Village Farms International, Inc

(VFF)
By Alexandra Bdard
Louis-Emile Beaudoin
Ahmed Al-Own

Summary

Description
IPO
Rights Offering
Corporate Structure
Dividend Policy
Important Events
Ratio Analysis
Financial Planning

Description
One of the largest North American producers of hydroponically
grown beefsteak and cherry tomatoes and tomatoes on-the-vine.
Operates four greenhouses covering nearly 230 acres.
Purchases and sells tomatoes, sweet peppers, and English seedless
cucumbers grown by other greenhouses.
Selling under the Village Farms and Home Choice brand names.
Located in Marfa and Fort Davis, Texas, and Delta, British Columbia.

Product available year-round throughout the US, Canada, and

Mexico.
Incorporated in 2009

Industry
Agricultural Products
Sector: Consumer Goods

Top Competitors
BC Hot House Foods Inc
Eurofresh Inc
Wilson Farm, Inc.

Raising Capital & Capital

Structure
Initial Public Offering:
The company went public under the income trust structure as an
unincorporated open-ended limited trust known as Hot House
Growers Income Fund. (VEG.UN) on December 19th 2003

Underwriters of the offering:

TD Securities Inc., RBC Dominion Securities Inc.,
National Bank Financial Inc., HSBC Securities (Canada) Inc.,
Canaccord Capital Corporation, and Raymond James Ltd.

70%-75% of the common shares issued.

Retained interest of 20-25% held by HHGI Holdings Co.
Exactitude depends on the extent of the exercise of the overallotment option.

Raising Capital & Capital

Structure
Initial Public Offering:
Issuance of 6,602,509 units at 10$/unit
Over-Allotment option for 471,607 additional units.
Total Units issued for the IPO = 7,074,160 units for 75%of
the common shares.
Price to the
public
Per Unit

Total
Total (OverAllotment
Exercised)

$10.00

Underwrit Proceeds to the

er Fees
Fund
$0.60

$9.40

$66,025,090 $3,961,505

$62,063,585

$70,741,160 $4,244,470

$66,496,690

Raising Capital & Capital

Structure
Restructuration:
In August of 2006 they announce the acquisition with Village
Farms and the restructuration and renaming of the Hot House
Growers Income Fund into the Village Farms Income Fund.

Rights Offering: November 23rd 2006

Issued to holders of its outstanding ordinary units
transferable rights to subscribe for and purchase an
aggregate of 3,623,189 units at 2.76$/unit.
Each holder is issued one Right for each ordinary Unit
held.
Each right entitles the holder to subscribe to for 0.512
Ordinary Units.
As of Dec.31st 2006 Village Farms income fund had
10,697,305 units outstanding.

Raising Capital & Capital

Structure
In December of 2008
2,358,040 Class C shares (the 25% original retained interest)
were converted into fund units.
385 Participating Preferred Shares (one time share-based
compensation) converted into fund units.
With the original 10,697,305 outstanding units already
issued, this sums up to 13,440,345 units by the 2008 year
end.

Raising Capital & Capital

Structure
Conversion from Income Fund Structure to
Corporate Structure as of Dec.31st 2009.
Every trust unit held is converted to a common share
of the corporation.
U.S. Holdings subscribes for 25,267,000 special shares.
In 2010, 5,993,049 special shares were converted into
common shares
In 2012, the remaining 19,273,951 special shares were
converted into common shares.
Total up to date outstanding common shares of Village
Farms International, Inc. = 38,707,345 shares.

Variations over year

2014:

- COGS increased to 89,65% relatively to sales

- 9% decrease in the average selling price of tomatoes
- Change in biological asset (Fair value method)
- Peak period: next quarter

2012-2013: - The storm makes comparison difficult over year to year

- Higher gross profit arising from the recovery of the loss
2010-2011: - Net profit usually arround 3- 3,5%

Competitors
Mostly Private companies
Many recorded a negative profit (BC hot house Food, Dole, Chiquita)

Ratio Analysis
Liquidity Ratios:

2014:
-

Acquired Maxim Power (B.C) for approximately 5,2 Millions cash.

Capital expenditures of $6,117 for the six months ended June 30,2014
related to the repair costs to one Texas greenhouses.

Ratio Analysis
Financial Leverage

January to June,30 2014

- Retained earning decreased by $774 due to the loss in the first two quarter

- Peak period is during summer months, F/S should improve in the next quarter

Ratio Analysis
Asset management

(Cant compare the asset management for 2014: year-end on December 30,2014)

2012:
- A hail storm closed three of the Texas facilities

Ratio Analysis
Profitability and Market Ratio

Dupont Analysis:

2013 Financial Planning

Increase in Sales by 3% between 2013-2012
due to a 25% increase in the average selling price of tomatoes, a 10% increase in the average selling pepper price and a
10% increase in cucumber price.

Decrease of COGS by 6% between 2013-2012

due to lower purchases of supply partner product and lower transportation costs offset by higher costs at Village Farms
owned cucumbers and the Permian Basin facility having a higher cost of production than the Marfa facility was in
production until the hail storm of May 2012.

Decrease in Income tax of 1% between 2013-2013

Lead to a surplus of around $29,037.67 Due to high insurance proceeds
They kept $15,867.00 in cash
They invested $4,615 in PPE and $590 in other assets
Paid $2,948 worth of Payable

Paid back $6,247 worth of net Long term loans

(Numbers expressed in Thousands)

Maxim Power
July 17, 2014 - Village Farms International, Inc. announced
that it has closed its previously announced acquisition of
Maxim Power (B.C.) Inc.
The deal was worth approximately CAD $5.2 million
On July 31,2014- Village Farms took a loan of CAD $3.0
million with Bank of Montreal to partly finance the
acquisition.
This Acquisition will decrease Village Farms long term
dependence on natural gas.

2015 Financial Planning

With 0% increase in sales
Expect a $10,599.70 Surplus
With 3% increase in sales
Expect a $11,861.96 Surplus

With 20% increase in sales

Expect a $19,009.44 Surplus
With a 5% decrease in sales
Expect a $8,497.27 Surplus
With a 30% decrease in sales
Expect a $2,014.91 Deficit

Village farms Risks

Risks Relating to the Company
Product Pricing
Maintain Profitability
Risks Inherent in the Agricultural Business
Natural Disasters
Vulnerability to Rising Energy Costs
Competition
Labour
Foreign Exchange Exposure
Key Executives
Uninsured and Underinsured Losses
Environmental, Health and Safety Risk
Governmental Regulations
Risks Associated with Cross Border Trade
Growth
Accounting Estimates
Retail Consolidation
Product Liability
Technological Advances
Transportation Disruptions
Dependence Upon Credit Facilities
Risks of Regulatory Change
Substantial Common Shares held by Village Farms Owners
Risks Related to Tax
Potential U.S. Permanent Establishment of VF Canada GP, VFCLP and VFF
Advances by VF Operations Canada Inc. to U.S. Holdings
Transfer Pricing
U.S. Real Property Holding Corporation

Reduce Risk
2015:
Internal growth rate average over last 5 years = 15.18%
Sustainable Growth Rate = 16.88%
By 2015 we expect the Marfa, Texas greenhouse to have
recovered , which we expect will lead to an increase in sales
by 3%
Increase in sales by 3% will lead to an surplus of $11,861.96
Reduce product pricing risk and interest rate risk
Diversify inventory to reduce pricing risk
Invest part of the surplus of $7,861.96 in Eggplants and
biological assets
Use the rest of the surplus $4,000 to pay off some debt and
reduce interest risk

Ratios 2015

Questions?!

Sources
http://www.villagefarms.com/InvestorRelations/FinancialReports.aspx
http://www.villagefarms.com/images/pdf/financialReports/2013MDA.p
df
http://www.villagefarms.com/images/pdf/investorPressReleases/press
Release081314.pdf
http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuer
No=00029410
https://ca.finance.yahoo.com/q/ks?s=VFF.TO
http://www.mergentonline.com/companydetail.php?compnumber=107
885&pagetype=synopsis
http://investing.businessweek.com/research/stocks/snapshot/snapshot
.asp?ticker=VFF:CN
http://investors.morningstar.com/ownership/shareholdersoverview.html?t=VFF&region=CAN&culture=en-US