Chiquita Brands Reports Third Quarter 2010 Results
By Chiquita Brands International Inc., PRNEMonday, November 1, 2010
Reports comparable loss of $7 million, or ($0.14) per diluted share
CINCINNATI, November 2, 2010 - Chiquita Brands International, Inc. (NYSE: CQB) today released financial
and operating results for the third quarter 2010. All figures in this press
release are for continuing operations, unless otherwise noted.
For the third quarter 2010, on a comparable basis, the company reported a
loss of $7 million, or ($0.14) per diluted share, versus income of $9
million, or $0.20 per diluted share, in 2009. On a GAAP basis, the company
reported a loss of $8 million, or ($0.19) per diluted share, versus income of
$5 million, or $0.11 per diluted share, in 2009. Net sales were $730 million,
an 8 percent decrease from the prior year period. The comparable basis
amounts exclude certain items described below under "Items affecting
comparability."
"While our third quarter results are mostly in line with our
expectations, we are disappointed by recent trends in local European
pricing," said Fernando Aguirre, chairman and chief executive officer.
"Although we continue to make progress in executing our business improvement
plans in Europe and realized better local pricing year-on-year, market
pricing began to soften late in the quarter due to excessive imports from EU
and ACP sources. In the salads business, volumes were lower than we expected,
reflecting retailers' conversion to private label and generally soft category
demand."
Aguirre added, "This has been one of the most challenging operating
environments in Europe. Notwithstanding the recent strengthening of the Euro,
if market conditions do not improve in the near term, our full-year
comparable income is expected to be lower than previously estimated. Despite
the weak economic environment, we believe our market leadership, operating
efficiencies and breakthrough innovations such as the FreshRinse food safety
and freshness technology will enable us to strengthen our business. We
continue to focus on enhancing our business to deliver growth and
diversification of earnings in 2011 and beyond."
2010 THIRD 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 "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.
(in millions, except per
share amounts) Income (loss) Income (loss) per
diluted share
2010 2009 2010 2009
---- ---- ---- ----
Comparable results (Non-
GAAP) ($7) $9 ($0.14) $0.20
European headquarters
relocation - (2) - (0.04)
Incremental non-cash
interest expense on
Convertible Notes (2) (2) (0.04) (0.04)
--- --- ----- -----
Reported results (GAAP) ($8) $5 ($0.19) $0.11
=== === ====== =====
Columns may not total due to rounding.
Net Sales and Results: Quarterly sales decreased 8 percent year-over-year
to $730 million due to lower volumes in retail value-added salads and
bananas, partly offset by higher local pricing in core European and North
American markets. The company had operating income of $6 million for the
third quarter of 2010 compared to $23 million in the year-ago period. This
decrease was due to increased banana sourcing and fuel costs, lower retail
value-added salad volumes and a lower Euro, and was partially offset by the
reduction of the EU import tariff rate.
Cash, Debt and Liquidity: Cash flow from operations was $66 million for
the quarter compared to $58 million in the year-ago period. At September 30,
2010, cash and equivalents were $182 million and debt was reduced to $636
million. The company continues to have significant financial flexibility,
with no more than $20 million in debt maturities due in any year until 2014
and $128 million of available revolving credit, which has not been drawn upon
in 2010.
Banana Segment: Net sales for the segment decreased 9 percent to $431
million, as a result of reduced volume across all markets and lower European
exchange rates, partly offset by higher local banana pricing in core European
and North American markets. Operating income was $3 million, compared to $22
million in the third quarter of 2009, due to increased sourcing and fuel
costs, lower average European exchange rates and reduced volumes.
Salads and Healthy Snacks Segment: Net sales decreased 13 percent to $251
million, due to lower volumes in retail value-added salads. Operating income
was $18 million, compared to $24 million in the third quarter of 2009,
primarily due to lower retail value-added salad volume, the effect of which
was only partially offset by improved network efficiencies and cost
improvements. In addition, the company invested $3 million more in consumer
marketing during the third quarter of 2010 than in the year-ago period.
2010 OUTLOOK
The company continues to expect to deliver its third consecutive year of
profitability for full-year 2010, with a full-year comparable income target
of $50 to $60 million, despite the weak economic environment and industry
challenges in Europe. For the full-year 2010, the company expects revenues to
be lower by approximately 5 percent.
In Europe, the company expects to continue making progress in
implementing its business plan to improve pricing, execute significant cost
reductions and increase distribution. These expected cost reductions, which
include $20 million of lower surplus fruit costs resulting from the
restructuring of purchased fruit contracts, lower European tariff costs and
lower investment in Just Fruit in a Bottle, are expected to mitigate the
expected increase in fuel and purchased fruit costs versus 2009. Regarding
industry supplies, while banana supplies in Latin America have continued to
tighten, increased supply from the subsidized EU and ACP sources negatively
affected the balance of supply and demand in the market, and reduced the
level of improvements in pricing the company had anticipated. Should these
conditions remain unchanged, even though the average Euro rate has improved
recently to approximately $1.37, the company expects that dollar equivalent
pricing in the fourth quarter will not achieve its earlier estimates.
In North America, the company expects continued stable performance in
bananas. Additionally, the company has executed sustainable cost reductions,
such as improved network and manufacturing efficiencies, in salads. The
company expects to improve its full-year 2010 value-added salad operating
margin to approximately 8 percent, even with increased investment in consumer
marketing and innovation that is expected to strengthen its long-term
competitive position by extending consumer loyalty and preference for its
branded products.
The company's expectations of comparable results exclude any unforeseen
weather or event risks; further major currency fluctuations; the $32 million
gain on the deconsolidation and sale of 51 percent of Just Fruit in a Bottle;
and $8 million of non-cash interest expense on the Convertible Notes. The
latter two items are already included in the company's U.S. GAAP results.
The following chart summarizes the quarterly results and management's
estimates of certain key items for 2010:
(in millions) Q1 2010 Q2 2010 Q3 2010 FY 2010
Actual Actual Actual Estimate
Capital Expenditures $7 $9 $16 $70-75
Depreciation &
Amortization $14 $15 $16 $60
Gross Interest Expense (1) $14 $14 $14 $57
Net Interest Expense (1) $13 $13 $13 $51
(1) Interest expense includes the impact of adoption in 2009 of an
accounting standard that changed the method used to account for the
company's Convertible Notes, which added non-cash interest expense
of $7 million for the full year 2009 and will be $8 million for the
full year 2010.
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 web cast is available at
www.chiquitabrands.com and a replay will be available until November
16. Toll-free telephone access will be available by dialing 1-888-503-8163 in
the United States and +719-457-2636 from international locations and
providing the conference code 4613145. 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 4613145.
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, as well as the 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. The differences between the U.S.
GAAP and non-GAAP financial measures are described below in "Items affecting
comparability." 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.
ITEMS AFFECTING COMPARABILITY
Third Quarter 2010 & 2009 Items
- European Headquarters Relocation: In the fourth quarter of 2008, the
company committed to relocate its European headquarters in order to
optimize its long-term tax structure. The relocation resulted in total
one-time costs of approximately $19 million; $12 million was recognized
in 2009, including $2 million recorded in the third quarter.
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: In 2009,
the company retrospectively adopted a new accounting standard related
to its convertible debt instruments, which increases the amount of
reported GAAP interest expense on its $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 the standard. Such higher non-cash interest
expense was $2 million for both quarters ended September 30, 2010 and
2009, respectively, was $7 million for the full year 2009, and will be
$8 million for the full year 2010.
About Chiquita Brands International, Inc.
Chiquita Brands International, Inc. (NYSE: CQB) is a leading
international marketer and distributor of high-quality fresh and value-added
food products - from energy-rich bananas and other fruits to nutritious
blends of convenient green salads. The company markets its healthy, fresh
products under the Chiquita(R) and Fresh Express(R) premium brands and other
related trademarks. With annual revenues of $3.5 billion, Chiquita employs
approximately 23,000 people and has operations in nearly 80 countries
worldwide. For more information, please visit our corporate web site at
www.chiquitabrands.com.
Forward-looking Statements
This press release contains certain statements, including in the "2010
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 commodity and other
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; unusual weather
events, conditions or crop risks; access to and cost of financing; 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 Sept Nine Months Ended
Sept 30, Sept 30,
------------------- -----------------
2010 2009 2010 2009
---- ---- ---- ----
Net sales $730 $797 $2,454 $2,591
---- ---- ------ ------
Operating expenses:
Cost of sales 630 666 2,075 2,122
Selling, general and
administrative 76 91 247 262
Depreciation 13 13 37 39
Amortization 2 3 7 8
Equity in earnings
of investees 2 (0) (0) (16)
Deconsolidation and
sale of Just - - (32) -
Fruit in a Bottle
European
headquarters
relocation - 2 - 11
--- ---
723 774 2,334 2,425
--- --- ----- -----
Operating income 6 23 121 166
Interest income 1 2 4 4
Interest expense (14) (15) (43) (47)
Other income
(expense) (1) (3) (0) 0 (0)
--- ---
Income (loss) from
continuing
operations (9) 9 83 122
before taxes
Income tax benefits
(expense) (1, 2) 1 (4) (2) (5)
--- --- --- ---
Income (loss) from
continuing
operations (8) 5 80 117
Loss from
discontinued - - (3) -
Operations (3) --- --- --- ---
Net income (loss) ($8) $5 $77 $117
=== === === ====
Basic earnings per
share:
Continuing
operations ($0.19) $0.11 $1.78 $2.63
Discontinued
operations - - (0.07) -
--- --- ----- ---
($0.19) $0.11 $1.71 $2.63
====== ===== ===== =====
Diluted earnings per
share:
Continuing
operations ($0.19) $0.11 $1.75 $2.58
Discontinued
operations - - (0.07) -
--- --- ----- ---
($0.19) $0.11 $1.68 $2.58
====== ===== ===== =====
Shares used to
calculate basic 45.1 44.7 44.9 44.5
earnings per share
Shares used to
calculate diluted 45.1 45.2 45.8 45.4
earnings per share
Columns may not total due to rounding.
(1) Other income (expense) in the third quarter 2010 relates to
contingency reserves, while the nine months ended September 30, 2010
relates to the resolution of a claim related to a non-income tax
refund which has an offsetting $1 million of related expense
included in "Income tax benefits (expense)."
(2) Income taxes were a net benefit of $1 million for the third
quarter of 2010 compared to a net expense of $4 million for the
third quarter of 2009, including gross income tax benefits of $4
million and $1 million, respectively. Income taxes were a net
expense of $2 million and $5 million for the nine months ended
September 30, 2010 and 2009, respectively, including gross income
tax benefits of $4 million and $9 million, respectively. The
benefits in 2010 relate to governmental rulings in various
jurisdictions; in 2009, $4 million of benefits were from the sale of
the company's operations in the Ivory Coast. Both years included
resolution of tax contingencies in various jurisdictions.
(3) Loss from discontinued operations relates to potential
indemnification obligations for tax liabilities of Atlanta AG.
Exhibit B:
CHIQUITA BRANDS INTERNATIONAL, INC.
OPERATING STATISTICS
(Unaudited - in millions, except for percentages and exchange rates)
Quarter Ended
September 30,
2010 2009
---- ----
Net sales by segment
Bananas $431 $472
Salads and Healthy Snacks 251 289
Other Produce 47 37
--- ---
Total net sales $730 $797
Comparable segment operating income
(loss) (1)
Bananas $3 $22
Salads and Healthy Snacks
(2) 18 24
Other Produce 1 (2)
Corporate (15) (19)
---- ---
Total comparable
operating income $6 $25
Comparable operating margin by segment
Bananas 0.6% 4.7%
Salads and Healthy Snacks
(2) 7.1% 8.4%
Other Produce 1.4% (5.8)%
SG&A as a percent of sales 10.4% 11.4%
Company banana sales volume (40 lb.
boxes)
North America 15.1 15.7
Europe & Middle East
Core European markets
(3) 9.0 9.8
Mediterranean & Middle
East 4.2 5.8
Banana Pricing
North America
Core European markets (3)
U.S. Dollar
Local
Mediterranean & Middle East
Fresh Express-branded retail value-
added salads
Volume (12-count cases) 12.9 15.7
Pricing (4)
Euro average exchange rate, spot
(dollars per euro) $1.28 $1.42
Euro average exchange rate, hedged $1.24 $1.40
(dollars per euro)
Percent Change
Increase
(Decrease)
vs. 2009
--------
Net sales by segment
Bananas (8.6)%
Salads and Healthy Snacks (13.0)%
Other Produce 27.3 %
------
Total net sales (8.5)%
Comparable segment operating income
(loss) (1)
Bananas (87.6)%
Salads and Healthy Snacks
(2) (26.5)%
Other Produce N/A
Corporate (22.2)%
-------
Total comparable
operating income (75.0)%
Comparable operating margin by segment
Bananas (4.1) pts
Salads and Healthy Snacks
(2) (1.3) pts
Other Produce 7.2 pts
SG&A as a percent of sales (1.0) pts
Company banana sales volume (40 lb.
boxes)
North America (3.8)%
Europe & Middle East
Core European markets
(3) (8.2)%
Mediterranean & Middle
East (27.6)%
Banana Pricing
North America 3.6 %
Core European markets (3)
U.S. Dollar (5.4)%
Local 5.5 %
Mediterranean & Middle East (3.6)%
Fresh Express-branded retail value-
added salads
Volume (12-count cases) (17.8)%
Pricing (4) 1.5 %
Euro average exchange rate, spot
(dollars per euro) (9.9) %
Euro average exchange rate, hedged (11.4) %
(dollars per euro)
Nine Months
ended
September 30,
2010 2009
---- ----
Net sales by segment
Bananas $1,455 $1,513
Salads and Healthy Snacks 798 875
Other Produce 202 203
--- ---
Total net sales $2,454 $2,591
Comparable segment operating income
(loss) (1)
Bananas $71 $158
Salads and Healthy Snacks
(2) 68 67
Other Produce 4 5
Corporate (54) (57)
---- ---
Total comparable
operating income $88 $173
Comparable operating margin by segment
Bananas 4.9% 10.5%
Salads and Healthy Snacks
(2) 8.5% 7.6%
Other Produce 1.9% 2.5%
SG&A as a percent of sales 10.1% 10.1%
Company banana sales volume (40 lb.
boxes)
North America 46.5 46.9
Europe & Middle East
Core European markets
(3) 30.5 33.4
Mediterranean & Middle
East 14.0 13.9
Banana Pricing
North America
Core European markets (3)
U.S. Dollar
Local
Mediterranean & Middle East
Fresh Express-branded retail value-
added salads
Volume (12-count cases) 42.4 48.9
Pricing (4)
Euro average exchange rate, spot
(dollars per euro) $1.31 $1.35
Euro average exchange rate, hedged $1.33 $1.36
(dollars per euro)
Percent Change
Increase
(Decrease)
vs. 2009
--------
Net sales by segment
Bananas (3.9)%
Salads and Healthy Snacks (8.8)%
Other Produce (0.3)%
------
Total net sales (5.3)%
Comparable segment operating income
(loss) (1)
Bananas (55.3)%
Salads and Healthy Snacks
(2) 0.9 %
Other Produce (23.2)%
Corporate (5.6)%
------
Total comparable
operating income (49.1)%
Comparable operating margin by segment
Bananas (5.6) pts
Salads and Healthy Snacks
(2) 0.9 pts
Other Produce (0.6) pts
SG&A as a percent of sales 0.0 pts
Company banana sales volume (40 lb.
boxes)
North America (0.9)%
Europe & Middle East
Core European markets
(3) (8.7)%
Mediterranean & Middle
East 0.7 %
Banana Pricing
North America 4.6 %
Core European markets (3)
U.S. Dollar (7.7)%
Local (4.8)%
Mediterranean & Middle East (5.2)%
Fresh Express-branded retail value-
added salads
Volume (12-count cases) (13.3)%
Pricing (4) 0.8 %
Euro average exchange rate, spot
(dollars per euro) (3.0)%
Euro average exchange rate, hedged (2.2)%
(dollars per euro)
Columns may not total due to rounding.
(1) See detailed description of reconciling items between GAAP and
comparable basis figures in the text of this press release under the
heading titled "Items affecting comparability."
(2) Sales of Just Fruit in a Bottle before entering into the Danone
joint venture were $13 million in the first half of 2010. Just
Fruit in a Bottle sales were $7 million and $20 million for the
third quarter and nine months ended September 30, 2009,
respectively. Operating losses recognized by the company were $2
million and $5 million in the third quarters of 2010 and 2009,
respectively, and $5 million and $13 million in the nine months
ended September 30, 2010 and 2009, respectively.
(3) The company's core European markets include the 27 member states
of the European Union, Switzerland, Norway and Iceland.
(4) Pricing is for Fresh Express-branded products only, and includes
fuel surcharges.
Exhibit C:
EUROPEAN CURRENCY
YEAR-OVER-YEAR CHANGE - FAVORABLE (UNFAVORABLE)
2010 vs. 2009
(Unaudited - in millions)
Currency Impact (Euro/Dollar) Q3 YTD
--- ---
Revenue ($20) ($20)
Local Costs 6 4
Hedging (1) (1) 4
Balance sheet translation (2) 3 (3)
--- ---
Net European currency impact ($13) ($16)
==== ====
Columns may not total due to rounding.
(1) Hedging costs were $4 million in the third quarter of 2010 and $2
million in third quarter of 2009. Hedging benefits for YTD 2010 were
$5 million compared to $2 million for YTD 2009.
(2) Balance sheet translation for the third quarter of 2010 was a
gain of $5 million compared to $2 million in the third quarter of
2009. Balance sheet translation for YTD 2010 was a loss of $2
million compared to a gain of $1 million for YTD 2009.
Ed Loyd of Chiquita Brands International, Inc., +1-513-784-8935, eloyd at chiquita.com
Tags: Chiquita Brands International Inc., Cincinnati, November 2, Ohio, Western Europe
