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. The Company's "Chiquita operations" constitute its only industry segment other than its Meat Division, which is held for sale. (See MEAT DIVISION HELD FOR SALE below.) Net sales, operating income and identifiable assets of the Company's Chiquita operations and Meat Division held for sale are set forth in Note 3 to the Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders, which is incorporated herein by reference.
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, apples, avocados, citrus, grapes, kiwi, mangos and nectarines sold under the "Chiquita" brand name;
- Bananas, citrus and other quality fresh fruit including apples, apricots, cherries, grapes, 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," "Naked Juice," "Friday" and other brands;
- Wet, fresh cut and ready-to-eat salads sold under the "Club Chef " 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 1994 Annual Report to Shareholders, for a discussion of factors affecting results of the Company's operations for 1994, 1993 and 1992. 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 38% in 1994, 36% in 1993 and 37% in 1992. Excluding revenues of the Meat Division held for sale, sales of bananas comprised 60%, 58% and 62% of the Company's total net sales in 1994, 1993 and 1992, respectively.
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 positions in Europe and North America, its principal markets;
- 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 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 130,000 acres and leases approximately 41,000 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 charters 25 ocean-going refrigerated vessels, including 2 delivered in 1994, and has 17 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 MEAT DIVISION HELD FOR SALE, above, and Notes 6 and 7 to the Consolidated Financial Statements included in the Company's 1994 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 - MEAT DIVISION HELD FOR SALE affecting the Meat Division. 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.
In 1993, the Company and other major banana producing companies were added as defendants in several lawsuits, now pending as three suits in the U.S. District Courts for the Southern, Eastern, and Northern Districts of Texas. These cases were originally filed in early 1993 against the manufacturers of an agricultural chemical called DBCP and now represent claims on behalf of an aggregate of approximately 25,000 individuals of whom less than 15% claim to have worked for the Company's subsidiaries. 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., Del Monte Fresh Produce, N.A. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. H-94-1337 (U.S. District Court, Southern District of Texas, Houston Division) consolidated with Ramon Rodriguez Rodriguez, et al. v. Shell Oil Company, et al., Shell Oil Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. L-94-49 (U.S. District Court, Southern District of Texas, Laredo Division); Narcisco Borja, et al. v. Shell Oil Company, et al., The Dow Chemical Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. 94-CV-689D (U.S. District
Court, Northern District of Texas, Dallas Division); and Juan Ramon Valdez, et al. v. Shell Oil Company, et al., The Dow Chemical Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. 2-94-CV-69 (U.S. District Court, Eastern District of Texas, Marshall Division). Similar suits on behalf of individuals have been filed in Costa Rica and Panama by approximately 900 individuals against subsidiaries of the Company, including Compania Palma Tica and Compania Bananera Atlantica Limitada. 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
The number of shareholders at March 1, 1995 and the markets for the Company's capital stock are set forth on the inside back cover of the Company's 1994 Annual Report to Shareholders under "Investor Information." Price ranges of the Company's capital stock and dividends declared thereon are set forth in Note 15 to the Consolidated Financial Statements included in the 1994 Annual Report to Shareholders. Restrictions on the Company's ability to declare and pay dividends are described in Note 8 to the Consolidated Financial Statements included in the 1994 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 1994 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 7 through 9 of the Company's 1994 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 10 through 23 of the Company's 1994 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 75) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since 1984 and Chairman of the Board of Directors and Chief Executive Officer of American Financial Corporation ("AFC") since AFC was founded over 35 years ago. AFC is a holding company which, through subsidiaries, is engaged in a variety of 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, and in radio and television station operations, through its ownership of Citicasters Inc. (formerly Great American Communications Company, or "GACC"). Keith E. Lindner (age 35) - Mr. Lindner has been President and Chief Operating Officer of the Company since 1989 and President of its Chiquita Brands, Inc. subsidiary since 1986. He was Senior Executive Vice President of the Company from 1986 until 1989. Fred J. Runk (age 52) - Mr. Runk has been a Vice President of the Company since 1984. He was also the Company's Chief Financial Officer from 1984 to 1994. Mr. Runk has served as Vice President and Treasurer of AFC for over five years. Steven G. Warshaw (age 41) - Mr. Warshaw was named Chief Financial Officer of the Company in 1994 and has also been the Company's Executive Vice President and Chief Administrative Officer since 1990. Mr. Warshaw has served in various capacities since 1986. Robert F. Kistinger (age 42) - Mr. Kistinger was named Senior Executive Vice President of the Company's Chiquita Banana Group in 1994. He was Executive Vice President, Operations for the Company's Chiquita Tropical Products Division from 1989 to 1994 and has served in various capacities since 1980. Thomas E. Mischell (age 47) - Mr. Mischell has been Vice President of the Company since 1986 and a Vice President of AFC for more than five years. Charles R. Morgan (age 48) - Mr. Morgan has been Vice President, General Counsel and Secretary of the Company since 1990 and has served in various capacities since 1988. Jos P. Stalenhoef (age 53) - Mr. Stalenhoef was named President, Chiquita Banana-North American Division in 1994. He was Senior Vice President, North America, Chiquita Tropical Products Division from 1989 to 1994 and has served in various capacities since 1988. William A. Tsacalis (age 51) - Mr. Tsacalis has been Vice President and Controller of the Company since 1987. He was Controller from 1984 to 1987 and has served in various capacities since 1980. Carl H. Lindner, Fred J. Runk and Thomas E. Mischell provide broad policy determination and guidance to operating management, which is headed by Keith E. Lindner, but devote substantial portions of their time to the affairs of AFC and its other subsidiaries. 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, Fred J. Runk and Thomas E. Mischell 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 1994 Annual Report to Shareholders and are incorporated by reference in Part II, Item 8: Page of Annual Report Report of Independent Auditors 5 Consolidated Statement of Income for 1994, 1993 and 1992 10 Consolidated Balance Sheet at December 31, 1994 and 1993 11 Consolidated Statement of Shareholders' Equity for 1994, 1993 and 1992 12 Consolidated Statement of Cash Flow for 1994, 1993 and 1992 13 Notes to Consolidated Financial Statements 14 2. Financial Statement Schedule. Financial Statement Schedule II - Allowance for Doubtful Accounts Receivable is included on page 16 of this Annual Report on Form 10-K. 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 17) for a listing of all exhibits filed with this Annual Report on Form 10-K.
(b) The following reports on Form 8-K were filed during the quarter ended Decemer 31, 1994:
October 10, 1994 - to report unusual charges and non- recurring losses expected for the quarter ended September 30, 1994.
October 17, 1994 - to report the U.S. Government's agreement to initiate a formal investigation of the EU banana import policy under Section 301 of the U.S. Trade Act of 1974.
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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, 1995.
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, 1995:
/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
/s/ Fred J. Runk Director and Vice President Fred J. Runk
Jean H. Sisco* Director Jean H. Sisco
William W. Verity* Director William W. Verity
/s/Oliver W. Waddell* Director Oliver W. Waddell
/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.
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE (In thousands)
CHIQUITA BRANDS INTERNATIONAL, INC. Index of Exhibits Exhibit Number Description *3-a Second Restated Certificate of Incorporation, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 *3-b 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, filed as Exhibit 10-a to Annual Report on Form 10-K for the year ended December 31, 1993 *10-b Agreement dated April 22, 1976 effective January 1, 1976 between Tela Railroad Company and the Government of Honduras, filed as Exhibit 10-b to Annual Report on Form 10-K for the year ended December 31, 1993 Executive Compensation Plans *10-c 1986 Stock Option and Incentive Plan, as amended, filed as Exhibit 10(c) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 *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 13 Chiquita Brands International, Inc. 1994 Annual Report to Shareholders (pages 5 through 23 and inside back cover) 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedule 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 1994 will be filed by amendment on or before June 29, 1995. * Incorporated by reference.