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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, 1996 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
---------------------- --------------------------
Capital Stock ($.33 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
10-1/4% 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. [X]
As of February 28, 1997, there were 56,132,371 shares of
Common Stock outstanding. The aggregate market value of Common
Stock held by non-affiliates at February 28, 1997 was
approximately $434 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1996
Annual Report to Shareholders are incorporated by reference in
Parts I and II. Portions of the Chiquita Brands International,
Inc. Proxy Statement for the 1997 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 . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . 9
Executive Officers of the Registrant . . . . . . 10
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . 11
Item 6. Selected Financial Data . . . . . . . . 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . 11
Part III
Item10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . 12
Item11. Executive Compensation . . . . . . . . 12
Item12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . 12
Item13. Certain Relationships and Related
Transactions . . . . . . . . . . . . 12
Part IV
Item14. 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, producer and
distributor of bananas and other quality fresh and processed food
products sold under the Chiquita and other brand names. In
addition to bananas, these products include other tropical fruit,
such as mangoes, kiwi and citrus, and a wide variety of other
fresh produce. The Company's operations also include fruit and
vegetable juices and beverages; processed bananas and other
processed fruits and vegetables; fresh cut and ready-to-eat
salads; and edible oil-based consumer 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 and by expanding its quality fruit and vegetable
operations. Chiquita has benefited from its multi-year
investment spending program and its restructuring and cost
reduction efforts to significantly reduce production,
distribution and overhead costs. (See "Distribution and
Logistics," "Sourcing" and ITEM 2 - PROPERTIES.) Its
restructuring and cost reduction efforts also included measures
to reorganize the Company's European banana operations to adjust
to a quota which effectively restricts the volume of Latin
American bananas imported into the European Union ("EU"), as well
as to the banana Framework Agreement which authorizes the
imposition of additional restrictive and discriminatory quotas
and export licenses on non-European banana marketing firms. (See
RISKS OF INTERNATIONAL OPERATIONS.)
Since the announcement of the EU banana quota, Chiquita s
primary objectives have been to focus on core businesses, to
lower operating costs and to reduce debt and the Company s cost
of capital in an effort to maximize shareholder value by
strengthening the balance sheet and increasing free cash flow.
Steps completed in the Company s efforts to maximize shareholder
value include:
- in 1996, certain strategic undertakings designed to achieve
further long-term reductions in the delivered product cost
of bananas through the modification of distribution
logistics and the wind-down of particular production
facilities;
- in 1995, the sale of its meat business, older ships and the
Costa Rican operations of its Numar edible oils group, the
shut-down of a portion of its juice operations and the
reconfiguration of banana production assets; and
- beginning in 1994, the prepayment of higher rate
subordinated public debt and high cost subsidiary debt
using proceeds from public offerings of preferred shares
and senior notes and from available cash.
See "Management's Analysis of Operations and Financial Condition"
and Note 2 to the Consolidated Financial Statements included in
the Company's 1996 Annual Report to Shareholders for a discussion
of factors affecting results of the Company's operations for
1996, 1995 and 1994. Factors which may cause fluctuations in the
results of operations are also discussed in the description of
the Company's
-1-
operations below. No individual customer accounted for more than
10% of the Company's consolidated net sales during any of the
last three years.
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 accounted
for approximately 60% of consolidated net sales in each of the
last three years.
Chiquita believes it derives competitive benefits in the
marketing, distribution and sourcing of fresh foods through its:
- Recognized brand names and reputation for quality;
- Strong market positions in Europe and North America, its
principal markets;
- Modern, cost-efficient fresh fruit transportation system;
and
- Industry leading position in terms of number and geographic
diversity of its sources of bananas, which enhances its
ability to provide customers with premium quality products
on a consistent basis.
Marketing. Chiquita markets bananas under brand names
including "Chiquita," "Chiquita Jr.," "Consul" and "Amigo." In
1996, Chiquita sold approximately 50% of its banana volume in
North America and approximately 45% of its banana volume in
Europe.
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. Chiquita 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.
Bananas are highly perishable and must be brought to market
and sold generally within 60 days after harvest. Therefore, the
selling price which an importer receives for bananas depends on
several factors, including: the availability of bananas and
other fruit in each market; the relative quality of competing
fruit; 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.)
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 and the
cost to obtain alternate supplies from sources in other
geographic areas.
-2-
Banana marketing in international trade is highly competitive.
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. In
order 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. The Company
believes it sells more bananas than any of its competitors,
accounting for approximately one-fourth of all bananas imported
into its principal markets.
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 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.
Through a network of fresh fruit and vegetable operations in
Europe, North America and the Pacific Rim, Chiquita sells and
distributes a variety of quality fruit and vegetable products.
These products include quality fresh fruit such as apples,
apricots, cherries, grapes, peaches, pears, plums, strawberries
and tomatoes sold under the "Chiquita," "Frupac" and other brand
names; and 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.
Some of these operations 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.
Chiquita owns or controls under long-term lease approximately 70%
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.) 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 1996 approximately 30% of all bananas sold by Chiquita
were sourced from Panama. Bananas are sourced from numerous
other countries, including Colombia, Costa Rica, Ecuador,
Guatemala and Honduras which comprised 5% to 21% (depending on
the country) of bananas sold by Chiquita during 1996.
In 1996 approximately two-thirds of the 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. No
single supplier provided a significant portion of the bananas
sold by Chiquita in 1996.
-3-
Bananas are vulnerable to adverse local weather conditions,
which are quite common but difficult to predict, and to crop
disease. These factors may result in lower sales volume and
increased costs, but may also restrict worldwide supplies and
lead to increased prices for bananas. In addition, banana
production may be affected by political changes in countries
where bananas are grown. 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 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.
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 in the United States and Europe; processed fruit and
vegetables, including processed bananas, sold worldwide under the
"Chiquita," "Friday" and other brands; fresh cut and ready-to-eat
salads sold in the United States under the "Club Chef" brand; and
other consumer products (primarily edible oils) sold in Honduras
under the "Numar" and other brand names.
Chiquita branded fruit juices sold in the United States
include a full line of tropical blends which are manufactured by
others to Chiquita's specifications and sold in shelf-stable,
refrigerated and frozen varieties. Shelf-stable individual
servings come in three blends-- "Wild Berry Splash," "Tropical
Paradise" and "Calypso Breeze"-- and are sold through club stores
and mass merchandisers throughout most of the United States. The
Company licenses its refrigerated and frozen juice product lines
to a national fruit juice producer. In addition to the three
tropical blends above, the refrigerated and frozen lines include
"Raspberry Passion," "Pineapple Guava Mango Cocktail," "Orange
Strawberry Banana Cocktail," "Kiwi Strawberry Cocktail" and
"Pineapple Orange Banana Cocktail." Chiquita branded fruit
juices are sold in Europe in shelf-stable and refrigerated
varieties through a 50%-owned joint venture. 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'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,
sliced bananas and other specialty products which 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. These products are primarily produced in
Chiquita s processing facilities in Honduras and Costa Rica.
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.
-4-
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 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 and competes principally
against 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 in Note 12 to the Consolidated Financial Statements included
in the Company's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
On July 1, 1993, the European Union ("EU") implemented a new
quota regulation effectively restricting the volume of Latin
American bananas imported into the EU, which had the effect of
decreasing the Company's volume and market share in Europe. The
quota regulation is administered through a licensing system which
grants preferred status to producers and importers within the EU
and its former colonies. The regulation also imposes quotas and
tariffs on bananas imported from other sources, including Latin
America, Chiquita's primary source of fruit. Since imposition of
the EU quota regime, prices within the EU have increased to a
higher level than the levels prevailing prior to the quota.
Banana prices in other worldwide markets, however, have been
lower than in years prior to the EU quota, as the displaced EU
volume has entered those markets.
In two separate rulings, General Agreement on Tariffs and
Trade ("GATT") panels found the EU banana policy to be illegal.
In March 1994, four of the countries which had filed GATT actions
against the EU banana policy (Costa Rica, Colombia, Nicaragua and
Venezuela) reached a settlement with the EU by signing a
"Framework Agreement." The Framework Agreement authorizes the
imposition of additional restrictive and discriminatory quotas
and export licenses on U.S. banana marketing firms, while leaving
EU firms exempt. Costa Rica and Colombia implemented this
agreement in 1995, significantly increasing the Company s cost to
export bananas from these countries.
In July 1996, the EU adopted an interim measure that increased
its annual banana quota to adjust for the entry of Sweden,
Finland and Austria into the EU and made its preferential
licensing system applicable to the increase. Prior to their
entry into the EU, these countries had unregulated banana markets
in which the Company supplied a significant portion of the
bananas. Implementation of the quota and licensing regime
continues to evolve, and there can be no assurance that the EU
banana regulation will not change further.
In September 1994, Chiquita and the Hawaii Banana Industry
Association made a joint filing with the Office of the U.S.Trade
Representative ("USTR") under Section 301 of the U.S. Trade Act
of 1974, charging that the EU quota and licensing regime and the
Framework Agreement are unreasonable, discriminatory, and a
burden and restriction on U.S. commerce. In response to this
-5-
petition, the U.S. Government initiated formal investigations of
the EU banana import policy and of the Colombian and Costa Rican
Framework Agreement export policies.
In January 1995, the U.S. Government announced a preliminary
finding against the EU banana import policy. In September 1995,
based on information obtained in the USTR's investigation under
Section 301, the United States, joined by Guatemala, Honduras and
Mexico, commenced a new international trade challenge against the
EU regime using the procedures of the World Trade Organization
("WTO"). In January 1996, the USTR announced that it had found
the banana Framework Agreement export policies of Costa Rica and
Colombia to be unfair. In February 1996, Ecuador, the world's
largest exporter of bananas, joined the United States, Guatemala,
Honduras and Mexico in challenging the EU regime under the WTO.
During the fourth quarter of 1996, a WTO arbitration panel heard
the case against the EU quota and licensing regime and Framework
Agreement. It has been widely reported that in March 1997, the
panel issued a preliminary report finding that the licensing and
quota systems under the EU regime and the Framework Agreement
violate numerous international trade agreements to the detriment
of Latin American supplying countries and U.S. marketing firms
such as Chiquita. Reportedly, the preliminary report recommends
that the WTO request the EU to bring its import regime for
bananas into conformity with these agreements. The panel is
expected to issue a final report during the second quarter of
1997. The final report is expected to be subject to appeal
procedures that could extend by a few months the time before any
ruling is final. Thereafter, the parties have a "reasonable"
period of time (not to exceed 15 months) to implement the ruling.
Both the WTO and Section 301 authorize retaliatory measures,
such as tariffs or withdrawal of trade concessions, against
offending countries. However, there can be no assurance as to
the results of the WTO and Section 301 proceedings (including the
WTO panel s final report and any appeal of the final report), the
nature and extent of actions that may be taken by the affected
countries or the impact on the EU quota regime or the Framework
Agreement.
Certain of 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. Certain of these activities
are substantially dependent upon leases and other agreements with
the governments of these countries.
Chiquita leases all the agricultural land 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, has the right
to purchase other Panamanian assets of Chiquita at specified
values which approximate carrying value but may be less than
market value.
Certain facilities in Honduras previously owned by Chiquita
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 which expires on December
31, 1998.
-6-
The Company's worldwide operations and products 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 Chiquita 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 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 reduce
potential losses on cash flows originating in currencies other
than the U.S. dollar. See Notes 1 and 7 to the Consolidated
Financial Statements and "Management's Analysis of Operations and
Financial Condition" included in the Company's 1996 Annual Report
to Shareholders for information with respect to currency
exchange.
LABOR RELATIONS
---------------
The Company employs approximately 36,000 associates.
Approximately 32,000 of these associates are employed in Central
and South America, including 23,000 workers covered by 76 labor
contracts. Contracts covering approximately 11,000 employees
expire in 1997, including two contracts which expire in June
covering 4,700 employees at the Company s banana operations in
Honduras and 4,500 employees at one of the Company s banana
producing divisions in Panama. 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 90,000 acres and leases
approximately 40,000 acres of improved land, principally in Costa
Rica, Panama and Honduras. Nearly all of this land is used for
the cultivation of bananas 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 operations.
The Company owns or controls under long-term bareboat charters
16 ocean-going refrigerated vessels and has 9 additional such
vessels under time charters, primarily for transporting tropical
fruit sold by Chiquita. From time to time, excess capacity may
be chartered or subchartered 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 food. The
owned ships are pledged as collateral for related financings.
-7-
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, Europe, and Central and South America. The
Company leases the space for its headquarters in Cincinnati,
Ohio.
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 1996 Annual Report to
Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
A number of legal actions are pending against the Company,
including those described below. Although some of these cases,
including the DBCP cases described below, are in very preliminary
stages, based on information currently available to it and advice
of counsel, management does not believe such litigation will,
individually or in the aggregate, have a material adverse effect
on the financial statements of the Company.
Several suits are pending in different jurisdictions against
the manufacturers of an agricultural chemical called DBCP and
against the Company and other banana producing companies which
used DBCP primarily in the 1970's. Most of the plaintiffs are
foreign citizens who claim to have been employees of banana
companies and allege sterility and other injuries as a result of
exposure to DBCP. Plaintiffs' alleged damage claims have yet to
be quantified.
Several of these lawsuits were filed in Texas state court in
1993. These cases originally represented claims on behalf of
approximately 25,000 individuals, of whom approximately 4,000
purported to have claims against the Company. In 1995, all but
one of the cases involving Chiquita were removed to the U.S.
District Court for the Southern District of Texas and dismissed
on the grounds that courts in the plaintiffs' home countries
(limited to Costa Rica, Panama and the Philippines in the case of
suits involving the Company) were more appropriate forums for
pursuing their claims. The plaintiffs, which include
approximately 3,650 alleging claims against Chiquita, have
appealed these dismissals to the U.S. Court of Appeals for the
Fifth Circuit. In February 1997, the other case involving
Chiquita was removed to the U.S. District Court in the Southern
District of Texas where the defendants have moved to dismiss on
the same grounds. This case, Narciso Borja, et al. v. Dow
Chemical Company, et al. (District Court of Dallas County),
involves approximately 2,000 plaintiffs, including approximately
350 who claim that the Company has liability for their alleged
injuries.
A similar suit was filed in 1995 in Louisiana state court by
approximately 4,000 plaintiffs. The Company does not have
information concerning how many of these plaintiffs allege that
Chiquita has liability for their injuries, but the same
manufacturer and banana producer defendants have been named in
this suit. This case, Lucas Pastor Canales Martinez, et al. v.
Dow Chemical Company, et al., was removed to U.S. District Court
for the Eastern District of Louisiana and then remanded to
Louisiana state court, where various procedural issues are being
addressed.
Five additional lawsuits, each involving one plaintiff, were
filed in 1996 in Mississippi state court against the same
manufacturer and banana producer defendants. Each case was
removed to the United States District Court for the Southern
District of Mississippi, Southern Division, where the defendants
-8-
motions to dismiss on grounds of lack of personal jurisdiction
and plaintiffs motions to remand the cases to state court are
pending.
As a result of the dismissals of the Texas suits described
above, similar suits against the Company and its subsidiaries
have been filed in Costa Rica, Panama and the Philippines (in
addition to previously filed actions in Costa Rica and Panama).
Cases involving approximately 4,000 plaintiffs who purport to
have claims against the Company are currently pending in those
countries.
The Company believes it has a number of meritorious defenses
in all of the foregoing DBCP cases, including that at all times
when it used DBCP commercially, the product was registered for
use by the United States Environmental Protection Agency. In
addition, the Company ceased using the product on a commercial
basis in 1977, promptly after learning that health hazards might
exist.
In 1993, Great White Fleet Ltd., the Company's shipping
subsidiary ("GWF"), redelivered three cargo ships to RSG Reefer
Services GmbH ("RSG") in reliance on the force majeure provisions
of the applicable contract of affreightment with RSG due to the
imposition of the EU banana quota and licensing regime. In 1994,
RSG commenced an arbitration proceeding in London, England
disputing the occurrence of a force majeure event and seeking
damages from GWF of approximately $20 million. In December 1996,
the arbitrators awarded RSG $9.75 million, which was provided for
in the Company s 1996 results.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
Not applicable.
-9-
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Carl H. Lindner (age 77) - Mr. Lindner has been Chairman of
the Board of Directors 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"), a holding
company formed in April 1995 which, through its subsidiaries, is
engaged primarily in specialty and multi-line property and
casualty insurance businesses and in the sale of tax-deferred
annuities. For over 35 years, Mr. Lindner has been Chairman of
the Board and Chief Executive Officer of American Financial
Corporation, which became an AFG subsidiary in 1995.
Keith E. Lindner (age 37) - Mr. Lindner was named Vice
Chairman of the Board of Directors in March 1997. From 1989 to
March 1997, he was President and Chief Operating Officer of the
Company and has served the Company in various executive
capacities since 1984. Mr. Lindner is also a Co-President and a
Director of AFG.
Steven G. Warshaw (age 43) - In March 1997, Mr. Warshaw was
appointed President and Chief Operating Officer of the Company
and retained his position as Chief Financial Officer. From 1990
to March 1997, he was the Company's Executive Vice President and
Chief Administrative Officer and has been the Chief Financial
Officer of the Company since 1994. Mr. Warshaw has served the
Company in various capacities since 1986.
Robert F. Kistinger (age 44) - Mr. Kistinger was named
President of the Company's Chiquita Banana Group in March 1997
and assumed the responsibilities of President of Chiquita Banana
Group - North America in August 1996. From 1994 to March 1997,
he was Senior Executive Vice President of the Chiquita Banana
Group. He was Executive Vice President, Operations for the
Company's Chiquita Tropical Products Division from 1989 to 1994
and has served the Company in various capacities since 1980.
Robert W. Olson (age 51) - Mr. Olson was named Senior Vice
President, General Counsel and Secretary of the Company in
September 1996. From 1995 to September 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.
Jos P. Stalenhoef (age 55) - Mr. Stalenhoef was named Chief
Transformation Officer - North America of the Company s Chiquita
Banana Group in August 1996. From 1994 to August 1996, he served
as President of the Company s Chiquita Banana-North America
Division. He was Senior Vice President, North America, Chiquita
Tropical Products Division from 1989 to 1994 and has served the
Company in various capacities since 1988.
William A. Tsacalis (age 53) - 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.
-10-
PART II
--------
ITEM 5 -MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
- -----------------------------------------------------------
The number of shareholders at February 28, 1997 and the
markets for the Company's capital stock are included on page 52
of the Company's 1996 Annual Report to Shareholders under
"Investor Information." Price ranges of the Company's capital
stock and dividends declared thereon are included in Note 14 to
the Consolidated Financial Statements included in the 1996 Annual
Report to Shareholders. Restrictions on the Company's ability to
declare and pay dividends are described in Note 6 to the
Consolidated Financial Statements included in the 1996 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 26 of the Company's 1996 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
27 through 30 of the Company's 1996 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 31
through 50 of the Company's 1996 Annual Report to Shareholders,
and "Quarterly Financial Data" which is included in Note 14 to
such Consolidated Financial Statements, are incorporated herein
by reference.
ITEM 9 -CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ----------------------------------------------------------
None.
-11-
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 1997
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 1996
Annual Report to Shareholders and are incorporated by
reference in Part II, Item 8:
Page of
Annual Report
Report of Independent Auditors 25
Consolidated Statement of Income for 1996,
1995 and 1994 31
Consolidated Balance Sheet at December 31,
1996 and 1995 32
Consolidated Statement of Shareholders' Equity
for 1996, 1995 and 1994 33
Consolidated Statement of Cash Flow for 1996,
1995 and 1994 34
Notes to Consolidated Financial Statements 35
2. Financial Statement Schedule. Financial Statement
Schedule II - Allowance for Doubtful Accounts Receivable is
included on page 16 of this Annual Report on Form 10-K. All
other schedules are not required under the related
instructions or are inapplicable.
-12-
3. Exhibits. See Index of Exhibits (page 18) 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, 1996.
-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 28, 1997.
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 28, 1997:
/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,
Steven G. Warshaw Chief Operating Officer and
Chief Financial Officer
/s/ Fred J. Runk Director
Fred J. Runk
Jean H. Sisco* Director
Jean H. Sisco
William W. Verity* Director
William W. Verity
-14-
Oliver W. Waddell* Director
Oliver W. Waddell
/s/ Ronald F. Walker Director
Ronald F. Walker
/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-
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
Year Ended December 31,
1996 1995 1994
-------- -------- --------
Balance at beginning of period $11,310 $13,060 $12,393
-------- -------- --------
Additions:
Charged to costs and expenses 3,685 4,303 6,966
-------- -------- --------
Deductions:
Write-offs 4,268 5,703 6,330
Other, net 895 350 (31)
-------- -------- --------
5,163 6,053 6,299
-------- -------- --------
Balance at end of period $9,832 $11,310 $13,060
======== ======== ========
-16-
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-17-
CHIQUITA BRANDS INTERNATIONAL, INC.
Index of Exhibits
Exhibit
Number Description
- -------- --------------------------
*3-a Second Restated Certificate of Incorporation, filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, as amended by 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
*3-b 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, with respect
to Senior Debt Securities, under which the Company s 9
1/8% Senior Notes due 2004 and the Company s 10 1/4%
Senior Notes due 2006 have been issued (incorporated by
reference to Exhibit 4(c) of Registration Statement
333-00789), as supplemented by the First Supplemental
Indenture dated as of June 15, 1994 (incorporated by
reference to Exhibit 6(a)99(c) to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994) and by
the Second Supplemental Indenture dated as of July 15,
1996 (incorporated by reference to Exhibit 4 to
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996); and as further supplemented by the
Certificate of the Vice President and Controller of the
Company establishing the terms of the 9 1/8% Senior
Notes (incorporated by reference to Exhibit 7(c)(3) to
Current Report on Form 8-K dated February 8, 1994) and
by the Terms of 10 1/4% Senior Notes approved by the
Executive Committee of the Board of Directors of the
Company (incorporated by reference to Exhibit 7(c)99.6
to Current Report on Form 8-K dated July 22, 1996)
*10-a Lease of Lands and Operating Contract between United
Brands Company, Chiriqui Land Company, Compania
Procesadora de Frutas and the Republic of Panama, dated
January 8, 1976, effective January 1, 1976, filed as
Exhibit 10-a to Annual Report on Form 10-K for the year
ended December 31, 1993
*10-b Agreement dated January 11, 1996 effective January 1,
1996 between Tela Railroad Company and the Honduran
National Railroad, filed as Exhibit 10-b to Annual
Report on Form 10-K for the year ended December 31,
1995
*10-c Stock Purchase Agreement dated December 20, 1995
between Smithfield Foods, Inc. ("Smithfield") and the Company
filed as Exhibit 7.1 to Schedule 13D dated December 20,
1995 filed by the Company and certain other persons
with respect to Smithfield common stock
10-d 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 thereunder relating to
the Company s $125 million revolving credit facility
Executive Compensation Plans
----------------------------
10-e 1986 Stock Option and Incentive Plan, as amended
*10-f 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-g Amended and Restated Deferred Compensation Plan, filed
as Exhibit 10-f to Annual Report on Form 10-K for the
year ended December 31, 1995
-18-
10-h Deferred Compensation Plan for Board of Directors of
Chiquita Brands International, Inc. dated January 1,
1997
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. 1996 Annual Report
to Shareholders (pages 25 through 50 and page 52)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
99 Annual Report on Form 11-K for the Chiquita Savings and
Investment Plan for 1996 will be filed by amendment on
or before June 29, 1997.
- -----------------------------------
* Incorporated by reference.
-19-