BOULDER, Colo., Nov. 4 /PRNewswire-FirstCall/ -- Horizon Organic Holding Corporation (NASDAQ: HCOW) , which markets America's leading brand of organic foods, earned $723,000, or $0.07 diluted per share, from continuing operations in the third quarter of 2002, compared with $424,000, or $0.04 per diluted share, in the comparable 2001 period. Sales of $47.6 million were up 22 percent from $39.0 million a year ago.
For the first nine months of 2002, income from continuing operations rose to $2.2 million, or $0.21 per diluted share, from $404,000, or $0.04 per diluted share, a year ago. Sales grew by 17 percent to $134.6 million from $115.2 million.
The results are in line with the company's previous guidance and support its 2002 forecast of a 16 to 20 percent increase in sales with earnings from continuing operations rising to $0.33 to $0.36 per share.
Including discontinued operations, Horizon Organic reported total net income for the third quarter of $324,000, or $0.03 per share, and a loss for the nine months of $1 million, or $0.09 per share. Discontinued operations encompass farms in Colorado, where a management agreement was terminated on September 30, and in Idaho, where the sale of the farm to an experienced dairy farmer is pending. In 2001 the company reported total net income of $592,000, or $0.06 per share, for the quarter and $799,000, or $0.08 per share, for the nine months.
"We are delighted that our sales growth has increased each quarter from 12 percent in the first quarter to 16 percent in the second to 22 percent in the third," said Chuck Marcy, Horizon Organic President and CEO. "We are particularly excited that during the third quarter we saw 25 percent sales growth in the U.S., which accelerated to 29 percent in September. This was due in large part to expanded distribution. Our products can now be purchased in 60 percent of conventional grocery stores nationwide, a goal we achieved three months earlier than anticipated. And this is only the beginning! With increased consumer interest generated by the October introduction of new USDA organic standards in the U.S., we expect this strong momentum to continue well into 2003."
Marcy also pointed out that earnings per share growth from continuing operations of 75 percent in the third quarter outpaced sales growth. And, he said, while progress on the Idaho farm is moving slower than anticipated, the sale is expected to go through by year-end.
Third Quarter 2002
U.S. earnings from continuing operations rose 20 percent to $754,000, or $0.07 per share, from $626,000, or $0.06 per share in the prior year. International operations essentially broke even compared with a loss of $202,000, or $0.02 per share, last year.
U.S. sales of $39.3 million were up 25 percent from the prior year. Milk sales were up 24 percent to $27.7 million, as sales of ultra pasteurized (UP) milk rose 43 percent driven by expanded distribution. UP milk now accounts for 52 percent of Horizon Organic's milk sales. New distribution of single-serve milk also contributed to the sales growth. Dairy sales rose 27 percent to $8.4 million, with cheese and cottage cheese posting growth of 33 percent or better. Sales of butter and yogurt also recorded double-digit growth. The introduction of Horizon Organic pudding in natural food stores during the quarter generated excellent sales. The company will add to its line of dessert products in the fourth quarter with the introduction of fruit jels.
International sales rose 9 percent, the strongest performance in more than a year, to $8.3 million. Rachel's Organic branded products posted an 88 percent sales increase in the U.K. Yogurt sales grew 52 percent, and the recently introduced Rachel's Organic milk has already become the country's leading organic milk brand. Success of the company's strategy to convert from private label to branded sales was evident as branded sales rose to 48 percent of total sales in the quarter from 28 percent a year-ago.
By controlling costs, the company's gross margin increased to 31.4 percent of sales, during the quarter, allowing a significant investment in selling and marketing to introduce new products and promote the Horizon Organic brand.
The loss of $399,000 on discontinued operations primarily reflected estimated fourth quarter depreciation on the Idaho farm recorded in the third quarter. The Idaho farm sale was not completed in the third quarter and is now expected to close by year-end.
Nine Months 2002
U.S. earnings from continuing operations of $2.1 million, or $0.19 per share, were 66 percent higher than the $1.2 million, or $0.12 per share, earned in the comparable 2001 period. International earnings for the nine months were $164,000, or $0.02 per share, compared with a year-ago loss of $834,000, or $0.08 per share, reflecting a change in account rules that reduced amortization charges on goodwill.
U.S. sales rose 20 percent to $110.3 million, while international sales grew by three percent to $24.3 million. Dairy sales grew by 27 percent and milk sales rose 18 percent. The company's gross margin improved to 31.9 percent of sales from 29.2 percent in 2001.
In addition to depreciation charges through the anticipated sales date, the $3.2 million loss on discontinued operations included anticipated selling costs for the Idaho farm and closure costs in Colorado.
Fourth Quarter 2002 and 2003 Outlook
"We have built excellent momentum during the first three quarters as we move into what is generally our best quarter of the year," said Marcy. "The roll-out of the organic regulations in October was a huge success. Through an aggressive promotional campaign, we were able to position Horizon Organic as the nation's leading organic brand in national, regional and local newspapers, magazines and on television. This should provide a strong catalyst for continued growth by heightening consumer awareness and confidence in organic products in general and the Horizon Organic brand in particular."
As a result, Marcy said Horizon Organic expects 20 to 25 percent sales growth in 2003 and percentage growth in earnings per share from continuing operations in the high teens to low twenties. Furthermore, following the sale of the Idaho farm, the company will be able to significantly reduce its debt, thereby putting its financial as well as operational focus on expanding its brand franchise through the introduction of new products and expanded distribution.
Horizon Organic management will host a conference call on Tuesday, November 5, 2002 at 11:00 a.m. Eastern Time to discuss the company's year-to-date performance and outlook. To hear the call in a listen only mode, participants should dial 1-800-309-5940 and refer to reservation # 6258938 ten minutes prior to the event, or visit the company's web site at www.horizonorganic.com for a live simulcast and replay of the call.
Horizon Organic produces and markets the leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also markets certified organic eggs and juices. The company's products can be found in conventional supermarkets and natural foods stores across the U.S. and in the U.K. For more information, please visit the company's web site at www.horizonorganic.com.
Note on Forward-Looking Statements: This news release contains forward- looking statements that involve risks and uncertainties. Future events may differ materially from those discussed herein, due to a number of factors, including uncertainties related to the company's ability to continue to maintain and expand its brands, avoid adverse publicity, manage its supply chain efficiently, continue and effectively manage its rapid growth, and maintain key management as well as to volatility in the cost of organic farm products, increased competition, changes in consumer preferences, and increases in charges under governmental dairy programs. These factors and others are more fully discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2001.