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Monterey Gourmet Foods Reports Third Quarter 2008 Results Reduced Annual Costs Run Rate by $1.2 Million in November 2008 SALINAS, CA--(MARKET WIRE)--Nov 6, 2008 -- Monterey Gourmet Foods (NasdaqGM:PSTA - News), a
manufacturer and marketer of fresh gourmet refrigerated
food products,
reported results for its third quarter ended September 30,
2008.
"Although sales in the third quarter came in below our expectations due to a large club channel customer delaying orders, we are encouraged by a number of factors," stated Eric C. Eddings, president and CEO of Monterey Gourmet Foods. "Company performance began to track upward in September, which was a strong month. First, the aforementioned large club customer has indicated its fourth quarter orders will increase, due to both the impact of the delayed third quarter orders and an increase in the volume of orders. Also, we continued to build on our successes adding new varietals to popular lines and introducing favorites to different channels through existing relationships in club, retail and food service. As consumers are shifting from dining out to more frequently preparing and eating dinner at home, we stand to benefit from the increased demand for cost-conscious product offerings. In particular, our new value-sized packages of our fresh pasta and sausage appeal to today's family-value shopper who demands quality. Our limited-edition seasonal pastas draw the return customer to stock up on special items. In addition, we are gaining traction in the food services channel as we are providing items to multiple national food service chains. Finally, during the fourth quarter, we are participating in a joint-vendor coupon with one of our largest customers, which we expect to drive top-line sales beginning next quarter." "In addition, we are very excited we received our approved occupancy for our new Kent, Washington facility in early November. We designed this flexible footprint, state-of-the-art facility to improve productivity, deliver cost savings and quickly accommodate new varieties and expanded capacity needs for new products and new business opportunities." Third Quarter 2008 Results Compared to Third Quarter 2007
-- Revenue was $23.2 million compared to $24.5 million.
-- The Gourmet Foods segment net revenues were $21.6 million, compared
to $22.5 million.
-- The Sonoma Foods segment net revenues were $1.6 million, compared to
$1.9 million.
-- Cost of goods sold was $17.3 million, compared to $17.8 million in last
year's third quarter.
-- Gross margin was 25.2%, compared to 27.1%.
-- The total net loss was $524,000, compared to net income of $279,000.
-- SG&A for the quarter was $6.4 million, compared to third quarter 2007
SG&A of $6.2 million and is consistent with the $6.4 million recorded
during the second quarter of 2008.For the nine months, cash from operations generated $3.7 million. At September 30, 2008 cash and cash equivalents equaled $3.4 million, compared to $5.5 million at December 31, 2007, reflecting cash paid to fund the company's facility in Kent Washington. In addition, the company has access to a line of credit of $5 million through its bank, which remained fully available at the quarter end. Effective November 5, 2008, the company shut down its Direct Store Delivery system at Sonoma Foods, reduced its salaried workforce by 10%, eliminated some variable culinary support and restructured outside selling support. In total, these changes are projected to reduce the annual costs run rate by $1.2 million. The associated severance costs of approximately $60,000 will be recorded in the fourth quarter. Scott Wheeler, Monterey Gourmet Foods' CFO, said, "Our balance sheet has a solid cash position and carries no debt, so we have the flexibility necessary to continue to act on growth initiatives. In addition, in the fourth quarter we expect the costs of freight and raw materials to decrease, in particular flour, olive oil and pine nuts. Nonetheless, we are stalwart in our focus on controlling costs and this week we aggressively reduced ongoing expenses. We believe this approach will improve our fourth quarter results." Recent Business Highlights
-- Offered limited-edition Monterey Pasta Company seasonal, smoked
mozzarella & artichoke ravioli to club and retail channels.
-- Shipped Monterey Pasta Company organic butternut squash ravioli to
both club and retail channels.
-- Introduced and shipped an At Home Gourmet chicken tetrazzini, co-
branded with Chef Paul Prudhomme, exclusively to a club channel customer.
-- Began shipping CIBO Naturals sundried tomato pesto item to Panera
Bread, a large national bakery-café chain.
-- Shipped Emerald Valley Kitchen products in new, more environmentally
friendly packaging.
-- Drove a new At Home Gourmet initiative, testing value-sized packages
of fresh pasta and Casual Gourmet sausages.Outlook Eddings concluded, "We know the economic pressures on our end consumer and expect continued challenges in the consumer market place. We believe the key to maintaining strength in such an environment is to anticipate the volatility, implement aggressive cost saving measures and enhance selling strategies to address the opportunities that are inherently embedded in these conditions. With that in mind, we have further adjusted our cost structure and continue to evaluate new product initiatives carefully. This quarter, we began to offer family varieties to discerning home cooks seeking to provide a gourmet experience with creative choices and the freshest ingredients in value packages." 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 888-282-0031. No pass code is required. About Monterey Gourmet Foods (NasdaqGM: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 projections for future periods including without limitation such phrases and terms as "goal to," "We are encouraged," "will significantly increase," "we stand to benefit," "we expect to drive top-line sales," "we have the flexibility necessary to continue to act," "we expect... costs... to decrease," "we believe the combination will improve," "expect continued challenges," and "anticipated environment." 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 November 6, 2008 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)
September 30, December 31,
2008 2007
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,405 $ 5,541
Accounts receivable less allowances
of $636 and $981 9,110 8,587
Inventories 7,381 7,865
Deferred tax assets - current 703 703
Prepaid expenses and other 972 1,084
------------- -------------
Total current assets 21,571 23,780
Property and equipment, net 17,148 14,280
Deferred tax assets - long term 2,646 2,646
Deposits and other 330 243
Intangible assets, net 5,748 6,346
Goodwill 12,164 13,211
------------- -------------
Total assets $ 59,607 $ 60,506
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,006 $ 6,160
Accrued payroll and related benefits 1,327 1,192
Accrued and other current liabilities 1,368 962
Current portion of notes, loans, and
capital leases payable - 50
------------- -------------
Total current liabilities 10,701 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, 17,391,342 and 17,356,976
issued and 16,766,471 and 17,141,976
outstanding 17 17
Additional paid-in capital 60,775 60,462
Treasury stock 624,871 and 215,000 shares,
respectively, at cost (1,789) (657)
Accumulated deficit (10,097) (7,868)
------------- -------------
Total stockholders' equity 48,906 51,954
Total liabilities and stockholders'
equity $ 59,607 $ 60,506
============= =============
MONTEREY GOURMET FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except earnings per share numbers and share totals)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
------------- ------------- ------------- -------------
Net revenues $ 23,190 $ 24,458 $ 72,722 $ 73,702
Cost of sales 17,336 17,835 53,760 53,409
------------- ------------- ------------- -------------
Gross profit 5,854 6,623 18,962 20,293
Selling,
general and
administrative
expenses 6,393 6,184 19,742 18,641
Impairment and
restructuring - - 1,606 -
Loss on
disposition of
assets - (26) (16) (38)
------------- ------------- ------------- -------------
Operating
income (loss) (539) 413 (2,402) 1,614
Other income,
net - 4 114 8
Interest
income, net 15 43 63 109
------------- ------------- ------------- -------------
Income (loss)
before
provision for
income tax
expense (524) 460 (2,225) 1,731
Income tax
provision - (181) (3) (690)
------------- ------------- ------------- -------------
Net income
(loss) $ (524) $ 279 $ (2,228) $ 1,041
============= ============= ============= =============
Basic income
(loss) per
share $ (0.03) $ 0.02 $ (0.13) $ 0.06
Diluted income
(loss) per
share $ (0.03) $ 0.02 $ (0.13) $ 0.06
Weighted
average
primary shares
outstanding 16,758,100 17,343,270 16,876,025 17,327,988
Weighted
average
diluted shares
outstanding 16,758,100 17,426,504 16,876,025 17,460,402Information on segments and a reconciliation to operating income are as follows (in thousands):
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
------------- ------------- ------------- -------------
Net Revenues
Gourmet Foods
Products 21,607 22,532 68,135 67,819
Sonoma Cheese
Products $ 1,583 $ 1,926 $ 4,587 $ 5,883
------------- ------------- ------------- -------------
Total Net
Revenues $ 23,190 $ 24,458 $ 72,722 $ 73,702
============= ============= ============= =============
Operating
Income (Loss):
Gourmet Foods
Products (318) 707 507 2,339
Sonoma Cheese
Products $ (221) $ (294) $ (2,909) $ (725)
------------- ------------- ------------- -------------
Total Operating
Income (Loss) $ (539) $ 413 $ (2,402) $ 1,614
============= ============= ============= =============
MONTEREY GOURMET FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands of dollars)
Nine Months Ended
--------------------------------------
September 30, 2008 September 30, 2007
------------------ ------------------
Cash flows from operating
activities:
Net income (loss) $ (2,228) $ 1,041
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Deferred income taxes - 919
Depreciation and amortization 2,245 2,185
Impairment and restructuring 1,355 -
Provision for allowances for
bad debts, returns,
adjustments and spoils 4,767 3,561
Provisions for inventory 563 183
Stock-based compensation 262 552
Loss on disposition of assets 16 38
Gain on acquisition of minority
interest (109) -
Changes in assets and
liabilities:
Accounts receivable (5,290) (2,670)
Inventories (79) (517)
Prepaid expenses 112 (387)
Deposits and other (87) -
Accounts payable 1,846 (1,295)
Accrued liabilities 328 (693)
------------------ ------------------
Net cash provided by
operating activities 3,701 2,917
------------------ ------------------
Cash flows from investing
activities:
Purchase of property and
equipment (4,641) (845)
Proceeds from sale of fixed
assets 15 -
Acquisition of minority interest (50) -
------------------ ------------------
Net cash used in investing
activities (4,676) (845)
------------------ ------------------
Cash flows from financing
activities:
Repayment of debt (44) (978)
Repayment of capital lease
obligations (35) (26)
Purchase of treasury stock (1,132) -
Proceeds from issuance of
common stock 50 66
------------------ ------------------
Net cash used in financing
activities (1,161) (938)
------------------ ------------------
Net increase in cash and cash
equivalents (2,136) 1,134
Cash and cash equivalents,
beginning of period 5,541 4,281
------------------ ------------------
Cash and cash equivalents,
end of period $ 3,405 $ 5,415
================== ==================
Cash payments: September 30, 2008 September 30, 2007
------------------ ------------------
Interest $ 2 $ 54
Income Taxes $ 103 $ 55Contact: 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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