New Jersey | 1-1550 | 04-1923360 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
CHIQUITA BRANDS INTERNATIONAL, INC. | |||
Date: November 7, 2013 | By: | /s/ Joseph B. Johnson | |
Joseph B. Johnson | |||
Vice President and Chief Accounting Officer | |||
• | GAAP net loss of $18 million compared to GAAP net loss of $67 million for the third quarter of 2012 |
• | Adjusted EBITDA[1] of $18 million compared to an adjusted EBITDA loss of $1 million for the third quarter of 2012 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Operating income (loss) (U.S. GAAP) | $ | 1 | $ | (66 | ) | $ | 67 | $ | (49 | ) | |||||
Unrealized foreign currency hedging (gain) loss 1 | 2 | — | — | — | |||||||||||
Headquarters relocation | — | 6 | — | 17 | |||||||||||
Restructuring | — | 14 | — | 14 | |||||||||||
Exit activities | — | — | 1 | 4 | |||||||||||
Shipping reconfiguration | — | — | — | 6 | |||||||||||
Danone JV investment impairment | — | 28 | — | 28 | |||||||||||
European Healthy Snacking goodwill impairment | — | 2 | — | 2 | |||||||||||
Recovery of grower receivables | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||
Comparable operating income (Non-GAAP) | 2 | (17 | ) | 67 | 20 | ||||||||||
Depreciation and amortization | 16 | 16 | 48 | 46 | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 18 | $ | (1 | ) | $ | 115 | $ | 67 |
• | The excess supply of bananas in core markets is expected to remain through the end of the year before returning to balance in the first quarter of 2014 |
• | The company continues to implement a substantial change process with the consolidation of its Midwest salad plants |
• | Raw salad product costs are expected to remain unfavorable as weather continues to impact harvest yield, quality, and availability |
• | Disciplined contract renewals and customer acquisitions, with continued benefits from customer acquisition and retention in North America and focus on prioritizing price over volume in Europe |
• | An accelerated pace of core innovation in the salads business in 2014 |
• | Elimination of the transition costs related to the 2013 consolidation of the company’s Midwest salad plants |
• | Ongoing focus on owned farm and manufacturing plant productivity enhancements |
• | Continued discipline in SG&A expenditures |
FY 2013 | Q3 2013 | Q2 2013 | Q1 2013 | |||||
(in millions) | Estimated | Actual | Actual | Actual | ||||
Capital expenditures | $50-55 | $15 | $11 | $10 | ||||
Depreciation & amortization | 60-65 | 16 | 16 | 16 | ||||
Gross interest expense 1 | 55-60 | 15 | 15 | 15 |
• | Unrealized foreign currency hedging (gain) loss: On February 5, 2013, in conjunction with a debt refinancing, the company transferred certain currency option contracts to counterparties within its current bank group. The transfer resulted in the termination of hedge accounting for these currency option contracts that all settled by the end of the third quarter of 2013. Changes in the fair value of these contracts until February 5, 2013 were deferred in Accumulated other comprehensive income, and the changes in the fair value subsequent to that date until the date of settlement were recognized currently in Net sales. Termination of hedge accounting did not change the economic intention or cash flow of the option contracts. In the third quarter of 2013, the company recognized $2 million of losses, in Net sales associated with previously recognized unrealized changes in the fair value of these option contracts, which were excluded from the comparable net sales and results of the Bananas segment. These unrealized changes net to zero in the first nine months of 2013 because all of the affected option contracts had settled by September 30, 2013. |
• | Headquarters relocation: In November 2011, the company announced its plan to relocate its corporate headquarters to Charlotte, North Carolina. The relocation was completed in 2012. $6 million and $17 million were incurred in the third quarter of 2012 and in the first nine months of 2012, respectively. The company expects only minor remaining costs (less than $1 million) and capital expenditures to be recognized throughout 2013. Relocation costs are excluded from comparable reporting of Corporate costs. |
• | Restructuring: In August 2012, Chiquita announced a company restructuring supporting the goal of increasing profitability in its core businesses, resulting in at least $60 million of annual savings. In the third quarter of 2012 the company recognized $14 million of restructuring costs, including $9 million of severance expenses. Cash payments related to the restructuring plan are expected to continue through 2014, primarily related to severance payments to the former Chief Executive Officer. Restructuring costs are excluded from comparable reporting of Corporate costs. |
• | Exit activities: In the first quarter of 2013, comparable operating income of the Salads and Healthy Snacks segment excludes $1 million of severance expenses related to discontinued products. Also in the first nine months of 2012, the company excluded from comparable operating income $4 million for asset write-offs and severance for discontinued products and other restructuring-related severance; GAAP reporting included $2.8 million of these activities in the Salads and Healthy Snacks segment and $1.6 million in the Other Produce segment. |
• | Shipping reconfiguration: During the third quarter of 2011, the company initiated a reconfiguration of its European shipping system which provided more than $12 million of annualized cost savings, net of transition costs that included expected losses on subleased vessels removed from service in 2011 and 2012. Comparable operating income of the Banana segment excludes a charge of $6 million in the first quarter of 2012 for net losses on certain ship sublease contracts. These sublease losses will not recur in 2013 since primary leases for vessels expiring at the end of 2012 were not renewed. |
• | Danone JV investment impairment: In the third quarter of 2012, the company recognized $28 million to fully impair its 49% equity-method investment and to record probable funding obligations to the Danone JV, which are excluded from comparable results of the Salads and Healthy Snacks segment. |
• | European Healthy Snacking goodwill impairment: During the third quarter of 2012, the company also recorded a $2 million non-cash impairment charge to goodwill related to a non-core business as a result of the change in strategic focus announced with the restructuring plan, which is excluded from comparable reporting of Corporate costs. |
• | Recovery of grower receivables: In the second quarter of 2011, $32 million was reserved for the remaining carrying value of advances made to a Chilean grower. The company recovered $1 million in the third quarter of 2013, and $1 million during the third quarter and nine months ended September 30, 2012, respectively, of these advances through the bankruptcy process and continues to seek additional recoveries. These recoveries are excluded from comparable income of the Other Produce segment. |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales | $ | 723 | $ | 714 | $ | 2,309 | $ | 2,341 | |||||||
Operating expenses: | |||||||||||||||
Cost of sales | 645 | 644 | 2,018 | 2,076 | |||||||||||
Selling, general and administrative | 61 | 70 | 177 | 203 | |||||||||||
Depreciation | 13 | 13 | 41 | 39 | |||||||||||
Amortization | 2 | 2 | 7 | 7 | |||||||||||
Equity in (earnings) losses of investees | — | 29 | — | 32 | |||||||||||
Goodwill impairment | — | 2 | — | 2 | |||||||||||
Restructuring and relocation costs | — | 20 | — | 31 | |||||||||||
Operating income (loss) | 1 | (66 | ) | 67 | (49 | ) | |||||||||
Interest income | 1 | 1 | 2 | 2 | |||||||||||
Interest expense | (15 | ) | (12 | ) | (45 | ) | (33 | ) | |||||||
Loss on debt extinguishment | — | — | (6 | ) | — | ||||||||||
Other income (expense), net | (1 | ) | — | 2 | — | ||||||||||
Income (loss) before taxes | (14 | ) | (78 | ) | 20 | (80 | ) | ||||||||
Income tax (expense) benefit | (4 | ) | 11 | (4 | ) | 7 | |||||||||
Net income (loss) | $ | (18 | ) | $ | (67 | ) | $ | 16 | $ | (72 | ) | ||||
Diluted earnings per share: | |||||||||||||||
Basic earnings per share | $ | (0.38 | ) | $ | (1.45 | ) | $ | 0.34 | $ | (1.57 | ) | ||||
Diluted earnings per share | $ | (0.38 | ) | $ | (1.45 | ) | $ | 0.33 | $ | (1.57 | ) | ||||
Shares used to calculate basic earnings per share | 46.6 | 46.1 | 46.5 | 46.0 | |||||||||||
Shares used to calculate diluted earnings per share | 46.6 | 46.1 | 47.4 | 46.0 |
September 30, 2013 | December 31, 2012 | September 30, 2012 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and equivalents | $ | 72 | $ | 51 | $ | 37 | |||||
Trade receivables, less allowances of $20, $19 and $15, respectively | 270 | 285 | 305 | ||||||||
Other receivables, net | 67 | 65 | 67 | ||||||||
Inventories | 235 | 220 | 226 | ||||||||
Prepaid expenses | 47 | 41 | 46 | ||||||||
Other current assets | 17 | 18 | 33 | ||||||||
Total current assets | 708 | 680 | 714 | ||||||||
Property, plant and equipment, net | 393 | 395 | 386 | ||||||||
Investments and other assets, net | 89 | 82 | 104 | ||||||||
Trademarks | 426 | 426 | 449 | ||||||||
Goodwill | 18 | 18 | 175 | ||||||||
Other intangible assets, net | 89 | 96 | 99 | ||||||||
Total assets | $ | 1,723 | $ | 1,698 | $ | 1,927 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current portion of long-term debt and capital lease obligations | $ | 2 | $ | 65 | $ | 41 | |||||
Accounts payable | 284 | 275 | 288 | ||||||||
Accrued liabilities | 148 | 141 | 124 | ||||||||
Total current liabilities | 434 | 480 | 453 | ||||||||
Long-term debt and capital lease obligations, net of current portion | 620 | 541 | 546 | ||||||||
Accrued pension and other employee benefits | 82 | 75 | 74 | ||||||||
Deferred gain – sale of shipping fleet | 10 | 20 | 23 | ||||||||
Deferred tax liabilities | 112 | 112 | 32 | ||||||||
Other liabilities | 70 | 100 | 83 | ||||||||
Total liabilities | 1,329 | 1,327 | 1,212 | ||||||||
Commitments and contingencies | — | — | — | ||||||||
Shareholders' equity: | |||||||||||
Common stock, $.01 par value (46,759,590, 46,317,433 and 46,303,732 shares outstanding, respectively) | — | — | — | ||||||||
Capital surplus | 838 | 835 | 833 | ||||||||
Accumulated deficit | (408 | ) | (424 | ) | (91 | ) | |||||
Accumulated other comprehensive (loss) | (36 | ) | (41 | ) | (27 | ) | |||||
Total shareholders' equity | 394 | 370 | 715 | ||||||||
Total liabilities and shareholders' equity | $ | 1,723 | $ | 1,698 | $ | 1,927 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Cash provided (used) by: | |||||||||||||||
OPERATIONS | |||||||||||||||
Net income (loss) | $ | (18 | ) | $ | (67 | ) | $ | 16 | $ | (72 | ) | ||||
Depreciation and amortization | 16 | 16 | 48 | 46 | |||||||||||
Goodwill impairment | — | 2 | — | 2 | |||||||||||
Loss on debt extinguishment | — | — | 6 | — | |||||||||||
Deferred income taxes | — | (10 | ) | — | (9 | ) | |||||||||
Amortization of discount on Convertible Notes | 3 | 2 | 8 | 7 | |||||||||||
Equity in (earnings) losses of investees | — | 29 | — | 32 | |||||||||||
Amortization of gain on sale of the shipping fleet | (4 | ) | (3 | ) | (10 | ) | (11 | ) | |||||||
Stock-based compensation | 1 | 1 | 5 | 6 | |||||||||||
Restructuring related asset impairments | — | 5 | — | 5 | |||||||||||
Changes in current assets and liabilities and other | 31 | 25 | 20 | 16 | |||||||||||
Operating cash flow | 29 | — | 92 | 21 | |||||||||||
INVESTING | |||||||||||||||
Capital expenditures | (15 | ) | (13 | ) | (36 | ) | (36 | ) | |||||||
Contribution to equity-method investment | (13 | ) | — | (13 | ) | — | |||||||||
Net proceeds from sale of long-term assets | 4 | 2 | 12 | 4 | |||||||||||
Other, net | — | (1 | ) | 4 | (3 | ) | |||||||||
Investing cash flow | (23 | ) | (12 | ) | (34 | ) | (35 | ) | |||||||
FINANCING | |||||||||||||||
Issuance of long-term debt | — | — | 429 | — | |||||||||||
Repayments of long-term debt and capital lease obligations | (1 | ) | (4 | ) | (413 | ) | (13 | ) | |||||||
Borrowings under the ABL Revolver | — | — | 37 | — | |||||||||||
Repayments of ABL Revolver | — | — | (37 | ) | — | ||||||||||
Borrowings under the Credit Facility Revolver | — | — | — | 50 | |||||||||||
Repayments of the Credit Facility Revolver | — | — | (40 | ) | (30 | ) | |||||||||
Payments for debt modification and issuance costs | — | — | (14 | ) | (2 | ) | |||||||||
Financing cash flow | (1 | ) | (4 | ) | (37 | ) | 5 | ||||||||
Increase in cash and equivalents | 5 | (16 | ) | 21 | (8 | ) | |||||||||
Balance at beginning of period | 67 | 53 | 51 | 45 | |||||||||||
Balance at end of period | $ | 72 | $ | 37 | $ | 72 | $ | 37 |
Quarter Ended September 30, | Better (Worse) | Nine Months Ended September 30, | Better (Worse) | ||||||||||||||||||
2013 | 2012 | vs. 2012 | 2013 | 2012 | vs. 2012 | ||||||||||||||||
Comparable net sales by segment [1] | |||||||||||||||||||||
Bananas | $ | 458 | $ | 446 | 2.6 | % | $ | 1,482 | $ | 1,499 | (1.2 | )% | |||||||||
Salads and Healthy Snacks | 239 | 240 | (0.4 | )% | 739 | 729 | 1.4 | % | |||||||||||||
Other Produce | 28 | 28 | (0.6 | )% | 88 | 112 | (21.2 | )% | |||||||||||||
$ | 725 | $ | 714 | 1.5 | % | $ | 2,309 | $ | 2,341 | (1.3 | )% | ||||||||||
Comparable operating income (loss) [1] | |||||||||||||||||||||
Bananas | $ | 20 | $ | (2 | ) | 1,205.2 | % | $ | 101 | $ | 52 | 94.5 | % | ||||||||
Salads and Healthy Snacks | (5 | ) | 1 | (814.0 | )% | 6 | 14 | (60.4 | )% | ||||||||||||
Other Produce | 1 | (4 | ) | 133.0 | % | 1 | (13 | ) | 107.4 | % | |||||||||||
Corporate | (14 | ) | (12 | ) | (17.8 | )% | (41 | ) | (33 | ) | (22.6 | )% | |||||||||
$ | 2 | $ | (17 | ) | 110.8 | % | $ | 67 | $ | 20 | 230.9 | % | |||||||||
Comparable operating margin by segment [1] | |||||||||||||||||||||
Bananas | 4.3 | % | (0.4 | )% | 4.7 pts | 6.8 | % | 3.5 | % | 3.4 pts | |||||||||||
Salads and Healthy Snacks | (2.2 | )% | 0.3 | % | (2.5) pts | 0.7 | % | 1.9 | % | (1.2) pts | |||||||||||
Other Produce | 4.8 | % | (14.5 | )% | 19.3 pts | 1.0 | % | (11.2 | )% | 12.2 pts | |||||||||||
SG&A as a percent of sales | 8.4 | % | 9.8 | % | 1.3 pts | 7.7 | % | 8.7 | % | 1.0 pts | |||||||||||
Company banana sales volume (40 lb. boxes) | |||||||||||||||||||||
North America | 18.1 | 16.3 | 11.1 | % | 54.1 | 48.8 | 11.0 | % | |||||||||||||
Core Europe:[3] | 7.3 | 8.6 | (15.3 | )% | 25.6 | 29.2 | (12.3 | )% | |||||||||||||
Mediterranean | 2.6 | 2.7 | (3.9 | )% | 8.7 | 8.2 | 5.6 | % | |||||||||||||
Middle East | 1.1 | 1.8 | (35.1 | )% | 3.2 | 5.1 | (37.8 | )% | |||||||||||||
Europe and the Middle East | 11.0 | 13.1 | (15.6 | )% | 37.4 | 42.5 | (11.9 | )% | |||||||||||||
Total banana sales volume | 29.2 | 29.4 | (0.8 | )% | 91.6 | 91.3 | 0.3 | % | |||||||||||||
Banana Pricing | |||||||||||||||||||||
North America[2] | (1.0 | )% | (2.4 | )% | |||||||||||||||||
Core Europe:[3] | |||||||||||||||||||||
Local currency | 13.1 | % | 5.9 | % | |||||||||||||||||
Currency exchange impact | 6.3 | % | 2.4 | % | |||||||||||||||||
Core Europe U.S. Dollar Basis | 19.4 | % | 8.3 | % | |||||||||||||||||
Mediterranean | 13.3 | % | 2.1 | % | |||||||||||||||||
Middle East | 2.2 | % | (2.9 | )% | |||||||||||||||||
Europe and the Middle East | 16.9 | % | 6.4 | % | |||||||||||||||||
Retail value-added salads | |||||||||||||||||||||
Volume (12-count cases) | 12.2 | 11.3 | 7.5 | % | 36.9 | 35.8 | 3.1 | % | |||||||||||||
Pricing, including mix | (0.3 | )% | (0.3 | )% | |||||||||||||||||
Euro average exchange rate, spot (dollars per euro) | $ | 1.32 | $ | 1.25 | 5.8 | % | $ | 1.32 | $ | 1.28 | 3.3 | % | |||||||||
Euro average exchange rate, hedged (dollars per euro) | $ | 1.28 | $ | 1.24 | 3.0 | % | $ | 1.27 | $ | 1.29 | (1.7 | )% |
Q3 | YTD | |||||||
Net sales: | ||||||||
Change in euro exchange rate | $ | 10 | $ | 15 | ||||
Change in realized hedging loss[1] | (4 | ) | (20 | ) | ||||
Unrealized hedging gain (loss)[2] | (2 | ) | — | |||||
Effect on net sales | 4 | (5 | ) | |||||
Local costs increase | (2 | ) | (3 | ) | ||||
Change in balance sheet translation gain[3] | — | 2 | ||||||
Net effect on operating income (loss) | $ | 2 | $ | (7 | ) |
1 | Third quarter hedging loss was $5 million in 2013 versus $1 million loss in the same period of 2012. In the first nine months of 2013, hedging loss was $16 million in 2013 versus $3 million gain in the same period of 2012. |
2 | Hedge accounting was terminated in the first quarter of 2013 for certain currency hedges that were transferred to banks participating in the company's ABL Credit Facility. These unrealized gains and losses were recognized in "Net sales" for positions originally intended to hedge sales in future quarters of 2013. Termination of hedge accounting did not change the economic purpose or effect to reduce uncertainty in the U.S. dollar realization of euro-denominated sales, but did result in unrealized changes in fair value of these hedge positions to be recognized currently in "Net sales" until the hedge positions settled. These unrealized changes net to zero in the first nine months of 2013 because all of the affected hedge positions had settled by September 30, 2013. |
3 | Third quarter balance sheet translation was a net gain of $2 million in both 2013 and 2012. Balance sheet translation in the first nine months was a net loss of $3 million in 2013 and a net loss of $4 million in 2012. |