ITEM 1 - BUSINESS
GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a leading international marketer, processor and producer of quality fresh and processed food products. In recent years, the Company has capitalized on its "Chiquita" and other premium brand names by building on its worldwide leadership position in the marketing, distribution and sourcing of bananas; by expanding its quality fresh fruit and vegetable operations; and by further developing its business in value-added processed foods.
Chiquita's products include:
- Bananas, citrus, grapes, kiwi, mangos, pears and pineapples sold under the "Chiquita" brand name;
- Bananas, citrus and other quality fresh fruit including apples, grapes, papaya, peaches, pears, plums, strawberries and tomatoes sold under the "Consul," "Chico," "Amigo," "Frupac" and other brand names;
- A wide variety of fresh vegetables including asparagus, beans, broccoli, carrots, celery, lettuce, onions and potatoes sold under the "Premium" and various other brand names;
- Fruit and vegetable juices and other processed fruits and vegetables, including banana puree, marketed under the "Chiquita," "Friday" and other brands;
- Wet and dry salads sold under the "Club Chef," "Chef Classic" and "Naked Foods" brands; and
- Margarine, shortening and other consumer packaged foods sold under the "Numar," "Clover" and various regional brand names.
No individual customer accounted for more than 10% of the Company's consolidated net sales during any of the last three years. See "Management's Analysis of Operations and Financial Condition," which is incorporated by reference in Item 7 herein from the Company's 1993 Annual Report to Shareholders, for a discussion of factors affecting results of the Company's operations for 1993, 1992 and 1991. Factors which may cause fluctuations in the results of operations are also discussed in the description of the Company's operations below.
Fresh food products
The Company markets an extensive line of fresh fruits and vegetables sold under the "Chiquita" and other brand names. The core of Chiquita's fresh foods operations is the marketing, distribution and sourcing of bananas. Sales of bananas, as a percent of consolidated net sales, were 67% in 1991, 62% in 1992 and 58% in 1993.
Chiquita believes that it derives competitive benefits in the marketing, distribution and sourcing of fresh foods through its:
- Recognized brand names and reputation for quality;
- Strong market position in Europe, North America and Japan, the world's principal markets for fresh fruit;
- Modern, cost-efficient fresh fruit transportation system; and
- Industry leading position in terms of number and geographic diversity of its sources of bananas, which enhances its ability to provide customers with premium quality products on a consistent basis.
Chiquita has benefitted from its multi-year investment spending program and the ongoing effects of its restructuring and cost reduction efforts to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. (See "Distribution and Logistics" and "Sourcing" below and ITEM 2
ITEM 2 - PROPERTIES
The Company owns approximately 132,000 acres and leases approximately 46,000 acres of improved land, principally in Costa Rica, Panama and Honduras. Substantially all of this land is used for
the cultivation of bananas and oil palm and support activities, including the maintenance of floodways. The Company also owns power plants, packing stations, warehouses, irrigation systems and loading and unloading facilities used in connection with its banana and oil palm operations.
The Company owns or controls under long-term bareboat leases 23 ocean-going refrigerated vessels, including 1 delivered in early 1994, and has 21 additional such vessels under time charters, primarily for transporting tropical fruit sold by the Company. From time to time, excess capacity may be chartered or subchartered to others. In addition, the Company enters into spot charters as necessary to supplement its transportation resources. The Company also owns or leases other related equipment, including refrigerated container units, used to transport fresh food. The majority of the ships owned and related container units are pledged as collateral for related financings.
Properties used by the Company's processed foods operations include processing facilities in Costa Rica and Honduras, and vegetable canning facilities in Wisconsin. Other operating units of the Company own, lease and operate properties, principally in the United States and Central and South America. The Company leases the space for its executive offices in Cincinnati, Ohio. For further information with respect to the Company's physical properties, see the descriptions under ITEM 1 - BUSINESS - GENERAL and DISCONTINUED OPERATIONS, above, and Notes 6 and 7 to the Consolidated Financial Statements included in the Company's 1993 Annual Report to Shareholders.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
A number of legal actions are pending against the Company, including those described below and in ITEM 1 - BUSINESS - DISCONTINUED OPERATIONS affecting the Meat Division, which is reported as a discontinued operation. Based on evaluations of facts which have been ascertained and opinions of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the consolidated financial condition or results of operations of the Company.
The Company and other major banana producing companies have been added as defendants in two purported class actions, filed in state courts in Galveston and Brazoria counties, Texas, and in three other Texas state court cases. These cases were originally filed in early 1993 against the manufacturers of an agricultural chemical called DBCP by an aggregate of approximately 20,000 individuals. Most of the plaintiffs are foreign citizens who claim to have been employees of banana companies, including in some cases subsidiaries of the Company. The plaintiffs allege they were injured as a result of exposure to DBCP, which was used primarily in the 1970's. The damage claims have not been quantified. The suits are Franklin Rodriguez Delgado, et al. v. Shell Oil Company, et al., Cause No. 93-CV-0030 (Galveston County, Texas); Armando Ramos Bermudez, et al. v. Shell Oil Company, et al., Cause No. 93-C-2290 (Brazoria County, Texas); Narcisco Borja, et al. v. Dow Chemical Company, et al., Cause No. 93-320 (Dallas County, Texas); Juan Ramon Valdez, et al. v. Shell Oil Company, et al., Cause No. 17814 (Morris County, Texas); and Ramon Rodriguez Rodriguez, et al. v. Shell Oil Company, et al., Cause No. 3813 (Jim Hogg County, Texas). Similar suits have been filed in Costa Rica and Panama by approximately 800 individuals against subsidiaries of the Company, including Compania Palma Tica and Compania Bananera Atlantica Limitada. Similar suits have been filed in other countries against other defendants as well. The Company has answered all suits, believes it has substantial and meritorious defenses and is vigorously defending the actions.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information concerning the number of shareholders at March 1, 1994, and the market for the Company's capital stock is set forth on the inside back cover of the Company's 1993 Annual Report to Shareholders under "Investor Information." Information concerning the price ranges of the Company's capital stock and dividends declared thereon is set forth in Note 15 to the Consolidated Financial Statements included in the 1993 Annual Report to Shareholders. Information concerning restrictions on the Company's ability to declare and pay dividends is set forth in Note 8 to the Consolidated Financial Statements included in the 1993 Annual Report to Shareholders. All such information is incorporated herein by reference.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
This information is included in the table entitled "Selected Financial Data" on page 6 of the Company's 1993 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is included under the caption "Management's Analysis of Operations and Financial Condition" included on pages 8 through 10 of the Company's 1993 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Chiquita Brands International, Inc. and its subsidiaries included on pages 11 through 23 of the Company's 1993 Annual Report to Shareholders, and "Quarterly Financial Data" which is set forth in Note 15 to such Consolidated Financial Statements, are incorporated herein by reference.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Except for information relating to the Company's executive officers set forth in ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
Carl H. Lindner (age 74) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since August 1984 and Chairman of the Board of Directors and Chief Executive Officer of AFC since AFC was founded over 30 years ago. AFC is a holding company which, through subsidiaries, is engaged in several financial businesses, including property and casualty insurance, annuities, and portfolio investing. In nonfinancial areas, AFC has substantial operations in the food products industry, through its ownership in Chiquita, in television and radio station operations, through its ownership of Great American Communications Company ("GACC"), and in industrial manufacturing.
Keith E. Lindner (age 34) - Mr. Lindner has been President and Chief Operating Officer of the Company since June 1989 and President of its Chiquita Brands, Inc. subsidiary since December 1986. He was Senior Executive Vice President of the Company from March 1986 to June 1989.
Fred J. Runk (age 51) - Mr. Runk has been a Vice President of the Company since September 1984. From September 1984 to March 1994 he served as the Company's Chief Financial Officer. From February 1985 until June 1988, he was also Treasurer of the Company. Mr. Runk has served as Vice President and Treasurer of AFC for more than five years.
Steven G. Warshaw (age 40) - Mr. Warshaw was named Chief Financial Officer of the Company in March 1994. He has also served as the Company's Executive Vice President and Chief Administrative Officer since January 1990. Mr. Warshaw has been employed by the Company in various executive capacities since April 1986.
Robert F. Kistinger (age 41) - Mr. Kistinger was named Senior Executive Vice President of the Company's Chiquita Banana Group in February 1994. From March 1989 until February 1994, he was Executive Vice President, Operations of the Company's Chiquita Tropical Products Division. Mr. Kistinger has been employed by the Company in various capacities since 1980.
Thomas E. Mischell (age 46) - Mr. Mischell has served as a Vice President of the Company since July 1986 and has served as Vice President of AFC for more than five years.
Charles R. Morgan (age 47) - Mr. Morgan has been Vice President, General Counsel and Secretary of the Company since January 1990. Mr. Morgan has also served as Vice President, General Counsel and Secretary of Chiquita Brands, Inc. since June 1988 and as Vice President and Secretary of Morrell since February 1989. From February 1989 to July 1993, he was also General Counsel of Morrell.
Jos P. Stalenhoef (age 52) - Mr. Stalenhoef was named President, Chiquita Banana-North American Division in February 1994. From March 1989 until February 1994, he was Senior Vice President, North America, Chiquita Tropical Products Division. Prior to that time, Mr. Stalenhoef was Vice President, Marketing, Chiquita Tropical Products Division.
William A. Tsacalis (age 50) - Mr. Tsacalis has served as Vice President and Controller of the Company since November 1987.
In December 1993, GACC completed a comprehensive financial restructuring which included a prepackaged plan of reorganization filed in November of that year under Chapter 11 of the Bankruptcy Code. Carl H. Lindner and Fred J. Runk were executive officers of GACC within two years before GACC's bankruptcy reorganization.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the Company and the Report of Independent Auditors are included in the Company's 1993 Annual Report to Shareholders and are incorporated by reference in Part II, Item 8: Page of Annual Report Report of Independent Auditors 7 Consolidated Statement of Income Years ended December 31, 1993, 1992 and 1991 11 Consolidated Balance Sheet December 31, 1993 and 1992 12 Consolidated Statement of Shareholders' Equity Years ended December 31, 1993, 1992 and 1991 13 Consolidated Statement of Cash Flow Years ended December 31, 1993, 1992 and 1991 14 Notes to Consolidated Financial Statements 15
2. Financial Statement Schedules The following consolidated financial statement schedules of the Company, which exclude amounts relating to its discontinued operations, are included in this Annual Report on Form 10-K: Page of Form 10-K II - Amounts Receivable from Related Parties, and Underwriters, Promoters, and Employees Other Than Related Parties V - Property, Plant and Equipment 18 VI - Accumulated Depreciation of Property, Plant and Equipment VIII - Allowance for Doubtful Accounts Receivable 20 IX - Short-term Borrowings 21 X - Supplementary Income Statement Information 22
All other schedules are not required under the related instructions or are inapplicable and, therefore, have been omitted.
3. Exhibits
See Index of Exhibits (page 23) for a listing of all exhibits filed with this Annual Report on Form 10-K.
(b) There were no reports on Form 8-K filed by the Company during the quarter ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 30, 1994.
CHIQUITA BRANDS INTERNATIONAL, INC.
By /s/ Carl H. Lindner Carl H. Lindner Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below on March 30, 1994:
/s/ Carl H. Lindner Chairman of the Board and Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Director; President and Keith E. Lindner Chief Operating Officer
/s/ S. Craig Lindner Director S. Craig Lindner
Hugh F. Culverhouse* Director Hugh F. Culverhouse
/s/ Fred J. Runk Director and Vice President Fred J. Runk
Jean H. Sisco* Director Jean H. Sisco
/s/ Ronald F. Walker Director Ronald F. Walker
/s/ Steven G. Warshaw Executive Vice President, Chief Administrative Steven G. Warshaw Officer and Chief Financial Officer
/s/ William A. Tsacalis Vice President and Controller William A. Tsacalis (Chief Accounting Officer)
* By /s/ William A. Tsacalis Attorney-in-Fact**
** By authority of powers of attorney filed with this annual report on Form 10-K.
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CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE IX - SHORT-TERM BORROWINGS (In thousands)
Short-term borrowings include borrowings in currencies other than the U.S. dollar carrying interest rates which generally are higher than interest rates on U.S. dollar debt.
Average outstanding borrowings during each year were determined based on the amounts outstanding at the end of each month during the year.
The weighted average interest rate during each year was computed by dividing actual interest expense on short-term borrowings in each year by average short-term borrowings in such year.
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands)
CHIQUITA BRANDS INTERNATIONAL, INC. Index of Exhibits
Exhibit Number Description
3-a The Company's Certificate of Incorporation
*3-b The Company's By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K for the year ended December 31, 1992
4 Registrant has no outstanding debt issues exceeding 10% of the assets of Registrant and its consolidated subsidiaries. The Registrant will furnish to the Securities and Exchange Commission, upon request, copies of all agreements and instruments defining the rights of security holders for debt issues not exceeding 10% of the assets of Registrant and its consolidated subsidiaries.
10-a Lease of Lands and Operating Contract between United Brands Company, Chiriqui Land Company, Compania Procesadora de Frutas and the Republic of Panama, dated January 8, 1976, effective January 1, 1976
10-b Agreement dated April 22, 1976 effective January 1, 1976 between Tela Railroad Company and the Government of Honduras
Executive Compensation Plans
*10-c 1986 Stock Option and Incentive Plan, filed as Exhibit A to the definitive Proxy Statement in connection with the Company's 1992 Annual Meeting of Shareholders
*10-d Individual Stock Option Plan and Agreement, filed as Exhibit 4 to Registration Statement on Form S-8 No. 33- 25950 dated December 7, 1988
*10-e Deferred Compensation Plan, filed as Exhibit 10-e to Annual Report on Form 10-K for the year ended December 31, 1992
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends
13 Chiquita Brands International, Inc. 1993 Annual Report to Shareholders (pages 6 through 23 and inside back cover)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
99 Annual Reports on Form 11-K for the Chiquita Savings and Investment Plan and the John Morrell & Co. Salaried Employees Incentive Savings Plan for 1993 will be filed by amendment on or before June 29, 1994.
* Incorporated by reference.