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Monterey Gourmet Foods Announces Third Quarter Results In Line With Previous Announcement

Posted on: Tuesday, 7 November 2006, 09:00 CST

Monterey Gourmet Foods (NASDAQ: PSTA) today announced third quarter results consistent with its October 2, 2006 press release. As a result of the one-time write down of intangible assets associated with the 2005 Casual Gourmet Foods acquisition and severance costs associated with the reduction in staff, Monterey Gourmet Foods had a third quarter net loss of $3.9 million or $(.22) per share diluted. Third quarter revenues fell slightly to $22.1 million compared to $22.8 million for the third quarter 2005. Year-to-date net revenues, however, increased to $67.6 million compared to $61.6 for the same period in 2005.

Eric Eddings, President/CEO of Monterey Gourmet Foods explained, "We generated $6.0 million in cash from operating activities for the nine months ending September 30, 2006, a majority of which was generated from a reduction in working capital, compared to $1.5 million operating cash generated for the same period a year earlier. Noting the quarterly loss is in line with what was projected, we are making great progress on the actions to improve efficiencies that we outlined in early October."

A summary of these actions is as follows:

     1.  Reduced salaried workforce by 10%.     2.  Plant consolidations are on track to complete the consolidation         within the quarter.     3.  Realigned reporting responsibilities to strengthen marketing and         selling efforts which will enhance sales of all Monterey Gourmet         Foods brands and products.     4.  Solidified fourth quarter revenue targets which has resulted in the         October revenue increase of 23% over October, 2005.     5.  Implemented key projects to improve efficiencies within the         Company.     6.  Engaged industry experts to help address cost increases in such         activities as supply chain management, freight, plant utilization         and brand strategies. 

In conclusion, Mr. Eddings emphasized, "With the initiatives we have underway and the momentum in our core business, we remain confident that our results will continue on a positive trend in the coming quarters."

Monterey Gourmet Foods manufactures USDA inspected, fresh gourmet refrigerated food products at its integrated 143,000 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.

This press release contains forward-looking statements concerning the effect of Monterey Gourmet Foods' corporate actions and product innovations on projected sales for future periods. Such statements are introduced by or include words or phrases such as "great progress,""on track,""will enhance,""targets,""will continue on a positive trend," and the like. 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 recent acquisitions, processes, and products, (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 in connection with the introduction of its new items, (v) the timely and cost-effective introduction of new products in the coming months, (vi) retention of key personnel and management, (vii) the risks inherent in food production, (viii) intense competition in the market in which the Company competes and (ix) Monterey Gourmet Foods' ability to source competitively priced raw materials to achieve historic 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 and June 30, 2006, and Forms 8-K filed on January 23, 2006, February 23, 2006, March 9, 2006, April 25, 2006, June 13, 2006, June 28, 2006, September 11, 2006, September 21, 2006, and October 2, 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.

                        MONTEREY GOURMET FOODS, INC.                   CONDENSED CONSOLIDATED BALANCE SHEETS                         (in thousands of dollars)                                             September 30,     December 31,                                                 2006             2005                                              (unaudited) ASSETS Current assets:   Cash and cash equivalents                $        4,161   $          330   Accounts receivable, net                          7,270            9,342   Inventories                                       7,299            6,949   Deferred tax assets                                 932            1,030   Prepaid expenses and other                          900              866                                            --------------   --------------     Total current assets                           20,562           18,517   Property and equipment, net                      14,983           14,324   Deferred tax assets                               5,067            6,172   Deposit and other                                   170              148   Intangible assets, net                            7,202           11,088   Goodwill                                         13,167           11,956                                            --------------   --------------     Total assets                           $       61,151   $       62,205                                            ==============   ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:   Bank overdraft                           $            -   $        1,507   Line of credit                                        -            3,000   Accounts payable                                  5,680            4,171   Accrued liabilities                               2,826            2,299   Current portion of long-term debt                 1,052            2,521                                            --------------   --------------     Total current liabilities                       9,558           13,498 Long-term debt                                        145            6,626 Deferred tax liability                              1,708            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, 17,274,188 and    14,514,038 issued and outstanding                   17               14   Additional paid-in capital                       59,630           45,534   Accumulated deficit                             (10,066)          (6,438)                                            --------------   --------------   Total stockholders' equity                       49,581           39,110                                            --------------   --------------     Total liabilities and stockholders'      equity                                $       61,151   $       62,205                                            ==============   ==============                        MONTEREY GOURMET FOODS, INC.               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                 (unaudited)               (in thousands, except earnings per share data)                               Three Months Ended      Nine Months Ended                             ----------------------  ----------------------                             September   September   September   September                              30, 2006    30, 2005    30, 2006    30, 2005                             ----------  ----------  ----------  ---------- Net revenues                $   22,090  $   22,772  $   67,649  $   61,590 Cost of sales                   15,711      16,181      47,527      44,308                             ----------  ----------  ----------  ---------- Gross profit                     6,379       6,591      20,122      17,282 Selling, general and  administrative expenses         7,174       6,285      20,126      16,680 Impairment of intangible  assets                          3,160           -       3,160           - Gain on disposition of  assets                              -           -          13           -                             ----------  ----------  ----------  ---------- Operating income/(loss)         (3,955)        306      (3,151)        602 Other income, net                    -           9           2          18 Interest income/(expense),  net                                16        (167)       (379)       (427)                             ----------  ----------  ----------  ---------- Income/(loss) before  provision for income taxes     (3,939)        148      (3,528)        193 Income tax  benefit/(provision)                67         (16)        (98)        (33)                             ----------  ----------  ----------  ---------- Net income/(loss)           $   (3,872) $      132  $   (3,626) $      160                             ==========  ==========  ==========  ========== Basic income/(loss) per  share                      $    (0.22) $     0.01  $    (0.23) $     0.01 Diluted income/(loss) per  share                      $    (0.22) $     0.01  $    (0.23) $     0.01 Weighted average primary  shares outstanding         17,274,188  14,467,416  15,704,909  14,436,890 Weighted average diluted  shares outstanding         17,274,188  14,645,608  15,704,909  14,554,923                        MONTEREY GOURMET FOODS, INC.               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                 (unaudited)                         (in thousands of dollars)                                                   Nine Months Ended                                             ------------------------------                                             September 30,   September 30,                                                  2006            2005                                             --------------  -------------- Cash flows from operating activities: Net income/(loss)                           $       (3,626) $          160 Adjustments to reconcile net income  (loss) to net cash provided   by operating activities:    Deferred income taxes                                99              (1)    Depreciation and amortization                     2,236           2,242    Impairment of intangible assets                   3,160               -    Provisions for allowances for bad     debts, returns, adjustments and spoils           3,669             (26)    Provisions for inventory allowances                 515               -    Stock based compensation expense                    433               -    Changes in assets and liabilities:      Accounts receivable                            (1,597)             91      Inventories                                      (865)         (1,935)      Prepaid expenses and other current       assets                                           (56)           (238)      Bank overdraft                                      -             124      Accounts payable                                1,509           1,770      Accrued liabilities                               527            (730)                                             --------------  --------------       Net cash provided by operating        activities                                    6,004           1,457                                             --------------  -------------- Cash flows from investing activities:    Purchase of property and equipment               (2,150)           (694)    Acquisition of businesses net of cash     and minority interest                              (25)         (9,062)                                             --------------  --------------   Net cash used in investing activities             (2,175)         (9,756)                                             --------------  -------------- Cash flows from financing activities:    Proceeds from bank borrowing                          -           7,500    Line of credit                                        -           2,000    Bank overdraft                                   (1,507)           (818)    Repayment of line of credit                      (3,000)              -    Repayment of debt obligations                    (7,949)              -    Repayment of capital lease obligations              (20)             (5)    Proceeds from issuance of common stock           12,478              67                                             --------------  --------------   Net cash provided by financing activities              2           8,744                                             --------------  -------------- Net increase in cash and cash equivalents            3,831             445 Cash and cash equivalents, beginning  of period                                             330             569                                             --------------  -------------- Cash and cash equivalents, end of period    $        4,161  $        1,014                                             ==============  ============== Cash payments:    Interest                                 $          488  $          426    Income taxes                             $            6  $           18 Non-cash investing and financing  activities:    Issuance of stock for acquisition of     business                                $        1,186  $          199    Capital lease obligations                $           19  $            - 

 CONTACT: Eric Eddings Chief Executive Officer Contact via http://www.marketwire.com/mw/emailprcntct?id=AD14627BA3C1E178  Scott Wheeler Chief Financial Officer Contact via http://www.marketwire.com/mw/emailprcntct?id=5624611088FE12C4  Monterey Gourmet Foods, Inc. 1528 Moffett Street. Salinas, California 93905 831/753-6262  

SOURCE: Monterey Gourmet Foods

Source: MARKET WIRE

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