Sylvan Inc. Announces First Quarter Results SAXONBURG, Pa., May 19
/PRNewswire-FirstCall/ -- Sylvan Inc. today reported net income of
$843,000, or $.16 per share, for the quarter ended April 4, 2004,
as compared with $833,000, or $.16 per share, for the first quarter
of 2003. Consolidated operating income for the 2004 quarter
decreased 3%, when compared with the corresponding 2003 quarter,
reflecting a 5% increase in operating income from the Spawn
Products Segment, a 3% decrease in operating income from the Fresh
Mushrooms Segment and a 10% increase in unallocated corporate
expenses. Segment Information (In thousands) Spawn Products Segment
Fresh Mushrooms Segment 2004 2003 % Change 2004 2003 % Change Net
Sales $17,086 $15,452 + 11 $7,849 $7,258 + 8 Operating Income 2,340
2,237 + 5 828 853 - 3 Spawn Products Segment Net sales of spawn and
spawn-related products increased 11%, primarily due to a weaker
U.S. dollar, which had the effect of increasing net sales on a
quarter-over-quarter comparison by $2.4 million. Spawn product
sales volume increased 3.9%, with a 6.3% increase in the Americas
and a 1.1% decrease in overseas markets. Most of the volume
increase in the Americas resulted from an additional week of sales
included in the first quarter of 2004. Sylvan's U.S. companies
report results on a 52-53 week fiscal-year basis. The 2004 first
quarter results, for Sylvan's U.S. companies, are for the fourteen
weeks ended April 4, 2004, while the corresponding 2003 quarter was
a thirteen-week period. Sales of disease-control agents and
nutritional supplements decreased 4.8%, after adjusting for the
weaker U.S. dollar, and accounted for 14% of Sylvan's consolidated
net sales for the first quarter of 2004, as compared with 15% for
the first quarter of 2003. The overseas U.S. dollar-equivalent
selling price was 15.3% higher during the first quarter of 2004, as
compared with the corresponding quarter of 2003, primarily due to
the weakening of the U.S. dollar. Overseas local currency selling
prices decreased approximately 1.1% and the selling price in the
Americas increased 1.9%. Operating expenses increased 11.6% when
compared with the first quarter of 2003. The effect of a weaker
U.S. dollar increased operating expenses on a quarter-over-quarter
comparison by $2.2 million. Within operating expenses, cost of
sales was 54.9% of net sales, as compared with 56.3% for the
corresponding 2003 quarter. The increase in spawn product sales
volumes contributed to the improved cost of sales percentage,
spreading costs that are primarily fixed in nature over more units.
Selling, administration, research and development expenses were
$3.8 million for the April 4, 2004 quarter and $3.0 million for the
March 30, 2003 quarter. Approximately one-half of this increase is
attributable to the weaker U.S. dollar. The segment also recorded
higher professional fees, related to the acquisition of intangible
assets, bad debt expense and warranty costs during the first
quarter of 2004, when compared with the first quarter of 2003.
Operating income, as a percentage of net sales, was 13.7% for the
first quarter of 2004, as compared with 14.5% for the corresponding
2003 quarter. Operating income was positively impacted by the
weakening of the U.S. dollar, with an effect of approximately
$225,000. The company's bioproducts division recorded net sales of
$277,000 for the first quarter of 2004, as compared with $349,000
for the first quarter of 2003. The company experienced sales growth
in its Red Yeast Rice product, but recorded no sales of its
Agaricus mushroom product during the first quarter of 2004, due to
relatively high inventory levels held by the Japanese customer who
purchases this product. The operating loss in the bioproducts
division for the first quarter of 2004 was $64,000, as compared
with an operating income of $11,000 for the first quarter of 2003.
Fresh Mushrooms Segment Net sales of fresh mushrooms increased to
$7.8 million during the first quarter, as compared with $7.3
million for the corresponding quarter of 2003. The number of pounds
sold increased 3.2% and the average selling price per pound
increased 7.0%. The Fresh Mushrooms Segment reports results on a
52-53 week fiscal-year basis. The 2004 first quarter results are
for the fourteen weeks ended April 4, 2004, while the corresponding
2003 quarter was a thirteen-week period. The Fresh Mushrooms
Segment's cost of sales was $5.7 million, or 72.9% of net sales,
for the quarter ended April 4, 2004, as compared with $5.1 million,
or 70.2%, for the 2003 first quarter. Lower yields per square foot
and higher employee benefit costs contributed to the increase in
the cost of sales percentage. Quincy sold $1.0 million of
ready-to-grow mushroom compost to its satellite farms and purchased
$1.9 million of high-quality mushrooms from the satellites for
immediate resale to its third-party wholesaler during the first
quarter of 2004. By comparison, Quincy sold $0.8 million of
ready-to-grow mushroom compost to its satellite farms and purchased
$1.3 million of high- quality mushrooms in the first quarter of
2003. The segment's operating income for the quarter was $828,000,
or 10.6% of net sales, as compared with $853,000 and 11.8% for the
first quarter of 2003. Operating income, when measured on a weekly
basis, decreased 9.9% to $59,000. Proposed Merger As announced on
November 16, 2003, Sylvan entered into a definitive agreement with
Snyder Associated Companies, Inc. of Kittanning, Pennsylvania,
which will result in a merger between Sylvan and a Snyder
affiliate. The Sylvan board of directors, upon the unanimous
recommendation of its special committee of independent directors,
approved the merger and the agreement. The merger is subject to
certain conditions, including the approval by a majority of the
shareholders of Sylvan. Sylvan has scheduled a special meeting of
its shareholders for that purpose on June 9, 2004. If approved by
Sylvan's shareholders at the meeting, the merger transaction is
expected to be completed shortly thereafter. Upon completion of the
merger, Sylvan will be obligated to pay approximately $1.6 million
in professional fees. Sylvan currently anticipates completing the
merger by the merger termination deadline of June 15, 2004. About
Sylvan A leader in fungal technology, Sylvan Inc. is a preeminent
worldwide producer and distributor of products for the mushroom
industry, specializing in spawn (the equivalent of seed for
mushrooms) and other spawn-related products and services, and is a
major grower of fresh mushrooms in the United States. Conference
Call Sylvan will not conduct a conference call to discuss results
for the first quarter of 2004. SYLVAN INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (In thousands except
share data) Three Months Ended April 4, 2004 Mar. 30, 2003
(Unaudited) (Unaudited) Net sales $24,582 $22,382 Operating costs
and expenses: Cost of sales 15,111 13,791 Selling, administration,
research and development 6,180 5,302 Depreciation 1,614 1,557
22,905 20,650 Operating income 1,677 1,732 Interest expense 351 422
Other income 152 4 Income before income taxes 1,478 1,314 Income
tax expense 517 434 Minority interest 118 47 Net income $ 843 $ 833
Diluted earnings per share $ 0.16 $ 0.16 Equivalent diluted shares
5,208,082 5,144,419 Condensed Consolidated Balance Sheets (In
thousands) Assets April 4, Dec. 28, Liabilities April 4, Dec. 28
2004 2003 and Equity 2004 2003 (Unaudited) (Unaudited) Cash and
equivalents $ 4,508 $ 5,849 Short-term debt $ 76 $ 110 Accounts
receivable, net 14,912 15,901 Accounts payable 4,307 5,739
Inventories 13,142 12,514 Other current Other current assets 3,666
3,336 liabilities 4,111 4,812 Total current assets $ 36,228 $
37,600 Total current liabilities $ 8,494 $ 10,661 Fixed assets, net
59,737 61,134 Long-term debt 33,659 33,548 Other assets 16,764
15,131 Other long-term liabilities 10,489 10,438 Minority interest
2,312 2,195 Shareholders' equity 57,775 57,023 Total liabilities
Total assets $112,729 $113,865 and equity $112,729 $113,865
DATASOURCE: Sylvan Inc. CONTACT: Don Smith of Sylvan Inc.,
+1-724-352-7520 Web site: http://www.sylvaninc.com/
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