EX-99.14 2 spectrum99-14.txt PRESS RELEASE EXHIBIT 99.14 Spectrum Organic Products Inc. News Release Contact: Andrea Proulx For Immediate Release ---------------------- --------------------- 707-778-8900 ext. 3101 andreap@spectrumorganic.com Spectrum Organic Products Reports Second Quarter Results -------------------------------------------------------- PETALUMA, CA (August 4, 2005) Spectrum Organic Products, Inc. (OTCBB-SPOP.OB) 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".
---------- (1) Net sales by business segment for the three and six month periods ended June 30, 2005 and 2004 are summarized as follows: Three months ended June 30, ----------------------------------- 2005 2004 % Change ----------- ----------- -------- Spectrum Naturals(R) Culinary Products $ 6,850,700 $ 5,688,300 +20% Spectrum Essentials(R) Nutritional Supplements 2,404,800 2,130,500 +13% Spectrum Ingredients/Private Label 5,099,600 4,562,000 +12% ----------- ----------- ---- Comparable Net Sales 14,335,100 12,380,800 +16% Discontinued Product Lines 54,400 430,600 -87% ----------- ----------- ---- Total Net Sales $14,409,500 $12,811,400 +13% ----------- ----------- ---- Six months ended June 30, ---------------------------------- 2005 2004 % Change ----------- ----------- -------- Spectrum Naturals(R) Culinary Products $12,656,000 $11,250,400 +12% Spectrum Essentials(R) Nutritional Supplements 5,177,600 4,799,300 +8% Spectrum Ingredients/Private Label 9,522,000 8,803,500 +8% ----------- ----------- ---- Comparable Net Sales 27,355,600 24,853,200 +10% Discontinued Product Lines 296,900 691,300 -57% ----------- ----------- ---- Total Net Sales $27,652,500 $25,544,500 +8% ----------- ----------- ---- The discontinued product lines consisted of the Individually Quick Frozen fruits and vegetables formerly aggregated with the Spectrum Naturals(R) segment and the Running Stream Food & Beverage private label fruit and juice products formerly aggregated with the Spectrum Ingredients/Private Label products. (2) The reconciliation of net income to EBITDA for the three and six month periods ended June 30, 2005 and 2004 is summarized as follows: Three months ended June 30, --------------------------- 2005 2004 -------- -------- Net Income $396,300 $178,400 Add back: Provision for Income Taxes 264,200 118,900 Interest Expense 140,200 77,800 Depreciation and Amortization Expense 159,400 154,000 -------- -------- EBITDA $960,100 $529,100 -------- -------- Six months ended June 30, ------------------------- 2005 2004 ---------- ---------- Net Income $ 426,100 $ 69,400 Add back: Provision for Income Taxes 284,100 46,300 Interest Expense 274,200 151,800 Depreciation and Amortization Expense 317,200 302,200 ---------- ---------- EBITDA $1,301,600 $ 569,700 ---------- ---------- SPECTRUM ORGANIC PRODUCTS, INC. BALANCE SHEETS ASSETS (Unaudited) June 30, December 31, 2005 2004 ------------ ------------ Current Assets: Cash $ 16,500 $ 11,000 Accounts receivable, net 5,149,900 3,799,800 Inventories, net 10,518,500 9,564,800 Deferred income taxes - current 561,200 630,000 Prepaid expenses and other current assets 248,900 141,400 ------------ ------------ Total Current Assets 16,495,000 14,147,000 Property and Equipment, net 3,864,500 3,990,200 Other Assets: Deferred income taxes - long-term 1,323,300 1,529,500 Intangible assets, net 583,800 584,800 Other assets 269,500 251,200 ------------ ------------ Total Assets $ 22,536,100 $ 20,502,700 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Bank overdraft $ 79,700 $ 843,300 Line of credit 7,819,200 6,984,400 Accounts payable, trade 5,336,400 4,033,800 Accrued expenses 1,446,200 854,100 Current maturities of term notes payable and capital lease obligations 504,900 514,600 Current maturities of notes payable, related parties 110,600 228,200 ------------ ------------ Total Current Liabilities 15,297,000 13,458,400 Notes payable and capitalized lease obligations, less current maturities 1,125,100 1,375,000 Notes payable, related parties, less current maturities 338,700 326,200 Deferred rent 30,200 37,000 ------------ ------------ Total Liabilities 16,791,000 15,196,600 ------------ ------------ Commitments and Contingencies Stockholders' Equity: Preferred stock, 5,000,000 shares authorized, no shares issued or outstanding -- -- Common stock, no par value, 60,000,000 shares authorized, 46,444,693 and 46,405,943 issued and outstanding at June 30, 2005 and December 31, 2004, respectively 9,644,300 9,631,400 Accumulated deficit (3,899,200) (4,325,300) ------------ ------------ Total Stockholders' Equity 5,745,100 5,306,100 ------------ ------------ Total Liabilities and Stockholders' Equity $ 22,536,100 $ 20,502,700 ============ ============ SPECTRUM ORGANIC PRODUCTS, INC. STATEMENTS OF OPERATIONS (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004 ------------- ------------- ------------- ------------- Net Sales $ 14,409,500 $ 12,811,400 $ 27,652,500 $ 25,544,500 Cost of Goods Sold 10,485,500 9,851,900 20,536,000 19,682,300 ------------ ------------ ------------ ------------ Gross Profit 3,924,000 2,959,500 7,116,500 5,862,200 ------------ ------------ ------------ ------------ Operating Expenses: Sales and Marketing 1,990,800 1,722,900 4,027,400 3,704,800 General and Administrative 1,151,200 874,400 2,123,400 1,903,800 ------------ ------------ ------------ ------------ Total Operating Expenses 3,142,000 2,597,300 6,150,800 5,608,600 ------------ ------------ ------------ ------------ Income from Operations 782,000 362,200 965,700 253,600 Other Income (Expense): Interest Expense (140,200) (77,800) (274,200) (151,800) Other 18,700 12,900 18,700 13,900 ------------ ------------ ------------ ------------ Income Before Income Taxes 660,500 297,300 710,200 115,700 Provision for Income Taxes (264,200) (118,900) (284,100) (46,300) ------------ ------------ ------------ ------------ Net Income $ 396,300 $ 178,400 $ 426,100 $ 69,400 ============ ============ ============ ============ Basic and Fully Diluted Income Per Share $ 0.01 $ 0.00 $ 0.01 $ 0.00 ============ ============ ============ ============ Weighted Average Shares Outstanding 46,444,693 46,321,295 44,434,203 46,298,426 ============ ============ ============ ============ Fully Diluted Average Shares Outstanding 47,868,680 48,464,066 48,069,258 48,739,211 ============ ============ ============ ============ SPECTRUM ORGANIC PRODUCTS, INC. STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, June 30, 2005 2004 Cash Flows from Operating Activities: ------------ ------------ Net Income $ 426,100 $ 69,400 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation and amortization expense 317,200 302,200 Provision for inventory obsolescence 170,800 105,600 Provision for allowances against receivables 32,300 20,000 Imputed interest on note payable, related party 12,500 10,100 Revaluation of derivative financial instruments 45,700 -- Changes in Assets and Liabilities: Accounts receivable (1,382,400) (129,200) Inventories (1,124,500) (931,200) Other assets 149,200 (173,900) Accounts payable 2,031,200 1,189,300 Accrued expenses and other liabilities (189,000) (606,100) ------------ ------------ Net Cash Provided by (Used in) Operating Activities 489,100 (143,800) ------------ ------------ Cash Flows from Investing Activities: Purchase of property and equipment (190,500) (782,200) ------------ ------------ Net Cash Used in Investing Activities (190,500) (782,200) ------------ ------------ Cash Flows from Financing Activities: Decrease in bank overdraft (763,600) (492,100) Proceeds from line of credit 12,690,400 11,198,100 Repayment of line of credit (11,855,600) (9,998,100) Proceeds from note payable -- 460,000 Repayment of bank term notes payable (250,000) (140,800) Repayment of capitalized lease obligations (9,600) (24,800) Repayment of notes payable, related parties (117,600) (125,000) Proceeds from exercise of stock options 12,900 45,900 ------------ ------------ Net Cash Provided by (Used in) Financing Activities (293,100) 923,200 ------------ ------------ Net Increase (Decrease) in Cash 5,500 (2,800) Cash, beginning of the year 11,000 7,300 ------------ ------------ Cash, end of the period $ 16,500 $ 4,500 ============ ============ Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 9,000 $ 16,000 Cash paid for interest $ 261,400 $ 144,500 -End-