Hain Celestial: Announces Q3/2016 Results

Lake Success / NY. (hc) The Hain Celestial Group Inc., a leading natural and organic products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life, reported results for its third quarter ended March 31, 2016.

Third Quarter Performance Highlights

• Net sales of 750.0 million USD, a 13 percent increase, or 15 percent on a constant currency basis, over prior year period net sales of 662.7 million USD. Net sales were impacted by 13.9 million USD of foreign exchange rate movements versus a year ago.
• Hain Celestial US net sales increased by 2.7 percent on a constant currency basis over the prior year period.
• Earnings per diluted share of 0.47 USD, a 47 percent increase over the prior year period, or on an adjusted basis 0.49 USD, a 9 percent increase over the prior year period. Foreign currencies impacted reported results by 0.01 USD per diluted share.
• Operating income of 69.0 million USD, or 9.2 percent of net sales; adjusted operating income of 80.4 million USD, or 10.7 percent of net sales.
• Strong nine month operating cash flow of 131 million USD, an increase of 87 percent over the prior year period.

«Our net sales reflect the strong performance across our businesses led by Hain Celestial United States, Hain Pure Protein, Hain Celestial United Kingdom and Hain Celestial Europe as well as Hain Celestial Canada», said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial. «The diversification of our product portfolio with leading organic, natural and better-for-you brands around the world, combined with our team’s solid execution of our operational initiatives fueled our financial performance. We are extremely pleased with our US results where we returned to growth in the third quarter and expect these trends to continue».

Third Quarter 2016

The United States segment reported third quarter net sales of 351.9 million USD. In the United Kingdom segment, net sales were 208.4 million USD. Hain Pure Protein reported net sales of 113.6 million USD, and the Rest of World segment reported net sales of 75.9 million USD. The Company had strong branded sales in constant currency led by Imagine®, Plainville Farms®, Terra®, Garden of Eatin’®, Tilda®, Yves®, FreeBird®, The Greek Gods®, Spectrum® and Sensible Portions® brands as well as its personal care brands, Alba Botanica® and Jason®. Net sales of Joya® brand and the Orchard House Foods business, both acquired after the third quarter of fiscal year 2015 also contributed to the net sales growth.

The Company earned net income of 49.0 million USD, a 47 percent increase, and adjusted net income of 50.6 million USD, a 9 percent increase, compared to the prior year period. Earnings per diluted share for the third quarter were 0.47 USD, a 47 percent increase compared to the prior year period. On an adjusted basis earnings per diluted share for the third quarter were 0.49 USD, a 9 percent increase compared to the prior year period.

Project Terra

As previously communicated, the Company commenced a strategic review under Project Terra and has identified approximately 100 million USD in global cost savings, which it expects to achieve during fiscal years 2017 through 2019. These initiatives are expected to include optimizing plants, co-packers and procurement and rationalizing the Company’s product portfolio, and reinvesting these incremental savings into the business to further brand building efforts and household penetration. Effective immediately, James R. Meiers has been appointed to the newly-created position of Chief Operations Officer for Hain Celestial reporting to Irwin Simon, with responsibility for achieving the cost savings across the Company’s worldwide operations.

The strategic review has also resulted in the Company redefining its core platforms for future growth based upon consumer trends to create and inspire A Healthier Way of Life™. The core platforms are now defined by common consumer need, route-to-market or internal advantage and are aligned with the Company’s strategic roadmap to continue its leadership position in the organic and natural, better-for-you industry.

Beginning in fiscal year 2017, the Company plans to establish five strategic platforms within Hain Celestial US with the purpose to drive accelerated net sales and margin growth. The platforms will be:

• Fresh Living: includes poultry, yogurt, plant-based proteins and other refrigerated products;
• Better-for-You Baby: includes infant foods, infant formula, diapers and wipe products that nurture and care for babies and toddlers;
• Better-for-You Snacking: wholesome products for in-between meals;
• Better-for-You Pantry: core consumer staples; and
• Pure Personal Care: personal care products focused on providing consumers with cleaner and gentler ingredients.

In addition, the Company will launch Cultivate Ventures (Cultivate), a venture unit whose purpose is threefold: (i) to strategically invest in the Company’s smaller brands in high potential categories such as SunSpire® chocolates and DeBoles® pasta by giving them a dedicated, creative focus for refresh and relaunch; (ii) to incubate small acquisitions until they reach the scale for the Company’s core platforms; and (iii) to invest in concepts, products and technology, which focus on health and wellness.

The Company has also identified certain brands representing approximately 30 million USD in sales, which no longer fit into its core strategy for future growth, and it intends to sell these as a group.

«We are excited about the launch of our new platforms in fiscal year 2017, which are uniquely aligned with consumer eating habits and usage needs», commented Irwin Simon. «We believe our platforms represent distinct opportunities for incremental growth and margin improvement. We expect this new approach will enable us to define more distinct channel strategies for our branded product offerings, and ensure that we continue to extend our organic and natural industry leadership position».

Fiscal Year 2016 Guidance

The Company updated its fiscal year 2016 guidance expectations:

• Total net sales range of 2.946 billion USD to 2.966 billion USD, an increase of approximately 9 percent to 10 percent as compared to fiscal year 2015, and
• Earnings per diluted share range of 2.00 USD to 2.04 USD, an increase of approximately 6 percent to 9 percent as compared to fiscal year 2015.

Guidance is provided on a non-GAAP basis and excludes acquisition-related expenses, integration and restructuring charges, start-up costs, unrealized net foreign currency gains or losses, reserves for litigation matters and other non-recurring items, including any product recalls or market withdrawals, that have been or may be incurred during the Company’s fiscal year 2016, which the Company will continue to identify as it reports its future financial results. Guidance excludes the impact of any future acquisitions.

Segment Results

The Company’s operations are managed into the following segments: United States, United Kingdom, Hain Pure Protein and Rest of World (comprised of Canada and Continental Europe). The following is a summary of results for the three and nine months ended March 31, 2016 by reportable segment.

(USD in thousands)	United States	United Kingdom	Hain Pure Protein	Rest of World	Corporate / Other	Total
Net Sales
Q1/2016	USD 351’887	USD 208’391	USD 113’643	USD 75’941	USD –	USD 749’862
Q1/2015	USD 343’728	USD 178’068	USD 83’192	USD 57’751	USD –	USD 662’739
Change FY-2016 versus FY-2015	2.4%	17.0%	36.6%	31.5%		13.1%
Operating Income
Three months ended 03/31/16
Operating income	USD 54’546	USD 16’217	USD 4’613	USD 6’198	USD (12’567)	USD 69’007
Non-GAAP Adjustments	USD 2’700	USD –	USD 3’054	USD –	USD 5’701	USD 11’455
Adjusted operating income	USD 57’246	USD 16’217	USD 7’667	USD 6’198	USD (6’866)	USD 80’462
Adjusted operating income margin	16.3%	7.8%	6.7%	8.2%		10.7%
Three months ended 03/31/15
Operating income	USD 55’851	USD 11’760	USD 4’970	USD 4’412	USD (16’799)	USD 60’194
Non-GAAP Adjustments	USD 3’188	USD 3’838	USD –	USD –	USD 10’326	USD 17’352
Adjusted operating income	USD 59’039	USD 15’598	USD 4’970	USD 4’412	USD (6’473)	USD 77’546
Adjusted operating income margin	17.2%	8.8%	6.0%	7.6%		11.7%

.

(USD in thousands)	United States	United Kingdom	Hain Pure Protein	Rest of World	Corporate / Other	Total
Net Sales
Net sales – Nine months ended 03/31/16	USD  1’025’398	USD 567’971	USD 379’336	USD 216’934	USD –	USD  2’189’639
Net sales – Nine months ended 03/31/15	USD  1’034’612	USD 551’144	USD 240’078	USD 164’545	USD –	USD  1’990’379
Non-GAAP Adjustments	USD 15’773	USD –	USD –	USD 928	USD –	USD 16’701
Adjusted net sales – 9M ended 03/31/15	USD  1’050’385	USD 551’144	USD 240’078	USD 165’473	USD –	USD  2’007’080
Change FY-2016 versus FY-2015	-2.4%	3.1%	58.0%	31.1%		9.1%
Operating Income
Nine months ended 03/31/16
Operating income	USD 149’233	USD 45’189	USD 33’009	USD 12’981	USD (26’216)	USD 214’196
Non-GAAP Adjustments	USD 6’597	USD 1’020	USD 3’940	USD 515	USD 10’293	USD 22’365
Adjusted operating income	USD 155’830	USD 46’209	USD 36’949	USD 13’496	USD (15’923)	USD 236’561
Adjusted operating income margin	15.2%	8.1%	9.7%	6.2%		10.8%
Nine months ended 03/31/15
Operating income	USD 141’031	USD 29’618	USD 16’505	USD 10’660	USD (34’781)	USD 163’033
Non-GAAP Adjustments	USD 33’546	USD 12’002	USD 140	USD 2’187	USD 12’822	USD 60’697
Adjusted operating income	USD 174’577	USD 41’620	USD 16’645	USD 12’847	USD (21’959)	USD 223’730
Adjusted operating income margin	16.6%	7.6%	6.9%	7.8%		11.1%