WHOLESOME & HEARTY FOODS REPORTS STRONG FIRST-QUARTER RESULTS; Net Income Rises 61 Percent on 121 Percent Increase in Net Sales

Business Wire, May 9, 1995

PORTLAND, Ore.--(BUSINESS WIRE)--May 9, 1995--Wholesome & Hearty Foods Inc. (NASDAQ:WHFI) today announced financial results for the first quarter ended March 31, 1995, showing strong increases in net sales, net income and income per share over the same period in fiscal 1994.

For the first quarter ended March 31, 1995, net sales increased 121 percent to $8,281,000 from $3,747,000 for the first quarter of fiscal 1994. Gross profit increased 91 percent to $4,008,000. The gross margin in the first quarter of 1995 decreased to 48.4 percent from 52.0 percent for the full year in 1994 due to aggressive discounting to club stores, higher price discounting overall and start-up costs associated with the new sub sandwich product. Operating income increased 61 percent to $1,069,000 due to the increased sales net of the higher costs of goods sold and a 100 percent increase in selling, general and administrative expenses.

The increase in selling, general and administrative expenses was due primarily to increased sales and marketing activities to promote sales growth in club stores and chain accounts and to increase the company's market share.

Overall, selling and marketing expenses increased by 132 percent from the first quarter of 1994 while general and administrative expenses increased only 38 percent over the same period last year, due mainly to improved expense controls and the leveraging of higher net sales. Net income of $652,000 for the first quarter of fiscal 1995, or 8 cents per share, improved 61 percent from $405,000, or 5 cents per share, for the previous year's first quarter.

In the first quarter of fiscal 1995, net sales grew at the highest quarterly rate in two years. Distribution was expanded to 27,000 food service locations, 5,800 retail grocery stores, 3,600 natural food stores and 282 club stores. The Gardenburger(R) continues to be the leading meatless patty served at chain restaurants, such as TGI Fridays, where the 100 millionth patty was served in February. The nation's second largest chain, Subway, has approved the Gardenburger Sub(TM) as a local sandwich for its 10,500 units. Currently, approximately 500 units are serving the Gardenburger Sub.

Based on the growing demand for great tasting, convenient and healthy food choices when eating out or at home, the company plans to begin construction of a new plant and world headquarters in the Portland area in 1995. The company will continue to add co-packing alliances and evaluate additional plant sites and strategic partners as needed to support the growth.

"I believe our accelerating sales growth in the first quarter supports the trend that healthy food items such as Gardenburgers(R) have become a matter of choice -- not just a passing fad. We at Wholesome and Hearty Foods continue to promote a lifestyle of healthy eating and environmental awareness for a better world tomorrow," said Paul Wenner, company founder, chairman of the board and chief executive officer.

Based in Portland, Wholesome and Hearty Foods Inc. currently employs more than 100 people and contributes a percentage of all company profits to a number of organization dedicated to the betterment of the environment. -0-

                           First Quarter Ended
                      March 31, 1995    March 26, 1994