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Issue Date: Vol. 42, No. 3 / March 25, 2002 - April 24, 2002, Posted On: 3/25/2002


Van Houtte

Despite the impact of the weakened economy on the workplace services market over much of the past year, Van Houtte is moving forward with its plans to position itself as an OCS leader and reinforce its solid foundations  for substantial sales growth once the market rebounds.

For the 12-week period ended January 5, 2002, the performance of Van Houtte Inc. varied from segment to segment. Coffee shipments, and operating income from roasting operations, exceeded the company's objectives. Although Coffee Services operations also advanced, this segment failed to meet targets. The company attributes this to the significant job losses recorded in the U.S. and Canada in recent months. For the quarter, the company's vending and brewer manufacturing operations declined.

Third-quarter net earnings totaled $5.3 million, compared with $5.7 million recorded in the year-earlier period. Earnings per share for the quarter amounted to $0.25 ($0.24 fully diluted) against $0.26 (basic and fully diluted) a year earlier.

Year to date, net earnings amounted to $16.9 million, a 7.4% increase over the corresponding year-earlier nine months, while earnings per share amounted to $0.78 ($0.77 fully diluted), an increase of 7.2% over the year-ago period.

Van Houtte posted consolidated sales of $74.6 million for the 12 weeks ended January 5, 2002, a 12.7% increase over the equivalent prior-year quarter.

The Coffee Services division recorded sales of $45.2 million, an increase of 24%. That increase resulted primarily from acquisitions made last year and during this quarter, specifically USRefresh OCS operations and The Alexandria Group and Alexandria Coffee Services. The growth of the Coffee Services division has been steady, but did not meet corporate targets nor maintain the pace set at the beginning of the year. Offices have been hit hard by the economic slowdown. Total employment in the U.S. declined every month during the last five months of 2001, a net loss of 1.2 million jobs. This sort of contraction has not been seen since 1991, Van Houtte observed. The information technology industries important to Van Houtte's Coffee Services operations suffered many of these job losses.

Programs launched by Van Houtte during the fall of 2001 are expected to   bolster Coffee Services sales. The programs, which capitalize on quality service, the launch of the "Van Houtte" brand and the rollout of  Keurig coffee brewers should have a positive impact on the next few quarters.

Installed single-cup brewing equipment belonging to Van Houtte totaled 36,722 machines on January 5, 2002,  600 fewer machines than at the end of the previous quarter.

After the end of the quarter, Van Houtte completed its acquisition of a 27.7% interest in Keurig Inc. (see related story on this page). Van Houtte also acquired Coffee for a Purpose, Inc. (Denver, CO), a coffee service that sells approximately 125,000 lbs. of coffee every year. The company will be integrated with the Filterfresh branch in Denver.

Van Houtte's manufacturing and marketing division recorded sales of $38.1 million, compared with $39 million a year earlier. This leveling off reflects a decrease in sales by the vending operations and by VKI Technologies, which manufactures single-cup brewers, both dependent on the level of activity in the workplace. Specifically, VKI sales suffered the consequences of the slowdown of sales in the Coffee Services division, its primary customer.

"The economic situation requires that we remain circumspect about the outlook for the last quarter," said Van Houtte president and chief executive officer Paul-André Guillotte. "It bears pointing out, however, that while lower than our ambitious objectives, growth and profitability are there; cash flow is substantial and increasing; and the company's financial position remains sound. We therefore expect to benefit from this context to increase our market shares, in order for us to be ready to take full advantage of the economic recovery."

Founded in 1919, Van Houtte is one of North America's leading gourmet coffee roasters, marketers and distributors.


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