Spectrum Organic Products Reports Second Quarter Results

PETALUMA, Calif., Aug 04, 2005 (BUSINESS WIRE) -- Spectrum Organic Products, Inc. (SPOP) reported that net sales for the three months ended June 30, 2005 were $14,409,500 compared to net sales of $12,811,400 for the same period of the prior year, an increase of 13 percent(1). The improved sales performance was primarily attributable to increased consumer awareness of the importance of healthy oils to overall health and nutrition. Additionally, influential health practitioners continued to recommend omega-3 essential fatty acid diet supplementation to most consumers, which contributed to increased sales in the company's nutritional supplements segment.

Spectrum reported net income for the quarter of $396,300 versus net income of $178,400 for the second quarter of 2004. The improved profit for 2005 was primarily attributable to margin improvement in all three of the company's business segments, partially offset by higher operating expenses and higher interest expense. In particular, margins improved in the Company's Spectrum Essentials(R) flax oil products as a result of lower flaxseed costs and operating efficiencies at the new BIOWA Nutraceuticals production facility in Cherokee, Iowa. Also contributing to the improved profit margin in 2005 was the stronger dollar during the second quarter, which served to reduce the cost of imported olive and canola oils from Europe and Canada, respectively. The increased operating expenses were primarily attributable to compensation and benefits associated with new hires, while the increased interest expense was primarily attributable to rate hikes by the Federal Reserve over the last year.

Net sales for the six months ended June 30, 2005 were $27,652,500 versus net sales of $25,544,500 for the first half of 2004, an increase of 8%. The increase was driven by growth in Spectrum Naturals(R) olive oil and other culinary oils as consumers continued to gravitate towards a Mediterranean-based diet high in mono-unsaturated oils and away from partially-hydrogenated vegetable oils. Net income for the six months ended June 30, 2005 was $426,100 versus $69,400 for the same period of the prior year. Once again the increase in 2005 was primarily driven by improved gross margins in all three business segments, partially offset by higher operating and interest expenses.

Management believes that earnings before interest, taxes, depreciation and amortization (EBITDA)(2) is an important measure of its financial performance. For the three months ending June 30, 2005, Spectrum reported EBITDA of $960,100 versus EBITDA of $529,100 for the second quarter of 2004. The improvement was driven by higher gross margins partially offset by increased operating expenses. For the six months ending June 30, 2005 Spectrum reported EBITDA of $1,301,600 versus EBITDA of $569,700 for the prior year. Higher gross margins were the driving force behind the increased EBITDA performance year-to-date.

Spectrum Organic Products, Inc. is a leading manufacturer and marketer of natural and organic culinary oils, vinegar, condiments and 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 oils, vinegar and nutritional ingredients to other manufacturers through its Spectrum Ingredients Division and provides private label products to major retailers. All of the company's products feature healthy oils that are mechanically extracted and free of trans fats and genetically modified organisms.

"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 trading symbol "SPOP.OB".

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