10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-1550

CHIQUITA BRANDS INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

New Jersey	04-1923360
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

250 East Fifth Street

Cincinnati, Ohio 45202

(Address of principal executive offices and zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x.     No  ¨.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨.    No  x.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 31, 2005, there were 41,924,962 shares of Common Stock outstanding.

CHIQUITA BRANDS INTERNATIONAL, INC.

TABLE OF CONTENTS

	Page
PART I - Financial Information
Item 1 - Financial Statements
Consolidated Statement of Income for the quarters and nine months ended September 30, 2005 and 2004	3
Consolidated Balance Sheet as of September 30, 2005, December 31, 2004 and September 30, 2004	4
Consolidated Statement of Cash Flow for the nine months ended September 30, 2005 and 2004	5
Notes to Consolidated Financial Statements	6
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	25
Item 4 - Controls and Procedures	25
PART II - Other Information
Item 1 - Legal Proceedings	26
Item 6 - Exhibits	26
Signature	27

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Part I - Financial Information

Item 1 - Financial Statements

CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

(In thousands, except per share amounts)

	Quarter Ended Sept. 30,						Nine Months Ended Sept. 30,
	2005			2004			2005			2004
Net sales	$	954,006		$	661,610		$	2,905,279		$	2,303,164
Operating expenses
Cost of sales		784,924			573,332			2,390,569			1,972,857
Selling, general and administrative		127,578			68,986			287,251			219,989
Depreciation		18,826			10,235			41,138			31,742
Amortization		2,669			—			2,753			—
Loss on sale of Colombian division		—			—			—			9,289
Equity in earnings of investees		(32	)		(996	)		(4,795	)		(9,080	)
		933,965			651,557			2,716,916			2,224,797
Operating income		20,041			10,053			188,363			78,367
Interest income		2,359			2,347			7,618			3,710
Interest expense		(21,671	)		(9,823	)		(37,105	)		(29,850	)
Other income (expense), net		772			(19,706	)		(1,221	)		(19,706	)
Income (loss) before income taxes		1,501			(17,129	)		157,655			32,521
Income taxes		(1,200	)		(2,700	)		(7,200	)		(2,200	)
Net income (loss)	$	301		$	(19,829	)	$	150,455		$	30,321
Earnings per common share:
Basic	$	0.01		$	(0.49	)	$	3.63		$	0.74
Diluted		0.01			(0.49	)		3.26			0.72
Dividends per common share	$	0.10		$	—		$	0.30		$	—

See Notes to Consolidated Financial Statements.

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CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET (Unaudited)

(In thousands, except share amounts)

	September 30, 2005		December 31, 2004		September 30, 2004
ASSETS
Current assets
Cash and equivalents	$	181,074	$	142,791	$	229,617
Trade receivables (less allowances of $11,685, $12,241, and $11,020)		393,739		340,552		267,548
Other receivables, net		85,283		89,312		74,983
Inventories		220,255		187,073		163,819
Prepaid expenses		32,300		19,164		16,220
Other current assets		42,737		14,859		25,156
Total current assets		955,388		793,751		777,343
Property, plant and equipment, net		606,866		419,601		402,360
Investments and other assets, net		162,986		131,715		143,686
Trademarks		449,085		387,585		387,585
Goodwill		575,469		46,109		42,501
Other intangible assets, net		168,174		1,277		1,651
Total assets	$	2,917,968	$	1,780,038	$	1,755,126
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes and loans payable	$	10,732	$	11,220	$	12,620
Long-term debt of parent company due within one year		—		—		40,917
Long-term debt of subsidiaries due within one year		22,224		22,981		23,448
Accounts payable		363,095		321,296		260,932
Accrued liabilities		165,838		107,037		104,943
Total current liabilities		561,889		462,534		442,860
Long-term debt of parent company		475,000		250,000		250,000
Long-term debt of subsidiaries		572,863		65,266		80,850
Accrued pension and other employee benefits		74,479		78,190		73,394
Other liabilities		203,792		85,224		84,313
Total liabilities		1,888,023		941,214		931,417
Shareholders’ equity
Common stock, $.01 par value (41,915,644, 40,476,381 and 40,858,263 shares outstanding, respectively)		419		405		409
Capital surplus		674,238		645,365		650,709
Retained earnings		300,298		162,375		142,722
Accumulated other comprehensive income		54,990		30,679		29,869
Total shareholders’ equity		1,029,945		838,824		823,709
Total liabilities and shareholders’ equity	$	2,917,968	$	1,780,038	$	1,755,126

See Notes to Consolidated Financial Statements.

4

CHIQUITA BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2005			2004
Cash provided (used) by:
Operations
Net income	$	150,455		$	30,321
Depreciation and amortization		43,891			31,742
Loss on extinguishment of debt		—			22,015
Loss on sale of Colombian division		—			3,589
Equity in earnings of investees		(4,795	)		(9,080	)
Changes in current assets and liabilities and other		22,326			11,475
Cash flow from operations		211,877			90,062
Investing
Capital expenditures		(20,019	)		(27,588	)
Proceeds from sale of:
Colombian division		—			28,500
Seneca preferred stock		14,467			—
Other property, plant and equipment		2,862			8,066
Acquisition of businesses		(889,087	)		(2,255	)
Other		3,741			3,170
Cash flow from investing		(888,036	)		9,893
Financing
Issuances of long-term debt		781,319			259,460
Repayments of long-term debt		(73,596	)		(277,985	)
Costs for CBL revolving credit facility and other fees		(4,003	)		(640	)
Increase in notes and loans payable		773			3,425
Proceeds from exercise of stock options/warrants		22,337			11,106
Dividends on common stock		(12,388	)		—
Cash flow from financing		714,442			(4,634	)
Increase in cash and equivalents		38,283			95,321
Balance at beginning of period		142,791			134,296
Balance at end of period	$	181,074		$	229,617

See Notes to Consolidated Financial Statements.

5

CHIQUITA BRANDS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Interim results for Chiquita Brands International, Inc. (“CBII”) and subsidiaries (collectively, with CBII, the “Company”) are subject to significant seasonal variations and are not necessarily indicative of the results of operations for a full fiscal year. The Company’s results during the third and fourth quarters are generally weaker than in the first half of the year due to increased availability of competing fruits and resulting lower banana prices.

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 2004 Annual Report on Form 10-K for additional information relating to the Company’s financial statements.

Note 1 - Earnings Per Share

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

	Quarter Ended Sept. 30,					Nine Months Ended Sept. 30,
	2005		2004			2005		2004
Net income (loss)	$	301	$	(19,829	)	$	150,455	$	30,321
Weighted average common shares outstanding (used to calculate basic EPS)		41,864		40,846			41,492		40,704
Warrants, stock options and other stock awards		5,160		—			4,651		1,188
Shares used to calculate diluted EPS		47,024		40,846			46,143		41,892
Basic earnings per common share	$	0.01	$	(0.49	)	$	3.63	$	0.74
Diluted earnings per common share		0.01		(0.49	)		3.26		0.72

The assumed conversions to common stock of the Company’s outstanding warrants, stock options and other stock awards are excluded from the diluted EPS computations for periods in which these items, on an individual basis, have an anti-dilutive effect on diluted EPS. For the quarter ended September 30, 2004, the shares used to calculate diluted EPS would have been 41,467 if the Company had generated net income.

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Note 2 - Acquisitions and Divestitures

Acquisition of Fresh Express

On June 28, 2005, the Company completed its acquisition of the Fresh Express packaged salad and fresh-cut fruit division of Performance Food Group (“PFG”). Fresh Express is the retail market leader of value-added packaged salads in the United States. The acquisition will increase Chiquita’s consolidated annual revenues by about $1 billion. The Company believes that this acquisition will permit it to diversify its business, accelerate revenue growth in higher margin value-added products, and lead to a more balanced mix of sales between Europe and North America, which will make the Company less susceptible to risks unique to Europe, such as pending changes to the European Union banana import regime and foreign exchange risk.

The Company paid $855 million in consideration and incurred transaction expenses of $8 million. In addition, at closing and subject to certain post-closing adjustments, the Company transferred $26 million to PFG corresponding to the estimated amount of cash at Fresh Express and outstanding checks (issued by PFG in payment of Fresh Express obligations) in excess of deposits. Additionally, the Company incurred approximately $24 million of fees related to the financing of the acquisition, which are not included in the purchase price allocation below and will be amortized over the effective life of the respective loans. Debt prepayments will result in accelerated amortization.

The purchase price allocation for this transaction is still preliminary. The Company recorded the following values for the identifiable tangible and intangible assets and liabilities of Fresh Express (in millions):

Fair value of fixed assets acquired	$	220
Intangible assets subject to amortization		170
Intangible assets not subject to amortization		62
Other assets		122
Deferred tax effect of acquisition		(112	)
Fair value of liabilities acquired		(96	)
Goodwill		531
	$	897

The fair value of fixed assets and intangible assets acquired is based on work of independent appraisers. The other assets and liabilities, which primarily represent trade receivables, trade payables and accrued liabilities, are based on historical values and are assumed to be stated at fair market values.

The following table presents detail of Fresh Express’s intangible assets as of the date of acquisition:

	Fair value		Amortization period	Valuation method
Intangible assets subject to amortization:
Customer relationships	$	110 million	16 to 20 years	Excess earnings
Patented technology	$	60 million	5 to 17 years	Relief-from-royalty
Intangible assets not subject to amortization:
Trademarks	$	62 million	—	Relief-from-royalty

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The excess earnings method estimates the present value of future cash flows attributable to the company’s customer base and requires estimates of the expected future revenues and remaining useful lives of the customer relationships.

The relief-from-royalty valuation method estimates the royalty expense that could be avoided in the operating business as a result of owning the respective asset or technology. The royalty savings are measured, tax-affected and, thereafter, converted to present value with a discount rate that considers the risk associated with owning the intangible assets.

Significant assumptions inherent in the excess earnings and relief-from-royalty methodologies include estimates of cash flows, discount rates, royalty rates and income tax rates. Actual results may differ from the assumptions used. The assumptions about future cash flows were based on certain projections and long-term plans. Discount rate assumptions represent the inherent risk in intangible assets compared with the Company’s weighted average cost of capital using guideline companies in similar lines of business. Royalty rate assumptions are based on the rates at which similar intangibles are being licensed in the marketplace. Income tax rate assumptions are based on the effective tax rates of guideline companies in similar lines of business.

The Company has recorded approximately $112 million of deferred tax liabilities, related to the consolidated differences in the basis between book and tax tangible and intangible assets existing immediately after the transaction.

Contemporaneous with the completion of the acquisition, the Company started preparing a formal integration plan. Management’s plans are preliminary but may include exiting or consolidating certain activities of Fresh Express and may include costs such as lease and contract termination, severance and certain other exit costs. Upon completion of a formal consolidation plan authorized by appropriate executives, the Company anticipates that expenses to fully execute the plan will total $25 to $35 million and will be recorded as additional purchase price of the acquisition in accordance with Emerging Issues Task Force Bulletin 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.”

Starting with the June 28, 2005 acquisition date, the Company’s Consolidated Statement of Income includes the operations of Fresh Express, and interest expense on the acquisition financing.

Set forth below is summary consolidated pro forma information for the Company, giving effect to the acquisition of Fresh Express as though it had been completed on the first day of each period presented. The summary consolidated pro forma information below is based on the preliminary purchase price allocation, and does not reflect any adjustments related to integration synergies or certain expenses previously allocated to Fresh Express by PFG.

	Quarter Ended Sept. 30,					Nine Months Ended Sept. 30,
(in millions, except per share amounts)	2005		2004			2005		2004
	(Actual)		(Pro Forma)			(Pro Forma)		(Pro Forma)
Net sales	$	954.0	$	905.3		$	3,422.3	$	3,058.1
Net income (loss)		0.3		(25.3	)		145.9		17.4
Earnings per share - basic	$	0.01	$	(0.62	)	$	3.52	$	0.43
Earnings per share - diluted		0.01		(0.62	)		3.16		0.42

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Other acquisitions and divestitures

In April 2005, the Company sold approximately 968,000 shares of Seneca Foods Corporation preferred stock, which had been received as part of the May 2003 sale of the Company’s Chiquita Processed Foods division to Seneca. The Company received proceeds of more than $14 million from the sale of the preferred stock and recorded a $1 million gain on the transaction in the 2005 second quarter in “Other income (expense), net.”

In January 2005, the Company acquired Darex S.A., a distributor of bananas in Poland, for approximately $5 million in cash, assumption of approximately $5 million of debt and forgiveness of certain receivables. Darex has approximately $30 million in annual revenues.

In June 2004, the Company sold its banana-producing and port operations in Colombia to Invesmar Ltd. (“Invesmar”), the holding company of C.I. Banacol S.A., a Colombian-based producer and exporter of bananas and other fresh products.

In exchange for the Colombian operations, the Company received $28.5 million in cash; $15 million face amount of notes and deferred payments; and the assumption by the buyer of approximately $7 million of pension liabilities.

In connection with the Colombian sale, Chiquita entered into eight-year agreements to purchase bananas and pineapples from affiliates of the buyer. Under the banana purchase agreement, Chiquita purchases approximately 11 million boxes of Colombian bananas per year at above-market prices. This resulted in a liability of $33 million at the sale date ($30 million at September 30, 2005), which represented the estimated net present value of the above-market premium to be paid for the purchase of bananas over the term of the contract. Substantially all of this liability is included in “Other liabilities” in the Consolidated Balance Sheet. Under the pineapple purchase agreement, Chiquita purchases approximately 2.5 million boxes of Costa Rican golden pineapples per year at below-market prices. This resulted in a receivable of $25 million at the sale date ($23 million at September 30, 2005), which represented the estimated net present value of the discount to be received for the purchase of pineapples over the term of the contract. Substantially all of this receivable is included in “Investments and other assets, net” in the Consolidated Balance Sheet.

Also in connection with the Colombian sale, Chiquita agreed that, in the event that it becomes unable to perform its obligations under the banana purchase agreement due to a conflict with U.S. law, Chiquita will indemnify Invesmar primarily for the lost premium on the banana purchases.

The net book value of the assets and liabilities transferred in the Colombian transaction was $36 million, primarily comprised of $25 million of property, plant and equipment; $19 million of growing crop inventory; $5 million of materials and supplies inventory; $6 million of deferred tax liabilities; and $7 million of pension liabilities. The Company recognized a before-tax loss of $9 million and an after-tax loss of $4 million on the transaction, which takes into account the net $8 million loss from the two long-term fruit purchase agreements.

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Note 3 - Contingencies

In April 2003, the Company’s management and audit committee, in consultation with the board of directors, voluntarily disclosed to the U.S. Department of Justice, Criminal Division (the “Justice Department”), that its banana producing subsidiary in Colombia, which was sold in June 2004, had been forced to make “protection” payments to certain groups in that country which had been designated under United States law as foreign terrorist organizations. The Company’s sole reason for allowing its subsidiary to submit to these payment demands had been to protect its employees from the risks to their safety if the payments were not made. The voluntary disclosure to the Justice Department was made because the Company’s management became aware that these groups had been designated as foreign terrorist organizations under a U.S. statute that makes it a crime to support such an organization. The Company requested the Justice Department’s guidance. Following the voluntary disclosure, the Justice Department undertook an investigation. The Company has cooperated with that investigation. In March 2004, the Justice Department advised that, as part of its criminal investigation, it will be evaluating the role and conduct of the Company and some of its officers in the matter. In September-October 2005, the Company was advised that the investigation is continuing and that the conduct of the Company and some of its officers and directors remains within the scope of the investigation. The Company intends to continue its cooperation with this investigation, but it cannot predict its outcome or any possible adverse effect on the Company, which could include the imposition of fines and/or civil penalties.

In October 2004 and May 2005, the Company’s Italian subsidiary received notices from customs authorities in Italy stating that this subsidiary is potentially liable for an aggregate of approximately €26.9 million (approximately $32 million) of additional duties and taxes on the import of certain bananas into the European Union from 1998 to 2000, plus interest currently estimated at approximately €13.2 million (approximately $16 million). The Customs authorities claim that these amounts are due because the bananas were imported with licenses that were subsequently determined to have been forged. The Company is contesting these claims through appropriate proceedings, principally on the basis of its good faith belief at the time the import licenses were obtained and used that they were valid. The Company’s Italian subsidiary has requested suspension of payment, pending appeal, of the approximately €4.8 million claimed in October 2004 and also intends to request suspension of payment, when appropriate, of the additional amounts claimed in May 2005. The authorities may require the Italian subsidiary to post bonds for the full amounts claimed as a condition to suspension of payment.

As the Company announced in June 2005, Chiquita’s management became aware that certain of its employees had shared pricing and volume information with competitors in Europe over many years in violation of European competition laws and Company policies, and may have engaged in several instances of other conduct which did not comply with European competition laws or applicable Company policies. The Company promptly stopped the conduct and notified the European Commission (“EC”) and other regulatory authorities of these matters; the Company is cooperating with the related investigation subsequently commenced by the EC. Based on the Company’s voluntary notification and cooperation with the investigation, the EC has notified Chiquita that it will be granted immunity from any fines related to the conduct, subject to customary conditions, including the Company’s continuing cooperation with the investigation. Accordingly, Chiquita does not expect to be subject to any fines by the EC. However, if at the conclusion of its investigation, which could take one or more years, the EC were to determine, among other things, that Chiquita did not continue to cooperate, then the Company could be subject to fines, which, if imposed, could be substantial. The Company does not believe that the reporting of these matters or the cessation of the conduct should have any material adverse effect on the regulatory or competitive environment in which it operates, although there can be no assurance in this regard.

The Consolidated Balance Sheet does not reflect a liability for these contingencies for any of the periods presented.

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Note 4 - Inventories (in thousands)

	September 30, 2005		December 31, 2004		September 30, 2004
Bananas	$	46,199	$	35,757	$	37,610
Fresh Select (see Note 6)		5,917		14,226		7,554
Fresh Cut (see Note 6)		8,421		—		—
Processed food products		8,324		8,870		7,256
Growing crops		94,890		80,882		76,094
Materials, supplies and other		56,504		47,338		35,305
	$	220,255	$	187,073	$	163,819

Note 5 - Debt

On June 28, 2005, the Company and Chiquita Brands L.L.C. (“CBL”), the main operating subsidiary of the Company, entered into an amended and restated credit agreement (the “Credit Agreement”) with a syndicate of bank lenders for a $650 million senior secured credit facility (the “CBL Facility”) that replaced the credit agreement entered into by CBL in January 2005. Total fees of approximately $18 million were paid to obtain the CBL Facility. The CBL Facility consists of:

• A five-year $150 million revolving credit facility (the “Revolving Credit Facility”) which may be increased to $200 million under certain conditions. At September 30, 2005, no borrowings were outstanding; however, $27 million of credit availability was used to support issued letters of credit. The Revolving Credit Facility bears interest at LIBOR plus a margin of 1.25% to 2.75% and CBL is required to pay a fee on the daily unused portion of the Revolving Credit Facility of 0.25% to 0.50% per annum, depending in each case on the Company’s consolidated leverage ratio; and

• Two seven-year term loans, one for $125 million (the “Term Loan B”) and one for $375 million (the “Term Loan C”) (collectively, the “Term Loans”), the proceeds of which were used to finance a portion of the acquisition of Fresh Express. At September 30, 2005, $100 million was outstanding under the Term Loan B and $374 million was outstanding under the Term Loan C. The Company made a $25 million principal prepayment on the Term Loan B in August 2005 and a second $25 million principal prepayment in October 2005, reducing the outstanding balance on the Term Loan B to $75 million. The Term Loans cannot be re-borrowed and each requires quarterly payments, which began in September 2005, amounting to 1% per year of the initial principal amount, less any prepayments, for the first six years with the remaining balance to be paid quarterly in the seventh year. The Term Loans bear interest at LIBOR plus a margin of 2.00% to 2.50%, depending on the Company’s consolidated leverage ratio. At September 30, 2005, the interest rate on the Term Loans was LIBOR plus 2.50%.

Substantially all U.S. assets of CBL and its subsidiaries are pledged to secure the CBL Facility. The Revolving Credit Facility and Term Loan B are principally secured by the U.S. assets of CBL and its subsidiaries other than Fresh Express and its subsidiaries. The Term Loan C is principally secured by the assets of Fresh Express and its subsidiaries. The CBL Facility is also secured by liens on CBL’s trademarks as well as pledges of equity and guarantees by various subsidiaries worldwide. The CBL Facility is guaranteed by CBII and secured by a pledge of CBL’s equity.

Under the Credit Agreement, CBL may distribute cash to CBII for routine CBII operating expenses, interest payments on CBII’s 7 ¹/2% and 8 ⁷/8% Senior Notes, and payment of other limited CBII liabilities. Certain liquidity tests must be met prior to distributions to CBII for other purposes, such as dividend

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payments to Chiquita shareholders and repurchases of CBII’s common stock or warrants; at September 30, 2005, distributions to CBII for these other purposes were limited to approximately $94 million. The Credit Facility includes covenants that require the Company and CBL and its subsidiaries, respectively, to maintain certain financial ratios related to leverage and fixed charge coverage and that place limitations on the ability of CBL and its subsidiaries to incur debt, create liens, dispose of assets, carry out mergers and acquisitions, and make investments and capital expenditures.

On June 28, 2005, the Company completed the offering of $225 million of 8 ⁷/8% Senior Notes due 2015 (the “Notes”) for net proceeds of $219 million. The proceeds were used to finance a portion of the acquisition of Fresh Express. The Company may redeem the Notes at its option at any time on or after June 1, 2010, in whole or from time to time in part, at 104.438% of face value declining to face value in 2013. Before June 1, 2010, the Company may redeem some or all of the Notes at a specified treasury make-whole rate. Upon a change of control of the Company followed by a downgrade in the rating of the Notes, the Company will be required to make an offer to purchase the Notes at 101% of their principal amount, plus accrued interest. The indenture contains covenants that limit the ability of the Company and its subsidiaries to incur debt and issue preferred stock, dispose of assets, make investments, pay dividends or make distributions in respect of the Company’s capital stock, create liens, merge or consolidate, issue or sell stock of subsidiaries, enter into transactions with certain stockholders or affiliates, and guarantee Company debt.

In April 2005, Great White Fleet Ltd. (“GWF”), the Company’s shipping subsidiary, entered into a seven-year secured revolving credit facility for $80 million (the “GWF Facility”). The full proceeds from this facility were drawn, of which approximately $30 million was used to exercise buyout options under then-existing capital leases for four vessels, and approximately $50 million was used to finance a portion of the acquisition of Fresh Express. The loan requires GWF to maintain certain financial covenants related to tangible net worth and total debt ratios.

The GWF Facility requires 13 consecutive semi-annual principal payments of approximately $4 million each, beginning in October 2005, plus a balloon payment at the end of the seven-year term. These semi-annual principal payments represent a corresponding reduction in the availability of funds under the GWF Facility. Amounts available under the GWF Facility may be borrowed, repaid and re-borrowed prior to the final maturity date, subject to the semi-annual payments and corresponding reductions in availability. GWF may elect to draw parts of or the entire amount of credit available in either U.S. dollars or euro, at interest rates of LIBOR plus 1.25% for dollar loans and EURIBOR plus 1.25% for euro loans. At September 30, 2005, GWF had drawn the entire facility in euro to hedge against the potential balance sheet translation impact of the Company’s euro net asset exposure. The total amount drawn was approximately €66 million.

Note 6 - Segment Information

Prior to the acquisition of Fresh Express in June 2005, the Company reported two business segments, Bananas and Other Fresh Produce. The Banana segment included the sourcing (purchase and production), transportation, marketing and distribution of bananas. The Other Fresh Produce segment included the sourcing, marketing and distribution of fresh fruits and vegetables other than bananas. The Other Fresh Produce segment also included Chiquita’s fresh-cut fruit business. Remaining operations, which were reported in “Other,” primarily consisted of processed fruit ingredient products, which are produced in Latin America and sold in other parts of the world, and other consumer packaged goods.

In June 2005, as a result of the Fresh Express acquisition, the Company determined that it has the following three reportable segments: Bananas, Fresh Select and Fresh Cut. The Company’s Banana segment remains unchanged. The Fresh Select segment includes the sourcing, marketing and distribution

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of whole fresh fruits and vegetables other than bananas. The Company’s Fresh Cut segment includes the packaged salads and fresh-cut fruit businesses. Remaining operations, reported in “Other,” continue to substantially consist of processed fruit ingredient products. The Company evaluates the performance of its business segments based on operating income. Intercompany transactions between segments are eliminated.

Financial information for each segment follows (in thousands):

	Quarter Ended Sept. 30,						Nine Months Ended Sept. 30,
	2005			2004			2005			2004
Net sales
Bananas	$	411,395		$	380,332		$	1,503,017		$	1,256,876
Fresh Select		267,964			263,739			1,073,038			992,939
Fresh Cut		259,041			2,780			282,365			7,536
Other		15,606			14,759			46,859			45,813
	$	954,006		$	661,610		$	2,905,279		$	2,303,164
Operating income (loss)
Bananas	$	16,999		$	13,695		$	176,798		$	78,621
Fresh Select		(2,753	)		(1,637	)		11,527			7,764
Fresh Cut		6,844			(2,708	)		1,283			(10,303	)
Other		(1,049	)		703			(1,245	)		2,285
	$	20,041		$	10,053		$	188,363		$	78,367

	September 30, 2005		December 31, 2004		September 30, 2004
Total assets
Bananas	$	1,402,548	$	1,324,579	$	1,341,988
Fresh Select		365,345		419,790		376,040
Fresh Cut		1,118,220		9,501		8,792
Other		31,855		26,168		28,306
	$	2,917,968	$	1,780,038	$	1,755,126

Note 7 - Comprehensive Income (Loss) (in thousands)

	Quarter Ended Sept. 30,						Nine Months Ended Sept. 30,
	2005			2004			2005			2004
Net income (loss)	$	301		$	(19,829	)	$	150,455		$	30,321
Other comprehensive income
Unrealized foreign currency translation gains (losses)		2,709			761			(19,007	)		(3,275	)
Change in minimum pension liability		—			—			—			1,077
Change in fair value of cost investments		941			989			(31	)		(2,191	)
Changes in fair value of currency and fuel hedges		5,913			(5,938	)		40,319			(2,183	)
Losses (gains) reclassified from OCI into net income		(2,615	)		3,736			3,030			22,764
Comprehensive income (loss)	$	7,249		$	(20,281	)	$	174,766		$	46,513

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Note 8 - Hedging

The Company purchases euro put option contracts to reduce the negative impact that any significant decline in the value of the euro would have on the conversion of euro-based net cash flow into U.S. dollars, without limiting the benefit it would receive from a stronger euro. The Company also enters into hedge contracts for fuel oil for its shipping operations, which permit it to lock in fuel purchase prices for up to two years and thereby minimize the volatility that changes in fuel prices could have on its operating results.

Currency hedging costs charged to the Consolidated Statement of Income were $3 million and $11 million for the quarter and nine months ended September 30, 2005, compared to $5 million and $23 million for the quarter and nine months ended September 30, 2004. At September 30, 2005, unrealized losses of $5 million on the Company’s currency option contracts were included in “Accumulated other comprehensive income,” substantially all of which is expected to be reclassified to net income during the next 12 months. Unrealized gains of $25 million on the fuel oil forward contracts were also included in “Accumulated other comprehensive income,” of which $18 million is expected to be reclassified to net income during the next 12 months.

At September 30, 2005, the Company had euro-denominated put options which allow for conversion of approximately €85 million of sales in 2005 at an average rate of $1.26 per euro, approximately €360 million of sales in 2006 at an average rate of $1.19 per euro and approximately €70 million of sales in 2007 at an average rate of $1.22 per euro. The Company also had 3.5% Rotterdam barge fuel oil forward contracts at September 30, 2005 that require conversion of approximately 50,000 metric tons in 2005 and 115,000 metric tons in 2006 at prices ranging from $155 to $175 per metric ton, and 50,000 metric tons in 2007 at prices ranging from $175 to $300 per metric ton. The Company also had a combination of Singapore and New York Harbor fuel oil forward contracts that require conversion of approximately 10,000 metric tons in 2005 and 25,000 metric tons in 2006 at prices ranging from $180 to $215 per metric ton, and 10,000 metric tons in 2007 at prices ranging from $200 to $330 per metric ton. At September 30, 2005, the fair value of the foreign currency option and fuel oil forward contracts was $48 million, $33 million of which was included in “Other current assets” and $15 million in “Investments and other assets, net.” For the quarter and nine months ended September 30, 2005, the increase in the fair value of the fuel oil forward contracts relating to hedge ineffectiveness, and included in net income, was $1 million and $5 million, respectively.

Note 9 - Stock-Based Compensation

Effective January 1, 2003, on a prospective basis, the Company began using the fair value method under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” to recognize stock option expense in its results of operations for stock options granted after December 31, 2002. Prior to January 1, 2003, the Company accounted for stock options using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” The approach to accounting for share-based payments in SFAS 123R is similar to the approach described in the original statement; however, SFAS 123R requires all share-based payments to be recognized in the financial statements based on their fair values.

In April 2005, the Securities and Exchange Commission announced that registrants with a fiscal year ending December 31, such as the Company, will not be required to adopt SFAS 123R until January 1, 2006.

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The Company has been recognizing expense in its results of operations for stock options granted after December 31, 2002. For grants prior to that date (the “2002 Grants”), the expense has been included in pro forma disclosures rather than the Consolidated Statement of Income. The 2002 Grants will be fully vested as of January 1, 2006 and, as a result, SFAS 123R will not have an impact on pre-tax income as it relates to the 2002 Grants. The Company does not anticipate that the adoption of SFAS 123R will have a material impact on net income.

The table below illustrates the effect of stock compensation expense on the periods presented as if the Company had always applied the fair value method:

	Quarter Ended Sept. 30,						Nine Months Ended Sept. 30,
(in thousands, except per share amounts)	2005			2004			2005			2004
Income (loss) before stock compensation expense	$	3,298		$	(18,400	)	$	157,895		$	39,332
Stock compensation expense included in net income (loss) 1		(2,997	)		(1,429	)		(7,440	)		(9,011	)
Net income (loss)		301			(19,829	)		150,455			30,321
Pro forma stock compensation expense 2		(1,513	)		(1,636	)		(4,539	)		(5,086	)
Pro forma net income (loss)	$	(1,212	)	$	(21,465	)	$	145,916		$	25,235
Basic earnings per common share:
Income (loss) before stock compensation expense	$	0.08		$	(0.45	)	$	3.81		$	0.96
Stock compensation expense included in net income (loss)		(0.07	)		(0.04	)		(0.18	)		(0.22	)
Net income (loss)		0.01			(0.49	)		3.63			0.74
Pro forma stock compensation expense 2		(0.04	)		(0.04	)		(0.11	)		(0.12	)
Pro forma net income (loss)	$	(0.03	)	$	(0.53	)	$	3.52		$	0.62
Diluted earnings per common share:
Income (loss) before stock compensation expense	$	0.07		$	(0.45	)	$	3.42		$	0.94
Stock compensation expense included in net income (loss)		(0.06	)		(0.04	)		(0.16	)		(0.22	)
Net income (loss)		0.01			(0.49	)		3.26			0.72
Pro forma stock compensation expense 2		(0.03	)		(0.04	)		(0.10	)		(0.12	)
Pro forma net income (loss)	$	(0.02	)	$	(0.53	)	$	3.16		$	0.60

¹ Represents expense from stock options and stock appreciation rights (“SARs”) of $0.3 million and $1.0 million for the quarter and nine months ended September 30, 2005 and $0.4 million and $4.2 million for the quarter and nine months ended September 30, 2004. Also represents expense from restricted stock awards of $2.7 million and $6.4 million for the quarter and nine months ended September 30, 2005 and $1.0 million and $4.8 million for the quarter and nine months ended September 30, 2004. Expense for the nine months ended September 30, 2004 includes a charge of $3.6 million for awards granted to the Company’s former chairman and chief executive officer that vested upon his retirement as chairman on May 25, 2004.

² Represents the additional amount of stock compensation expense that would have been included in net income had the Company applied the fair value method under SFAS No. 123 for awards issued prior to 2003, when the Company first began expensing options.

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Options for 335,000 shares were granted during the first quarter of 2004 and none thereafter. The estimated weighted average fair value per option share granted was $12.47 during the first quarter of 2004 using a Black-Scholes option pricing model based on market prices and the following assumptions at the dates of option grant: weighted average risk-free interest rate of 3.0%, dividend yield of 0%, volatility factor for the Company’s common stock price of 60%, and a weighted average expected life of five years for options not forfeited.

Approximately 1,325,000 options and SARs were exercised during the first nine months of 2005, resulting in a cash inflow of $22 million. During the first nine months of 2004, approximately 665,000 options and SARs were exercised, resulting in a cash inflow of $11 million.

Restricted stock awards for approximately 6,000 shares and 107,000 shares were granted to employees and directors during the quarter and nine months ended September 30, 2005. For the quarter and nine months ended September 30, 2004, restricted stock awards for approximately 10,000 shares and 592,000 shares were granted. These awards generally vest over 1-4 years, and the fair value of the awards at the grant date is expensed over the vesting periods. Approximately 40,000 shares and 75,000 shares were issued during the quarter and nine months ended September 30, 2005 upon vesting of previously granted restricted stock awards.

Note 10 - Pension and Severance Benefits

Net pension expense from the Company’s defined benefit and severance plans, primarily comprised of the Company’s severance plans covering Central American employees, consists of the following (in thousands):

	Quarter Ended Sept. 30,						Nine Months Ended Sept. 30,
	2005			2004			2005			2004
Defined benefit and severance plans:
Service cost	$	1,283		$	1,181		$	3,520		$	3,629
Interest on projected benefit obligation		1,639			1,924			4,556			5,069
Expected return on plan assets		(561	)		(326	)		(1,572	)		(1,518	)
Recognized actuarial loss		42			250			136			504
Amortization of prior service cost		250			231			691			505
		2,653			3,260			7,331			8,189
Settlement gain		(65	)		—			(1,732	)		—
	$	2,588		$	3,260		$	5,599		$	8,189

Note 11 - Income Taxes

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.

Income tax expense for the nine months ended September 30, 2005 increased over the same period in 2004 due to higher earnings in certain tax jurisdictions and the 2004 tax benefit from the sale of Colombian operations described below. The increase in income tax expense was mitigated by a net reduction in reserves of $3 million for the nine months ended September 30, 2005 due to the resolution of outstanding tax audit items and contingencies in various jurisdictions.

For the nine months ended September 30, 2004, income tax expense reflects a benefit of $5.7 million from the release to income, upon the sale of the Colombian banana production division, of a deferred tax liability related to growing crops in Colombia.

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Item 2

CHIQUITA BRANDS INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company’s improvement in operating income in the third quarter of 2005 compared to the 2004 third quarter resulted primarily from the acquisition of Fresh Express. For the nine months ended September 30, 2005, the improvement in operating income resulted from improved local banana pricing in both Europe and North America and favorable European currency exchange rates. The improvement in North American pricing occurred during the first quarter and was principally due to temporary contract price increases implemented after flooding in Costa Rica and Panama early in the year. These improvements have been partially offset by an increase in costs, due in part to rising fuel, paper and ship charter costs and to the costs resulting from the floods.

On June 28, 2005, the Company completed its previously announced acquisition of the Fresh Express unit of Performance Food Group (“PFG”) for a purchase price of $855 million, before certain closing adjustments. Fresh Express is the retail market leader of value-added packaged salads in the United States. The acquisition will increase Chiquita’s consolidated annual revenues by about $1 billion. The Company believes that the acquisition will permit it to diversify its business, accelerate revenue growth in higher margin value-added products, and lead to a more balanced mix of sales between Europe and North America, which will make the Company less susceptible to risks unique to Europe, such as pending changes to the European Union banana import regime and foreign exchange risk.

The Company’s Consolidated Balance Sheet at September 30, 2005 reflects the preliminary purchase price allocation, while the Consolidated Statement of Income for the quarter and nine months ended September 30, 2005 includes the operations of Fresh Express, and interest expense on the acquisition financing, from the June 28 acquisition date to the end of the third quarter.

Prior to the acquisition of Fresh Express in June 2005, the Company reported two business segments, Bananas and Other Fresh Produce. The Banana segment included the sourcing (purchase and production), transportation, marketing and distribution of bananas. The Other Fresh Produce segment included the sourcing, marketing and distribution of fresh fruits and vegetables other than bananas. The Other Fresh Produce segment also included Chiquita’s fresh-cut fruit business. Remaining operations, which were reported in “Other,” consisted primarily of processed fruit ingredient products and other consumer packaged goods. In June 2005, as a result of the Fresh Express acquisition, the Company determined that it has the following three reportable segments: Bananas, Fresh Select and Fresh Cut. The Banana segment remains unchanged. The Fresh Select segment includes the sourcing, marketing and distribution of whole fresh fruits and vegetables other than bananas. The Company’s Fresh Cut segment includes the packaged salads and fresh-cut fruit operations.

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Operations

Net sales

Net sales for the third quarter of 2005 were $954 million, an increase of $292 million from last year’s third quarter. The increase resulted from the acquisition of Fresh Express and higher banana pricing in Europe.

Net sales for the nine months ended September 30, 2005 were $2.9 billion, compared to $2.3 billion in 2004. The increase resulted from the acquisition of Fresh Express, higher banana pricing and volume in both Europe and North America, favorable currency exchange rates and increased sales of Fresh Select products at Atlanta AG.

Substantially all of the 2005 revenue in the Fresh Cut segment was due to the acquisition of Fresh Express.

Operating income - Third Quarter

Operating income for the third quarter of 2005 was $20 million, compared to $10 million in the third quarter of 2004, primarily due to the acquisition of Fresh Express.

Banana Segment. In the Company’s Banana segment, operating income was $17 million, compared to $14 million last year.

Banana segment operating results were favorably affected by:

• $33 million benefit from improved local European pricing; and

• $2 million increase due to lower currency hedging costs.

These items were mostly offset by:

• $9 million of higher fuel, paper and ship charter costs;

• $6 million of higher license-related banana import costs in Europe;

• $6 million of higher administrative costs, primarily accruals for performance-based compensation due to improved year-over-year operating results;

• $4 million of increased tropical production costs due to lower farm yields in Panama and Honduras;

• $4 million of higher costs for advertising, marketing and innovation spending, primarily due to consumer brand support efforts in nine European countries where the Company has introduced Chiquita bananas with the Rainforest Alliance-certified seal; and

• $3 million from lower volume in Europe, primarily due to the Company’s allocation of annual import licenses to higher-margin periods earlier in the year.

The 2005 percentage changes in the Company’s banana pricing compared to 2004 follow:

	Q3		YTD
North America	0	%	3	%
European Core Markets 1
U.S. Dollar basis 2	22	%	24	%
Local Currency	23	%	20	%
Trading Markets 3
U.S. Dollar basis	15	%	5	%
Asia
U.S. Dollar basis	7	%	-2	%
Local Currency	8	%	-2	%

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The Company’s banana sales volumes of 40-pound boxes were as follows:

(In millions, except percentages)	Q3 2005	Q3 2004	% Change		YTD 2005	YTD 2004	% Change
European Core Markets 1	11.3	12.1	-7	%	41.1	40.8	1	%
Trading Markets 3	1.6	1.7	-6	%	3.9	3.9	0	%
North America	14.3	14.7	-3	%	44.9	43.0	4	%
Total	27.2	28.5	-5	%	89.9	87.7	3	%

¹ The 25 member countries of the European Union, Norway, Iceland and Switzerland.

² Prices on a U.S. dollar basis do not include the impact of hedging.

³ Other European and Mediterranean countries not listed above.

In addition, the Company is a 50% owner of a joint venture serving Asia, which had banana sales volume of 4.5 million and 4.1 million boxes during the third quarters of 2005 and 2004, respectively. For the nine months ended September 30, 2005 and 2004, this joint venture had volume of 13.5 million and 12.0 million boxes, respectively.

Foreign currency hedging costs charged to the Consolidated Statement of Income were $3 million in the 2005 third quarter, compared to $5 million in the third quarter of 2004. These costs relate primarily to hedging the Company’s net cash flow exposure to fluctuations in the U.S. dollar value of its euro-denominated net cash flows. At September 30, 2005, unrealized losses of $5 million on the Company’s currency option contracts were included in “Accumulated other comprehensive income,” substantially all of which is expected to be reclassified to net income during the next 12 months. The Company purchases put options, which require an upfront premium payment, to hedge its currency risk. These put options can reduce the negative earnings impact on the Company of a significant future decline in the value of the euro, without limiting the benefit the Company would receive from a stronger euro. Unrealized gains of $25 million on the Company’s fuel oil forward contracts at September 30, 2005 were also included in “Accumulated other comprehensive income,” of which $18 million is expected to be reclassified to net income during the next 12 months.

Fresh Select Segment. For the Fresh Select segment, the operating loss in the 2005 third quarter was $3 million compared to an operating loss of $2 million in the third quarter of 2004. The year-over-year decrease was primarily due to poor weather in Chile, which led to lesser-quality fruit, lower pricing and higher costs.

Fresh Cut Segment. In the Company’s Fresh Cut segment, operating income was $7 million in the 2005 third quarter compared to an operating loss of $3 million in 2004. Substantially all of the increase in operating income was due to the acquisition of Fresh Express. Hurricanes Katrina and Rita negatively impacted Fresh Cut segment results by approximately $2 million in the third quarter of 2005, primarily due to a temporary decrease in consumer demand in the southeastern United States as well as higher logistics costs. Third quarter 2005 results were in line with the Company’s expectations.

On a pro forma basis as if the Company had completed its acquisition of Fresh Express on June 30, 2004, the Fresh Cut segment revenue in the third quarter of 2004 would have been $247 million, and operating income would have totaled $4 million compared to $259 million and $7 million, respectively, in the third quarter of 2005. Fresh Express’ operations in the 2005 third quarter were favorably impacted by retail sales growth of 8% and administrative expense reductions. New product introductions, such as reconfigured and relaunched complete salad kits, drove the year-over-year growth. Operating improvements were partially offset by food service revenue contraction of 15%, softer consumer demand after the hurricanes noted above, and higher fuel, paper and other industry costs. Foodservice revenues decreased year-over-year as a result of Fresh Express’ decision in 2004 to stop supplying foodservice customers that would not allow the pass-through of raw product cost increases as well as the loss of customers who were competitors to the distribution business of PFG, the previous owner of Fresh Express. The pro forma segment results for the quarter ended September 30, 2004 do not purport to be indicative of what the actual results would have been had the acquisition been completed on the date assumed or what results may be achieved in the future.

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The 2005 percentage changes in the Fresh Express value-added salads net revenue per case compared to 2004 follow:

	Q3		YTD
North America 1	3	%	4	%

The Fresh Express value-added salad sales volume of 12-count cases was as follows:

(In millions, except percentages)	Q3 2005	Q3 2004	% Change		YTD 2005	YTD 2004	% Change
Total retail sold volume 1	13.8	13.1	5	%	44.1	41.2	7	%

¹ Includes sales of Fresh Express value-added salads prior to Chiquita’s acquisition of Fresh Express on June 28, 2005.

The amortization included in the Consolidated Statement of Income relates to the Fresh Express intangible assets. See Note 2 for a further description of the intangible assets.

Operating income - Year-to-Date

Operating income for the nine months ended September 30, 2005 was $188 million, compared to $78 million for the nine months ended September 30, 2004.

Banana Segment. In the Company’s Banana segment, operating income was $177 million year-to-date, compared to $79 million last year.

Banana segment operating results were favorably affected by:

• $127 million of European pricing and currency benefit, comprised of $113 million from improved local European pricing, $25 million of increased revenue from favorable European exchange rates and $12 million of decreased currency hedging costs, offset by balance sheet translation losses of $19 million, and $4 million in increased European costs due to the stronger euro;

• $11 million from improved pricing in North America, due principally to temporary contract price increases implemented after flooding in January 2005 that affected the Company’s Costa Rica and Bocas, Panama divisions;

• $9 million before-tax loss on the sale of the Colombian banana production division in the second quarter of 2004;

• $7 million of savings primarily related to purchased fruit, tropical production and logistics;

• $4 million charge recorded in the prior year first quarter related to stock options and restricted stock granted to the Company’s former chairman and CEO that vested upon his retirement in May 2004; and

• $3 million from an increase in volume in Europe and North America.

These items were offset in part by:

• $24 million of cost increases from higher fuel, paper and ship charter costs;

• $16 million of higher license-related banana import costs in Europe;

• $11 million of increased costs related to the January flooding in Costa Rica and Panama, including alternative fruit sourcing, logistics and farm rehabilitation costs, and write-downs of damaged farms;

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• $7 million of increased expenses related to advertising and innovation spending for future growth; and

• $5 million of higher administrative costs, primarily accruals for performance-based compensation due to improved year-over-year operating results.

Information on the Company’s banana pricing and volume is included in the Operating Income - Third Quarter section above.

Foreign currency hedging costs charged to the Consolidated Statement of Income were $11 million for the nine months ended September 30, 2005, compared to $23 million for the same period in 2004. The higher 2004 costs related primarily to losses on forward and zero-cost collar contracts that have since expired.

Fresh Select Segment. For the Fresh Select segment, operating income for the nine months ended September 30, 2005 was $12 million, compared to operating income of $8 million a year ago. The improvement resulted primarily from a restructured melon program in North America and continued operational improvement at Atlanta AG, partially offset by a primarily weather-related decline in the Company’s Chilean operations.

Fresh Cut Segment. In the Company’s Fresh Cut segment, operating income was $1 million for the nine months ended September 30, 2005, compared to a loss of $10 million last year. The nine months ended September 30, 2005 includes the results of the Company’s newly acquired Fresh Express unit from the June 28, 2005 acquisition date to the end of the third quarter. Substantially all of the improvement in operating income was due to the acquisition of Fresh Express.

While management anticipates the seasonality of its results will lessen as a result of the Fresh Express acquisition, interim results for the Company remain subject to significant seasonal variations and are not necessarily indicative of the results of operations for a full fiscal year. The Company’s results during the third and fourth quarters are generally weaker than in the first half of the year due to increased availability of competing fruits and resulting lower banana prices.

Interest, Other Income (Expense) and Taxes

Interest income in the 2005 third quarter was $2 million, flat compared to the year-ago quarter. Interest expense in the 2005 third quarter was $22 million, compared to $10 million in the year-ago quarter. Interest expense increased $14 million due to the Fresh Express acquisition financing, partially offset by a $2 million decline due to the refinancing of the Company’s 10.56% Senior Notes late in the third quarter of 2004.

Other income (expense) for the nine months ended September 30, 2005 includes $3 million of financing fees, primarily related to the write-off of unamortized debt issue costs for the prior credit facility, partially offset by a $1 million gain on the sale of Seneca preferred stock and a $1 million gain from an insurance settlement. In the 2004 third quarter, other income (expense) includes a loss of $22 million from the premium associated with the refinancing of the $250 million principal amount of 10.56% Senior Notes, partially offset by a $2 million gain relating to proceeds received as a result of the demutualization of a company with which Chiquita held pension annuity contracts.

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.

Income tax expense for the nine months ended September 30, 2005 increased over the same period in 2004 due to higher earnings in certain tax jurisdictions and the 2004 tax benefit from the sale of

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Colombian operations described below. The increase in income tax expense was mitigated by a net reduction in reserves of $3 million for the nine months ended September 30, 2005 due to the resolution of outstanding tax audit items and contingencies in various jurisdictions.

For the nine months ended September 30, 2004, income tax expense reflects a benefit of $5.7 million from the release to income, upon the sale of the Colombian banana production division, of a deferred tax liability related to growing crops in Colombia.

Hurricane Impacts

Since August 2005, the Company has experienced operational and financial challenges from several major hurricanes that impacted operations at its U.S. port facilities, in its banana sourcing regions and at consumer markets in the southeastern United States.

In late August, the Company’s port facilities in Gulfport, Miss., were severely damaged by Hurricane Katrina. Gulfport is one of five U.S. ports Chiquita uses to import bananas and other fresh produce. This port handles about one quarter of all bananas the Company imports to the United States. Since the hurricane, the Company has expanded its port services in Freeport, Texas, and Port Everglades, Fla., to minimize disruptions and restore normal service levels to customers. In mid-October, Chiquita resumed limited operations at Gulfport, and expects to fully rebuild its operations there. In the third quarter 2005, the Company incurred asset write-downs and incremental costs of $9 million, which were entirely offset by the recognition of a receivable for insurance proceeds. While the Company is continuing to monitor and evaluate the situation, it believes that its insurance coverage for property and business interruption, as well as the pass-through to customers of certain incremental logistics costs, will cover most, but not all, of the losses from Hurricane Katrina.

In late September, Hurricane Rita temporarily closed the Company’s port operations at Freeport. However, no damage was sustained to our facilities, and normal operations have resumed. In early October, flooding from Hurricane Stan damaged many farms owned by independent growers in southern Guatemala. Many of these farms supply bananas and plantains to Chiquita and other marketing companies. The Company’s owned farms and port facilities did not sustain significant damage from this storm. While there has been a temporary decrease in banana volume from Guatemala, the Company’s diverse sourcing portfolio has allowed it to secure alternative volume to meet customer needs from other countries in Latin America.

In late October, Hurricane Wilma made landfall in Florida, forcing the Company to temporarily shift operations at Port Everglades to Port Canaveral. Operations have now resumed at Port Everglades, and the Company is still assessing the extent of any damage to its facilities. Also in late October, Hurricane Beta made landfall in Nicaragua. The Company is still assessing the impact of this storm on its owned farms in Honduras or to independent growers in Nicaragua.

Acquisitions and Divestitures

See Note 2 to the Consolidated Financial Statements for information on the Company’s acquisitions and divestitures occurring during 2005 and 2004.

Financial Condition – Liquidity and Capital Resources

The Company’s cash balance was $181 million at September 30, 2005, compared to $143 million at December 31, 2004 and $230 million at September 30, 2004.

Operating cash flow was $212 million for the nine months ended September 30, 2005, which was partially used to fund a portion of the Fresh Express acquisition. The increase from $90 million of operating cash flow for the same period in 2004 was primarily due to significantly improved operating results.

Capital expenditures were $20 million year-to-date 2005 and $28 million during the comparable period of 2004.

In the fourth quarter of 2004, Chiquita announced the initiation of a quarterly cash dividend of $0.10 per share on the Company’s outstanding shares of common stock. A dividend was paid on October 17, 2005 to shareholders of record as of the close of business on October 3, 2005. While Chiquita intends to pay regular quarterly dividends for the foreseeable future, all dividends are reviewed quarterly and require approval by the board of directors.

In conjunction with the Fresh Express acquisition, the Company entered into an amended and restated senior secured credit facility, which replaced an existing $150 million revolving credit facility and added $500 million in new term loans, and completed the offering of $225 million of 8 ⁷/8% Senior Notes due

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2015. A $25 million principal prepayment on one of the new term loans was made in August 2005. Additionally, another $25 million was prepaid on the same term loan in late October. In addition, in April 2005, Great White Fleet Ltd., the Company’s shipping subsidiary, entered into a seven-year secured revolving credit facility for $80 million. For a full description of these transactions, see Note 5 to the Consolidated Financial Statements.

On a pro forma basis, including the Fresh Express acquisition and relating financing, interest expense would have been $64 million for the nine months ended September 30, 2005. The Company had approximately $600 million of variable-rate debt after the acquisition, and as a result, a 1% change in interest rates would have resulted in a change to pro forma interest expense of approximately $4.5 million for the nine months ended September 30, 2005.

As a result of the Fresh Express acquisition, the Company’s contractual cash commitments for raw product increased by approximately $120 million. In addition, approximately $25 million in lease payments remain under one of the Fresh Express facility leases.

As more fully described in Note 3 to the Consolidated Financial Statements, the Company may be required to pay, or post bonds for, up to approximately $50 million in connection with its appeal of certain claims of Italian customs authorities.

The Company believes that its cash level, cash flow generated by operating subsidiaries and borrowing capacity will provide sufficient cash reserves and liquidity to fund the Company’s working capital needs, capital expenditures and debt service requirements.

Critical Accounting Policies and Estimates

Review of Carrying Values of Fresh Express Intangibles

On June 28, 2005, the Company completed its acquisition of the Fresh Express packaged salad and fresh-cut fruit division of PFG (see Note 2 to the Consolidated Financial Statements). In conjunction with the acquisition, the Company recorded approximately $170 million of intangible assets subject to amortization, $62 million of intangible assets not subject to amortization and $531 million of goodwill related to Fresh Express. The fair value of these assets was based on the work of independent appraisers at the time of the acquisition. The Company will review the carrying values of Fresh Express intangible assets annually or when impairment indicators are noted.

European Union Banana Import Regime

In 2001, the European Commission (“EC”) agreed to amend the quota and licensing regime for the importation of bananas into the EU. Under the 2001 agreement, the current EU banana tariff rate quota system is scheduled to be followed by a tariff-only system no later than 2006. Under the current quota system, import licenses are required to import bananas into the EU within the quota. Each year, a fixed quantity of licenses is allocated to each eligible operator, including the Company. The Company uses licenses allocated to it to import a large majority of the bananas it sells in the EU. It imports the remainder of the bananas it sells with licenses owned by its customers or purchased from other operators. In 2004, the Company sold approximately 61 million boxes (1.1 million metric tons) of bananas in Europe, a large majority of which were sold in the EU and are subject to the current tariff of €75 per metric ton. The current tariff applies to bananas imported from Latin America, which is the source of substantially all of the bananas the Company imports into the EU, but does not apply to bananas imported from certain African, Caribbean and Pacific (“ACP”) sources. Under a tariff-only system, (i) the quota and all license requirements, as well as the Company’s receipt of allocated licenses, would be eliminated, (ii) the payment of a tariff would continue to be required for the importation of any Latin American bananas into the EU, and (iii) ACP bananas imported into the EU would continue to be exempt from the payment of any tariff.

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In order to remain consistent with World Trade Organization (“WTO”) principles, any new EU banana tariff is required under a 2001 WTO decision to “result in at least maintaining total market access” for Latin American suppliers. That decision establishes consultation and arbitration procedures to determine whether the proposed tariff would result in at least maintaining Latin American market access and requires that those procedures be completed before any new EU tariff-only system takes effect. In February 2005, the EC notified the WTO that it would propose a tariff on Latin American bananas of €230 per metric ton. This would have represented a substantial increase over the €75 per metric ton tariff now applicable to Latin American bananas entering within the EU’s current tariff rate quota system. The Latin American supplying countries announced their opposition to any tariff above €75 on the basis that it would be inconsistent with the WTO standard, and in March 2005, nine Latin American governments requested arbitration. On August 1, the WTO arbitrators ruled that the EU’s €230 per metric ton proposal would not “result in at least maintaining total market access” for Latin American suppliers. Following that decision, the EC proposed a revised tariff of €187 per metric ton. The Latin American supplying countries opposed this proposal, as well, and in accordance with the WTO procedures, the EC requested a second WTO arbitration. On October 27, 2005, the WTO arbitrators ruled that the €187 per metric ton would likewise not meet the “at least maintaining total market access” standard. The EC has not yet indicated its intentions in light of the WTO rulings.

There can be no assurance that (a) a tariff-only system will be installed by 2006, (b) the tariff level finally established for Latin American bananas will be no more than the current €75 per metric ton, or (c) if a higher tariff level is imposed, it will not have a materially adverse effect on marketers of Latin American bananas, including the Company. In addition, if the tariff-only system is installed, then regardless of the amount of the final tariff, there can be no assurance that over time there will not be a materially adverse effect on EU marketers of bananas (whether from Latin America or ACP sources), including the Company, due to any decline in prices that could result from an increase in the total volume of bananas imported into the EU after the elimination of the current quota restrictions.

*    *    *    *    *

This quarterly report contains certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of Chiquita, including: the impact of changes in the European Union banana import regime as a result of the anticipated conversion to a tariff-only regime in 2006; the Company’s ability to successfully integrate the operations of Fresh Express; unusual weather conditions; the customary risks experienced by global companies, such as the impact of product and commodity prices, currency exchange rate fluctuations, government regulations, labor relations, taxes, political instability and terrorism; and the outcome of pending governmental investigations and claims involving the Company.

The forward-looking statements speak as of the date made and are not guarantees of future performance. Actual results or developments may differ materially from the expectations expressed or implied in the forward-looking statements, and the Company undertakes no obligation to update any such statements.

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Item 3 - Quantitative and Qualitative Disclosures About Market Risk

Reference is made to the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk Management” in the Company’s 2004 Annual Report on Form 10-K. As of September 30, 2005, there were no material changes to the information presented, with the following exceptions. At December 31, 2004, the potential reduction in the fair value of the Company’s foreign currency hedging instruments from a hypothetical 10% increase in euro currency rates would have been approximately $5 million. At September 30, 2005, a hypothetical 10% increase in euro currency rates would result in a fair value reduction of approximately $14 million. However, the Company expects that any loss on these contracts would tend to be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies.

At September 30, 2005, the Company had $475 million of Senior Notes outstanding, including the new $225 million of 8 ⁷/8% Senior Notes issued to finance the acquisition of Fresh Express. The adverse change in fair value of the Company’s fixed-rate debt from a hypothetical 10% decrease in interest rates would have been approximately $15 million at September 30, 2005, compared to $9 million at December 31, 2004.

Item 4 - Controls and Procedures

Evaluation of disclosure controls and procedures

Chiquita maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic filings with the SEC is (a) accumulated and communicated to the Company’s management in a timely manner and (b) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of September 30, 2005, an evaluation was carried out by Chiquita’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of that date.

Changes in internal control over financial reporting

Chiquita also maintains a system of internal accounting controls, which includes internal control over financial reporting, that is designed to provide reasonable assurance that the Company’s financial records can be relied on for preparation of its financial statements and that its assets are safeguarded against loss from unauthorized use or disposition. During the quarter ended September 30, 2005, the Company’s Fresh Express subsidiary consolidated multiple instances of its enterprise management reporting system located at various facilities into one combined system, which among other functions, is used to process and accumulate financial data principally supporting sales, cost of sales, accounts receivable, inventory, accounts payable and general ledger transactions. Although the software version was not significantly changed, the combination of several master data files and transaction processing modules into one centralized system results in a more efficient system which is easier to maintain. The Company believes this system consolidation represents a material change to the Company’s internal control over financial reporting. There were no other changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the quarter ended September 30, 2005.

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Part II - Other Information

Item 1 - Legal Proceedings

Reference is made to the discussion in Part II - Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 relating to five class action lawsuits that were filed in the U.S. District Court for the Southern District of Florida against the Company and three of its competitors. The suits were filed on behalf of entities that purchased bananas in the United States directly from one or more of the defendants and allege that the defendants engaged in a conspiracy to artificially raise or maintain prices and control and restrict output of bananas in the United States. Subsequent to the date of the Form 10-Q for the second quarter, three additional lawsuits were filed in the same court, including one purporting to be on behalf of “indirect” banana purchasers. The Company expects that all the pending lawsuits will be consolidated into one case. The Company continues to believe that the lawsuits are without merit.

As described in Part II – Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, between October 2004 and May 2005, four lawsuits were filed in Superior Court of California, Los Angeles County against two manufacturers of an agricultural chemical called DBCP, as well as three banana producing companies, including the Company, that used DBCP. The plaintiffs in these U.S. lawsuits claim to have been workers on banana farms in Costa Rica, Panama, Guatemala and Honduras, owned or managed by the defendant banana companies and allege sterility and other injuries as a result of exposure to DBCP. In October 2005, the Company learned of a lawsuit filed against the same defendants, including the Company, in civil court in the City of David, Panama on behalf of approximately 400 persons who allegedly suffered a variety of injuries and illnesses, mostly other than sterility, resulting from exposure to DBCP. However, no evidence or argument has yet been offered in the Panama lawsuit to support or explain the plaintiffs’ alleged exposure to DBCP, the allegations of injury or illness, or the amount demanded ($85 million). Similarly, little or no substantive discovery has occurred in the U.S. cases, where the alleged damages have not yet been quantified. None of the U.S. or Panamanian suits identify how many of the approximately 5,800 total named plaintiffs purport to have claims against the Company, as opposed to other banana company defendants. Although the Company has little information with which to evaluate these lawsuits, it believes it has meritorious defenses, including the fact that the Company used DBCP commercially only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency and to its knowledge never used DBCP commercially in either Guatemala or Honduras. The EPA did not revoke DBCP’s registration for use until 1979.

In 1998, the Company settled, for $4.7 million, virtually all of the then pending DBCP cases against it, which had been brought in U.S. and foreign courts on behalf of approximately 4,000 claimants in Panama, the Philippines and Costa Rica. (A purported DBCP class action in Hawaii state court that had identified 11 claimants against the three banana producing companies and alleged an indeterminate number of other claimants was not settled and remains pending but dormant). At that time, the Company believed that these settlements covered the great preponderance of workers who could have had claims against the Company arising in these three countries. To the Company’s knowledge, the Company did not use DBCP in other countries.

Item 6 - Exhibits

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Exhibit 32 - Section 1350 Certifications

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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/ Brian W. Kocher
	Brian W. Kocher
	Vice President and Controller
	(Chief Accounting Officer)

November 4, 2005

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Fernando Aguirre, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chiquita Brands International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005

/s/ Fernando Aguirre
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Jeffrey M. Zalla, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chiquita Brands International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005

/s/ Jeffrey M. Zalla
Title:	Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Chiquita Brands International, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 4, 2005

/s/ Fernando Aguirre
Name:	Fernando Aguirre
Title:	Chief Executive Officer

Dated: November 4, 2005

/s/ Jeffrey M. Zalla
Name:	Jeffrey M. Zalla
Title:	Chief Financial Officer