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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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, 1993 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) 784-8011
Securities registered pursuant to Section 12(b) of the Act:
Name of Each
Exchange
Title of Each Class On Which Registered
Capital Stock ($.33 par value) New York, Pacific,
Boston
$2.875 Non-Voting Cumulative Preferred Stock, Series ANew York
$1.32 Depositary Shares, each representing one-fifth of a share of
Series C Mandatorily Exchangeable Cumulative Preference StockNew York
9-1/8% Subordinated Debentures due February 1, 1998 New York
10-1/4% Subordinated Debentures due August 1, 2005 New York, Pacific
10-1/2% Subordinated Debentures due August 1, 2004 New York, Pacific
11-7/8% Subordinated Debentures due May 1, 2003 New York, Pacific
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
11-1/2% Subordinated Notes due June 1, 2001
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. [ X ]
As of March 1, 1994, there were 48,557,653 shares of Common Stock
outstanding. The aggregate market value of Common Stock held by non-affiliates
at March 1, 1994 was approximately $441 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1993 Annual Report to
Shareholders are incorporated by reference in Parts I and II. Portions of the
Chiquita Brands International, Inc. Proxy Statement for the 1994 Annual Meeting
of Shareholders are incorporated by reference in Part III.
CHIQUITA BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
Part I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . .10
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . 10
Item 6. Selected Financial Data. . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 10
Item 8. Financial Statements and Supplementary Data. . . . . 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . 10
Part III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . .11
Item 11. Executive Compensation . . . . . . . . . . . . . . . 12
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . 12
Item 13. Certain Relationships and Related Transactions 12
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PART I
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;
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- 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 - PROPERTIES.) The
restructuring program also included measures to reorganize the
Company's European banana operations to adjust to a new quota
which effectively restricts the volume of Latin American
bananas imported into the European Union. (See RISKS OF
INTERNATIONAL OPERATIONS below.)
Marketing. Chiquita markets bananas under trade names
including "Chiquita," "Chiquita Jr.," "Consul," "Amigo,"
"Petite 150," "Chico" and "Bananos." Chiquita's sales of
bananas in 1993 in its principal markets, as a percent of its
total banana net sales, were: Europe, 45%; North America,
34%; and other (principally the Far East and Middle East),
21%.
The Company has been able to obtain a premium price for
its bananas due to its reputation for quality and its
innovative marketing techniques, which include providing
retail marketing support services to its customers. Chiquita
sells bananas through its regional sales organizations and
commissioned agents throughout the world directly to
wholesalers and retail chains, which in turn ripen and resell
or distribute the fruit. The Company also sells bananas
ripened in its own facilities or under contractual ripening
arrangements.
Bananas are highly perishable and must be brought to
market and sold generally within 60 days after harvest.
Therefore, selling prices which importers receive for bananas
depend on the available supplies of bananas and other fruit in
each market, the relative quality, and wholesaler and retailer
acceptance of bananas offered by competing importers. Excess
supplies may result in increased price competition. Profit
margins on sales may also be significantly affected by
fluctuations in currency exchange rates. (See RISKS OF
INTERNATIONAL OPERATIONS below.)
Adverse weather such as major windstorms or floods in
banana growing areas may restrict worldwide supplies and
result in increased prices for bananas. However, competing
importers may be affected differently, depending upon their
ability to obtain adequate supplies from sources in other
geographic areas.
Banana marketing is highly competitive. In order to
compete successfully, Chiquita must be able to source bananas
of uniformly high quality and distribute them in worldwide
markets on a timely basis. A limited number of competitors
account for most of the banana imports throughout the world.
The Company believes that it sells more bananas than any of
its competitors, accounting for approximately one-fourth of
all bananas imported into its principal markets throughout the
world. While smaller companies, including growers'
cooperatives, have also become a competitive factor,
Chiquita's principal competitors continue to be a limited
number of large international companies.
Although production of bananas tends to be relatively
stable throughout the year, competition in the sale of bananas
comes not only from bananas sold by others, but also from
other fresh fruit which may
2
be seasonal in nature. The resulting seasonal variations in
demand cause banana pricing to be seasonal, with the first six
months of the calendar year being the stronger period.
Chiquita's interests in food-related businesses include a
network of fresh fruit and vegetable operations in Europe,
North America and the Pacific Rim. Through these
affiliations, Chiquita sells and distributes a variety of
quality fruit and vegetable products under other brand names.
Certain of these affiliations involve both the production and
marketing of fresh fruits and vegetables while others involve
only marketing. These businesses compete against numerous
other regional fresh fruit and vegetable producers and
distributors. No single competitor has a dominant market
share in this industry due to the regionalized nature of these
businesses.
Distribution and Logistics. Transportation expenses
comprise approximately one-fourth of the total costs incurred
by Chiquita in its sale of tropical fruit. Chiquita ships its
tropical fruit in 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 that
minimize damage to the product by eliminating the need to
handle individual boxes. As a result of a multi-year
investment program, now nearly completed, and the elimination
of a substantial amount of chartered ship capacity under
Chiquita's restructuring program, Chiquita now owns or
controls under long-term lease approximately 60% of its
aggregate shipping capacity. Most of the remaining capacity
is operated under contractual arrangements having terms of
three years or less. (See also ITEM 2 - PROPERTIES below and
Notes 6 and 7 to the Consolidated Financial Statements.)
Chiquita also operates loading and unloading facilities which
it owns or leases in Central and South America and various
ports of destination.
Sourcing. Chiquita has a greater number and geographic
diversity of sources of bananas than any of its competitors.
During 1993, approximately 30% of all bananas sold by Chiquita
were sourced from Panama. Bananas sourced from other
countries, including Colombia, Costa Rica, Guatemala,
Honduras, Mexico and the Philippines, comprised from 6% to 17%
(depending on the country) of bananas sold by Chiquita during 1993.
In 1993 approximately two-thirds of the bananas sourced by
Chiquita were produced by subsidiaries and the remainder were
purchased under purchase fruit arrangements from suppliers.
Under certain of the purchase fruit arrangements, which
require less initial capital investment by the Company than
owned production facilities, Chiquita furnishes financial and
technical assistance to its suppliers to support the
production and preparation of bananas for shipment. Individual
suppliers in Mexico and the Philippines provided approximately
6% and 10%, respectively, of the bananas sold by Chiquita in
1993. The producer in the Philippines has traditionally
supplied substantially all of the bananas marketed by the
Company in Japan. No other single supplier provided 5% or
more of Chiquita's bananas.
Bananas are vulnerable to adverse local weather
conditions, which are quite common but difficult to predict,
and to crop disease, the control of which entails significant
expense. These factors may restrict worldwide supplies and
result in increased prices for bananas. However, competitors
may be affected differently depending upon their ability to
obtain adequate supplies from sources in other geographic
areas. Chiquita's overall risk from these factors, as well as
from political changes in countries where bananas are grown,
is reduced by the low concentration of its banana production
in individual producing locations.
Labor cost, which is a significant portion of the cost of
producing bananas, varies depending on the country of origin.
Since bananas are shipped in cardboard boxes, paper cost is
also significant.
3
The geographically diverse sources of other fresh fruits
and vegetables primarily involve formal and informal purchase
arrangements with numerous unrelated producers and importers.
None of these arrangements is individually significant to the
Company's operations.
Processed Food Products
Chiquita's processed food products include fruit and
vegetable juices sold primarily in the United States;
processed fruit and vegetables, including processed bananas,
sold worldwide under the "Chiquita," "Friday" and other
brands; wet and dry salads sold under the "Club Chef," "Chef
Classic" and "Naked Foods" brands; and other consumer packaged
foods sold in Latin America by the Numar Division.
Chiquita branded fruit juices include a full line of
tropical blends sold refrigerated, frozen and in shelf stable
individual servings. The refrigerated and frozen lines
include six varieties: "Caribbean Splash," "Tropical
Squeeze," "Raspberry Passion," "Orange Banana," "Calypso
Breeze" and "Hawaiian Sunrise." Individual servings are sold
in three of these varieties: "Caribbean Splash," "Orange
Banana" and "Calypso Breeze." These all natural tropical
blends are available throughout most of the United States and
are manufactured by others from fruit juice concentrates and
purees to the Company's specifications. The Company also
produces and markets natural fresh fruit and vegetable juices
sold under the "Ferraro's Fine Juices" and "Naked Juice"
brands.
Chiquita's processed banana products include banana puree,
sliced bananas and other specialty products which are produced
by the Company and 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.
Friday Canning Corporation ("Friday") is one of the
largest private-label vegetable processors in the United
States. Friday markets a full line of over twenty-five types
of processed vegetables to retail and food service customers
throughout the U.S. and other countries. Friday 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.
The vegetable processing industry is affected by the
availability of produce, which can vary due to local weather
conditions.
The Numar Division is a vertically integrated marketer,
refiner and producer of shortening, margarine and vegetable
oil products primarily in Costa Rica and Honduras. These
products are derived primarily from oil palm grown on the
Company's plantations located in these countries. Numar is
the leading marketer of such products in Costa Rica and
Honduras and sells its products in these and other Central
American countries under the "Numar," "Clover" and other brand
names. Numar's competitors in Central America consist
principally of a number of small local firms and subsidiaries
of multinational corporations.
RISKS OF INTERNATIONAL OPERATIONS
Information about the Company's operations by geographic
area is included in Note 14 to the Consolidated Financial
Statements included in the Company's 1993 Annual Report to
Shareholders and is incorporated herein by reference.
The Company is subject to a variety of governmental
regulations in certain countries where it sources and markets
its products, including import quotas and tariffs, currency
exchange controls and taxes. On July 1, 1993, the European
Union ("EU") implemented a new quota effectively restricting
the volume of Latin American bananas imported into the EU to
approximately 80% of prior levels. The quota is administered
through a licensing system and grants preferred status to
producers and importers within
4
the EU and its former colonies, while imposing new quotas and
tariffs on bananas imported from other sources, including
Latin America, Chiquita's primary source of fruit. Challenges
to the quota and many matters regarding implementation and
administration of the quota remain to be resolved. Prior to
its implementation, the principles underlying the new
regulation were ruled illegal under the General Agreement on
Tariffs and Trade ("GATT") by a GATT dispute settlement panel.
In January 1994, a GATT dispute settlement panel ruled on a
second lawsuit against the current EU regulation in favor of
the Latin American countries. GATT rulings in favor of the
Latin American countries could result in an increase in the
total volume of Latin American bananas, including banana
volume of the Company, which could be imported under the
quota. However, there can be no assurance that the EU will
comply, or of the manner in which it would comply, with such
rulings. (See "Management's Analysis of Operations and
Financial Condition" included in the Company's 1993 Annual
Report to Shareholders for a discussion of the impact of the
EU quota on current operations.)
Certain of the Company's operations are heavily dependent
upon products grown and purchased in Central and South America
and, to a lesser extent, the Philippines. These activities, a
significant factor in the economies of many of the countries
where the Company produces and purchases bananas and other
agricultural and consumer products, are subject to risks that
are inherent in operating in such 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.
Certain of these activities are dependent upon leases and
other agreements with the governments of these countries.
The Company leases all the agricultural lands it uses in
Panama from the Republic of Panama under lease and operating
agreements which automatically renew each year unless canceled
by either party on four years prior notice. In the event of
termination of the agreements, the government of Panama, which
previously purchased such agricultural lands from the Company,
may purchase other Panamanian assets of the Company at
specified values which approximate carrying value but may be
less than market value.
Certain facilities in Honduras previously owned by the
Company were transferred in prior years to the government of
Honduras with provision for their subsequent use by the
Company. Such facilities include a railroad which the Company
operates under a lease with the government of Honduras that
expires January 1, 1995. The Company believes that the lease,
if required in 1995, can be extended or renewed.
As a result of certain governmental price and export
controls in Costa Rica and Honduras, cost increases related to
the Company's oil palm operations may not initially be
recovered through selling prices in the markets in which these
products are sold.
The Company's operations worldwide and the products it
sells are subject to numerous governmental regulations and
inspections by environmental, food safety and health
authorities. These regulations directly affect day-to-day
operations. Although the Company believes it is substantially
in compliance with such regulations, actions by regulators
have in the past required, and in the future may require,
operational modifications or capital improvements at various
locations or the payment of fines and penalties, or both.
The Company's operations are conducted in many areas of
the world and involve transactions in a variety of currencies.
Results of its operations may be significantly affected by
fluctuations of currency exchange rates. Such fluctuations
affect the Company's banana operations because many of its
costs are incurred in currencies different from those that are
received from the sale of bananas in non-U.S. markets, and
there is normally a time lag between the incurrence of such
costs and collection of the related sales
5
proceeds. The Company's policy is to exchange local
currencies for dollars immediately upon receipt, thus reducing
exchange risk. The Company also engages from time to time in
various hedging activities to further minimize potential
losses on cash flows originating in currencies other than the
U.S. dollar. Fluctuations of currency exchange rates may also
affect the Company's Numar Division. Since Numar's profits
are generated in many of the same Central American countries
where the Company incurs costs to produce bananas, exchange
fluctuations with an adverse effect on Numar's profits would
generally have a favorable impact on the Company's cost of
producing bananas. See Note 1 to the Consolidated Financial
Statements and "Management's Analysis of Operations and
Financial Condition" included in the Company's 1993 Annual
Report to Shareholders for information with respect to
currency exchange.
LABOR RELATIONS
The Company employs a total of approximately 45,000
persons in its continuing operations. Approximately 39,000 of
these associates are employed in Central and South America
including 32,000 workers covered by labor contracts.
The Company has approximately 75 labor contracts with
terms expiring from 1994 to 1997. Contracts expiring in 1994
cover approximately 9,000 employees including approximately
6,500 under a contract expiring in July at one of Chiquita's
Panamanian banana producing divisions. The Company has
commenced negotiations for a new contract with these workers
and does not expect any new terms of the contract to have a
material effect on its operations. Strikes or other labor-
related actions are often encountered upon expiration of labor
contracts and also frequently occur during the term of the
contracts.
DISCONTINUED OPERATIONS
During the fourth quarter of 1992, after evaluation of
reorganization plans announced earlier that year and
completion of other preparatory actions, the Company adopted a
plan of disposal for its Meat Division operations. (See Note
3 to the Company's Consolidated Financial Statements included
in the Company's 1993 Annual Report to Shareholders.)
Pursuant to the plan, the Company immediately completed
the sale of a major fresh pork processing facility in December
1992. During 1993 and early 1994, the Company engaged in
extensive activity with respect to execution of the balance of
its disposal plan. Numerous proposals for the sale of
individual components of the Meat Division were received from
a larger number of buyers than originally expected. Although
progress under the plan has been slower than anticipated,
partially as a result of the Company evaluating all these
proposals in the interest of maximizing shareholder value, the
Company has made significant progress in the implementation of
its disposal plan. This progress includes:
- successful ongoing cost reduction efforts that have
contributed to the improvement in Meat Division
operating results to approximately breakeven levels for
1993.
- progress toward obtaining further substantial cost
reductions for 1994 and beyond relating to retiree
medical costs. In June 1993, the Company received a
favorable court ruling on its previously filed
litigation that confirms its right to unilaterally
reduce medical benefits of retired hourly employees.
This ruling is being appealed by the union and a
hearing on the appeal was held in February 1994. A
decision on the appeal is expected later in 1994.
- receiving subsidies and concessions from the State of
South Dakota and the City of Sioux Falls that will
enhance the operating profitability of the Sioux Falls
plant. These incentives were offered in September 1993
by newly installed state and city administration
officials who took office in April 1993 after their
predecessors, including the Governor of South Dakota,
were
6
killed in a plane crash on their return from a meeting
to discuss incentives with Company and Meat Division
representatives.
- obtaining a new stand-alone revolving credit facility
in June 1993 to fund the Meat Division's working
capital needs.
- obtaining financial incentives and concessions in
November 1993 from the City of Sioux City, Iowa and the
local labor union to enhance the salability of the
Sioux City pork processing plant as an operating
facility.
- completing the sale of the Division's specialty meat
operations in February 1994 for approximately $50
million in cash.
The Company also continues to be engaged in marketing
efforts with respect to the remaining Meat Division operations
and expects to complete the divestitures of these operations
by the end of 1994.
Marketing. The Meat Division is engaged in the
processing and marketing primarily of fresh pork and processed
meat products, including sausage, frankfurters, bacon, hams
and luncheon meats. The Meat Division's products are sold
principally in the United States, and for export to Japan,
Mexico, Canada, and other Central American and Pacific Rim
countries. In addition to operating its own meat-packing
plants, the Company engages other meat packers to custom
slaughter and process meat products.
The Meat Division's products are marketed in the United
States nationally under the "John Morrell" brand name and
regionally under brands such as "Dinner Bell," "Kretschmar,"
"Rath Black Hawk" and "Tobin's First Prize," as well as under
various private customer labels.
Profit margins in the fresh meat business are low and
competition among packers in the United States is strong.
Price, quality and brand identification are major competitive
factors. The Meat Division's major competitors in fresh and
processed meats are large U.S. meat-packing corporations, as
well as a large number of U.S. regional and local meat
packers. Competition also comes from other high protein
products, including beef, poultry, seafood and dairy products.
The Meat Division's operations involve supplying a
consistent quality product to a broad market, including large
food chains. The Meat Division maintains an experienced sales
force that sells its products principally in the United States
and Japan. Some fresh and processed meats, including export
sales, are also sold through independent food brokers or
expedited through international trading companies.
The availability of adequate supplies and cost of
livestock are significant to the profitability of the Meat
Division's fresh meat operations. Generally, results of
operations are adversely affected when livestock is in short
supply because competition among meat packers for available
supplies is strong and prices for livestock may increase. The
availability of livestock is determined primarily by decisions
made independently by a large number of growers and feeders
over a period of years and is beyond the control of the Meat
Division and competing meat packers.
Labor relations. The Meat Division employs approximately
4,600 domestic employees, nearly all of whom are covered under
approximately 10 labor contracts with terms expiring from 1994
to 1998.
In January 1984 certain workers who were affected by the
closing and later reopening of one of the Meat Division's
plants sued John Morrell & Co. ("Morrell"), Chiquita and the
United Food and Commercial Workers Union in the U.S. District
Court for the Western District of Tennessee. The workers
claimed that Morrell breached its collective bargaining
agreement with the union and that the
7
union breached its duty of fair representation. Morrell,
Chiquita and the union settled with the workers in late 1988.
However, the union also asserted cross-claims against Morrell
and Chiquita. In December 1992, the Court dismissed all of
the cross-claims. The union has appealed this decision and a
hearing is scheduled for April 1994.
In an unrelated action, in October 1988 approximately 650
employees from three Morrell plants filed suit in the U.S.
District Court for the Northern District of Iowa claiming that
Morrell violated wage and hours laws by not paying them for
the time required to put on, take off and clean personal
protective clothing. In February 1994, Morrell settled this
suit with the employees for an immaterial amount.
A strike at Sioux Falls in May 1987 led to three lawsuits
by Morrell against the union. Following judgments in favor of
Morrell in the first two lawsuits which resulted in payments
to Morrell by the union totaling $29.3 million, the union
demanded further arbitration of its claims that its contract
had required Morrell to recall the striking employees. In the
fall of 1991 in the third lawsuit, Morrell sued the union in
the U.S. District Court for the District of South Dakota,
seeking a ruling that the prior litigation disposed of the
union's recall claims. In March 1992, the court ruled in
Morrell's favor. On appeal, the Eighth Circuit Court of
Appeals reversed the lower court's decision, ruling that the
union is entitled to have its remaining arguments heard in a
second round of arbitration, and the United States Supreme
Court refused to grant certiorari. In February 1994, the
union petitioned to re-commence arbitration.
Properties. The Meat Division owns and operates its
principal slaughtering plant and processed meat facility
located in Sioux Falls, South Dakota. The Meat Division also
owns or leases and operates meat-processing facilities in Iowa
and Ohio and operates warehouses and distribution facilities
in several states. Although much of the Sioux Falls plant is
relatively old, the Company believes that it and other more
modern plants and facilities now used are, in general, well
maintained and suitable for its operations. Certain products
are produced for the Meat Division by custom meat packers in
plants located in Ohio and Kansas.
Regulation. The Meat Division's operations are subject
to numerous governmental regulations and regular inspections
by the U.S. Department of Agriculture and other environmental
and health authorities. Actions by regulators directly affect
day-to-day operations and have in the past required, and in
the future may require, plant improvements at various
locations or the payment of fines and penalties, or both.
While it is not possible to predict the cost of such future
improvements with a high degree of certainty, management does
not expect that such expenditures will have a material impact
on the Company's financial results.
In March 1993, Morrell brought to the attention of the
United States Environmental Protection Agency ("USEPA")
certain deficiencies relating to the wastewater treatment
facility at one of its plants. The Company's internal
investigation of this matter and discussions with the USEPA
are continuing. The U.S. Department of Justice (DOJ) has
proposed that Morrell consider entering into a judicial civil
consent order requiring compliance with certain environmental
laws, regulations and permits and other actions. The DOJ
indicated that the amount of civil penalties, if any, to be
imposed would be resolved later. In addition, the U.S.
Attorney for South Dakota and the Environmental Crimes Section
of the Environment and Natural Resources Division of the DOJ
are reviewing the matter. Morrell is presently operating this
wastewater treatment facility under an extension of its
previous five-year permit which will remain in place until a
permanent permit is issued.
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
8
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 - 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.
9
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
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 - 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 - 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 - 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 - 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 below, 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 1994
Annual Meeting of Shareholders and is incorporated herein by
reference.
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.
11
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 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
17
V - Property, Plant and Equipment 18
VI - Accumulated Depreciation of Property,
Plant and Equipment
19
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.
12
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.
13
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
14
/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.
15
(This page left blank intentionally.)
16
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES, AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Balance at
Balance at Deductions December 31, 1993
January 1, Amounts Amounts Not
Name of Debtor 1993 Additions Collected Written off Current Current
Robert F. Kistinger,
Senior Executive
Vice President,
Chiquita Banana Group(1) $ --$200,000 $ -- $ --$200,000$
- --
(1) Collateralized by a second mortgage on Mr.
Kistinger's principal residence originally due
on March 1, 1995 with interest at 7% compounded
semi-annually. Repaid in full on January 25,
1994.
17
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Sales Other Balance
Balance at Additions and Changes at
Beginning at Retire- Add End of
of Period Cost ments (Deduct) Period
Year Ended
December 31,
1993
Land $ 101,131 $ 1,969 $ (241) $ 1,128 $ 103,987
Buildings and
Improvements 186,038 11,998 (2,358) 2,756 198,434
Machinery and
Equipment 403,480 29,193 (23,298) 2,318 411,693
Ships and
Containers 692,375 125,171 (27,931) 1,202 790,817
Cultivations 292,843 18,752 (15,068) 9,019 305,546
Other 85,106 9,471 (1,056) (14,188) 79,333
Total $ 1,760,973 $ 196,554 $ (69,952) $ 2,235 $ 1,889,810
Year Ended
December 31,
1992
Land $ 90,407 $ 9,360 $ (300) $ 1,664 $ 101,131
Buildings and
Improvements 137,054 42,697 (2,076) 8,363 186,038
Machinery and
Equipment 333,151 56,398 (11,683) 25,614 403,480
Ships and
Containers 412,243 281,919 (226) (1,561) 692,375
Cultivations 224,149 69,108 (397) (17) 292,843
Other 73,514 12,791 (2,134) 935 85,106
Total $ 1,270,518 $ 472,273 $ (16,816) $ 34,998* $ 1,760,973
Year Ended
December 31,
1991
Land $ 53,279 $ 37,398 $ (1,348) $ 1,078 $ 90,407
Buildings and
Improvements 104,250 37,140 (1,858) (2,478) 137,054
Machinery and
Equipment 272,572 61,975 (11,146) 9,750 333,151
Ships and
Containers 236,833 184,021 (11,832) 3,221 412,243
Cultivations 162,245 62,703 (863) 64 224,149
Other 58,784 12,404 (479) 2,805 73,514
Total $ 887,963 $ 395,641 $ (27,526) $ 14,440* $ 1,270,518
* Principally relates to acquisitions of businesses.
18
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Sales Other Balance
Balance at Additions and Changes at
Beginning at Retire- Add End of
of Period Cost ments (Deduct) Period
Year Ended
December 31,
1993
Buildings and
Improvements $ 49,253 $ 7,828 $ (1,120) $ (987) $ 54,974
Machinery and
Equipment 185,489 35,386 (12,769) 1,946 210,052
Ships and
Containers 52,469 43,492 (5,661) (3) 90,297
Cultivations 70,087 10,166 (5,716) 1,265 75,802
Other 28,762 5,719 (486) (2,501) 31,494
Total $ 386,060 $ 102,591 $ (25,752) $ (280) $ 462,619
Year Ended
December 31,
1992
Buildings and
Improvements $ 37,103 $ 8,277 $ (1,168) $ 5,041 $ 49,253
Machinery and
Equipment 146,710 30,208 (8,202) 16,773 185,489
Ships and
Containers 20,346 32,147 (26) 2 52,469
Cultivations 61,937 8,147 (17) 20 70,087
Other 27,112 1,659 (123) 114 28,762
Total $ 293,208 $ 80,438 $ (9,536) $ 21,950* $ 386,060
Year Ended
December 31,
1991
Buildings and
Improvements $ 33,681 $ 5,711 $ (1,278) $ (1,011) $ 37,103
Machinery and
Equipment 126,569 23,714 (2,766) (807) 146,710
Ships and
Containers 15,825 16,457 (11,935) (1) 20,346
Cultivations 55,995 5,578 (425) 789 61,937
Other 22,074 2,941 (369) 2,466 27,112
Total $ 254,144 $ 54,401 $ (16,773) $ 1,436* $ 293,208
* Principally relates to acquisitions of businesses.
19
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE VIII - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
Year Ended December 31,
1993 1992 1991
Balance at beginning of period $ 9,698 $ 7,196 $ 6,826
Additions:
Charged to costs and expenses 4,797 6,300
2,261
Deductions:
Write-offs 3,220 4,182 1,751
Other, net 224 (384) 140
3,444 3,798 1,891
Balance at end of period $ 11,051 $ 9,698 $ 7,196
20
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE IX - SHORT-TERM BORROWINGS
(In thousands)
Maximum
Weighted Aggregate Average Weighted
Average Borrowings Out- Average
Category Interest Out- standing Interest
of Balance Rate at standing Borrowing Rate
Year Borrow- at End End of at any During During
Ended ing of Year Year Month End the Year the Year
12/31/93 Banks $112,796 10.9% $149,328 $125,090 12.4%
12/31/92 Banks $136,765 12.7% $167,365 $142,448 15.6%
12/31/91 Banks $146,756 18.1% $146,756 $75,460 17.2%
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.
21
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Charged to Costs and Expenses
Year Ended December 31,
1993 1992 1991
Maintenance and repairs $64,340 $66,429 $54,961
Taxes, other than payroll
and income taxes:
Import 51,446 40,945 36,795
Export 25,765 25,602 33,020
Other 11,059 10,038 6,129
Advertising 44,302 71,699 60,095
22
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.
23