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Fresh Del Monte Produce Inc. Reports Operating Results (10-Q)

October 27, 2009 | About:

10qk

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Fresh Del Monte Produce Inc. (FDP) filed Quarterly Report for the period ended 2009-09-25.

Fresh Del Monte Produce Inc. is a world leader in the production distribution and marketing of fresh produce. The products are marketed throughout the world under the DEL MONTE brand name and is a widely recognized symbol of product quality and reliability. The major products are bananas pineapples deciduous fruit and melons. The deciduous fruit the company sells includes primarily grapes plums nectarines peaches apricots cherries apples pears and citrus. Fresh Del Monte Produce Inc. has a market cap of $1.39 billion; its shares were traded at around $21.92 with a P/E ratio of 8.6 and P/S ratio of 0.4.

Highlight of Business Operations:

Net cash used in investing activities for the first nine months of 2009 was $50.8 million compared with $469.9 million for the first nine months of 2008. Net cash used in investing activities for the first nine months of 2009 consisted of capital expenditures of $63.2 million, partially offset by proceeds from sales of assets of $12.4 million. Capital expenditures for the first nine months of 2009 were primarily for distribution centers in Saudi Arabia and expansion of production facilities in Costa Rica, Guatemala, Chile and the Philippines related to the banana and other fresh produce segments. Proceeds from sale of assets for the first nine months of 2009 consisted primarily of the sale of four refrigerated vessels that were scrapped.

Net cash used in financing activities for the first nine months of 2009 was $207.7 million compared with net cash provided by financing activities of $224.7 for the first nine months of 2008. Net cash used in financing activities for the first nine months of 2009 consisted primarily of net repayments on long-term debt of $204.7 million. Net cash provided by financing activities for the first nine months of 2008 consisted of net proceeds from long-term debt of $207.5 million and $21.8 million of cash proceeds received from stock options exercised.

As of September 25, 2009, we had $314.4 million of long-term debt and capital lease obligations, including the current portion, consisting of $297.0 million outstanding under the New Credit Facility, $7.0 million of capital lease obligations and $10.4 million of other long-term debt.

The fair value of our derivatives changed from a net asset of $7.1 million as of December 26, 2008, to a net liability of $2.2 million as of September 25, 2009, primarily related to our foreign currency cash flow hedges as a result of the weakening of the U.S. dollar relative to the euro and British pound and the strengthening of the U.S. dollar relative to the Japanese yen. We also entered into bunker fuel derivatives of which the fair valuation comprised $1.3 million of the net liability as of September 25, 2009. We expect that $1.2 million net assets outstanding will be transferred to earnings in 2009, offset by $3.3 million in net liability outstanding, which will be transferred to earnings in 2010, along with the earnings effect of the related forecasted transaction for each year.

Asset Impairment and Other Charges (Credits), Net. Asset impairment and other charges (credits), net of $10.0 million were recorded during the third quarter of 2009 as compared with a credit of $(0.2) million during the third quarter of 2008. Asset impairment and other charges, net for the third quarter of 2009 related principally to asset impairments of $9.7 million as a result of 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. Asset impairments and other charges for the third quarter of 2009, also included $1.1 million in one-time termination benefits and contract termination costs resulting from our decision to discontinue our commercial cargo service in Europe and a credit of $0.8 million for reversals of contract termination costs previously recorded related to the closure of an under-utilized distribution center in the United Kingdom. The Brazil asset impairment charges are related to the other fresh produce segment and the remaining asset impairment and other charges are principally related to the banana segment.

Cost of Products Sold. Cost of products sold was $2,380.5 million for the first nine months of 2009 compared with $2,424.5 million for the first nine months of 2008, a decrease of $44.0 million. This decrease in cost of products sold was primarily attributable to lower ocean freight rates and distribution costs that resulted from lower fuel prices, partially offset by a charge of $17.1 million related to growing crop inventory as a re

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