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."
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 Kingdomreportable 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.
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.