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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K / 405
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 1999 Number 1-1550
CHIQUITA BRANDS INTERNATIONAL, INC.
Incorporated under the I.R.S. Employer I.D.
Laws of New Jersey No. 04-1923360
250 East Fifth Street, Cincinnati, Ohio 45202
(513) 784-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- --------------------- --------------------
Common Stock ($.01 par value) New York, Pacific,
Boston
$2.875 Non-Voting Cumulative
Preferred Stock, Series A New York
$3.75 Convertible Preferred
Stock, Series B New York
Securities registered pursuant to Section 12(g) of the Act: None
Other securities for which reports are submitted pursuant to Section 15(d) of
the Act:
9-1/8% Senior Notes due March 1, 2004
9-5/8% Senior Notes due January 15, 2004
10% Senior Notes due June 15, 2009
10-1/4% Senior Notes due November 1, 2006
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 15, 2000, there were 66,431,497 shares of Common Stock
outstanding. The aggregate market value of Common Stock held by non-
affiliates at March 15, 2000 was approximately $163 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1999 Annual Report to
Shareholders are incorporated by reference in Parts I and II. Portions of the
Chiquita Brands International, Inc. Proxy Statement for the 2000 Annual
Meeting of Shareholders are incorporated by reference in Part III.
CHIQUITA BRANDS INTERNATIONAL, INC. TABLE OF CONTENTS
Page
Part I ------
- ------
Item 1. Business . . . . . . . . . . . . . . . . . . K-1
Item 2. Properties. . . . . . . . . . . . . . . . . . K-7
Item 3. Legal Proceedings . . . . . . . . . . . . . . K-8
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . K-8
Executive Officers of the Registrant. . . . . . . . . . K-9
Part II
- -------
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . K-10
Item 6. Selected Financial Data . . . . . . . . . . . K-10
Item 7. Management's Discussion and
Analysis of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . K-10
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . K-10
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . K-10
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . . . K-10
Part III
- ---------
Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . K-11
Item 11. Executive Compensation. . . . . . . . . . . . K-11
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . K-11
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . K-11
Part IV
- -------
Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K . . . . . . . . . . . . . . . . . K-11
Signatures . . . . . . . . . . . . . . . . . . . . . . K-12
This Annual Report on Form 10-K includes, in Items 1, 3, 7, 7A
and elsewhere, statements that may be deemed "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
All statements included in this report, in future filings with the Securities
and Exchange Commission ("SEC") and in written and verbal statements by the
Company and its representatives that address events, developments or financial
results that the Company expects, believes or estimates will or may occur in
the future are forward-looking statements that are intended to be covered by
the safe harbor provisions of that Act. These statements are based on the
Company's assumptions and estimates made in light of its experience and
analysis of historical trends, current conditions, expected future
developments and other factors it believes are appropriate under the
circumstances. They are subject to a number of assumptions, risks
and uncertainties, many of which are beyond the control of Chiquita, including
the prices at which Chiquita can sell its products, the costs at which it
can 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, and other market and competitive
conditions. Investors are cautioned that the forward looking statements
speak as of the date made and are not guarantees of future performance.
Actual results or developments may differ materially from the expectations
expressed or implied in the forward-looking statements.
PART I
ITEM 1 - BUSINESS
GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a
leading international marketer, producer and distributor of quality fresh
fruits and vegetables and processed foods sold under the "Chiquita" and other
brand names. The Company has capitalized on its "Chiquita" and other premium
brand names by building on its reputation for quality and worldwide leadership
position in the marketing, distribution and sourcing of bananas and other
fresh produce. In addition, in recent years, the Company has expanded its
processed fruit and vegetable operations, primarily through acquisitions of
vegetable canning companies.
The Company conducts business in two segments, organized primarily on a
product line basis, with each segment offering a variety of different but
related products. The Fresh Produce segment includes the production,
transportation, distribution and marketing of Chiquita bananas and a wide
variety of other fresh fruits and vegetables. The Processed Foods segment
consists of the production, distribution and marketing of the Company's
private-label and branded canned vegetables, branded fruit and vegetable juices
and beverages, processed bananas and edible oil based consumer products. No
individual customer accounted for more than 10% of the Company's consolidated
net sales during any of the last three years. Financial information by
business segment and geographic area for the last three years is set forth in
Note 13 to the Consolidated Financial Statements included in the Company's
1999 Annual Report to Shareholders.
In 1993, the European Union ("EU") implemented a banana quota regime
which restricts the importation into the EU of bananas from Latin America,
Chiquita's primary source of fruit. The quota regime has significantly
affected the worldwide banana industry and severely burdened Chiquita's
operations. Since 1993, the Company has reduced operating costs and taken
other measures to adjust to the quota regime. For a discussion of the EU
quota and other factors affecting Chiquita's results of operations, liquidity
and financial condition, see "Management's Analysis of Operations and
Financial Condition" included in the Company's 1999 Annual Report to
Shareholders. Factors that may cause fluctuations in operating results are
also discussed below.
Fresh Produce
- --------------
The Company markets an extensive line of fresh fruits and
vegetables sold under the "Chiquita" and other brand names. Chiquita's fresh
fruits and vegetables include bananas, berries, citrus, mangoes, melons,
tomatoes, lettuce, mushrooms and a wide variety of other fresh produce. Fresh
Produce sales, as a percent of consolidated net sales, amounted to 80% in
1999, 82% in 1998 and 90% in 1997. In 1999, approximately half of Fresh
Produce sales were in North America and the remainder were in European and
other international markets. The core of Chiquita's Fresh Produce
operations is the marketing, distribution and sourcing of bananas. Sales of
bananas accounted for approximately two-thirds of Fresh Produce net sales in
each of the last three years.
Chiquita believes it derives competitive benefits in the marketing,
distribution and sourcing of fresh produce through:
* recognized brand names and a reputation for quality;
* strong market positions in North America and Europe, its
principal markets;
- K-1 -
* a modern, cost-efficient fresh fruit transportation system;
* an industry leading position in terms of number and
geographic diversity of major sources of bananas;
* state-of-the-art banana ripening techniques; and
* best-demonstrated agricultural practices.
These characteristics enhance Chiquita's ability to provide customers with
premium quality products on a consistent basis.
DISTRIBUTION AND MARKETING. Chiquita sells and distributes a variety of
quality fruit and vegetable products through a network of fresh produce
operations in North America, Europe and the Pacific Rim. Some of these
operations involve the production, distribution and marketing of fresh fruits
and vegetables while others involve only distribution and marketing. The
Company has regional sales organizations and utilizes commissioned agents to
sell to retail customers and wholesalers. The retail customers include large
chain stores with which Chiquita enters into supply contracts, typically for a
one year term.
Bananas are sold under the "Chiquita," "Chiquita Jr.," "Consul" and
"Amigo" brand names. Other fresh fruits are also sold under the "Chiquita"
and other brand names and include apples, apricots, berries, cherries, grapes,
peaches, pears, plums and tomatoes. Fresh vegetables, such as asparagus,
beans, broccoli, carrots, celery, cucumbers, lettuce, mushrooms, onions,
peppers and potatoes, are sold under the "Premium" and other brand names.
Fresh produce is highly perishable and must be brought to market and sold
generally within 30 to 60 days after harvest. Some items, such as lettuce and
berries, must be sold more quickly, while other items, such as apples and
pears, can be held in cold storage for longer periods of time.
The selling price received for each type of fruit or vegetable depends on
several factors, including:
* the availability and quality of the produce item in the
market; and
* the availability and quality of competing types of produce.
For example, although banana production tends to be relatively stable
throughout the year, banana pricing is seasonal. This is because bananas
compete against other fresh fruit which generally comes to market beginning in
the summer. As a result, banana prices are typically higher during the first
half of the year.
Adverse weather may restrict the availability of fresh produce
and result in increased prices. However, competing producers and distributors
may be affected differently, depending upon their ability and the cost to
obtain alternate supplies.
Bananas are distributed and marketed internationally in a highly
competitive environment. While smaller companies, including growers'
cooperatives, are a competitive factor, Chiquita's primary competitors are a
limited number of other international banana importers and exporters. To
compete successfully, Chiquita must be able to source bananas of uniformly
high quality and, on a timely basis, transport and distribute them to
worldwide markets. Chiquita sells approximately one-fourth of all bananas
imported into each of North America and Europe, its principal markets.
- K-2 -
Chiquita sources fresh fruit from Central and South America for
international distribution in order to increase the year-round availability of
certain types of seasonal produce. In other instances, the sourcing and
distribution of fresh produce is more regionalized. Typically in these
regional markets, no single competitor has a dominant market share.
To control quality, bananas are normally ripened under
controlled conditions. Most other types of fresh produce are already ripe
when shipped or ripen naturally. The Company sells some bananas ripened in
its own facilities or under contractual ripening arrangements. Chiquita also
provides advice and technical assistance to customers who purchase unripened
bananas. Chiquita generally obtains a premium price for its bananas due to
its reputation for quality and its innovative ripening and marketing
techniques, which include providing retail marketing support services to its
customers.
LOGISTICS. Transportation costs are significant in Chiquita's Fresh
Produce business. Oil is an important component of transportation costs.
Fresh produce distributed internationally is transported primarily by ocean-
going vessels. Chiquita ships its tropical fruit in refrigerated vessels
owned or chartered by the Company. All of Chiquita's tropical fruit shipments
into the North American market are delivered using pallets or containers.
This minimizes damage to the product by eliminating the need to handle
individual boxes. Chiquita owns or controls under long-term lease
approximately 75% of its aggregate shipping capacity. The remaining capacity
is operated under contractual arrangements having terms of approximately one
year. (See also ITEM 2 PROPERTIES and Notes 4 and 5 to the Consolidated
Financial Statements included in the Company's 1999 Annual Report to
Shareholders.)
Chiquita operates loading and unloading facilities which it owns or
leases in Central and South America and various ports of destination.
Chiquita generally uses common carriers and trucks owned or leased by the
Company to transport fresh produce to and from these ports as well as fresh
produce grown near its intended market.
SOURCING. Chiquita has a greater number and geographic diversity of
major sources of bananas than any of its competitors. During 1999,
approximately one-fourth of all bananas sold by Chiquita were sourced from
each of Costa Rica and Panama. Bananas are also sourced from numerous other
countries. Colombia, Ecuador, Guatemala and the Philippines each produced
between 7% and 15% (depending on the country) of the bananas sold by Chiquita
during 1999. As described below, Chiquita's banana production for 1999 was
significantly reduced in Guatemala and virtually eliminated in Honduras as a
result of Hurricane Mitch. The Company met its banana volume requirements in
1999 through improved productivity in its other farm divisions and through
purchases of fruit from other growers. Rehabilitated farms in Guatemala and
Honduras are expected to return to full production in the first half of 2000.
In 1999, approximately 45% of bananas sourced by Chiquita were produced
by subsidiaries and the remainder were purchased under fruit supply
arrangements from other growers. Generally, these arrangements require less
initial capital investment by the Company than owned production facilities.
Under some of these fruit supply arrangements, Chiquita furnishes financial
and technical assistance to its suppliers to support the production and
preparation of bananas for shipment. Approximately 14% of the bananas sold by
Chiquita in 1999 were purchased from one supplier in Ecuador. No other single
supplier provided more than 10% of Chiquita's bananas.
The most significant cost in the production of bananas is
labor, which varies depending on the country of origin. Since bananas are
packed in cardboard boxes for shipment, paper cost is also significant.
- K-3 -
In addition to its extensive production of bananas, Chiquita produces
mushrooms and berries in Australia, grapefruit in Florida and apples and
grapes in Chile. However, the majority of other fresh produce marketed by
Chiquita is purchased from numerous geographically diverse producers and
importers. Some of these production operations and purchase arrangements
involve joint ventures. Other arrangements involve formal long-term purchase
contracts or informal market trading with unrelated suppliers. Under these
arrangements, Chiquita may provide financial assistance. None of these
arrangements accounts for more than 5% of the Company's consolidated net
sales.
Fresh produce is vulnerable to adverse weather conditions including
windstorms, floods, drought and temperature extremes, which are quite common
but difficult to predict. Fresh produce is also vulnerable to crop disease
and pests. These factors may result in lower sales volume and increased
costs, but may also restrict supplies and lead to an increase in prices for
fresh produce. In addition, production may be affected by political changes
in countries where fruits and vegetables are grown. However, competitors may
be affected differently, depending upon their ability and the cost to obtain
adequate supplies from sources in other geographic areas. Chiquita's overall
risk from these factors is reduced by the geographic diversity of its
producing locations.
In late October and early November of 1998, Chiquita sustained
significant damage to its operations in Honduras and Guatemala as a result of
widespread flooding caused by Hurricane Mitch. Nearly all of the banana
plantings on the Company's 17,000 acres of cultivations in Honduras were
destroyed; approximately two-thirds of the plantings on the Company's 8,000
acres of cultivations in Guatemala were destroyed or severely damaged. The
Company has rehabilitated approximately half of the affected acreage in
Honduras and substantially all affected acreage in Guatemala.
Processed Foods
- -----------------
Chiquita's Processed Foods include:
* private-label and branded canned vegetables sold in North America and
abroad;
* fruit and vegetable juices and beverages sold in North
America and Europe;
* processed bananas sold primarily in North America, Europe and the Far
East under the "Chiquita" brand; and
* other consumer products (primarily edible oils) sold in
Honduras under the "Numar" and other brand names.
Processed Foods sales, as a percent of consolidated net sales, amounted
to 20% in 1999, 18% in 1998 and 10% in 1997. This business has expanded since
1996 through acquisitions of vegetable canning companies. Sales of canned
vegetables accounted for 80% of Processed Foods net sales in 1999, 81% in 1998
and 63% in 1997.
Chiquita's vegetable canning operations are conducted by its subsidiary,
Chiquita Processed Foods, L.L.C. ("CPF"). CPF operates 20 processing
facilities in the upper Midwest and Northwest and markets a full line of over
25 types of processed vegetables, including corn, green beans, peas, pumpkin,
root vegetables and other related products, to retail and food service
customers throughout the U.S. and in over 40 other countries. Corn is CPF's
leading canned vegetable product, accounting for approximately 30% of
Processed Foods net sales. CPF enjoys the largest share of the U.S. private-
label canned vegetable business. It also sells branded products under the
"Stokely's," "Read" and other labels. CPF competes directly with a few major
producers of both branded and private-label canned vegetables, as well as
indirectly with numerous marketers of frozen and fresh vegetable products.
- K-4 -
Operating results for CPF are dependent on product availability and
market prices. Market prices tend to decrease as more product is available
and increase when product is scarce. The availability of vegetables for
canning is a direct result of planting acreage, weather and growing conditions
and crop yields. Favorable growing conditions increase both crop size and crop
quality.
Prior to each growing season, CPF enters into fixed-price supply
agreements with growers to purchase the vegetables to be processed in its
canning facilities. These supply agreements are typically for one year. To
ensure the quality and freshness of the vegetables used in its products, CPF:
* selects growers located near its canning facilities;
* requires growers to use seed selected by CPF; and
* controls the harvest process and its timing.
CPF's products are shipped to customers primarily via truck or rail. CPF
ships to its customers both directly from its plants and from regional storage
and distribution centers. This maximizes customer service and efficiency.
Sales of canned vegetables are not highly seasonal, although some
products, such as canned pumpkin, have higher sales volume in certain months.
Since the availability of vegetables for canning is predominantly seasonal,
the production of canned vegetables is also seasonal. As a result, CPF
requires a higher level of working capital to meet production requirements
during these periods.
The Company sells "Chiquita" branded fruit juices and beverages in North
America and Europe. These include a full line of tropical blends which are
manufactured by others to Chiquita's specifications and sold in shelf-stable
servings through club stores and mass merchandisers. In addition, a national
fruit juice producer produces and sells refrigerated and frozen juice products
in the United States using the "Chiquita" brand name and pays Chiquita a
license fee. In the western United States, the Company also produces and
markets natural fresh fruit and vegetable juices sold under the "Ferraro's
Earth Juice" and "Naked Juice" brand names; the Company has recently signed
an agreement to sell this business. The Company's juice products compete
with a wide variety of beverages in the highly competitive commercial
beverages industry, which includes other regional and national producers of
juice and juice drink products.
Chiquita's processed banana products include banana puree, frozen banana
pieces, sliced bananas and other specialty products. These products are sold
to producers of baby food, fruit beverages, baked goods and fruit-based
products, to wholesalers of bakery and dairy food products, and to selected
licensees including Beech-Nut and General Mills. Chiquita produces these
products in processing facilities in Costa Rica and through an Ecuadorian
joint venture formed in late 1999. The joint venture replaces the Company's
processed banana facility in Honduras, which had suffered significant damage
caused by Hurricane Mitch. This joint venture will produce a broader range of
processed fruit products, including pineapples and mangoes. Although Chiquita
enjoys the largest share of the worldwide processed banana market, this
industry remains highly competitive due to the existence of numerous other
producers with available processing capacity, including other banana growers,
fruit ingredients companies and large, international food companies.
The Company's consumer products operations in Honduras are conducted
through a 50%-owned joint venture. The joint venture produces and sells its
edible oil and other products under the "Numar," "Clover" and other brand
names. It competes principally with a number of small local firms and
subsidiaries of multinational corporations.
- K-5 -
RISKS OF INTERNATIONAL OPERATIONS
---------------------------------
The Company conducts operations in many foreign countries. Information
about the Company's operations by geographic area is in Note 13 to the
Consolidated Financial Statements included in the Company's 1999 Annual Report
to Shareholders and is incorporated herein by reference. These operations are
subject to a variety of risks inherent in doing business in those countries.
In 1993, the European Union implemented a regulatory system
governing the importation of bananas into the EU. By restricting the volume
of Latin American bananas imported into the EU, this quota system had the
effect of significantly decreasing the Company's overall volume and market
share in Europe. The quota regime is administered through a licensing system
and grants preferred status to producers and importers within the EU and its
former colonies, while imposing restrictive quotas, licenses and tariffs on
bananas imported from other sources, including Latin America, Chiquita's
primary source of fruit. Following imposition of the EU quota regime, prices
within the EU increased and have remained at a higher level than the levels
prevailing prior to the quota. Banana prices in other worldwide markets,
however, declined as the displaced EU volume entered those markets, and have
remained lower than in years prior to the EU quota.
The EU quota regime has been determined to be in violation of a number of
international trade obligations by both the World Trade Organization ("WTO")
and its predecessor, the General Agreement on Tariffs and Trade ("GATT"). See
"Management's Analysis of Operations and Financial Condition" included in the
Company's 1999 Annual Report to Shareholders for a chronology summarizing key
developments since the quota regime was implemented.
The EU continues to discuss numerous proposals to reform the EU banana
import regime. There can be no assurance as to the nature, extent or timing
of actions that may be taken by the EU or any other affected countries, nor as
to their impact on the EU banana import regulation or on the Company's
business.
The Company's operations are heavily dependent upon products grown and
purchased in Central and South American countries; at the same time,
Chiquita's operations are a significant factor in the economies of many of
these countries. These activities are subject to risks that are inherent in
operating in these countries, including government regulation, currency
restrictions and other restraints, risks of expropriation and burdensome
taxes. There is also a risk that legal or regulatory requirements will be
changed or that administrative policies will change.
The Company's operations in some Central and South American countries
are dependent upon leases and other agreements with the governments of these
countries. Chiquita leases all the land it uses in Panama from the Republic
of Panama. There are two leases, one for land on the Caribbean coast and the
other for land on the Pacific coast. The leases each have an initial term of
20 years expiring at the end of 2017, with consecutive 12-year extension
periods. Either lease can be canceled by Chiquita at any time on three
years' prior notice; the Republic of Panama has the right not to renew
either lease at the end of the initial term or any extension period, provided
that it gives four years' prior notice.
The Company's worldwide operations and products are subject to numerous
governmental regulations and inspections by environmental, food safety and
health authorities, including those relating to the use and disposal of
agrichemicals. These regulations directly affect day-to-day operations. The
Company believes it is substantially in compliance with applicable
regulations. However, actions by regulators in the past have required, and in
the future may require, operational modifications or capital improvements at
various locations. In addition, if violations occur, regulators can impose
fines, penalties and other sanctions, and the Company may be subject to
private lawsuits alleging personal injury or property damage.
- K-6 -
The Company's operations involve transactions in a variety of currencies.
Accordingly, its operating results may be significantly affected by
fluctuations in currency exchange rates. These fluctuations affect Chiquita's
operations because many of its costs are incurred in currencies different from
those received from the sale of its products. In addition, there is normally
a time lag between the incurrence of production costs and collection of the
related sales proceeds. The Company's policy is to exchange local currencies
for dollars immediately upon receipt, thus reducing exchange risk. The
Company also engages in various hedging activities to further reduce potential
losses on cash flows originating in currencies other than the U.S. dollar.
For information with respect to currency exchange, see Notes 1 and 7 to the
Consolidated Financial Statements and "Management's Analysis of Operations and
Financial Condition" included in the Company's 1999 Annual Report to
Shareholders.
LABOR RELATIONS
-----------------
The Company employs approximately 36,000 associates. Approximately
26,000 of these associates are employed in Central and South America,
including 20,000 workers covered by 51 labor contracts. Contracts covering
approximately 7,000 employees are currently being renegotiated or expire in
2000. The number of employees at the Company's vegetable canning subsidiary
increases from approximately 2,300 to 4,600 during peak production times.
Approximately 600 of these employees are covered by labor contracts.
Strikes or other labor-related actions are sometimes encountered upon
expiration of labor contracts or during the term of the contracts.
ITEM 2 - PROPERTIES
- -------------------
The Company owns approximately 85,000 acres and leases approximately
45,000 acres of improved land, principally in Colombia, Costa Rica, Honduras
and Panama. This land is primarily used for the cultivation of bananas and
support activities, including the maintenance of floodways. The Company also
owns warehouses, power plants, packing stations, irrigation systems and
loading and unloading facilities used in connection with its Fresh Produce
operations.
The Company owns or controls under long-term bareboat charters 16
refrigerated vessels and has 6 additional vessels under time charters,
primarily for transporting tropical fruit sold by Chiquita. From time to
time, excess capacity may be utilized by transporting cargo for third parties
or by chartering or subchartering vessels to other shippers. In addition, the
Company enters into spot charters and contracts of affreightment as necessary
to supplement its transportation resources. Chiquita also owns or leases
other related equipment, including refrigerated container units, used to
transport fresh produce. The owned ships are pledged as collateral for
related financings.
Properties used by the Company's Processed Foods operations include a
total of 20 vegetable canning facilities in Idaho, Illinois, Iowa, Michigan,
Minnesota, Oregon, Washington and Wisconsin, fruit processing facilities in
Costa Rica and Ecuador, and edible oil processing facilities in Honduras. All
of these facilities are owned, with the exception of the facilities in Ecuador
and Honduras which are owned and operated by joint ventures. In addition,
certain machinery and equipment owned by the Company's vegetable canning
subsidiary is pledged as collateral for its credit facility.
Other operating units of the Company own, lease and operate properties,
principally in the United States, Europe, Central and South America, and
Australia. The Company leases the space for its headquarters in Cincinnati,
Ohio.
- K-7 -
The Company believes its property and equipment are generally well
maintained, in good operating condition and adequate for its present needs.
The Company typically insures its assets against standard risks with third
party insurers, with the exception of banana cultivations in Central and
South America. The Company self-insures its banana cultivations because of
the high total cost of insurance from third parties and the geographic
diversity of its banana sources.
For further information with respect to the Company's physical
properties, see the descriptions under ITEM 1-BUSINESS-GENERAL above, and
Notes 4 and 5 to the Consolidated Financial Statements included in the
Company's 1999 Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
- ----------------------------
A number of legal actions are pending against the Company. Based on
information currently available to the Company and on advice of counsel,
management does not believe this litigation will, individually or in the
aggregate, have a material adverse effect on the financial statements of
the Company.
On May 3, 1998, a Cincinnati, Ohio newspaper published accounts
describing alleged improper environmental and business practices by the
Company in certain of its operations in Central and South America. The
newspaper reported that one of its sources had previously provided to the SEC
information furnished to the newspaper. In late June 1998, the newspaper
renounced the series of articles as containing untrue accusations and
conclusions and creating a false and misleading impression of Chiquita's
business practices.
In April 1998, the Company was notified that it is the subject of a
confidential investigation by the SEC seeking to determine whether the Company
has complied with certain provisions of the Securities Exchange Act of 1934
(the "Exchange Act"), including provisions of the Foreign Corrupt Practices
Act (the "FCPA"). The investigation seeks to determine whether the Company,
with respect to certain operations in Central and South America, has complied
with FCPA provisions relating to the making or offering of illegal payments to
foreign officials and the maintenance of fair and accurate books, records and
accounts and an appropriate system of internal accounting controls or has
complied with Exchange Act provisions relating to the making, or filing with
the SEC of reports containing, untrue statements of material fact or omissions
of material fact. Although it is not in a position to predict the outcome of
this investigation, the Company believes that it has not violated the Exchange
Act or the FCPA and is cooperating with the investigation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
- K-8 -
EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------
Carl H. Lindner (age 80) - Mr. Lindner has been Chairman of
the Board and Chief Executive Officer of the Company since 1984.
He is also Chairman of the Board and Chief Executive Officer of American
Financial Group, Inc. ("AFG") which, through its subsidiaries, is engaged
primarily in property and casualty insurance businesses and in the sale of
annuities and life insurance. For more than 40 years, Mr. Lindner has been
Chairman of the Board and Chief Executive Officer of American Financial
Corporation ("AFC"), which became an AFG subsidiary in 1995.
Keith E. Lindner (age 40) - Mr. Lindner has been Vice Chairman
of the Board since 1997 and was President and Chief Operating Officer of the
Company from 1989 to 1997. He has served the Company in various executive
capacities since 1984. Mr. Lindner is also CoPresident and a Director of AFG
and AFC.
Steven G. Warshaw (age 46) - Mr. Warshaw has been President
and Chief Operating Officer and a Director of the Company since 1997. He
served as Chief Financial Officer from 1994 to 1998, and as Executive Vice
President and Chief Administrative Officer of the Company from 1990 to 1997.
Mr. Warshaw has served the Company in
various capacities since 1986.
Peter A. Horekens (age 51) - Mr. Horekens was appointed President and
Chief Operating Officer of the Company's Chiquita Fresh Group - Europe in
March 2000. He was President and Chief Operating Officer of the Company's
Chiquita Banana Group - Europe from 1997 to 2000. Mr. Horekens had previously
been employed by Kellogg Company, a multi-national food company, for over five
years, most recently as Vice President and Director of Asian Operations.
Robert F. Kistinger (age 47) - Mr. Kistinger was appointed President and
Chief Operating Officer of the Company's Chiquita Fresh Group in March 2000.
He was President and Chief Operating Officer of the Company's Chiquita Banana
Group from 1997 to 2000 and Senior Executive Vice President of the Chiquita
Banana Group from 1994 to 1997. He has served the Company in various
capacities since 1980.
Warren J. Ligan (age 46) - Mr. Ligan has been Senior Vice President and
Chief Financial Officer since 1998. Mr. Ligan has served the Company in
various capacities since 1993, most recently as Vice President, Taxation.
Robert W. Olson (age 54) - Mr. Olson has been Senior Vice President,
General Counsel and Secretary of the Company since 1996. From 1995 to 1996, he
was the Company's Vice President, General Counsel and Secretary. From 1987 to
1995, he served as Senior Vice President, General Counsel and Secretary of
American Premier Underwriters, Inc. (formerly named The Penn Central
Corporation), an affiliate of AFG. He was Senior Vice President and Secretary
of AFG from April 1995 until he joined the Company.
William A. Tsacalis (age 56) - Mr. Tsacalis has been Vice President and
Controller of the Company since 1987. He was Controller from 1984 to 1987
and has served the Company in various capacities since 1980.
- K-9 -
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- -----------------------------------------------------------------------
The Company's common stock is listed for trading on the New
York, Boston and Pacific Stock Exchanges under the symbol "CQB."
At March 15, 2000, there were 5,501 common shareholders of record. Price and
dividend information for the Company's common stock is in Note 16 to the
Consolidated Financial Statements included in the Company's 1999 Annual Report
to Shareholders. Restrictions on the Company's ability to declare and pay
dividends, and the suspension of its common stock dividend beginning in the
first quarter of 2000, are described in "Management's Analysis of Operations
and Financial Condition" and Note 8 to the Consolidated Financial Statements
included in the Company's 1999 Annual Report to Shareholders. The information
in Notes 8 and 16 described above is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
- ---------------------------------
This information is included in the table entitled "Selected Financial
Data" on page 28 of the Company's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
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 3 through 7 of the
Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
- ----------------------------------------------------
This information is included under the caption "Management's Analysis of
Operations and Financial Condition - Market Risk Management" included on page
6 of the Company's 1999 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The Consolidated Financial Statements of Chiquita Brands International,
Inc. on pages 8 through 27 of the Company's 1999 Annual Report to
Shareholders, including "Quarterly Financial Data" in Note 16 to the
Consolidated Financial Statements, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------
None.
- K-10 -
PART III
-----------
Except for information relating to the Company's executive officers
included in Part I of this report, the information required by the following
Items will be included in Chiquita's definitive Proxy Statement which will
be filed with the Securities and Exchange Commission in connection with the
2000 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
ITEM 11 - EXECUTIVE COMPENSATION
- ----------------------------------
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
PART IV
-------
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 1999 Annual Report to Shareholders and are
incorporated by reference in Part II, Item 8:
Page of
Annual Report
--------------
Report of Independent Auditors 2
Consolidated Statement of Income for
1999, 1998 and 1997 8
Consolidated Balance Sheet at
December 31, 1999 and 1998 9
Consolidated Statement of Shareholders'
Equity for 1999, 1998 and 1997 10
Consolidated Statement of Cash Flow
for 1999, 1998 and 1997 11
Notes to Consolidated Financial Statements 12
2. FINANCIAL STATEMENT SCHEDULES. Financial Statement Schedules I -
Condensed Financial Information of Registrant and II - Allowance for
Doubtful Accounts Receivable are included on pages K-14 and K-15 and
page K-16, respectively, of this Annual Report on Form 10-K. All other
schedules are not required under the related instructions or are not
applicable.
3. EXHIBITS. See Index of Exhibits (pages K-18 and K-19) for a
listing of all exhibits to this Annual Report on Form 10-K.
(b) The Company has filed the following report on Form 8-K since
September 30, 1999:
February 7, 2000 - to file Amendment No. 4 and related agreements
to the Company's Credit Agreement dated December 31, 1996.
- K-11 -
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 27, 2000.
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 27, 2000:
/s/ Carl H. Lindner Chairman of the Board and
Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Vice Chairman of the Board
Keith E. Lindner
/s/ Steven G. Warshaw Director, President and
Steven G. Warshaw Chief Operating Officer
/s/ Fred J. Runk Director
Fred J. Runk
Jean Head Sisco* Director
Jean Head Sisco
William W. Verity* Director
William W. Verity
Oliver W. Waddell* Director
Oliver W. Waddell
- K-12 -
/s/ Warren J. Ligan Senior Vice President and
Warren J. Ligan 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.
- K-13 -
CHIQUITA BRANDS INTERNATIONAL, INC. - PARENT COMPANY ONLY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(In thousands)
Condensed Balance Sheet
December 31,
1999 1998
---------- ---------
ASSETS
Current assets
Cash and equivalents $ 23,458 $ 24,967
Trade receivables, net 22,513 17,377
Other receivables, net 30,955 1,262
---------- ---------
Total current assets 76,926 43,606
Investments in and accounts
with subsidiaries 1,551,987 1,508,849
Other assets 31,046 46,586
---------- ---------
Total assets $1,659,959 $1,599,041
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable $ - $ 49,000
Accounts payable and accrued liabilities 50,470 43,504
---------- ---------
Total current liabilities 50,470 92,504
Long-term debt 883,815 683,294
Accrued pension and other employee benefits 20,388 29,263
---------- ---------
Total liabilities 954,673 805,061
Shareholders' equity 705,286 793,980
---------- ---------
Total liabilities and shareholders'
equity $1,659,959 $1,599,041
========== ==========
Condensed Statement of Income
1999 1998 1997
--------- -------- ---------
Net sales $507,254 $503,753 $500,713
Cost of sales (431,722) (438,222) (436,624)
Selling, general and
administrative (113,981) (97,600) (91,362)
Equity in earnings of subsidiaries 57,256 85,338 102,454
-------- -------- ---------
Operating income 18,807 53,269 75,181
Interest income 13,446 1,553 3,951
Interest expense (82,335) (71,614) (70,589)
Other income, net - 6,880 -
-------- -------- ---------
Income (loss) before income taxes (50,082) (9,912) 8,543
Income taxes (8,300) (8,500) (8,200)
-------- -------- ---------
Net income (loss) $(58,382) $(18,412) $ 343
======== ========= =========
- K-14 -
CHIQUITA BRANDS INTERNATIONAL, INC. - PARENT COMPANY ONLY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(In thousands)
Condensed Statement of Cash Flow
1999 1998 1997
--------- -------- --------
Cash flow from operations $(69,546) $(4,378) $(47,341)
--------- -------- --------
Investing
Capital contributions to
subsidiaries (41,865) - (434)
Acquisitions of businesses - (18,907) (21,600)
Other (5,261) 5,016 1,284
-------- -------- --------
Cash flow from investing (47,126) (13,891) (20,750)
-------- -------- --------
Financing
Debt transactions
Issuances of long-term debt 194,363 - -
Repayments of long-term debt - (4,909) (15,366)
Increase (decrease) in
notes and loans payable (49,000) 49,000 -
Stock transactions
Issuances of common stock 58 1,483 6,215
Dividends (30,258) (30,069) (28,327)
-------- -------- ---------
Cash flow from financing 115,163 15,505 (37,478)
-------- -------- ---------
Decrease in cash and equivalents (1,509) (2,764) (105,569)
Balance at beginning of year 24,967 27,731 133,300
-------- -------- ---------
Balance at end of year $23,458 $24,967 $27,731
======== ======== =========
Notes to Condensed Financial Information
1.These condensed financial statements present the accounts of the Chiquita
Brands International, Inc. Parent Company only ("CBII"). For purposes of
these condensed financial statements, CBII's investments in its subsidiaries
are accounted for by the equity method.
2.For additional information regarding long-term debt and equity, see Notes 8
and 11 to the Consolidated Financial Statements included in the Company's
1999 Annual Report to Shareholders.
- K-15 -
CHIQUITA BRANDS INTERNATIONAL, INC.
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
Year Ended December 31,
1999 1998 1997
-------- -------- --------
Balance at beginning
of period $10,603 $10,683 $ 9,832
-------- -------- --------
Additions:
Charged to costs
and expenses 3,418 2,401 3,049
-------- -------- --------
Deductions:
Write-offs 1,382 3,011 1,441
Other, net 425 (530) 757
-------- -------- --------
1,807 2,481 2,198
-------- -------- --------
Balance at end of period $12,214 $10,603 $10,683
======== ======== ========
- K-16 -
CHIQUITA BRANDS INTERNATIONAL, INC.
Index of Exhibits
Exhibit
Number Description
- --------- -------------
*3(i) Second Restated Certificate of Incorporation, filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, as amended by: (1) the Certificate of Amendment establishing
the terms of the Series B Preferred Stock, filed as Exhibit 3(a) to
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; (2)
the Second Certificate of Amendment establishing the terms of the Series
C Preference Stock, filed as Exhibit 3.1 to Current Report on Form 8-K
dated September 15, 1997; (3) the Third Certificate of Amendment
increasing the number of authorized shares and changing the title and
par value of the common stock, filed as Exhibit 4 to Amendment No. 1 to
Form 8-A dated June 18, 1998; and (4) the Fourth Certificate of
Amendment reducing the number of shares designated as Series C
Preference Stock, filed as Exhibit 5 to Amendment No. 1 to Form 8-A
dated June 18, 1998
*3(ii)By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K
for the year ended December 31, 1992
*4 Indenture dated as of February 15, 1994 between the
Company and The Fifth Third Bank, Trustee, relating to the issuance of
Senior Debt Securities, filed as Exhibit 4(c) of Registration Statement
333-00789, as amended by: (1) the First Supplemental Indenture dated as
of June 15, 1994, filed as Exhibit 6(a)99(c) to Quarterly Report on Form
10-Q for the quarter ended June 30, 1994; (2) the Second Supplemental
Indenture dated as of July 15, 1996, filed as Exhibit 4 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996; and (3) the
Third Supplemental Indenture dated as of June 15, 1999, filed as Exhibit
4.2 to Amendment No. 1 to Form 8-A dated June 23, 1999. The Indenture
has been further supplemented by the terms of the following Senior Debt
Securities issued to date: (A) the Certificate of the Vice President and
Controller of the Company establishing the terms of the 9 1/8% Senior
Notes due 2004, filed as Exhibit 7(c)(3) to Current Report on Form 8-K
dated February 8, 1994; (B) the Terms of the 10 1/4% Senior Notes due
2006 approved by the Executive Committee of the Board of Directors of
the Company, filed as Exhibit 7(c)99.6 to Current Report on Form 8-K
dated July 22, 1996; and (C) the Certificate of Actions taken by the
President of the Company establishing the terms of the 10% Senior Notes
due 2009, filed as Exhibit 4.3 to Amendment No. 1 to Form 8-A dated June
23, 1999.
The Company has no other outstanding debt issues exceeding 10% of
its consolidated total assets. The Company 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 consolidated total assets.
*10-a Operating contracts dated February 18, 1998 between the
Republic of Panama and Chiriqui Land Company consisting of Contract of
Operations (Bocas del Toro), Contract of Operations (Armuelles),
Amendment and Extension of the Lease Land Contract, and related
documents as published in the Republic of Panama Official Gazette No.
23,485, filed as Exhibit 10-b to Annual Report on Form 10-K for the year
ended December 31, 1997
- K-18 -
*10-b Credit Agreement dated December 31, 1996 among
Chiquita Brands International, Inc., The First National Bank of Boston,
as administrative agent, and the financial institutions which are
lenders relating to the Company's $125 million revolving credit
facility, filed as Exhibit 10-d to Annual Report on Form 10-K for the
year ended December 31, 1996, as amended by: (1) Amendment No. 1 dated
as of December 8, 1997, filed as Exhibit 10-c to Annual Report on Form
10-K for the year ended December 31, 1997; (2) Amendment No. 2 dated as
of May 19, 1999 and Amendment No. 3 dated as of July 23, 1999, filed as
Exhibit 10 to Quarterly Report on Form 10Q for the quarter ended June
30, 1999; and (3) Amendment No. 4, and related pledge and security
agreements, dated as of February 7, 2000, filed as Exhibits 10.1, 10.2
and 10.3 to Current Report on Form 8-K dated February 7, 2000
*10-c Credit Agreement dated as of September 22, 1999
among Chiquita Processed Foods, L.L.C., First Union National Bank, as
administrative agent, and the financial institutions which are lenders,
relating to CPF's $200 million senior secured credit facility, filed as
Exhibit 10 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999
Executive Compensation Plans
-----------------------------
*10-d 1986 Stock Option and Incentive Plan, as Amended
and Restated effective May 13, 1998, filed as Exhibit 10-d to Annual
Report on Form 10-K for the year ended December 31, 1998
*10-e 1998 Stock Option and Incentive Plan, included as
Appendix A to the Company's definitive Proxy Statement filed on Schedule
14A dated April 8, 1998
*10-f 1997 Amended and Restated Deferred Compensation
Plan (conformed to include amendments effective January 1, 1998), filed
as Exhibit 10-f to Annual Report on Form 10-K for the year ended
December 31, 1998
*10-g 1997 Deferred Compensation Plan for the Board of
Directors (conformed to include amendments effective January 1, 1998),
filed as Exhibit 10-g to Annual Report on Form 10-K for the year ended
December 31, 1998
13 Chiquita Brands International, Inc. 1999 Annual Report to
Shareholders (pages 2 through 28)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
---------------------------------------
* Incorporated by reference.
- K-19 -