Hain Celestial(US:HAIN)2022-05-05 20:28Part I - Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes Consolidated Financial Statements Balance Sheet (in thousands USD) | Financial Metric | March 31, 2022 (in thousands USD) | June 30, 2021 (in thousands USD) | | :--- | :--- | :--- | | Balance Sheet | | | | Total Current Assets | $559,591 | $577,055 | | Total Assets | $2,441,480 | $2,205,908 | | Total Current Liabilities | $282,654 | $290,434 | | Total Liabilities | $1,297,436 | $683,025 | | Total Stockholders' Equity | $1,144,044 | $1,522,883 | Income Statement (in thousands USD) | Financial Metric | Three Months Ended Mar 31, 2022 (in thousands USD) | Nine Months Ended Mar 31, 2022 (in thousands USD) | | :--- | :--- | :--- | | Income Statement | | | | Net Sales | $502,939 | $1,434,783 | | Gross Profit | $115,703 | $338,416 | | Operating Income | $35,164 | $92,732 | | Net Income | $24,531 | $74,831 | | Diluted EPS | $0.27 | $0.79 | Cash Flow (in thousands USD) | Cash Flow Activity | Nine Months Ended Mar 31, 2022 (in thousands USD) | Nine Months Ended Mar 31, 2021 (in thousands USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $99,186 | $146,517 | | Net cash used in investing activities | ($284,271) | ($25,968) | | Net cash provided by (used in) financing activities | $172,858 | ($110,956) | | Net (decrease) increase in cash | ($18,063) | $15,243 | Notes to Consolidated Financial Statements - On December 28, 2021, the Company acquired That's How We Roll (THWR) for cash consideration of $260.9 million, strengthening its position in the snacking category3144 - The company completed several divestitures, including its North America non-dairy beverages business for $31.3 million on April 15, 2021, and its Fruit business on January 13, 20215051 - On December 22, 2021, the Company refinanced its credit facility with a new $1.1 billion senior secured financing agreement, comprising a $300 million term loan and an $800 million revolving credit facility, both maturing in December 202669 - The company is involved in significant litigation, including securities class actions and numerous lawsuits alleging unsafe levels of naturally occurring heavy metals in its Earth's Best baby food products123130 Segment Performance (in thousands USD) | Segment | Net Sales (3mo ended 3/31/22, in thousands USD) | Operating Income (3mo ended 3/31/22, in thousands USD) | | :--- | :--- | :--- | | North America | $325,742 | $28,526 | | International | $177,197 | $18,303 | | Segment | Net Sales (9mo ended 3/31/22, in thousands USD) | Operating Income (9mo ended 3/31/22, in thousands USD) | | :--- | :--- | :--- | | North America | $866,281 | $72,530 | | International | $568,502 | $69,740 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, strategic initiatives, and market conditions, including the 'Hain 3.0' strategy and THWR acquisition Overview and Strategy - The company is executing its 'Hain 3.0' strategy to build a global healthy food and beverage company by re-segmenting its brand portfolio into 'Turbocharge', 'Targeted Investment', and 'Fuel' categories146147 - Operational challenges from the COVID-19 pandemic, including supply chain issues and labor shortages, have been exacerbated by the Russia-Ukraine war, increasing fuel, raw material, and labor costs150 - The acquisition of THWR (ParmCrisps® and Thinsters®) on December 28, 2021, is a key step in strengthening the company's snacking category position and advancing its high-growth strategy151 Results of Operations Quarterly Financial Performance (Millions USD) | Metric | Q3 FY22 (Millions USD) | Q3 FY21 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $502.9M | $492.6M | +2.1% | | Gross Profit | $115.7M | $129.9M | -10.9% | | Operating Income | $35.2M | $49.6M | -29.1% | | Net Income | $24.5M | $34.3M | -28.4% | | Diluted EPS | $0.27 | $0.34 | -20.6% | - For Q3 FY22, North America net sales grew 13.3% to $325.7 million, driven by the THWR acquisition and stronger sales in snacks, baby, and personal care, though operating income fell 27.8% to $28.5 million due to inflation and supply chain costs168169 - For Q3 FY22, International net sales decreased 13.6% to $177.2 million, impacted by foreign exchange, divestitures, and lower sales in Europe and the UK, with operating income declining 31.6% to $18.3 million due to lower sales and higher costs168170 Nine-Month Financial Performance (Millions USD) | Metric | 9 Months FY22 (Millions USD) | 9 Months FY21 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,434.8M | $1,519.6M | -5.6% | | Gross Profit | $338.4M | $379.0M | -10.7% | | Operating Income | $92.7M | $65.8M | +42.1% | | Net Income | $74.8M | $36.9M | +102.9% | | Diluted EPS | $0.79 | $0.36 | +119.4% | - The significant increase in operating income for the nine-month period was primarily due to a $57.7 million impairment charge related to the UK fruit business in the prior year period, which was not repeated180181 Liquidity and Capital Resources - The company refinanced its debt on December 22, 2021, with a new $1.1 billion Credit Agreement, including a $300 million term loan and an $800 million revolver, maturing in December 2026199 Key Financial Position Metrics (Millions USD) | Metric | March 31, 2022 (Millions USD) | June 30, 2021 (Millions USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $57.8M | $75.9M | | Total Debt | $835.5M | $231.0M | | Working Capital | $273.6M | $284.7M | - Cash from operations for the nine months ended March 31, 2022, was $99.2 million, a decrease from $146.5 million in the prior year, primarily due to lower net income (adjusted for non-cash items) and a prior-year CARES Act refund203 - During the nine months ended March 31, 2022, the company repurchased 10.1 million shares for $395.8 million, with $186.6 million remaining under the share repurchase authorization as of March 31, 2022207 Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposures from those disclosed in the prior fiscal year's Annual Report on Form 10-K - There have been no significant changes in market risk from those addressed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021226 Item 4. Controls and Procedures CEO and CFO concluded disclosure controls were effective, excluding the recently acquired THWR business from evaluation - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2022227 - The assessment of internal controls over financial reporting for the recently acquired THWR business was omitted from the evaluation, as permitted by SEC guidance, as THWR was acquired on December 28, 2021227229 Part II - Other Information Item 1. Legal Proceedings Details ongoing legal matters, including securities class actions and lawsuits regarding heavy metals in baby food products - The company is subject to ongoing legal proceedings, including securities class actions and stockholder derivative complaints filed in federal court123124 - Since February 2021, the company has faced numerous consumer class actions (29 active lawsuits) and personal injury lawsuits alleging its Earth's Best baby food contains unsafe levels of heavy metals, which the company denies130133 Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the prior fiscal year - There have been no material changes from the risk factors discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021233 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchases, with 3.6 million shares bought for $130.4 million in Q1 2022 Common Stock Repurchases | Period (2022) | Total Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | January | 2,332,093 | $37.80 | | February | 425,086 | $36.46 | | March | 857,340 | $33.07 | | Total Q1 2022 | 3,614,519 | $36.52 | - As of March 31, 2022, the Company had $186.6 million of remaining authorization under its share repurchase program, following authorizations in June 2017, August 2021, and January 2022235 Item 5. Other Information Announced leadership restructuring on May 3, 2022, eliminating the Chief Commercial Officer position and resulting in a departure - On May 3, 2022, the Board of Directors eliminated the position of Executive Vice President and Chief Commercial Officer236 - Christopher J. Boever, the Chief Commercial Officer, left the company effective May 6, 2022, as a result of the restructuring236 Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including corporate documents, executive letters, and SEC-required certifications