Monterey Gourmet Foods Reports First Quarter 2009 Results

Market Wire, May, 2009

Monterey Gourmet Foods (NASDAQ: PSTA), a manufacturer and marketer of fresh gourmet refrigerated food products, reported its financial results for the first quarter ended March 31, 2009.

"Our first quarter results demonstrate the effectiveness of our strategy to focus on our core business, contain costs and continue to meet and exceed the expectations of our customers," stated Eric C. Eddings, president and CEO of Monterey Gourmet Foods. "In addition, we continued to leverage the strength of our brands, further penetrated the retail and club channels, and continued to pursue opportunities in the Private Label and Foodservice channels."

Eddings continued, "Consistent with celebrating the 20th anniversary of our Monterey Pasta Company(TM) brand, we are continuing to build on our solid relationships with our customers and our focus on innovation. We are aggressively introducing new products to the market place and in April we began shipping Pasta Duets, a new product developed using restaurant-inspired concepts. In addition, we are taking advantage of growth in the Private Label channel by pursuing product development opportunities with our key customers."

Financial Highlights: First Quarter 2009 Compared to First Quarter 2008

All results exclude the discontinued Casual Gourmet brand, as previously announced.

--  Revenue was $21.0 million, compared to $24.0 million.  Cost of goods
    sold was $15.1 million, compared to $18.3 million.
--  Gross margin was 27.9 percent, compared to 23.8 percent.
--  Net income from continuing operations was $773,000, or $0.05 per
    diluted share, compared to a net loss from continuing operations of $1.4
    million, or $0.08 per diluted share.
--  Net income was $747,000, or $0.04 per diluted share, compared to a
    loss of $1.5 million, or $0.09 per diluted share.  Net income for the 2008
    first quarter included $1.6 million in impairment and restructuring
    charges.
    

During the quarter, the company generated $1.9 million in cash provided by operations, compared to cash used by operations of $131,000 in the same quarter last year. At March 31, 2009, cash and cash equivalents were $3.9 million, compared to $2.2 million at December 31, 2008.

Scott Wheeler, CFO of Monterey Gourmet Foods, stated, "Our profitable results demonstrate the success of our cost containment programs and position us well as we focus on growing revenues in our core business. As such, while revenue was soft for the first quarter, our margins improved by over four-hundred basis points from the same quarter last year. Our SG&A for the first quarter of 2009 was 24.1 percent of revenue, down from 26.3 percent of revenue in last year's first quarter, which contributed to our improved bottom line of $0.04 in earnings per diluted share. We also successfully managed our working capital components during the quarter, which helped improve our cash flow by approximately $2 million over the first quarter of 2008. As a result, working capital increased to $10.1 million at March 31, 2009, up 17 percent from $8.7 million at December 31, 2008."

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 its first quarter 2009 financial results. To listen to the call live, please dial 877-917-3614 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 800-879-7966. 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 manufacturing facilities in Salinas (Monterey County), CA; Kent, WA; and Eugene, OR. Monterey Gourmet Foods has national distribution of its products, which are sold under the brands Monterey Pasta Company, CIBO Naturals, Emerald Valley Kitchen and Sonoma Cheese 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 "we are ... pursuing product development opportunities with our key customers" and "position us well as we focus on growing revenues in our core business." Such 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 2008 as well as other filings with the SEC. These statements are based on information as of May 6, 2009 and the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.