Melville, N.Y., Aug. 27 - The Hain Celestial Group, Inc., a leading natural and organic food and personal care products company, has 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 EuropeThe 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 AccomplishmentsThe 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 OutlookThe 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.