-----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, KlMJR1pni8A2BVOXdCQa93P3r8pj10u3WJuwtHqrUdhurmqpOq9wFazbxyRnmURv P/LpP0rA7AKHijca70lbnw== 0000101063-99-000018.txt : 19990517 0000101063-99-000018.hdr.sgml : 19990517 ACCESSION NUMBER: 0000101063-99-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIQUITA BRANDS INTERNATIONAL INC CENTRAL INDEX KEY: 0000101063 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 041923360 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01550 FILM NUMBER: 99624135 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-Q 1 - -------------------------------------------------------------- FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended Commission File March 31, 1999 Number 1-1550 CHIQUITA BRANDS INTERNATIONAL, INC. Incorporated under the IRS Employer I.D. Laws of New Jersey No. 04-1923360 250 East Fifth Street, Cincinnati, Ohio 45202 (513) 784-8000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO As of April 30, 1999, there were 65,746,923 shares of Common Stock outstanding. Page 1 of 12 Pages - -------------------------------------------------------------- CHIQUITA BRANDS INTERNATIONAL, INC. ----------------------------------- TABLE OF CONTENTS ----------------- Page ---- PART I - Financial Information - ------ Item 1 - Financial Statements
Consolidated Statement of Income for the quarters ended March 31, 1999 and 1998. . . . 3 Consolidated Balance Sheet as of March 31, 1999, December 31, 1998 and March 31, 1998. . . . . 4 Consolidated Statement of Cash Flow for the quarters ended March 31, 1999 and 1998. . . . 5 Notes to Consolidated Financial Statements. . . 6 Item 2 - Management's Analysis of Operations and Financial Condition . . . . . . . . . . . . 9 Item 3 - Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 11 PART II - Other Information - ------- Item 6 - Exhibits and Reports on Form 8-K . . . . 11 Signature. . . . . . . . . . . . . . . . . . . . . . 12
Part I - Financial Information - ------------------------------ Item 1 - Financial Statements - ----------------------------- CHIQUITA BRANDS INTERNATIONAL, INC. ----------------------------------- CONSOLIDATED STATEMENT OF INCOME (Unaudited) -------------------------------------------- (In thousands, except per share amounts)
Quarter Ended March 31, ---------------------- 1999 1998 --------- --------- Net sales $ 693,002 $ 717,217 --------- --------- Operating expenses Cost of sales 514,775 540,587 Selling, general and administrative 78,738 83,607 Depreciation 22,265 23,253 -------- -------- 615,778 647,447 -------- -------- Operating income 77,224 69,770 Interest income 2,289 3,062 Interest expense (26,693) (27,999) Other income, net 88 245 -------- --------- Income before income taxes 52,908 45,078 Income taxes (4,200) (4,000) --------- --------- Net income $ 48,708 $ 41,078 ======== ======== Earnings per common share: Basic $ .68 $ .58 Diluted .60 .52 Dividends per common share $ .05 $ .05
See Notes to Consolidated Financial Statements 3 CHIQUITA BRANDS INTERNATIONAL, INC. ----------------------------------- CONSOLIDATED BALANCE SHEET (Unaudited) ------------------------------------- (In thousands, except share amounts)
March 31, December 31, March 31, 1999 1998 1998 --------- ------------ --------- ASSETS - ------ Current assets Cash and equivalents $ 97,902 $ 88,906 $ 91,309 Trade receivables (less allowances of $10,316, $10,603 and $10,148) 239,884 201,574 233,002 Other receivables, net 117,217 128,293 90,881 Inventories 353,272 387,293 379,136 Other current assets 32,550 34,168 41,884 ---------- ---------- ---------- Total current assets 840,825 840,234 836,212 Property, plant and equipment, net 1,121,376 1,122,847 1,172,750 Investments and other assets 367,192 356,228 306,872 Intangibles, net 189,101 189,824 201,963 ---------- ---------- ---------- Total assets $2,518,494 $2,509,133 $2,517,797 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities Notes and loans payable $ 137,040 $ 131,768 $ 86,545 Long-term debt due within one year 101,335 37,511 45,493 Accounts payable 240,363 217,266 222,759 Accrued liabilities 99,638 144,884 91,940 ---------- ---------- ---------- Total current liabilities 578,376 531,429 446,737 Long-term debt of parent company 683,420 683,294 689,162 Long-term debt of subsidiaries 245,037 319,312 342,289 Accrued pension and other employee benefits 86,375 90,382 87,305 Other liabilities 90,124 90,736 90,402 ---------- ---------- ---------- Total liabilities 1,683,332 1,715,153 1,655,895 ---------- ---------- ---------- Shareholders' equity Preferred and preference stock 253,475 253,475 253,475 Common stock - 65,734,685 and 65,447,875 shares, $.01 par value; 64,368,998 shares, $.33 par value 657 654 21,456 Capital surplus 758,935 755,660 725,107 Accumulated deficit (173,817) (214,967) (132,889) Accumulated other comprehensive loss (4,088) (842) (5,247) ---------- ---------- ---------- Total shareholders' equity 835,162 793,980 861,902 ---------- ---------- ---------- Total liabilities and shareholders' equity $2,518,494 $2,509,133 $2,517,797 ========== ========== ==========
See Notes to Consolidated Financial Statements 4 CHIQUITA BRANDS INTERNATIONAL, INC. ----------------------------------- CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) ---------------------------------------------- (In thousands)
Quarter Ended March 31, --------------------- 1999 1998 --------- --------- Cash provided (used) by: Operations Net income $ 48,708 $ 41,078 Depreciation and amortization 23,869 24,925 Changes in current assets and liabilities (43,729) (57,363) Other (10,442) (4,134) -------- -------- Cash flow from operations 18,406 4,506 -------- -------- Investing Capital expenditures (23,744) (13,573) Hurricane Mitch insurance proceeds 25,000 -- Refundable deposits for container equipment 9,051 (8,268) Long-term investments (6,132) (1,000) Acquisition of vegetable canning business -- (17,424) Other (2,663) (1,771) ------- ------- Cash flow from investing 1,512 (42,036) ------- ------- Financing Debt transactions Issuances of long-term debt -- 54,397 Repayments of long-term debt (9,229) (62,686) Increase in notes and loans payable 5,816 18,637 Stock transactions Issuances of common stock 49 270 Dividends (7,558) (7,481) ------- ------ Cash flow from financing (10,922) 3,137 ------- ------ Increase (decrease) in cash and equivalents 8,996 (34,393) Balance at beginning of period 88,906 125,702 --------- --------- Balance at end of period $ 97,902 $ 91,309 ========= =========
See Notes to Consolidated Financial Statements 5 CHIQUITA BRANDS INTERNATIONAL, INC. ----------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ------------------------------------------------------ Interim results are subject to significant seasonal variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of the interim periods shown have been made. See Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 for additional information relating to the Company's financial statements. Earnings Per Share - ------------------ Basic and diluted earnings per common share ("EPS") are calculated as follows (in thousands, except per share amounts):
Quarter Ended March 31, -------------------- 1999 1998 -------- --------- Net income $ 48,708 $ 41,078 Dividends on preferred and preference stock (4,276) (4,276) -------- -------- Net income attributed to common shares for basic EPS 44,432 36,802 Add back dividends on preferred and preference stock 4,276 4,276 -------- -------- Net income attributed to common shares for diluted EPS $ 48,708 $ 41,078 ======== ========= Weighted average common shares outstanding 65,618 63,682 Nonvested restricted shares -- (72) -------- -------- Shares used to calculate basic EPS 65,618 63,610 Assumed conversion of preferred and preference stock 15,479 15,479 Assumed exercise of stock options 215 635 -------- -------- Shares used to calculate diluted EPS 81,312 79,724 ======== ======== Basic EPS $ .68 $ .58 Diluted EPS .60 .52
The assumed conversion to common stock of the Company's 7% convertible subordinated debentures would have an anti-dilutive effect on diluted EPS and, therefore, has not been included in the computation. 6 Segment Information - ------------------- Net sales for the Company's Fresh Produce and Processed Foods business segments totaled $573 million and $120 million for the first quarter of 1999, respectively, and $602 million and $115 million for the first quarter of 1998. Operating income for the Fresh Produce and Processed Foods segments was $71 million and $6 million for the first quarter of 1999, respectively, and $63 million and $7 million for the first quarter of 1998. Inventories (in thousands) - --------------------------
March 31, December 31, March 31, 1999 1998 1998 ---------- ------------ ----------- Fresh produce $ 47,319 $ 43,052 $ 41,285 Processed food products 139,455 184,438 150,112 Growing crops 109,992 109,891 116,348 Materials, supplies and other 56,506 49,912 71,391 ---------- ---------- ----------- $ 353,272 $ 387,293 $ 379,136 ========== ========== ===========
Hedging - ------- Chiquita has a long-standing policy of periodically hedging transactions denominated in foreign currencies. At March 31, 1999, the Company had option contracts denominated in Deutsche marks and the European Union ("EU") common currency (the "Euro") which ensure conversion of approximately $260 million of foreign sales through the end of 1999 at equivalent rates not higher than 1.77 Deutsche marks (.90 Euros) per dollar or lower than 1.59 Deutsche marks (.82 Euros) per dollar and approximately $55 million of foreign sales in 2000 at equivalent rates not higher than 1.78 Deutsche marks (.91 Euros) per dollar or lower than 1.58 Deutsche marks (.81 Euros) per dollar. The carrying value of these option contracts at March 31, 1999 was approximately $5 million and their fair value based on quoted market prices was approximately $9 million. Acquisitions - ------------ In January 1998, Chiquita acquired Stokely USA, Inc., previously a publicly-owned vegetable canning business. In connection with the acquisition, Chiquita issued $11 million of common stock (.8 million shares) in exchange for all outstanding Stokely shares and issued $33 million of common stock (2.2 million shares) and paid $18 million of cash to retire corresponding amounts of Stokely debt. The transaction was accounted for as a purchase. 7 Comprehensive Income - -------------------- Comprehensive income for all periods presented consisted solely of net income and unrealized foreign currency translation losses, as follows (in thousands):
Quarter Ended March 31, --------------------- 1999 1998 -------- --------- Net income $ 48,708 $ 41,078 Unrealized foreign currency translation losses (3,246) (1,839) -------- --------- Comprehensive income $ 45,462 $ 39,239 ======== =========
8 Item 2 - ------ CHIQUITA BRANDS INTERNATIONAL, INC. ---------------------------------- MANAGEMENT'S ANALYSIS OF ------------------------ OPERATIONS AND FINANCIAL CONDITION ----------------------------------- Operations - ---------- Net sales for the quarter ended March 31, 1999 decreased by $24 million to $693 million primarily as a result of a merger of the Company's Chilean fresh produce operations into a joint venture in September 1998 and the sale of Chiquita's Central American plastic products operations in December 1998. Operating expenses also decreased from prior year levels as a result of these transactions. Operating income for the 1999 first quarter was $77 million compared to 1998 first quarter operating income of $70 million. The improvement in first quarter operating results occurred in the Company's Fresh Produce business segment primarily as a result of higher banana pricing on comparable core market volume and lower volume in Eastern European trading markets. While the Company's Processed Foods segment continued to consolidate and reduce costs in its canning operations, it experienced lower cyclical pricing for canned vegetable products during the quarter. Throughout the first six weeks of the second quarter of 1999, the Company has been experiencing significantly lower banana pricing in all markets in comparison to the second quarter of 1998. The Company's effective tax rate is affected by the level and mix of income among various domestic and foreign jurisdictions in which the Company operates. Financial Condition - ------------------- Operating cash flow increased from $5 million in 1998 to $18 million in 1999 primarily as a result of improved earnings and lower working capital levels. For the 1999 first quarter, capital expenditures of $24 million included spending to rehabilitate farms in Honduras and Guatemala destroyed or damaged by Hurricane Mitch flooding in late 1998. The Company expects to finance the remaining flood rehabilitation and its other capital expenditures with cash flow from operations, insurance proceeds and long-term borrowings. During the quarter, the Company received an initial insurance payment of $25 million. In April 1999, Chiquita Processed Foods, L.L.C., the Company's vegetable canning subsidiary, acquired certain canning assets in Oregon. The purchase price of approximately $20 million was funded with borrowings under Chiquita Processed Foods' revolving credit facility. At May 12, 1999, approximately $30 million of borrowings were available under Chiquita's $125 million revolving credit facility, and approximately $60 million of borrowings were available under committed lines of credit of subsidiaries. 9 World Trade Organization Proceeding - ----------------------------------- Reference is made to the discussion of the European Union banana quota and licensing regime contained in Part I, Item 1 - - "Business - Risks of International Operations" in the Company's 1998 Form 10-K and "Management's Analysis of Operations and Financial Condition" in the Company's 1998 Annual Report to Shareholders. On April 6, 1999, a World Trade Organization ("WTO") arbitration panel ruled that the revised banana import regime implemented by the EU in January 1999 continues the same discrimination against the United States and Latin America which previous WTO rulings found to be in violation of the EU's international trade obligations. The WTO arbitrators concluded that the United States is being harmed by the revised regime in the amount of $191.4 million annually and is entitled to suspend EU trade concessions in that amount. Accordingly, the United States has commenced the imposition of prohibitive (100% of value) duties on selected EU products accounting for annual exports to the United States in the amount authorized by the arbitrators' ruling. The arbitrators' ruling is not appealable and the EU has indicated that it will modify its banana import regime to be consistent with its international trade obligations. However, there can be no assurance as to the nature, extent or timing of any such modification or its impact on the Company. Year 2000 Project - ----------------- Reference is made to the discussion of Chiquita's company-wide Year 2000 Project (the "Project") in "Management's Analysis of Operations and Financial Condition" in the Company's 1998 Annual Report to Shareholders. The Project has included the following phases: (1) inventorying the Company's hardware, software and equipment; (2) assessing which items have Year 2000 issues; (3) determining critical versus non-critical items; (4) replacing or repairing items that have Year 2000 issues; (5) testing material items; (6) assessing the Year 2000 readiness of the Company's material customers and suppliers; and (7) developing contingency plans. As of March 31, 1999, the first five phases of the Project are substantially complete. The Company is assessing the Year 2000 readiness of material customers and suppliers, including financial institutions, telecommunications companies, public utility companies and commercial vendors. Assessment has included obtaining written certifications of Year 2000 readiness from third parties, review of their Year 2000 readiness plans and site visits. This assessment is substantially complete for those third parties whose functions are most critical to the operations of the Company, such as financial institutions. Assessment of risk associated with remaining material customers and suppliers and development of necessary contingency plans for third parties and critical internal systems are expected to be completed before the end of 1999. Chiquita's contingency planning is focusing on minimizing Year 2000 disruptions, should they occur, by having sufficient personnel and other resources in place to permit an appropriate response to specific problems. The estimated total cost of the Project for systems that have not been replaced or upgraded in the normal course is less than $10 million. Most of the cost has already been incurred by the Company. Due to the widespread uncertainties inherent in the Year 2000 problem, resulting primarily from the widely reported uncertainty of the Year 2000 readiness of suppliers, customers and other third parties, including U.S. and foreign governmental entities, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Company's financial statements. However, the Company believes the most reasonably likely worst case scenario is that there could be some localized, temporary disruptions to portions of business activities, such as shipping, ripening and data processing, rather than systemic or long-term problems affecting its business operations as a whole. 10 Item 3 - Quantitative and Qualitative Disclosures About Market - -------------------------------------------------------------- Risk ---- Reference is made to the discussion of Chiquita's Management of Market Risk in "Management's Analysis of Operations and Financial Condition" in the Company's 1998 Annual Report to Shareholders. As of March 31, 1999, there were no material changes to the information presented. * * * * * This quarterly report contains certain information that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. This information is subject to a number of assumptions, risks and uncertainties, including product pricing, costs to purchase or grow (and availability of) fresh produce and other raw materials, currency exchange rate fluctuations, natural disasters and unusual weather conditions, operating efficiencies, labor relations, access to capital, actions of governmental bodies, actions or failures to act of customers, suppliers and other third parties with respect to Year 2000 readiness issues, and other market and competitive conditions, many of which are beyond the control of Chiquita. Actual results or developments may differ materially from the expectations expressed or implied in the forward-looking information. Part II - Other Information - --------------------------- Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- Page Number(s) --------- (a) Exhibit 27 - Financial Data Schedule. . . . . ** ** Omitted from this copy of Quarterly Report on Form 10-Q. Copy included in report filed electronically with the Securities and Exchange Commission. (b) There were no reports on Form 8-K filed by the Company during the quarter ended March 31, 1999. 11 SIGNATURE --------- Pursuant to the requirements 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. CHIQUITA BRANDS INTERNATIONAL, INC. By: /s/ William A. Tsacalis ----------------------------- William A. Tsacalis Vice President and Controller (Chief Accounting Officer) May 14, 1999 12 EX-27 2
5 This schedule contains summary financial information extracted from the Chiquita Brands International, Inc. Form 10-Q for the three months ended March 31, 1999 and is qualified in its entirety by reference to such financial information. 1,000 3-MOS DEC-31-1999 MAR-31-1999 97,902 0 250,200 10,316 353,272 840,825 1,785,918 664,542 2,518,494 578,376 928,457 0 253,475 657 581,030 2,518,494 693,002 693,002 514,775 514,775 22,265 0 26,693 52,908 4,200 48,708 0 0 0 48,708 .68 .60
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