Cincinnati, Oct. 27 - Chiquita Brands International, Inc. today released financial and operating results for the third quarter 2009. All figures in this press release are for continuing operations.
For the third quarter 2009, the company reported GAAP income of $5 million, or $0.11 per diluted share, on net sales of $801 million versus a loss of $7 million, or ($0.16) per diluted share, on net sales of $840 million in the 2008 quarter. On a comparable basis, income in the third quarter was $9 million, or $0.20 per diluted share, versus a loss of $15 million, or ($0.33) per diluted share, in the 2008 period. The comparable basis amounts exclude certain items described below under "Items affecting comparability."
"Our third quarter results reflect the terrific progress of our diversification strategy and ongoing pricing and cost discipline," said Fernando Aguirre, chairman and chief executive officer. "We significantly improved over year-ago results to deliver profitability by driving costs out of the business and adhering to a pricing discipline to overcome some historically seasonal aspects of our business, as well as a tough economic environment. Our value-added salads business is showing significant and sustainable improvement and our focus on consistent execution is continuing to deliver strong results in bananas in North America and Europe."
Aguirre added, "We are encouraged by our strong momentum and are confident that, absent any major unforeseen events, we will achieve a year-over-year improvement in comparable second-half results of at least as much as we achieved in the first-half. Looking ahead, we are well-positioned to capitalize on profitable growth opportunities as we continue to transform into a more stable and predictable business. While we will remain diligent in managing our business for profitability, our attention is focused on growth in new geographies, distribution channels and innovative products."
2009 THIRD QUARTER SUMMARY
(The following table shows adjustments made to income and EPS from continuing operations between comparable and GAAP results. See "Items affecting comparability" below for a description of items excluded on a comparable basis. Exhibit B provides a reconciliation by segment for "Operating income.")
(in millions, except per Income (loss) per
share amounts) Income (loss) diluted share
2009 2008 2009 2008
---- ---- ---- ----
Comparable results $9 $(15) $0.20 $(0.33)
Restructuring costs (2) (1) (0.04) (0.02)
Incremental non-cash interest
expense on Convertible Notes (2) (2) (0.04) (0.03)
Gain (loss) on debt purchases (0) 10 (0.00) 0.22
--- --- ----- ----
As Reported on a GAAP basis $5 $(7) $0.11 $(0.16)
=== === ===== ======
Table may not total due to rounding.
Net Sales and Comparable Results: Quarterly sales decreased 5 percent year-over-year to $801 million principally from previously implemented reductions in unprofitable foodservice volumes in salads. Comparable net income for the third quarter 2009 increased by $24 million versus the 2008 quarter due to increased network and manufacturing efficiencies in salads and lower interest costs, net of higher taxes on income.
Cash, Debt and Liquidity: Cash flow from operations for the first nine months of 2009 was $164 million, a significant improvement compared to $46 million in the same period of 2008. At Sept. 30, 2009, cash and equivalents increased to $176 million and debt decreased to $669 million. During September 2009, the company purchased $25 million of its senior notes in the open market, comprised of $16 million principal amount of 7½% senior notes and $9 million principal amount of 87/8% senior notes, as part of the company's ongoing commitment to further strengthen its financial position. Annualized interest expense will be reduced by approximately $2 million as a result of the repurchases. With $128 million of available revolving credit and no more than $20 million in debt maturities in any year until 2014, the company continues to have ample liquidity and financial flexibility.
Banana Segment: Net sales for the segment were roughly flat at $472 million. The benefit of higher volume in the Mediterranean and the Middle East and higher local pricing in core European markets was offset by the effects of lower volume in core European markets and lower European exchange rates. In North America, banana prices were relatively unchanged from the year-ago quarter, despite a significant decline in fuel surcharges, on slightly higher volume. Operating income was $22 million for both 2009 and 2008.
Salads and Healthy Snacks Segment: Net sales decreased 11 percent to $289 million, primarily as a result of the reduction of certain unprofitable foodservice volumes in North America beginning in the fourth quarter of 2008. Operating income increased to $24 million, versus a loss of $8 million in the third quarter of 2008, due to improved pricing, distribution network efficiencies, sustainable cost reductions and lower net fuel costs.
Other Produce: Net sales for the segment were $40 million compared to $42 million in the 2008 quarter. The segment had an operating loss of $2 million, versus income of less than $1 million in 2008, as a result of lower volumes and margin performance in melons and grapes.
2009 OUTLOOK
Based on the company's strong performance for the first nine months of 2009 and absent any major unforeseen negative events, the company continues to expect significant full-year 2009 improvement on a comparable basis versus 2008. Second-half 2009 comparable net income is expected to improve from 2008 levels by at least as much as in the first half of the year, even though fourth quarter results are likely to be lower than the third quarter due to seasonally lower consumption of salads and planned investments in consumer marketing and innovation, consistent with the company's long-term plans to drive profitable sales growth.
In the Banana segment, sourcing and production costs are expected to be higher in the fourth quarter of 2009 compared to the year-ago period due to increases in purchased fruit contract pricing and government-imposed exit prices. Banana pricing is expected to remain relatively stable in North America, despite a significant decline in fuel-related surcharges as a component of pricing. In core European markets, local banana pricing currently continues to exceed year-ago levels, while the U.S. dollar exchange rate, of $1.50/euro at Oct. 23, 2009, compares favorably versus the fourth quarter 2008 average of $1.32/ euro. The company has hedged approximately 75 percent of its fourth quarter 2009 euro exposure at about $1.44/euro, and approximately 50 percent of its exposure in the first half of 2010 at $1.39/euro, using put options that allow the company to retain the benefit of higher exchange rates.
In the Salads and Healthy Snacks segment, the company expects to deliver an operating margin for salads of seven to eight percent for the full-year 2009. Salad results in the fourth quarter are expected to reflect seasonally lower consumption, as well as planned investments in consumer marketing and innovation. In healthy snacks, the company expects reduced operating losses in 2009 from the roll-out of Just Fruit in a Bottle in nine European countries.
In addition to the company's overall business outlook, the following chart summarizes management's estimates of certain key items for 2009:
(in millions) Q1 2009 Q2 2009 Q3 2009 FY 2009
Actual Actual Actual Estimate
------ ------ ------ --------
Capital expenditures $11 $11 $16 $70-80
Depreciation and amortization $16 $15 $16 $62-64
Gross interest expense (1) $15 $14 $14 $55-57
Net interest expense (1) $13 $13 $12 $49-51
(1) Interest expense excludes the impact of adopting a new accounting
standard that changed the method used to account for the company's
Convertible Notes.
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 www.chiquitabrands.com and a replay will be available until Nov. 10. Toll-free telephone access will be available by dialing 1-866-688-3789 in the United States and +706-634-9841 from international locations and providing the conference code 33299348. To access the telephone replay, dial 1-800-642-1687 from the United States and +706-645-9291 from international locations and enter the confirmation code 19781966.
NON-GAAP MEASUREMENTS
The company reports its financial results in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). In an effort to provide investors with additional information regarding the company's results and to provide more meaningful year-over-year comparisons of the company's financial performance, the company may use non-GAAP measures as defined by the Securities and Exchange Commission. The differences between the U.S. GAAP and non-GAAP financial measures are reconciled in the text of this press release and in attached schedules, and are more fully described below in "Items affecting comparability." In presenting comparable results, the company discloses non-GAAP financial measures that it believes will be useful to investors. Management uses the non-GAAP financial measures to evaluate the company's financial performance against internal budgets and targets, including those associated with incentive compensation plans, because it believes that these non-GAAP financial measures are useful for evaluating the company's core operating results and facilitating comparisons across reporting periods. Importantly, non-GAAP financial measures should be considered in addition to, and not instead of, U.S. GAAP financial measures. In addition, the non-GAAP measures the company is using may differ from non-GAAP measures that other companies use.
ITEMS AFFECTING COMPARABILITY
(See Exhibit B for Reconciliation of GAAP and Non-GAAP Operating Information)
Third Quarter 2009 & 2008 Items
-
Restructuring related costs: In the fourth quarter of 2008, the company committed to relocate its European headquarters from Belgium to Switzerland in order to optimize the company's long-term tax structure. The relocation, which is now substantially complete, is expected to result in one-time costs of approximately $19 million, of which $2 million and $1 million were recognized in the third quarters of 2009 and 2008, respectively, $4 million in the second quarter of 2009, $5 million in the first quarter of 2009, and $7 million recognized in prior periods. As shown in Exhibit B, restructuring related costs are included in reportable figures as a component of operating income, but are not allocated to the reportable segments.
-
Incremental non-cash interest expense on Convertible Notes: As previously disclosed, the company retrospectively adopted new accounting standards related to its convertible debt instruments. These new standards changed the method of accounting for, and 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 the additional non-cash interest expense that results from the application of these new accounting standards. This higher non-cash interest expense was $2 million for both the third quarters in 2009 and 2008, and will be $7 million and $5 million, respectively, for the full years 2009 and 2008.
.
Exhibit A:
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENT
(Unaudited - in millions, except per share amounts)
Quarter Ended Nine Months Ended
Sept 30, Sept 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $801 $840 $2,597 $2,770
---- ---- ------ ------
Operating expenses:
Cost of sales 669 734 2,128 2,321
Selling, general and
administrative 91 94 262 275
Depreciation 13 14 39 48
Amortization 3 2 8 7
Equity in earnings of
investees (0) (1) (16) (7)
European headquarters
relocation 2 1 11 2
--- --- --- ---
778 845 2,432 2,646
--- --- ----- -----
Operating income (loss) 23 (5) 166 124
Interest income 2 2 4 5
Interest expense(1) (15) (18) (47) (64)
(Loss) gain on debt
extinguishment, net (0) 10 (0) 10
Other income(2) - - - 9
--- --- --- ---
Income (loss) from continuing
operations before taxes 9 (12) 122 84
Income tax (expense) benefit (4) 4 (5) (2)
-- - -- --
Income (loss) from continuing
operations 5 (7) 117 82
Income from discontinued
operations - 0 - 2
--- --- --- ---
Net income (loss) $5 $(7) $117 $85
== === ==== ===
Basic earnings per share:
Continuing operations $0.11 $(0.16) $2.63 $1.89
Discontinued operations - 0.00 - 0.06
--- ---- --- ----
$0.11 $(0.16) $2.63 $1.95
===== ====== ===== =====
Diluted earnings per share:
Continuing operations $0.11 $(0.16) $2.58 $1.85
Discontinued operations - 0.00 - 0.05
--- ---- --- ----
$0.11 $(0.16) $2.58 $1.90
===== ====== ===== =====
Shares used to calculate basic
earnings per share 44.7 44.2 44.5 43.5
Shares used to calculate
diluted earnings per share 45.2 44.2 45.4 44.6
Table may not total due to rounding.
(1) Nine months ended September 30, 2008 includes $9 million of
"Interest expense" for the write-off of deferred fees related
to the refinancing of the company's credit facility. 2008
amounts differ from those previously reported due to the adoption
of new accounting standards related to the Convertible Notes.
(2) Other income includes the resolution of a claim related to a
non-income tax refund. An offsetting $3 million of related
expense is included in "Income tax (expense) benefit."
Exhibit B:
CHIQUITA BRANDS INTERNATIONAL, INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
OPERATING INCOME (LOSS) - THIRD QUARTER & NINE MONTHS
(Unaudited - in millions)
Salads & Operating
Healthy Other Restruc- income
Bananas Snacks Produce Corporate turing (loss)
Q3 2009 ------- -------- ------- --------- -------- ---------
Reconciliation
---------------
Comparable results
(Non-GAAP) $22 $24 $(2) $(19) $- $25
Restructuring
related costs - - - - (2) (2)
--- --- --- --- --- ---
Reported results
(GAAP) $22 $24 $(2) $(19) $(2) $23
=== === === ==== === ===
YTD 2009
Reconciliation
---------------
Comparable results
(Non-GAAP) $158 $67 $5 $(57) $- $173
Gain on
divestitures 4 - - - - 4
Restructuring
related costs - - - - (11) (11)
--- --- --- --- --- ---
Reported results
(GAAP) $162 $67 $5 $(57) $(11) $166
==== === == ==== ==== ====
Q3 2008
Reconciliation
---------------
Comparable results
(Non-GAAP) $22 $(8) $0 $(17) $- $(4)
Restructuring
related costs - - - - (1) (1)
--- --- --- --- -- --
Reported results
(GAAP) $22 $(8) $0 $(17) $(1) $(5)
=== === == ==== === ===
YTD 2008
Reconciliation
---------------
Comparable results
(Non-GAAP) $171 $(11) $8 $(43) $- $126
Restructuring
related costs - - - - (2) (2)
--- --- --- --- -- --
Reported results
(GAAP) $171 $(11) $8 $(43) $(2) $124
==== ==== == ==== === ====
Table may not total due to rounding.
Exhibit C:
CHIQUITA BRANDS INTERNATIONAL, INC.
OPERATING STATISTICS - THIRD QUARTER & NINE MONTHS
(Unaudited - in millions, except for percentages and exchange rates)
Percent Percent
Change Nine Change
Quarter Ended Favorable Months ended Favorable
September 30, (Unfavorable) September 30, (Unfavorable)
2009 2008 vs. 2008 2009 2008 vs. 2008
Net sales by
segment
Bananas $472 $474 (0.4)% $1,513 $1,564 (3.3)%
Salads and
Healthy Snacks 289 325 (11.1)% 875 1,010 (13.4)%
Other Produce 40 42 (3.5)% 209 196 6.5%
-- -- ----- --- --- ---
Total net
sales $801 $840 (4.6)% $2,597 $2,770 (6.2)%
Comparable segment
operating income
(loss)(1)
Bananas $22 $22 3.7% $158 $171 (7.6)%
Salads and
Healthy Snacks 24 (8) N/A 67 (11) N/A
Other Produce (2) 0 N/A 5 8 (37.3)%
Corporate (19) (17) (9.7)% (57) (43) (33.7)%
--- --- ----- --- --- ------
Total operating
income (loss) $25 $(4) N/A $173 $126 37.4%
Comparable
operating margin
by segment
Bananas 4.7% 4.6% 0.2pts 10.7% 11.0% (0.3)pts
Salads and
Healthy Snacks 8.4% (2.6)% 11.0pts 7.6% (1.1)% 8.7pts
Other Produce (5.3)% 0.5% (5.8)pts 2.5% 4.2% (1.7)pts
SG&A as a percent
of sales 11.3% 11.2% (0.1)pts 10.1% 9.9% (0.2)pts
Company banana
sales volume
(40 lb. boxes)
North America 15.7 15.3 2.6% 46.9 46.6 0.6%
Europe &
Middle East
Core European
markets(2) 9.8 11.6 (15.5)% 33.4 36.8 (9.2)%
Mediterranean
& Middle
East 5.8 3.6 61.1% 13.9 10.1 37.6%
Banana Pricing
North America (0.2)% 4.9%
Core European
markets(2)
U.S. Dollar 3.0% (3.8)%
Local 9.7% 7.4%
Fresh Express-branded
retail value-added
salads
Volume (12-count
cases) 15.7 15.6 0.9% 49.4 49.0 0.9%
Pricing(3) 0.7% 0.9%
Euro average
exchange rate,
spot (dollars
per euro) $1.42 $1.51 (6.0)% $1.35 $1.52 (11.2)%
Euro average
exchange rate,
hedged (dollars
per euro) $1.40 $1.49 (6.0)% $1.36 $1.49 (8.7)%
Table may not total due to rounding.
(1) See detailed description of reconciling items between GAAP and
comparable basis figures in Exhibit B and in the text of this press
release under the heading titled "Items affecting comparability."
(2) The company's core European Markets include the 27 member states of
the European Union, Switzerland, Norway and Iceland.
(3) Pricing is for Fresh Express-branded products only, and includes fuel
and regulatory surcharges.
Exhibit D:
EUROPEAN CURRENCY
YEAR-OVER-YEAR CHANGE - FAVORABLE (UNFAVORABLE)
2009 vs. 2008
(Unaudited - in millions)
Currency Impact (Euro/Dollar) Q3 YTD
---- ---
Revenue $(13) $(93)
Local Costs 5 26
Hedging(1) 0 15
Balance sheet translation(2) 5 3
--- ---
Net European currency impact $(3) $(48)
=== ====
Table may not total due to rounding.
(1) Hedging costs were $2 million in each of the third quarters of
2009 and 2008. Hedging gains for YTD 2009 were $2 million compared
to costs of $13 million for YTD 2008.
(2) Balance sheet translation for the third quarter of 2009 was a gain of
$2 million compared to a loss of $3 million in the third quarter of
2008. Balance sheet translation for YTD 2009 was a gain of $1 million
compared to a loss of $2 million for YTD 2008.