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Cuisine Solutions, Inc. Announces Second Quarter 2008 Financial Results
ALEXANDRIA, Va.-(Business Wire)-January 23, 2008 - Cuisine Solutions, Inc. (AMEX:FZN), a leading premium, fully-cooked, frozen food manufacturer, today announced results for its second quarter of fiscal year 2008. Net sales increased 2%, to $23.7 million from the previous year second quarter sales of $23.3 million. Sales grew in three key channels as compared to the same quarter of fiscal year 2007. National Restaurant Chains led the way with sales up 167%, to $2.2 million, reflecting continued product acceptance in larger chain restaurants. On Board Services sales also increased 37.2%, to $6.4 million, from sales to additional new airlines and continued product expansion in existing carriers. Food Service sales were up 8.6%, to $4.0 million, from increased purchases from existing and new customers. New product sales were $4.0 million from continued innovation, a decrease of 12.5% compared to the same quarter of fiscal year 2007.
Second quarter fiscal year 2008 net income was $225,000, a decrease of $1.4 million from the previous fiscal year second quarter net income of $1.6 million. The decrease in net income was primarily due to lower gross margins associated with higher raw material costs, fuel surcharges, continued increased costs in facility expansions and increased costs associated with new production introductions, particularly in France, and higher general and administrative expenses. For the second quarter of fiscal year 2008, our gross margin decreased to 20.2% from 24.9% in the same quarter of the prior year. As announced last quarter, we started to institute price increases across all sales channels that we expect to be fully implemented by late in the third quarter. We also continue to seek other cost savings such as improved production efficiencies and reduced raw material costs in our manufacturing and purchasing departments, particularly in France. In the second quarter of fiscal year 2008, research and development expenses increased 42.9%, or $79,000, due to salaries for additional staff; selling and marketing expenses decreased 3.8%, or $91,000, due primarily to fewer in store demonstrations, offset by higher promotion costs; and general and administrative expenses increased 18.3%, or $274,000, due primarily to additional staff and salary increases, and insurance increases.
"After September 11 we consciously expanded into the 3 new channels of Military, Retail and National Restaurant Chains to balance our previous dependency on the travel and hospitality channels," said Stanislas Vilgrain, president and chief executive officer. "After several years of steady growth we have seen two of these new channels, Military and Retail, suffer some setbacks and performance changes quarter to quarter. We have expanded our selling and marketing efforts to these channels and we remain excited about the Company's direction and the continued growth in the On Board channel as we acquire new airline customers as well as the National Restaurant Chains channel where we continue to expand our relationship and plan to place products with several new national restaurant chains soon."
"Our margin issues remain a concern and our attention is shifting toward France. In the U.S. the price increases are starting to make a difference, but in France we are behind in our price increases and we still face production inefficiencies. Our France effort is centered on production and procurement improvements where we hope to see quicker gross margin improvement. Our selling and marketing, general and administrative expenses, while still up, are normalizing and our new enterprise resource planning software implementation is progressing. We are confident about the upcoming remainder of the year as our education efforts with National Restaurant Chains and other customers are starting to pay off with increased sales leads and development samples. All of these efforts lead us to believe that our product strategy of exceptional, non-comparable products along with our safety and efficiency benefits is being recognized throughout the industry."
The financial statements attached below are without footnotes so readers should obtain and carefully review our Form 10-Q for the quarter ended December 15, 2007, including the footnotes to the financial statements contained therein. We will file the Form 10-Q with the Securities and Exchange Commission ("SEC") and the Form 10-Q can be retrieved from the SEC's website at www.sec.gov or our website at www.cuisinesolutions.com. -0- *T Unaudited Comparison of the twelve weeks and twenty-four weeks ended December 15, 2007 and December 9, 2006, respectively Twelve weeks ended December 15, December 9, % 2007 2006 Change By Geographic Region USA Sales $15,692,000 $16,510,000 -5.0% Europe Sales 7,766,000 6,701,000 15.9% Rest of World Sales 280,000 37,000 656.8% —————— —————- Net Sales $23,738,000 $23,248,000 2.1% Existing products $19,732,000 $18,668,000 5.7% New products 4,006,000 4,580,000 -12.5% —————— —————- Net Sales $23,738,000 $23,248,000 2.1% By Channel On Board Services $ 6,358,000 $ 4,634,000 37.2% Food Service 3,999,000 3,681,000 8.6% Retail 8,069,000 9,434,000 (14.5%) Military 3,087,000 4,666,000 (33.8%) National Restaurant Chain 2,225,000 833,000 167.1% —————— —————- Net Sales $23,738,000 $23,248,000 2.1% Twenty-four weeks ended December 15, December 9, % 2007 2006 Change By Geographic Region USA Sales $27,291,000 $26,306,000 3.7% Europe Sales 13,599,000 11,094,000 22.6% Rest of World Sales 328,000 54,000 507.4% —————— —————- Net Sales $41,218,000 $37,454,000 10.0% Existing products $33,605,000 $30,750,000 9.3% New products 7,613,000 6,704,000 13.6% —————— —————- Net Sales $41,218,000 $37,454,000 10.0% By Channel On Board Services $11,969,000 $ 8,762,000 36.6% Food Service 6,627,000 6,094,000 8.7% Retail 11,912,000 12,489,000 (4.6%) Military 7,019,000 8,499,000 (17.4%) National Restaurant Chain 3,691,000 1,610,000 129.3% —————— —————- Net Sales $41,218,000 $37,454,000 10.0% *T -0- *T CUISINE SOLUTIONS, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) ————————————- ————————————- Twelve Weeks Ended Twenty Four Weeks Ended ————————————- ————————————- December 15, December 9, December 15, December 9, 2007 2006 2007 2006 —————— —————— —————— —————— Net sales $23,738,000 $23,248,000 $41,218,000 $37,454,000 Cost of goods sold 18,934,000 17,466,000 32,867,000 28,502,000 —————— —————— —————— —————— Gross margin 4,804,000 5,782,000 8,351,000 8,952,000 —————— —————— —————— —————— Research and development 263,000 184,000 499,000 357,000 Selling and marketing 2,314,000 2,405,000 3,849,000 3,689,000 General and administrative 1,775,000 1,501,000 3,475,000 2,620,000 —————— —————— —————— —————— Income before non- operating expense and income taxes 452,000 1,692,000 528,000 2,286,000 —————— —————— —————— —————— Non-operating income (expense) Interest expense (101,000) (68,000) (182,000) (139,000) Other income, net 27,000 8,000 43,000 16,000 —————— —————— —————— —————— Total non- operating expense (74,000) (60,000) (139,000) (123,000) —————— —————— —————— —————— Income before income tax 378,000 1,632,000 389,000 2,163,000 Provision for income tax expense (153,000) (4,000) (157,000) (10,000) —————— —————— —————— —————— NET INCOME $ 225,000 $ 1,628,000 $ 232,000 $ 2,153,000 —————— —————— —————— —————— Per common share data Basic earnings: $ 0.01 $ 0.10 $ 0.01 $ 0.13 Diluted earnings: $ 0.01 $ 0.09 $ 0.01 $ 0.12 Weighted average shares outstanding-basic 16,693,091 16,439,191 16,678,523 16,439,191 Common stock equivalents 1,719,076 1,664,453 1,747,497 1,647,271 —————— —————— —————— —————— Weighted average shares outstanding- diluted 18,412,167 18,103,644 18,426,020 18,086,462 ============ ============ ============ ============ *T -0- *T CUISINE SOLUTIONS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) ————————————- December 15, June 30, 2007 2007 —————— —————— ASSETS Current assets Cash and cash equivalents $ 593,000 $ 546,000 Trade accounts receivable, net 9,444,000 5,864,000 Inventory, net 13,248,000 15,081,000 Prepaid expenses 641,000 521,000 Accounts receivable, related parties 45,000 57,000 Deferred tax assets 1,806,000 — Other current assets 601,000 638,000 —————— —————— TOTAL CURRENT ASSETS 26,378,000 22,707,000 Fixed assets, net 13,612,000 12,520,000 Deferred tax assets, net 5,152,000 7,069,000 Investments, non-current 375,000 375,000 Restricted cash 97,000 66,000 Other assets 71,000 83,000 —————— —————— TOTAL ASSETS $45,685,000 $42,820,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 9,587,000 $ 6,999,000 Line-of-credit 2,058,000 1,811,000 Accrued payroll and related liabilities 1,748,000 2,486,000 Current portion of long-term debt 926,000 777,000 —————— —————— TOTAL CURRENT LIABILITIES 14,319,000 12,073,000 Long-term debt, less current portion 5,425,000 5,523,000 Asset retirement obligation 499,000 499,000 Deferred rent 132,000 100,000 —————— —————— TOTAL LIABILITIES 20,375,000 18,195,000 —————— —————— Commitments and contingencies Stockholders' equity Preferred Stock - $.01 par value, 2,000,000 shares authorized, none issued Common Stock - $.01 par value, 38,000,000 shares authorized, 16,693,091 and 16,623,191 shares issued and outstanding at December 15, 2007 and June 30, 2007 167,000 166,000 Additional paid-in capital 27,992,000 27,934,000 Accumulated deficit (4,351,000) (4,583,000) Accumulated other comprehensive income Cumulative translation adjustment 1,502,000 1,108,000 —————— —————— TOTAL STOCKHOLDERS' EQUITY 25,310,000 24,625,000 —————— —————— TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,685,000 $42,820,000 ============ ============ *T
This press release may include statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regard to the future performance of the Company and the closing of any transaction. Words such as "may," "will," "believes," "anticipates," "intends," "expects," "projects," "estimates" and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans, expectations and beliefs that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended June 30, 2007, as filed with the SEC on September 21, 2007 and in the Company's Form 10-Q for the quarter ended December 15, 2007 filed with the SEC on January 23, 2008. The risk factors set forth in the Form 10-K and the Form 10-Q under the caption "Risk Factors" are specifically incorporated by reference into this press release. Among these risks and uncertainties are the Company's assumptions related to the performance of certain aspects of its business upon which its future financial results may be materially reliant, including, without limitation, projected sales generated by its military, retail, onboard services, food service and national restaurant chain channels, changes in product mix and corresponding changes in average unit price and production efficiencies, and costs related to new facilities and other expenditures incident to plans to future growth. Material changes in any of these or other financial factors may cause actual results to differ materially from any projections made herein. All forward-looking statements are based on current plans, expectations and beliefs and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
