Cuisine Solutions Announces Fiscal Year 2002 Results
PR NEWSWIRE - September 23, 2002 18:28
ALEXANDRIA, Va., Sep 23, 2002 /PRNewswire-FirstCall via COMTEX/ -- Cuisine Solutions, Inc. (OTC Bulletin Board: CUIS), announced a loss of $6,027,000 for the Fiscal Year 2002 compared with the previous years loss of $861,000. Net losses for Fiscal Year 2002 were $5,166,000 higher than Fiscal Year 2001 losses due to the decline in USA sales, the amortization and impairment of the FIVELEAF website in the amount of $95,000 and $619,000 respectively, and the additional recognition of losses in equity from the investment in Brazil in the amount of $997,000. The Company was successful in lowering cost by the reduction of personnel in Alexandria as well as to salary cuts throughout the Company, but these cost reductions could not cover overhead cost due to the decreased sales and correspondent low production volume during Fiscal Year 2002. This reduction in production volume resulted in higher cost of goods of more than $1 million of fixed overhead costs that were not absorbed due to the low volumes.
Fiscal Year 2002 revenue of $28,616,000 reflect a consolidated sales decrease of 20.8% from Fiscal Year 2001 revenue of $36,138,000. The decrease in sales were due to a 28.9% decrease in U.S. sales, a 6.7% decrease in sales from France and a 66.5% increase in non-inter-company sales from the Norwegian subsidiary. The sales decline was driven by reduced travel and temporary cost saving programs of large Cuisine Solutions customers, specifically by the airlines, which had a dramatic impact on the Company's sales after the terrorist attacks in the USA. The weeks following September 11, 2001 resulted in extremely limited business travel, a major source of Cuisine Solutions revenue via sales to airlines and the hotel banquet industries.
Fiscal Year 2002 revenues by country for each of the Cuisine Solutions subsidiaries were as follows:
Fiscal 2002 Fiscal 2001 $ Change % Change
USA 18,092,000 25,449,000 (7,357,000) (28.9%)
Norway 1,255,000 754,000 501,000 66.5%
France 9,269,000 9,935,000 (666,000) (6.7%)
Total Product
Sales Revenue $28,616,000 $36,138,000 $(7,522,000) (20.8%)
USA
The Fiscal Year 2002 USA sales decrease was driven by decreased sales of $5,029,000 from the On Board Services channel, $3,360,000 from the Foodservice channel, $170,000 from Retail, whereas sales from the Military channel increased by $912,000 and the New Business channel increased by $290,00.
Cuisine Solutions USA Fiscal Year 2002 sales by sales channel were as follows:
FY02 FY01 $ Change % Change
Food Service 5,621,000 8,981,000 (3,360,000) (37.4%)
On Board Services 8,618,000 13,647,000 (5,029,000) (36.9%)
Retail 758,000 928,000 (170,000) (18.3%)
Military 2,282,000 1,370,000 912,000 66.6%
New Business 813,000 523,000 290,000 55.5%
Total $18,092,000 $25,449,000 $7,357,000 (28.9%)
Norway
Net U.S. dollar sales from Norway increased due to the increase of non inter-company sales and due to the strength of the Norwegian kroner versus the U.S. dollar. During Fiscal Year 2002, approximately 68% (FY01: 86%) of the sales from Cuisine Solutions Norway were inter-company sales to the USA and French subsidiaries, and eliminated during financial consolidation. Fiscal Year 2002 gross sales decreased compared to the previous Fiscal Year due to the decreased demand of the Norway product line after the slowdown of the economy.
FY02 FY01 Change % Change
Sales in U.S. Dollars 3,863,000 5,566,000 (1,703,000) (30.6%)
Sales in Norwegian
Kroners 33,829,000 50,421,000 (16,592,000) (32.9%)
Average Exchange Rate 8.757 9.059
The decreased demand of the Norway product line in turn impacted the ability to cover fixed production overhead cost due to the reduction in production. However, all controllable costs in Norway have been managed during Fiscal Year 2002.
France
Total sales from France decreased by 6.7% which was driven by lower sales from the Retail and the On Board Services channel.
FY02 FY01 Change % Change
Sales in U.S. Dollars 9,269,000 9,935,000 (666,000) (6.7%)
Sales in EURO 10,361,000 11,124,000 (763,000) (6.9%)
Average Exchange Rate 1.118 1.120
Cuisine Solutions France had the third consecutive profitable year since the acquisition by Cuisine Solutions 1999. Since the acquisition, the French subsidiary has contributed approximately one and a half million U.S. dollars in cash flow to the Company. In spite of the lackluster economy during Fiscal Year 2002, the French subsidiary reported profitable results and double digit growth in the Foodservice channel in France. Although the overall travel industry suffered declines during the past Fiscal Year, Management credits both the thirty-five hour work week rule and its impact on labor cost in France for the increase in demand for the Foodservice channel as well as aggressive cost control for the delivery of a positive net income in France.
Selling and administration costs decreased by $749,000 from $9,451,000 in Fiscal 2001 to $8,702,000 in Fiscal 2002. Selling expenses as a percentage of sales were 30.4% in Fiscal 2002 versus 26.1% in Fiscal 2001. The percentage increase reflects the impact of lower sales while the dollar expense decrease is attributed to the reduction of sales and administrative staff, compensation plans tied to top line sales and profit contribution and improved cost controls. However, Fiscal Year 2002 includes significant extraordinary expenses related to the restructuring of the sales departments ($268,000) and initial expenses related to the lawsuit against the Brazilian Joint Venture partner ($45,000).
Accounts Receivables at the end of the Fiscal Year 2002 have been decreased $1,644,000 or 33.4% to $3,272,000 from $4,916,000 as at the end of last Fiscal Year due to the aggressive collection management. Furthermore, inventory at the end of Fiscal 2002 decreased $1,982,000 or 31.0% to $4,419,000 from $6,401,000 as at the end of Fiscal 2001 due to the well executed plan to minimize the effect of cash tied up in inventory and due to improved co-ordination with production planning. As a result, the Company experienced a significant increase in its liquidity in Fiscal Year 2002.
The Company begun to amortize the capitalized web site development cost for FIVELEAF.com(TM) in accordance with SOP No. 98-1 after the web site was launched in February 2002. The Company impaired the remaining balance of the capitalized cost totaling $619,000 in accordance with SFAS No. 144, 'Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,' due the uncertainty with respect to a long-term sales forecast as of June 29, 2002. However, the FIVELEAF product line has profitable margins and plays an important role in the Company's business and marketing strategy. Cuisine Solutions experienced positive feedback and interest in these high quality products from customers throughout all sales channels after the launch of the product line.
At the end of Fiscal Year 2002, the Company has filed a civil lawsuit in the Federal District Court of Brasilia against the controlling partner in the joint venture, Cuisine Solutions do Brasil Ltda, as a result of the Brazilian partner's failure to disclose financial information and operating results of Cuisine Solutions do Brasil Ltda to Cuisine Solutions Inc. according to both the joint venture agreement and Brazilian law. The Company claims full recovery of the amounts owed to Cuisine Solutions, Inc. by Cuisine Solutions do Brasil Ltda, including the loan of $763,000 in addition to the management and administrative fees of approximately $895,000 according to the Joint Venture agreement with the Brazilian Partner. Due to the early stage of the filed lawsuit, management cannot predict a judgment from this lawsuit before the end of Fiscal Year 2003.
In June 2001 Cuisine Solutions entered into a joint venture agreement with a Euro-Chilean partnership that will build a processing facility in Chile to produce a wide range of seafood items. This facility tactically and vertically integrates the Company as a leading source of high quality seafood items. By strategically bypassing the current white fish supply chain that includes brokers and related costs, as well as product yield loss from the current shipping process, the Company will secure and produce an unprecedented quality, finished product with a production facility located right at the source of the raw materials. Cuisine Solutions anticipates the facility to be up and running by the end of Fiscal 2003.
Although the Company faces the same economic challenges addressing the market place today, Cuisine Solutions has been able to reduce selling and administrative expenses and build a unique platform for large-scale global expansion and competitive positioning for today and tomorrow's market place. Company Management believes that the Airlines and Hotel/Banquet industry will face similar cost reduction pressure during Fiscal 2003, but these pressures may enhance the value of the Cuisine Solutions product line since lower product yield loss, lower labor cost and increased flexibility are some of the benefits customers realize when using Cuisine Solutions products versus making them from scratch.
The Company initiates its Fiscal Year 2003 objectives with increased cash resources from June 2001, an aggressive competitive position in the Airlines industry, renewed efforts to pursue the Hotel/Banquet industry, and a planned national roll-out of the Cuisine Solutions product line to the Retail industry.
Management is confident that Cuisine Solutions will continue to create sustainable value to the rapidly changing Foodservice Industry and to our shareholders and will take advantage of its ability to constrict operations and related expenditures until the market completely recovers. |
