This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Chiquita Brands International (CQB) on February 19, 2008.
Chairman, Chief Executive Officer, and President: Fernando Aguirre
Chief Financial Officer, Senior Vice President: Jeffrey M. Zalla
Director of Corporate Communications: Ed Loyd
Key Investors Issues
- The net loss improved to 67 cents per share as against 98 cents a share in last year.
- Quarterly revenue improved to $1.15 billion, up 6% from previous year.
- For fiscal 2007, the net loss was $49 million, on sales of $4.66 billion.
- The company has issued $200 million of 4.25% convertible senior notes due in 2016.
Fourth Quarter Fiscal 2007 Financial Highlights
Net sales rose 6% over prior year to $1.2 billion.
The sales rose primarily due to higher banana pricing in core European and North American markets and favorable foreign exchange rates, partially offset by lower volumes in core European and trading markets.
The company reported break-even results in net income compared to a net loss of $17 million in the year-ago period.
These figures are before charges of $26 million in the fourth quarter of 2007 related to the company’s restructuring plans and a $25 million accrual in the fourth quarter of 2006 related to the settlements of the U.S. Department of Justice investigation.
The company incurred an operating loss of $11 million compared to an operating loss of $33 million in the year-ago quarter.
This improvement was principally due to higher banana pricing in core European and North American markets. This $11 million figure for this quarter is in the favorable end of the range of estimates that the firm provided several weeks ago in connection to its refinancing and issuance of convertible senior notes.
Operating cash flow was negative $9 million, a $51 million improvement from the year-ago quarter.
This was due largely to improvements in operating results and working capital items, such as trade receivables and inventory. The working capital improvements include about $10 million of benefit from the switch to a direct export model in the firm’s Chilean sourcing operations.
The company is exploring strategic alternatives for its German distribution business, Atlanta AG.
This includes a possible sale, and does not expect to announce developments with respect to this process unless and until its board of directors has reached a decision. There can be no assurance regarding the timing or ultimate outcome of this process.
Earlier this month, the firm issued $200 million of 4.25% convertible senior notes due in 2016.
The company has already used the entire net proceeds of approximately $194 million to repay much of the outstanding amount under our Term Loan C. The firm has also signed a fully underwritten commitment with Rabobank to refinance its existing revolving credit facility and the remaining portion of its Term Loan C with a new six-year senior secured facility, including a $200 million revolver and $200 million term loan. The firm expects to close the new facility by March 31, 2008. These actions are consistent with the firm’s commitment to manage the company’s capital structure in a prudent manner. By year-end 2007, the firm’s total debt to capital ratio was down to 48% after paying down $215 million of total debt during the year, principally from the proceeds of its ship sale.
In October of 2007, Chiquita Brands began executing a corporate restructuring to improve profitability by simplifying and streamlining its operations.
The firm is on track with these initiatives, and it is confident that beginning this year they will enable the firm to achieve sustainable annual cost savings of $60 million to $80 million. By now, the firm has completed virtually all of the people-related actions under the plan. In addition, the consolidation of the company’s processing and distribution facilities in North America is on track to be completed by the end of March 2008. As part of its efforts to improve profitability in North America, the firm has consolidated its sales operations so that there is only one face to the customer for bananas, salads and other healthy snacks.
The management believes that building a pipeline of new value-added higher-margin products is the best vehicle to gain access to new distribution channels and profitable geographies.
