SOURCE: Monterey Gourmet Foods

February 16, 2007 07:45 ET

Monterey Gourmet Foods Announces Fourth Quarter and Year End Results

Quarterly Sales Up 13% and Fourth Quarter EPS at $.03

SALINAS, CA -- (MARKET WIRE) -- February 16, 2007 -- Monterey Gourmet Foods (NASDAQ: PSTA) today announced a fourth quarter sales increase of 13% to $26,648,000 compared to $23,658,000 for the fourth quarter 2005. The Company also reported net income of $516,000 or $.03 per share for the fourth quarter ended December 31, 2006. This compares to the net loss of $697,000 or $.05 per share for the fourth quarter ended December 31, 2005 -- a $1.2 million improvement.

For the calendar year ended December 31, 2006, the Company reported net revenues of $94,297,000, resulting in a net loss of $3,110,000 or $0.19 per share on 16.1 million weighted average shares outstanding. This compares with net revenues for the twelve months ended December 31, 2005, of $85,248,000, with a net loss of $537,000, or $0.04 per share on 14.5 million weighted average shares outstanding.

Eric Eddings, President/CEO of Monterey Gourmet Foods, explained, "We are encouraged with the fourth quarter increase in sales, margins and income compared to the previous year, especially because it is a broad increase across all of our brands. Our revenues increased 13%, our gross profit improved by 23% and our net income improved by $1,213,000."

Commenting further on the year end results, Mr. Eddings stated, "Our revenues increased 11% to $94,297,000 and our gross profit increased 18% to $27,439,000. Because of reduced revenue in the third quarter of 2006 from our investment in Casual Gourmet Foods, we impaired this investment by $3,160,000 which created an operating loss of $2,462,000 for the 2006 calendar year compared to an operating loss of $358,000 for the calendar year 2005. However, as indicated in our statement of cash flows, we generated $7.0 million in cash from operating activities during 2006."

Mr. Eddings addressed the outlook for 2007 with these comments: "With the completion of our plant consolidation project, the realignment of our resources, and the expansion of the responsibilities of key individuals from our various subsidiaries across all of our brands, we begin 2007 as one company, with one sales force, and a unified vision for marketing our multiple brands. The fourth quarter results are very encouraging and provide us with a push towards even stronger momentum as we go forward."

In conclusion, Eddings emphasized, "While we still have challenges ahead, we believe our recent achievements validate our strategy and provide us with the roadmap for future success. We wish to invite all interested parties to listen to our conference call later today where we will further discuss recent developments and future initiatives."

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) California, Seattle, Washington, and Eugene, Oregon. Monterey Gourmet Foods has national distribution of its products in over 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 the effect of Monterey Gourmet Foods' corporate acquisitions and product innovations on projected sales for future periods including without limitation statements including such terms as "we are encouraged," "very encouraging," "provide us with a push," "very excited," "validate our strategy" and "roadmap for future success." 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 2005, its Proxy Statement filed April 21, 2006, Forms 10-Q filed for our quarters ended March 31, 2006, June 30, 2006, and September 30, 2006 and Forms 8-K filed on January 23, February 23, March 9, April 25, June 13, June 28, September 11, September 21, October 5 and November 8, 2006. 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.

FINANCIAL STATEMENTS

                       MONTEREY GOURMET FOODS, INC.
                        CONSOLIDATED BALANCE SHEET
                   (in thousands, except share amounts)


                                                December 31,  December 31,
                                                    2006          2005
                                                ------------  ------------


ASSETS
Current assets:
  Cash and cash equivalents                     $      4,281  $        330
  Accounts receivable less allowances of $722
   and $992                                            9,958         9,342
  Inventories                                          7,574         6,949
  Deferred tax assets-current                            793         1,030
  Prepaid expenses and other                             807           866
                                                ------------  ------------

    Total current assets                              23,413        18,517

  Property and equipment, net                         15,303        14,324
  Deferred tax assets-long term                        5,240         6,172
  Deposits and other                                     174           148
  Intangible assets, net                               7,052        11,088
  Goodwill                                            13,211        11,956
                                                ------------  ------------

    Total assets                                $     64,393  $     62,205
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Bank overdraft                                $          -  $      1,507
  Line of credit                                           -         3,000
  Accounts payable                                     7,835         4,171
  Accrued payroll and related benefits                 1,487         1,246
  Accrued and other current liabilities                1,577         1,053
  Current portion of notes, loans, and capital
   leases payable                                      1,018         2,521
                                                ------------  ------------

    Total current liabilities                         11,917        13,498

Notes, loans, and capital leases payable, less
 current portion                                         129         6,626

Deferred tax liability-long term                       1,925         2,812

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, 17,307,647 and
   14,514,038 issued and outstanding                      17            14
  Additional paid-in capital                          59,796        45,534
  Accumulated deficit                                 (9,550)       (6,438)
                                                ------------  ------------
  Total stockholders' equity                          50,263        39,110
                                                ------------  ------------

    Total liabilities and stockholders' equity  $     64,393  $     62,205
                                                ============  ============


             See accompanying summary of significant accounting policies
             and notes to consolidated financial statements





                       MONTEREY GOURMET FOODS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(000's $)
                       Fourth Quarter Ended         Twelve Months Ended
                    --------------------------  --------------------------
                    December 31,  December 31,  December 31,  December 31,
                        2006          2005          2006          2005
                    ------------  ------------  ------------  ------------

Net revenues        $     26,648  $     23,658  $     94,297  $     85,248
Cost of sales             19,331        17,708        66,858        62,016
                    ------------  ------------  ------------  ------------

Gross profit               7,317         5,950        27,439        23,232

Selling, general
 and administrative
 expenses                  6,628         6,910        26,754        23,590

Impairment of
 intangible assets             -             -         3,160             -

Gain on disposition
 of assets                     -             -            13             -
                    ------------  ------------  ------------  ------------

Operating income
 (loss)                      689          (960)       (2,462)         (358)

Other income, net              -             -             2            18

Interest income/
 (expense), net               24          (201)         (355)         (628)
                    ------------  ------------  ------------  ------------

Income (loss)
 before provision
 for income tax
 benefit/(expense)           713        (1,161)       (2,815)         (968)
Provision for
 income tax
 benefit/(expense)          (197)          464          (295)          431
                    ------------  ------------  ------------  ------------

Net income (loss)   $        516  $       (697) $     (3,110) $       (537)
                    ============  ============  ============  ============


Basic income (loss)
 per share          $       0.03  $      (0.05) $      (0.19) $      (0.04)

Diluted income
 (loss) per share   $       0.03  $      (0.05) $      (0.19) $      (0.04)

Primary shares
 outstanding          17,286,272    14,490,333    16,100,250    14,450,251

Diluted shares
 outstanding          17,442,497    14,490,333    16,100,250    14,450,251





                       MONTEREY GOURMET FOODS, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (in thousands, except share amounts)



                                                      Years Ended
                                              ----------------------------
                                                2006      2005      2004
                                              --------  --------  --------
Cash flows from operating activities:
Net loss                                      $ (3,110) $   (537) $ (1,344)
Adjustments to reconcile net loss to net
 cash provided by (used in) operating
 activities net of acquisition:
   Deferred income taxes                           282      (379)     (557)
   Depreciation and amortization                 2,926     3,033     2,510
   Impairment of intangibles                     3,160         -         -
   Provisions for allowances for bad debts,
    returns, adjustments and spoils              4,876     4,792     3,646
   Provisions for inventory allowances             629       499       550
   Tax benefit of disqualifying dispositions         -         -        55
   Non-cash stock compensation                     515        80         -
   (Gain) Loss on disposition of assets            (13)        -         5
   Changes in assets and liabilities:
     Accounts receivable                        (5,492)   (6,554)   (2,924)
     Inventories                                (1,254)   (2,473)     (267)
     Prepaid expenses and other                     33       205       538
     Accounts payable                            3,664       972        (3)
     Accrued and other current liabilities         765      (742)     (311)
                                              --------  --------  --------
Net cash provided by (used in) operating
 activities                                      6,981    (1,104)    1,898
                                              --------  --------  --------

Cash flows from investing activities:
   Purchase of property and equipment           (3,010)   (1,071)     (777)
   Gain on disposition of assets                    13         -         -
   Acquisition of business net of cash and
    minority interest                              (69)   (9,062)   (7,689)
                                              --------  --------  --------
Net cash used in investing activities           (3,066)  (10,133)   (8,466)
                                              --------  --------  --------

Cash flows from financing activities:
   Proceeds from bank borrowing                      -     7,500     2,000
   Bank overdraft                               (1,507)    1,507         -
   Line of Credit                               (3,000)    3,000         -
   Repayment of debt                            (7,992)   (1,143)     (610)
   Tax benefit of disqualifying dispositions         2         -         -
   Repayment of capital lease obligations          (27)      (19)       (8)
   Proceeds from issuance of common stock       12,560       153       470
                                              --------  --------  --------
Net cash provided by financing activities           36    10,998     1,852
                                              --------  --------  --------

Net decrease in cash and cash equivalents        3,951      (239)   (4,716)

Cash and cash equivalents, beginning of
 period                                            330       569     5,285
                                              --------  --------  --------
Cash and cash equivalents, end of period      $  4,281  $    330  $    569
                                              ========  ========  ========

Cash payments:
   Interest                                   $    501  $    634  $    131
   Income taxes                                      6         7        89

Non-cash investing and financing activities:
   Note issued to seller in acquisition of
    business                                  $      -  $      -  $  1,000
   Capital lease obligations                        19        86         5
   Issuance of stock for acquisition of
    business                                     1,186       198         -


See accompanying summary of significant accounting policies and notes to
consolidated financial statements

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