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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the transition period from                 to                

Commission file number 1-1550

CHIQUITA BRANDS INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

250 East Fifth Street
Cincinnati, Ohio 45202
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (513) 784-8000

     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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      X        No            

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes      X        No            

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes      X        No            

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 31, 2002, there were 39,822,371 shares of Common Stock outstanding.

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CHIQUITA BRANDS INTERNATIONAL, INC.

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Part I — Financial Information

Item 1 — Financial Statements

CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In thousands, except per share amounts)

*See Notes to Consolidated Financial Statements, including Basis of Presentation
describing the Reorganized Company and Predecessor Company.

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CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands, except share amounts)

*See Notes to Consolidated Financial Statements, including Basis of Presentation
describing the Reorganized Company and Predecessor Company.

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CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
(In thousands)

*See Notes to Consolidated Financial Statements, including Basis of Presentation
describing the Reorganized Company and Predecessor Company.

 

**

On March 19, 2002, in accordance with the Company’s Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code, all previously existing parent company public debt ($861 million principal plus $102 million accrued interest) was exchanged for 95.5% of the new common stock of the Reorganized Company and $250 million of 10.56% Senior Notes due 2009.

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CHIQUITA BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Basis of Presentation

     Chiquita Brands International, Inc. (“CBII”) and its subsidiaries (collectively, “Chiquita” or the “Company”) operate as a leading international marketer, producer and distributor of quality fresh fruits and vegetables and processed foods. On March 19, 2002, CBII, a parent holding company without business operations of its own, completed its previously announced financial restructuring when its pre-arranged Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the “Plan” or “Plan of Reorganization”) became effective. For financial reporting purposes, the Company used an effective date of March 31, 2002. References in these financial statements to “Predecessor Company” refer to the Company prior to March 31, 2002. References to “Reorganized Company” refer to the Company on and after March 31, 2002, after giving effect to the issuance of new securities in exchange for the previously outstanding securities in accordance with the Plan, and implementation of fresh start accounting. In accordance with financial reporting requirements for companies emerging from a Chapter 11 restructuring, financial information for the nine months ended September 30, 2002 is not presented in the financial statements since such information would combine the results of the Predecessor and Reorganized Company. The securities issued pursuant to the Plan and the fresh start adjustments are described in “Parent Company Debt Restructuring” and “Financial Restructuring Items” below.

     Interim results for the Company are subject to significant seasonal variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of the interim periods shown have been made. See Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 for additional information relating to the Company’s financial statements.

Parent Company Debt Restructuring

     The Plan was confirmed by the bankruptcy court on March 8, 2002 and became effective March 19, 2002, resulting in the exchange of $861 million of CBII’s outstanding senior notes and subordinated debentures (“Old Notes”) and $102 million of accrued and unpaid interest thereon for $250 million of 10.56% Senior Notes due 2009 (“New Notes”) and 95.5% of the common stock of the reorganized entity (“New Common Stock”). Previously outstanding preferred, preference and common stock of the Predecessor Company was exchanged for 2% of the New Common Stock as well as 7-year warrants (“Warrants”) to purchase up to 25% of the New Common Stock of the Reorganized Company on a fully diluted basis (prior to any dilution by issuance of stock under the stock option plan or other issuances of stock). In addition, as part of a management incentive program, certain executives were granted rights to receive 1 million shares (2.5%) of the New Common Stock. At September 30, 2002, 865,950 of these shares had been issued, 34,050 shares had been surrendered in satisfaction of tax withholding obligations, and 100,000 shares were held in a “rabbi trust.”

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     In accordance with the Plan, the Reorganized Company:

	•		authorized 150,000,000 shares of New Common Stock and issued 39,965,950 shares;
	•		issued the New Notes and the Warrants;
	•		adopted a new stock option plan;
	•		reserved (a) 13,333,333 shares of New Common Stock for issuance upon exercise of the Warrants and (b) 5,925,926 shares of New Common Stock for issuance pursuant to awards authorized under the new stock option plan; and
	•		cancelled the Old Notes, previously outstanding preferred, preference and common stock, and previously outstanding stock options.

     The New Notes mature on March 15, 2009. These Notes were issued by CBII and are not secured by any of the assets of CBII and its subsidiaries. The indenture for the New Notes contains dividend payment restrictions that, at September 30, 2002, limited the aggregate amount of dividends that could be paid by CBII to approximately $30 million. The indenture has additional restrictions related to asset sales, incurrence of additional indebtedness, sale-leaseback transactions, and related-party transactions. The New Notes are callable on or after March 15, 2005 at a price of 105.28% of face value, declining to face value in 2008. In addition, the Company may redeem some or all of the New Notes prior to March 15, 2005 at a redemption price equal to the greater of (a) 100% of the face value of the New Notes to be redeemed, or (b) the sum of the present values of (i) 105.28% of face value of the New Notes, and (ii) interest payments due from the date of redemption through March 15, 2005, in each case discounted to the redemption date on a semiannual basis at the applicable U.S. Treasury rates plus 0.25%; plus, in the case of either clause (a) or (b) above, any accrued and unpaid interest as of the redemption date.

     The Warrants, which entitle the holders to purchase up to 13.3 million shares of New Common Stock at a price of $19.23 per share, are exercisable through March 19, 2009. In the Consolidated Balance Sheet of the Reorganized Company at September 30, 2002, the Warrants, valued at $41 million for purposes of the Plan of Reorganization, are included in capital surplus.

     Of the 5.9 million shares authorized for issuance under the new stock option plan, options for approximately 4.5 million and 0.2 million shares were granted during the second and third quarters of 2002, respectively. The Company also granted 241,000 stock appreciation rights (“SARs”) to certain non-U.S. employees during the third quarter. These options and SARs are exercisable for a period of 10 years. The weighted average exercise price of the options and SARs granted in the second and third quarters was $16.94 per share.

     For the stock options, the estimated weighted average fair value per option granted was $7.12 using a Black-Scholes option pricing model based on the market price of the Company’s stock and the following assumptions at the date of option grant: weighted average risk-free interest rate of 4.6%; dividend yield of 0%; volatility factor for the Company’s common stock price of 40%; and a weighted average expected life of 5 years for options not forfeited. If the Company were recognizing expense for these options in accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” the estimated pro forma compensation expense based on the option fair values would be approximately $7 million for 2002, of which approximately $3 million ($0.07 per share) would have been recognized in the third quarter of 2002. Beginning in 2003, the Company intends to recognize stock option expense in its results of operations for new stock options granted after December 31, 2002.

     No interest payments on the Old Notes were made in 2002 and 2001. The Company recorded interest expense on the Old Notes until November 28, 2001, the date the Company filed its Chapter 11 petition, but not thereafter. As a result, interest expense for the first quarter of 2002 does not include $20 million which would have been payable under the terms of the Old Notes. The Company is accruing interest on the New Notes at the stated 10.56% rate. The first interest payment on the New Notes of $13 million was made September 15, 2002.

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Financial Restructuring Items

     The Company’s emergence from Chapter 11 bankruptcy proceedings on March 19, 2002 resulted in a new reporting entity and adoption of fresh start reporting in accordance with Statement of Position (“SOP”) No. 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.” The consolidated financial statements as of and for the quarter ended March 31, 2002 reflect reorganization adjustments for the discharge of debt and adoption of fresh start reporting. Accordingly, the estimated reorganization value of the Company of $1,280 million, which served as the basis for the Plan approved by the bankruptcy court, was used to determine the equity value allocated to the assets and liabilities of the Reorganized Company in proportion to their relative fair values in conformity with Statement of Financial Accounting Standards No. 141, “Business Combinations.”

     Financial restructuring items for the quarter ended March 31, 2002, comprising a net charge of $286 million, resulted from the following:

	•		Exchange of Old Notes and accrued interest for 95.5% of the New Common Stock and $250 million of New Notes, resulting in a gain of $154 million;
	•		Reduction of property, plant and equipment carrying values by $550 million, including reduction of the Company’s tropical farm assets by $320 million, shipping vessels by $158 million, and vegetable canning assets by $55 million;
	•		Reduction of long-term operating investments and other asset carrying values by $186 million;
	•		Increase of $375 million in the carrying value of the Chiquita trademark;
	•		Increase of $33 million in accrued pension and other employee benefits primarily associated with tropical pension/severance obligations;
	•		$16 million increase in other liabilities for unfavorable lease obligations; and
	•		$30 million of reorganization costs during the first quarter of 2002 primarily associated with grants of New Common Stock to certain executives as part of the Chapter 11 restructuring agreement and professional fees. Cash payments in the first quarter of 2002 associated with reorganization costs were $13 million.

     The fresh start adjustments to the carrying values of the Company’s assets and liabilities were based upon the work of outside appraisers, actuaries and financial consultants, as well as internal valuation estimates using discounted cash flow analyses, to determine the relative fair values of the Company’s assets and liabilities.

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     The following table reflects the reorganization adjustments to the Company’s Consolidated Balance Sheet as of March 31, 2002:

*

After deducting $654 million of indebtedness from the Company’s $1,280 million estimated reorganization value, the total equity value of the Company was approximately $626 million at March 31, 2002. The total shareholders’ equity in the March 31, 2002 Reorganized Company balance sheet excludes $13 million related to restricted management shares subject to delayed delivery, which are reflected in accounts payable and accrued liabilities above. These shares were issued in the second quarter of 2002 and are included in equity as of September 30, 2002.

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Earnings Per Share

     Basic and diluted earnings per common share (“EPS”) are calculated as follows (in thousands, except per share amounts):