Hain Celestial Group: Third Quarter Results

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The Hain Celestial Group, Inc., a leading natural and organic products company, today reported results for the third quarter ended March 31, 2009. The Company reported third quarter net sales of $267.7 million versus the prior year's third quarter sales of $264.6 million. Sales in the quarter would have been $12.7 million higher without the effects of foreign exchange rate changes between the periods, or 6% higher on a year-over-year basis. Net loss in the third quarter was $41.2 million, or $1.01 per share, on a GAAP basis, driven by the Company taking an estimated after-tax non-cash impairment charge of $48.4 million against goodwill and intangible assets related to the Company's European and Hain Pure Protein's (HPP) reporting units. On a non-GAAP basis(1), adjusted net income was $12.5 million, or $0.31 per share, in the third quarter this year.

"Hain Celestial's U.S. business delivered a solid quarter as health conscious consumers remain committed to natural and organic products even in tough economic times. The macroeconomic conditions in this past quarter -- and particularly at the beginning of the calendar year -- led to sales being challenged by reduced inventories and by consumers using their pantry goods. However, we believe that, as the quarter progressed, our strong brand portfolio and innovative range of healthy products offered through various distribution channels at reasonable prices provided consumers with the core goods they need for a healthy lifestyle. Their response was encouraging. Our results also reflect the sharp emphasis we continue to place on cost containment and productivity initiatives," said Irwin D. Simon, President and Chief Executive Officer of Hain Celestial.

"At the same time, we continue to improve our business, and focus on the challenges in our European and protein operations. In Europe, we are encouraged by recent business wins at our Fakenham facility in the United Kingdom in light of the challenges we have faced, including the under-utilization of the plant. New volume will be coming into the plant starting very soon as we produce new frozen meat-free and dessert products. In late April, HPP's Kosher Valley(TM) brand commenced production of natural, antibiotic-free, vegetarian-fed kosher poultry products at the Plainville facility," commented Irwin Simon.

On a GAAP basis gross margin was 23.5% in the third quarter versus 26.0% in the prior year quarter. If not for the Company's lower margin HPP joint venture with its current mix of commodity versus antibiotic-free mix, gross margin would have been 485 basis points higher this year at 28.3%, versus 126 basis points higher last year at 27.2%. The Company is in the process of de-emphasizing sales of conventional turkey and chicken products while it focuses on antibiotic-free products to improve its mix of sales for future periods.

Adjusted selling, general and administrative expenses declined as a percentage of sales to 17.8% in this year's quarter, compared to 18.4% in the prior year quarter. This reduction comes from the Company's continued successful focus on its cost structure and from productivity initiatives. On a GAAP basis the selling, general and administrative expenses as a percentage of sales was 18.7% in this year's quarter compared to 19.4% in the prior year quarter.

Interest and other expense, net includes interest expense of $3.4 million in the third quarter this year compared to $3.2 million for the prior year quarter. Also included is the minority interest share of the results of our protein operations, amounting to $(3.4) million in this year's quarter compared to $0.3 million in the prior year quarter. The remaining items of other expense in the current year quarter include foreign exchange and the settlement of a pre-acquisition contingency which could not be estimated or accrued at the time of the acquisition in 2003.

The Company recorded an estimated non-cash impairment charge aggregating $52.6 million ($48.4 million after-tax, or $1.19 per share) from the write-down of goodwill and other intangibles in its European and its Hain Pure Protein operations. This non-cash charge had no impact on the Company's compliance with financial covenants under its debt obligations.

The Company's balance sheet remains strong, with $255.6 million in working capital and a current ratio of 2.8 at March 31, 2009. Debt as a percentage of equity was 42.5%, with equity at $685.7 million. Operating free cash flow in the third quarter this year was $3.7 million compared to $6.8 million in the prior year quarter. The Company's cash balance at March 31, 2009 was $27.8 million after reducing outstanding debt by $28.5 million in the quarter.

"In an exceptionally tough operating environment, the Company drove growth in the natural, mass market and specialty channels, while we delivered on productivity and efficiencies. These initiatives, which, coupled with strategic pricing actions, position the Company for future growth," concluded Irwin Simon.

Fiscal Year 2009 Guidance

The Company updated its fiscal year 2009 guidance and narrowed the range to $1.162 to $1.170 billion in sales and $1.25 to $1.30 earnings per share excluding the impairment and other adjustments. The earnings guidance is before deducting $0.10 per share in stock compensation expense to amortize equity grants.

Webcast

Hain Celestial will host a conference call and webcast at 4:30 PM Eastern Daylight Time today to review its third quarter fiscal year 2009 results. The event will be webcast and available under the Investor Relations section of the Company's website at www.hain-celestial.com.

The Hain Celestial Group

The Hain Celestial Group, headquartered in Melville, NY, is a leading natural and organic company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings(R), Terra(R), Garden of Eatin'(R), Health Valley(R), WestSoy(R), Earth's Best(R), Arrowhead Mills(R), MaraNatha(R), SunSpire(R), DeBoles(R), Hain Pure Foods(R), FreeBird(TM), Plainville Farms(R), Kosher Valley(TM), Hollywood(R), Spectrum Naturals(R), Spectrum Essentials(R), Walnut Acres Organic(R), Imagine(R), Rice Dream(R), Soy Dream(R), Rosetto(R), Ethnic Gourmet(R), Yves Veggie Cuisine(R), Granose(R), Realeat(R), Linda McCartney(R), Daily Bread(TM), Lima(R), Grains Noirs(R), Natumi(R), JASON(R), Zia(R) Natural Skincare, Avalon Organics(R), Alba Botanica(R), Queen Helene(R), Tushies(R) and TenderCare(R). Hain Celestial has been providing "A Healthy Way of Life(TM)" since 1993. 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; changes in estimates or judgments related to our impairment analysis of goodwill and other intangible assets; our ability to implement our business and acquisition strategy; our ability to effectively integrate our acquisitions; competition; availability and retention of key personnel; our reliance on third party distributors, manufacturers and suppliers; our ability to maintain existing contacts and secure new customers; changes in customer preferences and consumption; international sales and operations; changes in fuel and commodity costs; the impact of foreign exchange; the resolution of the SEC inquiry and litigation regarding our stock option practices; changes in, or the failure to comply with, government regulations; and other risks detailed from time-to-time in the Company's reports filed with the SEC, including the annual report on Form 10-K for the fiscal year ended June 30, 2008. As a result of the foregoing and other factors, no assurance can be given as to future results, levels of activity and achievements and neither the Company nor any person assumes responsibility for the accuracy and completeness of these statements.

Non-GAAP Financial Measures

Management believes that the non-GAAP financial measures presented provide useful additional information to investors about current trends in the Company's operations and are useful for period-over-period comparisons of operations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should only be read in connection with the Company's condensed consolidated statements of earnings presented in accordance with GAAP.

(1) See Reconciliation of GAAP Results to Non-GAAP Presentation Table

                          THE HAIN CELESTIAL GROUP, INC.
                            Consolidated Balance Sheets
                                  (In thousands)

                                                        March 31,    June 30,
                                                           2009        2008
                                                       (Unaudited)

    ASSETS
    Current assets:
      Cash and cash equivalents                           $27,784     $58,513
      Trade receivables, net                              128,595     118,867
      Inventories                                         204,599     175,667
      Deferred income taxes                                13,277      12,512
      Other current assets                                 26,401      27,482
        Total current assets                              400,656     393,041

    Property, plant and equipment,  net                   142,336     159,089
    Goodwill, net                                         454,197     550,238
    Trademarks and other intangible assets, net           154,366     136,861
    Other assets                                           18,714      20,155
        Total assets                                   $1,170,269  $1,259,384

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued expenses              $140,045    $145,186
      Income taxes payable                                  4,735         907
      Current portion of long-term debt                       289         222
        Total current liabilities                         145,069     146,315

    Deferred income taxes                                  17,198      26,524
    Other noncurrent liabilities                            2,158       5,012
    Long-term debt, less current portion                  291,044     308,220
        Total liabilities                                 455,469     486,071

    Minority Interest                                      29,134      30,502

    Stockholders' equity:
      Common stock                                            415         411
      Additional paid-in capital                          500,474     488,650
      Retained earnings                                   211,020     237,008
      Treasury stock                                      (15,518)    (15,473)
      Accumulated other comprehensive income (loss)       (10,725)     32,215
        Total stockholders' equity                        685,666     742,811

        Total liabilities and stockholders' equity     $1,170,269  $1,259,384



                          THE HAIN CELESTIAL GROUP, INC.
                      Consolidated Statements of Operations
                     (in thousands, except per share amounts)

                                           Three Months       Nine Months
                                          Ended March 31,    Ended March 31,
                                          2009      2008     2009      2008
                                                     (Unaudited)

    Net sales                          $267,723  $264,632  $872,601  $778,110
    Cost of sales                       204,933   195,910   664,722   561,393
    Gross profit                         62,790    68,722   207,879   216,717

    SG&A expenses                        49,954    51,291   160,636   151,719
    Impairment of goodwill and
     intangibles                         52,567         -    52,567         -

    Operating income (loss)             (39,731)   17,431    (5,324)   64,998

    Interest and other expenses, net      1,072     3,528    10,925     8,799
    Income (loss) before income taxes   (40,803)   13,903   (16,249)   56,199
    Income tax provision                    347     5,588     9,739    21,482
    Net income (loss)                  $(41,150)   $8,315  $(25,988)  $34,717


    Basic net income (loss) per share    $(1.01)    $0.21    $(0.64)    $0.87

    Diluted net income (loss) per share  $(1.01)    $0.20    $(0.63)    $0.83

    Weighted average common shares
     outstanding:
      Basic                              40,555    40,101    40,415    40,058
      Diluted                            40,672    41,588    41,065    41,837



                         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 March 31,
                                                             2009      2008
                                   2009 GAAP  Adjustments  Adjusted  Adjusted
                                                  (Unaudited)
    Net sales                       $267,723               $267,723  $264,632
    Cost of Sales                    204,933    $(5,780)    199,153   188,102
    Gross profit                      62,790      5,780      68,570    76,530

    SG&A expenses                     49,954     (2,191)     47,763    48,610
    Impairment of goodwill and
     intangibles                      52,567    (52,567)          -         -

    Operating income (loss)          (39,731)    60,538      20,807    27,920

    Interest and other expenses,
     net                               1,072        191       1,263     3,528
    Income (loss) before income
     taxes                           (40,803)    60,347      19,544    24,392

    Income tax provision                 347      6,727       7,074     9,595
    Net income (loss)               $(41,150)   $53,620     $12,470   $14,797

    Basic net income (loss) per
     share                            $(1.01)     $1.32       $0.31     $0.37

    Diluted net income (loss) per
     share                            $(1.01)     $1.32       $0.31     $0.36

    Weighted average common shares
     outstanding:
      Basic                           40,555                 40,555    40,101
      Diluted                         40,672                 40,672    41,588


                                             FY 2009            FY 2008
                                         Impact             Impact
                                           on     Impact      on     Impact
                                         Income     on      Income     on
                                         before   Income    before   Income
                                         income     tax     income     tax
                                          taxes  provision   taxes  provision
                                                      (Unaudited)
    Start-up and integration costs
     related to the Company's Kosher
     Valley poultry operations           $2,300     $883

    Start-up costs at the Fakenham
     manufacturing facility related
     to the integration of the
     Haldane Foods frozen meat-free
     operations and, in 2009,
     unabsorbed overhead resulting from
     expiration of a co-pack agreement
     with the prior owner                 1,532      429    $1,796     $685

    SKU rationalization, severance
     and other reorganization costs       1,011      378     6,012    2,296

    Other items                             937      358
                         Cost of sales    5,780    2,048     7,808    2,981

    Professional fees and other
     expenses incurred in connection
     with the review of the Company's
     stock option practices, net of
     insurance recovery                  (2,303)    (861)      682      261

    Stock compensation expense            1,558      583      (459)    (174)

    Severance and other
     reorganization costs                 1,946      728     2,458      939

    Other items                             990      370
                         SG&A expenses    2,191      820     2,681    1,026

    Impairment of goodwill and
     intangibles                         52,567    4,153         -        -

    Other (income) expenses, net           (191)    (294)

      Interest and other expenses, net     (191)    (294)        -        -

                     Total adjustments  $60,347   $6,727   $10,489   $4,007



                          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)

                                            Nine Months Ended March 31,
                                                             2009      2008
                                   2009 GAAP  Adjustments  Adjusted  Adjusted
                                                    (Unaudited)
    Net sales                       $872,601               $872,601  $778,110
    Cost of Sales                    664,722    $(12,304)   652,418   550,428
    Gross profit                     207,879      12,304    220,183   227,682

    SG&A expenses                    160,636     (11,649)   148,987   144,710
    Impairment of goodwill and
     intangibles                      52,567     (52,567)         -         -

    Operating income (loss)           (5,324)     76,520     71,196    82,972

    Interest and other expenses, net  10,925        (834)    10,091    10,801
    Income (loss) before income
     taxes                           (16,249)     77,354     61,105    72,171

    Income tax provision               9,739      12,571     22,310    27,512
    Net income (loss)               $(25,988)    $64,783    $38,795   $44,659

    Basic net income (loss) per
     share                            $(0.64)      $1.60      $0.96     $1.11

    Diluted net income (loss) per
     share                            $(0.63)      $1.58      $0.94     $1.07

    Weighted average common shares
     outstanding:
      Basic                           40,415                 40,415    40,058
      Diluted                         41,065                 41,065    41,837


                                             FY 2009           FY 2008
                                         Impact            Impact
                                           on     Impact     on     Impact
                                         Income     on     Income     on
                                         before   Income   before   Income
                                         income     tax    income     tax
                                          taxes  provision  taxes  provision
                                                    (Unaudited)
    Start-up and integration costs
     related to the Company's
     Kosher Valley poultry operations    $2,300     $883

    Start-up costs at the Fakenham
     manufacturing facility related
     to the integration of the Haldane
     Foods frozen meat-free operations
     and, in 2009, unabsorbed overhead
     resulting from expiration of a
     co-pack agreement with the prior
     owner                                6,647    1,862   $4,953   $1,858

    SKU rationalization, severance and
     other reorganization costs           1,699      602    6,012    2,296

    Impact of co-pack pricing
     agreement related to acquisition
     of turkey processing facility          721      277

      Other items                           937      358
                         Cost of sales   12,304    3,982   10,965    4,154

    Professional fees and other
     expenses incurred in connection
     with the review of the Company's
     stock option practices, net of
     insurance recovery                   1,416      530    4,695    1,777

    Stock compensation expense            4,455    1,666     (144)     (56)

    Legal settlement                      1,350      505

    Severance and other
     reorganization costs                 3,438    1,268    2,458      939

    Other items                             990      370
                         SG&A expenses   11,649    4,339    7,009    2,660

    Impairment of goodwill and
     intangibles                         52,567    4,153        -        -

    Other (income) expenses, net            834       97

    Gain on the sale of the Company's
     investment in a rice cake
     manufacturing joint venture in
     Belgium recorded in the first
     quarter of FY 2008                                    (2,002)      (784)
      Interest and other expenses, net      834       97   (2,002)      (784)

                     Total adjustments  $77,354  $12,571  $15,972     $6,030



SOURCE: The Hain Celestial Group, Inc.
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