UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-Q
-------------------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-20330
GARDENBURGER, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0886359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1411 SW Morrison Street, Suite 400
Portland, Oregon 97205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-205-1500
WHOLESOME & HEARTY FOODS, INC.
(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 8,604,624
(Class) (Outstanding at October 17, 1997)
================================================================================
<PAGE>
GARDENBURGER, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
Balance Sheets - September 30, 1997 and December 31, 1996 2
Statements of Operations - Three Month and Nine Month Periods
Ended September 30, 1997 and 1996 3
Statements of Cash Flows - Nine Months Ended September 30,
1997 and 1996 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
-1-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
GARDENBURGER, INC.
BALANCE SHEETS
September 30, December 31,
1997 1996
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,546,000 $ 7,755,000
Accounts receivable, net of allowances of
$243,000 and $177,000 6,228,000 2,800,000
Inventories, net 3,073,000 4,790,000
Prepaid expenses 1,254,000 378,000
Income taxes receivable 1,931,000 653,000
Deferred income tax benefit 626,000 470,000
----------- -----------
Total Current Assets 14,658,000 16,846,000
Property, Plant and Equipment, net of accumulated
depreciation of $1,817,000 and $1,220,000 12,271,000 6,814,000
Other Assets, net of accumulated amortization of
$217,000 and $122,000 1,257,000 1,274,000
----------- -----------
Total Assets $28,186,000 $24,934,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short term note payable $ 3,500,000 $ -
Accounts payable 2,245,000 2,173,000
Payroll and related liabilities payable 648,000 458,000
Accrued employee bonuses 657,000 221,000
Accrued relocation 104,000 178,000
Accrued brokers' commissions 427,000 199,000
Other current liabilities 1,304,000 224,000
----------- -----------
Total Current Liabilities 8,885,000 3,453,000
Deferred Income Taxes 569,000 502,000
Shareholders' Equity:
Preferred Stock, no par value, 5,000,000 shares
authorized; none issued - -
Series A Junior Participating Preferred Stock,
no par value, 250,000 shares authorized;
none issued - -
Common Stock, no par value, 25,000,000 shares
authorized; shares issued and outstanding:
8,599,626 and 8,566,456 8,594,000 8,468,000
Additional paid-in capital 4,145,000 4,139,000
Retained earnings 5,993,000 8,372,000
----------- -----------
Total Shareholders' Equity 18,732,000 20,979,000
----------- -----------
Total Liabilities and Shareholders' Equity $28,186,000 $24,934,000
=========== ===========
The accompanying notes are an integral part of these balance sheets.
-2-
<PAGE>
GARDENBURGER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $15,533,000 $11,042,000 $38,599,000 $31,211,000
Cost of goods sold 7,892,000 5,608,000 19,703,000 15,722,000
----------- ----------- ----------- -----------
Gross margin 7,641,000 5,434,000 18,896,000 15,489,000
Operating expenses:
Sales and marketing 7,286,000 3,141,000 18,795,000 9,271,000
General and administrative 1,256,000 1,146,000 3,902,000 3,735,000
Acquired in-process research & development - - - 612,000
----------- ----------- ----------- -----------
8,542,000 4,287,000 22,697,000 13,618,000
----------- ----------- ----------- -----------
Operating income (loss) (901,000) 1,147,000 (3,801,000) 1,871,000
Other income (expense):
Interest income 22,000 92,000 128,000 288,000
Interest expense (35,000) - (40,000) -
Other, net (80,000) - (87,000) (1,000)
----------- ----------- ----------- -----------
(93,000) 92,000 1,000 287,000
----------- ----------- ----------- -----------
Income (loss) before (provision for) benefit (994,000) 1,239,000 (3,800,000) 2,158,000
from income taxes
(Provision for) benefit from income taxes 349,000 (461,000) 1,429,000 (801,000)
----------- ----------- ----------- -----------
Net income (loss) $ (645,000) $ 778,000 $(2,371,000) $ 1,357,000
=========== =========== =========== ===========
Net income (loss) per share $ (0.08) $ 0.09 $ (0.28) $ 0.15
=========== =========== =========== ===========
Shares used in per share calculations 8,589,592 9,053,749 8,576,798 8,831,424
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
GARDENBURGER, INC.
STATEMENTS OF CASH FLOWS
Nine months ended September 30,
1997 1996
------------- --------------
Cash flows from operating activities:
Net income (loss) $(2,371,000) $ 1,357,000
Effect of exchange rate on operating
accounts (9,000) 8,000
Adjustments to reconcile net income
(loss) to net cash flows used in
operating activities:
Depreciation and amortization 716,000 418,000
Acquired in-process research and
development, net of tax - 386,000
Loss on sale of fixed assets 8,000 -
Deferred income taxes (89,000) (15,000)
(Increase) decrease in:
Accounts receivable, net (3,428,000) (1,253,000)
Inventories, net 1,717,000 (1,416,000)
Prepaid expenses (876,000) (96,000)
Income taxes receivable (1,278,000) (966,000)
Increase (decrease) in:
Accounts payable 72,000 390,000
Payroll and related liabilities payable 190,000 314,000
Accrued employee bonuses 436,000 168,000
Accrued relocation (74,000) -
Accrued brokers' commissions 228,000 92,000
Other current liabilities 1,080,000 (75,000)
----------- -----------
Net cash used in operating activities (3,678,000) (688,000)
Cash flows from investing activities:
Payments for purchase of property
and equipment (6,062,000) (1,451,000)
Proceeds from sale of equipment 1,000 12,000
Cash paid for Gorilla Foods and
Whole Food Marketing - (419,000)
Other assets, net (102,000) (58,000)
----------- -----------
Net cash used in investing activities (6,163,000) (1,916,000)
Cash flows from financing activities:
Proceeds from line of credit 3,500,000 -
Proceeds from exercise of common stock options 126,000 625,000
Income tax benefit of non-qualified
stock option exercises and
disqualifying dispositions 6,000 1,402,000
----------- -----------
Net cash provided by financing activities 3,632,000 2,027,000
Decrease in cash and cash equivalents (6,209,000) (577,000)
Cash and cash equivalents:
Beginning of period 7,755,000 9,247,000
----------- -----------
End of period $ 1,546,000 $ 8,670,000
=========== ===========
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
GARDENBURGER, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
- -----------------------------
The financial information included herein for the three and nine month periods
ended September 30, 1997 and 1996 and the financial information as of September
30, 1997 is unaudited. However, such information reflects all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. The financial information
as of December 31, 1996 is derived from Gardenburger, Inc.'s (formerly Wholesome
& Hearty Foods, Inc.'s) (the Company's) 1996 Annual Report on Form 10-K. The
interim financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's 1996 Annual Report on
Form 10-K. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
NOTE 2: INVENTORIES
- -------------------
Inventories are valued at standard cost, which approximates the lower of cost
(using the first-in, first-out (FIFO) method), or market, and include materials,
labor and manufacturing overhead.
September 30, 1997 December 31, 1996
----------------------------- ---------------------------
Raw materials $ 758,000 $ 670,000
Supplies 204,000 243,000
Finished goods 2,111,000 3,877,000
----------------------------- ---------------------------
$3,073,000 $4,790,000
============================= ===========================
NOTE 3: FACILITIES AND EQUIPMENT LEASES
- ---------------------------------------
In May 1997, the Company announced the lease of a production facility in Utah.
The Company also expects to lease various production and other equipment for
this facility. There are no lease payments associated with the facility lease in
1997. Annual lease payments on the facility will total $336,000 during 1998.
NOTE 4: LINE OF CREDIT
- ----------------------
On June 26, 1997, the Company signed a $10.0 million unsecured line-of-credit
agreement with a commercial bank. Interest is at the bank's reference rate or,
at the Company's option, at LIBOR plus 1.0 percent or at the Offshore Rate plus
1.0 percent. The line-of-credit decreases to $5.0 million on April 16, 1998 and
expires July 1, 1998. The line-of-credit agreement contains certain financial
and other covenants. At September 30, 1997, the Company had $3.5 million
outstanding under this line of credit and was in compliance with its covenants.
-5-
<PAGE>
NOTE 5: SUPPLEMENTAL CASH FLOW INFORMATION
- ------------------------------------------
Supplemental disclosure of cash flow information is as follows:
Nine Months Ended
September 30,
---------------------------
1997 1996
------------ -----------
Cash paid during the period for income taxes $ 10,000 $ 1,062,000
Cash paid during the period for interest $ 40,000 $ --
Issuance of Common Stock in exchange for the
assets of Gorilla Foods, Inc. $ -- $ 990,000
NOTE 6: EARNINGS PER SHARE
- --------------------------
In March 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share ("SFAS 128"), superseding Accounting Principles Board
Opinion No. 15 ("APB 15"). This statement establishes a different method of
computing net income per share from that currently required under the provisions
of APB 15. Under SFAS 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net income per
share is expected to be comparable or slightly higher than the currently
presented net income per share as the effect of dilutive stock options will not
be considered in computing basic net income per share. Diluted net income per
share is expected to be comparable or slightly higher than the currently
presented net income per share. SFAS 128 is required to be adopted for periods
ending after December 15, 1997. Pro forma effects of applying SFAS 128 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- -------------------------------------
1997 1996 1997 1996
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Primary EPS as reported $ (0.08) $ 0.09 $ (0.28) $ 0.15
Effect of SFAS 128 0.00 0.00 0.00 0.01
================= ================= ================ ================
Basic EPS as restated $ (0.08) $ 0.09 $ (0.28) $ 0.16
================= ================= ================ ================
Fully diluted EPS as reported $ (0.08) $ 0.09 $ (0.28) $ 0.15
Effect of SFAS 128 0.00 0.00 0.00 0.00
================= ================= ================ ================
Diluted EPS as restated $ (0.08) $ 0.09 $ (0.28) $ 0.15
================= ================= ================ ================
</TABLE>
NOTE 7: SUBSEQUENT EVENT
- ------------------------
On October 17, 1997, the Company's shareholders approved the change of the
Company's name to Gardenburger, Inc. from Wholesome & Hearty Foods, Inc. Also
effective October 17, 1997, the Company's trading symbol on the Nasdaq National
Market System changed to GBUR from WHFI.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-----------------------------------------------------------------------
Forward-Looking Information
- ---------------------------
Statements in this report which are not historical in nature, including
discussion of the Company's expansion plans and research and development
efforts, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
-6-
<PAGE>
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors with respect to the
Company include changes in food manufacturing technology, volatility in raw
materials prices, product acceptance by consumers, the Company's ability to
implement its retail distribution expansion plans, the effectiveness of the
Company's sales and marketing efforts and intensifying competition in the
meatless food products industry. Given these uncertainties, investors are
cautioned not to place undue reliance on the forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained in this report to reflect future events or developments.
Results of Operations
- ---------------------
Net sales increased to $15.5 million in the third quarter of 1997 from $11.0
million in the third quarter of 1996 and to $38.6 million for the first nine
months of 1997 compared to $31.2 million for the comparable period of 1996. The
Company has increased its sales levels in its natural foods, retail and club
store channels. The increases are primarily a result of increased marketing and
public relations activities, which have increased awareness of the Company's
products throughout its channels of distribution.
Gross margin increased to $7.6 million and $18.9 million, respectively (49
percent and 49 percent of net sales, respectively) for the three and nine month
periods ended September 30, 1997 from $5.4 million and $15.5 million,
respectively (49 percent and 50 percent of net sales, respectively) for the
comparable periods of 1996.
Sales and marketing expense increased to $7.3 million and $18.8 million,
respectively (47 percent and 49 percent of net sales, respectively) for the
three month and nine month periods ended September 30, 1997 compared to $3.1
million and $9.3 million, respectively (28 percent and 30 percent of net sales,
respectively) for the three month and nine month periods ended September 30,
1996. The increase is primarily as a result of costs associated with the
Company's plan to aggressively expand its retail grocery business nationwide in
1997 and increased promotional activities, including the launching of a new
national advertising campaign.
General and administrative expense increased to $1.3 million and $3.9 million,
respectively (8 percent and 10 percent of net sales, respectively) for the three
month and nine month periods ended September 30, 1997 compared to $1.1 million
and $3.7 million, respectively (10 percent and 12 percent of net sales,
respectively) for the three month and nine month periods ended September 30,
1996. General and administrative expense remained relatively constant as
increases in compensation expense related to additional personnel to support the
growth of the Company and increased bonus accruals in 1997 were substantially
offset by a decrease in severance and hiring costs and litigation costs
resulting from settlement of a lawsuit against the Company during the third
quarter of 1996 and a related insurance refund of $240,000 which was received in
the first quarter of 1997.
In connection with the acquisition of Gorilla Foods, Inc., the Company recorded
a one-time pretax charge of $612,000 ($386,000 net of taxes) related to acquired
in-process research and development costs in the first quarter of 1996. The
value assigned to the in-process research and development was determined by an
-7-
<PAGE>
independent appraisal and represents those efforts in process at the acquisition
date that had not yet established feasibility and that had no alternative future
uses. Accounting rules require that such costs be charged to expense as
incurred. The Company currently believes that these research and development
efforts will result in commercially viable products within the next several
years.
Loss from operations was $0.9 million and $3.8 million, respectively, for the
three month and nine month periods ended September 30, 1997, compared to
operating income of $1.1 million and $1.9 million ($2.5 million without the
effect of acquired in-process research and development), respectively (10
percent and 6 percent of net sales), for the comparable periods of 1996.
Income taxes are based on an estimated rate of 37.6 percent, which is lower than
the 40.6 percent rate achieved for 1996 primarily due to the revision of 1995
tax estimates that increased the 1996 rate by approximately 2.0 percent.
Net loss was $645,000 and $2.4 million, respectively, for the three month and
nine month periods ended September 30, 1997 compared to net income of $778,000
and $1.4 million ($1.7 million without the after tax effect of the acquired
in-process research and development), respectively (7 percent and 4 percent of
net sales, respectively) for the comparable periods of 1996. Loss per share was
$(0.08) and $(0.28), respectively (on 8,589,592 and 8,576,798 shares,
respectively) for the three month and nine month periods ended September 30,
1997 compared to income per share of $0.09 and $0.15 ($0.20 without the after
tax effect of the acquired in-process research and development), respectively
(on 9,053,749 and 8,831,424 shares, respectively), for the comparable periods of
1996.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997, working capital was $5.8 million, including $1.5 million
of cash and cash equivalents. In the first nine months of 1997, working capital
decreased by $7.6 million and the current ratio decreased to 1.6:1 from 4.9:1 at
December 31, 1996.
Cash and cash equivalents decreased $6.2 million from December 31, 1996,
primarily due to use of $3.7 million in operations and $6.1 million for the
purchase of property and equipment, offset by $3.5 million provided by proceeds
from the Company's line of credit and $132,000 provided by the exercise of stock
options and related income tax benefits.
Accounts receivable increased $3.4 million to $6.2 million at September 30, 1997
from $2.8 million at December 31, 1996, due primarily to growth of the business
and significant sales at the end of the third quarter of 1997. Days sales
outstanding were 30 at September 30, 1997 compared to 32 at December 31, 1996.
Accounts 80 days or more past due represented approximately 4 percent of
accounts receivable at September 30, 1997 compared to approximately 2 percent at
December 31, 1996.
Inventories decreased $1.7 million to $3.1 million at September 30, 1997 from
$4.8 million at December 31, 1996, due primarily to a decrease in finished goods
inventory resulting from significant sales at the end of the 1997 third quarter.
Inventory turned 8.0 times on an annualized basis in the third quarter of 1997
compared to 5.1 times for all of 1996.
Prepaid expenses increased $876,000 to $1.3 million at September 30, 1997 from
$378,000 at December 31, 1996, due primarily to prepaid marketing and sales
expenses.
-8-
<PAGE>
In May 1997, the Company announced the lease of a production facility in
Clearfield, Utah. The Company also expects to lease various production and other
equipment for this facility. There are no lease payments associated with the
facility lease in 1997. Annual lease payments on the facility will total
$336,000 during 1998.
Capital expenditures of $6.1 million during the first nine months of 1997
primarily resulted from a capacity expansion project at one of the Company's
production facilities, including building improvements and new processing
equipment as well as equipment for the start-up of the Company's newly leased
Utah facility.
Short term notes payable increased to $3.5 million at September 30, 1997 from
zero at December 31, 1996. Proceeds from the line of credit have been used
primarily to finance the Company's aggressive sales growth plans and to purchase
equipment for the Company's new Utah facility.
Other current liabilities increased $1.1 million to $1.3 million at September
30, 1997 from $224,000 at December 31, 1996 primarily as a result of accrued
sales and marketing expenses related to the Company's growth strategy.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS
128"). This statement establishes a different method of computing net income per
share than is currently required under the provisions of Accounting Principles
Board Opinion No. 15. Under SFAS 128, the Company will be required to present
both basic net income per share and diluted net income per share. Basic net
income per share is expected to be comparable or slightly higher than the
currently presented net income per share as the effect of dilutive stock options
will not be considered in computing basic net income per share. Diluted net
income per share is expected to be comparable or slightly higher than the
currently presented net income per share since the diluted calculation will also
use the average market price instead of the higher of the average or ending
market price. The Company expects to adopt SFAS 128 in the fourth quarter of
1997 and, at that time, all historical net income per share data presented will
be restated to conform to the provisions of SFAS 128.
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS 130
is to report a measure of all changes in equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company expects to adopt SFAS 130 in the first
quarter of 1998 and does not expect comprehensive income to be materially
different from currently reported net income.
-9-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) The exhibits filed as part of this report are listed below and this list
constitutes the Exhibit Index:
Exhibit No. and Description
---------------------------
3 Restated Articles of Incorporation as amended October 17, 1997
10.1 Business Loan Agreement with Bank of America re: Line-of-Credit,
dated June 26, 1997 (1)
10.2 Facility Lease by and between Freeport Center Associates, a Utah
general partnership and Wholesome & Hearty Foods, Inc., an
Oregon corporation, dated May 28, 1997(1)
11 Calculations of Net Income Per Share
27 Financial Data Schedule
(1) Previously filed with the Company's Form 10-Q for the
quarter ended June 30, 1997 as filed with the Securities
Exchange Commission on August 14, 1997, and is incorporated
herein by reference.
(b) Reports on Form 8-K:
None.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 27, 1997 GARDENBURGER, INC.
By: /s/ LYLE G. HUBBARD
-------------------------------------
Lyle G. Hubbard
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ RICHARD C. DIETZ
------------------------------------
Richard C. Dietz
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
-11-
EXHIBIT 3
RESTATED ARTICLES OF INCORPORATION
OF
GARDENBURGER, INC.
(as amended through October 17, 1997)
ARTICLE I
Name
----
The name of this corporation is Gardenburger, Inc.
ARTICLE II
Authorized Stock
----------------
1. Class of Shares. The Corporation is authorized to issue two classes
of shares to be designated respectively "Preferred" and "Common." The total
number of Preferred shares authorized is 5,000,000, and the total number of
Common shares authorized is 25,000,000.
2. Preferred Shares in Series.
(a) The Preferred shares may be issued in one or more series at
such time or times and for such consideration or considerations as the Board of
Directors may determine. Each series shall be so designated to distinguish its
shares from the shares of all other series and classes. All Preferred shares of
a series shall have preferences, limitations, and relative rights identical with
those of other shares of the same series and, except to the extent otherwise
provided in the Articles of Amendment, adopted by the Board of Directors
creating the series, of those of other series of the same class. Except as
otherwise provided in the Restated Articles of Incorporation, different series
of Preferred shares shall not be construed to constitute different classes of
shares for the purpose of voting by classes.
(b) Subject to the foregoing, the Board of Directors is expressly
authorized to provide for the issuance of all or any Preferred shares in one or
more series, each with such preferences, limitations, and relative rights as
shall be stated in the Articles of Amendment adopted by the Board of Directors
to create such series and filed with the Oregon Secretary of State in accordance
with the Oregon Business Corporation Act. The authority of the Board of
Directors with respect to each such series shall include, without limitation of
the foregoing, the right to provide that the shares of each such series may (i)
have special conditional, or limited voting rights, or no voting rights, (ii) be
redeemable or convertible (x) at the option of the corporation, the shareholder,
or another person on the occurrence of a designated event, (y) for cash,
indebtedness, securities, or other property, or (z) in a designated amount or in
an amount determined in accordance with a designated formula or by reference to
extrinsic data or events, (iii) entitle the holders to distributions calculated
Page 1 - RESTATED ARTICLES OF INCORPORATION
<PAGE>
in any manner, including dividends that may be cumulative, noncumulative, or
partially cumulative, and (iv) have preference over any other classes or series
of shares with respect to distributions, including dividends and distributions
upon the dissolution of the corporation; all as the Board of Directors may deem
advisable and as are not inconsistent with the Oregon Business Corporation Act
and the provisions of the Restated Articles of Incorporation.
3. Rights of Common Stock. Subject to provisions governing Preferred
shares that may from time to time come into existence, the holders of the Common
shares shall have unlimited voting rights and the unlimited right to receive the
net assets of the corporation upon dissolution.
4. Waiver of Preemptive Rights. The corporation elects to waive
preemptive rights.
5. Voting of Common Stock. Except as otherwise required by law, each
outstanding Common share is entitled to one vote on each matter voted on at a
shareholder's meeting, and each outstanding Preferred share is entitled to such
vote or votes, if any, as fixed by the Board of Directors in the Articles of
Amendment filed pursuant to Paragraph 2 above.
ARTICLE III
Registered Office and Agent
---------------------------
The address of the registered office of the corporation is 1411 S.W.
Morrison Street, Suite 400, Portland, Oregon 97205, and the name of the
registered agent at such address is Richard C. Dietz.
ARTICLE IV
Notices
-------
The name and address to which the Corporation Division may mail notices
are Richard C. Dietz, 1411 S.W. Morrison Street, Suite 400, Portland, OR 97205.
ARTICLE V
Director Liability
------------------
To the full extent the Oregon Business Corporation Act, as it exists on
the date hereof or may hereafter be amended, permits the limitation or
elimination of liability of directors, a director shall not be liable to the
corporation or its shareholders for monetary damages for conduct as a director.
Any amendment to or repeal of this Article V shall not adversely affect any
right or protection of a director of the corporation for or with respect to any
acts or omissions of such directors occurring prior to such amendment or repeal.
Page 2 - RESTATED ARTICLES OF INCORPORATION
EXHIBIT 11
GARDENBURGER, INC.
CALCULATIONS OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------------------- ----------------------------------------------------
1997 1996 1997 1996
------------------------- ------------------------ ------------------------- -------------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
------------------------- ------------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average Shares
Outstanding for the Period 8,589,592 8,589,592 8,566,456 8,566,456 8,576,798 8,576,798 8,418,408 8,418,408
Dilutive Common Stock
Options Using the Treasury
Stock Method - - 487,293 487,293 - - 413,016 450,038
----------------------- ----------------------- ------------------------- ------------------------
Total Shares Used for
Per Share Calculations 8,589,592 8,589,592 9,053,749 9,053,749 8,576,798 8,576,798 8,831,424 8,868,446
======================= ======================= ========================= =======================
Net Income (Loss) $ (645,000) $ (645,000) $ 778,000 $ 778,000 $(2,371,000) $(2,371,000) $1,357,000 $1,357,000
======================= ======================= ========================= =======================
Net Income (Loss)
Per Share $ (0.08) $ (0.08) $ 0.09 $ 0.09 $ (0.28) $ (0.28) $ 0.15 $ 0.15
======================= ======================= ========================= =======================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Company's balance sheets and related statements of operations for the
period ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,546,000
<SECURITIES> 0
<RECEIVABLES> 6,471,000
<ALLOWANCES> 243,000
<INVENTORY> 3,073,000
<CURRENT-ASSETS> 14,658,000
<PP&E> 14,088,000
<DEPRECIATION> 1,817,000
<TOTAL-ASSETS> 28,186,000
<CURRENT-LIABILITIES> 8,885,000
<BONDS> 3,500,000
0
0
<COMMON> 8,594,000
<OTHER-SE> 10,138,000
<TOTAL-LIABILITY-AND-EQUITY> 28,186,000
<SALES> 38,599,000
<TOTAL-REVENUES> 38,599,000
<CGS> 19,703,000
<TOTAL-COSTS> 19,703,000
<OTHER-EXPENSES> 22,697,000
<LOSS-PROVISION> 58,000
<INTEREST-EXPENSE> 40,000
<INCOME-PRETAX> (3,800,000)
<INCOME-TAX> 1,429,000
<INCOME-CONTINUING> (2,371,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,371,000)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
