Fourth Quarter Revenue Grows 21%, with strong growth of existing brand portfolio and acquired brands
Earnings from operations of $0.11 per share after restructuring and one-time items; Reported loss per share of $0.38
Fourth Quarter includes $21.3 Million of Charges from Expected Sale of Irwindale, CA Health Valley facility and Previously Announced Discontinuation of Supplements Business and Weight Watchers' License
CEO Irwin Simon and CFO Ira Lamel to certify financial statements
MELVILLE, N.Y., Aug. 29 /PRNewswire-FirstCall/ -- The Hain Celestial Group (NASDAQ: HAIN) , the leading natural and organic food company, today announced results for the Fiscal 2002 fourth quarter ended June 30, 2002. Excluding restructuring and one-time items, Hain Celestial reported operating earnings of $0.11 per share compared with $0.08 per share in the prior year quarter. Including restructuring and one-time items, Hain Celestial had a net loss of $12.8 million, or $0.38 per share. In the prior year quarter, the Company earned $2.7 million, or $0.08 per share.
Fourth quarter sales grew 21% to $95.4 million, compared with net sales of $79.1 million in the prior year period. The increase in revenue reflected higher unit volume from the Company's existing portfolio of brands and the contribution of acquisitions. Commenting on the sales growth, Irwin D. Simon, Chairman, President and Chief Executive Officer, said, "I am pleased with our brands' strong growth during the quarter, with particularly good contributions from our snack brands of Terra and Garden of Eatin', Yves Veggie Cuisine, Health Valley and our business in Europe. In this quarter, we also recorded some major distribution gains in the super-mass category of the retail channel, which includes large-scale merchandisers, club stores and food service. We achieved the 21% revenue growth despite a switch in distributors by Wild Oats, one of our major natural customers, which reduced our sales by approximately $3 - 4 million as the terminated distributor stopped buying for Wild Oats and reduced inventories. This impacted our earnings by approximately $ 0.02 per share. We expect that our sales over the next year will recover as the new distributor fully meets Wild Oats' orders."
For the full fiscal year ended June 30, 2002, Hain Celestial reported earnings, including restructuring and one-time items in the fourth quarter, of $3 million, or $ 0.09 per share, compared with $23.6 million, or $ 0.68 per share in the prior year. Net sales grew to $396 million, a 14.5% increase over prior year sales of $345.7 million.
Commenting on the 2002 fiscal year, Mr. Simon said, "This was a challenging year of transition for our business. We are very proud of our accomplishments during the year, particularly in light of an economic slowdown, inventory reductions, the tragic events of 9/11 that affected our entire nation, and the second warmest winter on record. During 2002, we made the decisions necessary to position Hain Celestial to meet the rapidly growing demand for natural and organic food in the super-mass category of the retail channel. We are now ready to better realize that opportunity in 2003. At the same time, our accomplishments during the year -- including the opening of our new Terra Chips manufacturing facility, the acquisitions of Lima and Bio Marche, the agreement to sell the Health Valley manufacturing operations, and numerous significant management changes -- have enabled us to better meet growing demand from our other important partners -- our existing natural and retail customers. These steps, combined with a very strong balance sheet positions us well to achieve our planned results in 2003 -- our tenth anniversary year."
Restructuring and One-time Items
In the fourth quarter:
The Company announced that it has entered into an agreement (subject to customary consents and conditions) relating to the sale of its Irwindale, CA manufacturing facility to one of its existing, high quality co-packers. Under the agreement, the co-packer will acquire all manufacturing assets located at the facility and assume the lease on the property. The co-packer will manufacture product for the Company's Health Valley, Breadshop's, Casbah, and Nile Spice brands. In total, charges for items related to this agreement equaled approximately $12.9 million, or $ 0.24 per share, including $1.6 million associated with inefficiencies of the facility that are expected to be eliminated. In connection with the agreement, the Company recorded a restructuring charge of $11.3 million to reduce manufacturing assets and inventories to their net realizable values. The Company also anticipates that in the future an additional amount may be charged to this restructuring, related to potential employee costs and other expenses which could not be charged in the fourth quarter under accounting rules. The Company expects this potential charge to total approximately $2 million, and to substantially occur in Fiscal 2003. Of the aggregate in expected restructuring charges of $13.3 million, $9.2 million are non-cash charges.
Mr. Simon said, "We are pleased that we have resolved our manufacturing operations issues at the Irwindale facility. This 23-year old facility has operated at levels substantially below its effective capacity and has constrained the operating profitability of our Health Valley, Breadshop's, Casbah, and Nile Spice brands. We have eliminated the competitive disadvantage that this facility imposed on pricing and cost competitiveness and its limiting effect on new product and brand introductions. We are particularly excited that we will now be able to expand the growth potential of Health Valley, one of the most recognizable natural foods brands. We look forward to launching new Health Valley cookies, cereals, snack bars and other line extensions."
The Company anticipates that over time the cost of products produced by the co-packer at the Irwindale Facility will be reduced resulting in increased margins for those products.
In June 2002, the Company announced charges of $8 - $10 million related to the discontinuation of the supplements business and the termination of the Weight Watchers' license agreement. Charges related to the supplements business inherited with the acquisition of Celestial Seasonings, amounted to approximately $7.9 million, or $ 0.14 per share. Charges related to the Weight Watchers' license amounted to approximately $2.1 million, or $ 0.04 per share. Approximately $8.7 million of these charges are for non-cash items. While planning the discontinuance of these businesses during the quarter, the Company slowed shipments to customers to reduce future returns and other issues. This caused a sales shortfall from plan of approximately $ 0.7 - 1 million, or approximately $ 0.01 per share.
The Company has continued start-up activities relating to its numerous previously announced new business development opportunities, including its continuing discussions with both Barilla in Italy and Shin-Shin in Japan, to conclude the joint ventures announced in June. Further, the Company's Yves brand became the supplier of veggie burgers to McDonald's in Canada. At the same time, the Company began start-up activities in Europe intended to result in the future sale of numerous Hain Celestial products to the European markets using Lima as its base. As a result of these activities, the Company incurred charges of approximately $1.8 million, or $0.03 per share, which under accounting rules could not be deferred into future periods, despite the fact that those charges provided no current benefit.
The Company also incurred logistics and other consulting fees and management reorganization costs, which amounted to approximately $0.5 million, or $ 0.01 per share.
In sum, the aggregate reported net loss for the fourth quarter is $ 0.38 per share. Health Valley items total $0.24 per share, supplements and Weight Watchers' items total $0.19 per share, new business development activities and consulting and management reorganization charges total $0.04 per share, and the distributor change by Wild Oats had a $ 0.02 per share impact, all of which combined results in the operating income of $0.11 per share.
The Company announced that Mo Siegel, founder of Celestial Seasonings and Co-Chairman of the Board of Directors, has decided to retire from the Company. Irwin Simon commented on this event, "We thank Mo for his many contributions to The Hain Celestial Group. His return to the Company two years ago was an important factor in the successful integration of our two companies. We wish Mo every success in the future."
The Company also announced that Fran Daily, former CFO of Heinz North America, has joined the Company as Executive Vice President - Strategic Planning and Development. Fran will work on various projects for the Company, and will act as a liaison with H. J. Heinz to promote programs between the two companies. The Company previously announced the appointment of David Yale to lead its snacks brands, and that Daniel Glickman, former Secretary of Agriculture, had joined the Board of Directors.
Reaffirming Fiscal 2003 Guidance
Mr. Simon concluded, "With 2002 behind us, we are focused on 2003, and look forward to achieving the guidance we previously provided of $0.78 - $0.84 per share on revenues of $450 - $470 million. Our first quarter 2003 operations should return results of $0.14 to $0.17 per share, before continuing Health Valley restructuring and new business development charges."
The Company also announced that both Irwin Simon, CEO, and Ira Lamel, CFO, will sign and file the required certifications of the Company's financial statements when submitted as part of the Company's annual filing in September as required by the new regulations of the Securities and Exchange Commission.
About The Hain Celestial Group
The Hain Celestial Group, headquartered in Melville, NY, is a natural, specialty and snack food company. The Company is a leader in 13 of the top 15 natural food categories, with such well-known natural food brands as Celestial Seasonings (R) teas, Hain Pure Foods(R), Westbrae(R), Westsoy(R), Arrowhead Mills(R), Health Valley(R), Breadshop's(R), Casbah(R), Garden of Eatin(R), Terra Chips(R), Yves Veggie Cuisine(R), The Good Dog (R), The Good Slice(R), DeBoles(R), Earth's Best(R), Nile Spice, and Lima & Biomarche(R) in Europe. The Company's principal specialty product lines include Hollywood(R) cooking oils, Estee(R) sugar-free products, Kineret(R) kosher foods, Boston Better Snacks(R), and Alba Foods(R). The Hain Celestial Group's website can be found at http://www.hain-celestial.com/.
Statements made in this Press Release that are estimates of past or future performance are based on a number of factors, some of which are outside of the Company's control. Statements made in this Press Release that state the intentions, beliefs, expectations or predictions of The Hain Celestial Group and its management for the future are forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in filings of The Hain Celestial Group with the U.S. Securities and Exchange Commission. Copies of these filings may be obtained by contacting The Hain Celestial Group or the SEC.