Hain Celestial Group to Acquire World Gourmet Marketing

World Gourmet develops, produces, markets and sells Sensible Portions branded Veggie Straws, Pita Bites and other snack products into various sales channels and has developed significant strength in the club store channel.

6 May 2010 --- The Hain Celestial Group, Inc. a leading natural and organic products company providing consumers with A Healthy Way of Life has reported results for the third quarter ended March 31, 2010. The Company also announced that it has reached an agreement in principle to acquire the assets and business of World Gourmet Marketing, LLC, producer and marketer of Sensible Portions Veggie Straws and Pita Bites and that Hain Pure Protein (HPP), a joint venture where the Company holds a 48.7% interest, will divest its Kosher Valley brand.

Net sales in the third quarter totaled $222,098,000 versus $234,582,000 in the prior year period after excluding net sales of $30,346,000 by HPP. Total net sales on a GAAP basis in the prior year quarter amounted to $264,928,000 including HPP, which was then a consolidated subsidiary. Net sales in the current year third quarter were negatively affected by a total of approximately $24,000,000 as a result of inventory reductions at two major distributors and the phasing out of the supply of fresh sandwiches to Marks and Spencer in the United Kingdom, offset by $4,814,000 of favorable changes in exchange rates for foreign currencies.

"Our consumption trends improved across our branded business during the third quarter led by our operations in the United States and followed by Canada and Europe, as consumers continue to see healthy eating and living as a way of life. I'm pleased with the top line growth in Europe at 9% and the UK at 21%(2)," said Irwin D. Simon, President and Chief Executive Officer. "Despite inventory reductions at key distributors, our sales momentum gained in the natural, mass market and specialty channels while the grocery channel showed signs of improving trends. Our productivity and efficiencies continued to positively impact our margins, where we believe there is more room to improve, and the strength of our operations enabled us to generate healthy cash flow to maintain a strong balance sheet and reduce our debt."

"Our focus on driving profitable consumption growth was evident in our third quarter results," commented John Carroll, Chief Executive Officer, Hain Celestial US. "All US business units experienced consumption growth led by double digit increases from our Imagine, Terra , DeBoles, Spectrum Naturals and MaraNatha brands as well as our Alba personal care brand, followed by single digit increases from our Celestial Seasonings brand, Dream(TM) non-dairy beverages, Earth's Best baby food as well as our Avalon personal care brands."

The Company reported GAAP net income of $2,656,000, or $0.06 per share, which includes a non-cash charge for the recording of a valuation allowance on deferred tax assets in the United Kingdom. Net income adjusted to exclude this charge was $9,740,000, or $0.24 per share. During the quarter, the Company also absorbed $1,161,000 ($721,000 after tax), or $0.02 per share, related to litigation, and $701,000 after tax, or $0.02 per share, related to operating losses at HPP's Kosher Valley brand. In the prior year quarter the Company incurred a net loss of $41,150,000, or $1.01 per share, which was driven by non-cash impairment charges against goodwill and intangible assets related to the Company's European and HPP reporting units.

"We expect our UK operations will become profitable; however, accounting guidance requires that we take a charge against our recorded deferred tax assets now despite the potential that we may benefit from them in the future. We believe that we are experiencing a turnaround in our frozen food and food-to-go operations, as they win new business opportunities," commented Irwin Simon.

The Company's gross profit increased 24 basis points to 27.69% of net sales in the third quarter, from 27.45% in the year ago period, after adjusting the prior year quarter for the gross profit of HPP(1). The prior year gross profit reported under GAAP was 22.6%. The gross profit improvement was primarily driven by a favorable mix of sales of higher margin products in the US, a more normalized cost environment and continued improvements from productivity initiatives. In addition, the Company's gross margins in Canada benefited from a stronger Canadian currency.

Selling, general and administrative expenses were 19.0% of net sales in this year's third quarter compared to 18.3% after adjusting the prior year quarter for the deconsolidation of HPP(1). SG&A as reported under GAAP was 17.1% of net sales in the prior year period. Both the GAAP and HPP-adjusted SG&A in the prior year quarter were favorably reduced by a net insurance recovery of $2,303,000, without which, SG&A as a percentage of net sales in the prior year would have been 17.9% under GAAP and 19.2% as adjusted for HPP. The increase in SG&A as a percentage of net sales was principally the result of the lower net sales in the current quarter.

Operating free cash flow was $59,362,000 over the most recent 12-month period ended March 31, 2010, improving by $83,948,000 from the comparable period one year ago(1). The Company's balance sheet remained strong as the Company reduced borrowings by $10,000,000 in the quarter, bringing the total debt reduction to $63,500,000 over the 12 months ended March 31, 2010. Debt as a percentage of equity was 30.7%, with equity at $734,267,000 at the end of the third quarter this year.

The Company has reached an agreement in principle to acquire the assets and business, subject to certain liabilities, of World Gourmet Marketing, LLC. World Gourmet develops, produces, markets and sells Sensible Portions branded Veggie Straws, Pita Bites and other snack products into various sales channels and has developed significant strength in the club store channel. The transaction is subject to regulatory and other approvals. The Company expects the acquisition will be accretive to the Company after closing. "We are excited about adding Sensible Portions to our portfolio of brands and the opportunity to leverage their distribution and in-house capabilities," said Irwin Simon. "We look forward to having Jerry Bello and Jason Cohen, co-founders of Sensible Portions, join us and continue to lead the growth and innovation of their products in Hain Celestial's portfolio."

"We are also pleased that HPP has entered into a letter of intent to exchange its Kosher Valley brand and customer relationships with Empire Kosher Poultry, Inc. ("Empire") for an equity interest in Empire. We are delighted that this combination will expand the breadth of the product lines and their distribution reach," said Irwin D. Simon, a Director of HPP. "Empire has been a premier brand in kosher poultry for many years, and Kosher Valley will benefit greatly from Empire's production capabilities and reputation for delivering high-quality products to a broad market. Hain Pure Protein has made significant investments over the last year in building Kosher Valley into the strong brand that it is today," concluded Irwin Simon. Mr. Simon is expected to become a director of Empire. The Company's share of the after-tax losses incurred by Kosher Valley amounted to $701,000 in the three months and $1,644,000 in the nine months ended March 31, 2010, which had the effect of reducing Hain Celestial's diluted earnings per share by $0.02 in the three months and $0.04 in the nine months, and therefore this transaction is expected to be accretive to Hain Celestial.

During the third quarter this year, the Company recorded a valuation allowance of $7,084,000 as a result of the Company's evaluation of its United Kingdom tax position in accordance with the requirements of Accounting Standards Codification Topic 740, "Accounting for Income Taxes" ("ASC 740"). The Company's United Kingdom operations have incurred losses in recent years and have been affected by restructuring and other charges, such as the costs incurred in connection with the recent consolidation of its food-to-go production facilities, the phase out of sales to Marks and Spencer, as well as the economy in the United Kingdom. In accordance with ASC 740, current year losses coupled with the losses of prior periods required that management record a full valuation allowance against the deferred tax assets that arose in the loss periods despite management's expectations indicating that the United Kingdom operations will be profitable in fiscal year 2011. If the United Kingdom operations are able to realize any of these deferred tax assets in the future, the provision for income taxes will be reduced by a release of the corresponding valuation allowance.

The Company updated its fiscal year 2010 guidance. The Company anticipates full fiscal year net sales will be $915 to $925 million. GAAP earnings per share is expected to be $0.78 to $0.81, and non-GAAP earnings per share is expected to be $1.03 to $1.06, which excludes the effects of the valuation allowance recorded for United Kingdom deferred tax assets, the costs related to litigation settlements, the non-cash write-down of the Company's investment in Yeo Hiap Seng Limited and costs incurred in connection with the consolidation of our two United Kingdom production facilities.