The Hain Celestial Group Announces Fourth Quarter and Fiscal Year 2008 Results

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 Melville, NY, August 26, 2008 ~ The Hain Celestial Group, Inc. (Nasdaq: HAIN), a leading natural and organic food and personal care products company, today reported results for the fourth quarter and full year ended June 30, 2008. Reflecting continued strong consumer demand for the Company's brands and products, the Company reported fourth quarter net sales of $278.3 million, a 25.2% increase over the prior year's fourth quarter sales of $222.3 million. Full fiscal year sales reached a record $1.06 billion, a 17.3% year-over-year increase over the prior year's sales of $900.4 million …

"Our fiscal year has come to a close with record fourth quarter sales, driven by the successful introduction of new products, continued contribution from our existing brands, and our continued sharp focus on improving our productivity, expense efficiency and pricing, appropriate steps for this extraordinary environment," said Irwin D. Simon, President and Chief Executive Officer of Hain Celestial. "With consumers staying at home more and the continuing expansion of our presence in grocery, mass-market and specialty retailers, along with strong performance in the natural channel, we are seeing indications that consumers have prioritized leading a healthy lifestyle, despite the challenging economy and inflationary pressures. Additionally, consumers are seeking more natural and organic foods and poultry to replace more costly meat products. We see continued expansion of our personal care products as well, as food products are not unique to the healthy lifestyle."

Net income in the current year fourth quarter was $6.5 million on a GAAP basis and $14.0 million after reflecting previously announced adjustments resulting from the continuing execution of the third quarter Stock Keeping Unit ("SKU") Rationalization Program, continued acquisition-related integration and start-up costs in the United Kingdom, stock compensation related expense and continued professional fees. Diluted earnings per share for the current year fourth quarter totaled $0.16 on a GAAP basis and $0.34 after these adjustments.

"The strength in our fourth quarter sales and earnings was largely due to solid brand performance in various distribution channels," continued Irwin Simon. "In the United States we are pleased with the strong results from Earth's Best(R), Arrowhead Mills(R), Imagine(R) soup, Garden of Eatin'(R), FreeBird(TM), Spectrum(R), Rice Dream(R), Soy Dream(R), Avalon Organics(R) and Alba Botanica(R), with more modest contribution from Celestial Seasonings(R), where our new leadership team is beginning to make real progress; further strong sales in Canada by Yves Veggie Cuisine(R), Imagine soup, Spectrum and Terra(R); and in Europe by Lima(R), Rice Dream, Natumi(R) and Daily Bread(TM)," said Irwin Simon.

Reflecting the previously stated adjustments, gross margin for the same brands operated by the Company in each full year (other than the Company's lower margin Hain Pure Protein joint venture) was 28.6% this year versus 29.1% last year. This 50 basis point decline, during a year in which input costs increased significantly, is indicative of the Company's ability to successfully manage costs, increase prices and achieve productivity improvements. A recently announced price increase in the United States is expected to have a positive impact on margin beginning with the Company's second quarter of fiscal year 2009.

Adjusted selling, general and administrative expenses have declined as a percentage of sales by 120 basis points during the year, to 18.5% of sales, as the Company has continued to focus on expense efficiency and reduction and realize the benefit of synergies from acquisitions. The Company's poultry operations, which have increased in size with the acquisition of the New Oxford facility and are now integrated under one management team and back office platform, operate with lower selling, general and administrative expenses than the other units, thereby positively impacting expense ratios.

The Company's balance sheet remains strong, with $246.7 million in working capital and a current ratio of 2.7 at June 30, 2008. Debt as a percentage of equity was 42% with equity at $742.8 million. The Company's cash conversion cycle improved to 75 days compared to 76 days in the prior year period despite the planned increase in inventory of Earth's Best ingredients and the longer inventory cycle at the Company's turkey operations.

Interest and other expense, net, was $2.5 million in the fourth quarter and $11.3 million for the full year. The Company's interest cost this year includes the cost of higher borrowings resulting from acquisitions during the year. The Company continues to have significant availability under its credit facility.

The Company's effective tax rate for the full year was 37.0% versus 38.4% in the prior year. The Company had been estimating a 38.2% tax rate for the year. The lower rate was the result of the mix of the Company's income in foreign jurisdictions and a higher than expected utilization of foreign tax credits. As a result, the tax rate in the fourth quarter of the year was lower than the rate reported through the first three quarters.

Executive Changes in Europe

The Company also announced that it had appointed Peter McPhillips as Executive Chairman-Hain Celestial Europe, effective August 1, 2008. With a distinguished career in the food industry, including having served as Managing Director of Uniq Prepared Foods, Peter is an important addition to our efforts to expand our food-to-go, grocery, and frozen meat-free product lines in the United Kingdom and across Europe. "We are pleased to have Peter join us to expand our offerings in the United Kingdom and Europe. Peter achieved profitable growth in his prior assignments, and we expect his success will continue with Hain Celestial, based upon his excellent, long-standing relationships with the retail trade and in food service," commented Irwin Simon.

Fiscal Year 2008 Accomplishments

The Company highlighted several of its accomplishments during fiscal year 2008:

  • Delivered solid sales and earnings growth despite a challenging economy and commodity and other inflationary pressures;
  • Achieved productivity gains resulting from a multi-year initiative, which, combined with price increases, mitigated escalating commodity costs;
  • Introduced over 50 innovative new products in growth categories and subcategories, exceeding the industry average for sales contribution;
  • Implemented an SKU Rationalization in Personal Care, combining the operations of Avalon(R), Alba(R), JASON(R), Zia(R) and Queen Helene(R); and
  • Acquired TenderCare(R), MaraNatha(R), SunSpire(R), Daily Bread(TM) and Plainville Farms(R) brands-brands with products in fast growing categories to complement existing brands and product lines-and added production capacity for Hain Pure Protein with acquired facilities in North Carolina and Pennsylvania.

"The focused execution of our long-term strategy for sustainable growth has enabled us to surpass $1 billion in sales this past year for the first time in the Company's history and to continue to grow sales and earnings in a challenging environment," concluded Irwin Simon. "Building upon the foundation of our core brands, we have a robust pipeline of innovative product offerings and a talented team supporting our sales and marketing efforts in various channels of distribution. We are excited about fiscal year 2009, and look forward to building on our current accomplishments and opportunities for the benefit of our shareholders, customers, consumers and employees as they pursue A Healthy Way of Life(TM)."

Fiscal Year 2009 Guidance Outlook

The Company announced its fiscal year 2009 guidance of $1.2 to $1.3 billion in sales and $1.54 to $1.61 earnings per share. Similar to fiscal year 2008, the Company expects to incur $0.08 per share in stock compensation expense to amortize equity grants made this past fiscal year in fiscal year 2009.

Webcast and Upcoming Events

Hain Celestial will host a conference call and webcast at 4:30 PM Eastern Daylight Time today to review its fourth quarter and full fiscal year 2008 results. On September 4, 2008 the Company is scheduled to present at the Lehman Brothers Back-To-School Consumer Conference and on October 2, 2008, the Company is scheduled to present at the RBC Capital Markets Consumer Conference. These events will be webcast and available under the Investor Relations section of the Company's website at http://www.hain-celestial.com.

The Hain Celestial Group

The Hain Celestial Group (Nasdaq: 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(R), Garden of Eatin'(R), Health Valley(R), WestSoy(R), Earth's Best(R), Arrowhead Mills(R), MaraNatha(R), SunSpire(R), DeBoles(R), Hain Pure Foods(R), FreeBird(TM), Plainville Farms(R), Hollywood(R), Spectrum Naturals(R), Spectrum Essentials(R), Walnut Acres Organic(R), Imagine(R), Rice Dream(R), Soy Dream(R), Rosetto(R), Ethnic Gourmet(R), Yves Veggie Cuisine(R), Granose(R), Realeat(R), Linda McCartney(R), Daily Bread(TM), Lima(R), Grains Noirs(R), Natumi(R), JASON(R), Zia(R) Natural Skincare, Avalon Organics(R), Alba Botanica(R), Queen Helene(R), Tushies(R) and TenderCare(R). Hain Celestial has been providing "A Healthy Way of Life(TM)" since 1993. 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; 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, 2007. 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.

                        THE HAIN CELESTIAL GROUP, INC.
                         Consolidated Balance Sheets
                                (In thousands)

                                              June 30,         June 30,
                                               2008              2007
    ASSETS
    Current assets:
       Cash and cash equivalents              $58,513           $60,518
       Trade receivables, net                 118,867            95,405
       Inventories                            175,667           129,062
       Deferred income taxes                   12,512             8,069
       Other current assets                    27,482            22,950
            Total current assets              393,041           316,004

    Property, plant and equipment, net        159,089           114,901
    Goodwill, net                             550,238           509,336
    Trademarks and other intangible
     assets, net                              136,861            96,342
    Other assets                               20,155            21,873
            Total assets                   $1,259,384        $1,058,456

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable and accrued
        expenses                             $145,186          $112,458
       Income taxes payable                       907             4,456
       Current portion of long-term debt          222               566
            Total current liabilities         146,315           117,480

    Long-term debt, less current portion      308,220           215,446
    Deferred income taxes                      26,524            22,232
    Other noncurrent liabilities                5,012               664
            Total liabilities                 486,071           355,822

    Minority Interest                          30,502             5,678

    Stockholders' equity:
       Common stock                               411               409
       Additional paid-in capital             488,650           487,750
       Retained earnings                      237,008           195,658
       Foreign currency translation
        adjustment                             32,215            25,884
                                              758,284           709,701
       Less:  Treasury stock                  (15,473)          (12,745)
            Total stockholders' equity        742,811           696,956

            Total liabilities and
             stockholders' equity          $1,259,384        $1,058,456

 

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

                                     Three Months Ended    Twelve Months Ended
                                          June 30,               June 30,
                                       2008      2007        2008       2007
                                                   (Unaudited)

    Net sales                        $278,261  $222,320   $1,056,371  $900,432
    Cost of sales                     210,669   160,329      772,062   639,002
    Gross profit                       67,592    61,991      284,309   261,430

    SG&A expenses                      55,834    43,359      207,553   177,453

    Operating income                   11,758    18,632       76,756    83,977

    Interest expense and other
     expenses                           2,512        19       11,311     6,885
    Income before income taxes          9,246    18,613       65,445    77,092
    Income tax provision                2,742     6,473       24,224    29,610
    Net income                         $6,504   $12,140      $41,221   $47,482

    Basic per share amounts             $0.16     $0.30        $1.03     $1.21

    Diluted per share amounts           $0.16     $0.29        $0.99     $1.16

    Weighted average common shares
     outstanding:
    Basic                              40,133    39,810       40,077    39,315
    Diluted                            41,550    41,706       41,765    41,108

 

                        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 June 30,
                                                              2008      2007
                                   2008 GAAP   Adjustments  Adjusted  Adjusted
                                                     (Unaudited)

    Net sales                       $278,261                $278,261  $222,320
    Cost of sales                    210,669     $(3,474)    207,195   160,329
    Gross profit                      67,592       3,474      71,066    61,991

    SG&A expenses                     55,834      (4,762)     51,072    43,483

    Operating income                  11,758       8,236      19,994    18,508

    Interest and other expenses,
     net                               2,512                   2,512     3,136
    Income before income taxes         9,246       8,236      17,482    15,372
    Income tax provision               2,742         740       3,482     4,819
    Net income                        $6,504      $7,496     $14,000   $10,553

    Basic per share amounts            $0.16                   $0.35     $0.27

    Diluted per share amounts          $0.16                   $0.34     $0.25

    Weighted average common shares
     outstanding:
      Basic                           40,133                  40,133    39,810
      Diluted                         41,550                  41,550    41,706

 

                                          2008                    2007
                                Impact on               Impact on
                                 Income     Impact on    Income     Impact on
                                 before     Income tax   before     Income tax
                               income taxes provision  income taxes provision
                                                (Unaudited)
    Start-up costs at the
     Fakenham manufacturing
     facility related to the
     integration of the Haldane
     Foods frozen meat-free
     operations                   $2,537       $230
    SKU rationalization              937        285
        Cost of sales             $3,474       $515         $-           $-

    Professional fees and other
     expenses incurred in
     connection with the review
     of the Company's stock
     option practices             $1,079       $462       $281         $105

    Stock compensation expense     2,273       (667)      (405)        (225)

    Severence and other
     reorganization costs          1,410        430
        SG&A expenses             $4,762       $225      $(124)       $(120)

    Gain on the sale of
     Biomarche                        $-         $-      $(871)       $(677)

    Reversal of charge in
     connection with the
     decision by the German
     government regarding
     application of VAT on non-
     dairy beverages                                    (2,246)        (857)
      Interest and other expenses,
       net                            $-         $-    $(3,117)     $(1,534)

        Total adjustments         $8,236       $740    $(3,241)     $(1,654)

 

                        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)

                                          Twelve Months Ended June 30,
                                                             2008      2007
                                   2008 GAAP  Adjustments  Adjusted  Adjusted
                                                  (Unaudited)

    Net sales                     $1,056,371             $1,056,371  $900,432
    Cost of sales                    772,062   $(14,439)    757,623   637,253
    Gross profit                     284,309     14,439     298,748   263,179

    SG&A expenses                    207,553    (11,771)    195,782   177,124

    Operating income                  76,756     26,210     102,966    86,055

    Interest and other expenses,
     net                              11,311      2,002      13,313    10,286
    Income before income taxes        65,445     24,208      89,653    75,769
    Income tax provision              24,224      6,770      30,994    28,237
    Net income                       $41,221    $17,438     $58,659   $47,532

    Basic per share amounts            $1.03                  $1.46     $1.21

    Diluted per share amounts          $0.99                  $1.40     $1.16

    Weighted average common shares
     outstanding:
    Basic                             40,077                 40,077    39,315
    Diluted                           41,765                 41,765    41,108

 

                                          2008                    2007
                                Impact on               Impact on
                                 Income     Impact on    Income     Impact on
                                 before     Income tax   before     Income tax
                               income taxes provision  income taxes provision
                                                (Unaudited)

    Start-up costs at the
     Fakenham manufacturing
     facility related to the
     integration of the Haldane
     Foods frozen meat-free
     operations (2008) and the
     West Chester Frozen Foods
     Facility (2007)              $7,490      $2,097       $1,749       $680

    SKU rationalization            6,949       2,558
        Cost of sales            $14,439      $4,655       $1,749       $680

    Professional fees and other
     expenses incurred in
     connection with the review
     of the Company's stock
     option practices             $5,774      $2,229         $281       $105

    Stock compensation expense     2,129        (722)          48         19

    Severence and other
     reorganization costs          3,868       1,392
        SG&A expenses            $11,771      $2,899         $329       $124

    Gain on sale of rice cake
     factory joint venture       $(2,002)      $(784)

    Gain on the sale of
     Biomarche                                            $(3,401)   $(2,177)

      Interest and other expenses,
       net                       $(2,002)      $(784)     $(3,401)   $(2,177)

        Total adjustments        $24,208      $6,770      $(1,323)   $(1,373)

About Author

Alisa is the founder of GoDairyFree.org, Senior Editor for Allergic Living magazine, and author of the best-selling dairy-free book, Go Dairy Free: The Guide and Cookbook for Milk Allergies, Lactose Intolerance, and Casein-Free Living. Alisa is also a professional recipe creator and product ambassador for the natural food industry.

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