-Sales and Earnings Impacted by Customer Inventory Reduction and Continued Strategic Warehouse Consolidation –
– Recent Recovery in Customers’ Orders Cycling Through and Strongly Increasing Sales in March and April –
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Reflecting the impact of general economic conditions on its major natural customers and a strategic consolidation of inventories and packaging, The Hain Celestial Group (Nasdaq: HAIN), the leading natural and organic food company, yesterday announced a net profit of $4.2 million, or $0.12 per share on a diluted basis, for its third quarter ended March 31, 2001. Net revenues for the third quarter totaled $104 million, versus $108.6 million in the prior year period on a comparative basis. EBITDA in the third quarter was $9.8 million, compared to $18.4 million in the same quarter of 2000.
Irwin D. Simon, Chairman, President and Chief Executive Officer of The Hain Celestial Group said, “Revenues for the third quarter were impacted by the general economic conditions in late 2000 that caused inventory adjustments for our major natural foods customers and distributors of one to two weeks, cycling through and lowering our sales by approximately $15-20 million in January and February. However, following positive adjustments in distributor and customer purchasing patterns in January and February, we have seen strong sales in March, April and into May as these corrections cycle through to us. In this quarter, we are also faced with a comparison to the year-ago quarter which includes a load of approximately 400,000-600,000 cases of tea. Excluding the customer inventory reduction and tea deloading, we believe revenue would have increased by 17% in the quarter.”
“During this third quarter, we have taken steps to better position Hain Celestial’s leading brands for long-term growth and to strengthen our brand presence in the mass market. We secured a $240 million line of credit, which we may use as we continue to identify opportunities to grow our business. In addition, we continue to consolidate warehousing into our Ontario facility, closing another warehouse and upgrading our information systems. In the process, we used the unique opportunity to strategically consolidate our inventories and packaging levels, reducing non-performing SKUs, to better enhance our focus on core brands and popular products.”
The Company also reported that its third quarter earnings were adversely impacted by increased freight and power costs.
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By GlobalDataThe impact of specific items on earnings in the third quarter was as follows:
- Item: EPS Impact:
- Customer Inventory Reduction $0.12
- Strategic Warehouse Consolidation $0.05
- Fuel/Energy Costs $0.01
Mr. Simon concluded, “We continue to see strong momentum in many of our brands. Specifically, Terra and Garden of Eatin’ both demonstrated solid double-digit growth. Though Westsoy, Earth’s Best and Health Valley sales were flat, and Celestial Seasonings’ revenues were down compared to the third quarter of 2000, the prior year’s quarter included an unusually high tea inventory pipeline and higher comps for Westsoy and Earth’s Best, which have since resumed normal levels. In the upcoming fourth quarter, we have a number of exciting new product launches in these brands, including Westsoy Soy Shakes and Smoothies, Earth’s Best Kidz line for toddlers, and Celestial Seasonings new, revitalized herb teas, the first in over 3 years. In light of the initiatives we have underway to realize the full potential of our brands, we anticipate that 2002 results will include 20% EPS growth and double-digit revenue growth.”
Hain Celestial’s balance sheet continued to improve in the third quarter, with working capital totaling approximately $120 million, cash on hand of $59 million, a current ratio of 3.5:1; debt to equity at 2.7%; and total equity of $390 million.
For the three months ended March 31, 2001, gross profit decreased by approximately $11.8 million to $42.8 million (41.2% of net sales) as compared to $54.6 million (48.8% of net sales) in the corresponding 2000 period, primarily due to the lower sales, as discussed above, as a result of the reduction in customers’ inventory levels, and the costs associated with the strategic warehouse consolidation, including the inventory and packaging write-offs related to non-performing SKU’s. Selling, general and administrative expenses decreased by $3.0 million (33.4% of net sales) to $34.7 million for the three months ended March 31, 2001 as compared to $37.7 million (33.7% of net sales) in the March 31, 2000 quarter. The dollar and percentage decrease reflected a combination of $2.5 million of synergies realized in the March 2001 period resulting from the Celestial merger, and approximately $0.5 million in other lower selling, general and administrative expense components. To date, a substantial portion of synergies from the Celestial merger have been identified and it is expected that the integration process will be substantially completed by calendar 2002. It is expected that in the next couple of fiscal quarters, the Company plans to invest in consumer spending and enhance brand equity while closely monitoring its trade spending.
About The Hain Celestial Group
The Hain Celestial Group, headquartered in Uniondale, NY, is a natural, specialty and snack food company. The Company is a leader in 13 of the top 15 natural food categories, with such well-known natural food brands as Celestial Seasonings® teas, Hain Pure Foods®, Westbrae®, Westsoy®, Arrowhead Mills®, Health Valley®, Breadshop’s®, Casbah®, Garden of Eatin®, Terra Chips®, DeBoles®, Earth’s Best®, and Nile Spice. The Company’s principal specialty product lines include Hollywood® cooking oils, Estee® sugar-free products, Weight Watchers® dry and refrigerated products, Kineret® kosher foods, Boston Better Snacks®, and Alba Foods®. The Hain Celestial Group’s website can be found at http://www.hain-celestial.com.
Statements made in this Press Release that are estimates of past or future performance are based on a number of factors, some of which are outside of the Company’s control. Statements made in this Press Release that state the intentions, beliefs, expectations or predictions of The Hain Celestial Group and its management for the future are forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in filings of The Hain Celestial Group with the U.S. Securities and Exchange Commission. Copies of these filings may be obtained by contacting The Hain Celestial Group or the SEC.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share and share amounts)
March 31, June 30,
2001 2000
ASSETS (Unaudited) (Note)
Current assets:
Cash $58,555 $38,308
Accounts receivable, less allowance
for doubtful accounts of $1,339 and $929 51,017 36,120
Inventories 46,490 48,139
Recoverable income taxes — 7,982
Deferred income taxes 8,724 8,724
Other current assets 4,360 3,611
Total current assets 169,146 142,884
Property, plant and equipment, net of accumulated
depreciation and amortization
of $23,853 and $19,471 47,603 39,340
Goodwill, net of accumulated amortization
of $16,925 and $13,109 191,127 188,212
Trademarks and other intangible assets,
net of accumulated amortization of
$6,488 and $5,594 38,490 39,086
Deferred financing costs, net of accumulated
amortization of $343 and $328 1,408 238
Other assets 6,203 6,257
Total assets $453,977 $416,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $38,734 $43,039
Income taxes payable, net 7,786 —
Accrued merger related charges 1,681 9,414
Current portion of long-term debt 803 681
Total current liabilities 49,004 53,134
Long-term debt, less current portion 9,787 5,622
Deferred income taxes 5,537 5,537
Total liabilities 64,328 64,293
Commitments and contingencies
Stockholders’ equity:
Preferred stock 0- $.01 par value,
authorized 5,000,000 shares, no
shares issued — —
Common stock — $.01 par value,
authorized 100,000,000 shares,
issued 33,570,222 and 32,147,261 shares 336 321
Additional paid-in capital 343,639 326,641
Retained earnings 45,949 25,037
389,924 351,999
Less: 100,000 shares of treasury stock,
at cost (275) (275)
Total stockholders’ equity 389,649 351,724
Total liabilities and stockholders’ equity $453,977 $416,017
Note: The balance sheet at June 30, 2000 has been derived from the
audited financial statements at that date.
THE HAIN CELESTIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
Net Sales $103,909 $111,916 $313,587 $316,531
Cost of sales 61,129 57,302 176,671 172,383
Gross profit 42,780 54,614 136,916 144,148
Selling, general &
administrative expenses 34,697 37,670 97,008 107,968
Merger costs — — 1,032 —
Amortization of goodwill and
other intangible assets 1,522 1,704 4,770 4,988
Operating income 6,561 15,240 34,106 31,192
Other income, net 915 619 2,324 1,372
Interest and financing costs (163) (1,318) (375) (5,684)
Income before income taxes and
cumulative change in
accounting principle 7,313 14,541 36,055 26,880
Provision for income taxes 3,072 5,904 15,143 10,954
Income before cumulative change
in accounting principle 4,241 8,637 20,912 15,926
Cumulative change in accounting
principle, net of income
tax benefit of $2,547 — — — (3,754)
Net income $4,241 $8,637 $20,912 $12,172
Basic earnings per common share:
Income before cumulative change
in accounting principle $0.13 $0.30 $0.64 $0.58
Cumulative change in
accounting principle — — — (0.14)
Net income $0.13 $0.30 $0.64 $0.44
Diluted earnings per common share:
Income before cumulative change
in accounting principle $0.12 $0.28 $0.61 $0.54
Cumulative change in accounting
principle — — — (0.13)
Net income $0.12 $0.28 $0.61 $0.41
Weighted average common shares
outstanding:
Basic 33,368 28,840 32,833 27,443
Diluted 34,845 30,906 34,508 29,623
Supplementary Information:
EBITDA (Earnings before Interest,
Taxes, Depreciation and
Amortization $9,789 $18,399 $43,521 $40,170
