories | 294,428 | | | 285,410 | |
Prepaid expenses and other current assets | 45,308 | | | 39,834 | |
Assets held for sale | 3,313 | | | 1,874 | |
Total current assets | 559,591 | | | 577,055 | |
Property, plant and equipment, net | 312,819 | | | 312,777 | |
Goodwill | 950,820 | | | 871,067 | |
Trademarks and other intangible assets, net | 492,939 | | | 314,895 | |
Investments and joint ventures | 16,056 | | | 16,917 | |
Operating lease right-of-use assets, net | 88,636 | | | 92,010 | |
Other assets | 20,619 | | | 21,187 | |
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Total assets | $ | 2,441,480 | | | $ | 2,205,908 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 176,699 | | | $ | 171,947 | |
Accrued expenses and other current liabilities | 98,181 | | | 117,957 | |
Current portion of long-term debt | 7,774 | | | 530 | |
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Total current liabilities | 282,654 | | | 290,434 | |
Long-term debt, less current portion | 827,771 | | | 230,492 | |
Deferred income taxes | 86,120 | | | 42,639 | |
Operating lease liabilities, noncurrent portion | 81,379 | | | 85,929 | |
Other noncurrent liabilities | 19,512 | | | 33,531 | |
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Total liabilities | 1,297,436 | | | 683,025 | |
Commitments and contingencies (Note 17) | | | |
Stockholders’ equity: | | | |
Preferred stock - $.01 par value, authorized 5,000 shares; issued and outstanding: none | — | | | — | |
Common stock - $.01 par value, authorized 150,000 shares; issued: 111,087 and 109,507 shares, respectively; outstanding: 89,800 and 99,069 shares, respectively | 1,111 | | | 1,096 | |
Additional paid-in capital | 1,199,804 | | | 1,187,530 | |
Retained earnings | 766,056 | | | 691,225 | |
Accumulated other comprehensive loss | (110,350) | | | (73,011) | |
| 1,856,621 | | | 1,806,840 | |
Less: Treasury stock, at cost, 21,287 and 10,438 shares, respectively | (712,577) | | | (283,957) | |
Total stockholders’ equity | 1,144,044 | | | 1,522,883 | |
Total liabilities and stockholders’ equity | $ | 2,441,480 | | | $ | 2,205,908 | |
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See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022 AND 2021
(In thousands, except per share amounts) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net sales | $ | 502,939 | | | $ | 492,604 | | | $ | 1,434,783 | | | $ | 1,519,649 | |
Cost of sales | 387,236 | | | 362,698 | | | 1,096,367 | | | 1,140,614 | |
Gross profit | 115,703 | | | 129,906 | | | 338,416 | | | 379,035 | |
Selling, general and administrative expenses | 75,750 | | | 74,325 | | | 229,875 | | | 238,471 | |
Amortization of acquired intangible assets | 3,110 | | | 2,145 | | | 7,254 | | | 6,771 | |
Productivity and transformation costs | 1,679 | | | 4,451 | | | 8,448 | | | 10,895 | |
Proceeds from insurance claim | — | | | (592) | | | (196) | | | (592) | |
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Long-lived asset and intangibles impairment | — | | | — | | | 303 | | | 57,676 | |
Operating income | 35,164 | | | 49,577 | | | 92,732 | | | 65,814 | |
Interest and other financing expense, net | 3,224 | | | 2,030 | | | 7,672 | | | 6,820 | |
Other (income) expense, net | (712) | | | 1,566 | | | (10,570) | | | (852) | |
Income from continuing operations before income taxes and equity in net loss (income) of equity-method investees | 32,652 | | | 45,981 | | | 95,630 | | | 59,846 | |
Provision for income taxes | 7,738 | | | 11,797 | | | 19,425 | | | 33,197 | |
Equity in net loss (income) of equity-method investees | 383 | | | (70) | | | 1,374 | | | 1,025 | |
Net income from continuing operations | $ | 24,531 | | | $ | 34,254 | | | $ | 74,831 | | | $ | 25,624 | |
Net income from discontinued operations, net of tax | — | | | — | | | — | | | 11,255 | |
Net income | $ | 24,531 | | | $ | 34,254 | | | $ | 74,831 | | | $ | 36,879 | |
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Net income per common share: | | | | | | | |
Basic net income per common share from continuing operations | $ | 0.27 | | | $ | 0.34 | | | $ | 0.80 | | | $ | 0.25 | |
Basic net income per common share from discontinued operations | — | | | — | | | — | | | 0.11 | |
Basic net income per common share | $ | 0.27 | | | $ | 0.34 | | | $ | 0.80 | | | $ | 0.36 | |
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Diluted net income per common share from continuing operations | $ | 0.27 | | | $ | 0.34 | | | $ | 0.79 | | | $ | 0.25 | |
Diluted net income per common share from discontinued operations | — | | | — | | | — | | | 0.11 | |
Diluted net income per common share | $ | 0.27 | | | $ | 0.34 | | | $ | 0.79 | | | $ | 0.36 | |
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Shares used in the calculation of net income per common share: | | | | | | | |
Basic | 91,139 | | | 99,831 | | | 94,099 | | | 100,502 | |
Diluted | 91,310 | | | 101,596 | | | 94,519 | | | 101,385 | |
See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022 AND 2021
(In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2022 | | March 31, 2021 |
| Pre-tax amount | | Tax (expense) benefit | | After-tax amount | | Pre-tax amount | | Tax (expense) benefit | | After-tax amount |
Net income | | | | | $ | 24,531 | | | | | | | $ | 34,254 | |
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Other comprehensive income (loss): | | | | | | | | | | | |
Foreign currency translation adjustments before reclassifications | $ | (18,701) | | | $ | — | | | (18,701) | | | $ | 1,672 | | | $ | — | | | 1,672 | |
Reclassification of currency translation adjustment included in net loss from discontinued operations, net of tax | — | | | — | | | — | | | 14,725 | | | — | | | 14,725 | |
Change in deferred gains (losses) on cash flow hedging instruments | 1,841 | | | (387) | | | 1,454 | | | 322 | | | (68) | | | 254 | |
Change in deferred gains (losses) on net investment hedging instruments | 1,426 | | | (299) | | | 1,127 | | | 3,810 | | | (800) | | | 3,010 | |
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Total other comprehensive (loss) income | $ | (15,434) | | | $ | (686) | | | $ | (16,120) | | | $ | 20,529 | | | $ | (868) | | | $ | 19,661 | |
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Total comprehensive income | | | | | $ | 8,411 | | | | | | | $ | 53,915 | |
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| Nine Months Ended |
| March 31, 2022 | | March 31, 2021 |
| Pre-tax amount | | Tax (expense) benefit | | After-tax amount | | Pre-tax amount | | Tax (expense) benefit | | After-tax amount |
Net income | | | | | $ | 74,831 | | | | | | | $ | 36,879 | |
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Other comprehensive income (loss): | | | | | | | | | | | |
Foreign currency translation adjustments before reclassifications | $ | (43,649) | | | $ | — | | | (43,649) | | | $ | 80,491 | | | $ | — | | | 80,491 | |
Reclassification of currency translation adjustment included in net income | — | | | — | | | — | | | 15,906 | | | — | | | 15,906 | |
Change in deferred gains (losses) on cash flow hedging instruments | 2,567 | | | (540) | | | 2,027 | | | 474 | | | (100) | | | 374 | |
Change in deferred gains (losses) on net investment hedging instruments | 5,423 | | | (1,140) | | | 4,283 | | | (3,875) | | | 814 | | | (3,061) | |
Total other comprehensive (loss) income | $ | (35,659) | | | $ | (1,680) | | | $ | (37,339) | | | $ | 92,996 | | | $ | 714 | | | $ | 93,710 | |
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Total comprehensive income | | | | | $ | 37,492 | | | | | | | $ | 130,589 | |
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See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022
(In thousands, except par values)
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| Common Stock | | Additional | | | | | | | | Accumulated Other | | |
| | | Amount | | Paid-in | | Retained | | Treasury Stock | | Comprehensive | | |
| Shares | | at $.01 | | Capital | | Earnings | | Shares | | Amount | | Loss | | Total |
Balance at June 30, 2021 | 109,507 | | | $ | 1,096 | | | $ | 1,187,530 | | | $ | 691,225 | | | 10,438 | | | $ | (283,957) | | | $ | (73,011) | | | $ | 1,522,883 | |
Net income | | | | | | | 19,411 | | | | | | | | | 19,411 | |
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Other comprehensive loss | | | | | | | | | | | | | (20,963) | | | (20,963) | |
Issuance of common stock pursuant to stock-based compensation plans | 61 | | | — | | | — | | | | | | | | | | | — | |
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Employee shares withheld for taxes | | | | | | | | | 29 | | | (1,175) | | | | | (1,175) | |
Repurchases of common stock | | | | | | | | | 4,525 | | | (175,687) | | | | | (175,687) | |
Stock-based compensation expense | | | | | 4,287 | | | | | | | | | | | 4,287 | |
Balance at September 30, 2021 | 109,568 | | | $ | 1,096 | | | $ | 1,191,817 | | | $ | 710,636 | | | 14,992 | | | $ | (460,819) | | | $ | (93,974) | | | $ | 1,348,756 | |
Net income | | | | | | | 30,889 | | | | | | | | | 30,889 | |
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Other comprehensive loss | | | | | | | | | | | | | (256) | | | (256) | |
Issuance of common stock pursuant to stock-based compensation plans | 1,436 | | | 14 | | | (14) | | | | | | | | | | | — | |
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Employee shares withheld for taxes | | | | | | | | | 654 | | | (29,858) | | | | | (29,858) | |
Repurchases of common stock | | | | | | | | | 2,027 | | | (89,831) | | | | | (89,831) | |
Stock-based compensation expense | | | | | 4,156 | | | | | | | | | | | 4,156 | |
Balance at December 31, 2021 | 111,004 | | | $ | 1,110 | | | $ | 1,195,959 | | | $ | 741,525 | | | 17,673 | | | $ | (580,508) | | | $ | (94,230) | | | $ | 1,263,856 | |
Net income | | | | | | | 24,531 | | | | | | | | | 24,531 | |
Other comprehensive loss | | | | | | | | | | | | | $ | (16,120) | | | (16,120) | |
Issuance of common stock pursuant to stock-based compensation plans | 83 | | | 1 | | | (1) | | | | | | | | | | | — | |
Employee shares withheld for taxes | | | | | | | | | 40 | | | (1,597) | | | | | (1,597) | |
Repurchases of common stock | | | | | | | | | 3,574 | | | (130,472) | | | | | (130,472) | |
Stock-based compensation expense | | | | | 3,846 | | | | | | | | | | | 3,846 | |
Balance at March 31, 2022 | 111,087 | | | $ | 1,111 | | | $ | 1,199,804 | | | $ | 766,056 | | | 21,287 | | | $ | (712,577) | | | $ | (110,350) | | | $ | 1,144,044 | |
See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2021
(In thousands, except par values)
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| Common Stock | | Additional | | | | | | | | Accumulated Other | | |
| | | Amount | | Paid-in | | Retained | | Treasury Stock | | Comprehensive | | |
| Shares | | at $.01 | | Capital | | Earnings | | Shares | | Amount | | Income (Loss) | | Total |
Balance at June 30, 2020 | 109,123 | | | $ | 1,092 | | | $ | 1,171,875 | | | $ | 614,171 | | | 7,238 | | | $ | (172,192) | | | $ | (171,392) | | | $ | 1,443,554 | |
Net income | | | | | | | 485 | | | | | | | | | 485 | |
Cumulative effect of adoption of ASU 2016-02 | | | | | | | (310) | | | | | | | | | (310) | |
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Other comprehensive income | | | | | | | | | | | | | 31,005 | | | 31,005 | |
Issuance of common stock pursuant to stock-based compensation plans | 54 | | | 1 | | | (1) | | | | | | | | | | | — | |
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Employee shares withheld for taxes | | | | | | | | | 20 | | | (468) | | | | | (468) | |
Repurchase of common stock | | | | | | | | | 1,281 | | | (42,052) | | | | | (42,052) | |
Stock-based compensation expense | | | | | 4,367 | | | | | | | | | | | 4,367 | |
Balance at September 30, 2020 | 109,177 | | | $ | 1,093 | | | $ | 1,176,241 | | | $ | 614,346 | | | 8,539 | | | $ | (214,712) | | | $ | (140,387) | | | $ | 1,436,581 | |
Net income | | | | | | | 2,140 | | | | | | | | | 2,140 | |
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Other comprehensive income | | | | | | | | | | | | | 43,044 | | | 43,044 | |
Issuance of common stock pursuant to stock-based compensation plans | 162 | | | 2 | | | (2) | | | | | | | | | | | — | |
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Employee shares withheld for taxes | | | | | | | | | 38 | | | (1,255) | | | | | (1,255) | |
Repurchase of common stock | | | | | | | | | 923 | | | (29,684) | | | | | (29,684) | |
Stock-based compensation expense | | | | | 3,823 | | | | | | | | | | | 3,823 | |
Balance at December 31, 2020 | 109,339 | | | $ | 1,095 | | | $ | 1,180,062 | | | $ | 616,486 | | | 9,500 | | | $ | (245,651) | | | $ | (97,343) | | | $ | 1,454,649 | |
Net income | | | | | | | 34,254 | | | | | | | | | 34,254 | |
Other comprehensive income | | | | | | | | | | | | | 19,661 | | | 19,661 | |
Issuance of common stock pursuant to stock-based compensation plans | 127 | | | 1 | | | (1) | | | | | | | | | | | — | |
Employee shares withheld for taxes | | | | | | | | | 49 | | | (2,018) | | | | | (2,018) | |
Repurchase of common stock | | | | | | | | | 204 | | | (8,562) | | | | | (8,562) | |
Stock-based compensation expense | | | | | 3,698 | | | | | | | | | | | 3,698 | |
Balance at March 31, 2021 | 109,466 | | | $ | 1,096 | | | $ | 1,183,759 | | | $ | 650,740 | | | 9,753 | | | $ | (256,231) | | | $ | (77,682) | | | $ | 1,501,682 | |
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See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 2022 AND 2021
(In thousands) | | | | | | | | | | | |
| Nine Months Ended March 31, |
| 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income | $ | 74,831 | | | $ | 36,879 | |
Net income from discontinued operations | — | | | 11,255 | |
Net income from continuing operations | 74,831 | | | 25,624 | |
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations: | | | |
Depreciation and amortization | 34,396 | | | 37,768 | |
Deferred income taxes | 7,374 | | | 3,216 | |
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Equity in net loss of equity-method investees | 1,374 | | | 1,025 | |
Stock-based compensation, net | 12,289 | | | 11,888 | |
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Long-lived asset and intangibles impairment | 303 | | | 57,676 | |
Gain on sale of assets | (8,869) | | | — | |
Loss on sale of businesses | — | | | 1,217 | |
Other non-cash items, net | (2,155) | | | (723) | |
Increase (decrease) in cash attributable to changes in operating assets and liabilities: | | | |
Accounts receivable | 14,150 | | | (20,721) | |
Inventories | (4,371) | | | (60,304) | |
Other current assets | (10,996) | | | 56,487 | |
Other assets and liabilities | (2,705) | | | (952) | |
Accounts payable and accrued expenses | (16,435) | | | 34,316 | |
Net cash provided by operating activities from continuing operations | 99,186 | | | 146,517 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Purchases of property, plant and equipment | (33,939) | | | (53,062) | |
Acquisitions of businesses, net of cash acquired | (260,474) | | | — | |
Investment in joint venture | (614) | | | (694) | |
Proceeds from sale of assets | 10,756 | | | — | |
Proceeds from sale of businesses, net and other | — | | | 27,788 | |
Net cash used in investing activities from continuing operations | (284,271) | | | (25,968) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Borrowings under bank revolving credit facility | 678,000 | | | 206,000 | |
Repayments under bank revolving credit facility | (370,000) | | | (231,000) | |
Borrowings under term loan | 300,000 | | | — | |
Repayments under term loan | (1,875) | | | — | |
| | | |
Payments of other debt, net | (3,232) | | | (1,917) | |
Share repurchases | (397,405) | | | (80,298) | |
Employee shares withheld for taxes | (32,630) | | | (3,741) | |
Net cash provided by (used in) financing activities from continuing operations | 172,858 | | | (110,956) | |
Effect of exchange rate changes on cash from continuing operations | (5,836) | | | 5,650 | |
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Net (decrease) increase in cash and cash equivalents | (18,063) | | | 15,243 | |
Cash and cash equivalents at beginning of period | 75,871 | | | 37,771 | |
Cash and cash equivalents at end of period | $ | 57,808 | | | $ | 53,014 | |
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See notes to consolidated financial statements.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands, except par values and per share data)
1. BUSINESS
The Hain Celestial Group, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “Hain Celestial,” “we,” “us” or “our”), was founded in 1993 and is headquartered in Lake Success, New York. The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet. The Company continues to be a leading marketer, manufacturer and seller of organic and natural, “better-for-you” products by anticipating and exceeding consumer expectations in providing quality, innovation, value and convenience. The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes. Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores in over 80 countries worldwide. The Company operates under two reportable segments: North America and International.
Acquisition
On December 28, 2021, the Company acquired all outstanding stock of Proven Brands, Inc. (and its subsidiary That's How We Roll LLC) and KTB Foods Inc., collectively doing business as "That's How We Roll" ("THWR"), the producer and marketer of ParmCrisps® and Thinsters®. See Note 4, Acquisitions and Dispositions, for details.
Discontinued Operations
The financial statements separately report discontinued operations and the results of continuing operations (see Note 4, Acquisitions and Dispositions). All footnotes exclude discontinued operations unless otherwise noted.
2. BASIS OF PRESENTATION
The Company’s unaudited consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated companies in which the Company exerts significant influence, but which it does not control, are accounted for under the equity method of accounting. As such, consolidated net income includes the Company's equity in the current earnings or losses of such companies.
The Company's unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (the “Form 10-K”). The amounts as of and for the periods ended June 30, 2021 are derived from the Company’s audited annual financial statements. The unaudited consolidated financial statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair presentation for interim periods. Operating results for the nine months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2022. Please refer to the Notes to the Consolidated Financial Statements as of June 30, 2021 and for the fiscal year then ended included in the Form 10-K for information not included in these condensed notes.
All amounts in the unaudited consolidated financial statements, notes and tables have been rounded to the nearest thousand, except par values and per share amounts, unless otherwise indicated.
Significant Accounting Policies
The Company's significant accounting policies are described in Note 2, Summary of Significant Accounting Policies and Practices, in the Notes to the Consolidated Financial Statements in the Form 10-K. Included herein are certain updates to those policies.
Transfer of Financial Assets
The Company has non-recourse accounts receivable financing arrangements in which eligible receivables are sold to third-party buyers in exchange for cash. The Company transferred accounts receivable in their entirety to the buyers and satisfied all of the conditions to report the transfer of financial assets in their entirety as a sale. The principal amount of receivables sold under these arrangements was $112,607 and $59,871 during the nine months ended March 31, 2022 and 2021, respectively. The incremental cost
of accounts receivable financing arrangements is included in Other (income) expense, net in the Company’s Consolidated Statements of Operations. The proceeds from the sale of receivables are included in cash provided by operating activities in the accompanying Consolidated Statements of Cash Flows.
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination on the acquisition date in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. The Company adopted ASU 2021-08 during the second quarter of fiscal year 2022, and the adoption did not have an impact on the Company's consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. ASU 2020-04 is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies certain provisions in Topic 848, if elected by an entity, to apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. During the first quarter of fiscal year 2022, the Company adopted the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income per share:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net income from continuing operations | $ | 24,531 | | | $ | 34,254 | | | $ | 74,831 | | | $ | 25,624 | |
Net income from discontinued operations | — | | | — | | | — | | | 11,255 | |
Net income | $ | 24,531 | | | $ | 34,254 | | | $ | 74,831 | | | $ | 36,879 | |
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Denominator: | | | | | | | |
Basic weighted average shares outstanding | 91,139 | | | 99,831 | | | 94,099 | | | 100,502 | |
Effect of dilutive stock options, unvested restricted stock and unvested restricted share units | 171 | | | 1,765 | | | 420 | | | 883 | |
Diluted weighted average shares outstanding | 91,310 | | | 101,596 | | | 94,519 | | | 101,385 | |
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Basic net income per common share: | | | | | | | |
Continuing operations | $ | 0.27 | | | $ | 0.34 | | | $ | 0.80 | | | $ | 0.25 | |
Discontinued operations | — | | | — | | | — | | | 0.11 | |
Basic net income per common share | $ | 0.27 | | | $ | 0.34 | | | $ | 0.80 | | | $ | 0.36 | |
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Diluted net income per common share: | | | | | | | |
Continuing operations | $ | 0.27 | | | $ | 0.34 | | | $ | 0.79 | | | $ | 0.25 | |
Discontinued operations | — | | | — | | | — | | | 0.11 | |
Diluted net income per common share | $ | 0.27 | | | $ | 0.34 | | | |