Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FDP > SEC Filings for FDP > Form 10-Q on 1-Nov-2011All Recent SEC Filings

Show all filings for FRESH DEL MONTE PRODUCE INC

Form 10-Q for FRESH DEL MONTE PRODUCE INC


1-Nov-2011

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are one of the world's leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa, the Middle East and countries formerly part of the Soviet Union. We market our products worldwide under the DEL MONTE® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our global sourcing and logistics system allows us to provide regular delivery of consistently high-quality produce and value-added services to our customers. Our major producing operations are located in North, Central and South America, Asia and Africa. Production operations are aggregated on the basis of our products: bananas, other fresh produce and prepared foods. Other fresh produce includes pineapples, melons, tomatoes, non-tropical fruit (including grapes, apples, pears, peaches, plums, nectarines, avocados, citrus and kiwis), fresh-cut produce, other fruit and vegetables and a plastic product and box manufacturing business, a grain business (which we exited in 2010) and third-party ocean freight services (which we significantly curtailed in 2009). Prepared foods include prepared fruit and vegetables, juices, beverages, snacks, poultry and meat products.

Liquidity and Capital Resources

Net cash provided by operating activities was $248.8 million for the first nine months of 2011 as compared with $239.8 million for the first nine months of 2010, an increase of $9.0 million. The increase in cash provided by operating activities was principally attributable to higher net income, partially offset by changes in operating assets and liabilities, principally a lower decrease in inventories during the first nine months of 2011 as compared with the same period in 2010.

Working capital was $420.8 million at September 30, 2011 compared with working capital of $513.8 million at December 31, 2010. The decrease in working capital of $93.0 million was primarily attributable to lower cash and cash equivalents, accounts receivables, inventories and higher accounts payable and accrued expenses, partially offset by higher income taxes and other taxes payable. Accounts receivables and inventories are lower as compared with year-end 2010 due to seasonal variations and lower quantities of finished products in-transit to markets and income and other taxes payable increased due to higher earnings in certain taxable jurisdictions.

Net cash used in investing activities for the first nine months of 2011 was $58.8 million compared with $31.3 million for the first nine months of 2010. Net cash used in investing activities for the first nine months of 2011 consisted of capital expenditures of $62.7 million, partially offset by proceeds from sales of property, plant and equipment of $3.9 million. Capital expenditures for the first nine months of 2011 were primarily for improvements and expansion of production facilities in Jordan, Kenya and Greece related to the prepared food segment and Costa Rica, Guatemala and the Middle East related to the other fresh produce segment. Capital expenditures for the first nine months of 2011 also included improvements of distribution facilities in North America and production facilities in Guatemala principally related to the banana segment. Proceeds from sales of property, plant and equipment for the first nine months of 2011 consisted primarily of the sale of surplus shipping-related equipment.

Net cash used in investing activities for the first nine months of 2010 consisted of capital expenditures of $48.0 million, partially offset by proceeds from sales of property, plant and equipment of $12.5 million and the return of capital by one of our Costa Rica subsidiaries of $4.2 million. Capital expenditures for the first nine months of 2010 were primarily for expansion of production facilities in Costa Rica, Guatemala, Brazil, Philippines and Kenya and port facilities in North America related to the banana, other fresh produce and prepared food segments. Proceeds from sales of property, plant and equipment for the first nine months of 2010 consisted primarily of the sale of four refrigerated vessels and a distribution center in Brazil.

Net cash used in financing activities for the first nine months of 2011 was $214.5 million compared with $198.1 million for the first nine months of 2010. Net cash used in financing activities for the first nine months of 2011 consisted of net repayments on long-term debt of $183.4 million, distributions to noncontrolling interests of $3.1 million, $11.9 million of dividends paid and repurchase of our ordinary shares of $37.9 million, partially offset by proceeds from stock options exercised of $21.8 million.

Net cash used in financing activities for the first nine months of 2010 consisted of net repayments on long-term debt of $123.5 million and repurchases of our ordinary shares of $78.8 million, partially offset by contributions from noncontrolling interests of $3.4 million and proceeds from stock options exercised of $0.8 million.

We finance our working capital and other liquidity requirements primarily through cash from operations and borrowings under our senior secured revolving credit facility (the "Credit Facility") administered by Rabobank Nederland, New York Branch. Effective August 8, 2011, we voluntarily lowered the borrowing capacity on the Credit Facility from $500.0 million to $300.0 million in order to reduce our unused commitment fees. As a result of the voluntary reduction of our borrowing capacity, we proportionately reduced capitalized debt issuance costs by $1.2 million. This write-off is included as additional interest expense in our accompanying Consolidated Statement of Income. The Credit Facility has a 3.5-year term, with a scheduled termination date of January 17, 2013. The Credit Facility includes a swing line facility and a letter of credit facility with a $100.0 million sublimit. Borrowings under the Credit Facility bear interest at a spread over the London Interbank Offer Rate ("LIBOR") that varies with our leverage ratio. On March 28, 2011, we amended the Credit Facility by lowering the applicable margins over LIBOR or Base rate borrowings that vary with our leverage ratio. The Credit Facility is collateralized directly or indirectly by substantially all of our assets and is guaranteed by certain of our subsidiaries. At September 30, 2011, we had $104.7 million outstanding under the Credit Facility bearing interest at a per annum rate of 1.74%. In addition, we pay a fee on unused commitments.


The Credit Facility requires us to be in compliance with financial and other covenants, including limitations on capital expenditures, the amount of dividends that can be paid in the future, the amount and types of liens and indebtedness, material asset sales and mergers. As of September 30, 2011, we were in compliance with all of the financial and other covenants contained in the Credit Facility.

At September 30, 2011, we had $198.5 million available under committed working capital facilities, primarily under the Credit Facility. At September 30, 2011, we applied $15.4 million to the letter of credit facility, comprised primarily of certain contingent obligations and other governmental agencies and purchases of equipment guarantees. We also had $8.9 million in other letters of credit and bank guarantees not included in the letter of credit facility.

As of September 30, 2011, we had $113.4 million of long-term debt and capital lease obligations, including the current portion, consisting of $104.7 million outstanding under the Credit Facility, $1.8 million of capital lease obligations and $6.9 million of other long-term debt and notes payable.

Based on our operating plan, combined with our borrowing capacity under our Credit Facility, we believe we will have sufficient resources to meet our cash obligations in the foreseeable future.

As of September 30, 2011, we had cash and cash equivalents of $26.8 million.

As a result of abandoning isolated areas in the Philippines banana operations due to plant disease, melon program rationalization in Costa Rica and Guatemala and the closure of distribution centers in the United Kingdom, we paid approximately $0.3 million in termination benefits and $2.2 million in contractual obligations during the first nine months of 2011. We expect to make additional payments of approximately $3.1 million principally related to the previously announced closure of our Hawaii pineapple operations and the closure of facilities in the United Kingdom. In addition, we expect to pay approximately $3.8 million in the next 12 months as a result of an unfavorable outcome to litigation regarding a tax position in a foreign jurisdiction. These cash outlays will be funded from operating cash flows and available borrowings under credit facilities.

The fair value of our derivatives changed from a net liability of $18.6 million as of December 31, 2010, to a net liability of $4.3 million as of September 30, 2011 related to our foreign currency cash flow hedges. The decrease in the net liability related primarily to the stronger U.S. dollar relative to the euro and British pound offset by the weaker U.S. dollar relative to the Japanese yen being hedged when compared to the contracted exchange rates. We expect that $3.3 million in net liabilities outstanding will be transferred to earnings during the next 12 months and $1.0 million in 2012, along with the earnings effect of the related forecasted transaction for each year.

Results of Operations

The following tables present for each of the periods indicated (i) net sales by geographic region and (ii) net sales and gross profit by product category, and in each case, the percentage of the total represented thereby (U.S. dollars in millions, except percent data):

As a result of our decision to exit grain operations during 2010 and the elimination of third-party ocean freight services from Northern Europe to the Caribbean during 2009 and the relative size of the remaining operations, we have combined the other products and services segment with the other fresh produce segment in 2011. Prior year amounts have been reclassified to conform to the 2011 presentation.

Net sales by geographic region:

                                      Quarter ended                                          Nine months ended
                      September 30, 2011            October 1, 2010            September 30, 2011            October 1, 2010
   North America   $     399.9            50 %   $    380.5          48 %   $    1,430.6           51 %   $  1,355.4          49 %
   Europe                174.7            22 %        198.1          25 %          666.8           24 %        703.6          26 %
   Asia                   93.6            12 %         93.6          12 %          341.2           12 %        319.1          12 %
   Middle East           114.2            14 %        108.6          14 %          324.3           11 %        308.2          11 %
   Other                  12.8             2 %         12.3           1 %           46.0            2 %         49.9           2 %
     Total         $     795.2           100 %   $    793.1         100 %   $    2,808.9          100 %   $  2,736.2         100 %


Product net sales and gross profit:

                                                                     Quarter ended
                                     September 30, 2011                                          October 1, 2010
                    Net Sales                     Gross Profit (Loss)          Net Sales                     Gross Profit (Loss)
   Banana          $     375.1          47 %   $     (1.0 )            -2 %   $     370.1          47 %   $     (6.7 )           -13 %
   Other fresh
produce                  337.0          42 %         52.1              83 %         329.4          41 %         45.2              87 %
   Prepared food          83.1          11 %         11.8              19 %          93.6          12 %         13.5              26 %
     Total         $     795.2         100 %   $     62.9             100 %   $     793.1         100 %   $     52.0             100 %




                                                           Nine months ended
                                 September 30, 2011                                  October 1, 2010
                   Net Sales                     Gross Profit         Net Sales                     Gross Profit
   Banana          $  1,268.7          45 %   $  91.3          32 %   $  1,225.0          45 %   $  42.2          18 %
   Other fresh
produce               1,266.1          45 %     151.7          52 %      1,244.9          45 %     153.5          66 %
   Prepared food        274.1          10 %      45.6          16 %        266.3          10 %      37.1          16 %
     Total         $  2,808.9         100 %   $ 288.6         100 %   $  2,736.2         100 %   $ 232.8         100 %

Third Quarter 2011 Compared with Third Quarter 2010

Net Sales. Net sales for the third quarter of 2011 were $795.2 million compared with $793.1 million for the third quarter of 2010. The increase in net sales of $2.1 million was attributable to higher net sales of other fresh produce and bananas, partially offset by lower net sales of prepared food.

· Net sales in the other fresh produce segment increased $7.6 million principally as a result of higher net sales of fresh-cut products and pineapples, partially offset by lower net sales of tomatoes, Argentine grain and melons.

o Net sales of fresh-cut products increased primarily due to increased sales of higher priced products combined with an expanded customer base.

o Net sales of pineapples increased principally as a result of higher sales volume in North America, the Middle East and Asia, partially offset by lower sales volume in Europe. Per unit sales prices were higher in Europe and North America due to favorable market conditions and exchange rates and lower in the Middle East and Asia due to increases in sales volumes. Worldwide sales volume increased 4% and per unit sales prices increased 5% principally due to favorable market and growing conditions.

o Net sales of tomatoes decreased principally due to lower customer demand and program rationalization.

o Net sales of Argentine grain decreased as a result of our decision in 2010 to exit grain operations in Argentina.

o Net sales of melons decreased principally as a result of lower sales volume in North America due to the rationalization of melon operations, partially offset by higher per unit sales prices.

· Net sales of bananas increased by $5.0 million principally due to higher per unit sales prices in North America and higher sales volumes in the Middle East, partially offset by lower sales volume and per unit sales prices in Europe and lower per unit sales prices in Asia. Worldwide banana per unit sales prices decreased 4% and sales volume increased by 6%.

o North America banana net sales increased principally as a result of higher per unit sales prices due to industry shortages.

o Middle East banana net sales increased due to higher sales volume, partially offset by lower per unit sales prices.

o Europe banana net sales decreased as a result of lower sales volumes and lower per unit sales prices that resulted from unfavorable market conditions.

o Asia banana net sales decreased principally due to lower demand.

· Net sales in the prepared food segment decreased $10.5 million principally due to lower net sales of canned pineapple and deciduous products in Europe as a result of reduced production volumes of pineapple due to the residual effect of a drought earlier in the year in our sourcing operation and planned volume reduction of deciduous products. Partially offsetting these decreases in net sales were higher net sales in our Jordanian poultry and processed meat business that resulted from improved selling prices and an expanded customer base.


Cost of Products Sold. Cost of products sold was $732.3 million for the third quarter of 2011 compared with $741.1 million for the third quarter of 2010, a decrease of $8.8 million. This decrease in cost of products sold was primarily attributable to lower fruit cost that resulted from favorable growing conditions, partially offset by higher fuel costs.

Gross Profit. Gross profit was $62.9 million for the third quarter of 2011 compared with $52.0 million for the third quarter of 2010, an increase of $10.9 million. The increase in gross profit was primarily attributable to higher gross profit on other fresh produce and bananas, partially offset by lower gross profit on prepared food.

· Gross profit in the other fresh produce segment increased $6.9 million principally due to higher gross profit on pineapples partially offset by lower gross profit on fresh-cut products.

o Gross profit on pineapples increased principally due to higher per unit sales prices in North America and Europe primarily the result of favorable market conditions combined with lower fruit cost that resulted from favorable growing conditions, partially offset by higher fuel costs. Worldwide per unit sales prices increased 5% and per unit cost decreased 2%.

o Gross profit on fresh-cut products decreased principally due to higher fruit costs that resulted from higher input costs, partially offset by higher per unit sales prices and sales volumes.

· Gross profit in the banana segment increased $5.7 million primarily due to higher per unit sales prices in North America as a resulted of industry shortages and improved market conditions, partially offset by higher fuel costs and lower sales volume and per unit sales prices in Europe. Also contributing to the increase in gross profit during the third quarter of 2011 was lower fruit cost that resulted from favorable growing conditions.

· Gross profit in the prepared food segment decreased by $1.7 million principally as a result of lower gross profit on canned pineapples due to lower yields as a result of drought conditions and higher ocean freight costs. Also contributing to the decrease in gross profit was higher production cost in our Jordanian poultry business as a result of lower yields, partially offset by higher per unit sales price.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $6.2 million from $40.9 million in the third quarter of 2010 to $47.1 million for the third quarter of 2011. The increase was principally due to higher compensation and advertising and promotional expense.

Gain on Sales of Property, Plant and Equipment. The gain on sales of property, plant and equipment of $1.8 million during the third quarter of 2011 was principally due to the sale of shipping-related equipment. The gain on sales of property, plant and equipment of $4.5 million during the third quarter of 2010 was principally related to the sale of a distribution center in Brazil and the sale of a refrigerated vessel and other shipping-related equipment.

Asset Impairment and Other Charges, Net. Asset impairment and other charges, net were $0.6 million during the third quarter of 2011 as compared with $0.1 million during the third quarter of 2010. During the third quarter of 2011, we recorded $1.3 million in asset impairments and contract termination charges due to the closure of a leased distribution center in the United Kingdom related to the banana segment and a reversal of accrued legal expenses of $0.7 million in Hawaii related to the other fresh produce segment.

During the third quarter of 2010, we recorded a $1.4 million impairment charge of the DEL MONTE® perpetual, royalty-free brand name license due to lower than expected sales volume and pricing in the United Kingdom related to beverage products in the prepared food segment. We also incurred a $0.7 million impairment charge as a result of the relocation of a port facility in North America related to the banana segment, an additional $0.3 million in impairments and received $2.4 million in insurance reimbursements related to flood damage to our Guatemala banana farms and recorded $0.1 million in termination benefits in South Africa related to the prepared food segment.

Operating Income. Operating income for the third quarter of 2011 increased by $1.5 million from $15.5 million in the third quarter of 2010 to $17.0 million for the third quarter of 2011. The increase in operating income was due to higher gross profit, partially offset by higher selling, general and administrative expenses, lower gain on sales of property, plant and equipment and higher asset impairment and other charges.

Interest Expense. Interest expense was $2.1 million for the third quarter of 2011 as compared with $2.2 million for the third quarter of 2010, a decrease of $0.1 million. This decrease was principally due to lower interest rates and average debt balances partially offset by a $1.2 million write-off of debt issuance costs as a result of our voluntary reduction of available borrowing capacity under our Credit Facility.

Other Expense(Income), Net. Other expense, net was $0.4 million for the third quarter of 2011 as compared with other income of $3.0 million for the third quarter of 2010. The decrease in other expense (income) of $3.4 million was principally attributable to foreign exchange losses during the third quarter of 2011 as compared with foreign exchange gains during the third quarter of 2010.

Provision for Income Taxes. Provision for income taxes was $2.0 million for the third quarter of 2011 as compared with $3.2 million for the third quarter of 2010.


First Nine Months of 2011 Compared with First Nine Months of 2010

Net Sales. Net sales for the first nine months of 2011 were $2,808.9 million compared with $2,736.2 million for the first nine months of 2010. The increase in net sales of $72.7 million was attributable to higher net sales in all of our segments.

· Net sales of bananas increased by $43.7 million principally due to higher sales volume and per unit sales prices in North America and higher per unit sales prices in Asia, partially offset by lower sales volume in Europe and the Middle East. Worldwide banana per unit sales prices increased 4% and sales volume was relatively flat as compared with the prior year.

o North America banana net sales increased principally as a result of higher per unit sales prices due to industry shortages.

o Asia banana net sales increased principally due to higher per unit sales prices as a result of improved market conditions and favorable exchange rates.

o Europe banana net sales decreased primarily as a result of lower sales volumes earlier in the year, partially offset by higher per unit sales prices and favorable exchange rates.

o Middle East banana net sales decreased principally due to lower sales volume and lower per unit sales prices.

· Net sales in the other fresh produce segment increased $21.2 million principally as a result of higher net sales of non-tropical fruit, fresh-cut products and pineapples, partially offset by lower net sales of melons, strawberries and Argentine grain.

o Net sales of non-tropical fruit increased principally due to significantly higher per unit sales prices of avocados in North America as a result of increased demand, combined with higher sales volume of grapes in Asia and North America and higher per unit sales prices of grapes in the Middle East, partially offset by lower per unit selling prices of grapes in North America.

o Net sales of fresh-cut products increased primarily due to higher per unit sales prices and sales volume in North America, Europe and the Middle East that resulted from improved market conditions and an expanded customer base.

o Net sales of pineapples increased principally as a result of higher sales volume in Asia, the Middle East and North America principally due to favorable growing conditions in Asia, partially offset by lower sales volume in Europe and lower per unit sales prices in Asia and the Middle East.

o Net sales of melons decreased principally as a result of planned sales volume reductions.

o Net sales of strawberries decreased due to lower customer demand in North America.

o Net sales of Argentine grain decreased as a result of our decision in 2010 to exit grain operations in Argentina.

· Net sales in the prepared food segment increased $7.8 million principally due to higher net sales in our Jordanian poultry and processed meat business that resulted from improved selling prices and an expanded customer base combined with higher net sales of pineapple industrial products in Europe and beverage products in Africa and the Middle East. Partially offsetting these increases were lower net sales of canned deciduous and pineapple products as a result of reduced deciduous sourcing from South Africa and lower yields in our Kenya pineapple operations as a result of drought conditions earlier in the year.

Cost of Products Sold. Cost of products sold was $2,520.3 million for the first nine months of 2011compared with $2,503.4 million for the first nine months of 2010, an increase of $16.9 million. This increase in cost of products sold was primarily attributable to higher fruit cost for all segments with the exception of bananas as a result of higher input costs combined with higher fuel cost and unfavorable exchange rates in producing countries. Partially offsetting these increases in cost of product sold was a reduction of other charges associated with exit activities, floods and an earthquake. During the first nine months of 2010, we incurred $8.3 million in other charges principally related to exit activities in Brazil, the write-off of inventory as a result of damage caused by floods in our Guatemala banana farms and by an earthquake in our Chile non-tropical fruit operations.

Gross Profit. Gross profit was $288.6 million for the first nine months of 2011 compared with $232.8 million for the first nine months of 2010, an increase of $55.8 million. The increase in gross profit was primarily attributable to higher gross profit on bananas and prepared food, partially offset by lower gross profit on other fresh produce.

· Gross profit in the banana segment increased $49.1 million primarily due to higher per unit sales prices in North America and Asia that resulted from industry shortages and improving market conditions combined with lower fruit cost due to favorable growing conditions, partially offset by higher fuel costs and lower sales volume in Europe.

· Gross profit in the prepared food segment increased by $8.5 million principally as a result of lower costs of canned deciduous products as a result of operational improvements made during 2010, combined with increases in per unit sales prices of pineapple products and beverage products that resulted from improved market conditions. These increases in gross profit were partially offset by higher costs in the Jordanian poultry business, primarily the cost of corn feed and higher fruit cost in our Kenya canned pineapple operations principally due to unfavorable growing conditions.

· Gross profit in the other fresh produce segment decreased $1.8 million principally due to lower gross profit on non-tropical fruit and tomatoes, partially offset by higher gross profit on pineapples and melons.

o Gross profit on non-tropical fruit decreased principally due to lower selling prices of grapes in North America and Asia and higher costs of grapes in North America as a result of increased fruit procurement and fuel costs. Also contributing to the decrease in gross profit was lower per unit selling prices of stonefruit in North America and Europe. Partially offsetting these decreases in gross profit on non-tropical fruit were higher per unit selling prices for grapes in the Middle East due to reduced . . .

  Add FDP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FDP - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.