Fresh Del Monte Produce Inc (FDP) 2003 Q1 法說會逐字稿

This is only Please stand by. Ladies and gentlemen, good morning. My name is Natalie and I will be your conference facilitator today. Please note that today's call is being recorded. At this time I would like to welcome everyone to Fresh Del Monte Produce's first quarter 2003 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask a question during that time, simply press star then the number one on your touch-tone phone. If you would like to withdraw your question, please press the pound key. And now I will turn the conference over to Ms. Christine Cannella (ph.). Ms. Cannella, you may begin.

Thank you, Natalie. Good morning, everyone an welcome to Fresh Del Monte first quarter 2003 conference call. I'm joined today by Chairman and Chief Executive Officer, Mohammad Abu-Ghazaleh and Executive Vice-President and Chief Financial Officer John Inserra. We will discuss our results for the quarter ended March 28, 2003. We released the results this morning by Business Wire, e-mail and first com. If you have not received a copy of the earnings release please contact Fresh Del Monte and Investor Relations at (305)520-8451. You may also visit our website at freshdelmonte.com, to register for future distributions. This conference call is also being webcast live on our website and will be available for replay approximately two hours after the conclusion of this call. For those listen to go this call live webcast or participating in a listen-only mode, please feel free to contact me directly with any questions following today's call. Again, my number is (305)520-8451.

This morning, Mohammad will review our operating earnings for the quarter and discuss our operating outlook after which John will review our financial performance.

Before we turn the call over to Mohammad, please let me remind you that much of the information we will discuss this morning, including the answers we give in response to questions may include forward-looking statements regarding our beliefs and current expectations with respect to various manners. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors, including those described under the heading, "description of business risk factors" in the company's Form 20-F for the year-ended December 27th, 2002.

would also like to add that this call is a property of Fresh Del Monte. Redistribution, retransmission or rebroadcast of this call in any form without our written consent is strictly prohibited. With that, please allow me to turn this call over to Mohammad Abu-Ghazaleh. Mohammad?

Thank you, Christine and good morning everyone. Despite the struggle economy, we were able to maintain last year's outstanding first quarter performance delivering record results for the first quarter of 2003.

What was especially note worthy about our first quarter 2003 financial results was that they were not driven by a soaring banana marketed, lower banana supply, higher prices brought about by aggressive weather conditions or an increase in PA pricing as they were in the first quarter of 2002.

We did benefit from favorable foreign exchange and lower into rates. Although these factors were partially offset by high seas

transportation, and higher energy and operating costs. In fact, our (inaudible) results were the product of our management disciplines, through which we carefully monitor every aspect of our business--

from our balance sheet to our very operations—in order to provide our shareholders with the best earnings possible.

Our earnings in the first quarter of 2003 are attributed to the continuing growth of our business and the determination of our management team in spite of challenging economic conditions and geo political uncertainties, as well as controversy taking place around us.

Let's talk briefly about these controversies for a moment. As you know, Fresh Del Monte has been the subject of litigation which was described in our 20-F and in our recent press releases that are available on our website. Our policy, of course, is not to comment on going litigation observation ; however, I would like to reiterate that the lawsuits are without merit.

We feel strongly about our position and we will continue to depend ourselves in court against all allegations. With respect to the securities and exchange commission authority, we made a public announcement in March and that is the information that we can provide at this time. I feel that this issue has made us stronger, sharpened our will, and made us more determined than ever to make Fresh Del Monte the leading total produce company in the world. In fact we know, that we can achieve this growth as we continue to deliver steady earnings quarter after quarter and year after year we will not be deterred by these events and we will not allow them to control our vision and throw us off our winning platform.

I would like to add that I take great personal pride in our team's stewardship of Fresh Del Monte. We have been diligent, ethical and honorable in our business dealings. I’m confident about the outcome of this issue and I look forward to putting them behind us once and for all. Let's turn now to the performance of our products and our operations.

The U.S. banana market was stable during the first quarter of 2003. And our banana sales volume pricing and margins were strong. As we processed more bananas through our distribution network, we increasingly provide value-added ripening (ph.) services to our customers; thereby generating higher prices, stronger

margins and increasing sales. Although the weather caused soft banana pricing in Europe at the beginning of the quarter, we have seen pricing strengthen substantially over the last four to five weeks. We also continue to benefit from a strong euro.

Banana pricing in Asia was significantly lower in the first quarter compared with last year's record first quarter, which was attributable to the weather conditions (inaudible) supply in 2002. Strong performance continues to characterize the pineapple market. We're seeing higher pineapple volumes and demand is out there for supply. We believe that Fresh Del Monte today commands a 50% global market share and this popular fresh produce category, with demand continuing to expand.

In addition, melon, grape and tropical fruits increased during the quarter.

As you know, we have been working to capitalize on our rapidly growing Fresh Cut business. During the first quarter, we more than doubled our world wide Fresh Cut sales to more than $40m, from less than $20m last year at this time and increased them by our U.K. acquisition. In the U.S. we significantly increased (inaudible) in our Fresh Cut operations. We also open our new research and development center in the San Francisco Bay Area where we are focusing our efforts on increasing quality shelf life and packaging of our Fresh Cut products.

In our U.K. Fresh Cut operations, we have developed several branded Fresh Cut fruits, and we have recently launched the Fresh Cut pineapple making Del Monte the first global brand to enter the Fresh Cut brand in Britain. Healthy and consumer eating plans in both Europe and the U.S. have helped to spur a sharper focus by fast food restaurants, in providing what customers with Fresh Cut fruit, vegetables and prepared salads in their restaurants. And we are capitalizing on this event.

In the U.K., for example, we recently started supplying McDonald's with fresh pre-packaged apples and grapes and chicken pasta salad. To give you a sense of how rapidly this business is growing, we have more than doubled our volumes with McDonald's within a few short weeks. Del Monte is at the forefront of meeting our fast food customer's needs, and we are uniquely positioned to do so. Major fast food operators are specifically seeking suppliers that can provide them with quantity consistent quality and uniform packaging they need--every day of the year.

This is a challenge that very few fresh fruit and vegetable companies, other than Fresh Del Monte can overcome. Virtually no one has the infrastructure and the deliverables and capabilities that we have. We're very excited about this new business developments and the potential of possibilities that it presents. And we will continue to work with major food suppliers to develop new product ideas in the future.

We are also continuing our European expansion, made easier because we now control our own destiny in Europe distribution our products and managing sales organizations in Germany the Netherlands and Belgium.

We're Coordinating market activities, that used to be handled the partnership we sold in 2002. We are in the early stages and doing well. For example, net sales in Germany for the first quarter was $16m, and we anticipate for the year about $70m.

We are also pleased with how well our integration of Dallas (ph.) based Standard (ph.) fruits and vegetables are progressing. As you know, we acquired Standard at the end of January, and we have already started processing its primary products--tomatoes, potatoes, and onions—through a number of distribution centers in the U.S.

We have a very clear vision of what we want to do with this acquisition and our joint management team has done an excellent job of managing the two companies. In a three short months we have integrated our sales forces, our administrative functions, our production of (inaudible) and our customer bases. We have also begun to consolidate certain sales and distribution centers and merged related activities in highly effective way.

Fresh Del Monte North American distribution business continues to perform well during the quarter. Excluding any contribution from the Standard acquisition, we have driven increased sales through distribution centers in our proprietary network. As you know, in the past, Fresh Del Monte was predominantly a banana pineapple and melon company.

Over the past several years, our diversification strategy has transformed our company's product line into a vast area of fresh and Fresh Cut fruit and vegetables. With the strength of the Del Monte brand behind, us as well as the distribution centers, the global customer base and approximately 25,000 dedicated employees, we have everything we need to become the worlds leading produce company. As a result, we have every reason to be optimistic about the future.

One of the things I am most proud of at Fresh Del Monte is our performance and more over we expect this performance to continue into 2003. At this point I will like John give you some financial highlights. John.

Thank you, Mohammad. And as Mohammad said, we delivered record results for the first quarter of 2003 despite the challenging economic conditions that have characterized 2003 so far. We have been able to maintain our full momentum and we continue to expand our business.

Net sales for the first quarter of 2003 rose to $644m compared with $537m in the first quarter of 2002. This 20% increase in net sales was driven by an expansion in our distribution channels, contributions from our acquisition of Standard fruit and vegetable, contributions from our U.K. Fresh Cut operations and strong banana sales.

Net sales also benefited from foreign exchange gains of approximately $26m during the quarter, primarily as a result of the strong euro. I should note that we partially hedged our foreign currency net sells exposure for the remainder of 2003, a measure that is keeping with our corporate policy.

Gross profit was stable during the quarter due to increase sales volumes in bananas, pineapples, Fresh Cut produce, grapes and nontropical products combined with improved banana price engine Europe and North America.

As Mohammad noted, we also experienced the negative after the of high sea transportation costs action higher energy costs as well as high operating costs as a result of strong foreign currencies.

Net income in the quarter of $88m also included $11m of insurance recoveries and reduced interest expense. Total debt rose $79m from year-end 2002 to $166m at the end of the first quarter an increase that resulted from the $100m Standard acquisition. As a result, at the end of the first quarter, we had a debt to equity ratio of 17%.

At a quarter end we had a quarter $111m outstanding on our revolving credit facility and as of today we have only $45m outstanding on this facility. This highlights the fact that in three short months we have paid down $55m of approximately $100m borrowed for this standard acquisition. In March we signed a new $400m revolving credit facility, which matures in 2007 and bears interest at a libor (ph.)

rate plus a margin.

As we have said before, we plan to use the revolving credit facility for general corporate purposes and to fund acquisitions. Let's now turn to the company's primary business segments--bananas, other fresh produce and non-produce.

Banana net sales for the first quarter war $253m--a $26m

increase over the first quarter of 2002 due to volume increases, improved price engine Europe and North America and favorable foreign exchange. Gross profit increased 13%, or $4m. Worldwide banana prices averaged $10.29 per box for the quarter, or 6% above the prior year. In our other pressure produce segment, net sales for the quarter rose 27%, to $361m, primarily due to the standard in U.K. acquisitions.

Gross profit decreased $5m due to higher seas transportation, and contained a broad cost along with slightly lower sales pricing per unit on pineapples and melons compared with the first quarter of last year.

Our fresh whole pineapple business continued to perform well with net sales for the first quarter increasing $2m, or 2% over the first quarter of 2002 as a result of a 6% increase in volume. Our Fresh Cut fruit and vegetable line continues to grow did your the quarter.

Fresh Cut net sales rose by $25m during the quarter compared with the prior year. Fresh Cut sales represents 7% of the company's total sales in the first quarter due primarily to the U.K. Fresh Cut acquisition, and an 18% increase in our existing North America Fresh Cut business. We continue to expand our market presence as customers seek the convenience of Fresh Cut fruit and vegetables. The U.S. Fresh Cut fruit retail category has now reached $200m based on the latest industry data.

In our grape and nontropical category for the quarter, volume increased 7% as consumer demand continues to rise in this category. Net sales decreased $2m, or 2% due to lower pricing. Melon volume increased by 9% in the first quarter of 2003 compared with the first quarter of 2002. Melon sales declined 2% primarily as a result of lower pricing and adverse weather conditions in certain production areas in Latin America. In our North America integrated distribution network which now includes the Standard acquisition, net sales increased $62m to $108m, compared with $45m for the same quarter last year.

In the first quarter, 30% of our sales in North America was sold through our distribution centers compared with 15% in the same period a year ago. With our recent expansion into Boston and Greensboro, North Carolina, we now have the total of 23 integrated distribution centers, in major U.S. cities, serving our customers.

I should add that during the quarter, the Standard acquisition contributed $57m in sales from repacking and wholesale activities, primarily from tomatoes, potatoes and onions. This has opened a door and new opportunity for Fresh Del Monte Produce. This is driven by high volume, high inventory turnover, approximately once every seven days and lower risk, which does result in lower gross margins than our traditional business while optimizing consistency and predictability in its performance. Consistent with the prior quarters, the non-produce category represents 5% of total sales with a gross profit increase of $1m. Selling general and administrative expenses increased $1.3m primarily as a result of the standard acquisition, our direct marketing activities in Europe and increased insurance costs.

Interest expense decreased by $2m

from the prior year as a result of $135m reduction in debt quarter-over-quarter. Other income for the quarter increased by $15m primarily due to the insurance proceeds from the 1998 hurricane Mitch (ph.) claim. Tax expense for 2003 was in line with the same quarter last year. I would like to reiterate before we start the question and answer session that our first quarter financial and operating performance was very solid compared to the outstanding first quarter last year.

We experienced good management in the markets with increased economic weakness and we kept a steady focus on controlling costs while integrating new business. Now I'd like to turn the call over to the operator for the question and answer session. Natalie.

Thank you. The question and answer session will be conducted electronically today. If you would like to ask a question, please signal by pressing the star key followed by the number one on your touch-tone phone. If you are using a Speaker phone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again please press star one to ask a question and we will pause just a minute to assemble our roster. We'll take our first question from Bill Leach with Banc of America.

Good morning, everyone.

Good morning, Bill.

Good morning, Bill.

Two questions. One, can you break out the sales gain a little more specifically between, you know, like organic volume acquisitions and currency pricing? You have a 20% gain overall. How does that break out?

The 20% gain is due to sales of bananas, sales of bananas were up 11% and we said we had -- $57m from Standard. That represented about 10% of our total sales.

And currency was about 5%?

Currency was $26m impact on sales.

The organic sales growth was about 5%?

Roughly.

Okay. And can you give us any guidance on the next quarter of the full year in terms of earnings outlook?

As I mentioned, Bill, a few minutes ago, we believe that we will continue with our strong performance during 2003.

So do you expect the year to be better than last year?

I believe so, yes.

Okay. Good luck. Thanks a lot.

Thank you.

We'll take our next question from Leonard Teitelbaum from Merrill Lynch.

Good morning.

Good morning.

Just a couple of things a follow along with what Bill said so we get the numbers right. John, the gross profit was flat with approximately a 20% increase in sales. Was that more of a mix or was there something in -- what was Bunker fuel in Expenses. And you carrying that in costs of goods sold, right?

Correct.

How much of the costs of goods sold go up because of fuel?

Well, our fuel and container for impact was about $8m.

$8m?

$8m.

Because I'm trying to -- I'm trying to pull out--to say that to get beyond the numbers because the flat gross profit with a 20% increase somehow doesn't -- I think Bill Leach was talking about the sales had it as well. So I'm just trying to figure out where the difference would be on a margin base. We lost 3% on cost of goods sold. Was that mixed change?

There is some mix in there. Of course we have added new businesses and as I mentioned in my discussion, the standard business does generate a tremendous amount of sales with very wrapped turnover and having some impact on margins. But overall, Lenny, we still achieved 16% overall margin and, you know, 19% last year is completely outstanding.

I think what we really need to focus on is that first quarter last year was a fantastic first quarter.

Right.

We have sale record prices in all the items, all the activities we had contrary to with we see this year first quarter, Lenny, and I think that by itself is a testimony of the achievements, the results that we have achieved.

Now, John, could we take a look at the SG&A expense in the first quarter?

Sure.

Is that a normal ratio to use?

Yeah, I think the -- I don't expect too much of it further increase overall quarter-over-quarter in our SG&A going forward. So I think we're going to, you know, certainly stay sort of on that trend, you know. It could be a little higher as we go a little bit forward as we expand more and more of our business with new, you know, with some new activities where we have in Europe as we expand our business there and also with expanding sales in North America.

But, you know, it should be in line maybe a little bit higher but not really going much further astray. We are still in a -- I think, as a percent of sales we're in very, very good shape compared to everyone else.

Two other questions if I might. You had interest income for the quarter and I assume that is a timing issue. What is your stand by rate on your new line?

It is about 3% roughly overall. Depending on what libor does.

All I'm trying to figure out is I assume you have plenty of interest expense for the year, not interest income. Is that correct?

Interest income we're not going to have a lot because we continue to pay down the debt. We didn't have very much in the quarter, a couple hundred thousand is all.

Could you give us a perfectionist on interest expense for the year?

About $8m roughly.

Is that pretty evenly over the last three quarters?

Yeah, coming down and assuming no further acquisitions and things like that, continuing business as usual.

Okay. In the last things attached rate is it correct to say that if we pull out the $11.4m extraordinary tax rate of under 7%, what should we use going forward?

I think we'll see the tax the absolute taxes stay within the same level as we had this year.

Around 7%?

I think in absolute terms we should say in that range, $6m or so.

I see. So you use $6m , don't use --

Yeah, I wouldn't use the rate right now based upon what we know today.

Mohammad, I'm going to try Bill's question one more time. Clearly you've got -- the mix is better near terms of the revenue line. Is there any reason you wanted to give you're a little reluctant to talk about revenue for the full year if not by quarter?

No, the revenue we believe we're going to be at around $2.5b for the total year.

Okay.

Provided of course there are no additional acquisitions during the year, additional acquisitions, I mean.

Okay, very thank you very much.

Pleasure.

Next we'll go to Terry Bivens with Bear Stearns.

Good morning, everyone.

Good morning, Terry. Just a couple of things. If we look at -- I,

too, was just a little bit surprised by the gross margin percentage. What was pricing just in terms of pineapple is, how much was that up or down on the Gold line?

Overall the pineapple pricing is about 4% decrease, not totally significant.

Are you seeing any more competitive activity there, Mohammad N terms of our friends at Dole?

Yeah, we do see competitive activity but as a matter of fact, the more competition we see in the market the stronger the market pineapples become in the market and that is a fact. I'm not just telling you this as a salesman, you know, pitch. This is a fact—I actually I have been in Europe recently just less than two weeks ago and I was listening visiting our offices including our Italy and Spain operations.

And I became convinced seeing it first hand that no matter what competition comes, I don't think the volume is going to change anything for Del Monte and we have seen this quarter-over-quarter. We are extremely confident at this stage and in the future that Del Monte pineapple will stay at the top. And we cannot even stay in pace with the demand.

The first quarter on so many occasions we have been short of supplies even though our revenues have been increasing, we have been short to pineapples in the different markets including North America and that gives you an idea of where we are going.

Okay. As you look at the golden pineapple business, what percentage now would you say of the pineapples you bring in to both U.S. and Europe, what percentage would you say is now going towards the Fresh Cut business?

I don't have the figure, but we can provide that to you later. I don't think it is that material as far as overall percentages are going through the Fresh Cut business.

I didn’t expect it would be. But just order of magnitude is it up to 5% now, 10%, something on that line?

We are about 5% to 7%.

Five to seven, okay, very good. If you look at the taxes now, in fact those were lower than I expected as well. John, you have kind of given your feeling it is the absolute number we should focus on through, I guess, the remaining three quarters; is that correct?

I think that is the fact that they have normalized themselves and that is what we're anticipating as we go forward.

So about $24, $25m by the end of the year?

Yes, somewhere in that neighborhood.

And I'm familiar with how you get there, but is that -- this comes up a lot with Sarah Lee. Is that a number that you think is sustainable, the worry there would be in, you know, years forward that it might somehow come unwound. In your mind is that a sustainable kind of effective rate?

Yes, I think so. We would have had -- we have more and more U.S. business so our taxes may climb as the U.S. business increases and that will be a function of how much more we put through our -- you know, in U.S. products that we put through. So, you know, in our U.S. business, the U.S. demand business will change and we will have to monitor as we see the growth from distribution, potatoes, tomatoes and onions business and certainly U.S. grown and that will change the tax complex. But we'll have to look at that and we'll provide you with information as we go forward and as that takes hold, you know, only three months here into this acquisition, you know, it's still too early.

Okay. Just a quick one on CAPEX. What was it in the quarter? What are you looking for the year?

Okay. Just look at the one sheet here. The CAPEX, quarter-over-quarter was $9.8 million and we I'm sorry, I'm giving the wrong one out. $13.6 million -- I'm on the wrong line.

Yep.

And we expect about $105m, so something in that neighborhood for the year.

Okay, very thanks very much.

Pleasure.

Next we'll go to Eric Larson with Piper Jaffrey.

Good morning, everyone, nice quarter.

Thank you, Eric.

I would like Mohammad to focus a little bit, you've now had the standard fruit acquisition for three months. Could you -- could you talk about what you've learn, the opportunity you have there? Does it accelerate your thinking strategic thinking of getting more acquisitions that you might run into?

It is very is that true. This acquisition for us was an extremely beneficial in reality and actually exceeded our expectations in terms of the potential and in terms of the future growth for that activity. We're growing this business very, very fast during the last coupled of months we have gained a lot of new customers.

For instance, we have one of the bigger suppliers to Wal-Mart in terms of the tomato category and strawberry as well. This business is growing rapidly in a -- on a weekly basis.

As I mentioned, you know, we have already actually laid out the same type of products into other DCs We have. We started the potato, tomato business in Los Angeles as well as Denver and San Francisco and Denver, we're starting in Oakland on the West Coast. These actually just started up because of the need to service our customers on a national level.

As I you said, this is going to induce us to go forward into that category and either organically which we are doing, or by acquisitions, as well as looking into different new items that can compliment the same type of operations we have in place with today.

Okay, thanks. You've already taken, what, $55m of your debt off of the standard fruit acquisition. You know, can this acquisition like your U.K. acquisition add earnings pretty quickly? Could it be accretive this year?

Yeah, I believe it will be accretive. I think when you see the 6 K there will be some nice information on it and we have to lay it out. We're required if you wait another couple of days you'll have a little bit more to go on.

That is great. John, just another number detail. What was depreciation in the quarter?

Actually, we did include it. Eric, it is in the press release.

I'm sorry.

I can certainly give it to you again.

I can look it up.

It's on that -- if you look at the bottom, depreciation is $14.9m. Depreciation and amortization.

I did not see that.

I put it on so everyone has it.

Thanks.

My pleasure.

Once again please press star one if you would like to ask a question. Our next question comes from Heather Jones with BB&T Capital Markets.

Thank you. I was just wondering on the currency impact, you said it was primarily the euro. Did you get any benefit from the yen during the quarter?

Yes. We had about $5m from the yen and $21m from the euro.

And have you -- when you said you hedged out for the remainder of the year, have you have you hedged with the yen and the euro or just the euro?

Yes, we have actually hedged the yen, the euro and the British pound as we go forward and since the sterling has become much more part of our business, we have now decided to hedge that.

Oh, okay. Now, the foreign exchange impact, I assume it's primarily in bananas. But could you separate the impact for non-produce versus -- I mean not non-produce but other produce versus bananas?

I don't really have knows numbers available.

Okay.

Now, the pineapple volume increase, I assume that was all Gold or are you all increasing your Shempocko (ph.) volumes at all?

It's primarily Gold.

And you mentioned ship freight or you mentioned fuel and all and being the reason why profits were down $5m in the other produce business, but you didn't mention it for bananas because I think you said banana profits were up. I mean --

We did mention it overall that cause of fuel plus it affects all the products we shipped by sea vessel so it does affect those also.

So this higher sea transportation costs that were cited in the release, is that the 8 million in paper and fuel that you cited earlier?

And of course we had to bring fruit from other locations, also, that impacted our freight expense.

What does that mean, fruit from other locations?

In other words, we bought some from other countries that we normally do. Year-to-year we had to have a little bit more.

Is this at operating costs?

That is the operating costs.

Okay. And you said that standard contributed $57m in sales. How much did the U.K. acquisition contribute?

I think it was -- I think we gave the number in there of $25m or something like that.

25, okay. And the profitability matrix, that will be in the 6 K?

Yes, the profitability matrix will be in there as far as the two categories we will get segment information.

Okay, thank you.

All righty.

Next we'll take a follow-up question from Leonard Teitelbaum.

Yes, thank you and actually Heather had asked a question on the hedging that I was going to ask. But there is a second one that I'm trying to work some numbers here, John, and thank goodness Diane can do them a lot better than I.

If I'm looking at this why wouldn't I come out say in absolute terms, unless the Fresh Cut operation margins get up over pineapples, we shouldn't have a quarter -- per quarter, sorry, the second quarter to look an awful lot like this one in terms of, taking out the $11m of course and saying that we shouldn't be looking at a quarter somewhere around $1.35 for this quarter coming up?

Well, that is your guess. I mean

You see the industry trends. Like Mohammad said, it doesn't sound -- we're building supply, we're building presence, it's costing us money to do it but it's money well-spent. I don't see where the numbers -- this is what I would like some guidance on -- where the numbers are going to be that different from an environmental point of have you into Q1?

The markets -- you know, the markets change. We have now a situation in the Far East where, you know, we have this epidemic which is really creating a lot of disturbance in terms of distribution and marking and it's going to affect us only but it can affect everybody else. We don't have yet any negative impact from that situation, but we have to take into consideration that could happen in the next couple of months. You know, something can happen that might affect our business. But I'm sure that -- we have contingencies plans for that. We believe that, you know, all in all our business is performing. Not necessarily bananas on -- on the one side or melons on the other side, but when we look at our operations in total, our operation is running as planned. And we believe that we will deliver the results. Now, whether it will be like the first quarter or -- whether we like the first quarter or not, that is something we have to see as we go forward. We don't want to be -- it will be misleading maybe.

Oh, go for it.

Thank you.

Thank you.

Next we'll go to Bill leash Bill Leach with Banc of America.

Yes, John, I was walked to know if you have a bank flow for your cash this year?

Well, free cash flow will probably be a little less than -- than it was last year. I think maybe we should see some contraction as we have more of a ramp-up in some of our working capital items as we, you know, change our business model a bit.

So can you give me a dollar amount?

Yeah, something like $235m to $240m, somewhere in that range maybe. It will be off a little but we did have extraordinary operating cash flows last year.

And that is before dividend payments?

Yes.

And so if everything goes reasonably well, where do you think your debt will end up on your end if you don't make any more acquisitions?

There won't be very much left. Probably including the capital leases about $75m, maybe $80 million.

So about where you were last year?

No, no. We -- last year -- yeah, if we were at 87? About the same.

I guess this raises a logical --

We have a $100m acquisition in there, Bill.

The other thing is your stocks is selling at five times earnings. If you have the potential to be relatively under leveraged. Have you considered a share buy back program to help out the stock here? It seems so incredibly undervalued?

This is something for the board to decide. We cannot decide for them.

Do you have an opinion? You're an important member of the board last time I looked.

I think the share price will reflect its value as it goes forward. I think at the end of the day the truth will be there and the right things will prevail. This is my comment at this stage.

What about the dividend you recently doubled the dividend but still relatively okay you think you might raise the Pat ratio?

That might go.

We need to track the earnings and see how we go forward.

Definitely we will be looking at several options, Bill, but at this stage I cannot tell you which one we will take. But definitely we will enhance the value and the benefit for our shareholders and that is something that is primary to our in our own minds.

Your biggest competitor Dole just went private. Is that an option for the company?

Everything is an option here.

Okay.

Who knows.

Thanks a lot.

Next we'll take a follow-up question from Heather Jones.

Thank you. I meant to ask you, you said Asian pricing was down for the quarter. I was just wondering in local currency what that did.

I'm sorry, I don't have the local currency

pricing here, Heather.

But in pricing was last year first quarter was in the region of 1500, 1600 yen. This year we have seen prices in the 1100, 1200 yen.

Okay.

And I'm talking roughly throughout the quarter.

And has that improved going into the second quarter? I can't remember. I knew the first half was difficult comparisons but I can't remember did they become more difficult in the second quarter or did they ease?

As a matter of fact, what we see right now going into the second quarter, improvement in the first quarter.

Okay. And going back to Bill's question on the going private, I mean, that is definitely a question people have asked. I was wondering what the $400m revolver you've, I mean, there is any -- could you use those proceeds or is there limits on share buy back activity with that revolver?

There is a limit but it's not that -- that significant. There is some kind of restriction. The document has been filed but it's not significant.

Okay. Thank you.

Next we'll take a follow-up question from Terry Bivens.

Just wanted to check in quickly on the legal situation. Do we have any upcoming hearing dates that we should be aware of within the next couple of months?

I can't -- you know, this is in the hands of our attorneys and it's progressing and, you know, we are taking it very active I've role in that respect, but really I cannot comment on litigation because, you know, on a confidence call.

Thank you.

Okay.

And this concludes the time allotted for the question and answer session. I'll now turn the conference back over to Mr. Abu-Ghazaleh for closing comments.

Well, I would like to thank everybody for participating in this call and I can assure everybody that all our pro formas and our diligent work will continue as we go forward regardless of whatever distractions we have as we move forward. I would like to thank you again and hope to talk to you soon. Thank you.

That concludes today's conference call. Thank you all for your participation today.