SOURCE: Monterey Gourmet Foods

November 08, 2007 07:00 ET

Monterey Gourmet Foods Continues to Record Year-Over-Year Improvements

SALINAS, CA--(Marketwire - November 8, 2007) - Monterey Gourmet Foods (NASDAQ: PSTA) today announced third quarter operating profit of $413,000 compared to an operating loss of ($3,955,000) for the third quarter of 2006. The Company also reported net income of $279,000 or $.02 per share compared to a net loss of ($3,872,000) or ($.22) per share in the third quarter 2006 -- a net improvement of $4,151,000. The Company also reported net revenues of $24.5 million compared to $22.1 million for the third quarter 2006 -- an 11% improvement.

Eric Eddings, President/CEO of Monterey Gourmet Foods, explained, "We are pleased to report continued improvement in revenues, profits, and working capital. When compared to the third quarter 2006, our third quarter 2007 revenues increased by $2.4 million; our income before taxes grew by $4.4 million; and our net income grew by $4.2 million. Our third quarter 2006 net loss was impacted by $3.2 million intangible asset impairment charge. In addition, our working capital increased by $1.3 million to $14.7 million. Key brands contributing to our revenue growth were Monterey Pasta and Casual Gourmet branded products, which were up 45 percent and 49 percent respectively in net revenues."

Commenting further, Mr. Eddings noted that "Selling, General and Administrative expenses as a percent of net revenues for the third quarter 2007 were 25.3 percent compared to 32.5 percent for the third quarter 2006, which continues to reflect our cost savings initiatives that we implemented starting in September of last year. We continue to make process improvements throughout our business and keep our product lines fresh as we introduce new items within our culinary expertise."

Mr. Eddings also stated that "we continue to work toward meeting our goals regarding our talent improvement and our ability to accomplish pre-established goals. Our new products are doing well in the market place as reflected by the fact that 10% of our year to date revenues have been generated by new products. Our aggressive launch of organic and made with organic pastas continues to exceed our internal and external expectations, including criteria established by some of our largest customers. In addition the re-launch of our retail pasta packaging, which includes enhancements to our graphics and brand identity as well as a significant reduction in packaging material, has been met with great enthusiasm by our trade partners. This also demonstrates our ability to quickly execute on key branding and cost savings initiatives. We are also very excited about the new item introductions of our Casual Gourmet Chicken Meatballs and our Emerald Valley Kitchen Edamame Spreads. Both of these new categories are being presented by our national sales teams and will make significant contributions to the respective brands future growth."

In conclusion, Eddings emphasized that "while we still have challenges ahead, we have overcome many challenges, which we believe create significant momentum for the future benefit of our shareholders."

MORE ABOUT MONTEREY GOURMET FOODS (PSTA)

Monterey Gourmet Foods manufactures USDA inspected, fresh gourmet refrigerated food products at its integrated 133,000 square foot corporate headquarters, distribution, and manufacturing facilities in Salinas (Monterey County), Calif.; Seattle, Wash.; and Eugene, Ore. Monterey Gourmet Foods has national distribution of its products in more than 10,000 retail and club stores throughout the United States and selected regions of Canada, the Caribbean, Latin America, and Asia Pacific. For more information about Monterey Gourmet Foods, visit www.MontereyGourmetFoods.com.

This press release contains forward-looking statements concerning unannounced results of operations for the most recent quarter and sales for future periods including without limitation such phrases and terms as "create significant momentum." These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Consequently, the Company wishes to caution readers not to place undue reliance on any forward-looking statements. Among the factors that could cause Monterey Gourmet Foods' actual results to differ from such forward-looking statements are the following: (i) the process associated with the integrations of all the Company's brands, plants and sales force, (ii) a significant reduction of sales to two major customers currently comprising a majority of total revenues, (iii) the retention of newly acquired customers including achieving volume projections for these new customers, (iv) the Company's ability to achieve improved production efficiencies, (v) the timely and cost-effective introduction of new products in the coming months, (vi) the utilization of the recently-completed plant expansion and the increased fixed costs associated with increased plant capacity, (vii) retention of key personnel and retention of key management, (viii) the risks inherent in food production, (ix) intense competition in the market in which the Company competes and (x) Monterey Gourmet Foods' ability to source competitively priced raw materials to achieve historical operating margins. In addition, the Company's results may also be affected by general factors, such as economic conditions, political developments, interest and inflation rates, accounting standards, taxes, and laws and regulations in markets where the Company competes.

The Company has provided additional information regarding risks associated with the business in the Company's Annual Report on Form 10-K for fiscal 2006, its Proxy Statement for its June 22, 2007 Annual meeting of Shareholders, and Forms 8-K filed on February 21, 2007, April 27, 2007, May 11, 2007 and August 13, 2007. The Company undertakes no obligation to update or revise publicly, any forward-looking statements whether as a result of new information, future events or otherwise.


                       MONTEREY GOURMET FOODS, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands of dollars)


                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------
                                               (unaudited)
ASSETS
Current assets:
   Cash and cash equivalents                  $       5,415  $       4,281
   Accounts receivable, net                           9,067          9,958
   Inventories                                        7,908          7,574
   Deferred tax assets - current                        103            793
   Prepaid expenses and other assets                  1,197            807
                                              -------------  -------------

      Total current assets                           23,690         23,413

   Property and equipment, net                       14,402         15,303
   Deferred tax assets - long term                    3,086          3,315
   Deposit and other                                    171            174
   Intangible assets, net                             6,575          7,052
   Goodwill                                          13,211         13,211
                                              -------------  -------------

      Total assets                            $      61,135  $      62,468
                                              =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                           $       6,540  $       7,835
   Accrued liabilities                                2,371          3,064
   Current portion of long-term debt                     72          1,018
                                              -------------  -------------

      Total current liabilities                       8,983         11,917
Long-term debt                                           71            129
Minority interest                                       159            159

Stockholders' equity:
   Preferred stock, $.001 par value,
    1,000,000 shares authorized, none
    outstanding                                           -              -
   Common stock, $.001 par value,  50,000,000
    shares authorized, 17,356,976 and 17,307,647
    issued and outstanding                               17             17
   Additional paid-in capital                        60,414         59,796
   Accumulated deficit                               (8,509)        (9,550)
                                              -------------  -------------
   Total stockholders' equity                        51,922         50,263
                                              -------------  -------------
      Total liabilities and stockholders'
       equity                                 $      61,135  $      62,468
                                              =============  =============



                       MONTEREY GOURMET FOODS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
   (in thousands of dollars except earnings per share numbers and share
                                  totals)


                              Three Months Ended      Nine Months Ended
                            ----------------------  ----------------------
                            September   September   September   September
                             30, 2007    30, 2006    30, 2007    30, 2006
                            ----------  ----------  ----------  ----------

Net revenues                $   24,458  $   22,090  $   73,702  $   67,649
Cost of sales                   17,835      15,711      53,409      47,527
                            ----------  ----------  ----------  ----------

Gross profit                     6,623       6,379      20,293      20,122
Selling, general and
 administrative expenses         6,184       7,174      18,641      20,126
Impairment of intangible
 assets                              -       3,160           -       3,160
(Loss) gain on disposition
 of assets                         (26)          -         (38)         13
                            ----------  ----------  ----------  ----------
Operating income (loss)            413      (3,955)      1,614      (3,151)

Other income, net                    4           -           8           2
Interest income (expense),
 net                                43          16         109        (379)
                            ----------  ----------  ----------  ----------

Income (loss) before income
 taxes                             460      (3,939)      1,731      (3,528)
Income tax (provision)
 benefit                          (181)         67        (690)        (98)
                            ----------  ----------  ----------  ----------

Net income (loss)           $      279  $   (3,872) $    1,041  $   (3,626)
                            ==========  ==========  ==========  ==========

Basic income (loss) per
 share                      $     0.02  $    (0.22) $     0.06  $    (0.23)
Diluted income (loss) per
 share                      $     0.02  $    (0.22) $     0.06  $    (0.23)

Primary shares outstanding  17,343,270  17,274,188  17,327,988  15,704,909

Diluted shares outstanding  17,426,504  17,274,188  17,460,402  15,704,909



                       MONTEREY GOURMET FOODS, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (unaudited)
                       (in thousands of dollars)


                                                    Nine Months Ended
                                              ----------------------------
                                              September 30,  September 30,
                                                  2007           2006
                                              -------------  -------------
Cash flows from operating activities:
Net income (loss)                             $       1,041         (3,626)
Adjustments to reconcile net income to net
 cash provided by
 operating activities:
    Deferred income taxes                               919             99
    Depreciation and amortization                     2,185          2,236
   Impairment of intangible assets                        -          3,160
    Provisions for allowances for bad
     debts, returns, adjustments and spoils           3,561          3,669
    Provisions for inventory allowances                 183            515
    Stock based compensation expense                    552            433
    Loss on disposition of assets                        38              -
    Changes in assets and liabilities:
      Accounts receivable                            (2,670)        (1,597)
      Inventories                                      (517)          (865)
      Prepaid expenses and other                       (387)           (56)
      Accounts payable                               (1,295)         1,509
      Accrued liabilities                              (693)           527
                                              -------------  -------------
        Net cash provided by operating
         activities                                   2,917          6,004
                                              -------------  -------------

Cash flows from investing activities:
    Purchase of property and equipment                 (845)        (2,150)
    Acquisition of businesses net of cash and
     minority interest                                    -            (25)
                                              -------------  -------------
  Net cash used in investing activities                (845)        (2,175)
                                              -------------  -------------

Cash flows from financing activities:
    Bank overdraft                                        -         (1,507)
    Repayment of line of credit                           -         (3,000)
    Repayment of debt                                  (978)        (7,949)
    Repayment of capital lease obligations              (26)           (20)
    Proceeds from issuance of common stock               66         12,478
                                              -------------  -------------
  Net cash (used in) provided by financing
   activities                                          (938)             2
                                              -------------  -------------

Net increase in cash and cash equivalents             1,134          3,831

Cash and cash equivalents, beginning of
 period                                               4,281            330
                                              -------------  -------------
Cash and cash equivalents, end of period      $       5,415  $       4,161
                                              =============  =============


                                               September 30, September 30,
                                                   2007          2006
Cash payments:                                -------------  -------------
    Interest                                  $          54  $         488
    Income Taxes                              $          55  $           6
Non-cash investing and financing activities:
    Issuance of stock for acquisition of
     business                                 $           -  $       1,186
    Capital lease obligations                 $           -  $          19

Contact Information

  • CONTACT:

    Eric Eddings
    Chief Executive Officer
    Email Contact

    Scott Wheeler
    Chief Financial Officer
    Email Contact

    Monterey Gourmet Foods, Inc.
    1528 Moffett Street
    Salinas, California 93905
    831/753-6262