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Company Overview. A leading grower & marketer of branded, high-quality hydroponic greenhouse grown produce in North America Fresh vine ripened tomatoes, bell peppers & cucumber varieties Approaching 25 th Year of Operations Annual sales of over $135m

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Company Overview

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Company Overview

  • A leading grower & marketer of branded, high-quality hydroponic greenhouse grown produce in North America

    • Fresh vine ripened tomatoes, bell peppers & cucumber varieties

    • Approaching 25th Year of Operations

    • Annual sales of over $135m

    • Listed on TMX (Toronto Stock Exchange) – VFF

    • Member of TMX Clean Technology Market Index

    • Vertically integrated year-round direct supplier to leading retail grocers

    • Largest hydroponic producer in Canada and 2nd largest in North America

    • Strong reputation as industry leader in quality and service

  • Highly Sustainable

    • “Local” source produce supplier

    • Small carbon and physical footprint

    • Highly productive compared to field farming

  • Operating and marketing in Canada, US, Mexico and DR

    • Greenhouse facilities owned – BC (110 acres), TX(110 acres)

    • New 30-acre GATES® greenhouse completed – end of 2011

    • Four distribution centers

    • Exclusive marketing arrangements with US, Mexican, Canadian & DR growers


Experienced Management Team

Mike DeGiglio – Chief Executive Officer and Director

  • Co-Founder; Served as Chief Executive Officer since inception

  • 27 years intensive agricultural experience in controlled environmental growing – former CEO of two other industry related companies in greenhouse and agriculture biotechnology

  • Served on active duty in the United States Navy as an officer and jet aviator (1976 – 1983), and the Naval Air Reserves (1983 – 2001), retiring at the rank of Captain

Stephen Ruffini – Chief Financial Officer

  • Joined Village Farms in January 2009

  • Previously at HIT Entertainment PLC where he served as Chief Financial Officer

  • 25 years of extensive financial, operations, investor relations and mergers and acquisitions experience with leading international companies


Greenhouse Produce – A Premium Product

  • Retail consumers pay a premium for Greenhouse produce

    • Offers more consistent quality, taste, appearance and food safety than field grown produce

    • Vine-Ripened Tomatoes

      • Consistent quality

      • Longer growing season

      • Multiple varieties

      • Flavor fully develops/better taste

    • English Cucumbers

      • Thin dark green skin

      • Unwaxed/not coated

      • Seedless

    • Peppers

      • Vibrant colors, firm skin

      • Free of spots & blemishes

      • Stems; green and fresh

      • Sweet taste


Key Customer Relationships

Relationships with Marquee Customers

Winco Foods


Size of Produce Markets


Retail Tomato Market

Retail Tomato Dollars

Retail Tomato Volume (lbs)


Greenhouse Capacity (U.S. & Canada)

318

220

208

155

110

  • Greenhouse tomato capacity in Canada and the U.S. is approximately 2,343 acres1

    • 1,334 acres in Canada

    • 1,008 acres in United States

Significant Canadian & U.S. Producers (in Acres)

  • 2

3

3

2012 Village Farms AIF

Purchased by NatureSweet through bankruptcy in early 2013

VFF management estimates of assets owned

Note: North American capacity excludes Mexico


Strategically Located Operations

Greenhouses

Partners

Distribution Centers

Corporate Offices

4

  • VFF has the logistics and distribution capabilities to ensure fresh high quality produce that meets consumer demands. Over 60% delivered direct to retailer from greenhouses.

Partnerships

Greenhouses


Recent Initiatives

New US/Mexico Suspension Agreement

  • Place season minimum pricing on imports of Mexican Tomatoes

  • Distinction between field and non-field product – mislabeling no longer allowed

  • Stronger enforcement on both sides of the border

Implementation of Certified Greenhouse Association Technology

  • Founding member of Certified Greenhouse Vegetable Producers Association

  • Qualified facilities may designate product with CGA logo

  • Next step enhanced definition and enforcement of greenhouse definition – federal and consumers

  • Hail storm took out 82 acres of production on 5/31/12 – Marfa, Texas

  • Received net Insurance proceeds through June 2013 of $36.5m

  • Final settlement of $11.25m – September 2013

Settlement of Insurance Claim

  • Due to hail storm impact – One lender tried to force an early exit

  • Restructured Long Term Debt – March 2013

    • $58m , LIBOR+, 5 years, 14- year amort.

  • New Operating Line – September 2013

    • $10m, LIBOR+, 3 years

Restructure of Company Debt


Financial Performance

  • VFF revenue negatively impacted by Loss of Acreage

    • Hail Storm in May 2012 – took out 82 acres – reducing production thus revenues

    • 40 Acres up and operational late 2012

    • Another 20 acres up and operational in Spring/Summer 2012

  • VFF EBITDA impacted by

    • Poor Pricing in late 2011 through September 2012

    • Hail Storm Proceeds in 2012

Revenue (US$ millions)

EBITDA (US$ millions)1

  • See EBITDA Support Schedule


Capitalization

High

Low

Current

(1)

$1.08

$1.08

$1.08

Price

(2)

38.9

F/D Shares Outstanding

F/D Market Capitalization

$ 42.0

(3)

$ 55.4

Net Debt

$ 97.4

Enterprise Value

(3)

LTM

TEV / EBITDA

4.2x

(4)

8.3x

Price / EPS

Net Debt / EBITDA

2.4x

(1) Close price as of 09/17/2013

(2) Calculated using the treasury stock method; includes exchangeable shares

(3) As of 6/30/2013; rolling LTM EBITDA (incl. Ins. Proceeds)

(4) Diluted earnings per share

Capitalization

  • Improved financial performance has driven share price appreciation

    • VFF currently trades at 4.2x EV / LTM EBITDA

  • Repair of 20 acres in Marfa, Texas in 2014

  • Proving out GATES®technology a potential catalyst for improved valuation / share price performance

Two Year Price and Volume


Significant Insider Ownership

  • Insiders hold an economic interest in Village Farms of approximately 29.8%

Shareholder Overview

  • Includes outstanding options

  • 2Management estimate


Key Trends Driving Greenhouse Development

Forecasted Water Scarcity, 2050

Population Density, 2025

Carbon Dioxide Emissions, Today

  • Water and Land Scarcity

  • Greenhouses have higher production volumes per acre of land

  • Water can be precisely measured and applied to plants

  • Safer, Locally Grown Food

  • Greenhouses can be located anywhere, esp. to serve densely populated regions

  • Controlled environment reduces chance of disease

  • Reduced GHG’s

  • Combined heat and power systems on greenhouses are over 40% more efficient

  • 47% reduction in CO2

  • 99% reduction in SO2

  • 93% reduction in NOx


GATES® – Extreme Growing

  • Greenhouse Advanced Technology Expert System (“GATES®”)

    • Millions of dollars invested to develop the next generation, closed system greenhouse

    • Employs new concepts in greenhouse design technology, climate control and crop management

    • Successful pilot plant in Marfa, Texas sets the stage for growth

Consumer Demand Drivers

GATES®1Facility

  • Focus on “food miles”

  • Reduced carbon footprint

  • Reduced spoilage

  • Supply in close proximity to local markets

  • Food safety

  • Ability to locate in non-traditional locations: closer proximity to key markets

  • Advanced climate control with improved monitoring capabilities

  • CoGen partnerships further improve economics and provide environmental benefits


Growth Initiatives

  • Repair Damaged acreage in Marfa, Texas

    • Repair 20 acres of hail storm damage – Spring 2014

    • Rebuild of another 20 acres – 2015/16

  • Expand Production Capacity

    • Higher yields – year round (lowering costs per pound)

    • Enhance existing acreage with lights

    • More flexibility on crop selection

    • Lower labor costs due to technology

  • Expand US/CA regional markets

    • Buy ‘local’ trend – retailers and consumers

    • Improve retailer ‘shrink’ due to fresher product

    • Freight advantages - cost savings


Investment Highlights

Greenhouse Produce Industry Leader

  • Vertically integrated year-round direct supplier to leading retail grocers

  • Largest hydroponic producer in Canada and 2nd largest in North America

  • Strong reputation as industry innovator in quality and safety

Advanced Greenhouse Technology

  • Track record of improvements in greenhouse production technology

  • GATES®technology / Extreme Growing

  • Repairs at Marfa facility will utilize some enhancements learned from GATES®

  • “Local source” produce supplier – market is short of US supply

  • Small carbon and physical footprint

  • Highly productive compared to field farming

Value-Add and Sustainability Story

  • Increased EBITDA since the acquisition of Hot House in 2006

  • Reduced financial leverage

  • Increased operating capacity and crop yield

  • Significant alignment of interest – Management holds 30% ownership

Successful Track Record of Value Creation


EBITDA Support Schedule


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