MELVILLE, N.Y., May 3, 2006 /PRNewswire-FirstCall via COMTEX/ -- The Hain Celestial Group, Inc. (HAIN) , a leading natural and organic food and personal care products company, today reported strong sales and earnings growth for the third quarter ended March 31, 2006. Hain Celestial reported record sales of $196.4 million in its third quarter, a 22% increase over the prior year's $161.3 million. Net income reached $9.7 million, an increase of 27% from the prior year's $7.7 million. Diluted earnings for the third quarter this year were $0.25 per share as compared to $0.21 in the prior year's third quarter.
"We are very pleased to once again report record sales and strong earnings, realizing substantial growth in sales, operating profits and net income," said Irwin D. Simon, President and Chief Executive Officer of The Hain Celestial Group. "By nearly every measure, people across Hain Celestial delivered excellent performance this quarter while managing higher input and fuel-related costs and the challenges of unusually warm weather nationwide."
"Our Grocery and Snacks unit remains strong, with impressive performance across its brands, including Earth's Best(R), Garden of Eatin'(R), Terra(R), Rice Dream(R), WestSoy(R) and Imagine(R) soups. Celestial Seasonings(R) generated growth even with the effects of warmer weather, and we are quite pleased with our Personal Care unit, which after nearly two years of ownership is being led by strong growth in the Jason(R) brand with exciting new product introductions and with the new brands acquired from Para Laboratories, Inc. After a period of weak sales in Canada, we are pleased to see double digit growth in our brands lead by a quality management team at Hain Celestial Canada."
The Company's gross margin for the third quarter was 30.4% versus 28.2% in the prior year period before consolidation of the Company's lower margin Hain Pure Protein joint venture, which reduced gross margin by 1.0%. Operating income grew 47% to $17.2 million versus $11.7 million in the prior year period while selling, general and administrative expenses decreased as a percentage of sales to 20.6% versus the prior year's 20.9%.
Interest expense and other expenses in the quarter were $0.4 million higher than in the prior year's quarter due to increased market rates and from higher borrowings for acquisitions.
The Company's average diluted shares outstanding during the third quarter were 39.5 million, an increase of 2.2 million shares or 6%, over the prior year's quarter. This increase in shares was caused principally by the issuance of shares in the December 2005 acquisition of Spectrum Organic Products, Inc. and incremental equivalent shares included in the computation due to the higher market price of the Company's stock. The higher share count reduced earnings by $0.01 per share in the third quarter when compared to the prior year.
The Company's balance sheet remains strong with $158.7 million in working capital and a current ratio of 2.7 to 1 at the end of the third quarter. Debt as a percentage of equity was 23% with total equity at $595 million at March 31, 2006. The cash conversion cycle improved to 70 days this period versus 78 days in the prior year period.
"As we proceed with our long-term strategy of building our brands in the natural and organic category, we continue to make progress with our margin enhancement and cash conversion, the results of which continue to be demonstrated quarter by quarter in our operating results. The execution of our strategy is creating a foundation for sustainable top and bottom line growth," commented Mr. Simon. "We are excited about our opportunities here in the United States and internationally, particularly with the announcement this morning of the establishment of a base of operations in the United Kingdom to expand our European reach. With our secure capital structure and a solid management team in place, Hain Celestial is well-positioned to grow as a leader in the natural and organic sector."
In separate press releases issued today, the Company announced the acquisition of the fresh prepared foods business in Luton, England from the H.J. Heinz Company and its exclusive negotiations to purchase the frozen meat- free business including the Linda McCartney brand (under license). The Company also announced the closing of a new Amended and Restated Credit Agreement with significantly improved terms and the private placement of $150 million of senior notes due 2016.
Fiscal Year 2006 Outlook
The Company anticipates revenues of $185 to $190 million and earnings of $0.22 to $0.23 per share for the fourth quarter to conclude its fiscal year ending June 30, 2006. The Company's guidance anticipates sales contributions from the recently acquired Spectrum Organic Products and the brands of Para Laboratories, as well as from Hain Celestial United Kingdom, which are expected to be accretive to earnings in fiscal year 2007.
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), Raised Right(TM), Hollywood(R), Spectrum Naturals(R), Spectrum Essentials(R), Walnut Acres Organic(TM), Imagine Foods(R), Rice Dream(R), Soy Dream(R), Rosetto(R), Ethnic Gourmet(R), Yves Veggie Cuisine(R), Lima(R), Biomarche(TM), Grains Noirs(R), Natumi(R), JASON(R), Zia(R) Natural Skincare, Queen Helene(R), Batherapy(R) and Footherapy(R). For more information, visit http://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, 2005. 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.