10-K 1 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, 1994 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 A New York $1.32 Depositary Shares, each representing one-fifth of a share of Series C Mandatorily Exchangeable Cumulative Preference Stock New York 10-1/2% Subordinated Debentures due August 1, 2004New 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, 1995, there were 49,809,149 shares of Common Stock outstanding. The aggregate market value of Common Stock held by non-affiliates at March 1, 1995 was approximately $361 million. Documents Incorporated by Reference Portions of the Chiquita Brands International, Inc. 1994 Annual Report to Shareholders are incorporated by reference in Parts I and II. Portions of the Chiquita Brands International, Inc. Proxy Statement for the 1995 Annual Meeting of Shareholders are incorporated by reference in Part III. PAGE CHIQUITA BRANDS INTERNATIONAL, INC. TABLE OF CONTENTS Page Part I Item 1.. . . . . . . . . . . . . . . . . . . . . . . Business 1 Item 2.. . . . . . . . . . . . . . . . . . . . . . Properties 9 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 PAGE 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. The Company's "Chiquita operations" constitute its only industry segment other than its Meat Division, which is held for sale. (See MEAT DIVISION HELD FOR SALE below.) Net sales, operating income and identifiable assets of the Company's Chiquita operations and Meat Division held for sale are set forth in Note 3 to the Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders, which is incorporated herein by reference. In recent years, the Company has capitalized on its "Chiquita" and other premium brand names by building on its worldwide leadership position in the marketing, distribution and sourcing of bananas; by expanding its quality fresh fruit and vegetable operations; and by further developing its business in value-added processed foods. Chiquita's products include: - Bananas, apples, avocados, citrus, grapes, kiwi, mangos and nectarines sold under the "Chiquita" brand name; - Bananas, citrus and other quality fresh fruit including apples, apricots, cherries, grapes, peaches, pears, plums, strawberries and tomatoes sold under the "Consul," "Chico," "Amigo," "Frupac" and other brand names; - A wide variety of fresh vegetables including asparagus, beans, broccoli, carrots, celery, lettuce, onions and potatoes sold under the "Premium" and various other brand names; - Fruit and vegetable juices and other processed fruits and vegetables, including banana puree, marketed under the "Chiquita," "Naked Juice," "Friday" and other brands; - Wet, fresh cut and ready-to-eat salads sold under the "Club Chef " and "Naked Foods" brands; and - Margarine, shortening and other consumer packaged foods sold under the "Numar," "Clover" and various regional brand names. No individual customer accounted for more than 10% of the Company's consolidated net sales during any of the last three years. See "Management's Analysis of Operations and Financial Condition," which is incorporated by reference in Item 7 herein from the Company's 1994 Annual Report to Shareholders, for a discussion of factors affecting results of the Company's operations for 1994, 1993 and 1992. Factors which may cause fluctuations in the results of operations are also discussed in the description of the Company's operations below. 1 Fresh food products The Company markets an extensive line of fresh fruits and vegetables sold under the "Chiquita" and other brand names. The core of Chiquita's fresh foods operations is the marketing, distribution and sourcing of bananas. Sales of bananas, as a percent of consolidated net sales, were 38% in 1994, 36% in 1993 and 37% in 1992. Excluding revenues of the Meat Division held for sale, sales of bananas comprised 60%, 58% and 62% of the Company's total net sales in 1994, 1993 and 1992, respectively. Chiquita believes that it derives competitive benefits in the marketing, distribution and sourcing of fresh foods through its: - Recognized brand names and reputation for quality; - Strong market positions in Europe and North America, its principal markets; - Modern, cost-efficient fresh fruit transportation system; and - Industry leading position in terms of number and geographic diversity of its sources of bananas, which enhances its ability to provide customers with premium quality products on a consistent basis. Chiquita has benefitted from its multi-year investment spending program and its restructuring and cost reduction efforts to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. (See "Distribution and Logistics" and "Sourcing" below and ITEM 2 - 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 brand names including "Chiquita," "Chiquita Jr.," "Consul," "Amigo," "Chico" and "Bananos." Chiquita sold over 40% of its total banana volumes for 1994 in each of Europe and North America. As a result of a decision in 1994 to significantly scale back "green" banana trading operations in Japan, sales of bananas in the Far East market are no longer a significant portion of the Company's total banana net sales. 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.) 2 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 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 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 1994, approximately 35% of all bananas sold by Chiquita were sourced from Panama. Bananas sourced from other countries, including Colombia, Costa Rica, Guatemala and Honduras, comprised from 4% to 19% (depending on the country) of bananas sold by Chiquita during 1994. In 1994, 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. No single supplier provided a significant portion of the bananas sold by Chiquita in 1994. 3 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. 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, fresh cut and ready-to-eat salads sold under the "Club Chef" 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 Paradise," "Raspberry Passion," "Cranberry Seabreeze," "Calypso Breeze" and "Hawaiian Sunrise." Individual servings are sold in three of these varieties: "Caribbean Splash," "Tropical Paradise" and "Calypso Breeze." These 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 "Chiquita," "Ferraro's Earth Juice" 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. These products are derived primarily from oil palm grown on the Company's plantations located in Costa Rica and Honduras. Numar is the leading marketer of such products in Costa Rica and, through a 50%-owned joint venture, in Honduras. Numar 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. 4 RISKS OF INTERNATIONAL OPERATIONS Information about the Company's operations by geographic area is included in Note 3 to the Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. The Company is subject to a variety of governmental regulations in 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, which had the effect of decreasing the Company's volume and market share in Europe. The quota is administered through a licensing system and grants preferred status to producers and importers within 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. In two separate rulings, General Agreement on Tariffs and Trade ("GATT") panels found this 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 are presently implementing this agreement. Full implementation of the Framework Agreement could significantly increase the Company's cost to export bananas from these sources. Three additional European countries (Sweden, Finland and Austria) joined the EU effective January 1, 1995. These countries, which have had substantially unrestricted banana markets in which Chiquita has supplied a significant portion of the bananas, are in the process of transition to the restrictive EU quota and licensing environment. The timing and exact nature of any adjustments in the quota and licensing regulations that will be made for these new EU members have not yet been determined. In September 1994, Chiquita and the Hawaii Banana Industry Association made a joint filing with the Office of the U.S. Trade Representative 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 petition, the U.S. Government initiated a formal investigation of the EU banana import policy in October 1994. In January 1995, the U.S. Government announced a preliminary finding against the EU banana import policy and launched separate investigations of the Colombian and Costa Rican Framework Agreement policies. The EU, Colombian and Costa Rican investigations are continuing. Section 301 authorizes retaliatory measures, such as tariffs or withdrawal of trade concessions, against the offending countries. However, there can be no assurance as to the results of the investigation, the nature and extent of actions the U.S. Government might take, 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 America. 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. 5 The Company 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, 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 December 31, 1995. The Company believes that the lease, if required in future years, can be extended or renewed. Governmental price and export controls in Costa Rica and Honduras could affect the Company's ability to initially recover, through selling prices, cost increases related to its oil palm operations. 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 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 Notes 1 and 9 to the Consolidated Financial Statements and "Management's Analysis of Operations and Financial Condition" included in the Company's 1994 Annual Report to Shareholders for information with respect to currency exchange. LABOR RELATIONS The Company employs a total of approximately 40,000 persons in its Chiquita operations. Approximately 36,000 of these associates are employed in Central and South America, including 28,000 workers covered by labor contracts. The Company has approximately 85 labor contracts with terms expiring from 1995 to 1997. Strikes or other labor-related actions are often encountered upon expiration of labor contracts and also frequently occur during the term of the contracts. During the summer of 1994, the Company's workers in La Lima, Honduras struck its operations there seeking higher wages. The contract covering these approximately 4,800 employees expires April 1, 1995. After a 35-day strike, the Company and the workers' union reached an agreement on additional contractual cost of living adjustments for the remainder of the contract period. The cost of living adjustments have not 6 had a significant impact on the Company's operations. Chiquita decided not to reopen four low productivity farms which had been closed during the strike and, at the Company's remaining Honduran farms, chopped back cultivations weakened during the strike. Write-downs associated with the Honduran farms and cultivations were approximately $25 million. A contract covering approximately 5,100 workers at one of Chiquita's Panamanian banana producing locations expired in July 1994. The Company is in the process of completing negotiations on a new contract, and nearly all of the affected employees are now working under the terms of the new contract. The new terms of the contract are not expected to have a material effect on the Company's operations. Approximately 30 other contracts covering 6,000 employees expire in 1995. MEAT DIVISION HELD FOR SALE 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 all remaining Meat Division operations. (See Note 2 to the Company's Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders.) Pursuant to the plan, the Meat Division sold a major fresh pork processing facility in December 1992 and its specialty meat operations in 1994. During 1993 and 1994, the Company engaged in extensive activity with respect to execution of its disposal plan. This activity included successful ongoing cost reduction efforts that have contributed to the improvement in Meat Division operating results, terminating retiree medical benefits, and obtaining government subsidies and financial incentives, union concessions, and a new stand-alone revolving credit facility to fund the Meat Division's working capital needs. The Company is continuing to pursue the sale of the remainder of its Meat Division operations. Operations. 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 in Japan. Some fresh and processed meats, including export sales, are also sold through independent food brokers or expedited through international trading companies. 7 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 4,800 domestic employees, nearly all of whom are covered under 11 labor contracts with terms expiring from 1995 to 1999. A strike at Sioux Falls in May 1987 led to three lawsuits by John Morrell & Co. ("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 was entitled to have its remaining arguments heard in a second round of arbitration, and the United States Supreme Court refused to grant certiorari. In October 1994, the case was settled (with an aggregate payment of approximately $2.3 million, or $1,250 per worker) and dismissed. In 1992, Morrell filed a declaratory judgment action in the U.S. District Court for the District of South Dakota seeking confirmation of its right to unilaterally reduce or eliminate medical benefits of retired hourly employees. In 1993, the District Court ruled in favor of Morrell. In 1994, this ruling was upheld by the U.S. Court of Appeals for the Eighth Circuit and Morrell subsequently terminated retiree medical benefits. Properties. The Meat Division owns and operates its principal slaughtering plant and processed meat facility in Sioux Falls, South Dakota. The Meat Division also owns or leases and operates meat-processing facilities in Iowa and Ohio. In order to obtain distribution efficiencies, the Meat Division now uses public warehouses for its warehousing and distribution operations, and is disposing of its remaining distribution facilities. 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 its Sioux Falls plant. The U.S. Department of Justice ("DOJ") has proposed that Morrell enter 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 DOJ are currently investigating the matter; two former plant 8 employees have entered into plea agreements with the United States. Morrell has taken substantial steps to remedy past noncompliance and to avoid future recurrences. ITEM 2 - PROPERTIES The Company owns approximately 130,000 acres and leases approximately 41,000 acres of improved land, principally in Costa Rica, Panama and Honduras. Substantially all of this land is used for the cultivation of bananas and oil palm and support activities, including the maintenance of floodways. The Company also owns power plants, packing stations, warehouses, irrigation systems and loading and unloading facilities used in connection with its banana and oil palm operations. The Company owns or controls under long-term bareboat charters 25 ocean-going refrigerated vessels, including 2 delivered in 1994, and has 17 additional such vessels under time charters, primarily for transporting tropical fruit sold by the Company. From time to time, excess capacity may be chartered or subchartered to others. In addition, the Company enters into spot charters as necessary to supplement its transportation resources. The Company also owns or leases other related equipment, including refrigerated container units, used to transport fresh food. The majority of the ships owned and related container units are pledged as collateral for related financings. Properties used by the Company's processed foods operations include processing facilities in Costa Rica and Honduras, and vegetable canning facilities in Wisconsin. Other operating units of the Company own, lease and operate properties, principally in the United States and Central and South America. The Company leases the space for its executive offices in Cincinnati, Ohio. For further information with respect to the Company's physical properties, see the descriptions under ITEM 1 - BUSINESS - GENERAL and MEAT DIVISION HELD FOR SALE, above, and Notes 6 and 7 to the Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders. ITEM 3 - LEGAL PROCEEDINGS A number of legal actions are pending against the Company, including those described below and in ITEM 1 - BUSINESS - MEAT DIVISION HELD FOR SALE affecting the Meat Division. Based on evaluations of facts which have been ascertained and opinions of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the consolidated financial condition or results of operations of the Company. In 1993, the Company and other major banana producing companies were added as defendants in several lawsuits, now pending as three suits in the U.S. District Courts for the Southern, Eastern, and Northern Districts of Texas. These cases were originally filed in early 1993 against the manufacturers of an agricultural chemical called DBCP and now represent claims on behalf of an aggregate of approximately 25,000 individuals of whom less than 15% claim to have worked for the Company's subsidiaries. Most of the plaintiffs are foreign citizens who claim to have been employees of banana companies, including in some cases subsidiaries of the Company. The plaintiffs allege they were injured as a result of exposure to DBCP, which was used primarily in the 1970's. The damage claims have not been quantified. The suits are Franklin Rodriguez Delgado, et al. v. Shell Oil Company, et al., Del Monte Fresh Produce, N.A. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. H-94-1337 (U.S. District Court, Southern District of Texas, Houston Division) consolidated with Ramon Rodriguez Rodriguez, et al. v. Shell Oil Company, et al., Shell Oil Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. L-94-49 (U.S. District Court, Southern District of Texas, Laredo Division); Narcisco Borja, et al. v. Shell Oil Company, et al., The Dow Chemical Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. 94-CV-689D (U.S. District 9 Court, Northern District of Texas, Dallas Division); and Juan Ramon Valdez, et al. v. Shell Oil Company, et al., The Dow Chemical Company, et al. v. Dead Sea Bromine Co. Ltd., et al., Civil Action No. 2-94-CV-69 (U.S. District Court, Eastern District of Texas, Marshall Division). Similar suits on behalf of individuals have been filed in Costa Rica and Panama by approximately 900 individuals against subsidiaries of the Company, including Compania Palma Tica and Compania Bananera Atlantica Limitada. The Company has answered all suits, believes it has substantial and meritorious defenses, and is vigorously defending the actions. ITEM 4 - 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 The number of shareholders at March 1, 1995 and the markets for the Company's capital stock are set forth on the inside back cover of the Company's 1994 Annual Report to Shareholders under "Investor Information." Price ranges of the Company's capital stock and dividends declared thereon are set forth in Note 15 to the Consolidated Financial Statements included in the 1994 Annual Report to Shareholders. Restrictions on the Company's ability to declare and pay dividends are described in Note 8 to the Consolidated Financial Statements included in the 1994 Annual Report to Shareholders. All such information is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA This information is included in the table entitled "Selected Financial Data" on page 6 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information is included under the caption "Management's Analysis of Operations and Financial Condition" included on pages 7 through 9 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of Chiquita Brands International, Inc. and its subsidiaries included on pages 10 through 23 of the Company's 1994 Annual Report to Shareholders, and "Quarterly Financial Data" which is set forth in Note 15 to such Consolidated Financial Statements, are incorporated herein by reference. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 10 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 1995 Annual Meeting of Shareholders and is incorporated herein by reference. ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are: Carl H. Lindner (age 75) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since 1984 and Chairman of the Board of Directors and Chief Executive Officer of American Financial Corporation ("AFC") since AFC was founded over 35 years ago. AFC is a holding company which, through subsidiaries, is engaged in a variety of financial businesses, including property and casualty insurance, annuities and portfolio investing. In nonfinancial areas, AFC has substantial operations in the food products industry, through its ownership in Chiquita, and in radio and television station operations, through its ownership of Citicasters Inc. (formerly Great American Communications Company, or "GACC"). Keith E. Lindner (age 35) - Mr. Lindner has been President and Chief Operating Officer of the Company since 1989 and President of its Chiquita Brands, Inc. subsidiary since 1986. He was Senior Executive Vice President of the Company from 1986 until 1989. Fred J. Runk (age 52) - Mr. Runk has been a Vice President of the Company since 1984. He was also the Company's Chief Financial Officer from 1984 to 1994. Mr. Runk has served as Vice President and Treasurer of AFC for over five years. Steven G. Warshaw (age 41) - Mr. Warshaw was named Chief Financial Officer of the Company in 1994 and has also been the Company's Executive Vice President and Chief Administrative Officer since 1990. Mr. Warshaw has served in various capacities since 1986. Robert F. Kistinger (age 42) - Mr. Kistinger was named Senior Executive Vice President of the Company's Chiquita Banana Group in 1994. He was Executive Vice President, Operations for the Company's Chiquita Tropical Products Division from 1989 to 1994 and has served in various capacities since 1980. Thomas E. Mischell (age 47) - Mr. Mischell has been Vice President of the Company since 1986 and a Vice President of AFC for more than five years. Charles R. Morgan (age 48) - Mr. Morgan has been Vice President, General Counsel and Secretary of the Company since 1990 and has served in various capacities since 1988. Jos P. Stalenhoef (age 53) - Mr. Stalenhoef was named President, Chiquita Banana-North American Division in 1994. He was Senior Vice President, North America, Chiquita Tropical Products Division from 1989 to 1994 and has served in various capacities since 1988. William A. Tsacalis (age 51) - Mr. Tsacalis has been Vice President and Controller of the Company since 1987. He was Controller from 1984 to 1987 and has served in various capacities since 1980. 11 Carl H. Lindner, Fred J. Runk and Thomas E. Mischell provide broad policy determination and guidance to operating management, which is headed by Keith E. Lindner, but devote substantial portions of their time to the affairs of AFC and its other subsidiaries. In December 1993, GACC completed a comprehensive financial restructuring which included a prepackaged plan of reorganization filed in November of that year under Chapter 11 of the Bankruptcy Code. Carl H. Lindner, Fred J. Runk and Thomas E. Mischell were executive officers of GACC within two years before GACC's bankruptcy reorganization. ITEM 11 - 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 1994 Annual Report to Shareholders and are incorporated by reference in Part II, Item 8: Page of Annual Report Report of Independent Auditors 5 Consolidated Statement of Income for 1994, 1993 and 1992 10 Consolidated Balance Sheet at December 31, 1994 and 1993 11 Consolidated Statement of Shareholders' Equity for 1994, 1993 and 1992 12 Consolidated Statement of Cash Flow for 1994, 1993 and 1992 13 Notes to Consolidated Financial Statements 14 2. Financial Statement Schedule. Financial Statement Schedule II - Allowance for Doubtful Accounts Receivable is included on page 16 of this Annual Report on Form 10-K. All other schedules are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Exhibits. See Index of Exhibits (page 17) for a listing of all exhibits filed with this Annual Report on Form 10-K. (b) The following reports on Form 8-K were filed during the quarter ended Decemer 31, 1994: October 10, 1994 - to report unusual charges and non- recurring losses expected for the quarter ended September 30, 1994. October 17, 1994 - to report the U.S. Government's agreement to initiate a formal investigation of the EU banana import policy under Section 301 of the U.S. Trade Act of 1974. 12 (This page left blank intentionally.) 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, 1995. CHIQUITA BRANDS INTERNATIONAL, INC. By /s/ Carl H. Lindner Carl H. Lindner Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below on March 30, 1995: /s/ Carl H. Lindner Chairman of the Board and Carl H. Lindner Chief Executive Officer /s/ Keith E. Lindner Director; President and Keith E. Lindner Chief Operating Officer /s/ S. Craig Lindner Director S. Craig Lindner /s/ Fred J. Runk Director and Vice President Fred J. Runk Jean H. Sisco* Director Jean H. Sisco William W. Verity* Director William W. Verity 14 /s/Oliver W. Waddell* Director Oliver W. Waddell /s/ Ronald F. Walker Director Ronald F. Walker /s/ Steven G. Warshaw Executive Vice President, Chief Administrative Steven G. Warshaw Officer and Chief Financial Officer /s/ William A. Tsacalis Vice President and Controller William A. Tsacalis (Chief Accounting Officer) * By /s/ William A. Tsacalis Attorney-in-Fact** ** By authority of powers of attorney filed with this annual report on Form 10-K. 15 CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE (In thousands)
Year Ended December 31, 1994 1993 1992 Balance at beginning of period $13,033 $11,733 $ 9,307 Additions: Charged to costs and expenses 7,622 5,002 6,761 Deductions: Write-offs 6,537 3,478 4,715 Other, net (31) 224 (380) 6,506 3,702 4,335 Balance at end of period $14,149 $13,033 $11,733
16 CHIQUITA BRANDS INTERNATIONAL, INC. Index of Exhibits Exhibit Number Description *3-a Second Restated Certificate of Incorporation, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 *3-b By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K for the year ended December 31, 1992 4 Registrant has no outstanding debt issues exceeding 10% of the assets of Registrant and its consolidated subsidiaries. The Registrant will furnish to the Securities and Exchange Commission, upon request, copies of all agreements and instruments defining the rights of security holders for debt issues not exceeding 10% of the assets of Registrant and its consolidated subsidiaries. *10-a Lease of Lands and Operating Contract between United Brands Company, Chiriqui Land Company, Compania Procesadora de Frutas and the Republic of Panama, dated January 8, 1976, effective January 1, 1976, filed as Exhibit 10-a to Annual Report on Form 10-K for the year ended December 31, 1993 *10-b Agreement dated April 22, 1976 effective January 1, 1976 between Tela Railroad Company and the Government of Honduras, filed as Exhibit 10-b to Annual Report on Form 10-K for the year ended December 31, 1993 Executive Compensation Plans *10-c 1986 Stock Option and Incentive Plan, as amended, filed as Exhibit 10(c) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 *10-d Individual Stock Option Plan and Agreement, filed as Exhibit 4 to Registration Statement on Form S-8 No. 33- 25950 dated December 7, 1988 *10-e Deferred Compensation Plan, filed as Exhibit 10-e to Annual Report on Form 10-K for the year ended December 31, 1992 11 Computation of Earnings Per Common Share 13 Chiquita Brands International, Inc. 1994 Annual Report to Shareholders (pages 5 through 23 and inside back cover) 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedule 99 Annual Reports on Form 11-K for the Chiquita Savings and Investment Plan and the John Morrell & Co. Salaried Employees Incentive Savings Plan for 1994 will be filed by amendment on or before June 29, 1995. * Incorporated by reference. 17 EX-11 2 CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts)
Year Ended December 31, 1994 1993 1992 1991 1990 A.Computation of primary earnings (loss) per common share: Income (loss) before extraordinary item $(48,700)$(51,081)$(284,040)$128,495$93,918 Dividends on Series A preferred stock (7,232) -- -- -- -- Income (loss) available to common shares before extraordinary item (55,932) (51,081)(284,040) 128,495 93,918 Extraordinary loss from prepayment of debt (22,840) -- -- -- -- Net income (loss) used to calculate primary earnings per share $(78,772)$(51,081)$(284,040)$128,495$93,918 Shares used in calculation of per share data: Weighted average common and equivalent Series C preference shares outstanding 52,033 51,427 51,804 47,834 40,100 Dilutive effect of assumed exercise of certain stock options and warrants -- -- -- 2,548 1,989 Weighted average common shares used to calculate primary earnings (loss) per share 52,033 51,427 51,804 50,382 42,089 Primary earnings (loss) per common share: - Before extraordinary item $(1.07) $(.99)$ (5.48) $2.55 $ 2.23 - Extraordinary item (.44) -- --- - -- - Net income (loss) $ (1.51 ) $(.99)$ (5.48) $2.55 $ 2.23
CHIQUITA BRANDS INTERNATIONAL, INC.EXHIBIT 11 (cont.) COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts)
Year Ended December 31, 1994 1993 1992 1991 1990 B. Computation of fully diluted earnings (loss) per common share: Income (loss) available to common shares before extraordinary item $(55,932)$(51,081)$(284,040)$128,495$93,918 Additional income as a result of assumed conversion of convertible debentures -- -- -- 4,836 1,175 Income (loss) used to calculate fully diluted earnings per share before extraordinary item (55,932)(51,081)(284,040)133,331 95,093 Extraordinary loss from prepayment of debt (22,840) -- -- -- -- Net income (loss) used to calculate fully diluted earnings per share $(78,772)$(51,081)$(284,040)$133,331$95,093 Shares used in calculation of per share data: Weighted average common shares used to calculate primary earnings (loss) per share 52,033 51,427 51,804 50,382 42,089 Additional shares resulting from assumed exercise of options and assumed conversions of convertible subordinated debentures -- -- -- 2,530 1,201 Weighted average common shares used to calculate fully diluted earnings (loss) per share 52,033 51,427 51,804 52,912 43,290 Fully diluted earnings (loss) per common share: - Before extraordinary item $(1.07) $(.99)$ (5.48) $2.52 $ 2.20 - Extraordinary item (.44) -- --- - -- - Net income (loss) $ (1.51 ) $(.99)$ (5.48) $2.52 $ 2.20
EX-21 3 EXHIBIT 21 CHIQUITA BRANDS INTERNATIONAL, INC. SUBSIDIARIES As of March 1, 1995, the major subsidiaries of the Company, the jurisdiction in which organized and the percent of voting securities owned by the immediate parent corporation were as follows: Percent of Voting Securities Organized Owned by Under Laws ofImmediate Parent Chiquita Brands, Inc. Delaware 100% American Produce Company Delaware 100% Banana Supply Co., Inc. Florida 100% California Day-Fresh Foods, Inc. California 100% Caribbean Enterprises, Inc. Delaware 100% Great White Fleet, Ltd. Bermuda 100% BVS Ltd. Bermuda 100% CDV, Ltd. Bermuda 100% CDY, Ltd. Bermuda 100% CKQ, Ltd. Cayman Islands 100% CRH Shipping, Ltd. Bermuda 100% Danfund Ltd. Bermuda 100% Danop, Ltd. Bermuda 100% DSF, Ltd. Bermuda 100% Elke Shipping Limited Bermuda 100% GPH, Ltd. Bermuda 100% NCV, Ltd. Bermuda 100% Norvel, Ltd. Bermuda 100% Chiquita Brands Company, North America Delaware 100% CB Containers, Inc. Delaware 100% OV Containers, Inc. Delaware 100% Chiquita Citrus Packers, Inc. Delaware 80% Chiquita Europe, B.V. Netherlands 100% Chiquita Banana Company, B.V. Netherlands 100% Chiquita Italia, S.p.A. Italy 100% Chiquita Finland Oy Finland 100% Chiquita Norge AS Norway 100% Chiquita Packaged Foods, B.V. Netherlands 100% Chiquita Sweden AB Sweden 100% Chiquita Tropical Fruit Company, B.V. Netherlands 100% (Continued) PAGE EXHIBIT 21 (Cont.) Percent of Voting Securities Organized Owned by Under Laws ofImmediate Parent Chiquita Frupac, Inc. Delaware 100% Chiquita International Trading Company Delaware 100% Chiquita International Limited Bermuda 100% Chiquita Brands South Pacific Limited Australia 100% Exportadora Frupac Limitada Chile 100% M.M. Holding Ltd. Bermuda 100% Chiquita Tropical Products Company Delaware 100% Chiquita Gulf Citrus, Inc. Delaware 100% Chiquita Ventures, Inc. Delaware 100% Chiriqui Land Company Delaware 100% Compania Agricola del Guayas Delaware 100% Compania Agricola de Rio Tinto Delaware 100% Compania Frutera de Sevilla Delaware 100% Corpofinanzas, S.A. Costa Rica 100% Friday Canning Corporation Wisconsin 100% Maritrop Trading Corporation Delaware 100% Polymer United, Inc. Delaware 100% Progressive Produce Corporation Ohio 100% Tela Railroad Company Delaware 100% United Brands Japan, Ltd. Japan 95% Compania Numar, S.A. Costa Rica 100% Compania Palma Tica Delaware 100% Compania Bananera Atlantica Limitada Costa Rica 100% Compania Mundimar, S.A. Costa Rica 100% Polymer United G.C., Inc. Delaware 100% John Morrell & Co. Delaware 100% United Brands Food Ventures, Ltd. Delaware 100% Solar Aquafarms, Inc. California 78% United Marketing, S.A. Delaware 100% The names of approximately 500 wholly-owned subsidiaries have been omitted. In the aggregate these subsidiaries, after excluding approximately 170 foreign subsidiaries whose immediate parents are listed above and which are involved in fresh foods operations, do not constitute a significant subsidiary. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. EX-23 4 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report on Form 10-K of Chiquita Brands International, Inc. and subsidiary companies of our report dated February 27, 1995, included in the 1994 Annual Report of Chiquita Brands International, Inc. and subsidiary companies. Our audits also included the financial statement schedule of Chiquita Brands International, Inc. and subsidiary companies listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the following Registration Statements and related prospectuses of Chiquita Brands International, Inc. and subsidiary companies of our report dated February 27, 1995, with respect to the consolidated financial statements and schedule of Chiquita Brands International, Inc. and subsidiary companies incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1994. Registration Form No. Description S-3 33-43333 Dividend Reinvestment Plan 33-58424 S-3 33-41057 Common Stock issuable upon conversion of Convertible Subordinated Debentures S-3 33-51995 Debt Securities, Preferred Stock and Common Stock S-8 33-2241 Chiquita Savings and Investment Plan 33-16801 33-42733 33-56572 S-8 33-14254 1986 Stock Option and Incentive Plan 33-38284 33-41069 33-53993 S-8 33-25950 Individual Stock Option Plan S-8 33-29147 John Morrell & Co. Salaried 33-56570 Employees Incentive Savings Plan S-8 33-38147 Associate Stock Purchase Plan Cincinnati, Ohio /s/ERNST & YOUNG LLP March 30, 1995 EX-24 5 EXHIBIT 24 POWER OF ATTORNEY We, the undersigned officers and directors of Chiquita Brands International, Inc. (the Company) hereby severally constitute and appoint Fred J. Runk and William A. Tsacalis, and each of them singly, our true and lawful attorneys and agents with full power to them and each of them to do any and all acts and things in connection with the preparation and filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the Report) pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in response thereof, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the Company and the names of the undersigned directors and officers in the capacities indicated below to the Report, and any and all amendments and supplements thereto and any and all other instruments and documents which said attorneys and agents or any of them may deem necessary or advisable in connection therewith. Signature Title Date Director, Chairman of the March , 1995 (Carl H. Lindner) Board of Directors, Chief Executive Officer and Chairman of the Executive Committee (Principal Executive Officer) Director, President and March , 1995 (Keith E. Lindner) Chief Operating Officer Director March , 1995 (S. Craig Lindner) Director March , 1995 (Fred J. Runk) PAGE EXHIBIT 24 (Continued) /s/Jean H. Sisco Director March 31, 1995 (Jean H. Sisco) /s/William W. Verity DirectorMarch 31, 1995 (William W. Verity) /s/Oliver W. Waddell DirectorMarch 31, 1995 (Oliver W. Waddell) Director March , 1995 (Ronald F. Walker) EX-27 6
5 The schedule contains summary financial information extracted from the Chiquita Brands International, Inc. Form 10-K for the year ended December 31, 1994 and is qualified in its entirety by references to such financial statements. 1,000 12-MOS DEC-31-1994 DEC-31-1994 178,855 0 271,926 14,149 351,730 918,242 2,077,572 643,714 2,902,021 653,817 1,364,877 16,434 0 190,639 437,736 2,902,021 3,961,720 3,961,720 3,293,341 3,293,341 115,816 0 169,521 (35,200) 13,500 (48,700) 0 (22,840) 0 (71,540) (1.51) (1.51) Amounts include an extraordinary loss of $.44 per share resulting from the prepayment of debt in the first quarter.
EX-13 7 EXHIBIT 13 FINANCIAL REPORT Statement of Management Responsibility The financial information presented in this Annual Report is the responsibility of Chiquita Brands International, Inc. management, who believes that it presents fairly its consolidated financial position and results of operations in accordance with generally accepted accounting principles. The Company's system of internal accounting controls, which is supported by formal financial and administrative policies, is designed to provide reasonable assurance that the financial records are reliable for preparation of financial statements and that assets are safeguarded against losses from unauthorized use or disposition. Management reviews, modifies and improves these systems and controls as changes occur in business conditions and operations. The Company's worldwide internal audit function reviews the adequacy and effectiveness of controls and compliance with policies. The Audit Committee of the Board of Directors reviews the Company's financial statements, accounting policies and internal controls. In performing its reviews, the Committee meets with the independent auditors, management and internal auditors periodically to discuss these matters. The Company engages Ernst & Young LLP, an independent auditing firm, to audit its financial statements and express an opinion thereon. The scope of the audit is set by Ernst & Young LLP who have full and free access to all Company records and personnel in conducting their audits. Representatives of Ernst & Young LLP are free to meet with the Audit Committee, with or without members of management present, to discuss their audit work and any other matters they believe should be brought to the attention of the Committee. Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Shareholders of Chiquita Brands International, Inc. We have audited the accompanying consolidated balance sheets of Chiquita Brands International, Inc. and subsidiary companies as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flow for each of the three years in the period ended December 31, 1994. These financial statements, appearing on pages 10 through 23, are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chiquita Brands International, Inc. and subsidiary companies at December 31, 1994 and 1993 and the consolidated results of their operations and their cash flow for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cincinnati, Ohio February 27, 1995 5 Selected Financial Data Chiquita Brands International, Inc. and Subsidiary Companies
(In thousands, except per share amounts) 1994 1993 1992 1991 1990 FINANCIAL CONDITION Working capital $264,425 $273,751 $490,708 $983,329 $438,137 Capital expenditures 148,834 205,380 481,014 410,652 323,334 Total assets 2,902,021 2,889,250 3,041,568 3,142,532 2,174,437 Capitalization Short-term debt 221,195 218,355 251,513 212,818 163,698 Long-term debt 1,364,877 1,438,439 1,428,100 1,226,575 521,923 Shareholders' equity 644,809 584,069 667,962 967,925 687,709 OPERATIONS Net sales $3,961,720$4,082,637$4,468,046$4,627,397$4,272,660 Operating income (loss) * 109,783 110,203 (153,781) 226,155 173,762 Income (loss) before income taxes (35,200) (39,081) (279,040) 183,395 151,618 Income (loss) before extraordinary item(48,700)(51,081) (284,040) 128,495 93,918 Net income (loss)* (71,540) (51,081) (284,040) 128,495 93,918 SHARE DATA Average number of common shares outstanding 52,033 51,427 51,804 50,382 42,089 Earnings (loss) per common share: Primary -Before extraordinary item $(1.07) $(0.99) $(5.48) $2.55 $2.23 -Extraordinary item(0.44) -- -- -- -- -Net income (loss)(1.51) (0.99)) (5.48) 2.55 2.23 Fully diluted-Before extraordinary item(1.07) (0.99) (5.48) 2.52 2.20 -Extraordinary item(0.44) -- -- -- -- -Net income (loss)(1.51) (0.99) (5.48) 2.52 2.20 Dividends declared per common share .20 .44 .66 .55.35 Market price per common share: High 19.25 17.50 40.13 50.63 32.00 Low 11.25 10.13 15.75 29.63 16.13 End of year 13.63 11.50 17.25 40.00 32.00 * Includes unusual charges and losses of $57.2 million in 1994 and restructuring and reorganization charges of $96.4million in 1992 (see Notes 3 and 15 to the Consolidated Financial Statements).
6 Management's Analysis of Operations and Financial Condition Chiquita Brands International, Inc. and Subsidiary Companies Operations As described in Note 2 to the Consolidated Financial Statements, the Company's Meat Division has been reconsolidated for financial reporting purposes. The Company is continuing to pursue the sale of the remainder of its Meat Division operations.
Consolidated Results (In thousands) 1994 1993 1992 Net sales $3,961,720 $4,082,637 $4,468,046 Operating income (loss) 109,783 110,203 (153,781) Net loss (71,540) (51,081) (284,040)
Sales decreased 3% in 1994 and 9% in 1993 principally as a result of the sale or closing of certain meat operations and lower banana volumes. Operating income was comparable in 1994 and 1993 as an improvement in Meat Division operations was offset by a decline in Chiquita operations resulting primarily from charges and losses relating to farm closings and banana cultivation write-downs in Honduras and the substantial reduction of the Company's Japanese "green" banana trading operations. Operating income in 1993 improved by $264 million over 1992 (which included restructuring and reorganization charges of $96 million) as a result of benefits from the Company's multi-year investment spending program and its restructuring and cost reduction efforts. The depreciation and interest components of total costs were higher during this period (depreciation by $21 million and net interest expense by $37 million) principally as a result of the shift from rented to owned production and shipping capacity, a majority of which was financed. Net interest expense decreased in 1994 primarily as a result of the prepayment of debt early in the year with the proceeds of first quarter issuances of preferred stock and senior notes. The net loss in 1994 includes a $23 million extraordinary charge from this debt prepayment, consisting principally of write-offs of unamortized discounts and $5 million of call premiums. Income taxes consist principally of foreign income taxes currently paid or payable. No tax benefit was recorded for U.S. net operating loss carryforwards or other available tax credits.
Chiquita Operations (In thousands) 1994 1993 1992 Net sales $2,505,826 $2,532,925 $2,723,250 Operating income (loss) 71,185 103,848 (96,588)
"Chiquita operations" represent the Company's core business operations other than the Meat Division. Net sales for 1994 declined $27 million (1%) from the prior year level. More than three-fourths of the effect of lower volumes on revenues was offset by the effect of a higher average worldwide banana price. Operating income for 1994, which decreased $33 million, includes $57 million of third quarter charges and losses as follows: - approximately $25 million in write-downs from the shutdown of over 1,200 hectares of low productivity Honduran banana farms following an unusually severe strike and the chopback of additional cultivations weakened during the strike. - approximately $13 million of shut-down costs (principally workforce severance and facility closures) and operating losses associated with the substantial reduction of the Company's Japanese "green" banana trading operations. - approximately $18 million of charges and losses related to excess shipping capacity caused in part by the scale- back of Japanese "green" banana trading operations. These charges and losses represented provisions for losses on sale of owned ships, subchartering or idling of other ships and unrecovered shipping costs. In addition, higher costs have been incurred to replace Honduran volume that was curtailed following the strike. Sales decreased 7% to $2.5 billion in 1993 primarily as a result of lower banana volumes. Nevertheless, operating income for 1993 was $104 million compared to an operating loss for 1992 of $97 million, which included restructuring and reorganization charges of $61 million. This improvement was largely attributable to cost improvements relating to decreased reliance on high cost purchased fruit, enhanced production practices, shipping fleet realignment, reorganization and consolidation of marketing organizations, and overhead reductions. 7 Subsequent to imposition of a new quota system on July 1, 1993 (see "International Operations") which restricts the volume of Latin American bananas imported into the European Union ("EU"), 1993 prices within the EU increased to a higher level than in prior years. Banana prices outside the EU following implementation of the quota were lower than in previous years, as displaced EU volume entered those markets.
Meat Division Held for Sale (In thousands) 1994 1993 1992 Net sales $1,455,894 $1,549,712 $1,744,796 Operating income (loss) 38,598 6,355 (57,193)
In 1992, the Company adopted a plan of disposal for its Meat Division operations. Pursuant to the plan, the Meat Division sold a major fresh pork processing facility in December 1992 and sold its specialty meat operations in 1994. In addition, the Meat Division obtained government subsidies and financial incentives, union concessions, and a new stand-alone credit facility to fund its working capital needs. It also terminated retiree medical benefits. These benefits had an annual cost of over $12 million in each of the last three years. Sales decreased 6% in 1994 and 11% in 1993 primarily as a result of operations sold or closed. Operating income improved by $32 million in 1994 primarily as a result of higher industry margins for fresh pork, reduced selling and administrative costs and a $10 million gain from the sale of the Meat Division's specialty meat operations. Operating income increased $64 million in 1993 primarily due to successful cost reduction efforts and the absence of $35 million of restructuring and reorganization charges recorded in 1992. The 1992 restructuring and reorganization charges represented a provision for loss on disposal of Meat Division operations, including the costs of various preparatory actions related to the divestiture as well as the writedown of certain facilities held for sale or to be closed. International Operations Chiquita's products are distributed in more than 40 countries and its international sales are made primarily in U.S. dollars and major European currencies. The Company manages currency exchange risks from sales originating in currencies other than the dollar generally by exchanging local currencies for dollars immediately upon receipt, and by engaging from time to time in various hedging activities. Debt denominated in currencies other than the U.S. dollar serves as a hedge of the net investment in those respective countries. In addition, various hedging activities are used to offset currency exchange movements on firm commitments and other transactions where the potential for loss exists. (See Note 9 of the Consolidated Financial Statements for additional discussion of the Company's hedging activities.) On July 1, 1993, the EU implemented a new quota 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 is administered through a licensing system and grants preferred status to producers and importers within 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. In two separate rulings, General Agreement on Tariffs and Trade ("GATT") panels found this 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 are presently implementing this agreement. Full implementation of the Framework Agreement could significantly increase the Company's cost to export bananas from these sources. Three additional European countries (Sweden, Finland and Austria) joined the EU effective January 1, 1995. These countries, which have had substantially unrestricted banana markets in which Chiquita has supplied a significant portion of the bananas, are in the process of transition to the restrictive EU quota and licensing environment. The timing and exact nature of any adjustments in the quota and licensing regulations that will be made for these new EU members have not yet been determined. 8 In September 1994, Chiquita and the Hawaii Banana Industry Association made a joint filing with the Office of the U.S. Trade Representative 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 petition, the U.S. Government initiated a formal investigation of the EU banana import policy in October 1994. In January 1995, the U.S. Government announced a preliminary finding against the EU banana import policy and launched separate investigations of the Colombian and Costa Rican Framework Agreement policies. The EU, Colombian and Costa Rican investigations are continuing. Section 301 authorizes retaliatory measures, such as tariffs or withdrawal of trade concessions, against the offending countries. However, there can be no assurance as to the results of the investigation, the nature and extent of actions the U.S. Government might take, or the impact on the EU quota regime or the Framework Agreement. Financial Condition Cash flow provided by operations was $87 million for 1994 compared to $49 million for 1993 and a negative cash flow of $43 million for 1992. A significant portion of the 1994 operating loss represented non-cash charges for depreciation and amortization and write-downs of farms and cultivations. At December 31, 1994, Chiquita had $179 million of cash and equivalents, not including $75 million of restricted cash on deposit.
Capital expenditures for the last three years were as follows: (In millions) 1994 1993 1992 Investment spending (primarily transportation system improvements and fresh fruit production capacity) $72 $144 $405* Normal spending 77 61 76 $149 $205 $481 * Includes $63 million of purchases which were directly financed.
During 1994, the Company completed its multi-year investment spending program with the delivery of the last two ships under construction. This program was the primary reason for approximately $500 million in long-term subsidiary borrowings during the last three years. "Normal spending" for 1994 exceeded 1993 levels principally due to the post-strike renovation of Honduras cultivations. Capital expenditures for 1995 are expected to approximate "normal spending" levels experienced in 1993. In order to strengthen its balance sheet, enhance short-term liquidity and reduce overall borrowing costs, Chiquita: - raised approximately $310 million in a 1994 public offering of 9 1/8% senior notes and preferred stock. The Company used the proceeds of these offerings to redeem or repay subordinated and subsidiary debt, including 11 7/8% subordinated debentures, and 10 1/2% and 10 1/4% subordinated debentures which carried effective interest rates of 12.1% and 13.7%, respectively. - sold and leased back shipping containers in 1994 which generated gross proceeds of $32 million. Approximately $20 million of related 9.8% debt financing was retired. - sold its specialty meat operations in 1994 for $53 million in cash and used the proceeds primarily to reduce short-term borrowings of the Meat Division. - reduced the annual dividend rate on its capital stock in mid- 1993 from $.68 per share to $.20 per share. Chiquita is also exploring various alternatives to extend maturities of certain lower cost subsidiary indebtedness. In 1992, Chiquita issued 2.7 million shares of capital stock in exchange for all outstanding common shares of Friday Canning Corporation, a private-label vegetable processor. The Company also repurchased 1.7 million shares of capital stock during 1992 for approximately $35 million. 9 Consolidated Statement of Income Chiquita Brands International, Inc. and Subsidiary Companies
Year Ended December 31, (In thousands, except per share amounts)1994 1993 1992 Net sales $3,961,720$4,082,637$4,468,046 Operating expenses Cost of sales 3,293,341 3,412,151 3,948,429 Selling, general and administrative expenses442,780 448,685 486,397 Depreciation 115,816 111,598 90,601 Restructuring and reorganization -- -- 96,400 3,851,937 3,972,434 4,621,827 Operating income (loss) 109,783 110,203 (153,781) Interest income 22,967 20,413 43,356 Interest expense (169,521) (174,112) (160,285) Other income (expense), net 1,571 4,415 (8,330) Loss before income taxes (35,200) (39,081) (279,040) Income taxes (13,500) (12,000) (5,000) Loss before extraordinary item (48,700) (51,081) (284,040) Extraordinary loss from prepayment of debt (22,840) -- -- Net loss $(71,540) $(51,081)$(284,040) Less dividends on Series A preferred stock (7,232) -- -- Net loss on common shares $(78,772) $(51,081)$(284,040) Per common share - primary and fully diluted - Loss before extraordinary item $(1.07) $(.99) $(5.48) - Extraordinary item (.44) -- -- - Net loss (1.51) (.99) (5.48) Weighted average number of common shares outstanding 52,033 51,427 51,804 See Notes to Consolidated Financial Statements.
10 Consolidated Balance Sheet Chiquita Brands International, Inc. and Subsidiary Companies
December 31, (In thousands, except share amounts) 1994 1993 ASSETS Current assets Cash and equivalents $178,855 $151,226 Trade receivables, less allowances of $14,149 and $13,033, respectively 257,777 241,953 Other receivables, net 95,948 87,495 Inventories 351,730 364,915 Other current assets 33,932 40,029 Total current assets 918,242 885,618 Restricted cash 75,030 51,020 Property, plant and equipment, net 1,433,858 1,480,936 Investments and other assets 309,721 291,304 Intangibles, net 165,170 180,372 Total assets $2,902,021$2,889,250 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes and loans payable $130,163 $138,925 Long-term debt due within one year 91,032 79,430 Accounts payable 270,033 244,669 Accrued liabilities 162,589 148,843 Total current liabilities 653,817 611,867 Long-term debt of parent company 840,377 881,124 Long-term debt of subsidiaries 524,500 557,315 Accrued pension and other employee benefits120,325 130,924 Other liabilities 118,193 123,951 Total liabilities 2,257,212 2,305,181 Shareholders' equity Preferred and preference stock 190,639 52,270 Capital stock, $.33 par value (49,300,881 and 48,510,353 shares outstanding, respectively)16,43416,170 Capital surplus 505,800 494,240 Retained earnings (deficit) (52,940) 39,318 Minimum pension liability adjustment (15,124) (17,929) Total shareholders' equity 644,809 584,069 Total liabilities and shareholders' equity$2,902,021$2,889,250 See Notes to Consolidated Financial Statements.
11 Consolidated Statement of Shareholders' Equity Chiquita Brands International, Inc. and Subsidiary Companies
Minimum Total Preferred and Retainedpension Share- preference Capitalearningsliabilityholders' stockCapital stock surplus(deficit)adjustmentequity (In thousands, except share amounts)SharesPar value Balance at December 31, 1991 $ --49,925,777$16,642$533,627$417,656$ -- $967,925 Capital stock repurchased --(1,699,100)(566)(17,395)(16,542)-- (34,503) Stock options exercised --297,573 99 4,549 -- -- 4,648 Series C preference stock issued in exchange for capital stock 52,270(3,241,546)(1,081)(32,909)(18,795)-- (515) Shares issued in an acquisition --2,694,136 898 (751)52,258 - - 52,405 Other shares issued -- 186,720 63 3,248 -- -- 3,311 Change in minimum pension liability adjustment -- -- -- -- -- (6,925) (6,925) Net loss -- -- -- --(284,040) -- (284,040) Dividends Capital stock -- -- -- --(33,566) -- (33,566) Preference stock -- -- -- -- (778) -- (778) Balance at December 31, 1992 $52,27048,163,560$16,055$490,369$116,193 $(6,925) $667,962 Capital stock repurchased -- (30,000) (10) (102) (325)-- (437) Stock options exercised -- 17,120 6 168 -- -- 174 Other shares issued -- 168,000 55 1,738 -- -- 1,793 Change in minimum pension liability adjustment -- -- -- -- -- (11,004) (11,004) Net loss -- -- -- --(51,081) -- (51,081) Dividends Capital stock -- -- -- --(21,191) -- (21,191) Preference stock -- 191,673 64 2,067 (4,278) -- (2,147) Balance at December 31, 1993 $52,27048,510,353$16,170$494,240$39,318 $(17,929) $584,069 Stock options exercised --118,133 40 1,325 -- -- 1,365 Series A preferred stock issued 138,369 -- -- -- -- - - 138,369 Other shares issued -- 358,244 119 6,075 -- -- 6,194 Change in minimum pension liability adjustment -- -- -- -- -- 2,805 2,805 Net loss -- -- -- --(71,540) -- (71,540) Dividends Capital stock -- -- -- -- (9,757) -- (9,757) Preferred and preference stock--314,151 105 4,160 (10,961) - - (6,696) Balance at December 31, 1994 $190,63949,300,881$16,434$505,800$(52,940) $(15,124) $644,809 See Notes to Consolidated Financial Statements.
12 Consolidated Statement of Cash Flow Chiquita Brands International, Inc. and Subsidiary Companies
Year Ended December 31, (In thousands) 1994 1993 1992 Cash provided (used) by: Operations Loss before extraordinary item$(48,700)$(51,081)$(284,040) Depreciation and amortization 122,173 119,184 98,558 Non-cash charges (write-downs of farms and cultivations in 1994 and restructuring and reorganization charges in 1992) 24,600 -- 69,500 Changes in current assets and liabilities Receivables (18,243) (10,030) 51,756 Inventories (23,144) 35,510 41,796 Accounts payable 23,749 (12,872) (55,035) Other current assets and liabilities 20,502 (30,240) 33,701 Other (14,365) (1,438) 553 Cash flow from operations 86,572 49,033 (43,211) Investing Capital expenditures (148,834) (205,380) (418,511) Restricted cash deposits (24,010) (51,020) -- Acquisitions and long-term investments (7,717) (49,466) (35,217) Decrease in marketable securities -- 25,212 87,113 Proceeds from sales of ships and equipment41,705 22,000 - - Proceeds from sales of meat operations 52,700 -- 4,498 Other (4,318) 12,081 (8,330) Cash flow from investing (90,474) (246,573) (370,447) Financing Debt transactions Issuances of long-term debt 278,388 151,160 254,820 Repayments of long-term debt(369,684)(154,067) (69,684) Decrease in notes and loans payable (4,095) (17,192) (34,598) Stock transactions Issuance of preferred stock 138,369 -- -- Issuances of capital stock 5,006 1,854 6,101 Repurchases of capital stock -- (437) (34,503) Dividends (16,453) (23,338) (34,344) Cash flow from financing 31,531 (42,020) 87,792 Increase (decrease) in cash and equivalents 27,629 (239,560) (325,866) Balance at beginning of year 151,226 390,786 716,652 Balance at end of year $178,855 $151,226 $390,786 See Notes to Consolidated Financial Statements.
13 Notes to Consolidated Financial Statements Chiquita Brands International, Inc. and Subsidiary Companies Note 1 -- Summary of Significant Accounting Policies American Financial Corporation and its subsidiaries ("AFC") owned approximately 46% of the voting stock of Chiquita Brands International, Inc. ("Chiquita" or the "Company") as of December 31, 1994. Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries, including its Meat Division held for sale (see Note 2). Intercompany balances and transactions have been eliminated. Investments representing minority interests are accounted for by the equity method when Chiquita has the ability to exercise significant influence in the investees' operations; otherwise, they are accounted for at cost. At December 31, 1994 and 1993, investments in food-related companies of $66 million and $54 million, respectively, were accounted for using the equity method. The excess ($18 million) of the carrying value over Chiquita's share of the fair value of the investees' net assets at the date of acquisition is being amortized over 40 years. Cash and Equivalents Cash and equivalents include all unrestricted cash and highly liquid investments with a maturity when purchased of three months or less. Inventories Inventories are valued at the lower of cost or market, except for certain meat products which are valued at approximate market. Cost for growing crops and certain banana inventories is determined principally on the "last-in, first-out" (LIFO) basis. Cost for other inventory categories is determined principally on the "first-in, first-out" (FIFO) or average cost basis. Intangibles Intangibles consist of goodwill and trademarks which are being amortized over 40 years. Accumulated amortization was $35.2 million and $32.2 million at December 31, 1994 and 1993, respectively. Income Taxes Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities. Deferred taxes are not provided on the undistributed earnings of subsidiaries operating outside the U.S. that have been or are intended to be permanently reinvested. Foreign Currencies Chiquita utilizes the U.S. dollar as its functional currency. Net foreign exchange gains, which amounted to approximately $11.0 million, $7.5 million and $4.8 million in 1994, 1993 and 1992, respectively, are included in income. The Company has a long-standing policy of periodically entering into foreign exchange forward contracts and purchasing foreign currency options to hedge transactions denominated in foreign currencies in order to protect the Company from the risk that the eventual dollar cash flows of the transactions will be adversely affected by changes in exchange rates. Gains and losses on forward contracts used to hedge firm commitments and on purchased options are deferred and included in the measurement of the underlying transactions. Gains and losses on forward contracts used to hedge other transactions are included in income on a current basis. Earnings Per Share Primary earnings per share is calculated on the basis of the weighted average number of shares of common stock and equivalent Series C preference stock outstanding during the year and the dilutive effect, if any, of assumed conversion of other common stock equivalents (stock options and warrants). Fully diluted earnings per share includes the dilutive effect, if any, of assumed conversion of Series A preferred stock and convertible subordinated debentures. 14 Note 2 -- Meat Division Held for Sale During the fourth quarter of 1992, after evaluation of reorganization plans announced earlier that year and completion of other preparatory actions, Chiquita adopted a plan of disposal for all remaining Meat Division operations (see Note 4). Pursuant to the plan, the Company completed the sale of a major fresh pork processing facility in December 1992. During 1994, the Division's specialty meat operations were sold for approximately $53 million in cash and the Meat Division obtained a favorable Federal Circuit Court of Appeals ruling that reconfirmed its right to unilaterally reduce or eliminate medical benefits of retired hourly employees. The Meat Division subsequently terminated these benefits, which had an annual cost of approximately $12.2 million in 1994, $15.3 million in 1993 and $12.9 million in 1992. The Company is continuing to pursue the sale of the remainder of its Meat Division operations. The Meat Division was previously accounted for as a discontinued operation and, accordingly, was not consolidated in the financial statements. However, as required by current Securities and Exchange Commission practices and interpretations, which have evolved since 1992, the Meat Division has been reconsolidated in the 1994 financial statements because the disposition of all remaining meat operations was not entirely completed as of December 31, 1994. Prior years' financial statements have been presented on a comparable basis. At December 31, 1994, the net assets of the Meat Division held for sale included in the consolidated balance sheet are as follows: (In thousands) Current assets $113,917 Property, plant and equipment, net 46,726 Other assets 13,857 Total assets 174,500 Current liabilities 79,926 Accrued pension and other employee benefits 45,470 Other liabilities 2,386 Total liabilities 127,782 Total net assets $46,718
The Company has evaluated the recoverability of its investment in the Meat Division and has concluded that the investment is recoverable through the completion of its disposal plan. See Note 3 for information regarding Meat Division net sales, operating income and identifiable assets and Note 6 for information regarding Meat Division depreciation expense and capital expenditures. Meat Division cost of sales and selling, general and administrative expenses included in the consolidated income statement for 1994 were $1.3 billion and $111 million, respectively. Note 3 -- Industry Segment and Geographic Area Information The Company is one of the world's leading marketers, processors and producers of quality food products. The Company's products are sold throughout the world and its principal production and processing operations are conducted in North, Central and South America. The Company's "Chiquita operations" constitute its only industry segment other than the Meat Division held for sale, the operations of which are conducted in North America. Chiquita's earnings are heavily dependent upon products grown and purchased in Central and South America. These activities, a significant factor in the economies of the countries where Chiquita produces bananas and other agricultural and consumer products, are subject to the risks that are inherent in operating in such foreign countries, including government regulation, currency restrictions and other restraints, risk of expropriation and burdensome taxes. Certain of these operations are substantially dependent upon leases and other agreements with these governments. The Company is also subject to a variety of governmental regulations in certain countries where it markets bananas, including import quotas and tariffs, currency exchange controls and taxes. Financial information with respect to the Company's operations by industry segment and geographic area is shown on the following page. 15 INFORMATION BY INDUSTRY SEGMENT
(In thousands) 1994 1993 1992 Net sales Chiquita operations $2,505,826 $2,532,925 $2,723,250 Meat Division held for sale1,455,894 1,549,712 1,744,796 Consolidated net sales $3,961,720 $4,082,637 $4,468,046 Operating income (loss) Chiquita operations $71,185 $103,848 $(96,588) Meat Division held for sale 38,598 6,355 (57,193) Consolidated operating income (loss)$109,783$110,203$(153,781) Identifiable assets Chiquita operations $2,727,521 $2,697,885 $2,857,870 Meat Division held for sale 174,500 191,365 183,698 Consolidated assets $2,902,021 $2,889,250 $3,041,568 INFORMATION BY GEOGRAPHIC AREA (In thousands) 1994 1993 1992 Net sales to unaffiliated customers North America $2,680,008 $2,788,390 $2,937,409 Central and South America 179,726 184,060 187,753 Europe and other international1,101,9861,110,187 1,342,884 Consolidated net sales $3,961,720 $4,082,637 $4,468,046 Operating income (loss) North America $30,228 $26,824 $(104,777) Central and South America 19,071 17,607 16,906 Europe and other international73,746 78,691 (52,541) Unallocated expenses (13,262) (12,919) (13,369) Consolidated operating income (loss)$109,783$110,203$(153,781) Identifiable assets North America $652,320 $698,609 $719,826 Central and South America 864,232 912,321 918,230 Europe and other international385,241 339,374 306,131 Shipping operations 671,756 656,816 586,960 Corporate assets 328,472 282,130 510,421 Consolidated assets $2,902,021 $2,889,250 $3,041,568
See Note 6 for information regarding depreciation and capital expenditures by industry segment. Net sales in the preceding tables exclude intercompany sales of bananas from Central and South America to different geographic areas. These sales, which are eliminated in consolidation and are measured at cost under the method used for internal management financial reporting purposes, were approximately $500 million in each of the last three years. There are no banana sales to unaffiliated customers in Central and South America. Other intergeographic sales are not significant. Operating income for 1994 includes third quarter charges and losses within Chiquita operations totaling $57.2 million primarily resulting from farm closings and write-downs of banana cultivations in Honduras and the substantial reduction of the Company's Japanese "green" banana trading operations as follows: North America, $27.1 million; Europe and other international, $30.1 million. Operating income for 1992 includes restructuring and reorganization charges (see Note 4) allocated as follows: North America, $41.9 million; Europe and other international, $54.5 million. For purposes of reporting identifiable assets by geographic area, cash and equivalents, marketable securities, restricted cash and trademarks are included in corporate assets. Minority equity investments are included in the geographic area where their operations are located. Note 4 -- Restructuring and Reorganization During the fourth quarter of 1992, the Company undertook a program to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. This program, which included consolidation of operations, asset disposals and workforce reductions, resulted in restructuring and reorganization charges of $61.3 million. In 1992, the Company recorded a provision for loss on disposal of the Meat Division of $35.1 million, which included the costs of various preparatory actions related to the divestiture of the Meat Division as well as the writedown of certain facilities held for sale or to be closed. 16 Note 5 -- Inventories
Inventories consist of the following: December 31, (In thousands) 1994 1993 Bananas and other fresh produce $47,592 $42,918 Meat 35,165 48,174 Other food products 63,565 56,043 Growing crops 115,177 117,839 Materials and supplies 76,078 84,874 Other 14,153 15,067 $351,730 $364,915
The carrying value of inventories valued by the LIFO method was $126 million at December 31, 1994 and $129 million at December 31, 1993. If inventories were stated at current costs, total inventory values would have been approximately $30 million and $10 million higher than reported at December 31, 1994 and 1993. Note 6 -- Property, Plant and Equipment, Net
Property, plant and equipment consist of the following: December 31, (In thousands) 1994 1993 Land $108,334 $107,288 Buildings and improvements 244,847 248,768 Machinery and equipment 531,210 556,133 Ships and containers 796,906 790,817 Cultivations 317,233 305,546 Other 79,042 80,023 2,077,572 2,088,575 Less accumulated depreciation (643,714) (607,639) Property, plant and equipment, net $1,433,858 $1,480,936
Property, plant and equipment are stated at cost and, except for land and certain improvements, are depreciated on a straight- line basis over their estimated useful lives. The Company capitalized interest costs of $4 million in 1994, $8 million in 1993 and $21 million in 1992 as part of the cost of major production and shipping asset construction projects. The following tables present depreciation and capital expenditures for Chiquita operations and the Meat Division held for sale: (In thousands) 1994 1993 1992 Depreciation Chiquita operations $106,964 $102,591 $80,438 Meat Division held for sale 8,852 9,007 10,163 $115,816 $111,598 $ 90,601 Capital Expenditures Chiquita operations $136,981 $196,554 $472,273 Meat Division held for sale11,853 8,826 8,741 $148,834 $205,380 $481,014
Capital expenditures of Chiquita operations presented above for 1992 include $62.5 million of purchases which were directly financed. Note 7 -- Leases
Total rental expense consists of the following: (In thousands) 1994 1993 1992 Gross rentals-ships and containers $101,207 $142,969 $222,916 - other 40,985 41,632 45,023 142,192 184,601 267,939 Less sublease rentals (4,740) (7,189) (20,775) $137,452 $177,412 $247,164
Future minimum rental payments required under operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 1994 are as follows: (In thousands) Gross Rentals Ships and containers Other Total 1995 $71,749 $19,513 $91,262 1996 29,168 16,914 46,082 1997 27,492 14,012 41,504 1998 22,601 9,940 32,541 1999 22,253 5,038 27,291 Later years 70,425 6,703 77,128
Portions of the minimum rental payments for ships constitute reimbursement for ship operating costs paid for by the lessor. Future minimum rental payments to be received from non-cancelable subleases at December 31, 1994, principally for office space and ships, are $49.3 million. 17 Note 8 -- Debt
Long-term debt consists of the following: (In thousands) December 31, Parent Company 1994 1993 9 1/8% senior notes, due 2004 $175,000 $ -- 9 5/8% senior notes, due 2004, less unamortized discount of $2,632 and $2,805 (imputed interest rate of 9.8%)247,368 247,195 7% subordinated debentures, due 2001, convertible into capital stock at $43 per share 138,000 138,000 10 1/2% subordinated debentures, due 2004, less unamortized discount of $5,839 and $10,391 (imputed interest rate of 12.1%) 59,980 100,429 11 1/2% subordinated notes, due 2001 220,000 220,000 9 1/8% subordinated debentures, due 1998, less unamortized discount of $1,776 (imputed interest rate of 13.2%) -- 15,900 10 1/4% subordinated debentures, due 2005, less unamortized discount of $7,538 (imputed interest rate of 13.7%) -- 34,554 11 7/8% subordinated debentures, due 2003 -- 125,000 Other notes and loans 47 62 Less current maturities (18) (16) Long-term debt of parent company $840,377 $881,124 Subsidiary Companies Loans payable secured by ships and containers, due in installments from 1995 to 2005, bearing interest at effective rates averaging 8.8% (8.1% at December 31, 1993) $368,146 $376,492 Caribbean Basin Projects Financing Authority (CBI Industrial Revenue Bonds 1993 Series A) loan, due 1998, bearing interest at a variable rate of 4.4% (2.7% at December 31, 1993) 38,000 38,000 Overseas Private Investment Corporation loans, due in installments through 2002, bearing interest at rates averaging 9% 17,774 25,275 Note payable, due in installments from 1995 through 1998, bearing interest at 1% below prime17,200 19,200 Loans and notes payable in foreign currencies maturing through 2008, bearing interest at rates averaging 22% (23% at December 31, 1993) 50,846 81,902 Other loans and notes payable maturing through 2012, bearing interest at rates averaging 9% (8% at December 31, 1993) 123,548 95,860 Less current maturities (91,014) (79,414) Long-term debt of subsidiaries $524,500 $557,315
Certain of the subordinated debentures have sinking fund requirements and are callable at the Company's option at prices ranging from par to premiums of 1.9% to 5.7% over par at various dates through 1998. Certain of the Company's debt agreements contain restrictions on the payment of cash dividends. At December 31, 1994, approximately $155 million was available for dividend payments under the most restrictive of these agreements. In February 1994, the Company issued $175 million principal amount of 9 1/8% senior notes due 2004. The unsecured notes rank equally with existing and future senior unsecured indebtedness of the Company. The proceeds from this issuance, together with the proceeds from the sale of preferred stock (see Note 12), were used to redeem or repay subordinated and subsidiary debt, including 11 7/8% Subordinated Debentures, 10 1/4% Subordinated Debentures, 9 1/8% Subordinated Debentures and a portion ($45 million principal amount) of its 10 1/2% Subordinated Debentures. These prepayments resulted in an extraordinary loss of $22.8 million on which no tax benefit was recorded. This loss consists principally of write-offs of unamortized discounts and $5 million of call premiums. At December 31, 1994, $70 million of the carrying amount of loans secured by ships bear interest at fixed rates averaging 6.9%. The remaining ship and container loans carry variable interest rates ranging from .75% to 1.5% over LIBOR. Interest rate swap agreements fix the rate of interest on $92 million of these variable rate ship and container loans at an average rate of 9.1% (see Note 9). The overall effective interest rate on ship and container loans includes the amortization of deferred hedging gains and losses from interest rate futures contracts. No such contracts were outstanding at December 31, 1994 or 1993. Cash payments relating to interest expense were $161.2 million, $164.3 million and $144.8 million in 1994, 1993 and 1992, respectively. 18 Maturities and sinking fund requirements on long-term debt during the next five years, after application of previously reacquired debentures to meet sinking fund requirements, are: Parent Subsidiary (In thousands) Company Companies Total 1995 $18 $91,014 $91,032 1996 20 91,709 91,729 1997 9 104,780 104,789 1998 -- 117,892 117,892 1999 -- 46,854 46,854
The Company maintains lines of credit with various domestic and foreign banks for borrowing funds on a short-term basis. The Meat Division has an $80 million revolving credit facility (available through September 1995) secured by its working capital which bears interest at prime plus 2%. An annual fee of 1/2% is payable on the unused portion of the facility. No borrowings were outstanding under this facility at December 31, 1994 and $26 million was outstanding at December 31, 1993. Chiquita also has short-term working capital loans with domestic and foreign banks. At December 31, 1994, the weighted average interest rate for all short-term notes and loans payable was 11.7% (10.3% at December 31, 1993). Note 9 -- Hedging Transactions At December 31, 1994, the Company had foreign exchange forward contracts to ensure conversion at an average exchange rate of 1.54 Deutsche mark for each U.S. dollar of approximately $179 million of foreign sales commitments for 1995. The Company also had purchased foreign currency options to ensure conversion at an average exchange rate of 1.60 Deutsche mark for each U.S. dollar of approximately $62 million of foreign sales commitments in the first half of 1995. The fair value of these contracts and options, based on quoted market prices, was not significant. Chiquita has interest rate swap agreements to fix the rate of interest on approximately $92 million of its variable rate ship and container loans maturing between 1998 and 2001. The Company has also entered into foreign currency swap agreements to convert $59 million of ship debt denominated in pounds sterling to U.S. dollar loans maturing in 2004 and 2005 in order to protect the Company from the risk that interest and principal repayments will be adversely affected by changes in exchange rates. The swap agreements have maturities which correspond with those of the underlying loans. The carrying values and estimated fair values of the Company's debt and associated swap agreements are summarized below: December 31, 1994 1993 Carrying Estimated Carrying Estimated (In thousands) value fair value valuefair value Debt $1,586,072 $1,531,600$1,656,794$1,720,000 Interest rate swap agreements -- (300) --10,700 Foreign currency swap agreements -- 400 -- (4,100) $1,586,072 $1,531,700$1,656,794$1,726,600
Fair value for the Company's publicly traded debt is based on quoted market prices. Fair value for other debt is estimated based on the current rates offered to the Company for debt of similar maturities. The fair values of interest rate and foreign currency swap agreements are estimated based on the cost to terminate the agreements. The Company is exposed to credit loss in the event of nonperformance by counterparties on foreign exchange forward contracts, interest rate swap agreements and currency swap agreements. However, because the Company's hedging activities are transacted only with highly rated institutions, Chiquita does not anticipate nonperformance by any of these counterparties. The amount of any credit exposure is limited to unrealized gains on such contracts and swaps. 19 Note 10 -- Pension and Severance Benefits The Company and its subsidiaries have several defined benefit and contribution pension plans covering approximately 9,000 domestic and foreign employees. Approximately 35,000 employees are covered by Central and South American severance plans. Pension plans covering eligible salaried employees and Central and South American severance plans for all employees call for benefits to be based upon years of service and compensation rates. Other plans covering hourly workers generally provide benefits of stated amounts for each year of service. Pension and severance expense consists of the following: (In thousands) 1994 1993 1992 Defined benefit and severance plans: Service cost -- benefits earned during the period $6,637 $6,980 $6,328 Interest cost on projected benefit obligation20,840 20,927 20,330 Actual return on plan assets 424 (10,176) (4,400) Net amortization and deferral (13,185) (4,022) (9,207) 14,716 13,709 13,051 Defined contribution and multi-employer plans 7,140 6,021 7,004 Total pension and severance expense$21,856 $19,730 $20,055
Total pension expense included in the table above for plans of the Meat Division held for sale was $6.2 million in 1994, $4.5 million in 1993 and $5.3 million in 1992. The projected benefit obligations were determined using assumed discount rates of approximately 9 1/4% 1994 and 1993 for unfunded Central and South American pension and severance benefits and approximately 8 3/4% in 1994 and 7 3/4% in 1993 for all other plan benefits. The assumed long-term rate of compensation increase was between 5% and 6% and the assumed long-term rate of return on plan assets was approximately 9% in 1994 and 1993. Pensions are funded in accordance with the requirements of the Employee Retirement Income Security Act or equivalent foreign regulations. Plan assets consist primarily of corporate debt, U.S. government and agency obligations and collective trust funds. Severance benefits in Central and South America are generally funded as benefits are paid. The funded status of the Company's domestic and foreign defined benefit pension and severance plans is as follows: Plans for which Plans for which Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets at December 31, at December 31, (In thousands) 1994 1993 1994 1993 Plan assets at fair market value $73,757 $74,839 $66,645$72,069 Present value of benefit obligations: Vested 62,649 68,068 156,689 166,673 Nonvested 2,562 3,439 6,594 6,713 Accumulated benefit obligation65,21171,507 163,283 173,386 Additional amounts related to projected pay increases 7,180 8,543 18,333 19,062 Projected benefit obligation72,391 80,050 181,616 192,448 Projected benefit obligation less than (in excess of) plan assets1,366 (5,211) (114,971) (120,379) Projected benefit obligation not yet recognized in the balance sheet: Net actuarial loss 9,926 14,374 26,044 24,231 Prior service cost -- -- 2,333 2,684 Obligation (asset) at transition, net of amortization (4,413) (5,152) 7,119 8,709 Adjustment required to recognize minimum liability -- -- (15,948) (18,833) Net balance sheet asset (liability)$6,879 $4,011 $(95,423) $(103,588)
The fair value of plan assets, the projected benefit obligation and the net balance sheet liability included in the table above for plans of the Meat Division held for sale at December 31, 1994 were $102.6 million, $149.7 million and $41.1 million, respectively ($108.3 million, $166.5 million and $50.0 million, respectively, at December 31, 1993). The adjustment required to recognize the minimum pension liability is based on the excess of the accumulated benefit obligation over the fair market value of assets of the Meat Division's plan for hourly workers. 20 Note 11 -- Stock Options Under a non-qualified stock option plan, the Company may grant options to purchase up to an aggregate of 15,000,000 shares of capital stock. Under this plan and other formal stock option and incentive plans, options have been granted to directors, officers and other key employees to purchase shares of the Company's capital stock at the fair market value at the date of grant. The options may be exercised over a period not in excess of 20 years. 1994 1993 Option Option Shares Price Shares Price Under option at beginning of year 5,451,768$5.75 - 47.755,969,996$5.75 - 49.63 Options granted 287,16511.44 - 17.063,282,76510.19 - 14.25 Options exercised (118,133)8.67 - 16.38 (17,120)8.67 - 16.13 Options canceled or expired(407,042)8.67 - 47.75(3,783,873)8.67 - 49.63 Under option at end of year5,213,758$5.75 - 34.445,451,768$ 5.75 - 47.75 Options exercisable at end of year2,234,823 1,517,236 Shares available for future grant7,968,754 2,852,598
In 1993, in connection with a voluntary exchange offer, the Company canceled options for 2,298,186 shares at prices ranging from $15.81 to $49.63 issued in 1988 through 1992 and, in exchange, reissued options for 1,451,430 shares at a price of $10.31, the exchange date market value. Existing options were canceled at rates ranging from 1.5 to 2.0 outstanding option shares for each new option share granted pursuant to the offer. The new options vest over periods of up to nine years. Stock options for 297,573 shares were exercised during 1992 at prices ranging from $5.75 to $34.44 per share. Note 12 -- Shareholders' Equity At December 31, 1994, there were 150,000,000 authorized shares of capital stock. Of the shares authorized but unissued at December 31, 1994, approximately 54,000,000 shares were reserved for issuance upon conversion of other securities and under stock option and other employee benefit plans. In February 1994, the Company sold 2,875,000 shares of $2.875 Non-Voting Cumulative Preferred Stock, Series A, par value $1.00 per share (the "Series A Shares") for aggregate net proceeds of $138 million. The Series A Shares have a liquidation preference of $50.00 per share; pay an annual cash dividend of $2.875 per share; and are convertible into 2.6316 shares of capital stock at each holder's option. The Company may convert the Series A Shares at its option, under certain circumstances, after February 14, 1997. The Board of Directors has the authority to fix the terms of 7,125,000 additional shares of Non-Voting Cumulative Preferred Stock. The Company has 4,000,000 authorized shares of Cumulative Preference Stock, 1,000,000 of which have been designated as Series C Shares. In October 1992, Chiquita issued 648,310 shares of Mandatorily Exchangeable Cumulative Preference Stock, Series C (the "Series C Shares"), represented by 3,241,546 $1.32 depositary shares (the "Depositary Shares"), in exchange for 3,241,546 shares of the Company's capital stock. The Depositary Shares have one vote per share, voting with the capital stock; have a liquidation preference of $18.00 per share; pay annual dividends in cash or capital stock at the Company's option of $1.32 per share and will convert back into capital stock on September 7, 1995, or earlier at the Company's option or upon the occurrence of certain events at a rate of one-for-one (except that the rate will be proportionately less than one-for-one if the market value of the capital stock exceeds $24.00 per share at the time of the conversion). In the third quarter of 1993, the Company began paying Series C dividends in capital stock. Holders of Series A and Depositary Shares have the right to elect additional directors in addition to the directors ordinarily elected by holders of capital stock and Depositary Shares in certain circumstances where the Company fails to pay quarterly dividends on the preferred and preference stock. In March 1992, the Company exchanged 2,694,136 shares of its capital stock for all of the outstanding common shares of Friday Canning Corporation, one of the largest U.S. private-label vegetable processors. The net assets of Friday at the time of the merger were $52 million and included $67 million of inventories and $19 million of notes and loans payable. This transaction was accounted for as a pooling of interests. 21 Note 13 - Income Taxes
Income taxes consist of the following: United States (In thousands) Federal State Foreign Total 1994Current tax expense$ -- $1,024 $11,566 $12,590 Deferred tax expense -- -- 910 910 $ -- $1,024 $12,476 $13,500 1993 Current tax expense $ -- $1,944 $13,247 $15,191 Deferred tax benefit -- -- (3,191) (3,191) $ -- $1,944 $10,056 $12,000 1992 Current tax expense $ -- $468 $4,532 $5,000 Deferred tax expense -- -- -- -- $ -- $468 $4,532 $5,000 Income (loss) before income taxes consists of the following: (In thousands) Subject to tax in: 1994 1993 1992 United States $(76,165) $(94,314)$(215,109) Foreign jurisdictions 40,965 55,233 (63,931) $(35,200) $(39,081)$(279,040) Income tax expense differs from income taxes computed at the U.S. federal statutory rate for the following reasons: (In thousands) 1994 1993 1992 Income tax benefit computed at U.S. federal statutory rate $(12,320) $(13,678)$(94,874) State income taxes, net of federal benefit 666 1,264 309 U.S. losses for which no tax benefit has been recognized 22,951 19,694 55,503 Foreign losses for which no tax benefit has been recognized 19,406 13,166 44,347 Taxes on foreign operations at other than U.S. rates (19,914) (12,005) (1,482) Other 2,711 3,559 1,197 Income tax expense $13,500 $12,000 $5,000 The components of deferred income taxes included on the balance sheet at December 31, 1994 and 1993 are as follows: (In thousands) 1994 1993 Deferred tax benefits Employee benefits $42,878 $51,389 Accrued expenses 26,775 27,043 Other 16,951 22,464 86,604 100,896 Valuation allowance (14,442) (15,906) 72,162 84,990 Deferred tax liabilities Depreciation and amortization (23,959) (28,936) Growing crops (20,968) (22,454) Long-term debt (16,651) (19,281) Other (14,032) (16,318) (75,610) (86,989) Net deferred tax liability$(3,448) $(1,999)
Net deferred taxes do not reflect the benefit that would be available to the Company from the use of its U.S. operating loss carryforwards of $202 million, alternative minimum tax credits of $5 million and foreign tax credit carryforwards of $66 million. The loss carryforwards expire in 2008 and 2009 and the foreign tax credit carryforwards expire between now and 1999. Undistributed earnings of foreign subsidiaries which have been, or are intended to be, permanently reinvested in operating assets, if remitted, are expected to result in little or no tax by operation of relevant statutes and the carryforward attributes described above. Cash payments for income taxes, net of refunds, were $12.5 million in 1994, $17.2 million in 1993 and $5.4 million in 1992. Note 14 -- Litigation A number of legal actions are pending against the Company. Based on evaluation of facts which have been ascertained, and on opinions 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. 22 Note 15 -- Quarterly Financial Data (Unaudited) The following quarterly financial data are unaudited, but in the opinion of management include all necessary adjustments for a fair presentation of the interim results, which are subject to significant seasonal variations. All quarters reflect the reconsolidation of the Company's Meat Division held for sale (see Note 2). 1994 (In thousands, except per share amounts)March 31 June 30 Sept.30 Dec. 31 Net sales $1,056,247$1,007,121 $900,941 $997,411 Cost of sales (840,956) (793,517) (810,487)(848,381) Operating income (loss) 81,985 70,501 (44,174) 1,471 Income (loss) before extraordinary item 35,534 30,945 (80,652) (34,527) Extraordinary loss from prepayment of debt(22,840) -- -- -- Net income (loss) 12,694 30,945 (80,652) (34,527) Fully diluted earnings (loss) per share - Income (loss) before extraordinary item .62 .51 (1.59) (.70) - Extraordinary item (.40) -- -- -- - Net income (loss) .22 .51 (1.59) (.70) Dividends per common share .05 .05 .05 .05 Capital stock market price High 19.25 17.63 17.00 16.50 Low 11.25 12.13 12.13 12.38 1993 (In thousands, except per share amounts)March 31 June 30 Sept.30 Dec. 31 Net sales $1,125,121$1,063,253 $924,547 $969,716 Cost of sales (906,076) (885,376) (780,017)(840,682) Operating income (loss) 71,331 42,709 12,431 (16,268) Net income (loss) 27,530 7,673 (25,868) (60,416) Fully diluted earnings (loss) per share .53 .15 (.50) (1.17) Dividends per common share .17 .17 .05 .05 Capital stock market price High 17.50 15.63 14.00 11.88 Low 13.25 10.50 10.25 10.13
The operating loss for the quarter ended September 30, 1994 includes charges and losses totaling $57.2 million primarily resulting from write-downs associated with farms and cultivations in Honduras and shut-down costs, operating losses and charges for excess shipping capacity related to the reduction of the Company's Japanese "green" banana trading operations. For the quarter ended December 31, 1994, results include a $10.2 million gain from the sale of the Meat Division's specialty meat operations which was substantially offset by write-downs of ships held for sale and losses from the scale-back of the Company's Japanese "green" banana trading operations. A separate computation of earnings per share is made for each quarter presented. The dilutive effect on earnings per share resulting from the assumed conversions of preferred stock and convertible debt and exercise of stock options and warrants is included in each quarter in which dilution occurs. The earnings per share computation for the year is a separate annual calculation. Accordingly, the sum of the quarterly earnings per share amounts will not necessarily equal the earnings per share for the year. 23 Investor Information Chiquita Brands International, Inc. Stock Exchange Listings:New York, Boston & Pacific Stock Symbol: CQB Shareholders of Record At March 1, 1995, there were 7,203 common shareholders of record. Transfer Agent and Registrar - Capital Stock, $2.875 Non-Voting Cumulative Preferred Stock, Series A and Mandatorily Exchangeable Cumulative Preference Stock, Series C ($1.32 Depositary Shares) Chiquita Brands International, Inc. c/o Securities Transfer Company One East Fourth Street Cincinnati, Ohio 45202 (513) 579-2414 (800) 368-3417 Dividend Reinvestment Shareholders who hold at least 100 common shares may increase their investment in Chiquita shares through the Dividend Reinvestment Plan without payment of any brokerage commission or service charge. Full details concerning the Plan may be obtained from Corporate Affairs or the Transfer Agent. Annual Meeting: May 10, 1995 10 a.m. Eastern Daylight Time Omni Netherland Plaza 35 West Fifth Street Cincinnati, Ohio 45202 Investor Inquiries:For other questions concerning your investment in Chiquita, contact Vice President, Corporate Affairs at (513) 784-6366. Trustees and Transfer Agents - Debentures/Notes 7% Convertible Subordinated Debentures due March 28, 2001 Trustee- Chemical Bank 450 West 33rd Street New York, New York 10001 Transfer, Paying and Conversion Agents Chemical Bank - London, England Banque Paribas Luxembourg- Luxembourg Banque Bruxelles Lambert S.A.-Brussels, Belgium Bank Leu, Ltd.-Zurich, Switzerland 9 1/8% Senior Notes due March 1, 2004 * 9 5/8% Senior Notes due January 15, 2004 * Trustee- The Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 10 1/2% Subordinated Debentures due August 1, 2004* 11 1/2% Subordinated Notes due June 1, 2001* Trustee- Star Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 * Chiquita Brands International, Inc., c/o Securities Transfer Company is transfer agent for these Notes and Debentures