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Monterey Gourmet Foods Records Best Operating Profit in 17 Quarters

Posted on: Thursday, 9 August 2007, 09:02 CDT

Monterey Gourmet Foods (NASDAQ: PSTA) today announced second quarter operating profit of $734,000 -- exceeding the operating performance of all prior quarters dating back to March 2003. The company also reported net income of $464,000 or $.03 per share compared to $146,000 or $.01 per share in the second quarter 2006 -- a 218 percent increase. The Company also reported net revenues of $24.5 million compared to $23.1 million for the second quarter 2006.

Eric Eddings, President/CEO of Monterey Gourmet Foods, explained, "We are pleased to report our best quarterly operating results in more than four years. For the quarter, our revenues increased by $1.4 million; our income before taxes grew by $569,000 or 276 percent; our net income grew by $318,000 and our cash increased by $1.4 million. Key brands contributing to our revenue growth were CIBO Naturals, Monterey Pasta's refrigerated pasta and Casual Gourmet branded products, which were up 21 percent, 15 percent, and 26 percent respectively in net revenues.

"Selling, General and Administrative expenses as a percent of net revenues for the second quarter 2007 were 24.5 percent compared to 28.5 percent for the second quarter 2006, which reflects 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, our innovation and our ability to complete our objectives. We are excited about our new product innovations and our new product category launches which continue to be a major priority for our organization. With the launch of several new items including Tuscan Bean Spreads, Edamame Spreads and Organic Cut and Filled Pastas, we believe we are better positioned for higher and more profitable sales growth in the future."

In conclusion, Eddings emphasized that "while we still have challenges ahead, our Company has significant momentum; our management team is working closely together for the benefit of our shareholders; and our continued improvement in profits validate our strategy which will lead us to future successes."

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 "we believe we are better positioned for higher and more profitable sales growth in the future,""we feel our Company has a lot of forward momentum," and "we believe... that our continued improvements in profits validate our strategy and will lead us to 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 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, and May 11, 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)                                          June 30, 2007   December 31, 2006                                          --------------- -----------------                                            (unaudited) ASSETS Current assets:   Cash and cash equivalents              $         5,656  $         4,281   Accounts receivable, net                         7,838            9,958   Inventories                                      7,413            7,574   Deferred tax assets - current                      284              793   Prepaid expenses and other                         798              807                                          ---------------  ---------------    Total current assets                           21,989           23,413   Property and equipment, net                     14,821           15,303   Deferred tax assets - long term                  3,315            3,315   Deposit and other                                  171              174   Intangible assets, net                           6,746            7,052   Goodwill                                        13,211           13,211                                          ---------------  ---------------    Total assets                          $        60,253  $        62,468                                          ===============  =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:   Accounts payable                       $         5,458  $         7,835   Accrued liabilities                              2,184            3,064   Current portion of long-term debt                  972            1,018                                          ---------------  ---------------    Total current liabilities                       8,614           11,917 Long-term debt                                        84              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,    17,323,025 and 17,307,647 issued    and outstanding                                    17               17   Additional paid-in capital                      60,167           59,796   Accumulated deficit                             (8,788)          (9,550)                                          ---------------  ---------------   Total stockholders' equity                      51,396           50,263                                          ---------------  ---------------    Total liabilities and stockholders'     equity                               $        60,253  $        62,468                                          ===============  =============== See accompanying summary of significant accounting policies and notes to  consolidated financial statements.                       MONTEREY GOURMET FOODS, INC.                CONDENSED CONSOLIDATED STATEMENTS OF INCOME                               (Unaudited)               (in thousands of dollars except earnings per                      share numbers and share totals)                               Three Months Ended       Six Months Ended                             ----------------------  ----------------------                              June 30,    June 30,    June 30,    June 30,                                2007        2006        2007        2006                             ----------  ----------  ----------  ---------- Net revenues                $   24,529  $   23,081  $   49,244  $   45,559 Cost of sales                   17,790      16,118      35,574      31,816                             ----------  ----------  ----------  ---------- Gross profit                     6,739       6,963      13,670      13,743 Selling, general and  administrative expenses         6,005       6,576      12,457      12,952 Gain (loss) on disposition  of assets                           -          13         (12)         13                             ----------  ----------  ----------  ---------- Operating income                   734         400       1,201         804 Other income, net                    3           1           4           2 Interest income (expense), net      38        (195)         66        (395)                             ----------  ----------  ----------  ---------- Income before provision for  income tax expense                775         206       1,271         411 Provision for income tax  expense                          (311)        (60)       (509)       (165)                             ----------  ----------  ----------  ---------- Net income                  $      464  $      146  $      762  $      246                             ==========  ==========  ==========  ========== Basic income per share      $     0.03  $     0.01  $     0.04  $     0.02 Diluted income per share    $     0.03  $     0.01  $     0.04  $     0.02 Primary shares outstanding  17,323,025  15,058,039  17,320,347  14,920,270 Diluted shares outstanding  17,478,266  15,452,071  17,485,003  15,238,544                         MONTEREY GOURMET FOODS, INC.               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                 (unaudited)                          (in thousands of dollars)                                                    Six Months Ended                                              ----------------------------                                              June 30, 2007  June 30, 2006                                              -------------  ------------- Cash flows from operating activities: Net income                                   $         762  $         246 Adjustments to reconcile net income to net  cash provided by operating activities:     Deferred income taxes                              509            165     Depreciation and amortization                    1,427          1,504     Provisions for allowances for bad debts,      returns, adjustments and spoils                 2,489          2,635     Provisions for inventory allowances                127            322     Stock-based compensation expense                   335            161     Loss on disposition of assets                       12              -     Changes in assets and liabilities:       Accounts receivable                             (369)        (1,278)       Inventories                                       34           (171)       Prepaid expenses                                   9            (11)       Deposits and other                                 3            (21)       Accounts payable                              (2,377)           231       Accrued liabilities                             (880)           474                                              -------------  -------------         Net cash provided by operating          activities                                  2,081          4,257                                              -------------  ------------- Cash flows from investing activities:     Purchase of property and equipment                (651)        (1,217)     Acquisition of businesses net of cash      and minority interest                               -             (2)                                              -------------  -------------   Net cash used in investing activities               (651)        (1,219)                                              -------------  ------------- Cash flows from financing activities:     Bank overdraft                                       -         (1,507)     Repayment of line of credit                          -         (3,000)     Repayment of debt                                  (67)        (7,906)     Repayment of capital lease obligations             (24)           (15)     Proceeds from issuance of common stock              36         12,496                                              -------------  -------------   Net cash (used in) provided by financing    activities                                          (55)            68                                              -------------  ------------- Net increase in cash and cash equivalents            1,375          3,106 Cash and cash equivalents, beginning of  period                                              4,281            330                                              -------------  ------------- Cash and cash equivalents, end of period     $       5,656  $       3,436                                              =============  =============                                              June 30, 2007  June 30, 2006 Cash payments:                               -------------  -------------     Interest                                 $          39  $         468     Income Taxes                             $          10  $           6 Non-cash investing and financing activities:     Issuance of stock for acquisition of      business                                $           -  $       1,186     Capital lease obligations                $           -  $          19 

 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  

SOURCE: Monterey Gourmet Foods

Source: MARKET WIRE

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