• Fourteenth Consecutive Profitable Quarter: Net Income Up 78% Over Third Quarter ’99
  • Quarterly Earnings of $.13 Per Diluted Share: Best Ever for Gourmet Fresh Food Maker
  • Gross profit up nearly one percentage point compared with Second Quarter 2000
  • Sales Increase of 22% Compared to Third Quarter 1999

Monterey Pasta Company (Nasdaq:PSTA) today reported net income for the third quarter ended September 24, 2000 of $1,826,000, or $0.13 per diluted share, on net revenues of $12,161,000, based on 13.9 million diluted shares outstanding.

Basic income was $0.14 per share based on 13.3 million shares outstanding. This compares with a net income of $1,025,000 for the quarter ended September 26, 1999, which resulted in earnings of $0.08 per share, on net revenues of $9,943,000, based on 13.3 million diluted shares outstanding.

On a year-to-date basis Monterey Pasta’s net income of $4,231,000 on sales of $34,362,000 and diluted shares of 13.8 million, which resulted in earnings of $0.32 per basic and $0.31 per diluted share, compared very favorably with 1999 results, which showed net income of $2,664,000 or $0.21 per basic and diluted share on sales of $27,016,000 and 13.0 million diluted shares outstanding.

Commenting on the results, Lance Hewitt, Chief Executive Officer and President, said, “We are very pleased to report our fourteenth consecutive profitable quarter as, once again, our most profitable quarter in the history of the company. Our sales increased 22% over the third quarter of 1999, and operating income increased 41% vs. the same quarter. Net income, which increased 78%, was augmented by a tax credit of nearly $300,000, primarily resulting from California Manufacturer’s tax credits, which offset Federal alternative minimum and State taxes of approximately $75,000 for the quarter. Net income before the tax credit would have been $0.11 per diluted share, still nearly a 49% increase on a dollar basis. Our gross profit increase of nearly one full point vs. second quarter 2000 was especially encouraging and reflected the initial increase resulting from our internal profit improvements put in place by late June of this year and continuing. Our year-to-date results are also noteworthy, with sales up 27% and net income, adjusted for the tax credit, up 47% compared to third quarter 1999.”

“The company continues to generate substantial cash from operations with EBITDA at a robust $5.2 million for the first nine months of 2000, compared with $3.8 million for the same period a year ago,” said Stephen L. Brinkman, CFO. “This performance has allowed us to finance all of the $3.5 million capital program internally and retire all bank debt by the end of quarter three,” added Mr. Brinkman.

Founded as a regional brand, Monterey Pasta now has national distribution in over 5,735 retail and club stores throughout the United States and selected regions of Canada. Monterey Pasta manufactures USDA inspected, healthy, gourmet refrigerated fresh pasta, sauces and soups at its integrated corporate headquarters/manufacturing facility in Salinas, (Monterey County) CA.

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 successful completion of the Company’s capital expansion program, retention of key personnel and retention of key management, the risks inherent in food production, and intense competition in the market in which the Company competes. 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 regarding these and other risks, please read the Company’s Annual Report on Form 10-K, for the year ended December 26, 1999, its Forms 10-Q for First Quarter and Second Quarter 2000, and its 2000 Proxy.

                        MONTEREY PASTA COMPANY

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

Third Quarter Ended Nine Months Ended
September September September September
24, 26, 24, 26,
2000 1999 2000 1999

Net revenues
from continuing
operations 12,161 9,943 34,362 27,016
Cost of sales 7,364 6,163 21,182 16,527
----------- ----------- ----------- -----------

Gross profit 4,797 3,780 13,180 10,489
Selling, general
expenses 3,185 2,635 8,932 7,551
----------- ----------- ----------- -----------
Operating income 1,612 1,145 4,248 2,938

Gain (loss) on
disposition of
assets -- 3 -- (13)

Other income/
(expense), net (4) 5 (7) --

expense, net (7) (36) (60) (135)
----------- ----------- ----------- -----------

Income from
provision for
income tax
(expense) 1,601 1,117 4,181 2,790
Provision for
income tax
(expense) 225 (92) 50 (126)
----------- ----------- ----------- -----------

Net income from
operations 1,826 1,025 4,231 2,664

Basic income per
share 0.14 0.08 0.32 0.21

Diluted income
per share 0.13 0.08 0.31 0.21

Primary shares
outstanding 13,278,210 12,791,078 13,193,992 12,638,036

Diluted shares
outstanding 13,939,510 13,255,983 13,801,901 12,972,284