Gardenburger, Inc. (Nasdaq: GBUR - news) reported today that it recorded an operating income of $1.1 million in the quarter ended June 30, 2000, compared to an operating loss of $16.1 million for the quarter ended June 30, 1999. Sales were $21.3 million for the fiscal third quarter of 2000, which is a 4 percent decline from the sales for the quarter ended June 30, 1999. These sales numbers were achieved without the benefit of the two national coupon drops or television advertising that ran in the comparative quarter of 1999.

The company also reported that, according to AC Nielsen data, Gardenburger held a 38 percent market share of veggie burgers for the April through June time period, 5 share points below the company's market share for the quarter ended June 30, 1999 and one share point below the company's market share for the fiscal second quarter of 2000, despite very aggressive spending by Kellogg's behind Worthington's Morningstar brand and despite Philip Morris' Kraft spending behind Boca Burger. For the week ended July 8, 2000, Gardenburger's market share held at 39.1 percent compared to a market share of 32.0 percent for Kellogg's Morningstar and Harvest Burger brands and a 20.0 percent market share for Philip Morris' Boca Burger. As of July 8, 2000, the company's new Gardenburger Flame Grilled(TM) (patent pending) products could be found in 28 percent of the grocery ACV, and distribution continues to grow weekly. "The company is very encouraged by the strength of the Gardenburger® brand equity and the loyalty shown by consumers to Gardenburger products," said Lyle Hubbard, Gardenburger's President and CEO. "The company remains committed to developing and producing the best tasting, highest quality products available in the veggie patty market.

"We are pleased with our profitable quarter," said Hubbard. "Our next step is to return to profitable growth, which we expect will be led by our introduction of Gardenburger Flame Grilled(TM) veggie patties. Consumer and trade reaction in all sales channels has been extremely favorable to our new Gardenburger Flame Grilled(TM) products."

Third Quarter Results

For the three months ended June 30, 2000, sales were $21.3, million compared to sales of $22.2 million in the same period last year.

During the fiscal third quarter of 2000, Gardenburger posted a gross margin of 48.6 percent compared to a gross margin of 41.3 percent during the same period last year.

Selling and marketing expenses for the fiscal third quarter of 2000 were $7.9 million, compared to $22.0 million for the three months ended June 30, 1999. This decrease was the result of significantly lower expenses in the areas of media advertising and couponing. General and administrative costs for the quarter decreased to $1.4 million from $1.7 million in the same quarter last year, due mainly to overhead reduction efforts and reduced personnel at the company's Portland, Oregon headquarters.

For the fiscal third quarter of 2000, the company posted an operating profit of $1.1 million, compared with an operating loss of $16.1 million for the same period last year. The improvement was due mainly to significantly lower selling and marketing expenses during the fiscal third quarter of 2000, as well as improved gross margins and lower overhead. Net income before accrual for preferred non-cash dividends totaled $388,000 for the fiscal third quarter of 2000, compared to a net loss of $10.5 million for the same period last year.

In April of 1999, the company raised $32.5 million of capital through a convertible preferred stock offering. In the fiscal third quarter of 2000, the company recorded preferred non-cash dividends of $1.1 million, compared to $889,000 for the quarter ended June 30, 1999. Future quarters will reflect a normal non-cash dividend of approximately $1.1 million. The cumulative dividends are payable upon redemption of the stock or in the event of a sale or liquidation of the company.

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® 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 190 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 retail distribution plan, effectiveness of the company's sales and marketing efforts, and intense competition in the veggie patty and other meat alternatives industry, which the company believes will increase. 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, 1999 and the company's 1999 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

30-Jun 30-Jun CHANGE
2000 1999 DOLLARS %

Net Sales 21,333,000 22,228,000 (895,000) -4%
Cost of goods sold 10,956,000 13,052,000 (2,096,000) -16%
Gross profit 10,377,000 9,176,000 1,201,000 13%
MARGIN 49% 41%

Operating expenses:
Sales & marketing 7,888,000 22,032,000 (14,144,000) -64%
General & administrative 1,420,000 1,669,000 (249,000) -15%
Restructuring charge -- 1,584,000 (1,584,000) -100%
Total Operating
expenses 9,308,000 25,285,000 (15,977,000) -63%

Operating income/(loss) 1,069,000 (16,109,000) 17,178,000 107%

Other income(expense):
Interest income 20,000 127,000 (107,000) -84%
Interest expense (476,000) (495,000) 19,000 -4%
Other 8,000 2,000 6,000 300%
Total other
income(expense) (448,000) (366,000) (82,000) 22%

Income/(loss) before
provision for
(benefit from)
income taxes 621,000 (16,475,000) 17,096,000 104%

Provision for (benefit
from) income taxes 233,000 (5,936,000) 6,169,000 104%

Net Earnings(loss) 388,000 (10,539,000) 10,927,000 104%
Margin 2% -47%

Preferred Dividends 1,092,000 889,000.00 203,000
Earnings/(loss)
available for Common
Shareholders (704,000) (11,428,000) 10,724,000

Basic earnings/(loss)
per share (0.08) (1.29)

Diluted earnings/(loss)
per share (0.08) (1.29)

Basic number of shares
outstanding 8,926,279 8,834,143

Diluted # of shares
outstanding 8,926,279 8,834,143


PROFORMA FISCAL 9 MONTHS YTD

30-Jun 30-Jun CHANGE
2000 1999 DOLLARS %

Net Sales 54,444,000 64,502,000 (10,058,000) -16%
Cost of goods sold 27,446,000 34,212,000 (6,766,000) -20%
Gross profit 26,998,000 30,290,000 (3,292,000) -11%
MARGIN 50% 47%

Operating expenses:
Sales & marketing 21,775,000 45,395,000 (23,620,000) -52%
General & administrative 5,095,000 5,164,000 (69,000) -1%
Restructuring charge -- 2,684,000 (2,684,000) -100%
Total Operating
expenses 26,870,000 53,243,000 (26,373,000) -50%

Operating income/(loss) 128,000 (22,953,000) 23,081,000 101%

Other income(expense):
Interest income 100,000 162,000 (62,000) -38%
Interest expense (1,379,000) (1,688,000) 309,000 -18%
Other (176,000) (1,000) (175,000) 17500%
Total other
income(expense) (1,455,000) (1,527,000) 72,000 -5%

Income/(loss) before
provision for
(benefit from)
income taxes (1,327,000) (24,480,000) 23,153,000 95%

Provision for (benefit
from) income taxes (461,000) (8,805,000) 8,344,000 95%

Net Earnings(loss) (866,000) (15,675,000) 14,809,000 94%
Margin -2% -24%

Preferred Dividends 11,401,000 889,000.00 10,512,000
Earnings/(loss)
available for Common
Shareholders (12,267,000) (16,564,000) 4,297,000

Basic earnings/(loss)
per share (1.38) (1.89)

Diluted earnings/(loss)
per share (1.38) (1.89)

Basic number of
shares outstanding 8,875,195 8,772,749

Diluted # of shares
outstanding 8,875,195 8,772,749


Gardenburger, Inc.
Balance Sheet
(unaudited)

June-00 Sep-99

ASSETS
Current Assets:

Cash & cash equivalents 2,038,000 7,033,000
Accounts receivable (net) 6,245,000 6,133,000
Inventories, net 7,684,000 7,268,000
Prepaid expenses 2,273,000 2,207,000
Deferred income taxes 5,245,000 4,775,000
Total current assets 23,485,000 27,416,000

Net fixed assets 7,685,000 10,275,000
Deferred income taxes 12,691,000 12,691,000
Other assets, net 2,057,000 2,320,000

TOTAL ASSETS 45,918,000 52,702,000

LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

Short term note payable 3,500,000 5,000,000
Accounts payable 2,058,000 6,669,000
Payroll and related liabilities payable 1,960,000 941,000
Other current liabilities 1,771,000 3,065,000
Total Current Liabilities 9,289,000 15,675,000

Other Long-Term Liabilities 171,000 199,000

Convertible Note Payable 15,000,000 15,000,000

Convertible Redeemable Preferred Stock 35,421,000 32,147,000

Shareholders' equity (deficit):
Common stock 11,114,000 10,619,000
Capital paid in surplus 12,405,000 4,277,000
Retained earnings (accumulated
deficit) (37,482,000) (25,215,000)
Total Shareholders' Equity (Deficit) (13,963,000) (10,319,000)

TOTAL LIABILITIES & EQUITY 45,918,000 52,702,000