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, 1999
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 30, 1999 the Registrant had 8,326,809 shares of Common
Stock, $0.01 Par Value, outstanding. This report on Form 10-Q
contains 17 pages.
<PAGE>
CELESTIAL SEASONINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
PAGE(S)
ITEM 1. FINANCIAL STATEMENTS
Unaudited consolidated income 3
statements
Unaudited consolidated balance sheets 4
Unaudited consolidated statements of 5
cash flows
Notes to unaudited consolidated 6-8
financial statements
ITEM 2. MANAGEMANT'S DISCUSSION AND ANALYSIS 9-13
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
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,
------------------ -----------------
1999 1998 1999 1998
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Case volume 1,229 857 4,858 3,959
Net sales $20,737 $19,395 $89,975 $79,124
Cost of goods sold 8,032 6,822 32,367 28,151
------- ------- ------- -------
Gross profit 12,705 12,573 57,608 50,973
Operating expenses:
Selling and marketing 8,899 10,371 41,431 35,713
General and administrative 1,459 1,528 4,437 4,619
Amortization of intangibles 293 319 909 982
------- ------- ------- -------
Total operating expenses 10,651 12,218 46,777 41,314
Operating income 2,054 355 10,831 9,659
Interest expense 131 154 559 386
------- ------- ------- -------
Income before income taxes 1,923 201 10,272 9,273
Income taxes 721 77 3,852 3,570
------- ------- ------- -------
Net income $ 1,202 $ 124 $ 6,420 $ 5,703
======= ======= ======= =======
Earnings per share-basic:
Net income per common share $ 0.14 $ 0.01 $ 0.77 $ 0.69
======= ======= ======= =======
Weighted average common shares 8,322 8,285 8,314 8,233
======= ======= ======= =======
Earnings per share-assuming dilution:
Net income per common share $ 0.14 $ 0.01 $ 0.72 $ 0.65
======= ======= ======= =======
Weighted average common shares 8,753 8,898 8,858 8,730
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 3
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
-------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 202 $ 2,533
Accounts receivable, net of allowance
(June - $659 Sept. - $534) 12,383 15,156
Inventory 17,282 23,185
Deferred income taxes 101 93
Prepaid income taxes 440 630
Prepaid expenses 2,270 2,111
------- -------
Total current assets 32,678 43,708
Property, plant and equipment, net 20,341 19,240
Intangible assets, net 12,084 12,598
Goodwill, net 5,660 5,870
Deferred income taxes 174 217
Other assets 3,826 1,014
------- -------
Total assets $74,763 $82,647
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,521 $ 8,656
Accrued liabilities and wages 4,382 7,551
Accrued interest payable 28 47
Current portion of long-term debt 350 4,323
------- -------
Total current liabilities 9,281 20,577
Long-term debt 7,390 10,750
Commitments
Stockholders' equity:
Common stock, $.01 par value -
authorized 15,000,000 shares;
June - issued 8,340,220 shares,
outstanding 8,322,420 shares;
Sept. - issued 8,322,528 shares,
outstanding 8,304,728 shares 83 83
Capital surplus 35,363 35,011
Retained earnings 22,821 16,401
Treasury stock, 17,800 shares of
common stock at cost (175) (175)
------- -------
Total stockholders' equity 58,092 51,320
------- -------
Total liabilities and stockholders' equity $74,763 $82,647
======= =======
</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,
-----------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,420 $ 5,703
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 1,270 960
Amortization of intangibles 909 982
Amortization of financing fees 158 146
Deferred income taxes 35 (334)
Gain on sale of asset (100) -
Changes in operating assets and liabilities:
Accounts receivable 2,773 (4,785)
Inventory 5,903 (15,272)
Prepaid income taxes 190 -
Prepaid expenses (159) (405)
Accounts payable (4,135) 3,397
Accrued liabilities and wages (3,169) 1,736
Accrued income taxes - 355
Accrued interest payable (19) 36
------- -------
Net cash provided by (used in) operating activities 10,076 (7,481)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of asset 148 -
Capital expenditures (2,419) (1,720)
Increase in intangible assets (185) (300)
(Increase) decrease in other assets (2,970) 575
------- -------
Net cash used in investing activities (5,426) (1,445)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 352 1,153
Increase in long-term debt 7,035 7,250
Reduction in long-term debt (14,368) (258)
------- -------
Net cash (used in) provided by financing activities (6,981) 8,145
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,331) (781)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,533 2,829
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 202 $ 2,048
======= =======
CASH PAID FOR INTEREST $ 422 $ 179
CASH PAID FOR INCOME TAXES $ 3,627 $ 3,549
</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 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.
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, 1998. 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, 1999. The Company
believes that this Quarterly Report filed on Form 10-Q is
representative of its financial position, its results of operations
and its cash flows for the periods ended June 30, 1999 and 1998
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 431,000 and 613,000 weighted average shares for the three
months ended June 30, 1999 and 1998, respectively, and an additional
544,000 and 497,000 weighted average shares for the nine months ended
June 30, 1999 and 1998 respectively.
Comprehensive Income - In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
requires companies to disclose comprehensive income and its
components. The Company currently has no items of other comprehensive
income and therefore SFAS 130 does not apply.
PAGE 6
<PAGE>
Operating Segments - Commencing with fiscal 1999, the Company
redefined its reportable segments as wellness products and beverage
products. The wellness segment includes the Company's dietary
supplements in capsule form along with related wellness teas. The
beverage segment contains the Company's herb, green, specialty black,
organic and chai teas. The Company believes that its current forms of
advertising are designed to develop an overall brand awareness.
Therefore, advertising is treated as a corporate expense, not
directly attributable to any one segment. Trade and consumer
promotion expenses for specific product lines are charged directly to
operating segments.
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales:
Beverages $17,003 $11,644 $73,639 $62,334
Wellness 3,734 7,751 16,336 16,790
------- ------- ------- -------
Total net sales $20,737 $19,395 $89,975 $79,124
======= ======= ======= =======
Operating income (loss):
Beverages $ 4,001 $ 2,976 $22,408 $17,763
Wellness (86) 1,246 378 2,662
------- ------- ------- -------
3,915 4,222 22,786 20,425
Corporate advertising
expense (109) (2,020) (6,609) (5,165)
General and administrative (1,459) (1,528) (4,437) (4,619)
Amortization of intangibles (293) (319) (909) (982)
------- ------- ------- -------
Total operating income 2,054 355 10,831 9,659
Interest expense 131 154 559 386
------- ------- ------- -------
Income before income taxes $ 1,923 $ 201 $10,272 $ 9,273
======= ======= ======= =======
<CAPTION>
June 30, September 30,
1999 1998
-------- -----------
<S> <C> <C>
Assets:
Beverages $57,388 $55,894
Wellness 13,336 20,341
Corporate 4,039 6,412
------- -------
Total assets $74,763 $82,647
======= =======
</TABLE>
PAGE 7
<PAGE>
2. DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------- -----------
<S> <C> <C>
Raw materials and supplies $ 9,860 $10,941
Work in process 1,774 2,047
Finished goods 5,915 10,406
------- -------
17,549 23,394
Less inventory reserves 267 209
------- -------
Total $17,282 $23,185
======= =======
</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. On
September 5, 1997, however, the court of appeals reversed the
decision of the district court and returned the case to the district
court for further proceedings. The case has been certified as a class
action. Due to the uncertainties inherent in the litigation process,
the Company is unable to predict the outcome of this matter.
PAGE 8
<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 1999 Fiscal 1998
---------------------------- ------------------------------------
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 1,229 1,733 1,896 1,120 857 1,611 1,491
Net sales $20,737 $31,576 $37,662 $23,073 $19,395 $32,329 $27,400
Gross profit 12,705 21,244 23,659 14,586 12,573 21,131 17,269
Operating income 2,054 4,367 4,410 1,782 355 5,549 3,755
Operating margin 9.9% 13.8% 11.7% 7.7% 1.8% 17.2% 13.7%
Net income $ 1,202 $ 2,613 $ 2,605 $ 1,053 $ 124 $ 3,341 $ 2,238
Percent of fiscal
year net sales N/A N/A N/A 22.6% 19.0% 31.6% 26.8%
</TABLE>
Quarterly fluctuations in sales volume and operating results are
due to a number of factors, including the timing of trade promotions,
advertising, consumer promotions, production requirements and
inventory adjustments by customers. Due to the timing and extent of
these factors the impact on sales volume and operating results can be
significant.
RESULTS OF OPERATIONS
The following table is derived from the Company's unaudited
consolidated income statements for the periods indicated and presents
(i) the results of operations as a percentage of net sales and (ii)
the percentage change in the dollar amounts of each item from the
prior period.
<TABLE>
<CAPTION>
Period-to-Period
Percentage of Net Sales Percentage Increase/(Decrease)
----------------------- -----------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
----------- ---------- ----------- -----------
1999 1998 1999 1998 1999 to 1998 1999 to 1998
---- ---- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 6.9% 13.7%
Cost of goods sold 38.7 35.2 36.0 35.6 17.7 15.0
----- ----- ----- -----
Gross profit 61.3 64.8 64.0 64.4 1.0 13.0
Total operating
expenses 51.4 63.0 52.0 52.2 (12.8) 13.2
----- ----- ----- -----
Operating income 9.9 1.8 12.0 12.2 478.6 12.1
Interest expense 0.6 0.8 0.6 0.5 (14.9) 44.8
----- ----- ----- -----
Income before income
taxes 9.3 1.0 11.4 11.7 856.7 10.8
Income taxes 3.5 0.4 4.3 4.5 836.4 7.9
----- ----- ----- -----
Net income 5.8% 0.6% 7.1% 7.2% 869.4% 12.6%
===== ===== ===== =====
</TABLE>
PAGE 9
<PAGE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1998
Net sales. Net sales for the three months ended June 30, 1999
increased 6.9% to $20.7 million from $19.4 million for the comparable
period in fiscal 1998. The net sales increase was the result of
increased sales of the Company's beverage products to $17.0 million
during the third quarter of fiscal 1999 from $11.6 million for the
comparable period in 1998. A large portion of the increased sales
represents shipments of the Company's hot herb and green tea products
which were delayed from the second quarter of fiscal 1999 to the
third quarter due to warehouse transition issues. Warehouse
transition issues experienced during the prior quarter were resolved
during the quarter ended June 30, 1999. The increase in beverage
product sales was partially offset by a 51.8% decrease in sales of
the Company's wellness products to $3.7 million from $7.8 million for
the comparable prior year period. A general softness in the dietary
supplements category this year and initial sales to retailers last
year to establish stocking levels contributed to the decline. The
Company is currently transitioning from a 30-count to a 60-count
dietary supplements line. The new 60-count line has a reduced number
of products and new, more cost effective formulations. The Company
believes that the 60-count line will put it in a more competitive
position in the dietary supplements market. Discounts offered on the
30-count inventory in addition to decreased sales volume of the
Company's dietary supplements products contributed to the sales
decline. An increase in sales of the Company's wellness tea products
partially offset this decline.
Gross profit. Gross profit for the three months ended June 30,
1999 increased 1.0% to $12.7 million from $12.6 million for the
comparable period in fiscal 1998. The Company's gross profit margin
as a percent of net sales decreased to 61.3% from 64.8% for the
comparable prior year period. The Company experienced decreased
margins in its wellness segment due to discounts offered on dietary
supplement products. Lower margins from its wellness products are
expected to continue for the next few quarters as the Company
transitions its customers to the new 60-count line of capsules from
the existing 30-count line. The Company is implementing production
improvements that it believes will permit gross margins to recover to
that of previous levels for capsule products.
Operating expenses. Total operating expenses for the three
months ended June 30, 1999 decreased 12.8% to $10.7 million from
$12.2 million for the comparable period in fiscal 1998, and decreased
as a percentage of net sales to 51.4% from 63.0%. The decrease in
operating expenses was primarily due to decreased advertising
expenses, mostly resulting from differences in timing versus fiscal
1998. During fiscal 1999 most of the Company's annual advertising
budget was utilized during the first half of the year. Consumer
promotion expenses also experienced a significant decrease for the
third quarter of fiscal 1999 from the comparable period in fiscal
1998, primarily due to fiscal 1998 expenses associated with promoting
the Company's dietary supplement products. These decreases were
partially offset by increased trade promotion expenses for the
Company's beverage products.
Operating income. Operating income for the three months ended
June 30, 1999, increased 478.6% to $2.1 million from $0.4 million for
the comparable period in fiscal 1998 and as a percentage of net sales
increased to 9.9% from 1.8%, primarily due to decreased operating
expenses.
PAGE 10
<PAGE>
NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE NINE MONTHS ENDED
JUNE 30, 1998
Net sales. Net sales for the nine months ended June 30, 1999
increased 13.7% to $90.0 million from $79.1 million for the
comparable period in fiscal 1998. Net sales of the Company's beverage
products increased 18.1% to $73.7 million from $62.3 million for the
comparable period in fiscal 1998. Net sales growth of beverage
products was primarily the result of increased sales of the Company's
herb and green tea products. The Company's wellness products
contributed net sales of approximately $16.3 million during the nine
months ended June 30, 1999, as compared to $16.8 million for the
comparable period in 1998, a decrease of 2.7%.
Gross profit. Gross profit for the nine months ended June 30,
1999 increased 13.0% to $57.6 million from $51.0 million for the
comparable period in fiscal 1998. The Company's gross profit margin
as a percent of net sales remained relatively unchanged from 1998.
The Company experienced increased margins in its beverage segment due
to increased sales of its higher margin green tea products and
decreased sales of its lower margin specialty black tea products. The
increase was partially offset by the effect of lower margins realized
on sales of the Company's dietary supplement products.
Operating expenses. Total operating expenses for the nine months
ended June 30, 1999 increased 13.2% to $46.8 million from $41.3
million for the comparable period in fiscal 1998, and as a percentage
of net sales remained relatively unchanged. The increase in operating
expenses was primarily due to increased trade promotion expenses
associated with ongoing development of the Company's wellness
products and increased advertising expenses associated with building
its brand awareness.
Operating income. Operating income for the nine months ended
June 30, 1999, increased 12.1% to $10.8 million from $9.7 million for
the comparable period in fiscal 1998, and as a percentage of net
sales remained relatively unchanged. The increase is primarily due to
increased sales and gross profit and was partially offset by
increased operating expenses.
Interest expense. Interest expense for the nine months ended
June 30, 1999 increased 44.8% from the comparable period in fiscal
1998 primarily as a result of increased borrowings under the
Company's credit facility in support of inventories of its wellness
capsule products and accounts receivable.
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 are expected to be the development of new or
existing beverage and wellness 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.
Cash and cash equivalents decreased $2.3 million for the nine
months ended June 30, 1999. Cash provided by operating activities was
$10.1 million for the nine months ended June 30, 1999. The Company's
investing activities used cash of $5.4 million and financing
activities used cash of $7.0 million for the nine months ended June
30, 1999.
The Company incurred capital expenditures of approximately $2.6
million during the nine months ended June 30, 1999, including $2.4
million for factory and computer equipment and $0.2 million for the
design and development of new packaging artwork. The Company
currently anticipates making additional capital expenditures of
approximately $3.0 million during the remainder of fiscal 1999,
primarily for the installation of a new production line at the
Company's existing facility.
YEAR 2000 COMPLIANCE
A number of computer programs are written using two digits
rather than four to define the applicable year. As a result, 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, has executed a plan to prepare its systems and
business relationships for the Year 2000. The Company believes all
internal components of its systems are Year 2000 compliant. The
Company has developed a contingency plan which includes non-
computerized backup systems and will remain in effect until the year
2000.
The ability of 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. Through communication with key
supply chain partners the Company believes that most, if not all, are
Year 2000 compliant.
The total cost to the Company of Year 2000 compliance activities
has not yet been, and is not anticipated to be, material to the
Company's financial position or results of operations in any given
year. These costs, and the Company's achievement of Year 2000
compliance, 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.
PAGE 12
<PAGE>
FORWARD LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q
which are not historical facts, including, but not limited to,
statements found under the captions "Results of Operations,"
"Liquidity and Capital Resources" and "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,
general economic conditions, consumer trends, inventory levels
maintained by customers, costs and availability of raw materials and
management information systems, manufacturing processes, competition,
litigation and the effect of governmental regulation. The Company
disclaims any intention or obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
PAGE 13
<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, 1999.
PAGE 14
<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 6, 1999 By: /s/ Darrell F. Askey
---------------------
Darrell F. Askey
Vice President - Finance and Chief Financial
Officer
(Principal Financial Officer)
PAGE 15
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
Sequentially
Exhibit No. Description Numbered Pages
- ----------- ----------- --------------
23.1 - Report of Deloitte & Touche LLP on
unaudited consolidated financial 17
statements
PAGE 16
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, 1999 and the related consolidated statements of income and
cash flows for the three-month and nine-month periods ended June 30,
1999 and 1998. 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 as
of September 30, 1998, 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 10, 1998, 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, 1998 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 21, 1999
<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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 202
<SECURITIES> 0
<RECEIVABLES> 13042
<ALLOWANCES> (659)
<INVENTORY> 17282
<CURRENT-ASSETS> 32678
<PP&E> 33398
<DEPRECIATION> (13057)
<TOTAL-ASSETS> 74763
<CURRENT-LIABILITIES> 9281
<BONDS> 7390
0
0
<COMMON> 83
<OTHER-SE> 58009
<TOTAL-LIABILITY-AND-EQUITY> 74763
<SALES> 89975
<TOTAL-REVENUES> 89975
<CGS> 32367
<TOTAL-COSTS> 32367
<OTHER-EXPENSES> 46777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559
<INCOME-PRETAX> 10272
<INCOME-TAX> 3852
<INCOME-CONTINUING> 6420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6420
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.72
</TABLE>
