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Fresh Del Monte Produce Inc. Reports Third Quarter 2015 Financial Results

CORAL GABLES, Fla.--(BUSINESS WIRE)--Oct. 27, 2015-- Fresh Del Monte Produce Inc. (NYSE: FDP) today reported financial results for the third quarter ended September 25, 2015. The Company reported earnings per diluted share of $0.54 for the third quarter of 2015, compared with earnings per diluted share of $0.35 in the third quarter of 2014. Comparable earnings per diluted share were $0.57 in the third quarter of 2015, compared with comparable earnings per diluted share of $0.35 in the third quarter of 2014.

“We are very pleased with our financial performance in the third quarter. We saw excellent growth in our fresh-cut and avocado businesses. We hold a commanding position as the global leader in the fresh-cut space, and avocados are becoming one of our fastest growing categories. We look to aggressively capitalize on our position as a leader in avocados to meet growing customer demand. Our results were further shaped by our focus on higher value products, continued expansion of our geographic presence, further leveraging of our distribution and marketing channels, innovative opportunities with new customers globally, and closer relationships with existing customers. Higher banana production and procurement costs, unfavorable foreign exchange rates, and lingering effects of a tough Chilean season were adverse factors we had to overcome in order to achieve these results,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer. “Over the years, our team has done an exceptional job in transforming our Company for long-term growth and profitability by focusing on our fundamental strengths, and further leveraging our healthy and convenient product lines and geographic presence, allowing us to build a formidable strategic advantage for our Company as demonstrated by our third quarter achievements.”

Net sales for the third quarter of 2015 were $936.1 million, compared with $884.6 million in the third quarter of 2014. The increase in net sales was led by higher net sales in all of the Company's business segments, with solid volume gains over the prior year quarter, along with higher selling prices in the Company's other fresh produce business segment. The increase in net sales was partially offset by a $27 million exchange rate variance over the prior year period.

Gross profit for the third quarter of 2015 was $83.3 million, compared with $73.9 million in the third quarter of 2014. The increase in gross profit was primarily attributable to higher net sales and lower transportation costs, partially offset by higher fruit production and procurement costs in the Company's banana business segment, along with unfavorable exchange rates.

Operating income for the third quarter of 2015 was $34.4 million, compared with operating income of $29.3 million in the third quarter of 2014. Comparable operating income for the third quarter of 2015 was $35.9 million, compared with $29.5 million in the third quarter of 2014.

Net income for the third quarter of 2015 was $28.5 million, compared with net income of $19.9 million in the third quarter of 2014. Comparable net income for the third quarter of 2015 was $30.0 million, compared with $20.1 million in the third quarter of 2014.

 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(U.S. dollars in millions, except share and per share data) - (Unaudited)
       
Quarter ended Nine months ended
 
September 25, September 26, September 25, September 26,
Income Statement: 2015 2014 2015 2014
Net sales $   936.1 $   884.6 $   3,078.6 $   2,998.2
Cost of products sold 852.8 810.7 2,780.6 2,696.1
Other charges (1)     0.3  
Gross profit 83.3 73.9 297.7 302.1
 
Selling, general and administrative expenses 47.7 44.6 133.5 132.6
Gain on disposal of property, plant and equipment 0.3 0.2 2.5 0.4
Asset impairment and other charges, net (1) 1.5   0.2   2.4   0.1
Operating income 34.4 29.3 164.3 169.8
 
Interest expense, net 0.4 0.4 2.8 2.3
Other expense (income), net (1.3 ) 4.2   4.7   7.1
 
Income before income taxes 35.3 24.7 156.8 160.4
 
Provision for income taxes 5.4   4.0   16.8   15.4
Net income $   29.9   $   20.7   $   140.0   $   145.0
 
Less: Net income attributable to noncontrolling interests 1.4   0.8   4.5   2.2
Net income attributable to Fresh Del Monte Produce Inc. $   28.5   $   19.9   $   135.5   $   142.8
 
Net income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Basic $   0.54   $   0.36   $   2.57   $   2.54
 
Net income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Diluted $   0.54   $   0.35   $   2.54   $   2.53
 
Dividends declared per ordinary share $   0.125   $   0.125   $   0.375   $   0.375
 
Weighted average number of ordinary shares:
Basic 52,788,564   55,901,110   52,817,849   56,174,870
Diluted 53,208,152   56,339,077   53,247,184   56,549,096
 
Selected Income Statement Data:
Depreciation and amortization $   17.8   $   18.3   $   53.7   $   54.4
 
Non-GAAP Measures (per share):
Reported net income - Diluted $ 0.54 $ 0.35 $ 2.54 $ 2.53
Asset impairment and other charges, net (1) 0.03     0.05  
Comparable net income - Diluted (2) $   0.57   $   0.35   $   2.59   $   2.53

(1) Asset impairment and other charges, net, for the nine months ended September 25, 2015 related principally to damages resulting from unfavorable weather conditions in Chile offset by a credit on litigation settlement. Additionally, asset impairment and other charges for the quarter ended September 25, 2015 principally included an impairment of assets held for sale in Guatemala. Asset impairment and other charges, net for the quarter and nine months ended September 26, 2014 related principally to restructuring activities in the United Kingdom and Germany, previously announced exit activities in Brazil partially offset by a gain on litigation in Hawaii.

(2) Management reviews comparable operating income, comparable net income and comparable net income per share and considers these measures relevant to investors because management believes they better represent the underlying business trends and performance of the Company.

 
Fresh Del Monte Produce Inc. and Subsidiaries
Business Segment Data
(U.S. dollars in millions) - (Unaudited)
   
Quarter ended
September 25, 2015   September 26, 2014
Segment Data:                    
Net Sales Gross Profit Net Sales Gross Profit
 
Banana $   425 .2 45 % $   20 .6 25 % $   423 .8 48 % $   22 .5 30 %
Other Fresh Produce 420 .3 45 % 48 .9 59 % 371 .0 42 % 40 .7 55 %
Prepared Food 90 .6   10 % 13 .8   16 % 89 .8   10 % 10 .7   15 %
$   936 .1   100 % $   83 .3   100 % $   884 .6   100 % $   73 .9   100 %
  Quarter ended

Net Sales by Geographic Region:

September 25,   September 26,

 

2015 2014
       
North America $   528.2 56 % $   481.6 55 %
Europe 156.6 17 % 154.0 17 %
Asia 96.5 10 % 98.2 11 %
Middle East 140.8 15 % 133.5 15 %
Other 14.0   2 % 17.3   2 %
$   936.1   100 % $   884.6   100 %
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions) - (Unaudited)
   
September 25, December 26,
2015 2014
 
Assets
Current assets:
Cash and cash equivalents $   42.6 $   34.1
Trade accounts receivable, net 333.6 344.6
Other accounts receivable, net 66.2 69.0
Inventories, net 482.5 516.1
Other current assets 73.1   77.1
Total current assets 998.0   1,040.9
 
Investment in and advances to unconsolidated companies 2.2 2.0
Property, plant and equipment, net 1,195.4 1,170.2
Goodwill 330.1 330.5
Other noncurrent assets 132.7   131.7
Total assets $   2,658.4   $   2,675.3
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 365.3 $ 382.1
Current portion of long-term debt and capital lease obligations 1.8 2.2
Other current liabilities 34.0   25.1
Total current liabilities 401.1   409.4
 
Long-term debt and capital lease obligations 209.8 264.7
Other noncurrent liabilities 210.2   213.3
Total liabilities 821.1   887.4
 
Total Fresh Del Monte Produce Inc. shareholders' equity 1,793.9 1,747.9
Noncontrolling interests 43.4   40.0
Total shareholders' equity 1,837.3   1,787.9
Total liabilities and shareholders' equity $   2,658.4   $   2,675.3
 
 
Selected Balance Sheet Data:
Working capital $ 596.9 $ 631.5
Total debt $ 211.6 $ 266.9
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
 
  Nine months ended
September 25,   September 26,
2015 2014
Operating activities:
Net income $   140.0 $   145.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 53.7 54.4
Amortization of debt issuance costs 0.3 0.3
Asset impairment, net 2.4 0.3
Gain on sales of property, plant and equipment (2.5 ) (0.4 )
Foreign currency translation adjustment (4.9 ) (1.7 )
Other changes 11.2 7.9
Changes in operating assets and liabilities:
Receivables, net 8.6 3.5
Inventories, net 21.3 26.3
Other current assets (4.5 ) (9.7 )
Accounts payable and accrued expenses 15.4 19.7
Other noncurrent assets and liabilities (2.8 ) (2.5 )
Net cash provided by operating activities 238.2   243.1  
 
Investing activities:
Capital expenditures (90.0 ) (119.0 )
Proceeds from sales of property, plant and equipment 6.1   1.2  
Net cash used in investing activities (83.9 ) (117.8 )
 
Financing activities:
Net repayments on long-term debt (55.4 ) (112.1 )
Contributions from (distributions to) noncontrolling interests (1.8 ) 5.0
Proceeds from stock options exercised 32.6 34.8
Excess tax benefit from stock-based compensation 1.1 0.1

Dividends paid

(19.7 ) (20.9 )
Repurchase and retirement of ordinary shares (112.8 ) (42.4 )

Net cash used in financing activities

(156.0 ) (135.5 )
 
Effect of exchange rate changes on cash 10.2   5.0  
 
Net increase (decrease) in cash and cash equivalents 8.5 (5.2 )
Cash and cash equivalents, beginning 34.1   42.5  
Cash and cash equivalents, ending $   42.6   $   37.3  

Third Quarter 2015 Business Segment Performance

(As reported in business segment data)

Bananas

Net sales for the third quarter increased $1.4 million to $425.2 million, compared with $423.8 million in the third quarter of 2014, primarily driven by higher sales volume in the Company's Middle East and North America regions, along with higher selling prices in the Middle East region. Worldwide pricing decreased $0.13, or 1%, to $14.64 per unit, compared with $14.77 per unit in the third quarter of 2014. Volume was 1% higher than the prior year period. Gross profit for the quarter was $20.6 million, compared with $22.5 million in the third quarter of 2014. Unit cost was in line with the prior year period.

Other Fresh Produce

Net sales for the third quarter increased $49.3 million to $420.3 million, compared with $371.0 million in the third quarter of 2014. The increase in net sales was led by higher sales volume in the Company's fresh-cut and avocado product lines, along with higher selling prices in the Company's fresh-cut product line. Gross profit for the quarter was $48.9 million, compared with gross profit of $40.7 million in the third quarter of 2014.

Gold pineapple - Net sales decreased 8% to $118.9 million, compared with the prior year. Volume decreased 12%. Pricing was 4% higher. Unit cost was 1% lower.

Fresh-cut - Net sales increased 32% to $126.3 million, compared with the prior year. Volume increased 30%. Pricing increased 2%. Unit cost was 1% higher.

Non-tropical - Net sales increased 9% to $52.0 million, compared with the prior year. Volume increased 19%. Pricing decreased 8%. Unit cost was 8% lower.

Avocados - Net sales increased 38% to $45.5 million, compared with the prior year. Volume increased 52%. Pricing decreased 9%. Unit cost was 8% lower.

Prepared Food

Net sales for the quarter increased to $90.6 million, compared with $89.8 million in the third quarter of 2014, primarily due to higher sales volume in the Company's canned pineapple product line, along with higher sales volume and higher selling prices in the industrial pineapple product line. The increase in net sales was partially offset by lower sales in the Company's Jordanian poultry product line, due to lower production. Gross profit for the quarter was $13.8 million, compared with $10.7 million in the third quarter of 2014.

Cash Flows

Net cash provided by operating activities for the first nine months of 2015 was $238.2 million, compared with $243.1 million in the same period of 2014.

Total Debt

Total debt decreased from $266.9 million at the end of 2014 to $211.6 million at the end of the third quarter of 2015.

Conference Call and Web Cast Data

Fresh Del Monte will host a conference call and simultaneous webcast at 11:00 a.m. Eastern Time today to discuss the third quarter 2015 financial results and to review the Company’s progress and outlook. The webcast can be accessed on the Company’s Investor Relations home page at http://ir.freshdelmonte.com. The call will be available for re-broadcast on the Company’s web site approximately two hours after the conclusion of the call.

About Fresh Del Monte Produce Inc.

Fresh Del Monte is 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 distributor of prepared food in Europe, Africa, the Middle East and the countries formerly part of the Soviet Union. Fresh Del Monte markets its products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability for more than 100 years.

Forward-looking Information

This press release contains certain forward-looking statements regarding the intent, beliefs or current expectations of the Company or its officers with respect to the Company’s plans and future performance. These forward-looking statements are based on information currently available to the Company and the Company assumes no obligation to update these statements. It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. In this press release, these statements appear in a number of places and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates” or similar expressions). The Company’s plans and performance may differ materially from those in the forward-looking statements as a result of various factors, including (i) the uncertain global economic environment and the timing and strength of a recovery in the markets the Company serves, and the extent to which adverse economic conditions continue to affect its sales volume and results, including the Company’s ability to command premium prices for certain of its principal products, or increase competitive pressures within the industry, (ii) the impact of governmental initiatives in the United States and abroad to spur economic activity, including the effects of significant government monetary or other market interventions on inflation, price controls and foreign exchange rates, (iii) the impact of governmental trade restrictions, including adverse governmental regulation that may impact the Company’s ability to access certain markets, (iv) the Company’s anticipated cash needs in light of its liquidity, (v) the continued ability of the Company’s distributors and suppliers to have access to sufficient liquidity to fund their operations, (vi) trends and other factors affecting the Company’s financial condition or results of operations from period to period, including changes in product mix or consumer demand for branded products such as its, particularly as consumers remain price-conscious in the current economic environment; anticipated price and expense levels; the impact of crop disease, severe weather conditions, such as flooding, or natural disasters, such as earthquakes, on crop quality and yields and on its ability to grow, procure or export its products; the impact of prices for petroleum-based products and packaging materials; and the availability of sufficient labor during peak growing and harvesting seasons, (vii) the impact of pricing and other actions by the Company’s competitors, particularly during periods of low consumer confidence and spending levels, (viii) the impact of foreign currency fluctuations, (ix) the Company’s plans for expansion of its business (including through acquisitions) and cost savings, (x) the Company’s ability to successfully integrate acquisitions into its operations, (xi) the impact of impairment or other charges associated with exit activities, crop or facility damage or otherwise, (xii) the timing and cost of resolution of pending and future legal and environmental proceedings or investigations, (xiii) the impact of changes in tax accounting or tax laws (or interpretations thereof), and the impact of settlements of adjustments proposed by the Internal Revenue Service or other taxing authorities in connection with the Company’s tax audits, and (xiv) the cost and other implications of changes in regulations applicable to its business, including potential legislative or regulatory initiatives in the United States or elsewhere directed at mitigating the effects of climate change. All forward-looking statements in this report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. The Company’s plans and performance may also be affected by the factors described in Item 1A. - “Risk Factors” in Fresh Del Monte Produce Inc.’s Annual Report on Form 10-K for the year ended December 26, 2014 along with other reports that the Company has on file with the Securities and Exchange Commission.

Source: Fresh Del Monte Produce Inc.

Fresh Del Monte Produce Inc.
Christine Cannella, 305-520-8433
Assistant Vice President, Investor Relations