Struggling Cuisine Solutions Pursues Plan to Go Private

Cuisine Solutions, an Alexandria-based provider of frozen and prepared meals to airlines and restaurants, is pursuing a plan to return itself to private ownership to save on the expenses of being a publicly traded company.

As its customers have struggled during the recession, Cuisine Solutions' sales and profits have slipped, leading it to announce layoffs earlier this year. Three and a half years ago, the company's stock traded above $10 per share; on Thursday, it closed at $1.15.

Now, seeking to further reduce costs, the company hopes to persuade investors to approve a proposal first announced in June to return to private ownership and voluntarily delist its shares from the NYSE Amex.

To bring the number of shareholders to under 300, which is required for the company to go private, the board has proposed a 1-for-5,000 reverse stock split and is offering to pay out $1.30 per share to investors who own fewer than 5,000 shares. Cuisine Solutions has scheduled a special shareholders meeting next Wednesday to vote on the plan.

The firm's chief financial officer, Ronald Zilkowski, said that he expects the measure to win shareholder approval. As a privately held company, he said, Cuisine Solutions would be able to focus more exclusively on its core business instead of regularly gearing up for its next quarterly report. What's more, he said, the company would save at least $800,000 a year in compliance-related costs by "going dark."

Cuisine Solutions, which employs about 300 people, was founded in 1972 as a wholesale baker of French bread and became a publicly traded company two years later. In the late 1980s, it began developing a line of frozen foods for the U.S. market. And in the 1990s it expanded internationally with the addition of production facilities in France and other overseas locations.

The economic downturn has hurt the company's business. As airlines cut back on the meals they offer passengers and as people travel less frequently, Cuisine Solutions' sales of in-flight meals have declined by more than 22 percent so far this fiscal year compared with a year ago, while sales of products for national restaurant chains have fallen 44.2 percent. Total sales this fiscal year have dropped 11.5 percent, and the company's loss in the first three quarters of fiscal 2009 widened to $401,000 from $178,000 during the comparable period a year earlier.

To cope with the recession, the company said in January that it would cut an unspecified number of jobs, mostly in the United States. It said the cuts would generate as much as $2 million in annual savings.

Because of its relatively small size, Cuisine Solutions does not receive much attention from industry analysts, but the company's larger competitors have been reporting similarly bleak outlooks this year. Los Angeles-based Overhill Farms, for example, reported comparable slowdowns in its businesses and said this month that revenue has been down 13 percent so far this year.

One change in store for Cuisine Solutions may be a shift away from consumer offerings, Zilkowski said. The company produces a line of premium frozen foods sold at chain stores such as Costco, but retail sales are down more than 20 percent this year.

"Consumers find the product interesting," said Zilkowski, "but it is in the high end of their freezer case. We believe it's going to be a while before that market comes back, so we're redirecting our efforts."

There's one promising business in the company's portfolio, however: Sales to the military were up 39 percent for the first three quarters of this fiscal year. The company hopes such revenue sources will carry it until the economy springs back.

"We believe there's future value in this thing, or we wouldn't be doing it," said Zilkowski.