Hain Celestial(HAIN) - 2024 Q2 - Quarterly Report

Part I - Financial Information Financial Statements Presents the unaudited consolidated financial statements of The Hain Celestial Group, Inc. as of December 31, 2023, covering key financial positions and performance Consolidated Balance Sheets Total assets slightly decreased to $2.23 billion, with stockholders' equity declining to $995.8 million as of December 31, 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Jun 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $599,440 | $591,031 | | Total Assets | $2,233,634 | $2,258,639 | | Total Current Liabilities | $267,480 | $230,867 | | Total Liabilities | $1,237,813 | $1,240,732 | | Total Stockholders' Equity | $995,821 | $1,017,907 | Consolidated Statements of Operations The company reported a net loss of $13.5 million for Q2 FY2024, a significant shift from prior-year net income, primarily due to impairment and higher costs Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2024 (3 mo ended Dec 31, 2023) | Q2 2023 (3 mo ended Dec 31, 2022) | YTD 2024 (6 mo ended Dec 31, 2023) | YTD 2023 (6 mo ended Dec 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $454,100 | $454,208 | $879,129 | $893,559 | | Gross Profit | $102,215 | $103,857 | $186,158 | $198,192 | | Operating (Loss) Income | $(781) | $27,389 | $(3,059) | $43,212 | | Net (Loss) Income | $(13,535) | $10,966 | $(23,911) | $17,889 | | Diluted EPS | $(0.15) | $0.12 | $(0.27) | $0.20 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $34.7 million for the six months ended December 31, 2023, ending with $53.7 million in cash Cash Flow Summary (in thousands) | Activity | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $34,685 | $(2,652) | | Net cash used in investing activities | $(11,403) | $(6,014) | | Net cash used in financing activities | $(24,093) | $(10,892) | | Net increase (decrease) in cash | $308 | $(22,075) | | Cash and cash equivalents at end of period | $53,672 | $43,437 | Notes to Consolidated Financial Statements Detailed notes cover accounting policies, a $20.7 million asset impairment, $40.4 million in 'Hain Reimagined' program costs, debt updates, and ongoing legal proceedings - The company operates under two reportable segments: North America and International[25] - A non-cash impairment charge of $20.7 million was recognized in Q2 2024 related to certain production assets in the North America segment due to declining performance and cash flow projections[41] - The 'Hain Reimagined Program', a multi-year transformation initiative, was launched in Q1 2024. For the six months ended Dec 31, 2023, the company incurred approximately $40.4 million in related expenses[100][103] - The company is involved in multiple legal proceedings, including consumer class actions regarding heavy metals in its Earth's Best baby food, securities class actions, and is cooperating with a new SEC investigation that began in November 2023[107][114][120] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses flat Q2 net sales, a net loss impacted by impairment and restructuring, and improved operating cash flow for the six months ended December 31, 2023 Hain Reimagined Program A multi-year transformation strategy launched in Q1 FY2024, targeting $130-$150 million in annualized pretax savings by fiscal 2027 - The program's four strategic pillars are: Focus, Grow, Build, and Fuel[133] Hain Reimagined Program Financial Targets | Metric | Expected Amount | | :--- | :--- | | Cumulative Pretax Charges | $115M - $125M | | Annualized Pretax Savings | $130M - $150M | - In the first six months of fiscal 2024, the company has already incurred approximately $40 million in expenses related to this program[133] Results of Operations Q2 FY2024 net sales were flat at $454.1 million, with an operating loss of $0.8 million due to asset impairment and increased transformation costs Q2 FY2024 vs Q2 FY2023 Performance (Three Months Ended Dec 31) | Metric | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $454.1M | $454.2M | ($0.1M) | 0.0% | | Gross Profit | $102.2M | $103.9M | ($1.6M) | (1.6)% | | Operating (Loss) Income | ($0.8M) | $27.4M | ($28.2M) | (102.9)% | | Net (Loss) Income | ($13.5M) | $11.0M | ($24.5M) | N/A | Segment Net Sales Performance (Q2 FY2024 vs Q2 FY2023) | Segment | Q2 2024 Net Sales | % Change YoY | | :--- | :--- | :--- | | North America | $267.7M | (5.2)% | | International | $186.4M | +8.5% | - The operating loss in Q2 was primarily caused by a $20.7 million long-lived asset impairment in North America and a $5.9 million year-over-year increase in productivity and transformation costs[140][141] Liquidity and Capital Resources Liquidity is adequate with $53.7 million cash and $270.8 million available credit, and operating cash flow significantly improved to $34.7 million - As of December 31, 2023, the company had $270.8 million available under its Credit Agreement and was in compliance with all covenants[193] Cash Flow Comparison (Six Months Ended Dec 31) | Flow | 2023 | 2022 | | :--- | :--- | :--- | | Cash from Operations | $34.7M | ($2.7M) | | Free Cash Flow | $22.0M | ($16.7M) | - The company repurchased no shares during the six months ended December 31, 2023, with $173.5 million remaining under the current authorization[201] Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposures were reported from the prior fiscal year's Annual Report on Form 10-K - There have been no significant changes in market risk during the six months ended December 31, 2023[212] Controls and Procedures Disclosure controls and procedures were effective as of December 31, 2023, with no material changes in internal control over financial reporting - The CEO and CFO have concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[213] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[215] Part II - Other Information Legal Proceedings Refers to Note 17 for details on ongoing legal proceedings, including baby food litigation and a new SEC investigation - Information regarding legal proceedings is incorporated by reference from Note 17 of the Consolidated Financial Statements[217] Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - There have been no material changes from the risk factors disclosed in the company's most recent Form 10-K[218] Unregistered Sales of Equity Securities and Use of Proceeds No equity securities were repurchased under the company's share repurchase programs during the three months ended December 31, 2023 - No shares were repurchased under the company's share repurchase programs during the three months ended December 31, 2023[219] Exhibits Lists exhibits filed with the Form 10-Q, including new equity award agreements and required CEO and CFO certifications - The exhibits include various corporate governance documents, new forms of equity award agreements, and certifications by the CEO and CFO[223]