Horizon Organic Holding Corp. (Nasdaq: HCOW), the nation’s leading producer of organic dairy products, today announced results for its fiscal 2000 third quarter and nine months ended September 30, 2000. Net sales in the third quarter rose 46 percent to a record $33.4 million from $22.8 million for the same period a year ago. Net income for the third quarter of 2000 was $277,000 versus $761,000 for the comparable period last year. Fully diluted earnings per share for the third quarter of 2000 were $0.03 compared with $0.08 reported in the third quarter last year.
For the nine-month period ended September 30, 2000, net sales reached $89.4 million compared with $59.8 million for the 1999 nine-month period, a 50 percent increase. Net income for the nine-month period was $1.1 million versus $1.9 million for the same period last year. Fully diluted earnings per share for the nine months ended September 30, 2000, were $0.11 versus $0.19 reported in the comparable period a year ago.
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“We continue to experience phenomenal, record sales growth as acceptance of our products increases here and in the U.K. Ultra Pasteurized (UP) milk products, which accounted for 30 percent of our milk business in the third quarter, significantly exceeded our expectations. Additionally, revenues from our juice line continue to grow rapidly. During the quarter we added six new customers that represent 700 new outlets for Horizon Organic products. We also are seeing strong interest from conventional grocery chains to expand their organic dairy sections featuring the Horizon Organic brand,” said Chuck Marcy, president and chief executive officer of Horizon Organic.
“With two acquisitions in the second quarter of 2000, we now are the leading organic milk company in the U.K. Sales from these operations during the quarter represented 26 percent of total company revenue and are expected to increase rapidly as we establish the Horizon Organic brand in the U.K. Our single serve branded milk was introduced this month and other products will quickly follow. We are pleased that Horizon Organic continues to lead the organic dairy category in both the U.S. and abroad,” added Marcy.
This quarter the company also opened the Horizon Organic Farm and Education Center, at the former Naval Academy Dairy near Annapolis, MD. The farm provides an opportunity to showcase the Horizon Organic brand and to introduce consumers to its products. At the center, visitors of all ages have the opportunity to experience a working farm, and gain firsthand appreciation for the care and attention that goes into producing quality organic products. The Horizon Organic Farm and Education Center provides the company a platform to launch an aggressive marketing and public relations effort in 2001.
“We are very pleased with both the sales growth and increase in consumer awareness of the Horizon Organic brand that we have achieved so far this year. Equally important are the initiatives we have undertaken to enhance sales and earnings growth in fiscal 2001,” added Marcy.
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By GlobalDataSince the introduction of UP milk earlier this year, Horizon Organic experienced capacity constraints, which impacted its ability to fill customer orders. The company identified new processing sources on both the East and West Coasts. However, the transition to the new processors took longer than anticipated and the East Coast supplier will not be fully operational until later this quarter. Importantly, this new processor network will provide capacity to allow the UP product line to continue its phenomenal growth at a significantly lower cost. In addition, Horizon Organic has devoted resources to streamlining its logistics and distribution systems, to provide better efficiencies, inventory tracking capabilities and control systems. The company also invested in consumer research, which will be used to develop a targeted 2001 advertising and marketing campaign.
While the company has made significant improvements, most of the impact will not be realized until 2001. Fourth quarter projections have been lowered due to the slower than anticipated start-up of additional UP milk processing for the East Coast. Consequently, earnings per share in the fourth quarter of fiscal 2000 are projected to be in the range of $0.02 to $0.05.
Looking ahead, the company anticipates sales growth in fiscal 2001 to be approximately 40 percent. While gross margins are expected to improve, the company plans to increase its sales and marketing spending to build the Horizon Organic brand. As a result, earnings are expected to increase only slightly faster than sales to a range from $0.20 to $0.25 per share next year.
“The improvements Horizon Organic initiated this year position us for aggressive profitable growth in 2001. With an improved cost structure, we now can invest more aggressively in building our brand. We see tremendous opportunity with organic dairy sections, and we plan to invest in a targeted advertising campaign. We also are very excited about the potential growth in the U.K. of Horizon Organic branded milk. We expect the same enthusiastic reception there as we’ve enjoyed in the U.S. We have laid the groundwork necessary to build our brand and believe we are positioned to enjoy significant sales and earnings growth next year,” Marcy concluded.
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. Horizon Organic products can be found in conventional supermarkets and natural foods stores across the U.S. and in the U.K. For more information, visit the Company’s web site at www.horizonorganic.com.
Horizon Organic management has scheduled an investment community conference call for Thursday November 9, 2000 at 11:00 a.m. Eastern Time to discuss these results. To hear the call in a listen-only mode, participants must dial 212-676-5255 and refer to reservation #16652942 ten minutes prior to the start of the event, or visit the company’s web site at www.horizonorganic.com for a live simulcast and replay of the call.
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 31,1999.
HORIZON ORGANIC HOLDING CORPORATION
SELECTED FINANCIAL DATA
(In thousands, except per share data)Three Months Ended September 30,
2000 %NS 1999 %NS
Net sales $33,392 100.0% $22,798 100.0%
Growth vs.
prior year 46.5% 78.6%
Cost of sales 23,093 69.2% 14,655 64.3%
Gross profit 10,299 30.8% 8,143 35.7%Selling expense 5,939 17.8% 4,887 21.4%
General and
administrative 2,077 6.2% 1,544 6.8%
Goodwill Amortization 824 2.5% 375 1.6%Operating income 1,459 4.4% 1,337 5.9%
Interest and other,
net (1,005) -3.0% (69) -0.3%Pretax income 454 1.4% 1,268 5.6%
Income tax expense (177) -0.5% (507) -2.2%
Net income 277 0.8% 761 3.3%
Earnings per share
Basic $0.03 $0.08
Diluted $0.03 $0.08Weighted average shares
outstanding:
Basic 9,814 9,719
Diluted 10,078 10,093Nine Months Ended September 30,
2000 %NS 1999 %NS
Net sales $89,419 100.0% $59,811 100.0%
Growth vs.
prior year 49.5% 72.6%
Cost of sales 60,490 67.6% 38,914 65.1%
Gross profit 28,929 32.4% 20,897 34.9%Selling expense 17,752 19.9% 12,828 21.4%
General and
administrative 6,097 6.8% 4,118 6.9%
Goodwill Amortization 1,725 1.9% 834 1.4%Operating income 3,355 3.8% 3,117 5.2%
Interest and other,
net (1,521) -1.7% 97 0.2%Pretax income 1,834 2.1% 3,214 5.4%
Income tax expense (736) -0.8% (1,286) -2.2%
Net income 1,098 1.2% 1,928 3.2%
Earnings per share
Basic $0.11 $0.20
Diluted $0.11 $0.19Weighted average shares
outstanding:
Basic 9,782 9,692
Diluted 10,051 10,084Selected Balance Sheet Data
Sept 30, Dec 31,
2000 1999
Working capital $20,810 $18,435
Total assets 127,831 84,612
Current liabilities 24,783 14,225
Long-term debt, less
current portion 42,860 11,255
Stockholders' equity 58,420 57,888
