<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, 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 May 1, 1998 the Registrant had 4,142,446 shares of Common
Stock, $0.01 Par Value, outstanding. This report on Form 10-Q
contains 16 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 8-12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 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 Six Months Ended
March 31, March 31,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Case volume 1,611 1,491 3,102 2,930
Net sales $32,329 $25,861 $59,729 $51,534
Cost of goods sold 11,198 8,883 21,329 17,957
------- ------- ------- -------
Gross profit 21,131 16,978 38,400 33,577
Operating expenses:
Selling and marketing 13,723 10,549 25,342 22,264
General and administrative 1,516 1,139 3,091 2,119
Amortization of intangibles 343 321 663 647
------- ------- ------- -------
Total operating expenses 15,582 12,009 29,096 25,030
Operating income 5,549 4,969 9,304 8,547
Interest expense 116 96 232 277
------- ------- ------- -------
Income before income taxes 5,433 4,873 9,072 8,270
Income taxes 2,092 1,866 3,493 3,225
------- ------- ------- -------
Net income $ 3,341 $ 3,007 $ 5,579 $ 5,045
======= ======= ======= =======
Earnings per share:
Net income per common share $ 0.81 $ 0.74 $ 1.36 $ 1.25
======= ======= ======= =======
Weighted average common
shares 4,128 4,051 4,103 4,051
======= ======= ======= =======
Earnings per share-assuming dilution:
Net income per common share $ 0.77 $ 0.73 $ 1.30 $ 1.22
======= ======= ======= =======
Weighted average common
shares 4,346 4,133 4,308 4,129
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 3
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
---------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,300 $ 2,829
Accounts receivable, net of allowance
(Mar. - $349 Sept. -$165) 15,920 7,755
Inventory 15,651 8,410
Deferred income taxes 478 200
Prepaid expenses 1,213 641
-------- --------
Total current assets 35,562 19,835
Property, plant and equipment, net 17,039 17,085
Intangible assets, net 12,884 13,236
Goodwill, net 6,010 6,150
Deferred income taxes 301 263
Other assets 1,705 1,802
-------- --------
Total assets $ 73,501 $ 58,371
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,295 $ 4,160
Accrued liabilities and wages 6,834 4,584
Accrued income taxes 1,487 99
Accrued interest payable 30 31
Current portion of long-term debt 371 373
-------- --------
Total current liabilities 18,017 9,247
Long-term debt 5,906 6,073
Stockholders' equity:
Common stock, $.01 par value -
authorized 15,000,000 shares;
Mar. - issued 4,146,050 shares,
outstanding 4,137,150 shares
Sept. - issued 4,068,491 shares,
outstanding 4,059,591 shares 41 41
Capital surplus 34,488 33,540
Retained earnings 15,224 9,645
Treasury stock, 8,900 shares of common
stock at cost (175) (175)
------- -------
Total stockholders' equity 49,578 43,051
------- -------
Total liabilities and stockholders' equity $ 73,501 $ 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>
Six Months Ended
March 31,
-----------------
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,579 $ 5,045
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 643 509
Amortization of intangibles 663 647
Amortization of financing fees 97 98
Deferred income taxes (316) (161)
Changes in operating assets and liabilities:
Accounts receivable (8,165) (1,587)
Inventory (7,241) (554)
Prepaid expenses (572) 390
Accounts payable 5,135 939
Accrued liabilities and wages 2,250 516
Accrued income taxes 1,388 1,843
Accrued interest payable (1) (23)
------ ------
Net cash (used in) provided by operating
activities (540) 7,662
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (597) (386)
Increase in intangible assets (171) (350)
Decrease in other assets - 145
------- -------
Net cash used in investing activities (768) (591)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 948 34
Increase in long-term debt - 2,285
Reduction in long-term debt (169) (5,082)
------- -------
Net cash provided by (used in) financing activities 779 (2,763)
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (529) 4,308
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,829 204
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,300 $ 4,512
======= ========
CASH PAID FOR INTEREST $ 117 $ 196
CASH PAID FOR INCOME TAXES $ 2,421 $ 1,543
</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.
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 March 31, 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
218,000 and 82,000 weighted average shares for the three
months ended March 31, 1998 and 1997, respectively, and an
additional 205,000 and 78,000 weighted average shares for
the six months ended March 31, 1998 and 1997, respectively.
2. DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Raw materials and supplies $ 9,556 $ 4,924
Work in process 2,308 1,393
Finished goods 4,636 2,431
-------- ---------
16,500 8,748
Less inventory reserves 849 338
-------- ---------
Total $ 15,651 $ 8,410
======== =========
</TABLE>
PAGE 6
<PAGE>
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 six most recent quarters.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------
Fiscal 1998 Fiscal 1997
----------------------- -----------------------------------
Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
------- ------- -------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Case volume 1,611 1,491 855 656 1,491 1,439
Net sales $32,329 $27,400 $15,916 $11,589 $25,861 $25,673
Gross profit 21,131 17,269 9,439 6,417 16,978 16,599
Operating income 5,549 3,755 898 221 4,969 3,578
Operating margin 17.2% 13.7% 5.6% 1.9% 19.2% 13.9%
Net income $ 3,341 $ 2,238 $ 545 $ 74 $ 3,007 $ 2,038
Percent of fiscal
year net sales 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 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.
NEW PRODUCT LINES
The Company has developed and recently introduced a new line of
dietary supplement products, which include herbs such as echinacea,
ginkgo, ginseng and St. John's wort. Sales of the new product line
increased the Company's net sales and marketing expenses during the
quarter ended March 31, 1998. However, because the
Company's sales are primarily to retail accounts such as grocery
stores, natural foods stores, drug stores and mass merchandisers, the
increase in net sales, caused primarily by initial sales of the
product line to the Company's customers, does not indicate that the
new products have been or will be successful with individual
customers.
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 it's 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
March 31, March 31, March 31, March 31,
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% 25.0 % 15.9 %
Cost of goods sold 34.6 34.4 35.7 34.8 26.1 18.8
---- ---- ----- -----
Gross profit 65.4 65.6 64.3 65.2 24.5 14.4
Selling and marketing 42.5 40.8 42.4 43.2 30.1 13.8
General and
administrative 4.7 4.4 5.2 4.1 33.1 45.9
Amortization of
intangibles 1.0 1.2 1.1 1.3 6.9 2.5
----- ----- ----- -----
Operating income 17.2 19.2 15.6 16.6 11.7 8.9
Interest expense 0.4 0.4 0.4 0.5 20.8 (16.2)
----- ----- ----- ------
Income before income
taxes 16.8 18.8 15.2 16.1 11.5 9.7
Income taxes 6.5 7.2 5.9 6.3 12.1 8.3
----- ----- ----- ------
Net income 10.3% 11.6% 9.3% 9.8% 11.1% 10.6 %
===== ===== ===== ======
</TABLE>
PAGE 9
<PAGE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1997
Net sales. Net sales for the three months ended March 31, 1998
increased 25.0% to $32.3 million from $25.9 million for the
comparable period in fiscal 1997. Net sales of the Company's tea
products increased 6.1% primarily due to the sales of a new line of
green tea products. The Company also introduced a new line of dietary
supplement products which contributed net sales of $5.9 million
during the second quarter of fiscal 1998, a 530.2% increase from
fiscal 1997.
Gross profit. Gross profit for the three months ended March 31,
1998 increased 24.5% to $21.1 million from $17.0 million for the
comparable period in fiscal 1997, primarily due to increased net
sales. The Company's gross profit margin decreased to 65.4% from
65.6% for the comparable prior year period. The decrease in gross
margin was primarily due to increased sales of the Company's dietary
supplement products which have lower margins than the Company's dry
tea products.
Selling and marketing expenses. Selling and marketing expenses
for the three months ended March 31, 1998 increased 30.1% to $13.7
million from $10.5 million for the comparable period in fiscal 1997,
and increased as a percentage of net sales to 42.5% from 40.8%. The
increase in selling and marketing expenses primarily was due to
increased personnel costs, consumer promotion expenses and
advertising expenses.
General and administrative expenses. General and administrative
expenses for the three months ended March 31, 1998 increased 33.1%
from the comparable period in fiscal 1997, and increased as a
percentage of net sales to 4.7% from 4.4%. The increase was primarily
due to legal fees associated with a shareholder's lawsuit (see note
3) and increased personnel costs.
Amortization of intangibles. Amortization of intangibles,
including amortization of goodwill and other intangible assets, for
the three months ended March 31, 1998 increased 6.9% from fiscal
1997. The increase in amortization was primarily due to new additions
to artwork and plates associated with the Company's development of
dietary supplement and green tea products.
Operating income. Operating income for the three months ended
March 31, 1998 increased 11.7% to $5.5 million from $5.0 million for
the comparable period in fiscal 1997, primarily due to increased net
sales. Operating income as a percentage of net sales decreased to
17.2% from 19.2% primarily due to increased selling and marketing
expenses.
Interest expense. Interest expense for the three months ended
March 31, 1998 increased 20.8% from the comparable period in fiscal
1997, primarily as a result of higher interest rates on Industrial
Revenue Bonds which are secured by the Company's facility. Interest
expense for the three months ended March 31, 1998 primarily relates
to Industrial Revenue Bonds 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, 1998 increased 12.1% from the comparable period in fiscal
1997 due to increased pre-tax income.
PAGE 10
<PAGE>
SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 1997
Net sales. Net sales for the six months ended March 31, 1998
increased 15.9% to $59.7 million from $51.5 million for the
comparable period in fiscal 1997. Case volume increased 5.9% to
3,102,000 cases from 2,930,000 cases. Net sales and case volume
growth was primarily the result of increased sales of the Company's
dietary supplement products and the introduction of a new line of
green tea products. The Company's dietary supplement products
contributed net sales of over $6.8 million for the six months ended
March 31, 1998, a 319.4% increase from the comparable period in
fiscal 1997.
Gross profit. Gross profit for the six months ended March 31,
1998 increased 14.4% to $38.4 million from $33.6 million for the
comparable period in fiscal 1997, primarily due to increased net
sales. The Company's gross profit margin decreased to 64.3% from
65.2% for the comparable prior year period. The decrease in gross
margin is primarily due to increased sales of the Company's dietary
supplement products which have lower margins than the Company's dry
tea products.
Selling and marketing expenses. Selling and marketing expenses
for the six months ended March 31, 1998 increased 13.8% to $25.3
million from $22.3 million for the comparable period in fiscal 1997,
but decreased as a percentage of net sales to 42.4% from 43.2%. The
increase in selling and marketing expenses primarily was due to
expenses incurred in connection with the introduction of the
Company's dietary supplements line, increased personnel costs and
trade and consumer promotion expenses. This increase was partially
offset by a decrease in advertising expenses.
General and administrative expenses. General and administrative
expenses for the six months ended March 31, 1998 increased 45.9% from
the comparable period in fiscal 1997, and increased as a percentage
of net sales to 5.2% from 4.1% for the same period of the prior
fiscal year. The increase was primarily due to legal fees associated
with a shareholder's lawsuit (see note 3), increased personnel costs
and expenses incurred in connection with the Company's acquisition
efforts.
Amortization of intangibles. Amortization of intangibles,
including amortization of goodwill and other intangible assets, for
the six months ended March 31, 1998 increased 2.5% from fiscal 1997.
The increase in amortization was primarily due to new additions to
artwork and plates associated with the Company's development of
dietary supplement and green tea products.
Operating income. Operating income for the six months ended
March 31, 1998 increased 8.9% to $9.3 million from $8.5 million for
the comparable period in fiscal 1997, primarily due to increased net
sales. Operating income as a percentage of net sales decreased to
15.6% from 16.6% primarily due to lower gross margins.
Interest expense. Interest expense for the six months ended
March 31, 1998 declined 16.2% from the comparable period in fiscal
1997 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, 1998 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, 1998 increased 8.3% from the comparable period in fiscal 1997
due to increased pre-tax income.
PAGE 11
<PAGE>
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.
Cash and cash equivalents decreased $0.5 million for the six
months ended March 31, 1998. Cash used in operating activities was
$0.5 million for the six months ended March 31, 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 new line of
dietary supplement products. The Company's
investing activities used cash of $0.8 million for the six months
ended March 31, 1998, while financing activities provided cash of
$0.8 million for the six months ended March 31, 1998.
The Company incurred capital expenditures of approximately
$768,000 during the six months ended March 31, 1998, including
$597,000 primarily for factory and computer equipment and $171,000
for the design and development of new packaging artwork. The Company
anticipates making capital expenditures of approximately $2.9 million
in fiscal 1998.
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," and "Liquidity and Capital
Resources" 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, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
The annual meeting of stockholders of the Company was held on
February 12, 1998. The following matters were submitted to a vote of
the stockholders:
(a) Election of directors - Three Class I directors were elected to
serve until the 2001 annual meeting of stockholders and until their
successors are elected.
Total Votes Total Votes
For Withheld
----------- -----------
Stephen B. Hughes 2,988,572 109,385
Marina Hahn 2,625,983 471,974
Leonard Lieberman 2,989,505 108,452
Incumbent Class II directors with terms expiring in 1999 are Ronald
V. Davis and John D. Howard. Incumbent Class III directors with terms
expiring in 2000 are Mo Siegel and James P. Kelley.
(b) Approval of an amendment to the Company's 1993 Long Term
Incentive Plan - The proposal was approved by a vote of 1,534,106
shares in favor, 665,657 shares against, and 5,561 shares abstaining.
(c) Approval of an amendment to the Company's 1994 Non-Employee
Director Compensation Plan - The proposal was approved by a vote of
2,267,336 shares in favor, 783,839 shares against, and 6,091 shares
abstaining.
(d) 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, 1998 was
approved by a vote of 3,079,386 shares in favor, 14,879 shares
against, and 3,653 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, 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)
May 8, 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
consolidated financial statements 16
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
March 31, 1998 and the related consolidated statements of income and
cash flows for the three-month and six-month periods ended March 31,
1998 and March 31, 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
April 15, 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
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
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<RECEIVABLES> 16269
<ALLOWANCES> (349)
<INVENTORY> 15651
<CURRENT-ASSETS> 35562
<PP&E> 28199
<DEPRECIATION> (11160)
<TOTAL-ASSETS> 73501
<CURRENT-LIABILITIES> 18017
<BONDS> 5906
0
0
<COMMON> 41
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<TOTAL-LIABILITY-AND-EQUITY> 73501
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<OTHER-EXPENSES> 29096
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<INCOME-PRETAX> 9072
<INCOME-TAX> 3493
<INCOME-CONTINUING> 5579
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<NET-INCOME> 5579
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.30
</TABLE>
