Chiquita Brands International Inc. (CQB) filed Quarterly Report for the period ended 2009-09-30.
Chiquita Brands International Inc. operates as a leading international marketer producer and distributor of quality fresh fruits and vegetables and processed foods sold under the `Chiquita` and other brand names. In addition in recent years the Company has expanded its processed fruit and vegetableoperations primarily through acquisitions of vegetable canning companies. Chiquita Brands International Inc. has a market cap of $657 million; its shares were traded at around $14.75 with a P/E ratio of 10.1 and P/S ratio of 0.2.
Highlight of Business Operations:
Operating income for the segment was $24 million for the third quarter of 2009 compared to an operating loss of $8 million for the third quarter of 2008. The $32 million improvement was primarily due to network efficiencies and cost reductions that have resulted in significant, sustainable improvements in North American value-added salad operations. Year-over-year improvement is expected for the fourth quarter of 2009 compared to 2008 due to the absence of a $375 million goodwill impairment charge recorded in the fourth quarter of 2008 and to continuation of the network efficiencies and cost reductions achieved in 2009. In the remainder of 2009, the company plans to invest in consumer marketing and innovation. The North American salad business also faces seasonally lower consumption in the fourth quarter and competitive pressures from the continuing expansion of private-label products in grocery retail, especially lower-priced products.
Net sales for the segment were $40 million and $42 million in the third quarters of 2009 and 2008, respectively. Operating loss for the segment was $2 million in the third quarter of 2009 compared to operating income of less than $1 million in the third quarter of 2008. The decrease was due to lower margins and volume on certain produce items, such as melons and grapes. Seasonal advances to growers of other produce were $72 million and $49 million, net of allowances, at September 30, 2009 and 2008, respectively. Seasonal advances, which are generally repaid as produce is sold, typically peak in the first half of the year. A strategy to purchase other produce from independent growers that in earlier years had been produced by owned operations in Chile, as well as higher volumes of certain produce, resulted in the increase in these advances.
In late October 2008, the company committed to relocate its European headquarters from Belgium to Switzerland to optimize its long-term tax structure. The relocation affected approximately 100 employees and was substantially complete at September 30, 2009. The relocation did not affect employees in sales offices, ports and other field offices throughout Europe. Through September 30, 2009, the company recorded aggregate costs of $18 million, of which $2 million were incurred in the third quarter of 2009, $4 million in the second quarter of 2009, $5 million in the first quarter of 2009, $5 million in the fourth quarter of 2008 and $2 million prior to the company’s commitment to the relocation plan. The company expects remaining relocation costs will be less than $1 million and will be incurred in the fourth quarter of 2009. See Note 2 to the Condensed Consolidated Financial Statements for further description.
Interest expense was $15 million and $18 million for the third quarters of 2009 and 2008, respectively. Interest expense was $47 million and $64 million for the nine months ended September 30, 2009 and 2008, respectively. Interest expense includes $9 million in the first quarter of 2008 for the write-off of deferred financing fees as a result of refinancing the company’s credit facility. The remainder of the decrease in interest expense relates primarily to reductions in debt.
In total, income taxes were a net expense of $4 million for the third quarter of 2009 and a net benefit of $4 million for the third quarter of 2008, including gross income tax benefits of $1 million and $4 million, respectively. Income taxes were a net expense of $5 million and $2 million in the nine months ended September 30, 2009 and 2008, respectively, including $9 million and $9 million of gross income tax benefits, respectively. Approximately $4 million of the gross income tax benefits for the nine months ended September 30, 2009 related to the sale of the company’s operations in the Ivory Coast in the first quarter of 2009. The remainder of the gross income tax benefits in the second and third quarters and nine months ended 2009 and 2008 primarily resulted from the resolution of tax contingencies in various jurisdictions. See Note 8 to the Condensed Consolidated Financial Statements for further discussion of income taxes.
At September 30, 2009, the company had total cash and equivalents of $176 million, comprised of either bank deposits or amounts invested in money market funds, and $128 million of available borrowing capacity under its revolving credit facility. The company borrowed $38 million in the first quarter of 2009 under the revolving credit facility for normal seasonal working capital needs and repaid the full balance in the second quarter of 2009. The company is in compliance with the financial covenants of its credit facility and expects to remain in compliance for at least twelve months from the date of this filing. In addition, the company has no mandatory debt maturities of more than $20 million in any year until 2014. See Note 4 of the Condensed Consolidated Financial Statements for further description of the company’s debt agreements and financing activities.
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