Gardenburger Releases Annual Report

Gardenburger Releases Annual Report

PORTLAND, Ore.--Gardenburger Inc., manufacturer of meatless, low-fat foodproducts, said in its annual report for the twelve-month period ended Sept. 30,2000 that net sales for fiscal 2000 increased to $71.0 million from $60.1million, primarily due to the company's change in its fiscal year during 1999from a calendar year to a fiscal year ended Sept. 30. However, decreasedadvertising and coupon programs and an overall decrease in veggie burger saleshave led to reduced unit sales. Fiscal fourth quarter sales ended Sept. 30, 2000dropped to $16.6 million compared to sales of $24.3 million in the same quarterlast year. According to the company, a market-wide softening in the meatlessburger market and heavy marketing expenditures by major competitors alsoattributed to decreased sales. In an attempt to drive new sales, the companyplans to offer other types of meat alternatives.

Gross margin percentages were also affected by the change in the company'sfiscal year. Gross margin increased from $25.8 million in 1999 to $34.9 millionfor fiscal 2000 based on the fiscal year change, as well as favorable purchaseprices for dairy products and increased efficiencies at the company's productionfacility located in Clearfield Utah. Fourth quarter results reported in November2000 found that these improvements and the company's transition to a singleproduction facility helped return the company to its historical gross marginlevel in the 48 to 50 percent range and is expected to continue into fiscal2001.

The company also reduced sales and marketing expenditures as it moved from anaggressive media advertising model to a profit driven business model in 2000.Sales and marketing expenses decreased to $28.3 million from $48.0 million. Thedecline was a result of the company's decision not to continue a televisionmarketing program but to focus on areas within the grocery channel that couldmore efficiently manage Gardenburger's market position.

The increased gross margin percentages and decreased sales and marketingexpenses helped improve operating losses. Total loss from operations was$686,000 in fiscal 2000 compared to an operating loss of $30.0 million in 1999.

Net loss for 2000 was $32.7 million or $3.67 per share compared to $22.1million or $2.51 per share in 1999. The current loss for 2000 included anadditional $8.1 million non-cash preferred dividends charge in the first quarterof 2000 as well as a $17.5 million valuation reserve against the company's netdeferred tax assets. The company stated that the impact of inflation was notmaterial for both 1999 and 2000.

For more information on this report, visit the company's Web site at www.gardenburger.comor http://biz.yahoo.com/e/001226/gbur.html