<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(a)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(o) or (S)240.14a-12
CELESTIAL SEASONINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO OF CELESTIAL SEASONINGS APPEARS HERE]
CELESTIAL SEASONINGS, INC.
4600 SLEEPYTIME DRIVE
BOULDER, COLORADO 80301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 13, 1997
To the Stockholders of Celestial Seasonings, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Stockholders (the "Meeting") of Celestial Seasonings, Inc., a Delaware
corporation (the "Company"), will be held on Thursday, February 13, 1997, at
2:30 p.m., (MST), at Celestial Seasonings, Inc., 4600 Sleepytime Drive,
Boulder, Colorado 80301, for the following purposes:
1) To elect two Class III directors to serve until the 2000 Annual
Meeting of Stockholders, and until their successors are duly
elected and qualified; and
2) To ratify the appointment of Deloitte & Touche llp as the Company's
independent auditors for the year ending September 30, 1997; and
3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
These matters are more fully described in the accompanying Proxy
Statement. The Board of Directors of the Company fixed the close of business
on December 20, 1996, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Meeting. Only holders of the
Company's common stock, $.01 par value per share, at the close of business on
the record date are entitled to notice of, and to vote at, the Meeting. A
complete list of stockholders entitled to vote at the Meeting will be
available during normal business hours for examination by any stockholder, for
purposes related to the Meeting, for a period of ten days prior to the
Meeting, at the Company's corporate offices located at 4600 Sleepytime Drive,
Boulder, Colorado 80301.
You are cordially invited to attend the Meeting. Whether or not
you plan to attend the Meeting in person, please complete, date and sign the
accompanying proxy card and return it promptly in the enclosed envelope to
ensure that your shares, regardless of the size of your holdings, are
represented and voted in accordance with your wishes. If you choose, you may
still vote in person at the Meeting even though you previously submitted your
proxy.
By order of the Board of Directors
Darrell F. Askey,
Vice President-Finance, Secretary and Treasurer
Boulder, Colorado
January 6, 1997
<PAGE>
[LOGO OF CELESTIAL SEASONINGS, INC. APPEARS HERE]
CELESTIAL SEASONINGS, INC.
4600 SLEEPYTIME DRIVE
BOULDER, COLORADO 80301
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 1997
----------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being furnished
in connection with the solicitation of proxies by and on behalf of the Board
of Directors (the "Board of Directors") of Celestial Seasonings, Inc., a
Delaware corporation, to be used at the 1997 Annual Meeting of Stockholders of
the Company to be held on Thursday, February 13, 1997, at 2:30 p.m. (MST), at
Celestial Seasonings, Inc., 4600 Sleepytime Drive, Boulder, Colorado 80301,
and at any adjournment or postponement thereof. This Proxy Statement and the
accompanying proxy card are first being mailed to the holders of the Company's
common stock, $.01 par value per share (the "Common Stock"), on or about
January 6, 1997.
Stockholders of the Company represented at the Meeting will consider and
vote upon (i) the election of two Class III directors, to serve until the 2000
annual meeting of stockholders, and until their successors are duly elected
and qualified, (ii) the ratification of the appointment of Deloitte & Touche
llp as the Company's independent auditors for the year ending September 30,
1997, and (iii) such other business as may properly come before the Meeting.
The Company is not aware of any other business to be presented for
consideration at the Meeting.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock at the close of business on
December 20, 1996 (the "Record Date") will be entitled to notice of, and to
vote at, the Meeting. As of the Record Date, there were 4,050,916 shares of
Common Stock outstanding. Each stockholder is entitled to one vote for each
share held on the Record Date on all matters which may come before the
Meeting. The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum for the conduct of business at the Meeting.
Any proxy given pursuant to this solicitation is revocable at any time
prior to being voted at the Meeting. Revocation must be mailed to the
Secretary of the Company and received prior to the Meeting, or any person who
attends the Meeting may vote in person, thereby revoking any previously
executed proxy. All shares represented by properly executed proxies will,
unless such proxies have previously been revoked, be voted at the Meeting in
accordance with the directions on the proxies. If no direction is indicated,
the shares will be voted in favor of the Board of Directors' nominees for
director and for the ratification of Deloitte & Touche llp as independent
auditors as listed in this Proxy Statement. The persons named in the proxies
will have discretionary authority to vote all proxies with respect to
additional matters that are properly presented for action at the Meeting.
<PAGE>
This proxy solicitation is made by and on behalf of the Board of Directors.
Solicitation of proxies for use at the Meeting may be made in person or by
mail, telephone or telegram, by directors, officers and regular employees of
the Company. Such persons will receive no additional compensation for any
solicitation activities. The Company will request banks and brokers to solicit
their customers who beneficially own shares listed of record in names of
nominees, and will reimburse those banks and brokers for their reasonable out-
of-pocket expenses in connection with such solicitation. The Company will bear
all expenses of this Proxy Statement, the enclosed form of proxy, and of
soliciting proxies.
ELECTION OF DIRECTORS
At the Meeting, directors of the Company will be elected by a plurality of
the shares voting in the election of directors. Thus, the director candidates,
up to the number of directors to be elected, receiving the highest number of
votes will be elected. Abstentions and broker non-votes will have no effect on
the election of directors.
At the Meeting, stockholders will elect two Class III directors, who will
serve until the 2000 annual meeting, or until the director's respective
successor has been elected and qualified or until the director's earlier
resignation or removal. The shares represented by the proxy card will be voted
in favor of the election of the persons named below unless authorization to do
so is withheld. In the event that either of the nominees should be unavailable
to serve as director, which is not presently anticipated, it is the intention
of the persons named in the proxy card to select and cast the shares
represented by proxies for the election of such other person or persons as the
Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES IDENTIFIED BELOW.
INFORMATION CONCERNING THE NOMINEES
Set forth below is the name of each nominee for election to the Board of
Directors, his age, his principal occupation for at least the past five years,
and the period during which he has served as a director. Each nominee is
currently a director of the Company.
Nominees for Class III directors (terms expiring in 2000)
Mo Siegel, 47, founded the Company's predecessor in 1970 and was
President and Chairman of the Board until 1986. From 1986 until 1990, Mr.
Siegel was involved in private investments and not-for-profit activities,
and from 1990 until 1991 was a founder and chief executive officer of
Earth Wise, Inc., a marketer of environmentally friendly cleaning
products and trash bags. He became a director of the Company again in
1988 and rejoined the Company as Chairman and Chief Executive Officer in
1991. Mr. Siegel is a director of Corporate Express, Inc.
James P. Kelley, 42, has served as a director of the Company since
1988. Mr. Kelley is a Managing Director of Vestar Capital Partners, Inc.
("Vestar"), a private investment firm. Prior to the founding of Vestar in
1988, he was a Vice President of The First Boston Corporation, an
investment banking firm. Mr. Kelley is Chairman of the Board of Directors
of La Petite Academy, Inc., and a director of the Westinghouse Air Brake
Company.
Incumbent Class I directors (terms expiring in 1998)
Leonard Lieberman, 67, has served as a director of the Company since
1988. Mr. Lieberman is a retired Chairman, President and Chief Executive
Officer of Supermarkets General Corporation, one of the largest
supermarket companies in the United States and operator of Pathmark
Supermarkets. Mr. Lieberman is a director of several publicly-held and
privately-held companies, including Republic New York Corporation and La
Petite Academy, Inc.
2
<PAGE>
Marina Hahn, 39, has served as a director of the Company since 1994.
Currently, Ms. Hahn is a Marketing/Advertising Consultant. During 1994
and 1995, Ms. Hahn was Vice President of Advertising of Sony Electronics,
Inc., a consumer electronics manufacturer. From 1989 until joining Sony,
she was the Director of Advertising of Pepsi-Cola Company, a beverage,
restaurant and food company. From 1979 to 1989 she was employed by DDB
Needham Worldwide, Inc., an advertising agency.
Incumbent Class II directors (terms expiring in 1999)
Ronald V. Davis, 49, has served as a director of the Company since
1993. Mr. Davis is Chairman of Davis Capital, LLC, a private investment
firm. From 1992 to 1994 he was Chairman of Perrier Group of America, Inc.
("Perrier USA"), a leading beverage manufacturer and distributor, and
from 1980 to 1992 he was President and Chief Executive Officer of Perrier
USA.
John D. Howard, 44, has served as a director of the Company since
1988. Mr. Howard is Chief Executive Officer of Gryphon Capital Partners,
a private investment firm. From 1990 to 1996 he was Co-Chief Executive
Officer of Vestar. Prior to joining Vestar in 1990, he had been, since
1985, a Senior Vice President of Wesray Capital Corporation, a private
investment firm. Mr. Howard is a director of Access Beyond, Inc., Clark-
Schwebel Inc., Dyersburg Fabrics, Inc., and National Realty Trust.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during fiscal 1996. Each of the
directors attended at least 75% of the total number of such meetings and
committee meetings on which he or she served that were held during fiscal
1996.
The Board of Directors has established the following standing committees:
Compensation Committee. The principal responsibilities of the Compensation
Committee are to establish policies and periodically review matters involving
executive compensation, recommend changes in employee benefit programs, grant
stock options under the Incentive Plan, and provide counsel on key personnel
selection, effective succession planning and development programs for all
corporate officers. The current members of the Compensation Committee are
Messrs. Davis (Chairman), Kelley and Lieberman.
Audit Committee. The principal responsibilities of the Audit Committee are
to review the plan, scope and results of the independent audit and report to
the Board of Directors on whether financial information is fairly presented
and whether generally accepted accounting principles are followed, monitor the
internal accounting and financial functions of the Company to assure quality
of staff and proper internal controls, and investigate conflicts of interest,
ethics and compliance with laws and regulations. The current members of the
Audit Committee are Messrs. Davis, Kelley and Lieberman (Chairman).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who beneficially own greater than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Based solely upon its review of copies of the Section 16 reports the Company
has received and representations from certain reporting persons, the Company
believes that during its year ended September 30, 1996, all of its directors,
executive officers and greater than 10% beneficial owners were in compliance
with their filing requirements.
3
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of the Company. Biographical information with respect to Mo Siegel is
set forth under "Election of Directors" above.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Mo Siegel 47 Chairman of the Board, Chief Executive
Officer and President
John D. Hale 47 Senior Vice President and
Vice President--Operations
Darrell F. Askey 40 Vice President--Finance, Secretary and
Treasurer
Marie A. Gambon 44 Vice President--Human Resources
Abbe G. Kuhn 40 Vice President--Research & Development
</TABLE>
Mr. Hale joined the Company as Vice President--Operations in May 1992 and
was promoted to Senior Vice President in September 1996. From 1987 until
joining the Company, Mr. Hale was a manufacturing executive with Frito Lay,
Inc., a manufacturer and distributor of food products. At Frito Lay, he held
the positions of Director of Operations--Manufacturing South, Area Vice
President--Manufacturing South, and Plant Manager. Prior to his employment at
Frito Lay, Mr. Hale was employed by the Quaker Oats Company, a food products
company, for 14 years.
Mr. Askey has been the Vice President--Finance since December 1995. He
joined the Company in January 1994 as Corporate Controller. Prior to joining
the Company, from 1991 to 1993 he was Director of Finance at Synergen, Inc., a
biotechnology company. Prior to his employment at Synergen, Mr. Askey served
as Controller from 1989 to 1991 for Cholestech, Inc., a medical diagnostics
products company. Prior to Cholestech, Mr. Askey served in various financial
and operating positions at Genentech, Inc., a biotechnology company, for eight
years. Mr. Askey began his career in 1979 with the General Tire Company, a
tire manufacturer and a division of GenCorp., Inc.
Ms. Gambon joined the Company as Vice President--Human Resources in March
1994. Prior to joining the Company, from 1992 to 1994 she was Executive
Director--Leadership and Learning of U.S. West, a telephone company. From 1991
to 1992 she was Director of the Leadership Center of U.S. West. Prior to her
employment with U.S. West, Ms. Gambon was employed by International Business
Machines, a computer hardware and software manufacturer, for 17 years.
Ms. Kuhn joined the Company as Vice President--Research & Development in
January 1994. From 1992 to 1994 she was Director, Research & Development of
A&W Brands, Inc., a beverage company. From 1989 to 1992 she served as Manager
of Carbonated Beverages, North America, for Cadbury Beverages, a beverage
company, and from 1985 to 1989 she served as Director of Product Development
for Calvin Beverage Company/Hiram Walker, Inc., a company engaged in the
liquor industry.
4
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
During fiscal 1996, non-employee directors received an annual directors'
fee of $8,000, a fee of $3,000 for each meeting of the Board of Directors or
Board committee attended, and $500 for each special meeting attended, as well
as reimbursement for their costs of attending such meetings. These amounts
were paid as cash compensation or stock in lieu of fees in accordance with the
provisions of the Company's 1994 Non-Employee Director Compensation Plan.
During 1996, all directors elected to receive compensation for meeting fees in
stock. Mr. Siegel, the Chairman of the Board and Chief Executive Officer,
receives no annual or meeting fees for services as a director.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded by the Company to
its Chief Executive Officer and its four other most highly compensated
executive officers for services rendered during the three years ended
September 30, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND ------------------------ OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDED(#) COMPENSATION (6)
------------------ ---- -------- ------- ------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mo Siegel
Chief Executive
Officer............... 1996 $212,000 $69,030 $ -- -- $8,541
1995 211,538 46,262 -- -- 8,196
1994 199,385 79,952 -- -- 7,391
Ramona L. Cappello
Vice President--
Marketing............. 1996 155,250 179 53,656(3) -- 6,714
1995(1) 98,077 20,012 27,171(3) 15,000 180
John D. Hale
Senior Vice President
and Vice President--
Operations............ 1996 141,000 49,336 5,000(4) -- 7,853
1995 131,750 23,712 5,000(4) 1,500 7,012
1994 123,066 34,115 5,000(4) -- 6,254
Darrell F. Askey
Vice President--
Finance, Secretary
Treasurer.............. 1996 107,196 44,339 1,721(5) 12,052 5,376
Abbe G. Kuhn
Vice President--
Research &
Development........... 1996 104,998 24,114 12,600(3) -- 5,504
1995 101,036 14,155 21,101(3) 5,000 5,080
1994(2) 67,846 18,462 11,842(3) -- --
</TABLE>
- --------
(1) Ms. Cappello's employment with the Company commenced during the Company's
second quarter in 1995.
(2) Ms. Kuhn's employment with the Company commenced during the Company's
second quarter in 1994.
(3) Consists of reimbursement of relocation expenses.
(4) Consists of benefits in lieu of provision of a leased vehicle.
(5) Consists of benefits related to the Company's provision of a leased
vehicle.
(6) Consists of Company contributions pursuant to the Company's 401(k) defined
contribution plan, Company contributions pursuant to the Company's thrift
retirement plan, Company contributions to fund purchases of Common Stock
for the officer's account under the Company's employee stock ownership
plan, and premiums paid by the Company for the officer's personal term
life insurance policy.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
the executives named in the Summary Compensation Table above during the year
ended September 30, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------ --------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($ / SH) DATE 5% 10%
---- ----------- ------------ ----------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Darrell F. Askey........ 12,052 26.7% $18.50 December 20, 2005 $ 61,600 $ 136,121
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises
during the last fiscal year and outstanding options held as of September 30,
1996 by the executives named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR- FISCAL YEAR-
END (#) END ($)
SHARES ---------------- -----------------
ACQUIRED ON VALUE EXERCISABLE / EXERCISABLE /
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- ------------ ------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Mo Siegel............... -- $ -- 107,245 / 6,725 $874,536 / 0
Ramona L. Cappello...... -- -- 5,000 / 10,000 21,550 / 43,100
John D. Hale............ -- -- 19,986 / 6,666 104,738 / 14,542
Darrell F. Askey........ -- -- 472 / 12,930 1,770 / 9,319
Abbe G. Kuhn............ -- -- 1,750 / 3,250 6,563 / 12,188
</TABLE>
- --------
(1) Amounts are calculated as the difference between the fair market value of
the stock underlying the options ($19.00 per share on the last trading day
of the fiscal year) and the exercise price of the options. The weighted
average exercise price on the last trading day of the fiscal year was
$11.49 for Mr. Siegel's options, $14.69 for Ms. Cappello's options, $14.98
for Mr. Hale's options, $18.17 for Mr. Askey's options, and $15.25 for Ms.
Kuhn's options.
EMPLOYMENT AGREEMENTS
The Company and Mr. Hale, Ms. Cappello and Ms. Kuhn have entered into
substantially similar employment agreements pursuant to which the executive is
entitled to an annual base salary, reviewed annually. The executive also may
receive a performance bonus each year with a target equal to a percentage of
his or her base salary. In addition, the executive is entitled to participate
in the company's health and welfare benefit plans, incentive stock option and
bonus plans, and other plans generally available to executive officers and
employees. In addition, the executives received reimbursement of certain
relocation expenses when they joined the Company. The employment agreements
provide for severance compensation equal to a maximum of nine months' base
salary if the executive is terminated by the Company without cause during the
first year of employment and six months' base salary if the executive is
terminated by the Company without cause thereafter.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The three
members of the Committee are non-employee directors. The Committee determines
the compensation of all executive officers of the Company, including
compensation of the executives named in the Summary Compensation Table. In
reviewing the compensation of individual executive officers the Committee
considers individual performance, the recommendations of Mr. Siegel (other
than with respect to his own compensation), published compensation surveys,
and current market conditions.
6
<PAGE>
Overall Policy
The Company's compensation programs are tied closely to Company
performance, which the Board of Directors believes contributes to increases in
shareholder value. The Company's compensation programs are aimed at enabling
the Company to attract and retain the best possible executive talent, and
rewarding those executives commensurate with their ability and performance and
the Company's performance.
At least once each year, the Committee conducts a comprehensive review of
the Company's executive compensation programs. The purpose of the review is to
assure that the Company's executive compensation programs remain competitive
and that the programs meet their objective of creation of shareholder value.
In its review, the Committee considers data provided by a leading management
consulting group and by management.
Compensation Programs
The Company's compensation programs consist of base salary, a cash
incentive program (the "Annual Plan"), annual profit sharing (known as
"Gainsharing"), and a long-term incentive stock option program. At the
executive officer level, compensation includes a significant amount of
performance-based compensation (annual and long-term incentive programs).
Base Salary
Base salaries for executive officers are determined in the same manner as
that of other salaried employees. Salary guidelines are established by
comparing the responsibilities of the individual's position in relation to
similar positions in other manufacturing companies of comparable size and
lines of business. In 1996, the Committee reviewed both regional and national
data presented by the consulting group in making its assessment of
compensation levels. Individual salaries are determined considering the
person's performance against personal objectives for the year, as well as the
Company's performance against certain corporate objectives.
Annual Plan
The Company's officers are eligible to receive an annual cash incentive
award under the Annual Plan. In addition to the executive officers, 37 key
managers participated in the Annual Plan in 1996. Under the Annual Plan,
individual target bonuses are established based on position level.
Participants may receive the target bonus, or more or less than the target
bonus depending upon the Company's performance to plan, and the participants'
performance against individual objectives established at the start of the
year. The 1996 Annual Plan for executive management had 75% of their incentive
tied to operating profit and case sales volume objectives, and 25% to three or
more strategic objectives. Such strategic objectives were specific to each
executive manager.
Gainsharing
The Company believes that employee participation in profitability is a
cornerstone to increased productivity and a successful organization.
Therefore, each employee of the Company receives a pro rata portion of a
profit sharing pool based on operating profit results as measured against the
annual plan. The pro rata amount paid to each employee is based on a formula
incorporating length of service and salary earned for the year. The salary
portion of the formula is subject to a ceiling substantially lower than the
annual salary of any of the executives named in the Summary Compensation
Table, resulting in payments being spread more evenly among all employees of
the Company. In 1996, the executive officers of the Company waived their
participation rights in order to increase the pool available to non-executive
employees.
Long-Term Incentive
The Company believes in the importance of stock ownership by management and
other employees. Consequently, the Company's long-term incentive plans are
stock-based. The primary long-term incentive vehicle is the Incentive Plan, in
which all employees are eligible to participate. Participants are considered
for
7
<PAGE>
awards of stock options, based upon an assessment of job level, performance,
potential, past award history, and competitive practice. Stock options for
executive management become exercisable (vest) over a four or five year period
and have terms of from six to ten years.
CEO Compensation
In determining Mr. Siegel's compensation, the Committee considers financial
and non-financial performance, as well as how Mr. Siegel's compensation
compares to that of CEO's in comparable companies. Mr. Siegel's base salary
was not adjusted in 1996.
The Company's key internal financial measurement is performance against
earnings before interest, taxes, depreciation and amortization ("EBITDA")
targets. For 1996, the Company's EBITDA decreased 2.8% and was less than
planned. Another measure of Company performance, case volume, increased 1.5%
in 1996. However, after considering the effect of licensing and transferring
its ready-to-drink volume, the Company's tea volume increased 5.8%. Earnings
per share was $1.22 in 1996, an increase of 3.4% over $1.18 on a pro forma
fully taxed basis in 1995.
The Company increased its case volume of specialty black tea by 43.9% from
1995 to 1996. Case volume for the international segment increased 14.0% from
1995 to 1996. Volume in the food service segment increased 53.8% in 1996 after
a 46.5% increase in 1995. However, iced tea volume declined by 10.1% from
1995.
Non-financial accomplishments of the Company in 1996 included making its
brand the number one brand in Canada, expanding its line of nutraceutical
products and licensing the manufacturing and distribution of its ready-to-
drink business to Tri-Arc/Royal Crown Company, Inc.
The Committee considered that Mr. Siegel's leadership was key in achieving
the Company's level of performance in 1996. In recognition of this
performance, the Committee approved an Annual Plan award of $68,852 for 1996.
This is an increase of approximately 49% over his Annual Plan award of $46,084
for 1995 but remains below his 1994 award of $78,199.
MEMBERS OF THE COMMITTEE
Ronald V. Davis, Chairman
James P. Kelley
Leonard Lieberman
8
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
return* for the Standard & Poor's Foods Index, the Standard & Poor's Beverage-
Soft Drink Index, the Wilshire 5000 Index, and the Company since the Company's
initial public offering on July 12, 1993.
[LINE GRAPH APPEARS HERE]
* $100 invested July 12, 1993 in Common Stock at the initial public offering
price or in the index indicated, including reinvestment of dividends. All
other dates in the graph correspond with the last trading day of the Company's
fiscal periods.
Corresponding index values and Common Stock price values are given below:
<TABLE>
<CAPTION>
07/12/93 09/24/93 03/25/94 09/23/94 03/24/95 09/29/95 03/29/96 09/27/96
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Celestial Seasonings In-
dex $100.00 $153.75 $150.00 $ 90.00 $ 96.55 $ 90.00 $108.75 $ 95.00
S&P Foods Index $100.00 $100.22 $100.92 $107.78 $123.99 $137.08 $130.65 $144.02
S&P Bev.-S.D. Index $100.00 $102.47 $ 99.07 $106.34 $128.69 $157.71 $174.32 $192.69
Wilshire 5000 Index $100.00 $102.83 $104.27 $102.66 $110.36 $130.47 $143.04 $151.77
CELESTIAL SEASONINGS
CLOSING STOCK PRICE $ 20.00 $ 30.75 $ 30.00 $ 18.00 $ 19.31 $ 18.00 $ 21.75 $ 19.00
</TABLE>
9
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table and notes set forth as of December 2, 1996 the
beneficial ownership, as defined by the regulations of the Commission, of
Common Stock held by (i) each person or group of persons known by the Company
to beneficially own more than five percent (5%) of the outstanding Common
Stock, (ii) each director and nominee for director of the Company, (iii) each
executive officer named in the Summary Compensation Table set forth under
"Compensation of Directors and Executive Officers" and (iv) all executive
officers and directors of the Company as a group. All information is taken
from or based upon ownership filings made by such persons with the Commission
or upon information provided by such persons to the Company. Unless otherwise
indicated, the stockholders listed below have sole voting and investment power
with respect to the shares reported as owned. Except as otherwise indicated,
the address of each person listed below is 4600 Sleepytime Drive, Boulder,
Colorado, 80301.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME/ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIALLY OWNED
-------------------------------- -------------------- ------------------
<S> <C> <C>
FMR Corp. (1)
82 Devonshire Street
Boston, MA 02109 318,700 7.87%
Gabelli Funds, Inc. (2)
One Corporate Center
Rye, NY 10580 298,800 7.38
Quaker Capital Management Co.
(3)
Abbott Bldg. 401 Wood Street
Pittsburgh, PA 15219 220,600 5.45
Southeastern Asset Management,
Inc. (4)
6075 Poplar Avenue, Suite 900
Memphis, TN 38119 312,270 7.71
Mo Siegel (5) 543,155 13.06
Ronald V. Davis (6) 10,563 *
Marina Hahn (7) 3,094 *
John D. Howard 40,305 *
James P. Kelley 26,580 *
Leonard Lieberman 1,950 *
Darrell F. Askey (8) 891 *
Ramona L. Cappello (9) 5,500 *
John D. Hale (10) 36,550 *
Abbe G. Kuhn (11) 2,078 *
All Officers and Directors as a
Group
(11 persons) (12) 673,252 16.02%
</TABLE>
--------
*Less than 1%
(1) According to a statement on Schedule 13F-E filed on November 15, 1996
with the Commission, FMR Corp. had sole voting power over 108,700 shares
and may be deemed to have beneficial ownership of 210,000 shares.
(2) According to a statement on Schedule 13D/A filed on June 24, 1996 with
the Commission, Gabelli Funds had sole voting power over 42,000 shares
and may be deemed to have beneficial ownership of 256,800 shares.
(3) According to a statement on Schedule 13G filed on February 15, 1996 with
the Commission, Quaker Capital Management had sole voting power over
1,000 shares and may be deemed to have beneficial ownership of 219,600
shares.
(4) According to a statement on Schedule 13G filed on February 9, 1996 with
the Commission, Southeastern Asset Management had sole voting power over
76,270 shares and may be deemed to have beneficial ownership of 236,000
shares.
(5) Includes 107,857 shares obtainable upon the exercise of presently
exercisable options and 230 shares held in Mr. Siegel's account in the
Company's employee stock ownership plan (the "ESOP").
(6) Includes 10,000 shares obtainable upon the exercise of presently
exercisable options.
(7) Includes 2,500 shares obtainable upon the exercise of presently
exercisable options.
(8) Includes 540 shares obtainable upon the exercise of presently exercisable
options.
(9) Shares obtainable upon the exercise of presently exercisable options.
(10) Includes 20,424 shares obtainable upon the exercise of presently
exercisable options and 68 shares held in Mr. Hale's account in the ESOP.
(11) Includes 2,000 shares obtainable upon the exercise of presently
exercisable options.
(12) Includes 150,820 shares obtainable upon the exercise of presently
exercisable options and 298 shares held in accounts in the ESOP.
10
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche llp served as independent auditors of the
Company for the year ended September 30, 1996 and, upon recommendation of the
Audit Committee, the Board of Directors has appointed Deloitte & Touche llp to
serve for the year ending September 30, 1997. The Board of Directors is
requesting ratification by the stockholders of Deloitte & Touche llp's
appointment. Representatives of Deloitte & Touche llp are expected to attend
the Annual Meeting. They will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
In the event this proposal is defeated, the vote will be considered as a
direction to the Board of Directors to select other auditors for the next
year. However, because of the difficulty and expense of making any
substitution of auditors after the beginning of a year, Deloitte & Touche
llp's appointment for the 1997 year will be permitted to stand unless the
Board of Directors finds other reasons for making a change.
Services to be performed by Deloitte & Touche llp for the 1997 year will
include, among other things, audit of annual financial statements, limited
reviews of quarterly financial information and consultations in connection
with various financial reporting, accounting and tax matters. Ratification of
Deloitte & Touche llp's appointment requires the affirmative vote of the
holders of a majority of the shares of Common Stock present at the Meeting, in
person or by proxy, and entitled to vote. In determining whether the proposal
has received a majority, abstentions will be counted and have the same effect
as a vote against the proposal and broker non-votes will not be considered as
present and entitled to vote and therefore will have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
11
<PAGE>
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual stockholder meetings, consistent with rules
adopted by the Commission. Such proposals must be received by the Company not
later than September 5, 1997 to be considered for inclusion in the proxy
statement and form of proxy relating to the 1998 Annual Meeting of
Stockholders. Any such proposals should be addressed to: Corporate Secretary,
Celestial Seasonings, Inc., 4600 Sleepytime Drive, Boulder, Colorado 80301.
ANNUAL REPORT TO STOCKHOLDERS
The 1996 Annual Report of the Company, as filed with the Commission, is
being mailed to the stockholders with this Proxy Statement. The Annual Report
is not to be considered part of the soliciting material.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Meeting except the matters set forth in the Notice and described in this Proxy
Statement. If any other matters properly come before the Meeting, the persons
designated as agents in the enclosed form of proxy will vote on such matters
in accordance with their best judgment.
Celestial Seasonings, Inc.
Boulder, Colorado
January 6, 1997
12
<PAGE>
PROXY PROXY
CELESTIAL SEASONINGS, INC.
Proxy Solicited on Behalf of The Board of Directors
The undersigned appoints Mo Siegel and Darrell F. Askey, or any of them,
the proxies and attorneys-in-fact for the undersigned, with full power of
substitution and revocation, to vote on behalf of the undersigned, at the 1997
annual meeting of stockholders of Celestial Seasonings, Inc. (the "Company") to
be held at Celestial Seasonings, Inc., 4800 Sleepytime Drive, Boulder, Colorado
80301 on Thursday, February 13, 1997 at 2:30 p.m. (MST), and any adjournments or
postponements thereof, all shares of the common stock, $.01 par value per
share, of the Company standing in the name of the undersigned or which the
undersigned may be entitled to vote as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 and 2
PROPOSED BY THE COMPANY
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
CELESTIAL SEASONINGS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
For All
(Except those
For Withheld written to
All All the left)
1. ELECTION OF DIRECTORS. Nominees: [_] [_] [_]
Mo Siegel and James P. Kelley
________________________________
For Against Abstain
2. Ratification of the appointment of [_] [_] [_]
Deloitte & Touche LLP as the
Company's independent auditors for
the year ending September 30, 1997.
[_] Yes, I am planning on attending the meeting.
The undersigned hereby revokes all previous proxies given by the undersigned to
vote at such meeting or adjournment or postponement thereof.
Dated: ________________
Signature(s) _________________________________________________________________
______________________________________________________________________________
Please sign exactly as name appears on this card. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator or guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned. (If no direction is made, this proxy will be voted FOR
items 1 and 2. The persons named as proxies on the reverse side of this card
will have discretionary authority to vote this proxy with respect to additional
matters that are properly presented at the meeting. Receipt of the Notice of
Annual Meeting of Stockholders and accompanying Proxy Statement is hereby
acknowledged.)
