Hain Celestial: Second Quarter Results

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The Hain Celestial Group, Inc., a leading natural and organic products company, reported results for the second quarter ended December 31, 2008. The Company reported solid second quarter net sales of $315.6 million, a 14.2% increase over the prior year's second quarter sales of $276.2 million. Net income in the second quarter was $8.1 million on a GAAP basis and $14.9 million adjusted(1). Diluted earnings per share for the second quarter totaled $0.20 on a GAAP basis and $0.36 adjusted(1).

"In these challenging economic times, we are seeing that consumers are still health conscious and seeking natural and organic products in a variety of distribution channels. Despite a strong start in the quarter, sales moderated toward the end of the quarter with the acceleration of the economic downturn. Although there is evidence that some customers are reducing their inventories and some consumers are destocking their pantries, we continue to see growth in key categories, supported by our innovative new products," said Irwin D. Simon, President and Chief Executive Officer. "Inventory reductions, grain costs at Hain Pure Protein ("HPP") and the lag in fully realizing our August price increase impacted our earnings by almost $0.11 per share this quarter. We continue to evaluate our business while aggressively managing costs with a sharpened focus on productivity to position the Company for the difficult worldwide economic macroeconomic conditions. The work we have done in the past four years in this regard gives a strong foundation from which to implement these improvements"

Adjusted gross margin for the same brands operated by the Company (other than the Company's lower margin HPP joint venture) was 28.7% in the second quarter, versus 30.9% in the prior year quarter. Inflation in input costs caused a 458 basis point decline in gross margin with productivity improvements recouping 95 basis points. The August price increase contributed 304 basis points to gross margin. The full benefit of the price increase is expected to improve the Company's revenues and margin during the second half of the year. Increased consumer couponing negatively impacted margin by 44 basis points, and disappointing margin performance in the United Kingdom impacted margin by 95 basis points.

Despite strong holiday sales, HPP faced challenges in the protein category with increased grain costs year-over-year and the effects of an unfavorable antibiotic-free to conventional sales mix. As a result, HPP gross margin declined by 670 basis points versus the prior year quarter. The Company and HPP should benefit from lower commodity costs in the second half of the year.

Adjusted selling, general and administrative expenses declined as a percentage of sales to 15.4% in this year's quarter compared to 17.5% in the prior year quarter. This reduction comes from the Company's continued successful focus on its cost structure and from the increased scale of HPP.

Interest expense, net, was $4.1 million in the second quarter compared to $3.0 million for the prior year quarter. The Company's interest cost this year includes the cost of higher borrowings resulting from acquisitions during the prior fiscal year. Foreign exchange losses from the rapid strengthening of the U.S. dollar amounted to $1.4 million during the second quarter this year versus $0.2 million in the prior year quarter. The Company's effective tax rate for the current period increased to 38.5% to bring the full year estimated rate to 38.25%.

The Company's balance sheet remains strong, with $275.5 million in working capital and a current ratio of 3.0 at December 31, 2008. Debt as a percentage of equity was 43.9%, with equity at $729.1 million. The Company's cash conversion cycle was 80 days compared to 72 days in the prior year. Operating free cash flow in the second quarter this year was $9.4 million compared to $4.9 million in the prior year quarter. The Company's cash balance at December 31, 2008 was $50 million.

"The Company remains well-positioned for the difficult worldwide economic slowdown. As we benefit from stabilizing input costs and from pricing in the second half of the year, we'll provide market support where necessary to provide consumers with healthy, innovative products," concluded Irwin Simon.

In a separate press release issued today, the Company announced a license agreement with Martha Stewart Living Omnimedia, Inc. to produce natural home cleaning solutions, which the Company expects to introduce in the Fall of 2009.

Fiscal Year 2009 Guidance

The Company updated its fiscal year 2009 guidance to account for the rapid deceleration in global economic conditions, and now expects $1.175 to $1.20 billion in sales and $1.38 to $1.42 earnings per share. Guidance has been reset to reflect current economic conditions and may change based on future events. This earnings guidance is before deducting $0.08 per share in stock compensation expense to amortize the previous year's equity grants.

Webcast

Hain Celestial will host a conference call and webcast at 4:30 PM Eastern Standard Time today to review its second 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 (NASDAQ: HAIN - News), 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®, Garden of Eatin'®, Health Valley®, WestSoy®, Earth's Best®, Arrowhead Mills®, MaraNatha®, SunSpire®, DeBoles®, Hain Pure Foods®, FreeBird(TM), Plainville Farms®, Hollywood®, Spectrum Naturals®, Spectrum Essentials®, Walnut Acres Organic®, Imagine®, Rice Dream®, Soy Dream®, Rosetto®, Ethnic Gourmet®, Yves Veggie Cuisine®, Granose®, Realeat®, Linda McCartney®, Daily Bread(TM), Lima®, Grains Noirs®, Natumi®, JASON®, Zia® Natural Skincare, Avalon Organics®, Alba Botanica®, Queen Helene®, Tushies® and TenderCare®. 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; 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; changes in customer preferences; international sales and operations; escalating fuel and commodity costs; 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)

                                                  December 31,   June 30,
                                                 -------------  ----------
                                                      2008         2008
                                                 -------------  ----------
                                                  (Unaudited)

    ASSETS
    Current assets:
      Cash and cash equivalents                        $49,912     $58,513
      Trade receivables, net                           113,586     118,867
      Inventories                                      212,763     175,667
      Deferred income taxes                             12,456      12,512
      Other current assets                              21,964      27,482
                                                 -------------  ----------
        Total current assets                           410,681     393,041

    Property, plant and equipment, net                 143,448     159,089
    Goodwill, net                                      529,154     550,238
    Trademarks and other intangible assets,
     net                                               142,072     136,861
    Other assets                                        19,946      20,155
                                                 -------------  ----------
        Total assets                                $1,245,301  $1,259,384
                                                 =============  ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued expenses           $133,953    $145,186
      Income taxes payable                                 917         907
      Current portion of long-term debt                    267         222
                                                 -------------  ----------
        Total current liabilities                      135,137     146,315

    Deferred income taxes                               25,023      26,524
    Other noncurrent liabilities                         2,127       5,012
    Long-term debt, less current portion               319,608     308,220
                                                 -------------  ----------
        Total liabilities                              481,895     486,071

    Minority Interest                                   34,316      30,502

    Stockholders' equity:
      Common stock                                         414         411
      Additional paid-in capital                       497,114     488,650
      Retained earnings                                252,170     237,008
      Treasury stock                                   (15,517)    (15,473)
      Accumulated other comprehensive income
       (loss)                                           (5,091)     32,215
                                                 -------------  ----------
        Total stockholders' equity                     729,090     742,811
                                                 -------------  ----------
        Total liabilities and stockholders'
         equity                                     $1,245,301  $1,259,384
                                                 =============  ==========



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


                                  Three Months Ended   Six Months Ended
                                      December 31,       December 31,
                                  ------------------  ------------------
                                    2008      2007      2008      2007
                                  --------  --------  --------  --------
                                               (Unaudited)

    Net sales                     $315,561  $276,233  $604,878  $513,478
    Cost of sales                  241,838   197,089   459,789   365,483
                                  --------  --------  --------  --------
    Gross profit                    73,723    79,144   145,089   147,995

    SG&A expenses                   54,212    49,882   110,682   100,428
                                  --------  --------  --------  --------

    Operating income                19,511    29,262    34,407    47,567

    Interest and other
     expenses, net                   6,284     4,312     9,853     5,271
                                  --------  --------  --------  --------
    Income before income taxes      13,227    24,950    24,554    42,296
    Income tax provision             5,087     9,368     9,392    15,894
                                  --------  --------  --------  --------
    Net income                      $8,140   $15,582   $15,162   $26,402
                                  ========  ========  ========  ========


    Basic net income per share       $0.20     $0.39     $0.38     $0.66
                                  ========  ========  ========  ========

    Diluted net income per share     $0.20     $0.37     $0.37     $0.63
                                  ========  ========  ========  ========
    Weighted average common
     shares outstanding:
      Basic                         40,464    40,048    40,344    40,037
                                  ========  ========  ========  ========
      Diluted                       41,025    42,096    41,262    41,961
                                  ========  ========  ========  ========



                          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,
                                    -----------------------------------------
                                      2008                   2008      2007
                                      GAAP   Adjustments   Adjusted  Adjusted
                                    -----------------------------------------
                                                   (Unaudited)

    Net sales                       $315,561               $315,561  $276,233
    Cost of Sales                    241,838     $(2,984)   238,854   195,005
                                    -----------------------------------------
    Gross profit                      73,723       2,984     76,707    81,228

    SG&A expenses                     54,212      (5,690)    48,522    48,240
                                    -----------------------------------------

    Operating income                  19,511       8,674     28,185    32,988

    Interest and other expenses,
     net                               6,284      (1,385)     4,899     4,312
                                    -----------------------------------------
    Income before income taxes        13,227      10,059     23,286    28,676

    Income tax provision               5,087       3,305      8,392    10,753
                                    -----------------------------------------
    Net income                        $8,140      $6,754    $14,894   $17,923
                                    =========================================

    Basic net income per share         $0.20       $0.17      $0.37     $0.45
                                    =========================================

    Diluted net income per share       $0.20       $0.16      $0.36     $0.43
                                    =========================================

    Weighted average common shares
     outstanding:
      Basic                           40,464                 40,464    40,048
                                    =========================================
      Diluted                         41,025                 41,025    42,096
                                    =========================================


                                         FY 2009                FY 2008
                                  ---------------------  ---------------------
                                   Impact on             Impact on
                                    Income   Impact on     Income   Impact on
                                    before     Income      before     Income
                                     income     tax        income      tax
                                     taxes    provision     taxes    provision
                                  ---------------------  ---------------------
                                                   (Unaudited)
    Start-up costs at the
     Fakenham manufacturing
     facility related to the
     integration of the
     Haldane Foods frozen
     meat-free operations
     and, in 2009, also
     includes unabsorbed
     overhead resulting from
     expiration of a
     co-pack agreement with
     prior owner                   $2,596       $634     $2,084        $774

    Severence and other
     reorganization costs             388        106
                                  ---------------------  ---------------------
                   Cost of sales    2,984        740      2,084         774
                                  ---------------------  ---------------------

    Professional fees and
     other expenses incurred
     in connection with the
     review of the Company's
     stock option practices         1,966        699      1,747         650

    Stock compensation
     expense                        1,480        523       (105)        (39)

    Legal settlement                1,350        505

    Severence and other
     reorganization costs             894        309
                                  ---------------------  ---------------------
                   SG&A expenses    5,690      2,036      1,642         611
                                  ---------------------  ---------------------

    Other (income) expenses,
     net                            1,385        529

                                  ---------------------  ---------------------
              Interest and other
                   expenses, net    1,385        529          -           -
                                  ---------------------  ---------------------

               Total adjustments  $10,059     $3,305     $3,726      $1,385
                                  =====================  =====================



                          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)

                                            Six Months Ended December 31,
                                    -----------------------------------------
                                      2008                   2008      2007
                                      GAAP   Adjustments   Adjusted  Adjusted
                                    -----------------------------------------
                                                     (Unaudited)

    Net sales                       $604,878               $604,878  $513,478
    Cost of Sales                    459,789     $(6,524)   453,265   362,326
                                    -----------------------------------------
    Gross profit                     145,089       6,524    151,613   151,152

    SG&A expenses                    110,682      (9,458)   101,224    96,100
                                    -----------------------------------------

    Operating income                  34,407      15,982     50,389    55,052

    Interest and other expenses, net   9,853      (1,025)     8,828     7,273
                                    -----------------------------------------
    Income before income taxes        24,554      17,007     41,561    47,779

    Income tax provision               9,392       5,844     15,236    17,917
                                    -----------------------------------------
    Net income                       $15,162     $11,163    $26,325   $29,862
                                    =========================================

    Basic net income per share         $0.38       $0.28      $0.65     $0.75
                                    =========================================

    Diluted net income per share       $0.37       $0.27      $0.64     $0.71
                                    =========================================

    Weighted average common shares
     outstanding:
      Basic                           40,344                 40,344    40,037
                                    =========================================
      Diluted                         41,262                 41,262    41,961
                                    =========================================



                                        FY 2009                FY 2008
                                 ---------------------  ----------------------
                                 Impact on              Impact on
                                   Income   Impact on     Income    Impact on
                                   before     Income      before      Income
                                   income      tax        income       tax
                                    taxes    provision     taxes     provision
                                 ---------------------  ----------------------
                                                  (Unaudited)
    Start-up costs at the
     Fakenham manufacturing
     facility related to the
     integration of the
     Haldane Foods frozen meat-
     free operations
     and, in 2009, also
     includes unabsorbed
     overhead resulting from
     expiration of a
     co-pack agreement with
     prior owner                  $5,115      $1,433      $3,157      $1,184

    Severence and other
     reorganization costs            688         224

    Impact of co-pack pricing
     agreement related
     to acquisition of turkey
     processing facility             721         277
                                 ---------------------  ----------------------
                  Cost of sales    6,524       1,934       3,157       1,184
                                 ---------------------  ----------------------

    Professional fees and
     other expenses incurred
     in connection with the
     review of the Company's
     stock option practices        3,719       1,391       4,013       1,505

    Stock compensation
     expense                       2,897       1,083         315         118

    Legal settlement               1,350         505

    Severence and other
     reorganization costs          1,492         540
                                 ---------------------  ----------------------
                  SG&A expenses    9,458       3,519       4,328       1,623
                                 ---------------------  ----------------------

    Other (income) expenses,
     net                           1,025         391      (2,002)       (784)

                                 ---------------------  ----------------------
             Interest and other
                  expenses, net    1,025         391      (2,002)       (784)
                                 ---------------------  ----------------------

              Total adjustments  $17,007      $5,844      $5,483      $2,023
                                 =============================================



Source: The Hain Celestial Group, Inc.
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