MELVILLE, N.Y., Nov 01, 2007 /PRNewswire-FirstCall via COMTEX/ -- The Hain Celestial Group, Inc. (HAIN) , a leading natural and organic food and personal care products company, today reported results for the first quarter ended September 30, 2007. The Company reported net sales of $237.2 million, a 13% increase compared with $209.9 million in the prior year first quarter. GAAP net income for the first quarter was $10.8 million compared to the prior year's $8.8 million, a 22% increase. The Company reported GAAP earnings of $0.26 per diluted share, an 18% increase over the prior year's $0.22 per diluted share.
Adjusted earnings in the quarter totaled $0.29 per diluted share. The reported results include charges of $0.4 million ($0.3 million after tax or $0.01 per diluted share) related to SFAS No. 123R charges for ungranted stock options; $1.1 million ($0.7 million after tax or $0.02 per diluted share) of acquisition related start-up costs at the Company's Fakenham facility into which the frozen meat-free operations of Haldane Foods have been consolidated; $2.3 million ($1.4 million after tax or $0.03 per diluted share) for professional fees associated with the previously announced review of the Company's stock options practices; and a gain of $2.0 million ($1.2 million after tax or $0.03 per diluted share) from the sale of a joint venture investment in a rice cake manufacturing facility in Belgium.
"Our new fiscal year is off to an excellent start with continued strong sales from Earth's Best(R), Arrowhead Mills(R), Imagine(R), Health Valley(R), Spectrum(R), Rice Dream(R), Terra(R), Garden of Eatin'(R), Westbrae Natural(R) Casbah(R), DeBoles(R) and Freebird(TM), along with the Avalon(R) and Alba(R) brands in Personal Care. We continue to sustain solid results from sales of our U.S. brands in Canada, Europe and the United Kingdom alongside the contributions from brands produced by our operations in those areas of the world," said Irwin D. Simon, President and Chief Executive Officer of Hain Celestial. "We are pleased to see improved results from Celestial Seasonings(R) with its restaged brand, updated logo, and new packaging. We are also excited about Celestial Seasonings new products with Saphara(TM) premium organic tea and Celestial Seasonings premium organic coffee just beginning to roll out in the United States."
The Company reported gross margin of 29% in the first quarter, compared to 28% in the prior year first quarter, reflecting continued improvements in operating efficiencies in a challenging, inflationary cost environment. Adjusted for the effects of the Fakenham start-up cost, the Company achieved adjusted gross margin of 29.5% in the 2008 quarter compared to adjusted gross margin of 28.6% in the prior year quarter.
"In addition to various cost-saving initiatives, in the second quarter we implemented a 3-to-5% price increase across many of our global brands to offset input cost pressures. These pricing actions should benefit the second half of fiscal year 2008," commented Irwin Simon.
Selling, general and administrative expenses for the first quarter was 21.3% of net sales, or 20.2% adjusted, compared to 19.9% in the prior year. The professional fees of the stock options review and the SFAS 123R charge for ungranted stock options are included in selling, general and administrative expenses.
Interest expense, net, in the first quarter was $2.7 million versus $1.8 million in the prior year quarter. The higher interest cost this year was the result of higher borrowings for acquisitions.
Average diluted shares outstanding for the quarter were 41.8 million, an increase of 1.8 million shares, or nearly 5%, over the prior year quarter.
The Company's tax rate for the first quarter was 37.6% versus 36.7% in the prior full fiscal year 2007.
The Company's balance sheet remains strong, with $210.4 million in working capital and a current ratio of 2.7 at September 30, 2007. Debt as a percentage of equity was 30% with equity at $716.6 million. The number of days in the Company's cash conversion cycle was 75 compared to 67 days in the prior year period, due to higher levels of inventory for Celestial Seasonings and Earth's Best and the inclusion of our recently acquired Plainville Turkey Farm and Avalon Natural Products. In the first quarter, the Company used $1.8 million of operating free cash flow principally as a result of its inventory build-up for Celestial Seasonings, Earth's Best and capital expenditures at the Fakenham facility.
Fiscal Year 2008 Guidance
The Company reconfirmed its fiscal year 2008 guidance for sales of $1.025 to $1.050 billion and earnings per share of $1.38 to $1.42.
"Lasting consumer awareness of the benefits of natural and organic food and personal care products, coupled with our legacy brands and innovative products, continues to drive our sales growth in various distribution channels. This demand provides the Company with momentum for our solid sales and earnings growth," commented Irwin Simon. "At the same time, as we leverage our existing infrastructure and integrate our acquired operations, we are focused on delivering additional operating efficiencies and margin improvements."
Update on Review of Stock Options and Nasdaq Hearing
On June 15, 2007 the Company announced that it had been informed by the Securities and Exchange Commission that it was conducting an informal inquiry into its stock options practices. The Company at that time also stated its intention to cooperate with the SEC's investigation.
A group of independent directors of the Company's Board of Directors was appointed to review the Company's stock options grants and procedures. This review is being conducted with the assistance of independent legal counsel and experts retained by counsel.
While counsel's review is substantially complete, the Company is not yet in a position to file its Annual Report on Form 10-K for the year ended June 30, 2007 or its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. The Company intends to incorporate the results of the review in the upcoming filing of its Form 10-K. Therefore, the financial information included in this release remains unaudited and certain items in the balance sheets at June 30, 2007 and September 30, 2007, such as stockholders' equity and deferred tax accounts, are subject to the conclusion of the review.
In response to the previously disclosed notice of delisting from The NASDAQ Stock Market, Inc., Hain Celestial met with the NASDAQ Listing Qualifications Panel on October 31, 2007, pursuant to NASDAQ's procedures following Hain Celestial's request for a hearing and continued listing. Pending a decision by the Panel, Hain Celestial shares will remain listed on The NASDAQ Global Select Market.
The Hain Celestial Group
The Hain Celestial Group (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(R), Terra Chips(R), Garden of Eatin'(R), Health Valley(R), WestSoy(R), Earth's Best(R), Arrowhead Mills(R), DeBoles(R), Hain Pure Foods(R), FreeBird(TM), Plainville Farms(TM), Hollywood(R), Spectrum Naturals(R), Spectrum Essentials(R), Walnut Acres Organic(TM), Imagine Foods(TM), Rice Dream(R), Soy Dream(R), Rosetto(R), Ethnic Gourmet(R), Yves Veggie Cuisine(R), Linda McCartney(R), Realeat(R), Lima(R), Grains Noirs(R), Natumi(R), JASON(R), Zia(R) Natural Skincare, Avalon Organics(R), Alba Botanica(R) and Queen Helene(R). 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; the results of the stock options review described above; compliance with government regulations, including the rules on proxy solicitations when necessary or required, and other risks detailed from time- to-time in the Company's reports filed with the Securities and Exchange Commission, including the annual 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.