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Monterey Gourmet Foods Reports Second Quarter 2008 Results Delivers Total Revenue of $23.9 Million and Pre-Tax Income of $642,000; Improves Gross Margin to 28.9%; Provides $3.6 Million in Cash From Operations, Up from $2.1 Million in the Second Quarter of 2007 SALINAS, CA--(MARKET WIRE)--Aug 7, 2008 -- Monterey Gourmet Foods (PSTA - News), 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 (PSTA - News) 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. Tables Follow
MONTEREY GOURMET FOODS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, December 31,
2008 2007
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,184 $ 5,541
Accounts receivable less allowances of $662
and $981 6,460 8,587
Inventories 6,710 7,865
Deferred tax assets-current 703 703
Prepaid expenses and other 958 1,084
----------- -----------
Total current assets 21,015 23,780
Property and equipment, net 14,821 14,280
Deferred tax assets-long term 2,646 2,646
Deposits and other 293 243
Intangible assets, net 5,916 6,346
Goodwill 12,164 13,211
----------- -----------
Total assets $ 56,855 $ 60,506
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,243 $ 6,160
Accrued payroll and related benefits 1,055 1,192
Accrued and other current liabilities 1,221 962
Current portion of notes, loans, and capital
leases payable - 50
----------- -----------
Total current liabilities 7,519 8,364
Notes, loans, and capital leases payable, less
current portion - 29
Minority interest - 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, 17,372,588 and 17,356,976
issued and 16,747,717 and 17,141,976
outstanding 17 17
Additional paid-in capital 60,680 60,462
Treasury stock 624,871 and 215,000 shares,
respectively, at cost (1,789) (657)
Accumulated deficit (9,572) (7,868)
----------- -----------
Total stockholders' equity 49,336 51,954
----------- -----------
Total liabilities and stockholders' equity $ 56,855 $ 60,506
=========== ===========
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,
2008 2007 2008 2007
---------- ---------- ---------- ----------
Net revenues $ 23,909 $ 24,529 $ 49,532 $ 49,244
Cost of sales 16,990 17,790 36,424 35,574
---------- ---------- ---------- ----------
Gross profit 6,919 6,739 13,108 13,670
Selling, general and
administrative expenses 6,398 6,005 13,349 12,457
Impairment and restructuring - - 1,606 -
Loss on disposition of
assets (7) - (16) (12)
---------- ---------- ---------- ----------
Operating income (loss) 514 734 (1,863) 1,201
Other income, net 106 3 114 4
Interest income, net 22 38 48 66
---------- ---------- ---------- ----------
Income (loss) before
provision for income tax
expense 642 775 (1,701) 1,271
Income tax provision (815) (311) (3) (509)
---------- ---------- ---------- ----------
Net income (loss) $ (173) $ 464 $ (1,704) $ 762
========== ========== ========== ==========
Basic income (loss) per
share $ (0.01) $ 0.03 $ (0.10) $ 0.04
Diluted income (loss) per
share $ (0.01) $ 0.03 $ (0.10) $ 0.04
Weighted average primary
shares outstanding 16,838,981 17,323,025 16,934,987 17,320,347
Weighted average diluted
shares outstanding 16,838,981 17,478,266 16,934,987 17,485,003
Information on segments and a reconciliation to operating income are as
follows (in thousands):
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Net Revenues
Gourmet Foods Products 22,318 22,585 46,528 45,287
Sonoma Cheese Products $ 1,591 $ 1,944 $ 3,004 $ 3,957
-------- -------- -------- --------
Total Net Revenues $ 23,909 $ 24,529 $ 49,532 $ 49,244
======== ======== ======== ========
Operating Income (Loss):
Gourmet Foods Products 618 999 824 1,631
Sonoma Cheese Products $ (104) $ (265) $ (2,687) $ (430)
-------- -------- -------- --------
Total Operating Income (Loss) $ 514 $ 734 $ (1,863) $ 1,201
-------- -------- -------- --------
MONTEREY GOURMET FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands of dollars)
Six Months Ended
------------------
June 30, June 30,
2008 2007
-------- --------
Cash flows from operating activities:
Net income (loss) $ (1,704) $ 762
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Deferred income taxes - 509
Depreciation and amortization 1,498 1,427
Impairment and restructuring 1,465 -
Provisions for allowances for bad debts,
returns, adjustments and spoils 2,993 2,489
Provisions for inventory 543 127
Stock-based compensation 192 335
Loss on disposition of assets 16 12
Gain on acquisition of minority interest (109) -
Changes in assets and liabilities:
Accounts receivable (866) (369)
Inventories 612 34
Prepaid expenses 126 9
Deposits and other (50) 3
Accounts payable (917) (2,377)
Accrued liabilities (202) (880)
-------- --------
Net cash provided by operating
activities 3,597 2,081
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (1,734) (651)
Proceeds from sale of fixed assets 15 -
Acquisition of minority interest (50) -
-------- --------
Net cash used in investing activities (1,769) (651)
-------- --------
Cash flows from financing activities:
Repayment of debt (44) (67)
Repayment of capital lease obligations (35) (24)
Purchase of treasury stock (1,132) -
Proceeds from issuance of common stock 26 36
-------- --------
Net cash used in financing activities (1,185) (55)
-------- --------
Net increase in cash and cash equivalents 643 1,375
Cash and cash equivalents, beginning of period 5,541 4,281
-------- --------
Cash and cash equivalents, end of period $ 6,184 $ 5,656
======== ========
Cash payments: June 30, June 30,
2008 2007
-------- --------
Interest $ 2 $ 39
Income Taxes $ 103 $ 10Contact: Company Contacts:
Monterey Gourmet Foods
Eric Eddings
Chief Executive Officer
Email Contact
Scott Wheeler
Chief Financial Officer
Email Contact
(206) 622-1016
Investor Relations Contacts:
Lippert / Heilshorn & Associates
Kirsten Chapman
Email Contact
(415) 433-3777
Source: Monterey Gourmet Foods
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