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, 1996 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) 784-8000
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, 1996, there were 55,682,619 shares of Common Stock
outstanding.
Page 1 of 11 Pages<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
Page(s)
PART I - Financial Information
Consolidated Statement of Income for the quarters and
nine months ended September 30, 1996 and 1995 . . . . . . . . . . 3
Consolidated Balance Sheet as of September 30, 1996,
December 31, 1995 and September 30, 1995 . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flow for the nine months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 6
Management's Analysis of Operations and Financial Condition . . . . 7-8
PART II - Other Information
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 8
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 8
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
<TABLE>
<CAPTION>
Part I - Financial Information
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 541,581 $ 569,005 $ 1,880,085 $ 1,970,793
---------- ---------- ---------- ----------
Operating expenses
Cost of sales 431,385 437,884 1,437,975 1,481,215
Selling, general and administrative 72,266 80,886 226,820 243,789
Depreciation 22,069 24,894 66,448 74,064
525,720 543,664 1,731,243 1,799,068
OPERATING INCOME 15,861 25,341 148,842 171,725
Interest income 6,965 7,285 21,976 22,387
Interest expense (30,626) (40,924) (100,742) (123,793)
Other income, net 215 20 656 997
---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income taxes (7,585) (8,278) 70,732 71,316
Income taxes -- -- (11,000) (13,900)
---------- ---------- ---------- ----------
Income (loss) from continuing operations (7,585) (8,278) 59,732 57,416
Discontinued operations -- (2,713) -- 3,351
Income (loss) before extraordinary item (7,585) (10,991) 59,732 60,767
Extraordinary loss from debt refinancing (17,282) -- (22,838) (4,713)
---------- ---------- ---------- ----------
Net income (loss) $ (24,867) $ (10,991) $ 36,894 $ 56,054
========== ========== ========== ==========
Shares used to calculate earnings per common share:
Primary 55,319 53,368 55,741 53,585
========== ========== ========== ==========
Fully diluted 55,319 53,368 55,856 61,263
========== ========== ========== ==========
Earnings per common share:
Primary - Continuing operations $ (.20) $ (.19) $ .93 $ .96
- Discontinued operations -- (.05) -- .06
- Extraordinary item (.31) -- (.41) (.09)
- Net income (loss) $ (.51) $ (.24) $ .52 $ .93
========== ========== ========== ==========
Fully - Continuing operations $ (.20) $ (.19) $ .93 $ .94
diluted - Discontinued operations -- (.05) -- .05
- Extraordinary item (.31) -- .(41) (.08)
- Net income (loss) $ (.51) $ (.24) $ .52 $ .91
========== ========== ========== ==========
Dividends per common share $ .05 $ .05 $ .15 $ .15
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION> CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands, except share amounts)
September 30, December 31, September 30,
1996 1995 1995
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 246,835 $ 236,675 $ 223,675
Marketable securities 39,780 34,743 --
Trade receivables (less allowances
of $11,164, $11,310 and $13,361) 186,106 184,364 210,769
Other receivables, net 90,050 89,848 86,963
Inventories 283,310 293,379 312,483
Other current assets 32,947 37,827 33,858
---------- ---------- ----------
TOTAL CURRENT ASSETS 879,028 876,836 867,748
Restricted cash -- 39,520 69,530
Net assets of discontinued operations -- -- 53,109
Property, plant and equipment, net 1,156,620 1,182,144 1,269,034
Investments and other assets 343,864 356,805 327,537
Intangibles, net 164,929 168,228 154,709
---------- ---------- ----------
TOTAL ASSETS $ 2,544,441 $ 2,623,533 $ 2,741,667
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and loans payable $ 94,488 $ 119,456 $ 114,381
Long-term debt due within one year 51,179 52,877 66,230
Accounts payable 206,337 206,717 221,111
Accrued liabilities 101,036 130,893 139,519
---------- ---------- ----------
Total current liabilities 453,040 509,943 541,241
Long-term debt of parent company 709,478 840,925 840,783
Long-term debt of subsidiaries 368,165 401,121 475,896
Accrued pension and other employee benefits 87,111 85,514 74,001
Other liabilities 110,602 113,823 115,377
---------- ---------- ----------
TOTAL LIABILITIES 1,728,396 1,951,326 2,047,298
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock 249,256 138,369 138,369
Capital stock, $.33 par value (55,655,675,
54,769,140 and 53,807,078 shares) 18,552 18,256 17,936
Capital surplus 592,277 581,019 567,005
Accumulated deficit (44,040) (65,437) (13,817)
Minimum pension liability adjustment -- -- (15,124)
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 816,045 672,207 694,369
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 2,544,441 $ 2,623,533 $ 2,741,667
========== ========== ==========
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CHIQUITA BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
(In thousands)
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
CASH PROVIDED (USED) BY:
Operations
Income from continuing operations $ 59,732 $ 57,416
Depreciation and amortization 71,718 78,437
Write-down of Costa Rican banana producing assets 8,900 --
Changes in current assets and liabilities (15,043) (22,840)
Other 7,079 (13,057)
---------- ----------
CASH FLOW FROM OPERATIONS 132,386 99,956
Investing ---------- ----------
Capital expenditures (57,637) (47,145)
Restricted cash deposits 39,520 5,500
Proceeds from disposal of non-core assets 41,331 102,708
Purchases of marketable securities (39,235) --
Other 5,379 (2,159)
---------- ----------
CASH FLOW FROM INVESTING (10,642) 58,904
---------- ----------
Financing
Debt transactions
Issuances of long-term debt 168,472 202,356
Repayments of long-term debt (357,539) (281,034)
Decrease in notes and loans payable (22,789) (8,432)
Stock transactions
Issuances of capital stock 4,882 2,093
Issuance of preferred stock 110,887 --
Dividends (15,497) (13,732)
---------- ----------
CASH FLOW FROM FINANCING (111,584) (98,749)
---------- ----------
Discontinued operations -- (1,959)
---------- ----------
Increase in cash and equivalents 10,160 58,152
Balance at beginning of period 236,675 165,523
---------- ----------
Balance at end of period $ 246,835 $ 223,675
========== ==========
See Notes to Consolidated Financial Statements.
/TABLE
<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, 1995 for additional information relating to the Company's
financial statements.
In December 1995, the Company's remaining meat operations were sold. As a
result, the Meat Division is accounted for as a discontinued operation in
1995.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
<S> <C> <C> <C>
Bananas and other fresh produce $ 34,547 $ 39,920 $ 37,821
Other food products 70,388 64,528 81,489
Growing crops 120,020 120,178 116,046
Materials and supplies 47,512 56,925 62,889
Other 10,843 11,828 14,238
$ 283,310 $ 293,379 $ 312,483
</TABLE>
In July and August 1996, the Company sold 2,300,000 shares of $3.75
Convertible Preferred Stock and $150 million principal amount of 10 1/4%
Senior Notes due 2006 for net proceeds of approximately $255 million. In
August 1996, using proceeds from the offerings, the Company redeemed its $220
million outstanding 11 1/2% Subordinated Notes at a redemption premium of 5.7%
of the principal amount. This debt prepayment resulted in an extraordinary
charge of $17 million.
In June 1996, Chiquita called for redemption at par and defeased its $66
million outstanding 10 1/2% Subordinated Debentures. This debt prepayment
resulted in an extraordinary charge of $6 million consisting primarily of a
non-cash write-off of unamortized discount. During the second quarter of
1995, the Company replaced $153 million of ship loans with loans having longer
maturities totaling $187 million resulting in an extraordinary loss of $5
million.<PAGE>
In accordance with its long-standing policy to periodically hedge
transactions denominated in foreign currencies, at September 30, 1996, the
Company had option contracts which ensure conversion of approximately $100
million of foreign sales through 1996 and approximately $300 million of
foreign sales in 1997 at rates not higher than 1.49 Deutsche marks per dollar
or lower than 1.40 Deutsche marks per dollar. The carrying value of these
option contracts, and their fair value based on quoted market prices, were not
significant at September 30, 1996.<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
MANAGEMENT'S ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
Net sales for the quarter and nine months ended September 30, 1996
decreased by 5% from the same periods last year primarily as a result of the
December 1995 sale of Numar Costa Rica.
Operating income for the quarter was $16 million in 1996 compared to $25
million in 1995. The 1995 amount includes an unusual gain of $6 million
resulting principally from the sales of older, non-core shipping assets.
Operating income from the Company's core operations remaining after the
disposal of Numar Costa Rica improved by $7 million over the prior year
quarter, including a slight improvement in banana operations due primarily to
lower delivered product costs. North American banana volume was higher on
lower average pricing. Late in the 1996 third quarter, European Union banana
prices were trending lower than in 1995.
Nine month operating income in 1996 was $149 million after $12 million of
first quarter write-downs and costs resulting from damage to the Company's
banana producing assets caused by industry-wide flooding in Costa Rica.
Operating income for the first nine months of 1995 was $172 million, including
the unusual gain on sales of ships. Earnings for remaining core operations,
excluding the 1996 flood related charges and 1995 gain on sales of ships,
improved sufficiently in 1996 as a result of lower delivered product costs to
substantially offset the elimination of earnings from the divested Numar
operation.
Net interest expense for the quarter and nine months ended September 30,
1996 was decreased by $10 million and $23 million from the prior year levels
as a result of sales of non-core assets in 1995 as well as the Company's
refinancing and deleveraging program.
The Company's 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 flow from operations of $132 million during the first nine months of
1996 and net proceeds of $255 million from preferred stock and senior note
issuances were used primarily for repayments of debt. The Company has reduced
net debt (total debt less cash and securities) by $267 million since September
30, 1995 to $937 million at September 30, 1996. In addition, during the third
quarter the Company's restricted cash of $40 million became available for
general corporate purposes.<PAGE>
OTHER
In connection with the international trade action pending in the World
Trade Organization ("WTO") filed by the United States, Ecuador, Guatemala,
Honduras and Mexico challenging the European Union ("EU") banana quota and
licensing regime and the Framework Agreement, the WTO arbitration panel
currently hearing the case is now scheduled to issue its ruling in February
1997. Following the ruling, available appeal procedures could extend by a few
months the time before a ruling is final. Thereafter, the parties have a
"reasonable" period of time (not to exceed 15 months) to implement the ruling.
There can be no assurance as to the results of the WTO proceedings, the nature
and extent of actions that may be taken by the U.S. or other adversely
affected countries 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 3 - "Legal Proceedings" in the
Company's 1995 Form 10-K and the discussion of the cases pending in
various courts alleging injuries as a result of exposure to DBCP, an
agricultural chemical. The lawsuit pending in Louisiana, Lucas Pastor
Canales Martinez, et al. v. Dow Chemical Company, et al., has been
remanded to Louisiana state court, where various procedural issues are
being addressed.
Reference is also made to Part I, Item 3 - "Legal Proceedings" in the
Company's 1995 Form 10-K and the discussion of the three actions pending
in Wisconsin against Friday Canning Corporation alleging violations of
certain Wisconsin environmental laws. All of these actions were settled
in September 1996 for a total payment of $200,000.
Item 6 - Exhibits and Reports on Form 8-K
Page
Numbers
(a) Exhibit 11 - Computation of Earnings Per Common Share . . . 10-11
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.
(b) The following reports on Form 8-K were filed by the Company during
the quarter ended September 30, 1996:
July 22, 1996 - to report the terms of the offerings of the
Company's $3.75 Convertible Preferred Stock, Series B, and 10 1/4%
Senior Notes due 2006.
August 1, 1996 - to report the Company's announcement of results of
operations for the quarter ended June 30, 1996.<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 12, 1996<PAGE>
<TABLE>
<CAPTION> Exhibit 11
CHIQUITA BRANDS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
(In thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
A. Primary earnings (loss) per common share
Income (loss) from continuing operations $ (7,585) $ (8,278) $ 59,732 $ 57,416
Dividends on preferred stock (3,599) (2,066) (7,732) (6,199)
---------- ---------- ---------- ----------
Income (loss) from continuing operations
attributable to common shares (11,184) (10,344) 52,000 51,217
Discontinued operations -- (2,713) -- 3,351
---------- ---------- ---------- ----------
Income (loss) attributable to common shares
before extraordinary item (11,184) (13,057) 52,000 54,568
Extraordinary loss from debt refinancing (17,282) -- (22,838) (4,713)
---------- ---------- ---------- ----------
Net income (loss) attributable to common
shares $ (28,466) $ (13,057) $ 29,162 $ 49,855
========== ========== ========== ==========
Shares used in calculation of per share data:
Weighted average common and equivalent
Series C preference shares outstanding 55,607 53,732 55,368 53,429
Less restricted common shares (288) (364) (292) (391)
Dilutive effect of assumed exercise of
stock options and warrants -- -- 665 547
---------- ---------- ---------- ----------
55,319 53,368 55,741 53,585
========== ========== ========== ==========
Primary earnings (loss) per common share:
Continuing operations $ (.20) $ (.19) $ .93 $ .96
Discontinued operations -- (.05) -- .06
Extraordinary item (.31) -- (.41) (.09)
---------- --------- ---------- ---------
Net income (loss) $ (.51) $ (.24) $ .52 $ .93
========== ========== ========== =========
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11 (continued)
CHIQUITA BRANDS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
(In thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
B. Fully diluted earnings (loss) per common share
Income (loss) from continuing operations $ (7,585) $ (8,278) $ 59,732 $ 57,416
Dividends on preferred stock (3,599) (2,066) (7,732) --
---------- ---------- ---------- ----------
Income (loss) from continuing operations
attributable to common shares (11,184) (10,344) 52,000 57,416
Discontinued operations -- (2,713) -- 3,351
---------- ---------- ---------- ----------
Income (loss) attributable to common shares
before extraordinary item (11,184) (13,057) 52,000 60,767
Extraordinary loss from debt refinancing (17,282) -- (22,838) (4,713)
---------- ---------- ---------- ----------
Net income (loss) attributable to common
shares $ (28,466) $ (13,057) $ 29,162 $ 56,054
========== ========== ========== ==========
Shares used in calculation of per share data:
Weighted average common and equivalent
Series C preference shares outstanding 55,607 53,732 55,368 53,429
Less restricted common shares (288) (364) (285) (358)
Dilutive effect of assumed exercise of
stock options and warrants -- -- 773 626
Dilutive effect of assumed conversion of
preferred stock -- -- -- 7,566
---------- ---------- ---------- ----------
55,319 53,368 55,856 61,263
========== ========== ========== ==========
Fully diluted earnings (loss) per common share:
Continuing operations $ (.20) $ (.19) $ .93 $ .94
Discontinued operations -- (.05) -- .05
Extraordinary item (.31) -- (.41) (.08)
---------- ---------- ----------- ----------
Net income (loss) $ (.51) $ (.24) $ .52 $ .91
========== ========== =========== ==========
/TABLE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Chiquita
Brands International, Inc. Form 10-Q for the nine months ended September 30,
1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 246,835
<SECURITIES> 39,780
<RECEIVABLES> 197,270
<ALLOWANCES> 11,164
<INVENTORY> 283,310
<CURRENT-ASSETS> 879,028
<PP&E> 1,716,788
<DEPRECIATION> 560,168
<TOTAL-ASSETS> 2,544,441
<CURRENT-LIABILITIES> 453,040
<BONDS> 1,077,643
0
249,256
<COMMON> 18,552
<OTHER-SE> 548,237
<TOTAL-LIABILITY-AND-EQUITY> 2,544,441
<SALES> 1,880,085
<TOTAL-REVENUES> 1,880,085
<CGS> 1,437,975
<TOTAL-COSTS> 1,437,975
<OTHER-EXPENSES> 66,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,742
<INCOME-PRETAX> 70,732
<INCOME-TAX> 11,000
<INCOME-CONTINUING> 59,732
<DISCONTINUED> 0
<EXTRAORDINARY> (22,838)
<CHANGES> 0
<NET-INCOME> 36,894
<EPS-PRIMARY> .52<F1>
<EPS-DILUTED> .52<F1>
<FN>
<F1>Amounts include extraordinary losses of $.41 per share resulting from
refinancings of debt.
</FN>
</TABLE>
