SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 1994 Number 1-1550
CHIQUITA BRANDS INTERNATIONAL, INC.
Incorporated under the I.R.S. Employer
I.D.
Laws of New Jersey No. 04-1923360
250 East Fifth Street, Cincinnati, Ohio 45202
(513) 784-8011
Securities registered pursuant to Section 12(b) of the Act:
Name of Each
Exchange
Title of Each Class On Which
Registered
Capital Stock ($.33 par value) New York,
Pacific, Boston
$2.875 Non-Voting Cumulative Preferred Stock, Series A New York
$1.32 Depositary Shares, each representing one-fifth of a
share of
Series C Mandatorily Exchangeable Cumulative Preference
Stock New York
10-1/2% Subordinated Debentures due August 1, 2004New York, Pacific
Securities registered pursuant to Section 12(g) of the Act: None
Other securities for which reports are submitted pursuant to
Section 15(d) of the Act:
9-1/8% Senior Notes due March 1, 2004
9-5/8% Senior Notes due January 15, 2004
11-1/2% Subordinated Notes due June 1, 2001
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form
10-K. [ X ]
As of March 1, 1995, there were 49,809,149 shares of Common
Stock outstanding. The aggregate market
value of Common Stock held by non-affiliates at March 1, 1995 was
approximately $361 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1994
Annual Report to Shareholders are incorporated by
reference in Parts I and II. Portions of the Chiquita Brands
International, Inc. Proxy Statement for the 1995
Annual Meeting of Shareholders are incorporated by reference in
Part III.
PAGE
CHIQUITA BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
Part I
Item 1.. . . . . . . . . . . . . . . . . . . . . . . Business 1
Item 2.. . . . . . . . . . . . . . . . . . . . . . Properties 9
Item 3.. . . . . . . . . . . . . . . . . . .Legal Proceedings 9
Item 4.. .Submission of Matters to a Vote of Security Holders
10
Part II
Item 5.. . .Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . 10
Item 6.. . . . . . . . . . . . . . . .Selected Financial Data
10
Item 7.. . .Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 10
Item 8.. . . . . .Financial Statements and Supplementary Data
10
Item 9.. . . Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . 10
Part III
Item 10. . Directors and Executive Officers of the Registrant
11
Item 11. . . . . . . . . . . . . . . . Executive Compensation
12
Item 12. . . .Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . 12
Item 13. . . . Certain Relationships and Related Transactions
12
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .
14
PAGE
PART I
ITEM 1 - BUSINESS
GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the
"Company") is a leading international
marketer, processor and producer of quality fresh and
processed food products. The Company's
"Chiquita operations" constitute its only industry segment
other than its Meat Division, which is held
for sale. (See MEAT DIVISION HELD FOR SALE below.) Net
sales, operating income and identifiable assets of the
Company's Chiquita operations and Meat Division held for sale
are set forth in Note 3 to the Consolidated Financial
Statements included in the Company's 1994 Annual Report to
Shareholders, which is incorporated herein by reference.
In recent years, the Company has capitalized on its
"Chiquita" and other premium brand
names by building on its worldwide leadership position in the
marketing, distribution and sourcing of
bananas; by expanding its quality fresh fruit and vegetable
operations; and by further developing its
business in value-added processed foods.
Chiquita's products include:
- Bananas, apples, avocados, citrus, grapes, kiwi, mangos
and nectarines sold under the
"Chiquita" brand name;
- Bananas, citrus and other quality fresh fruit including
apples, apricots, cherries, grapes,
peaches, pears, plums, strawberries and tomatoes sold
under the "Consul," "Chico,"
"Amigo," "Frupac" and other brand names;
- A wide variety of fresh vegetables including asparagus,
beans, broccoli, carrots, celery,
lettuce, onions and potatoes sold under the "Premium" and
various other brand names;
- Fruit and vegetable juices and other processed fruits and
vegetables, including banana
puree, marketed under the "Chiquita," "Naked Juice,"
"Friday" and other brands;
- Wet, fresh cut and ready-to-eat salads sold under the
"Club Chef " and "Naked Foods"
brands; and
- Margarine, shortening and other consumer packaged foods
sold under the "Numar,"
"Clover" and various regional brand names.
No individual customer accounted for more than 10% of the
Company's consolidated net sales during any of the last three
years. See "Management's Analysis of Operations and Financial
Condition," which is incorporated by reference in Item 7
herein from the Company's 1994 Annual Report to Shareholders,
for a discussion of factors affecting results of the Company's
operations for 1994, 1993 and 1992. Factors which may cause
fluctuations in the results of operations are also discussed
in the description of the Company's operations below.
1
Fresh food products
The Company markets an extensive line of fresh fruits and
vegetables sold under the
"Chiquita" and other brand names. The core of Chiquita's
fresh foods operations is the marketing,
distribution and sourcing of bananas. Sales of bananas, as a
percent of consolidated net sales, were
38% in 1994, 36% in 1993 and 37% in 1992. Excluding revenues
of the Meat Division held for
sale, sales of bananas comprised 60%, 58% and 62% of the
Company's total net sales in 1994, 1993
and 1992, respectively.
Chiquita believes that it derives competitive benefits in
the marketing, distribution and
sourcing of fresh foods through its:
- Recognized brand names and reputation for quality;
- Strong market positions in Europe and North America, its
principal markets;
- Modern, cost-efficient fresh fruit transportation system;
and
- Industry leading position in terms of number and
geographic diversity of its sources of
bananas, which enhances its ability to provide customers
with premium quality products
on a consistent basis.
Chiquita has benefitted from its multi-year investment
spending program and its restructuring and cost reduction
efforts to adjust its fresh foods volume and cost
infrastructure to significantly reduce production,
distribution and overhead costs. (See "Distribution and
Logistics" and "Sourcing" below and ITEM 2 - PROPERTIES.) The
restructuring program also included measures to reorganize the
Company's European banana operations to adjust to a new quota
which effectively restricts the volume of Latin American
bananas imported into the European Union. (See RISKS OF
INTERNATIONAL OPERATIONS below.)
Marketing. Chiquita markets bananas under brand names
including "Chiquita," "Chiquita
Jr.," "Consul," "Amigo," "Chico" and "Bananos." Chiquita sold
over 40% of its total banana
volumes for 1994 in each of Europe and North America. As a
result of a decision in 1994 to significantly scale back
"green" banana trading operations in Japan, sales of bananas
in the Far East market are no longer a significant portion of
the Company's total banana net sales.
The Company has been able to obtain a premium price for its
bananas due to its reputation
for quality and its innovative marketing techniques, which
include providing retail marketing support
services to its customers. Chiquita sells bananas through its
regional sales organizations and
commissioned agents throughout the world directly to
wholesalers and retail chains, which in turn
ripen and resell or distribute the fruit. The Company also
sells bananas ripened in its own facilities
or under contractual ripening arrangements.
Bananas are highly perishable and must be brought to market
and sold generally within 60
days after harvest. Therefore, selling prices which importers
receive for bananas depend on the
available supplies of bananas and other fruit in each market,
the relative quality, and wholesaler and
retailer acceptance of bananas offered by competing importers.
Excess supplies may result in
increased price competition. Profit margins on sales may also
be significantly affected by
fluctuations in currency exchange rates. (See RISKS OF
INTERNATIONAL OPERATIONS
below.)
2
Adverse weather such as major windstorms or floods in banana
growing areas may restrict
worldwide supplies and result in increased prices for bananas.
However, competing importers may
be affected differently, depending upon their ability to
obtain adequate supplies from sources in
other geographic areas.
Banana marketing is highly competitive. In order to compete
successfully, Chiquita must be
able to source bananas of uniformly high quality and
distribute them in worldwide markets on a
timely basis. A limited number of competitors account for
most of the banana imports throughout
the world. The Company believes that it sells more bananas
than any of its competitors, accounting
for approximately one-fourth of all bananas imported into its
principal markets throughout the world.
While smaller companies, including growers' cooperatives, have
also become a competitive factor,
Chiquita's principal competitors continue to be a limited
number of large international companies.
Although production of bananas tends to be relatively stable
throughout the year, competition
in the sale of bananas comes not only from bananas sold by
others, but also from other fresh fruit
which may be seasonal in nature. The resulting seasonal
variations in demand cause banana pricing
to be seasonal, with the first six months of the calendar year
being the stronger period.
Chiquita's interests in food-related businesses include a
network of fresh fruit and vegetable
operations in Europe, North America and the Pacific Rim.
Through these affiliations, Chiquita sells
and distributes a variety of quality fruit and vegetable
products under other brand names. Certain of
these affiliations involve both the production and marketing
of fresh fruits and vegetables while
others involve only marketing. These businesses compete
against numerous other regional fresh
fruit and vegetable producers and distributors. No single
competitor has a dominant market share in
this industry due to the regionalized nature of these
businesses.
Distribution and Logistics. Transportation expenses
comprise approximately one-fourth of
the total costs incurred by Chiquita in its sale of tropical
fruit. Chiquita ships its tropical fruit in
vessels owned or chartered by the Company. All of Chiquita's
tropical fruit shipments into the
North American market are delivered using pallets or
containers that minimize damage to the
product by eliminating the need to handle individual boxes.
As a result of a multi-year investment
program, now completed, and the elimination of a substantial
amount of chartered ship capacity
under Chiquita's restructuring program, Chiquita now owns or
controls under long-term lease
approximately 60% of its aggregate shipping capacity. Most of
the remaining capacity is operated
under contractual arrangements having terms of three years or
less. (See also ITEM 2 -
PROPERTIES below and Notes 6 and 7 to the Consolidated
Financial Statements.) Chiquita also
operates loading and unloading facilities which it owns or
leases in Central and South America and
various ports of destination.
Sourcing. Chiquita has a greater number and geographic
diversity of sources of bananas
than any of its competitors. During 1994, approximately 35%
of all bananas sold by Chiquita were
sourced from Panama. Bananas sourced from other countries,
including Colombia, Costa Rica,
Guatemala and Honduras, comprised from 4% to 19% (depending on
the country) of bananas sold
by Chiquita during 1994.
In 1994, approximately two-thirds of the bananas sourced by
Chiquita were produced by
subsidiaries and the remainder were purchased under purchase
fruit arrangements from suppliers.
Under certain of the purchase fruit arrangements, which
require less initial capital investment by the
Company than owned production facilities, Chiquita furnishes
financial and technical assistance to its
suppliers to support the production and preparation of bananas
for shipment. No single supplier
provided a significant portion of the bananas sold by Chiquita
in 1994.
3
Bananas are vulnerable to adverse local weather conditions,
which are quite common but
difficult to predict, and to crop disease, the control of
which entails significant expense. These
factors may restrict worldwide supplies and result in
increased prices for bananas. However,
competitors may be affected differently depending upon their
ability to obtain adequate supplies from
sources in other geographic areas. Chiquita's overall risk
from these factors, as well as from
political changes in countries where bananas are grown, is
reduced by the low concentration of its
banana production in individual producing locations.
Labor cost, which is a significant portion of the cost of
producing bananas, varies depending
on the country of origin. Since bananas are shipped in
cardboard boxes, paper cost is also
significant.
The geographically diverse sources of other fresh fruits and
vegetables primarily involve
formal and informal purchase arrangements with numerous
unrelated producers and importers.
None of these arrangements is individually significant to the
Company's operations.
Processed Food Products
Chiquita's processed food products include fruit and
vegetable juices sold primarily in the
United States; processed fruit and vegetables, including
processed bananas, sold worldwide under
the "Chiquita," "Friday" and other brands; wet, fresh cut and
ready-to-eat salads sold under the
"Club Chef" and "Naked Foods" brands; and other consumer
packaged foods sold in Latin America
by the Numar Division.
Chiquita branded fruit juices include a full line of
tropical blends sold refrigerated, frozen
and in shelf stable individual servings. The refrigerated and
frozen lines include six varieties:
"Caribbean Splash," "Tropical Paradise," "Raspberry Passion,"
"Cranberry Seabreeze," "Calypso
Breeze" and "Hawaiian Sunrise." Individual servings are sold
in three of these varieties: "Caribbean Splash," "Tropical
Paradise" and "Calypso Breeze." These tropical blends are
available throughout most of the United States and are
manufactured by others from fruit juice concentrates and
purees to the Company's specifications. The Company also
produces and markets natural fresh fruit and vegetable juices
sold under the "Chiquita," "Ferraro's Earth Juice" and "Naked
Juice" brands.
Chiquita's processed banana products include banana puree,
sliced bananas and other
specialty products which are produced by the Company and sold
to producers of baby food, fruit
beverages, baked goods and fruit-based products, to
wholesalers of bakery and dairy food products,
and to selected licensees including Beech-Nut and General
Mills.
Friday Canning Corporation ("Friday") is one of the largest
private-label vegetable
processors in the United States. Friday markets a full line
of over twenty-five types of processed
vegetables to retail and food service customers throughout the
U.S. and other countries. Friday
competes directly with a few major producers of both branded
and private-label canned vegetables,
as well as indirectly with numerous marketers of frozen and
fresh vegetable products. The vegetable
processing industry is affected by the availability of
produce, which can vary due to local weather
conditions.
The Numar Division is a vertically integrated marketer,
refiner and producer of shortening,
margarine and vegetable oil products. These products are
derived primarily from oil palm grown on
the Company's plantations located in Costa Rica and Honduras.
Numar is the leading marketer of
such products in Costa Rica and, through a 50%-owned joint
venture, in Honduras. Numar sells its
products in these and other Central American countries under
the "Numar," "Clover" and other
brand names. Numar's competitors in Central America consist
principally of a number of small
local firms and subsidiaries of multinational corporations.
4
RISKS OF INTERNATIONAL OPERATIONS
Information about the Company's operations by geographic
area is included in Note 3 to the
Consolidated Financial Statements included in the Company's
1994 Annual Report to Shareholders
and is incorporated herein by reference.
The Company is subject to a variety of governmental
regulations in countries where it
sources and markets its products, including import quotas and
tariffs, currency exchange controls
and taxes. On July 1, 1993, the European Union ("EU")
implemented a new quota effectively
restricting the volume of Latin American bananas imported into
the EU, which had the effect of
decreasing the Company's volume and market share in Europe.
The quota is administered through a
licensing system and grants preferred status to producers and
importers within the EU and its former
colonies, while imposing new quotas and tariffs on bananas
imported from other sources, including
Latin America, Chiquita's primary source of fruit. In two
separate rulings, General Agreement on
Tariffs and Trade ("GATT") panels found this banana policy to
be illegal. In March 1994, four of
the countries which had filed GATT actions against the EU
banana policy (Costa Rica, Colombia,
Nicaragua and Venezuela) reached a settlement with the EU by
signing a "Framework Agreement."
The Framework Agreement authorizes the imposition of
additional restrictive and discriminatory
quotas and export licenses on U.S. banana marketing firms,
while leaving EU firms exempt. Costa
Rica and Colombia are presently implementing this agreement.
Full implementation of the
Framework Agreement could significantly increase the Company's
cost to export bananas from these
sources. Three additional European countries (Sweden, Finland
and Austria) joined the EU effective
January 1, 1995. These countries, which have had
substantially unrestricted banana markets in
which Chiquita has supplied a significant portion of the
bananas, are in the process of transition to
the restrictive EU quota and licensing environment. The
timing and exact nature of any adjustments
in the quota and licensing regulations that will be made for
these new EU members have not yet
been determined.
In September 1994, Chiquita and the Hawaii Banana Industry
Association made a joint filing
with the Office of the U.S. Trade Representative under Section
301 of the U.S. Trade Act of 1974,
charging that the EU quota and licensing regime and the
Framework Agreement are unreasonable,
discriminatory, and a burden and restriction on U.S. commerce.
In response to this petition, the
U.S. Government initiated a formal investigation of the EU
banana import policy in October 1994.
In January 1995, the U.S. Government announced a preliminary
finding against the EU banana
import policy and launched separate investigations of the
Colombian and Costa Rican Framework
Agreement policies. The EU, Colombian and Costa Rican
investigations are continuing. Section
301 authorizes retaliatory measures, such as tariffs or
withdrawal of trade concessions, against the
offending countries. However, there can be no assurance as to
the results of the investigation, the
nature and extent of actions the U.S. Government might take,
or the impact on the EU quota regime
or the Framework Agreement.
Certain of the Company's operations are heavily dependent
upon products grown and
purchased in Central and South America. These activities, a
significant factor in the economies of
many of the countries where the Company produces and purchases
bananas and other agricultural
and consumer products, are subject to risks that are inherent
in operating in such countries,
including government regulation, currency restrictions and
other restraints, risks of expropriation
and burdensome taxes. There is also a risk that legal or
regulatory requirements will be changed or
that administrative policies will change. Certain of these
activities are dependent upon leases and
other agreements with the governments of these countries.
5
The Company leases all the agricultural land it uses in
Panama from the Republic of
Panama under lease and operating agreements which
automatically renew each year unless canceled
by either party on four years prior notice. In the event of
termination of the agreements, the
government of Panama, which previously purchased such
agricultural lands from the Company, may
purchase other Panamanian assets of the Company at specified
values which approximate carrying
value but may be less than market value.
Certain facilities in Honduras previously owned by the
Company were transferred in prior
years to the government of Honduras with provision for their
subsequent use by the Company. Such
facilities include a railroad which the Company operates under
a lease with the government of
Honduras that expires December 31, 1995. The Company believes
that the lease, if required in
future years, can be extended or renewed.
Governmental price and export controls in Costa Rica and
Honduras could affect the Company's ability to initially
recover, through selling prices, cost increases related to its
oil palm operations.
The Company's operations worldwide and the products it sells
are subject to numerous
governmental regulations and inspections by environmental,
food safety and health authorities.
These regulations directly affect day-to-day operations.
Although the Company believes it is
substantially in compliance with such regulations, actions by
regulators have in the past required,
and in the future may require, operational modifications or
capital improvements at various locations
or the payment of fines and penalties, or both.
The Company's operations are conducted in many areas of the
world and involve
transactions in a variety of currencies. Results of its
operations may be significantly affected by
fluctuations of currency exchange rates. Such fluctuations
affect the Company's banana operations
because many of its costs are incurred in currencies different
from those that are received from the
sale of bananas in non-U.S. markets, and there is normally a
time lag between the incurrence of such
costs and collection of the related sales proceeds. The
Company's policy is to exchange local
currencies for dollars immediately upon receipt, thus reducing
exchange risk. The Company also
engages from time to time in various hedging activities to
further minimize potential losses on cash
flows originating in currencies other than the U.S. dollar.
Fluctuations of currency exchange rates
may also affect the Company's Numar Division. Since Numar's
profits are generated in many of the
same Central American countries where the Company incurs costs
to produce bananas, exchange
fluctuations with an adverse effect on Numar's profits would
generally have a favorable impact on
the Company's cost of producing bananas. See Notes 1 and 9 to
the Consolidated Financial
Statements and "Management's Analysis of Operations and
Financial Condition" included in the
Company's 1994 Annual Report to Shareholders for information
with respect to currency exchange.
LABOR RELATIONS
The Company employs a total of approximately 40,000 persons
in its Chiquita operations.
Approximately 36,000 of these associates are employed in
Central and South America, including
28,000 workers covered by labor contracts.
The Company has approximately 85 labor contracts with terms
expiring from 1995 to 1997.
Strikes or other labor-related actions are often encountered
upon expiration of labor contracts and
also frequently occur during the term of the contracts.
During the summer of 1994, the Company's workers in La Lima,
Honduras struck its
operations there seeking higher wages. The contract covering
these approximately 4,800 employees
expires April 1, 1995. After a 35-day strike, the Company and
the workers' union reached an
agreement on additional contractual cost of living adjustments
for the remainder of the contract
period. The cost of living adjustments have not
6
had a significant impact on the Company's operations.
Chiquita decided not to reopen four low productivity farms
which had been closed during the strike and, at the Company's
remaining Honduran farms, chopped back cultivations weakened
during the strike. Write-downs associated with the Honduran
farms and cultivations were approximately $25 million.
A contract covering approximately 5,100 workers at one of
Chiquita's Panamanian banana
producing locations expired in July 1994. The Company is in
the process of completing negotiations
on a new contract, and nearly all of the affected employees
are now working under the terms of the
new contract. The new terms of the contract are not expected
to have a material effect on the
Company's operations.
Approximately 30 other contracts covering 6,000 employees
expire in 1995.
MEAT DIVISION HELD FOR SALE
During the fourth quarter of 1992, after evaluation of
reorganization plans announced earlier
that year and completion of other preparatory actions, the
Company adopted a plan of disposal for
all remaining Meat Division operations. (See Note 2 to the
Company's Consolidated Financial
Statements included in the Company's 1994 Annual Report to
Shareholders.)
Pursuant to the plan, the Meat Division sold a major fresh
pork processing facility in
December 1992 and its specialty meat operations in 1994.
During 1993 and 1994, the Company
engaged in extensive activity with respect to execution of its
disposal plan. This activity included
successful ongoing cost reduction efforts that have
contributed to the improvement in Meat Division
operating results, terminating retiree medical benefits, and
obtaining government subsidies and financial incentives, union
concessions, and a new stand-alone revolving credit facility
to fund the Meat Division's working capital needs. The
Company is continuing to pursue the sale of the remainder of
its Meat Division operations.
Operations. The Meat Division is engaged in the processing
and marketing primarily of
fresh pork and processed meat products, including sausage,
frankfurters, bacon, hams and luncheon
meats. The Meat Division's products are sold principally in
the United States, and for export to
Japan, Mexico, Canada, and other Central American and Pacific
Rim countries. In addition to
operating its own meat-packing plants, the Company engages
other meat packers to custom slaughter
and process meat products.
The Meat Division's products are marketed in the United
States nationally under the "John
Morrell" brand name and regionally under brands such as
"Dinner Bell," "Kretschmar," "Rath Black
Hawk" and "Tobin's First Prize," as well as under various
private customer labels.
Profit margins in the fresh meat business are low and
competition among packers in the
United States is strong. Price, quality and brand
identification are major competitive factors. The
Meat Division's major competitors in fresh and processed meats
are large U.S. meat-packing
corporations, as well as a large number of U.S. regional and
local meat packers. Competition also
comes from other high protein products, including beef,
poultry, seafood and dairy products.
The Meat Division's operations involve supplying a
consistent quality product to a broad market, including large
food chains. The Meat Division maintains an experienced sales
force that sells its products principally in the United States
and in Japan. Some fresh and processed meats, including
export sales, are also sold through independent food brokers
or expedited through international trading companies.
7
The availability of adequate supplies and cost of livestock
are significant to the profitability of the Meat Division's
fresh meat operations. Generally, results of operations are
adversely affected when livestock is in short supply because
competition among meat packers for available supplies is
strong and prices for livestock may increase. The
availability of livestock is determined primarily by decisions
made independently by a large number of growers and feeders
over a period of years and is beyond the control of the Meat
Division and competing meat packers.
Labor relations. The Meat Division employs approximately
4,800 domestic employees, nearly all of whom are covered under
11 labor contracts with terms expiring from 1995 to 1999.
A strike at Sioux Falls in May 1987 led to three lawsuits by
John Morrell & Co. ("Morrell") against the union. Following
judgments in favor of Morrell in the first two lawsuits which
resulted in payments to Morrell by the union totaling $29.3
million, the union demanded further arbitration of its claims
that its contract had required Morrell to recall the striking
employees. In the fall of 1991 in the third lawsuit, Morrell
sued the union in the U.S. District Court for the District of
South Dakota, seeking a ruling that the prior litigation
disposed of the union's recall claims. In March 1992, the
court ruled in Morrell's favor. On appeal, the Eighth Circuit
Court of Appeals reversed the lower court's decision, ruling
that the union was entitled to have its remaining arguments
heard in a second round of arbitration, and the United States
Supreme Court refused to grant certiorari. In October 1994,
the case was settled (with an aggregate payment of
approximately $2.3 million, or $1,250 per worker) and
dismissed.
In 1992, Morrell filed a declaratory judgment action in the
U.S. District Court for the District of South Dakota seeking
confirmation of its right to unilaterally reduce or eliminate
medical benefits of retired hourly employees. In 1993, the
District Court ruled in favor of Morrell. In 1994, this
ruling was upheld by the U.S. Court of Appeals for the Eighth
Circuit and Morrell subsequently terminated retiree medical
benefits.
Properties. The Meat Division owns and operates its
principal slaughtering plant and processed meat facility in
Sioux Falls, South Dakota. The Meat Division also owns or
leases and operates meat-processing facilities in Iowa and
Ohio. In order to obtain distribution efficiencies, the Meat
Division now uses public warehouses for its warehousing and
distribution operations, and is disposing of its remaining
distribution facilities. Although much of the Sioux Falls
plant is relatively old, the Company believes that it and
other more modern plants and facilities now used are, in
general, well maintained and suitable for its operations.
Certain products are produced for the Meat Division by custom
meat packers in plants located in Ohio and Kansas.
Regulation. The Meat Division's operations are subject to
numerous governmental regulations and regular inspections by
the U.S. Department of Agriculture and other environmental and
health authorities. Actions by regulators directly affect
day-to-day operations and have in the past required, and in
the future may require, plant improvements at various
locations or the payment of fines and penalties, or both.
While it is not possible to predict the cost of such future
improvements with a high degree of certainty, management does
not expect that such expenditures will have a material impact
on the Company's financial results.
In March 1993, Morrell brought to the attention of the
United States Environmental Protection Agency ("USEPA")
certain deficiencies relating to the wastewater treatment
facility at its Sioux Falls plant. The U.S. Department of
Justice ("DOJ") has proposed that Morrell enter into a
judicial civil consent order requiring compliance with certain
environmental laws, regulations and permits and other actions.
The DOJ indicated that the amount of civil penalties, if any,
to be imposed would be resolved later. In addition, the U.S.
Attorney for South Dakota and the DOJ are currently
investigating the matter; two former plant
8
employees have entered into plea agreements with the United
States. Morrell has taken substantial steps to remedy past
noncompliance and to avoid future recurrences.
ITEM 2 - PROPERTIES
The Company owns approximately 130,000 acres and leases
approximately 41,000 acres of improved land, principally in
Costa Rica, Panama and Honduras. Substantially all of this
land is used for the cultivation of bananas and oil palm and
support activities, including the maintenance of floodways.
The Company also owns power plants, packing stations,
warehouses, irrigation systems and loading and unloading
facilities used in connection with its banana and oil palm
operations.
The Company owns or controls under long-term bareboat
charters 25 ocean-going refrigerated vessels, including 2
delivered in 1994, and has 17 additional such vessels under
time charters, primarily for transporting tropical fruit sold
by the Company. From time to time, excess capacity may be
chartered or subchartered to others. In addition, the Company
enters into spot charters as necessary to supplement its
transportation resources. The Company also owns or leases
other related equipment, including refrigerated container
units, used to transport fresh food. The majority of the
ships owned and related container units are pledged as
collateral for related financings.
Properties used by the Company's processed foods operations
include processing facilities in Costa Rica and Honduras, and
vegetable canning facilities in Wisconsin. Other operating
units of the Company own, lease and operate properties,
principally in the United States and Central and South
America. The Company leases the space for its executive
offices in Cincinnati, Ohio.
For further information with respect to the Company's
physical properties, see the descriptions under ITEM 1 -
BUSINESS - GENERAL and MEAT DIVISION HELD FOR SALE, above, and
Notes 6 and 7 to the Consolidated Financial Statements
included in the Company's 1994 Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
A number of legal actions are pending against the Company,
including those described below and in ITEM 1 - BUSINESS -
MEAT DIVISION HELD FOR SALE affecting the Meat Division. Based
on evaluations of facts which have been ascertained and
opinions of counsel, management does not believe such
litigation will, individually or in the aggregate, have a
material adverse effect on the consolidated financial
condition or results of operations of the Company.
In 1993, the Company and other major banana producing
companies were added as defendants in several lawsuits, now
pending as three suits in the U.S. District Courts for the
Southern, Eastern, and Northern Districts of Texas. These
cases were originally filed in early 1993 against the
manufacturers of an agricultural chemical called DBCP and now
represent claims on behalf of an aggregate of approximately
25,000 individuals of whom less than 15% claim to have worked
for the Company's subsidiaries. Most of the plaintiffs are
foreign citizens who claim to have been employees of banana
companies, including in some cases subsidiaries of the
Company. The plaintiffs allege they were injured as a result
of exposure to DBCP, which was used primarily in the 1970's.
The damage claims have not been quantified. The suits are
Franklin Rodriguez Delgado, et al. v. Shell Oil Company, et
al., Del Monte Fresh Produce, N.A. v. Dead Sea Bromine Co.
Ltd., et al., Civil Action No. H-94-1337 (U.S. District Court,
Southern District of Texas, Houston Division) consolidated
with Ramon Rodriguez Rodriguez, et al. v. Shell Oil Company,
et al., Shell Oil Company, et al. v. Dead Sea Bromine Co.
Ltd., et al., Civil Action No. L-94-49 (U.S. District Court,
Southern District of Texas, Laredo Division); Narcisco Borja,
et al. v. Shell Oil Company, et al., The Dow Chemical Company,
et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No.
94-CV-689D (U.S. District
9
Court, Northern District of Texas, Dallas Division); and Juan
Ramon Valdez, et al. v. Shell Oil Company, et al., The Dow
Chemical Company, et al. v. Dead Sea Bromine Co. Ltd., et al.,
Civil Action No. 2-94-CV-69 (U.S. District Court, Eastern
District of Texas, Marshall Division). Similar suits on
behalf of individuals have been filed in Costa Rica and Panama
by approximately 900 individuals against subsidiaries of the
Company, including Compania Palma Tica and Compania Bananera
Atlantica Limitada. The Company has answered all suits,
believes it has substantial and meritorious defenses, and is
vigorously defending the actions.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The number of shareholders at March 1, 1995 and the markets
for the Company's capital stock are set forth on the inside
back cover of the Company's 1994 Annual Report to Shareholders
under "Investor Information." Price ranges of the Company's
capital stock and dividends declared thereon are set forth in
Note 15 to the Consolidated Financial Statements included in
the 1994 Annual Report to Shareholders. Restrictions on the
Company's ability to declare and pay dividends are described
in Note 8 to the Consolidated Financial Statements included in
the 1994 Annual Report to Shareholders. All such information
is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
This information is included in the table entitled "Selected
Financial Data" on page 6 of the Company's 1994 Annual Report
to Shareholders and is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
This information is included under the caption "Management's
Analysis of Operations and Financial Condition" included on
pages 7 through 9 of the Company's 1994 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Chiquita Brands
International, Inc. and its subsidiaries included on pages 10
through 23 of the Company's 1994 Annual Report to
Shareholders, and "Quarterly Financial Data" which is set
forth in Note 15 to such Consolidated Financial Statements,
are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
10
PART III
Except for information relating to the Company's executive
officers set forth in ITEM 10 below, the information required
by the following Items will be included in Chiquita's
definitive Proxy Statement which will be filed with the
Securities and Exchange Commission in connection with the 1995
Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
Carl H. Lindner (age 75) - Mr. Lindner has been Chairman of
the Board of Directors and Chief Executive Officer of the
Company since 1984 and Chairman of the Board of Directors and
Chief Executive Officer of American Financial Corporation
("AFC") since AFC was founded over 35 years ago. AFC is a
holding company which, through subsidiaries, is engaged in a
variety of financial businesses, including property and
casualty insurance, annuities and portfolio investing. In
nonfinancial areas, AFC has substantial operations in the food
products industry, through its ownership in Chiquita, and in
radio and television station operations, through its ownership
of Citicasters Inc. (formerly Great American Communications
Company, or "GACC").
Keith E. Lindner (age 35) - Mr. Lindner has been President
and Chief Operating Officer of the Company since 1989 and
President of its Chiquita Brands, Inc. subsidiary since 1986.
He was Senior Executive Vice President of the Company from
1986 until 1989.
Fred J. Runk (age 52) - Mr. Runk has been a Vice President
of the Company since 1984. He was also the Company's Chief
Financial Officer from 1984 to 1994. Mr. Runk has served as
Vice President and Treasurer of AFC for over five years.
Steven G. Warshaw (age 41) - Mr. Warshaw was named Chief
Financial Officer of the Company in 1994 and has also been the
Company's Executive Vice President and Chief Administrative
Officer since 1990. Mr. Warshaw has served in various
capacities since 1986.
Robert F. Kistinger (age 42) - Mr. Kistinger was named
Senior Executive Vice President of the Company's Chiquita
Banana Group in 1994. He was Executive Vice President,
Operations for the Company's Chiquita Tropical Products
Division from 1989 to 1994 and has served in various
capacities since 1980.
Thomas E. Mischell (age 47) - Mr. Mischell has been Vice
President of the Company since 1986 and a Vice President of
AFC for more than five years.
Charles R. Morgan (age 48) - Mr. Morgan has been Vice
President, General Counsel and Secretary of the Company since
1990 and has served in various capacities since 1988.
Jos P. Stalenhoef (age 53) - Mr. Stalenhoef was named
President, Chiquita Banana-North American Division in 1994.
He was Senior Vice President, North America, Chiquita Tropical
Products Division from 1989 to 1994 and has served in various
capacities since 1988.
William A. Tsacalis (age 51) - Mr. Tsacalis has been Vice
President and Controller of the Company since 1987. He was
Controller from 1984 to 1987 and has served in various
capacities since 1980.
11
Carl H. Lindner, Fred J. Runk and Thomas E. Mischell provide
broad policy determination and guidance to operating
management, which is headed by Keith E. Lindner, but devote
substantial portions of their time to the affairs of AFC and
its other subsidiaries.
In December 1993, GACC completed a comprehensive financial
restructuring which included a prepackaged plan of
reorganization filed in November of that year under Chapter 11
of the Bankruptcy Code. Carl H. Lindner, Fred J. Runk and
Thomas E. Mischell were executive officers of GACC within two
years before GACC's bankruptcy reorganization.
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements. The following consolidated
financial statements of the
Company and the Report of Independent Auditors are included
in the Company's 1994 Annual Report to Shareholders and are
incorporated by reference in Part II, Item 8:
Page of
Annual Report
Report of Independent Auditors 5
Consolidated Statement of Income for 1994, 1993 and
1992 10
Consolidated Balance Sheet at December 31, 1994 and
1993 11
Consolidated Statement of Shareholders' Equity for
1994, 1993 and 1992 12
Consolidated Statement of Cash Flow for 1994, 1993 and
1992 13
Notes to Consolidated Financial Statements 14
2. Financial Statement Schedule. Financial Statement
Schedule II - Allowance for
Doubtful Accounts Receivable is included on page 16 of this
Annual Report on Form 10-K. All other schedules are not
required under the related instructions or are inapplicable
and, therefore, have been omitted.
3. Exhibits. See Index of Exhibits (page 17) for a
listing of all exhibits filed with
this Annual Report on Form 10-K.
(b) The following reports on Form 8-K were filed during
the quarter ended Decemer 31,
1994:
October 10, 1994 - to report unusual charges and non-
recurring losses expected for the
quarter ended September 30, 1994.
October 17, 1994 - to report the U.S. Government's
agreement to initiate a formal
investigation of the EU banana import policy under
Section 301 of the U.S. Trade Act
of 1974.
12
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13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly
authorized on March 30, 1995.
CHIQUITA BRANDS INTERNATIONAL, INC.
By /s/ Carl H. Lindner
Carl H. Lindner
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been
signed below by the following persons on behalf of the
Registrant and in the capacities indicated
below on March 30, 1995:
/s/ Carl H. Lindner Chairman of the Board and
Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Director; President and
Keith E. Lindner Chief Operating Officer
/s/ S. Craig Lindner Director
S. Craig Lindner
/s/ Fred J. Runk Director and Vice President
Fred J. Runk
Jean H. Sisco* Director
Jean H. Sisco
William W. Verity* Director
William W. Verity
14
/s/Oliver W. Waddell*
Director
Oliver W. Waddell
/s/ Ronald F. Walker Director
Ronald F. Walker
/s/ Steven G. Warshaw
Executive Vice President, Chief Administrative
Steven G. Warshaw Officer and Chief Financial Officer
/s/ William A. Tsacalis Vice
President and Controller
William A. Tsacalis (Chief Accounting Officer)
* By /s/ William A. Tsacalis
Attorney-in-Fact**
** By authority of powers of attorney filed with this annual
report on Form 10-K.
15
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
Year Ended December 31,
1994 1993 1992
Balance at beginning of period $13,033 $11,733 $ 9,307
Additions:
Charged to costs and expenses 7,622 5,002
6,761
Deductions:
Write-offs 6,537 3,478 4,715
Other, net (31) 224 (380)
6,506 3,702 4,335
Balance at end of period $14,149 $13,033 $11,733
16
CHIQUITA BRANDS INTERNATIONAL, INC.
Index of Exhibits
Exhibit
Number Description
*3-a Second Restated Certificate of Incorporation, filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994
*3-b By-Laws, filed as Exhibit 3-b to Annual Report on Form
10-K for the year ended December 31, 1992
4 Registrant has no outstanding debt issues exceeding 10%
of the assets of Registrant and its consolidated
subsidiaries. The Registrant will furnish to the
Securities and Exchange Commission, upon request, copies
of all agreements and instruments defining the rights of
security holders for debt issues not exceeding 10% of
the assets of Registrant and its consolidated
subsidiaries.
*10-a Lease of Lands and Operating Contract between United
Brands Company, Chiriqui Land Company, Compania
Procesadora de Frutas and the Republic of Panama, dated
January 8, 1976, effective January 1, 1976, filed as
Exhibit 10-a to Annual Report on Form 10-K for the year
ended December 31, 1993
*10-b Agreement dated April 22, 1976 effective January 1, 1976
between Tela Railroad Company and the Government of
Honduras, filed as Exhibit 10-b to Annual Report on Form
10-K for the year ended December 31, 1993
Executive Compensation Plans
*10-c 1986 Stock Option and Incentive Plan, as amended, filed
as Exhibit 10(c) to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994
*10-d Individual Stock Option Plan and Agreement, filed as
Exhibit 4 to Registration Statement on Form S-8 No. 33-
25950 dated December 7, 1988
*10-e Deferred Compensation Plan, filed as Exhibit 10-e to
Annual Report on Form 10-K for the year ended December
31, 1992
11 Computation of Earnings Per Common Share
13 Chiquita Brands International, Inc. 1994 Annual Report
to Shareholders (pages 5 through 23 and inside back
cover)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
99 Annual Reports on Form 11-K for the Chiquita Savings and
Investment Plan and the John Morrell & Co. Salaried
Employees Incentive Savings Plan for 1994 will be filed
by amendment on or before June 29, 1995.
* Incorporated by reference.
17