EX-99.1 2 ex99_1.htm EXHIBIT 99.1 - PRESS RELEASE Exhibit 99.1 - Press Release
 
Exhibit 99.1
 

 
Contact:
Ira Lamel/Mary Anthes
Jeremy Fielding/David Lilly
 
The Hain Celestial Group, Inc.
Kekst and Company
 
631-730-2220
212-521-4800

THE HAIN CELESTIAL GROUP ANNOUNCES RECORD SECOND QUARTER

SALES AND EARNINGS HIGHEST IN COMPANY HISTORY

COMPANY RAISES EARNINGS GUIDANCE TO $1.16-$1.21

Sales Increased 24% to $230.9 Million
GAAP Net Income Grew 20% to $14.8 Million
Adjusted EPS Increased 15% to $0.38

Melville, NY, February 1, 2007 —The Hain Celestial Group, Inc. (NASDAQ: HAIN), a leading natural and organic food and personal care products company, today reported results for the second quarter ended December 31, 2006. The Company reported net sales of $230.9 million, a 24% increase compared with $186.2 million in the prior year second quarter. GAAP net income for the second quarter was $14.8 million, or $0.36 per diluted share, a 20% increase over the prior year’s $12.3 million, or $0.32 per diluted share. Adjusted earnings for the quarter totaled $0.38 per share on adjusted net income of $15.6 million.

The Company successfully completed the previously announced start-up phase of the new production lines at its West Chester Frozen Foods Facility, and incurred the final start-up costs, consistent with its previous estimate of $0.6 million pre-tax, or $0.01 per share. The Company also incurred a non-cash mark-to-market charge of $0.7 million pre-tax, or $0.01 per share, to reflect its contractual obligation for ungranted stock options at fair value in accordance with SFAS No. 123R. These options remain ungranted and therefore remain subject to mark-to-market adjustments as was first reported by the Company with its fiscal year 2006 results.

“I am pleased with our performance this quarter. We continue to see robust sales and strong consumption from our Garden of Eatin’®, Earth’s Best®, Arrowhead Mills®, Rice Dream®, Imagine® and Health Valley® soups, Ethnic Gourmet™, Westbrae®, Yves Veggie Cuisine® and Spectrum® brands as well as significant contributions from our personal care brands, Hain Celestial Canada and Hain Celestial Europe, including Hain Celestial United Kingdom,” said Irwin D. Simon, President and Chief Executive Officer of Hain Celestial. “The increasing scale and diversity of our business continues to provide the Company with a balanced portfolio of markets and categories that result in a stable base of


 

sales and earnings that reflect the growth of the natural and organic category. At the same time, we are maintaining our focus on continually improving efficiencies.”

The Company reported gross margin of 30.6% in the second quarter, compared to 31.2% in the prior year’s second quarter. In order to compare gross margin performance against the prior year’s comparable quarter, the Company reported that adjusted gross margin for the current quarter was 31.9% when excluding the final start-up costs at its West Chester Frozen Foods Facility and the Company’s lower margin business in the UK. The 70 basis points margin improvement was achieved despite increasing input costs and the challenging selling conditions of the unusually warm weather throughout the quarter impacting the Company’s Celestial Seasonings tea brand.

Selling, general and administrative expense for the second quarter was 19.4% of sales in the current year quarter compared to 19.9% in the prior year. Adjusted for the SFAS No. 123R charges for ungranted stock options, selling, general and administrative expense was 19.1% in the current year versus 19.6% in the prior year quarter. The Company continues to benefit from its increased scale and disciplined strategy for building effective marketing programs.

Interest expense in the second quarter was $2.3 million versus $1.3 million in the prior year quarter and interest income was $0.9 million this year versus $0.2 million last year. The higher level of interest expense was attributable to the $150 million of 10-year 5.98% Senior Notes issued in May 2006, which was in part offset by interest earned on excess cash balances.

The Company’s effective tax rate for the quarter was 38.6% versus 37.9% in the prior year quarter.

Average diluted shares outstanding in the quarter were 41.2 million, an increase of 2.8 million shares, or 7%, over the second quarter of the prior year, and 1.2 million shares, or 3%, higher than in the immediately preceding first quarter of fiscal 2007. The increase resulted from additional shares issued for the exercise of employee stock options and higher equivalent shares included in the earnings per diluted share calculation resulting from the Company’s higher share price. In announcing full year guidance in September 2006, the Company had anticipated an average diluted share count of 40.5 million for the full fiscal 2007 year.

The Company’s balance sheet remains strong with $214.5 million in working capital and a current ratio of 2.9 at December 31, 2006. Debt as a percentage of equity was 23.3% with equity at $651.9 million. The number of days in the


 
 

Company’s cash conversion cycle was 67 compared to 71 days in the prior year period. Operating free cash flow was $61.0 million for the trailing twelve months ended December 31, 2006 versus $23.5 million in the comparable period of the prior year.
 
“The broad distribution of our natural and organic food and personal care products into varied channels in North America, Europe and the United Kingdom, alongside our effectiveness in executing our grocery and international businesses, allows us to continue to expand our growth in sales and earnings. These results were achieved despite unusually warm weather in the United States, which challenged our Celestial Seasonings® tea brand this past quarter,” added Irwin Simon.

“I am particularly excited about the strategic opportunities from our most recent acquisitions of Avalon Natural Products and certain assets of Haldane Foods. These latest additions to our growing portfolio, with the synergistic opportunities they bring, will aid in our continued drive to achieve further margin efficiencies, general and administrative cost savings and to improve our return on equity. Avalon Organics® and Alba Botanica® are premier brands that complement our natural and organic personal care products. This acquisition demonstrates our commitment to and solidifies our position in the fast-growing personal care category. Haldane Foods provides us with critical mass in the meat-free category, building upon our Linda McCartney® brand. This acquisition establishes a manufacturing base for our non-dairy brands along with Haldane’s soy-based products in the United Kingdom. These acquisitions strengthen our portfolio of brands to meet the increasing consumer needs for natural and organic products across multiple categories,” concluded Irwin Simon.

Fiscal Year 2007 Outlook
The Company raised its annual guidance for fiscal year 2007 to reflect the recently completed acquisitions of Haldane Foods Limited and Avalon Natural Products. The Company expects full year fiscal 2007 sales of $900 million to $920 million and earnings per share of $1.16 to $1.21 based on 41.0 million shares outstanding.

Webcast and Upcoming Events
Hain Celestial will host a conference call and webcast at 4:30 PM Eastern Standard Time today to review its second quarter fiscal year 2007 results. On March 13, 2007, the Company is scheduled to present at the Banc of America Securities Consumer Conference. These events will be available under the Investor Relations section of the Company’s website at www.hain-celestial.com.


 
 

The Hain Celestial Group
The Hain Celestial Group (NASDAQ: HAIN), headquartered in Melville, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings®, Terra Chips®, Garden of Eatin’®, Health Valley®, WestSoy®, Earth’s Best®, Arrowhead Mills®, DeBoles®, Hain Pure Foods®, FreeBird™, Hollywood®, Spectrum Naturals®, Spectrum Essentials®, Walnut Acres Organic™, Imagine Foods™, Rice Dream®, Soy Dream®, Rosetto®, Ethnic Gourmet™, Yves Veggie Cuisine®, Linda McCartney®, Realeat®, Lima®, Grains Noirs®, Natumi®, JASON®, Zia® Natural Skincare, Avalon Organics®, Alba Botanica® and Queen Helene®. For more information, visit www.hain-celestial.com.

Safe Harbor Statement
This press release contains forward-looking statements within and constitutes a "Safe Harbor" statement under the Private Securities Litigation Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those described in the forward-looking statements. These risks include but are not limited to general economic and business conditions; the ability to implement business and acquisition strategies and integrate acquisitions; competition; retention of key personnel; compliance with government regulations and other risks detailed from time-to-time in the Company's reports filed with the Securities and Exchange Commission, including the report on Form 10-K for the fiscal year ended June 30, 2006. The forward-looking statements made in this press release are current as of the date of this press release, and the Company does not undertake any obligation to update forward-looking statements.

 
 
 


 
THE HAIN CELESTIAL GROUP, INC.
Consolidated Balance Sheets
(In thousands)
           
   
December 31,
 
June 30,
 
   
2006
 
2006
 
   
(Unaudited)
     
           
ASSETS
         
Current assets:
         
Cash and cash equivalents
 
$
83,079
 
$
48,875
 
Trade receivables, net
   
104,106
   
80,764
 
Inventories
   
115,665
   
105,883
 
Deferred income taxes
   
3,872
   
2,986
 
Other current assets
   
17,860
   
21,968
 
Total current assets
   
324,582
   
260,476
 
               
Property, plant and equipment, net
   
117,704
   
119,830
 
Goodwill, net
   
399,666
   
421,002
 
Trademarks and other intangible assets, net
   
79,939
   
61,626
 
Other assets
   
16,043
   
14,750
 
Total assets
 
$
937,934
 
$
877,684
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
             
Current liabilities:
             
Accounts payable and accrued expenses
 
$
98,775
 
$
81,894
 
Income taxes payable
   
10,940
   
3,083
 
Current portion of long-term debt
   
400
   
1,065
 
Total current liabilities
   
110,115
   
86,042
 
               
Deferred income taxes
   
19,086
   
19,086
 
Long-term debt, less current portion
   
151,409
   
151,229
 
Minority interest
   
5,378
   
4,926
 
Total liabilities
   
285,988
   
261,283
 
               
Stockholders' equity:
             
Common stock
   
403
   
396
 
Additional paid-in capital
   
459,098
   
446,319
 
Retained earnings
   
188,836
   
165,034
 
Treasury stock
   
(12,745
)
 
(12,745
)
Foreign currency translation adjustment
   
16,354
   
17,397
 
Total stockholders' equity
   
651,946
   
616,401
 
               
Total liabilities and stockholders' equity
 
$
937,934
 
$
877,684
 
               
 
 
 

 

THE HAIN CELESTIAL GROUP, INC.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
                   
                   
   
Three Months Ended December 31,
 
Six Months Ended December 31,
 
   
2006
 
2005
 
2006
 
2005
 
                   
                   
Net sales
 
$
230,909
 
$
186,227
 
$
441,116
 
$
347,324
 
Cost of Sales
   
160,319
   
128,061
   
311,384
   
243,309
 
Gross profit
   
70,590
   
58,166
   
129,732
   
104,015
 
                           
SG&A expenses
   
44,799
   
36,988
   
86,645
   
70,857
 
                           
Operating income
   
25,791
   
21,178
   
43,087
   
33,158
 
                           
Interest expense and other expenses
   
1,754
   
1,309
   
3,574
   
2,177
 
Income before income taxes
   
24,037
   
19,869
   
39,513
   
30,981
 
Income tax provision
   
9,269
   
7,531
   
15,711
   
11,752
 
Net income
 
$
14,768
 
$
12,338
 
$
23,802
 
$
19,229
 
                           
                           
Basic per share amounts
 
$
0.38
 
$
0.33
 
$
0.61
 
$
0.52
 
                           
Diluted per share amounts
 
$
0.36
 
$
0.32
 
$
0.59
 
$
0.51
 
                           
Weighted average common shares outstanding:
                         
Basic
   
39,173
   
37,165
   
38,960
   
36,900
 
Diluted
   
41,202
   
38,434
   
40,613
   
37,997
 
                           
                           
 
 

 
THE HAIN CELESTIAL GROUP, INC.
Consolidated Statements of Operations With Adjustments
Reconciliation of GAAP Results to Non-GAAP Presentation
(in thousands, except per share amounts)
   
Three Months Ended December 31,
 
   
2006 GAAP
 
Adjustments
     
2006 Adjusted
 
2005 Adjusted (2)
   
(Unaudited)
 
Net sales
 
$
230,909
             
$
230,909
 
$
186,227
 
Cost of Sales
   
160,319
 
$
(641
)
 
(1)
 
 
159,678
   
128,061
 
Gross profit
   
70,590
   
641
         
71,231
   
58,166
 
                                 
SG&A expenses
   
44,799
   
(723
)
 
(2)
 
 
44,076
   
36,445
 
                                 
                                 
Operating income
   
25,791
   
1,364
         
27,155
   
21,721
 
                                 
Interest expense and other expenses
   
1,754
               
1,754
   
1,309
 
Income before income taxes
   
24,037
   
1,364
         
25,401
   
20,412
 
Income tax provision
   
9,269
   
529
   
(4)
 
 
9,798
   
7,743
 
Net income
 
$
14,768
 
$
835
       
$
15,603
 
$
12,669
 
                                 
Basic per share amounts
 
$
0.38
 
$
0.02
       
$
0.40
 
$
0.34
 
                                 
Diluted per share amounts
 
$
0.36
 
$
0.02
       
$
0.38
 
$
0.33
 
                                 
Weighted average common shares outstanding:
                               
Basic
   
39,173
               
39,173
   
37,165
 
Diluted
   
41,202
               
41,202
   
38,434
 
 
   
Six Months Ended December 31,
   
2006 GAAP
 
Adjustments
     
2006 Adjusted
 
2005 Adjusted (2)
   
(Unaudited)
                       
Net sales
 
$
441,116
             
$
441,116
 
$
347,324
 
Cost of Sales
   
311,384
 
$
(1,749
)
 
(1)
 
 
309,635
   
243,309
 
Gross profit
   
129,732
   
1,749
         
131,481
   
104,015
 
                                 
SG&A expenses
   
86,645
   
(723
)
 
(2)
 
 
85,922
   
69,540
 
                                 
Operating income
   
43,087
   
2,472
         
45,559
   
34,475
 
                                 
Interest expense and other expenses
   
3,574
   
264
   
(3)
 
 
3,838
   
2,177
 
Income before income taxes
   
39,513
   
2,208
         
41,721
   
32,298
 
Income tax provision
   
15,711
   
383
   
(4)
 
 
16,094
   
12,266
 
Net income
 
$
23,802
 
$
1,825
       
$
25,627
 
$
20,032
 
                                 
                                 
Basic per share amounts
 
$
0.61
 
$
0.05
       
$
0.66
 
$
0.54
 
                                 
Diluted per share amounts
 
$
0.59
 
$
0.04
       
$
0.63
 
$
0.53
 
                                 
Weighted average common shares outstanding:
                               
Basic
   
38,960
               
38,960
   
36,900
 
Diluted
   
40,613
               
40,613
   
37,997
 
 

 

(1) Start-up costs at the Company's West Chester Frozen Foods Facility.
 
   
(2) Adjustment in connection with the requirements of SFAS No. 123R to record compensation when there is a contractual
 
requirement to grant stock options, whether or not such options have been granted. Each quarter the Company marks to market
 
the Black Scholes value of the ungranted stock options. For the three and six month periods ended December 31, 2005,
 
the SFAS No. 123R adjustment was $543 and $1,317, respectively.
 
   
(3) The adjustment of $264 includes $2,510 pre-tax gain on the sale of Biomarche, and $2,246 pre-tax charge for the unfavorable
 
decision by the German government regarding the application of VAT on non-dairy beverages.
 
   
(4) Tax effects of the adjustments described above.