Sylvan Inc. Announces First Quarter Results

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., [phone]



Web site:  http://www.sylvaninc.com/ 

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