LAKE SUCCESS, N.Y., Feb. 7, 2018 /PRNewswire/ -- 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 second quarter ended December 31, 2017.

"We are pleased with the increase in net sales and profitability across our international business segments for the second quarter along with contributions from various brands in the United States, which reflects our well-diversified geographic portfolio.  Our team remains intently focused on generating the growth we believe we are capable of achieving from our brand building efforts," said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial.  "Throughout our organization, we continue to make progress on our long-term strategic priorities and Project Terra cost savings initiatives.  As we look to reduce complexities across our business and drive greater efficiencies, our team has already identified specific opportunities to simplify our brand portfolio near-term to enhance stockholder value, positioning Hain Celestial for future growth."

FINANCIAL HIGHLIGHTS¹

Second Quarter Results Summary

• Net sales increased 5% to $775.2 million compared to the prior year period, or 2% on a constant currency basis, primarily reflecting mid-single digit net sales increases from our United Kingdom, Canada and Europe and Hain Pure Protein operating segments, partially offset by a low single digit decrease from the United States segment.
• Net sales increased 1%, compared to the prior year period, when adjusted for foreign exchange and acquisitions, divestitures, and certain other items².
• Gross margin of 18.6%; adjusted gross margin of 20.2%.
• Operating income of $36.3 million; adjusted operating income of $62.1 million.
• Net income of $47.1 million, an increase of 73% over the prior year period; adjusted net income of $42.7 million, an increase of 30% over the prior year period.
• EBITDA increased 2% to $61.0 million compared to $59.6 million in the prior year period; adjusted EBITDA increased 19% to $82.7 million compared to $69.5 million in the prior year period.
• EPS of $0.45 compared to $0.26 in the prior year period; adjusted EPS of $0.41 compared to $0.32 in the prior year period.

SECOND QUARTER OPERATING SEGMENT HIGHLIGHTS

Hain Celestial United States
Net sales for Hain Celestial United States decreased 3% over the prior year period to $270.3 million; net sales adjusted for acquisitions, divestitures and certain other items² decreased 5%.  Growth from the Tea, Pure Personal Care and Better-For-You Baby platforms including Celestial Seasonings®, Terra®, Garden of Eatin®, Alba Botanica®, Avalon Organics®, Live Clean® and Earth's Best® brands was offset by declines from Sensible Portions®, Spectrum® and The Greek Gods® brands in Better-For-You Snacking, Better-For-You Pantry and Fresh Living platforms, despite growth from MaraNatha® and Arrowhead Mills® brands.  In addition, the declines were being driven by the strategic decision to no longer support certain lower margin stock keeping units ("SKUs") in order to reduce complexity and increase gross margins as the Company continues its focus on its top 500 SKUs in the United States.  The prior year second quarter results were also negatively impacted by inventory realignment at certain customers.  Segment operating income was $21.9 million, a 45% decrease over the prior year period, and adjusted operating income was $31.0 million, a 24% decrease over the prior year period, driven primarily by higher marketing investments, increased freight and commodity costs and unfavorable mix.  The financial results for the current period as well as the prior year second quarter results exclude the United Kingdom operations of the Ella's Kitchen® brand, thereby eliminating net sales of approximately $22.4 million and $19.5 million, respectively, as these net sales are now reported as part of the United Kingdom reportable segment.

Hain Celestial United Kingdom 
Net sales for Hain Celestial United Kingdom increased 12% to $238.2 million over the prior year period, reflecting 13% growth from Tilda®, 15% growth from Ella's Kitchen® and 12% growth from Hain Daniels.  Hain Daniels net sales, adjusted for both foreign exchange and acquisitions and divestitures², increased 4% over the prior year period, with strong brand performance from Hartley's®, Linda McCartney's® and Cully & Sully® brands.  Net sales for Hain Celestial United Kingdom, on a consolidated basis, was up 5% over the prior year period, adjusted for both foreign exchange and acquisitions and divestitures².  Segment operating income of $13.6 million increased 46% over the prior year period, and adjusted operating income of $16.3 million increased 41% over the prior year period driven by strong contribution from the Hain Daniels brands.  As discussed above, the financial results for the current period as well as the prior year second quarter results includes the United Kingdom operations of the Ella's Kitchen® brand, which was previously reported as part of the United States reportable segment. 

Hain Pure Protein 
Net sales for Hain Pure Protein increased 4% to $159.0 million over the prior year period, reflecting a 15% increase from Plainville Farms®, 17% from FreeBird® and 7% from Empire® Kosher brands, partially offset by a decrease in private label sales.  Segment operating income increased to $5.3 million or 50% from the prior year period of $3.5 million, and adjusted operating income increased 256% to $12.6 million due to improvements in operating expenses across the business.

Rest of World 
Net sales for Rest of World increased 12% to $107.7 million over the prior year period, or by 6% on a constant currency basis.  Net sales for Hain Celestial Canada grew 6%, driven by strong performance from Yves Veggie Cuisine®, Sensible Portions® and Live Clean® brands.  Net sales for Hain Celestial Europe grew 5%, driven by the Joya® and Natumi® brands as well as own-label products.  Segment operating income increased to $10.5 million, a 41% increase over the prior year period, and adjusted operating income increased 55% to $11.4 million over the prior year period.

Explores Divestiture of Hain Pure Protein
The Company announced it is exploring the divestiture of its Hain Pure Protein business.  The Company cannot give any assurances that this will result in any specific action or regarding the outcome or timing of any action.  The Company does not intend to comment further regarding the potential divestiture at this time.

Fiscal Year 2018 Guidance 
The Company reiterated its net sales outlook and updated its Adjusted EPS and Adjusted EBITDA guidance for fiscal year 2018 to take into account continued investment in marketing and brand awareness, primarily in the United States, as well as recent freight and certain commodity price headwinds:

• Net sales of $2.967 billion to $3.036 billion, an increase of approximately 4% to 6% as compared to fiscal year 2017.
• Adjusted EBITDA of $340 million to $355 million, an increase of approximately 24% to 29% as compared to fiscal year 2017.
• Adjusted earnings per diluted share of $1.64 to $1.75, which includes an $.08 to $.09 benefit due to tax reform, an increase of approximately 34% to 43% as compared to fiscal year 2017.

Guidance, where adjusted, is provided on a non-GAAP basis, which excludes acquisition-related expenses, integration and restructuring charges, start-up costs, unrealized net foreign currency gains or losses, accounting review and remediation costs and other non-recurring items that have been or may be incurred during the Company's fiscal year 2018, which the Company will continue to identify as it reports its future financial results. Guidance excludes the impact of any future acquisitions.

The Company has not reconciled its expected adjusted EBITDA to net income or adjusted earnings per diluted share to earnings per share under "Fiscal Year 2018 Guidance" 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.

Effective July 1, 2017, due to changes to the Company's internal management and reporting structure, the United Kingdom operations of the Ella's Kitchen® brand, which was previously included within the United States reportable segment, is included in the United Kingdom reportable segment.  The prior period segment information contained below has been adjusted to reflect the Company's new operating and reporting structure.

Webcasts and Upcoming Presentation 
Hain Celestial will host a conference call and webcast today at 8:30 AM Eastern Time to discuss its results and business outlook.  Additionally, the Company is scheduled to present at the CAGNY 2018 Conference on Tuesday, February 20, 2018 at 5:00 PM Eastern Time. These events will be webcast, and the accompanying presentations will be 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 Celestial Seasonings®, Earth's Best®, Ella's Kitchen®, Terra®, Garden of Eatin'®, Sensible Portions®, Health Valley®, Arrowhead Mills®, MaraNatha®, SunSpire®, DeBoles®, Casbah®, Rudi's Organic Bakery®, Gluten Free Café™, Hain Pure Foods®, Spectrum®, Spectrum Essentials®, Walnut Acres Organic®, Imagine®, Almond Dream®, Rice Dream®, Soy Dream®, WestSoy®, The Greek Gods®, BluePrint®, FreeBird®, Plainville Farms®, Empire®, Kosher Valley®, Yves Veggie Cuisine®, Better Bean™, Europe's Best®, Cully & Sully®, New Covent Garden Soup Co.®, Yorkshire Provender™, Johnson's Juice Co.®, Farmhouse Fare®, Hartley's®, Sun-Pat®, Gale's®, Clarks™, Robertson's®, Frank Cooper's®, Linda McCartney®, Lima®, Danival®, Happy®, Joya® Natumi®, GG UniqueFiber®, Tilda®, JASON®, Avalon Organics®, Alba Botanica®, Live Clean® and Queen Helene®.  Hain Celestial has been providing A Healthier Way of Life™ since 1993.  For more information, visit www.hain.com.

Safe Harbor Statement  
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of 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 facts.  You can also identify forward-looking statements by discussions of the Project Terra strategic initiatives, the Company's potential divestiture of its Hain Pure Protein business, and our future performance and results of operations. Such 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 (i) the Company's guidance for Fiscal Year 2018; (ii) the Company's ability to generate growth; (iii) the potential divestiture of the Hain Pure Protein business, and (iv) the Company's ability to execute Project Terra initiatives for future growth and simplify its brand portfolio to enhance value; and the 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, 2017, 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 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 currency, acquisitions and divestitures and certain other items, as applicable in each case, adjusted operating income, adjusted gross margin, 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 months ended December 31, 2017 and 2016 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 Income presented in accordance with GAAP.

The Company defines Operating Free Cash Flow as cash provided from or used in operating activities (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 months and six months ended December 31, 2017 and 2016, operating free cash flow was calculated as follows:

The Company's operating free cash flow was $28.8 million for the three months ended December 31, 2017, a decrease of $60.4 million from the three months ended December 31, 2016.  The Company's operating free cash flow was negative $5.6 million for the six months ended December 31, 2017, a decrease of $93.0 million from the six months ended December 31, 2016.  The decrease in operating free cash flow was primarily attributable to an increase in inventories and accounts receivable.

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, as applicable in each case, to understand the growth rate of net sales excluding 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 income (a GAAP measure) before income taxes, net interest expense, depreciation and amortization, equity in earnings of equity method investees, stock based compensation expense and unrealized currency gains.  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 months and six months ended December 31, 2017 and 2016, EBITDA and Adjusted EBITDA was calculated as follows:  

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.

­­² Refer to "Net Sales Growth at Constant Currency and Adjusted for Acquisitions, Divestitures and Other" provided herein.

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SOURCE The Hain Celestial Group, Inc.