Gardenburger Announces Fiscal Second Quarter 2001 Results

Apr 30, 2001, 01:00 ET from Gardenburger, Inc.

    PORTLAND, Ore., April 30 /PRNewswire/ -- Gardenburger, Inc.
 (OTC Bulletin Board:   GBUR) said today that its sales for the fiscal quarter
 ended March 31, 2001 were $12.7 million compared to sales of $14.4 million in
 the same quarter last year.
     "We announced in February at our Annual Shareholders meeting that
 Gardenburger would shift to a disciplined, profit-focused marketing approach,"
 said Scott Wallace, President and Chief Executive Officer of Gardenburger,
 Inc.  "In the short term, this change in strategy may mean lower sales due to
 the large percentage of our business done as a result of promotional spending
 in the burger segment and our need to rationalize marketing spending to levels
 that generate profitable sales.  However, demand for meat alternative products
 continues to rise and Gardenburger is working hard to bring innovative new
 products to market quickly to capitalize on this opportunity.  Sales of the
 recently introduced Gardenburger Chik'N Grill(TM) have exceeded expectations
 and we plan to introduce several additional new products this summer.  Our
 veggie and soy burger businesses remain the backbone of our company and we
 plan to continue supporting this important segment.  If we are successful in
 achieving our goals of combining a stable or growing profitable veggie burger
 business and our aggressive new product plans in the alternative forms
 segment, we should see improvement in both top and bottom line results going
 forward."
 
     Second Quarter Results
     During the second quarter of fiscal 2001, which ended March 31, 2001,
 Gardenburger posted a gross margin of 41.3 percent, down from 46.3 percent
 during the comparative quarter last year.  The decreased gross margin is a
 result of introducing the Chik'N Grill product to the company's production
 facility in Utah and lower production levels associated with lower sales.  As
 of March 2001, the Chik'N Grill product was fully integrated into the
 production process.
     Selling and marketing expenses for the fiscal 2001 second quarter were
 $5.9 million, compared to $7.0 million for the second quarter of fiscal 2000.
 The lower expense in the second quarter of fiscal 2001 resulted from reduced
 incentive spending with trade customers, reduced fixed selling overhead, and
 reduced variable selling costs such as freight and commissions.  These cost
 reductions are associated with lower sales levels as well as cost saving
 measures the Company has implemented in the past year.  General and
 administrative costs for the quarter decreased to $1.3 million from
 $1.7 million in the comparative quarter of fiscal 2000.  The decrease is a
 direct result of reduced overhead costs at the Company's administrative
 offices.  The resulting operating loss for the second quarter of fiscal 2001
 of $1.9 million was slightly less than the $2.0 million operating loss for the
 second quarter of fiscal 2000.
     In December 2000, the Company reached an agreement with Dresdner Kleinwort
 Benson Private Equity Partners L.P., the holder of the 7 percent Convertible
 Senior Subordinated Notes (the "Notes"), to amend the Notes to provide an
 additional alternative for interest payments.  Under this alternative, the
 Company elected to make its March 31, 2001 interest payment by increasing the
 then unpaid principal amount of the Notes by an amount equal to the interest
 payable at such date, $757,500, calculated at an annual rate of 10 percent
 rather than 7 percent.  This was in lieu of a cash interest payment and
 resulted in recording an additional $236,000 of interest expense in the second
 quarter of fiscal 2001.
     No income tax benefit was recorded for the second quarter of fiscal 2001
 compared to an income tax benefit of $954,000 for the second quarter of fiscal
 2000.  As of September 30, 2000, the Company recorded a reserve against its'
 total accumulated deferred income tax asset and is no longer recording an
 income tax benefit against any losses.  Net loss before accrual for preferred
 dividends amounted to $2.6 million during the second quarter of fiscal 2001,
 compared to a net loss before preferred dividends of $1.7 million for the
 second quarter of fiscal 2000.
     The net loss after preferred dividends, which are non-cash, for the second
 quarter of fiscal 2001 was $3.7 million, or $0.41 per diluted share, compared
 with a net loss of $2.8 million, or $0.32 per diluted share, for the second
 quarter of fiscal 2000.
     Founded in 1985 by GardenChef Paul Wenner(TM), Gardenburger, Inc. is an
 innovator in meatless, low-fat food products. The Company distributes its
 flagship Gardenburger(R) veggie patty to more than 35,000 food service outlets
 throughout the United States and Canada.  Retail customers include more than
 30,000 grocery, natural food and club stores. Based in Portland, Ore., the
 Company currently employs approximately 185 people.
     Statements in this press release about future events or performance are
 forward-looking statements that are necessarily subject to risk and
 uncertainty. The Company's actual results could be quite different. Important
 factors that could affect results include the Company's reliance on product
 acceptance, the Company's ability to execute its distribution plan,
 effectiveness of the Company's sales and marketing efforts, and intense
 competition in the veggie burger and other meat alternatives industry, which
 the Company believes will continue. Other important factors that could affect
 results are set forth in the Company's Annual Report on Form 10-K for the year
 ended September 30, 2000 and the Company's 2000 Annual Report to shareholders.
 Although forward-looking statements help provide complete information about
 the Company, investors should keep in mind that forward-looking statements are
 inherently less reliable than historical information.
 
 
                               Gardenburger, Inc.
                       Analysis of Statements of Earnings
                                   Unaudited
 
                                      FISCAL QUARTER ENDED
 
                                      31-Mar       31-Mar      CHANGE
                                       2001         2000      DOLLARS      %
 
     Net Sales                       12,725,000  14,361,000  (1,636,000)  -11%
 
     Cost of goods sold               7,473,000   7,709,000    (236,000)   -3%
        Gross profit                  5,252,000   6,652,000  (1,400,000)  -21%
        MARGIN                              41%         46%
 
     Operating expenses:
       Sales & marketing              5,872,000   7,002,000  (1,130,000)  -16%
       General & administrative       1,288,000   1,662,000    (374,000)  -23%
         Total Operating expenses     7,160,000   8,664,000  (1,504,000)  -17%
 
         Operating income/(loss)     (1,908,000) (2,012,000)    104,000     5%
 
     Other income(expense):
       Interest income                   21,000      25,000      (4,000)  -16%
       Interest expense                (682,000)   (499,000)   (183,000)   37%
       Other                             10,000    (166,000)    176,000  -106%
        Total other income(expense)    (651,000)   (640,000)    (11,000)    2%
 
           Income/(loss) before
            provision for
               (benefit from) income
                taxes                (2,559,000) (2,652,000)     93,000     4%
 
     Provision for (benefit from)
      income taxes                          --      (954,000)    954,000   100%
 
        Net Earnings(loss)           (2,559,000) (1,698,000)   (861,000)  -51%
        Margin                             -20%        -12%
 
     Preferred Dividends              1,092,000   1,093,000      (1,000)
          Earnings/(loss) available
           for Common Shareholders   (3,651,000) (2,791,000)   (860,000)
 
     Basic earnings/(loss) per share      (0.41)      (0.32)
     Diluted earnings/(loss) per
      share                               (0.41)      (0.32)
 
     Basic number of
     shares outstanding               9,002,101   8,850,451
 
     Diluted # of shares outstanding  9,002,101   8,850,451
 
                                      FISCAL 6 MONTHS YTD
 
                                     31-Mar       31-Mar       CHANGE
                                      2001         2000       DOLLARS      %
 
     Net Sales                      25,328,000   33,111,000  (7,783,000)  -24%
 
     Cost of goods sold             14,131,000   16,490,000  (2,359,000)  -14%
        Gross profit                11,197,000   16,621,000  (5,424,000)  -33%
        MARGIN                             44%          50%
 
     Operating expenses:
       Sales & marketing            11,369,000   13,887,000  (2,518,000)  -18%
       General & administrative      2,638,000    3,675,000  (1,037,000)  -28%
         Total Operating expenses   14,007,000   17,562,000  (3,555,000)  -20%
 
         Operating income/(loss)    (2,810,000)    (941,000) (1,869,000) -199%
 
     Other income(expense):
       Interest income                  46,000       80,000     (34,000)  -43%
       Interest expense             (1,322,000)    (903,000)   (419,000)   46%
       Other                           (50,000)    (184,000)    134,000   -73%
        Total other income(expense) (1,326,000)  (1,007,000)   (319,000)   32%
 
           Income/(loss) before
            provision for
               (benefit from)
                income taxes        (4,136,000)  (1,948,000) (2,188,000) -112%
 
     Provision for (benefit from)
      income taxes                          --     (694,000)    694,000   100%
 
        Net Earnings(loss)          (4,136,000)  (1,254,000) (2,882,000) -230%
        Margin                            -16%          -4%
 
     Preferred Dividends             2,184,000   10,309,000  (8,125,000)
          Earnings/(loss) available
           for Common Shareholders  (6,320,000) (11,563,000)  5,243,000
 
     Basic earnings/(loss) per
      share                              (0.70)       (1.31)
     Diluted earnings/(loss) per
      share                              (0.70)       (1.31)
 
     Basic number of
     shares outstanding              8,998,370    8,849,517
 
     Diluted # of shares
      outstanding                    8,998,370    8,849,517
 
                               Gardenburger, Inc.
                                 Balance Sheet
                                  (unaudited)
 
                                                   Mar-01           Sep-00
     ASSETS
 
     Current Assets:
 
        Cash & cash equivalents                   1,974,000         2,178,000
        Accounts receivable (net)                 2,914,000         4,098,000
        Inventories, net                          7,625,000         7,499,000
        Prepaid expenses                          1,656,000         2,079,000
               Total current assets              14,169,000        15,854,000
 
        Net fixed assets                          6,099,000         7,342,000
        Other assets, net                         1,765,000         1,964,000
 
     TOTAL ASSETS                                22,033,000        25,160,000
 
     LIABILITIES & SHAREHOLDERS' EQUITY
      (DEFICIT)
 
     Current Liabilities:
 
        Short term note payable                   3,241,000         2,591,000
        Accounts payable                          2,156,000         1,876,000
        Payroll and related liabilities
         payable                                    678,000         1,411,000
        Other current liabilities                 1,175,000         1,918,000
           Total Current Liabilities              7,250,000         7,796,000
 
 
     Other Long-Term Liabilities                    144,000           162,000
 
     Convertible Note Payable                    16,538,000        15,000,000
 
     Convertible Redeemable Preferred
      Stock                                      38,696,000        36,513,000
 
     Shareholders' equity (deficit):
        Common stock                             11,189,000        11,153,000
        Capital paid in surplus                  12,405,000        12,405,000
        Retained earnings (accumulated
         deficit)                               (64,189,000)      (57,869,000)
               Total Shareholders' Equity
                (Deficit)                       (40,595,000)      (34,311,000)
 
 
     TOTAL LIABILITIES & EQUITY                  22,033,000        25,160,000
 
                      MAKE YOUR OPINION COUNT - Click Here
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SOURCE Gardenburger, Inc.
    PORTLAND, Ore., April 30 /PRNewswire/ -- Gardenburger, Inc.
 (OTC Bulletin Board:   GBUR) said today that its sales for the fiscal quarter
 ended March 31, 2001 were $12.7 million compared to sales of $14.4 million in
 the same quarter last year.
     "We announced in February at our Annual Shareholders meeting that
 Gardenburger would shift to a disciplined, profit-focused marketing approach,"
 said Scott Wallace, President and Chief Executive Officer of Gardenburger,
 Inc.  "In the short term, this change in strategy may mean lower sales due to
 the large percentage of our business done as a result of promotional spending
 in the burger segment and our need to rationalize marketing spending to levels
 that generate profitable sales.  However, demand for meat alternative products
 continues to rise and Gardenburger is working hard to bring innovative new
 products to market quickly to capitalize on this opportunity.  Sales of the
 recently introduced Gardenburger Chik'N Grill(TM) have exceeded expectations
 and we plan to introduce several additional new products this summer.  Our
 veggie and soy burger businesses remain the backbone of our company and we
 plan to continue supporting this important segment.  If we are successful in
 achieving our goals of combining a stable or growing profitable veggie burger
 business and our aggressive new product plans in the alternative forms
 segment, we should see improvement in both top and bottom line results going
 forward."
 
     Second Quarter Results
     During the second quarter of fiscal 2001, which ended March 31, 2001,
 Gardenburger posted a gross margin of 41.3 percent, down from 46.3 percent
 during the comparative quarter last year.  The decreased gross margin is a
 result of introducing the Chik'N Grill product to the company's production
 facility in Utah and lower production levels associated with lower sales.  As
 of March 2001, the Chik'N Grill product was fully integrated into the
 production process.
     Selling and marketing expenses for the fiscal 2001 second quarter were
 $5.9 million, compared to $7.0 million for the second quarter of fiscal 2000.
 The lower expense in the second quarter of fiscal 2001 resulted from reduced
 incentive spending with trade customers, reduced fixed selling overhead, and
 reduced variable selling costs such as freight and commissions.  These cost
 reductions are associated with lower sales levels as well as cost saving
 measures the Company has implemented in the past year.  General and
 administrative costs for the quarter decreased to $1.3 million from
 $1.7 million in the comparative quarter of fiscal 2000.  The decrease is a
 direct result of reduced overhead costs at the Company's administrative
 offices.  The resulting operating loss for the second quarter of fiscal 2001
 of $1.9 million was slightly less than the $2.0 million operating loss for the
 second quarter of fiscal 2000.
     In December 2000, the Company reached an agreement with Dresdner Kleinwort
 Benson Private Equity Partners L.P., the holder of the 7 percent Convertible
 Senior Subordinated Notes (the "Notes"), to amend the Notes to provide an
 additional alternative for interest payments.  Under this alternative, the
 Company elected to make its March 31, 2001 interest payment by increasing the
 then unpaid principal amount of the Notes by an amount equal to the interest
 payable at such date, $757,500, calculated at an annual rate of 10 percent
 rather than 7 percent.  This was in lieu of a cash interest payment and
 resulted in recording an additional $236,000 of interest expense in the second
 quarter of fiscal 2001.
     No income tax benefit was recorded for the second quarter of fiscal 2001
 compared to an income tax benefit of $954,000 for the second quarter of fiscal
 2000.  As of September 30, 2000, the Company recorded a reserve against its'
 total accumulated deferred income tax asset and is no longer recording an
 income tax benefit against any losses.  Net loss before accrual for preferred
 dividends amounted to $2.6 million during the second quarter of fiscal 2001,
 compared to a net loss before preferred dividends of $1.7 million for the
 second quarter of fiscal 2000.
     The net loss after preferred dividends, which are non-cash, for the second
 quarter of fiscal 2001 was $3.7 million, or $0.41 per diluted share, compared
 with a net loss of $2.8 million, or $0.32 per diluted share, for the second
 quarter of fiscal 2000.
     Founded in 1985 by GardenChef Paul Wenner(TM), Gardenburger, Inc. is an
 innovator in meatless, low-fat food products. The Company distributes its
 flagship Gardenburger(R) veggie patty to more than 35,000 food service outlets
 throughout the United States and Canada.  Retail customers include more than
 30,000 grocery, natural food and club stores. Based in Portland, Ore., the
 Company currently employs approximately 185 people.
     Statements in this press release about future events or performance are
 forward-looking statements that are necessarily subject to risk and
 uncertainty. The Company's actual results could be quite different. Important
 factors that could affect results include the Company's reliance on product
 acceptance, the Company's ability to execute its distribution plan,
 effectiveness of the Company's sales and marketing efforts, and intense
 competition in the veggie burger and other meat alternatives industry, which
 the Company believes will continue. Other important factors that could affect
 results are set forth in the Company's Annual Report on Form 10-K for the year
 ended September 30, 2000 and the Company's 2000 Annual Report to shareholders.
 Although forward-looking statements help provide complete information about
 the Company, investors should keep in mind that forward-looking statements are
 inherently less reliable than historical information.
 
 
                               Gardenburger, Inc.
                       Analysis of Statements of Earnings
                                   Unaudited
 
                                      FISCAL QUARTER ENDED
 
                                      31-Mar       31-Mar      CHANGE
                                       2001         2000      DOLLARS      %
 
     Net Sales                       12,725,000  14,361,000  (1,636,000)  -11%
 
     Cost of goods sold               7,473,000   7,709,000    (236,000)   -3%
        Gross profit                  5,252,000   6,652,000  (1,400,000)  -21%
        MARGIN                              41%         46%
 
     Operating expenses:
       Sales & marketing              5,872,000   7,002,000  (1,130,000)  -16%
       General & administrative       1,288,000   1,662,000    (374,000)  -23%
         Total Operating expenses     7,160,000   8,664,000  (1,504,000)  -17%
 
         Operating income/(loss)     (1,908,000) (2,012,000)    104,000     5%
 
     Other income(expense):
       Interest income                   21,000      25,000      (4,000)  -16%
       Interest expense                (682,000)   (499,000)   (183,000)   37%
       Other                             10,000    (166,000)    176,000  -106%
        Total other income(expense)    (651,000)   (640,000)    (11,000)    2%
 
           Income/(loss) before
            provision for
               (benefit from) income
                taxes                (2,559,000) (2,652,000)     93,000     4%
 
     Provision for (benefit from)
      income taxes                          --      (954,000)    954,000   100%
 
        Net Earnings(loss)           (2,559,000) (1,698,000)   (861,000)  -51%
        Margin                             -20%        -12%
 
     Preferred Dividends              1,092,000   1,093,000      (1,000)
          Earnings/(loss) available
           for Common Shareholders   (3,651,000) (2,791,000)   (860,000)
 
     Basic earnings/(loss) per share      (0.41)      (0.32)
     Diluted earnings/(loss) per
      share                               (0.41)      (0.32)
 
     Basic number of
     shares outstanding               9,002,101   8,850,451
 
     Diluted # of shares outstanding  9,002,101   8,850,451
 
                                      FISCAL 6 MONTHS YTD
 
                                     31-Mar       31-Mar       CHANGE
                                      2001         2000       DOLLARS      %
 
     Net Sales                      25,328,000   33,111,000  (7,783,000)  -24%
 
     Cost of goods sold             14,131,000   16,490,000  (2,359,000)  -14%
        Gross profit                11,197,000   16,621,000  (5,424,000)  -33%
        MARGIN                             44%          50%
 
     Operating expenses:
       Sales & marketing            11,369,000   13,887,000  (2,518,000)  -18%
       General & administrative      2,638,000    3,675,000  (1,037,000)  -28%
         Total Operating expenses   14,007,000   17,562,000  (3,555,000)  -20%
 
         Operating income/(loss)    (2,810,000)    (941,000) (1,869,000) -199%
 
     Other income(expense):
       Interest income                  46,000       80,000     (34,000)  -43%
       Interest expense             (1,322,000)    (903,000)   (419,000)   46%
       Other                           (50,000)    (184,000)    134,000   -73%
        Total other income(expense) (1,326,000)  (1,007,000)   (319,000)   32%
 
           Income/(loss) before
            provision for
               (benefit from)
                income taxes        (4,136,000)  (1,948,000) (2,188,000) -112%
 
     Provision for (benefit from)
      income taxes                          --     (694,000)    694,000   100%
 
        Net Earnings(loss)          (4,136,000)  (1,254,000) (2,882,000) -230%
        Margin                            -16%          -4%
 
     Preferred Dividends             2,184,000   10,309,000  (8,125,000)
          Earnings/(loss) available
           for Common Shareholders  (6,320,000) (11,563,000)  5,243,000
 
     Basic earnings/(loss) per
      share                              (0.70)       (1.31)
     Diluted earnings/(loss) per
      share                              (0.70)       (1.31)
 
     Basic number of
     shares outstanding              8,998,370    8,849,517
 
     Diluted # of shares
      outstanding                    8,998,370    8,849,517
 
                               Gardenburger, Inc.
                                 Balance Sheet
                                  (unaudited)
 
                                                   Mar-01           Sep-00
     ASSETS
 
     Current Assets:
 
        Cash & cash equivalents                   1,974,000         2,178,000
        Accounts receivable (net)                 2,914,000         4,098,000
        Inventories, net                          7,625,000         7,499,000
        Prepaid expenses                          1,656,000         2,079,000
               Total current assets              14,169,000        15,854,000
 
        Net fixed assets                          6,099,000         7,342,000
        Other assets, net                         1,765,000         1,964,000
 
     TOTAL ASSETS                                22,033,000        25,160,000
 
     LIABILITIES & SHAREHOLDERS' EQUITY
      (DEFICIT)
 
     Current Liabilities:
 
        Short term note payable                   3,241,000         2,591,000
        Accounts payable                          2,156,000         1,876,000
        Payroll and related liabilities
         payable                                    678,000         1,411,000
        Other current liabilities                 1,175,000         1,918,000
           Total Current Liabilities              7,250,000         7,796,000
 
 
     Other Long-Term Liabilities                    144,000           162,000
 
     Convertible Note Payable                    16,538,000        15,000,000
 
     Convertible Redeemable Preferred
      Stock                                      38,696,000        36,513,000
 
     Shareholders' equity (deficit):
        Common stock                             11,189,000        11,153,000
        Capital paid in surplus                  12,405,000        12,405,000
        Retained earnings (accumulated
         deficit)                               (64,189,000)      (57,869,000)
               Total Shareholders' Equity
                (Deficit)                       (40,595,000)      (34,311,000)
 
 
     TOTAL LIABILITIES & EQUITY                  22,033,000        25,160,000
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X72962102
 
 SOURCE  Gardenburger, Inc.