Corn Products International, Inc. (NYSE: CPO), a leading global
provider of agriculturally derived ingredients for diversified
markets, today reported 2010 second-quarter net income of $37
million, or $0.48 per diluted share (“EPS”) compared to a net loss
of $85 million, or $1.13 EPS in the same period last year. The
second-quarter 2010 results include an $18 million charge, or $0.23
EPS, from the impairment of the Company’s plant in Llay-Llay,
Chile, and an after-tax charge of $3 million, or $0.04 EPS, related
to the pending National Starch acquisition. The second-quarter 2009
results include after-tax impairment and restructuring charges of
$110 million, with a negative EPS impact of $1.47.
Excluding National Starch acquisition costs and impairment and
restructuring charges, second-quarter 2010 adjusted EPS was $0.75,
a 121 percent improvement over the second-quarter 2009 adjusted EPS
of $0.34. Diluted weighted average shares outstanding in the second
quarter of 2010 were 76.6 million, up from 74.8 million in the same
quarter last year.
“I am pleased to report that we had another very good quarter,”
said Ilene Gordon, Chairman, President and Chief Executive Officer.
“We saw strong volume recovery across all our regions. In North
America, we continued to see strong demand from the beverage
industry in Mexico. In South America, volume growth was led by our
customers in the brewing, confectionary, processed foods, and
packaging industries. Volume improvement in Asia/Africa was led by
customer demand for sweeteners and starches in South Korea and the
confectionary and textile industries in Pakistan.”
Net sales of $1 billion in the second quarter of 2010 increased
10 percent versus $912 million in the prior-year period. The
primary contributors to growth in net sales were a positive $143
million from higher volumes and a positive $44 million from
stronger foreign currencies, partially offset by a negative $96
million from lower price/mix. The price/mix decline was largely
attributable to North America and reflected the normal correlation
between lower corn costs and the corresponding decline in selling
prices.
Second-quarter 2010 gross profit of $164 million improved 47
percent versus $112 million a year ago. The gross margin of 16.3
percent compared favorably to 12.2 percent last year. The
improvement in gross profit was attributable to cost improvement
due to higher utilization rates, lower unit corn costs, cost
reduction programs, and stronger foreign currencies.
Operating expenses in the second quarter were $73 million,
including $4 million of cost related to the pending acquisition of
National Starch. Excluding the National Starch acquisition costs,
operating expenses were $69 million, or 6.9 percent of net sales,
versus $61 million, or 6.7 percent of net sales, last year. The
increase in operating expenses reflects a return to more historical
run rates, the impact of stronger currencies, and higher costs.
Operating income for the second quarter of 2010 was $77 million,
versus an operating loss of $73 million last year. Second quarter
2010 results include an asset impairment charge for the Company’s
plant in Chile. The Llay-Llay plant suffered damage during a major
earthquake that occurred in Chile on February 27, 2010. After
receiving a completed engineering report in the second quarter, the
Company recorded an impairment charge of $18 million. Excluding
this impairment charge and $4 million of costs related to the
pending National Starch acquisition, second quarter 2010 adjusted
operating income was $99 million, a 90 percent improvement compared
to $52 million last year, excluding $125 million in impairment and
restructuring charges.
Net financing costs in the second quarter of 2010 were $7
million versus $11 million last year, down $4 million on a
combination of lower debt, higher cash balances and a positive $2.5
million swing in foreign exchange. The second-quarter 2010 tax rate
was 44.3 percent versus 1.1 percent last year, reflecting the
impact of the impairment charge in 2010, the 2009 impairment and
restructuring charges and National Starch acquisition-related costs
along with changes in earnings mix and discrete items.
Regional Business Segment Performance
Regional results for the quarter ended June 30, 2010 were as
follows:
North America
Net sales of $583 million were flat against last year as higher
volumes of $83 million and a $12 million positive impact from a
stronger Canadian dollar were offset by lower price/mix of $97
million. The decline in price/mix reflected the normal correlation
between finished product pricing and a 23 percent decline in corn
costs versus last year. Operating income of $60 million increased
78 percent from $33 million last year, primarily due to volume
growth, improved plant utilization rates, and cost reduction
programs. The operating income margin increased to 10.2 percent
from 5.7 percent last year.
South America
Net sales of $287 million increased 26 percent compared with
$228 million a year ago, primarily due to improved volumes of $36
million and the impact of favorable foreign currency translation of
$27 million, partially offset by unfavorable price/mix of $4
million due to lower co-product prices. Gross corn cost per ton on
a dollar basis increased 2 percent versus last year. Operating
income increased 48 percent to $39 million, compared with $26
million in the prior year. The operating income margin was 13.6
percent, up from 11.6 percent in the same period last year.
Asia/Africa
Net sales of $134 million increased 35 percent versus $99
million last year, primarily due to the higher volumes of $25
million, and improved price/mix and favorable foreign currency
translation of $5 million each. Gross corn cost per ton declined 5
percent versus last year. Operating income of $13 million was up
from $6 million last year, reflecting the improved business
performance in South Korea and Pakistan. The operating income
margin was 9.6 percent, up from 5.7 percent in the second quarter
of 2009.
Balance Sheet and Cash Flow
At June 30, 2010, total debt and cash and cash equivalents were
$599 million and $326 million respectively, versus $544 million and
$175 million respectively at year-end 2009.
Cash provided from operations in the first half of 2010 was $185
million. Capital expenditures, net of proceeds on disposals, were
$56 million. Cash provided by financing activities was $24 million.
The change in cash and cash equivalents for the six months ended
June 30, 2010 was $151 million.
2010 Outlook
“On a comparable basis to the Company’s prior 2010 earnings per
share outlook, which was $2.25 to $2.60, we are revising the range
to incorporate the strong first half performance. The revised
comparable range is $2.55 to $2.75, which would put the second half
of 2010 in a range of $1.17 to $1.37. This range excludes the
impact associated with the impending National Starch transaction
and the impairment of the company’s Chilean plant and assumes a
more normalized tax rate.
National Starch Transaction
“I am pleased to report that we are making good progress with
respect to the National Starch acquisition,” said Ilene Gordon.
“Our integration work is underway and we are progressing with our
regulatory filings. We expect the transaction to close near the end
of September or early October of 2010.”
Conference Call and Webcast
Corn Products International will conduct a conference call today
at 8:30 a.m. Eastern Time (7:30 a.m. Central Time) to be hosted by
Ilene Gordon, Chairman, President and Chief Executive Officer, and
Cheryl Beebe, Chief Financial Officer.
The call will be broadcast in a real-time webcast. The broadcast
will consist of the call and a visual presentation accessible
through the Corn Products International web site at
www.cornproducts.com. The “listen-and-view-only” presentation will
be available to download approximately 60 minutes prior to the
start of the call. A replay of the webcast will be available at
www.cornproducts.com. Individuals without Internet access may
listen to the live conference call by dialing 719-325-2199. A
replay of the audio call will be available through Tuesday, August
10, by calling 719-457-0820 and using passcode 2346756.
About the Company
Corn Products International, headquartered in Westchester, IL,
is a leading global provider of agriculturally derived ingredients
for diversified markets with operations in 13 countries at 28
plants, including wholly owned businesses, affiliates, and joint
ventures. In 2009, Corn Products International reported net sales
of $3.67 billion. For more information, visit
www.cornproducts.com.
Forward-Looking Statements
This news release contains or may
contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. The Company
intends these forward-looking statements to be covered by the safe
harbor provisions for such statements. These statements include,
among other things, any predictions regarding the Company’s
prospects or future financial condition, earnings, revenues,
expenses or other financial items, any statements concerning the
Company’s prospects or future operations, including management’s
plans or strategies and objectives therefor and any assumptions,
expectations or beliefs underlying the foregoing. These statements
can sometimes be identified by the use of forward looking words
such as “may,” “will,” “should,” “anticipate,” “believe,” “plan,”
“project,” “estimate,” “expect,” “intend,” “continue,” “pro forma,”
“forecast” or other similar expressions or the negative thereof.
All statements other than statements of historical facts in this
release or referred to in this release are “forward-looking
statements.” These statements are based on current expectations,
but are subject to certain inherent risks and uncertainties, many
of which are difficult to predict and are beyond our control.
Although we believe our expectations reflected in these
forward-looking statements are based on reasonable assumptions,
stockholders are cautioned that no assurance can be given that our
expectations will prove correct. Actual results and developments
may differ materially from the expectations expressed in or implied
by these statements, based on various factors, including the
effects of the global economic recession and its impact on our
sales volumes and pricing of our products, our ability to collect
our receivables from customers and our ability to raise funds at
reasonable rates; fluctuations in worldwide markets for corn and
other commodities, and the associated risks of hedging against such
fluctuations; fluctuations in the markets and prices for our
co-products, particularly corn oil; fluctuations in aggregate
industry supply and market demand; the behavior of financial
markets, including foreign currency fluctuations and fluctuations
in interest and exchange rates; continued volatility and turmoil in
the capital markets; the commercial and consumer credit
environment; general political, economic, business, market and
weather conditions in the various geographic regions and countries
in which we manufacture and/or sell our products; future financial
performance of major industries which we serve, including, without
limitation, the food and beverage, pharmaceuticals, paper,
corrugated, textile and brewing industries; energy costs and
availability, freight and shipping costs, and changes in regulatory
controls regarding quotas, tariffs, duties, taxes and income tax
rates; operating difficulties; boiler reliability; our ability to
effectively integrate acquired businesses; labor disputes; genetic
and biotechnology issues; changing consumption preferences and
trends; increased competitive and/or customer pressure in the
corn-refining industry; and the outbreak or continuation of serious
communicable disease or hostilities including acts of terrorism.
Our forward-looking statements speak only as of the date on which
they are made and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after
the date of the statement as a result of new information or future
events or developments. If we do update or correct one or more of
these statements, investors and others should not conclude that we
will make additional updates or corrections. For a further
description of these and other risks, see “Risk Factors” included
in our Annual Report on Form 10-K for the year ended December 31,
2009 and subsequent reports on Forms 10-Q or 8-K.
Corn Products International,
Inc. ("CPI")
Condensed Consolidated Statements of Income (Losses)
(Unaudited)
(In millions, except per share amounts)
Three Months EndedJune
30,
Change %
Six Months EndedJune
30,
Change % 2010 2009 2010 2009 Net sales
before shipping and handling costs $ 1,065.6 $ 965.6 10 % $ 2,060.6
$ 1,846.4 12 % Less: shipping and handling costs 62.6
54.0 16 % 120.3 103.7 16 % Net sales $
1,003.0 $ 911.6 10 % $ 1,940.3 $ 1,742.7 11 % Cost of sales 839.2
800.1 5 % 1,633.6 1,538.3
6 % Gross profit $ 163.8 $ 111.5 47 % $ 306.7 $ 204.4 50 %
Operating expenses 73.2 61.0 20 % 143.0 115.7 24 % Other (income),
net (4.0 ) (1.3 ) (5.4 ) (2.2 ) Impairment / restructuring charges
18.1 125.0 20.8 125.0
Operating income (loss) $ 76.5 $ (73.2 ) 205 % $ 148.3 $ (34.1 )
535 % Financing costs, net 6.8 10.8 (37 %)
11.5 22.2 (48 %) Income (loss) before income
taxes $ 69.7 $ (84.0 ) 183 % $ 136.8 $ (56.3 ) 343 % Provision
(benefit) for income taxes 30.9 (0.9 ) 53.0
8.5 Net income (loss) $ 38.8 $ (83.1 ) 147 % $ 83.8 $
(64.8 ) 229 % Less: Net income attributable to non-controlling
interests 2.0 1.7 18 % 3.5 3.3
6 % Net income (loss) attributable to CPI $ 36.8
$ (84.8 ) 143 % $ 80.3 $ (68.1 ) 218 %
Earnings (Loss) per Common Share
Attributable to CPI Common Shareholders:
Weighted average common shares outstanding: Basic 75.5 74.8
75.4 74.8 Diluted 76.6 74.8 76.5 74.8 Earnings (loss) per
common share of CPI: Basic $0.49 ($1.13 ) 143 % $1.06 ($0.91 ) 216
% Diluted $0.48 ($1.13 ) 142 % $1.05 ($0.91 ) 215 %
Corn Products International, Inc. ("CPI") Condensed
Consolidated Balance Sheets
(In millions, except share and per share
amounts) June 30, 2010 December 31, 2009
(Unaudited)
Assets Current assets Cash and cash
equivalents $326 $175 Accounts receivable – net 472 440 Inventories
399 394 Prepaid expenses 32 13 Deferred income tax assets 25
23 Total current assets 1,254
1,045 Property, plant and equipment – net 1,515 1,564
Goodwill and other intangible assets 243 245 Deferred income tax
assets 2 3 Investments 11 10 Other assets 81
85
Total assets $3,106 $2,952
Liabilities and equity Current liabilities Short-term
borrowings and current portion of long-term debt $100 $136 Deferred
income taxes - 9 Accounts payable and accrued liabilities
476 420 Total current liabilities 576
565 Non-current liabilities 148 142 Long-term
debt 499 408 Deferred income taxes 111 111 Redeemable common stock
(500,000 shares issued and outstanding at December 31, 2009) stated
at redemption value - 14 Share-based payments subject to redemption
6 8 Equity CPI stockholders' equity: Preferred stock
– authorized 25,000,000 shares- $0.01 par value, none issued - -
Common stock – authorized 200,000,000 shares- $0.01 par value –
75,419,870 and 74,819,774 shares issued at June 30, 2010 and
December 31, 2009, respectively 1 1 Additional paid-in capital
1,101 1,082 Less: Treasury stock (common stock; 168,455 and 433,596
shares at June 30, 2010 and December 31, 2009, respectively) at
cost (6 ) (13 ) Accumulated other comprehensive loss (332 ) (308 )
Retained earnings 979 919 Total CPI
stockholders' equity 1,743 1,681 Non-controlling interests 23
23 Total equity 1,766 1,704
Total liabilities and
equity $3,106 $2,952
Corn
Products International, Inc. ("CPI") Condensed Consolidated
Statements of Cash Flows (Unaudited)
For the Six Months
EndedJune 30,
( In millions ) 2010 2009 Cash
provided by operating activities: Net income (loss) $ 84 $ (65
) Adjustments to reconcile net income (loss) to net cash provided
by operating activities: Write-off of impaired assets 19 124
Depreciation and amortization 70 62 (Increase) decrease in margin
accounts (43 ) 127 Decrease (increase) in other trade working
capital 54 (31 ) Other 1 (6 )
Cash provided by operating activities 185 211
Cash used for investing activities: Capital
expenditures, net of proceeds on disposals (56 ) (66 ) Other
- (1 ) Cash used for investing
activities (56 ) (67 )
Cash provided by
(used for) financing activities: Proceeds from (payments on)
debt, net 59 (50 )
Bridge financing costs
(16 ) - Issuance (repurchase) of common stock, net 2 (2 ) Dividends
paid (including to non-controlling interests) (23 ) (23 )
Excess tax benefit on share-based compensation 2
- Cash provided by (used for) financing
activities 24 (75 ) Effect of
foreign exchange rate changes on cash (2 ) (1 )
Increase in cash and cash equivalents 151 68 Cash and cash
equivalents, beginning of period 175 107
Cash and cash equivalents, end of period $ 326
$ 175
Corn Products
International, Inc. ("CPI") Supplemental Financial
Information (Unaudited)
I. Geographic Information of Net
Sales and Operating Income (Dollars in millions)
Three Months EndedJune
30,
Change
Six Months EndedJune
30,
Change 2010 2009 % 2010
2009 % Net Sales North America $ 582.7 $ 584.4 0 %
$1,123.4 $1,115.7 1 % South America 286.6 228.2 26 % 564.3 442.7 27
% Asia/Africa 133.7 99.0 35 % 252.6 184.3
37 % Total $1,003.0 $ 911.6 10 % $1,940.3
$1,742.7 11 % Operating Income (Loss) North
America $ 59.6 $ 33.4 78 % $ 98.0 $ 53.8 82 % South America 39.1
26.4 48 % 77.7 54.1 44 % Asia/Africa 12.9 5.6 130 % 26.0 7.4 251 %
Corporate (13.1 ) (13.6 ) (4 %) (25.7 ) (24.4 ) 5 % Sub-total 98.5
51.8 90 % 176.0 90.9 94 % Impairment / restructuring charges (18.1
) (125.0 ) (20.8 ) (125.0 ) Acquisition costs (3.9 ) -
(6.9 ) - Total $ 76.5 $ (73.2 ) 205 % $
148.3 $ (34.1 ) 535 %
II. Capital
expenditures
Capital expenditures, net of
proceeds on disposals, for the quarters ended June 30, 2010 and
2009, were $35 million and $30 million, respectively. Capital
expenditures for the full year 2010 are anticipated to be in the
range of $150 million to $175 million.
III. Non-GAAP
Information
The presentation below contains
information that is not prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") and is provided
for analytical purposes only. Management believes that
this non-GAAP information (1) provides a more meaningful
presentation of the Company's results, on a basis consistent with
the way in which management evaluates operating performance and (2)
provides investors with additional information to assess and
facilitate a more clear understanding of our financial results. The
information presented should not be used as a substitute for our
financial results under GAAP.
Corn Products International, Inc. ("CPI")
Reconciliation to Non-GAAP Earnings Per Share ("EPS")
(Unaudited)
Three Months Ended Three Months Ended Six Months
Ended Six Months Ended June 30, 2010 June 30, 2009 June 30, 2010
June 30, 2009 (in millions) EPS (in millions) EPS (in
millions) EPS (in millions) EPS Net income
(loss) attributable to CPI $36.8 $0.48 ($84.8 ) ($1.13 ) $80.3
$1.05 ($68.1 ) ($0.91 ) Add back:
Impairment/restructuring charges,
net of income tax benefit of $0.4 million and $14.7 million in 2010
and 2009, respectively
17.7 0.23 110.3 1.47 20.4 0.27 110.3 1.47
Acquisition costs, net of income
tax benefit of $0.8 million and $2.0 million, respectively
3.1 0.04 - - 4.9 0.06 - -
Non-GAAP net income $57.6
$0.75 $25.5 $0.34 $105.6
$1.38 $42.2 $0.56
Corn Products International, Inc. ("CPI")
Reconciliation to Non-GAAP Operating Income
(Unaudited) Three Months Ended Six Months
Ended June 30, June 30,
(in
millions)
2010 2009 2010 2009 Operating income (loss)
$76.5 ($73.2 ) $148.3 ($34.1 ) Add back:
Impairment/restructuring charges 18.1 125.0 20.8 125.0
Acquisition costs 3.9 - 6.9 -
Non-GAAP operating income $98.5 $51.8 $176.0
$90.9
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