Horizon Organic Holding Corporation, the marketer of the leading brand of certified organic foods in the U.S., increased fourth quarter 2002 earnings from continuing operations 10 percent to $1.4 million, or $0.13 per diluted share, compared to $1.3 million, or $0.12 per share in the fourth quarter of 2001. Sales increased 21 percent to $53.0 million.
For the year, earnings from continuing operations more than doubled to $3.6 million, or $0.34 per diluted share, from $1.7 million, or $0.16 per share a year earlier. Full year sales grew 18 percent to $187.5 million from $158.9 million in 2001. Both fourth quarter and year end earnings results met analysts"" consensus estimates.
Results from continuing operations exclude the dairy farms in Idaho, where a pending sale is being finalized, and Colorado, where a management agreement was terminated in September. These discontinued operations generated losses of $426,000, or $0.04 per share, during the quarter and $3.6 million or $0.34 per share, for the year including anticipated selling costs for the Idaho farm. Including these discontinued operations, net income for the 2002 quarter was $964,000, or $0.09 per share, compared with $941,000, or $0.09 per share, in the comparable 2001 period. On the same basis, the Company broke even for all of 2002, compared with a net income of $1.7 million, or $0.17 per share, in 2001.
"We have made excellent progress over the past two years, successfully combining rapid sales growth with solid continuing operations earnings performance," said Chuck Marcy, Horizon Organic President and CEO. "We are especially pleased that we strengthened our business in both the U.S. and the U.K. in 2002."
Marcy cited the following key accomplishments during 2002: -- Sales growth, which registered 18 percent for the year, accelerated in each quarter of the year, reaching 25 percent in the U.S. and 6 percent in the U.K. in the fourth quarter. -- Fourth quarter U.S. sales growth included a 26 percent increase in milk sales and a 26 percent increase in higher margin dairy products. -- The Company expanded milk distribution by 10 percentage points during the year. As a result, in the fourth quarter, Horizon Organic products were sold in 60 percent of U.S. grocery stores. -- Horizon Organic generated significant consumer awareness and brand recognition as it invested in sales and marketing programs surrounding the introduction of the U.S. Department of Agriculture""s new National Organic Standards in October. This activity brought many new consumers to Horizon Organic. -- For the year, the Company achieved a gross margin of 31.9 percent of sales, a 2.3 percentage point improvement over 2001, with significant improvement in both the U.S. and U.K.
"This was a very important year for our Company," Marcy said. "We were able to increase distribution and successfully introduce new products. This resulted in accelerated sales growth and an expanded consumer base. At the same time, we were able to improve efficiencies and increase our gross margin."
In particular Marcy cited the successful introduction of Horizon Organic single serve milk in the U.S. and the introduction of Rachel""s Organic milk in the U.K. Both resulted in additional distribution with existing customers as well as opening new distribution channels. He also said that the Company took a number of steps to improve worldwide margins. In the U.S. the Company was better able to balance its milk supply, reduce processing costs and take full advantage of new information systems. In the U.K., the improvement reflects increased branded sales, lower processing costs due to the affiliation with Dairy Crest and improved efficiencies at the Company""s yogurt manufacturing facility in Wales.
"We have an aggressive growth plan for 2003, with continued emphasis on brand-building activities, expanded distribution through existing and new channels and introducing an entirely new line of exciting products," Marcy said. "We also expect to see accelerated sales growth in the U.K., as we seek new markets for Rachel""s Organic milk and yogurt."
The Company confirmed its previous 2003 guidance with sales growth anticipated to be 20 to 25 percent and growth in earnings per share from continuing operations in the high teens to low twenties. Accordingly, Marcy said he was comfortable with first quarter consensus earnings estimates of $0.07 to $0.09 per share. Further, he said the Company made significant progress on the sale of its Idaho farm during the last few weeks and believes that closing should occur in early 2003.
Horizon Organic management will host a conference call on Wednesday, February 5, 2003 at 11:30 a.m. Eastern Time to discuss the Company""s year-to- date performance and outlook. To hear the call in a listen only mode, participants should dial 1-800-603-5503 and refer to reservation #7712733 ten minutes prior to the event, or visit the Company""s web site atwww.horizonorganic.comfor a live simulcast and replay of the call.
Horizon Organic markets the leading brand of certified organic foods in the U.S. and the leading brand of organic milk in both the U.S. and U.K. In the U.S. its products include organic milk, a full-line of organic dairy products, organic eggs and juices. In the U.K., the Company markets organic yogurt, milk and butter under the Rachel""s Organic brand. For more information, please visit the Company""s web site atwww.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 to maintain and expand its brands, avoid adverse publicity, manage its supply chain efficiently, continue and effectively manage its rapid growth, and maintain key management, as well as the volatility in the cost of organic farm products, increased competition, changes in consumer preferences, and increases in charges under governmental dairy programs. These factors and others are more fully discussed in the Company""s Annual Report on Form 10-K for the year ended December 31, 2001.
HORIZON ORGANIC HOLDING CORPORATION SELECTED FINANCIAL DATA (In thousands, except per share data) Three Months Ended December 31, 2002 %NS 2001 %NS Net sales $52,975 100.0% $43,657 100.0% Growth vs. prior year 21.3% 15.5% Cost of sales 35,986 67.9% 30,289 69.4% Gross profit 16,989 32.1% 13,368 30.6% Selling expense 11,297 21.3% 8,149 18.7% General and administrative 3,035 5.7% 2,168 5.0% Intangible assets amortization 328 0.6% 779 1.8% Operating income 2,329 4.4% 2,272 5.2% Interest and other, net (50) -0.1% (174) -0.4% Income from continuing operations before income tax 2,279 4.3% 2,098 4.8% Income tax expense (889) -1.7% (840) -1.9% Net income from continuing operations 1,390 2.6% 1,258 2.9% Income (loss) from discontinued operations, net (426) -0.8% (317) -0.7% Net income (loss) 964 1.8% 941 2.2% Earnings per share from continuing operations Basic $0.13 $0.12 Diluted $0.13 $0.12 Income (loss) per share from discontinued operations Basic ($0.04) ($0.03) Diluted ($0.04) ($0.03) Earnings (loss) per share Basic $0.09 $0.09 Diluted $0.09 $0.09 Weighted average shares outstanding: Basic 10,272 10,110 Diluted 10,609 10,441 HORIZON ORGANIC HOLDING CORPORATION SELECTED FINANCIAL DATA (In thousands, except per share data) Year Ended December 31, 2002 %NS 2001 %NS Net sales $187,537 100.0% $158,870 100.0% Growth vs. prior year 18.0% 24.9% Cost of sales 127,681 68.1% 111,847 70.4% Gross profit 59,856 31.9% 47,023 29.6% Selling expense 41,390 22.1% 31,341 19.7% General and administrative 10,704 5.7% 8,036 5.0% Intangible assets amortization 1,307 0.7% 3,115 2.0% Operating income 6,455 3.4% 4,531 2.9% Interest and other, net (545) -0.3% (1,750) -1.1% Income from continuing operations before income tax 5,910 3.2% 2,781 1.8% Income tax expense (2,305) - 1.2% (1,119) -0.7% Net income from continuing operations 3,605 1.9% 1,662 1.0% Income (loss) from discontinued operations, net (3,638) -1.9% 78 0.0% Net income (loss) (33) 0.0% 1,740 1.1% Earnings per share from continuing operations Basic $0.35 $0.16 Diluted $0.34 $0.16 Income (loss) per share from discontinued operations Basic ($0.35) $0.01 Diluted ($0.34) $0.01 Earnings (loss) per share Basic ($0.00) $0.17 Diluted ($0.00) $0.17 Weighted average shares outstanding: Basic 10,204 10,007 Diluted 10,583 10,213 Selected Balance Sheet Data December 31, December 31, 2002 2001 Working capital $23,250 $21,885 Total assets 128,207 129,268 Current liabilities 45,546 25,379 Long-term debt, less current portion 14,110 40,313 Stockholders"" equity 65,653 60,754 EBITDA Data Three Months Year Ended December 31, Ended December 31, 2002 2002 EBITDA from continuing operations $3,290 $10,155 EBITDA from discontinued operations 460 529 Total EBITDA 3,750 10,684