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Fresh Del Monte Produce Inc. Reports Second Quarter 2016 Financial Results

CORAL GABLES, Fla.--(BUSINESS WIRE)--Aug. 2, 2016-- Fresh Del Monte Produce Inc. (NYSE: FDP) today reported financial results for the second quarter ended July 1, 2016. The Company reported earnings per diluted share of $1.86 for the second quarter, compared with earnings per diluted share of $1.21 in the second quarter of 2015. Comparable earnings per diluted share were $1.75 in the second quarter, compared with comparable earnings per diluted share of $1.18 in the second quarter of 2015.

“We are pleased with our performance in the second quarter,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer. “We continued to see strong growth in our fresh-cut and avocado product lines. We achieved higher selling prices in our pineapple and banana business segments, and we benefited from lower input costs and cost-reduction initiatives that directly improved our bottom-line performance. We also continued to invest in our diversification strategy and advanced our global business platform during the quarter. Our investment in diversifying our products and geographies over the years resulted in solid second quarter results, despite weather issues which negatively affected sales volume in several of our product lines.”

Net sales for the second quarter of 2016 were $1,088.6 million, compared with $1,134.1 million in the second quarter of 2015. The decrease in net sales was due to lower sales volume in the Company's other fresh produce and banana business segments as a result of inclement weather that decreased production, as well as the negative impact of unfavorable exchange rates.

Gross profit for the second quarter of 2016 was $145.4 million, compared with $114.0 million in the second quarter of 2015. The $31.4 million increase in gross profit was attributable to higher gross profit in all of the Company's business segments, principally due to higher selling prices in the Company's other fresh produce and banana business segments, along with lower transportation and banana production and procurement costs.

Operating income for the second quarter of 2016 was $106.7 million, compared with operating income of $73.6 million in the second quarter of 2015. Comparable operating income was $100.9 million in the second quarter of 2016, compared with comparable operating income of $72.1 million in the second quarter of 2015.

Net income for the second quarter of 2016 was $96.2 million, compared with net income of $64.5 million in the second quarter of 2015. Comparable net income was $90.4 million in the second quarter of 2016, compared with comparable net income of $63.0 million in the second quarter of 2015.

 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(U.S. dollars in millions) - (Unaudited)
                     
Quarter ended Six months ended
 
Income Statement: July 1,
2016
June 26,
2015
July 1,
2016
June 26,
2015
Net sales $ 1,088.6 $ 1,134.1 $ 2,106.7 $ 2,142.5
Cost of products sold 943.2 1,020.1 1,820.6 1,927.8
Other charges (1)       0.3  
Gross profit 145.4 114.0 286.1 214.4
 
Selling, general and administrative expenses 44.5 41.9 91.6 85.8
Gain on disposal of property, plant and equipment, net (2) 8.9 1.0 5.8 2.2
Asset impairment and other charges (credits), net (1) 3.1   (0.5 ) 3.1   0.9  
Operating income 106.7 73.6 197.2 129.9
 
Interest expense, net 1.0 1.2 1.8 2.4
Other income (expense), net 0.7   (0.1 ) 3.3   (6.0 )
 
Income before income taxes 106.4 72.3 198.7 121.5
 
Provision for income taxes 8.7   6.4   19.8   11.4  
Net income $ 97.7   $ 65.9   $ 178.9   $ 110.1  
 
Less: Net income attributable to noncontrolling interests 1.5   1.4   1.0   3.1  
Net income attributable to Fresh Del Monte Produce Inc. $ 96.2   $ 64.5   $ 177.9   $ 107.0  
 
Net income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Basic $ 1.88   $ 1.22   $ 3.46   $ 2.03  
 
Net income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Diluted $ 1.86   $ 1.21   $ 3.43   $ 2.01  
 
Dividends declared per ordinary share $ 0.125   $ 0.125   $ 0.250   $ 0.250  
 
Weighted average number of ordinary shares:
Basic 51,164,438   52,655,228   51,396,505   52,831,466  
Diluted 51,700,345   53,147,604   51,868,455   53,278,723  
 
Selected Income Statement Data:
Depreciation and amortization $ 19.1   $ 17.9   $ 38.2   $ 36.1  
 
Non-GAAP Measures (per share):
Reported net income - Diluted $ 1.86 $ 1.21 $ 3.43 $ 2.01
Asset impairment and other charges (credits), net (1) 0.06 (0.01 ) 0.06 0.02
Gain on sale of assets (2) (0.17 ) (0.02 ) (0.17 ) (0.05 )
Comparable net income - Diluted $ 1.75   $ 1.18   $ 3.32   $ 1.98  
 
(1) Asset impairment and other charges (credits), net, for the quarter and six months ended July 1, 2016 included impairment charges in Asia and
Central America. Asset impairment and other charges (credits), net, for six months ended June 26, 2015 related principally to damages resulting
from unfavorable weather conditions in Chile. Additionally, asset impairment and other charges (credits), net for the quarter ended June 26,
2015 included a credit due to litigation settlement.
 
(2) Gain on disposal of property, plant and equipment, net for the quarter and six months ended July 1, 2016 included gain on sale of assets
comprised of $8.9 million related to the sale of surplus lands in Central and South America. Gain on disposal of property, plant and equipment, net
included gain on sale of assets of $1.3 million for the quarter ended June 26, 2015 and $2.4 million for the six months ended June 26, 2015
principally related to the sale of refrigerated vessels.
 
Fresh Del Monte Produce Inc. and Subsidiaries
Business Segment Data
(U.S. dollars in millions) - (Unaudited)
         
Quarter ended
July 1, 2016       June 26, 2015
Segment Data:                                            
Net Sales Gross Profit Net Sales Gross Profit
 
Banana $ 497.4 45% $ 66.5 46% $ 513.8 45% $ 44.6 39%
Other Fresh Produce 496.8 46% 59.9 41% 523.7 46% 54.9 48%
Prepared Food 94.4   9% 19.0   13% 96.6   9% 14.5   13%
$ 1,088.6   100% $ 145.4   100% $ 1,134.1   100% $ 114.0   100%
 
        Quarter ended
Net Sales by Geographic Region: July 1,
2016
      June 26,
2015
               
North America $ 578.6 53% $ 603.7 53%
Europe 190.3 17% 211.7 19%
Middle East 161.1 15% 154.0 14%
Asia 139.8 13% 144.0 12%
Other 18.8   2% 20.7   2%
$ 1,088.6   100% $ 1,134.1   100%
 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions) - (Unaudited)
         
July 1,
2016
January 1,
2016
 
Assets
Current assets:
Cash and cash equivalents $ 42.8 $ 24.9
Trade accounts receivable, net 346.7 346.1
Other accounts receivable, net 67.2 71.3
Inventories, net 424.0 481.9
Other current assets 41.2 61.6
Total current assets 921.9 985.8
 
Investment in and advances to unconsolidated companies 2.0 2.0
Property, plant and equipment, net 1,247.8 1,215.4
Goodwill 263.2 263.7
Other noncurrent assets 149.3 129.2
Total assets $ 2,584.2 $ 2,596.1
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 336.8 $ 359.1
Current portion of long-term debt and capital lease obligations 0.5 1.5
Other current liabilities 18.6 21.2
Total current liabilities 355.9 381.8
 
Long-term debt and capital lease obligations 191.9 252.7
Other noncurrent liabilities 227.3 210.7
Total liabilities 775.1 845.2
 
Total Fresh Del Monte Produce Inc. shareholders' equity 1,784.5 1,708.0
Noncontrolling interests 24.6 42.9
Total shareholders' equity 1,809.1 1,750.9
Total liabilities and shareholders' equity $ 2,584.2 $ 2,596.1
 
 
Selected Balance Sheet Data:
Working capital $ 566.0 $ 604.0
Total debt $ 192.4 $ 254.2
 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
 
    Six months ended
July 1,
2016
      June 26,
2015
Operating activities:
Net income $ 178.9 $ 110.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 38.0 35.9
Amortization of debt issuance costs 0.2 0.2
Asset impairment, net 3.1 1.4
Gain on disposal of property, plant and equipment, net (5.8 ) (2.2 )
Foreign currency translation adjustment (1.8 ) (2.3 )
Other changes 6.9 6.2
Changes in operating assets and liabilities:
Receivables, net 9.3 (48.4 )
Inventories, net 57.4 56.7
Other current assets (0.8 ) (1.9 )
Accounts payable and accrued expenses (12.4 ) 22.1
Other noncurrent assets and liabilities (4.1 ) 1.7  
Net cash provided by operating activities 268.9   179.5  
 
Investing activities:
Capital expenditures (67.3 ) (52.5 )
Proceeds from sales of property, plant and equipment 7.4 5.8
Purchase of a business (7.1 )  
Net cash used in investing activities (67.0 ) (46.7 )
 
Financing activities:
Net repayments on long-term debt (66.0 ) (58.8 )
Purchase of noncontrolling interest (40.0 )
Distributions to noncontrolling interests (0.1 ) (0.2 )
Proceeds from stock options exercised 4.2 19.7
Excess tax benefit from stock-based compensation 0.2 0.3
Dividends paid (12.7 ) (13.1 )
Repurchase and retirement of ordinary shares (68.7 ) (84.8 )
Net cash used in financing activities (183.1 ) (136.9 )
 
Effect of exchange rate changes on cash (0.9 ) 4.4  
 
Net increase in cash and cash equivalents 17.9 0.3
Cash and cash equivalents, beginning 24.9   34.1  
Cash and cash equivalents, ending $ 42.8   $ 34.4  
 

Second Quarter 2016 Business Segment Performance

(As reported in business segment data)

Bananas

Net sales for the second quarter of 2016 decreased $16.4 million to $497.4 million, compared with $513.8 million in the second quarter of 2015, due to lower sales volume. Worldwide pricing increased $0.24, or 2%, to $15.30 per unit, compared with $15.06 per unit in the second quarter of 2015. Volume was 5% lower than the prior year period. Gross profit for the second quarter of 2016 increased $21.9 million to $66.5 million, compared with $44.6 million in the second quarter of 2015. Unit cost was 4% lower than the prior year period.

Other Fresh Produce

Net sales for the second quarter of 2016 decreased $26.9 million to $496.8 million, compared with $523.7 million in the second quarter of 2015. The decrease in net sales was primarily due to lower sales volume in the Company's pineapple product line. Gross profit for the second quarter of 2016 increased $5.0 million to $59.9 million, compared with gross profit of $54.9 million in the second quarter of 2015.

Gold pineapple - Net sales decreased 19% to $123.4 million, compared with the prior year. Volume decreased 25%. Pricing was 9% higher. Unit cost was 1% higher.

Fresh-cut - Net sales increased 9% to $134.9 million, compared with the prior year. Volume increased 9%. Pricing was 1% lower. Unit cost was in line with the prior year period.

Non-tropical - Net sales decreased 8% to $85.7 million, compared with the prior year. Volume decreased 11%. Pricing increased 4%. Unit cost was in line with the prior year period.

Avocados - Net sales increased 15% to $57.7 million, compared with the prior year. Volume increased 39%. Pricing decreased 17%. Unit cost was 17% lower.

Prepared Food

Net sales for the second quarter of 2016 decreased to $94.4 million, compared with $96.6 million in the second quarter of 2015. Gross profit for the quarter increased $4.5 million to $19.0 million, compared with $14.5 million in the second quarter of 2015.

Cash Flows

Net cash provided by operating activities for the first six months of 2016 was $268.9 million, compared with $179.5 million in the same period of 2015.

Total Debt

Total debt decreased from $254.2 million at the end of 2015 to $192.4 million at the end of the second quarter of 2016.

Non-GAAP Measures

The Company's results are determined in accordance with U.S. generally accepted accounting principles (GAAP). Some of the information presented in this press release reflects adjustments to GAAP measures such as amounts related to restructuring, asset impairment charges, gain on sales of assets and certain other special items, if any. Management believes these adjustments provide a more comparable analysis of the ongoing operating performance of the business. These adjustments result in non-GAAP financial measures and are referred to in this press release as comparable operating income, comparable net income and comparable net income per share. Because all companies do not use identical calculations, our presentation of these non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.

Comparable operating income and comparable net income provide us with an understanding of the results from the primary operations of our business. We use comparable operating income and comparable net income to evaluate our period-over-period operating performance because management believes they provide more comparable measures of our continuing business as they adjust for special items that are not reflective of the normal earnings of our business. These measures may be useful to an investor in evaluating the underlying operating performance of our business because these measures:

  1. Are used by investors to measure a company's comparable operating performance;
  2. Are financial measurements that are used by lenders and other parties to evaluate creditworthiness; and
  3. Are used by our management for various purposes, including as measures of performance of our operating entities and as a basis of strategic planning and forecasting.

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 second quarter 2016 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 such as uncertainty surrounding the recent vote in the United Kingdom to leave the European Union (often referred as Brexit), including spillover effects to other Eurozone countries, (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 January 1, 2016 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