PETALUMA, Calif.--(BUSINESS WIRE)--Oct. 31, 2002--Spectrum Organic Products, Inc. (OTCBB:SPOP) reported that net income reached a record level of $574,800 or $0.01 per share for the third quarter ended September 30, 2002 compared to net income of $195,900 ($0.00 per share) for the third quarter of the prior year. The improved performance was primarily attributable to improved gross profit, lower operating expenses, lower interest expense and a gain on the sale of disposed product lines of $97,700. The gain was attributable to the collection of previously escrowed funds on the April 2002 sale of the Organic Ingredients product lines and related inventories of fruits, vegetables, purees and concentrates. The OI product line sale has generated cash proceeds of $3,042,000 during 2002, which the Company has deployed against the outstanding borrowings under its line of credit. As a result, the Company has significantly strengthened its balance sheet and reported excess borrowing capacity under its line of credit of 2,872,200 at September 30, 2002, also an all-time record.
For the nine months ended September 30, 2002 the Company reported net income of $855,000 or $0.02 per share versus a net loss for the corresponding period of the prior year of $4,698,200 or $0.10 per share. The improvement was primarily driven by a non-cash loss in the prior year on the sale of the Company's tomato-based consumer product lines. Also contributing to the improvement was sharply lower interest expense and the cessation of goodwill amortization effective January 1, 2002 in accordance with Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets." The Company's interest expense declined 45% from the prior year, primarily due to reduced borrowing levels under the line of credit as a result of the two product line sales and reductions in the prime rate during 2001.
Management believes that the Company's earnings before interest, taxes, depreciation, amortization and gains or losses on the sales of product lines ("EBITDA as adjusted") is an important indicator of its financial performance. For the three months ending September 30, 2002 the Company reported EBITDA as adjusted of $682,500 compared to $540,100 for the corresponding period of the prior year. The increase in 2002 was primarily attributable to higher gross profit and reduced general and administrative expense. The Company's gross margin for the third quarter increased by more than two points to 28.3% versus 26.2% for the prior year, primarily as a result of an improved sales mix which featured significantly higher sales of the Company's highest margin consumer product lines.
The Company reported that third quarter net sales were $9,726,400 versus $10,388,100 for the prior year. The overall decrease of 6% is entirely due to the lost sales associated with the disposed product lines. Comparable net sales (after eliminating sales of the disposed product lines from both periods) increased by 25%. Leading the way were increases in Spectrum Essentials(R) nutritional supplements of 50% and increases in Spectrum Naturals(R) culinary oils, vinegar, condiments and butter substitutes of 18%.
For the first nine months, net sales were $31,119,300 versus $30,957,300 for the prior year. The overall increase of 1% was the result of strong growth across all three major product categories, offset by the lost sales associated with the disposed product lines. Comparable net sales for the nine months ended September 30 increased by 20%, driven by increases in Spectrum Essentials(R) nutritional supplements (+30%), Spectrum Ingredients industrial sales of culinary oils and vinegar (+25%) and Spectrum Naturals(R) culinary products (+13%).
Spectrum CEO Neil G. Blomquist stated, "Our third quarter results were impressive, particularly from a top-line standpoint, with strong double-digit growth in all three major product categories the Company competes in. Gross margin for the quarter was up significantly and our balance sheet reflects the improvement from the sale of the Organic Ingredients business during the second quarter. Working capital and excess borrowing capacity under the line of credit both hit record levels at September 30, 2002."
Spectrum Organic Products, Inc. is a leading manufacturer and marketer of natural and organic culinary oils, vinegar, condiments and healthy fat butter substitutes under the Spectrum Naturals(R) brand and essential fatty acid nutritional supplements under the Spectrum Essentials(R) brand. The Company also produces and sells a wide range of industrial oils, vinegar and nutritional ingredients to other manufacturers through its Spectrum Ingredients organization.
"Safe Harbor" statements under the Private Securities Act of 1995: The statements contained in this release, which are not historical facts, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by the forward-looking statements. These risks and uncertainties are described in the Company's Securities and Exchange Commission filings under the symbol "SPOP."