SALINAS, Calif.--(BUSINESS WIRE)--Oct. 31, 2002--Monterey Pasta Company (Nasdaq:PSTA)
-- Quarterly Sales Increase of 15% Compared to Third Quarter 2001
-- Operating Income Increased 13% Compared to Third Quarter of
-- Reported earnings of $.38 after One Time Tax Adjustment of
Monterey Pasta Company (Nasdaq:PSTA) today reported net income for the third quarter ended September 29, 2002 of $5,543,000, or $.38 per share, on net revenues of $16,569,000, based on 14.6 million diluted shares outstanding. This compares with a net income of $1,099,000 for the quarter ended September 30, 2001, which resulted in earnings of $.08 per share, on net revenues of $14,408,000, based on 14.4 million diluted shares outstanding. The 2002 net income results include a one time tax credit of $4,317,000, which offset proforma book of $768,000 based on an estimated combined Federal and State full taxation tax rate of 38.5%. The 2001 numbers included a provision for estimated income taxes at 38.5%. Applying a level of taxation to the 2002 pre-tax income, consistent with the 2001 rate, results in a proforma 2002 net income of $1,226,000 or $.08 per share, or the same earnings per share as third quarter 2001, although net income increased 12% compared with the prior year. The 2002 tax credit reflects the reversal of a valuation allowance on certain deferred tax assets associated with the Company's former subsidiary, Upscale Food Outlets, as the Company's current evaluation of facts and circumstances indicate it is more likely than not that these deferred tax assets will be realized. Taxation for book purposes in the future will be accrued at full statutory rates less certain tax credits, and are expected to be in the vicinity of 38.5% to 40.0%.
On a year-to-date basis Monterey Pasta's net income of $8,630,000 on sales of $46,425,000 and diluted shares of 14.7 million, resulted in a diluted earnings per share of $.59, compared with 2001 results, which showed net income of $3,157,000 or $.22 per share on sales of $41,985,000 and 14.3 million diluted shares outstanding. Applying a level of taxation to the 2002 pre-tax income, consistent with the 2001 rate, results in a proforma year-to-date 2002 net income of $3,384,000 or $.23 per share, an increase of 7% compared with 2001 (Refer to chart labeled "Proforma Earnings Results Based on Level Taxation").
Commenting on the results, Lance Hewitt, Chief Executive Officer, said, "Thanks to record September sales and the addition of the Emerald Valley business, which was purchased August 23, 2002, we were able to achieve a sales increase of 15%, significantly beating earlier estimates of 5%-10%. The Emerald Valley business contributed approximately 3% of the 15% sales growth. The net income growth on a tax-adjusted basis of 12% compared with third quarter 2001 was accomplished in spite of approximately $.01 per share of one time expenses associated with the successful search for a new President."
Looking forward to the fourth quarter and the future Mr. Hewitt had these comments: "We are still confident of achieving earnings per share of $.31 to $.32 for the year, on top line growth of 12% to 15% for the fourth quarter. Based on the addition of the Emerald Valley business and our recent chain distribution gains of Wal-Mart, Albertson's and BJ's, we also believe we can achieve a sales growth of 15% to 20% in 2003 over analysts' projections for 2002, when those numbers are adjusted for the positive third quarter results. We also feel the analysts' projections of a $.42 to $.45 range of fully taxed earnings per share for 2003 are reasonable to expect."
Concluded Mr. Hewitt, "After a careful strategic review of our business and general trends in the food business over the past couple of years, we feel a 10% internal sales growth target is realistic for years 2004 and beyond. Of course, we will continue our diligent search for suitable acquisitions to layer on more growth in sales and earnings per share."
Founded as a regional brand, Monterey Pasta now has national distribution in over 8,600 retail and club stores throughout the United States and selected regions of Canada. Monterey Pasta manufactures USDA inspected, fresh gourmet refrigerated food products at its integrated 130,000 square foot corporate headquarters, distribution, and manufacturing facilities 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 timely and cost-effective introduction of new products in the coming months, risks associated with accomplishing the anticipated results of the current plant expansion program, risks associated with the timely and effective assimilation of the Emerald Valley Kitchen business, 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 30, 2001, its Quarterly Report on Form 10-Q for the First and Second Quarters of 2002, and its Proxy Statement filed June 17, 2002.