Monterey Pasta
  • Quarterly Sales Increase of 23% Compared to Third Quarter 2000
  • Year-to-date Sales up 27% vs. 2000
  • Third Quarter EPS up $.02 vs. Second Quarter 2001

Monterey Pasta Company (Nasdaq:PSTA) yesterday reported net income for the third quarter ended September 30, 2001 of $1,099,000, or $.08 per share, on net revenues of $14,929,000, based on 14.4 million diluted shares outstanding. This compares with a net income of $1,825,000 for the quarter ended September 24, 2000, which resulted in earnings of $.13 per share, on net revenues of $12,161,000, based on 13.9 million diluted shares outstanding. The 2001 net income results are stated at full taxation for book reporting purposes, while the 2000 numbers reflect only nominal taxation, due to the deferral of taxes resulting from the Company's Net Operating Loss carryforwards. Applying a level of taxation to the 2000 net income, consistent with the 2001 rate, results in a proforma 2000 net income of $984,000 or $.07 per share. After adjusting for consistent taxation, the third quarter 2001 net income of $.08 per diluted share represents an increase of $.01 per share compared with the third quarter 2000.

On a year-to-date basis Monterey Pasta's net income of $3,157,000 on sales of $43,673,000 and diluted shares of 14.3 million, resulted in earnings per share of $.22, compared with 2000 results, which showed net income of $4,231,000 or $.31 per share on sales of $34,362,000 and 13.8 million diluted shares outstanding. Applying a level of taxation to the 2000 net income, consistent with the 2001 rate, results in a proforma year-to-date 2000 net income of $2,572,000 or $.19 per share. After adjusting for consistent taxation, the year-to-date 2001 net income of $.22 per diluted share represents a 23% increase over the proforma 2000 results.

Commenting on the results, Lance Hewitt, chief executive officer and president, said, "When you consider the obstacles we have had to face in recent months, I feel good about the third quarter. The net income growth compared with second quarter 2001 was accomplished with no benefit from the recent decline in dairy ingredients. We also enjoyed only a partial impact from the improved borsellini and calzone production efficiencies, and the recent dramatic reduction in natural gas prices. We are also encouraged by our sales which increased 23% over the third quarter of 2000, and are now 27% ahead of a year ago."

Steve Brinkman, chief financial officer, commented, "We continue to be encouraged by our cash generation with year-to-date EBITDA at nearly $6.3 million. Our current ratio is over 4:1, and we remain free of bank debt. Return on equity is at 22%. Your company continues to exhibit strong fundamentals."

Founded as a regional brand, Monterey Pasta now has national distribution in over 6,400 retail and club stores throughout the United States and selected regions of Canada. Monterey Pasta manufactures USDA inspected, healthy, gourmet refrigerated food products at its integrated corporate headquarters/ manufacturing and distribution facilities in Salinas, (Monterey County) Calif.

This press release contains forward-looking statements that involve a number of uncertainties and risks that could cause actual results to differ materially from those discussed in the forward-looking statements. Risks that could cause actual results to differ materially from those discussed in the forward-looking statements include risks associated with the retention of key personnel and retention of key management, the risks inherent in food production, intense competition in the market in which the Company competes, consumer acceptance of new products, and continued increased energy and dairy ingredient costs. Future projections are based on the assumption that we will continue to sell in existing retail and club stores and will continue to add new stores. For additional information on these risks, please read the Company's Annual Report on Form 10-K as of December 31, 2000, its Quarterly Report on Form 10-Q for First and Second Quarter 2001, and its 2001 Proxy.

                        MONTEREY PASTA COMPANY
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)


(000's $ except earnings per share numbers and share totals)

                               Third Quarter         Nine Months
                                   Ended                Ended
                          ---------------------   --------------------
                          Sept. 30,   Sept. 24,   Sept. 30,  Sept. 24,
                             2001       2000        2001       2000
                         ----------   ---------   ---------  ---------



Net revenues                14,929     12,161       43,673     34,362
Cost of sales                9,383      7,364       27,279     21,182
                            ------     ------       ------     -------
Gross profit                 5,546      4,797       16,394     13,180
Selling, general and
 administrative expenses     3,789      3,185       11,359      8,932
                            ------     ------       ------     -------
Operating income             1,757      1,612        5,035      4,248

Gain on disposition
 of assets                       3         --           20         --

Other income/(expense),
 net                            --         (4)           1         (7)

Interest income/(expense),
 net                            27         (7)          77        (60)
                            -------    -------      ------     -------
Income before provision
 for income tax
 benefit/(expense)            1,787     1,601        5,133      4,181
Provision for income
 tax benefit/(expense)        (688)       225       (1,976)        50
                            -------    ------       -------    -------

Net income                   1,099      1,826        3,157      4,231


Basic income
 per share                    0.08       0.14         0.24       0.32

Diluted income
 per share                    0.08       0.13         0.22       0.31

Primary shares
 outstanding            13,583,153 13,278,210   13,424,435 13,193,992

Diluted shares
 outstanding            14,378,552 13,939,510   14,257,387 13,801,901