SALINAS, CA (August 7, 2008) -- Monterey Gourmet Foods (NASDAQ: PSTA), a manufacturer and marketer of fresh gourmet refrigerated food products, reported results for its second quarter ended June 30, 2008.
“Due to our commitment to innovation and quality, this quarter we delivered solid performance in a challenging food industry market,” stated Eric C. Eddings, president and CEO of Monterey Gourmet Foods. “This quarter, gross margins improved to 28.9%, up from 24.2% in the first quarter of 2008. Our Sonoma Foods turnaround resulted in significant improvements sooner than anticipated, growing net revenues to $1.6 million for the two months it was in place, compared $1.4 million last quarter. To drive ongoing growth, we are leveraging our equipment and technology investments to introduce new products and brands and further penetrate the fresh healthy gourmet segments. Right now, we are launching the Sonoma Snack Cheese Cubes, At Home Gourmet frozen entrees, and Abuela Maria’s frozen tamales. In addition, we continue to revitalize distribution channels with relationships such as our collaboration with Acosta Sales and Marketing announced in July.”
Second Quarter 2008 Results Compared to Second Quarter 2007
•Revenue was $23.9 million compared to $24.5 million.
•The Gourmet Foods segment net revenues were comparable with $22.3 million this year and $22.6 million last year.
•The Sonoma Foods segment net revenues were $1.6 million, compared to $1.9 million a year ago.
•Gross margins improved to 28.9% from 27.5%.
•Income before provision for income tax expense was $642,000, compared to $775,000.
•Income tax expense was a non-cash true-up of $815,000, or approximately 127% of pretax income, and offset the first quarter 2008 tax benefit that was recorded in conjunction with the Sonoma Foods impairment charge. This compares to $311,000, or approximately 40% of pretax income a year ago.
•The total net loss was $173,000, compared to net income of $464,000.
Scott Wheeler, Monterey Gourmet Foods’ CFO, said, “Our efforts to improve profitability by increasing prices to adjust for higher commodities costs and reducing expenses with new packaging are beginning to come to fruition. Combining tighter cost controls and working-capital management, we increased cash provided by operating activities to $3.6 million from $2.1 million in the same period last year, and we were able to offset an operating use of $131,000 last quarter.”
Recent Business Highlights
•Signed Acosta Sales and Marketing Company to represent the flagship Monterey Pasta Company brand of premium refrigerated raviolis and pastas in the retail grocery channel in select markets.
•Launched Sonoma Snacks Cheese Cubes for club and retail distribution.
•Increased frozen entrée efforts creating At Home Gourmet brand with 5 selections including tortellini and protein and revitalizing One Step frozen brand with new selections.
•Expanded the tamales product line adding a new varietal to Isabella’s Kitchen fresh tamales, introducing frozen selections for Isabella’s Kitchen and unveiling Abuela Maria’s frozen brand.
•Introduced new varieties of Casual Gourmet meatballs for the holiday season.
•Started the re-launch of our fresh sauce category with new packaging and varieties.
2008 Outlook
Eddings concluded, “We are very encouraged by our performance and are optimistic about the year. Monterey Pasta Company brand continues to demonstrate double digit revenue growth. Our goal is to capture even more of the growing demand for fresh food by expanding in all channels. For example, we are leveraging raw material procurement, plant efficiencies, and new product marketing efforts as we introduce new sauces varietals for club, retail and food service distribution. We intend to emulate this model for other categories, and we are excited about the opportunities.”
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 second quarter 2008 financial results. To listen to the call live, please dial 800-857-6028 at least 10 minutes before the start of the conference and mention pass code “Monterey.” The call is also being webcast and can be accessed 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 866-361-4941. 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 133,000 square foot corporate headquarters, distribution, and manufacturing facilities in Salinas (Monterey County), CA; Seattle, WA; and Eugene, OR. Monterey Gourmet Foods has national distribution of its products, which are sold under the brands Monterey Pasta, CIBO Naturals, Emerald Valley Kitchen, Sonoma Foods and Casual Gourmet 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 sales for future periods including without limitation such phrases and terms as “is beginning to come to fruition,” “We are very encouraged…and are optimistic about the year,” “Our goal is to capture even more of the growing demand,” and “we are excited about the opportunities.” 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 2007 as well as other filings with the SEC. These statements are based on information as of August 7, 2008 and the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
