FINANCIAL REPORT EXHIBIT 13
Statement of Management Responsibility
The financial information presented in this Annual Report is
the responsibility of Chiquita Brands International, Inc.
management, who believes that it presents fairly its consolidated
financial position and results of operations in accordance with
generally accepted accounting principles.
The Company's system of internal accounting controls, which is
supported by formal financial and administrative policies, is
designed to provide reasonable assurance that the financial
records are reliable for preparation of financial statements and
that assets are safeguarded against losses from unauthorized use
or disposition. Management reviews, modifies and improves these
systems and controls as changes occur in business conditions and
operations. The Company's worldwide internal audit function
reviews the adequacy and effectiveness of controls and compliance
with policies.
The Audit Committee of the Board of Directors reviews the
Company's financial statements, accounting policies and internal
controls. In performing its reviews, the Committee meets with
the independent auditors, management and internal auditors
periodically to discuss these matters.
The Company engages Ernst & Young LLP, an independent auditing
firm, to audit its financial statements and express an opinion
thereon. The scope of the audit is set by Ernst & Young LLP who
have full and free access to all Company records and personnel in
conducting their audits. Representatives of Ernst & Young LLP
are free to meet with the Audit Committee, with or without
members of management present, to discuss their audit work and
any other matters they believe should be brought to the attention
of the Committee.
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders of
Chiquita Brands International, Inc.
We have audited the accompanying consolidated balance sheets
of Chiquita Brands International, Inc. and subsidiary companies
as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flow for each
of the three years in the period ended December 31, 1995. These
financial statements, appearing on pages 10 through 22, are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Chiquita Brands International, Inc. and
subsidiary companies at December 31, 1995 and 1994 and the
consolidated results of their operations and their cash flow for
each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 26, 1996
-5-
SELECTED FINANCIAL DATA
Chiquita Brands International, Inc. and Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) 1995 1994 1993 1992 1991
- - ------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Working capital $366,893 $230,434 $266,793 $482,338 $960,093
Capital expenditures 64,640 136,981 196,554 472,273 395,641
Total assets 2,623,533 2,774,239 2,722,824 2,873,699 2,937,344
Capitalization
Short-term debt 172,333 221,051 192,207 229,286 187,821
Long-term debt 1,242,046 1,364,836 1,438,378 1,411,319 1,202,839
Shareholders' equity 672,207 644,809 584,069 667,962 967,925
================================================================================================
OPERATIONS
Net sales $2,565,992 $2,505,826 $2,532,925 $2,723,250 $2,604,128
Operating income (loss) * 175,770 71,185 103,848 (96,588) 197,818
Income (loss) from
continuing operations 27,969 (84,311) (51,081) (221,708) 110,909
Discontinued operations (11,197) 35,611 -- (62,332) 17,586
Income (loss) before
extraordinary item 16,772 (48,700) (51,081) (284,040) 128,495
Net income (loss)* 9,212 (71,540) (51,081) (284,040) 128,495
================================================================================================
SHARE DATA
Average number of common
shares outstanding 53,670 52,033 51,427 51,804 50,382
Earnings (loss) per common share:
Primary
- Continuing operations $.37 $(1.76) $(.99) $(4.28) $2.20
- Discontinued operations (.21) .69 -- (1.20) .35
- Extraordinary item (.14) (.44) -- -- --
- Net income (loss) .02 (1.51) (.99) (5.48) 2.55
Fully diluted
- Continuing operations .37 (1.76) (.99) (4.28) 2.19
- Discontinued operations (.21) .69 -- (1.20) .33
- Extraordinary item (.14) (.44) -- -- --
- Net income (loss) .02 (1.51) (.99) (5.48) 2.52
Dividends per common share .20 .20 .44 .66 .55
Market price per common share:
High 18.00 19.25 17.50 40.13 50.63
Low 12.25 11.25 10.13 15.75 29.63
End of year 13.75 13.63 11.50 17.25 40.00
===================================================================================================
* See "Management's Analysis of Operations and Financial Condition" and Notes to Consolidated Financial
Statements for a discussion of significant items included in operating income in 1995, 1994 and 1993.
-6-
Management's Analysis of Operations and Financial Condition
Chiquita Brands International, Inc. and Subsidiary Companies
Operations
Sales increased 2% in 1995 to approximately $2.6 billion
primarily as a result of higher fresh fruit prices. Operating
income for the year increased to $176 million from $71 million in
1994. Operating income includes:
- in 1995, a net gain of $19 million primarily resulting from
divestitures of operations and other actions taken as part
of the Company s ongoing program to improve shareholder
value. These divestitures and other actions included sales
of older ships, the sale of the Costa Rican operations of
Chiquita s Numar edible oils group, the shut-down of a
portion of the Company s juice operations and the
reconfiguration of banana production assets.
- in 1994, charges and losses of $67 million resulting
primarily from farm closings and write-downs of banana
cultivations following a strike in Honduras, and the
substantial reduction of the Company's Japanese "green"
banana trading operations.
In addition to the effects of the items described above, 1995
operating income increased from 1994 due to higher banana prices
outside the European Union ("EU"), the favorable effect of
changes in foreign exchange rates on European sales and earnings
improvements from other food products. These favorable effects
were partially offset by higher banana operating costs resulting
from the implementation of the banana Framework Agreement between
the EU, Colombia and Costa Rica, higher paper costs, and lower EU
banana prices late in the year. These lower EU prices, which
continued into early 1996, were brought about by the over
issuance of special import licenses to European-based banana
companies as relief for hurricane damage sustained in the
Caribbean.
Operating income for 1994 was $33 million lower than for 1993
primarily due to the charges and losses described above as well
as higher costs which were incurred to replace Honduran banana
volume that was curtailed following the strike.
Net interest expense decreased in both 1995 and 1994 as a
result of debt refinancing and reduction activities and, in 1995,
higher average yields on investments. Net income of $9 million
in 1995 and the net loss of $72 million in 1994 include
extraordinary charges of $8 million and $23 million,
respectively, resulting from refinancings and prepayments of
debt.
Income taxes consist principally of foreign income taxes
currently paid or payable. No tax benefit was recorded for
unrealized U.S. net operating loss carryforwards or other
available tax credits.
In February 1996, heavy rainfall caused significant flooding
in Costa Rica. Banana industry cultivations in the region,
including Chiquita's, were damaged and banana industry production
in Costa Rica has been reduced. The Company estimates that less
than 5% of its total Latin American banana cultivations sustained
varying degrees of damage from the flooding.
International Operations
Chiquita's products are distributed in more than 40 countries.
Its international sales are made primarily in U.S. dollars and
major European currencies. The Company manages currency exchange
risks from sales originating in currencies other than the dollar
generally by exchanging local currencies for dollars immediately
upon receipt, and by engaging from time to time in various
hedging activities. Debt denominated in currencies other than
the U.S. dollar serves as a hedge of the net investments in those
respective countries. In addition, various hedging activities
are used to offset currency exchange movements on firm
commitments and other transactions where the potential for loss
exists. At December 31, 1995, the Company had foreign exchange
forward contracts and options to ensure conversion of
approximately $320 million of foreign sales in 1996 at a rate not
higher than 1.45 Deutsche marks per U.S. dollar. (See Note 8 of
the Consolidated Financial Statements for additional discussion
of the Company's hedging activities.)
-7-
On July 1, 1993, the 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
quotas and tariffs on bananas imported from other sources,
including Latin America, Chiquita's primary source of fruit.
Since imposition of the EU quota regime, prices within the EU
have increased to a higher level than the levels prevailing prior
to the quota. Banana prices in other worldwide markets, however,
have been lower than in years prior to the EU quota, as the
displaced EU volume has entered those markets. 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 implemented this agreement in 1995,
significantly increasing the Company's cost to export bananas
from these countries. Three additional European countries
(Sweden, Finland and Austria) joined the EU effective January 1,
1995. These countries, which had substantially unrestricted
banana markets in which the Company 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. Implementation of the quota regime
continues to evolve, and there can be no assurance that the EU
banana regulation will not change further.
In September 1994, Chiquita and the Hawaii Banana Industry
Association made a joint filing with the Office of the U.S. Trade
Representative ("USTR") 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 formal investigations of
the EU banana import policy and of the Colombian and Costa Rican
Framework Agreement export policies. In January 1995, the U.S.
Government announced a preliminary finding against the EU banana
import policy and in September 1995, based on information
obtained in the USTR's investigation under Section 301, the
United States, joined by Guatemala, Honduras and Mexico,
commenced a new international trade challenge against the EU
regime using the procedures of the World Trade Organization
("WTO"). In January 1996, the USTR announced that it had found
the banana Framework Agreement export policies of Costa Rica and
Colombia to be unfair. The USTR further announced it was not
imposing sanctions at that time, pending further consultations
with those countries to eliminate harm to U.S. commerce. In
early February 1996, Ecuador, the world s largest exporter of
bananas, joined the United States, Guatemala, Honduras and Mexico
in challenging the EU regime under the WTO. Both the WTO and
Section 301 authorize 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 WTO
and Section 301 proceedings, the nature and extent of actions
that may be taken by the United States or other adversely
affected countries, or the impact on the EU quota regime or the
Framework Agreement.
Discontinued Meat Operations
As described in Note 2 to the Consolidated Financial
Statements, the Company completed the sale of its meat operations
in December 1995 and has accounted for it as a discontinued
operation.
-8-
Financial Condition
Cash flow from operations was $90 million, $73 million and $47
million in 1995, 1994 and 1993, respectively. At December 31,
1995, Chiquita had $311 million of cash and marketable
securities, including $40 million of restricted cash on deposit.
Capital expenditures were $65 million in 1995, $137 million in
1994 and $197 million in 1993, including $72 million in 1994 and
$144 million in 1993 of investment spending primarily for
transportation system improvements and fresh fruit production
capacity. During 1994, the Company completed its multi-year
investment spending program with the delivery of the last two
ships under construction. This program was the primary reason
for approximately $260 million in long-term subsidiary borrowings
during 1994 and 1993. As a result of this program, the Company s
free cash flow (the excess of earnings before depreciation and
amortization over capital expenditures) is greater than its
results of operations.
In accordance with its strategic program to improve
shareholder value by strengthening its balance sheet, enhancing
short-term liquidity, reducing overall borrowing costs and
positioning the Company for future cost reduction and
deleveraging opportunities, Chiquita:
- Sold its remaining meat operations to Smithfield Foods, Inc.
in December 1995 for approximately $60 million, including
$25 million in cash and 1.1 million shares of Smithfield
common stock. Smithfield's common stock is traded publicly
on NASDAQ. In 1994, the Company sold its specialty meat
operations for $53 million in cash and used the proceeds
primarily to reduce short-term borrowings of the Meat
Division.
- Sold the Costa Rican operations of its Numar edible oils
group in December 1995 for approximately $100 million,
including $50 million in cash and $50 million in secured
notes receivable.
- Sold older ships in 1995 for $90 million in cash and used
approximately $50 million of the proceeds to prepay the
related debt.
- Sold and leased back shipping containers in 1995 and 1994
which generated gross proceeds of $40 million and $32
million, respectively. Approximately $27 million and $20
million of related 9.8% debt was retired in 1995 and 1994,
respectively.
- Replaced $153 million of shipping related loans in 1995 with
loans having longer maturities totaling $187 million and
negotiated the extension of the maturities on another $23
million ship loan.
- Used $36 million of restricted cash to repay related
subsidiary debt in December 1995.
- Raised approximately $310 million in a 1994 public offering
of 9 1/8% senior notes and preferred stock. The Company
used the proceeds of these offerings to redeem or repay
subordinated and subsidiary debt, including 11 7/8%
subordinated debentures, and 10 1/2% and 10 1/4%
subordinated debentures which carried effective interest
rates of 12.1% and 13.7%, respectively.
- Reduced the annual dividend rate on its capital stock in
mid-1993 from $.68 per share to $.20 per share.
-9-
CONSOLIDATED STATEMENT OF INCOME
Chiquita Brands International, Inc. and Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
Year Ended December 31,
(In thousands, except per share amounts) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Net sales $2,565,992 $2,505,826 $2,532,925
- - ------------------------------------------------------------------------------------------------------------
Operating expenses
Cost of sales 1,958,063 1,996,179 1,993,552
Selling, general and administrative expenses 333,537 331,498 332,934
Depreciation 98,622 106,964 102,591
- - ------------------------------------------------------------------------------------------------------------
2,390,222 2,434,641 2,429,077
- - ------------------------------------------------------------------------------------------------------------
Operating income 175,770 71,185 103,848
Interest income 28,157 22,902 20,377
Interest expense (163,513) (167,464) (169,789)
Other income, net 1,455 2,566 6,483
- - ------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes 41,869 (70,811) (39,081)
Income taxes (13,900) (13,500) (12,000)
- - ------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 27,969 (84,311) (51,081)
Discontinued operations (11,197) 35,611 --
- - ------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 16,772 (48,700) (51,081)
Extraordinary loss from debt refinancing (7,560) (22,840) --
- - ------------------------------------------------------------------------------------------------------------
Net income (loss) $9,212 $(71,540) $(51,081)
Less dividends on Series A preferred stock (8,266) (7,232) --
- - ------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common shares $946 $(78,772) $(51,081)
Per common share - primary and fully diluted
- Continuing operations $.37 $(1.76) $(.99)
- Discontinued operations (.21) .69 --
- Extraordinary item (.14) (.44) --
- Net income (loss) .02 (1.51) (.99)
=============================================================================================================
Weighted average number of common
shares outstanding 53,670 52,033 51,427
=============================================================================================================
See Notes to Consolidated Financial Statements.
-10-
CONSOLIDATED BALANCE SHEET
Chiquita Brands International, Inc. and Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
December 31,
(In thousands, except share amounts) 1995 1994
- - ------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $236,675 $165,523
Marketable securities 34,743 --
Trade receivables, less allowances of $11,310 and $13,060, respectively 184,364 205,194
Other receivables, net 89,848 92,725
Inventories 293,379 308,549
Other current assets 37,827 32,334
- - ------------------------------------------------------------------------------------------------------------
Total current assets 876,836 804,325
Restricted cash 39,520 75,030
Net assets of discontinued operations -- 46,718
Property, plant and equipment, net 1,182,144 1,387,132
Investments and other assets 356,805 301,776
Intangibles, net 168,228 159,258
- - ------------------------------------------------------------------------------------------------------------
Total assets $2,623,533 $2,774,239
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable $119,456 $130,040
Long-term debt due within one year 52,877 91,011
Accounts payable 206,717 232,535
Accrued liabilities 130,893 120,305
- - ------------------------------------------------------------------------------------------------------------
Total current liabilities 509,943 573,891
Long-term debt of parent company 840,925 840,377
Long-term debt of subsidiaries 401,121 524,459
Accrued pension and other employee benefits 85,514 74,855
Other liabilities 113,823 115,848
- - ------------------------------------------------------------------------------------------------------------
Total liabilities 1,951,326 2,129,430
============================================================================================================
Shareholders' equity
Preferred and preference stock 138,369 190,639
Capital stock, $.33 par value (54,769,140 and
49,300,881 shares outstanding, respectively) 18,256 16,434
Capital surplus 581,019 505,800
Accumulated deficit (65,437) (52,940)
Minimum pension liability adjustment -- (15,124)
- - ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 672,207 644,809
============================================================================================================
Total liabilities and shareholders' equity $2,623,533 $2,774,239
============================================================================================================
See Notes to Consolidated Financial Statements.
-11-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Chiquita Brands International, Inc. and Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
Minimum
Preferred pension Total
and Retained liability share-
preference Capital earnings adjust- holders
stock Capital stock surplus (deficit) ment equity
- - ------------------------------------------------------------------------------------------------------------
(In thousands, except share amounts) Shares Par value
- - ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 $52,270 48,163,560 $16,055 $490,369 $116,193 $(6,925) $667,962
Capital stock repurchased -- (30,000) (10) (102) (325) -- (437)
Stock options exercised -- 17,120 6 168 -- -- 174
Other shares issued -- 168,000 55 1,738 -- -- 1,793
Change in minimum pension
liability adjustment -- -- -- -- -- (11,004) (11,004)
Net loss -- -- -- -- (51,081) -- (51,081)
Dividends
Capital stock -- -- -- -- (21,191) -- (21,191)
Preference stock -- 191,673 64 2,067 (4,278) -- (2,147)
- - ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $52,270 48,510,353 $16,170 $494,240 $ 39,318 $(17,929) $584,069
Stock options exercised -- 118,133 40 1,325 -- -- 1,365
Series A preferred stock issued 138,369 -- -- -- -- -- 138,369
Other shares issued -- 358,244 119 6,075 -- -- 6,194
Change in minimum pension
liability adjustment -- -- -- -- -- 2,805 2,805
Net loss -- -- -- -- (71,540) -- (71,540)
Dividends
Capital stock -- -- -- -- (9,757) -- (9,757)
Preferred and preference stock -- 314,151 105 4,160 (10,961) -- (6,696)
- - ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $190,639 49,300,881 $16,434 $505,800 $(52,940) $(15,124) $644,809
Stock options exercised -- 331,691 110 3,249 -- -- 3,359
Capital stock issued in exchange
for Series C preference stock (52,270) 3,241,546 1,081 51,189 -- -- --
Other shares issued -- 1,661,658 553 17,659 -- -- 18,212
Change in minimum pension
liability adjustment -- -- -- -- -- 15,124 15,124
Net income -- -- -- -- 9,212 -- 9,212
Dividends
Capital stock -- -- -- -- (10,236) -- (10,236)
Preferred and preference stock -- 233,364 78 3,122 (11,473) -- (8,273)
- - ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $138,369 54,769,140 $18,256 $581,019 $(65,437) $ -- $672,207
============================================================================================================
See Notes to Consolidated Financial Statements.
-12-
CONSOLIDATED STATEMENT OF CASH FLOW
Chiquita Brands International, Inc. and Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
Year Ended December 31,
(In thousands 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Cash provided (used) by:
Operations
Income (loss) from continuing operations $27,969 $(84,311) $(51,081)
Depreciation and amortization 104,581 113,080 109,711
Gain on sales of transportation assets and other divestitures(32,100) -- --
Write-downs of farms and cultivations -- 24,600 --
Changes in current assets and liabilities
Receivables 16,194 (19,418) (7,571)
Inventories 10,054 (14,275) 40,535
Accounts payable (29,838) 26,083 (16,405)
Other current assets and liabilities (3,643) 19,454 (28,871)
Other (2,906) 7,600 895
- - ------------------------------------------------------------------------------------------------------------
Cash flow from operations 90,311 72,813 47,213
- - ------------------------------------------------------------------------------------------------------------
Investing
Capital expenditures (64,640) (136,981) (196,554)
Restricted cash deposits 35,510 (24,010) (51,020)
Long-term investments (814) (7,717) (49,466)
Decrease in marketable securities -- -- 25,212
Proceeds from sales of transportation assets
and other divestitures 166,835 41,705 22,000
Other (4,188) (6,518) 11,828
- - ------------------------------------------------------------------------------------------------------------
Cash flow from investing 132,703 (133,521) (238,000)
- - ------------------------------------------------------------------------------------------------------------
Financing
Debt transactions
Issuances of long-term debt 214,171 278,388 151,160
Repayments of long-term debt (361,906) (369,666) (132,839)
Increase (decrease) in notes and loans payable (10,236) 21,911 (25,621)
Stock transactions
Issuance of preferred stock -- 138,369 --
Issuances of capital stock 3,413 5,006 1,417
Dividends (18,509) (16,453) (23,338)
- - ------------------------------------------------------------------------------------------------------------
Cash flow from financing (173,067) 57,555 (29,221)
- - ------------------------------------------------------------------------------------------------------------
Discontinued Operations 21,205 17,450 (16,735)
- - ------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 71,152 14,297 (236,743)
Balance at beginning of year 165,523 151,226 387,969
- - ------------------------------------------------------------------------------------------------------------
Balance at end of year $236,675 $165,523 $151,226
=============================================================================================================
See Notes to Consolidated Financial Statements.
-13-
Notes to Consolidated Financial Statements
Chiquita Brands International, Inc. and Subsidiary Companies
Note 1 -- Summary of Significant Accounting Policies
American Financial Group, Inc. and its subsidiaries ("AFG")
owned approximately 44% of the outstanding capital stock of
Chiquita Brands International, Inc. ("Chiquita" or the "Company")
as of December 31, 1995.
Consolidation
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries, other than the
Meat Division which was sold in December 1995 and is accounted
for as a discontinued operation (see Note 2). The accompanying
notes present amounts related only to continuing operations,
unless otherwise indicated. Intercompany balances and
transactions have been eliminated.
Investments representing minority interests are accounted for
by the equity method when Chiquita has the ability to exercise
significant influence in the investees' operations; otherwise,
they are accounted for at cost. At December 31, 1995 and 1994,
investments in food-related companies of $79 million and $66
million, respectively, were accounted for using the equity
method. The excess ($16 million) of the carrying value over
Chiquita's share of the fair value of the investees' net assets
at the date of acquisition is being amortized over periods
ranging from 10 to 40 years.
Use of Estimates
The financial statements have been prepared in conformity with
generally accepted accounting principles, which require
management to make estimates and assumptions that affect the
amounts and disclosures reported in the financial statements and
accompanying notes.
Cash and Equivalents
Cash and equivalents include all unrestricted cash and highly
liquid investments with a maturity when purchased of three months
or less.
Marketable Securities
Marketable securities consist of common stock categorized as
available-for-sale (see Note 2).
Inventories
Inventories are valued at the lower of cost or market. Cost
for growing crops and certain banana inventories is determined
principally on the "last-in, first-out" (LIFO) basis. Cost for
other inventory categories is determined principally on the
"first-in, first-out" (FIFO) or average cost basis.
Intangibles
Intangibles consist of goodwill and trademarks which are being
amortized over 40 years. Accumulated amortization was $39.3
million and $34.0 million at December 31, 1995 and 1994,
respectively. The carrying value of intangibles is evaluated
periodically in relation to the operating performance and future
cash flows of the underlying businesses.
Income Taxes
Deferred income taxes are recognized at currently enacted tax
rates for temporary differences between the financial reporting
and income tax bases of assets and liabilities. Deferred taxes
are not provided on the undistributed earnings of subsidiaries
operating outside the U.S. that have been or are intended to be
permanently reinvested.
Foreign Exchange
Chiquita utilizes the U.S. dollar as its functional currency.
Net foreign exchange gains, which amounted to approximately $7.2
million, $11.0 million and $7.5 million in 1995, 1994 and 1993,
respectively, are included in income.
The Company has a long-standing policy of periodically
entering into foreign exchange forward contracts and purchasing
foreign currency options to hedge transactions denominated in
foreign currencies in order to protect the Company from the risk
that the eventual dollar cash flows of the transactions will be
adversely affected by changes in exchange rates. Gains and
losses on forward contracts used to hedge firm commitments and on
purchased options are deferred and included in the measurement of
the underlying transactions. Gains and losses on forward
contracts used to hedge other transactions are included in income
on a current basis.
Earnings Per Share
Primary earnings per share is calculated on the basis of the
weighted average number of shares of common stock and equivalent
Series C preference stock outstanding during the year, reduced by
restricted
-14-
shares related to unearned compensation, and increased by the
dilutive effect, if any, of assumed conversion of stock options.
Fully diluted earnings per share also includes the dilutive
effect, if any, of assumed conversion of Series A preferred stock
and convertible subordinated debentures.
Note 2 -- Discontinued Operations
Pursuant to a plan of disposal for all remaining Meat Division
operations, the Company completed the sale of a major fresh pork
processing facility in December 1992. During 1994, the
Division's specialty meat operations were sold for approximately
$53 million in cash resulting in a gain of $10.2 million. In
December 1995, the remaining meat operations were sold to
Smithfield Foods, Inc. for approximately $60 million, including
$25 million in cash and approximately 1.1 million shares (6%) of
Smithfield s outstanding common stock. Smithfield assumed all
Meat Division liabilities, including those related to pension
obligations.
Meat Division operating results included in Chiquita s
Consolidated Statement of Income as Discontinued operations are
as follows:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Net sales $1,460,608 $1,455,894 $1,549,712
- - ------------------------------------------------------------------------------------------------------------
Income from operations 3,351 25,455 --
Gain on sale 576 10,156 --
Minimum pension liability adjustment (15,124) -- --
- - ------------------------------------------------------------------------------------------------------------
Discontinued operations $(11,197) $35,611 $--
============================================================================================================
The $15.1 million minimum pension liability adjustment
recognized in 1995 was previously charged directly to
shareholders' equity.
Note 3 -- Other Divestitures
During 1995, the Company completed certain divestitures and
took other actions as part of its ongoing program to improve
shareholder value. These actions, which included sales of older
ships, the sale of the Costa Rican operations of Chiquita's Numar
edible oils group, the shut-down of a portion of the Company's
juice operations and the reconfiguration of banana production
assets, resulted in a net gain of $19 million. Cash proceeds
aggregated $167 million. Additional proceeds of $50 million,
consisting of secured notes, are collectible over the next five
years.
Note 4 -- Inventories
Inventories consist of the following:
- - ------------------------------------------------------------------------------------------------------------
December 31,
(In thousands) 1995 1994
- - ------------------------------------------------------------------------------------------------------------
Bananas and other fresh produce $39,920 $42,444
Other food products 64,528 68,713
Growing crops 120,178 115,177
Materials and supplies 56,925 68,062
Other 11,828 14,153
- - ------------------------------------------------------------------------------------------------------------
$293,379 $308,549
============================================================================================================
The carrying value of inventories valued by the LIFO method
was $128 million at December 31, 1995 and $126 million at
December 31, 1994. If inventories were stated at current costs,
total inventory values would have been approximately $28 million
and $30 million higher than reported at December 31, 1995 and
1994, respectively.
Note 5 -- Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:
- - ------------------------------------------------------------------------------------------------------------
December 31, Depreciable
(In thousands) 1995 1994 Lives (Years)
- - ------------------------------------------------------------------------------------------------------------
Land $88,963 $107,579
Buildings and improvements 190,980 205,735 7 to 40
Machinery and equipment 387,376 399,437 3 to 30
Ships and containers 662,967 796,906 5 to 20
Cultivations 291,326 317,233 3 to 30
Other 71,517 78,352 3 to 40
- - ------------------------------------------------------------------------------------------------------------
1,693,129 1,905,242
Accumulated depreciation (510,985) (518,110)
- - ------------------------------------------------------------------------------------------------------------
$1,182,144 $1,387,132
============================================================================================================
-15-
Property, plant and equipment are stated at cost and, except
for land and certain improvements, are depreciated on a straight-
line basis over their estimated useful lives. The Company
capitalized interest costs of $1 million in 1995, $4 million in
1994 and $8 million in 1993.
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of effective for 1996. Although the
new rule is under study, the Company does not expect it to have a
material effect on its financial statements.
Note 6 -- Leases
Total rental expense consists of the following:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Gross rentals - ships and containers $94,829 $101,207 $142,969
- other 35,562 34,084 32,528
- - ------------------------------------------------------------------------------------------------------------
130,391 135,291 175,497
Less sublease rentals (17,310) (4,740) (7,189)
- - ------------------------------------------------------------------------------------------------------------
$113,081 $130,551 $168,308
=============================================================================================================
Future minimum rental payments required under operating leases
having initial or remaining non-cancelable lease terms in excess
of one year at December 31, 1995 are as follows:
- - ------------------------------------------------------------------------------------------------------------
Gross Rentals
- - ------------------------------------------------------------------------------------------------------------
(In thousands) Ships and containers Other Total
- - ------------------------------------------------------------------------------------------------------------
1996 $46,698 $20,607 $67,305
1997 27,258 18,574 45,832
1998 26,932 13,917 40,849
1999 30,191 9,658 39,849
2000 25,174 4,164 29,338
Later years 51,124 6,009 57,133
=============================================================================================================
Portions of the minimum rental payments for ships constitute
reimbursement for ship operating costs paid for by the lessor.
Aggregate future minimum rental payments to be received from non-
cancelable subleases at December 31, 1995, principally for office
space and ships, are $37 million.
Note 7 -- Debt
Long-term debt consists of the following:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) December 31,
Parent Company 1995 1994
- - ------------------------------------------------------------------------------------------------------------
9 1/8% senior notes, due 2004 $175,000 $175,000
9 5/8% senior notes, due 2004, less unamortized discount
of $2,439 and $2,632 (imputed interest rate of 9.8%) 247,561 247,368
7% subordinated debentures, due 2001, convertible
into capital stock at $43 per share 138,000 138,000
10 1/2% subordinated debentures, due 2004, less unamortized
discount of $5,464 and $5,839 (imputed interest rate of 12.1%) 60,355 59,980
11 1/2% subordinated notes, due 2001 220,000 220,000
Other notes and loans 28 47
Less current maturities (19) (18)
- - ------------------------------------------------------------------------------------------------------------
Long-term debt of parent company $840,925 $840,377
============================================================================================================
Subsidiary Companies
- - ------------------------------------------------------------------------------------------------------------
Loans payable secured by ships and containers, due in
installments from 1996 to 2009, bearing interest at
effective rates averaging 8.6% (8.8% at December 31, 1994) $295,074 $368,146
Caribbean Basin Projects Financing Authority (CBI Industrial
Revenue Bonds 1993 Series A) loan, due 1998, bearing
interest at a variable rate of 4.8% (4.4% at December 31, 1994) 38,000 38,000
Overseas Private Investment Corporation loans, due in installments
through 2002, bearing interest at rates averaging 9% 15,621 17,774
Loans and notes payable in foreign currencies maturing through 2008,
bearing interest at rates averaging 19% (22% at December 31, 1994) 34,076 50,846
Other loans and notes payable maturing through 2012,
bearing interest at rates averaging 9% 71,208 140,686
Less current maturities (52,858) (90,993)
- - ------------------------------------------------------------------------------------------------------------
Long-term debt of subsidiaries $401,121 $524,459
============================================================================================================
Certain of the subordinated debentures have sinking fund
requirements and are callable at the Company's option at prices
ranging from par to premiums of 1.9% to 5.7% over par at various
dates through 1998. Certain of the Company's debt agreements
contain restrictions on the payment of cash dividends. At
December 31, 1995, approximately $160 million was available for
dividend payments under the most restrictive of these agreements.
During the second quarter of 1995, the Company replaced $153
million of ship loans with loans having
-16-
longer maturities totaling $187 million resulting in an
extraordinary loss of $4.7 million. In 1995, the Company sold
and leased back $40 million of container equipment and used $27
million of the sale proceeds to prepay related debt, resulting in
an extraordinary loss of $2.9 million.
In February 1994, the Company issued $175 million principal
amount of 9 1/8% senior notes due 2004. The proceeds from this
issuance, together with the proceeds from the sale of preferred
stock (see Note 11), were used to redeem or repay higher rate
subordinated and subsidiary debt. These prepayments resulted in
an extraordinary loss of $22.8 million consisting principally of
write-offs of unamortized discounts and $5 million of call
premiums.
At December 31, 1995, $68 million of the carrying amount of
loans secured by ships and containers had interest rates fixed at
an average of 8% by the terms of the loans or by the operation of
interest rate swap agreements (see Note 8). The overall
effective interest rate on ship and container loans includes the
amortization of deferred hedging gains and losses from interest
rate futures contracts. No such contracts were outstanding at
December 31, 1995 or 1994.
Cash payments relating to interest expense were $156.0
million, $158.7 million and $159.4 million in 1995, 1994 and
1993, respectively.
Maturities and sinking fund requirements on long-term debt
during the next five years, after application of previously
reacquired debentures to meet sinking fund requirements, are:
- - ------------------------------------------------------------------------------------------------------------
Parent Subsidiary
(In thousands) Company Companies Total
- - ------------------------------------------------------------------------------------------------------------
1996 $19 $52,858 $52,877
1997 9 61,000 61,009
1998 -- 96,872 96,872
1999 -- 35,671 35,671
2000 -- 37,176 37,176
============================================================================================================
The Company maintains lines of credit with various domestic
and foreign banks for borrowing funds on a short-term basis and
has short-term working capital loans with domestic and foreign
banks. At December 31, 1995, the weighted average interest rate
for all short-term notes and loans payable was 10.6% (11.7% at
December 31, 1994).
Note 8 -- Hedging Transactions
At December 31, 1995, the Company had foreign exchange forward
contracts to ensure conversion of approximately $20 million of
foreign sales commitments for 1996 at an average exchange rate of
1.36 Deutsche marks per U.S. dollar. The fair value of these
contracts, based on quoted market prices, was not significant.
The Company also had option contracts which ensure conversion
through 1996 of approximately $70 million of foreign sales at a
rate not higher than 1.44 Deutsche marks per U.S. dollar and
approximately $230 million of foreign sales at a rate not higher
than 1.45 Deutsche marks per U.S. dollar or lower than 1.32
Deutsche marks per U.S. dollar. The carrying value of these
option contracts, and the fair value based on quoted market
prices, was not significant.
Chiquita has interest rate swap agreements to fix the rate of
interest on approximately $49 million of its variable rate ship
and container loans maturing between 1998 and 2001. The Company
has entered into currency and interest rate swap agreements which
have the effect of converting $54 million of ship loans
denominated in pounds sterling into U.S. dollar loans with
variable interest rates that become fixed at 7.7% beginning in
1997. The Company s swap agreements have maturities ranging from
1998 to 2005.
The carrying values and estimated fair values of the Company's
debt and associated swap agreements are summarized below:
- - ------------------------------------------------------------------------------------------------------------
December 31,
1995 1994
- - ------------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
(In thousands) value fair value value fair value
- - ------------------------------------------------------------------------------------------------------------
Debt $1,414,379 $1,442,900 $1,585,887 $1,531,400
Interest rate swap agreements -- 3,100 -- (300)
Foreign currency swap
agreements -- (3,000) -- 400
- - ------------------------------------------------------------------------------------------------------------
$1,414,379 $1,443,000 $1,585,887 $1,531,500
============================================================================================================
Fair value for the Company's publicly traded debt is based on
quoted market prices. Fair value for other debt is estimated
based on the current rates offered to
-17-
the Company for debt of similar maturities. The fair values of
interest rate and foreign currency swap agreements are estimated
based on the cost to terminate the agreements.
The Company is exposed to credit loss in the event of
nonperformance by counterparties on foreign exchange forward
contracts, interest rate swap agreements and currency swap
agreements. However, because the Company's hedging activities
are transacted only with highly rated institutions, Chiquita does
not anticipate nonperformance by any of these counterparties.
The amount of any credit exposure is limited to unrealized gains
on such contracts and swaps.
Note 9 -- Pension and Severance Benefits
The Company and its subsidiaries have several defined benefit
and contribution pension plans covering approximately 5,000
domestic and foreign employees. Approximately 31,000 employees
are covered by Central and South American severance plans.
Pension plans covering eligible salaried employees and Central
and South American severance plans for all employees call for
benefits to be based upon years of service and compensation
rates.
Pension and severance expense consists of the following:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Defined benefit and severance plans:
Service cost -- benefits earned
during the period $5,664 $5,383 $5,885
Interest cost on projected benefit obligation 8,622 8,412 8,423
Actual return on plan assets (2,505) (623) (2,215)
Net amortization and deferral 1,441 (1,181) (521)
- - ------------------------------------------------------------------------------------------------------------
13,222 11,991 11,572
Defined contribution plans 3,458 3,648 3,669
- - ------------------------------------------------------------------------------------------------------------
Total pension and severance expense $16,680 $15,639 $15,241
=============================================================================================================
The projected benefit obligations were determined using
assumed discount rates of approximately 9 1/4% in 1995 and 1994
for unfunded Central and South American pension and severance
benefits and approximately 7 3/4% in 1995 and 7% in 1994 for all
other plan benefits. The assumed long-term rate of compensation
increase was between 5% and 6% in 1995 and 1994 and the assumed
long-term rate of return on plan assets was approximately 9% in
1995 and 1994.
Pensions are funded in accordance with the requirements of the
Employee Retirement Income Security Act or equivalent foreign
regulations. Plan assets consist primarily of corporate debt,
U.S. government and agency obligations and collective trust
funds. In accordance with local regulations, severance benefits
in Central and South America are generally not funded until
benefits are paid.
The funded status of the Company's domestic and foreign
defined benefit pension and severance plans is as follows:
- - ------------------------------------------------------------------------------------------------------------
Plans for which Plans for which
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
at December 31, at December 31,
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1995 1994
- - ------------------------------------------------------------------------------------------------------------
Plan assets at fair market value $6,723 $15,193 $16,836 $22,587
- - ------------------------------------------------------------------------------------------------------------
Present value of benefit obligations:
Vested 4,933 13,875 74,720 67,056
Nonvested 56 37 965 4,182
- - ------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 4,989 13,912 75,685 71,238
Additional amounts related to
projected pay increases 2,094 854 19,286 18,333
- - ------------------------------------------------------------------------------------------------------------
Projected benefit obligation 7,083 14,766 94,971 89,571
- - ------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than
(in excess of) plan assets (360) 427 (78,135) (66,984)
Projected benefit obligation not yet
recognized in the balance sheet:
Net actuarial (gain) loss 690 (414) 18,661 9,705
Prior service cost 224 -- 3,262 2,333
Obligation (asset) at transition,
net of amortization (39) (45) 5,109 6,295
Adjustment required to recognize
minimum liability -- -- (7,746) --
- - ------------------------------------------------------------------------------------------------------------
Net balance sheet asset (liability) $515 $(32) $(58,849)* $(48,651)*
=============================================================================================================
*Includes $56 million in 1995 and $47 million in 1994 relating to
foreign pension and severance plans that are not required to be
funded until benefits are paid.
-18-
The adjustment required to recognize the minimum pension
liability is based on the excess of the accumulated benefit
obligation over the fair market value of assets of Central and
South American severance plans. This adjustment is offset by
recording an intangible asset.
Note 10 -- Stock Options
Under its non-qualified 1986 Stock Option and Incentive Plan,
the Company may grant up to an aggregate of 15,000,000 shares of
capital stock in the form of stock options, stock appreciation
rights and stock awards. Under this plan, options have been
granted to directors, officers and other key employees to
purchase shares of the Company's capital stock at the fair market
value at the date of grant. The options may be exercised over a
period not in excess of 20 years.
- - ------------------------------------------------------------------------------------------------------------
1995 1994
Option Option
Shares Price Shares Price
- - ------------------------------------------------------------------------------------------------------------
Under option at beginning
of year 5,213,758 $5.75 - 34.44 5,451,768 $5.75 - 47.75
Options granted 1,764,460 12.31 - 15.88 287,165 11.44 - 17.06
Options exercised (331,691) 5.75 - 16.38 (118,133 )8.67 - 16.38
Options canceled or expired (653,555) 10.31 - 34.44 (407,042 )8.67 - 47.75
- - ------------------------------------------------------------------------------------------------------------
Under option at end of year 5,992,972 $8.67 - 34.44 5,213,758 $5.75 - 34.44
- - ------------------------------------------------------------------------------------------------------------
Options exercisable at end of year 2,439,015 2,234,823
- - ------------------------------------------------------------------------------------------------------------
Shares available for future grant 6,365,296 7,968,754
- - ------------------------------------------------------------------------------------------------------------
Stock options for 17,120 shares were exercised during 1993 at
prices ranging from $8.67 to $16.13 per share.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123") effective for 1996. The Company
intends to continue to use its current method of accounting for
stock-based compensation, as permitted by SFAS No. 123.
Therefore, the new rule will have no effect on the Company's
financial statements.
Note 11 -- Shareholders' Equity
At December 31, 1995, there were 150 million authorized shares
of capital stock. Of the shares authorized but unissued at
December 31, 1995, 14.8 million shares were reserved for issuance
under stock option and employee benefit plans, 3.2 million shares
were reserved for conversion of subordinated debentures, and 7.6
million shares were reserved for conversion of preferred stock at
the holders option. In addition, Chiquita has reserved 21.1
million shares for the maximum additional number of shares
potentially issuable upon conversion of preferred stock at the
Company's option after February 2001.
During the fourth quarter of 1995, Chiquita issued 725,000
shares of capital stock in repayment of $11.2 million of
subsidiary debt.
In February 1994, the Company sold 2,875,000 shares of $2.875
Non-Voting Cumulative Preferred Stock, Series A, par value $1.00
per share (the "Series A Shares") for aggregate net proceeds of
$138 million. Each Series A Share has a liquidation preference
of $50.00 per share and is entitled to an annual cash dividend of
$2.875 per share. Each Series A Share is convertible into 2.6316
shares of capital stock at the holder's option or, in certain
circumstances beginning in February 1997, at the Company s
option. After February 2001, the Company may convert each Series
A Share into a number of capital shares (not exceeding 10 shares)
having a total market value of $50.00. Holders of Series A
Shares have the right to elect additional directors in addition
to the directors ordinarily elected by holders of capital stock
in certain circumstances where the Company fails to pay quarterly
dividends on the preferred stock. The Board of Directors has the
authority to fix the terms of 7,125,000 additional shares of Non-
Voting Cumulative Preferred Stock.
The Company has four million authorized shares of Cumulative
Preference Stock, one million of which were designated as Series
C Shares. In 1995, all outstanding shares of Mandatorily
Exchangeable Cumulative Preference Stock, Series C were converted
into capital stock.
-19-
Note 12 - Income Taxes
Income taxes consist of the following:
- - ------------------------------------------------------------------------------------------------------------
United States
(In thousands) Federal State Foreign Total
- - ------------------------------------------------------------------------------------------------------------
1995
Current tax expense $1,218 $1,011 $12,657 $14,886
Deferred tax benefit -- -- (986) (986)
- - ------------------------------------------------------------------------------------------------------------
$1,218 $1,011 $11,671 $13,900
============================================================================================================
1994
Current tax expense $-- $1,024 $11,566 $12,590
Deferred tax expense -- -- 910 910
- - ------------------------------------------------------------------------------------------------------------
$-- $1,024 $12,476 $13,500
============================================================================================================
1993
Current tax expense $-- $1,944 $13,247 $15,191
Deferred tax benefit -- -- (3,191) (3,191)
- - ------------------------------------------------------------------------------------------------------------
$-- $1,944 $10,056 $12,000
============================================================================================================
Income (loss) from continuing operations before income taxes consists of the following:
- - ------------------------------------------------------------------------------------------------------------
(In thousands)
Subject to tax in: 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
United States $(17,735) $(111,776) $(94,314)
Foreign jurisdictions 59,604 40,965 55,233
- - ------------------------------------------------------------------------------------------------------------
$ 41,869 $ (70,811) $(39,081)
============================================================================================================
Income tax expense differs from income taxes computed at the U.S. federal statutory rate for the
following reasons:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) computed at U.S.
federal statutory rate $14,654 $(24,784) $(13,678)
U.S. alternative minimum tax, net of credit 821 -- --
State income taxes, net of federal benefit 657 666 1,264
U.S. losses for which no tax benefit has
been recognized -- 34,012 19,694
Foreign losses for which no tax benefit has
been recognized 21,563 19,406 13,166
Taxes on foreign operations at other than
U.S. rates (10,968) (19,914) (12,005)
Use of U.S. net operating loss carryforwards (11,959) -- --
Other (868) 4,114 3,559
- - ------------------------------------------------------------------------------------------------------------
Income tax expense $13,900 $ 13,500 $ 12,000
============================================================================================================
The components of deferred income taxes included on the balance sheet at December 31, 1995 and 1994 are
as follows:
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994
- - ------------------------------------------------------------------------------------------------------------
Deferred tax benefits
Employee benefits $24,003 $23,194
Accrued expenses 27,291 23,626
Discontinued operations -- 21,430
Other 16,932 15,832
- - ------------------------------------------------------------------------------------------------------------
68,226 84,082
Valuation allowance (2,600) (14,442)
- - ------------------------------------------------------------------------------------------------------------
65,626 69,640
- - ------------------------------------------------------------------------------------------------------------
Deferred tax liabilities
Depreciation and amortization (22,837) (22,016)
Growing crops (20,968) (20,968)
Long-term debt (11,583) (16,072)
Other (11,344) (14,032)
- - ------------------------------------------------------------------------------------------------------------
(66,732) (73,088)
- - ------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ (1,106) $ (3,448)
=============================================================================================================
Net deferred taxes do not reflect the benefit that would be
available to the Company from the use of its U.S. operating loss
carryforwards of $180 million, capital loss carryforwards of $37
million, alternative minimum tax credits of $6 million and
foreign tax credit carryforwards of $21 million. The operating
loss carryforwards expire in 2008 and 2009, the capital loss
carryforwards expire in 2000 and the foreign tax credit
carryforwards expire between now and 1999. Undistributed
earnings of foreign subsidiaries which have been, or are intended
to be, permanently reinvested in operating assets, if remitted,
are expected to result in little or no tax by operation of
relevant statutes and the carryforward attributes described
above.
Cash payments for income taxes, net of refunds, were $14.4
million in 1995, $12.1 million in 1994 and $17.0 million in 1993.
Note 13 -- Geographic Area Information
The Company is one of the world's leading marketers,
processors and producers of quality food products. The Company's
products are sold throughout the world and its principal
production and processing
-20-
operations are conducted in Central, South and North America.
With the sale of its remaining Meat Division operations in
December 1995, the Company s continuing operations constitute a
single business segment.
Chiquita's earnings are heavily dependent upon products grown
and purchased in Central and South America. These activities, a
significant factor in the economies of the countries where
Chiquita produces bananas and related products, are subject to
the risks that are inherent in operating in such foreign
countries, including government regulation, currency restrictions
and other restraints, risk of expropriation and burdensome taxes.
Certain of these operations are substantially dependent upon
leases and other agreements with these governments.
The Company is also subject to a variety of governmental
regulations in certain countries where it markets bananas,
including import quotas and tariffs, currency exchange controls
and taxes.
INFORMATION BY GEOGRAPHIC AREA
- - ------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
Net sales to unaffiliated customers
North America $1,261,422 $1,224,114 $1,238,678
Central and South America 177,419 179,726 184,060
Europe and other international 1,127,151 1,101,986 1,110,187
- - ------------------------------------------------------------------------------------------------------------
Consolidated net sales $2,565,992 $2,505,826 $2,532,925
- - ------------------------------------------------------------------------------------------------------------
Operating income
North America $31,203 $(8,370) $20,469
Central and South America 64,891 19,071 17,607
Europe and other international 93,102 73,746 78,691
Unallocated expenses (13,426) (13,262) (12,919)
- - ------------------------------------------------------------------------------------------------------------
Consolidated operating income $175,770 $71,185 $103,848
- - ------------------------------------------------------------------------------------------------------------
Identifiable assets
North America $439,385 $493,079 $509,760
Central and South America 835,851 864,232 912,321
Europe and other international 409,677 385,241 339,374
Shipping operations 575,761 671,756 656,816
Corporate assets 362,859 359,931 304,553
- - ------------------------------------------------------------------------------------------------------------
Consolidated assets $2,623,533 $2,774,239 $2,722,824
- - ------------------------------------------------------------------------------------------------------------
Net sales in the preceding table excludes intercompany sales
of bananas from Central and South America to different geographic
areas. These sales, which are eliminated in consolidation and
are measured at cost under the method used for internal
management financial reporting purposes, were approximately $500
million in each of the last three years. Banana sales to
unaffiliated customers in Central and South America and other
intergeographic sales are not significant.
In 1995, divestitures of certain operations and other actions
(see Note 3) had the effect of increasing (decreasing) operating
income by geographic area as follows: North America, $(9)
million; Central and South America, $37 million; Europe and
other international, $(9) million. Operating income for 1994
includes charges and losses totaling $67 million primarily
resulting from farm closings and write-downs of banana
cultivations in Honduras and the substantial reduction of the
Company's Japanese "green" banana trading operations as follows:
North America, $(27) million; Europe and other international,
$(40) million.
For purposes of reporting identifiable assets by geographic
area, cash and equivalents, marketable securities, restricted
cash, trademarks and the net assets of discontinued operations
are included in corporate assets. Minority equity investments
are included in the geographic area where their operations are
located.
Note 14 -- Litigation
A number of legal actions are pending against the Company.
Based on information currently available to the Company and
advice of counsel, management does not believe such litigation
will, individually or in the aggregate, have a material adverse
effect on the financial statements of the Company.
-21-
Note 15 -- Quarterly Financial Data (Unaudited)
The following quarterly financial data are unaudited, but in
the opinion of management include all necessary adjustments for a
fair presentation of the interim results, which are subject to
significant seasonal variations.
- - ------------------------------------------------------------------------------------------------------------
1995
- - ------------------------------------------------------------------------------------------------------------
(In thousands, except per
share amounts) March 31 June 30 Sept. 30 Dec. 31
- - ------------------------------------------------------------------------------------------------------------
Net sales $674,269 $727,519 $569,005 $595,199
Cost of sales (495,995) (547,336) (437,884) (476,848)
Operating income 76,220 70,164 25,341 4,045
Income (loss) from continuing operations 33,599 32,095 (8,278) (29,447)
Discontinued operations 4,029 2,035 (2,713) (14,548)
Income (loss) before extraordinary item 37,628 34,130 (10,991) (43,995)
Extraordinary loss from debt refinancing -- (4,713) -- (2,847)
Net income (loss) 37,628 29,417 (10,991) (46,842)
Fully diluted earnings (loss) per share
- Continuing operations .55 .52 (.19) (.58)
- Discontinued operations .07 .03 (.05) (.27)
- Extraordinary item -- (.07) -- (.06)
- Net income (loss) .62 .48 (.24) (.91)
Dividends per common share .05 .05 .05 .05
Capital stock market price
High 14.50 14.00 17.25 18.00
Low 12.25 12.63 13.63 13.38
=============================================================================================================
1994
- - ------------------------------------------------------------------------------------------------------------
(In thousands, except per
share amounts) March 31 June 30 Sept. 30 Dec. 31
- - ------------------------------------------------------------------------------------------------------------
Net sales $672,468 $660,710 $564,314 $608,334
Cost of sales (488,395) (477,319) (502,150) (528,315)
Operating income (loss) 81,183 70,133 (44,891) (35,240)
Income (loss) from continuing operations 35,534 30,945 (80,652) (70,138)
Discontinued operations -- -- -- 35,611
Extraordinary loss from debt refinancing (22,840) -- -- --
Net income (loss) 12,694 30,945 (80,652) (34,527)
Fully diluted earnings (loss) per share
- Continuing operations .62 .51 (1.59) (1.38)
- Discontinued operations -- -- -- .68
- Extraordinary item (.40) -- -- --
- Net income (loss) .22 .51 (1.59) (.70)
Dividends per common share .05 .05 .05 .05
Capital stock market price
High 19.25 17.63 17.00 16.50
Low 11.25 12.13 12.13 12.38
=============================================================================================================
Operating income for the quarter ended September 30, 1995
includes a net gain of $5.8 million resulting primarily from the
sale of older ships. For the quarter ended December 31, 1995,
results include net gains of $13.5 million primarily resulting
from divestitures of operations and other actions taken as part
of the Company s ongoing program to improve shareholder value.
The operating loss for the quarter ended September 30, 1994
includes charges and losses totaling $57.2 million primarily
resulting from farm closings and write-downs of banana
cultivations in Honduras and the substantial reduction of the
Company's Japanese "green" banana trading operations. For the
quarter ended December 31, 1994, results include $10.3 million of
charges and losses primarily resulting from write-downs of ships
held for sale and losses from the scale-back of the Company's
Japanese "green" banana trading operations.
A separate computation of earnings per share is made for each
quarter presented. The dilutive effect on earnings per share
resulting from the assumed conversions of preferred stock and
convertible debt and exercise of stock options and warrants is
included in each quarter in which dilution occurs. The earnings
per share computation for the year is a separate annual
calculation. Accordingly, the sum of the quarterly earnings per
share amounts will not necessarily equal the earnings per share
for the year.
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Investor Information
Chiquita Brands International, Inc.
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Stock Exchange Listings Trustees and Transfer Agents -
New York, Boston & Pacific Debentures/Notes
Stock Symbol 7% Convertible Subordinated Debentures due
CQB March 28, 2001
Trustee -
Shareholders of Record Chemical Bank
At March 1, 1996, there were 6,535 450 West 33rd Street
common shareholders of record. New York, New York 10001
Transfer Agent and Registrar - Transfer, Paying and Conversion Agents -
Capital Stock and $2.875 Non-Voting Chemical Bank - London, England
Cumulative Preferred Stock Series A Banque Paribas Luxembourg - Luxembourg
Chiquita Brands International, Inc. Banque Bruxelles Lambert S.A.-Brussels, Belgium
c/o Securities Transfer Company Bank Leu, Ltd.-Zurich, Switzerland
One East Fourth Street
Cincinnati, Ohio 45202 9 1/8% Senior Notes due March 1, 2004*
(513) 579-2414 9 5/8% Senior Notes due January 15, 2004*
(800) 368-3417 Trustee -
The Fifth Third Bank
Dividend Reinvestment 38 Fountain Square Plaza
Shareholders who hold at least 100 common Cincinnati, OH 45263
shares may increase their investment in
Chiquita shares through the Dividend 10 1/2% Subordinated Debentures due August 1, 2004*
Reinvestment Plan without payment of any 11 1/2% Subordinated Notes due June 1, 2001*
brokerage commission or service charge. Trustee-
Full details concerning the Plan may be Star Bank, N.A.
obtained from Corporate Affairs or the 425 Walnut Street
Transfer Agennt. Cincinnati, Ohio 45202
Annual Meeting *Chiquita Brands International, Inc., c/o Securities
May 8, 1996 Transfer Company, is transfer agent for these Notes
10 a.m. Eastern Daylight Time and Debentures
Omni Netherland Plaza
35 West Fifth Street
Cincinnati, Ohio 45202
Investor Inquiries
For other questions concerning your
investment in Chiquita, contact Vice
President, Corporate Affairs at (513)
784-6366.
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