Hain Celestial Group, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and first half ended December 31, 2023; comparable periods ended December 31, 2022. The filing was signed February 7, 2024. Hain Celestial markets and sells organic and natural food, beverage, and personal-care products through North America and International segments.
Financial results
Amounts below are in millions of dollars, except per-share data and margins.
| Metric | Three months ended Dec. 31, 2023 | Prior year | Six months ended Dec. 31, 2023 | Prior year |
|---|---|---|---|---|
| Net sales | $454.1 | $454.2 | $879.1 | $893.6 |
| Gross profit / margin | $102.2 / 22.5% | $103.9 / 22.9% | $186.2 / 21.2% | $198.2 / 22.2% |
| Operating income (loss) | $(0.8) | $27.4 | $(3.1) | $43.2 |
| Net income (loss) | $(13.5) | $11.0 | $(23.9) | $17.9 |
| Diluted EPS | $(0.15) | $0.12 | $(0.27) | $0.20 |
| Adjusted EBITDA and margin | $47.1 / 10.4% | $49.8 / 11.0% | $71.2 / 8.1% | $85.8 / 9.6% |
Cash flow, liquidity, and debt: First-half operating cash flow was $34.7 million, versus cash used of $2.7 million in the prior year; capital expenditures were $12.7 million, yielding reported free cash flow of $22.0 million versus negative $16.7 million. Cash was $53.7 million at December 31, 2023. Working capital was $332.0 million. Reported total debt was $809.2 million, down from $828.7 million at June 30, 2023. The company had $270.8 million available under its credit agreement, subject to covenant compliance, and reported compliance with its covenants. The weighted average borrowing rate was 7.90% excluding hedge impact and 6.81% including it.
Material changes and segment performance
- Quarterly sales were essentially flat; first-half sales declined 1.6% year over year. Foreign exchange increased reported sales by $10.0 million in the quarter and $20.8 million in the first half. Excluding divestitures and discontinued brands, first-half sales declined 1.3%.
- North America drove the weakness: quarterly sales fell 5.2% and first-half sales fell 7.5%. Management cited organic formula supply challenges, lower snacks sales amid promotional and channel changes, and lower meal-preparation and personal-care sales in the first half. First-half segment Adjusted EBITDA fell 27.9% to $49.9 million.
- International quarterly sales rose 8.5% and first-half sales rose 8.9%, supported by pricing, private-label performance, and favorable currency effects. First-half segment Adjusted EBITDA increased 27.0% to $43.4 million.
- First-half gross margin fell 1.0 percentage point. Management attributed the decline principally to lower North America volume and inflation, partly offset by pricing and productivity. Interest and other financing expense rose 58.9% in the first half to $29.4 million, primarily due to higher borrowing rates.
Outlook, management commentary, and risks
- Hain Reimagined: The multi-year program, launched in fiscal 2024, aims to focus the portfolio, grow selected platforms, build capabilities, and improve operating efficiency. Management expects completion by the end of fiscal 2027, cumulative pretax charges of $115–$125 million (including approximately $25 million of potential inventory reductions tied to brand/category exits), and annualized pretax savings of $130–$150 million. Charges were approximately $31 million in the quarter and $40 million in the first half. These are program targets, not consolidated revenue or earnings guidance.
- Management stated that operating cash flow and available borrowing capacity should be adequate for anticipated expenditures for the foreseeable future. It cautioned that quarterly results and cash flows are affected by seasonality and may not indicate full-year performance.
- Risks cited include inflation, supply-chain and input-cost pressures, consumer and competitive changes, international and foreign-exchange exposure, geopolitical events, and the ability to execute transformation and cost-reduction initiatives. The company said there were no material changes to the risk factors in its latest Form 10-K.
- Contingencies and unusual items: The company recorded a $20.7 million noncash impairment charge on North America production assets after weaker actual and projected performance and cash flows. It also incurred transformation costs and $1.4 million of inventory write-downs related to exited categories in the quarter. Baby-food litigation includes consumer and personal-injury claims concerning alleged heavy metals in Earth’s Best products; the company denies the allegations. No liability was recorded for the disclosed litigation matters at period end, and the company cautioned that potential costs may not be reasonably estimable.
- The SEC informed the company in November 2023 that it was investigating matters primarily concerning an acquisition, a divestiture and related accounting, and trading activity and prior earnings guidance. The company said it is cooperating. Separately, an appeal remains pending in a securities class action.
Important facts for investors to verify
- Whether North America sales and margins stabilize, particularly in baby/kids and snacks, and whether International growth persists.
- Actual Hain Reimagined costs, savings, timing, and any brand/category exits compared with management’s stated targets.
- Debt, interest costs, available credit, and covenant headroom as the amended covenant limits change after the amendment period.
- Developments in the SEC investigation and baby-food and securities litigation; the filing does not quantify potential exposure.
- How much of the improved first-half cash flow reflects sustainable operations versus working-capital timing and management initiatives. Adjusted EBITDA and free cash flow are non-GAAP measures and should be considered alongside GAAP results.