Gardenburger, Inc. (OTC Bulletin Board: GBUR) said yesterday 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.”
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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.
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By GlobalDataNo 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® 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
