-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M2Mw8ieXBpqlYmLB7Ps/0fwuOWlU9eAX+efsMbo0Fvrn7MDIsAfxBCU7Oqzz2nkt TK3tjhxlOH/JNj04bfaApQ== 0000101063-96-000013.txt : 19960328 0000101063-96-000013.hdr.sgml : 19960328 ACCESSION NUMBER: 0000101063-96-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: AMEX SROS: BSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIQUITA BRANDS INTERNATIONAL INC CENTRAL INDEX KEY: 0000101063 STANDARD INDUSTRIAL CLASSIFICATION: 2011 IRS NUMBER: 041923360 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01550 FILM NUMBER: 96538405 BUSINESS ADDRESS: STREET 1: 250 E FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137848011 FORMER COMPANY: FORMER CONFORMED NAME: UNITED BRANDS CO DATE OF NAME CHANGE: 19900403 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, 1995 Number 1-1550 CHIQUITA BRANDS INTERNATIONAL, INC. Incorporated under the I.R.S. Employer I.D. Laws of New Jersey No. 04-1923360 250 East Fifth Street, Cincinnati, Ohio 45202 (513) 784-8000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange On Title of Each Class Which Registered ------------------------- ------------------------- Capital Stock ($.33 par value) New York, Pacific, Boston $2.875 Non-Voting Cumulative Preferred Stock, Series A New York 10-1/2% Subordinated Debentures due August 1, 2004 New York, Pacific Securities registered pursuant to Section 12(g) of the Act: None Other securities for which reports are submitted pursuant to Section 15(d) of the Act: 9-1/8% Senior Notes due March 1, 2004 9-5/8% Senior Notes due January 15, 2004 11-1/2% Subordinated Notes due June 1, 2001 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 1, 1996, there were 55,153,531 shares of Common Stock outstanding. The aggregate market value of Common Stock held by non-affiliates at March 1, 1996 was approximately $485 million. Documents Incorporated by Reference Portions of the Chiquita Brands International, Inc. 1995 Annual Report to Shareholders are incorporated by reference in Parts I and II. Portions of the Chiquita Brands International, Inc. Proxy Statement for the 1996 Annual Meeting of Shareholders are incorporated by reference in Part III. CHIQUITA BRANDS INTERNATIONAL, INC. TABLE OF CONTENTS Page Part I Item 1. Business 1 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 8 Executive Officers of the Registrant 8 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9 Item 6. Selected Financial Data 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 8. Financial Statements and Supplementary Data 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9 Part III Item 10. Directors and Executive Officers of the Registrant 10 Item 11. Executive Compensation 10 Item 12. Security Ownership of Certain Beneficial Owners and Management 10 Item 13. Certain Relationships and Related Transactions 10 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 10 Signatures 12 PART I ------------------------ ITEM 1 - BUSINESS ---------------------------------- GENERAL ------------------------- Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products sold under the Chiquita and other brand names. In addition to bananas, these products include other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of other fresh produce. The Company's operations also include fruit and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based consumer products. With the completion of the sale of its meat business in December 1995, the Company's continuing operations constitute its only industry segment. See Note 2 to the Consolidated Financial Statements included in the Company's 1995 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 and by expanding its quality fresh fruit and vegetable operations. Chiquita has benefited from its multi-year investment spending program and its restructuring and cost reduction efforts to significantly reduce production, distribution and overhead costs. (See "Distribution and Logistics" and "Sourcing" below and ITEM 2 - PROPERTIES.) Its restructuring and cost reduction efforts also included measures to reorganize the Company's European banana operations to adjust to a quota which effectively restricts the volume of Latin American bananas imported into the European Union, as well as to the banana Framework Agreement which authorizes the imposition of additional restrictive and discriminatory quotas and export licenses on non-European banana marketing firms. (See RISKS OF INTERNATIONAL OPERATIONS below.) In addition to the sale of its meat business, in 1995 Chiquita completed additional steps in its ongoing program to improve shareholder value. These included sales of older ships, the sale of the Costa Rican operations of its Numar edible oils group, the shut-down of a portion of the Company's juice operations and the reconfiguration of banana production assets. See "Management's Analysis of Operations and Financial Condition" and Notes 2 and 3 to the Consolidated Financial Statements included in the Company's 1995 Annual Report to Shareholders. 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 1995 Annual Report to Shareholders, for a discussion of factors affecting results of the Company's operations for 1995, 1994 and 1993. Factors which may cause fluctuations in the results of operations are also discussed in the description of the Company's operations below. Fresh Food Products ----------------------------- The Company markets an extensive line of fresh fruits and vegetables sold under the "Chiquita" and other brand names. The core of Chiquita's fresh foods operations is the marketing, distribution and sourcing of bananas. Sales of bananas accounted for approximately 60% of consolidated net sales in each of the last three years. -1- Chiquita believes it derives competitive benefits in the marketing, distribution and sourcing of fresh foods through its: - Recognized brand names and reputation for quality; - Strong market positions in Europe and North America, its principal markets; - Modern, cost-efficient fresh fruit transportation system; and - Industry leading position in terms of number and geographic diversity of its sources of bananas, which enhances its ability to provide customers with premium quality products on a consistent basis. Marketing. Chiquita markets bananas under brand names including "Chiquita," "Chiquita Jr.," "Consul," "Amigo," "Chico" and "Bananos." In 1995, Chiquita sold approximately one-half of its total banana volumes in Europe and over 40% of its banana volumes in 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.) 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 it sells more bananas than any of its competitors, accounting for approximately one-fourth of all bananas imported into its principal markets. While smaller companies, including growers' cooperatives, are a competitive factor, Chiquita's principal competitors are 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. Through a network of fresh fruit and vegetable operations in Europe, North America and the Pacific Rim, Chiquita sells and distributes a variety of quality fruit and vegetable products. These products include -2- quality fresh fruit such as apples, apricots, cherries, grapes, peaches, pears, plums, strawberries and tomatoes sold under the "Chiquita," "Frupac" and other brand names; and a wide variety of fresh vegetables including asparagus, beans, broccoli, carrots, celery, lettuce, onions and potatoes sold under the "Premium" and various other brand names. Certain of these operations involve both the production and marketing of fresh fruits and vegetables while others involve only marketing. These businesses compete against numerous other regional fresh fruit and vegetable producers and distributors. No single competitor has a dominant market share in this industry due to the regionalized nature of these businesses. Distribution and Logistics. Transportation expenses comprise approximately one-fourth of the total costs incurred by Chiquita in its sale of tropical fruit. Chiquita ships its tropical fruit in vessels owned or chartered by the Company. All of Chiquita's tropical fruit shipments into the North American market are delivered using pallets or containers that minimize damage to the product by eliminating the need to handle individual boxes. 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 80% of its aggregate shipping capacity. The remaining capacity is operated under contractual arrangements having terms of less than two years. (See also ITEM 2 - PROPERTIES below and Notes 5 and 6 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 1995, approximately one-third of all bananas sold by Chiquita were sourced from Panama. Bananas are sourced from numerous other countries, including Colombia, Costa Rica, Ecuador, Guatemala and Honduras which comprised 6% to 23% (depending on the country) of bananas sold by Chiquita during 1995. In 1995, 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 1995. Bananas are vulnerable to adverse local weather conditions, which are quite common but difficult to predict, and to crop disease. These factors, which may result in lower sales volume and increased costs, may also 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. -3- 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; fresh cut and ready-to-eat salads sold in the United States under the "Club Chef" and "Naked Foods" brands; and other consumer products (primarily edible oils) sold in Honduras under the "Numar" and other brand names. Chiquita branded fruit juices include a full line of tropical blends which are manufactured by others to Chiquita's specifications and sold in shelf-stable, refrigerated and frozen varieties. Shelf stable individual servings come in three blends, "Caribbean Splash," "Tropical Paradise" and "Calypso Breeze," and are sold through club stores and mass merchandisers throughout most of the United States. In December 1995, the Company ceased direct marketing efforts of its refrigerated and frozen product lines and licensed these lines to a national fruit juice producer. In addition to the three tropical blends above, the refrigerated and frozen lines include "Cranberry Seabreeze," "Raspberry Passion," "Hawaiian Sunrise" and "Orange Banana." 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. In December 1995, the Company sold the Costa Rican operations of its Numar Group to a group consisting primarily of Costa Rican and Panamanian investors. The Company's remaining consumer products operations in Central America are conducted through a 50%-owned joint venture which owns the Numar Group's former Honduran edible oils business. The joint venture sells its products under the "Numar," "Clover" and other brand names and competes principally against a number of small local firms and subsidiaries of multinational corporations. RISKS OF INTERNATIONAL OPERATIONS ------------------------------------------------- Information about the Company's operations by geographic area is included in Note 13 to the Consolidated Financial Statements included in the Company's 1995 Annual Report to Shareholders and is incorporated herein by reference. On July 1, 1993, the European Union ("EU") implemented a new quota effectively restricting the volume of Latin American bananas imported into the EU. Implementation of the quota 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 quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. Since imposition of the EU quota regime, prices within the EU have increased to a higher -4- level than the levels prevailing prior to the quota. Banana prices in other worldwide markets, however, have been lower than in years prior to the EU quota, as the displaced EU volume has entered those markets. In two separate rulings, General Agreement on Tariffs and Trade ("GATT") panels found 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 implemented this agreement in 1995, significantly increasing 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 had substantially unrestricted banana markets in which the Company 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. Implementation of the quota regime continues to evolve and there can be no assurance that the EU banana regulation will not change further. In September 1994, Chiquita and the Hawaii Banana Industry Association made a joint filing with the Office of the U.S. Trade Representative ("USTR") under Section 301 of the U.S. Trade Act of 1974, charging that the EU quota and licensing regime and the Framework Agreement are unreasonable, discriminatory, and a burden and restriction on U.S. commerce. In response to this petition, the U.S. Government initiated formal investigations of the EU banana import policy and of the Colombian and Costa Rican Framework Agreement export policies. In January 1995, the U.S. Government announced a preliminary finding against the EU banana import policy and in September 1995, based on information obtained in the USTR's investigation under Section 301, the United States, joined by Guatemala, Honduras and Mexico, commenced a new international trade challenge against the EU regime using the procedures of the World Trade Organization ("WTO"). In January 1996, the USTR announced that it had found the banana Framework Agreement export policies of Costa Rica and Colombia to be unfair. The USTR further announced it was not imposing sanctions at that time, pending further consultations with those countries to eliminate harm to U.S. commerce. In February 1996, Ecuador, the world's largest exporter of bananas, joined the United States, Guatemala, Honduras and Mexico in challenging the EU regime under the WTO. Both the WTO and Section 301 authorize 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 WTO and Section 301 proceedings, the nature and extent of actions that may be taken by the United States or other adversely affected countries, or the impact on the EU quota regime or the Framework Agreement. Certain of the Company's operations are heavily dependent upon products grown and purchased in Central and South 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 substantially dependent upon leases and other agreements with the governments of these countries. 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, has the right to purchase other Panamanian assets of the Company at specified values which approximate carrying value but may be less than market value. -5- 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 which expires on December 31, 1998. 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. See Notes 1 and 8 to the Consolidated Financial Statements and "Management's Analysis of Operations and Financial Condition" included in the Company's 1995 Annual Report to Shareholders for information with respect to currency exchange. LABOR RELATIONS ----------------------------------------- The Company employs a total of approximately 36,000 associates. Approximately 32,000 of these associates are employed in Central and South America, including 28,000 workers covered by 85 labor contracts. One of these contracts covering approximately 5,000 workers in La Lima, Honduras expired April 1, 1995. The affected employees have continued to work since the expiration of the contract. Negotiations on a new contract with the workers' union are scheduled to begin in June 1996. Other labor contracts expire from 1996 to 1999, with approximately 45 of these contracts covering approximately 4,000 employees expiring in 1996. Strikes or other labor-related actions are often encountered upon expiration of labor contracts and also frequently occur during the term of the contracts. ITEM 2 - PROPERTIES --------------------------- The Company owns approximately 90,000 acres and leases approximately 40,000 acres of improved land, principally in Costa Rica, Panama and Honduras. Substantially all of this land is used for the cultivation of bananas and support activities, including the maintenance of floodways. The Company also owns power plants, packing stations, warehouses, irrigation systems and loading and unloading facilities used in connection with its operations. The Company owns or controls under long-term bareboat charters 16 ocean-going refrigerated vessels and has 4 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 and contracts of affreightment 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 owned ships are pledged as collateral for related financings. -6- 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 headquarters in Cincinnati, Ohio. For further information with respect to the Company's physical properties, see the descriptions under ITEM 1 - BUSINESS - GENERAL above, and Notes 5 and 6 to the Consolidated Financial Statements included in the Company's 1995 Annual Report to Shareholders. ITEM 3 - LEGAL PROCEEDINGS --------------------------------------------------- A number of legal actions are pending against the Company, including those described below. Although some of these cases, including the DBCP cases described below, are in very preliminary stages, based on information currently available to it and advice of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the financial statements of the Company. Several suits are pending in different jurisdictions against the manufacturers of an agricultural chemical called DBCP and against the Company and other banana producing companies which used DBCP primarily in the 1970's. Most of the plaintiffs are foreign citizens who claim to have been employees of banana companies and allege sterility and other injuries as a result of exposure to DBCP. Plaintiffs' alleged damage claims have yet to be quantified. Several of these lawsuits were filed in Texas state court in 1993. These cases originally represented claims on behalf of approximately 25,000 individuals, of whom approximately 4,000 purported to have claims against the Company. All but one of the cases involving Chiquita were removed to the U.S. District Court for the Southern District of Texas and, in October 1995, dismissed on the grounds that courts in the plaintiffs' home countries (limited to Costa Rica, Panama and the Philippines in the case of suits involving the Company) were more appropriate forums for pursuing their claims. The plaintiffs, which include approximately 3,650 alleging claims against Chiquita, have appealed these dismissals to the U.S. Court of Appeals for the Fifth Circuit. The other case involving Chiquita is still pending in Texas state court, where procedural issues are being addressed. This case, Narciso Borja, et al. v. Dow Chemical Company, et al. (District Court of Dallas County), involves approximately 2,000 plaintiffs, including approximately 350 who claim that the Company has liability for their alleged injuries. A similar suit was filed in 1995 in Louisiana state court by approximately 4,000 plaintiffs. The Company does not have information concerning how many of these plaintiffs allege that the Company has liability for their injuries, but the same manufacturer and banana producer defendants have been sued in this case. This case, Lucas Pastor Canales Martinez, et al. v. Dow Chemical Company, et al., has been removed to U.S. District Court for the Eastern District of Louisiana, where defendants motion to dismiss in favor of more appropriate forums and plaintiffs' motion to remand to state court are pending. As a result of the dismissals of the Texas suits described above, similar suits against the Company and its subsidiaries have been filed in Costa Rica, Panama and the Philippines (in addition to previously filed actions in Costa Rica and Panama). Cases involving approximately 5,000 plaintiffs who purport to have claims against the Company are currently pending in those countries. The Company believes it has a number of meritorious defenses in all of the foregoing DBCP cases, including that at all times during which it used DBCP commercially, the product was registered for use by the -7- United States Environmental Protection Agency. In addition, the Company ceased using the product on a commercial basis in 1977, promptly after learning that health hazards might exist. The Wisconsin Department of Justice has brought three actions against Friday Canning Corporation ("Friday"), a wholly owned subsidiary of the Company, asserting violations of certain Wisconsin environmental laws at Friday canning facilities located in Wisconsin. The actions were filed in Circuit Courts in Fond du Lac and Columbia Counties in September 1995 and Greenlake County in January 1996. The actions seek unspecified civil penalties and other relief for alleged violations of state-issued wastewater discharge permits and of laws governing such discharges. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------- Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------- Carl H. Lindner (age 76) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since 1984. He is also Chairman of the Board and Chief Executive Officer of American Financial Group, Inc. ("AFG"), a holding company formed in April 1995 which, through its subsidiaries, is engaged principally in specialty and multi-line property and casualty insurance businesses and in the sale of tax-deferred annuities. For over 35 years, Mr. Lindner has been Chairman of the Board and Chief Executive Officer of American Financial Corporation, which became an AFG subsidiary in 1995. Keith E. Lindner (age 36) - 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. Mr. Lindner is also a Vice Chairman of AFG. Steven G. Warshaw (age 42) - Mr. Warshaw has been the Company's Executive Vice President and Chief Administrative Officer since 1990 and was named Chief Financial Officer of the Company in 1994. Mr. Warshaw has served in various capacities since 1986. Robert F. Kistinger (age 43) - 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. Robert W. Olson (age 50) - Mr. Olson was elected Vice President, General Counsel and Secretary of the Company in August 1995. From 1987 to 1995, he served as Senior Vice President, General Counsel and Secretary of American Premier Underwriters, Inc. (formerly named The Penn Central Corporation), an affiliate of AFG. He was Senior Vice President and Secretary of AFG from April 1995 until he joined the Company. Jos P. Stalenhoef (age 54) - 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 52) - 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. Carl H. Lindner provides broad policy determination and guidance to operating management, which is headed by Keith E. Lindner, but devotes substantial portions of his time to the affairs of AFG and its subsidiaries. -8- PART II ------------------- ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------------------- The number of shareholders at March 1, 1996 and the markets for the Company's capital stock are set forth on page 24 of the Company's 1995 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 1995 Annual Report to Shareholders. Restrictions on the Company's ability to declare and pay dividends are described in Note 7 to the Consolidated Financial Statements included in the 1995 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 1995 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 1995 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 22 of the Company's 1995 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. -9- PART III ----------------------- Except for information relating to the Company's executive officers set forth in Part I above, 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 1996 Annual Meeting of Shareholders and is incorporated herein by reference. ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------- ITEM 11 - EXECUTIVE COMPENSATION ------------------------------------------------------------- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ------------------------------------------------------------- ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------------------------------------------------------------- PART IV ----------------- ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ------------------------------------------------------------- (a) 1. Financial Statements. The following consolidated financial statements of the Company and the Report of Independent Auditors are included in the Company's 1995 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 1995, 1994 and 1993 10 Consolidated Balance Sheet at December 31, 1995 and 1994 11 Consolidated Statement of Shareholders' Equity for 1995, 1994 and 1993 12 Consolidated Statement of Cash Flow for 1995, 1994 and 1993 13 Notes to Consolidated Financial Statements 14
2. Financial Statement Schedule. Financial Statement Schedule II - Allowance for Doubtful Accounts Receivable is included on page 14 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 15) for a listing of all exhibits filed with this Annual Report on Form 10-K. (b) The following report on Form 8-K was filed during the quarter ended December 31, 1995: December 20, 1995 - to report the Company's sale of its Meat Division to Smithfield Foods, Inc. and to provide required unaudited pro forma condensed consolidated financial statements excluding the Meat Division. -10- (This page left blank intentionally.) -11- SIGNATURES - - -------------------------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 25, 1996. 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 25, 1996: /s/ Carl H. Lindner Chairman of the Board and Carl H. Lindner Chief Executive Officer /s/ Keith E. Lindner Director; President and Chief Keith E. Lindner Operating Officer /s/ Fred J. Runk Director Fred J. Runk Jean H. Sisco* Director Jean H. Sisco William W. Verity* Director William W. Verity Oliver W. Waddell* Director Oliver W. Waddell -12- /s/ Ronald F. Walker Director Ronald F. Walker /s/ Steven G. Warshaw Executive Vice President, Steven G. Warshaw Chief Administrative 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. -13-
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE (In thousands) Year Ended December 31, 1995 1994 1993 --------- -------- ------- Balance at beginning of period $13,060 $12,393 $11,040 --------- -------- ------- Additions: Charged to costs and expenses 4,303 6,966 4,797 -------- -------- ------- Deductions: Write-offs 5,703 6,330 3,220 Other, net 350 (31) 224 -------- -------- ------- 6,053 6,299 3,444 -------- -------- ------- Balance at end of period $11,310 $13,060 $12,393 ======== ======== =======
-14- 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 January 11, 1996 effective January 1, 1996 between Tela Railroad Company and the Honduran National Railroad *10-c Stock Purchase Agreement dated December 20, 1995 between Smithfield Foods, Inc. ( Smithfield ) and the Company filed as Exhibit 7.1 to Schedule 13D dated December 20, 1995 filed by the Company and certain other persons with respect to Smithfield common stock Executive Compensation Plans 10-d 1986 Stock Option and Incentive Plan, as amended *10-e 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-f Amended and Restated Deferred Compensation Plan 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends 13 Chiquita Brands International, Inc. 1995 Annual Report to Shareholders (pages 5 through 22 and page 24) 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedule 99 Annual Report on Form 11-K for the Chiquita Savings and Investment Plan for 1995 will be filed by amendment on or before June 28, 1996. * Incorporated by reference. -15- EX-10 2 Exhibit 10-b PRIVATE LEASE CONTRACT FOR A RAILROAD COMPLEX, BETWEEN FERROCARRIL NACIONAL DE HONDURAS /Honduran National Railroad/ AND TELA RAILROAD COMPANY. We, Norberto Torres, of legal age, married, a civil engineer, a Honduran, domiciled in this city, acting in my capacity of General Manager and, as such, as Administrative, Legal and Extrajudicial Representative of Ferrocarril Nacional de Honduras, an autonomous entity of the state of Honduras with legal status, its own assets and indefinite term, created by Decree Number Forty-Eight, issued by the National Congress on the thirtieth day of April, nineteen hundred fifty-eight, whose Article Thirty-three sets forth that this institution shall be represented by its General Manager, with sufficient powers for this type of acts; and in accordance with the Certification of the Sole Point of Minutes Number 543, of the meeting of the Board of Directors of said Autonomous Entity, dated the twenty-eighth day of February, nineteen hundred ninety-four, which shows the election of the declarant, Mr. Norberto Torres, as General Manager of Ferrocarril Nacional de Honduras, who occupies said function and is authorized to execute this contract, as arises from the Certification of the Sole Point of the special meeting of the Board of Directors No. 548 of the fourth day of January, nineteen hundred ninety-six. For the purposes of this contract, Ferrocarril Nacional de Honduras shall be hereinafter referred to as "THE LESSOR," and, as party of the other part, Mr. Arnoldo Manuel Palma Isaacs, of legal age, married, a business agent, of Panamanian nationality, with legal residence in Honduras and domiciled in the city of La Lima, Department of Cortes, in transit in this city, who appears as General Representative of Tela Railroad Company, a joint stock company incorporated and existing pursuant to the laws of the State of Delaware, United States of America, located in the city of Wilmington in said State, which was acknowledged as a legal entity, and authorized to do business in the Republic of Honduras, under decision issued by the Executive Power through the Ministry of Government, Justice and Health on the twentieth day of February, nineteen hundred thirteen. For the purposes of this contract, Tela Railroad Company shall be hereinafter referred to as "THE LESSEE." The declarant, Mr. Arnoldo Manuel Palma Isaacs, proves the capacity in which he appears with the public instrument of substitution of general power of attorney, authorized in the city of La Lima, Department of Cortes, by Notary Pompilio Amador, and registered under number twenty-five (25) of Volume forty-four (44) of the Commercial Register of San Pedro Sula. Said instrument of general power of attorney grants sufficient powers for the representative to sign all types of instruments, contracts and agreements. And, after I verified that the declarants are in full enjoyment of their civil rights, they freely and spontaneously declared: FIRST: "THE LESSOR" and "THE LESSEE" declare that: On the twenty-ninth day of December, nineteen hundred ninety-four, under private document accepted and signed by both parties, they executed an Agreement for Temporary Lease of a Railroad Complex, for theterm of one year, counted from the first day of January, nineteen hundred ninety-five; On this date, and in the absence of any non-compliance or outstanding debts of the parties under the lease contract which expired on December 31, nineteen hundred ninety-four, they terminate, by mutual agreement, the aforementioned Lease of the Railroad Complex and, pursuant to Clauses 3 and 4 of the Agreement, and item F) of the Second Clause of the aforementioned Lease Contract, "THE LESSEE" returns to "THE LESSOR" the assets of the Railroad Complex, railroad lines, yards, branch lines, tracts, sections, bridges, rights-of-way, equipment and installations set forth in the contract expired in December 1994, and the respective inventories, and "THE LESSOR" receives them to its full satisfaction. SECOND. "THE LESSOR" declares that: It is the legitimate owner of the following assets: A) Railroad line connecting and passing through the following points: 1. From the Town Hall to the city of El Progreso, on a distance of eighty-four kilometers and six hundred eighty thousands of a kilometer (84.68 km), including its yards, branch lines, tracts, sections, bridges, and also the railroad yard of Tela. 2. From the city of La Lima to Baracoa, on a distance of one hundred thirteen kilometers and nine hundred twenty thousands of a kilometer (113.920 km), including its yards, branch lines, tracts, sections, and bridges; with a total of one hundred ninety-eight kilometers and six hundred thousands of a kilometer (198.600 km), including the yard lines found in Puerto Cortes. Both lines, their branch lines and sections, are on the respective dormers, embankments, bridges, and their respective right-of-way. B. "THE LESSOR" also owns the rest of the principal lines, branch lines, tracts, and railroad structures connected with those described above, as well as all railroad lines and railroad yards of the country. C) Other railroad assets described in the enclosed inventory, which is also signed by the contracting parties and is an integral part hereof. THIRD. "THE LESSOR" continues and declares that the assets described in the Second Clause, items A and C, above, are leased to "THE LESSOR" and also constitute an easement for transit to the installations of the railroad complex described in paragraph b) of the Second Clause, under the following conditions: a) In transport operations for its business, "THE LESSEE" shall be entitled to use and operate exclusively all the assets of the Railroad Complex described in items A and C of the Second Clause of this instrument; however, concerning transit by the railroad lines described in item A of said Clause, "THE LESSEE" shall have preferred use and operation at its discretion, through its control office, in the facilities described under item B of the Second Clause. "THE LESSEE" shall be entitled to share the easement with "THE LESSOR" or with third parties, to which the latter grants right-of-way after compliance with the formalities set forth herein. In order to avoid delaying the operations of both parties, transit by the facilities described in item B, second clause, shall be regulated by "THE LESSOR" through its control office, and must give preference to the banana transport traffic of "THE LESSEE," its affiliates, and other producers, since this is a perishable product. B) "THE LESSEE" shall pay an annual rent for the lease and easement set forth in this clause, in the amount of TWO HUNDRED SEVENTY-FIVE THOUSAND U.S. DOLLARS (US$ 275,000.00). The agreed annual rent shall be paid at the offices of Ferrocarril Nacional de Honduras in San Pedro Sula, Department of Cortes, in Lempiras at the valid rate of exchange established, or by consultation with the Central Bank of Honduras within the first five business days of each month, in equal monthly installments paid in advance. In the first year of the lease, "THE LESSEE" shall pay in advance, according to a disbursement schedule to be presented to the Board of Directors, an amount of up to SIXTY THOUSAND U.S. DOLLARS (US$ 60,000.00), in the equivalent in Lempiras thereof, to be disbursed and deposited in a special account with the Central Bank of Honduras in the name of Ferrocarril Nacional de Honduras, the funds whereof shall be used for the rehabilitation of the equipment and railroad, so that it may operate as an independent, self-financing enterprise; FORTY- FIVE THOUSAND U.S. DOLLARS (US$ 45,000.00) in the equivalent in Lempiras thereof, shall be paid to Ferrocarril Nacional de Honduras at its offices in San Pedro Sula, when signing the contract. The balance of the rent for the first year, i.e. ONE HUNDRED SEVENTY THOUSAND U.S. DOLLARS (US$ 170,000.00) shall be paid to Ferrocarril Nacional de Honduras in equal monthly installments, paid in advance, without need for collection formalities or any requirement, in the Lempiras equivalent thereof, at the valid rate of exchange established, or by consultation with the Central Bank of Honduras. In subsequent years, the annual rent shall be paid as follows: The equivalent of TWO HUNDRED FIFTEEN THOUSAND U.S. DOLLARS annually (US$ 215,000.00/YEAR) shall be paid in equal monthly installments paid in advance to Ferrocarril Nacional de Honduras, and the equivalent of SIXTY THOUSAND U.S. DOLLARS annually (US$ 60,000.00/YEAR) shall be disbursed to the order of Ferrocarril Nacional de Honduras, to be deposited in a special account with the Central Bank of Honduras, which fund shall be used for the rehabilitation of the equipment and railroad lines. c) This Contract of Lease and Easement is executed under the method of automatic extensions for a period of three years beginning as of the first day of January, nineteen hundred ninety-six, whereas automatic extension is understood as the maintenance of the same validity term of the contract at the end of each operative year without need for a new contract or agreement of the parties. However, this lease may become with limited term if either party so notifies the other in writing, in which case its term shall be three (3) years beginning as of the first day of January of the year following said notification. ch) If, due to reasons of economic competition in railroad operations, equipment or system obsolescence, severe deterioration of the tracks, requirement for a new transport method, and other similar situations, "THE LESSEE" cannot continue to use the railroad, it may notify in writing about its wish not to continue the lease and easement, in which case they shall expire on December 31 of the year following the notification. d) Under normal conditions, the parties shall not be entitled to request, nor to obtain, a reduction of the rates and periods, nor immediate termination of the contract, with the following exceptions: due to events of force majeure or act of nature duly proven by a competent authority; due to government political actions making necessary the reduction or termination of the activities of "THE LESSEE" in the country, due to operating conditions and provisions imposed by "THE LESSOR," and making impossible or delaying the operations of "THE LESSEE," or in the cases allowed by the law. e) During the term of this contract, "THE LESSEE" must perform, for its account and risk, the maintenance of the RAILROAD COMPLEX leased by it, so as to conserve it in normal operating condition, except for normal tear and wear arising from legitimate use. Without prejudice to the above, "THE LESSOR" shall timely formulate measures and indications to improve said maintenance, and "THE LESSEE" shall be obligated to comply with said indications, if they are technically and economically reasonable. The maintenance referred to in this clause shall be performed according to annual schedules agreed upon by both parties, and periodically and discretionally supervised by "THE LESSOR." These schedules shall be reviewed by both parties, as the need arises. Furthermore, they agree that the maintenance and repair of the lines from Puerto Cortes to Baracoa and Tela - 45 1/2, on which a transit easement is instituted, shall be the responsibility of "THE LESSEE" concerning execution and cost, provided the need for such works arises from the use of these lines and tracts by "THE LESSEE." To guarantee the physical preservation of the leased RAILROAD COMPLEX, "THE LESSEE" shall protect the related lines with fire and/or lightning insurance, against material damages caused by earthquake, hurricane, typhoon, tornado, cyclone, wind, storm and/or hailstorm, and material damages due to flood and/or tidal wave. Said insurance shall be paid by "THE LESSEE," and must be in force for the entire term of the lease and its extensions. f) At the end of this Lease Contract and its extensions set forth in this clause, or upon its termination due to any legal contractual cause, "THE LESSEE" shall return the RAILROAD COMPLEX to "THE LESSOR" in normal operating condition, except for normal tear and wear arising from legitimate use. The determination of the normal operating condition and of the normal tear and wear caused by legitimate use of the RAILROAD COMPLEX, and its repair expenses, shall be evaluated by "THE LESSOR" and, in the event of disagreement with "THE LESSEE," the difference shall be submitted to decision by two (2) experts appointed one by each party; if the experts do not agree, the parties, by mutual consensus, shall appoint a third arbitrator, appointed by mutual consent by the two experts of the parties. The arbitrator shall decide with the other two, and shall issue the verdict by resolution with simple majority. If the first two do not agree on the appointment of the third, the parties shall be free to resort to competent judicial authorities in order to enforce their rights. Between the onset of the disagreement between the two appointed experts and the final decision with the intervention of the third expert, no more than sixty business days may lapse; experts' costs shall be paid by the parties. g) During the term of this Lease Contract, "THE LESSEE" shall be entitled to fully or partially modify, for its own account and risk, the current system of railroad transport of bananas, after decision and written agreement with "THE LESSOR." It shall be understood that "THE LESSOR" agrees with the modification in the following cases: 1) In the event of modification of the hauling system, due to a change in fruit transport method. In this case, the materials remaining after making the modification shall be delivered to "THE LESSOR." 2) In the event of change in the size of the pallets, motivated by a change in the size of the containers. 3) In the event of change in the engines of the locomotives, tending to improve or extend their useful life. 4) Any other change in the system of the equipment and installations designed to facilitate or improve fruit transport by railroad. It is understood that these changes may not, in any case, impair the structure of the equipment and installations, according to the written opinion of the technicians of both parties. h) "THE LESSOR," as owner of the leased RAILROAD COMPLEX, shall be entitled to transit, regulated by the control office of "THE LESSEE," with its equipment and personnel, by the rail road lines, branch lines and tracts included in the leased RAILROAD COMPLEX. Transit by third parties authorized by "THE LESSOR" to operate on the leased lines and lines under easement maintained by "THE LESSEE" shall take place after agreement, without prejudice to "THE LESSEE'"s right to request special conditions for this service. i) "THE LESSOR" shall be liable for the cost of damages, interference and losses caused by its operations on the leased lines. j) At the end of this Contract and its extensions, "THE LESSOR" shall have preferred right to purchase all or part of the spare parts found warehouses, which "THE LESSEE" wishes to sell, and which are necessary for the operation of the RAILROAD COMPLEX; such purchase shall be made at the book value of "THE LESSEE" in Honduras; k) "THE LESSEE" shall have the right to assign this Lease and Easement Contract, or to sublease the RAILROAD COMPLEX, totally or partially, to the individual or corporation it deems convenient, and which was previously accepted and approved for this purpose by F.N.C. de H. In these cases, the assignee or sublessee shall assume the same obligations, and shall have the same rights held by "THE LESSEE." FOURTH. In turn, "THE LESSEE" declares that: It accepts the lease and easements of the RAILROAD COMPLEX granted by "THE LESSOR," under the terms, periods and conditions set forth, and pledges to pay and comply punctually with the obligations undertaken hereunder. FIFTH. "THE LESSOR" declares that: It grants easement to "THE LESSEE," so that the latter may maintain and use, in crossed and parallel lines, in the leased easement, and in that returned, the roads, channels, irrigation ditches, telephone and electricity lines, water and oil pipelines, irrigation and drain systems, cableway systems for the transport of bananas to packing stations, whereby "THE LESSEE" must take all necessary steps so that, in the enjoyment of this easement, and especially in the returned one, no damage is caused to the use of crossed and parallel lines by "THE LESSOR. "THE LESSOR" acknowledges that "THE LESSEE" has built, and currently maintains, in various locations, within the easement corresponding to the leased railroad lines, and in the easement of the returned railroad lines, installations such as: telephone and electricity lines, fruit packing stations, irrigation pumps, roads, cultivations, channels, irrigation ditches, water and oil pipeline systems, irrigation and drain systems, and fruit transport by cableway, and buildings all these installations are related to its agricultural activities. Consequently, it grants it the right, as long as these installations are maintained operational, to continue to occupy said easement with such installations. After agreement with "THE LESSOR," "THE LESSEE" may build new installations of this type, related to its agricultural activities, within the aforementioned easements. Furthermore, "THE LESSOR" grants to "THE LESSEE" the right to continue using for its land vehicles, as long as these installations are maintained operational, the railroad bridges habilitated in the leased Railroad Complex and in the returned one. The maintenance and, if applicable, the rehabilitation and reconstruction of these bridges, if they are used and required by "THE LESSEE" for its land operations, shall be for the account of "THE LESSEE." All easements and rights granted by "THE LESSOR" to "THE LESSEE" in this Fifth Clause, shall be at no cost for the latter, and, at the end of this Contract or of its extensions, they may be renewed under the same conditions, after agreement between the parties. SIXTH: "THE LESSEE" declares that: It accepts the easements and rights granted by "THE LESSOR" in the previous Clauses, and for the appropriate legal purposes, we sign this Lease Contract, while the respective Public Instrument is being drawn up under the same terms and conditions. In the city of La Lima, Department of Cortes, on the eleventh day of January, nineteen hundred ninety-six. /Seal and signature/ /Signature/ NORBERTO TORRES ARNOLDO MANUEL PALMA ISAACS /Signature/ /Signature/ WITNESS WITNESS WITNESS CERTIFICATE OF ACCURACY Deniza Kudish hereby affirms that she is a professional translator, domiciled at 305 W. 28th St., Apt. 18-G, New York, New York 10001, and that she is thoroughly familiar with the Spanish and English languages, and that she translated the attached contract entered into between Tela Railroad Company and Ferrocarril Nacional de Honduras [the Honduran National Railroad] from the Spanish language into the English language, and that the attached text is a true and correct translation of the original, to the best of her knowledge and belief. /signature/ Deniza Kudish This 19th day of March, 1996 EX-10 3 Exhibit 10-D CHIQUITA BRANDS INTERNATIONAL, INC. 1986 STOCK OPTION AND INCENTIVE PLAN (as amended and restated March 25, 1992, further amended by the Board of Directors on February 9, 1994, and on December 14, 1994) CHIQUITA BRANDS INTERNATIONAL, INC. 1986 STOCK OPTION AND INCENTIVE PLAN T A B L E O F C O N T E N T S I. OBJECTIVES 1 II. DEFINITIONS 1 III. ADMINISTRATION 3 3.1 The Committee 3 3.2 Awards 3 3.3 Guidelines 4 3.4 Delegation of Authority 4 3.5 Decisions Final 4 IV. SHARES SUBJECT TO PLAN 4 4.1 Shares 4 4.2 Adjustment Provisions 4 4.3 Dissolution or Liquidation 5 V. EFFECTIVE DATE OF AMENDED PLAN 5 VI. STOCK OPTIONS 5 6.1 Grants 5 6.2 Incentive Stock Options 5 6.3 Replacement Options 6 6.4 Terms of Options 6 6.5 Award of Options to Non-Employee Directors 7 VII. STOCK APPRECIATION RIGHTS 8 7.1 Grant 8 7.2 Term 8 7.3 Exercise 8 7.4 Payment 8 7.5 Non-Transferability and Termination 9 VIII. RESTRICTED AND UNRESTRICTED STOCK AWARDS 9 8.1 Grants of Restricted Stock Awards 9 8.2 Terms and Conditions of Restricted Awards 9 8.3 Unrestricted Stock Awards 9 IX. PERFORMANCE AWARDS 9 9.1 Performance Awards 9 9.2 Terms and Conditions of Performance Awards 10 X. NON-TRANSFERABILITY OF AWARDS 10 XI. TERMINATION OF AWARDS 10 11.1 Termination of Awards 10 11.2 Acceleration of Vesting and Extension of Exercise Period Upon Termination 11 XII. TERMINATION OR AMENDMENT OF THIS PLAN 11 12.1 Termination or Amendment 11 XIII. GENERAL PROVISIONS 12 13.1 No Right to Continued Employment 12 13.2 Other Plans 12 13.3 Withholding of Taxes 12 13.4 Reimbursement of Taxes 12 13.5 Governing Law 12 13.6 Liability 12 CHIQUITA BRANDS INTERNATIONAL, INC. 1986 STOCK OPTION AND INCENTIVE PLAN (as amended and restated March 25, 1992, further amended by the Board of Directors on February 9, 1994 and on December 14, 1994) SECTION I. OBJECTIVES The objectives of this 1986 Stock Option and Incentive Plan (the "Plan"), as amended and restated, are to enable Chiquita Brands International, Inc. (the "Company") to compete successfully in retaining and attracting key employees of outstanding ability, to stimulate the efforts of such employees toward the Company's objectives and to encourage the identification of their interests with those of the Company's shareholders. SECTION II. DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: 2.1 "Award" means any form of Stock Option, Stock Appreciation Right, Restricted Stock Award, Unrestricted Stock Award or Performance Award granted under this Plan. 2.2 "Award Agreement" means a written agreement setting forth the terms of an Award. 2.3 "Award Date" or "Grant Date" means the date designated by the Committee as the date upon which an Award is granted. 2.4 "Award Period" or "Term" means the period beginning on an Award Date and ending on the expiration date of such Award. 2.5 "Board" means the Board of Directors of the Company. 2.6 "Code" means the Internal Revenue Code of 1986, as amended, or any successor legislation. Reference to any particular section of the Code includes any successor amendments or replacements of such section. 2.7 "Committee" means the committee appointed by the Board and consisting of two or more Directors, none of whom shall be eligible to receive any Award pursuant to this Plan except as provided in Subsection 6.5. Members of the Committee must qualify as Disinterested Persons within the meaning of Rule 16b-3. 2.8 "Common Stock" means the Company's Capital Stock, $.33 par value. 2.9 "Disability" means a "permanent and total disability" within the meaning of Section 22(e)(3) of the Code. 2.10 "Disinterested Person" means a member of the Board who was not, during the year prior to being appointed to the Committee, or during the period of service as an administrator of this Plan, granted or awarded equity securities pursuant to the Plan or pursuant to any other plan of the Company, except to the extent consistent with the disinterested plan administration requirements under Rule 16b-3. 2.11 "Eligible Employee" means any person (other than one who receives retirement benefits, consulting fees, honorariums, and the like from the Company) (i) who performs services for the Company or a Subsidiary, including any individual who is an officer or director of the Company or a Subsidiary; and (ii) is compensated on a regular basis by the Company or a Subsidiary. Directors who are not full-time employees of the Company or a Subsidiary are not eligible to receive Awards under this Plan, except as set forth in Subsection 6.5. Eligibility under this Plan shall be determined by the Committee. 2.12 "Fair Market Value" means, as of any date, the average of the highest and lowest quoted selling prices of a Share as reported on the New York Stock Exchange Composite Transactions list (or such other consolidated transaction reporting system on which the Shares are primarily traded), or if the Shares were not traded on such day, then the next preceding day on which the Shares were traded, all as reported by such source as the Committee may select. If the Shares are not traded on a national securities exchange or other market system, Fair Market Value shall be set under procedures established by the Committee. 2.13 "Incentive Stock Option" means any Stock Option awarded under Section VI of this Plan intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code or any successor provision. 2.14 "Non-Qualified Stock Option" means any Stock Option awarded under Section VI of this Plan that is not an Incentive Stock Option. 2.15 "Officer" means a person who is considered to be an officer of the Company under Rule 16a-1(f). 2.16 "Option Price" or "Exercise Price" means the price per share at which Common Stock may be purchased upon the exercise of an Option or an Award. 2.17 "Participant" means an Eligible Employee to whom an Award has been made pursuant to this Plan. 2.18 "Replacement Option" means a Non-Qualified Stock Option granted pursuant to Subsection 6.3, upon the exercise of a Stock Option granted pursuant to this Plan where the Option Price is paid with previously owned shares of Common Stock. 2.19 "Restricted Stock" means those shares of Common Stock issued pursuant to a Restricted Stock Award which are subject to the restrictions set forth in the related Award Agreement. 2.20 "Restricted Stock Award" means an award of a fixed number of Shares to a Participant which is subject to forfeiture provisions and other conditions set forth in the Award Agreement. 2.21 "Retirement" means any termination of employment or service on the Board (other than by death or Disability) by an employee or a director who is at least 65 years of age or 55 years of age with at least 10 years of employment with or service on the Board of the Company or a Subsidiary. 2.22 "Rule 16b-3" and "Rule 16a-1(f)" mean Securities and Exchange Commission Regulations 240.16b-3 and 240.16a- 1(f) or any corresponding successor regulations. 2.23 "Share" means one share of the Company's Common Stock. 2.24 "Stock Appreciation Right" or "SAR" means the right to receive, for each unit of the SAR, cash and/or shares of Common Stock equal in value to the excess of the Fair Market Value of one Share on the date of exercise of the SAR over the reference price per share of Common Stock established on the date the SAR was granted. 2.25 "Stock Option" or "Option" means the right to purchase shares of Common Stock (including a Replacement Option) granted pursuant to Section VI of this Plan. 2.26 "Subsidiary" means any corporation, partnership, joint venture, or other entity (i) of which the Company owns or controls, directly or indirectly, 25% or more of the outstanding voting stock (or comparable equity participation and voting power) or (ii) which the Company otherwise controls (by contract or any other means); except that when the term "Subsidiary" is used in the context of an award of an Incentive Stock Option, the term shall have the same meaning given to it in the Code. "Control" means the power to direct or cause the direction of the management and policies of a corporation or other entity. 2.27 "Transfer" means alienation, attachment, sale, assignment, pledge, encumbrance, charge or other disposition; and the terms "Transferred" or "Transferable" have corresponding meanings. SECTION III. ADMINISTRATION 3.1 The Committee. This Plan shall be administered and interpreted by the Committee. 3.2 Awards. The Committee shall have full authority to grant, pursuant to the terms of this Plan, to Eligible Employees: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Unrestricted Stock and (v) Performance Awards. In particular, the Committee shall have the authority: (a) to select the Eligible Employees to whom Awards may be granted; (b) to determine the types and combinations of Awards to be granted to Eligible Employees; (c) to determine the number of Shares or monetary units which may be subject to each Award; (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award (including, but not limited to, any restriction or limitation on transfer, any vesting schedule or acceleration, or any forfeiture provisions or waiver, regarding any Award) and the related Shares, based on such factors as the Committee shall determine; and (e) to modify or waive any restrictions or limitations contained in, and grant extensions to the terms of or accelerate the vestings of, any outstanding Awards as long as such modifications, waivers, extensions or accelerations are not inconsistent with the terms of this Plan, but no such changes shall impair the rights of any Participant without his or her consent. 3.3 Guidelines. The Committee shall have the authority to adopt, alter and repeal administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it deems advisable; to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan; and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any related Award Agreement in the manner and to the extent it deems necessary to carry this Plan into effect. 3.4 Delegation of Authority. The Committee may delegate to one or more Officers of the Company the authority of the Committee under Section 3.2 (except in respect of Awards to Officers) and may delegate its administrative duties to one or more individuals who are Officers or employees of the Company. 3.5 Decisions Final. Any action, decision, interpretation or determination by or at the direction of the Committee concerning the application or administration of this Plan shall be final and binding upon all persons and need not be uniform with respect to its determination of recipients, amount, timing, form, terms or provisions of Awards. SECTION IV. SHARES SUBJECT TO PLAN 4.1 Shares. Subject to adjustment as provided in Subsection 4.2, the aggregate number of Shares which may be issued under this Plan shall not exceed fifteen million (15,000,000) Shares. If any Award granted under this Plan shall expire, terminate or be canceled for any reason without having been exercised in full, the number of unacquired Shares subject to such Award shall again be available for future grants; provided, however, that the reuse of such Shares is not prohibited under Rule 16b-3. 4.2 Adjustment Provisions. (a) If the Company shall at any time change the number of issued Shares without new consideration to the Company (such as by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Shares) or make a distribution of cash or property which has a substantial impact on the value of issued Shares, the total number of Shares reserved for issuance under the Plan shall be appropiately adjusted and the number of Shares covered by each outstanding Award and the reference price or Fair Market Value for each outstanding Award shall be adjusted so that the aggregate consideration payable to the Company and the value of each such Award shall not be changed. (b) Notwithstanding any other provision of the Plan, and without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance, continuation or assumption of Awards or provide for other equitable adjustments after changes in the Shares resulting from any merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence in which the Company is the continuing or surviving corporation, upon such terms and conditions as it may deem equitable and appropriate. 4.3 Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company or any merger, consolidation or combination in which the Company is not the surviving corporation or in which the outstanding Shares of the Company are converted into cash, other securities or other property, each outstanding Award shall terminate as of a date fixed by the Committee, provided that not less than 20 days' written notice of the date of expiration shall be given to each holder of an Award and each such holder shall have the right during such period following notice to exercise the Award as to all or any part of the Shares for which it is exercisable at the time of such notice. SECTION V. EFFECTIVE DATE OF AMENDED PLAN This Plan was amended and restated by the Board on March 25, 1992 and shall become effective, as amended, upon its approval by the holders of a majority of the shares of Common Stock represented, in person or by proxy, at the Company's Annual Meeting of Shareholders on May 14, 1992. This Plan shall continue in effect until December 31, 2015 unless terminated sooner by the Board pursuant to Section XII. SECTION VI. STOCK OPTIONS 6.1 Grants. Stock options may be granted alone or in addition to other Awards granted under this Plan. Each Option granted shall be designated as either a Non-Qualified Stock Option or an Incentive Stock Option and in each case such Option may or may not include Stock Appreciation Rights. One or more Stock Options and/or Stock Appreciation Rights may be granted to any Eligible Employee, except that no person shall receive during any twelve month period Stock Options and Stock Appreciation Rights covering more than 300,000 shares of Common Stock. 6.2 Incentive Stock Options. (a) Award Agreement. Any Award Agreement relating to an Incentive Stock Option shall contain such terms and conditions as are required for the Option to be an "incentive stock option" as that term is defined in Section 422 of the Code. (b) Ten Percent Shareholder. An Incentive Stock Option shall not be awarded to any person who, at the time of the Award, owns Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Subsidiaries. (c) Qualification under the Code. Notwithstanding anything in this Plan to the contrary, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under Section 422 of the Code. 6.3 Replacement Options. The Committee may provide either at the time of grant or subsequently that an Option shall include the right to acquire a Replacement Option upon the exercise of such Option (in whole or in part) prior to Participant's termination of employment if the payment of the Option Price is paid in Shares. In addition to any other terms and conditions the Committee deems appropriate, the Replacement Option shall be subject to the following terms: (i) the number of Shares subject to the Replacement Option shall not exceed the number of whole Shares used to satisfy the Option Price of the original Option and the number of whole Shares, if any, withheld by the Company as payment for withholding taxes in accordance with Subsection 13.3; (ii) the Replacement Option Grant Date will be the date of the exercise of the original Option; (iii) the Option Price per share shall be the Fair Market Value of a Share on the Replacement Option Grant Date; (iv) the Replacement Option shall be exercisable no earlier than one year after the Replacement Option Grant Date; (v) the Term of the Replacement Option will not extend beyond the Term of the original Option; and (vi) the Replacement Option shall be a Non-Qualified Stock Option and shall otherwise meet all conditions of this Subsection 6.3. The Committee may without the consent of the Participant rescind the right to receive a Replacement Option at any time prior to an Option being exercised. 6.4 Terms of Options. Except as otherwise required by Subsections 6.2, 6.3 and 6.5, Options granted under this Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: (a) Option Price. The Option Price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant, except that no Incentive Stock Option may be granted for an Option Price less than 100% of Fair Market Value on the Grant Date. (b) Option Term. The Term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than ten years after its Award Date, and no Non-Qualified Stock Option shall be exercisable more than 20 years after its Award Date. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee; provided, however, that Options may not be exercised as to less than 100 Shares at any time unless the number exercised is the total number available for exercise at that time under the terms of the Option. (d) Method of Exercise. Stock Options may be exercised in whole or in part at any time during the Option Term, by giving written notice of exercise to the Company specifying the number of Shares to be purchased. Such notice shall be accompanied by payment in full of the Option Price in such form as the Committee may accept. If and to the extent determined by the Committee at or after grant, payment in full or in part may also be made in the form of Common Stock owned by the Participant for at least six months prior to exercise or by reduction in the number of Shares issuable upon exercise based, in each case, on the Fair Market Value of the Common Stock on the payment date. (e) Non-Transferability of Options. Stock Options shall be Transferable only to the extent provided in Section X of this Plan. (f) Termination. Stock Options shall terminate in accordance with Section XI of this Plan. (g) Buyout and Settlement Provisions. The Committee may at any time offer to buy out an Option previously granted, based on such terms and conditions as the Committee shall establish. The Committee may also substitute new Stock Options for previously granted Stock Options having higher Option Prices than the new Stock Options being substituted therefor. 6.5 Award of Options to Non-Employee Directors. (a) Grants. The Company shall make the following grants of Stock Options to non-employee directors under this Plan: (i) On the date on which a person who is not a full-time employee of the Company or a Subsidiary first becomes a director of the Company (a "non-employee director"), whether by election or appointment, that non-employee director shall automatically be granted Non-Qualified Stock Options for 10,000 Shares. (ii) Each non-employee director who has served on the Board at least six months shall automatically receive a grant of Non- Qualified Stock Options for 10,000 Shares. The award shall be made on the same date on which the Committee decides the total number of stock options to be granted to employees in connection with the Company's annual total compensation review." (b) Terms and Conditions of Options Granted to Non-Employee Directors. (i) Term. The Term of all Options shall be 20 years from the Award Date of the Option. (ii) Option Price. The Option Price of all Options shall be the Fair Market Value of a Share on the Award Date. (iii) Vesting. All Options shall vest over a ten year period with 9% of the Option Shares immediately exercisable on the Award Date and an additional 9% exercisable on each anniversary of the Award Date thereafter until the tenth anniversary when the remaining 10% of the Option Shares shall be exercisable. (iv) Method of Exercise. All Options shall be exercisable in the manner provided in Subsection 6.4(d) except that, without further action by the Committee, non-employee directors may make payment of the Option Price by the delivery of Shares owned by the director for at least six months prior to exercise or by a reduction in the number of Shares issuable upon such exercise, and such directors may also use the provisions of Subsection 13.3. (v) Non-transferability and Termination. All Options shall be Transferable only to the extent provided in Section X of this Plan and shall terminate in accordance with Section XI of this Plan, except that the timing provisions of Subsections 11.1(b) and 11.1(c) may not be varied by Committee determination. (c) Amendment. Notwithstanding any other provision of this Plan, the provisions of this Subsection 6.5 may not be amended by the Board more frequently than once every six months other than to comply with changes in the Code or the rules thereunder. SECTION VII. STOCK APPRECIATION RIGHTS 7.1 Grant. A Stock Appreciation Right may be granted either with or without reference to all or any part of a Stock Option. A "Tandem SAR" means an SAR granted with reference to a Stock Option (the "Reference Option"). A "Non-Tandem SAR" means an SAR granted without reference to a Stock Option. If the Reference Option is a Non-Qualified Stock Option, a Tandem SAR may be granted at or after the date of the Reference Option; if the Reference Option is an Incentive Stock Option, the Grant Date of a Tandem SAR must be the same as the Grant Date of the Reference Option. Any SAR shall have such terms and conditions, not inconsistent with this Plan, as are established by the Committee in connection with the Award. 7.2 Term. A Tandem SAR shall terminate and no longer be exercisable upon the termination of its Reference Option. A Non-Tandem SAR may have a term no longer than 20 years from its Grant Date. 7.3 Exercise. A Tandem SAR may only be exercisable at the times and, in whole or in part, to the extent that its Reference Option is exercisable. The exercise of a Tandem SAR shall automatically result in the surrender of the applicable portion of its Reference Option. A Non-Tandem SAR shall be exercisable in whole or in part as provided in its Award Agreement. Written notice of any exercise must be given in the form prescribed by the Committee. 7.4 Payment. For purposes of payment of an SAR, the reference price per Share shall be the Option Price of the Reference Option in the case of a Tandem SAR and shall be the Fair Market Value of a Share on the Grant Date in the case of a Non-Tandem SAR. The Committee shall determine the form of payment. 7.5 Non-Transferability and Termination. Stock Appreciation Rights shall be Transferable only to the extent provided in Section X of this Plan and shall terminate in accordance with Section XI of this Plan. SECTION VIII. RESTRICTED AND UNRESTRICTED STOCK AWARDS 8.1 Grants of Restricted Stock Awards. The Committee may, in its discretion, grant one or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock Award shall specify the number of Shares to be issued to the Participant, the date of such issuance, the price, if any, to be paid for such Shares by the Participant and the restrictions imposed on such Shares. The Committee may grant Awards of Restricted Stock subject to the attainment of specified performance goals, continued employment or such other limitations or restrictions as the Committee may determine. 8.2 Terms and Conditions of Restricted Awards. Restricted Stock Awards shall be subject to the following provisions: (a) Issuance of Shares. Shares of Restricted Stock may be issued immediately upon grant or upon vesting as determined by the Committee. (b) Stock Powers and Custody. If shares of Restricted Stock are issued immediately upon grant, the Committee may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to the Restricted Stock covered by such an Award. The Committee may also require that the stock certificates evidencing such shares be held in custody by the Company until the restrictions on them shall have lapsed. (c) Shareholder Rights. Unless otherwise determined by the Committee at the time of grant, Participants receiving Restricted Stock Awards shall not be entitled to dividend or voting rights for the Restricted Shares until they are fully vested. 8.3 Unrestricted Stock Awards. The Committee may make awards of unrestricted Common Stock to key Eligible Employees in recognition of outstanding achievements by such employees. Unrestricted Shares issued on a bonus basis under this Subsection 8.3 may be issued for no cash consideration. Each certificate for unrestricted Common Stock shall be registered in the name of the Participant and delivered immediately to the Participant. SECTION IX. PERFORMANCE AWARDS 9.1 Performance Awards. (a) Grant. The Committee may, in its discretion, grant Performance Awards to Eligible Employees. A Performance Award shall consist of the right to receive either (i) Common Stock or cash of an equivalent value, or a combination of both, at the end of a specified Performance Period (defined below) or (ii) a fixed dollar amount payable in cash or Shares, or a combination of both, at the end of a specified Performance Period. The Committee shall determine the Eligible Employees to whom and the time or times at which Performance Awards shall be granted, the number of Shares or the amount of cash to be awarded to any person, the duration of the period (the "Performance Period") during which, and the conditions under which, a Participant's Performance Award will vest, and the other terms and conditions of the Performance Award in addition to those set forth in Subsection 9.2. (b) Criteria for Award. The Committee may condition the grant or vesting of a Performance Award upon the attainment of specified performance goals; the appreciation in the Fair Market Value, book value or other measure of value of the Common Stock; the performance of the Company based on earnings or cash flow; or such other factors or criteria as the Committee shall determine. 9.2 Terms and Conditions of Performance Awards. Performance Awards granted pursuant to this Section IX shall be subject to the following terms and conditions: (a) Dividends. Unless otherwise determined by the Committee at the time of the grant of the Award, amounts equal to any dividends declared during the Performance Period with respect to any Shares covered by a Performance Award will not be paid to the Participant. (b) Payment. Subject to the provisions of the Award Agreement and this Plan, at the expiration of the Performance Period, share certificates, cash or both (as the Committee may determine) shall be delivered to the Participant, or his or her legal representative or guardian, in a number or an amount equal to the vested portion of the Performance Award. (c) Non-Transferability. Performance Awards shall not be Transferable except in accordance with the provisions of Section X of this Plan. (d) Termination of Employment. Subject to the applicable provisions of the Award Agreement and this Plan, upon termination of a Participant's employment with the Company or a Subsidiary for any reason during the Performance Period for a given Award, the Performance Award in question will vest or be forfeited in accordance with the terms and conditions established by the Committee. SECTION X. NON-TRANSFERABILITY OF AWARDS No Award or benefit payable under this Plan shall be Transferable by the Participant during his or her lifetime and may not be assigned, exchanged, pledged, transferred or otherwise encumbered or disposed of except by a domestic relations order pursuant to Section 414(p)(1)(B) of the Code, or by will or the laws of descent and distribution. Awards shall be exercisable during a Participant's lifetime only by the Participant or by the Participant's guardian or legal representative. SECTION XI. TERMINATION OF AWARDS 11.1 All Awards issued under this Plan shall terminate as follows: (a) Termination at Expiration of Term. During any period of continuous employment with the Company or a Subsidiary, an Award will be terminated only if it is fully exercised or if it has expired by its terms. For purposes of this Plan, any leave of absence approved by the Company shall not be deemed to be a termination of employment. (b) Termination by Death, Disability or Retirement. If a Participant's employment by the Company or a Subsidiary terminates by reason of death, Disability or Retirement, any Award held by such Participant, unless otherwise determined by the Committee at grant, shall be fully vested and may thereafter be exercised by the Participant or by the Participant's beneficiary or legal representative, for a period of one year (or such longer period as the Committee may specify at or after grant) from the date of such death, Disability or Retirement or until the expiration of the stated term of such Award, whichever period is shorter. (c) Other Termination. Unless otherwise determined by the Committee at or after grant, if a Participant's employment by the Company or a Subsidiary terminates for any reason other than death, Disability or Retirement, the Award will terminate on the earlier to occur of the stated expiration date or 90 calendar days after termination of employment. If a Participant dies during the 90 day period following termination of employment, any unexercised Award held by the Participant shall be exercisable, to the full extent that such Award was exercisable at the time of death, for a period of 90 calendar days from the date of death or until the expiration of the stated term of the Award, whichever occurs first. 11.2 Acceleration of Vesting and Extension of Exercise Period Upon Termination. (a) Notwithstanding anything contained in this Section XI, upon the termination of employment of a Participant who is not an Officer or Director of the Company, for reasons other than death, Disability or Retirement, either the Committee or the President of the Company may, in its or his sole discretion, accelerate the vesting of all or part of any Awards held by such terminated Participant so that such Awards are fully or partially exercisable as of the date of termination, and may also extend the permitted exercise period of such Awards for up to five years from the date of termination, but in no event longer than the original expiration date of such Award. In the case of a terminated Participant who is an Officer, such discretion shall be exercised, if at all, only by the Committee. (b) Except as provided in Subsection 4.2, in no event will the continuation of the exercisability of an Award beyond the date of termination of employment allow the Eligible Employee, or his or her beneficiaries or heirs, to accrue additional rights under the Plan, or to purchase more Shares through the exercise of an Award than could have been purchased on the date that employment was terminated. SECTION XII. TERMINATION OR AMENDMENT OF THIS PLAN 12.1 Termination or Amendment. The Board may at any time, amend, in whole or in part, any or all of the provisions of this Plan, or suspend or terminate it entirely; provided, however, that, unless otherwise required by law, the rights of a Participant with respect to any Awards granted prior to such amendment, suspension or termination may not be impaired without the consent of such Participant; and, provided further, no amendment may be made, with or without shareholder approval, which would cause this Plan to lose its exemption under Rule 16b-3 and no amendment may be made without shareholder approval which would increase the number of shares available under this Plan. SECTION XIII. GENERAL PROVISIONS 13.1 No Right to Continued Employment. Neither the establishment of the Plan nor the granting of any Award hereunder shall confer upon any Participant any right to continue in the employ of the Company or any Subsidiary or interfere in any way with the right of the Company or any Subsidiary to terminate such employment at any time. 13.2 Other Plans. In no event shall the value of, or income arising from, any Awards issued under this Plan be treated as compensation for purposes of any pension, profit sharing, life insurance, disability or other retirement or welfare benefit plan now maintained or hereafter adopted by the Company or any Subsidiary, unless such plan specifically provides to the contrary. 13.3 Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any Shares or the payment of any cash to a Participant, payment by the Participant of any Federal, state, local or foreign taxes required by law to be withheld. The Committee may permit any such withholding obligation to be satisfied by reducing the number of Shares otherwise deliverable or by accepting the delivery of previously owned Shares. Any fraction of a Share required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. 13.4 Reimbursement of Taxes. The Committee may provide in its discretion that the Company may reimburse a Participant for federal, state, local and foreign tax obligations incurred as a result of the grant or exercise of an Award issued under this Plan. 13.5 Governing Law. This Plan and actions taken in connection with it shall be governed by the laws of the State of New Jersey, without regard to the principles of conflict of laws. 13.6 Liability. No employee of the Company nor member of the Committee or the Board shall be liable for any action or determination taken or made in good faith with respect to the Plan or any Award granted hereunder and, to the fullest extent permitted by law, all employees and members shall be indemnified by the Company for any liability and expenses which may occur through any claim or cause of action arising under or in connection with this Plan or any Awards granted under this Plan. EX-10 4 Exhibit 10-F AMENDED AND RESTATED CHIQUITA BRANDS INTERNATIONAL, INC. DEFERRED COMPENSATION PLAN Effective as of January 1, 1992 (as amended through May 30, 1995) Amended and Restated Chiquita Brands International, Inc. Deferred Compensation Plan TABLE OF CONTENTS Section Page 1.0 Establishment and Purpose . . . . . . . . . . . . . . . 1 2.0 Plan Objectives . . . . . . . . . . . . . . . . . . . . 1 3.0 Definitions . . . . . . . . . . . . . . . . . . . . . . 1 4.0 Eligibility . . . . . . . . . . . . . . . . . . . . . . 3 5.0 Participation . . . . . . . . . . . . . . . . . . . . . 3 6.0 Deferred Compensation Account . . . . . . . . . . . . . 3 7.0 Deferral Sources and Matching Contributions . . . . . . 3 8.0 Deferral Term . . . . . . . . . . . . . . . . . . . . . 4 9.0 Investment Indices . . . . . . . . . . . . . . . . . . . 4 10.0 Payment Form and Method . . . . . . . . . . . . . . . . 5 11.0 Account Statement . . . . . . . . . . . . . . . . . . . 6 12.0 Account Distribution . . . . . . . . . . . . . . . . . . 6 13.0 Hardship Distributions . . . . . . . . . . . . . . . . . 7 14.0 Beneficiary Designation . . . . . . . . . . . . . . . . 7 15.0 General Provisions . . . . . . . . . . . . . . . . . . . 8 Amended and Restated Chiquita Brands International, Inc. Deferred Compensation Plan (as amended through May 30, 1995) 1.0 Establishment and Purpose 1.1 Effective January 1, 1992, Chiquita Brands International, Inc., a New Jersey corporation, adopts this Amended and Restated Chiquita Brands International, Inc. Deferred Compensation Plan to enable eligible Associates of the Company and its subsidiaries and affiliates to elect deferral of payment of their compensation. 2.0 Plan Objectives 2.1 The purpose of this Plan is to achieve the following objectives: (a) Maximize Chiquita Savings and Investment Plan contributions; (b) Receive full Company matching contributions on Excess 401(k) Deferrals; (c) Accumulate income for retirement; and (d) Provide opportunity for financial growth. 3.0 Definitions When used in this Plan, the following words and phrases shall have the following meanings: 3.1 Account means the record maintained for each Participant to which all deferrals, investment indices and distributions are credited and debited for each Plan Year. 3.2 Administrator means the Employee Benefits Committee appointed by the Company's Board of Directors. 3.3 Annual Bonus means any direct lump-sum payment made in addition to a Participant's Base Salary. Applicable annual bonuses include (but are not limited to) the Management Incentive Plan, Quality and Sales Incentive Plan bonuses. 3.4 Associate means an employee of the Company. 3.5 Base Salary means base pay, excluding any bonuses, commissions and other extraordinary payments. 3.6 Company means Chiquita Brands International, Inc. and (unless the context indicates otherwise) its subsidiaries and affiliates. 3.7 Compensation means Base Salary and Annual Bonus earned for services rendered during a given Plan Year. 3.8 Disabled and Disability mean that a Participant, as a result of accident or illness, is physically, mentally or emotionally unable to perform the duties for which the Participant is employed, and in the Administrator's opinion is likely to remain so Disabled for at least one year. The Administrator shall make all determinations as to whether a Participant is Disabled and shall use such evidence, including independent medical reports and data, as the Administrator deems necessary and desirable. 3.9 Excess 401(k) Deferral means the excess, if any, of (i) the amount a Participant elects to defer under the Chiquita Savings and Investment Plan, over (ii) the limitation (as adjusted) on deferrals contained in Section 402(g) of the Internal Revenue Code of 1986, as amended. 3.10 Expiration Date means, with respect to each annual deferral under Section 7.1, the earlier of (i) the last day of the year to which a Participant elects to defer Compensation pursuant to Section 8.1, or (ii) the pay date for the payroll period in which a Participant dies, becomes Disabled or terminates employment with the Company. 3.11 Matching Contributions means, with respect to each Participant in a Plan Year, Company contributions to the Plan, in respect of the Participant's contributions under Section 7.1, equal to the difference, if any, between the following two amounts: (i) the total of the Basic Matching Contribution, Discretionary Matching Contribution and Stock Incentive Matching Contribution (the "Contributions") such Participant would have received for such Plan Year under the Chiquita Savings and Investment Plan (the "Savings Plan"), up to the 6% limit imposed by the Savings Plan, if such Contributions were determined without applying the limitations on compensation and contributions in Sections 401(a)(17) and 402(g) of the Internal Revenue Code of 1986, as amended, and (ii) the actual Contributions on behalf of such Participant under the Savings Plan for that Plan Year. 3.12 Participant means an officer or other highly compensated Associate who is selected or entitled to participate and participates in the Plan for a designated Plan Year. 3.13 Plan means this Amended and Restated Chiquita Brands International, Inc. Deferred Compensation Plan. 3.14 Plan Year means the calendar year, January 1 through December 31. 3.15 Prime Rate means the interest rate formally announced by Provident Bank to be the lowest available at a particular time to its most credit-worthy customers. 3.16 Stock means Chiquita Brands International, Inc. Capital Stock, $.33 par value. 3.17 Stock Price means the average of the high and low prices of the Stock on the New York Stock Exchange on a given day. 4.0 Eligibility 4.1 Officers and other highly compensated Associates of the Company will be eligible to become Participants in the Plan either through annual invitation by the President of the Company or through an employment agreement approved by the President. 5.0 Participation 5.1 A Participant elects to participate in the Plan by delivering to the Administrator, before the beginning of each Plan Year, a properly completed enrollment form. 5.2 The enrollment form shall conform to the terms and conditions of the Plan. 6.0 Deferred Compensation Account 6.1 Each Plan Year a deferred compensation Account will be established for each Participant. 6.2 All Compensation deferred by the Participant (including all Excess 401(k) Deferrals), all increases or decreases in the value of the Account resulting from the investment index or indices chosen by the Participant, all other amounts credited to the Account pursuant to this Plan and all distributions from the Account to the Participant or the Participant's beneficiary(ies) or estate shall be reflected in the Account. 6.3 All Accounts shall be maintained by the Administrator. 7.0 Deferral Sources and Matching Contributions 7.1 At the time of enrollment, a Participant must elect to defer Compensation for services rendered in the next Plan Year consisting, for the purposes of this Plan, of one or more of the following three components: Base Salary, Annual Bonus and Excess 401(k) Deferrals. 7.2 Any Base Salary deferral must be at least 10% of Base Salary. Any Annual Bonus deferral must be at least 20% of each Annual Bonus or $10,000, whichever is less. 7.3 Compensation deferred under this Plan and Excess 401(k) Deferrals shall be credited to the Participant's Account on the date such amounts would have otherwise been paid. 7.4 The deferral sources and amounts elected for a given Plan Year are irrevocable. 7.5 If a Participant in this Plan has elected to participate in the Savings Plan and has Excess 401(k) Deferrals, the Company will make Matching Contributions for that Participant in accordance with Section 3.11. 8.0 Deferral Term 8.1 At the time a Participant elects to defer Compensation, the Participant must also elect the term for which such deferral is made (the "deferral term"). The deferral term for Base Salary or Annual Bonus deferrals must be either a fixed number of years or the date on which the Participant dies, becomes Disabled or terminates employment with the Company for any reason. The deferral term for all Excess 401(k) Deferrals shall always end upon death, Disability or termination of employment for any reason. 8.2 A deferral term that is for a fixed number of years must be in full year increments. 8.3 The deferral terms for deferrals of Base Salary and Annual Bonus may be elected separately and do not have to be the same. 8.4 A deferral term, once elected, is irrevocable. 8.5 Should a Participant die, become Disabled or the Participant's employment with the Company be terminated for any reason before the Expiration Date of a deferral term that is for a fixed number of years, the Participant's Account will be distributed as if the Participant had elected the death, Disability or termination of employment deferral term. 9.0 Investment Indices 9.1 Upon enrollment for a given Plan Year, a Participant must elect the manner in which the Participant's deferrals made during that Plan Year are to be valued. For each deferral source, as defined in Section 7.1, a Participant may elect one or a proportional combination of the following investment indices. The exception to this is the Company's Matching Contributions which shall always be valued using the Stock Index. 9.1.1 Graduated Interest Index (a) Prior to the Expiration Date, each deferral amount shall be credited to the Account and interest, accruing from the date on which any amount is so credited to the Account, shall be credited quarterly in accordance with the Graduated Interest Rate Schedule for the respective Plan Year. 9.1.2 Stock Index (a) Prior to the Expiration Date, each deferral and/or Company Matching Contribution shall be credited to the Account. Each amount so credited shall then be converted into units equivalent to the number of shares of Stock purchasable on the date on which the deferred amount would otherwise have been paid, or the date on which the Matching Contribution is credited, based on the Stock Price for that date. (b) When a dividend is declared, the Account shall be credited with an amount equivalent to the dividend paid on the Stock. The total dividend amount shall be calculated based on the equivalent units in the Account on the declaration date. The total dividend amount shall then be converted into additional units based on the Stock Price on the dividend declaration date. Appropriate adjustments shall also be made to the Account to reflect any stock splits, stock dividends, combinations or exchanges of shares or other similar capital adjustments by the Company relating to the Stock. (c) The total value of the Account shall be based on the Stock Price on any given date. (d) In the event that the Stock ceases to be traded on the New York Stock Exchange or the Company is merged into or consolidated with another entity, any Stock Index portion of a Participant's Account shall be valued based on the Stock Price on the last day the Stock is actively traded on the New York Stock Exchange. The resulting amount shall thereafter be valued according to the Graduated Interest Rate Schedule that corresponds to the Plan Year in which the principal amount was deferred. The deferral term will remain as initially designated. 9.2 An investment index election for deferrals in a given Plan Year is irrevocable. 10.0 Payment Form and Method 10.1 All payments from the Plan shall be made only in the form of cash. 10.2 At the time of enrollment for a given Plan Year, a Participant shall elect the method of payment desired upon the Expiration Date of the deferral term(s) elected. 10.3 A Participant may choose either a lump sum or an equal monthly installment payment method for any deferrals of Compensation earned during any Plan Year prior to 1996. Only lump sum payments will be available (and installment payments will not be available) for any deferrals of Compensation earned on or after January 1, 1996. 10.4 The payment method elected shall cover all deferral terms, from all deferral sources, for the respective Plan Year. 10.5 Should a Participant elect equal monthly installments, the Participant must elect at the time of enrollment the length of time over which installments are to be received. 10.6 The payment method and the installment period elected for deferrals in a given Plan Year are irrevocable. 11.0 Account Statement 11.1 Account statements will be sent periodically (at least annually) to each Participant until the Participant's Account has been completely distributed. 11.2 The Stock Price on the last business day of each quarter will be used for valuing the units accrued pursuant to Section 9.1.2 and valued using the Stock Index method. 11.3 The appropriate Graduated Interest Rate Schedules will be used for crediting the deferrals accrued pursuant to Section 9.1.1 and valued using the Graduated Interest Index method. 12.0 Account Distribution 12.1 Payment will begin on the first payroll day of the month which first follows a 30-day processing period beginning on the Expiration Date. For lump sum payments no interest or credits will accrue during the 30-day processing period. For installment payments, interest will accrue at the Prime Rate during the 30- day processing period. 12.2 Applicable federal, state, local and foreign taxes will be deducted from the gross amount of the payment. 12.3 Equal monthly installments shall be at least $1,000. The Administrator, therefore, shall have the right to reduce the length of the installment period to that which provides an equal monthly installment of at least $1,000. 12.4 The ongoing processing of an equal installment distribution shall be as follows: 12.4.1 The Participant's Account shall no longer be valued based on the Graduated Interest Index or Stock Index. 12.4.2 Interest shall be credited quarterly throughout the distribution period, based on the quarter-end Prime Rate, for both Graduated Interest Index and Stock Index balances. 12.4.3 The Administrator may accelerate payment of any amount remaining in the Account to the extent that the amounts being paid are not sufficiently large enough to warrant the administrative expense being incurred. 13.0 Hardship Distributions 13.1 Distribution of payments from a Participant's Account prior to the Expiration Date shall be made only if the Administrator, after consideration of a written application by the Participant, determines that the Participant has sustained financial hardship. 13.2 A Participant who is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 is not eligible to receive a hardship distribution from any funds that are valued using the Stock Index. 13.3 Any hardship distribution shall be withdrawn from the Participant's Account starting with the most current Plan Year, continuing in reverse chronological order. 13.4 Applicable federal, state, local and foreign taxes will be deducted from the gross amount of the payment. 14.0 Beneficiary Designation 14.1 A Participant shall have the right to designate one or more beneficiaries and to change any beneficiary previously designated. 14.2 A Participant shall submit his or her beneficiary designation in writing using the beneficiary designation portion of the enrollment form. The Participant shall deliver the completed form to the Administrator. 14.3 The most recently dated and filed beneficiary designation shall cancel all prior designations. 14.4 In the event of the Participant's death before or after the commencement of payments from the Account, the amount otherwise payable to the Participant shall be paid to the designated beneficiary(ies) or, if no beneficiary, to the estate, according to the provisions of Section 12.0, as applicable. 15.0 General Provisions 15.1 Participant's Rights Unsecured. The right of any Participant to receive payments under the provisions of this Plan shall be an unsecured claim against the general assets of the Company. It is not required or intended that the amounts credited to the Participant's Account be segregated on the books of the Company or be held by the Company in trust for a Participant and a Participant shall not have any claim to or against a specific asset or assets of the Company. All credits to an Account are for bookkeeping purposes only. 15.2 Non-assignability. The right to receive payments shall not be transferrable or assignable by a Participant. Any attempted assignment or alienation of payments shall be void and of no force or effect. 15.3 Administration. The Administrator shall have the authority to adopt rules, regulations and procedures for carrying out this Plan, and shall interpret, construe and implement the provisions of the Plan according to the laws of the State of Ohio. 15.4 Amendment and Termination. The Company expressly reserves the sole and exclusive right to amend, modify, or terminate this Plan at any time by action of the Board of Directors of the Company or, to the extent it has delegated such authority, by action of the Employee Benefits Committee. Any amendment, modification, or termination shall be in a writing authorized by the Board of Directors or the Employee Benefits Committee, as the case may be, and signed by an officer of the Company. The Company's right of amendment, modification, or termination shall not require the assent, concurrence, or any other action by any subsidiary or affiliate of the Company even though actions by the Company may relate to persons employed by a subsidiary or affiliate. However, no amendment, modification or termination of this Plan shall adversely affect any Participant's accrued rights arising from any election to defer Compensation made prior to such amendment, modification or termination of the Plan. 15.5 Construction. The singular shall also include the plural where appropriate. 15.6 Employment Rights. This Plan does not constitute a contract of employment and participation in the Plan will not give any Participant the right to be retained in the employ of the Company. 15.7 Annual Bonus Rights. This Plan does not confer the right for a Participant to receive an Annual Bonus. EX-11 5
CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) Year Ended December 31, 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- A. Primary earnings (loss) per common share: - - ------------------------------ Income (loss) from continuing operations $27,969 $(84,311) $(51,081) $(221,708) $110,909 Dividends on Series A preferred stock (8,266) (7,232) -- -- -- -------- -------- -------- -------- -------- Income (loss) from continuing operations attributable to common shares 19,703 (91,543) (51,081) (221,708) 110,909 Discontinued operations (11,197) 35,611 -- (62,332) 17,586 -------- -------- -------- -------- -------- Income (loss) attributable to common shares before extraordinary item 8,506 (55,932) (51,081) (284,040) 128,495 Extraordinary loss from debt refinancing (7,560) (22,840) -- -- -- -------- -------- -------- -------- -------- Net income (loss) attributable to common shares $946 $(78,772) $(51,081) $(284,040) $128,495 ======== ======== ======== ======== ======== Shares used in calculation of per share data: Weighted average common and equivalent Series C preference shares outstanding 53,647 52,033 51,427 51,804 47,834 Less restricted common shares (387) -- -- -- -- Dilutive effect of assumed exercise of stock options and warrants 410 -- -- -- 2,548 -------- -------- -------- -------- -------- 53,670 52,033 51,427 51,804 50,382 ======== ======== ======== ======== ======== Primary earnings (loss) per common share: - Continuing operations $.37 $(1.76) $(.99) $(4.28) $2.20 - Discontinued operations (.21) .69 -- (1.20) .35 - Extraordinary item (.14) (.44) -- -- -- -------- -------- -------- -------- -------- - Net income (loss) $.02 $(1.51) $(.99) $(5.48) $2.55 ======== ======== ======== ======== ========
CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 11 (cont.) COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) Year Ended December 31, 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- B. Fully diluted earnings (loss) per common share: - - ----------------------------- Income (loss) from continuing operations $27,969 $(84,311) $(51,081) $(221,708) $110,909 Dividends on Series A preferred stock (8,266) (7,232) -- -- -- Additional income as a result of assumed conversion of convertible debentures -- -- -- -- 4,836 -------- -------- -------- -------- ---------- Income (loss) from continuing operations attributable to common shares 19,703 (91,543) (51,081) (221,708) 115,745 Discontinued operations (11,197) 35,611 -- (62,332) 17,586 -------- -------- -------- -------- --------- Income (loss) attributable to common shares before extraordinary item 8,506 (55,932) (51,081) (284,040) 133,331 Extraordinary loss from debt refinancing (7,560) (22,840) -- -- -- -------- -------- -------- -------- --------- Net income (loss) attributable to common shares $946 $(78,772) $(51,081) $(284,040) $133,331 ======== ======== ======== ======== ======== Shares used in calculation of per share data: Weighted average common and equivalent Series C preference shares outstanding 53,647 52,033 51,427 51,804 47,834 Less restricted common shares (355) -- -- -- -- Dilutive effect of assumed exercise of options and warrants and assumed conversion of convertible subordinated debentures 469 -- -- -- 5,078 -------- -------- -------- -------- --------- 53,761 52,033 51,427 51,804 52,912 ======== ======== ======== ======== ======== Fully diluted earnings (loss) per common share: - Continuing operations $.37 $(1.76) $(.99) $(4.28) $2.19 - Discontinued operations (.21) .69 -- (1.20) .33 - Extraordinary item (.14) (.44) -- -- -- -------- -------- -------- -------- --------- - Net income (loss) $.02 $(1.51) $(.99) $(5.48) $2.52 ======== ======== ======== ======== ========
EX-12 6
EXHIBIT 12 CHIQUITA BRANDS INTERNATIONAL, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (In thousands, except ratio amounts) Year Ended December 31, 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Earnings: Income (loss) from continuing operations before income taxes $41,869 $(70,811) $(39,081)$(216,708) $160,009 Interest expense 163,513 167,464 169,789 155,036 88,406 Portion of rentals representing interest cost 43,464 45,097 58,499 85,810 74,070 Amortization of capitalized interest 4,158 4,043 3,745 3,010 1,900 Undistributed share of income of less-than- fifty percent owned investees (2,963) (4,110) (1,429) (3,588) (4,352) -------- -------- -------- -------- -------- $250,041 $141,683 $191,523 $23,560 $320,033 ======== ======== ======== ======== ======== Fixed Charges: Interest expense $163,513 $167,464 $169,789 $155,036 $88,406 Capitalized interest 700 3,900 8,000 21,400 23,000 Portion of rentals representing interest cost 43,464 45,097 58,499 85,810 74,070 -------- -------- -------- -------- -------- $207,677 $216,461 $236,288 $262,246 $185,476 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 1.20 (a) (a) (a) 1.73 ======== ======== Earnings $250,041 $141,683 $191,523 $23,560 $320,033 ======== ======== ======== ======== ======== Fixed charges $207,677 $216,461 $236,288 $262,246 $185,476 Preferred stock dividends 8,266 10,961 4,278 778 -- -------- -------- -------- -------- -------- $215,943 $227,422 $240,566 $263,024 $185,476 ======== ======== ======== ======== ======== Ratio of earnings to combined fixed charges and preferred stock dividends 1.16 (b) (b) (b) 1.73 ======== ========
(a) Fixed charges exceeded earnings by $74,778 in 1994, $44,765 in 1993 and $238,686 in 1992. (b) Combined fixed charges and preferred stock dividends exceeded earnings by $85,739 in 1994, $49,043 in 1993 and $239,464 in 1992. EX-13 7 FINANCIAL REPORT EXHIBIT 13 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, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flow for each of the three years in the period ended December 31, 1995. These financial statements, appearing on pages 10 through 22, 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, 1995 and 1994 and the consolidated results of their operations and their cash flow for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cincinnati, Ohio February 26, 1996 -5-
SELECTED FINANCIAL DATA Chiquita Brands International, Inc. and Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) 1995 1994 1993 1992 1991 - - ------------------------------------------------------------------------------------------------------------ FINANCIAL CONDITION Working capital $366,893 $230,434 $266,793 $482,338 $960,093 Capital expenditures 64,640 136,981 196,554 472,273 395,641 Total assets 2,623,533 2,774,239 2,722,824 2,873,699 2,937,344 Capitalization Short-term debt 172,333 221,051 192,207 229,286 187,821 Long-term debt 1,242,046 1,364,836 1,438,378 1,411,319 1,202,839 Shareholders' equity 672,207 644,809 584,069 667,962 967,925 ================================================================================================ OPERATIONS Net sales $2,565,992 $2,505,826 $2,532,925 $2,723,250 $2,604,128 Operating income (loss) * 175,770 71,185 103,848 (96,588) 197,818 Income (loss) from continuing operations 27,969 (84,311) (51,081) (221,708) 110,909 Discontinued operations (11,197) 35,611 -- (62,332) 17,586 Income (loss) before extraordinary item 16,772 (48,700) (51,081) (284,040) 128,495 Net income (loss)* 9,212 (71,540) (51,081) (284,040) 128,495 ================================================================================================ SHARE DATA Average number of common shares outstanding 53,670 52,033 51,427 51,804 50,382 Earnings (loss) per common share: Primary - Continuing operations $.37 $(1.76) $(.99) $(4.28) $2.20 - Discontinued operations (.21) .69 -- (1.20) .35 - Extraordinary item (.14) (.44) -- -- -- - Net income (loss) .02 (1.51) (.99) (5.48) 2.55 Fully diluted - Continuing operations .37 (1.76) (.99) (4.28) 2.19 - Discontinued operations (.21) .69 -- (1.20) .33 - Extraordinary item (.14) (.44) -- -- -- - Net income (loss) .02 (1.51) (.99) (5.48) 2.52 Dividends per common share .20 .20 .44 .66 .55 Market price per common share: High 18.00 19.25 17.50 40.13 50.63 Low 12.25 11.25 10.13 15.75 29.63 End of year 13.75 13.63 11.50 17.25 40.00 =================================================================================================== * See "Management's Analysis of Operations and Financial Condition" and Notes to Consolidated Financial Statements for a discussion of significant items included in operating income in 1995, 1994 and 1993.
-6- Management's Analysis of Operations and Financial Condition Chiquita Brands International, Inc. and Subsidiary Companies Operations Sales increased 2% in 1995 to approximately $2.6 billion primarily as a result of higher fresh fruit prices. Operating income for the year increased to $176 million from $71 million in 1994. Operating income includes: - in 1995, a net gain of $19 million primarily resulting from divestitures of operations and other actions taken as part of the Company s ongoing program to improve shareholder value. These divestitures and other actions included sales of older ships, the sale of the Costa Rican operations of Chiquita s Numar edible oils group, the shut-down of a portion of the Company s juice operations and the reconfiguration of banana production assets. - in 1994, charges and losses of $67 million resulting primarily from farm closings and write-downs of banana cultivations following a strike in Honduras, and the substantial reduction of the Company's Japanese "green" banana trading operations. In addition to the effects of the items described above, 1995 operating income increased from 1994 due to higher banana prices outside the European Union ("EU"), the favorable effect of changes in foreign exchange rates on European sales and earnings improvements from other food products. These favorable effects were partially offset by higher banana operating costs resulting from the implementation of the banana Framework Agreement between the EU, Colombia and Costa Rica, higher paper costs, and lower EU banana prices late in the year. These lower EU prices, which continued into early 1996, were brought about by the over issuance of special import licenses to European-based banana companies as relief for hurricane damage sustained in the Caribbean. Operating income for 1994 was $33 million lower than for 1993 primarily due to the charges and losses described above as well as higher costs which were incurred to replace Honduran banana volume that was curtailed following the strike. Net interest expense decreased in both 1995 and 1994 as a result of debt refinancing and reduction activities and, in 1995, higher average yields on investments. Net income of $9 million in 1995 and the net loss of $72 million in 1994 include extraordinary charges of $8 million and $23 million, respectively, resulting from refinancings and prepayments of debt. Income taxes consist principally of foreign income taxes currently paid or payable. No tax benefit was recorded for unrealized U.S. net operating loss carryforwards or other available tax credits. In February 1996, heavy rainfall caused significant flooding in Costa Rica. Banana industry cultivations in the region, including Chiquita's, were damaged and banana industry production in Costa Rica has been reduced. The Company estimates that less than 5% of its total Latin American banana cultivations sustained varying degrees of damage from the flooding. International Operations Chiquita's products are distributed in more than 40 countries. 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 investments 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. At December 31, 1995, the Company had foreign exchange forward contracts and options to ensure conversion of approximately $320 million of foreign sales in 1996 at a rate not higher than 1.45 Deutsche marks per U.S. dollar. (See Note 8 of the Consolidated Financial Statements for additional discussion of the Company's hedging activities.) -7- 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 quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. Since imposition of the EU quota regime, prices within the EU have increased to a higher level than the levels prevailing prior to the quota. Banana prices in other worldwide markets, however, have been lower than in years prior to the EU quota, as the displaced EU volume has entered those markets. In two separate rulings, General Agreement on Tariffs and Trade ("GATT") panels found 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 implemented this agreement in 1995, significantly increasing the Company's cost to export bananas from these countries. Three additional European countries (Sweden, Finland and Austria) joined the EU effective January 1, 1995. These countries, which had substantially unrestricted banana markets in which the Company 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. Implementation of the quota regime continues to evolve, and there can be no assurance that the EU banana regulation will not change further. In September 1994, Chiquita and the Hawaii Banana Industry Association made a joint filing with the Office of the U.S. Trade Representative ("USTR") under Section 301 of the U.S. Trade Act of 1974, charging that the EU quota and licensing regime and the Framework Agreement are unreasonable, discriminatory, and a burden and restriction on U.S. commerce. In response to this petition, the U.S. Government initiated formal investigations of the EU banana import policy and of the Colombian and Costa Rican Framework Agreement export policies. In January 1995, the U.S. Government announced a preliminary finding against the EU banana import policy and in September 1995, based on information obtained in the USTR's investigation under Section 301, the United States, joined by Guatemala, Honduras and Mexico, commenced a new international trade challenge against the EU regime using the procedures of the World Trade Organization ("WTO"). In January 1996, the USTR announced that it had found the banana Framework Agreement export policies of Costa Rica and Colombia to be unfair. The USTR further announced it was not imposing sanctions at that time, pending further consultations with those countries to eliminate harm to U.S. commerce. In early February 1996, Ecuador, the world s largest exporter of bananas, joined the United States, Guatemala, Honduras and Mexico in challenging the EU regime under the WTO. Both the WTO and Section 301 authorize 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 WTO and Section 301 proceedings, the nature and extent of actions that may be taken by the United States or other adversely affected countries, or the impact on the EU quota regime or the Framework Agreement. Discontinued Meat Operations As described in Note 2 to the Consolidated Financial Statements, the Company completed the sale of its meat operations in December 1995 and has accounted for it as a discontinued operation. -8- Financial Condition Cash flow from operations was $90 million, $73 million and $47 million in 1995, 1994 and 1993, respectively. At December 31, 1995, Chiquita had $311 million of cash and marketable securities, including $40 million of restricted cash on deposit. Capital expenditures were $65 million in 1995, $137 million in 1994 and $197 million in 1993, including $72 million in 1994 and $144 million in 1993 of investment spending primarily for transportation system improvements and fresh fruit production capacity. 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 $260 million in long-term subsidiary borrowings during 1994 and 1993. As a result of this program, the Company s free cash flow (the excess of earnings before depreciation and amortization over capital expenditures) is greater than its results of operations. In accordance with its strategic program to improve shareholder value by strengthening its balance sheet, enhancing short-term liquidity, reducing overall borrowing costs and positioning the Company for future cost reduction and deleveraging opportunities, Chiquita: - Sold its remaining meat operations to Smithfield Foods, Inc. in December 1995 for approximately $60 million, including $25 million in cash and 1.1 million shares of Smithfield common stock. Smithfield's common stock is traded publicly on NASDAQ. In 1994, the Company sold its specialty meat operations for $53 million in cash and used the proceeds primarily to reduce short-term borrowings of the Meat Division. - Sold the Costa Rican operations of its Numar edible oils group in December 1995 for approximately $100 million, including $50 million in cash and $50 million in secured notes receivable. - Sold older ships in 1995 for $90 million in cash and used approximately $50 million of the proceeds to prepay the related debt. - Sold and leased back shipping containers in 1995 and 1994 which generated gross proceeds of $40 million and $32 million, respectively. Approximately $27 million and $20 million of related 9.8% debt was retired in 1995 and 1994, respectively. - Replaced $153 million of shipping related loans in 1995 with loans having longer maturities totaling $187 million and negotiated the extension of the maturities on another $23 million ship loan. - Used $36 million of restricted cash to repay related subsidiary debt in December 1995. - 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. - Reduced the annual dividend rate on its capital stock in mid-1993 from $.68 per share to $.20 per share. -9-
CONSOLIDATED STATEMENT OF INCOME Chiquita Brands International, Inc. and Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ Year Ended December 31, (In thousands, except per share amounts) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Net sales $2,565,992 $2,505,826 $2,532,925 - - ------------------------------------------------------------------------------------------------------------ Operating expenses Cost of sales 1,958,063 1,996,179 1,993,552 Selling, general and administrative expenses 333,537 331,498 332,934 Depreciation 98,622 106,964 102,591 - - ------------------------------------------------------------------------------------------------------------ 2,390,222 2,434,641 2,429,077 - - ------------------------------------------------------------------------------------------------------------ Operating income 175,770 71,185 103,848 Interest income 28,157 22,902 20,377 Interest expense (163,513) (167,464) (169,789) Other income, net 1,455 2,566 6,483 - - ------------------------------------------------------------------------------------------------------------ Income (loss) from continuing operations before income taxes 41,869 (70,811) (39,081) Income taxes (13,900) (13,500) (12,000) - - ------------------------------------------------------------------------------------------------------------ Income (loss) from continuing operations 27,969 (84,311) (51,081) Discontinued operations (11,197) 35,611 -- - - ------------------------------------------------------------------------------------------------------------ Income (loss) before extraordinary item 16,772 (48,700) (51,081) Extraordinary loss from debt refinancing (7,560) (22,840) -- - - ------------------------------------------------------------------------------------------------------------ Net income (loss) $9,212 $(71,540) $(51,081) Less dividends on Series A preferred stock (8,266) (7,232) -- - - ------------------------------------------------------------------------------------------------------------ Net income (loss) attributable to common shares $946 $(78,772) $(51,081) Per common share - primary and fully diluted - Continuing operations $.37 $(1.76) $(.99) - Discontinued operations (.21) .69 -- - Extraordinary item (.14) (.44) -- - Net income (loss) .02 (1.51) (.99) ============================================================================================================= Weighted average number of common shares outstanding 53,670 52,033 51,427 ============================================================================================================= See Notes to Consolidated Financial Statements.
-10-
CONSOLIDATED BALANCE SHEET Chiquita Brands International, Inc. and Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ December 31, (In thousands, except share amounts) 1995 1994 - - ------------------------------------------------------------------------------------------------------------ ASSETS Current assets Cash and equivalents $236,675 $165,523 Marketable securities 34,743 -- Trade receivables, less allowances of $11,310 and $13,060, respectively 184,364 205,194 Other receivables, net 89,848 92,725 Inventories 293,379 308,549 Other current assets 37,827 32,334 - - ------------------------------------------------------------------------------------------------------------ Total current assets 876,836 804,325 Restricted cash 39,520 75,030 Net assets of discontinued operations -- 46,718 Property, plant and equipment, net 1,182,144 1,387,132 Investments and other assets 356,805 301,776 Intangibles, net 168,228 159,258 - - ------------------------------------------------------------------------------------------------------------ Total assets $2,623,533 $2,774,239 ============================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes and loans payable $119,456 $130,040 Long-term debt due within one year 52,877 91,011 Accounts payable 206,717 232,535 Accrued liabilities 130,893 120,305 - - ------------------------------------------------------------------------------------------------------------ Total current liabilities 509,943 573,891 Long-term debt of parent company 840,925 840,377 Long-term debt of subsidiaries 401,121 524,459 Accrued pension and other employee benefits 85,514 74,855 Other liabilities 113,823 115,848 - - ------------------------------------------------------------------------------------------------------------ Total liabilities 1,951,326 2,129,430 ============================================================================================================ Shareholders' equity Preferred and preference stock 138,369 190,639 Capital stock, $.33 par value (54,769,140 and 49,300,881 shares outstanding, respectively) 18,256 16,434 Capital surplus 581,019 505,800 Accumulated deficit (65,437) (52,940) Minimum pension liability adjustment -- (15,124) - - ------------------------------------------------------------------------------------------------------------ Total shareholders' equity 672,207 644,809 ============================================================================================================ Total liabilities and shareholders' equity $2,623,533 $2,774,239 ============================================================================================================ See Notes to Consolidated Financial Statements.
-11-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Chiquita Brands International, Inc. and Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ Minimum Preferred pension Total and Retained liability share- preference Capital earnings adjust- holders stock Capital stock surplus (deficit) ment equity - - ------------------------------------------------------------------------------------------------------------ (In thousands, except share amounts) Shares Par value - - ------------------------------------------------------------------------------------------------------------ Balance at December 31, 1992 $52,270 48,163,560 $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 $52,270 48,510,353 $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 $190,639 49,300,881 $16,434 $505,800 $(52,940) $(15,124) $644,809 Stock options exercised -- 331,691 110 3,249 -- -- 3,359 Capital stock issued in exchange for Series C preference stock (52,270) 3,241,546 1,081 51,189 -- -- -- Other shares issued -- 1,661,658 553 17,659 -- -- 18,212 Change in minimum pension liability adjustment -- -- -- -- -- 15,124 15,124 Net income -- -- -- -- 9,212 -- 9,212 Dividends Capital stock -- -- -- -- (10,236) -- (10,236) Preferred and preference stock -- 233,364 78 3,122 (11,473) -- (8,273) - - ------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 $138,369 54,769,140 $18,256 $581,019 $(65,437) $ -- $672,207 ============================================================================================================ See Notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENT OF CASH FLOW Chiquita Brands International, Inc. and Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ Year Ended December 31, (In thousands 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Cash provided (used) by: Operations Income (loss) from continuing operations $27,969 $(84,311) $(51,081) Depreciation and amortization 104,581 113,080 109,711 Gain on sales of transportation assets and other divestitures(32,100) -- -- Write-downs of farms and cultivations -- 24,600 -- Changes in current assets and liabilities Receivables 16,194 (19,418) (7,571) Inventories 10,054 (14,275) 40,535 Accounts payable (29,838) 26,083 (16,405) Other current assets and liabilities (3,643) 19,454 (28,871) Other (2,906) 7,600 895 - - ------------------------------------------------------------------------------------------------------------ Cash flow from operations 90,311 72,813 47,213 - - ------------------------------------------------------------------------------------------------------------ Investing Capital expenditures (64,640) (136,981) (196,554) Restricted cash deposits 35,510 (24,010) (51,020) Long-term investments (814) (7,717) (49,466) Decrease in marketable securities -- -- 25,212 Proceeds from sales of transportation assets and other divestitures 166,835 41,705 22,000 Other (4,188) (6,518) 11,828 - - ------------------------------------------------------------------------------------------------------------ Cash flow from investing 132,703 (133,521) (238,000) - - ------------------------------------------------------------------------------------------------------------ Financing Debt transactions Issuances of long-term debt 214,171 278,388 151,160 Repayments of long-term debt (361,906) (369,666) (132,839) Increase (decrease) in notes and loans payable (10,236) 21,911 (25,621) Stock transactions Issuance of preferred stock -- 138,369 -- Issuances of capital stock 3,413 5,006 1,417 Dividends (18,509) (16,453) (23,338) - - ------------------------------------------------------------------------------------------------------------ Cash flow from financing (173,067) 57,555 (29,221) - - ------------------------------------------------------------------------------------------------------------ Discontinued Operations 21,205 17,450 (16,735) - - ------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and equivalents 71,152 14,297 (236,743) Balance at beginning of year 165,523 151,226 387,969 - - ------------------------------------------------------------------------------------------------------------ Balance at end of year $236,675 $165,523 $151,226 ============================================================================================================= 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 Group, Inc. and its subsidiaries ("AFG") owned approximately 44% of the outstanding capital stock of Chiquita Brands International, Inc. ("Chiquita" or the "Company") as of December 31, 1995. Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries, other than the Meat Division which was sold in December 1995 and is accounted for as a discontinued operation (see Note 2). The accompanying notes present amounts related only to continuing operations, unless otherwise indicated. 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, 1995 and 1994, investments in food-related companies of $79 million and $66 million, respectively, were accounted for using the equity method. The excess ($16 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 periods ranging from 10 to 40 years. Use of Estimates The financial statements have been prepared in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Cash and Equivalents Cash and equivalents include all unrestricted cash and highly liquid investments with a maturity when purchased of three months or less. Marketable Securities Marketable securities consist of common stock categorized as available-for-sale (see Note 2). Inventories Inventories are valued at the lower of cost or 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 $39.3 million and $34.0 million at December 31, 1995 and 1994, respectively. The carrying value of intangibles is evaluated periodically in relation to the operating performance and future cash flows of the underlying businesses. 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 Exchange Chiquita utilizes the U.S. dollar as its functional currency. Net foreign exchange gains, which amounted to approximately $7.2 million, $11.0 million and $7.5 million in 1995, 1994 and 1993, 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, reduced by restricted -14- shares related to unearned compensation, and increased by the dilutive effect, if any, of assumed conversion of stock options. Fully diluted earnings per share also includes the dilutive effect, if any, of assumed conversion of Series A preferred stock and convertible subordinated debentures. Note 2 -- Discontinued Operations Pursuant to a plan of disposal for all remaining Meat Division operations, 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 resulting in a gain of $10.2 million. In December 1995, the remaining meat operations were sold to Smithfield Foods, Inc. for approximately $60 million, including $25 million in cash and approximately 1.1 million shares (6%) of Smithfield s outstanding common stock. Smithfield assumed all Meat Division liabilities, including those related to pension obligations. Meat Division operating results included in Chiquita s Consolidated Statement of Income as Discontinued operations are as follows:
- - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Net sales $1,460,608 $1,455,894 $1,549,712 - - ------------------------------------------------------------------------------------------------------------ Income from operations 3,351 25,455 -- Gain on sale 576 10,156 -- Minimum pension liability adjustment (15,124) -- -- - - ------------------------------------------------------------------------------------------------------------ Discontinued operations $(11,197) $35,611 $-- ============================================================================================================
The $15.1 million minimum pension liability adjustment recognized in 1995 was previously charged directly to shareholders' equity. Note 3 -- Other Divestitures During 1995, the Company completed certain divestitures and took other actions as part of its ongoing program to improve shareholder value. These actions, which included sales of older ships, the sale of the Costa Rican operations of Chiquita's Numar edible oils group, the shut-down of a portion of the Company's juice operations and the reconfiguration of banana production assets, resulted in a net gain of $19 million. Cash proceeds aggregated $167 million. Additional proceeds of $50 million, consisting of secured notes, are collectible over the next five years.
Note 4 -- Inventories Inventories consist of the following: - - ------------------------------------------------------------------------------------------------------------ December 31, (In thousands) 1995 1994 - - ------------------------------------------------------------------------------------------------------------ Bananas and other fresh produce $39,920 $42,444 Other food products 64,528 68,713 Growing crops 120,178 115,177 Materials and supplies 56,925 68,062 Other 11,828 14,153 - - ------------------------------------------------------------------------------------------------------------ $293,379 $308,549 ============================================================================================================
The carrying value of inventories valued by the LIFO method was $128 million at December 31, 1995 and $126 million at December 31, 1994. If inventories were stated at current costs, total inventory values would have been approximately $28 million and $30 million higher than reported at December 31, 1995 and 1994, respectively.
Note 5 -- Property, Plant and Equipment, Net Property, plant and equipment consist of the following: - - ------------------------------------------------------------------------------------------------------------ December 31, Depreciable (In thousands) 1995 1994 Lives (Years) - - ------------------------------------------------------------------------------------------------------------ Land $88,963 $107,579 Buildings and improvements 190,980 205,735 7 to 40 Machinery and equipment 387,376 399,437 3 to 30 Ships and containers 662,967 796,906 5 to 20 Cultivations 291,326 317,233 3 to 30 Other 71,517 78,352 3 to 40 - - ------------------------------------------------------------------------------------------------------------ 1,693,129 1,905,242 Accumulated depreciation (510,985) (518,110) - - ------------------------------------------------------------------------------------------------------------ $1,182,144 $1,387,132 ============================================================================================================
-15- 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 $1 million in 1995, $4 million in 1994 and $8 million in 1993. In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 121 Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of effective for 1996. Although the new rule is under study, the Company does not expect it to have a material effect on its financial statements.
Note 6 -- Leases Total rental expense consists of the following: - - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Gross rentals - ships and containers $94,829 $101,207 $142,969 - other 35,562 34,084 32,528 - - ------------------------------------------------------------------------------------------------------------ 130,391 135,291 175,497 Less sublease rentals (17,310) (4,740) (7,189) - - ------------------------------------------------------------------------------------------------------------ $113,081 $130,551 $168,308 =============================================================================================================
Future minimum rental payments required under operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 1995 are as follows:
- - ------------------------------------------------------------------------------------------------------------ Gross Rentals - - ------------------------------------------------------------------------------------------------------------ (In thousands) Ships and containers Other Total - - ------------------------------------------------------------------------------------------------------------ 1996 $46,698 $20,607 $67,305 1997 27,258 18,574 45,832 1998 26,932 13,917 40,849 1999 30,191 9,658 39,849 2000 25,174 4,164 29,338 Later years 51,124 6,009 57,133 =============================================================================================================
Portions of the minimum rental payments for ships constitute reimbursement for ship operating costs paid for by the lessor. Aggregate future minimum rental payments to be received from non- cancelable subleases at December 31, 1995, principally for office space and ships, are $37 million.
Note 7 -- Debt Long-term debt consists of the following: - - ------------------------------------------------------------------------------------------------------------ (In thousands) December 31, Parent Company 1995 1994 - - ------------------------------------------------------------------------------------------------------------ 9 1/8% senior notes, due 2004 $175,000 $175,000 9 5/8% senior notes, due 2004, less unamortized discount of $2,439 and $2,632 (imputed interest rate of 9.8%) 247,561 247,368 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 $5,464 and $5,839 (imputed interest rate of 12.1%) 60,355 59,980 11 1/2% subordinated notes, due 2001 220,000 220,000 Other notes and loans 28 47 Less current maturities (19) (18) - - ------------------------------------------------------------------------------------------------------------ Long-term debt of parent company $840,925 $840,377 ============================================================================================================ Subsidiary Companies - - ------------------------------------------------------------------------------------------------------------ Loans payable secured by ships and containers, due in installments from 1996 to 2009, bearing interest at effective rates averaging 8.6% (8.8% at December 31, 1994) $295,074 $368,146 Caribbean Basin Projects Financing Authority (CBI Industrial Revenue Bonds 1993 Series A) loan, due 1998, bearing interest at a variable rate of 4.8% (4.4% at December 31, 1994) 38,000 38,000 Overseas Private Investment Corporation loans, due in installments through 2002, bearing interest at rates averaging 9% 15,621 17,774 Loans and notes payable in foreign currencies maturing through 2008, bearing interest at rates averaging 19% (22% at December 31, 1994) 34,076 50,846 Other loans and notes payable maturing through 2012, bearing interest at rates averaging 9% 71,208 140,686 Less current maturities (52,858) (90,993) - - ------------------------------------------------------------------------------------------------------------ Long-term debt of subsidiaries $401,121 $524,459 ============================================================================================================
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, 1995, approximately $160 million was available for dividend payments under the most restrictive of these agreements. During the second quarter of 1995, the Company replaced $153 million of ship loans with loans having -16- longer maturities totaling $187 million resulting in an extraordinary loss of $4.7 million. In 1995, the Company sold and leased back $40 million of container equipment and used $27 million of the sale proceeds to prepay related debt, resulting in an extraordinary loss of $2.9 million. In February 1994, the Company issued $175 million principal amount of 9 1/8% senior notes due 2004. The proceeds from this issuance, together with the proceeds from the sale of preferred stock (see Note 11), were used to redeem or repay higher rate subordinated and subsidiary debt. These prepayments resulted in an extraordinary loss of $22.8 million consisting principally of write-offs of unamortized discounts and $5 million of call premiums. At December 31, 1995, $68 million of the carrying amount of loans secured by ships and containers had interest rates fixed at an average of 8% by the terms of the loans or by the operation of interest rate swap agreements (see Note 8). 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, 1995 or 1994. Cash payments relating to interest expense were $156.0 million, $158.7 million and $159.4 million in 1995, 1994 and 1993, respectively. 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 - - ------------------------------------------------------------------------------------------------------------ 1996 $19 $52,858 $52,877 1997 9 61,000 61,009 1998 -- 96,872 96,872 1999 -- 35,671 35,671 2000 -- 37,176 37,176 ============================================================================================================
The Company maintains lines of credit with various domestic and foreign banks for borrowing funds on a short-term basis and has short-term working capital loans with domestic and foreign banks. At December 31, 1995, the weighted average interest rate for all short-term notes and loans payable was 10.6% (11.7% at December 31, 1994). Note 8 -- Hedging Transactions At December 31, 1995, the Company had foreign exchange forward contracts to ensure conversion of approximately $20 million of foreign sales commitments for 1996 at an average exchange rate of 1.36 Deutsche marks per U.S. dollar. The fair value of these contracts, based on quoted market prices, was not significant. The Company also had option contracts which ensure conversion through 1996 of approximately $70 million of foreign sales at a rate not higher than 1.44 Deutsche marks per U.S. dollar and approximately $230 million of foreign sales at a rate not higher than 1.45 Deutsche marks per U.S. dollar or lower than 1.32 Deutsche marks per U.S. dollar. The carrying value of these option contracts, and the fair value based on quoted market prices, was not significant. Chiquita has interest rate swap agreements to fix the rate of interest on approximately $49 million of its variable rate ship and container loans maturing between 1998 and 2001. The Company has entered into currency and interest rate swap agreements which have the effect of converting $54 million of ship loans denominated in pounds sterling into U.S. dollar loans with variable interest rates that become fixed at 7.7% beginning in 1997. The Company s swap agreements have maturities ranging from 1998 to 2005. The carrying values and estimated fair values of the Company's debt and associated swap agreements are summarized below:
- - ------------------------------------------------------------------------------------------------------------ December 31, 1995 1994 - - ------------------------------------------------------------------------------------------------------------ Carrying Estimated Carrying Estimated (In thousands) value fair value value fair value - - ------------------------------------------------------------------------------------------------------------ Debt $1,414,379 $1,442,900 $1,585,887 $1,531,400 Interest rate swap agreements -- 3,100 -- (300) Foreign currency swap agreements -- (3,000) -- 400 - - ------------------------------------------------------------------------------------------------------------ $1,414,379 $1,443,000 $1,585,887 $1,531,500 ============================================================================================================
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 -17- 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. Note 9 -- Pension and Severance Benefits The Company and its subsidiaries have several defined benefit and contribution pension plans covering approximately 5,000 domestic and foreign employees. Approximately 31,000 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.
Pension and severance expense consists of the following: - - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Defined benefit and severance plans: Service cost -- benefits earned during the period $5,664 $5,383 $5,885 Interest cost on projected benefit obligation 8,622 8,412 8,423 Actual return on plan assets (2,505) (623) (2,215) Net amortization and deferral 1,441 (1,181) (521) - - ------------------------------------------------------------------------------------------------------------ 13,222 11,991 11,572 Defined contribution plans 3,458 3,648 3,669 - - ------------------------------------------------------------------------------------------------------------ Total pension and severance expense $16,680 $15,639 $15,241 =============================================================================================================
The projected benefit obligations were determined using assumed discount rates of approximately 9 1/4% in 1995 and 1994 for unfunded Central and South American pension and severance benefits and approximately 7 3/4% in 1995 and 7% in 1994 for all other plan benefits. The assumed long-term rate of compensation increase was between 5% and 6% in 1995 and 1994 and the assumed long-term rate of return on plan assets was approximately 9% in 1995 and 1994. 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. In accordance with local regulations, severance benefits in Central and South America are generally not funded until 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) 1995 1994 1995 1994 - - ------------------------------------------------------------------------------------------------------------ Plan assets at fair market value $6,723 $15,193 $16,836 $22,587 - - ------------------------------------------------------------------------------------------------------------ Present value of benefit obligations: Vested 4,933 13,875 74,720 67,056 Nonvested 56 37 965 4,182 - - ------------------------------------------------------------------------------------------------------------ Accumulated benefit obligation 4,989 13,912 75,685 71,238 Additional amounts related to projected pay increases 2,094 854 19,286 18,333 - - ------------------------------------------------------------------------------------------------------------ Projected benefit obligation 7,083 14,766 94,971 89,571 - - ------------------------------------------------------------------------------------------------------------ Projected benefit obligation less than (in excess of) plan assets (360) 427 (78,135) (66,984) Projected benefit obligation not yet recognized in the balance sheet: Net actuarial (gain) loss 690 (414) 18,661 9,705 Prior service cost 224 -- 3,262 2,333 Obligation (asset) at transition, net of amortization (39) (45) 5,109 6,295 Adjustment required to recognize minimum liability -- -- (7,746) -- - - ------------------------------------------------------------------------------------------------------------ Net balance sheet asset (liability) $515 $(32) $(58,849)* $(48,651)* =============================================================================================================
*Includes $56 million in 1995 and $47 million in 1994 relating to foreign pension and severance plans that are not required to be funded until benefits are paid. -18- 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 Central and South American severance plans. This adjustment is offset by recording an intangible asset. Note 10 -- Stock Options Under its non-qualified 1986 Stock Option and Incentive Plan, the Company may grant up to an aggregate of 15,000,000 shares of capital stock in the form of stock options, stock appreciation rights and stock awards. Under this plan, 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.
- - ------------------------------------------------------------------------------------------------------------ 1995 1994 Option Option Shares Price Shares Price - - ------------------------------------------------------------------------------------------------------------ Under option at beginning of year 5,213,758 $5.75 - 34.44 5,451,768 $5.75 - 47.75 Options granted 1,764,460 12.31 - 15.88 287,165 11.44 - 17.06 Options exercised (331,691) 5.75 - 16.38 (118,133 )8.67 - 16.38 Options canceled or expired (653,555) 10.31 - 34.44 (407,042 )8.67 - 47.75 - - ------------------------------------------------------------------------------------------------------------ Under option at end of year 5,992,972 $8.67 - 34.44 5,213,758 $5.75 - 34.44 - - ------------------------------------------------------------------------------------------------------------ Options exercisable at end of year 2,439,015 2,234,823 - - ------------------------------------------------------------------------------------------------------------ Shares available for future grant 6,365,296 7,968,754 - - ------------------------------------------------------------------------------------------------------------
Stock options for 17,120 shares were exercised during 1993 at prices ranging from $8.67 to $16.13 per share. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") effective for 1996. The Company intends to continue to use its current method of accounting for stock-based compensation, as permitted by SFAS No. 123. Therefore, the new rule will have no effect on the Company's financial statements. Note 11 -- Shareholders' Equity At December 31, 1995, there were 150 million authorized shares of capital stock. Of the shares authorized but unissued at December 31, 1995, 14.8 million shares were reserved for issuance under stock option and employee benefit plans, 3.2 million shares were reserved for conversion of subordinated debentures, and 7.6 million shares were reserved for conversion of preferred stock at the holders option. In addition, Chiquita has reserved 21.1 million shares for the maximum additional number of shares potentially issuable upon conversion of preferred stock at the Company's option after February 2001. During the fourth quarter of 1995, Chiquita issued 725,000 shares of capital stock in repayment of $11.2 million of subsidiary debt. 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. Each Series A Share has a liquidation preference of $50.00 per share and is entitled to an annual cash dividend of $2.875 per share. Each Series A Share is convertible into 2.6316 shares of capital stock at the holder's option or, in certain circumstances beginning in February 1997, at the Company s option. After February 2001, the Company may convert each Series A Share into a number of capital shares (not exceeding 10 shares) having a total market value of $50.00. Holders of Series A Shares have the right to elect additional directors in addition to the directors ordinarily elected by holders of capital stock in certain circumstances where the Company fails to pay quarterly dividends on the preferred stock. 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 four million authorized shares of Cumulative Preference Stock, one million of which were designated as Series C Shares. In 1995, all outstanding shares of Mandatorily Exchangeable Cumulative Preference Stock, Series C were converted into capital stock. -19-
Note 12 - Income Taxes Income taxes consist of the following: - - ------------------------------------------------------------------------------------------------------------ United States (In thousands) Federal State Foreign Total - - ------------------------------------------------------------------------------------------------------------ 1995 Current tax expense $1,218 $1,011 $12,657 $14,886 Deferred tax benefit -- -- (986) (986) - - ------------------------------------------------------------------------------------------------------------ $1,218 $1,011 $11,671 $13,900 ============================================================================================================ 1994 Current 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 ============================================================================================================
Income (loss) from continuing operations before income taxes consists of the following: - - ------------------------------------------------------------------------------------------------------------ (In thousands) Subject to tax in: 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ United States $(17,735) $(111,776) $(94,314) Foreign jurisdictions 59,604 40,965 55,233 - - ------------------------------------------------------------------------------------------------------------ $ 41,869 $ (70,811) $(39,081) ============================================================================================================
Income tax expense differs from income taxes computed at the U.S. federal statutory rate for the following reasons: - - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Income tax expense (benefit) computed at U.S. federal statutory rate $14,654 $(24,784) $(13,678) U.S. alternative minimum tax, net of credit 821 -- -- State income taxes, net of federal benefit 657 666 1,264 U.S. losses for which no tax benefit has been recognized -- 34,012 19,694 Foreign losses for which no tax benefit has been recognized 21,563 19,406 13,166 Taxes on foreign operations at other than U.S. rates (10,968) (19,914) (12,005) Use of U.S. net operating loss carryforwards (11,959) -- -- Other (868) 4,114 3,559 - - ------------------------------------------------------------------------------------------------------------ Income tax expense $13,900 $ 13,500 $ 12,000 ============================================================================================================
The components of deferred income taxes included on the balance sheet at December 31, 1995 and 1994 are as follows: - - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 - - ------------------------------------------------------------------------------------------------------------ Deferred tax benefits Employee benefits $24,003 $23,194 Accrued expenses 27,291 23,626 Discontinued operations -- 21,430 Other 16,932 15,832 - - ------------------------------------------------------------------------------------------------------------ 68,226 84,082 Valuation allowance (2,600) (14,442) - - ------------------------------------------------------------------------------------------------------------ 65,626 69,640 - - ------------------------------------------------------------------------------------------------------------ Deferred tax liabilities Depreciation and amortization (22,837) (22,016) Growing crops (20,968) (20,968) Long-term debt (11,583) (16,072) Other (11,344) (14,032) - - ------------------------------------------------------------------------------------------------------------ (66,732) (73,088) - - ------------------------------------------------------------------------------------------------------------ Net deferred tax liability $ (1,106) $ (3,448) =============================================================================================================
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 $180 million, capital loss carryforwards of $37 million, alternative minimum tax credits of $6 million and foreign tax credit carryforwards of $21 million. The operating loss carryforwards expire in 2008 and 2009, the capital loss carryforwards expire in 2000 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 $14.4 million in 1995, $12.1 million in 1994 and $17.0 million in 1993. Note 13 -- 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 -20- operations are conducted in Central, South and North America. With the sale of its remaining Meat Division operations in December 1995, the Company s continuing operations constitute a single business segment. 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 related 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.
INFORMATION BY GEOGRAPHIC AREA - - ------------------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------ Net sales to unaffiliated customers North America $1,261,422 $1,224,114 $1,238,678 Central and South America 177,419 179,726 184,060 Europe and other international 1,127,151 1,101,986 1,110,187 - - ------------------------------------------------------------------------------------------------------------ Consolidated net sales $2,565,992 $2,505,826 $2,532,925 - - ------------------------------------------------------------------------------------------------------------ Operating income North America $31,203 $(8,370) $20,469 Central and South America 64,891 19,071 17,607 Europe and other international 93,102 73,746 78,691 Unallocated expenses (13,426) (13,262) (12,919) - - ------------------------------------------------------------------------------------------------------------ Consolidated operating income $175,770 $71,185 $103,848 - - ------------------------------------------------------------------------------------------------------------ Identifiable assets North America $439,385 $493,079 $509,760 Central and South America 835,851 864,232 912,321 Europe and other international 409,677 385,241 339,374 Shipping operations 575,761 671,756 656,816 Corporate assets 362,859 359,931 304,553 - - ------------------------------------------------------------------------------------------------------------ Consolidated assets $2,623,533 $2,774,239 $2,722,824 - - ------------------------------------------------------------------------------------------------------------
Net sales in the preceding table excludes 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. Banana sales to unaffiliated customers in Central and South America and other intergeographic sales are not significant. In 1995, divestitures of certain operations and other actions (see Note 3) had the effect of increasing (decreasing) operating income by geographic area as follows: North America, $(9) million; Central and South America, $37 million; Europe and other international, $(9) million. Operating income for 1994 includes charges and losses totaling $67 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) million; Europe and other international, $(40) million. For purposes of reporting identifiable assets by geographic area, cash and equivalents, marketable securities, restricted cash, trademarks and the net assets of discontinued operations are included in corporate assets. Minority equity investments are included in the geographic area where their operations are located. Note 14 -- Litigation A number of legal actions are pending against the Company. Based on information currently available to the Company and advice of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the financial statements of the Company. -21- 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.
- - ------------------------------------------------------------------------------------------------------------ 1995 - - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) March 31 June 30 Sept. 30 Dec. 31 - - ------------------------------------------------------------------------------------------------------------ Net sales $674,269 $727,519 $569,005 $595,199 Cost of sales (495,995) (547,336) (437,884) (476,848) Operating income 76,220 70,164 25,341 4,045 Income (loss) from continuing operations 33,599 32,095 (8,278) (29,447) Discontinued operations 4,029 2,035 (2,713) (14,548) Income (loss) before extraordinary item 37,628 34,130 (10,991) (43,995) Extraordinary loss from debt refinancing -- (4,713) -- (2,847) Net income (loss) 37,628 29,417 (10,991) (46,842) Fully diluted earnings (loss) per share - Continuing operations .55 .52 (.19) (.58) - Discontinued operations .07 .03 (.05) (.27) - Extraordinary item -- (.07) -- (.06) - Net income (loss) .62 .48 (.24) (.91) Dividends per common share .05 .05 .05 .05 Capital stock market price High 14.50 14.00 17.25 18.00 Low 12.25 12.63 13.63 13.38 =============================================================================================================
1994 - - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) March 31 June 30 Sept. 30 Dec. 31 - - ------------------------------------------------------------------------------------------------------------ Net sales $672,468 $660,710 $564,314 $608,334 Cost of sales (488,395) (477,319) (502,150) (528,315) Operating income (loss) 81,183 70,133 (44,891) (35,240) Income (loss) from continuing operations 35,534 30,945 (80,652) (70,138) Discontinued operations -- -- -- 35,611 Extraordinary loss from debt refinancing (22,840) -- -- -- Net income (loss) 12,694 30,945 (80,652) (34,527) Fully diluted earnings (loss) per share - Continuing operations .62 .51 (1.59) (1.38) - Discontinued operations -- -- -- .68 - 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 =============================================================================================================
Operating income for the quarter ended September 30, 1995 includes a net gain of $5.8 million resulting primarily from the sale of older ships. For the quarter ended December 31, 1995, results include net gains of $13.5 million primarily resulting from divestitures of operations and other actions taken as part of the Company s ongoing program to improve shareholder value. The operating loss for the quarter ended September 30, 1994 includes charges and losses 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. For the quarter ended December 31, 1994, results include $10.3 million of charges and losses primarily resulting from 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. -22-
Investor Information Chiquita Brands International, Inc. - - ------------------------------------------------------------------------------------------------------------ Stock Exchange Listings Trustees and Transfer Agents - New York, Boston & Pacific Debentures/Notes Stock Symbol 7% Convertible Subordinated Debentures due CQB March 28, 2001 Trustee - Shareholders of Record Chemical Bank At March 1, 1996, there were 6,535 450 West 33rd Street common shareholders of record. New York, New York 10001 Transfer Agent and Registrar - Transfer, Paying and Conversion Agents - Capital Stock and $2.875 Non-Voting Chemical Bank - London, England Cumulative Preferred Stock Series A Banque Paribas Luxembourg - Luxembourg Chiquita Brands International, Inc. Banque Bruxelles Lambert S.A.-Brussels, Belgium c/o Securities Transfer Company Bank Leu, Ltd.-Zurich, Switzerland One East Fourth Street Cincinnati, Ohio 45202 9 1/8% Senior Notes due March 1, 2004* (513) 579-2414 9 5/8% Senior Notes due January 15, 2004* (800) 368-3417 Trustee - The Fifth Third Bank Dividend Reinvestment 38 Fountain Square Plaza Shareholders who hold at least 100 common Cincinnati, OH 45263 shares may increase their investment in Chiquita shares through the Dividend 10 1/2% Subordinated Debentures due August 1, 2004* Reinvestment Plan without payment of any 11 1/2% Subordinated Notes due June 1, 2001* brokerage commission or service charge. Trustee- Full details concerning the Plan may be Star Bank, N.A. obtained from Corporate Affairs or the 425 Walnut Street Transfer Agennt. Cincinnati, Ohio 45202 Annual Meeting *Chiquita Brands International, Inc., c/o Securities May 8, 1996 Transfer Company, is transfer agent for these Notes 10 a.m. Eastern Daylight Time and Debentures 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.
-24- EX-21 8
EXHIBIT 21 CHIQUITA BRANDS INTERNATIONAL, INC. SUBSIDIARIES As of March 1, 1996, 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: Voting Securities Organized Owned by Under Laws of Immediate 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% 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% Chiquita Frupac Inc. Delaware 100% (Continued)
EXHIBIT 21 (cont.) Percent of Voting Securities Organized Owned by Under Laws of Immediate Parent --------------------- --------------------- Chiquita Gulf Citrus, Inc. Delaware 100% Chiquita International Trading Company Delaware 100% Chiquita International Limited Bermuda 100% Chiquita Brands South Pacific Limited Australia 100% Exportadora Chiquita Frupac Limitada Chile 100% M.M. Holding Ltd. Bermuda 100% Chiquita Tropical Products Company 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 Bananera Atlantica Limitada Costa Rica 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% Theodoredis and Sons Banana Holding Company Delaware 100% Tela Railroad Company Delaware 100% United Brands Japan, Ltd. Japan 95% Compania Mundimar, S.A. Costa Rica 100% Polymer United G.C., Inc. Delaware 100% Solar Aquafarms, Inc. Delaware 100%
been omitted. In the aggregate these subsidiaries, after excluding approximately 130 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 9 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 26, 1996, included in the 1995 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 26, 1996, 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, 1995.
Registration Form No. Description ------ ----------- ---------------------------------------- S-3 33-58424 Dividend Reinvestment Plan 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-3 333-00789 Debt Securities, Preferred Stock, Depositary Shares, Common Stock and Securities Warrants 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 33-38147 Associate Stock Purchase Plan
Cincinnati, Ohio /s/ERNST & YOUNG LLP March 25, 1996 EX-24 10 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 (Carl H. Lindner) Director, Chairman of the March , 1995 Board of Directors, Chief Executive Officer and Chairman of the Executive Committee (Principal Executive Officer) (Keith E. Lindner) Director, President and March , 1995 Chief Operating Officer (Fred J. Runk) Director March , 1995 /s/ Jean H. Sisco Director March 25, 1995 (Jean H. Sisco) /s/ William W. Verity Director March 25, 1995 (William W. Verity) /s/ Oliver W. Waddell Director March 25, 1995 (Oliver W. Waddell) (Ronald F. Walker) Director March , 1995 EX-27 11
5 This schedule contains summary financial information extracted from the Chiquita Brands International, Inc. Form 10-K for the year ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1995 DEC-31-1995 236,675 34,743 195,674 11,310 293,379 876,836 1,693,129 510,985 2,623,533 509,943 1,242,046 0 138,369 18,256 515,582 2,623,533 2,565,992 2,565,992 1,958,063 1,958,063 98,622 0 163,513 41,869 13,900 27,969 (11,197) (7,560) 0 9,212 .02 .02 Amounts include an extraordinary loss of $.14 per share from debt refinancing in the second and fourth quarters and a loss from discontinued operations of $.21 per share.
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