Chiquita Brands International, Inc : Chiquita Reports First Quarter 2012 Results
(Thomson Reuters ONE) -
CHIQUITA REPORTS FIRST QUARTER 2012 RESULTS
Comparable diluted EPS of $0.04; GAAP diluted EPS of ($0.24)
Strategy builds towards long-term growth even through challenging 2012
comparisons
CINCINNATI - May 8, 2012 - Chiquita Brands (NYSE: CQB) today released financial
and operating results for the first quarter of 2012, reporting comparable
income[1] of $2 million, and a GAAP loss of $11 million on net sales of $793
million. For the same period in 2011, the company reported comparable income of
$26 million and GAAP income of $24 million on net sales of $824 million. The
2012 first quarter GAAP loss includes $11 million in charges related to the
previously announced shipping reconfigurations in Europe, the company's
headquarters relocation, and other exit activities.
"Our first quarter results were impacted by near-term challenges in our
business," said Fernando Aguirre, chairman and chief executive officer. "In
Bananas, lower prices in each of our markets impacted both our revenues and
comparable income for the quarter. Our North American banana business remains
stable. In Europe, tight banana supply, particularly from Ecuador, helped
improve local pricing sequentially during the quarter; however, this was not
enough to overcome the impact of higher fuel costs and lower European exchange
rates. The constrained supply availability also hampered expected sales
volumes."
Aguirre added, "We are making progress on our strategic initiatives to take
advantage of long-term growth opportunities, but these initiatives will take
time to show in our results. In Salads, we have adapted our structure and
strategy to be more successful and profitable. We realized significant quality
improvements and improved efficiencies to increase the pace of product
innovation on our branded salads. Our purpose is to improve shareholder value.
Given the inherent complexity of managing a global business from farm to shelf,
we are focusing on leveraging our most important strength, our brand. That
enables us to outsource those elements of our business that are asset intensive
to focus on our unique competitive advantages."
_______________
[1]Comparable basis amounts exclude certain items described below under "Non-
GAAP Measurements and items affecting comparability." All figures in this press
release are for continuing operations, unless otherwise indicated.
2012 FIRST QUARTER SUMMARY
The following table shows adjustments made to "Income (loss) from continuing
operations" and EPS from continuing operations between comparable and GAAP
results. See "Non-GAAP Measurements and items affecting comparability" below for
descriptions of items excluded on a comparable basis, including descriptions of
how these items affect the results of reportable segments.
Income (loss)
per diluted
share[1]
Income (loss)
(in millions, except per
share amounts) 2012 2011 2012 2011
------- ------- --------- -------
Comparable results (Non-GAAP)
$2 $26 $0.04 $0.57
Exit Activities, net of tax (11) - (0.24) -
Incremental non-cash interest
expense (2) (2) (0.05) (0.04)
------- ------- --------- -------
Reported results (GAAP) ($11) $24 $(0.24) $0.52
------- ------- --------- -------
Columns may not total due to rounding.
[1]Shares used for diluted EPS calculation are on an as-reported basis.
Net Sales and Results: Quarterly sales decreased 4 percent year-on-year to
$793 million, primarily due to lower pricing in Bananas, which included a force
majeure surcharge in the year-ago period in North America. Lower sales were also
a result of exits from additional lower margin Other Produce products and of
lower retail value-added salad volume. Comparable results for the period
decreased due to lower revenues and higher fuel costs, partially offset by
reduced sourcing costs as a result of higher productivity.
Cash, Debt and Liquidity: Cash flow from operations was $13 million for the
first quarter 2012 compared to cash used of $26 million for the first quarter
2011. At March 31, 2012, cash and equivalents were $41 million. The Company
borrowed under its revolving credit facility $20 million in April 2012, for
seasonal working capital needs, which it expects to repay by the end of the
second quarter. Working capital demands are typically higher in the first half
of the year.
Bananas: Net sales decreased 3 percent to $520 million on lower dollar-
equivalent pricing in Europe and lower pricing in North America. Comparable
operating income was $25 million for the first quarter of 2012, compared to $56
million in 2011, due to lower pricing and higher total delivered fruit cost.
Although total delivered fruit cost was slightly higher than the 2011 quarter,
it was higher than expected and constrained fruit supply dampened expected
results. In Europe, pricing improved during the quarter, but started from a low
pricing base at the end of 2011.
Salads and Healthy Snacks: Net sales remained consistent year-on-year at $238
million. Comparable operating income declined to $2 million for the first
quarter of 2012, versus $6 million in 2011 on the adverse effect of lower retail
value-added salad sales volume.
OUTLOOK
Although Chiquita expects that 2012 will continue to be a challenging year, the
company is seeking long-term sales and profitability growth by leveraging scale
within its core businesses.
* In its banana business, the company plans to expand within its current North
American and European markets where it has been underrepresented or by
entering new markets.
* The company's Fresh Express salads business is expanding product offerings
to include additional organics, whole head lettuce, and customized SKU's,
including private label products. These actions will allow the company to
participate in a much larger $5 billion total salad market versus the $2
billion branded packaged salad market where it has been selling. The
company will be able to offer these additional products without investing in
new capacity or people, although meaningful volume increases are not
expected for 9-12 months due to the timing of potential customer contracts.
In 2012, the North American banana business remains stable and the European
Banana business is recovering but faces some significant hurdles as year-over-
year comparisons through 2012 will be challenging. The company expects
increased fuel costs and weaker European currency levels to have a significant
impact in year-over-year results. Euro exchange rates in recent periods have
averaged $1.31, compared to the $1.43 and $1.41 realized during the second and
third quarters of 2011, respectively.
In salads, based on the contracts the company has signed thus far, the company
expects volume to be flat or down slightly for the full year. However, for the
second quarter, the company expects that volume will be lower by approximately
15 percent compared to the same quarter a year ago, as it transitions from old
to new contracts.
The company will continue to focus on reducing costs as a way to partially
offset the 2012 challenges and will benefit from reduced corporate expenses, the
previously announced realignment of it salad business and global innovation
organizations and lower interest payments from refinancing and prepayment of
debt in 2011.
These expectations do not include any unforeseen weather, event risks or major
currency fluctuations. Management's estimates of certain financial items are as
follows:
+---------------------------------+---------+-----+----------+
| | Q1 2012 | | FY 2012 |
| (in $ millions) | Actual | | Estimate |
+---------------------------------+---------+-----+----------+
| Capital Expenditures | 12 | | 55-65 |
+---------------------------------+---------+-----+----------+
| Depreciation & Amortization | 16 | | 60-65 |
+---------------------------------+---------+-----+----------+
| Gross Interest Expense[1] | 11 | | 40-45 |
+---------------------------------+---------+-----+----------+
| Net Interest Expense[1] | 10 | | 35-40 |
+---------------------------------+---------+-----+----------+
[1] Interest expense includes the impact of accounting standards that add non-
cash interest expense of $2 million in the first quarter of 2012 and $10 million
for the full year.
CONFERENCE CALL
Chiquita will hold a conference call for investors to discuss its results at
4:30 p.m. EDT today. Access to a live audio webcast is available at
http://investors.chiquita.com. Toll-free telephone access will be available by
dialing 1-877-857-6147 in the United States and +719-325-4802 from international
locations and providing the conference code 8794742. To access the telephone
replay, dial 1-888-203-1112 from the United States and +719-457-0820 from
international locations and enter the confirmation code 8794742.
Contact: Steve Himes, 980-636-5636, shimes(at)chiquita.com; Ed Loyd,
513-784-8935, eloyd(at)chiquita.com.
NON-GAAP MEASUREMENTS AND ITEMS AFFECTING COMPARABILITY
The company reports its financial results in accordance with generally accepted
accounting principles in the United States of America (U.S. GAAP). To provide
investors with additional information regarding the company's results, more
meaningful year-on-year comparisons of the company's financial performance, and
measures that management uses to evaluate the company's performance against
internal budgets and targets, the company reports certain non-GAAP measures as
defined by the Securities and Exchange Commission. Non-GAAP financial measures
should be considered in addition to, and not instead of, U.S. GAAP financial
measures, and may differ from non-GAAP measures that other companies use. The
differences between the U.S. GAAP and non-GAAP financial measures are as
follows:
* Exit Activities:
Shipping reconfiguration: During the third quarter of 2011, the company
initiated a reconfiguration of its European shipping system which is expected to
provide more than $12 million of annualized cost savings, net of transition
costs that include expected losses on subleased vessels removed from service in
2011 and 2012. During the first quarter of 2012, the company recorded an
allowance of $6 million for net losses expected on certain sublease contracts in
the Banana segment. These sublease losses will not recur in 2013 since the
primary leases for vessels expiring in 2012 will not be renewed.
Headquarters relocation: In November 2011, Chiquita announced its plan to
relocate the Company's corporate headquarters from Cincinnati, Ohio to
Charlotte, North Carolina. Of the $30 million of one-time costs expected to be
incurred, the company recognized $4 million ($2 million net of tax) of costs in
the first quarter of 2012, primarily related to severance, and expects an
additional $8 million of other relocation costs to be recognized during the
second quarter of 2012. Relocation is included in Corporate costs for segment
reporting.
Other Exit Activities: During the first quarter of 2012, the company recognized
$4 million ($3 million net of tax) for asset write-off and severance for
discontinued product items, and other restructuring-related severance. Of these
exit activities, $2 million was included in the Salads and Healthy Snacks
segment and $2 million was included in the Other Produce segment.
* Incremental non-cash interest expense on Convertible Notes: Accounting
standards related to convertible debt instruments increased the amount of
reported GAAP interest expense on the company's $200 million of 4.25%
Convertible Senior Notes. In determining earnings on a comparable basis,
the company excludes this additional non-cash interest expense, which was $2
million for each of the first quarters of 2012 and 2011.
ABOUT CHIQUITA BRANDS INTERNATIONAL, INC.
Chiquita Brands International, Inc. (NYSE: CQB) is committed to Improving World
Nutrition, as a leading international marketer and distributor of nutritious,
high-quality fresh and value-added food products - from energy-rich bananas,
blends of convenient green salads, other fruits to healthy snacking products.
The company markets its healthy, fresh products under the Chiquita® and Fresh
Express® premium brands and other related trademarks. With annual revenues of
more than $3 billion, Chiquita employs more than 21,000 people and has
operations in nearly 70 countries worldwide. For more information, please visit
our corporate web site at www.chiquita.com.
FORWARD-LOOKING STATEMENTS
This press release contains certain statements, included in the "2012 Outlook"
section, that are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to a
number of assumptions, risks and uncertainties, many of which are beyond the
control of Chiquita, including: the customary risks experienced by global food
companies, such as prices for fuel and other commodity inputs, currency
exchange rate fluctuations, industry and competitive conditions (all of which
may be more unpredictable in light of continuing uncertainty in the global
economic environment), government regulations, food safety issues and product
recalls affecting the company or the industry, labor relations, taxes, political
instability and terrorism; challenges in implementing the relocation of the
Company's corporate headquarters, and other North American corporate functions,
to Charlotte, North Carolina; unusual weather events, conditions or crop risks;
our continued ability to access the capital and credit markets on commercially
reasonable terms and comply with the terms of our agreements; and the outcome of
pending litigation and governmental investigations involving the company, as
well as the legal fees and other costs incurred in connection with these items.
Any forward-looking statements made in this press release speak as of the date
made and are not guarantees of future performance. Actual results or
developments may differ materially from the expectations expressed or implied in
the forward-looking statements, and the company undertakes no obligation to
update any such statements. Additional information on factors that could
influence Chiquita's financial results is included in its SEC filings, including
its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
# # #
Exhibit A:
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENT
(Unaudited - in millions, except per share amounts)
Quarter Ended
March 31,
----------------------
2012 2011
----------------------
Net sales $ 793 $ 824
----------------------
Operating expenses:
Cost of sales 703 688
Selling, general and administrative 70 77
Depreciation 13 13
Amortization 2 2
Equity in loss of investees 2 2
Relocation costs 4 -
----------------------
Operating income (loss) (0) 42
Interest income 1 1
Interest expense (11) (14)
----------------------
Income (loss) before taxes (10) 29
Income tax (1) (5)
----------------------
Net income (loss) $ (11) $ 24
----------------------
Basic earnings per share $ (0.24) $ 0.53
Diluted earnings per share $ (0.24) $ 0.52
Shares used to calculate basic
earnings per share 45.8 45.3
Shares used to calculate diluted
earnings per share 45.8 46.2
Columns may not total due to rounding.
Exhibit B:
CHIQUITA BRANDS INTERNATIONAL, INC.
OPERATING STATISTICS
(Unaudited - in millions, except for percentages and exchange rates)
Percent
Change
Quarter ended Increase
March 31, (Decrease)
2012 2011 vs. 2011
--------------------------------
Net sales by segment
Bananas $520 $539 (3.4)%
Salads and Healthy Snacks 238 238 (0.3)%
Other Produce 35 47 (24.9)%
--------------------------------
$793 $824 (3.8)%
Comparable operating income
(loss) by segment[1]
Bananas $25 $56 (55.8)%
Salads and Healthy Snacks 2 6 (63.3)%
Other Produce (4) (3) 45.9%
Corporate (10) (17) 42.1%
--------------------------------
$13 $42 (69.6)%
Comparable operating margin by segment
Bananas 4.8% 10.4% (5.7) pts
Salads and Healthy Snacks 0.9% 2.5% (1.6) pts
Other Produce (12.4)% (6.4)% (6.0) pts
SG&A as a percent of sales 8.8% 9.3% 0.5 pts
Company banana sales volume
(40 lb. boxes)
North America 15.8 16.0 (1.3)%
Core European markets[2] 10.5 10.4 1.0%
Mediterranean & Middle East 4.3 3.2 34.4%
Banana Pricing
North America (5.9)%
Core European markets[2]
U.S. Dollar (10.3)%
Local (6.4)%
Mediterranean & Middle East (8.3)%
Retail value-added salads
Volume (12-count cases) 12.3 12.8 (3.9)%
Pricing (0.7)%
Euro average exchange rate, spot (dollars per $1.31 $1.36 (3.7)%
euro)
Euro average exchange rate, hedged $1.34 $1.35 (0.7)%
(dollars per euro)
Columns may not total due to rounding.
[1] See description of reconciling items between GAAP and comparable basis
figures in this press release under "Non-GAAP measurements and items affecting
comparability."
[2] The company's core European markets include the 27 member states of the
European Union, Switzerland, Norway and Iceland.
Exhibit C:
EUROPEAN CURRENCY
YEAR-ON-YEAR CHANGE - FAVORABLE (UNFAVORABLE)
2012 vs. 2011
(Unaudited - in millions)
Currency Impact (Euro/Dollar) Q1
Revenue $(10)
Local costs 2
Hedging[1] 6
Balance sheet translation[2] (0)
--------
Net European currency impact $(2)
--------
Columns may not total due to rounding.
[1] First quarter hedging benefits were $4 million in 2012 versus costs of $2
million in the same period of 2011.
[2] First quarter balance sheet translation was a gain of $1 million in 2012
versus $2 million in the same period of 2011.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Chiquita Brands International, Inc via Thomson Reuters ONE
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