The Hain Celestial Group Announces First Quarter 2007 Results

MELVILLE, N.Y., Nov. 2 /PRNewswire-FirstCall/ -- The Hain Celestial Group, Inc. (NASDAQ: HAIN) , a leading natural and organic food and personal care products company, today reported results for the first quarter ended September 30, 2006. The Company reported net sales of $210.2 million, a 30% increase compared with $161.1 million in the prior year first quarter. GAAP net income for the first quarter was $9.0 million, or $0.23 per diluted share, a 31% increase over the prior year's $6.9 million, or $0.18 per diluted share.

Adjusted earnings in the quarter totaled $0.25 per share. The reported results include $1.1 million ($0.7 million after tax) of previously announced start-up costs at the Company's West Chester Frozen Foods Facility, a gain of $2.5 million ($1.1 million after tax) from the sale of the Company's Biomarche fresh produce operation in Belgium, and a charge of $2.2 million ($1.4 million after tax) for an unfavorable decision by the German government regarding value added tax on all non-dairy beverage products.

"Our fiscal year 2007 is off to an excellent start. During the first quarter we achieved strong sales from Earth's Best(R), Garden of Eatin'(R), Rice Dream(R), Soy Dream(R), WestSoy(R), Westbrae(R), Ethnic Gourmet(TM), Casbah(R), FreeBird(TM) and JASON(R). We also drove strong results from our brands in Canada, and from our recent acquisitions," said Irwin D. Simon, President and Chief Executive Officer of Hain Celestial. "Rising consumer demand for natural and organic food and personal care products continues across many distribution channels in North America, Europe and the United Kingdom, enabling us to realize solid top and bottom line growth at the Company. We continue to integrate our recent acquisitions into our existing infrastructure, and look forward to continuing to achieve further margin efficiencies, general and administrative cost savings, and to improving our return on equity."

The Company reported gross margin of 28.1% in the first quarter, compared to 28.5% in the prior year's first quarter. Adjusted gross margin was 29.6% excluding start-up costs at the Company's West Chester Frozen Foods Facility and the Company's lower margin business in the UK. The Company continues to operate in an environment of high input costs, and the Company's recently implemented price increase effective in September 2006 is expected to benefit the Company in the second quarter.

Selling, general and administrative expense for the first quarter was 19.9%, compared to 21.0% a year ago as the Company continues to benefit from its increasing scale and disciplined strategy for building effective marketing programs.

Interest expense in the quarter was $2.5 million and interest income was $0.6 million. On August 31, 2006, the Company sold its Biomarche fresh produce operation in Belgium, resulting in a pre-tax gain of $2.5 million. The gain was reduced by taxes of $1.4 million to a net gain of $1.1 million, with the effective tax rate on the gain unusually high as $3.3 million of goodwill allocated to the Biomarche operation and charged off against the gain is not tax deductible. Also in the quarter, the Company incurred a pre-tax charge of $2.2 million ($1.4 million after tax) resulting from an unfavorable ruling in Germany regarding value added tax (VAT) on non-dairy beverages sold by all producers in Germany. This decision by the German government overturns what was previously a favorable decision handed down shortly after our acquisition of the non-dairy operation in Germany in 2004. There will be no impact on future operations as VAT is a pass-through tax. These items are included in interest and other expense, net.

The Company's effective tax rate for the quarter was 38.6%, excluding the taxes provided on the Biomarche gain and from the VAT charge. The effective tax rate in the quarter therefore appears in the financial statements at a higher rate of 41.6%.

Average diluted shares outstanding in the quarter were 40.0 million, an increase of 2.5 million shares, or 6.6% over the first quarter of the prior year. The increase resulted from additional shares issued during fiscal year 2006 for acquisitions, employee stock option exercises, and higher equivalent shares included in the earnings per share calculation, resulting from the Company's higher share price.

The Company's balance sheet remains strong with $196.6 million in working capital with a current ratio of 2.8 at September 30, 2006. Debt as a percentage of equity was 24.1% with equity at $630.3 million. The number of days in the Company's cash conversion cycle was 67. Operating free cash flow was $16.3 million for the first quarter this year and $58.1 million for the trailing twelve months ended September 30, 2006.

"We continue to focus on driving efficiencies and reinvesting in our business, most recently at our West Chester Frozen Foods Facility, where we have expanded capacity and production for our Ethnic Gourmet and Rosetto brands and expect to further increase our production," commented Irwin Simon. "With our first quarter completed, we continue to see positive trends in the second quarter with increased demand for natural and organic products and strong consumption for our products," concluded Irwin Simon.

Fiscal Year 2007 Guidance

The Company reconfirmed its fiscal year 2007 sales guidance of $880 million to $900 million and earnings per share of $1.15 to $1.19.

Webcast and Upcoming Events

Hain Celestial will host a conference call and webcast at 4:15 PM Eastern Standard Time today to review its first quarter fiscal year 2007 results. On November 16, 2006, the Company is scheduled to present at the Lehman Brothers Small Cap Conference. These events will be 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 Chips(R), Garden of Eatin'(R), Health Valley(R), WestSoy(R), Earth's Best(R), Arrowhead Mills(R), DeBoles(R), Hain Pure Foods(R), FreeBird(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(TM), Yves Veggie Cuisine(R), Linda McCartney(R), Lima(R), Grains Noirs(R), Natumi(R), JASON(R), Zia(R) Natural Skincare and Queen Helene(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, 2006. 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.

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

                                               September 30,      June 30,
                                                   2006             2006
                                                        (Unaudited)

  ASSETS
  Current assets:
      Cash and cash equivalents                  $78,143           $48,875
      Trade receivables, net                      95,215            80,764
      Inventories                                111,440           105,883
      Deferred income taxes                        3,843             2,986
      Other current assets                        17,291            21,968
           Total current assets                  305,932           260,476

  Property, plant and equipment, net             113,982           119,830
  Goodwill, net                                  416,836           421,002
  Trademarks and other intangible
   assets, net                                    62,260            61,626
  Other assets                                    16,001            14,750
           Total assets                         $915,011          $877,684

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
      Accounts payable and accrued
       expenses                                 $100,281           $81,894
      Income taxes payable                         8,175             3,083
      Current portion of long-term debt              840             1,065
           Total current liabilities             109,296            86,042

  Deferred income taxes                           19,086            19,086
  Long-term debt, less current portion           151,172           151,229
  Minority Interest                                5,184             4,926
           Total liabilities                     284,738           261,283

  Stockholders' equity:
      Common stock                                   398               396
      Additional paid-in capital                 450,657           446,319
      Retained earnings                          174,068           165,034
      Treasury stock                             (12,745)          (12,745)
      Foreign currency translation
       adjustment                                 17,895            17,397
           Total stockholders' equity            630,273           616,401

           Total liabilities and
            stockholders' equity                $915,011          $877,684



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



                                            Three Months Ended September 30,
                                                 2006               2005
                                                       (Unaudited)

  Net sales                                     $210,207          $161,097
  Cost of Sales                                  151,065           115,248
  Gross profit                                    59,142            45,849

  SG&A expenses                                   41,846            33,869

  Operating income                                17,296            11,980

  Interest expense and other, net                  1,820               868
  Income before income taxes                      15,476            11,112
  Income tax provision                             6,442             4,221
  Net income                                      $9,034            $6,891


  Basic per share amounts                          $0.23             $0.19

  Diluted per share amounts                        $0.23             $0.18

  Weighted average common shares
   outstanding:
  Basic                                           38,746            36,636
  Diluted                                         40,023            37,560



                      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 September 30,
                              2006 GAAP  Adjustments    2006       2005
                                                      Adjusted   Adjusted
                                              (Unaudited)

  Net sales                    $210,207               $210,207  $161,097
  Cost of Sales                 151,065  $(1,108) (1)  149,957   115,248
  Gross profit                   59,142    1,108        60,250    45,849

  SG&A expenses                  41,846                 41,846    33,869 (4)


  Operating income               17,296    1,108        18,404    11,980

  Interest and other expenses,
   net                            1,820      264  (2)    2,084       868
  Income before income taxes     15,476      844        16,320    11,112
  Income tax provision            6,442     (146) (3)    6,296     4,221
  Net income                     $9,034     $990       $10,024    $6,891

  Basic per share amounts         $0.23    $0.03         $0.26     $0.19

  Diluted per share amounts       $0.23    $0.02         $0.25     $0.18

  Weighted average common
   shares outstanding:
   Basic                         38,746   38,746        38,746    36,636
   Diluted                       40,023   40,023        40,023    37,560


  (1) Start-up costs at the Company's West Chester Frozen Foods Facility.

  (2) The adjustment of $264 includes $2,510 pre-tax gain on the sale of
      Biomarche, and $2,246 pre-tax charge for the unfavorable
      decision by the German government regarding the application of VAT on
      non-dairy beverages.

  (3) Tax adjustments include a tax provision of $1,433 on the gain on sale
      of Biomarche, net of tax benefits of $430 for the
      start-up costs at the Company's West Chester Frozen Foods Facility
      and $857 on the charge for VAT.

  (4) SG&A in the three months ended September 30, 2005 has been adjusted to
      reflect the $774 charge ($472 after tax) in connection
      with the requirements of SFAS 123R to record compensation expense for
      the contractual requirement to grant stock options.