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"We are pleased with the quarter's strength of earnings, in what is seasonally a weaker quarter," said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer at Fresh Del Monte Produce. "Our solid performance is characterized by our team's ability to balance operational improvements and cost savings, while investing in our future. Although we anticipate weak global market conditions to continue in the near term, we are very optimistic about Fresh Del Monte's future prospects. Our financial depth and flexibility are exceptionally sound."
Net sales for the quarter were $766.2 million, compared with $832.9 million in the third quarter of 2008. Net sales increased in the Company's banana business due to higher worldwide banana selling prices and strong global demand. These gains were more than offset by lower net sales in the Company's other fresh produce, other products and services and prepared food businesses.
Gross profit for the quarter was $69.0 million, compared with gross profit of $79.0 million for the same period last year. The decline in gross profit was a direct result of expected lower volume and selling prices in the Company's gold pineapple product line and higher fruit procurement costs in the Company's banana business, partially offset by higher gross profit in the Company's fresh-cut product line.
Excluding asset impairment and other charges, (credits), net, operating income for the quarter was $25.7 million, compared with $37.7 million for the same period last year, a result of the decrease in gross profit.
Net income for the quarter was $38.6 million, compared with $29.1 million in the third quarter of 2008, excluding asset impairment and other charges, (credits), net. The increase in net income reflects the effect of tax benefits, foreign exchange translation gains, and lower interest expense, partially offset by the decline in operating income.
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(U.S. dollars in millions, except share and per share data) -
(Unaudited)
Quarter ended Nine months ended
Income Statement: September 25, September 26, September 25, September 26,
2009 2008 2009 2008
Net sales $ 766.2 $ 832.9 $ 2,624.3 $ 2,700.0
Cost of products sold 697.2 753.9 2,363.4 2,422.4
Other charges (1) - - 17.1 2.1
Gross profit 69.0 79.0 243.8 275.5
Selling, general and administrative expenses 43.3 41.3 122.6 123.5
Asset impairment and other charges (credits), net (2) 10.0 (0.2 ) 11.5 16.0
Operating income 15.7 37.9 109.7 136.0
Interest expense, net 2.7 3.6 8.4 8.7
Other income (expense), net 3.4 (2.3 ) 2.5 12.0
Income before income taxes 16.4 32.0 103.8 139.3
Provision for (benefit from) income taxes (12.8 ) 2.6 (13.8 ) 5.0
Net income $ 29.2 $ 29.4 $ 117.6 $ 134.3
Less: Net income (loss) attributable to noncontrolling interests 0.6 0.1 1.9 (0.5 )
Net income attributable to Fresh Del Monte Produce Inc. $ 28.6 $ 29.3 $ 115.7 $ 134.8
Net income per ordinary share attributable to Fresh Del Monte $ 0.45 $ 0.46 $ 1.82 $ 2.13
Produce Inc. - Basic
Net income per ordinary share attributable to Fresh Del Monte $ 0.45 $ 0.46 $ 1.82 $ 2.12
Produce Inc. - Diluted
Weighted average number of ordinary shares:
Basic 63,568,042 63,553,299 63,558,155 63,279,692
Diluted 63,682,513 63,695,040 63,629,854 63,609,428
Selected Income Statement Data:
Depreciation and amortization $ 21.1 $ 21.4 $ 63.2 $ 62.3
Non-GAAP Measures:
Reported net income per share - Diluted $ 0.45 $ 0.46 $ 1.82 $ 2.12
Other charges (1) - - 0.27 0.03
Asset impairment and other charges (credits), net (2) 0.16 - 0.18 0.25
Adjusted net income per share - Diluted (3) $ 0.61 $ 0.46 $ 2.27 $ 2.40
Reported gross profit $ 69.0 $ 79.0 $ 243.8 $ 275.5
Other charges (1) - - $ 17.1 2.1
Adjusted gross profit (3) $ 69.0 $ 79.0 $ 260.9 $ 277.6
(1) Other charges for the nine months ended September 25, 2009
relates to the second quarter write-down of growing crop inventory
resulting from our decision to discontinue pineapple planting in
Brazil. Other charges for the nine months ended September 26, 2008
related to wages paid to idle workers and write-offs of packaging
material inventory incurred in the second quarter as a result of
extensive flood damage at our banana farms in Brazil.
(2) Asset impairment and other charges (credits), net, for the
third quarter ended September 25, 2009 related principally to
asset impairment charges resulting from our decision to
discontinue pineapple planting in Brazil during the second quarter
and our subsequent decision during the third quarter to not use
certain property, plant and equipment as originally intended for
other crop production. Also included in asset impairment and other
charges were one-time termination benefits and contract
termination costs resulting from the decision to discontinue our
commercial cargo service in Europe, and the reversal of contract
termination costs related to the closure of an under-utilized
distribution center in the United Kingdom. Asset impairment and
other charges, net, for the nine months ended September 25, 2009
related principally to asset impairment charges resulting from our
decision to discontinue pineapple planting in Brazil and
subsequent decision during the third quarter as explained above,
one-time termination benefits and contract termination costs
resulting from the decision to discontinue our commercial cargo
service in Europe, an impairment charge of the Del Monte(R) perpetual,
royalty-free brand name license due to lower than expected volumes
and pricing related to the U.K. beverage products, the reversals
of contract termination costs related to the closure of an
under-utilized distribution center in the United Kingdom and the
previously announced closing of our Hawaii pineapple operations.
Asset impairment and other charges (credits), net for the third
quarter and nine months ended September 28, 2008 related principally
to the flood damage at our banana farms in Brazil and the closure of
under-utilized distribution centers and a beverage production
facility in the United Kingdom.
(3) Management reviews adjusted net income, adjusted net income per
share and adjusted gross profit and considers these measures
relevant to investors because management believes they better
represent the underlying business trends and performance of the
Company.
Fresh Del Monte Produce Inc. and Subsidiaries
Business Segment Data
(U.S. dollars in millions) - (Unaudited)
Quarter ended
September 25, 2009 September 26, 2008
Segment Data:
Net Sales Gross Profit (Loss) Net Sales Gross Profit (Loss)
Banana $ 350.9 46 % $ 14.0 20 % $ 332.7 40 % $ 23.7 30 %
Other Fresh Produce 311.0 41 % 44.0 64 % 354.5 43 % 45.3 57 %
Prepared Food 85.5 11 % 14.0 20 % 102.4 12 % 13.3 17 %
Other Products and Services 18.8 2 % (3.0 ) -4 % 43.3 5 % (3.3 ) -4 %
Total $ 766.2 100 % $ 69.0 100 % $ 832.9 100 % $ 79.0 100 %
Nine months ended
September 25, 2009 September 26, 2008
Segment Data:
Net Sales Gross Profit (Loss) Net Sales Gross Profit
Banana $ 1,125.5 43 % $ 105.0 43 % $ 1,054.3 39 % $ 95.4 (2) 35 %
Other Fresh Produce 1,176.1 45 % 98.9 (1) 41 % 1,218.0 45 % 139.4 50 %
Prepared Food 248.0 9 % 41.8 17 % 318.8 12 % 38.6 14 %
Other Products and Services 74.7 3 % (1.9 ) -1 % 108.9 4 % 2.1 1 %
Total $ 2,624.3 100 % $ 243.8 100 % $ 2,700.0 100 % $ 275.5 100 %
Quarter ended Nine months ended
September 25, September 26, September 25, September 26,
Net Sales by Geographic Region: 2009 2008 2009 2008
North America $ 357.3 47 % $ 397.8 48 % $ 1,270.7 48 % $ 1,251.9 46 %
Europe 210.4 27 % 234.9 28 % 728.8 28 % 834.2 31 %
Asia 95.7 12 % 88.5 11 % 335.9 13 % 306.1 11 %
Middle East 88.7 12 % 69.4 8 % 222.6 8 % 204.2 8 %
Other 14.1 2 % 42.3 5 % 66.3 3 % 103.6 4 %
Total $ 766.2 100 % $ 832.9 100 % $ 2,624.3 100 % $ 2,700.0 100 %
(1) Other fresh produce gross profit for the nine months ended
September 25, 2009 included charges of $17.1 million recorded during
the second quarter of 2009 related to the write-down of growing crop
inventory resulting from our decision to discontinue pineapple
planting in Brazil.
(2) Banana gross profit for the nine months ended September 26, 2008
included charges of $2.1 million recorded during the second quarter
of 2008 related to wages paid to idle workers and write-offs of
packaging material inventory incurred as a result of extensive flood
damage at our banana farms in Brazil.
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
Nine months ended
September 25, September 26,
2009 2008
Operating activities:
Net income $ 117.6 $ 134.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 63.2 62.3
Amortization of debt issuance costs 2.7 1.3
Asset impairment charges 12.5 12.6
Gain on sales of assets (4.3 ) (7.5 )
Foreign currency translation adjustment 9.0 (4.9 )
Other (8.9 ) 7.1
Changes in operating assets and liabilities:
Receivables 67.7 43.0
Inventories 16.0 (20.3 )
Other current assets 4.5 (9.1 )
Accounts payable and accrued expenses (25.9 ) 32.2
Other noncurrent assets and liabilities 15.8 (5.1 )
Net cash provided by operating activities 269.9 245.9
Investing activities:
Capital expenditures (63.2 ) (72.3 )
Proceeds from sales of assets 12.4 16.5
Purchase of subsidiaries, net of cash acquired - (414.1 )
Net cash used in investing activities (50.8 ) (469.9 )
Financing activities:
Net (payments) proceeds on long-term debt (204.7 ) 207.5
Proceeds from stock options exercised 0.7 21.8
Contributions from noncontrolling interests (3.7 ) (4.6 )
Net cash (used in) provided by financing activities (207.7 ) 224.7
Effect of exchange rate changes on cash (0.2 ) (2.5 )
Net increase (decrease) in cash and cash equivalents 11.2 (1.8 )
Cash and cash equivalents, beginning 27.6 30.2
Cash and cash equivalents, ending $ 38.8 $ 28.4
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions)
September 25, December 26,
2009 2008
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 38.8 $ 27.6
Trade accounts receivable, net 298.2 348.0
Other accounts receivables, net 46.4 62.0
Inventories 441.2 459.8
Other current assets 49.8 77.2
Total current assets 874.4 974.6
Investment in and advances to unconsolidated companies 8.5 8.0
Property, plant and equipment, net 1,071.5 1,085.2
Goodwill 407.9 401.1
Other noncurrent assets 196.3 182.1
Total assets $ 2,558.6 $ 2,651.0
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 342.7 $ 379.6
Current portion of long-term debt and capital lease obligations 5.4 358.0
Other current liabilities 32.1 36.8
Total current liabilities 380.2 774.4
Long-term debt and capital lease obligations 309.0 154.8
Other noncurrent liabilities 211.8 207.9
Total liabilities 901.0 1,137.1
Total Fresh Del Monte Produce Inc. shareholders' equity 1,634.9 1,496.9
Noncontrolling interests 22.7 17.0
Total shareholders' equity 1,657.6 1,513.9
Total liabilities and shareholders' equity $ 2,558.6 $ 2,651.0
Selected Balance Sheet Data:
Working capital $ 494.2 $ 200.2
Total Debt $ 314.4 $ 512.8
Third Quarter 2009 Business Segment Performance
(As reported in business segment data)
Bananas
Net sales increased 5% to $351.0 million during the quarter. The increase in net sales was primarily driven by higher sales in the Company's Middle East, Europe and Asia-Pacific regions. Volume was in line with the prior year period. Worldwide pricing increased 4% to $13.75 per unit. These gains were partially offset by an 8% increase in unit costs, the result of higher fruit procurement costs. Gross profit decreased $9.6 million to $14.0 million.
Other Fresh Produce
Net sales for the quarter decreased 12% to $311.0 million. The decrease in net sales was primarily the result of lower sales in the Company's gold pineapple, melon and tomato product lines. Volume decreased by 13%, the result of lower supply of gold pineapple and the Company's planned reduction of domestic melons. Gross profit decreased $1.3 million to $44.0 million.
-- Gold pineapple -- Net sales decreased 15% to $104.0 million. Volume decreased 8% for the quarter. The decline in volume was the result of the previously announced supply shortages associated with the temporary reduction in volume sourced from Costa Rica. Pricing decreased 8%, primarily due to consumer-price sensitivity. Unit cost increased 1%.
-- Melon -- Net sales decreased 34% to $21.7 million. Volume was 39% lower than the prior year period. The decline in domestic melon volume was the result of the Company's decision to reduce purchases from third-party growers in California. Pricing increased 8%, with unit cost 8% higher.
-- Fresh-cut -- Net sales decreased 2% to $82.2 million. Volume was 4% lower. Pricing increased 2%, with an 8% decrease in unit cost.
-- Non-tropical -- Net sales decreased 4% to $46.9 million. Volume increased 15%. Pricing was 16% lower. Unit cost decreased 21%.
-- Tomato -- Net sales decreased 15% to $26.7 million. Volume decreased 10%. Pricing decreased 6%. Unit cost decreased 6%.
Prepared Food
Net sales decreased 17% to $85.5 million for the third quarter. The decline in net sales was largely attributable to challenging economic conditions and the negative impact of unfavorable exchange rates. Pricing increased by 3%, with a 1% decrease in unit cost. Gross profit for the quarter was $14.0 million, compared with $13.3 million in the third quarter of 2008.
Other Products and Services
Net sales decreased 57% to $18.8 million, compared to the prior year period, the result of lower commodity selling prices in the Company's Argentine grain business. Gross profit was a loss, in line with the prior year period due to lower gross profit in the Company's Argentine grain business, offset by lower expenses associated with the Company's third-party shipping operations.
Income Taxes
The income tax benefit recorded in the third quarter was $12.8 million. The benefit included two large changes in valuation allowances that netted to a tax benefit of $8.3 million.
Cash Flows for the Nine Months
Net cash provided by operating activities for the first nine months of 2009 was $269.9 million, compared with $245.9 million in the same period of 2008. The increase was primarily due to lower accounts receivable and inventory balances, offset by higher payments for accounts payable and accrued expenses.
Total Debt
Total debt decreased from $512.8 million at the end of 2008 to $314.4 million, a $198.4 million decrease.
Conference Call and Web Cast Data
Fresh Del Monte will host a conference call and simultaneous web cast at 11:00 a.m. Eastern Time today to discuss the third quarter 2009 results and to review the Company's progress and outlook. The Web cast can be accessed on the Company's Investor Relations home page at www.freshdelmonte.com. The call will be available for re-broadcast on the Company's Web site approximately two hours after the conclusion of the call.
About Fresh Del Monte Produce Inc.
Fresh Del Monte Produce Inc. is one of the world's leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared food in Europe, Africa and the Middle East. Fresh Del Monte markets its products worldwide under the Del Monte(R) brand, a symbol of product innovation, quality, freshness and reliability for more than 100 years.
Forward-looking Information
This press release contains certain forward-looking statements regarding the intent, beliefs or current expectations of the Company or its officers with respect to the Company's plans and future performance. These forward-looking statements are based on information currently available to the Company and the Company assumes no obligation to update these statements. It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. In this press release, these statements appear in a number of places and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include the words "believes," "expects," "anticipates" or similar expressions). The Company's plans and performance may differ materially from those in the forward-looking statements as a result of various factors, including (i) the uncertain global economic environment and the timing and strength of a recovery in the markets we serve, and the extent to which adverse economic conditions continue to affect the Company's sales, volume and results, including its ability to command premium prices for certain of the Company's principal products, or increase competitive pressures within the industry, (ii) the impact of governmental initiatives in the United States and abroad to spur economic activity, including the effects of significant government monetary or other market interventions on inflation, price controls and foreign exchange rates, (iii) the Company's anticipated cash needs in light of its liquidity and financing plans, (iv) the continued ability of the Company's distributors and suppliers to have access to sufficient liquidity to fund their operations, (v) trends and other factors affecting the Company's financial condition or results of operations from period to period, including changes in product mix or consumer demand for branded products such as the Company's, particularly as consumers become more price-conscious in the current economic environment, as well as anticipated price and expense levels, the impact of weather on crop quality and yields, the impact of prices for petroleum based products and the availability of sufficient labor during peak growing and harvesting seasons, (vi) the Company's plans for expansion of its business (including through acquisitions) and cost savings, (vii) the impact of foreign currency fluctuations, (viii) the impact of pricing and other actions by our competitors, particularly during periods of low consumer confidence and spending levels, (ix) the Company's ability to successfully integrate acquisitions into its operations, (x) the timing and cost of resolution of pending legal and environmental proceedings, and (xi) the impact of changes in tax accounting or tax laws (or interpretations thereof), and the impact of settlements of adjustments proposed by the Internal Revenue Service or other taxing authorities in connection with the Company's tax audits. The Company's plans and performance may also be affected by the factors described in Item 1A. -- "Risk Factors" in Fresh Del Monte Produce Inc.'s Annual Report on Form 10-K/A for the year ended December 26, 2008 along with other reports that the Company has on file with the Securities and Exchange Commission.
SOURCE: Fresh Del Monte Produce Inc.
Fresh Del Monte Produce Inc. Christine Cannella, 305-520-8433 Assistant Vice President, Investor Relations www.freshdelmonte.com
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