Village Farms International Announces First Quarter 2015 Results

TRADING SYMBOL: The Toronto Stock Exchange:
Village Farms International, Inc. – VFF

VANCOUVER, May 14, 2015 /CNW/ - Village Farms International, Inc. (the "Company") (TSX: VFF) announced today results for the quarter ended March 31, 2015.

Michael DeGiglio, Chief Executive Officer, stated "While the first quarter of 2015 continued the quarter on quarter trend of improved market conditions over previous corresponding year's quarterly period, we also experienced historically low light levels throughout the entire first quarter and into the second quarter at our Texas locations.  The lower light levels were the lowest since the inception of our west Texas operations in 1996.  Over the first 16 weeks of the year our average light levels were 21% lower than the historical average with some weeks 45% lower. If not for the lower light levels our 2015 first quarter results would have exceeded our expectations." 

"The low light levels continued until the end of April and will negatively impact our second quarter results. The produce normally harvested in the first quarter was delayed and is now being harvested, in the second quarter, when ample supply exists in the marketplace.  This can be seen on our income statement with a substantially lower change in bio asset, as April 2015 pricing was lower than April 2014 pricing. As such, our second quarter performance is off to a very slow start."  

"We are pleased that a US retailer has recently taken one of our new exclusive varieties national under the retailer's private label.  Other retailers are in the process of launching this same variety as well as additional exclusive products in the coming months.  We were also pleased with our first supplemental lighting investment at our Permian Basin facility, which provided substantially more cucumbers throughout the winter, versus the prior year, and allowed us to avoid the negative production impact caused by lower light levels that we experienced on our tomato crop." 

Mr. DeGiglio continued "We remain focused on strategic developments and operational enhancements to positively impact our 2015 performance over 2014 and to put us in a position to increase our market share with national retailers in both the U.S. and Canada."

First Quarter 2015 Operating Results Summary:
(Note amounts in U.S. Dollars) 

• Net sales increased 16% to $27.7 million for the first quarter of 2015 compared to $24.0 million for the first quarter of 2014;
• EBITDA increased 96% or $1.0 million to $2.0 million in the first quarter of 2015 compared to $1.0 million in the first quarter of 2014.
• (Loss) per share of ($0.02) for the first quarter of 2015 versus ($0.01) for the first quarter of 2014;
• Net (loss) increased ($0.6) million to ($0.9) million in the first quarter of 2015 compared to ($0.3) million in the first quarter of 2014.

Operational Summary for the Quarter:
(In thousands of U.S. Dollars)

Net Sales 

Net sales for the three month period ended March 31, 2015 increased by $3,743, or 16% to $27,747 from $24,004 for the three month period ended March 31, 2014.  The increase in net sales is primarily due to an increased average selling price for tomatoes of 15%, an increase in pepper selling price of 7% and a 44% increase in cucumber pieces sold, over the same period in 2014.  The increase in cucumber pieces is due to an increase in production from the Permian Basin facility due to the addition of supplemental lighting in November 2014.  

The tomato price increase for the three months ended March 31, 2015 was as a result of an increase in the tomato-on-the-vine price of 18% and an increased mix of specialty tomatoes grown by the Company.  For the three months ended March 31, 2015, total tomato pounds sold increased 3% from the comparable period in 2014.  Tomatoes grown by the Company increased 11% and supply partner tomato volume decreased (4%).  The increase in Company grown tomatoes, over the prior year first quarter is due to the completion of a 20-acre rebuilt greenhouse block in June 2014.  The increase in Company tomatoes pounds would have been higher if not for lower sun light levels in 2015 versus historical normal levels.      

Cost of Sales

Cost of sales for the three months ended March 31, 2015 increased by $3,214, or 15% to $24,931 from $21,717 for the three months ended March 31, 2014.  The increase is mostly due to the increase of pounds produced from the Company's facilities.  The increase of pounds from the Company's facilities is due to the rebuilt 20 acres in Marfa, TX, as well as the increased production at the Permian Basin mostly from the increase in cucumbers due to addition of supplemental lighting.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three month period ended March 31, 2015 decreased $183, to $2,944 from $3,127 for the three month period ended March 31, 2014.  The decrease is due to various cost reductions in most departments.

Change in Biological Asset

The net change in fair value of biological asset for the three months ended March 31, 2015 decreased by ($1,929) to ($816) from $1,113 for the three months ended March 31, 2014.  The decrease is due to lower selling prices in April 2015 versus April 2014, as well as an increase in cost per pound related to the additional exclusive tomatoes.  The exclusive tomatoes have a higher cost per pound than the big round tomatoes like beef and tomatoes-on-vine.  The fair value of the biological asset at March 31, 2015 is $6,964 and was $7,481 at March 31, 2014. 

Income (Loss) from Operations

Income from operations for the three months ended March 31, 2015 decreased by ($1,217) to a loss of ($944) from $273 for the three months ended March 31, 2014.  The decrease was primarily the result of the decrease in change in biological asset of ($1,929).  

Interest Expense, net

Interest expense, net, for the three month period ended March 31, 2015 decreased by ($127), to $561 from $688 for the three month period ended March 31, 2014.  The decrease is due to a decrease in the Company's borrowing rate and a lower principal balance.

Income Taxes

Income tax expense/(recovery) for the three month period ended March 31, 2015 was a recovery of ($675) compared a recovery of ($138) for the three month period ended March 31, 2014.  The income tax recovery in 2015 as compared to the (recovery) in the same period in 2014 is related to the lower biological asset value. 

Net (Loss) 

Net (loss) for the three months ended March 31, 2015 increased by ($604) to a loss of ($928) from a net loss of ($324) for the three months ended March 31, 2014.  The increased loss was the result of a decrease in income from operations of ($1,217), offset by a decrease in interest expense of $127 and an increase in the income tax recovery of $537.

EBITDA

EBITDA for the three month period ended March 31, 2015 increased by 96% or by $989, to $2,020 from $1,031 for the three month period ended March 31, 2014, primarily as a result of an increase in the selling price of tomatoes in 2015 as compared to the same period in 2014.  See the EBITDA calculation in "Calculation of EBITDA."

Calculation of EBITDA

References to "EBITDA" are to earnings before interest, taxes, depreciation, amortization, foreign currency exchange gains and losses on translation of long-term debt, unrealized gains on the changes in the value of derivative instruments, unrealized change in biological asset, stock compensation, and gains and losses on asset sales.  EBITDA is a cash flow measure that is not recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes that EBITDA is an important measure in evaluating the historical performance of the Company.    

The following table is the calculation of net income to EBITDA:

(in thousands of U.S. dollars)		For the three months  ended March 31,
		2015		2014
Net loss		($928)		($324)
Add:
	Amortization	2,078		1,826
	Foreign currency exchange loss	108		38
	Interest expense	561		688
	Income taxes	(675)		(138)
	Stock compensation	60		54
	Change in biological asset	816		(1,113)
	EBITDA	$2,020		$1,031

About Village Farms

Village Farms is one of the largest producers, marketers and distributors of premium-quality, greenhouse-grown tomatoes, bell peppers and cucumbers in North America.  This premium product as well as premium product produced under exclusive arrangements with other greenhouse producers is grown in sophisticated, highly efficient and intensive agricultural greenhouse facilities located in British Columbia and Texas.  Product is marketed and distributed under the Village Farms^® brand primarily to retail grocers and dedicated fresh food distributors throughout the United States and Canada.  Since its inception, Village Farms has been guided by friendly growing methods, growing produce vegetables 365 days a year from its facilities that are healthier for people and the planet.  Village Farms is Good for the Earth^®.

Forward Looking Statements

This press release contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities, industry performance and trends and capital availability. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict" , "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form and management's discussion and analysis for the year ended December 30, 2014, which is available electronically at www.sedar.com.  Actual results may differ materially from any forward looking statement.  Although the Company believes that the forward looking statements contained in this press release are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this press release, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.

		Village Farms International, Inc.
		Condensed Consolidated Interim Statements of Financial Position
		(In thousands of United States dollars)
					March 31, 2015			December 31, 2014
					(Unaudited)			(Audited)
ASSETS
	Current assets
		Cash and cash equivalents		$	4,425		$	6,337
		Trade receivables			8,431			9,168
		Other receivables			723			939
		Inventories			13,472			14,424
		Prepaid expenses and deposits			573			229
		Biological asset			6,964			4,698
	Total current assets				34,588			35,795
	Non-current assets
		Property, plant and equipment			99,543			101,430
		Other assets			1,477			1,664
	Total assets			$	135,608		$	138,889
LIABILITIES
	Current liabilities
		Trade payables		$	8,113		$	11,795
		Accrued liabilities			3,626			3,651
		Income taxes payable			-			426
		Operating loan			3,500			-
		Current maturities of long-term debt			4,399			4,418
		Current maturities of capital lease obligations			27			26
	Total current liabilities				19,665			20,316
	Non-current liabilities
		Long-term debt			47,746			48,947
		Long-term maturities of capital lease obligations			28			35
		Deferred tax liability			7,390			7,774
		Deferred compensation			847			817
	Total liabilities				75,676			77,889
SHAREHOLDERS' EQUITY
		Share capital			24,850			24,850
		Contributed surplus			1,081			1,021
		Accumulated other comprehensive loss			(410)			(210)
		Retained earnings			34,411			35,339
	Total shareholders' equity				59,932			61,000
	Total liabilities and shareholders' equity			$	135,608		$	138,889

Village Farms International, Inc.
Condensed Consolidated Interim Statements of Income and Comprehensive Income
For the Three Months Ended March 31, 2015 and 2014
(In thousands of United States dollars, except per share data, unaudited)
	2015			2014
Net sales	$	27,747		$	24,004
Cost of sales		(24,931)			(21,717)
Change in biological asset		(816)			1,113
Selling, general and administrative expenses		(2,944)			(3,127)
(Loss) Income from operations		(944)			273
Interest expense, net		561			688
Foreign exchange loss		108			38
Amortization of intangible assets		-			26
Other income		(10)			(17)
Loss before income taxes		(1,603)			(462)
Recovery of income taxes		(675)			(138)
Net loss	$	(928)		$	(324)
Basic loss per share	$	(0.02)		$	(0.01)
Diluted loss per share	$	(0.02)		$	(0.01)
Other comprehensive loss:
Foreign currency translation adjustment		(200)			-
Comprehensive loss	$	(1,128)		$	(324)

Village Farms International, Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the Three Months Ended March 31, 2015 and 2014
(In thousands of United States dollars, unaudited)
					2015			2014
Cash flows from operating activities:
	Net loss			$	(928)		$	(324)
	Adjustments to reconcile net loss to net cash
	used in operating activities:
		Depreciation and amortization			2,078			1,826
		Foreign exchange loss			108			38
		Interest paid			563			698
		Share-based compensation			60			54
		Deferred income taxes			(384)			(161)
		Change in biological asset			816			(1,113)
		Changes in non-cash working capital items			(5,654)			(7,904)
			Net cash used in operating activities		(3,341)			(6,886)
Cash flows from investing activities:
	Purchases of property, plant and equipment				(528)			(4,704)
	Other non-current assets and liabilities, net				233			56
			Net cash used in investing activities		(295)			(4,648)
Cash flows from financing activities:
	Proceeds from borrowings				3,500			1,000
	Repayments on borrowings				(1,099)			(1,042)
	Interest paid on long-term debt, net				(563)			(698)
	Payments on capital lease obligations				(6)			(6)
			Net cash provided by (used in) financing activities		1,832			(746)
Effect of exchange rate changes on cash and cash equivalents					(108)			(38)
Net decrease in cash and cash equivalents					(1,912)			(12,318)
Cash and cash equivalents, beginning of period					6,337			18,668
Cash and cash equivalents, end of period				$	4,425		$	6,350
Supplemental cash flow information:
	Income taxes paid			$	303		$	1,009

SOURCE Village Farms International, Inc.

Stephen C. Ruffini, Executive Vice President and Chief Financial Officer, Village Farms International, Inc., [phone] ext 340.