Horizon Organic Sales Increased 23 Percent in First Quarter, Largest Gain in Almost 2 Years; EPS $0.09 From Continuing Operations

Introduces Horizon Organic Infant Formula

BOULDER, Colo., May 5 /PRNewswire/ -- Horizon Organic Holding Corporation (Nasdaq: HCOW), which markets the leading brand of certified organic foods in the United States, grew sales 23 percent -- 24 percent in the U.S. and 19 percent in the U.K. -- during the first quarter of 2003, compared to the first quarter of 2002, posting its largest quarterly gain since the second quarter of 2001.

Earnings from continuing operations rose to $995,000, or $0.09 per diluted share, from $845,000, or $0.08 per diluted share, in the first quarter of 2002. Net income for the first quarter of 2003, including discontinued farm operations, was $187,000, or $0.02 per diluted share, compared with a 2002 first quarter loss of $1.7 million, or $0.16 per diluted share. These 2003 results include approximately $225,000 in one-time costs associated with a contemplated public equity financing. The Company elected not to proceed with this offering principally due to equity market conditions. Excluding this expense, the Company's earnings from continuing operations per diluted share were $0.11 for the first quarter of 2003.

"Foremost among the factors that contributed to these outstanding results was the successful introduction of the U.S. Department of Agriculture's Organic Regulations and our leadership role in bringing the organic seal to the public's attention. With increased consumer demand for organic foods, we saw a big boost in sales to our existing customers," said Chuck Marcy, Horizon Organic's president and chief executive officer. "Sales growth also can be attributed to our ongoing efforts to expand distribution and to introduce consumers to new and innovative products. We are delighted to continue this trend with today's announcement of our newest product, Horizon Organic Infant Formula."

Sales for the quarter of $51.8 million compared with $42.2 million a year ago. In the U.S., milk sales surged 27 percent to $30.5 million, while dairy sales were up 21 percent. Juice posted a decline of 6 percent. International sales benefited from last year's introduction of Rachel's Organic branded milk in the U.K. and an expansion of Rachel's Organic yogurt flavors.

The Company is continuing negotiations for the sale of its Idaho farm with an experienced dairy farmer, but that individual's delay in obtaining financing has led the Company to consider other potential buyers. "We remain hopeful that we will complete a transaction later this year," said Marcy. The Idaho farm and a farm management agreement in Colorado, where operations terminated last September, were classified as discontinued operations last year. Discontinued operations incurred a loss of $808,000, or $0.08 per diluted share, in the first quarter of 2003 versus a loss of $2.5 million, or $0.24 per diluted share, including anticipated selling costs, in the year-ago quarter.

Marcy said that the positive sales momentum is expected to continue throughout the year due to strong public relations and direct marketing activities, and significant new product introductions planned for both the U.S. and U.K.

A key new product -- Horizon Organic Infant Formula -- announced today, is the first and only organic infant formula and marks the Company's entry into the dry grocery business. Initially it will be available in the fall of 2003 on the West Coast. "Not only is there a real need for a healthy organic alternative for mothers who choose to use infant formula, but also Horizon Organic enters this category with a significant competitive advantage," Marcy said. "We are the only USDA-certified organic infant formula, and we are currently the only producer of USDA-certified organic lactose, a key ingredient in infant formula." Horizon Organic Infant Formula with Iron meets all of the FDA requirements for complete infant nutrition, and is produced without the use of antibiotics, growth hormones and dangerous pesticides.

Marcy reiterated that he is comfortable with the guidance previously provided of a 20 to 25 percent increase in sales in 2003 with earnings per share from continuing operations growing in the high teens to low 20 percent range. With an increased investment to promote and market Horizon Organic Infant Formula and other new products yet to be announced, Marcy said the Company expects earnings from continuing operations in the second quarter of 2003 to be in the range of $0.07 to $0.08 per share.

Conference Call

Horizon Organic management will host a conference call on Tuesday, May 6, 2003 at 11:00 a.m. Eastern Time to discuss the Company's year-to-date performance and outlook. To hear the call in a listen only mode, participants should dial 1-800-603-5503 ten minutes prior to the event, or visit the Company's web site at www.horizonorganic.com for a live simulcast and replay of the call.

Horizon Organic markets the leading brand of certified organic foods in the U.S. and the leading brand of organic milk in both the U.S. and U.K. In the U.S. its products include organic milk, a full-line of organic dairy products, organic eggs and juices. In the U.K., the Company markets organic yogurt, milk and butter under the Rachel's Organic brand. For more information, please visit the Company's web site at www.horizonorganic.com .

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 to maintain and expand its brands, avoid adverse publicity, manage its supply chain efficiently, continue and effectively manage its rapid growth, and maintain key management, as well as the volatility in the cost of organic farm products, increased competition, changes in consumer preferences, and increases in charges under governmental dairy programs. These factors and others are more fully discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

                             SELECTED FINANCIAL DATA
                      (In thousands, except per share data)

                                          Three Months Ended March 31,
                                        2003      %NS        2002     %NS
    Net sales                         $51,820    100.0%    $42,218   100.0%
      Growth vs. prior year             22.7%                12.3%
    Cost of sales                      35,305     68.1%     28,368    67.2%
    Gross profit                       16,515     31.9%     13,850    32.8%

    Selling expense                    11,309     21.8%      9,431    22.3%
    General and administrative          3,196      6.2%      2,520     6.0%
    Intangible asset amortization         329      0.6%        325     0.8%

    Operating income                    1,681      3.2%      1,574     3.7%

    Interest and other, net               (49)    -0.1%       (189)   -0.4%

    Income from continuing
     operations before income taxes     1,632      3.1%      1,385     3.3%

    Income tax expense                   (637)    -1.2%       (540)   -1.3%

    Income from continuing operations     995      1.9%        845     2.0%

    Loss from discontinued
     operations, net                     (808)    -1.6%     (2,519)   -6.0%

    Net income (loss)                     187      0.4%     (1,674)   -4.0%

    Earnings per share from
     continuing operations
        Basic                           $0.10                $0.08
        Diluted                         $0.09                $0.08

    Loss per share from
     discontinued operations
        Basic                          ($0.08)              ($0.25)
        Diluted                        ($0.08)              ($0.24)

    Earnings (loss) per share
        Basic                           $0.02               ($0.17)
        Diluted                         $0.02               ($0.16)

    Weighted average shares
        Basic                          10,304               10,143
        Diluted                        10,575               10,545

    Selected Balance Sheet Data
                                      March 31,           December 31,
                                        2003                 2002
    Working capital                   $22,184              $23,250
    Total assets                      127,344              128,207
    Current liabilities                46,401               45,546
    Long-term debt,
     less current portion              12,779               14,110
    Stockholders' equity               65,277               65,653

    EBITDA Data (a non-GAAP
     financial measure) (1)
                                    Three Months
                                   Ended March 31,
    EBITDA from continuing
     operations*                       $2,635
    EBITDA from discontinued
     operations*                         (144)
    Total EBITDA*                       2,491

    * Reconciliation to Generally
      Accepted Accounting
      Principles (GAAP):
                                       Three Months Ended March 31, 2003
                                     Continuing    Discontinued     Total
                                     Operations     Operations   Operations
    Total EBITDA                       $2,635         $(144)        $2,491
    Less interest and other, net
     (excluding amortization
     of loan fees of $30)                  19            431           450
    Less income tax expense (benefit)     637           (517)          120
    Less depreciation                     567             --           567
    Less loss on disposal of
     Idaho Dairy in lieu of depreciation   --            750           750
    Less amortization (including
     amortization of loan fees of $30)    417             --           417
    Net income                            995           (808)          187

    (1) EBITDA, as defined by the Company, represents earnings before interest
        and other, net; income taxes; depreciation (including anticipated
        losses on disposal of the discontinued operations in lieu of
        continuing depreciation) and amortization.  EBITDA is presented
        because it is a widely accepted financial indicator used by certain
        investors and analysts to analyze and compare companies.
        Additionally, management believes that EBITDA provides an important
        additional perspective on the Company's ability to service its long-
        term debt and to self-fund other investment opportunities.  EBITDA has
        not been presented as an alternative to operating income or cash flows
        from operating activities, or as an indicator of operating
        performance, and should not be considered in isolation or as a
        substitute for measures of performance prepared in accordance
        with GAAP.

SOURCE Horizon Organic Holding Corp.

/CONTACT: Tom Briggs, Chief Financial Officer, +1-303-530-2711 ext. 230,
[email protected], or Jennifer J. Matuschek, Director of Investor
Relations, +1-303-530-2711 ext. 178, [email protected], both of
Horizon Organic Holding Corp./

/Web site: http://www.horizonorganic.com /


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