ITEM 1 - BUSINESS - ----------------- GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products sold under the Chiquita and other brand names. In addition to bananas, these products include other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of other fresh produce. The Company's operations also include fruit and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based consumer products.
In recent years, the Company has capitalized on its "Chiquita" and other premium brand names by building on its worldwide leadership position in the marketing, distribution and sourcing of bananas and by expanding its quality fruit and vegetable operations. Chiquita has benefited from its multi-year investment spending program and its restructuring and cost reduction efforts to significantly reduce production, distribution and overhead costs. (See "Distribution and Logistics," "Sourcing" and ITEM 2
ITEM 2 - PROPERTIES - ------------------- The Company owns approximately 90,000 acres and leases approximately 40,000 acres of improved land, principally in Costa Rica, Panama and Honduras. Nearly all of this land is used for the cultivation of bananas and support activities, including the maintenance of floodways. The Company also owns power plants, packing stations, warehouses, irrigation systems and loading and unloading facilities used in connection with its operations.
The Company owns or controls under long-term bareboat charters 16 ocean-going refrigerated vessels and has 9 additional such vessels under time charters, primarily for transporting tropical fruit sold by Chiquita. From time to time, excess capacity may be chartered or subchartered to other shippers. In addition, the Company enters into spot charters and contracts of affreightment as necessary to supplement its transportation resources. Chiquita also owns or leases other related equipment, including refrigerated container units, used to transport fresh food. The owned ships are pledged as collateral for related financings.
Properties used by the Company's processed foods operations include processing facilities in Costa Rica and Honduras, and vegetable canning facilities in Wisconsin. Other operating units of the Company own, lease and operate properties, principally in the United States, Europe, and Central and South America. The Company leases the space for its headquarters in Cincinnati, Ohio.
For further information with respect to the Company's physical properties, see the descriptions under ITEM 1 - BUSINESS - GENERAL above, and Notes 4 and 5 to the Consolidated Financial Statements included in the Company's 1996 Annual Report to Shareholders.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS - -------------------------- A number of legal actions are pending against the Company, including those described below. Although some of these cases, including the DBCP cases described below, are in very preliminary stages, based on information currently available to it and advice of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the financial statements of the Company.
Several suits are pending in different jurisdictions against the manufacturers of an agricultural chemical called DBCP and against the Company and other banana producing companies which used DBCP primarily in the 1970's. Most of the plaintiffs are foreign citizens who claim to have been employees of banana companies and allege sterility and other injuries as a result of
exposure to DBCP. Plaintiffs' alleged damage claims have yet to be quantified.
Several of these lawsuits were filed in Texas state court in 1993. These cases originally represented claims on behalf of approximately 25,000 individuals, of whom approximately 4,000 purported to have claims against the Company. In 1995, all but one of the cases involving Chiquita were removed to the U.S. District Court for the Southern District of Texas and dismissed on the grounds that courts in the plaintiffs' home countries (limited to Costa Rica, Panama and the Philippines in the case of suits involving the Company) were more appropriate forums for pursuing their claims. The plaintiffs, which include approximately 3,650 alleging claims against Chiquita, have appealed these dismissals to the U.S. Court of Appeals for the Fifth Circuit. In February 1997, the other case involving Chiquita was removed to the U.S. District Court in the Southern District of Texas where the defendants have moved to dismiss on the same grounds. This case, Narciso Borja, et al. v. Dow Chemical Company, et al. (District Court of Dallas County), involves approximately 2,000 plaintiffs, including approximately 350 who claim that the Company has liability for their alleged injuries.
A similar suit was filed in 1995 in Louisiana state court by approximately 4,000 plaintiffs. The Company does not have information concerning how many of these plaintiffs allege that Chiquita has liability for their injuries, but the same manufacturer and banana producer defendants have been named in this suit. This case, Lucas Pastor Canales Martinez, et al. v. Dow Chemical Company, et al., was removed to U.S. District Court for the Eastern District of Louisiana and then remanded to Louisiana state court, where various procedural issues are being addressed.
Five additional lawsuits, each involving one plaintiff, were filed in 1996 in Mississippi state court against the same manufacturer and banana producer defendants. Each case was removed to the United States District Court for the Southern District of Mississippi, Southern Division, where the defendants
motions to dismiss on grounds of lack of personal jurisdiction and plaintiffs motions to remand the cases to state court are pending.
As a result of the dismissals of the Texas suits described above, similar suits against the Company and its subsidiaries have been filed in Costa Rica, Panama and the Philippines (in addition to previously filed actions in Costa Rica and Panama). Cases involving approximately 4,000 plaintiffs who purport to have claims against the Company are currently pending in those countries.
The Company believes it has a number of meritorious defenses in all of the foregoing DBCP cases, including that at all times when it used DBCP commercially, the product was registered for use by the United States Environmental Protection Agency. In addition, the Company ceased using the product on a commercial basis in 1977, promptly after learning that health hazards might exist.
In 1993, Great White Fleet Ltd., the Company's shipping subsidiary ("GWF"), redelivered three cargo ships to RSG Reefer Services GmbH ("RSG") in reliance on the force majeure provisions of the applicable contract of affreightment with RSG due to the imposition of the EU banana quota and licensing regime. In 1994, RSG commenced an arbitration proceeding in London, England disputing the occurrence of a force majeure event and seeking damages from GWF of approximately $20 million. In December 1996, the arbitrators awarded RSG $9.75 million, which was provided for in the Company s 1996 results.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------- Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ Carl H. Lindner (age 77) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since 1984. He is also Chairman of the Board and Chief Executive Officer of American Financial Group, Inc. ("AFG"), a holding company formed in April 1995 which, through its subsidiaries, is engaged primarily in specialty and multi-line property and casualty insurance businesses and in the sale of tax-deferred annuities. For over 35 years, Mr. Lindner has been Chairman of the Board and Chief Executive Officer of American Financial Corporation, which became an AFG subsidiary in 1995.
Keith E. Lindner (age 37) - Mr. Lindner was named Vice Chairman of the Board of Directors in March 1997. From 1989 to March 1997, he was President and Chief Operating Officer of the Company and has served the Company in various executive capacities since 1984. Mr. Lindner is also a Co-President and a Director of AFG.
Steven G. Warshaw (age 43) - In March 1997, Mr. Warshaw was appointed President and Chief Operating Officer of the Company and retained his position as Chief Financial Officer. From 1990 to March 1997, he was the Company's Executive Vice President and Chief Administrative Officer and has been the Chief Financial Officer of the Company since 1994. Mr. Warshaw has served the Company in various capacities since 1986.
Robert F. Kistinger (age 44) - Mr. Kistinger was named President of the Company's Chiquita Banana Group in March 1997 and assumed the responsibilities of President of Chiquita Banana Group - North America in August 1996. From 1994 to March 1997, he was Senior Executive Vice President of the Chiquita Banana Group. He was Executive Vice President, Operations for the Company's Chiquita Tropical Products Division from 1989 to 1994 and has served the Company in various capacities since 1980.
Robert W. Olson (age 51) - Mr. Olson was named Senior Vice President, General Counsel and Secretary of the Company in September 1996. From 1995 to September 1996, he was the Company s Vice President, General Counsel and Secretary. From 1987 to 1995, he served as Senior Vice President, General Counsel and Secretary of American Premier Underwriters, Inc. (formerly named The Penn Central Corporation), an affiliate of AFG. He was Senior Vice President and Secretary of AFG from April 1995 until he joined the Company.
Jos P. Stalenhoef (age 55) - Mr. Stalenhoef was named Chief Transformation Officer - North America of the Company s Chiquita Banana Group in August 1996. From 1994 to August 1996, he served as President of the Company s Chiquita Banana-North America Division. He was Senior Vice President, North America, Chiquita Tropical Products Division from 1989 to 1994 and has served the Company in various capacities since 1988.
William A. Tsacalis (age 53) - Mr. Tsacalis has been Vice President and Controller of the Company since 1987. He was Controller from 1984 to 1987 and has served the Company in various capacities since 1980.
PART II -------- ITEM 5
ITEM 5 -MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ----------------------------------------------------------- The number of shareholders at February 28, 1997 and the markets for the Company's capital stock are included on page 52 of the Company's 1996 Annual Report to Shareholders under "Investor Information." Price ranges of the Company's capital stock and dividends declared thereon are included in Note 14 to the Consolidated Financial Statements included in the 1996 Annual Report to Shareholders. Restrictions on the Company's ability to declare and pay dividends are described in Note 6 to the Consolidated Financial Statements included in the 1996 Annual Report to Shareholders. All such information is incorporated herein by reference.
ITEM 6
ITEM 6 -SELECTED FINANCIAL DATA - --------------------------------- This information is included in the table entitled "Selected Financial Data" on page 26 of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7
ITEM 7 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ----------------------------------------------------------- This information is included under the caption "Management's Analysis of Operations and Financial Condition" included on pages 27 through 30 of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8
ITEM 8 -FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ----------------------------------------------------- The Consolidated Financial Statements of Chiquita Brands International, Inc. and its subsidiaries included on pages 31 through 50 of the Company's 1996 Annual Report to Shareholders, and "Quarterly Financial Data" which is included in Note 14 to such Consolidated Financial Statements, are incorporated herein by reference.
ITEM 9
ITEM 9 -CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ---------------------------------------------------------- None.
PART III --------- Except for information relating to the Company's executive officers included in Part I of this report, the information required by the following Items will be included in Chiquita's definitive Proxy Statement which will be filed with the Securities and Exchange Commission in connection with the 1997 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 10
ITEM 10 -DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - --------------------------------------------------------------
ITEM 11
ITEM 11 -EXECUTIVE COMPENSATION - ----------------------------------
ITEM 12
ITEM 12 -SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -----------------------------------------------------------
ITEM 13
ITEM 13 -CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - ----------------------------------------------------------
PART IV ------- ITEM 14
ITEM 14 -EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------- (a) 1.Financial Statements. The following consolidated financial statements of the Company and the Report of Independent Auditors are included in the Company's 1996 Annual Report to Shareholders and are incorporated by reference in Part II, Item 8:
Page of Annual Report Report of Independent Auditors 25 Consolidated Statement of Income for 1996, 1995 and 1994 31 Consolidated Balance Sheet at December 31, 1996 and 1995 32 Consolidated Statement of Shareholders' Equity for 1996, 1995 and 1994 33 Consolidated Statement of Cash Flow for 1996, 1995 and 1994 34 Notes to Consolidated Financial Statements 35
2. Financial Statement Schedule. Financial Statement Schedule II - Allowance for Doubtful Accounts Receivable is included on page 16 of this Annual Report on Form 10-K. All other schedules are not required under the related instructions or are inapplicable.
3. Exhibits. See Index of Exhibits (page 18) for a listing of all exhibits filed with this Annual Report on Form 10-K.
(b) There were no reports on Form 8-K filed by the Company during the quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 28, 1997.
CHIQUITA BRANDS INTERNATIONAL, INC.
By /s/ Carl H. Lindner Carl H. Lindner Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below on March 28, 1997:
/s/ Carl H. Lindner Chairman of the Board and Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Vice Chairman of the Board Keith E. Lindner
/s/ Steven G. Warshaw Director, President, Steven G. Warshaw Chief Operating Officer and Chief Financial Officer
/s/ Fred J. Runk Director Fred J. Runk
Jean H. Sisco* Director Jean H. Sisco
William W. Verity* Director William W. Verity
Oliver W. Waddell* Director Oliver W. Waddell
/s/ Ronald F. Walker Director Ronald F. Walker
/s/ William A. Tsacalis Vice President and Controller William A. Tsacalis (Chief Accounting Officer)
* By /s/ William A. Tsacalis Attorney-in-Fact** - -------------------------------- ** By authority of powers of attorney filed with this Annual Report on Form 10-K.
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CHIQUITA BRANDS INTERNATIONAL, INC. Index of Exhibits Exhibit Number Description - -------- --------------------------
*3-a Second Restated Certificate of Incorporation, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, as amended by the Certificate of Amendment establishing the terms of the Series B Preferred Stock, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 *3-b By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K for the year ended December 31, 1992 *4 Indenture dated as of February 15, 1994 between the Company and The Fifth Third Bank, Trustee, with respect to Senior Debt Securities, under which the Company s 9 1/8% Senior Notes due 2004 and the Company s 10 1/4% Senior Notes due 2006 have been issued (incorporated by reference to Exhibit 4(c) of Registration Statement 333-00789), as supplemented by the First Supplemental Indenture dated as of June 15, 1994 (incorporated by reference to Exhibit 6(a)99(c) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994) and by the Second Supplemental Indenture dated as of July 15, 1996 (incorporated by reference to Exhibit 4 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996); and as further supplemented by the Certificate of the Vice President and Controller of the Company establishing the terms of the 9 1/8% Senior Notes (incorporated by reference to Exhibit 7(c)(3) to Current Report on Form 8-K dated February 8, 1994) and by the Terms of 10 1/4% Senior Notes approved by the Executive Committee of the Board of Directors of the Company (incorporated by reference to Exhibit 7(c)99.6 to Current Report on Form 8-K dated July 22, 1996) *10-a Lease of Lands and Operating Contract between United Brands Company, Chiriqui Land Company, Compania Procesadora de Frutas and the Republic of Panama, dated January 8, 1976, effective January 1, 1976, filed as Exhibit 10-a to Annual Report on Form 10-K for the year ended December 31, 1993 *10-b Agreement dated January 11, 1996 effective January 1, 1996 between Tela Railroad Company and the Honduran National Railroad, filed as Exhibit 10-b to Annual Report on Form 10-K for the year ended December 31, *10-c Stock Purchase Agreement dated December 20, 1995 between Smithfield Foods, Inc. ("Smithfield") and the Company filed as Exhibit 7.1 to Schedule 13D dated December 20, 1995 filed by the Company and certain other persons with respect to Smithfield common stock
10-d Credit Agreement dated December 31, 1996 among Chiquita Brands International, Inc., The First National Bank of Boston, as administrative agent, and the financial institutions which are lenders thereunder relating to the Company s $125 million revolving credit facility
Executive Compensation Plans ---------------------------- 10-e 1986 Stock Option and Incentive Plan, as amended *10-f Individual Stock Option Plan and Agreement, filed as Exhibit 4 to Registration Statement on Form S-8 No. 33-25950 dated December 7, 1988 *10-g Amended and Restated Deferred Compensation Plan, filed as Exhibit 10-f to Annual Report on Form 10-K for the year ended December 31, 1995
10-h Deferred Compensation Plan for Board of Directors of Chiquita Brands International, Inc. dated January 1,
11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends 13 Chiquita Brands International, Inc. 1996 Annual Report to Shareholders (pages 25 through 50 and page 52) 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedule 99 Annual Report on Form 11-K for the Chiquita Savings and Investment Plan for 1996 will be filed by amendment on or before June 29, 1997. - ----------------------------------- * Incorporated by reference.