------------------------------------------------------------------------
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, 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 October 31, 2000, there were 66,641,568 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
and nine months ended September 30, 2000 and 1999 3
Consolidated Balance Sheet as of September 30, 2000,
December 31, 1999 and September 30, 1999 4
Consolidated Statement of Cash Flow for the nine
months ended September 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 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 Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 465,773 $ 567,238 $ 1,725,291 $ 1,937,097
----------- ---------- ----------- -----------
Operating expenses
Cost of sales 408,771 483,922 1,369,059 1,534,746
Selling, general and
administrative 58,230 81,328 200,063 242,270
Depreciation 22,558 22,294 68,122 66,992
----------- ---------- ----------- -----------
489,559 587,544 1,637,244 1,844,008
----------- ---------- ----------- -----------
Operating income
(loss) (23,786) (20,306) 88,047 93,089
Interest income 3,371 12,647 9,300 17,247
Interest expense (31,589) (29,079) (95,552) (82,723)
Other income, net 52 84 165 265
----------- ---------- ----------- -----------
Income (loss) before
income taxes and
extraordinary item (51,952) (36,654) 1,960 27,878
Income taxes -- -- (8,000) (8,500)
----------- ---------- ----------- -----------
Income (loss) before
extraordinary item (51,952) (36,654) (6,040) 19,378
Extraordinary gain
(loss)from debt
extinguishment (1,761) -- 71 --
----------- ---------- ----------- -----------
Net income (loss) $ (53,713) $ (36,654) $ (5,969) $ 19,378
=========== ========== =========== ===========
Earnings per common
share:
Basic - Income (loss)
before
extraordinary
item $ (.84) $ (.62) $ (.28) $ .10
- Extraordinary
item (.03) -- .00 --
----------- ---------- ----------- -----------
- Net income
(loss) $ (.87) $ (.62) $ (.28) $ .10
=========== ========== =========== ==========
Diluted- Income (loss)
before
extraordinary
item $ (.84) $ (.62) $ (.28) $ .10
- Extraordinary
item (.03) -- .00 --
----------- ----------- ----------- ----------
- Net income
(loss) $ (.87) $ (.62) $ (.28) $ .10
=========== =========== ========== ==========
Dividends per common
share $ -- $ .05 $ -- $ .15
=========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
CONSOLIDATED BALANCE SHEET (Unaudited)
-------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
2000 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
------
Current assets
Cash and equivalents $ 109,965 $ 97,863 $ 132,947
Trade receivables (less
allowances of $9,746,
$12,214 and $11,878) 184,888 209,741 211,204
Other receivables, net 96,771 151,457 124,750
Inventories 442,527 421,806 438,157
Other current assets 27,100 22,000 25,766
------------- ------------ -------------
Total current assets 861,251 902,867 932,824
Property, plant and
equipment, net 1,102,078 1,177,823 1,174,168
Investments and other
assets 342,054 333,257 358,433
Intangibles, net 167,060 182,180 187,209
------------- ------------ -------------
Total assets $ 2,472,443 $ 2,596,127 $ 2,652,634
============= ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Notes and loans payable $ 41,319 $ 89,519 $ 41,482
Long-term debt due within
one year 180,360 40,235 37,085
Accounts payable 258,140 217,327 280,482
Accrued liabilities 105,165 141,341 114,745
------------- ------------ -------------
Total current liabilities 584,984 488,422 473,794
Long-term debt of parent
company 772,231 883,815 883,680
Long-term debt of subsidiaries 285,151 343,186 311,382
Other liabilities 145,905 175,418 192,716
------------- ------------ -------------
Total liabilities 1,788,271 1,890,841 1,861,572
------------- ------------ -------------
Shareholders' equity
Preferred and preference
stock 253,475 253,475 253,475
Common stock, $.01 par value
(66,616,884, 65,921,791
and 65,842,074 shares) 666 659 658
Capital surplus 766,048 761,079 760,279
Accumulated deficit (322,402) (303,607) (218,278)
Accumulated other
comprehensive loss (13,615) (6,320) (5,072)
------------- ------------ ------------
Total shareholders'
equity 684,172 705,286 791,062
------------- ------------ ------------
Total liabilities and
shareholders' equity $ 2,472,443 $ 2,596,127 $ 2,652,634
============= ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
-----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
2000 1999
----------- ----------
<S> <C> <C>
Cash provided (used) by:
Operations
Income (loss) before
extraordinary item $ (6,040) $ 19,378
Depreciation and amortization 72,982 71,736
Collection of tax refund 21,685 --
Changes in current assets and
liabilities and other (1,604) (10,439)
----------- ----------
Cash flow from operations 87,023 80,675
----------- ----------
Investing
Capital expenditures (46,127) (118,654)
Hurricane Mitch insurance
proceeds 32,500 25,000
Proceeds from sale of business 16,228 --
Proceeds from sales of property,
plant and equipment 5,825 8,759
Acquisitions of businesses -- (21,619)
Refundable deposits for container
equipment -- 9,673
Long-term investments (3,133) (8,142)
Other 335 3,647
----------- ----------
Cash flow from investing 5,628 (101,336)
----------- ---------
Financing
Debt transactions
Issuances of long-term debt 63,434 232,630
Repayments of long-term debt (84,616) (52,087)
Decrease in notes and loans
payable (46,541) (93,209)
Stock transactions
Issuances of common stock -- 57
Dividends (12,826) (22,689)
----------- ---------
Cash flow from financing (80,549) 64,702
----------- ---------
Increase in cash and equivalents 12,102 44,041
Balance at beginning of period 97,863 88,906
----------- ----------
Balance at end of period $ 109,965 $ 132,947
=========== ==========
</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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Income (loss) before
extraordinary item $ (51,952) $ (36,654) $ (6,040) $ 19,378
Extraordinary gain (loss)
from debt
extinguishment (1,761) -- 71 --
--------- --------- --------- ---------
Net income (loss) (53,713) (36,654) (5,969) 19,378
Dividends on preferred and
preference stock (4,275) (4,275) (12,826) (12,826)
--------- --------- ---------- ---------
Net income (loss)
attributed to common
shares $ (57,988) $ (40,929) $ (18,795) $ 6,552
========= ========= ========= =========
Weighted average common
shares outstanding
(shares used to calculate
basic EPS) 66,572 65,812 66,441 65,730
Stock options and other
stock awards -- -- -- 169
--------- --------- --------- ---------
Shares used to calculate
diluted EPS 66,572 65,812 66,441 65,899
========= ========= ========= =========
Basic and diluted earnings
per common share:
Before extraordinary
item $ (.84) $ (.62) $ (.28) $ .10
Extraordinary item (.03) -- .00 --
--------- --------- --------- --------
Net income (loss) $ (.87) $ (.62) $ (.28) $ .10
========= ========= ========= ========
</TABLE>
The assumed conversions to common stock of the Company's 7% convertible
subordinated debentures, preferred and preference stock, stock options
and other stock awards 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 Nine Months Ended
September 30, September 30,
--------------------- ------------------------
2000 1999 2000 1999
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales
Fresh Produce $ 363,696 $ 439,769 $ 1,375,418 $ 1,570,848
Processed Foods 102,077 127,469 349,873 366,249
---------- ---------- ----------- -----------
$ 465,773 $ 567,238 $ 1,725,291 $ 1,937,097
========== ========== =========== ===========
Operating income (loss)
Fresh Produce $ (31,502) $ (20,213) $ 68,415 $ 80,766
Processed Foods 7,716 5,907 19,632 18,323
---------- ---------- ----------- -----------
$ (23,786) $ (14,306) $ 88,047 $ 99,089
========== ========== =========== ===========
Segment operating income (loss) for the third quarter of 1999 excludes
$6 million of charges resulting from a workforce reduction program.
Inventories (in thousands)
-------------------------
September 30, December 31, September 30,
2000 1999 1999
-------------- -------------- ------------
Fresh produce $ 32,416 $ 39,762 $ 36,918
Processed food products 249,699 215,365 232,186
Growing crops 98,009 104,699 110,423
Materials, supplies and
other 62,403 61,980 58,630
-------------- -------------- ------------
$ 442,527 $ 421,806 $ 438,157
============== ============== ============
</TABLE>
Hedging
-------
Chiquita has a long-standing policy of periodically hedging
transactions denominated in foreign currencies. At September 30, 2000,
the Company had euro-denominated option contracts which ensure
conversion of approximately euro 45 million of sales in 2000 at rates
not lower than 0.88 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 40 million of sales in 2000 and
approximately euro 270 million of sales in 2001 at rates not lower than
0.88 dollars per euro. The carrying value of these option contracts at
September 30, 2000 was approximately $8 million and their fair value
based on quoted market prices was approximately $10 million. In
addition, the Company realized gains of $13 million on the early
termination of certain option contracts during the second and third
quarters of 2000. At September 30, 2000, approximately $4 million of
these gains have been recognized in income, and the remaining $9 million
will be recognized in income in the fourth quarter of 2000 and in 2001
based on the original maturity dates of the terminated option contracts.
7
<PAGE>
Accounting Pronouncements
-------------------------
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." This standard, which
must be implemented for the Company's 2001 fiscal year, requires the
recognition of all derivatives on the balance sheet at fair value, and
recognition of the resulting gains or losses as adjustments to net
income or other comprehensive income. The Company is currently
evaluating the impact of SFAS No. 133 on its consolidated financial
statements. The adoption of this standard could increase the likelihood
of volatility in earnings and other comprehensive income, the extent of
which is dependent upon the amount of derivatives outstanding and the
timing and size of foreign exchange rate fluctuations.
Comprehensive Income (Loss)
--------------------------
Comprehensive income (loss) for all periods presented consisted solely
of net income (loss) and unrealized foreign currency translation gains
(losses), as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2000 1999 2000 1999
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (53,713) $ (36,654) $ (5,969) $ 19,378
Unrealized foreign
currency translation
gains (losses) (3,278) 2,954 (7,295) (4,230)
---------- ---------- --------- ----------
Comprehensive income
(loss) $ (56,991) $ (33,700) $ (13,264) $ 15,148
========== ========== ========= ==========
</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 is no longer
consolidated but 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
which were subsequently collected in October 2000.
8
<PAGE>
Item 2
------
CHIQUITA BRANDS INTERNATIONAL, INC.
----------------------------------
MANAGEMENT'S ANALYSIS OF
-------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
Operations
----------
The Company incurred an operating loss of $24 million for the third
quarter of 2000 compared to a 1999 third quarter operating loss of $20
million. For the nine months ended September 30, 2000, operating income
was $88 million compared to $93 million for the nine months ended
September 30, 1999. In 2000, the Company's results have been negatively
affected by the strongest dollar in relation to major European
currencies in the last 14 years. This results in fewer U.S. dollars
from the Company's European sales (mitigated in part by the Company's
foreign currency hedging program). Additionally, the Company's results
have been adversely affected by higher fuel costs and lower banana
volume in North America. The negative effects of these items have been
partially offset by the Company's continued improvements in the
production and logistics costs of its Fresh Produce business and
benefits from its workforce reduction program announced in the third
quarter of 1999. Operating results for the Company's Processed Foods
business segment improved from the prior year as the Company continued
to consolidate productive capacity in its canning operations.
On a local currency basis, banana prices in 2000 have remained
comparable to 1999. However, local banana prices in both years have
been lower than in preceding years as the industry continues to
experience an oversupply of bananas.
Operating income for the nine months ended September 30, 2000 also
includes charges and write-offs relating primarily to banana production
assets. This includes the curtailment announced in June 2000 of
additional Hurricane Mitch farm rehabilitation. 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.
Operating income for both the quarter and nine months ended September
30, 1999 includes $6 million of workforce reduction charges.
Net sales for the quarter and nine months ended September 30, 2000
decreased $101 million and $212 million from the corresponding periods
in 1999 primarily as a result of the stronger dollar, lower banana
volume in North America and the deconsolidation of the Company's
Australian operations.
Net interest expense increased in the first nine months of 2000 over
the prior year as a result of higher average outstanding debt balances
and $10 million of interest income on tax refunds recorded in the 1999
third quarter.
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
-------------------
Approximately $145 million of debt matures in the first quarter of
2001, composed primarily of the Company's 7% subordinated debentures and
a bank loan to certain Costa Rican farm subsidiaries. The Company
presently intends to satisfy these obligations and its seasonal working
capital needs both with available cash and by obtaining additional
financing. Additional financing may include a new revolving credit
facility to replace the Company's $110 million revolving credit facility that
expires in January 2001 and/or other issuances of securities. However,
even if the Company is able to obtain these financings on satisfactory
terms, further deterioration in industry conditions or in the euro
exchange rate could adversely affect the Company's ability to repay the
$145 million of first quarter 2001 obligations.
9
<PAGE>
The Company is in discussions with financial institutions regarding a
new revolving credit facility. The Company's current revolving credit
facility has been used primarily for working capital purposes, with
highest amounts typically drawn during the first half of the year.
During 2000, the highest balance outstanding under this revolver was $42
million at March 31, 2000. At October 31, 2000, no borrowings were
outstanding under this facility.
At October 31, 2000, approximately $50 million of additional borrowings
were available to subsidiaries for working capital purposes under other
committed lines of credit.
As previously announced, the Company will not declare or pay any
further dividends on any of its outstanding preferred and preference
stock until conditions improve. This includes the $2.875 Non-Voting
Cumulative Preferred Stock, Series A, $3.75 Convertible Preferred Stock,
Series B, and $2.50 Convertible Preference Stock, Series C. Dividends
on these series, which total $17 million annually, will continue to
accrue, in accordance with the terms of these shares. The Company is
not permitted, under the terms of the preferred shares, to pay dividends
to common shareholders until preferred dividends in arrears have been
fully paid.
During the first nine months of 2000, capital expenditures of $46
million included approximately $18 million to rehabilitate farms in
Honduras and Guatemala which were destroyed or damaged by Hurricane
Mitch in late 1998.
International
-------------
As previously described in the Company's 1999 Annual Report to
Shareholders under "Management's Analysis of Operations and Financial
Condition - European Union Regulatory Developments" and in the Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000, 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. In May 2000,
the President of the United States signed into law a measure which could
increase pressure on the EU to make its banana regime consistent with
World Trade Organization ("WTO") rulings. 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 still considering how to implement that requirement.
On October 4, 2000, the European Commission approved the broad outline
of a "first come, first served" proposal that would continue to limit
access for Latin American bananas and involve the "pre-allocation" of
licenses based on the chronological order of applications and other
criteria. It is not known whether the European member states will
approve that proposal. The United States and Latin American producing
countries have opposed this proposal and have informed the EU of their
view that the "first come, first served" proposal would not be WTO
consistent.
Uncertainties remain as to the outcome of this dispute and its effect
on the Company and the banana industry as a whole.
10
<PAGE>
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 September 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.
Part II - Other Information
---------------------------
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 September 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)
November 13, 2000
12
