Horizon Organic Holding Corporation (Nasdaq: HCOW), the nation’s leading producer of organic dairy products, today announced that while it anticipates record sales for the third and fourth quarters of 2000, the company is experiencing short-term issues likely to impact third and fourth quarter results. The company expects earnings per share for the third quarter to be in the $.03 to $.05 per share range and the fourth quarter earnings per share to be in the range of $.06 to $.08.
The company attributes projected third and fourth quarter earnings shortfalls to two issues. In the U.S., the company struggled with capacity constraints in trying to meet demand for its rapidly growing Ultra Pasteurized (UP) milk business. In the U.K., the company is dealing with short-term issues related to the integration of the new acquisitions made in the second quarter of fiscal year 2000.
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Since mid-August, UP milk demand has exceeded processing capacity, resulting in significant lost sales in the third quarter. This shortfall was caused by an energy-related problem at the company’s Western UP processor and a delay in the start-up of new UP capacity. As previously announced, Suiza Foods Corp. will begin processing Horizon Organic UP milk in the West. Unfortunately, this new capacity was delayed from September until early October. In the East, the company also is working with a major processor to expand its UP capacity. It anticipates that this new capacity will become available in October. Importantly, when implemented, both arrangements should increase capacity and reduce costs. The total negative impact of these UP issues is expected to be in the $.01 to $.02 per share range in the third quarter.
In the U.K., the company has faced unanticipated issues resulting from the integration of its new acquisitions. In the third quarter, the company experienced a raw milk quality problem during the start-up of a new organic milk supply. Due to the low protein content of the milk, processing times had to be extended, increasing manufacturing costs during July and August. This problem has now been rectified. In addition, third quarter U.K. results will be impacted by a significant slow down in growth experienced during the summer. Both the third and fourth quarters will be affected by the unanticipated loss of an important Meadow Farms customer. As a result, the U.K. business is expected to be dilutive in the third quarter by $.01 to $.02 per share and in the fourth quarter by $.01 to $.03 per share.
“While we are disappointed that we may experience a shortfall in our results for 2000, these are short-term issues that are being aggressively addressed,” said Charles F. Marcy, president and CEO of Horizon Organic. “Our five-point strategic action plan is sound, and we are confident it will lead to significant improvement in performance in 2001.”
Marcy cited continued growth in the U.S., the introduction of Horizon Organic branded products in the U.K. and operational changes that he believes will contribute to improved 2001 performance.
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By GlobalData“U.S. sales continue to be strong, and with the added UP capacity, domestic sales should grow by 30 percent in the fourth quarter compared to the same period last year. Total company sales growth is expected to exceed 50 percent for the year 2000,” stated Marcy.
Marcy explained that despite the rough start, the integration of the U.K. acquisitions and management team has been completed prior to the important introduction of Horizon Organic products in the U.K. in October 2000. Despite a soft summer, demand for organic products continues to grow and Marcy said he expects U.K. business to have a significant, positive impact on earnings per share in 2001.
“Achieving operational excellence continues to be our major focus,” Marcy said. “While we have made headway, we need to significantly accelerate progress in improving productivity and reducing costs to increase earnings. As a result, I personally have taken over the leadership of the Horizon Organic operations team and will continue in this role until I am confident the operations side of the business is performing to my expectations. We cannot afford to let our phenomenal sales growth be hampered by operational issues,” Marcy concluded.
Horizon Organic produces and markets the leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also markets certified organic eggs and juices. Horizon Organic products can be found in conventional supermarkets and natural foods stores across the U.S. and in the U.K. For more information, please visit the Company’s web site at www.horizonorganic.com.
Horizon Organic management has scheduled an investment community conference call for Tuesday, September 19, 2000 at 10 a.m. Eastern Time to discuss these latest results. To hear the call in a listen-only mode, participants must dial (212)271-4810 and refer to reservation #16355558, ten minutes prior to the start of the event, or visit the company’s web site at www.horizonorganic.com for a live simulcast and replay of the call.
Note on Forward-Looking Statements: This news release contains forward-looking statements that involve risks and uncertainties. Future events may differ materially from those discussed herein, due to a number of factors, including uncertainties related to the company’s ability to continue strong growth, to achieve distribution and operational efficiencies, and to expand domestically and internationally, as well as increased milk costs, inbound and outbound freight and distribution costs, higher costs related to new-product introductions and increased personnel costs. These factors and others are more fully discussed in the company’s Annual Report on Form10-K for the year ended December 31,1999.
