CINCINNATI – Chiquita Brands (NYSE: CQB) today released financial and operating results for the first quarter of 2011, reporting comparable income(1) of $26 million, GAAP net income of $24 million, and net sales of $824 million. Comparable diluted EPS (1) was $0.57 for the first quarter of 2011, compared to a loss of ($0.09) in the prior year period. First quarter results improved from the year-ago period primarily due to European market stabilization versus the significant losses that occurred in the first quarter of 2010.
"We delivered a turn-around in profitability in the first quarter by executing well and overcoming increased industry costs," said Fernando Aguirre, chairman and chief executive officer. "I am particularly pleased with the progress we are making in Europe, and am confident that we can regain prior levels of profitability in the medium and the long-term and maximize our premium brand position. In North America, our banana business continues to perform well and we are very focused on attracting new customers to increase our salad distribution as the year progresses. Importantly, we are off to a good start for the year in terms of profitability and although second quarter comparisons may be more challenging, we continue to expect to deliver significant operating profit improvement in 2011 versus 2010."
Net Sales and Results: Quarterly sales increased 2 percent year-on-year to $824 million and comparable results for the quarter improved to $26 million from a loss of $4 million in the year-ago period. The improvement in comparable income was the result of stronger performance in bananas, partially offset by weaker results in Salads & Healthy Snacks and increased income tax costs.
Cash, Debt and Liquidity: Cash used in operations was $26 million for the first quarter of 2011 compared to $20 million in the year-ago period. Seasonal working capital demands typically use cash in the first quarter and provide cash in the second quarter. At March 31, 2011, cash and equivalents were $114 million and the company made debt principal payments of $5 million in the first quarter of 2011. The company continues to have significant financial flexibility with $128 million of available revolving credit, with no more than $20 million in debt maturities due in any year until 2014.
Bananas: Net sales for the segment increased 13 percent to $539 million, as the company achieved higher local pricing to overcome increased supply costs associated with tight industry supply conditions. European market prices also reflected improved consumer demand from the unusual lows during the first quarter of 2010. North American pricing included force majeure surcharges that began in late January to recover significantly higher sourcing costs that have continued since late 2010. Comparable operating income was $56 million for the first quarter of 2011, compared to $4 million in the 2010 period.
Salads and Healthy Snacks: Net sales decreased 8 percent to $238 million. Comparable operating income was $6 million for the first quarter of 2011, compared to income of $20 million in the year-ago period, primarily due to lower retail value-added salad volume from customer conversions to private label in 2010 and increased costs caused by adverse weather conditions during the winter lettuce sourcing season in Arizona.
2011 OUTLOOK
For the full year 2011, the company expects a 3 percent increase in net sales, excluding discontinued other non-core produce lines and the European smoothies business that was deconsolidated. The company expects relatively flat year-on-year sales on a reported basis. Based on current industry pricing and cost trends, as well as unit volume changes and other economic impacts discussed below, the company expects to significantly improve its full-year operating profitability.
Industry banana supplies have remained relatively tight thus far in 2011, which has led to higher sourcing costs. Through April, the company has continued to achieve higher pricing to recover industry cost increases. However, industry supplies are expected to approach more normal levels during the second half of the year which may affect the company's ability to achieve comparatively higher pricing. For the second quarter of 2011, year-on-year profit comparisons will be affected by increased marketing investments in Europe and the absence of retroactive duty benefits recognized during the 2010 period. For the balance of 2011, the company expects to achieve continued profitable banana volume growth in its core markets, and to execute internal product cost reduction programs. The company has hedged approximately 50 percent of its net euro cash flow for the remainder of 2011 at $1.42 per euro (an effective rate of $1.38 per euro after premium cost) to reduce currency-related volatility in its cash flows and earnings.
In salads, year-on-year retail value-added salad volume and operating margins are expected to be lower for the second quarter and first half of 2011, reflecting 2010 customer conversions to private label. New accounts will contribute additional volume as the year progresses. Including all of these factors, as well as investments in the company's planned rollout of Fresh Rinse™ and consumer marketing programs, operating margin percentages for full-year 2011 are expected to be roughly flat for the Salads & Healthy Snacks segment.
The company's expectations for improved results in 2011 exclude any unforeseen weather, event risks or major currency fluctuations. The following chart summarizes management's estimates of certain other financial items for 2011:
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. Toll-free telephone access will be available by dialing 1-888-312-9865 in the United States and +719-325-2418 from international locations and providing the conference code 8895207. 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 8895207.
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-on-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
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 quarters ended March 31, 2011 and 2010.
ABOUT CHIQUITA BRANDS INTERNATIONAL, INC.
Chiquita Brands International, Inc. (NYSE: CQB) is a leading international marketer and distributor of nutritious, high-quality fresh and value-added food products – from energy-rich bananas, other fruits, blends of convenient green salads 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.chiquitabrands.com.
FORWARD-LOOKING STATEMENTS
This press release contains certain statements, including in the "2011 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; 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.
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Source: Chiquita Brands International, Inc.
