<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 June 30, 1998
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 July 31, 1998 the Registrant had 4,150,471 shares of Common
Stock, $0.01 Par Value, outstanding. This report on Form 10-Q
contains 16 pages.
<PAGE>
CELESTIAL SEASONINGS, INC.
INDEX
PART 1 - 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 8-12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
PAGE 2
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Case volume 857 656 3,959 3,586
Net sales $19,395 $11,589 $79,124 $63,123
Cost of goods sold 6,822 5,172 28,151 23,129
-------- ------ ------- -------
Gross profit 12,573 6,417 50,973 39,994
Operating expenses:
Selling and marketing 10,371 4,931 35,713 27,195
General and administrative 1,528 945 4,619 3,064
Amortization of intangibles 319 320 982 967
-------- ------ ------- -------
Total operating expenses 12,218 6,196 41,314 31,226
Operating income 355 221 9,659 8,768
Interest expense 154 101 386 378
-------- ------ -------- --------
Income before income taxes 201 120 9,273 8,390
Income taxes 77 46 3,570 3,271
-------- ------ -------- --------
Net income $ 124 $ 74 $ 5,703 $ 5,119
======== ====== ======== ========
Earnings per share-basic:
Net income per common
share $ 0.03 $0.02 $ 1.39 $ 1.26
======== ====== ======== =========
Weighted average common
shares 4,143 4,053 4,116 4,052
======== ====== ======== =========
Earnings per share-assuming dilution:
Net income per common
share $ 0.03 $0.02 $ 1.31 $ 1.24
======== ====== ======== =========
Weighted average common
shares 4,449 4,135 4,365 4,131
======== ====== ======== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 3
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
-------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,048 $ 2,829
Accounts receivable, net of allowance
(June - $447 Sept. -$165) 12,540 7,755
Inventory 23,682 8,410
Deferred income taxes 480 200
Prepaid expenses 1,046 641
--------- ---------------
Total current assets 39,796 19,835
Property, plant and equipment, net 17,845 17,085
Intangible assets, net 12,764 13,236
Goodwill, net 5,940 6,150
Deferred income taxes 317 263
Other assets 1,081 1,802
--------- ---------------
Total assets $ 77,743 $ 58,371
========= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,557 $ 4,160
Accrued liabilities and wages 6,320 4,584
Accrued income taxes 454 99
Accrued interest payable 67 31
Current portion of long-term debt 357 373
--------- --------------
Total current liabilities 14,755 9,247
Long-term debt 13,081 6,073
Stockholders' equity:
Common stock, $.01 par value -
authorized 15,000,000 shares;
June - issued 4,154,489 shares,
outstanding 4,145,589 shares
Sept. - issued 4,068,491 shares,
outstanding 4,059,591 shares 42 41
Capital surplus 34,692 33,540
Retained earnings 15,348 9,645
Treasury stock, 8,900 shares of common
stock at cost (175) (175)
-------- ----------
Total stockholders' equity 49,907 43,051
-------- ----------
Total liabilities and stockholders' equity $ 77,743 $ 58,371
======== ==========
</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>
Nine Months Ended
June 30,
------------------
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,703 $ 5,119
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 960 840
Amortization of intangibles 982 967
Amortization of financing fees 146 147
Deferred income taxes (334) (43)
Changes in operating assets and liabilities:
Accounts receivable (4,785) 3,146
Inventory (15,272) (1,696)
Prepaid expenses (405) 610
Accounts payable 3,397 (1,469)
Accrued liabilities and wages 1,736 (566)
Accrued income taxes 355 1,182
Accrued interest payable 36 (17)
------- --------
Net cash (used in) provided by operating activities (7,481) 8,220
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,720) (597)
Increase in intangible assets (300) (427)
Decrease in other assets 575 144
-------- --------
Net cash used in investing activities (1,445) (880)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 1,153 115
Acquisition of treasury stock - (80)
Increase in long-term debt 7,250 2,285
Reduction in long-term debt (258) (5,168)
-------- --------
Net cash provided by (used in) financing activities 8,145 (2,848)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (781) 4,492
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,829 204
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,048 $ 4,696
======== ========
CASH PAID FOR INTEREST $ 179 $ 237
CASH PAID FOR INCOME TAXES $ 3,549 $ 2,132
</TABLE>
See accompanying notes to unaudited 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 third fiscal quarter ends on
the last Saturday of June. For presentation purposes,
however, the third fiscal quarter is presented as if it
ended on June 30.
The unaudited consolidated financial statements include
the accounts of the Company and its subsidiaries.
Intercompany balances have been eliminated in consolidation.
Certain reclassifications have been made to the Company's
fiscal 1997 financial statements to conform them to fiscal
1998 classifications.
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,
1997. 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, 1998. The Company believes that this
Quarterly Report on Form 10-Q is representative of its
financial position, its results of operations and its cash
flows for the periods ended June 30, 1998 and 1997 covered
thereby.
Earnings Per Share - In accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per
Share," the increase in weighted average common shares -
assuming dilution is due to the application of the treasury
share method for outstanding stock options. The application
of the treasury share method resulted in an additional
306,000 and 82,000 weighted average shares for the three
months ended June 30, 1998 and 1997, respectively, and an
additional 249,000 and 79,000 weighted average shares for
the nine months ended June 30, 1998 and 1997, respectively.
PAGE 6
<PAGE>
2. DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
---------- -------------
<S> <C> <C>
Raw materials and supplies $ 12,031 $ 4,924
Work in process 3,344 1,393
Finished goods 9,375 2,431
---------- -------------
24,750 8,748
Less inventory reserves 1,068 338
---------- -------------
Total $ 23,682 $ 8,410
========== =============
</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 appealed the district court's decision to
the United States Court of Appeals for the Tenth Circuit. On
September 5, 1997, the court of appeals reversed the
decision of the district court. The court of appeals found
that the plaintiff's complaint alleged sufficient facts to
support his claim. The case has been returned to the
district court for further proceedings. 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 seven most recent quarters.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------
Fiscal 1998 Fiscal 1997
------------------------- ---------------------------------
June 30 Mar.31 Dec.31 Sept.30 June 30 Mar.31 Dec. 31
------- ------ ------- ------- ------- ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Case volume 857 1,611 1,491 855 656 1,491 1,439
Net sales $19,395 $32,329 $27,400 $15,916 $11,589 $25,861 $25,673
Gross profit 12,573 21,131 17,269 9,439 6,417 16,978 16,599
Operating income 355 5,549 3,755 898 221 4,969 3,578
Operating margin 1.8% 17.2% 13.7% 5.6% 1.9% 19.2% 13.9%
Net income $ 124 $ 3,341 $ 2,238 $ 545 $ 74 $ 3,007 $ 2,038
Percent of fiscal
year net sales N/A N/A N/A 20.1% 14.7% 32.7% 32.5%
</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 new product introductions, the timing of
trade promotions, and advertising and consumer promotional
expenditures. The Company, as is common in the tea and dietary
supplement industries, 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 these factors can be
significant.
NEW PRODUCT LINES
Recently, the Company introduced a line of dietary supplement
products. These products are based primarily on herbs such as
echinacea, ginkgo biloba, ginseng and St. John's wort. Sales of these
new products significantly increased the Company's net sales, and
promotional support for the products significantly increased the
Company's marketing and selling expenses for the quarter ended June
30, 1998.
To date, sales of these new dietary supplements have been
largely to retail accounts such as grocery stores, natural foods
stores, mass merchandisers and drug stores, and therefore do not
indicate that the products are, or will be, successful with
consumers.
The Company's experience with dietary supplement products is
limited. The dietary supplement market is highly competitive. In
addition, the dietary supplement market is driven by consumer
preferences and overall industry sales are volatile. As a result, the
Company's sales of its dietary supplement products are subject to the
risks relating to the future trend of overall industry sales,
competition, whether the Company's products will achieve customer and
consumer acceptance and other risks normally associated with the
introduction of new products. There is no assurance that the
Company's dietary supplement products will be successful.
PAGE 8
<PAGE>
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
June 30, June 30, June 30, June 30,
------------- ----------- ------------ ------------
1998 1997 1998 1997 1998 to 1997 1998 to 1997
---- ---- ---- ---- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 67.4 % 25.3%
Cost of goods
sold 35.2 44.6 35.6 36.6 31.9 21.7
---- ---- ---- ----
Gross profit 64.8 55.4 64.4 63.4 95.9 27.5
Selling and
marketing 53.5 42.6 45.1 43.1 110.3 31.3
General and
administrative 7.9 8.1 5.8 4.9 61.7 50.8
Amortization of
intangibles 1.6 2.8 1.3 1.5 (0.3) 1.6
---- ---- ---- ----
Operating income 1.8 1.9 12.2 13.9 60.6 10.2
Interest expense 0.8 0.9 0.5 0.6 52.5 2.1
---- ---- ---- ----
Income before
income taxes 1.0 1.0 11.7 13.3 67.5 10.5
Income taxes 0.4 0.4 4.5 5.2 67.4 9.1
---- ---- ---- ----
Net income 0.6% 0.6% 7.2% 8.1% 67.6 11.4
===== ===== ===== =====
</TABLE>
PAGE 9
<PAGE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1997
Net sales. Net sales for the three months ended June 30, 1998
increased 67.4% to $19.4 million from $11.6 million for the
comparable period in fiscal 1997. The Company's new line of dietary
supplement products contributed net sales of $6.9 million during the
third quarter of fiscal 1998, as compared to $0.8 million during the
prior year period. Net sales of the Company's tea products increased
16.8% primarily due to the sales of a new line of green tea products,
as well as expansion in the Company's international and natural foods
distribution channels. These increases were partially offset by a
decrease in sales of the Company's iced tea products.
Gross profit. Gross profit for the three months ended June 30,
1998 increased 95.9% to $12.6 million from $6.4 million for the
comparable period in fiscal 1997, primarily due to increased net
sales. The Company's gross profit margin increased to 64.8% from
55.4% for the comparable prior year period. The increase in gross
margin was primarily due to decreased sales of the Company's iced tea
products which have lower margins than the Company's hot tea and
dietary supplement products, favorable pricing on key herbs used in
the Company's products, the effect of reducing tea bag count from 24
to 20 per package and the impact of greater utilization of the
Company's manufacturing facility based on higher sales volume of its
tea products.
Selling and marketing expenses. Selling and marketing expenses
for the three months ended June 30, 1998 increased 110.3% to $10.4
million from $4.9 million for the comparable period in fiscal 1997,
and increased as a percentage of net sales to 53.5% from 42.6%. The
increase in selling and marketing expenses primarily was due to
increased consumer promotion and advertising expenses associated with
the Company's dietary supplements product line.
General and administrative expenses. General and administrative
expenses for the three months ended June 30, 1998 increased 61.7%
from the comparable period in fiscal 1997, and decreased as a
percentage of net sales to 7.9% from 8.1%. The increase was primarily
due to increased personnel costs and legal fees associated with a
shareholder's lawsuit (see note 3 of Notes To Unaudited Consolidated
Financial Statements).
Operating income. Operating income for the three months ended
June 30, 1998 increased 60.6% to $0.4 million from $0.2 million for
the comparable period in fiscal 1997, primarily due to increased net
sales and improved gross margin. This increase was partially offset
by increased selling and marketing expenses. Operating income as a
percentage of net sales remained relatively unchanged from the
comparable period in fiscal 1997.
Interest expense. Interest expense for the three months ended
June 30, 1998 increased 52.5% from the comparable period in fiscal
1997, primarily as a result of increased borrowings under the
Company's credit facility. Borrowings were needed to fund increased
working capital requirements, primarily in the form of accounts
receivable and inventory associated with the introduction of the
Company's dietary supplements line.
Income taxes. Income tax expense for the three months ended June
30, 1998 increased 67.4% from the comparable period in fiscal 1997
due to increased pre-tax income.
PAGE 10
<PAGE>
NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE NINE MONTHS ENDED
JUNE 30, 1997
Net sales. Net sales for the nine months ended June 30, 1998
increased 25.3% to $79.1 million from $63.1 million for the
comparable period in fiscal 1997. Net sales growth was primarily the
result of increased sales of the Company's dietary supplement
products and the introduction of a line of green tea products. The
Company's dietary supplement products contributed net sales of $13.6
million for the nine months ended June 30, 1998, as compared to $2.4
million during the prior year period. This increase was partially
offset by a decrease in sales of the Company's iced tea products.
Gross profit. Gross profit for the nine months ended June 30,
1998 increased 27.5% to $51.0 million from $40.0 million for the
comparable period in fiscal 1997, primarily due to increased net
sales. The Company's gross profit margin increased to 64.4% from
63.4% for the comparable prior year period. The increase in gross
margin was primarily due to decreased sales of the Company's iced tea
products which have lower margins than the Company's hot tea and
dietary supplement products, favorable pricing on key herbs used in
the Company's products, and the impact of greater utilization of the
Company's manufacturing facility based on higher sales volume of its
tea products.
Selling and marketing expenses. Selling and marketing expenses
for the nine months ended June 30, 1998 increased 31.3% to $35.7
million from $27.2 million for the comparable period in fiscal 1997,
and increased as a percentage of net sales to 45.1% from 43.1%. The
increase in selling and marketing expenses primarily was due to
increased personnel costs and trade and consumer promotion expenses
associated with the introduction of the Company's dietary supplements line.
General and administrative expenses. General and administrative
expenses for the nine months ended June 30, 1998 increased 50.8% from
the comparable period in fiscal 1997, and increased as a percentage
of net sales to 5.8% from 4.9% for the same period of the prior
fiscal year. The increase was primarily due to increased personnel
costs, legal fees associated with a shareholder's lawsuit (see note 3
of Notes To Unaudited Consolidated Financial Statements) and expenses
associated with the support of accounts receivable.
Operating income. Operating income for the nine months ended
June 30, 1998 increased 10.2% to $9.7 million from $8.8 million for
the comparable period in fiscal 1997, primarily due to increased net
sales. Operating income as a percentage of net sales decreased to
12.2% from 13.9% primarily due to increased selling and marketing
expenses.
Interest expense. Interest expense for the nine months ended
June 30, 1998 remained relatively unchanged from the comparable
period in fiscal 1997.
Income taxes. Income tax expense for the nine months ended June
30, 1998 increased 9.1% from the comparable period in fiscal 1997 due
to increased pre-tax income.
PAGE 11
LIQUIDITY AND CAPITAL RESOURCES
The operations of the Company historically have been funded with
a combination of internally generated funds and external borrowings.
Other than funding ongoing operations, the Company's principal uses
of funds in the future will be the development of new or existing tea
and dietary supplement 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 credit facilities. The
Company currently believes that funds from operations and funds
expected to be available under the Company's credit facilities are
likely to be sufficient to meet operating and capital requirements
unless a significant acquisition is made. If necessary, the Company
believes it can increase availability under its credit facilities. On
July 23, 1998 the Company signed a commitment letter for a new three-
year credit facility, the terms of which are being finalized. It is
anticipated that the facility will provide for a $15 million
revolving credit line and a $7 million line of credit supporting
existing industrial development bonds.
Cash and cash equivalents decreased $0.8 million for the
nine months ended June 30, 1998. Cash used in operating activities
was $7.5 million for the nine months ended June 30, 1998. During the
current fiscal year, the Company has experienced increased working
capital requirements, primarily in the form of accounts receivable
and inventory, associated with the introduction of its line of
dietary supplement products. The Company's investing activities used
cash of $1.4 million for the nine months ended June 30, 1998, while
financing activities provided cash of $8.1 million for the nine
months ended June 30, 1998.
The Company incurred capital expenditures of approximately $2.0
million during the nine months ended June 30, 1998, including $1.7
million primarily for factory and computer equipment and $0.3 million
for the design and development of new packaging artwork. The Company
anticipates making capital expenditures of approximately $2.9 million
in fiscal 1998.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company, after an inventory of its business systems and
business interactions, is currently executing a plan to prepare its
systems and business relationships for the Year 2000. Although the
exact steps and timing vary depending upon component type, the
Company expects to complete its plan of preparation for all
components on or around July 1, 1999. In the event there is a delay
in the completion of the Year 2000 compliance plan, the Company is in
the process of developing a contingency plan which will include some
non-computerized backup systems. The ability for the Company to
achieve Year 2000 compliance is, however, highly dependent upon
compliance of the systems of the Company's customers, suppliers and
other third parties with which the Company has business
relationships.
The total cost to the Company of Year 2000 compliance activities
has not yet been, and is not anticipated to be, material to its
financial position or results of operations in any given year. These
costs, and the date on which the Company plans to complete the Year
2000 modification and testing processes, are based on management's
best estimates, which were derived using numerous assumptions of
future events including the continued availability of certain
resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and
actual results could differ from those plans.
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 "Seasonality," "New Product
Lines," "Results of Operations," "Liquidity and Capital Resources,"
and "Year 2000 Compliance" 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, consumer acceptance of new
products, general economic conditions, consumer trends, costs and
availability of raw materials and management information systems,
competition and the effect of governmental regulation.
PAGE 12
<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 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
Exhibit No. Description
- ------------ -----------
23.1 - Report of Deloitte & Touche LLP on unaudited consolidated
financial statements
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K for the quarter ended
June 30, 1998.
PAGE 13
<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)
August 7, 1998 By: /s/ Darrell F. Askey
---------------------
Darrell F. Askey
Vice President - Finance and Chief Financial
Officer
(Principal Financial Officer)
PAGE 14
<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 16
unaudited consolidated financial
statements
PAGE 15
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
June 30, 1998 and the related consolidated statements of income and
cash flows for the three-month and nine-month periods ended June 30,
1998 and June 30, 1997. 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, 1997, 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 3, 1997, 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, 1997 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
July 17, 1998
PAGE 16
<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
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 2048
<SECURITIES> 0
<RECEIVABLES> 12987
<ALLOWANCES> (447)
<INVENTORY> 23682
<CURRENT-ASSETS> 39796
<PP&E> 29322
<DEPRECIATION> (11477)
<TOTAL-ASSETS> 77743
<CURRENT-LIABILITIES> 14755
<BONDS> 13081
0
0
<COMMON> 42
<OTHER-SE> 49865
<TOTAL-LIABILITY-AND-EQUITY> 77743
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<TOTAL-REVENUES> 79124
<CGS> 28151
<TOTAL-COSTS> 28151
<OTHER-EXPENSES> 41314
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<INTEREST-EXPENSE> 386
<INCOME-PRETAX> 9273
<INCOME-TAX> 3570
<INCOME-CONTINUING> 5703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5703
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.31
</TABLE>
