This summary is based on the second quarter fiscal 2007 earnings call conducted by Chiquita Brands International, Inc. (CQB) on August 02, 2007.
Chairman and Chief Executive Officer: Fernando Aguirre
Chief Financial Officer: Jeff Zalla
President and Chief Operating Officer at Chiquita Fresh Group: Bob Kistinger
Key Investors Issues
- EPS were 20 cents a share compared to 54 cents in the year-ago period.
- Net income was $9 million compared to net income of $23 million last year.
- Revenues rose 2% to $1.26 billion from $1.23 billion a year ago.
Second Quarter Highlights
Net sales rose 2% to $1.3 billion, driven primarily by increased banana volume in trading markets as well as favorable European exchange rates.
Bananas sold in trading markets particularly Turkey, where the company established a year around presence this year, more than doubled the 2.7 million boxes in the quarter. At the same time, the Euro strengthened versus the dollar by an average of 8% year-over-year.
Net income was $9 million, or 20 cents per share, which included a charge of $3 million, or 7 cents per share, related to a settlement of US Anti-Trust litigation.
This compares to net income of $23 million, or 54 cents per share in the year-ago quarter.
- The company’s operating income was $34 million compared to $45 million in the year-ago quarter.
- Performance improved in the banana segment but declined in the Salads and Healthy Snacks and other produce segment.
- Operating cash flow was $69 million, down from the year-ago quarter, as continuing improvements in accounts receivable and other working capital items offset most of the decline in operating income.
- The company paid down more than $200 million of debt, bringing total debt to capital ratio to 49% at June 30th, which is a step toward achieving long term target ratio of 40%.
- mThe company used ship sale proceeds and operating cash flow to repay $100 million of debt that had been secured by the ship, $25 million of term loans and $80 million of revolving credit borrowing.
The company’s cash position at June 30th rose to $165 million compared to $92 million a year earlier.
The increase in cash primarily reflects the retention of more than $50 million in proceeds from the strategic shipping transaction for future debt repayment or growth investment.
- The company believes that cash level, operating cash flow and borrowing capacity provides sufficient liquidity to fund working capital needs, capital expenditures and debt service requirements.
- The company remains in full compliance with the financial maintenance governance in bank debt.
- Chiquita continues to examine options to replace or modify current bank debt facility, to provide further financial flexibility to execute long term growth strategy.
The company incurred $14 million of higher industry costs, primarily for purchased fruit and lettuce.
In the first half of the year, the company has incurred $34 million as industry cost increases, and it expect these pressures, including higher fuel prices to continue through the balance of the year. As a result the company has updated full year outlook to $55 million to $65 million.
In addition to these industry costs, the company incurred approximately $4 million of other cost increases, on top of $3 million of such increases in the first quarter. These costs represent items such as increased spending in agricultural areas that drive productivity improvements and higher rates for discharging and trucking in the market.
Beginning in 2007, Chiquita modified its reportable business segments to better align with the company''s current internal management reporting procedures and practices of other consumer food companies.
The company reports three business segments:
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Bananas: This segment includes the sourcing (purchase and production), transportation, marketing and distribution of bananas.
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Salads and Healthy Snacks: This segment includes value-added salads, fresh vegetable and fruit ingredients used in foodservice, fresh-cut fruit operations, and processed fruit ingredient products.
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Other Produce: This segment includes the sourcing, marketing and distribution of whole fresh fruits and vegetables other than bananas.
Segment Performance
