SOURCE: Monterey Gourmet Foods

Monterey Gourmet Foods

August 04, 2009 07:00 ET

Monterey Gourmet Foods Reports Second Quarter 2009 Results

Generates Net Income From Continuing Operations of $0.01 per Share; Working Capital Grew 9% During the Second Quarter of 2009; Cost Containment Program Results in 15% Reduction in SG&A Expenses Versus Prior Year

SALINAS, CA--(Marketwire - August 4, 2009) - Monterey Gourmet Foods (NASDAQ: PSTA), a manufacturer and marketer of fresh gourmet refrigerated food products, reported its financial results for the second quarter ended June 30, 2009.

"During the quarter the shipment schedules of two new non-branded products were pushed out, causing volume in our Salinas plant to fall below internal plan. As a result, lower overhead absorption overshadowed the benefits of lower raw material costs and production efficiencies, as well as gross margin improvement in our Sonoma Foods segment. Subsequent to the quarter close, however, we began shipping and are now on track to achieve our customer's targeted volumes of these non-branded products," said Eric C. Eddings, president and CEO.

"We continued to advance our strategy of focusing on our core, further penetrating the non-branded and Food Service channels and developing innovative items that address both consumer preferences for fresh, restaurant-quality specialty items for at-home preparation and the consumer shift in demand toward value-oriented products," Eddings added. "Based on the high quality of our products, we won several bids to distribute non-branded products to our retail and club customers and increased our share of the Food Service channel. As more retail customers evaluate their categories and pricing strategies in response to the economic downturn, we are creating opportunities to further leverage our high quality branded products in the growing non-branded channel.

"During the quarter we continued to invest in branding and innovation resources to drive long term growth. For example, we began initiatives to better communicate the restaurant-quality attributes and value proposition of our branded products and strengthen our retail pasta program. These investments advance our position as a leader in fresh at-home solution categories. Our performance for the first half of 2009 demonstrates the effectiveness of our growth strategy and our operational excellence."

Financial Highlights: Second Quarter 2009 Compared to Second Quarter 2008

All results exclude the discontinued Casual Gourmet brand, as previously announced.

--  Revenue was $19.3 million, compared to $21.6 million.
--  Cost of goods sold was $14.2 million, compared to $15.5 million.
--  Gross margin was 26.1 percent, compared to 28.4 percent.
--  SG&A was $4.9 million or 25.2 percent of net revenue, compared to $5.7
    million or 26.3 percent of net revenue.
--  Net income from continuing operations was $219,000, or $0.01 per
    share, compared to a net loss from continuing operations of $(188,000), or
    $(0.01) per share.
--  Net income was $204,000, or $0.01 per share, compared to a net loss of
    $(173,000), or $(0.01) per share.
    

At June 30, 2009, cash and cash equivalents were $3.8 million compared to $3.9 million at March 31, 2009.

"Our cost containment programs to cut just under $2.0 million from SG&A mitigated the impact of the quarter's lower gross profit on the bottom line," said Scott Wheeler, CFO. "As a result, we delivered positive earnings per share of $0.01 despite the quarter's revenue softness. Working capital reached $11.1 million, a 9% increase over the $10.1 million achieved in the first quarter of 2009.

"During the quarter we renewed our line of credit with our bank, without any change to the covenants under the facility, and extended the term through June 30, 2010," added Wheeler. "We remain debt free and well positioned to support growth initiatives."

Conference Call Information

Management will host a conference call at 1:00 p.m. Eastern Time / 10:00 a.m. Pacific Time today to discuss its second quarter 2009 financial results. To listen to the call live, please dial (877) 917-3614 at least 10 minutes prior to the start of the conference and mention participant pass code "Monterey." The call is also being webcast live at http://www.montereygourmetfoods.com. The call will be archived and available for replay for 90 days from the "Investor Relations" section of the company's website at http://www.montereygourmetfoods.com. A telephone replay will be available for 90 days by dialing (800) 583-8102. No pass code is required.

About Monterey Gourmet Foods (NASDAQ: PSTA)

Monterey Gourmet Foods manufactures USDA inspected, fresh gourmet refrigerated food products at its integrated manufacturing facilities in Salinas (Monterey County), CA; Kent, WA; and Eugene, OR. Monterey Gourmet Foods has national distribution of its products, which are sold under the brands Monterey Pasta Company, CIBO Naturals, Emerald Valley Kitchen and Sonoma Cheese in more than 11,000 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.

Safe Harbor Statement

This press release contains forward-looking statements concerning unannounced results of operations for the most recent quarter and projections for future periods including without limitation such phrases and terms as "we are now on track" and "we are creating opportunities." Such 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 2008 as well as other filings with the SEC. These statements are based on information as of August 4, 2009 and the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.



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

                                        June 30, 2009    December 31, 2008
                                      -----------------  -----------------
                                         (unaudited)
ASSETS
Current assets:
  Cash and cash equivalents           $           3,802  $           2,151
  Accounts receivable less
   allowances of $880 and $862                    5,584              5,725
  Inventories                                     6,532              6,642
  Prepaid expenses and other                        826                808
                                      -----------------  -----------------

    Total current assets                         16,744             15,326

  Property and equipment, net                    14,582             15,420
  Deposits and other                                183                249
  Intangible assets, net                          4,251              4,560
                                      -----------------  -----------------
    Total assets                      $          35,760  $          35,555
                                      =================  =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                    $           4,288  $           4,316
  Accrued payroll and related
   benefits                                         929              1,057
  Accrued and other current
   liabilities                                      466              1,279
                                      -----------------  -----------------
    Total current liabilities                     5,683              6,652

Other long-term liabilities                         251                217

Stockholders' equity:
  Preferred stock, $.001 par value,
   1,000,000 shares authorized, none
   outstanding                                        -                  -
  Common stock, $.001 par value,
   50,000,000 shares authorized,
   17,406,571 and 17,391,342 issued
   and 16,781,700 and 16,766,471
   outstanding                                       17                 17
  Additional paid-in capital                     61,064             60,875
  Treasury stock 624,871 and 624,871
   shares, respectively, at cost                 (1,789)            (1,789)
  Accumulated deficit                           (29,466)           (30,417)
                                      -----------------  -----------------
  Total stockholders' equity                     29,826             28,686
                                      -----------------  -----------------

    Total liabilities and
     stockholders' equity             $          35,760  $          35,555
                                      =================  =================




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

                              Three Months Ended       Six Months Ended
                            ----------------------  ----------------------
                             June 30,    June 30,    June 30,    June 30,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Net revenues                $   19,280  $   21,643  $   40,255  $   45,599
Cost of sales                   14,241      15,493      29,366      33,749
                            ----------  ----------  ----------  ----------

Gross profit                     5,039       6,150      10,889      11,850
Selling, general and
 administrative expenses         4,865       5,702       9,922      12,007
Impairment and restructuring         -           -           -       1,606
Gain (loss) on disposition
 of assets                          10          (8)         10          (8)
                            ----------  ----------  ----------  ----------
Operating income (loss)            184         440         977      (1,771)

Other income, net                   43         107          54         115

Interest income, net                 1          22           2          48
                            ----------  ----------  ----------  ----------

Income (loss) before income
 taxes                             228         569       1,033      (1,608)
Income tax benefit
 (provision)                        (9)       (757)        (41)         (3)
                            ----------  ----------  ----------  ----------

Net income (loss) from
 continuing operations             219        (188)        992      (1,611)

Income (loss) from
 discontinued operations,
 net of tax                        (15)         15         (41)        (93)
                            ----------  ----------  ----------  ----------

Net income (loss)           $      204  $     (173) $      951  $   (1,704)
                            ==========  ==========  ==========  ==========

Basic income (loss) per share
  Income (loss) from
   continuing operations    $     0.01  $    (0.01) $     0.06  $    (0.10)
  Net income (loss)         $     0.01  $    (0.01) $     0.06  $    (0.10)

Diluted income (loss) per share
  Income (loss) from
   continuing operations    $     0.01  $    (0.01) $     0.06  $    (0.10)
  Net income (loss)         $     0.01  $    (0.01) $     0.06  $    (0.10)

Weighted average primary
 shares outstanding         16,781,700  16,838,981  16,778,993  16,934,987
Weighted average diluted
 shares outstanding         16,805,042  16,838,981  16,779,429  16,934,987




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

                                                    Six Months Ended
                                              ----------------------------
                                              June 30, 2009  June 30, 2008
                                              -------------  -------------
Cash flows from operating activities:
Net income (loss)                             $         951  $      (1,704)
Adjustments to reconcile net income (loss)
 to net cash provided by operating activities:
       Depreciation and amortization                  1,556          1,498
       Impairment and restructuring                       -          1,606
       Provisions for inventory                           -            543
       Stock-based compensation                         179            192
       (Gain) loss on disposition of assets             (10)            16
       Gain on acquisition of minority
        interest                                          -           (109)
       Changes in assets and liabilities:
          Accounts receivable                           141          2,127
          Inventories                                   110            612
          Prepaid expenses                              (18)           126
          Deposits and other                             66            (50)
          Accounts payable                              (28)          (917)
          Accrued liabilities                          (907)          (343)
                                              -------------  -------------
             Net cash provided by
              operating activities                    2,040          3,597
                                              -------------  -------------

Cash flows from investing activities:
       Purchase of property and equipment, net         (409)        (1,734)
       Proceeds from sale of property and
        equipment                                        10             15
       Acquisition of businesses net of cash
        and minority interest                             -            (50)
                                              -------------  -------------
    Net cash used in investing activities              (399)        (1,769)
                                              -------------  -------------

       Repayment of debt                                  -            (44)
       Repayment of capital lease obligations             -            (35)
       Purchase of treasury stock                         -         (1,132)
       Proceeds from issuance of common stock            10             26
                                              -------------  -------------
    Net cash provided by (used in) financing
     activities                                          10         (1,185)
                                              -------------  -------------

Net increase in cash and cash equivalents             1,651            643

Cash and cash equivalents, beginning of period        2,151          5,541
                                              -------------  -------------
Cash and cash equivalents, end of period      $       3,802  $       6,184
                                              =============  =============


Cash payments:                                June 30, 2009  June 30, 2008
                                              -------------  -------------
       Interest                               $           -  $           2
       Income Taxes                           $           7  $         103




                          MONTEREY GOURMET FOODS
                            SEGMENT REPORTING

                     Three Months Ended             Six Months Ended
                ----------------------------  ----------------------------
                 June 30, 2009 June 30, 2008   June 30, 2009 June 30, 2008
                -------------- -------------  -------------- -------------
Net Revenues
  Gourmet Foods
   Products             17,809        20,052          37,401        42,595
  Sonoma Cheese
   Products     $        1,471 $       1,591  $        2,854 $       3,004
                -------------- -------------  -------------- -------------
Total Net
 Revenues       $       19,280 $      21,643  $       40,255 $      45,599
                ============== =============  ============== =============


Operating
 Income (Loss):
  Gourmet Foods
   Products                117           535             865           907
  Sonoma Cheese
   Products     $           67 $         (95) $          112 $      (2,678)
                -------------- -------------  -------------- -------------
Total Operating
 Income (Loss)  $          184 $         440  $          977 $      (1,771)
                ============== =============  ============== =============


                                December 31,
Assets           June 30, 2009      2008
                -------------- -------------
  Gourmet Foods
   Products             34,104        34,033
  Sonoma Cheese
   Products     $        1,656 $       1,522
                -------------- -------------
Total Assets    $       35,760 $      35,555
                ============== =============

Contact Information

  • Company Contact:
    Monterey Gourmet Foods
    Eric Eddings
    Chief Executive Officer
    Email Contact

    Scott Wheeler
    Chief Financial Officer
    Email Contact
    (206) 622-1016

    Investor Relations Contact:
    Lippert / Heilshorn & Associates
    Amy Gibbons / Jody Burfening
    Email Contact
    (212) 838-3777