Document/Exhibit Description Pages Size
1: 10-K Annual Report 25 125K
2: EX-10.C Credit Agreement Dated 9/22/1999 115 544K
3: EX-10.D Executive Compensation Plans 16 73K
4: EX-10.P Severance Agreement Dated 1/16/2001 20 81K
5: EX-10.R Description of 2002 Tcr Rentention Program 1 9K
6: EX-10.S Stock Unit Agreement--Carl H. Lindner 5 26K
7: EX-10.T Award Share Agreement--Steven G. Warshaw 4 22K
8: EX-10.U Award Share Agreement--Robert F. Kistinger 4 22K
9: EX-10.V Award Share Agreement--Robert W. Olson 4 22K
10: EX-10.W Award Share Agreement--James B. Riley 4 23K
11: EX-10.X Award Share Agreement--Carla A. Byron 4 22K
12: EX-13 2001 Annual Report to Shareholders 34 183K
13: EX-21 Subsidiaries of Registrant 2 13K
14: EX-23 Consent of Independent Auditors 1 10K
15: EX-24 Powers of Attorney 2± 12K
EXHIBIT 13
----------
Statement of Management Responsibility
--------------------------------------
The financial information presented in this Annual Report is the responsibility
of Chiquita Brands International, Inc. management, which believes that it
presents fairly the Company's consolidated financial position and results of
operations in accordance with generally accepted accounting principles.
The Company's system of internal accounting controls, which is supported by
formal financial and administrative policies, is designed to provide reasonable
assurance that the financial records are reliable for preparation of financial
statements and that assets are safeguarded against losses from unauthorized use
or disposition. Management reviews, modifies and improves these systems and
controls as changes occur in business conditions and operations. The Company's
worldwide internal audit function reviews the adequacy and effectiveness of
controls and compliance with policies.
The Audit Committee of the Board of Directors, all of whose members are
independent directors, reviews the Company's financial statements, accounting
policies and internal controls. In performing its reviews, the Committee meets
periodically with the independent auditors, management and internal auditors to
discuss these matters. The Company engages Ernst & Young, an independent
auditing firm, to audit the financial statements and express an opinion thereon.
The scope of the audit is set by Ernst & Young, which has full and free access
to all Company records and personnel in conducting its audits. Representatives
of Ernst & Young are free to meet with the Audit Committee, with or without
members of management present, to discuss their audit work and any other matters
they believe should be brought to the attention of the Committee.
2
Report of Ernst & Young, Independent Auditors
---------------------------------------------
The Board of Directors and Shareholders of Chiquita Brands International, Inc.
We have audited the accompanying consolidated balance sheets of Chiquita Brands
International, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of income, shareholders' equity and cash flow for each
of the three years in the period ended December 31, 2001. These financial
statements, appearing on pages 12 through 34, are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above fairly present,
in all material respects, the consolidated financial position of Chiquita Brands
International, Inc. at December 31, 2001 and 2000, and the consolidated results
of its operations and its cash flow for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
March 19, 2002
3
MANAGEMENT'S DISCUSSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATIONS
----------
This analysis of operations presents and addresses Chiquita's operating results
on the basis used by the Company to evaluate its business segments, and should
be read in conjunction with the segment information presented in Note 14 to the
Consolidated Financial Statements.
(In thousands) 2001 2000 1999
-------------------------------------------------------------------------
Net sales
Fresh Produce $ 1,792,064 $ 1,787,334 $ 2,044,788
Processed Foods 450,197 466,436 511,011
----------- ----------- -----------
Total net sales $ 2,242,261 $ 2,253,770 $ 2,555,799
=========== =========== ===========
Segment operating income
Fresh Produce $ 55,071 $ 16,886 $ 23,129
Processed Foods 8,709 30,540 27,909
Unusual items (27,870) (20,060) (9,000)
----------- ----------- -----------
Total operating income $ 35,910 $ 27,366 $ 42,038
=========== =========== ===========
Operating results of the Company's Fresh Produce business improved in 2001
as compared to 2000 primarily as a result of higher European banana pricing and
volume. The benefit of the higher pricing and volume more than offset the
substantial negative effect on earnings resulting from weak European currencies
in relation to the U.S. dollar. The Company's Processed Foods operating results
declined in 2001 primarily due to lower pricing on canned vegetables throughout
the year, as the Company and industry were reducing inventory levels.
The decline in Fresh Produce operating income in 2000 from 1999 resulted
from the adverse effect of weak European currencies in relation to the U.S.
dollar (mitigated in part by the Company's foreign currency hedging program),
higher fuel costs and lower banana volume in North America. The negative effects
of these items were mostly offset by the Company's substantial improvements in
production and logistics costs and benefits from its workforce reduction program
announced in the third quarter of 1999. Operating results for the Company's
Processed Foods business segment in 2000 improved from the prior year as the
Company consolidated productive capacity in its canning operations.
Unusual items include the following:
. In 2001, $28 million of charges primarily associated with the closure
of farms, a third quarter labor strike and related labor issues at the
Company's Armuelles, Panama banana producing division. During 2001,
the Company closed non-competitive farms that represented about 20% of
this division. However, during the fourth quarter of 2001, agreement
was reached with the local labor union regarding work practices that
should lead to gradual improvements in productivity, cost and quality
in the remaining farms.
. In 2000, $35 million of charges primarily associated with the write-
downs of production and sourcing assets in the Fresh Produce
operations, including the curtailment in June 2000 of additional
Hurricane Mitch farm rehabilitation. These charges were offset by a
$15 million gain on the sale of California Day-Fresh Foods, Inc., a
processor and distributor of natural fresh fruit and vegetable juices.
. In 1999, $9 million of charges associated with a workforce reduction
program that streamlined certain corporate and staff functions in the
U.S., Central America and Europe. These charges included severance,
benefits extensions and outplacement services provided by this
program.
4
Fresh Produce net sales in 2001 were comparable to the prior year, as
higher banana pricing and volume were offset by the effect of weak European
currencies and the deconsolidation of the Company's Australian operations in the
second quarter of 2000. Processed Foods net sales decreased in 2001 primarily as
a result of the sale, in the second quarter of 2000, of California Day-Fresh
Foods, Inc. In 2000, net sales decreased from the prior year in Fresh Produce
primarily resulting from the effect of weak European currencies, lower banana
volume in North America and non-core trading markets, and the deconsolidation of
the Company's Australian operations. Processed Foods net sales decreased in 2000
compared to 1999 primarily as a result of the sale of California Day-Fresh
Foods, Inc.
Interest expense on parent company public debt was accrued through November
28, 2001, the Company's Chapter 11 petition filing date, even though the Company
discontinued interest payments on such debt beginning in January 2001. See
"Liquidity and Capital Resources - Parent Company Debt Restructuring" below.
Interest income for 1999 includes $10 million related to refunds that resulted
from audits of the Company's federal income tax returns for 1989 through 1991.
In connection with the parent company debt restructuring, the Company
incurred $34 million of reorganization costs during 2001, which primarily
includes professional fees and a write-off of parent company debt issuance
costs.
Income taxes consist principally of foreign income taxes currently paid or
payable. No tax benefit was recorded for unrealized U.S. net operating loss
carryforwards or other available tax credits.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
PARENT COMPANY DEBT RESTRUCTURING
On March 19, 2002, Chiquita Brands International, Inc. ("CBII") completed its
previously announced financial restructuring when its pre-arranged Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "Plan" or "Plan
of Reorganization") became effective. CBII is a parent holding company without
business operations of its own. The events leading to the restructuring and
certain provisions of the Plan are described below.
In 1993, the European Union ("EU") implemented a discriminatory quota and
licensing regime that governed the importation of bananas into the EU and
violated the EU's international trade obligations. This regime significantly
decreased the Company's banana volume sold into Europe and resulted in
significantly diminished operating results for the Company as compared to years
prior to the regime's implementation. Although the Company has made significant
improvements in production and logistics costs, the deterioration of operating
results caused by this regime has been further exacerbated in recent years by
the continued weakness of major European currencies in relation to the U.S.
dollar. Principally due to these factors, the Company experienced financial
losses in seven of the nine years preceding 2001 and had evolved into a highly
leveraged position with consolidated debt of approximately $1.3 billion at
December 31, 2000. Under these circumstances, the Company faced the need to
obtain new financing in order to meet debt maturities and seasonal working
capital requirements during the first quarter of 2001.
During the second half of 2000, the Company encountered a severe tightening
of the bank credit and other capital markets previously accessed by the Company.
In early 2001, the Company's operating subsidiary, Chiquita Brands, Inc.
("CBI"), was able to secure a new three-year $120 million credit facility which,
combined with existing credit facilities of other subsidiaries of the Company,
enabled all of the Company's operating subsidiaries to meet their upcoming debt
maturities and seasonal working capital needs. However, the Company was not able
to obtain financing which would permit CBII to repay its $86 million of 7%
subordinated debentures maturing in March 2001.
These factors led to CBII's announcement in January 2001 that it would seek
to regain its financial health by proposing a restructuring of the $861 million
principal amount of CBII's outstanding senior notes and subordinated debentures
("Old Notes") through the conversion of a substantial portion of the Old Notes
into new common equity. As part of this initiative, CBII discontinued all
interest and principal payments on the Old Notes.
5
In February 2001, the Company commenced discussions with certain holders of
the Old Notes ("Prepetition Noteholder Committees") to discuss the financial
condition of the Company and the proposed restructuring. The Company engaged in
extensive, arms' length negotiations with the Prepetition Noteholder Committees
regarding the terms of a consensual restructuring of CBII. On November 9, 2001,
these parties agreed on the terms of the restructuring.
On November 28, 2001, CBII filed its Plan of Reorganization under Chapter
11 of the U.S. Bankruptcy Code. CBII's general unsecured creditors (except for
holders of the Old Notes) have been unaffected by the Chapter 11 bankruptcy
proceedings and the Plan. CBII's operating subsidiaries, which have continued to
meet their obligations with their own cash flow and credit facilities (including
the CBI credit facility), have not been involved in the restructuring or the
Chapter 11 bankruptcy proceedings. The Plan was confirmed by the bankruptcy
court on March 8, 2002 and became effective March 19, 2002, resulting in
conversion of the $861 million of Old Notes and $102 million of accrued and
unpaid interest thereon into $250 million of 10.56% senior notes ("New Notes")
and 95.5% of the common stock of CBII as the reorganized entity ("New Common
Stock"). Previously outstanding preferred, preference and common stock is being
exchanged for 2% of the New Common Stock and 7-year warrants ("Warrants") to
purchase up to 25% of the New Common Stock on a fully diluted basis (prior to
any dilution by grants under a new stock option plan). In addition, as part of a
management incentive program, existing management is receiving 2.5% of the New
Common Stock.
In accordance with the Plan, the Company will:
. issue 40,000,000 shares of New Common Stock, including 1,000,000
shares issued or issuable to existing management;
. issue the New Notes and the Warrants;
. adopt a new stock option plan;
. reserve (a) 13,333,333 shares of New Common Stock for issuance upon
exercise of the Warrants and (b) 5,925,926 shares of New Common Stock
for issuance upon exercise of employee stock options authorized for
grant under the new stock option plan; and
. cancel the Old Notes, previously outstanding preferred, preference
and common stock, and previously outstanding stock options.
The consolidated balance sheet at December 31, 2001 reflects $861 million
principal amount of parent company debt and $102 million of accrued and unpaid
interest on such debt as "Liabilities subject to compromise."
PRO FORMA FINANCIAL INFORMATION
The Company's emergence from Chapter 11 bankruptcy proceedings on March 19, 2002
will result in a new reporting entity and adoption of fresh start reporting as
of that date in accordance with Statement of Position No. 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code."
The financial statements as of December 31, 2001 do not give effect to any
adjustments in the carrying value of assets or the amounts or classification of
liabilities that will be recorded upon implementation of the Plan of
Reorganization.
The following unaudited pro forma financial information reflects the
implementation of the Plan as if the Plan was effective on December 31, 2001.
Reorganization adjustments have been estimated in the pro forma financial
information to reflect the discharge of debt and adoption of fresh start
reporting, in accordance with SOP 90-7. Accordingly, the estimated
reorganization value of the Company of $1,280 million, which served as the basis
for the Plan as approved by the bankruptcy court, has been used to determine the
pro forma equity value allocated to the assets and liabilities of the Company in
proportion to their relative fair values in conformity with Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations."
6
Estimated reorganization adjustments in the Pro Forma Balance Sheet result
primarily from the following:
. Reduction of property, plant and equipment carrying values related
primarily to the Company's shipping vessels and tropical farm assets;
. Reduction of long-term operating investment and other asset carrying
values;
. Increase in the carrying value of the Chiquita trademark, partially
offset by a reduction in the carrying value of goodwill;
. Reduction in parent company debt and accrued interest for the
implementation of the Plan; and
. Increase in other liabilities primarily associated with pension and
severance obligations.
These adjustments were based upon the work of outside appraisers, actuaries
and financial consultants, as well as valuation estimates using discounted cash
flow analyses, to determine the relative fair values of the Company's assets and
liabilities. The allocation of the reorganization value to individual assets and
liabilities will change based on facts present at the actual effective date of
the Plan, and will result in differences to the fresh start adjustments and
allocated values estimated in this pro forma information.
[Download Table]
Unaudited Pro Forma Balance Sheet at December 31, 2001
------------------------------------------------------
Debt Fresh Start
(In thousands) Actual Discharge Adjustments Pro Forma
----------------------------------------------------------------------------------
Current assets $ 772,355 $ -- $ -- $ 772,355
Property, plant and
equipment, net 1,005,606 -- (541,386) 464,220
Investments and other
assets, net 326,116 -- (148,339) 177,777
Intangibles, net 158,415 -- 182,544 340,959
----------- --------- --------- ----------
Total assets $ 2,262,492 $ -- $(507,181) $1,755,311
=========== ========= ========= ==========
Notes and loans payable $ 53,374 $ -- $ -- $ 53,374
Long-term debt due within
one year 56,376 -- -- 56,376
Accounts payable 175,161 -- -- 175,161
Accrued liabilities 102,452 -- 14,390 116,842
Long-term debt of parent
company -- 250,000 -- 250,000
Long-term debt of
subsidiaries 306,017 -- -- 306,017
Other liabilities 157,698 -- 40,000 197,698
Liabilities subject to
compromise 962,820 (962,820) -- --
----------- --------- --------- ----------
Total liabilities 1,813,898 (712,820) 54,390 1,155,468
Accumulated deficit (530,068) 165,701 364,367 --
Other shareholders'
equity 978,662 547,119 (925,938) 599,843 *
----------- --------- --------- ----------
Total liabilities
and shareholders'
equity $ 2,262,492 $ -- $(507,181) $1,755,311
=========== ========= ========= ==========
* After deducting $666 million of indebtedness from the Company's $1,280
million estimated reorganization value, the total equity value of the Company is
approximately $614 million. Shareholders' equity included in the Pro Forma
Balance Sheet of approximately $600 million excludes $14 million related to
restricted management shares, which are subject to delayed delivery.
The Plan will reduce Chiquita's future annual interest expense by
approximately $60 million. In addition, due to the fresh start adjustments to
property, plant and equipment, annual depreciation expense is expected to
decrease by approximately $40 million.
7
The following summarizes the Company's contractual cash obligations
associated with debt principal repayments and operating leases on a pro forma
basis assuming a Plan effective date of December 31, 2001:
Within 2-3 4-5 After 5
(In thousands) Total 1 year years years years
-------------------------------------------------------------------------
Long-term debt
Parent company $250,000 $ -- $ -- $ -- $250,000
Subsidiaries 362,393 56,376 180,256 89,107 36,654
Notes and loans
payable 53,374 53,374 -- -- --
Operating leases 150,696 41,191 60,009 37,972 11,524
-------- -------- -------- -------- --------
$816,463 $150,941 $240,265 $127,079 $298,178
======== ======== ======== ======== ========
OTHER LIQUIDITY AND CAPITAL RESOURCES INFORMATION
Operating cash flow was $100 million in 2001, $(1) million in 2000 and $(6)
million in 1999. The 2001 operating cash flow amount includes the effect of the
non-payment of $78 million of interest expense on parent company debt. Cash
payments relating to interest expense were $43 million in 2001, $124 million in
2000 and $105 million in 1999. The Company believes that the cash flow generated
by operating subsidiaries and available borrowings under its working capital
facilities will provide sufficient cash reserves and liquidity to fund the
Company's working capital needs, capital expenditures and debt service
requirements, including CBII's New Notes.
Capital expenditures were $30 million in 2001, $55 million in 2000 and $152
million in 1999. The 2000 and 1999 amounts include $20 million and $74 million,
respectively, for the rehabilitation of banana farms in Honduras and Guatemala
which were destroyed or damaged by Hurricane Mitch in late 1998. The Company
announced in June 2000 that it had curtailed plans for further rehabilitation of
farms damaged by Hurricane Mitch.
In the beginning of 2000, the Company discontinued payment of dividends on
common stock and, in the fourth quarter of 2000, it discontinued payment of
dividends on its preferred and preference stock.
In March 2001, the Company's operating subsidiary, CBI, obtained a
three-year secured bank credit facility for up to $120 million to replace CBII's
expiring bank revolving credit agreement. This facility consisted of a term loan
of $75 million and a revolving credit facility of $45 million. A portion of the
proceeds of the term loan was used to repay $50 million of bank loans of certain
Costa Rican farm subsidiaries. Interest on amounts outstanding under the
facility was based on the bank corporate base rate plus 5%, subject to a minimum
of 14% per annum. An annual facility fee of 2% of the total credit facility was
also payable. At December 31, 2001, the amount outstanding under the term loan
was $70 million, and $4 million of the availability under the revolving credit
facility had been used to issue letters of credit.
In March 2002, this CBI facility was increased to $130 million, comprised
of a $70 million term loan and a revolving credit facility of $60 million.
Interest on this amended facility is based on the prevailing LIBOR rates plus
3.75% or the bank corporate base rate plus 1% (at CBI's option), subject to a
minimum annual rate of 6%. The annual facility fee has been eliminated, and the
Company paid an amendment fee of 5% of the total credit facility. Substantially
all U.S. assets of CBI (except for those of subsidiaries, such as Chiquita
Processed Foods, L.L.C. ("CPF"), with their own credit facilities) are pledged
to secure the CBI credit facility. The CBI credit facility is also secured by
liens on CBI's trademarks and pledges of stock or guarantees by various
subsidiaries worldwide. The facility contains covenants that limit the
distribution of cash from CBI to CBII, the parent holding company, to amounts
necessary to pay interest on the New Notes (provided CBI meets certain liquidity
tests), income taxes and permitted CBII overhead. The facility also has
covenants that require CBI to maintain certain financial ratios related to debt
coverage and income, and that limit capital expenditures and investments. At
March 15, 2002, $70 million of the term loan was outstanding, $27 million of
borrowings were outstanding under the revolving credit facility and $4 million
of the availability under the revolving credit facility had also been used to
issue letters of credit.
8
In 1999, CPF, the Company's vegetable canning subsidiary, entered into a
five-year $200 million senior secured credit facility. The facility includes a
$135 million revolving credit line and a $65 million facility for term loans. At
March 15, 2002, approximately $70 million was available under the revolving
credit line. At March 15, 2002, payment of dividends by CPF was limited to $6
million under the terms of this facility.
In 1999, the Company issued $200 million principal amount of 10% senior
notes due 2009 for net proceeds of $195 million. The Company used most of these
proceeds to repay debt of subsidiaries and to repay borrowings under its parent
company revolving line of credit.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
------------------------------------------
The Company's significant accounting policies are summarized in Note 1. The
additional discussion below addresses:
. major judgments used in applying these policies;
. the use of fresh start reporting upon the Company's emergence from
Chapter 11 proceedings; and
. the application of new accounting standards having a significant
impact on the Company.
The Company reviews the carrying values of its property, plant and
equipment and goodwill annually. These reviews are conducted in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," by
comparing estimates of undiscounted future cash flows, before interest charges,
included in the Company's operating plans with the carrying values of the
related assets. These reviews at December 31, 2001 did not reveal any instances
in which an impairment charge was required.
The Company also reviews the carrying values of its long-term investments
annually. These reviews seek to determine if a decline in fair value below the
carrying value of an investment is other than temporary, which would require a
write-down of the investment. The reviews involve a comparison of the Company's
share of the estimated future undiscounted cash flows of the investment to the
carrying value of the investment. The reviews conducted as of December 31, 2001
did not reveal any instances requiring a write-down of the investments.
The Company's application of fresh start reporting in accordance with SOP
90-7 will require allocation of the reorganization value of the Company to its
assets and liabilities in proportion to their relative fair values, which are,
in part, based on discounted cash flow analyses. The change from the
undiscounted cash flow methodology described above to the use of reorganization
value in fresh start reporting will result in the recording of significant fresh
start adjustments upon the Plan effective date in March 2002. These adjustments,
estimated as if the Plan effective date was December 31, 2001, are reflected in
the pro forma financial information and are discussed more fully in "Liquidity
and Capital Resources - Pro Forma Financial Information."
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Other
Intangible Assets," which will be adopted by the Company on January 1, 2002.
Under this standard, goodwill and other intangible assets with an indefinite
life will no longer be amortized but will be reviewed at least annually for
impairment. On January 1, 2002, to give effect to the new standard, the Company
will record a goodwill write-down of approximately $145 million as a cumulative
effect of a change in method of accounting. The write-down results from applying
the SFAS No. 142 requirement to evaluate goodwill using discounted cash flows
rather than the undiscounted cash flow methodology prescribed by the previous
standard. As adoption of this new standard will precede the implementation of
fresh start reporting, the estimated goodwill valuation adjustment of $145
million included in the December 31, 2001 Pro Forma Balance Sheet on page 7 will
be recorded as the cumulative effect of adoption of SFAS No. 142 at January 1,
2002.
9
EUROPEAN UNION REGULATORY DEVELOPMENTS
--------------------------------------
In 1993, the EU implemented a discriminatory quota and licensing regime
governing the importation of bananas into the EU. This regime significantly
decreased the Company's banana volume sold into the EU and resulted in
significantly decreased operating results for the Company as compared to years
prior to the regime's implementation.
During nine years of legal challenges through the World Trade Organization
and its predecessor, the General Agreement on Tariffs and Trade, the EU quota
and licensing regime was determined in several rulings to be in violation of the
EU's international trade obligations. In April 2001, the European Commission
agreed to reform the EU banana import regime. The agreement led to a partial
redistribution of licenses for the import of Latin American bananas under a
tariff rate quota system for historical operators that went into effect on July
1, 2001 and is to continue through the end of 2005. As a result, the Company has
not needed to purchase as many import licenses as were required prior to July 1,
2001 in order to meet its customer demand. The April 2001 agreement also
contemplates movement to a tariff-only system starting in 2006, which will
require future consultations between the EU and the banana supplying interests.
There can be no assurance that the tariff rate quota system will remain
unchanged through 2005 or that a tariff-only system will be implemented after
2005 (or that, if implemented, the tariff levels established will not be adverse
to marketers of Latin American bananas, such as the Company). In addition, the
Company cannot predict the impact on the banana import regime of the enlargement
of the EU by ten member states that is expected to be implemented as early as
2004.
EU COMMON CURRENCY
------------------
In 1999, most of the EU member countries began implementation of the EU common
currency (the "euro") by accepting the euro as legal tender in addition to their
respective national currencies. On January 1, 2002, euro coins and notes were
put into circulation in participating countries and since February 28, 2002, the
euro has been the sole legal tender for these countries. Chiquita has adjusted
the day-to-day operations and information systems of its European business to
allow the use of the EU common currency at no significant cost.
MARKET RISK MANAGEMENT
----------------------
Chiquita's products are distributed in more than 60 countries. Its international
sales are made primarily in U.S. dollars and major European currencies (see "EU
Common Currency"). The Company reduces currency exchange risk from sales
originating in currencies other than the dollar by exchanging local currencies
for dollars promptly upon receipt. The Company further reduces its exposure to
exchange rate fluctuations by purchasing foreign currency option contracts
(principally euro contracts) to hedge sales denominated in foreign currencies.
Chiquita's interest rate risk arises from its fixed and variable rate debt
(see Note 9).
The Company's transportation costs are exposed to the risk of rising fuel
prices. To reduce this risk, the Company enters into fuel oil option contracts
that act to offset increases in the market purchase price of fuel oil.
The foreign currency and fuel oil option contracts are derivative financial
instruments that change in value in the opposite direction of the underlying
transactions being hedged. Chiquita uses a value at risk ("VAR") model to
estimate the potential loss the Company could incur as a result of adverse
changes in foreign currency exchange, interest rates and fuel oil prices, based
on a 95% confidence level, over a given period of time. The VAR calculations do
not consider the potential effect of favorable changes in these rates or the
offsetting change in the dollar amount of an underlying foreign currency
denominated sale or fuel oil purchase. Therefore, the VAR calculations are not
intended to represent actual losses the Company expects to incur.
10
As of December 31, 2001 and 2000 and for the year ended December 31, 2001,
the Company estimates that the fair value of foreign currency option contracts
would decline by less than $2 million over a one-day period due to an adverse
change in foreign currency exchange rates. However, the Company expects that any
decline in the fair value of these contracts would typically be offset by an
increase in the dollar realization of the underlying sales denominated in
foreign currencies.
As of December 31, 2001 and 2000 and for the year ended December 31, 2001,
the Company estimates that the adverse change in fair value of its debt would be
less than $2 million over a one-day period due to an unfavorable change in
interest rates.
As of December 31, 2001 and 2000 and for the year ended December 31, 2001,
the Company estimates that the fair value of fuel oil option contracts would
decline by less than $1 million over a one-day period due to an adverse change
in fuel oil prices. However, the Company expects that any decline in the fair
value of these contracts would be offset by a decrease in the cost of underlying
fuel purchases.
(See Note 8 to the Consolidated Financial Statements for additional
discussion of the Company's hedging activities. Also, see Note 1 to the
Consolidated Financial Statements regarding the Company's adoption of Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended.)
*******
This Annual Report contains certain information that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements reflect management's current
views and estimates of future economic circumstances, industry conditions and
Company performance. They are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of Chiquita. The
assumptions, risks and uncertainties include continued maintenance of the
reforms agreed to by the U.S. and EU regarding the EU's banana import regime,
the continuing availability of sufficient borrowing capacity or other financing
to fund operations, capital spending and working capital requirements, the
prices at which Chiquita can sell its products, the availability of and costs at
which it can purchase or grow fresh produce and other raw materials, currency
exchange rate fluctuations, natural disasters and unusual weather conditions,
operating efficiencies, labor relations, actions of governmental bodies, and
other market and competitive conditions. 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.
11
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF INCOME
[Enlarge/Download Table]
(In thousands, except
per share amounts) 2001 2000 1999
---------------------------------------------------------------------------------------------
Net sales $ 2,242,261 $ 2,253,770 $ 2,555,799
----------- ----------- -----------
Operating expenses
Cost of sales 1,890,050 1,863,818 2,094,406
Selling, general and
administrative 231,494 271,650 328,467
Depreciation 84,807 90,936 90,888
----------- ----------- -----------
2,206,351 2,226,404 2,513,761
----------- ----------- -----------
Operating income 35,910 27,366 42,038
Interest income 7,830 12,289 19,574
Interest expense (122,397) (127,815) (112,033)
Other income, net 493 293 339
Reorganization costs (33,604) -- --
----------- ----------- -----------
Loss before income taxes (111,768) (87,867) (50,082)
Income taxes (7,000) (7,000) (8,300)
----------- ----------- -----------
Net loss $ (118,768) $ (94,867) $ (58,382)
Less dividends on preferred and preference stock:
Paid -- (12,826) (17,102)
In arrears (11,809) (4,276) --
----------- ----------- -----------
Net loss attributed to
common shares $ (130,577) $ (111,969) $ (75,484)
=========== =========== ===========
Net loss per common share -
basic and diluted $ (1.78) $ (1.68) $ (1.15)
=========== =========== ===========
See Notes to Consolidated Financial Statements.
12
[Download Table]
Chiquita Brands International, Inc.
CONSOLIDATED BALANCE SHEET
December 31,
(In thousands, except share amounts) 2001 2000
------------------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $ 70,428 $ 96,924
Trade receivables, less allowances of
$11,902 and $10,685, respectively 193,945 191,476
Other receivables, net 80,378 105,018
Inventories 392,190 428,260
Other current assets 35,414 24,835
----------- -----------
Total current assets 772,355 846,513
Property, plant and equipment, net 1,005,606 1,071,341
Investments and other assets, net 326,116 334,573
Intangibles, net 158,415 164,363
----------- -----------
Total assets $ 2,262,492 $ 2,416,790
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise:
Current liabilities
Notes and loans payable $ 53,374 $ 109,274
Long-term debt due within one year
Parent (Note 2) -- 86,930
Subsidiaries 56,376 93,685
Accounts payable 175,161 194,367
Accrued liabilities 102,452 128,614
----------- -----------
Total current liabilities 387,363 612,870
Long-term debt of parent company (Note 2) -- 772,380
Long-term debt of subsidiaries 306,017 287,695
Other liabilities 157,698 161,302
----------- -----------
Total liabilities not subject to compromise 851,078 1,834,247
Liabilities subject to compromise (Note 2) 962,820 --
----------- -----------
Total liabilities 1,813,898 1,834,247
----------- -----------
Shareholders' equity
Preferred and preference stock 139,729 253,475
Common stock, $.01 par value
(78,273,183 and 66,705,622 shares
outstanding, respectively) 783 667
Capital surplus 881,192 766,217
Accumulated deficit (530,068) (411,300)
Accumulated other comprehensive loss (43,042) (26,516)
----------- -----------
Total shareholders' equity 448,594 582,543
----------- -----------
Total liabilities and
shareholders' equity $ 2,262,492 $ 2,416,790
=========== ===========
See Notes to Consolidated Financial Statements.
13
[Enlarge/Download Table]
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Preferred Accumulated Total
and other com- share-
preference Common Capital Accumulated prehensive holders'
(In thousands) stock stock surplus deficit income (loss) equity
-----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998 $ 253,475 $654 $755,660 $(214,967) $ (842) $ 793,980
---------
Net loss -- -- -- (58,382) -- (58,382)
Unrealized translation loss -- -- -- -- (5,478) (5,478)
---------
Comprehensive loss (63,860)
---------
Share issuances
Option exercises -- 1 57 -- -- 58
Other -- 4 5,362 -- -- 5,366
Dividends
Common stock -- -- -- (13,156) -- (13,156)
Preferred and preference
stock -- -- -- (17,102) -- (17,102)
--------- ---- -------- --------- -------- ---------
DECEMBER 31, 1999 253,475 659 761,079 (303,607) (6,320) 705,286
---------
Net loss -- -- -- (94,867) -- (94,867)
Unrealized translation loss -- -- -- -- (12,979) (12,979)
Change in minimum pension
liability -- -- -- -- (7,217) (7,217)
---------
Comprehensive loss (115,063)
---------
Share issuances -- 8 5,138 -- -- 5,146
Dividends paid on preferred
and preference stock -- -- -- (12,826) -- (12,826)
--------- ---- -------- --------- -------- ---------
DECEMBER 31, 2000 253,475 667 766,217 (411,300) (26,516) 582,543
---------
Net loss -- -- -- (118,768) -- (118,768)
Unrealized translation loss -- -- -- -- (2,633) (2,633)
Change in minimum pension
liability -- -- -- -- (7,830) (7,830)
Changes in fair value of
derivatives -- -- -- -- (1,183) (1,183)
Losses reclassified
from OCI into net loss -- -- -- -- 2,095 2,095
---------
Comprehensive loss before
cumulative effect of
adopting SFAS No. 133 -- -- -- -- -- (128,319)
Cumulative effect of adopting
SFAS No. 133 -- -- -- -- (6,975) (6,975)
---------
Comprehensive loss (135,294)
---------
Share issuances
Preferred stock conversion
to common stock (113,746) 115 113,631 -- -- --
Other -- 1 1,344 -- -- 1,345
--------- ---- -------- --------- -------- ---------
DECEMBER 31, 2001 $ 139,729 $783 $881,192 $(530,068) $(43,042) $ 448,594
========= ==== ======== ========= ======== =========
See Notes to Consolidated Financial Statements.
14
[Enlarge/Download Table]
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands) 2001 2000 1999
------------------------------------------------------------------------------------
CASH PROVIDED (USED) BY:
OPERATIONS
Net loss $(118,768) $ (94,867) $ (58,382)
Depreciation and amortization 91,050 97,505 97,304
Parent company interest expense not paid 77,672 -- --
Reorganization costs 16,991 -- --
Fresh produce sourcing asset write-downs
and charges 15,147 28,037 --
Collection of tax refund 9,456 21,685 --
Gain on sale of non-core business -- (14,710) --
Changes in current assets and liabilities
Trade receivables (5,534) 5,325 (4,222)
Other receivables 12,477 (5,567) (6,085)
Inventories 35,767 (17,804) (16,789)
Other current assets (1,477) (3,857) 1,877
Accounts payable and accrued liabilities (34,690) (17,581) (15,095)
Other 1,713 1,281 (4,651)
--------- --------- ---------
CASH FLOW FROM OPERATIONS 99,804 (553) (6,043)
--------- --------- ---------
INVESTING
Capital expenditures (29,690) (54,632) (152,080)
Hurricane Mitch insurance proceeds 6,393 32,500 32,500
Acquisitions of businesses -- -- (21,619)
Long-term investments (16,738) (3,601) (11,531)
Proceeds from sales of property, plant
and equipment 14,335 15,244 14,903
Proceeds from sale of non-core
business -- 26,251 --
Refundable cash deposits (14,500) (6,398) 9,745
Other 126 455 4,266
--------- --------- ---------
CASH FLOW FROM INVESTING (40,074) 9,819 (123,816)
--------- --------- ---------
FINANCING
Debt transactions
Issuances of long-term debt 73,874 81,085 284,327
Repayments of long-term debt (104,606) (100,085) (68,389)
Increase (decrease) in notes and
loans payable (55,494) 21,621 (46,922)
Stock transactions
Issuances of common stock -- -- 58
Dividends -- (12,826) (30,258)
--------- --------- ---------
CASH FLOW FROM FINANCING (86,226) (10,205) 138,816
--------- --------- ---------
Increase (decrease) in cash and equivalents (26,496) (939) 8,957
Balance at beginning of year 96,924 97,863 88,906
--------- --------- ---------
Balance at end of year $ 70,428 $ 96,924 $ 97,863
========= ========= =========
See Notes to Consolidated Financial Statements.
15
Chiquita Brands International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
--------------------------------------------------------------------------------
American Financial Group, Inc. and its subsidiaries ("AFG") owned approximately
31% of the outstanding common stock of Chiquita Brands International, Inc.
("CBII") as of December 31, 2001. Upon the March 19, 2002 effective date of
CBII's Plan of Reorganization (see Note 2), AFG will own less than 1% of the
common stock of the reorganized entity.
CONSOLIDATION - The consolidated financial statements include the accounts of
CBII and controlled majority-owned subsidiaries ("Chiquita" or the "Company").
Intercompany balances and transactions have been eliminated. Investments
representing minority interests are accounted for by the equity method when
Chiquita has the ability to exercise significant influence in the investees'
operations; otherwise, they are accounted for at cost.
USE OF ESTIMATES - The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States, which
require management to make estimates and assumptions that affect the amounts and
disclosures reported in the financial statements and accompanying notes.
CASH AND EQUIVALENTS - Cash and equivalents include cash and highly liquid
investments with a maturity when purchased of three months or less.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost for
growing crops and certain fresh produce inventories is determined principally on
the "last-in, first-out" (LIFO) basis. Cost for other inventory categories is
determined on the "first-in, first-out" (FIFO) or average cost basis.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost
and, except for land, are depreciated on a straight-line basis over their
estimated useful lives.
INTANGIBLES - Intangibles consist primarily of goodwill and trademarks which are
amortized over not more than 40 years. Accumulated amortization was $69 million
and $63 million at December 31, 2001 and 2000, respectively. The carrying value
of intangibles is evaluated annually in relation to the operating performance
and future undiscounted cash flows of the underlying businesses.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Other
Intangible Assets," which will be adopted by the Company on January 1, 2002.
Under this standard, goodwill and other intangible assets with an indefinite
life will no longer be amortized but will be reviewed at least annually for
impairment. On January 1, 2002, to give effect to the new standard, the Company
will record a goodwill write-down of approximately $145 million as a cumulative
effect of a change in method of accounting. The write-down results from applying
the SFAS No. 142 requirement to evaluate goodwill using discounted cash flows
rather than the undiscounted cash flow methodology prescribed by the previous
standard. The write-down of goodwill and the application of the non-amortization
provisions of SFAS No. 142 is expected to result in an annual increase to income
before taxes of approximately $6 million.
REVENUE RECOGNITION - Revenue is recognized on sales of products when the
customer receives title to the goods, generally upon delivery.
INCOME TAXES - Deferred income taxes are recognized at currently enacted tax
rates for temporary differences between the financial reporting and income tax
bases of assets and liabilities. Deferred taxes are not provided on the
undistributed earnings of subsidiaries operating outside the U.S. that have been
or are intended to be permanently reinvested.
16
EARNINGS PER SHARE - Basic earnings per share is calculated on the basis of the
weighted average number of shares of common stock outstanding during the year.
The assumed conversions to common stock of the Company's 7% convertible
subordinated debentures (which were convertible until March 28, 2001), preferred
and preference stock, stock options and other stock awards are excluded from
diluted earnings per share computations for periods in which these items, on an
individual basis, have an anti-dilutive effect.
FOREIGN EXCHANGE - Chiquita generally utilizes the U.S. dollar as its functional
currency. Net foreign exchange gains (losses) of $(5) million in 2001, $2
million in 2000 and $(5) million in 1999 are included in income.
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities," as amended, was
implemented by the Company on January 1, 2001. This standard requires the
recognition of all derivatives on the balance sheet at fair value, and
recognition of the resulting gains or losses as adjustments to net income or
other comprehensive income ("OCI"). The effect of adopting SFAS No. 133 was not
material to the Company's net income and resulted in a charge of $7 million to
OCI.
The Company is exposed to currency exchange risk on foreign sales. The
Company reduces this exposure by purchasing foreign currency option contracts
(principally euro contracts). The currency options qualify for hedge accounting
as cash flow hedges. The Company formally documents all relationships between
hedging instruments and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions. To the extent that
these hedges are effective in offsetting the Company's underlying risk exposure,
gains and losses are deferred in OCI until the underlying transaction is
recognized in net income. For the ineffective portion of the hedge, gains or
losses are charged to net income in the current period. The earnings impact of
the currency option contracts is recorded in net sales. The Company does not
hold or issue derivative financial instruments for speculative purposes. See
Note 8 for additional discussion of the Company's hedging activities.
Prior to adoption of SFAS No. 133 on January 1, 2001, the Company's foreign
currency option contracts qualified for hedge accounting under the previous
standard. Amounts paid for options and gains realized thereon were deferred in
other current assets until the hedged transaction occurred.
Note 2 - Parent Company Debt Restructuring
--------------------------------------------------------------------------------
On March 19, 2002, CBII completed its previously announced financial
restructuring when its pre-arranged Plan of Reorganization under Chapter 11 of
the U.S. Bankruptcy Code (the "Plan" or "Plan of Reorganization") became
effective. CBII is a parent holding company without business operations of its
own. Events occurring during 2001 and through March 19, 2002 related to the
Chapter 11 proceedings are summarized below.
In January 2001, the Company announced that it was seeking to restructure
$861 million principal amount of CBII's outstanding senior notes and
subordinated debentures ("Old Notes") through the conversion of a substantial
portion of the Old Notes into new common equity. As part of this initiative,
CBII discontinued all interest and principal payments on the Old Notes.
In February 2001, the Company commenced discussions with certain holders of
the Old Notes ("Prepetition Noteholder Committees") to discuss the financial
condition of the Company and the proposed restructuring. The Company engaged in
extensive, arms' length negotiations with the Prepetition Noteholder Committees
regarding the terms of a consensual restructuring of CBII. On November 9, 2001,
these parties agreed on the terms of the restructuring.
17
On November 28, 2001, CBII filed its Plan of Reorganization under Chapter
11 of the U.S. Bankruptcy Code. CBII's general unsecured creditors (except for
holders of the Old Notes) have been unaffected by the Chapter 11 bankruptcy
proceedings and the Plan. CBII's operating subsidiaries, which have continued to
meet their obligations with their own cash flow and credit facilities, have not
been involved in the restructuring or the Chapter 11 bankruptcy proceedings. The
Plan was confirmed by the bankruptcy court on March 8, 2002 and became effective
March 19, 2002, resulting in conversion of the $861 million of Old Notes and
$102 million of accrued and unpaid interest thereon into $250 million of 10.56%
senior notes ("New Notes") and 95.5% of the common stock of the reorganized
entity ("New Common Stock"). Previously outstanding preferred, preference and
common stock is being exchanged for 2% of the New Common Stock and 7-year
warrants ("Warrants") to purchase up to 25% of the New Common Stock on a fully
diluted basis (prior to any dilution by grants under a new stock option plan).
In addition, as part of a management incentive program, existing management is
receiving 2.5% of the New Common Stock.
In accordance with the Plan, the Company will:
. issue 40,000,000 shares of New Common Stock, including 1,000,000
shares issued or issuable to existing management;
. issue the New Notes and the Warrants;
. adopt a new stock option plan;
. reserve (a) 13,333,333 shares of New Common Stock for issuance upon
exercise of the Warrants and (b) 5,925,926 shares of New Common Stock
for issuance upon exercise of employee stock options authorized for
grant under the new stock option plan; and
. cancel the Old Notes, previously outstanding preferred, preference
and common stock, and previously outstanding stock options.
The consolidated balance sheet at December 31, 2001 reflects $861 million
principal amount of parent company debt and $102 million of accrued and unpaid
interest on such debt as "Liabilities subject to compromise."
Interest expense of $78 million on the parent company public debt was
accrued through November 28, 2001, the Company's Chapter 11 petition filing
date, even though the Company discontinued interest payments on such debt
beginning in January 2001. Interest expense for 2001 excludes $8 million of
stated contractual interest associated with the parent company debt between
November 28, 2001 and December 31, 2001.
The Company incurred $34 million of reorganization costs during 2001, which
primarily includes professional fees and a write-off of parent company debt
issuance costs. Cash payments in 2001 associated with reorganization costs were
$17 million.
The Company's emergence from Chapter 11 bankruptcy proceedings on March
19, 2002 will result in a new reporting entity and adoption of fresh start
reporting as of that date, in accordance with Statement of Position No. 90-7
("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." The financial statements as of December 31, 2001 do not give
effect to any adjustments in the carrying value of assets or the amounts or
classification of liabilities that will be recorded upon implementation of the
Plan of Reorganization.
The following unaudited pro forma financial information reflects the
implementation of the Plan as if the Plan was effective on December 31, 2001.
Reorganization adjustments have been estimated in the pro forma financial
information to reflect the discharge of debt and adoption of fresh start
reporting in accordance with SOP 90-7. Accordingly, the estimated reorganization
value of the Company of $1,280 million, which served as the basis for the Plan
as approved by the bankruptcy court, has been used to determine the pro forma
equity value allocated to the assets and liabilities of the Company in
proportion to their relative fair values in conformity with Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations."
18
Estimated reorganization adjustments in the Pro Forma Balance Sheet result
primarily from the following:
. Reduction of property, plant and equipment carrying values related
primarily to the Company's shipping vessels and tropical farm assets;
. Reduction of long-term operating investment and other asset carrying
values;
. Increase in the carrying value of the Chiquita trademark, partially
offset by a reduction in the carrying value of goodwill;
. Reduction in parent company debt and accrued interest for the
implementation of the Plan; and
. Increase in other liabilities primarily associated with pension and
severance obligations.
These adjustments were based upon the work of outside appraisers, actuaries
and financial consultants, as well as valuation estimates using discounted cash
flow analyses, to determine the relative fair values of the Company's assets and
liabilities. The allocation of the reorganization value to individual assets and
liabilities will change based on facts present at the actual effective date of
the Plan, and will result in differences to the fresh start adjustments and
allocated values estimated in this pro forma information.
[Download Table]
Unaudited Pro Forma Balance Sheet at December 31, 2001
------------------------------------------------------
Debt Fresh Start
(In thousands) Actual Discharge Adjustments Pro Forma
-------------------------------------------------------------------------------
Current assets $ 772,355 $ -- $ -- $ 772,355
Property, plant and
equipment, net 1,005,606 -- (541,386) 464,220
Investments and other
assets, net 326,116 -- (148,339) 177,777
Intangibles, net 158,415 -- 182,544 340,959
----------- --------- --------- ----------
Total assets $ 2,262,492 $ -- $(507,181) $1,755,311
=========== ========= ========= ==========
Notes and loans payable $ 53,374 $ -- $ -- $ 53,374
Long-term debt due within
one year 56,376 -- -- 56,376
Accounts payable 175,161 -- -- 175,161
Accrued liabilities 102,452 -- 14,390 116,842
Long-term debt of parent
company -- 250,000 -- 250,000
Long-term debt of
subsidiaries 306,017 -- -- 306,017
Other liabilities 157,698 -- 40,000 197,698
Liabilities subject to
compromise 962,820 (962,820) -- --
----------- --------- --------- ----------
Total liabilities 1,813,898 (712,820) 54,390 1,155,468
Accumulated deficit (530,068) 165,701 364,367 --
Other shareholders'
equity 978,662 547,119 (925,938) 599,843 *
----------- --------- --------- ----------
Total liabilities
and shareholders'
equity $ 2,262,492 $ -- $(507,181) $1,755,311
=========== ========= ========= ==========
* After deducting $666 million of indebtedness from the Company's $1,280 million
estimated reorganization value, the total equity value of the Company is
approximately $614 million. Shareholders' equity included in the Pro Forma
Balance Sheet of approximately $600 million excludes $14 million related to
restricted management shares, which are subject to delayed delivery.
The Plan will reduce Chiquita's future annual interest expense by
approximately $60 million. In addition, due to the fresh start adjustments to
property, plant and equipment, annual depreciation expense is expected to
decrease by approximately $40 million.
19
Note 3 - Earnings Per Share
--------------------------------------------------------------------------------
Basic and diluted earnings per share are calculated as follows:
(In thousands, except per share amounts) 2001 2000 1999
--------------------------------------------------------------------------------
Net loss $(118,768) $ (94,867) $(58,382)
Dividends on preferred and
preference stock:
Paid -- (12,826) (17,102)
In arrears (11,809) (4,276) --
--------- --------- --------
Net loss attributed to common shares $(130,577) $(111,969) $(75,484)
========= ========= ========
Weighted average common shares outstanding 73,347 66,498 65,768
========= ========= ========
Basic and diluted net loss per common
share $ (1.78) $ (1.68) $ (1.15)
========= ========= ========
The assumed conversions to common stock of the Company's 7% convertible
subordinated debentures (which were convertible until March 28, 2001), preferred
stock, preference stock and the assumed exercise of outstanding stock options
and other stock awards would have an anti-dilutive effect on diluted earnings
per share and, therefore, have not been included in the above calculations. The
Company's 7% convertible subordinated debentures, stock options and other stock
awards, and preferred and preference stock were all cancelled in accordance with
the Company's Plan of Reorganization (see Note 2).
Although the Company discontinued payment of dividends on its preferred and
preference stock in the fourth quarter of 2000, and unpaid dividends were
compromised as part of the Plan of Reorganization, these dividends have been
deducted from net income to calculate earnings per share.
Note 4 - Inventories
-----------------------------------------------------------------------
Inventories consist of the following:
December 31,
(In thousands) 2001 2000
-----------------------------------------------------------------------
Fresh produce $ 40,520 $ 31,199
Processed food products 208,436 241,787
Growing crops 96,203 97,620
Materials, supplies and other 47,031 57,654
-------- --------
$392,190 $428,260
======== ========
The carrying value of inventories valued by the LIFO method was $103
million at December 31, 2001 and $106 million at December 31, 2000. If these
inventories were stated at current costs, total inventories would have been
approximately $28 million and $26 million higher than reported at December 31,
2001 and 2000, respectively.
20
Note 5 - Property, Plant and Equipment
----------------------------------------------------------------------------
Property, plant and equipment consist of the following:
Weighted
average
December 31, depreciable
(In thousands) 2001 2000 lives
----------------------------------------------------------------------------
Land $ 66,431 $ 69,429
Buildings and improvements 247,027 250,533 25 years
Machinery and equipment 432,653 416,294 10 years
Ships and containers 685,214 682,268 24 years
Cultivations 306,115 322,282 29 years
Other 69,353 66,631 16 years
----------- -----------
1,806,793 1,807,437
Accumulated depreciation (801,187) (736,096)
----------- -----------
$ 1,005,606 $ 1,071,341
=========== ===========
Note 6 - Leases
-------------------------------------------------------------------------------
Total rental expense consists of the following:
(In thousands) 2001 2000 1999
-------------------------------------------------------------------------------
Gross rentals
Ships and containers $ 60,553 $ 64,403 $ 96,101
Other 34,449 35,767 36,937
--------- --------- ---------
95,002 100,170 133,038
Less sublease rentals (1,174) (1,016) (16,095)
--------- --------- ---------
$ 93,828 $ 99,154 $ 116,943
========= ========= =========
Future minimum rental payments required under operating leases having
initial or remaining non-cancelable lease terms in excess of one year at
December 31, 2001 are as follows:
Ships and
(In thousands) containers Other Total
-------------------------------------------------------------------
2002 $23,504 $17,687 $41,191
2003 17,515 14,171 31,686
2004 16,264 12,059 28,323
2005 12,282 10,816 23,098
2006 10,135 4,739 14,874
Later years 4,431 7,093 11,524
Portions of the minimum rental payments for ships constitute reimbursement
for ship operating costs paid by the lessor.
21
Note 7 - Equity Method Investments
--------------------------------------------------------------------------------
The Company has investments in a number of affiliates which are accounted for by
the equity method. These affiliates are primarily engaged in the distribution of
fresh produce. Chiquita's share of the income (loss) of these affiliates was
$(4) million in 2001, $(9) million in 2000 and $5 million in 1999, and its
investment in these companies totaled $125 million at December 31, 2001 and $119
million at December 31, 2000. The Company's share of undistributed earnings of
these affiliates totaled $25 million at both December 31, 2001 and 2000. The
excess of the carrying value of Chiquita's investment over its share of the fair
value of the investees' net assets at the date of acquisition is being amortized
over periods ranging from 10 to 40 years ($31 million and $33 million, net of
accumulated amortization, at December 31, 2001 and 2000, respectively).
Summarized unaudited financial information of these affiliates follows:
(In thousands) 2001 2000 1999
-------------------------------------------------------------------------
Revenue $ 1,037,510 $ 998,868 $978,180
Gross profit 123,182 104,254 109,608
Net income (loss) (3,874) (9,751) 16,016
Current assets 204,334 212,254
Total assets 488,248 504,931
Current liabilities 178,790 204,913
Total liabilities 279,178 301,719
22
Note 8 - Financial Instruments
--------------------------------------------------------------------------------
At December 31, 2001, the Company had euro-denominated option contracts which
ensure conversion of approximately (euro) 250 million of sales in 2002 at
average rates not lower than 0.87 dollars per euro. The Company also had 3.5%
Rotterdam barge fuel oil option contracts at December 31, 2001 that limit the
average cost on approximately 70,000 metric tons of fuel oil to no more than $97
per metric ton in 2002. The fair values of these option contracts at December
31, 2001, as listed in the following table, were included in other current
assets. The unrealized losses on these contracts deferred in OCI at the end of
2001, substantially all of which are expected to be reclassified to net income
in the next twelve months, were approximately $4 million. During 2001, the
change in the fair value of these contracts relating to hedge ineffectiveness
was not material.
The carrying values and estimated fair values of the Company's debt, fuel
oil option contracts and foreign currency option contracts are summarized below:
[Download Table]
December 31, 2001 December 31, 2000
---------------------- ----------------------
Carrying Estimated Carrying Estimated
(In thousands) value fair value value fair value
---------------------------------------------------------- ----------------------
Parent company debt $(860,890) $(700,000) $(859,310) $(270,000)
Subsidiary debt (415,767) (420,000) (490,654) (493,000)
Fuel oil swap agreements -- -- -- (3,500)
Fuel oil option contracts 737 737 -- --
Foreign currency option contracts 3,700 3,700 8,841 3,500
Fair values for the Company's publicly traded debt, foreign currency option
contracts and fuel oil option contracts are based on quoted market prices. Fair
value for other debt is estimated based on the current rates offered to the
Company for debt of similar maturities.
The Company is exposed to credit risk in the event of nonperformance by
counterparties. However, because the Company's hedging activities are transacted
only with highly rated institutions, Chiquita does not anticipate nonperformance
by any of these counterparties. The amount of any credit exposure is limited to
unrealized gains on these agreements.
23
[Enlarge/Download Table]
Note 9 - Debt
---------------------------------------------------------------------------------------
Long-term debt consists of the following:
December 31,
(In thousands) 2001 2000
---------------------------------------------------------------------------------------
Parent Company
9 1/8% senior notes, due 2004 $ 175,000 $ 175,000
9 5/8% senior notes, due 2004 250,000 248,246
10% senior notes, due 2009 200,000 200,000
10 1/4% senior notes, due 2006 150,000 149,134
7% subordinated debentures, due 2001 85,890 86,930
Less current maturities -- (86,930)
Less amounts subject to compromise (see Note 2) (860,890) --
------------ ------------
Long-term debt of parent company $ -- $ 772,380
============ ============
Subsidiaries
Loans secured by ships and containers, due in
installments from 2002 to 2010 - average
effective interest rate of 4.1% (8.8% in 2000) $ 167,567 $ 192,087
Loan secured by substantially all U.S. assets
except those of CPF, due 2004
- variable interest rate of 14% in 2001 69,800 --
Loan to Costa Rican farm subsidiaries
- variable interest rate of 10.6% in 2000 -- 50,000
Loan secured by vegetable canning assets, due in
installments from 2002 to 2004
- variable interest rate of 4.2% (8.4% in 2000) 35,714 42,857
Long-term portion of revolving credit facility
secured by vegetable canning assets, due 2004
- variable interest rate of 4.9% (8.9% in 2000) 35,000 35,000
Foreign currency loans maturing through 2008
- average interest rate of 12% (13% in 2000) 3,516 6,065
Other loans maturing through 2012
- average interest rate of 8% (10% in 2000) 50,796 55,371
Less current maturities (56,376) (93,685)
------------ ------------
Long-term debt of subsidiaries $ 306,017 $ 287,695
============ ============
Maturities on subsidiary long-term debt during the next five years are as
follows:
(In thousands)
---------------------------------------------------------------
2002 $ 56,376
2003 50,937
2004 129,319
2005 67,958
2006 21,149
24
In January 2001, the Company announced its intention to restructure $861
million principal amount of outstanding senior notes and subordinated debentures
("Old Notes") of CBII, which is a parent holding company without business
operations of its own. As part of this initiative, CBII discontinued all
interest and principal payments on this parent company public debt. CBII filed
its Plan of Reorganization on November 28, 2001 under Chapter 11 of the U.S.
Bankruptcy Code, and the Plan became effective on March 19, 2002. In accordance
with the Plan of Reorganization (see Note 2), the Old Notes and the accrued and
unpaid interest thereon are being converted into $250 million of 10.56% senior
notes ("New Notes") and 95.5% of the common stock of the reorganized entity. The
consolidated balance sheet at December 31, 2001 reflects $861 million principal
amount of Old Notes and $102 million of accrued and unpaid interest on such debt
as "Liabilities subject to compromise."
The indenture for the New Notes contains restrictions on the payment of
dividends. At March 19, 2002, these restrictions limited the aggregate amount
that could be paid by CBII as dividends to $25 million.
In March 2001, the Company's operating subsidiary, Chiquita Brands, Inc.
("CBI"), obtained a three-year secured bank credit facility for up to $120
million to replace CBII's expiring bank revolving credit agreement. This
facility consisted of a term loan of $75 million and a revolving credit facility
of $45 million. A portion of the proceeds of the term loan was used to repay $50
million of bank loans of certain Costa Rican farm subsidiaries. Interest on
amounts outstanding under the facility was based on the bank corporate base rate
plus 5%, subject to a minimum of 14% per annum. An annual facility fee of 2% of
the total credit facility was also payable. At December 31, 2001, the amount
outstanding under the term loan was $70 million, and $4 million of the
availability under the revolving credit facility had been used to issue letters
of credit.
In March 2002, this CBI facility was increased to $130 million, comprised
of a $70 million term loan and a revolving credit facility of $60 million.
Interest on this amended facility is based on the prevailing LIBOR rates plus
3.75% or the bank corporate base rate plus 1% (at CBI's option), subject to a
minimum annual rate of 6%. The annual facility fee has been eliminated, and the
Company paid an amendment fee of 5% of the total credit facility. Substantially
all U.S. assets of CBI (except for those of subsidiaries, such as Chiquita
Processed Foods, L.L.C. ("CPF"), with their own credit facilities) are pledged
to secure the CBI credit facility. The CBI credit facility is also secured by
liens on CBI's trademarks and pledges of stock or guarantees by various
subsidiaries worldwide. The facility contains covenants that limit the
distribution of cash from CBI to CBII, the parent holding company, to amounts
necessary to pay interest on the New Notes (provided CBI meets certain liquidity
tests), income taxes and permitted CBII overhead. The facility also has
covenants that require CBI to maintain certain financial ratios related to debt
coverage and income, and that limit capital expenditures and investments. At
March 15, 2002, $70 million of the term loan was outstanding, $27 million of
borrowings were outstanding under the revolving credit facility and $4 million
of the availability under the revolving credit facility had also been used to
issue letters of credit.
CPF, the Company's vegetable canning subsidiary, has a $200 million senior
secured credit facility. The facility includes a $135 million revolving credit
line and a $65 million facility for term loans. At December 31, 2001, $72
million of borrowings were outstanding under the revolving credit line, of which
$35 million is classified as long-term debt, and a $36 million term loan was
outstanding. Interest under the facility is based on, at the Company's option,
either the bank corporate base rate or prevailing LIBOR rates. An annual fee of
up to 1/2% is payable on the unused portion of the facility. This facility
contains covenants that limit capital expenditures and the payment of dividends
by CPF and require CPF to maintain certain financial ratios related to net worth
and debt coverage. At March 15, 2002, payment of dividends by CPF was limited to
$6 million under the terms of this facility.
The Company maintains various other lines of credit with domestic and
foreign banks for borrowing funds on a short-term basis. The average interest
rates for all short-term notes and loans payable outstanding were 4.9% and 9.3%
at December 31, 2001 and 2000, respectively.
Cash payments relating to interest expense were $43 million in 2001, $124
million in 2000 and $105 million in 1999.
25
Note 10 - Pension and Severance Benefits
--------------------------------------------------------------------------------
The Company and its subsidiaries have several defined benefit and contribution
pension plans covering domestic and foreign employees and have severance plans
covering Central and South American employees. Pension plans covering eligible
salaried employees and Central and South American severance plans for all
employees call for benefits to be based upon years of service and compensation
rates.
Pension and severance expense consists of the following:
Foreign Plans
-------------------------------
(In thousands) 2001 2000 1999
------------------------------------------------------------------------------
Defined benefit and severance plans:
Service cost $ 4,310 $ 3,552 $ 3,768
Interest on projected benefit obligation 4,543 4,585 5,122
Expected return on plan assets (186) (162) (139)
Recognized actuarial loss 1,099 1,057 368
Amortization of prior service cost
and transition obligation 571 525 525
------- -------- --------
10,337 9,557 9,644
Settlement loss 2,000 1,000 --
------- -------- --------
12,337 10,557 9,644
Defined contribution plans 533 561 604
------- -------- --------
Total pension and severance expense $12,870 $ 11,118 $ 10,248
======= ======== ========
Domestic Plans
-------------------------------
(In thousands) 2001 2000 1999
------------------------------------------------------------------------------
Defined benefit and severance plans:
Service cost $ 554 $ 1,357 $ 1,084
Interest on projected benefit obligation 3,028 3,511 3,034
Expected return on plan assets (3,310) (3,655) (3,424)
Recognized actuarial loss 577 567 317
Amortization of prior service cost
and transition obligation 93 131 109
------- -------- --------
942 1,911 1,120
Curtailment loss (gain) 228 (2,021) --
------- -------- --------
1,170 (110) 1,120
Defined contribution plans 5,051 4,675 4,786
------- -------- --------
Total pension and severance expense $ 6,221 $ 4,565 $ 5,906
======= ======== ========
The Company's pension and severance benefit obligations relate primarily to
Central and South American benefits which, in accordance with local government
regulations, are generally not funded until benefits are paid. Domestic pension
plans are funded in accordance with the requirements of the Employee Retirement
Income Security Act. Plan assets consist primarily of corporate debt securities,
U.S. Government and agency obligations and collective trust funds.
26
Financial information with respect to the Company's foreign and domestic
defined benefit pension and severance plans is as follows:
[Download Table]
Foreign Plans Domestic Plans
-------------------- --------------------
(In thousands) 2001 2000 2001 2000
--------------------------------------------------------- --------------------
Fair value of plan assets at
beginning of year $ 4,208 $ 3,598 $ 49,667 $ 45,448
Actual return on plan assets 139 87 (2,608) 4,441
Employer contributions 11,930 13,513 2,822 2,453
Benefits paid (11,979) (12,990) (3,039) (2,828)
Other -- -- 136 153
-------- -------- -------- --------
Fair value of plan assets at
end of year $ 4,298 $ 4,208 $ 46,978 $ 49,667
======== ======== ======== ========
Projected benefit obligation at
beginning of year $ 49,259 $ 48,024 $ 45,287 $ 43,248
Service and interest cost 8,853 8,137 3,582 4,868
Actuarial loss 3,570 6,088 4,321 1,881
Benefits paid (11,979) (12,990) (3,039) (2,828)
Curtailment -- -- -- (2,021)
Other -- -- 5 139
-------- -------- -------- --------
Projected benefit obligation
at end of year $ 49,703 $ 49,259 $ 50,156 $ 45,287
======== ======== ======== ========
Plan assets in excess of (less
than) projected benefit
obligation $(45,405) $(45,051) $ (3,178) $ 4,380
Unrecognized actuarial loss 10,632 10,210 13,611 3,910
Unrecognized prior service cost 770 923 592 385
Unrecognized transition obligation
(asset) (570) (200) 272 360
Adjustment required to recognize
minimum pension and severance
liability (1,924) (1,419) (14,088) (5,806)
-------- -------- -------- --------
(36,497) (35,537) (2,791) 3,229
Prepaid pension asset -- -- 7,834 9,132
-------- -------- -------- --------
Accrued pension and severance
liability $(36,497) $(35,537) $(10,625) $ (5,903)
======== ======== ======== ========
Included in the table above are plans whose benefit obligation exceeds plan
assets. The accumulated benefit obligation, projected benefit obligation and
fair value of assets of plans for which benefits exceed assets were $84 million,
$96 million and $43 million, respectively, as of December 31, 2001 and $62
million, $76 million and $27 million, respectively, as of December 31, 2000.
The projected benefit obligations of Central and South American pension and
severance plans in 2001 and 2000 were determined using discount rates of
approximately 9 1/4%. The assumed long-term rate of compensation increase was 6%
for both years. The projected benefit obligations of the Company's domestic
pension plans were determined using a discount rate of approximately 7% in 2001
and 7 3/4% in 2000. The assumed long-term rate of compensation increase was 6%
for both years and the assumed long-term rate of return on plan assets was
approximately 8% for both years.
27
Note 11 - Stock Options
--------------------------------------------------------------------------------
In accordance with the Company's Plan of Reorganization (see Note 2), on March
19, 2002, the Company has adopted a new stock option plan, under which the
Company may issue up to an aggregate of 5.9 million shares of New Common Stock
as stock options, stock awards and performance awards. The options may be
granted to directors, officers and other key employees to purchase shares of New
Common Stock at fair market value at the date of the grant. The options will be
exercisable for a period not in excess of 10 years.
In accordance with the Plan of Reorganization, the Company's stock option
and incentive plans existing at December 31, 2001 and all options and awards
issued thereunder (the "Old Options") have been cancelled.
Under the stock option and incentive plans existing at December 31, 2001,
the Company was authorized to grant up to an aggregate of 25 million shares of
the Company's then outstanding common stock (the "Old Common Stock") in the form
of stock options, stock appreciation rights and stock awards. Old Options were
granted to directors, officers and other key employees to purchase shares of the
Company's Old Common Stock at the fair market value at the date of grant. The
Old Options generally vested over ten years and were exercisable over a period
not in excess of 20 years.
A summary of the activity and related information for the Company's Old
Options follows:
[Enlarge/Download Table]
2001 2000 1999
------------------ ------------------ ------------------
Weighted Weighted Weighted
average average average
(In thousands, except exercise exercise exercise
per share amounts) Shares price Shares price Shares price
------------------------------------------------------------ ------------------ ------------------
Under option at
beginning of year 12,608 $10.31 10,997 $12.34 9,479 $13.32
Options granted 72 1.76 3,679 4.45 2,875 8.90
Options exercised -- -- -- -- (6) 10.31
Options canceled or expired (2,107) 10.39 (2,068) 10.67 (1,351) 11.92
------ ------ ------ ------ ------ ------
Under option at end of year 10,573 $10.24 12,608 $10.31 10,997 $12.34
====== ====== ====== ====== ====== ======
Options exercisable at end of year 5,038 $11.98 5,516 $12.15 4,926 $12.71
====== ====== ====== ====== ====== ======
Shares available for future grants 9,997 7,918 9,482
====== ====== ======
Old Options outstanding as of December 31, 2001 had a weighted average
remaining contractual life of 16 years at December 31, 2001 and had exercise
prices ranging from $1.06 to $34.44. The following table summarizes further
information on the range of exercise prices:
[Enlarge/Download Table]
Options
Options Outstanding Exercisable
----------------------------------- -------------------
Weighted Weighted Weighted
average average average
(In thousands, except exercise remaining exercise
per share amounts) Shares price life Shares price
--------------------------------------------------------------------- -------------------
Range of Exercise Prices
$ 1.06 - $ 5.00 3,087 $ 4.39 18 years 682 $ 4.43
5.00 - 10.00 1,532 9.17 17 years 457 9.19
10.00 - 15.00 5,222 12.75 14 years 3,393 12.55
15.00 - 34.44 732 19.25 13 years 506 20.86
28
The estimated weighted average fair value per option share granted was
$0.38 for 2001, $2.65 for 2000 and $3.66 for 1999 using a Black-Scholes option
pricing model based on market prices and the following assumptions at the date
of option grant: weighted average risk-free interest rates of 5.1% for 2001,
6.6% for 2000 and 5.0% for 1999; dividend yield of 0% for 2001 and 2000 and 1.5%
for 1999; volatility factor for the Company's common stock price of 49% for
2001, 43% for 2000 and 37% for 1999; and a weighted average expected life of one
year for 2001 and eight years for 2000 and 1999 for options not forfeited. The
estimated pro forma compensation expense based on these option fair values would
be approximately $4 million ($.05 per share) in 2001, $4 million ($.07 per
share) in 2000, and $5 million ($.07 per share) in 1999. Because Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," applies only to options granted after 1994 and because all
Old Options existing at December 31, 2001 have been cancelled, the effect of
applying this standard as discussed above is not necessarily indicative of the
effect in future years.
Note 12 - Shareholders' Equity
--------------------------------------------------------------------------------
In accordance with the Company's Plan of Reorganization (see Note 2), all Old
Common Stock and all preferred and preference stock (the "Old Preferred Stock")
of the Company existing at December 31, 2001 has been cancelled. In accordance
with the Plan, 150 million shares of New Common Stock are authorized, including
39.2 million shares which are being issued on the Plan effective date. In
addition, the Company is issuing warrants representing the right to purchase
13.3 million shares of the Company's New Common Stock. The warrants have an
exercise price of $19.23 per share and will be exercisable through March 19,
2009. Under the Plan, 20 million shares are reserved for the following purposes:
Shares subject to delayed delivery agreement 0.8 million
Issuance under new stock option plan (see Note 11) 5.9 million
Issuance for exercise of warrants 13.3 million
At December 31, 2001, 200 million shares of Old Common Stock were
authorized, including unissued shares reserved for the following purposes:
Issuance under stock option and employee
benefit plans 23.0 million
Conversion of Old Preferred Stock 14.5 million
The Company discontinued payment of dividends on Old Common Stock for all of
2000 and 2001.
At December 31, 2001, three series of Old Preferred Stock were outstanding,
each series having the number of shares outstanding as set forth in the table
below. Each share of the outstanding series of Old Preferred Stock had a
liquidation preference of $50.00, and had an annual dividend rate and was
convertible at the holder's option into a number of shares of Old Common Stock
as follows:
Annual Holders'
Shares dividend conversion
outstanding rate rate
------------------------------------------------------------------------------
$2.875 Non-Voting Cumulative
Preferred Stock, Series A 1,653,930 $2.875 2.6316
$3.75 Convertible Preferred
Stock, Series B 1,168,700 3.750 3.3333
$2.50 Convertible Preference
Stock, Series C 75,650 2.500 2.9220
------------------------------------------------------------------------------
The Series A and Series B shares were non-voting. The Series C shares had
one vote per share, voting with the common stock. If the Company failed to pay
quarterly dividends on Series A, B and C shares for six quarters, the holders of
such shares, voting as a class, had the right to elect two directors in
addition to the regular directors. In the fourth quarter of 2000, the Company
discontinued payment of dividends on its Old Preferred
29
Stock, and accordingly, the Company had five quarters of accumulated and unpaid
dividends at December 31, 2001. The following table sets forth the accumulated
dividend arrearage on Old Preferred Stock at December 31, 2001:
Total arrearage
--------------------------------------------------------------------------------
$2.875 Non-Voting Cumulative Preferred $5.9 million
Stock, Series A
$3.75 Convertible Preferred Stock, 5.5 million
Series B
$2.50 Convertible Preference Stock, 0.2 million
Series C
Pursuant to the Plan of Reorganization, all rights with respect to such
dividend arrearages have been cancelled.
At December 31, 2001, each Series A share was convertible at the Company's
option into a number of shares of common stock (not exceeding 10 shares) having
a total market value of $50.00.
At December 31, 2001, each Series C share was convertible at the Company's
option into a number of shares of common stock (not exceeding 10 shares) having
a total market value of $50.75.
The accumulated other comprehensive loss balance of $43 million at December
31, 2001 includes cumulative translation adjustments of $22 million, minimum
pension liability adjustments of $15 million, and unrealized losses on
derivatives of $6 million.
Note 13 - Income Taxes
-------------------------------------------------------------------------------
Income taxes consist of the following:
(In thousands) U.S. Federal U.S. State Foreign Total
-------------------------------------------------------------------------------
2001
Current tax expense $ 840 $ 708 $4,269 $5,817
Deferred tax expense -- 1,183 -- 1,183
------ ------ ------ ------
$ 840 $1,891 $4,269 $7,000
====== ====== ====== ======
2000
Current tax expense $ 175 $1,199 $5,108 $6,482
Deferred tax expense -- -- 518 518
------ ------ ------ ------
$ 175 $1,199 $5,626 $7,000
====== ====== ====== ======
1999
Current tax expense $ 235 $1,161 $6,144 $7,540
Deferred tax expense -- -- 760 760
------ ------ ------ ------
$ 235 $1,161 $6,904 $8,300
====== ====== ====== ======
Income tax expense differs from income taxes computed at the U.S. federal
statutory rate for the following reasons:
(In thousands) 2001 2000 1999
-------------------------------------------------------------------------------
Income tax benefit computed
at U.S. federal statutory rate $(39,119) $(30,753) $(17,529)
State income taxes, net of
federal benefit 1,477 779 755
Foreign tax differential 41,684 35,958 25,056
Goodwill amortization 1,656 1,678 1,651
Other 1,302 (662) (1,633)
-------- -------- --------
Income tax expense $ 7,000 $ 7,000 $ 8,300
======== ======== ========
30
Losses before income taxes consist of the following:
(In thousands) 2001 2000 1999
------------------------------------------------------------------------
Subject to tax in:
United States $ 149,923 $ (3,829) $ 6,230
Foreign jurisdictions (81,198) (84,038) (56,312)
Elimination of gain on transfer
of trademark rights from U.S.
subsidiary to foreign subsidiary (180,493) -- --
--------- -------- --------
$(111,768) $(87,867) $(50,082)
========= ======== ========
The components of deferred income taxes included on the balance sheet are
as follows:
December 31,
---------------------
(In thousands) 2001 2000
------------------------------------------------------------
Deferred tax benefits
Employee benefits $ 13,047 $ 17,123
Accrued expenses 22,705 21,991
Other 10,354 11,430
--------- --------
46,106 50,544
--------- --------
Deferred tax liabilities
Depreciation and amortization (22,571) (17,578)
Growing crops (3,828) (16,942)
Other (8,353) (8,860)
--------- --------
(34,752) (43,380)
--------- --------
11,354 7,164
Valuation allowance (12,537) (7,164)
--------- --------
Net deferred tax liability $ (1,183) $ --
========= ========
Net deferred taxes do not reflect the benefit that would be available to
the Company from the use of its U.S. operating loss carryforwards ("NOLs") of
$104 million at December 31, 2001 ($251 million at December 31, 2000) and
alternative minimum tax credits of $9 million at December 31, 2001 ($6 million
at December 31, 2000). The decrease in the NOLs resulted primarily from use of
NOLs to offset the taxable transfer of certain trademark rights from a U.S.
subsidiary to a foreign subsidiary during 2001. The remaining operating loss
carryforwards expire from 2011 through 2020, but may be reduced as of January 1,
2003 to the extent of gain on the parent company debt extinguishment as measured
for tax purposes by post-emergence stock trading values following completion of
the Plan of Reorganization (see Note 2). Undistributed earnings of foreign
subsidiaries which have been, or are intended to be, permanently reinvested in
operating assets, if remitted, are expected to result in little or no tax by
operation of relevant statutes and the carryforward attributes described above.
Cash payments for income taxes were $4 million in 2001, $6 million in 2000 and
$9 million in 1999. Additionally, the Company received $9 million of refunds in
2001 and $22 million of refunds in 2000 related to audits of the Company's
federal income tax returns for 1989 through 1991.
31
Note 14 - Segment Information
--------------------------------------------------------------------------------
The Company conducts business in two business segments, organized primarily on a
product line basis, with each segment offering a variety of different but
related products. The Fresh Produce segment includes the sourcing,
transportation, distribution and marketing of Chiquita bananas and a wide
variety of other fresh fruits and vegetables. The Processed Foods segment
consists of the production, distribution and marketing of the Company's
private-label and branded canned vegetables, processed bananas and edible oil
based consumer products. The Company evaluates the performance of its business
segments based on operating income before unusual items. Intercompany
transactions between segments are eliminated. Financial information for each
segment follows:
Fresh Processed
Produce Foods Consolidated
-------------------------------------------------------------------------
2001
Net sales $ 1,792,064 $450,197 $ 2,242,261
Segment operating income (1) 55,071 8,709 63,780
Depreciation and amortization 73,080 17,970 91,050
Income (loss) from equity
investments (6,290) 1,953 (4,337)
Total assets 1,806,736 455,756 2,262,492
Net operating assets (2) 1,385,957 370,796 1,756,753
Investment in equity affiliates 107,535 17,534 125,069
Expenditures for long-lived
assets 31,921 14,559 46,480
2000
Net sales $ 1,787,334 $466,436 $ 2,253,770
Segment operating income (1) 16,886 30,540 47,426
Depreciation and amortization 79,445 18,060 97,505
Income (loss) from equity
investments (10,346) 983 (9,363)
Total assets 1,895,287 521,503 2,416,790
Net operating assets (2) 1,400,400 435,183 1,835,583
Investment in equity affiliates 99,738 19,647 119,385
Expenditures for long-lived
assets 53,246 14,442 67,688
1999
Net sales $ 2,044,788 $511,011 $ 2,555,799
Segment operating income (1) 23,129 27,909 51,038
Depreciation and amortization 78,363 18,941 97,304
Income from equity investments 4,161 1,246 5,407
Total assets 2,079,903 516,224 2,596,127
Net operating assets (2) 1,533,397 430,781 1,964,178
Investment in equity affiliates 103,527 17,306 120,833
Expenditures for long-lived
assets 148,490 42,207 190,697
(1) Segment operating income excludes the following unusual items: in 2001, $28
million of charges primarily associated with the closure of farms, a third
quarter labor strike and related labor issues at the Company's Armuelles,
Panama banana producing division; in 2000, $35 million of charges primarily
associated with the write-downs of production and sourcing assets in the
Fresh Produce operations, including the curtailment in June 2000 of
additional Hurricane Mitch farm rehabilitation. These charges were offset
by a $15 million gain on the sale of California Day-Fresh Foods, Inc., a
processor and distributor of natural fresh fruit and vegetable juices; in
1999, $9 million of charges resulting from a workforce reduction program.
(2) Net operating assets consist of total assets less (i) cash and equivalents
and (ii) total liabilities other than debt and liabilities subject to
compromise.
32
Financial information by geographic area is as follows:
(In thousands) 2001 2000 1999
---------------------------------------------------------------------------
Net sales
United States $1,426,157 $1,452,481 $1,552,320
Central and South America 698 9,764 8,124
Europe and other international 815,406 791,525 995,355
---------- ---------- ----------
$2,242,261 $2,253,770 $2,555,799
========== ========== ==========
Long-lived assets
United States $ 362,638 $ 401,973 $ 427,542
Central and South America 483,442 514,889 532,504
Europe and other international 247,767 230,483 285,082
Shipping operations 396,290 422,932 448,132
---------- ---------- ----------
$1,490,137 $1,570,277 $1,693,260
========== ========== ==========
The Company's products are sold throughout the world and its principal
production and processing operations are conducted in Central and South America
and the United States. Chiquita's earnings are heavily dependent upon products
grown and purchased in Central and South America. These activities, a
significant factor in the economies of the countries where Chiquita produces
bananas and related products, are subject to the risks that are inherent in
operating in such foreign countries, including government regulation, currency
restrictions and other restraints, risk of expropriation and burdensome taxes.
Certain of these operations are substantially dependent upon leases and other
agreements with these governments.
The Company is also subject to a variety of government regulations in
certain countries where it markets bananas and other products, including import
quotas and tariffs, currency exchange controls and taxes.
Note 15 - Litigation
--------------------------------------------------------------------------------
A number of legal actions are pending against the Company. Based on information
currently available to the Company and advice of counsel, management does not
believe such litigation will, individually or in the aggregate, have a material
adverse effect on the financial statements of the Company.
Note 16 - Acquisitions and Divestitures
--------------------------------------------------------------------------------
In June 2000, the Company's Australian fresh produce subsidiary, Chiquita Brands
South Pacific Limited, issued additional shares in conjunction with two business
acquisitions. The Company's voting interest is now below 50% and, as a result,
the investment is no longer consolidated but is accounted for under the equity
method. Also in June 2000, the Company sold California Day-Fresh Foods, Inc.,
which produced and marketed natural fresh fruit and vegetable juices in the
United States. Proceeds consisted of $16 million in cash and $9 million in
short-term notes which were collected in October 2000.
In April 1999, CPF acquired certain vegetable canning assets of Agripac,
Inc. The purchase price of $20 million was funded with borrowings under CPF's
revolving credit facility.
33
Note 17 - Quarterly Financial Data (Unaudited)
--------------------------------------------------------------------------------
The following quarterly financial data are unaudited, but in the opinion of
management include all necessary adjustments for a fair presentation of the
interim results, which are subject to significant seasonal variations.
2001
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
--------------------------------------------------------------------------
Net sales $ 577,249 $ 595,410 $ 508,739 $ 560,863
Cost of sales (462,384) (488,449) (435,641) (503,576)
Operating income (loss) 38,279 24,349 (3,752) (22,966)
Net income (loss) 4,128 (10,988) (38,223) (73,685)
Basic earnings (loss)
per share .01 (.19) (.56) (.98)
Diluted earnings (loss)
per share .01 (.19) (.56) (.98)
Common stock market price
High 3.06 1.78 1.56 0.86
Low 1.01 0.99 0.82 0.42
2000
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
--------------------------------------------------------------------------
Net sales $ 658,053 $ 601,465 $ 465,773 $ 528,479
Cost of sales (498,005) (462,283) (408,771) (494,759)
Operating income (loss) 67,788 44,045 (23,786) (60,681)
Net income (loss) 34,990 12,754 (53,713) (88,898)
Basic earnings (loss)
per share .46 .13 (.87) (1.40)
Diluted earnings (loss)
per share .43 .13 (.87) (1.40)
Common stock market price
High 5.63 5.19 3.88 3.19
Low 4.00 3.63 3.00 0.88
Operating losses in the third and fourth quarters of 2001 include charges of $8
million and $20 million, respectively, primarily associated with the closure of
farms, a third quarter labor strike and related labor issues at the Company's
Armuelles, Panama banana producing division. In addition, parent company debt
restructuring costs of $1 million in the first quarter, $3 million in each of
the second and third quarters and $27 million in the fourth quarter are included
in net income (loss).
Operating income in the second quarter of 2000 includes charges and write-offs
relating primarily to banana production assets. This includes the curtailment
announced in June 2000 of additional Hurricane Mitch farm rehabilitation. These
charges were offset by a $15 million gain on the sale of California Day-Fresh
Foods, Inc., a processor and distributor of natural fresh fruit and vegetable
juices. Operating loss in the fourth quarter of 2000 includes $20 million of
charges and write-downs of production and sourcing assets in the Company's Fresh
Produce operations.
Per share results include the dilutive effect of assumed conversion of preferred
and preference stock, convertible debentures and options into common stock
during the period presented. The effects of assumed conversions are determined
independently for each respective quarter and year and may not be dilutive
during every period due to variations in operating results. Therefore, the sum
of quarterly per share results will not necessarily equal the per share results
for the full year.
34
Chiquita Brands International, Inc.
SELECTED FINANCIAL DATA
[Enlarge/Download Table]
(In thousands, except
per share amounts) 2001 2000 1999 1998 1997
-------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Working capital $ 384,992 $ 233,643 $ 414,445 $ 308,805 $ 300,348
Capital expenditures 29,690 54,632 152,080 118,250 76,248
Total assets 2,262,492 2,416,790 2,596,127 2,509,133 2,401,613
Capitalization
Short-term debt* 109,750 289,889 129,754 169,279 152,564
Long-term debt* 306,017 1,060,075 1,227,001 1,002,606 961,972
Liabilities subject to
compromise* 962,820 -- -- -- --
Shareholders' equity 448,594 582,543 705,286 793,980 780,086
OPERATIONS
Net sales $ 2,242,261 $ 2,253,770 $ 2,555,799 $ 2,720,361 $ 2,433,726
Operating income* 35,910 27,366 42,038 78,609 100,166
Net income (loss)* (118,768) (94,867) (58,382) (18,412) 343
SHARE DATA
Shares used to calculate diluted
loss per common share 73,347 66,498 65,768 64,663 57,025
Diluted loss per common share: $ (1.78) $ (1.68) $ (1.15) $ (.55) $ (.29)
Dividends per common share -- -- .20 .20 .20
Market price per common share:
High 3.06 5.63 11.75 16.00 18.00
Low 0.42 0.88 3.38 9.50 12.75
End of year 0.64 1.00 4.75 9.56 16.31
* See Management's Discussion and Analysis of Financial Condition and Results
of Operations and Notes to Consolidated Financial Statements for a
discussion of parent company debt restructuring and for a discussion of
significant items included in operating income in 2001, 2000 and 1999.
35
Dates Referenced Herein and Documents Incorporated by Reference
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