Correction of Immaterial Errors To Prior Period Financial Statements

3 Months Ended

Sep. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Correction of Immaterial Errors To Prior Period Financial Statements

CORRECTION OF IMMATERIAL ERRORS TO PRIOR PERIOD FINANCIAL STATEMENTS

Accounting Review

During the fourth quarter of fiscal 2016, the Company identified the practice of granting additional concessions to certain distributors in the United States and commenced an internal accounting review in order to (i) determine whether the revenue associated with those concessions was accounted for in the correct period and (ii) evaluate the Company’s internal control over financial reporting. The Audit Committee of the Company’s Board of Directors separately conducted an independent review of these matters and retained independent counsel to assist in their review. On November 16, 2016, the Company announced that the independent review of the Audit Committee was completed and that the review found no evidence of intentional wrongdoing in connection with the preparation of the Company’s financial statements. The aforementioned reviews identified material weaknesses in our internal control over financial reporting. Refer to “Part I, Item 4. Controls and Procedures” of the Form 10-Q for a description of these material weaknesses and management’s plan and implementation of remediation efforts to address these material weaknesses.

Although the initial focus of the Company’s internal accounting review discussed above pertained to the evaluation of the timing of the recognition of the revenue associated with the practice of granting additional concessions to certain distributors, the Company subsequently expanded its internal accounting review and performed an analysis of previously-issued financial statements in order to identify and assess other potential errors. Based upon this review, the Company identified certain immaterial errors relating to its previously-issued financial statements which resulted in revisions to our previously-issued financial statements. Accordingly, prior period amounts presented in the consolidated financial statements and the related notes have been revised (referred to as the “Revision”). All costs incurred in connection with the internal accounting review, the Audit Committee’s independent review and related matters are included in “Accounting review costs,” in the Company’s Consolidated Statements of Income.

Based on an analysis of Accounting Standards Codification (“ASC”) 250 - “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 - “Materiality” (“SAB 99”) and Staff Accounting Bulletin 108 - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), the Company determined that these errors were immaterial to the previously-issued financial statements; however, a cumulative correction of these errors would have had a material impact on the financial results for the three and twelve months ended June 30, 2016. Accordingly, we have revised our presentation of certain amounts in the consolidated financial statements for the three months ended September 30, 2015 to reflect such corrections as if they had been recorded in the appropriate fiscal period.

We refer the reader to the Company’s Form 10-K for the fiscal year ended June 30, 2016 for a detailed explanation of the immaterial errors.

Revised Financial Statements

The impact of the Revision on the Company’s previously-issued financial statements is illustrated in the tables below. Amounts throughout the consolidated financial statements and notes thereto have been adjusted to incorporate the revised amounts, where applicable.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended September 30, 2015
	As Reported			Adjustment			As Revised
Net sales	$	687,188		$	(19,461	)	$	667,727
Cost of sales	535,141			(5,295		)	529,846
Gross profit	152,047			(14,166		)	137,881
Selling, general and administrative expenses	86,254			(10,704		)	75,550
Amortization of acquired intangibles	4,672			(33		)	4,639
Acquisition related expenses, restructuring and integration charges and other	3,653			(233		)	3,420
Operating income	57,468			(3,196		)	54,272
Interest and other financing expense, net	6,467			—			6,467
Other (income)/expense, net	5,401			—			5,401
Income before income taxes and equity in earnings of equity-   method investees	45,600			(3,196		)	42,404
Provision for income taxes	14,382			(1,052		)	13,330
Equity in net income of equity-method investees	(84		)	—			(84		)
Net income	$	31,302		$	(2,144	)	$	29,158
Net income per common share:
Basic	$	0.30		$	(0.02	)	$	0.28
Diluted	$	0.30		$	(0.02	)	$	0.28
Weighted average common shares outstanding:
Basic	102,807			102,807			102,807
Diluted	104,258			104,258			104,258

* Net income per common share may not add in certain periods due to rounding

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended September 30, 2015
	As Reported			Adjustment			As Revised
Net income	$	31,302		$	(2,144	)	$	29,158
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(40,293	)	$	361		$	(39,932	)
Change in deferred gains on cash flow hedging instruments	1,341			—			1,341
Change in unrealized loss on available for sale investment	(156		)	—			(156		)
Total other comprehensive loss	$	(39,108	)	$	361		$	(38,747	)
Total comprehensive (loss)	$	(7,806	)	$	(1,783	)	$	(9,589	)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended September 30, 2015
	As Reported			Adjustment			As Revised
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	31,302		$	(2,144	)	$	29,158
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,556			187			15,743
Deferred income taxes	(1,681		)	(155		)	(1,836		)
Equity in net income of equity-method investees	(84		)	—			(84		)
Stock-based compensation	3,206			—			3,206
Other non-cash items, including unrealized currency (gains)/loss, net	4,625			—			4,625
Increase (decrease) in cash attributable to changes in operating assets and   liabilities, net of amounts applicable to acquisitions:
Accounts receivable	(7,167		)	3,789			(3,378		)
Inventories	(43,656		)	(1,399		)	(45,055		)
Other current assets	6,416			12,308			18,724
Other assets and liabilities	1,801			—			1,801
Accounts payable and accrued expenses	(4,533		)	(12,586		)	(17,119		)
Net cash provided by operating activities	$	5,785		$	—		$	5,785

There were no adjustments to cash balances and to cash flows from investing and financing activities for the three months ended September 30, 2015 as a result of the Revision.

SEGMENT NET SALES AND OPERATING INCOME (UNAUDITED)

	Three months ended September 30, 2015
	As Reported (1)			Adjustment			As Revised
Net Sales:
United States	$	314,586		$	(11,955	)	$	302,631
United Kingdom	165,354			(4,499		)	$	160,855
Hain Pure Protein	123,988			(933		)	$	123,055
Rest of World	83,260			(2,074		)	$	81,186
	$	687,188		$	(19,461	)	$	667,727
Operating Income:
United States	$	43,888		$	(2,381	)	$	41,507
United Kingdom	10,204			(362		)	9,842
Hain Pure Protein	10,271			218			10,489
Rest of World	2,673			(250		)	2,423
	$	67,036		$	(2,775	)	$	64,261
Corporate and Other	(9,568		)	(421		)	(9,989		)
	$	57,468		$	(3,196	)	$	54,272

⁽¹⁾ The information previously reported for the three months ended September 30, 2015 has been adjusted to reflect the Company’s

new operating and reporting structure effective in the first quarter of fiscal 2017. See Note 1, Business, and Note 16, Segment

Information, for additional details surrounding the formation of Cultivate.