------------------------------------------------------------------------
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
June 30, 2000 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 July 31, 2000, there were 66,557,712 shares of Common Stock
outstanding.
Page 1 of 12 Pages
------------------------------------------------------------------------
<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
and six months ended June 30, 2000 and 1999 3
Consolidated Balance Sheet as of June 30, 2000,
December 31, 1999 and June 30, 1999 4
Consolidated Statement of Cash Flow for the six
months ended June 30, 2000 and 1999 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 10
PART II - Other Information
-------
Item 4 - Submission of Matters to a Vote of Security
Holders 11
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 June 30, Six Months Ended June 30,
---------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 601,465 $ 676,857 $1,259,518 $1,369,859
---------- ---------- ---------- ----------
Operating expenses
Cost of sales 462,283 536,049 960,288 1,050,824
Selling, general and
administrative 72,133 82,204 141,833 160,942
Depreciation 23,004 22,433 45,564 44,698
---------- ---------- ---------- ----------
557,420 640,686 1,147,685 1,256,464
---------- ---------- ---------- ----------
Operating income 44,045 36,171 111,833 113,395
Interest income 2,824 2,311 5,929 4,600
Interest expense (31,997) (26,951) (63,963) (53,644)
Other income, net 50 93 113 181
---------- ---------- ---------- ----------
Income before
income taxes and
extraordinary item 14,922 11,624 53,912 64,532
Income taxes (4,000) (4,300) (8,000) (8,500)
---------- ---------- ---------- ----------
Income before
extraordinary item 10,922 7,324 45,912 56,032
Extraordinary gain from
debt prepayment 1,832 -- 1,832 --
---------- ---------- ---------- ----------
Net income $ 12,754 $ 7,324 $ 47,744 $ 56,032
========== ========== ========== ==========
Earnings per common
share:
Basic - Income before
extraordinary
item $ .10 $ . 05 $ .56 $ . 72
- Extraordinary
item .03 -- .03 --
---------- ---------- ---------- ----------
- Net income $ .13 $ .05 $ .59 $ .72
========== ========== ========== ==========
Diluted - Income before
extraordinary
item $ .10 $ . 05 $ .56 $ .69
- Extraordinary
item .03 -- .02 --
---------- ---------- ---------- ----------
- Net income $ .13 $ .05 $ .58 $ .69
========== ========== ========== ==========
Dividends per common
share $ -- $ . 05 $ -- $ .10
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
CONSOLIDATED BALANCE SHEET (Unaudited)
-------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
------
Current assets
Cash and equivalents $ 94,413 $ 97,863 $ 180,362
Trade receivables (less
allowances of $12,047,
$12,214 and $10,924) 192,366 209,741 237,477
Other receivables, net 143,040 151,457 76,706
Inventories 340,196 421,806 343,651
Other current assets 36,842 22,000 32,655
------------ ------------ ------------
Total current assets 806,857 902,867 870,851
Property, plant and equipment,
net 1,115,982 1,177,823 1,155,662
Investments and other assets 353,593 333,257 383,492
Intangibles, net 169,116 182,180 187,348
------------ ------------ ------------
Total assets $ 2,445,548 $ 2,596,127 $ 2,597,353
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Notes and loans payable $ 35,756 $ 89,519 $ 56,861
Long-term debt due within
one year 185,673 40,235 92,943
Accounts payable 199,338 217,327 223,220
Accrued liabilities 99,913 141,341 104,043
------------ ------------ ------------
Total current liabilities 520,680 488,422 477,067
Long-term debt of parent
company 772,086 883,815 883,548
Long-term debt of subsidiaries 260,597 343,186 222,446
Accrued pension and other
employee benefits 58,518 68,162 84,424
Other liabilities 88,696 107,256 98,186
------------ ------------ ------------
Total liabilities 1,700,577 1,890,841 1,765,671
------------ ------------ ------------
Shareholders' equity
Preferred and preference
stock 253,475 253,475 253,475
Common stock, $.01 par value
(66,532,262, 65,921,791 and
65,788,077 shares) 665 659 658
Capital surplus 765,582 761,079 759,632
Accumulated deficit (264,414) (303,607) (174,057)
Accumulated other
comprehensive loss (10,337) (6,320) (8,026)
------------ ------------ ------------
Total shareholders'
equity 744,971 705,286 831,682
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 2,445,548 $ 2,596,127 $ 2,597,353
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash provided (used) by:
Operations
Income before extraordinary item $ 45,912 $ 56,032
Depreciation and amortization 48,874 47,915
Changes in current assets and
liabilities and other (9,353) (17,217)
----------- -----------
Cash flow from operations 85,433 86,730
----------- -----------
Investing
Capital expenditures (33,772) (74,475)
Hurricane Mitch insurance proceeds 32,500 25,000
Proceeds from sale of business 16,228 --
Acquisitions of businesses -- (21,619)
Refundable deposits for container
equipment -- 9,673
Long-term investments (2,684) (8,142)
Other 1,088 11,424
----------- -----------
Cash flow from investing 13,360 (58,139)
----------- -----------
Financing
Debt transactions
Issances of long-term debt -- 194,623
Repayments of long-term debt (41,588) (42,330)
Decrease in notes and loans
payable (52,104) (74,363)
Stock transactions
Issuances of common stock -- 57
Dividends (8,551) (15,122)
----------- -----------
Cash flow from financing (102,243) 62,865
----------- -----------
Increase (decrease) in cash and
equivalents (3,450) 91,456
Balance at beginning of period 97,863 88,906
----------- -----------
Balance at end of period $ 94,413 $ 180,362
=========== ===========
</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, 1999 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 Six Months Ended
June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before extraordinary
item $ 10,922 $ 7,324 $ 45,912 $ 56,032
Extraordinary gain from debt
prepayment 1,832 -- 1,832 --
--------- --------- --------- --------
Net income 12,754 7,324 47,744 56,032
Dividends on preferred and
preference stock (4,275) (4,275) (8,551) (8,551)
--------- --------- --------- --------
Net income attributed to
common shares for basic EPS 8,479 3,049 39,193 47,481
Add back dividends on preferred
and preference stock -- -- 8,551 8,551
--------- --------- --------- --------
Net income attributed to common
shares for diluted EPS $ 8,479 $ 3,049 $ 47,744 $ 56,032
========= ========= ========= =========
Weighted average common shares
outstanding (shares used to
calculate basic EPS) 66,486 65,761 66,376 65,690
Convertible preferred and
preference stock -- -- 15,479 15,479
Stock options and other stock
awards 11 137 62 176
--------- --------- --------- ---------
Shares used to calculate
diluted EPS 66,497 65,898 81,917 81,345
========= ========= ========= =========
Earnings per common share:
Basic - Before extraordinary
item $ .10 $ . 05 $ .56 $ . 72
- Extraordinary item .03 -- .03 --
--------- --------- --------- ---------
- Net income $ .13 $ .05 $ .59 $ .72
========= ========= ========= =========
Diluted - Before extraordinary
item $ .10 $ . 05 $ .56 $ .69
- Extraordinary item .03 -- .02 --
--------- --------- --------- ---------
- Net income $ .13 $ .05 $ .58 $ .69
========= ========= ========= =========
</TABLE>
The assumed conversions to common stock of the Company's 7% convertible
subordinated debentures, preferred stock and preference stock are
excluded from the diluted EPS computations for periods in which these
items, on an individual basis, have an anti-dilutive effect on diluted
EPS.
6
<PAGE>
Segment Information (in thousands)
---------------------------------
Financial information for the Company's business segments is as
follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales
Fresh Produce $ 487,160 $ 557,816 $1,011,723 $1,131,079
Processed Foods 114,305 119,041 247,795 238,780
----------- ---------- ---------- ----------
$ 601,465 $ 676,857 $1,259,518 $1,369,859
=========== ========== ========== ==========
Operating income
Fresh Produce $ 37,130 $ 29,273 $ 99,917 $ 100,979
Processed Foods 6,915 6,898 11,916 12,416
----------- ---------- ---------- ----------
$ 44,045 $ 36,171 $ 111,833 $ 113,395
=========== ========== ========== ==========
Inventories (in thousands)
-------------------------
June 30, December 31, June 30,
2000 1999 1999
------------ ------------ ------------
Fresh produce $ 31,467 $ 39,762 $ 36,480
Processed food products 144,456 215,365 131,972
Growing crops 98,721 104,699 110,406
Materials, supplies and
other 65,552 61,980 64,793
------------ ------------ ------------
$ 340,196 $ 421,806 $ 343,651
============ ============ ============
</TABLE>
Hedging
-------
Chiquita has a long-standing policy of periodically hedging
transactions denominated in foreign currencies. At June 30, 2000, the
Company had euro-denominated option contracts which ensure conversion of
approximately euro 115 million of sales in 2000 at rates not lower than
0.92 dollars per euro or higher than 1.14 dollars per euro. The Company
also had euro-denominated option contracts which ensure conversion of
approximately euro 55 million of sales in 2000 at rates not lower than
0.92 dollars per euro and approximately euro 225 million of sales in
2001 at rates not lower than 0.91 dollars per euro. The carrying value
of these option contracts at June 30, 2000 was approximately $8 million
and their fair value based on quoted market prices was approximately $4
million. In addition, the Company realized a gain of $8 million on the
early termination of certain option contracts. This gain has been deferred
and will be recognized to income on the original maturity dates of the
terminated option contracts.
7
<PAGE>
Comprehensive Income
--------------------
Comprehensive income for all periods presented consisted solely of net
income and unrealized foreign currency translation gains (losses), as
follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
2000 1999 2000 1999
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 12,754 $ 7,324 $ 47,744 $ 56,032
Unrealized foreign
currency translation
gains (losses) 584 (3,938) (4,017) (7,184)
---------- ---------- ---------- ----------
Comprehensive income $ 13,338 $ 3,386 $ 43,727 $ 48,848
========== ========== ========== ==========
</TABLE>
Acquisitions and Divestitures
-----------------------------
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.
The acquisition was accounted for as a purchase.
In June 2000, the Company's Australian fresh produce subsidiary,
Chiquita Brands South Pacific Limited, issued additional shares in
conjunction with two business acquisitions. The Company's voting
interest is now below 50% and, as a result, the investment in this
business is accounted for under the equity method. Also in June 2000,
the Company sold its California Day-Fresh Foods, Inc. juice business
(marketing under the "Naked Foods" and "Ferraro's" brands) to North
Castle Partners, L.L.C., a venture capital firm. Proceeds consisted of
$16 million in cash and $9 million in short-term notes.
8
<PAGE>
Item 2
------
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
MANAGEMENT'S ANALYSIS OF
------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
Operations
----------
Operating income for the second quarter of 2000 was $44 million
compared to 1999 second quarter operating income of $36 million. For
the six months ended June 30, 2000, operating income was $112 million
compared to $113 million in the first half of 1999. During the first
half of 2000, the Company continued to achieve significant improvements
in the production and logistics costs of its Fresh Produce business and
to realize benefits from its workforce reduction program announced in
late 1999. These improvements were offset by the combined impact of a
significantly stronger dollar (mitigated in part by the Company's
foreign currency hedging program), higher fuel costs, and lower banana
volume in North America. Since June 30, 2000, the dollar has continued
to strengthen compared to major European currencies. First half
operating results for the Company's Processed Foods business segment
were comparable to the prior year.
Chiquita's second quarter 2000 operating income also includes charges
and write-offs primarily relating to banana production assets, including
the curtailment of Hurricane Mitch farm rehabilitation announced in June
2000. These charges were offset by a gain on the sale of California Day-
Fresh Foods, Inc., a producer and distributor of natural fresh fruit and
vegetable juices.
Net interest expense increased in the first half of 2000 over the
prior year as a result of higher average outstanding debt balances.
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
-------------------
Long-term debt due within one year increased $145 million from the end
of 1999 primarily due to the reclassification from long-term debt of the
Company's 7% subordinated debentures and a bank loan to certain of the
Company's Costa Rican farm subsidiaries, both of which mature in the
first quarter of 2001. The Company expects to repay these obligations
with available cash and by obtaining additional financing.
Additional financing to be obtained by the Company includes replacement
of its $110 million parent company revolving credit facility, which
expires in January 2001. The Company is in preliminary discussions with
financial institutions regarding a new facility. The current parent
company revolving credit facility has been used primarily for working capital
purposes, with highest amounts typically drawn during the first half of
the year. At March 31, 2000, the balance outstanding under this
revolver was $42 million, its highest level in 2000. At July 31, 2000,
no borrowings were outstanding under this facility. At July 31, 2000,
approximately $65 million of additional borrowings were available to
subsidiaries for working capital purposes under other committed lines of
credit.
Cash was unusually high at June 30, 1999 as a result of the Company's
issuance late in June 1999 of its 10% Senior Notes due 2009.
9
<PAGE>
During the first six months of 2000, capital expenditures of $34
million included approximately $14 million to rehabilitate farms in
Honduras and Guatemala which were destroyed or damaged by Hurricane
Mitch in late 1998. During the second quarter of 2000, the Company
received an additional $32 million of insurance proceeds related to
Hurricane Mitch.
International
-------------
As previously described under "Management's Analysis of Operations and
Financial Condition - European Union Regulatory Developments" in the
Company's 1999 Annual Report to Shareholders, in early 1999 the United
States Trade Representative ("USTR") imposed prohibitive retaliatory
duties on selected European Union ("EU") products accounting for $191
million of annual exports to the United States. This trade retaliation
was authorized by the World Trade Organization ("WTO") because of the
EU's failure to bring its banana import regime into conformity with its
international trade obligations. In May 2000, the President of the
United States signed into law a measure which should increase pressure
on the EU to make its banana regime WTO consistent. Referred to as
"carousel retaliation," this measure requires the USTR to change the
list of imported goods subject to retaliatory sanctions every six
months. The USTR is currently finalizing a new list of EU products
which will be subject to prohibitive duties.
In July 2000, the European Commission declared that it had been unable
to achieve consensus among the principal banana exporting nations on
allocation of import licenses and will therefore be studying the
feasibility of distributing licenses on a "first come, first served"
basis. The Commission further said that if it is not able to devise a
manageable "first come, first served" system by October 2000, it would
propose elimination of the quota in favor of a "tariff only" regime that
would impose a very substantial tariff on Latin American bananas while
leaving bananas imported from the EU and its former colonies duty free.
The United States and Latin American producing countries have informed
the EU that they do not believe either of these proposals would be
implemented in a WTO consistent manner. Uncertainties remain as to the
outcome of this dispute and its effect on the Company and the banana
industry as a whole.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
Reference is made to the discussion under "Management's Analysis of
Operations and Financial Condition - Market Risk Management" in the
Company's 1999 Annual Report to Shareholders. As of June 30, 2000,
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, ability to obtain debt or equity financing when and as
needed, actions of governmental bodies, 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.
10
<PAGE>
Part II - Other Information
---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
In connection with the election of directors of the Company, proxies
were solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934. One of the nominees for director, Jean Head Sisco,
passed away in April 2000 and the board was reduced to six members.
The following votes (representing approximately 90% of the shares
eligible to vote) were cast at the Company's Annual Meeting of
Shareholders held on May 10, 2000:
<TABLE>
<CAPTION>
Votes
--------------------------
Name For Withheld
----------------- ---------- ---------
<S> <C> <C>
Carl H. Lindner 58,573,007 1,659,917
Keith E. Lindner 58,574,005 1,658,919
Fred J. Runk 58,683,012 1,549,912
William W. Verity 58,687,718 1,545,206
Oliver W. Waddell 58,671,717 1,561,207
Steven G. Warshaw 58,644,839 1,588,085
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed
by the Company during the quarter ended
June 30, 2000.
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)
August 11, 2000
12
