<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-22018
CELESTIAL SEASONINGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1097571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 SLEEPYTIME DRIVE, BOULDER CO 80301-3292
(Address of principal executive offices, including zip code)
(303) 530-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 1997 the Registrant had 4,053,601 shares of
Common Stock, $0.01 Par Value, outstanding. This report on Form
10-Q contains 15 pages.
<PAGE>
CELESTIAL SEASONINGS, INC.
INDEX
-----
PART I - FINANCIAL INFORMATION
- ------------------------------
PAGE(S)
-------
ITEM 1. FINANCIAL STATEMENTS
Unaudited consolidated income statements 3
Unaudited consolidated balance sheets 4
Unaudited consolidated statements of cash flows 5
Notes to unaudited consolidated financial
statements 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-11
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 12
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
PAGE 2
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1997 1996 1997 1996
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Case volume 1,491 1,437 2,930 2,859
Net sales $ 25,861 $ 23,950 $ 51,534 $ 47,582
Cost of goods sold 8,867 8,755 17,941 17,505
-------- -------- -------- --------
Gross profit 16,994 15,195 33,593 30,077
Operating expenses:
Selling and marketing 10,565 8,757 22,280 18,907
General and administrative 1,139 1,153 2,119 2,205
Amortization of intangibles 321 356 647 742
-------- -------- -------- --------
Total operating expenses 12,025 10,266 25,046 21,854
Operating income 4,969 4,929 8,547 8,223
Interest expense 96 215 277 471
-------- -------- -------- --------
Income before income taxes 4,873 4,714 8,270 7,752
Income taxes 1,866 1,873 3,225 3,059
-------- -------- -------- --------
Net income $ 3,007 $ 2,841 $ 5,045 $ 4,693
======== ======== ======== ========
Net income per common share $ 0.73 $ 0.69 $ 1.22 $ 1.14
======== ======== ======== ========
Weighted average common shares 4,133 4,126 4,129 4,109
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statemants.
PAGE 3
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
-------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,512 $ 204
Accounts receivable, net of allowance
(Mar. - $204 Sept. - $148) 9,720 8,133
Inventory 7,362 6,808
Deferred income taxes 78 7
Prepaid income taxes - 470
Prepaid expenses 499 889
-------- --------
Total current assets 22,171 16,511
Property, plant and equipment, net 16,748 16,871
Intangible assets, net 13,357 13,514
Goodwill, net 6,290 6,430
Deferred income taxes 377 287
Other assets 1,047 1,290
-------- --------
Total assets $ 59,990 $ 54,903
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,693 $ 3,754
Accrued liabilities and wages 4,978 4,462
Accrued income taxes 1,373 -
Accrued interest payable 29 52
Current portion of long-term debt 347 361
-------- --------
Total current liabilities 11,420 8,629
Long-term debt 6,274 9,057
Commitments
Stockholders' equity:
Common stock, $.01 par value -
authorized 15,000,000 shares;
Mar. - issued 4,056,475 shares,
outstanding 4,051,475 shares
Sept. - issued 4,054,472 shares,
outstanding 4,049,472 shares 41 41
Capital surplus 33,324 33,290
Retained earnings 9,026 3,981
Treasury stock, 5,000 shares of common
stock at cost (95) (95)
-------- --------
Total stockholders' equity 42,296 37,217
-------- --------
Total liabilities and stockholders' equity $ 59,990 $ 54,903
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 4
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,045 $ 4,693
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 509 519
Amortization of intangibles 647 742
Amortization of financing fees 98 112
Deferred income taxes (161) 367
Changes in operating assets and liabilities:
Accounts receivable (1,587) (3,806)
Inventory (554) (20)
Prepaid expenses 390 256
Accounts payable 939 1,141
Accrued liabilities and wages 516 737
Accrued income taxes 1,843 369
Accrued interest payable (23) 3
-------- --------
Net cash provided by operating activities 7,662 5,113
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (386) (586)
Increase in intangible assets (350) (325)
Decrease in other assets 145 76
-------- --------
Net cash used in investing activities (591) (835)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 34 116
Increase in long-term debt 2,285 5,470
Reduction in long-term debt (5,082) (9,967)
-------- --------
Net cash used in financing activities (2,763) (4,381)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,308 (103)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 204 375
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,512 $ 272
======== ========
CASH PAID FOR INTEREST $ 196 $ 338
CASH PAID FOR INCOME TAXES $ 1,543 $ 2,323
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 5
<PAGE>
CELESTIAL SEASONINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Basis of Presentation - Each fiscal quarter includes
thirteen weeks. The Company's second fiscal quarter ends on
the last Saturday of March. For presentation purposes,
however, the second fiscal quarter is presented as if it
ended on March 31.
The unaudited consolidated financial statements include
the accounts of the Company and its subsidiaries.
Intercompany balances have been eliminated in consolidation.
Interim Financial Information - The financial
information contained herein is unaudited but includes all
normal and recurring adjustments which, in the opinion of
management, are necessary to present fairly the information
set forth. The unaudited consolidated financial statements
should be read in conjunction with the consolidated
financial statements which are included in the Company's
Annual Report on Form 10-K for the year ended September 30,
1996. The Company's business is seasonal; therefore, results
for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company
ending September 30, 1997. The Company believes that the
report filed on Form 10-Q is representative of its financial
position, its results of operations and its cash flows for
the periods ended March 31, 1997 and 1996 covered thereby.
Earnings Per Share - During February 1997, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share." SFAS 128 establishes standards for
computing and presenting earnings per share (EPS), and
supersedes Accounting Principles Board Opinion No. 15 ("APB
15") and its related interpretations. It replaces the
presentation of primary EPS with a presentation of basic
EPS, which excludes dilution, and requires dual presentation
of basic and diluted EPS for all entities with complex
capital structures. Diluted EPS is computed similarly to
fully diluted EPS pursuant to APB 15. SFAS 128 is effective
for periods ending after December 15, 1997, including
interim periods, and will require restatement of all prior
period EPS data presented; earlier application is not
permitted. The following table sets forth pro forma earnings
per share in accordance with the requirements of SFAS 128
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic earnings per share
Net income per common share $ 0.74 $ 0.70 $ 1.25 $ 1.16
======== ======== ======== ========
Weighted average common shares 4,051 4,040 4,051 4,039
======== ======== ======== ========
Diluted earnings per share
Net income per common share $ 0.73 $ 0.69 $ 1.22 $ 1.14
======== ======== ======== ========
Weighted average common shares 4,133 4,126 4,129 4,109
======== ======== ======== ========
</TABLE>
PAGE 6
<PAGE>
2. DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials and supplies $ 4,254 $ 4,486
Work in process 1,210 888
Finished goods 2,373 1,665
-------- --------
7,837 7,039
Less inventory reserves 475 231
-------- --------
Total $ 7,362 $ 6,808
======== ========
</TABLE>
3. LEGAL PROCEEDINGS
On May 5, 1995, a purported stockholder of the Company
filed a lawsuit, Schwartz v. Celestial Seasonings, Inc. et. al.,
-----------------------------------------------
in the United States District Court for the District of
Colorado (Civil Action Number: 95-K-1045), in connection
with disclosures by the Company concerning the Company's
license agreement with Perrier Group of America, Inc. which
was terminated on January 1, 1995. In addition to the
Company, the complaint names as defendants certain of the
Company's present and former directors and officers,
PaineWebber, Inc., Shearson/Lehman Brothers, Inc., and
Vestar/Celestial Investment Limited Partnership. The
complaint, which was pled as a class action on behalf of
persons who acquired the Company's common stock from July
12, 1993 through May 18, 1994, sought money damages from the
Company and the other defendants for the class in the amount
of their loss on their investment in the Company's common
stock, punitive damages, costs and expenses of the action,
and such other relief as the court may order.
On November 6, 1995, the federal district court granted
a motion by the Company and the other defendants to dismiss
the case. The court's order became final on December 11,
1995, after the plaintiff failed to amend the complaint
within the time permitted by the district court. The
plaintiff has appealed the district court's decision to the
United States Court of Appeals for the Tenth Circuit. Due to
the uncertainties inherent in the litigation process, the
Company is unable to predict the outcome of this matter.
PAGE 7
<PAGE>
CELESTIAL SEASONINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SEASONALITY
The Company's business is seasonal and its quarterly results of
operations reflect the results of increased demand for the Company's
hot tea products in the cooler months of the year. The following
table sets forth selected unaudited quarterly consolidated financial
and operational data for the six most recent quarters.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------
Fiscal 1997 Fiscal 1996
-------------------- -----------------------------------------
Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
-------- --------- --------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Case sales 1,491 1,439 832 647 1,437 1,422
Net sales $25,861 $25,673 $14,587 $10,829 $23,950 $23,632
Gross profit 16,994 16,599 8,536 5,840 15,195 14,882
Operating income
(loss) 4,969 3,578 906 (139) 4,929 3,294
Operating margin 19.2% 13.9% 6.2% (1.3)% 20.6% 13.9%
Net income (loss) $ 3,007 $ 2,038 $ 466 $ (136) $ 2,841 $ 1,852
Percent of fiscal
year net sales N/A N/A 20.0% 14.8% 32.8% 32.4%
</TABLE>
The Company has experienced quarterly fluctuations in sales volume
and operating results when compared to previous years due to a number of
factors, including the timing of trade promotions, advertising and
consumer promotional expenditures. The Company, as is common in the
tea industry, offers trade promotions for limited time periods on
specific items in order to provide incentives for the purchase and
promotion of products. The impact on case sales from period to period
due to the timing and extent of such trade promotions can be
significant.
RESULTS OF OPERATIONS
The following table is derived from the Company's unaudited
consolidated income statements for the periods indicated and presents
(i) the results of operations as a percentage of net sales and (ii)
the percentage change in the dollar amounts of each item from the
prior period.
<TABLE>
<CAPTION>
Period-to-Period
Percentage of Net Sales Percentage Increase/(Decrease)
------------------------- --------------------------------
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996 1997 to 1996 1997 to 1996
------ ------ ------ ------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 8.0% 8.3%
Cost of goods sold 34.3 36.6 34.8 36.8 1.3 2.5
----- ----- ----- -----
Gross profit 65.7 63.4 65.2 63.2 11.8 11.7
Selling and marketing 40.9 36.5 43.2 39.7 20.6 17.8
General and
administrative 4.4 4.8 4.1 4.6 (1.2) (3.9)
Amortization of
intangibles 1.2 1.5 1.3 1.6 (9.8) (12.8)
----- ----- ----- -----
Operating income 19.2 20.6 16.6 17.3 0.8 3.9
Interest expense 0.4 0.9 0.5 1.0 (55.3) (41.2)
----- ----- ----- -----
Income before income
taxes 18.8 19.7 16.1 16.3 3.4 6.7
Income taxes 7.2 7.8 6.3 6.4 (0.4) 5.4
----- ----- ----- -----
Net income 11.6% 11.9% 9.8% 9.9% 5.8% 7.5%
===== ===== ===== =====
</TABLE>
PAGE 8
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1996
Net sales. Net sales for the three months ended March 31, 1997
increased 8.0% to $25.9 million from $24.0 million for the comparable
period in fiscal 1996. Case sales increased 3.8% to 1,491,000 cases
from 1,437,000 cases. Case sales growth was the result of increased
sales of the Company's herb and specialty black hot tea products in
the Company's traditional channels of distribution, as well as
expansion in international markets. Fiscal 1997 net sales of the
Company's dry tea products reflect a price increase which was
implemented during the third quarter of fiscal 1996. The Company's
nutraceutical products contributed net sales of over $0.9 million
during the second quarter of fiscal 1997, a 61.9% increase from
fiscal 1996.
Gross profit. Gross profit for the three months ended March 31,
1997 increased 11.8% to $17.0 million from $15.2 million for the
comparable period in fiscal 1996. The Company's gross profit margin
increased to 65.7% from 63.4% for the comparable prior year period.
The increase in gross margin is primarily due to increased sales of
the company's higher margin hot herb tea products. In addition, the
Company's nutraceutical products realized higher gross margins during
fiscal 1997, as compared to fiscal 1996, due to greater efficiencies.
Selling and marketing expenses. Selling and marketing expenses
for the three months ended March 31, 1997 increased 20.6% to $10.6
million from $8.8 million for the comparable period in fiscal 1996,
and increased as a percentage of net sales to 40.9% from 36.5%. The
increase in selling and marketing expenses primarily was due to
increased trade and consumer promotion and advertising expenses.
General and administrative expenses. General and administrative
expenses for the three months ended March 31, 1997 remained
relatively unchanged from the comparable period in fiscal 1996, and
decreased as a percentage of net sales to 4.4% from 4.8%.
Amortization of intangibles. Amortization of intangibles,
including amortization of goodwill and other intangible assets, for
the three months ended March 31, 1997 decreased 9.8% from fiscal
1996. Amortization of intangibles was lower for fiscal 1997, as
compared to fiscal 1996, as certain intangible assets became fully
amortized or were written off. These reductions were partially offset
by increases in amortization on new additions to artwork and plates
resulting from the Company's continued development of new products
and improved packaging.
Operating income. Operating income for the three months ended
March 31, 1997 increased 0.8% from the comparable period in fiscal
1996. Operating income as a percentage of net sales decreased to
19.2% from 20.6% primarily due to increased selling and marketing
expenses.
Interest expense. Interest expense for the three months ended
March 31, 1997 declined 55.3% from the comparable period in fiscal
1996 as a result of reduced outstanding borrowings. The Company
extinguished its bank debt during the first quarter of fiscal 1997.
Interest expense for the three months ended March 31, 1997 primarily
relates to Industrial Revenue Bonds which are secured by the
Company's facility and fees relating to continued availability of the
Company's bank credit facility.
Income taxes. Income tax expense for the three months ended
March 31, 1997 decreased 0.4% from the comparable period in fiscal
1996. This decrease was primarily due to a reduction in the Company's
estimated effective tax rate during the second quarter of fiscal
1997. This decrease was partially offset by an increase in pre-tax
income.
PAGE 9
<PAGE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 1996
Net sales. Net sales for the six months ended March 31, 1997
increased 8.3% to $51.5 million from $47.6 million for the comparable
period in fiscal 1996. Case sales increased 2.5% to 2,930,000 cases
from 2,859,000 cases. Case sales growth was the result of increased
sales of the Company's herb and specialty black hot tea products in
the Company's traditional channels of distribution, as well as
expansion in international markets. Fiscal 1997 net sales of the
Company's dry tea products reflect a price increase which was
implemented during the third quarter of fiscal 1996. The Company's
nutraceutical products contributed net sales of over $1.6 million for
the six months ended March 31, 1997, a 66.6% increase from the
comparable period in fiscal 1996.
Gross profit. Gross profit for the six months ended March 31,
1997 increased 11.7% to $33.6 million from $30.1 million for the
comparable period in fiscal 1996. The Company's gross profit margin
increased to 65.2% from 63.2% for the comparable prior year period.
The increase in gross margin is primarily due to increased sales of
the Company's higher margin hot herb tea products. In addition, the
Company's nutraceutical products realized higher gross margins during
fiscal 1997, as compared to fiscal 1996, due to greater efficiencies.
Selling and marketing expenses. Selling and marketing expenses
for the six months ended March 31, 1997 increased 17.8% to $22.3
million from $18.9 million for the comparable period in fiscal 1996,
and increased as a percentage of net sales to 43.2% from 39.7%. The
increase in selling and marketing expenses primarily was due to
increased trade promotion, advertising and consumer promotion
expenses.
General and administrative expenses. General and administrative
expenses for the six months ended March 31, 1997 decreased 3.9% from
the comparable period in fiscal 1996, and decreased as a percentage
of net sales to 4.1% from 4.6% for the same period of the prior
fiscal year. The decrease is primarily due to spending controls
implemented by the Company which resulted in reduced expenses in
several areas.
Amortization of intangibles. Amortization of intangibles,
including amortization of goodwill and other intangible assets, for
the six months ended March 31, 1997 decreased 12.8% from fiscal 1996.
Amortization of intangibles was lower for fiscal 1997, as compared to
fiscal 1996, as certain intangible assets became fully amortized or
were written off. These reductions were partially offset by increases
in amortization on new additions to artwork and plates resulting from
the Company's continued development of new products and improved
packaging.
Operating income. Operating income for the six months ended
March 31, 1997 increased 3.9% from the comparable period in fiscal
1996, primarily due to increased net sales. Operating income as a
percentage of net sales decreased to 16.6% from 17.3% primarily due
to increased selling and marketing expenses.
Interest expense. Interest expense for the six months ended
March 31, 1997 declined 41.2% from the comparable period in fiscal
1996 as a result of reduced outstanding borrowings. The Company
extinguished its bank debt during the first quarter of fiscal 1997.
Interest expense for the six months ended March 31, 1997 primarily
relates to Industrial Revenue Bonds which are secured by the
Company's facility and fees relating to continued availability of the
Company's bank credit facility.
Income taxes. Income tax expense for the six months ended March
31, 1997 increased 5.4% from the comparable period in fiscal 1996.
The increase in income tax expense primarily was due to increased pre-
tax income.
PAGE 10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The operations of the Company historically have been funded with
a combination of internally generated funds and external borrowings.
Purchases of inventory, marketing expenditures and support of
accounts receivable have historically been, and are expected to
remain, the Company's principal recurring uses of funds for the
foreseeable future. The Company's other principal uses of funds in
the future will be the development of new or existing tea and
nutraceutical products, and the possible acquisition of brands,
product lines or other assets. The Company expects its primary
sources of financing for its future business activities will be funds
from operations plus borrowings under the credit facility. The
Company currently believes that funds from operations and funds
expected to be available under the Company's credit facility are
likely to be sufficient to meet operating and capital requirements
unless a significant acquisition is made. On February 13, 1997, the
Company announced that its Board of Directors authorized up to a $12
million program to repurchase shares of its common stock. The buyback
program does not include specific price targets and may be suspended
at any time. The Company initiated a stock repurchase transaction
after the conclusion of the quarter, which was deemed immaterial.
Cash and cash equivalents increased by $4.3 million for the six
months ended March 31, 1997. Cash provided by operating activities
was $7.7 million for the six months ended March 31, 1997. The
Company's investing activities used cash of $0.6 million for the six
months ended March 31, 1997. Financing activities of the Company used
cash of $2.8 million for the six months ended March 31, 1997,
principally for the extinguishment of bank debt.
The Company incurred capital expenditures of approximately
$736,000 during the six months ended March 31, 1997, including
$386,000 primarily for factory and computer equipment and $350,000
for the design and development of new packaging artwork. The Company
anticipates making capital expenditures of approximately $1.75 to
$2.0 million in fiscal 1997.
OTHER DEVELOPMENTS
The Company incurred legal expenses of approximately $647,000
during the six months ended March 31, 1997 associated with a lawsuit
against a competitor relating to trade dress infringements and unfair
competition claims. On January 13, 1997, judgment was entered in the
United States District Court for the District of Colorado which
absolved the competitor of any claims, and there were no monetary
damages assessed. The Company believes that no additional legal costs
associated with this lawsuit will be incurred.
The statements contained in this Quarterly Report on Form 10-Q
which are not historical facts, including, but not limited to,
statements found under the captions "Results of Operations,"
"Liquidity and Capital Resources" and "Other Developments," above,
are forward-looking statements that involve a number of risks and
uncertainties. The actual results of the future events described in
such forward-looking statements could differ materially from those
stated in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the risks and
uncertainties discussed in this Quarterly Report, including, without
limitation, the portions of such reports under the captions
referenced above, and the uncertainties set forth from time to time
in the Company's filings with the Securities and Exchange Commission,
and other public statements. Such risks and uncertainties include,
without limitation, seasonality, interest in the Company's products,
general economic conditions, consumer trends, costs and availability
of raw materials, competition and the effect of governmental
regulation.
PAGE 11
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
The information in Note 3 to the Unaudited Consolidated Financial
Statements included in Part I is incorporated herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
The annual meeting of stockholders of the Company was held on
February 13, 1997. The following matters were submitted to a vote of
the stockholders:
(a) Election of directors - Two Class III directors were elected to
serve until the 2000 annual meeting of stockholders and until
successors are elected.
Total Votes Total Votes
For Withheld
----------- -----------
Mo Siegel 3,593,377 18,269
James P. Kelley 3,600,185 11,461
Incumbent Class I directors with terms expiring in 1998 are Leonard
Lieberman and Marina Hahn. Incumbent Class II directors with terms
expiring in 1999 are Ronald V. Davis and John D. Howard.
(b) Appointment of independent auditors - The proposal to ratify the
appointment of Deloitte & Touche LLP as the Company's certified
public accountants for the fiscal year ending September 30, 1997
was approved by a vote of 3,597,454 shares in favor, 10,400 shares
against, and 3,792 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
--------
Exhibit No. Description
- ----------- -----------
23.1 - Report of Deloitte & Touche LLP on consolidated
financial statements
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K for the quarter ended March
31, 1997.
PAGE 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CELESTIAL SEASONINGS, INC.
(Registrant)
May 9, 1997 By: /s/ Darrell F. Askey
----------------------
Darrell F. Askey
Vice President - Finance, Secretary and
Treasurer
(Principal Financial Officer)
PAGE 13
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
Sequentially
Exhibit Numbered
No. Description Pages
- ------- ----------- ------------
23.1 - Report of Deloitte & Touche LLP on
consolidated financial statements 15
PAGE 14
Exhibit 23.1
INDEPENDENT ACCOUNTANTS' REPORT
Celestial Seasonings, Inc.:
We have reviewed the accompanying consolidated balance sheet of
Celestial Seasonings, Inc. and subsidiaries (the "Company") as of
March 31, 1997 and the related consolidated statements of income and
cash flows for the three-month and six-month periods ended March 31,
1997 and March 31, 1996. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such consolidated financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of the Company and
subsidiaries as of September 30, 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated
November 4, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying consolidated balance sheet as of
September 30, 1996 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
Deloitte & Touche LLP
Denver, Colorado
April 15, 1997
PAGE 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CELESTIAL SEASONINGS, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,512
<SECURITIES> 0
<RECEIVABLES> 9,924
<ALLOWANCES> (204)
<INVENTORY> 7,362
<CURRENT-ASSETS> 22,171
<PP&E> 26,659
<DEPRECIATION> (9,911)
<TOTAL-ASSETS> 59,990
<CURRENT-LIABILITIES> 11,420
<BONDS> 6,274
0
0
<COMMON> 41
<OTHER-SE> 42,255
<TOTAL-LIABILITY-AND-EQUITY> 59,990
<SALES> 51,534
<TOTAL-REVENUES> 51,534
<CGS> 17,941
<TOTAL-COSTS> 17,941
<OTHER-EXPENSES> 25,046
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 277
<INCOME-PRETAX> 8,270
<INCOME-TAX> 3,225
<INCOME-CONTINUING> 5,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,045
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
