- --------------------------------------------------------------
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
March 31, 1999 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 April 30, 1999, there were 65,746,923 shares of Common
Stock outstanding.
Page 1 of 12 Pages
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<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
-----------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I - Financial Information
- ------
Item 1 - Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C>
Consolidated Statement of Income for the
quarters ended March 31, 1999 and 1998. . . . 3
Consolidated Balance Sheet as of March 31, 1999,
December 31, 1998 and March 31, 1998. . . . . 4
Consolidated Statement of Cash Flow for the
quarters ended March 31, 1999 and 1998. . . . 5
Notes to Consolidated Financial Statements. . . 6
Item 2 - Management's Analysis of Operations
and Financial Condition . . . . . . . . . . . . 9
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . 11
PART II - Other Information
- -------
Item 6 - Exhibits and Reports on Form 8-K . . . . 11
Signature. . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
Part I - Financial Information
- ------------------------------
Item 1 - Financial Statements
- -----------------------------
CHIQUITA BRANDS INTERNATIONAL, INC.
-----------------------------------
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
--------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Net sales $ 693,002 $ 717,217
--------- ---------
Operating expenses
Cost of sales 514,775 540,587
Selling, general and
administrative 78,738 83,607
Depreciation 22,265 23,253
-------- --------
615,778 647,447
-------- --------
Operating income 77,224 69,770
Interest income 2,289 3,062
Interest expense (26,693) (27,999)
Other income, net 88 245
-------- ---------
Income before income taxes 52,908 45,078
Income taxes (4,200) (4,000)
--------- ---------
Net income $ 48,708 $ 41,078
======== ========
Earnings per common share:
Basic $ .68 $ .58
Diluted .60 .52
Dividends per common share $ .05 $ .05
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
-----------------------------------
CONSOLIDATED BALANCE SHEET (Unaudited)
-------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
--------- ------------ ---------
<S> <C> <C> <C>
ASSETS
- ------
Current assets
Cash and equivalents $ 97,902 $ 88,906 $ 91,309
Trade receivables
(less allowances of
$10,316, $10,603 and
$10,148) 239,884 201,574 233,002
Other receivables, net 117,217 128,293 90,881
Inventories 353,272 387,293 379,136
Other current assets 32,550 34,168 41,884
---------- ---------- ----------
Total current
assets 840,825 840,234 836,212
Property, plant and
equipment, net 1,121,376 1,122,847 1,172,750
Investments and other
assets 367,192 356,228 306,872
Intangibles, net 189,101 189,824 201,963
---------- ---------- ----------
Total assets $2,518,494 $2,509,133 $2,517,797
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Notes and loans
payable $ 137,040 $ 131,768 $ 86,545
Long-term debt due
within one year 101,335 37,511 45,493
Accounts payable 240,363 217,266 222,759
Accrued liabilities 99,638 144,884 91,940
---------- ---------- ----------
Total current
liabilities 578,376 531,429 446,737
Long-term debt of
parent company 683,420 683,294 689,162
Long-term debt of
subsidiaries 245,037 319,312 342,289
Accrued pension and other
employee benefits 86,375 90,382 87,305
Other liabilities 90,124 90,736 90,402
---------- ---------- ----------
Total liabilities 1,683,332 1,715,153 1,655,895
---------- ---------- ----------
Shareholders' equity
Preferred and
preference stock 253,475 253,475 253,475
Common stock -
65,734,685 and
65,447,875 shares,
$.01 par value;
64,368,998 shares,
$.33 par value 657 654 21,456
Capital surplus 758,935 755,660 725,107
Accumulated deficit (173,817) (214,967) (132,889)
Accumulated other
comprehensive loss (4,088) (842) (5,247)
---------- ---------- ----------
Total shareholders'
equity 835,162 793,980 861,902
---------- ---------- ----------
Total liabilities
and shareholders'
equity $2,518,494 $2,509,133 $2,517,797
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
-----------------------------------
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash provided (used) by:
Operations
Net income $ 48,708 $ 41,078
Depreciation and amortization 23,869 24,925
Changes in current assets and
liabilities (43,729) (57,363)
Other (10,442) (4,134)
-------- --------
Cash flow from operations 18,406 4,506
-------- --------
Investing
Capital expenditures (23,744) (13,573)
Hurricane Mitch insurance
proceeds 25,000 --
Refundable deposits for
container equipment 9,051 (8,268)
Long-term investments (6,132) (1,000)
Acquisition of vegetable
canning business -- (17,424)
Other (2,663) (1,771)
------- -------
Cash flow from investing 1,512 (42,036)
------- -------
Financing
Debt transactions
Issuances of long-term debt -- 54,397
Repayments of long-term debt (9,229) (62,686)
Increase in notes and loans
payable 5,816 18,637
Stock transactions
Issuances of common stock 49 270
Dividends (7,558) (7,481)
------- ------
Cash flow from financing (10,922) 3,137
------- ------
Increase (decrease) in cash
and equivalents 8,996 (34,393)
Balance at beginning of period 88,906 125,702
--------- ---------
Balance at end of period $ 97,902 $ 91,309
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
5
<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, 1998 for additional information relating to the
Company's financial statements.
Earnings Per Share
- ------------------
Basic and diluted earnings per common share ("EPS") are
calculated as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Quarter Ended
March 31,
--------------------
1999 1998
-------- ---------
<S> <C> <C>
Net income $ 48,708 $ 41,078
Dividends on preferred and
preference stock (4,276) (4,276)
-------- --------
Net income attributed to
common shares for basic EPS 44,432 36,802
Add back dividends on preferred
and preference stock 4,276 4,276
-------- --------
Net income attributed to common
shares for diluted EPS $ 48,708 $ 41,078
======== =========
Weighted average common shares
outstanding 65,618 63,682
Nonvested restricted shares -- (72)
-------- --------
Shares used to calculate basic EPS 65,618 63,610
Assumed conversion of preferred and
preference stock 15,479 15,479
Assumed exercise of stock options 215 635
-------- --------
Shares used to calculate diluted
EPS 81,312 79,724
======== ========
Basic EPS $ .68 $ .58
Diluted EPS .60 .52
</TABLE>
The assumed conversion to common stock of the Company's 7%
convertible subordinated debentures would have an anti-dilutive
effect on diluted EPS and, therefore, has not been included in the
computation.
6
<PAGE>
Segment Information
- -------------------
Net sales for the Company's Fresh Produce and Processed
Foods business segments totaled $573 million and $120 million
for the first quarter of 1999, respectively, and $602 million
and $115 million for the first quarter of 1998. Operating
income for the Fresh Produce and Processed Foods segments was
$71 million and $6 million for the first quarter of 1999,
respectively, and $63 million and $7 million for the first
quarter of 1998.
Inventories (in thousands)
- --------------------------
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
---------- ------------ -----------
<S> <C> <C> <C>
Fresh produce $ 47,319 $ 43,052 $ 41,285
Processed food
products 139,455 184,438 150,112
Growing crops 109,992 109,891 116,348
Materials, supplies
and other 56,506 49,912 71,391
---------- ---------- -----------
$ 353,272 $ 387,293 $ 379,136
========== ========== ===========
</TABLE>
Hedging
- -------
Chiquita has a long-standing policy of periodically hedging
transactions denominated in foreign currencies. At March 31,
1999, the Company had option contracts denominated in Deutsche marks
and the European Union ("EU") common currency (the "Euro") which
ensure conversion of approximately $260 million of foreign sales
through the end of 1999 at equivalent rates not higher than 1.77
Deutsche marks (.90 Euros) per dollar or lower than 1.59 Deutsche
marks (.82 Euros) per dollar and approximately $55 million of foreign
sales in 2000 at equivalent rates not higher than 1.78 Deutsche marks
(.91 Euros) per dollar or lower than 1.58 Deutsche marks (.81 Euros)
per dollar. The carrying value of these option contracts at
March 31, 1999 was approximately $5 million and their fair value based
on quoted market prices was approximately $9 million.
Acquisitions
- ------------
In January 1998, Chiquita acquired Stokely USA, Inc.,
previously a publicly-owned vegetable canning business. In
connection with the acquisition, Chiquita issued $11 million
of common stock (.8 million shares) in exchange for all
outstanding Stokely shares and issued $33 million of common
stock (2.2 million shares) and paid $18 million of cash to
retire corresponding amounts of Stokely debt. The transaction
was accounted for as a purchase.
7
Comprehensive Income
- --------------------
Comprehensive income for all periods presented consisted
solely of net income and unrealized foreign currency
translation losses, as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended
March 31,
---------------------
1999 1998
-------- ---------
<S> <C> <C>
Net income $ 48,708 $ 41,078
Unrealized foreign currency
translation losses (3,246) (1,839)
-------- ---------
Comprehensive income $ 45,462 $ 39,239
======== =========
</TABLE>
8
<PAGE>
Item 2
- ------
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
MANAGEMENT'S ANALYSIS OF
------------------------
OPERATIONS AND FINANCIAL CONDITION
-----------------------------------
Operations
- ----------
Net sales for the quarter ended March 31, 1999 decreased by
$24 million to $693 million primarily as a result of a merger
of the Company's Chilean fresh produce operations into a joint
venture in September 1998 and the sale of Chiquita's Central
American plastic products operations in December 1998.
Operating expenses also decreased from prior year levels as a
result of these transactions.
Operating income for the 1999 first quarter was $77 million
compared to 1998 first quarter operating income of $70
million. The improvement in first quarter operating results
occurred in the Company's Fresh Produce business segment
primarily as a result of higher banana pricing on comparable
core market volume and lower volume in Eastern European
trading markets. While the Company's Processed Foods segment
continued to consolidate and reduce costs in its canning
operations, it experienced lower cyclical pricing for canned
vegetable products during the quarter.
Throughout the first six weeks of the second quarter of
1999, the Company has been experiencing significantly lower
banana pricing in all markets in comparison to the second
quarter of 1998.
The Company's effective tax rate is affected by the level
and mix of income among various domestic and foreign jurisdictions
in which the Company operates.
Financial Condition
- -------------------
Operating cash flow increased from $5 million in 1998 to $18
million in 1999 primarily as a result of improved earnings and
lower working capital levels.
For the 1999 first quarter, capital expenditures of $24
million included spending to rehabilitate farms in Honduras
and Guatemala destroyed or damaged by Hurricane Mitch flooding
in late 1998. The Company expects to finance the remaining
flood rehabilitation and its other capital expenditures with
cash flow from operations, insurance proceeds and long-term
borrowings. During the quarter, the Company received an
initial insurance payment of $25 million.
In April 1999, Chiquita Processed Foods, L.L.C., the
Company's vegetable canning subsidiary, acquired certain
canning assets in Oregon. The purchase price of approximately
$20 million was funded with borrowings under Chiquita
Processed Foods' revolving credit facility.
At May 12, 1999, approximately $30 million of borrowings
were available under Chiquita's $125 million revolving credit
facility, and approximately $60 million of borrowings were
available under committed lines of credit of subsidiaries.
9
<PAGE>
World Trade Organization Proceeding
- -----------------------------------
Reference is made to the discussion of the European Union
banana quota and licensing regime contained in Part I, Item 1
- - "Business - Risks of International Operations" in the
Company's 1998 Form 10-K and "Management's Analysis of
Operations and Financial Condition" in the Company's 1998
Annual Report to Shareholders. On April 6, 1999, a World
Trade Organization ("WTO") arbitration panel ruled that the
revised banana import regime implemented by the EU in January
1999 continues the same discrimination against the United
States and Latin America which previous WTO rulings found to
be in violation of the EU's international trade obligations.
The WTO arbitrators concluded that the United States is being
harmed by the revised regime in the amount of $191.4 million
annually and is entitled to suspend EU trade concessions in
that amount. Accordingly, the United States has commenced
the imposition of prohibitive (100% of value) duties on
selected EU products accounting for annual exports to the
United States in the amount authorized by the arbitrators'
ruling.
The arbitrators' ruling is not appealable and the EU has
indicated that it will modify its banana import regime to be
consistent with its international trade obligations. However,
there can be no assurance as to the nature, extent or timing
of any such modification or its impact on the Company.
Year 2000 Project
- -----------------
Reference is made to the discussion of Chiquita's company-wide
Year 2000 Project (the "Project") in "Management's Analysis of Operations
and Financial Condition" in the Company's 1998 Annual Report to
Shareholders. The Project has included the following phases:
(1) inventorying the Company's hardware, software and equipment;
(2) assessing which items have Year 2000 issues; (3) determining critical
versus non-critical items; (4) replacing or repairing items that have
Year 2000 issues; (5) testing material items; (6) assessing the Year 2000
readiness of the Company's material customers and suppliers; and
(7) developing contingency plans. As of March 31, 1999, the first five
phases of the Project are substantially complete. The Company is assessing
the Year 2000 readiness of material customers and suppliers, including
financial institutions, telecommunications companies, public
utility companies and commercial vendors. Assessment has included
obtaining written certifications of Year 2000 readiness from third
parties, review of their Year 2000 readiness plans and site visits.
This assessment is substantially complete for those third parties whose
functions are most critical to the operations of the Company, such as
financial institutions. Assessment of risk associated with remaining
material customers and suppliers and development of necessary contingency
plans for third parties and critical internal systems are expected to be
completed before the end of 1999. Chiquita's contingency planning is
focusing on minimizing Year 2000 disruptions, should they occur, by having
sufficient personnel and other resources in place to permit an
appropriate response to specific problems.
The estimated total cost of the Project for systems that
have not been replaced or upgraded in the normal course is
less than $10 million. Most of the cost has already been
incurred by the Company.
Due to the widespread uncertainties inherent in the Year
2000 problem, resulting primarily from the widely reported
uncertainty of the Year 2000 readiness of suppliers, customers
and other third parties, including U.S. and foreign
governmental entities, the Company is unable to determine at
this time whether the consequences of Year 2000 failures will
have a material impact on the Company's financial statements.
However, the Company believes the most reasonably likely worst
case scenario is that there could be some localized, temporary
disruptions to portions of business activities, such as
shipping, ripening and data processing, rather than systemic
or long-term problems affecting its business operations as a
whole.
10
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market
- --------------------------------------------------------------
Risk
----
Reference is made to the discussion of Chiquita's Management
of Market Risk in "Management's Analysis of Operations and
Financial Condition" in the Company's 1998 Annual Report to
Shareholders. As of March 31, 1999, there were no material
changes to the information presented.
* * * * *
This quarterly report contains certain information that may
be deemed to be "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995.
This information is subject to a number of assumptions, risks
and uncertainties, including product pricing, costs to
purchase or grow (and availability of) fresh produce and other
raw materials, currency exchange rate fluctuations, natural
disasters and unusual weather conditions, operating
efficiencies, labor relations, access to capital, actions of
governmental bodies, actions or failures to act of customers,
suppliers and other third parties with respect to Year 2000
readiness issues, and other market and competitive conditions,
many of which are beyond the control of Chiquita. Actual
results or developments may differ materially from the
expectations expressed or implied in the forward-looking
information.
Part II - Other Information
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
Page
Number(s)
---------
(a) Exhibit 27 - Financial Data Schedule. . . . . **
** Omitted from this copy of
Quarterly Report on Form 10-Q.
Copy included in report filed
electronically with the Securities
and Exchange Commission.
(b) There were no reports on Form 8-K filed
by the Company during the quarter ended
March 31, 1999.
11
<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)
May 14, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Chiquita Brands International, Inc. Form 10-Q for the three months ended
March 31, 1999 and is qualified in its entirety by reference to such
financial information.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 97,902
<SECURITIES> 0
<RECEIVABLES> 250,200
<ALLOWANCES> 10,316
<INVENTORY> 353,272
<CURRENT-ASSETS> 840,825
<PP&E> 1,785,918
<DEPRECIATION> 664,542
<TOTAL-ASSETS> 2,518,494
<CURRENT-LIABILITIES> 578,376
<BONDS> 928,457
0
253,475
<COMMON> 657
<OTHER-SE> 581,030
<TOTAL-LIABILITY-AND-EQUITY> 2,518,494
<SALES> 693,002
<TOTAL-REVENUES> 693,002
<CGS> 514,775
<TOTAL-COSTS> 514,775
<OTHER-EXPENSES> 22,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,693
<INCOME-PRETAX> 52,908
<INCOME-TAX> 4,200
<INCOME-CONTINUING> 48,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,708
<EPS-PRIMARY> .68
<EPS-DILUTED> .60
</TABLE>
