<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, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-22018
CELESTIAL SEASONINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1097571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Sleepytime Drive, Boulder CO 80301-3292
(Address of principal executive offices, including zip code)
(303) 530-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of April 28, 2000 the Registrant had 8,415,758 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 statements 3
Unaudited consolidated balance sheets 4
Unaudited consolidated statements of cash flows 5
Notes to unaudited consolidated financial statements 6-8
Item 2. Management's Discussion and Analysis of Financial 9-12
Condition and Results of Operations
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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,
-------------------------------- ---------------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Case volume 1,798 1,733 3,581 3,629
----------- ----------- ------------ -----------
Net sales $ 34,879 $ 31,576 $ $70,532 $ 69,238
Cost of goods sold 11,647 10,332 24,269 24,335
----------- ----------- ------------ -----------
Gross profit 23,232 21,244 46,263 44,903
Operating expenses:
Selling and marketing 14,875 15,288 30,094 32,532
General and administrative 2,120 1,284 3,836 2,978
Amortization of intangibles 282 305 576 616
----------- ----------- ------------ -----------
Total operating expenses 17,277 16,877 34,506 36,126
Operating income 5,955 4,367 11,757 8,777
Interest expense 146 186 340 428
----------- ----------- ------------ -----------
Income before income taxes 5,809 4,181 11,417 8,349
Income taxes 1,975 1,568 4,050 3,131
----------- ----------- ------------ -----------
Net income $ 3,834 $ 2,613 $ 7,367 $ 5,218
=========== =========== ============ ===========
Earnings per share-basic:
Net income per common share $ 0 .46 $ 0.31 $ 0.88 $ .63
=========== =========== ============ ===========
Weighted average common shares 8,387 8,313 8,372 8,310
=========== =========== ============ ===========
Earnings per share-assuming dilution:
Net income per common share $ .43 $ 0.29 $ 0.83 $ 0.59
=========== =========== ============ ===========
Weighted average common shares 9,011 9,003 8,914 8,902
=========== =========== ============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, September 30,
2000 1999
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,202 $ 637
Accounts receivable, net of allowance for doubtful
accounts (Mar. - $459, Sept. - $727) 22,899 16,885
Inventory 10,232 10,721
Deferred income taxes 2,029 3,461
Prepaid income taxes - 524
Other current assets 972 2,568
----------- ------------
Total current assets 37,334 34,796
Property, plant and equipment, net 22,772 23,540
Intangible assets, net 11,655 12,078
Goodwill, net 5,450 5,590
Deferred income taxes 293 291
Other assets 5,993 4,552
----------- ------------
Total assets $ 83,497 $ 80,847
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,669 $ 6,587
Accrued liabilities and wages 9,935 8,883
Accrued income taxes 653 -
Accrued interest payable 41 59
Current portion of long-term debt 400 375
----------- ------------
Total current liabilities 15,698 15,904
Long-term debt 5,167 10,455
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value - authorized 15,000,000 shares:
Mar. - issued 8,420,275 shares, outstanding 8,402,475 shares;
Sept. - issued 8,369,135 shares, outstanding 8,351,335 shares 84 84
Capital surplus 36,468 35,691
Retained earnings 26,255 18,888
Treasury stock, 17,800 shares of common stock at cost (175) (175)
Total stockholders' equity 62,632 54,488
----------- ------------
Total liabilities and stockholders' equity $ 83,497 $ 80,847
=========== ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
CELESTIAL SEASONINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,367 $ 5,218
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,320 848
Amortization of intangibles 576 616
Amortization of financing fees 106 105
Deferred income taxes 1,430 (316)
Gain on sale of assets (3) (100)
Changes in operating assets and liabilities:
Accounts receivable (6,014) (1,413)
Inventory 489 3,929
Other current and non-current assets 573 85
Accounts payable (1,918) (4,007)
Accrued liabilities and wages 1,052 (908)
Accrued income taxes 653 -
Accrued interest payable (18) 24
---------- ----------
Net cash provided by operating activities 5,613 4,081
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 3 148
Capital expenditures (552) (775)
Increase in intangible assets (13) (85)
Increase in other assets - (21)
---------- ----------
Net cash used in investing activities (562) (733)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 777 268
Increase in long-term debt 9,355 2,800
Reduction in long-term debt (14,618) (8,673)
---------- ----------
Net cash used in financing activities (4,486) (5,605)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 565 (2,257)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 637 2,533
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,202 $ 276
========== ==========
CASH PAID FOR INTEREST $ 357 $ 300
CASH PAID FOR INCOME TAXES $ 1,443 $ 2,897
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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 ended on the last Saturday of March. For
presentation purposes, however, the second fiscal quarter is presented as if it
ended on March 31.
The unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany balances have been eliminated in
consolidation.
Interim Financial Information - The financial information contained herein
is unaudited but includes all normal and recurring adjustments which, in the
opinion of management, are necessary to present fairly the information set
forth. The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements, which are included in
the Company's Annual Report on Form 10-K/A for the year ended September 30,
1999. 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, 2000. 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 March 31, 2000
and 1999 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 624,000 and 690,000 weighted average shares for
the three months ended March 31, 2000 and 1999, respectively, and an additional
542,000 and 592,000 weighted average shares for the six months ended March 31,
2000 and 1999, 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.
6
<PAGE>
Operating Segments - The Company has two reportable segments, which are
segregated by product line: beverages and dietary supplements. The Company's
beverage products are sold in all 50 states and approximately 50 countries,
while its dietary supplement products are primarily sold in the United States.
Other includes corporate general and administrative expense and the Company's
direct retail business. Trade and consumer promotion expenses for specific
product lines are charged directly to operating segments.
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------------------ ---------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
Beverages $ 32,664 $ 29,547 $ 64,813 $ 61,368
Dietary supplements 1,105 1,105 2,779 5,706
Other 1,110 924 2,940 2,164
----------- ----------- ------------ ------------
Total net sales $ 34,879 $ 31,576 $ 70,532 $ 69,238
=========== =========== ============ ============
Operating income (loss):
Beverages $ 8,641 $ 9,135 $ 16,672 $ 19,243
Dietary supplements 349 (2,808) 440 (6,585)
Other (3,035) (1,960) (5,355) (3,881)
----------- ----------- ------------ ------------
Total operating income 5,955 4,367 11,757 8,777
Interest expense 146 186 340 428
----------- ----------- ------------ ------------
Income before income taxes $ 5,809 $ 4,181 $ 11,417 $ 8,349
=========== =========== ============ ============
</TABLE>
March 31, September 30
--------------- ---------------
2000 1999
--------------- ---------------
Assets:
Beverages $ 66,095 $ 68,784
Dietary supplements 5,157 4,771
Other 12,245 7,292
--------------- ---------------
Total assets $ 83,497 $ 80,847
=============== ===============
2. DETAIL OF INVENTORY ACCOUNTS
March 31, September 30
2000 1999
--------------- ---------------
Raw materials and supplies $ 6,356 $ 7,901
Work in process 1,013 1,626
Finished goods 4,102 4,117
--------------- ---------------
11,471 13,644
Less inventory reserves (1,239) (2,923)
--------------- ---------------
Total $ 10,232 $ 10,721
=============== ===============
7
<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. 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 was
certified as a class action.
On November 4, 1999, the Company reached a settlement with the plaintiff,
which resulted in a pre-tax charge of $1.2 million during the fourth quarter of
1999. The settlement was subject to completion of a definitive settlement
stipulation to be filed in the district court and court approval of the
settlement. On April 25, 2000, the settlement was approved by the courts. The
settlement will become final after the expiration of the appeal period in 30
days. The Company does not expect any additional shareholder lawsuits related
to this matter.
The Company is also a party to ordinary routine litigation incidental to
its business. The Company does not expect any of such incidental litigation to
have a material adverse effect on the Company's results of operations or
financial condition.
4. MERGER
On March 6, 2000, the Company and The Hain Food Group announced that they
had executed a definitive agreement to combine operations under the name The
Hain Celestial Group, Inc. Under the terms of the agreement, 1.265 shares of
Hain common stock will be exchanged for each outstanding share of the Company's
common stock. The merger is expected to be accounted for as a pooling-of-
interests and will be treated as a tax-free reorganization for all of the
Company's shareholders. The Company has scheduled a special shareholders
meeting for May 30, 2000 to vote on the proposed merger, and, if Celestial and
Hain stockholders approve the merger, management anticipates the merger will be
completed shortly after the vote.
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 six most recent
quarters.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------------
Fiscal 2000 Fiscal 1999
------------------------ -------------------------------------------------------------------
Mar. 31 Dec. 31 Sept. 30 after Sept.30 before June 30 Mar. 31 Dec. 31
non-recurring non-recurring
items items
----------- ---------- -------------------------------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Case volume 1,798 1,783 1,194 1,267 1,229 1,733 1,896
Net sales $34,879 $35,653 $19,876 $24,974 $20,737 $31,576 $37,662
Gross profit 23,232 23,031 5,321 14,426 12,705 21,244 23,659
Operating income 5,955 5,803 (7,061) 3,224 2,054 4,367 4,410
Operating margin 17.1% 16.3% (35.5)% 12.9% 9.9% 13.8% 11.7%
Net income (loss) $ 3,834 $ 3,534 $(3,933) $ 1,977 $ 1,202 $ 2,613 $ 2,605
Percent of fiscal year net sales N/A N/A N/A 21.7% 18.0% 27.5% 32.8%
</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
Percentage of Net Sales Increase/(Decrease)
----------------------------------------------------------- ------------------------------------
Three Months Six Months
Three Months Ended Six Months Ended Ended Ended
March 31, March 31, March 31, March 31,
----------------------------- ---------------------------- ------------------- -----------------
2000 1999 2000 1999 2000 to 1999 2000 to 1999
---------- ----------- ----------- ----------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 10.5% 1.9%
Cost of goods sold 33.4 32.7 34.4 35.2 12.7 (0.3)
----- ----- ---- -----
Gross profit 66.6 67.3 65.6 64.8 9.4 3.0
Selling and marketing 42.6 48.4 42.8 47.0 (2.7) (7.5)
General and administrative 6.1 4.1 5.4 4.3 65.2 28.8
Amortization of intangibles 0.8 1.0 0.8 0.9 (7.1) (6.5)
----- ----- ---- -----
Operating income 17.1 13.8 16.6 12.6 36.3 33.9
Interest expense 0.4 0.6 0.5 0.6 (21.8) (20.6)
----- ----- ---- -----
Income before income taxes 16.7 13.2 16.1 12.0 38.9 36.7
Income taxes 5.7 4.9 5.7 4.5 25.9 29.4
----- ----- ---- -----
Net income 11.0% 8.3% 10.4% 7.5% 46.7% 41.2%
===== ===== ==== =====
</TABLE>
9
<PAGE>
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999
Net sales. Net sales for the three months ended March 31, 2000 increased
10.5% to $34.9 million from $31.6 million for the comparable period in fiscal
1999. The net sales increase was primarily the result of increased sales of the
Company's tea products and favorable mix resulting in a higher average price per
case. Net sales of the Company's beverage products increased 10.5% to $32.7
million from $29.5 million for the comparable period in fiscal 1999.
Gross profit. Gross profit for the three months ended March 31, 2000
increased 9.4% to $23.2 million from $21.2 million for the comparable period in
fiscal 1999. The Company's gross profit margin as a percent of net sales
decreased to 66.6% from 67.3% for the comparable prior year period. This
decrease was partially due to increased cost of raw materials.
Selling and marketing expenses. Selling and marketing expenses for the
three months ended March 31, 2000 decreased 2.7% to $14.9 million from $15.3
million for the comparable period in fiscal 1999, and decreased as a percentage
of net sales to 42.6% from 48.4%. The decrease in selling and marketing expenses
was due to reductions in advertising expense, much of which related to
supplements, partially offset by increases in trade spending on teas which
included funding to build new distribution.
General and administrative expenses. General and administrative expenses
for the three months ended March 31, 2000 increased 65.0% from the comparable
period in fiscal 1999, and increased as a percentage of net sales to 6.1% from
4.1%. The increase was primarily due to additional accounting expenses related
to the merger discussed below and additional accruals for employee incentive
bonuses and community contributions.
Operating income. Operating income for the three months ended March 31,
2000, increased 36.3% to $6.0 million from $4.4 million for the comparable
period in fiscal 1999 and as a percentage of net sales increased to 17.1% from
13.8%. The increase was a result of the above factors and the absence in 2000
of operating losses from dietary supplements.
Interest expense. Interest expense for the three months ended March 31,
2000 decreased 21.8% from the comparable period in fiscal 1999 primarily as a
result of decreased borrowings under the Company's credit facility.
Six Months Ended March 31, 2000 Compared to the Six Months Ended March 31, 1999
Net sales. Net sales for the six months ended March 31, 2000 increased 1.9%
to $70.5 million from $69.2 million for the comparable period in fiscal 1999.
Net sales growth was primarily the result of increased sales of the Company's
green tea and wellness tea products. This increase was partially offset by a
decrease in sales of the Company's specialty black tea products. The Company's
wellness tea products contributed net sales of approximately $12.6 million
during the first half 2000, as compared to $9.0 million for the comparable
period in 1999. Net sales of the Company's beverage products increased 5.5% to
$64.8 million from $61.4 million for the comparable period in fiscal 1999.
Gross profit. Gross profit for the six months ended March 31, 2000
increased 3.0% to $46.2 million from $44.9 million for the comparable period in
fiscal 1999. The Company's gross profit margin as a percent of net sales
remained relatively unchanged from 1999. 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.
10
<PAGE>
Selling and marketing expenses. Selling and marketing expenses for the six
months ended March 31, 2000 decreased 7.5% to $30.1 million from $32.5 million
for the comparable period in fiscal 1999, and decreased as a percentage of net
sales to 42.7% from 47.0%. The decrease in selling and marketing expenses was
primarily due to a decrease in advertising expenses related to dietary
supplements and decreased consumer promotion expenses associated with the
Company's beverage products, offset by increases in trade promotion expenses
that included funding to build distribution.
General and administrative expenses. General and administrative expenses
for the six months ended March 31, 2000 increased 28.8% from the comparable
period in fiscal 1999, and increased as a percentage of net sales to 5.4% from
4.3%. The increase was primarily due to accounting fees incurred in conjunction
with the merger discussed below and increased accruals for employee incentive
bonuses and community contributions.
Operating income. Operating income for the six months ended March 31, 2000
increased 34.0% to $11.8 million from $8.8 million for the comparable period in
fiscal 1999, and as a percentage of net sales increased to 16.7% from 12.7%.
Interest expense. Interest expense for the six months ended March 31, 2000
decreased 20.6% from the comparable period in fiscal 1999 primarily as a result
of decreased borrowings under the Company's credit facility.
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's credit facility will terminate if the merger
described below is completed, and management is currently negotiating terms of a
revised credit facility to apply if the merger is completed. The Company
believes that the negotiations will be successfully completed by May 30, 2000.
The Company currently believes those 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 increased $565,000 for the six months ended March
31, 2000. Cash provided by operating activities was $5.6 million for the six
months ended March 31, 2000. The Company's investing activities used cash of
$0.6 million and financing activities used cash of $4.5 million for the six
months ended March 31, 2000.
The Company incurred capital expenditures of approximately $552,000 during
the six months ended March 31, 2000, including $446,000 in computer equipment.
11
<PAGE>
Merger with The Hain Food Group
On March 5, 2000, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with The Hain Food Group, Inc. ("Hain"). The Merger
Agreement contemplates that following approval of the stockholders of the
Company and Hain, a wholly-owned subsidiary of Hain will merge with and into the
Company and will become a wholly-owned subsidiary of Hain. Under the terms of
the Merger Agreement, 1.265 shares of Hain common stock will be exchanged for
each outstanding share of the Company common stock. The merger is intended to
qualify as a tax-free reorganization for federal income tax purposes and as a
"pooling-of-interests" for accounting purposes. Consummation of the acquisition
is subject to certain conditions, including the approval of the stockholders of
both the Company and Hain.
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 "Merger
with The Hain Food Group" 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,
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.
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 11, 2000.
The following matters were submitted to a vote of the stockholders:
(a) Election of directors - Two Class II directors were elected to serve until
the 2002 annual meeting of stockholders and until their successors are elected.
Total Votes For Total Votes Withheld
--------------------- ---------------------------
Mo Siegel 7,607,820 80,913
James P. Kelley 7,607,461 81,272
(b) Appointment of independent auditors - The proposal to ratify the
appointment of approved by a vote of Deloitte & Touche LLP as the Company's
certified public accountants the fiscal year ending September 30, 2000 was
approved by a vote of 7,666,444 shares in favor, 12,234 shares against, and
10,055 shares for abstaining.
Item 5. Other Information
- --------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Exhibit No. Description
- ----------- -----------
15 - Letter of Deloitte & Touche LLP regarding unaudited interim
financial information
23.1 - Report of Deloitte & Touche LLP on unaudited consolidated
financial statements
(b) Reports on Form 8-K
-------------------
On March 5, 2000, the Company filed a Form 8-K relating to entering into an
Agreement and Plan of Merger (the "Merger Agreement") with The Hain Food Group,
Inc. ("Hain"). The Merger Agreement contemplates that following approval of the
stockholders of the Company and Hain, a wholly-owned subsidiary of Hain will
merge with and into the Company and the Company will become a wholly-owned
subsidiary of Hain.
(c) Letter of Deloitte & Touche LLP regarding unaudited interim financial
information.
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, 2000 By: /s/ David I Rosenthal
------------------------
David I. Rosenthal
Sr. Director of Finance
(Principal Financial Officer)
14
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Pages
- ----------- ----------- -----
<S> <C> <C>
15 - Letter of Deloitte & Touche LLP regarding unaudited interim 16
financial information
23.1 - Report of Deloitte & Touche LLP on unaudited consolidated 17
financial statements
</TABLE>
15
<PAGE>
[DELOITTE & TOUCHE LETTERHEAD]
Exhibit 15
May 6, 2000
Celestial Seasonings, Inc
4600 Sleepytime Drive
Boulder, CO 80301
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Celestial Seasonings, Inc. and subsidiaries for the periods ended
March 31, 2000 and 1999, as indicated in our report dated April 12, 2000;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, is
incorporated by reference in Registration Statement No. 333-33830 on Form S-4 of
The Hain Food Group, Inc.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
/s/ Deloitte & Touche LLP
16
<PAGE>
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, 2000 and the
related consolidated statements of income and cash flows for the three-month and
six-month periods ended March 31, 2000 and 1999. 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,
1999, 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, 1999, 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, 1999 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 12, 2000
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,202
<SECURITIES> 0
<RECEIVABLES> 23,358
<ALLOWANCES> 459
<INVENTORY> 10,232
<CURRENT-ASSETS> 37,334
<PP&E> 22,772
<DEPRECIATION> 695
<TOTAL-ASSETS> 83,497
<CURRENT-LIABILITIES> 15,698
<BONDS> 5,167
0
0
<COMMON> 84
<OTHER-SE> 62,548
<TOTAL-LIABILITY-AND-EQUITY> 83,497
<SALES> 70,532
<TOTAL-REVENUES> 70,532
<CGS> 24,269
<TOTAL-COSTS> 58,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340
<INCOME-PRETAX> 11,417
<INCOME-TAX> 4,050
<INCOME-CONTINUING> 7,367
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,367
<EPS-BASIC> .88
<EPS-DILUTED> .83
</TABLE>
