Cuisine Solutions Announces First Quarter Fiscal Year 2002 Results
PR NEWSWIRE - November 06, 2001 08:58
ALEXANDRIA, Va., Nov 6, 2001 /PRNewswire via COMTEX/ -- Cuisine Solutions, Inc. (OTC Bulletin Board: CUIS), announced a net loss of $881,000 for the first quarter of fiscal year 2002 compared to a net loss of $171,000 last year. The increase in the loss was due to the significant decrease in USA sales compounded by higher distribution/storage costs since inventory levels increased, and the immediate subsequent reduction in production that affected the ability to cover fixed production overhead costs. In addition to the decrease in sales demand, the Company recorded an additional recognition of $120,000 of losses in equity from the investment in Brazil.
Revenue in the first quarter 2002 decreased from $8,343,000 to $7,335,000, a 12.1% decrease compared to the previous year, due to a sales decline in the core sales channel, On Board Services. The decline was driven by temporary cost saving programs of large customers, specifically by the airlines, which had a dramatic impact on the Company's sales after the September 11, 2001 terrorist attacks in New York and Virginia. The weeks following September 11, 2001 resulted in extremely limited business travel, a major source of Cuisine Solutions sales revenue via sales to airlines and the hotel banquet industries. Although the airline industry is cutting back, many of the cuts are short airline routes on non-meal shuttle flights. In addition, Management believes the associated travel industry headcount reduction may increase the dependency on prepared meal solutions due to the flexibility and reduced need for labor when using Cuisine Solutions pre-prepared meals. Management is also placing additional emphasis on retail sales for the holiday season, as well as additional focus on the already growing military business.
During the previous fiscal year, Management initiated further strategic efforts into retail sales in order to diversify the sales channels of the Company and to provide the opportunity for large volume sales that would provide increased efficiency and accelerated growth of the total Company. Management anticipates that this effort, initiated fifteen months ago, will produce the results anticipated.
The first quarter of fiscal year 2002 revenues by country for each of the Cuisine Solutions subsidiaries were as follows:
Q1 Fiscal 2002 Q1 Fiscal 2001 $Change %Change
USA $4,992,000 $5,899,000 $(907,000) (15.4%)
Norway 176,000 479,000 (303,000) (63.3%)
France 2,167,000 1,965,000 202,000 10.3%
Total Product
Sales Revenue $7,335,000 $8,343,000 $(1,008,000) (12.1%)
USA
Cuisine Solutions USA Fiscal Year 2002 first quarter sales by sales channel were as follows:
Q1 FY02 Q1 FY01 $Change %Change
Food Service $1,494,000 $1,650,000 $(156,000) (9.5%)
On Board Services 2,616,000 3,720,000 (1,104,000) (29.7%)
Retail 34,000 102,000 (68,000) (66.7%)
Military 724,000 279,000 445,000 159.5%
New Business 124,000 148,000 (24,000) (16.2%)
Total $4,992,000 $5,899,000 $(907,000) (15.4%)
The first quarter fiscal year 2002 USA sales decrease of $907,000 was primarily driven by the decreased sales of $1,104,000 from the On Board Services channel, as well as from the decreased sales of $156,000 from the Foodservice channel. Both industries have been affected due to the decreased travel related to the September 11, 2001 tragedy. Management is confident that the business cycle will swing back as well as possibly offer new opportunities for the Company. Management has already initiated drastic cut backs and re-focused efforts to accelerate sales to other sales channels, specifically military sales and retail sales. These sales channels already had formal sales programs in place, and management will accelerate where feasibly possible. The Company anticipates the product rollout for several premium frozen food projects to retail customers during the next quarters of fiscal year 2002. The Military channel is currently the sales channel with the highest growth rates with increased sales of $445,000 for the first quarter of fiscal year 2002.
Norway
The majority of Norwegian sales, approximately 84.7%, are inter-company sales to the USA and France. During the first quarter of fiscal year 2002, the total Norwegian sales volume decreased 40.6% to 10,373,000 Norwegian Kroner. The decrease in sales is primarily caused by the decreased demand of raw materials from Cuisine Solutions USA, due to the reduced business volume during the first quarter of fiscal year 2002. The sales amount converted to US dollars amounted to $1,150,000 in the first quarter of fiscal 2002 and $1,967,000 during the first quarter of fiscal 2001 before the elimination of inter-company balances.
Cuisine Solutions Norway fiscal year 2002 compared to fiscal year 2001 first quarter sales before inter-company eliminations in both US dollars and Norwegian Kroner were as follows:
Fiscal 2002 Fiscal 2001 Norway Q1 Sales Norway Q1 Sales $Change %Change
Sales in US Dollars 1,150,000 1,967,000 (817,000) (41.5%)
Sales in Norwegian
Kroner 10,373,000 17,479,000 (7,106,000) (40.6 %)
Average Exchange Rate 9.020 8.886
Cuisine Solutions has included many salmon items in its retail presentations and anticipates a dramatic increase in retail sales of salmon in the second and third quarters of fiscal year 2002.
France
Sales from France increased by 13.6%, but the US dollar equivalent shows an increase of 10.3% due to the exchange rate fluctuation. The majority of the growth was driven by strong retail sales of private label packaged products as well as a continued growing demand in the foodservice sector. Foodservice operators are forced to deal with the thirty-five hour workweek constraint and have discovered that the Cuisine Solutions product line offers a solution to the limited availability and higher cost of labor created as result of the new mandated work hour rules. Management anticipates continued double-digit growth rates from France for fiscal year 2002.
Cuisine Solutions France changed its local reporting currency from French francs to the EURO, effective with the beginning of fiscal year 2002. Cuisine Solutions France fiscal year 2002 first quarter sales, compared to prior year first quarter and respective exchange rates, were as follows:
Fiscal 2002 Fiscal 2001 France Q1 Sales France Q1 Sales $Change %Change
Sales in US Dollars 2,167,000 1,965,000 202,000 10.3%
Sales in EURO 2,441,000 2,148,000 293,000 13.6%
Average Exchange Rate 1.126 1.093
Gross margins decreased in the USA due to lower production and fixed cost absorption as well as increased distribution costs as sales almost stopped for a two-week period after the terrorist attacks in the USA, resulting in higher inventories. Inventory at the end of the first quarter of FY 2002 increased $1,002,000 or 15.7% to $7,403,000 from $6,401,000 as at the end of the FY 2001. Management has cut back on production to reduce the inventories as well as initiated large-scale cut backs to reduce operating expenses without impairing the Company to grow when demand grows.
Selling and administrative expenses increased $104,000 in the first quarter of fiscal year 2002 versus the first quarter of fiscal year 2001. Expenses as a percent of sales were 29.3% in the first quarter of fiscal 2002 versus 24.5% in first quarter of fiscal 2001. The increase was due to timing of legal expenses associated with trademarks and contracts as well as increased travel and marketing investments early in the fiscal year to increase visibility and prospects for the holiday retail and banquet season. Cuisine Solutions also donated a large quantity of product to help feed the men and women assisting with the rescue operations in New York City and Arlington, Virginia. Management does continue to push for reduction of selling and administrative expenses and initiated further cost reduction projects subsequently to the sales decrease in the USA.
Fiscal year 2002 first quarter Accounts Receivables have decreased $774,000 or 15.7% to $4,142,000 from $4,916,000 as at the end of last fiscal year 2001, due to the aggressive collection management and the reduced sales.
Although the rapid reduction in business travel has had an immediate impact on the Company, the Company is very diversified in terms of business channel opportunities as well as geographic markets since the Company sells to the European, Mercusor and North American marketplace. Management feels that while the economic situation presents challenges, it also presents a host of new business opportunities as well as the pressure to make the changes needed in the Organization to address these challenges and opportunities.
The company will launch their new FiveLeaf luxury line of prepared entrees, accompaniments, and desserts to consumers via a national introduction in December 2002. These products have been created by an extraordinary consortium of the most distinguished chefs in the United States and will be distributed through Omaha Steaks, who will manage all logistics and fulfillment. Consumers will be able to purchase FiveLeaf products over the telephone via call center, by catalog, and through the FiveLeaf.com Web site. Ultimately they will also be available in retail stores, beginning with the retail sites owned and operated by Omaha Steaks throughout the United States. |
