Chiquita Brands International Inc. (CQB, Financial) filed Quarterly Report for the period ended 2012-06-30.
Chiquita Brands International, Inc. has a market cap of $232.9 million; its shares were traded at around $5.79 with a P/E ratio of 28.2 and P/S ratio of 0.1.
Operating income in the Salads and Healthy Snacks segment was $10 million and $3 million for the second quarters of 2012 and 2011, respectively, and $10 million and $9 million for the six months ended June 30, 2012 and 2011, respectively. In the first quarter of 2012, the warm weather in the Yuma growing region improved raw product yields and quality and combined with process improvements to significantly reduce quality costs in the first and second quarters of 2012 compared to the year-ago periods. The quality improvements also correlate to increased sales velocity of our retail value-added salads in the second quarter of 2012 based on IRI scan data. Significant increases (decreases) in segment operating income compared to the year-ago period were as follows:
Net sales for the segment were $49 million and $63 million for the second quarters of 2012 and 2011, respectively, and $84 million and $109 million for the six months ended June 30, 2012 and 2011, respectively. A change in standard contract language of certain other produce sales in Europe resulted in recognizing the net amount retained in such sales (a commission earned as an agent) instead of recognizing gross sales and cost of sales, as when we acted as a principal in the transactions during 2011. Operating loss for the segment was $3 million and $33 million for the second quarters of 2012 and 2011, respectively, and $9 million and $37 million for the six months ended June 30, 2012 and 2011, respectively. Operating loss in the second quarter of 2011 included a $32 million reserve for advances to a Chilean grower of grapes and other produce, and represented the remaining balance of advances that were not repaid. The grower declared bankruptcy in late 2011; however, we continue to negotiate recovery with the bankruptcy trustee and other creditors of the grower. See further information on the grower advance in Note 3 to the Condensed Consolidated Financial Statements. Lower pineapple pricing also negatively affected sales and operating income. The first quarter of 2012 also included $2 million ($1 million, net of tax) of costs primarily related to inventory write-offs from the discontinuation of non-strategic, low-margin products.
Income taxes were a net expense (benefit) of $3 million and $4 million in the quarter and six months ended June 30, 2012, respectively, and $(77) million and $(72) million for the quarter and six months ended June 30, 2011, respectively. The net income tax benefit in the quarter and six months ended June 30, 2011 is primarily the result of the U.S. valuation allowance release of $87 million partially offset by a $6 million charge for a tax settlement in Italy, which was also recorded in the second quarter of 2011 (as described in Notes 9 and 13 to the Condensed Consolidated Financial Statements). For the second quarter and six months ended June 30, 2012, the difference in the overall effective tax rate from the U.S. statutory rate is due to the mix of earnings and losses in various jurisdictions, as well as discrete tax items, including a $2 million out of period adjustment relating to 2011 (as described in Note 9 to the Condensed Consolidated Financial Statements). We do not believe the error was material to any prior or current year financial statements.
Depending on fuel prices, we can have significant obligations or amounts receivable under our bunker fuel forward arrangements, although we would expect any liability or asset from these arrangements to be offset by the purchase price of fuel. At June 30, 2012, December 31, 2011 and June 30, 2011, our bunker fuel forward contracts were an asset of $4 million, $15 million and $54 million, respectively. Depending on euro pricing, we can have significant obligations or amounts receivable under our euro-based currency hedging contracts, although we would expect any liability or asset from these contracts to be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies. At June 30, 2012, December 31, 2011and June 30, 2011, our euro-based currency hedging contracts were an asset (liability) of $(3) million and $5 million, and less than $1 million, respectively. The amount ultimately due or receivable will depend upon fuel prices for our bunker fuel forward arrangements or the exchange rate for our euro-based hedging contracts at the dates of settlement. See Market Risk Management – Financial Instruments below and Notes 6 and 7 to the Condensed Consolidated Financial Statements for further information about our hedging activities. We expect operating cash flows will be sufficient to cover any hedging obligations.
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Chiquita Brands International, Inc. has a market cap of $232.9 million; its shares were traded at around $5.79 with a P/E ratio of 28.2 and P/S ratio of 0.1.
Highlight of Business Operations:
Net sales for the Salads and Healthy Snacks segment were $252 million and $253 million for the second quarters of 2012 and 2011, respectively, and $489 million and $491 million for the six months ended June 30, 2012 and 2011, respectively. Significant increases (decreases) in segment net sales compared to the year-ago period were as follows:Operating income in the Salads and Healthy Snacks segment was $10 million and $3 million for the second quarters of 2012 and 2011, respectively, and $10 million and $9 million for the six months ended June 30, 2012 and 2011, respectively. In the first quarter of 2012, the warm weather in the Yuma growing region improved raw product yields and quality and combined with process improvements to significantly reduce quality costs in the first and second quarters of 2012 compared to the year-ago periods. The quality improvements also correlate to increased sales velocity of our retail value-added salads in the second quarter of 2012 based on IRI scan data. Significant increases (decreases) in segment operating income compared to the year-ago period were as follows:
Net sales for the segment were $49 million and $63 million for the second quarters of 2012 and 2011, respectively, and $84 million and $109 million for the six months ended June 30, 2012 and 2011, respectively. A change in standard contract language of certain other produce sales in Europe resulted in recognizing the net amount retained in such sales (a commission earned as an agent) instead of recognizing gross sales and cost of sales, as when we acted as a principal in the transactions during 2011. Operating loss for the segment was $3 million and $33 million for the second quarters of 2012 and 2011, respectively, and $9 million and $37 million for the six months ended June 30, 2012 and 2011, respectively. Operating loss in the second quarter of 2011 included a $32 million reserve for advances to a Chilean grower of grapes and other produce, and represented the remaining balance of advances that were not repaid. The grower declared bankruptcy in late 2011; however, we continue to negotiate recovery with the bankruptcy trustee and other creditors of the grower. See further information on the grower advance in Note 3 to the Condensed Consolidated Financial Statements. Lower pineapple pricing also negatively affected sales and operating income. The first quarter of 2012 also included $2 million ($1 million, net of tax) of costs primarily related to inventory write-offs from the discontinuation of non-strategic, low-margin products.
Income taxes were a net expense (benefit) of $3 million and $4 million in the quarter and six months ended June 30, 2012, respectively, and $(77) million and $(72) million for the quarter and six months ended June 30, 2011, respectively. The net income tax benefit in the quarter and six months ended June 30, 2011 is primarily the result of the U.S. valuation allowance release of $87 million partially offset by a $6 million charge for a tax settlement in Italy, which was also recorded in the second quarter of 2011 (as described in Notes 9 and 13 to the Condensed Consolidated Financial Statements). For the second quarter and six months ended June 30, 2012, the difference in the overall effective tax rate from the U.S. statutory rate is due to the mix of earnings and losses in various jurisdictions, as well as discrete tax items, including a $2 million out of period adjustment relating to 2011 (as described in Note 9 to the Condensed Consolidated Financial Statements). We do not believe the error was material to any prior or current year financial statements.
Depending on fuel prices, we can have significant obligations or amounts receivable under our bunker fuel forward arrangements, although we would expect any liability or asset from these arrangements to be offset by the purchase price of fuel. At June 30, 2012, December 31, 2011 and June 30, 2011, our bunker fuel forward contracts were an asset of $4 million, $15 million and $54 million, respectively. Depending on euro pricing, we can have significant obligations or amounts receivable under our euro-based currency hedging contracts, although we would expect any liability or asset from these contracts to be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies. At June 30, 2012, December 31, 2011and June 30, 2011, our euro-based currency hedging contracts were an asset (liability) of $(3) million and $5 million, and less than $1 million, respectively. The amount ultimately due or receivable will depend upon fuel prices for our bunker fuel forward arrangements or the exchange rate for our euro-based hedging contracts at the dates of settlement. See Market Risk Management – Financial Instruments below and Notes 6 and 7 to the Condensed Consolidated Financial Statements for further information about our hedging activities. We expect operating cash flows will be sufficient to cover any hedging obligations.
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