Cuisine Solutions, Inc. (OTC Bulletin Board: CUIS), announced a loss of $861,000 for the fiscal year 2001 compared with the previous years loss of $1,980,000, an improvement of $1,119,000. Year to date 2001 revenue of $36,138,000 increased by 0.9% compared with year to date 2000 sales of $35,810,000.
During fiscal year 2001, the Company successfully executed the fiscal year objectives of global expansion through European market place penetration, attending to the management issues in the Norwegian facility and creating a successful business platform to accommodate our large-scale, global market opportunities. Fiscal year 2001 revenues by country for each of the Cuisine Solutions subsidiaries are as follows:
Fiscal 2001 Fiscal 2000 $Change %Change
USA 25,449,000 24,194,000 1,255,000 5.2%
Norway 754,000 2,982,000 (2,228,000) (74.7 %)
France 9,935,000 8,634,000 1,301,000 15.1%
Total Product Sales
Revenue $36,138,000 $35,810,000 $328,000 0.9%
The fiscal year 2001 USA sales increase was driven by increased sales of $779,000 from the Military channel, $497,000 from the Foodservice channel, $428,000 from Retail, $117,000 from the On Board Services channel, whereas sales from the New Business channel decreased by $566,00.
USA Fiscal Year 2001 Sales by Sales Channel
FY01 FY00 $ Change % Change
Food Service 8,981,000 8,484,000 497,000 5.9%
On Board Services 13,647,000 13,530,000 117,000 0.9%
Retail 928,000 500,000 428,000 85.6%
Military 1,370,000 591,000 779,000 131.8%
New Business 523,000 1,089,000 (566,000) (52.0%)
Total $25,449,000 $24,194,000 $1,255,000 5.2%
US dollar sales from Norway decreased as new sales from Norway are now managed through the French subsidiary Cuisine Solutions France, and the weakening of the Norwegian kroner versus the US dollar. Approximately 86% of the sales from Cuisine Solutions Norway are inter-company sales to the USA and French subsidiaries, and eliminated during financial consolidation. The weaker Norwegian kroner has resulted in a lower USA cost of goods.
FY01 FY00 $ Change % Change
Sales in US Dollars 5,566,000 6,098,000 (532,000) (8.7%)
Sales in Norwegian
Kroners 50,421,000 49,804,000 617,000 1.2%
Rate 9.059 8.167
The Norwegian subsidiary was restructured and returned positive results during the year. This facility is now ready for targeted and expanded production opportunities due to the focused efforts of the new management team put in place during fiscal year 2001.
Sales from France increased by 28.9%, but the US dollar equivalent does show an increase by 15.1% due to the exchange rate fluctuation. The majority of the sales increase was driven by sales from the retail channel of premium private label packaged prepared meals. Management anticipates continued double-digit growth rates from the retail sales channel in France for fiscal year 2002.
FY01 FY00 $ Change % Change
Sales in US Dollars 9,935,000 8,634,000 1,301,000 15.1%
Sales in French
Francs 72,969,000 56,620,000 16,349,000 28.9%
Rate 7.345 6.558
Gross margins as a percent of sales increased to 25% for fiscal 2001 compared to 20% in fiscal 2000, and 24% of fiscal 1999. The current year increase is attributed to decreased cost of salmon products purchased from Norway, which experienced significant price and supply problems during fiscal year 2000. The Company achieved other cost reductions through alternate sources of supply and product mix changes.
Selling and administration costs as a percentage of sales were 26.1% in fiscal 2001, 26.3% in fiscal 2000 and 30.2% in fiscal 1999. The percentage decrease in selling expenses from fiscal 2000 versus fiscal 2001 reflects the impact of higher sales growth while the dollar expense growth is attributed to additional sales staff and compensation plans tied to top line sales. Management has changed the sales compensation incentive programs to be based upon profit contribution rather than top line sales in fiscal 2001. The purpose is to create the incentives for high margin product mix sales and expense control.
General administrative expenses slowly grew each year due to additional staffing requirements to support the growing business, but have decreased each year as a percent of sales due to efficiency and cost controls.
Accounts Receivables at the end of the fiscal year 2001 have been decreased $945,000 or 16.1% to $4,916,000 from $5,861,00 as at the end of last fiscal year due to the aggressive collection management. Furthermore, inventory at the end of the FY 2001 increased $1,218,000 or 23.5% to $6,401,000 from $5,183,000 as at the end of the FY 2000 primarily due to the second quarter result to prepare for higher growth and test capacity limitation of the USA facility. However, the improved inventory and production planning management resulted in the consistent reduction of inventory during the following quarters.
In May 2001, Cuisine Solutions began production at their Brazilian facility via our joint venture resulting in the realization of lower poultry and beef costs available in the Brazilian market. The Brazilian facility has created competitive pricing, expanded capacity and unique logistical opportunities, which have opened new markets for Cuisine Solutions’ products in South America and Europe. The Brazilian project included the successful completion of construction as well as the strategic attainment of European Community approval to produce and ship product to our European marketplace.
Fiscal year expansion also included the signing of a joint venture agreement to build a facility in Chile to specialize in seafood production. 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.
Although the Company faces the same economic challenges addressing the market place today, Cuisine Solutions has been able to increase sales and margins, 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.
Management expects continuous growth of the business but is uncertain of the impact the slowdown in the US economy, especially after the consideration of the September 11 terrorist attacks in New York and Virginia, will have on the USA sales.
While there are increased concerns in the marketplace, Management of Cuisine Solutions will continue the execution of its strategic plans for fiscal 2002, and remain pro-active during this period of uncertainty, to continue to build value for our shareholders.