USA: Horizon Organic Holding Corp. reports 30 percent growth in second quarter 2001
For the six-month period ended June 30, 2001, net sales reached $76.2 million, up 36 percent from $56 million reported in the first six-months of 2000. Net income for the first half of fiscal 2001 was $207,000, or $0.02 per diluted share, compared with $821,000, or $0.08 per diluted share, reported in the same period a year ago.
Gross margins improved from 29.4 percent in the first quarter of this year to 31.5 percent this quarter. The company was able to capitalize on its cost reduction and logistics redesign programs. During the quarter, the company reduced delivery costs and began to benefit from lower production costs due to the new processors it brought on during the last six months.
"The second quarter is a significant milestone for the company. Not only have we continued our tremendous growth, but also our margins have improved. It is clear that the changes we have made in operations will help ensure that future growth is even more profitable. We believe we are on track to achieve record profits this year," said Chuck Marcy, president and chief executive officer of Horizon Organic.
Milk led the growth in revenues and was paced by demand for the company's ultra-pasteurized (UP) milk. UP milk comprised 42 percent of total milk sales this quarter and allowed the company to expand its presence in markets such as Seattle and Portland. Growth in dairy products was driven by consumer acceptance of the Horizon Organic repackaged line of cheese products, which grew 45 percent in the first half of the year and butter, which grew 20 percent during the second quarter. Additionally, divisions of two major conventional grocery customers added organic dairy sections this quarter, indicative of the progress being made on this important company initiative.
"Under the leadership of grocery industry veteran John Haydock, our new vice president of sales, we feel very confident that we will see further expansion of organic dairy sections in the second half of the year. We also expect the single-serve juice and eight-ounce butter introductions that occurred during the second quarter to enhance growth," Marcy said.
The company also is realizing the benefit of rising conventional milk prices, as the cost differential between conventional and organic milk is narrowing. The total organic milk category, which was growing at 28 percent during the fourth quarter of 2000, rose to 38 percent in the past three months.
In the second half of the year, Marcy said the company would continue to focus on expanding organic dairy sections, capitalize on the company's 10th anniversary and continue its cost reduction program.
Horizon Organic also stated that all future expansion of milk supply would be from independent dairy producers, which will save capital and reduce the importance of the company's internal supply. In that regard, the company is ending its herd management agreement in Colorado in the summer of 2002.
Furthermore, the company is forming the Horizon Organic Agriculture Leadership Program. The company will sponsor research and provide education for current and future organic dairy partners. This major initiative will provide the resources necessary to ensure that the company's organic dairy production partners remain in the forefront of developments in the industry.
The company also acknowledged that it is comfortable with analyst consensus estimates for fiscal 2001, which are at $0.16 per share. "In light of the improvement we saw this quarter, we are comfortable with the year-end consensus. In the third quarter, we only expect to see a modest improvement in earnings since it is traditionally the weakest quarter for milk sales; however, the fourth quarter is generally the strongest. Accordingly, we anticipate earnings per share to be in the range of $0.04 to $0.06 for the third quarter," concluded Marcy.
Horizon Organic produces and markets the leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also markets certified organic eggs and juices. The company's products can be found in conventional supermarkets and natural foods stores across the U.S. and in the U.K. For more information, please visit the Company's web site at www.horizonorganic.com.
Note on Forward-Looking Statements: This news release contains forward-looking statements that involve risks and uncertainties. Future events may differ materially from those discussed herein, due to a number of factors, including uncertainties related to the company's ability to continue strong growth, to achieve distribution and operational efficiencies, and to expand domestically and internationally, as well as increased milk costs, inbound and outbound freight and distribution costs, higher costs related to new-product introductions and increased personnel costs. These factors and others are more fully discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2000.
HORIZON ORGANIC HOLDING CORPORATION SELECTED FINANCIAL DATA (In thousands, except per share data) Three Months Ended June 30, 2001 %NS 2000 %NS Net sales $38,607 100.0% $29,691 100.0% Growth vs. prior year 30.0% 44.2% Cost of sales 26,462 68.5% 19,463 65.5% Gross profit 12,145 31.5% 10,229 34.5% Selling expense 7,651 19.8% 6,370 21.5% General and administrative 1,997 5.2% 2,072 7.0% Goodwill Amortization 812 2.1% 527 1.8% Operating income 1,685 4.4% 1,259 4.2% Interest and other, net (948) -2.5% (400) -1.3% Pretax income 737 1.9% 859 2.9% Income tax expense (295) -0.8% (346) -1.2% Net income 442 1.1% 514 1.7% Earnings per share Basic $0.04 $0.05 Diluted $0.04 $0.05 Weighted average shares outstanding: Basic 9,945 9,777 Diluted 10,076 10,048 Selected Balance Sheet Data Jun 30, Dec 31, 2001 2000 Working capital $23,168 $23,714 Total assets 128,344 132,164 Current liabilities 23,923 25,245 Long-term debt, less current portion 44,425 45,685 Stockholders' equity 57,413 58,644 HORIZON ORGANIC HOLDING CORPORATION SELECTED FINANCIAL DATA (In thousands, except per share data) Six Months Ended June 30, 2001 %NS 2000 %NS Net sales $76,205 100.0% $56,028 100.0% Growth vs. prior year 36.0% 51.4% Cost of sales 53,005 69.6% 37,397 66.7% Gross profit 23,200 30.4% 18,630 33.3% Selling expense 15,292 20.1% 11,813 21.1% General and administrative 3,922 5.1% 4,020 7.2% Goodwill Amortization 1,636 2.1% 901 1.6% Operating income 2,351 3.1% 1,896 3.4% Interest and other, net (1,993) -2.6% (516) -0.9% Pretax income 358 0.5% 1,380 2.5% Income tax expense (151) -0.2% (558) -1.0% Net income 207 0.3% 821 1.5% Earnings per share Basic $0.02 $0.08 Diluted $0.02 $0.08 Weighted average shares outstanding: Basic 9,923 9,765 Diluted 10,036 10,037
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