FZN Cuisine Solutions

Cuisine Solutions, Inc. (AMEX:FZN), a leading premium, fully-cooked, frozen food manufacturer, today announced results for its third quarter of fiscal year 2008. Net sales increased 5.6%, to $25.2 million, from the previous year third quarter sales of $23.9 million. Sales grew in four of five key channels as compared to the same quarter of fiscal year 2007. National Restaurant Chain continued to expand with sales up 35.4%, to $3.1 million, reflecting continued product penetration in larger chain restaurants. On Board Services sales also increased 15.4%, to $6.1 million,�from sales to additional new airlines and continued product expansion in existing carriers. Military sales increased 15.3%, to $5.9 million due to increased orders. Food Service sales were�up 5.2%, to $4.3 million, from increased purchases from existing and new customers. New product sales were $5.9 million from continued innovation, an increase of 4.7% compared to the same quarter of fiscal year 2007. Third quarter fiscal year 2008 net loss was $410,000, a decrease of $8.2 million from the previous fiscal year third quarter net income of $8.6 million. The primary difference was a prior year $7.9 million tax benefit related to a change in valuation allowance. The remaining decrease in net income was 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, most notably a charge for $590,000 related to costs associated with personnel reductions in France. For the third quarter of fiscal year 2008, our gross margin decreased to 19.6% from 21.1% in the same quarter of the prior year. Although we instituted price increases across all sales channels, manufacturing costs in France continue to be a challenge. We are working closely with France to seek cost savings from improved production efficiencies and procurement reductions for raw material costs. In the third quarter of fiscal year 2008, research and development expenses increased 10.3%, or $30,000, due to salaries for additional staff; selling and marketing expenses increased 3.1%, or $73,000, due to consulting costs and higher promotion costs; and general and administrative expenses increased 68.2%, or $1,194,000, due primarily to a charge for costs associated with personnel reductions in France of $590,000, an increased allowance for bad debt and increased public company expenses. The financial statements attached below are without footnotes so readers should obtain and carefully review our Form 10-Q for the quarter ended April 5, 2008, 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. Comparison of the sixteen weeks and forty weeks ended April 5, 2008 and March 31, 2007, respectively (Unaudited) � Sixteen weeks ended � Forty weeks ended April 5, � March 31, � % April 5, � March 31, � % 2008 2007 Change 2008 2007 Change By Geographic Region USA Sales $ 16,641,000 $ 16,401,000 1.5 % $ 43,932,000 $ 42,708,000 2.9 % Europe Sales 8,570,000 7,268,000 17.9 % 22,169,000 18,362,000 20.7 % Rest of World Sales � 34,000 � 229,000 -85.2 % � 362,000 � 282,000 28.3 % Net Sales $ 25,245,000 $ 23,898,000 5.6 % $ 66,463,000 $ 61,352,000 8.3 % � Existing products $ 19,333,000 $ 18,253,000 5.9 % $ 52,938,000 $ 48,129,000 10.0 % New products � 5,912,000 � 5,645,000 4.7 % � 13,525,000 � 13,223,000 2.3 % Net Sales $ 25,245,000 $ 23,898,000 5.6 % $ 66,463,000 $ 61,352,000 8.3 % � By Channel On Board Services $ 6,139,000 $ 5,319,000 15.4 % $ 18,108,000 $ 14,081,000 28.6 % Food Service 4,316,000 4,102,000 5.2 % 10,943,000 10,196,000 7.3 % Retail 5,789,000 7,104,000 (18.2 %) 17,701,000 19,593,000 (9.5 %) Military 5,862,000 5,086,000 15.3 % 12,881,000 13,585,000 (5.2 %) National Restaurant Chain � 3,139,000 � 2,287,000 35.4 % � 6,830,000 � 3,897,000 73.9 % Net Sales $ 25,245,000 $ 23,898,000 5.6 % $ 66,463,000 $ 61,352,000 8.3 % CUISINE SOLUTIONS, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) � � Sixteen Weeks Ended Forty Weeks Ended April 5, � March 31, April 5, � March 31, 2008 2007 2008 2007 Net sales $ 25,245,000 $ 23,898,000 $ 66,463,000 $ 61,352,000 Cost of goods sold � 20,294,000 � � 18,851,000 � � 53,161,000 � � 47,353,000 � Gross margin 4,951,000 5,047,000 13,302,000 13,999,000 Research and development 320,000 290,000 819,000 647,000 Selling and marketing 2,451,000 2,378,000 6,300,000 6,067,000 General and administrative � 2,946,000 � � 1,752,000 � � 6,421,000 � � 4,372,000 � (Loss) income before non-operating expense and income taxes � (766,000 ) � 627,000 � � (238,000 ) � 2,913,000 � Non-operating income (expense) Interest expense (149,000 ) (29,000 ) (331,000 ) (168,000 ) Other income, net � 141,000 � � 11,000 � � 184,000 � � 27,000 � Total non-operating expense � (8,000 ) � (18,000 ) � (147,000 ) � (141,000 ) (Loss) income before income tax (774,000 ) 609,000 (385,000 ) 2,772,000 Provision for income tax benefit � 364,000 � � 7,889,000 � � 207,000 � � 7,879,000 � (Loss) income from continuing operations before discontinued operations � (410,000 ) � 8,498,000 � � (178,000 ) � 10,651,000 � Discontinued operations Net gain from dissolution of CS Norway � � � � 116,000 � � � � � 116,000 � Net gain from discontinued operations � � � � 116,000 � � � � � 116,000 � NET (LOSS) INCOME $ (410,000 ) $ 8,614,000 � $ (178,000 ) $ 10,767,000 � Per common share data Basic earnings: From continuing operations $ (0.02 ) $ 0.51 $ (0.01 ) $ 0.64 From discontinued operations � 0.00 � � 0.01 � � 0.00 � � 0.01 � Net (loss) income $ (0.02 ) $ 0.52 $ (0.01 ) $ 0.65 Diluted earnings: From continuing operations $ (0.02 ) $ 0.46 $ (0.01 ) $ 0.58 From discontinued operations � 0.00 � � 0.01 � � 0.00 � � 0.01 � Net (loss) income $ (0.02 ) $ 0.47 $ (0.01 ) $ 0.59 Weighted average shares outstanding-basic 16,950,904 16,471,879 16,787,866 16,452,149 Common stock equivalents � � � � 1,960,536 � � � � � 1,913,645 � Weighted average shares outstanding-diluted � 16,950,904 � � 18,432,415 � � 16,787,866 � � 18,365,794 � CUISINE SOLUTIONS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) � � April 5,2008 June 30,2007 ASSETS Current assets Cash and cash equivalents $ 209,000 $ 546,000 Trade accounts receivable, net 8,144,000 5,864,000 Inventory, net 13,357,000 15,081,000 Prepaid expenses 656,000 521,000 Accounts receivable, related parties 12,000 57,000 Deferred tax assets, current portion 605,000 � Other current assets � 525,000 � 638,000 TOTAL CURRENT ASSETS 23,508,000 22,707,000 Fixed assets, net 14,013,000 12,520,000 Deferred tax assets, net 6,740,000 7,069,000 Investments, non-current 375,000 375,000 Restricted cash 118,000 66,000 Other assets � 94,000 � 83,000 TOTAL ASSETS $ 44,848,000 $ 42,820,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 7,809,000 $ 6,999,000 Line-of-credit 2,079,000 1,811,000 Accrued payroll and related liabilities 1,780,000 2,486,000 Current portion of long-term debt � 882,000 � 777,000 TOTAL CURRENT LIABILITIES 12,550,000 12,073,000 Long-term debt, less current portion 5,791,000 5,523,000 Asset retirement obligation 601,000 499,000 Deferred rent � 154,000 � 100,000 TOTAL LIABILITIES � 19,096,000 � 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, 17,130,591 and 16,623,191 shares issued and outstanding at April 5, 2008 and June 30, 2007, respectively. 171,000 166,000 Additional paid-in capital 28,415,000 27,934,000 Accumulated deficit (4,761,000) (4,583,000) Accumulated other comprehensive income Cumulative translation adjustment � 1,927,000 � 1,108,000 TOTAL STOCKHOLDERS' EQUITY � 25,752,000 � 24,625,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 44,848,000 $ 42,820,000 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.