Horizon Organic Holding Corporation (Nasdaq: HCOW), the nation's leading producer of organic dairy products, today announced results for its fiscal 2000 second quarter and six months ended June 30, 2000. For the second quarter, net sales increased 44 percent to a record $29.7 million from $20.6 million for the same period a year ago. Operating income for the second quarter of 2000 increased 12 percent to $1.26 million, from the $1.13 million reported in the comparable period last year. Net income was $514,000 compared with $666,000 for the second quarter of 1999. Basic and diluted earnings per share for the fiscal 2000 second quarter were $0.05, versus $0.07 per share for the same period last year.
Net sales for the six months ended June 30, 2000 rose 51 percent to $56 million versus $37 million reported for the first half of 1999. Operating income for the first half of fiscal 2000 increased 6.7 percent to $1.9 million compared with $1.78 million for the same period a year ago. Net income for the first half of 2000 was $821,000 versus $1.17 million for the first half of 1999. Basic and diluted earnings per share for the first half of 2000 were $0.08 versus $0.12 per share for the same period the prior year.
Sales growth for the second quarter and the first half of 2000 can be attributed to a number of key factors both in the U.S. and abroad. The company increased distribution in conventional grocery stores and, for the first time, exceeded 40 percent national penetration. Also in the second quarter, the company's line of ultra-pasteurized (UP) milk accounted for 29 percent of total milk sales, exceeding expectations by 33 percent. Additionally, juice sales increased 110 percent due to the successful expansion of that product line. The company experienced similar success in the United Kingdom with the introduction of three new flavors of yogurt under the Rachel's Organic brand, which also exceeded sales projections.
Another factor contributing to growth during the second quarter of 2000, were the two acquisitions the company completed in the U.K. effective May 31, 2000. For the quarter, the total U.K. business accounted for $4.1 million in sales. The acquisitions increased total assets by $32.8 million (which includes goodwill of $25.8 million) and increased long-term debt by $27.4 million. Integration of these two companies, Meadow Farms, Ltd., and Organic Matters Ltd., into Horizon Organic International is on track, as is the planned introduction of Horizon Organic branded products throughout the U.K. in the fall.
"We are pleased with our sales growth during the quarter and anticipate strong revenue growth of 55 to 60 percent this year. Importantly, we are making significant progress in all facets of our five-point action plan implemented at the beginning of the year," said Charles F. Marcy, Horizon Organic president and chief executive officer.
One key element of the plan is to reduce operational expenses. The fact that gross margins improved from 31.9 percent in the first quarter of 2000 to 34.5 percent in the second quarter, indicates that productivity improvement efforts are beginning to have an impact.
"We expect this productivity improvement to continue into the third quarter as we move into the second phase of our logistics redesign program which includes the consolidation of warehouses. This will result in reduced warehouse and transportation costs," Marcy added.
Finally, the company announced that it has strengthened its relationship with its partner, Suiza Foods. As a result, in the third quarter, Suiza will expand its processing of Horizon Organic's U.P. milk in the west. This will result in significant cost savings for the company.
"We remain focused on improving both top- and bottom-line performance. We believe that the second quarter results show that we are building the foundation for aggressive, profitable growth," 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 Horizon Organic(TM) certified organic eggs as well as The Organic Cow of Vermont® brand of organic dairy products in the northeast U.S. and organic yogurt under the Rachel's Organic(TM) brand in the U.K. In addition to its company-owned farms, Horizon Organic has established a network of milk producers, processors and distributors that allows consumers to purchase Horizon Organic products in conventional supermarkets and natural foods stores across the U.S. and in the U.K. Please visit the Company's web site atwww.horizonorganic.com
Horizon Organic management has scheduled an investment community conference call for Wednesday, August 9, 2000 at 11 a.m. Eastern Time to discuss 2000 second quarter results. To hear the call in a listen-only mode, participants must dial (212) 896-6073 and refer to reservation #15905322, 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.
Net sales for the six months ended June 30, 2000 rose 51 percent to $56 million versus $37 million reported for the first half of 1999. Operating income for the first half of fiscal 2000 increased 6.7 percent to $1.9 million compared with $1.78 million for the same period a year ago. Net income for the first half of 2000 was $821,000 versus $1.17 million for the first half of 1999. Basic and diluted earnings per share for the first half of 2000 were $0.08 versus $0.12 per share for the same period the prior year.
Sales growth for the second quarter and the first half of 2000 can be attributed to a number of key factors both in the U.S. and abroad. The company increased distribution in conventional grocery stores and, for the first time, exceeded 40 percent national penetration. Also in the second quarter, the company's line of ultra-pasteurized (UP) milk accounted for 29 percent of total milk sales, exceeding expectations by 33 percent. Additionally, juice sales increased 110 percent due to the successful expansion of that product line. The company experienced similar success in the United Kingdom with the introduction of three new flavors of yogurt under the Rachel's Organic brand, which also exceeded sales projections.
Another factor contributing to growth during the second quarter of 2000, were the two acquisitions the company completed in the U.K. effective May 31, 2000. For the quarter, the total U.K. business accounted for $4.1 million in sales. The acquisitions increased total assets by $32.8 million (which includes goodwill of $25.8 million) and increased long-term debt by $27.4 million. Integration of these two companies, Meadow Farms, Ltd., and Organic Matters Ltd., into Horizon Organic International is on track, as is the planned introduction of Horizon Organic branded products throughout the U.K. in the fall.
"We are pleased with our sales growth during the quarter and anticipate strong revenue growth of 55 to 60 percent this year. Importantly, we are making significant progress in all facets of our five-point action plan implemented at the beginning of the year," said Charles F. Marcy, Horizon Organic president and chief executive officer.
One key element of the plan is to reduce operational expenses. The fact that gross margins improved from 31.9 percent in the first quarter of 2000 to 34.5 percent in the second quarter, indicates that productivity improvement efforts are beginning to have an impact.
"We expect this productivity improvement to continue into the third quarter as we move into the second phase of our logistics redesign program which includes the consolidation of warehouses. This will result in reduced warehouse and transportation costs," Marcy added.
Finally, the company announced that it has strengthened its relationship with its partner, Suiza Foods. As a result, in the third quarter, Suiza will expand its processing of Horizon Organic's U.P. milk in the west. This will result in significant cost savings for the company.
"We remain focused on improving both top- and bottom-line performance. We believe that the second quarter results show that we are building the foundation for aggressive, profitable growth," 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 Horizon Organic(TM) certified organic eggs as well as The Organic Cow of Vermont® brand of organic dairy products in the northeast U.S. and organic yogurt under the Rachel's Organic(TM) brand in the U.K. In addition to its company-owned farms, Horizon Organic has established a network of milk producers, processors and distributors that allows consumers to purchase Horizon Organic products in conventional supermarkets and natural foods stores across the U.S. and in the U.K. Please visit the Company's web site atwww.horizonorganic.com
Horizon Organic management has scheduled an investment community conference call for Wednesday, August 9, 2000 at 11 a.m. Eastern Time to discuss 2000 second quarter results. To hear the call in a listen-only mode, participants must dial (212) 896-6073 and refer to reservation #15905322, 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 June 30,
2000 %NS 1999 %NS
Net sales $29,691 100.0% $20,590 100.0%
Growth vs. prior year 44.2% -- 74.6% --
Cost of sales 19,463 65.5% 13,358 64.9%
Gross profit 10,229 34.5% 7,232 35.1%
Selling expense 6,370 21.5% 4,357 21.2%
General and
administrative 2,600 8.8% 1,749 8.5%
Operating income 1,259 4.2% 1,126 5.5%
Interest and other, net (400) -1.3% (16) -0.1%
Pretax income 859 2.9% 1,110 5.4%
Income tax expense (346) -1.2% (444) -2.2%
Net income 514 1.7% 666 3.2%
Earnings per share
Basic $0.05 $0.07
Diluted $0.05 $0.07
Weighted average shares
outstanding:
Basic 9,777 9,692
Diluted 10,048 10,129
Six Months Ended June 30,
2000 %NS 1999 %NS
Net sales $56,028 100.0% $37,013 100.0%
Growth vs. prior year 51.4% -- 69.0% --
Cost of sales 37,397 66.6% 24,259 65.5%
Gross profit 18,630 33.3% 12,754 34.5%
Selling expense 11,813 21.1% 7,941 21.5%
General and
administrative 4,921 8.8% 3,033 8.2%
Operating income 1,896 3.4% 1,780 4.8%
Interest and other, net (516) -0.9% 165 0.4%
Pretax income 1,380 2.5% 1,946 5.3%
Income tax expense (558) -1.0% (778) -2.1%
Net income 821 1.5% 1,168 3.2%
Earnings per share
Basic $0.08 $0.12
Diluted $0.08 $0.12
Weighted average shares
outstanding:
Basic 9,765 9,679
Diluted 10,037 10,116
Selected Balance Sheet Data June 30, Dec 31,
2000 1999
Working capital $13,669 $18,436
Total assets 121,652 84,612
Current liabilities 24,942 14,225
Long-term debt, less current portion 36,780 11,255
Stockholders' equity 58,791 57,888
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