EXHIBIT 99.12
Spectrum Organic Products Inc.
News Release Contact: Andrea Proulx
For Immediate Release 707-778-8900 ext. 3101
andreap@spectrumorganics.com
Spectrum Organic Products Reports Record Sales for 2004
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PETALUMA, CA (March 7, 2005) Spectrum Organic Products, Inc. (OTCBB-SPOP.OB)
today reported its fourth quarter and full year results for 2004. Net sales for
the year ended December 31, 2004 were an all-time record of $49,915,400 versus
$45,676,500 for the prior year(1), an increase of 9%. Sales growth continued to
be excellent on the culinary side of the business, with the Spectrum Naturals(R)
brand of culinary products up 17% and the Spectrum Ingredients Division
industrial culinary sales increasing by 11%. The strong performance on the
culinary side of the business was partially offset by an 8% decline in the
Company's Spectrum Essentials(R) brand of nutritional supplements, 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, but will improve the freshness of product at
the retail shelf. For the fourth quarter net sales increased by 3%, driven by an
18% increase in Spectrum Naturals(R) net sales, which was partially offset by
declines in the sales of Spectrum Ingredients industrial culinary oils and
Spectrum Essentials(R) nutritional supplements of 10% and 5%, respectively.
Spectrum reported a net loss for 2004 of $832,700 or $0.02 per share versus net
income of $2,663,600 ($0.06 per share) for the prior year. The net loss for 2004
was primarily attributable to expenses associated with the manufacturing
facility relocation and reconfiguration of $1,565,300. During the fourth quarter
of 2004 the Company completed the final phase of a three-year project to close
its leased manufacturing facility located in Petaluma where flax oil production
formerly occurred. The Company held a grand opening event for its new production
facility in Cherokee Iowa in October. In connection with the shutdown of the
Petaluma facility, the Company incurred non-cash write-offs of $919,500 for
infrastructure and leasehold improvements at the Petaluma facility which could
not be relocated to Iowa, plus $237,100 in write-downs to fair market value for
equipment that was relocated to Iowa. There was also $408,700 in cash expenses
incurred for relocation costs and project management fees associated with the
move to Iowa. Also contributing to the net loss incurred in 2004 were higher
sales and marketing expenses which increased by $1,089,000 versus 2003,
primarily due to increased print advertising associated with the "I am Spectrum"
campaign. For the fourth quarter the Company reported a net loss of $934,400 or
$0.02 per share versus net income of $1,386,700 ($0.03 per share) for the prior
year. Again, the majority of the decline in profitability versus 2003 was
attributable to the expenses associated with the manufacturing facility
relocation and the increased sales and marketing expenses during 2004. During
the fourth quarter of 2003, the Company eliminated the 100% valuation reserve
that had previously been maintained against its deferred tax assets, which
contributed $1,647,800 of income to the prior year fourth quarter.
Management believes that earnings before interest, taxes, depreciation and
amortization, the plant relocation and expenses associated with the 2002
industrial accident (EBITDA as adjusted)(2) is an important measure of its
financial performance. For the year ended December 31, 2004 Spectrum reported
EBITDA as adjusted of $1,192,000 versus $2,436,100 for the prior year. The
decline was primarily attributable to the increased sales and marketing spending
and lower gross profit. Margins in the Company's culinary segments were squeezed
due to higher costs for certain key organic raw materials such as canola and
olive oils due to the weak dollar, an unfavorable commodity cycle during 2004,
and increased importation and transportation costs. For the fourth quarter ended
December 31, 2004 the Company reported EBITDA as adjusted of $140,600 compared
to $410,600 for the corresponding period of the prior year, a decrease of 66%.
Once again, the decrease was primarily attributable to increased sales and
marketing expenses and gross margin pressure.
"Spectrum completed its long-term goal of closing the Petaluma plant with the
grand opening celebration at our new production facility in Cherokee Iowa on
October 12, 2004. While the closing of the Petaluma plant was painful from a
financial standpoint, the Iowa facility is a brand new, state-of-the-art
production facility that will deliver lower cost and higher quality oils to the
Petaluma bottling facility," said Neil G. Blomquist, Spectrum CEO. "Working in
partnership with BIOWA Nutraceuticals, we expect to begin realizing the benefits
of the plant relocation in 2005."
Spectrum Organic Products, Inc. is a leading 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".
(1) Net sales by business segment for the three months and years ended December
31, 2004 and 2003 is summarized as follows:
Three months ended December 31,
------------------------------------
2004 2003 % Change
----------- ----------- --------
Spectrum Naturals(R) Culinary Products $ 6,069,300 $ 5,154,700 +18%
Spectrum Essentials(R) Nutritional Supplements 2,485,700 2,616,200 -5%
Spectrum Ingredients/Other 3,626,500 4,047,600 -10%
----------- ----------- --------
Total Net Sales $12,181,500 $11,818,500 +3%
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Years Ended December 31,
------------------------------------
2004 2003 % Change
----------- ----------- --------
Spectrum Naturals(R) Culinary Products $24,048,400 $20,608,300 +17%
Spectrum Essentials(R) Nutritional Supplements 9,566,100 10,353,900 -8%
Spectrum Ingredients/Other 16,300,900 14,714,300 +11%
----------- ----------- --------
Total Net Sales $49,915,400 $45,676,500 +9%
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(2) The reconciliation of net income or loss to EBITDA as adjusted for the three
months and years ended December 31, 2004 and 2003 is summarized as follows:
Three months ended December 31,
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2004 2003
----------- -----------
Net Income (Loss) $ (934,400) $ 1,386,700
Benefit from Income Taxes (622,900) (1,647,800)
Interest Expense 111,800 87,000
Depreciation and Amortization Expense 191,800 174,500
Manufacturing Facility Relocation 1,394,300 --
Industrial Accident Expenses -- 410,200
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EBITDA as adjusted $ 140,600 $ 410,600
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Years Ended December 31,
----------------------------
2004 2003
----------- -----------
Net Income (Loss) $ (832,700) $ 2,663,600
Benefit from Income Taxes (555,200) (1,566,600)
Interest Expense 361,900 404,200
Depreciation and Amortization Expense 652,700 524,700
Manufacturing Facility Relocation 1,565,300 --
Industrial Accident Expenses -- 410,200
----------- -----------
EBITDA as adjusted $ 1,192,000 $ 2,436,100
----------- -----------
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Spectrum Organic Products, Inc.
Balance Sheets
As of December 31,
2004 2003
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Assets
Current Assets:
Cash $ 11,000 $ 7,300
Accounts receivable, net 3,799,800 4,163,200
Inventories, net 9,564,800 8,007,200
Deferred income taxes - current 630,000 514,200
Prepaid expenses and other current assets 141,400 297,500
------------ ------------
Total Current Assets 14,147,000 12,989,400
Property and Equipment, net 3,990,200 4,338,700
Other Assets:
Deferred income taxes - long-term 1,529,500 1,087,700
Intangible assets, net 584,800 586,800
Other assets 251,200 218,300
------------ ------------
Total Assets $ 20,502,700 $ 19,220,900
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Bank overdraft $ 843,300 $ 513,800
Line of credit 6,984,400 4,833,000
Accounts payable, trade 4,033,800 4,168,000
Accrued expenses 854,100 1,307,700
Current maturities of notes payable & capital lease obligations 514,600 322,300
Current maturities of notes payable, related parties 228,200 275,200
Income taxes payable -- 9,900
------------ ------------
Total Current Liabilities 13,458,400 11,429,900
Notes payable & capital lease obligations, less current maturities 1,375,000 1,104,200
Notes payable, related parties, less current maturities 326,200 549,200
Deferred rent 37,000 50,700
------------ ------------
Total Liabilities 15,196,600 13,134,000
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Commitments and Contingencies
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized, no shares issued or
outstanding -- --
Common stock, without par value, 60,000,000 shares authorized,
46,405,943, 46,254,777 and 45,705,571 issued and outstanding at
December 31, 2004, 2003 and 2002, respectively 9,631,400 9,579,500
Accumulated deficit (4,325,300) (3,492,600)
------------ ------------
Total Stockholders' Equity 5,306,100 6,086,900
------------ ------------
Total Liabilities and Stockholders' Equity $ 20,502,700 $ 19,220,900
============ ============
Spectrum Organic Products, Inc.
Statements of Operations
For the years ended December 31,
2004 2003 2002
------------ ------------ ------------
Net sales $ 49,915,400 $ 45,676,500 $ 40,579,300
Cost of goods sold 38,380,700 33,806,800 29,823,000
------------ ------------ ------------
Gross profit 11,534,700 11,869,700 10,756,300
------------ ------------ ------------
Operating Expenses:
Sales and marketing 7,293,600 6,204,600 5,987,500
General and administrative 3,731,700 3,729,100 2,949,500
Manufacturing facility relocation 1,565,300 -- --
Industrial accident expenses -- 410,200 254,100
(Gain) loss on sale of product lines -- -- (210,300)
------------ ------------ ------------
Total Operating Expenses 12,590,600 10,343,900 8,980,800
------------ ------------ ------------
Income (Loss) From Operations (1,055,900) 1,525,800 1,775,500
Other Income (Expense):
Interest expense (361,900) (404,200) (480,600)
Other, net 29,900 (24,600) 14,900
------------ ------------ ------------
Income (Loss) Before Taxes (1,387,900) 1,097,000 1,309,800
Benefit (Provision) for income taxes 555,200 1,566,600 (189,800)
------------ ------------ ------------
Net Income (Loss) $ (832,700) $ 2,663,600 $ 1,120,000
============ ============ ============
Basic and Fully Diluted Income (Loss) Per Share $ (0.02) $ 0.06 $ 0.02
============ ============ ============
Weighted Average Shares Outstanding:
Basic 46,344,585 45,845,140 45,699,627
Fully Diluted 46,344,585 47,839,765 46,306,077
Spectrum Organic Products, Inc.
Statement of Stockholders' Equity
For the Years Ended December 31, 2002, 2003 and 2004
Retained
Earnings Total
Common Stock (Accumulated Stockholders'
Shares Amount Deficit) Equity
----------- ----------- ----------- -----------
Balances, January 1, 2002 45,698,661 $ 9,373,700 $(7,276,200) $ 2,097,500
Warrants net exercised by the note
holders under the private placement 6,910 -- -- --
Warrants issued in connection with the private
placement notes -- 49,500 -- 49,500
Non-qualified stock options issued -- 6,900 -- 6,900
Net income for the year -- -- 1,120,000 1,120,000
----------- ----------- ----------- -----------
Balances, December 31, 2002 45,705,571 $ 9,430,100 $(6,156,200) $ 3,273,900
Warrants exercised by the note
holders under the private placement 405,456 90,000 -- 90,000
Exercise of common stock options 143,750 59,400 -- 59,400
Net income for the year -- -- 2,663,600 2,663,600
----------- ----------- ----------- -----------
Balances, December 31, 2003 46,254,777 $ 9,579,500 $(3,492,600) $ 6,086,900
Exercise of common stock options 151,166 51,900 -- 51,900
Net loss for the year -- -- (832,700) (832,700)
----------- ----------- ----------- -----------
Balances, December 31, 2004 46,405,943 $ 9,631,400 $(4,325,300) $ 5,306,100
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Spectrum Organic Products, Inc.
Statements of Cash Flows
For the years ended December 31,
2004 2003 2002
------------ ------------ ------------
Cash Flows From Operating Activities:
Net Income (Loss) $ (832,700) $ 2,663,600 $ 1,120,000
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for allowances against receivables 56,300 103,400 47,000
Provision for inventory obsolescence 332,800 210,800 262,200
Provision for industrial accident -- 410,200 254,100
Depreciation and amortization 652,700 524,700 454,300
(Gain) Loss on sale of product lines -- -- (210,300)
Write-off of equipment due to plant closure 919,500 50,300 --
Writedown on equipment to fair market value 237,100 -- --
Imputed interest on notes payable and warrants issued 20,800 19,000 71,300
Imputed expense on non-qualified stock options -- -- 6,900
Changes in Assets and Liabilities:
Accounts receivable 307,100 (1,191,400) 430,400
Inventories (1,890,400) (2,948,400) (1,057,700)
Deferred income taxes (557,600) (1,601,900) --
Other assets 123,200 (224,300) (54,300)
Accounts payable (134,200) 871,700 (500,300)
Accrued expenses and other liabilities (477,200) (94,100) (106,200)
------------ ------------ ------------
Net Cash Provided by (Used in) Operating Activities (1,242,600) (1,206,400) 717,400
------------ ------------ ------------
Cash Flows From Investing Activities:
Purchase of property and equipment (1,474,100) (1,281,100) (719,300)
Proceeds from sale of assets 15,300 -- --
Purchase of intellectual property -- (550,000) --
Proceeds from sale of product lines and related inventories -- -- 3,215,200
Transaction fees on sale of product lines -- -- (152,000)
------------ ------------ ------------
Net Cash Provided by (Used in) Investing Activities (1,458,800) (1,831,100) 2,343,900
------------ ------------ ------------
Cash Flows From Financing Activities:
Increase (decrease) in bank overdraft 329,500 (87,200) 29,300
Proceeds from lines of credit 21,866,000 36,210,000 43,931,000
Repayment of lines of credit (19,714,600) (33,856,600) (46,050,000)
Proceeds of notes payable 754,800 1,495,200 --
Repayment of notes payable (250,000) (553,800) (545,200)
Repayment of notes payable, related parties (290,800) (275,300) (371,200)
Repayment of capitalized lease obligations (41,700) (49,600) (69,000)
Proceeds from exercise of common stock options 51,900 59,400 --
Proceeds from exercise of common stock warrants -- 90,000 --
------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities 2,705,100 3,032,100 (3,075,100)
------------ ------------ ------------
Net Increase (Decrease) in Cash 3,700 (5,400) (13,800)
Cash, beginning of the year 7,300 12,700 26,500
------------ ------------ ------------
Cash, end of the year $ 11,000 $ 7,300 $ 12,700
============ ============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 16,000 $ 323,500 $ 13,800
Cash paid for interest $ 359,800 $ 384,400 $ 446,300
-End-