Cincinnati-based marketer, producer and distributor of fruits, vegetables and processed foods, Chiquita Brands Int, said yesterday [Wednesday] that its Q1 2002 is slightly improved upon the same period in 2001.
The company had a Q1 net loss of US$398m, including one-time charges of US$286m related to its financial restructuring and a charge of US$144m as a result of the adoption of SFAS 142, a new accounting standard for goodwill.
The company reported a net loss of US$5.08 per share based on 78.3 million shares outstanding prior to the completion of the restructuring. In the future, the company will base its EPS calculations on the approximately 40 million new common shares issued on 20 March 2002.
Excluding special items, Q1 EBITDA increased 5% to US$64m, up from US$61m in Q1 2001. Income before one-time items was US$32m versus US$5m a year ago. US$20m of this improvement was due to the elimination of interest expense on parent company debt while the company was in Chapter 11 proceedings during Q1 2002.
“On 19 March, Chiquita emerged from Chapter 11 debt restructuring with a strong balance sheet and improved prospects for growth and earnings,” said Cyrus F. Freidheim, Jr., chairman and CEO. “As a result of the financial restructuring, Chiquita’s future annual interest expense will decrease by about US$60m, and annual depreciation expense will decline by about US$40m. With the restructuring behind us, we are actively reviewing Chiquita’s business strategy and operations. We now have a fresh start and we are focused on bringing this great company back to consistent profitability.”
Q1 net sales rose 9%, or US$52m, to US$630m versus a year ago, primarily due to increased European banana volume and higher local prices in Central Europe. Fresh Produce operating income was US$41m, up from US$38m in the Q1 2001. In core European markets, the company grew banana volume about 10% year on year and benefited from about US$6m in lower import license costs. Pricing was essentially flat on a local currency basis in the core markets, but European currency weakness had a US$9m negative effect on quarterly earnings. The company grew volume by about two million boxes in Central European markets, where market pricing was strong. In the US, the company increased banana volumes by about 5% but experienced 7% lower pricing year on year. In the Asia Pacific region, where the company has a relatively smaller presence, higher local banana prices drove a US$6m earnings improvement despite weakness in the yen.
Processed Foods operating income was US$1m versus a breakeven result in the Q1 2001. Slightly higher prices on canned vegetables were offset by increased costs per unit as a result of a planned smaller harvest during the fall 2001.
Financial restructuring charges
The one-time net charges related to the financial restructuring consist of:
- US$410m of charges from the implementation of fresh start accounting upon the company’s emergence from Chapter 11 proceedings as a new reporting entity. These charges result from the allocation of the company’s US$1.28bn estimated reorganization value to its assets and liabilities in conformity with accounting principles applicable to companies emerging from Chapter 11. This has resulted in the following changes to the carrying values of assets and liabilities: a reduction of US$736m for tropical farm assets, shipping vessels, and other long-term operating assets and investments; an increase of US$375m for the Chiquita trademark; and an increase of US$49m for other liabilities, primarily for the tropical pension/severance plans.
- US$30m of reorganisation costs primarily associated with grants of new common stock to certain executives as provided for in the Chapter 11 plan of reorganization, and professional fees.
- US$154m extraordinary gain resulting from the exchange of all previously existing parent company public debt (US$861m principal plus US$102m accrued interest) for 95.5% of the new common stock of the company and US$250m principal of new 10.56% Senior Notes.