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: February 27, 2014 | By: | /s/ Joseph B. Johnson | |
Joseph B. Johnson | |||
Vice President and Chief Accounting Officer | |||
• | GAAP net loss of $16 million in 2013 compared to GAAP net loss of $405 million in 2012 |
• | Adjusted EBITDA[1] of $118 million for 2013 compared to Adjusted EBITDA of $70 million in 2012 |
Operating income (loss) | |||||||
(in millions) | 2013 | 2012 | |||||
Operating income (loss) (U.S. GAAP) | $ | 50 | $ | (254 | ) | ||
Goodwill and trademark impairments | — | 182 | |||||
Danone JV investment impairment | — | 32 | |||||
Headquarters relocation and restructuring | — | 35 | |||||
Exit activities | 2 | 7 | |||||
Shipping reconfiguration | — | 6 | |||||
Recovery of grower receivables | (1 | ) | (2 | ) | |||
Other | 2 | — | |||||
Comparable operating income (Non-GAAP) | 53 | 7 | |||||
Depreciation and amortization | 65 | 63 | |||||
Adjusted EBITDA (Non-GAAP) | $ | 118 | $ | 70 |
Operating income (loss) | |||||||
(in millions) | 2013 | 2012 | |||||
Operating income (loss) (U.S. GAAP) | $ | (17 | ) | $ | (205 | ) | |
Goodwill and trademark impairments | — | 180 | |||||
Danone JV investment impairment | — | 4 | |||||
Headquarters relocation and restructuring | — | 5 | |||||
Exit activities | 1 | 3 | |||||
Other | 2 | — | |||||
Comparable operating income (Non-GAAP) | (14 | ) | (14 | ) | |||
Depreciation and amortization | 18 | 17 | |||||
Adjusted EBITDA (Non-GAAP) | $ | 4 | $ | 3 |
• | Disciplined contract renewals and acquisitions |
• | Accelerated pace of core innovation, especially in salads |
• | Continued focus on productivity enhancements, especially in production and logistics |
• | Continued discipline in SG&A |
• | Sourcing partnerships with key suppliers |
• | Shipping partnerships and rotations that drive efficiencies |
• | Cycling out of the substantial 2013 Midwest plant transition costs and raw material weather impacts in salads |
• | Prudent capital spending, with a focus on farm, port and plant productivity enhancements |
FY 2013 | FY 2014 | |||
(in millions) | Actual | Estimated | ||
Capital expenditures | $49 | $55-60 | ||
Depreciation & amortization | 65 | 60-65 | ||
Gross interest expense [1] | 61 | 55-60 |
• | Goodwill and trademark impairments: Goodwill and indefinite-lived intangible assets, such as trademarks, are subject to an annual impairment review each fourth quarter. Based on the 2012 fourth quarter impairment analysis, the company recorded a non-cash impairment charge to goodwill of $157 million and a non-cash impairment charge to the Fresh Express trademark of $23 million. These impairment charges are the result of lower operating performance of its retail salad business, lower retail salad volumes, lower perceived valuation multiples in the packaged salad industry and continuing demand for private label versus branded products. These goodwill and trademark impairments are excluded from the comparable results of the Salads and Healthy Snacks segment. 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. |
• | Danone JV investment impairment: In the third quarter of 2012, the company recognized $28 million to fully impair its 49% equity-method investment and related costs and to record probable funding obligations to the Danone JV, which are excluded from comparable results of the Salads and Healthy Snacks segment. In the fourth quarter of 2012, changes in the estimated funding obligations resulted in the recognition of additional charges of $4 million. |
• | Headquarters relocation and restructuring: In November 2011, the company announced its plan to relocate its corporate headquarters to Charlotte, North Carolina. The relocation was completed in 2012. The company recognized expenses of $3 million in the fourth quarter of 2012 and $20 million during 2012. The company recognized minor remaining costs during 2013. Relocation costs are excluded from comparable reporting of Corporate costs. Also 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. The company recognized $2 million and $16 million of restructuring costs, including $9 million of severance expenses during |
• | Exit activities: In the first and fourth quarters of 2013, comparable operating loss of the Salads and Healthy Snacks segment excludes $1 million each quarter, of severance expenses and inventory write-offs related to discontinued products. In the fourth quarter of 2012, the company recognized $2 million of estimated lease exit expense, net of estimated future sublease income, which is excluded from comparable results of Corporate costs and $1 million of estimated lease exit expense excluded from comparable results of the Other Produce segment. The first nine months of 2012 comparable operating results also exclude $3 million of expense from the Salads and Healthy Snacks segment and $2 million from the Other Produce segment for asset write-offs and severance, related to discontinued products and activities. |
• | 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 did not recur in 2013 since primary leases for vessels expiring at the end of 2012 were not renewed. |
• | Recovery of grower receivables: In 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 $2 million for full year 2012 of these advances, through the bankruptcy process and continues to seek additional recoveries. These recoveries are excluded from comparable results of the Other Produce segment. |
• | Other: In the fourth quarter of 2013 the company recognized $1 million related to legal expenses which are excluded from comparable results of Other Produce segment. Also in the fourth quarter of 2013 the company recognized $1 million related to relocation and hiring expenses which are excluded from comparable Corporate costs. |
Quarter Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales | $ | 748 | $ | 738 | $ | 3,057 | $ | 3,078 | |||||||
Operating expenses: | |||||||||||||||
Cost of sales | 691 | 667 | 2,708 | 2,743 | |||||||||||
Selling, general and administrative | 57 | 72 | 235 | 276 | |||||||||||
Depreciation | 15 | 14 | 56 | 54 | |||||||||||
Amortization | 2 | 2 | 9 | 9 | |||||||||||
Equity in (earnings) losses of investees | — | 2 | — | 33 | |||||||||||
Reserve for (recovery of) grower receivables, net | — | — | (1 | ) | (1 | ) | |||||||||
Restructuring and relocation costs | — | 5 | — | 35 | |||||||||||
Goodwill and trademark impairments | — | 180 | — | 182 | |||||||||||
Operating income (loss) | (17 | ) | (205 | ) | 50 | (254 | ) | ||||||||
Interest income | 1 | 1 | 3 | 3 | |||||||||||
Interest expense | (16 | ) | (12 | ) | (61 | ) | (45 | ) | |||||||
Loss on debt extinguishment | — | — | (6 | ) | — | ||||||||||
Other income (expense), net | 2 | (2 | ) | 4 | (2 | ) | |||||||||
Income (loss) from continuing operations before income taxes | (31 | ) | (218 | ) | (11 | ) | (298 | ) | |||||||
Income tax (expense) benefit | (1 | ) | (112 | ) | (5 | ) | (105 | ) | |||||||
Income (loss) from continuing operations | (31 | ) | (331 | ) | (16 | ) | (403 | ) | |||||||
Loss from discontinued operations | — | (2 | ) | — | (2 | ) | |||||||||
Net income (loss) | $ | (31 | ) | $ | (333 | ) | $ | (16 | ) | $ | (405 | ) | |||
Basic earnings per share: | |||||||||||||||
Continued operations | $ | (0.67 | ) | $ | (7.14 | ) | $ | (0.34 | ) | $ | (8.75 | ) | |||
Discontinued operations | $ | — | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | |||||
$ | (0.67 | ) | $ | (7.18 | ) | $ | (0.34 | ) | $ | (8.79 | ) | ||||
Diluted earnings per share: | |||||||||||||||
Continued operations | $ | (0.67 | ) | $ | (7.14 | ) | $ | (0.34 | ) | $ | (8.75 | ) | |||
Discontinued operations | $ | — | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | |||||
$ | (0.67 | ) | $ | (7.18 | ) | $ | (0.34 | ) | $ | (8.79 | ) | ||||
Shares used to calculate basic earnings per share | 46.8 | 46.3 | 46.6 | 46.1 | |||||||||||
Shares used to calculate diluted earnings per share | 46.8 | 46.3 | 46.6 | 46.1 |
December 31, 2013 | December 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 54 | $ | 51 | |||
Trade receivables, less allowances of $20 and $19, respectively | 252 | 285 | |||||
Other receivables, net | 56 | 65 | |||||
Inventories | 211 | 220 | |||||
Prepaid expenses | 50 | 41 | |||||
Other current assets | 7 | 18 | |||||
Total current assets | 629 | 680 | |||||
Property, plant and equipment, net | 391 | 395 | |||||
Investments and other assets, net | 108 | 82 | |||||
Trademarks | 426 | 426 | |||||
Goodwill | 18 | 18 | |||||
Other intangible assets, net | 87 | 96 | |||||
Total assets | $ | 1,659 | $ | 1,698 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt and capital lease obligations | $ | 2 | $ | 65 | |||
Accounts payable | 248 | 275 | |||||
Accrued liabilities | 158 | 141 | |||||
Total current liabilities | 409 | 480 | |||||
Long-term debt and capital lease obligations, net of current portion | 629 | 541 | |||||
Accrued pension and other employee benefits | 77 | 75 | |||||
Deferred gain – sale of shipping fleet | 6 | 20 | |||||
Deferred tax liabilities | 104 | 112 | |||||
Other liabilities | 60 | 100 | |||||
Total liabilities | 1,285 | 1,327 | |||||
Commitments and contingencies | — | — | |||||
Shareholders' equity: | |||||||
Common stock, $.01 par value (46,829,913 and 46,317,433 shares outstanding, respectively) | — | — | |||||
Capital surplus | 840 | 835 | |||||
Accumulated deficit | (440 | ) | (424 | ) | |||
Accumulated other comprehensive (loss) | (26 | ) | (41 | ) | |||
Total shareholders' equity | 374 | 370 | |||||
Total liabilities and shareholders' equity | $ | 1,659 | $ | 1,698 |
Quarter Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Cash (used) provided by: | |||||||||||||||
OPERATIONS | |||||||||||||||
Net income (loss) | $ | (31 | ) | $ | (333 | ) | $ | (16 | ) | $ | (405 | ) | |||
Loss from discontinued operations | — | 2 | — | 2 | |||||||||||
Depreciation and amortization | 18 | 17 | 65 | 63 | |||||||||||
Goodwill and trademark impairments | — | 180 | — | 182 | |||||||||||
Equity in (earnings) losses of investees | — | 2 | — | 33 | |||||||||||
Loss on debt extinguishment | — | — | 6 | — | |||||||||||
Deferred income taxes | (9 | ) | 101 | (9 | ) | 93 | |||||||||
Reserve for trade receivables | 2 | 5 | 5 | 14 | |||||||||||
Reserve for grower receivables | — | — | — | 1 | |||||||||||
Amortization of discount on Convertible Notes | 3 | 3 | 11 | 10 | |||||||||||
Amortization of gain on sale of the shipping fleet | (4 | ) | (3 | ) | (14 | ) | (14 | ) | |||||||
Stock-based compensation | 1 | 2 | 6 | 8 | |||||||||||
Restructuring related asset impairments | — | — | — | 5 | |||||||||||
Changes in current assets and liabilities: | |||||||||||||||
Trade receivables | 23 | 15 | 31 | (37 | ) | ||||||||||
Other receivables | 10 | 7 | 10 | (2 | ) | ||||||||||
Inventories | 15 | 7 | 4 | 15 | |||||||||||
Prepaid expenses and other current assets | (3 | ) | 5 | (11 | ) | (1 | ) | ||||||||
Accounts payable and accrued liabilities | (10 | ) | (15 | ) | 15 | 8 | |||||||||
Other liabilities | (4 | ) | 6 | (1 | ) | 31 | |||||||||
Other | (10 | ) | 10 | (11 | ) | 26 | |||||||||
Operating cash flow | — | 11 | 91 | 33 | |||||||||||
INVESTING | |||||||||||||||
Capital expenditures | (13 | ) | (17 | ) | (49 | ) | (53 | ) | |||||||
Contribution to equity-method investment | (5 | ) | — | (18 | ) | — | |||||||||
Net proceeds from sale of: | |||||||||||||||
Equity method investments | 1 | 1 | 3 | 3 | |||||||||||
Other long-term assets | 1 | 3 | 10 | 5 | |||||||||||
Other, net | — | — | 4 | (2 | ) | ||||||||||
Investing cash flow | (17 | ) | (13 | ) | (51 | ) | (48 | ) | |||||||
FINANCING | |||||||||||||||
Issuances of long-term debt | — | — | 429 | — | |||||||||||
Repayments of long-term debt and capital lease obligations | (1 | ) | (4 | ) | (413 | ) | (17 | ) | |||||||
Borrowings under the ABL Revolver | — | — | 37 | — | |||||||||||
Repayments of the ABL Revolver | — | — | (37 | ) | — | ||||||||||
Borrowings under the Credit Facility Revolver | — | 20 | — | 70 | |||||||||||
Repayments of the Credit Facility Revolver | — | — | (40 | ) | (30 | ) | |||||||||
Payments for debt modification and issuance costs | — | — | (14 | ) | (2 | ) | |||||||||
Financing cash flow | (1 | ) | 16 | (38 | ) | 21 | |||||||||
Increase (decrease) in cash and equivalents | (18 | ) | 14 | 3 | 6 | ||||||||||
Balance at beginning of period | 72 | 37 | 51 | 45 | |||||||||||
Balance at end of period | $ | 54 | $ | 51 | $ | 54 | $ | 51 |
Quarter Ended December 31, | Better (Worse) | Twelve Months Ended December 31, | Better (Worse) | ||||||||||||||||||
2013 | 2012 | vs. 2012 | 2013 | 2012 | vs. 2012 | ||||||||||||||||
Net sales by segment | |||||||||||||||||||||
Bananas | $ | 488 | $ | 486 | 0.3 | % | $ | 1,970 | $ | 1,985 | (0.8 | )% | |||||||||
Salads and Healthy Snacks | 228 | 223 | 1.9 | % | 967 | 953 | 1.5 | % | |||||||||||||
Other Produce | 32 | 28 | 16.6 | % | 121 | 140 | (13.7 | )% | |||||||||||||
$ | 748 | $ | 738 | 1.4 | % | $ | 3,057 | $ | 3,078 | (0.7 | )% | ||||||||||
Comparable operating income (loss) [1] | |||||||||||||||||||||
Bananas | $ | 10 | $ | 31 | (67.5 | )% | $ | 112 | $ | 83 | 34.0 | % | |||||||||
Salads and Healthy Snacks | (11 | ) | (18 | ) | 37.2 | % | (6 | ) | (4 | ) | (48.3 | )% | |||||||||
Other Produce | (3 | ) | (5 | ) | 25.2 | % | (3 | ) | (17 | ) | 85.2 | % | |||||||||
Corporate | (10 | ) | (22 | ) | 56.8 | % | (51 | ) | (56 | ) | 9.4 | % | |||||||||
$ | (14 | ) | $ | (14 | ) | (3.6 | )% | $ | 53 | $ | 7 | 703.1 | % | ||||||||
Comparable operating margin by segment [1] | |||||||||||||||||||||
Bananas | 2.1 | % | 6.4 | % | (4.3) pts | 5.7 | % | 4.2 | % | 1.5 pts | |||||||||||
Salads and Healthy Snacks | (4.9 | )% | (7.9 | )% | 3.0 pts | (0.6 | )% | (0.4 | )% | (0.2) pts | |||||||||||
Other Produce | (10.8 | )% | (16.8 | )% | 6.0 pts | (2.1 | )% | (12.3 | )% | 10.2 pts | |||||||||||
GAAP SG&A as a percent of net sales | 7.6 | % | 9.8 | % | 2.3 pts | 7.7 | % | 9.0 | % | 1.3 | % | ||||||||||
Company banana sales volume (40 lb. boxes) | |||||||||||||||||||||
North America | 18.5 | 17.0 | 8.7 | % | 72.7 | 65.8 | 10.4 | % | |||||||||||||
Core Europe [3] | 7.6 | 8.9 | (14.7 | )% | 33.2 | 38.1 | (12.8 | )% | |||||||||||||
Mediterranean | 5.8 | 3.0 | 96.6 | % | 14.5 | 11.2 | 29.8 | % | |||||||||||||
Middle East | 1.3 | 1.7 | (20.3 | )% | 4.5 | 6.7 | (33.0 | )% | |||||||||||||
Europe and the Middle East | 14.7 | 13.5 | 9.1 | % | 52.2 | 56.0 | (6.7 | )% | |||||||||||||
Total banana sales volume | 33.3 | 30.5 | 8.9 | % | 124.9 | 121.8 | 2.5 | % | |||||||||||||
Banana Pricing | |||||||||||||||||||||
North America [2] | (1.5 | )% | (2.3 | )% | |||||||||||||||||
Core Europe: [3] | |||||||||||||||||||||
Local currency | 4.5 | % | 5.6 | % | |||||||||||||||||
Currency exchange impact | 5.3 | % | 3.0 | % | |||||||||||||||||
Core Europe U.S. Dollar Basis | 9.8 | % | 8.6 | % | |||||||||||||||||
Mediterranean | (29.7 | )% | (9.1 | )% | |||||||||||||||||
Middle East | 4.8 | % | (0.8 | )% | |||||||||||||||||
Europe and the Middle East | (7.7 | )% | 2.6 | % | |||||||||||||||||
Retail value-added salads | |||||||||||||||||||||
Volume (12-count cases) | 11.7 | 10.9 | 7.4 | % | 48.6 | 46.7 | 4.1 | % | |||||||||||||
Pricing, including mix | 3.8 | % | 0.7 | % | |||||||||||||||||
Euro average exchange rate, spot (dollars per euro) | $ | 1.36 | $ | 1.29 | 5.0 | % | $ | 1.33 | $ | 1.28 | 3.2 | % | |||||||||
Euro average exchange rate, hedged (dollars per euro) | $ | 1.28 | $ | 1.27 | 0.6 | % | $ | 1.27 | $ | 1.29 | (1.2 | )% |
Q4 | YTD | |||||||
Net sales: | ||||||||
Change in euro exchange rate | $ | 9 | $ | 23 | ||||
Change in realized hedging loss [1] | (6 | ) | (26 | ) | ||||
Effect on net sales | 3 | (2 | ) | |||||
Local costs increase | (2 | ) | (5 | ) | ||||
Change in balance sheet translation gain [2] | 2 | 3 | ||||||
Net effect on operating income (loss) | $ | 2 | $ | (4 | ) |
[1] | Fourth quarter hedging loss was $9 million in 2013 versus $3 million loss in the same period of 2012. For the twelve months of 2013, hedging loss was $25 million in 2013 versus $1 million gain in the same period of 2012. |
[2] | Fourth quarter balance sheet translation was a net gain of $1 million in 2013 and $1 million loss in the same period 2012. Balance sheet translation in the full year was a net loss of $2 million in 2013 and a net loss of $5 million in 2012. |