Chiquita Brands has indicated that fourth quarter and full year results for 2012 are down on 2011 due to a poorer performance from its salad business, poorer currency exchange and on-off charges.
The banana group said today (28 January) that 2012 net sales totalled US$3.1bn, about level with 2011's results. However, in its preliminary results, the group predicted a full-year operating loss of $236-281m, compared to an operating income of $34m in 2011.
Stripping out the impact of one-offs, adjusted EBITDA is expected to total $64m - $74m. This compares to full year 2011 net sales of $3.1 billion
Likewise, fourth-quarter profitability is expected to dip. Chiquita said it anticipates a fourth-quarter operating loss to be between $188-$233m. During the period, the group will book a goodwill and trademark imparement charge of between $170m and $205m. Last year's fourht-quarter operating loss totalled $12m.
Fourth quarter sales were 2.2% up on last year, the group added.
Chiquita Brands International, Inc : Chiquita Announces Preliminary Fourth Quarter and Full-Year 2012 Selected Results CHIQUITA ANNOUNCES PRELIMINARY FOURTH QUARTER AND FULL-YEAR 2012 SELECTED RESULTS
CHARLOTTE - January 28, 2013 - Chiquita Brands International, Inc. (NYSE: CQB) today reported preliminary unaudited selected results for the fourth quarter and full year 2012 in conjunction with a proposed refinancing. Because the fourth quarter and full-year have only recently ended, the information that follows is preliminary and based upon information available to the company as of the date of this press release. The company has not finalized its financial statement closing process for the fourth quarter and full year 2012, including its calculations and accounting judgments related to income taxes. During the course of that process, the company may identify items that would require it to make adjustments, which may be material, to the amounts described below. As a result, the estimates and rates below constitute forward-looking statements and are subject to risks and uncertainties, including possible adjustments to the preliminary operating results. The company is providing this information and certain financial metrics on a one-time basis only and does not intend to update this information prior to its regularly scheduled fourth quarter and full year 2012 conference call and subsequent filings with the Securities and Exchange Commission.
Fourth quarter 2012 net sales were approximately $738 million and the company expects Comparable operating loss in the range of $10 - 20 million and Adjusted EBITDA in the range of $(3) - 7 million. This compares to fourth quarter 2011 net sales of $722 million, Comparable operating loss of $2 million and Adjusted EBITDA of $14 million. The company expects fourth quarter operating loss on a U.S. GAAP basis to be in the range of $188 - 233 million, including estimated non-cash goodwill and trademark impairment charges in the range of $170 - $205 million and restructuring, relocation and other exit charges as described below, compared to U.S. GAAP operating loss of $12 million in the fourth quarter of 2011. Compared to the fourth quarter of 2011, stronger banana pricing and logistical savings partially offset lower salad results, lower average European currency exchange rates and a number of unusual cost items in the fourth quarter of 2012, and the net results was in line with the company's previous expectations for the quarter.
For the full year 2012, net sales were approximately $3.1 billion and the company expects Comparable operating income (loss) in the range of $1 - 11 million and Adjusted EBITDA in the range of $64 - 74 million. This compares to full year 2011 net sales of $3.1 billion, Comparable operating income of $78 million and Adjusted EBITDA of $139 million. The company expects full-year operating loss on a U.S. GAAP basis to be in the range of approximately $236 - 281 million, including the non-cash goodwill and trademark impairment charges and the restructuring, relocation and other exit charges as described below, compared to U.S. GAAP operating income of $34 million for the full year 2011.
A reconciliation of (i) comparable operating income and (ii) Adjusted EBITDA amounts presented above to operating income is included in a Non-GAAP Financial Measures table below.
The company also estimates that it will have $52 million of cash at December 31, 2012, as well as $88 million of availability under its current revolving credit facility as of December 31, 2012. Under the company's existing credit facility, impairment charges are specifically excluded from consideration when determining its compliance with financial covenants. The company remained in compliance with its covenants under its existing debt facilities at December 31, 2012, and expects to remain in compliance with them.
GOODWILL AND TRADEMARK IMPAIRMENT ANALYSIS
At September 30, 2012, the company had goodwill of $175 million and trademarks of $61 million related to its salad operations, Fresh Express, which are subject to an annual impairment review each fourth quarter. Impairment reviews compare fair value to carrying value for both Fresh Express and its trademarks, and if the carrying value is greater than the fair value, impairment is indicated. Fair values fluctuate based on market conditions and assumptions regarding forecasted cash flows and discount rates applied to cash flows. Based on the fourth quarter impairment analysis, the company estimates a non-cash impairment charge to goodwill in the range of approximately $150 - $175 million and a non-cash impairment charge to the Fresh Express trademark of in the range of approximately $20 - $30 million. The goodwill impairment was the result of lower operating performance of our retail salad business, lower retail salad volumes, and lower perceived valuation multiples in the industry. These goodwill and trademark impairment charges remain subject to finalization.
STRATEGIC AND OPERATIONAL INITIATIVES
2012 was a year of transformation for Chiquita. In the third quarter the company announced a restructuring plan to strategically transform itself into a branded commodity operator. As previously announced, the company has already implemented strategic and operational initiatives to focus on:
Its core businesses of bananas and salads, Reduction of its value chain costs Reduction of its overhead and selling, general and administrative costs and Volume growth These strategic initiatives were substantially completed in the fourth quarter of 2012 and are expected to drive at least $60 million in annual savings beginning in 2013, including $25 million for completed headcount reductions and approximately $35 million for value chain cost reductions. The consolidation of the company's Midwest salad processing facilities is expected to be completed in the third quarter of 2013 and the company expects to generate $8 million of annual savings. The company has expanded its salad program by providing a more comprehensive product offering in the value-added salad market, which includes branded and private label packaged salads, organic packaged salads and whole head lettuce. Since September 30, 2012, the company has added approximately 5 million annual boxes of distribution growth in its North American banana business and were awarded private label business from certain retail grocery customers, scheduled to commence at the end of the first quarter of 2013, representing new estimated volume of 1.6 million cases for 2013.
Chiquita's goal is to achieve operating margins of 4 percent in Bananas and 7 to 8 percent in Salads in the next two to three years.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
The company reports its financial results in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). To provide investors with additional information regarding the company's results, more meaningful year-on-year comparisons of the company's core financial performance, and measures that management uses to evaluate the company's performance against internal budgets and targets, the company reports certain financial measures defined as non-GAAP measures by the Securities and Exchange Commission. This press release uses non-GAAP measures of comparable operating income (loss) and Adjusted EBITDA. Non-GAAP financial measures should be considered in addition to, and not instead of, U.S. GAAP financial measures, and may differ from non-GAAP measures and may not be compared to similar measures disclosed by other issuers, because not all issuers calculate these measures in the same way. The adjustments between the U.S. GAAP and non-GAAP financial measures listed below are excluded from comparable operating income because they are unusual and/or infrequent in nature and are consistent with the company's internal reporting and measurement of financial performance.