The Hain Celestial Group, Inc., a natural and organic products company providing consumers with A Healthy Way of Life(TM), reported results for the second quarter ended Dec. 31, 2010. Reflecting strong sales performance, net sales for the second quarter totaled $291.9 million, an increase of 21 percent over sales of $242.0 million in the prior year second quarter. The company earned $16.3 million in net income, a record quarter for the company and a 45 percent increase from $11.2 million in the prior year second quarter. The company reported GAAP earnings of $0.37 per diluted share as compared to $0.27 per diluted share in the prior year second quarter. On an adjusted basis earnings per diluted share were $0.39 on adjusted net income of $17.5 million before pre-tax acquisition related expenses of $1.4 million. Operating margin was 10.2 percent on a GAAP basis, a 127 basis point improvement, up from 8.9 percent in the prior year second quarter. On an adjusted basis operating margin was 10.5 percent, improving from 9.4 percent in the prior year second quarter.
"Our solid financial performance in the quarter reflected the continued strength of the consumption trends the company started to experience over a year ago. Consumers remain committed to maintaining healthy lifestyles and enjoying our products, and we're seeing improved sales across various classes of trade as we drive core distribution in these channels," said Irwin D. Simon, president and chief executive officer in a prepared statement. "Celestial Seasonings(R) tea, Earth's Best(R) infant and toddler products, Arrowhead Mills(R) cereals and grains, Terra(R) chips, Spectrum(R) oils, and our Avalon(R), Alba(R) and Jason(R) personal care brands led our strong sales. Sensible Portions(R) snacks and The Greek Gods(R) yogurt brands, acquired in June and July 2010, also contributed to the Company's performance this quarter. Bottom-line results improved across each of our worldwide locations. While the United Kingdom environment remains difficult for us, we are seeing sales growth and margin improvement."
Gross profit in this year's second quarter improved by 37 basis points to 29.3 percent of sales compared to 28.9 percent in the prior year second quarter. On an adjusted basis, gross profit in this year's second quarter was 29.4 percent, an improvement of 46 basis points over the prior year second quarter gross profit. The improved gross profit resulted from the mix of product sales worldwide, including the sales of higher margin products from recently acquired businesses in the U.S., which together with cost savings more than offset increased input costs that affected the company. The company did not realize the full benefit of the price increase made effective during the second quarter.
Selling, general and administrative expenses were 18.8 percent of net sales in this year's second quarter compared to 19.5 percent in the prior year second quarter. This improvement resulted from the leverage achieved from the company's existing expense base, which more than offset higher amortization expenses related to recent acquisitions and a higher level of product demonstrations and store level sampling employed by the acquired businesses.
Operating free cash flow for the 12-month period ended Dec. 31, 2010 improved to $59.6 million, an increase of $21.9 million from a year ago. The company had working capital of $171.4 million at Dec. 31, 2010. Debt was $240.1 million, or 29.7 percent of equity of $807.2 million at Dec. 31, 2010.
"At the beginning of fiscal year 2010 we embarked on a long-term strategy of sustainable growth with an emphasis on our sales and earnings and focused execution on cost containment, productivity and cash flow and margin enhancement. We see those results today in our financial performance. Our expectation is to achieve stronger year-over-year results as we move through the balance of fiscal year 2011, which is evidenced by our improved financial metrics, including our strong sales and improved profitability, despite the challenges of increased commodity costs," commented Simon.