FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended
Commission File
September 30, 1994 Number
1-1550
CHIQUITA BRANDS INTERNATIONAL, INC.
Incorporated under the IRS
Employer I.D.
Laws of New Jersey No. 04-
1923360
250 East Fifth Street, Cincinnati, Ohio 45202
(513) 784-8011
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
As of November 1, 1994, there were 49,093,044 shares of Common Stock
outstanding.
Page 1 of 13
<PAGE>
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
PART I - Financial Information
Consolidated Statement of Income for the quarters and
nine months ended September 30, 1994 and 1993 . . . . . 3
Consolidated Balance Sheet as of
September 30, 1994, December 31, 1993 and
September 30, 1993. . . . . . . . . . . . . . . . . . . 4-5
Consolidated Statement of Cash Flow for the nine months
ended September 30, 1994 and 1993 . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . 7
Management's Analysis of Operations and
Financial Condition . . . . . . . . . . . . . . . . . . 8-10
PART II - Other Information
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . 10
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . 10-11
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PAGE
<PAGE>
Part I - Financial Information
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $557,414 $552,329 $1,879,492$1,965,790
Operating expenses
Cost of sales 495,250 438,102 1,449,864 1,520,718
Selling, general and administrative 80,425 77,353 243,313
246,122
Depreciation 26,630 25,735 79,890 75,484
602,305 541,190 1,773,067 1,842,324
Operating income (loss) (44,891) 11,139 106,425 123,466
Interest income 4,731 5,221 15,458 17,512
Interest expense (41,160) (42,216) (125,558)
(126,612)
Other income, net 668 1,588 3,002 5,969
Income (loss) from continuing
operations before income taxes (80,652 ) (24,268)
(673) 20,335
Income taxes -- (1,600) (13,500)
(11,000)
Income (loss) from continuing
operations (80,652) (25,868) (14,173)
9,335
Discontinued operations -- -- -- --
Income loss before extraordinary item (80,652 ) (25,868)
(14,173) 9,335
Extraordinary loss from prepayment
of debt -- -- (22,840) --
Net income (loss) $(80,652) $(25,868) $ (37,013)$
9,335
Weighted average number of common
shares outstanding (see Exhibit 11) 52,054 51,404 51,939
51,621
Primary and fully diluted earnings (loss)
per common share:
- Continuing operations $ (1.59) $
(.50 ) $ (.37) $ .18
- Extraordinary loss -- --
(.44) --
- Net income (loss) $ (1.59) $
(.50 ) $ (.81) $ .18
Cash dividends declared per
common share $ .05 $ .05 $ .15 $ .39
</TABLE>
PAGE
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30,December 31,
September 30,
1994 1993
1993
<S> <C> <C> <C>
Current assets
Cash and equivalents $151,292 $151,226 $194,820
Trade receivables, less allowances
of $12,135, $11,051 and $9,492,
respectively 223,723 187,936 200,958
Other receivables, net 95,450 85,170 73,698
Inventories 318,765 307,073 320,601
Other current assets 33,367 39,054 34,655
Total current assets 822,597
770,459 824,732
Restricted cash 69,592 51,020 48,020
Net assets of discontinued operations 38,410 42,41042,410
Property, plant and equipment, net 1,433,196 1,427,191
1,442,978
Investments and other assets 294,160 282,914 279,576
Intangibles, net 157,969 166,759 184,182
$ 2,815,924 $2,740,753$
2,821,898
</TABLE>
PAGE
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET (continued)
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30,
December 31, September 30,
1994 1993
1993
<S> <C> <C> <C>
Current liabilities
Notes and loans payable $115,042 $112,796 $114,298
Long-term debt due within one year 89,182 79,411
75,668
Accounts payable 216,785 202,923 198,404
Accrued liabilities 111,697 108,536 134,396
Total current liabilities 532,706
503,666 522,766
Long-term debt of parent company 840,251 881,124 880,737
Long-term debt of subsidiaries 553,963 557,254 558,400
Accrued pension and other employee benefits 75,037 74,588
72,209
Other liabilities 119,299 122,123 124,786
Total liabilities 2,121,256
2,138,755 2,158,898
Shareholders' equity
Preferred stock, Series A (2,875,000
shares outstanding) 138,369 -- --
Preference stock, Series C
(648,310 shares outstanding) 52,270 52,270
52,270
Capital stock, $.33 par value (48,893,012,
48,510,353 and 48,242,090 shares
outstanding, respectively) 16,298 16,170 16,081
Capital surplus 500,553 494,240 491,433
Retained earnings (deficit) (12,822) 39,318 103,216
Total shareholders' equity
694,668 601,998 663,000
$ 2,815,924 $2,740,753$
2,821,898
</TABLE>
PAGE
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Cash provided (used) by:
Operations
Income (loss) from continuing operations $(14,173) $ 9,335
Depreciation and amortization 84,633 80,885
Write-downs of farms and cultivations 24,600 --
Changes in current assets and liabilities
Receivables (36,914) (1,593)
Inventories (16,536) 28,586
Accounts payable and accrued liabilities 16,823 (31,250)
Other current assets and liabilities 5,674 (3,984)
Other 2,272 (5,160)
Cash flow from operations 66,379 76,819
Investing
Capital expenditures (115,790) (174,185)
Restricted cash deposits (18,572) (48,020)
Acquisitions and long-term investments (386) (45,206)
Decrease in marketable securities -- 25,212
Proceeds from sale of ships and equipment -- 22,000
Other (6,944) (1,102)
Cash flow from investing (141,692) (221,301)
Financing
Debt transactions
Issuances of long-term debt 263,745 121,769
Repayments of long-term debt (326,208) (108,481)
Increase (decrease) in notes and loans payable 4,159(23,904)
Stock transactions
Issuance of preferred stock 138,369 --
Dividends (11,928) (20,922)
Net issuances (repurchases) of capital stock 3,242(394)
Cash flow from financing 71,379 (31,932)
Discontinued operations 4,000 (16,735)
Increase (decrease) in cash and equivalents 66 (193,149)
Balance at beginning of period 151,226 387,969
Balance at end of period $151,292 $194,820
</TABLE>
PAGE
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interim results are subject to significant seasonal variations and
are not necessarily indicative of the results of operations for a full
fiscal year. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary for a fair
statement of the results of the interim periods shown have been made.
See Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 for additional information relating to the Company's financial
statements.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
<S> <C> <C> <C>
Bananas and other fresh produce $ 44,498 $42,918$
38,266
Other food products 74,167 56,043 75,639
Growing crops 115,208 117,839 114,563
Materials and supplies 71,630 75,206 77,203
Other 13,262 15,067
14,930
$318,765 $307,073 $320,601
</TABLE>
In February 1994, the Company completed the sale of $175 million
principal amount of 9-1/8% Senior Notes due 2004 and 2,875,000 shares
of $2.875 Non-Voting Cumulative Preferred Stock, Series A. The net
proceeds from the offerings totaled approximately $310 million. In
March, most of these proceeds were used to prepay all of the
outstanding principal amount of the Company's 11-7/8% Subordinated
Debentures ($125 million), 10-1/4% Subordinated Debentures ($42
million), 9-1/8% Subordinated Debentures ($18 million) and a portion
($45 million principal amount) of its 10-1/2% Subordinated Debentures.
These prepayments resulted in an extraordinary loss of $22.8 million,
consisting primarily of write-offs of unamortized discounts and $5
million of call premiums.
In accordance with its long-standing policy to periodically hedge
transactions denominated in foreign currencies, at September 30, 1994,
the Company had foreign exchange forward contracts to ensure
conversion at an average exchange rate of 1.71 Deutsche mark for each
U.S. dollar of approximately $90 million of foreign sales commitments
for the fourth quarter of 1994. The fair value of these contracts,
based on quoted market prices, was approximately $9 million at
September 30, 1994. In addition, at September 30, 1994, the Company
had foreign exchange forward contracts to ensure conversion at an
average exchange rate of 1.54 Deutsche mark for each U.S. dollar of
approximately $95 million of foreign sales in the first half of 1995.
The fair value of these contracts, based on quoted market prices, was
not significant.
PAGE
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
MANAGEMENT'S ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
Net sales for the quarter ended September 30, 1994 were comparable
to sales for the same quarter of 1993. For the third quarter the
Company incurred an operating loss of $45 million in 1994 as compared
with operating income of $11 million a year ago. The 1994 quarter
included charges and losses totaling $57 million primarily resulting
from the following business developments:
o the shutdown of over 1,200 hectares of low productivity Honduran
banana farms following an unusually severe strike and, at the
Company's remaining Honduran farms, the chopback of cultivations
weakened during the strike. The Company undertook these
extraordinary measures to optimize the future economic yield and
quality of its Honduran banana production. Chiquita expects to
recommence banana exports from its Honduran farms around year-end.
o the substantial reduction of the Company's Japanese "green" banana
trading operations. Poor local market conditions, and the desire
to eliminate related losses, contributed to the Company's decision
to significantly scale back this portion of its business. Chiquita
will remain active in the Japanese banana market primarily through
its existing banana ripening and distribution operations.
Write-downs associated with the Honduran farms and cultivations were
approximately $25 million. Shut-down costs (principally workforce
severance and facility closures) and operating losses associated with
the scaled-back Japanese "green" banana trading business aggregated
approximately $13 million. An additional $18 million of the third
quarter charges and losses are related to excess shipping capacity
caused in part by the scale-back of Japanese "green" banana trading
operations. This portion of the third quarter loss represented
provisions for losses on sale of owned ships, subchartering or idling
of other ships and unrecovered shipping costs incurred during the
quarter.
Net sales for the nine-month period declined $86 million (4%) from
the prior year level. Approximately one-half of the effect of lower
volumes on revenue was offset by the effect of a higher average
worldwide banana price. Nine-month operating income declined to $106
million, versus $123 million in 1993, reflecting the impact of the
third quarter business developments discussed above, the effect of
lower first half volumes on operating income and the benefit of a
higher average banana price.
Net interest costs for the quarter and nine months were relatively
unchanged as the effect of lower average borrowings outstanding was
partially offset by lower capitalization of interest costs and lower
interest income.
PAGE
<PAGE>
The effective tax rate is affected by the level and mix of income
between various domestic and foreign jurisdictions in which the
Company operates.
FINANCIAL CONDITION
Cash was $151 million at both September 30, 1994 and December 31,
1993. Proceeds from new parent company financings during the first
quarter were used primarily to retire higher cost debt. Nine-month
capital expenditures of $116 million include $68 million for the
deliveries of new ships and equipment ordered in prior years,
completing the Company's multi-year investment spending program.
Approximately 80% of these shipping related expenditures were
externally financed. Cash provided by operations, $66 million,
exceeded normal capital expenditures, $48 million, by $18 million.
DISCONTINUED OPERATIONS
During the first quarter of 1994, the Company's Meat Division sold
its specialty meat operations for approximately $50 million in cash
and used the proceeds primarily to reduce short-term borrowings. In
March, the Meat Division made a scheduled payment of $4 million on its
secured debt held by Chiquita and subsequently retired substantially
all of the remaining $13 million of this secured debt in exchange for
a new preferred equity interest. During the first nine months of
1994, the Meat Division continued to produce improved operating
profits (which are not included in Chiquita's consolidated results of
operations) on approximately $1.1 billion in net sales.
In October 1994, the Company received a favorable Federal Circuit
Court of Appeals ruling that reconfirms its right to unilaterally
reduce medical benefits of retired hourly employees. The union may
seek further judicial review of this decision.
OTHER
As previously disclosed, 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
market share in Europe. 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. If implemented, the Framework Agreement and related
regulations could significantly increase the Company's cost to export
Latin American bananas to the EU. Four additional European countries
(Norway, Sweden, Finland and Austria) may join the EU in the first
half of 1995. These countries, which have had substantially
unrestricted banana markets in which Chiquita has supplied a
significant portion of the bananas, would then be subject to the quota
and licensing regulations and the quota could be increased. However,
the timing and exact nature of any adjustments in the quota and
licensing regulations that might be made if these countries join the
EU have not yet been determined.
PAGE
<PAGE>
On September 2, 1994, the Company 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 October 1994, in response to this
petition, the U.S. Government initiated a formal investigation of the
EU banana import policy and has officially advised the governments of
Costa Rica, Colombia, Nicaragua and Venezuela that if they act to
implement the Framework Agreement, or any alternative measures that
are unreasonable or discriminatory, those governments will be
immediately included in the Section 301 action. Section 301
authorizes the U.S. Government - unless satisfactory relief from
unfair practices is forthcoming - to take 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.
Part II - Other Information
Item 1 - Legal Proceedings
Reference is made to Part I, Item 1 - "Business-Discontinued
Operations-Labor Relations" in the Company's 1993 Form 10-K which
discusses several labor cases pending against John Morrell &
Company ("Morrell"). See also Part I - "Management's Analysis of
Operations and Financial Condition - Discontinued Operations" in
this report on Form 10-Q.
In the matter of the suit brought in January 1984 by certain
workers relating to the closing and later reopening of one of the
Meat Division's plants, on September 23, 1994, the lower court
decision dismissing all cross-claims against Morrell and Chiquita
was affirmed by the Sixth Circuit Court of Appeals.
In the matter of the third lawsuit resulting from a May 1987
strike at Sioux Falls, Morrell and the union agreed to a settlement
of the matter in early October 1994. The agreement is subject to
approval by the affected workers, which is currently being sought.
The settlement would require Morrell to make individual payments
to affected workers which could aggregate up to $2.3 million.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit
11 - Computation of Earnings Per Common Share. . . . . . Page 13
Exhibit 27 - Financial Data Schedule . . . . . . . . . .**
** Copy omitted from this Quarterly Report on Form 10-Q. Copy
included in report filed electronically with the Securities and
Exchange Commission.
PAGE
<PAGE>
(b) The
follo
wing
repor
t on
Form
8-K
was
filed
by
the
Compa
ny
durin
g the
quart
er
ended September 30, 1994:
September 2, 1994 - to report the Company's and Hawaii Banana
Industry Association's 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.
PAGE
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
CHIQUITA BRANDS INTERNATIONAL, INC.
By: /s/ William A. Tsacalis
William A. Tsacalis
Vice President and Controller
(Chief Accounting Officer)
November 14, 1994
<PAGE>
Exhibit 11
CHIQUITA BRANDS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ (80,652) $(25,868)$(14,173)$
9,335
Dividends on Series A Preferred Stock (2,066) -- (5,166)--
Income (loss) from continuing operations
available to common shares (82,718)(25,868) (19,339) 9,335
Discontinued operations -- -- -- --
Income (loss) before extraordinary item (82,718) (25,868) (19,339)9,335
Extraordinary loss from prepayment of debt -- -- (22,840)--
Net income (loss) used to calculate primary
and fully diluted earnings (loss) per share $(82,718) $(25,868)$(42,179)$
9,335
Shares used in calculation of per share data:
Weighted average common and equivalent
Series C preferred shares outstanding 52,054 51,404 51,939
51,393
Dilutive effect of assumed exercise of
certain stock options and warrants -- -- --
228
Weighted average common shares used to
calculate primary and fully diluted
earnings (loss) per share 52,054 51,404 51,939 51,621
Primary and fully diluted earnings (loss) per
common share:
- Continuing operations $ (1.59)$
(.50) $ (.37) $ .18
- Extraordinary loss -- --
(.44) --
- Net income (loss) $(1.59) $ (.50)$
(.81) $ .18
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Chiquita
Brands International, Inc. Form 10-Q for the quarterly period ended September
30, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 151,292
<SECURITIES> 0
<RECEIVABLES> 235,858
<ALLOWANCES> 12,135
<INVENTORY> 318,765
<CURRENT-ASSETS> 822,597
<PP&E> 1,964,682
<DEPRECIATION> 531,486
<TOTAL-ASSETS> 2,815,924
<CURRENT-LIABILITIES> 532,706
<BONDS> 1,394,214
<COMMON> 16,298
0
190,639
<OTHER-SE> 487,731
<TOTAL-LIABILITY-AND-EQUITY> 2,815,924
<SALES> 1,879,492
<TOTAL-REVENUES> 1,879,492
<CGS> 1,449,864
<TOTAL-COSTS> 1,449,864
<OTHER-EXPENSES> 79,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,558
<INCOME-PRETAX> (673)
<INCOME-TAX> 13,500
<INCOME-CONTINUING> (14,173)
<DISCONTINUED> 0
<EXTRAORDINARY> (22,840)
<CHANGES> 0
<NET-INCOME> (37,013)
<EPS-PRIMARY> (.81)<F1>
<EPS-DILUTED> (.81)<F1>
<FN>
<F1>Amounts include an extraordinary loss of $.44 per share resulting from the
prepayment of debt in the first quarter.
</FN>
</TABLE>
