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. |