Correction of Immaterial Errors To Prior Period Financial Statements

6 Months Ended

Dec. 31, 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 and six months ended December 31, 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 December 31, 2015
	As Reported		Adjustment			As Revised
Net sales	$	752,589	$	(9,152	)	$	743,437
Cost of sales	575,026		2,150			577,176
Gross profit	177,563		(11,302		)	166,261
Selling, general and administrative expenses	82,607		(13,626		)	68,981
Amortization of acquired intangibles	4,736		(32		)	4,704
Acquisition related expenses, restructuring and integration charges   and other	2,498		—			2,498
Operating income	87,722		2,356			90,078
Interest and other financing expense, net	6,300		—			6,300
Other (income)/expense, net	3,065		—			3,065
Income before income taxes and equity in earnings of equity-   method investees	78,357		2,356			80,713
Provision for income taxes	21,379		1,223			22,602
Equity in net loss of equity-method investees	31		—			31
Net income	$	56,947	$	1,133		$	58,080
Net income per common share:
Basic	$	0.55	$	0.01		$	0.56
Diluted	$	0.55	$	0.01		$	0.56
Weighted average common shares outstanding:
Basic	103,017		103,017			103,017
Diluted	104,161		104,161			104,161

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

	Six Months Ended December 31, 2015
	As Reported			Adjustment			As Revised
Net sales	$	1,439,777		$	(28,613	)	$	1,411,164
Cost of sales	1,110,167			(3,145		)	1,107,022
Gross profit	329,610			(25,468		)	304,142
Selling, general and administrative expenses	168,861			(24,330		)	144,531
Amortization/impairment of acquired intangibles	9,408			(65		)	9,343
Acquisition related expenses, restructuring and integration charges   and other	6,151			(233		)	5,918
Operating income	145,190			(840		)	144,350
Interest and other financing expense, net	12,767			—			12,767
Other (income)/expense, net	8,466			—			8,466
Income before income taxes and equity in earnings of equity-   method investees	123,957			(840		)	123,117
Provision for income taxes	35,761			171			35,932
Equity in net income of equity-method investees	(53		)	—			(53		)
Net income	$	88,249		$	(1,011	)	$	87,238
Net income per common share:
Basic	$	0.86		$	(0.01	)	$	0.85
Diluted	$	0.85		$	(0.01	)	$	0.84
Weighted average common shares outstanding:
Basic	102,912			102,912			102,912
Diluted	104,209			104,209			104,209

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended December 31, 2015								Six Months Ended December 31, 2015
	As Reported			Adjustment		As Revised			As Reported			Adjustment			As Revised
Net income	$	56,947		$	1,133	$	58,080		$	88,249		$	(1,011	)	$	87,238
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(25,791	)	$	136	(25,655		)	$	(66,084	)	497			(65,587		)
Change in deferred gains (losses) on cash flow hedging instruments	(296		)	—		(296		)	1,045			—			1,045
Change in unrealized gain (loss) on available for sale investment	24			—		24			(132		)	—			(132		)
Total other comprehensive income (loss)	$	(26,063	)	$	136	$	(25,927	)	$	(65,171	)	$	497		$	(64,674	)
Total comprehensive income	$	30,884		$	1,269	$	32,153		$	23,078		$	(514	)	$	22,564

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended December 31, 2015
	As Reported			Adjustment			As Revised
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	88,249		$	(1,011	)	$	87,238
Adjustments to reconcile net income to net cash provided by operating   activities:
Depreciation and amortization	31,409			381			31,790
Deferred income taxes	(8,693		)	(155		)	(8,848		)
Equity in net income of equity-method investees	(53		)	—			(53		)
Stock based compensation	7,229			—			7,229
Other non-cash items, including unrealized currency (gains)/loss, net	7,812			—			7,812
Increase (decrease) in cash attributable to changes in operating assets and   liabilities, net of amounts applicable to acquisitions:
Accounts receivable	(17,231		)	(1,181		)	(18,412		)
Inventories	(20,891		)	2,598			(18,293		)
Other current assets	5,336			20,811			26,147
Other assets and liabilities	2,187			—			2,187
Accounts payable and accrued expenses	4,290			(21,443		)	(17,153		)
Net cash provided by operating activities	$	99,644		$	—		$	99,644

There were no adjustments to cash balances and to cash flows from investing and financing activities for the six months ended December 31, 2015 as a result of the Revision.

SEGMENT NET SALES AND OPERATING INCOME (UNAUDITED)

	Three Months Ended December 31, 2015
	As Reported (1)			Adjustment			As Revised
Net Sales:
United States	$	322,878		$	(8,193	)	$	314,685
United Kingdom	194,226			(2,972		)	191,254
Hain Pure Protein	141,706			2,486			144,192
Rest of World	93,779			(473		)	93,306
	$	752,589		$	(9,152	)	$	743,437
Operating Income:
United States	$	48,315		$	2,625		$	50,940
United Kingdom	18,768			(343		)	18,425
Hain Pure Protein	18,125			37			18,162
Rest of World	6,595			496			7,091
	$	91,803		$	2,815		$	94,618
Corporate and Other	(4,081		)	(459		)	(4,540		)
	$	87,722		$	2,356		$	90,078

⁽¹⁾ The information previously reported for the three months ended December 31, 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.

	Six Months Ended December 31, 2015
	As Reported (1)			Adjustment			As Revised
Net Sales:
United States	$	637,464		$	(20,148	)	$	617,316
United Kingdom	359,580			(7,471		)	352,109
Hain Pure Protein	265,694			1,553			267,247
Rest of World	177,039			(2,547		)	174,492
	$	1,439,777		$	(28,613	)	$	1,411,164
Operating Income:
United States	$	92,203		$	244		$	92,447
United Kingdom	28,972			(705		)	28,267
Hain Pure Protein	28,396			255			28,651
Rest of World	9,268			246			9,514
	$	158,839		$	40		$	158,879
Corporate and Other	(13,649		)	(880		)	(14,529		)
	$	145,190		$	(840	)	$	144,350

⁽¹⁾ The information previously reported for the six months ended December 31, 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.