Cuisine Solutions announced a net loss of US$1.477m for the second quarter of fiscal 2002.

The significant loss was due to the decline in US sales, which in turn impact distribution/storage costs, and the ability to cover fixed production overhead costs due to the reduction in production. In addition to the decrease in sales demand, the Company recorded an additional recognition of US$100,000 of losses in equity from the investment in Brazil.

Revenue in the second quarter 2002 decreased from US$9.463m to US$6.235m, a 34.1% decrease compared to the previous year due to a sales decline in the core sales channels On Board Services and Foodservice in the USA.

The second quarter of fiscal year 2002 revenues by country for each of the Cuisine Solutions subsidiaries were as follows:

                     Q2 Fiscal 2002   Q2 Fiscal 2001    $Change      %Change

    USA                $3,812,000      $6,937,000    $(3,125,000)   (45.1%)
    Norway                144,000         143,000           1,000      0.7%
    France              2,279,000       2,383,000       (104,000)    (4.4%)
    Total Product
     Sales Revenue     $6,235,000      $9,463,000    $(3,228,000)   (34.1%)

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The sales decline was driven by reduced travel and related reduced demand from hotels, banquets and casinos. The weeks following 11 September resulted in extremely limited business travel, a major source of Cuisine Solutions sales revenue via sales to airlines and the hotel banquet industries.


Cuisine Solutions USA Fiscal Year 2002 second quarter sales by sales channel were as follows:

                          Q2 FY02      Q2 FY01        $Change        %Change

    Food Service        $1,372,000    $2,667,000    $(1,295,000)    (48.6%)
    On Board Services    1,442,000     3,704,000     (2,262,000)    (61.1%)
    Retail                 229,000       175,000          54,000      30.9%
    Military               583,000       245,000         338,000     138.0%
    New Business/NRC       186,000       146,000          40,000      27.4%
    Total               $3,812,000    $6,937,000    $(3,125,000)    (45.1%)


The majority of Norwegian sales, approximately 74.5%, are inter-company sales to the USA and France. During the second quarter of fiscal 2002, total Norwegian sales volume decreased 62.3% to 4,962,000 Norwegian Kroner in the second quarter of fiscal 2002 from 13,143,000 Norwegian Kroner during the second quarter of fiscal 2001. The sales amount converted to US dollars amounted to US$564,000 in the second quarter of fiscal 2002 and US$1.41m during the second quarter of fiscal 2001 before the elimination of inter- company balances. 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 second quarter of fiscal year 2002.

Cuisine Solutions Norway fiscal year 2002 compared to fiscal year 2001 second quarter sales before inter-company eliminations in both US dollars and Norwegian Kroner were as follows:

                         Fiscal 2002  Fiscal 2001
                           Norway        Norway      Change         %Change
                          Q2 Sales      Q2 Sales
    Sales in
     US Dollars            564,000     1,410,000    (846,000)       (60.0%)
    Sales in
     Norwegian Kroner    4,962,000    13,143,000  (8,181,000)       (62.3%)
    Average Exchange
     Rate                    8.798         9.321



The total fiscal year 2002 second quarter sales during this period in US dollars were US$2.279m versus previous year sales of US$2.383m, a reported decrease of US$104,000 or 4.4%. Sales in EURO during the same period were €2.538m versus €2.772m respectively, a decrease of 8.4%. The differences in percent ratios are due to the US$-€ fluctuations in the exchange rate for the respective periods. Sales were lower for the second quarter of fiscal 2002 due to lower Retail and On Board Services sales, but the Company experienced continued growing demand in the foodservice sector.

Cuisine Solutions France fiscal year 2002 second quarter sales compared to prior year second quarter and respective exchange rates are as follows:

                        Fiscal 2002   Fiscal 2001
                           France        France       Change         %Change
                          Q2 Sales      Q2 Sales
    Sales in
     US Dollars          2,279,000     2,383,000    (104,000)        (4.4%)
    Sales in
     EURO                2,538,000     2,772,000    (234,000)        (8.4%)
    Average Exchange
     Rate                    1.114         1.163

Gross margins decreased in the USA due to lower production and fixed cost absorption as well as increased distribution costs as sales were drastically lower for a six week period after the September 11 terrorist attacks resulting in higher inventories. Inventory at the end of the second quarter of FY 2002 increased US$153,000 or 2.4% to US$6.554m from US$6.401m 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 decreased US$223,000 in the second quarter of fiscal 2002 versus the second quarter of fiscal 2001. Expenses as a percent of sales were 30.4% in the second quarter of fiscal 2002 versus 22.4% in fiscal 2001. The decrease in the dollars spent was due to the significant reduction in overhead cost as well as decreased travel expenses. Marketing investments increased to increase visibility and prospects for the holiday retail and banquet season. Management does continue to push for reduction of selling and administrative expenses and initiated further significant cost reduction projects subsequently to the sales decrease in the USA.

Fiscal year 2002 second quarter Accounts Receivables have decreased US$1.09m or 22.4% to US$3.817m from US$4.916m 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. Management is confident that Cuisine Solutions will continue to create sustainable value to the consolidating industry and to our shareholders and will take advantage of its ability to constrict operations and related expenditures until the market recovers.

The company will launch their new FiveLeaf luxury line of prepared entrees, accompaniments, and desserts to consumers via a national introduction in February 2002. These products have been created by an extraordinary consortium of the most distinguished chefs in the US and will be distributed through Omaha Steaks. Cuisine Solutions will produce and sell the product to Omaha Steaks through a subsidiary company. Omaha Steaks will manage all customer service, logistics, fulfillment and the web site. Consumers will be able to purchase these FiveLeaf(TM) products over the telephone via call center, by catalog, and through the Web site. Ultimately they will also be available in retail stores, beginning with the retail sites owned and operated by Omaha Steaks throughout the US.