PETALUMA, Calif., Nov 9, 2004 (BUSINESS WIRE) -- Spectrum Organic Products, Inc. (SPOP) reported that net sales for the three months ended September 30, 2004, were $12,189,400, basically equal to net sales of $12,168,900 for the same period of the prior year(1). Although total net sales were flat versus the prior year, sales of the Company's culinary products continued to grow, increasing by 5% over the prior year. This was offset by a 17% decline in the Company's Spectrum Essentials(R) products, which were temporarily impacted by the launch of the Company's new Fresh & Cold program, which asks that distributors treat Spectrum Essentials(R) like a perishable product line. That change required a one-time reduction of trade inventories to an approximate thirty day supply and will improve the freshness of product at the retail shelf.
Spectrum reported net income for the quarter of $32,300 versus net income of $325,300 for the prior year. The reduced profit for 2004 was primarily attributable to margin pressure on the company's culinary product lines as a result of increased costs for certain key organic raw materials such as olive oil and canola oil. Also contributing to the reduced profit in 2004 was the Fresh & Cold program and its effect on sales of the Spectrum Essentials(R) products, the Company's highest margin products.
Net sales for the nine months ended September 30, 2004, were an all-time record for the Company of $37,733,900 versus net sales of $33,858,000 for the prior year, an increase of 11%. Sales growth continued to be excellent on the culinary side of the business, with the Spectrum Naturals(R) branded culinary products up 16% and the Spectrum Ingredients Division industrial culinary sales increasing by 19%. Net income for the nine months ended September 30, 2004, was $101,700 versus $1,276,900 for the same period of the prior year. Once again, the decline in 2004 was primarily driven by increased raw material costs and higher spending on sales and marketing programs, particularly the new "I am Spectrum" advertising campaign. Also contributing to the reduced net income in 2004 was the relocation of the Company's manufacturing facility to Cherokee, Iowa. The new Iowa facility provides the Company with a four-fold increase in capacity and a state-of-the-art, organically certified production facility. Relocation and other expenses incurred with the move to Iowa for the nine months ended September 30, 2004, were $171,000.
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 September 30, 2004, Spectrum reported EBITDA of $310,800 versus EBITDA of $645,200 for the prior year. The decline was primarily attributable to the reduced gross profit and increased sales and marketing spending. For the nine months ending September 30, 2004, Spectrum reported EBITDA of $880,400 versus EBITDA of $2,025,500 for the prior year. Higher raw material costs, increased spending on sales and marketing programs in 2004, and the move to the new Iowa facility were the driving forces behind the reduced EBITDA performance year-to-date.
"Our third quarter sales results were disappointing from a statistical sense; however, the new Fresh & Cold program, while negatively impacting our third quarter, is an important strategic shift for us that will enable us to compete more effectively on the retail shelf. Meanwhile, our culinary businesses continued to deliver impressive growth on the strength of our healthy oils position," said Neil G. Blomquist, Spectrum CEO.
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. 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".