Horizon Organic Holding Corporation (Nasdaq: HCOW), the world's leading producer of organic dairy products, announced today results for its second quarter and first half ended June 30, 2001. Net sales for the quarter rose 30 percent to $38.6 million, versus $29.7 million for the comparable period a year ago. Revenue from international operations increased 90 percent from the comparable period last year. Net income was $442,000 or $0.04 per diluted share, which was above analyst consensus estimates, compared with $514,000 or $0.05 per diluted share for the second quarter of last year.

For the six-month period ended June 30, 2001, net sales reached $76.2 million, up 36 percent from $56 million reported in the first six-months of 2000. Net income for the first half of fiscal 2001 was $207,000, or $0.02 per diluted share, compared with $821,000, or $0.08 per diluted share, reported in the same period a year ago.

Gross margins improved from 29.4 percent in the first quarter of this year to 31.5 percent this quarter. The company was able to capitalize on its cost reduction and logistics redesign programs. During the quarter, the company reduced delivery costs and began to benefit from lower production costs due to the new processors it brought on during the last six months.

"The second quarter is a significant milestone for the company. Not only have we continued our tremendous growth, but also our margins have improved. It is clear that the changes we have made in operations will help ensure that future growth is even more profitable. We believe we are on track to achieve record profits this year," said Chuck Marcy, president and chief executive officer of Horizon Organic.

Milk led the growth in revenues and was paced by demand for the company's ultra-pasteurized (UP) milk. UP milk comprised 42 percent of total milk sales this quarter and allowed the company to expand its presence in markets such as Seattle and Portland. Growth in dairy products was driven by consumer acceptance of the Horizon Organic repackaged line of cheese products, which grew 45 percent in the first half of the year and butter, which grew 20 percent during the second quarter. Additionally, divisions of two major conventional grocery customers added organic dairy sections this quarter, indicative of the progress being made on this important company initiative.

"Under the leadership of grocery industry veteran John Haydock, our new vice president of sales, we feel very confident that we will see further expansion of organic dairy sections in the second half of the year. We also expect the single-serve juice and eight-ounce butter introductions that occurred during the second quarter to enhance growth," Marcy said.

The company also is realizing the benefit of rising conventional milk prices, as the cost differential between conventional and organic milk is narrowing. The total organic milk category, which was growing at 28 percent during the fourth quarter of 2000, rose to 38 percent in the past three months.

In the second half of the year, Marcy said the company would continue to focus on expanding organic dairy sections, capitalize on the company's 10th anniversary and continue its cost reduction program.

Horizon Organic also stated that all future expansion of milk supply would be from independent dairy producers, which will save capital and reduce the importance of the company's internal supply. In that regard, the company is ending its herd management agreement in Colorado in the summer of 2002.

Furthermore, the company is forming the Horizon Organic Agriculture Leadership Program. The company will sponsor research and provide education for current and future organic dairy partners. This major initiative will provide the resources necessary to ensure that the company's organic dairy production partners remain in the forefront of developments in the industry.

The company also acknowledged that it is comfortable with analyst consensus estimates for fiscal 2001, which are at $0.16 per share. "In light of the improvement we saw this quarter, we are comfortable with the year-end consensus. In the third quarter, we only expect to see a modest improvement in earnings since it is traditionally the weakest quarter for milk sales; however, the fourth quarter is generally the strongest. Accordingly, we anticipate earnings per share to be in the range of $0.04 to $0.06 for the third quarter," concluded Marcy.

Horizon Organic produces and markets the leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also markets certified organic eggs and juices. The company's products can be found in conventional supermarkets and natural foods stores across the U.S. and in the U.K. 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 strong growth, to achieve distribution and operational efficiencies, and to expand domestically and internationally, as well as increased milk costs, inbound and outbound freight and distribution costs, higher costs related to new-product introductions and increased personnel costs. These factors and others are more fully discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2000.

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

                                      Three Months Ended June 30,
                                   2001       %NS       2000       %NS
    Net sales                    $38,607    100.0%   $29,691     100.0%
       Growth vs. prior year       30.0%               44.2%
    Cost of sales                 26,462     68.5%    19,463      65.5%
    Gross profit                  12,145     31.5%    10,229      34.5%

    Selling expense                7,651     19.8%     6,370      21.5%
    General and administrative     1,997      5.2%     2,072       7.0%
    Goodwill Amortization            812      2.1%       527       1.8%

    Operating income               1,685      4.4%     1,259       4.2%

    Interest and other, net         (948)    -2.5%      (400)     -1.3%

    Pretax income                    737      1.9%       859       2.9%

    Income tax expense              (295)    -0.8%      (346)     -1.2%

    Net income                       442      1.1%       514       1.7%

    Earnings per share
      Basic                        $0.04               $0.05
      Diluted                      $0.04               $0.05

    Weighted average shares outstanding:
      Basic                        9,945               9,777
      Diluted                     10,076              10,048

    Selected Balance Sheet Data  Jun 30,              Dec 31,
                                   2001                 2000
    Working capital              $23,168             $23,714
    Total assets                 128,344             132,164
    Current liabilities           23,923              25,245
    Long-term debt, less
     current portion              44,425              45,685
    Stockholders' equity          57,413              58,644

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

                                        Six Months Ended June 30,
                                    2001     %NS        2000       %NS
    Net sales                    $76,205    100.0%   $56,028     100.0%
       Growth vs. prior year       36.0%               51.4%
    Cost of sales                 53,005     69.6%    37,397      66.7%
    Gross profit                  23,200     30.4%    18,630      33.3%

    Selling expense               15,292     20.1%    11,813      21.1%
    General and administrative     3,922      5.1%     4,020       7.2%
    Goodwill Amortization          1,636      2.1%       901       1.6%

    Operating income               2,351      3.1%     1,896       3.4%

    Interest and other, net       (1,993)    -2.6%      (516)     -0.9%

    Pretax income                    358      0.5%     1,380       2.5%

    Income tax expense              (151)    -0.2%      (558)     -1.0%

    Net income                       207      0.3%       821       1.5%

    Earnings per share
      Basic                        $0.02               $0.08
      Diluted                      $0.02               $0.08

    Weighted average shares outstanding:
      Basic                        9,923               9,765
      Diluted                     10,036              10,037


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