EX-13 5 cqb10k-exhibit13.htm EXHIBIT 13 CQB 10K - Exhibit 13


EXHIBIT 13
MANAGEMENT'S RESPONSIBILITY FOR AND FINANCIAL REPORTING
The financial statements and related financial information presented in this Annual Report are the responsibility of Chiquita Brands International, Inc. management, who believe that they present fairly our consolidated financial position, results of operations, and cash flows in accordance with generally accepted accounting principles in the United States.
Chiquita’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our system of internal control over financial reporting, based on criteria established in Internal Control-Integrated Framwork issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), is designed under the supervision of our Chief Executive Officer and our Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial statements for external purposes. Our internal control over financial reporting includes those policies and procedures that:
a)
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets:
b)
Provide reasonable assurance that to ensure that material information relating to us is made known to our representatives who prepare and are responsible for our financial statements and periodic reports filed with the Securities and Exchange Commission ("SEC");
c)
Provide reasonable assurance that transactions are recorded in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
d)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
The effectiveness of these disclosure controls and procedures is reviewed quarterly by management, including our Chief Executive Officer and Chief Financial Officer. Management modifies these disclosure controls and procedures as a result of the quarterly reviews, when appropriate, or as changes occur in business conditions, operations or reporting requirements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the COSO criteria, our management concluded that our internal control over financial reporting was effective as of December 31, 2014.

 
 
 
 
 
/s/ Brian Kocher
 
/s/ Darcilo Santos
 
/s/ Joseph B. Johnson
President and Chief Executive Officer
 
Chief Financial Officer
 
Chief Accounting Officer

1



MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Termination of Combination With Fyffes and Subsequent Acquisition by Cutrale-Safra
In 2014, we incurred $51 million of transaction costs as a result of two competing transactions. On March 10, 2014, we announced our intention to combine with Fyffes plc ("Fyffes") and entered into a transaction agreement for the proposed combination, the terms of which were amended on September 25, 2014. A special meeting of the shareholders was held on October 24, 2014 in which the shareholders did not approve the amended transaction agreement with Fyffes; therefore Fyffes delivered a notice of termination of the transaction agreement. In connection with the terminated Fyffes strategic combination, we incurred legal, advisory and other expenses totaling $37 million in 2014, including the payment of a $23 million termination fee to Fyffes. This transaction and related costs are more fully described in Note 5 to the Consolidated Financial Statements.
On October 26, 2014, Chiquita entered into an Agreement and Plan of Merger ("Merger Agreement") with Cavendish Global Limited ("Parent"), a private limited company incorporated under the laws of England and Wales and an affiliate of the Cutrale and Safra Groups. The merger was consummated on January 6, 2015, as described in Note 1 to the Consolidated Financial Statements, with all of Chiquita's outstanding shares being purchased for $14.50 per share and resulting in Cavendish US Corporation, a wholly-owned, indirect subsidiary of Parent, owning 100% of Chiquita. In connection with the transaction, we incurred $14 million of expense in 2014 for legal, advisory and other services and an additional $44 million in January 2015 for the immediate vesting of stock compensation due to the change in control, severance, legal, advisory and other services.
Under new ownership, we commenced refinancing and restructuring activities in January and February 2015, which are described more fully in Note 1 to the Consolidated Financial Statements. These 2015 activities include:
Redeeming $224 million principal amount of 7.875% Senior Notes due 2021 funded by equity contributions and related party loans. After the redemptions, $191 million principal amount of these Notes remain outstanding.
Repurchasing $151 million principal amount of the Convertible Senior Notes due 2016 funded by related party loans. After the repurchase, $49 million principal amount of these Convertible Notes remain outstanding.
Replacing our existing Asset Based Lending Facility with a new 5-year, $150 million Asset Based Lending Facility.
Initiating restructuring activities designed to more closely align corporate services with operations and the strategies of new management, and announcing the closure of our headquarters in Charlotte, North Carolina. Total costs associated with these activities are expected to be in the range of $25 million to $40 million.
Initiating a reduction in force affecting approximately 300 employees in Latin America and resulting in less than $1 million of additional expense, but $5 million in severance payments.
Operations Overview
After adjusting for the $51 million of transaction costs described above, our overall 2014 operating income improved from 2013. This improvement was led by our Salads and Healthy Snacks segment, which showed a $24 million improvement from 2013. Our new Midwest salad plant continued to meet its performance targets in 2014, more than recovering the $18 million in transition costs that were incurred in 2013. Our Salads and Healthy Snacks segment results also reflected packaging efficiency and pricing actions that took effect in July 2014, resulting in increased retail value-added salad pricing inclusive of product mix; these changes returned the segment's products to an appropriate level of profitability and allowed the segment to recover from unusually harsh winter weather in the first quarter of 2014 that affected logistics and demand for our products, particularly in foodservice.
In our Bananas segment, our 2014 operating income also improved from 2013. Overall banana volume was lower, though volume increased in North America due to contract wins and remained flat in Core Europe (defined below), with a significant decrease in the Mediterranean and Middle Eastern markets. The new contract volume in North America included modest pricing gains. In Core Europe, the Mediterranean and Middle Eastern markets, pricing is mainly based on weekly price quotes. In Core Europe, pricing was down slightly on a U.S. dollar basis and higher in the Mediterranean and Middle Eastern markets as a result of lower volume due to tight supply. Our actions offset expected costs increases in labor, shipping and paper, and also increased costs due to lower productivity on owned and associate producer farms due to unfavorable weather in our growing regions, particularly in the first quarter of 2014.
We have taken a number of steps to reduce risk and improve operating efficiencies in our core businesses as we executed our return to the core strategy. We exited several non-core healthy snacking businesses that generated operating losses and

2



distracted management from its core businesses of bananas and salads, and we redirected that investment back to the core. In our banana business, we increased the investment in our owned banana farms, which included replanting and the addition of irrigation to both increase productivity and reduce the effect of unusual weather patterns. We expanded the area of controlled banana production with the purchase of approximately 450 hectares of production in Honduras in the first quarter of 2014. We have improved infrastructure in certain Latin American port operations to accommodate new shipping rotations and partnerships that we expect to create efficiencies in our value chain, which began in the fourth quarter of 2014. We have also taken a number of steps to reduce overhead expenses, which has resulted in meaningful reductions in our Corporate expenses, excluding the transaction-related costs described above.
Several other factors also affect year-over-year comparisons
Relocation and restructuring charges of $35 million in 2012. In 2012 we relocated our headquarters from Cincinnati to Charlotte and consolidated management and administrative functions. We also changed our leadership and restructured our business to become a branded commodity operator focused on bananas and salads.
Goodwill and trademark impairment charges of $180 million in 2012 related to the Fresh Express salads business. Goodwill and trademarks are reviewed for impairment each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. These impairment charges were the result of lower operating performance of the retail value-added salad business, lower retail salad volumes, lower perceived valuation multiples in the packaged salad industry and continuing demand for private label versus branded products.
Impairment and other charges of $32 million in 2012 to fully impair our former equity-method investment and related assets and to record estimates of probable cash obligations to the Danone Chiquita SAS ("Danone JV"), which sold Chiquita-branded fruit smoothies in Europe. In 2013, we fully paid our obligations without additional expense and exited the Danone JV.
We exited our North American deciduous product lines after the end of the California grape season at the end of 2012. These product lines represented approximately $40 million of annualized net sales and an insignificant negative contribution to our operating income on an annual basis. At the end of the second quarter of 2013, we sold a European healthy snacking business, which represented approximately $12 million of net sales and an insignificant contribution to our operating income on an annual basis.
Income taxes included expense of $130 million in 2012 to establish valuation allowances against U.S. deferred tax assets.
We operate in a highly competitive industry and are subject to significant risks beyond our immediate control. The major risks facing our business include: the customary risks experienced by global food companies, such as prices for commodity and other inputs, currency exchange rate fluctuations, industry and competitive conditions (all of which may be more unpredictable in light of continuing uncertainty in the global economic environment), government regulations, food safety issues and product recalls affecting us or the industry, labor relations, taxes, political instability and terrorism; challenges in implementing leadership, organizational, strategic and other changes as a result of being acquired in January 2015; unusual weather events, conditions or crop risks; continued ability to access the capital and credit markets on commercially reasonable terms and comply with the terms of our debt instruments; access to and cost of financing; and the outcome of pending litigation and governmental investigations involving us, as well as the legal fees and other costs incurred in connection with such items. We are a defendant in several pending legal proceedings that are described in Note 21 to the Consolidated Financial Statements, where unfavorable outcomes could be material to our results of operations or financial position. We believe that most of our products are well-positioned to continue to withstand the risks of the current global economic environment because they are healthy and convenient staple food items that provide value to consumers. See "Item 1A – Risk Factors" in the Annual Report on Form 10-K for a further description of other risks.
Operations
We report the following three business segments:
Bananas: Includes the sourcing (purchase and production), transportation, marketing and distribution of bananas.
Salads and Healthy Snacks: Includes ready-to-eat, packaged salads, referred to in the industry as "value-added salads" and other value-added products, such as healthy snacking items, fresh vegetable and fruit ingredients used in food service; processed fruit ingredients; and our former equity-method investment in Danone Chiquita Fruits, which sold Chiquita-branded fruit smoothies in Europe (see Note 9).
Other Produce: Includes the sourcing, marketing and distribution of whole fresh produce other than bananas.

3



Certain corporate expenses are not allocated to the reportable segments and are included in "Corporate costs," including costs related to the relocation of our headquarters and restructuring activities described in Note 4 to the Consolidated Financial Statements. Inter-segment transactions are eliminated. Additional segment information can be found in Note 20 to the Consolidated Financial Statements. See Note 2 to the Consolidated Financial Statements for information related to Discontinued Operations.
Financial information for each segment follows:
(In millions)
2014
 
2013
 
2012
 
Better (Worse)
Net sales:
 
 
 
 
 
 
2014 vs. 2013
 
2013 vs. 2012
Bananas
$
2,021

 
$
1,970

 
$
1,985

 
2.6
 %
 
(0.8
)%
Salads and Healthy Snacks
943

 
967

 
953

 
(2.5
)%
 
1.5
 %
Other Produce
127

 
121

 
140

 
5.0
 %
 
(13.6
)%
Total net sales
$
3,090

 
$
3,057

 
$
3,078

 
1.1
 %
 
(0.7
)%
 
 
 
 
 
 
 
 
 
 
Cost of sales1:
 
 
 
 
 
 
 
 
 
Bananas
$
1,767

 
$
1,715

 
$
1,748

 
(3.0
)%

1.9
 %
Salads and Healthy Snacks
824

 
861

 
833

 
4.3
 %

(3.4
)%
Other Produce
134

 
123

 
150

 
(8.9
)%

18.0
 %
Corporate costs
11

 
10

 
11

 
(10.0
)%

9.1
 %
Total cost of sales
$
2,736

 
$
2,708

 
$
2,743

 
(1.0
)%

1.3
 %
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
Bananas
$
114

 
$
112

 
$
77

 
1.8
 %

45.5
 %
Salads and Healthy Snacks2
16

 
(8
)
 
(218
)
 
300.0
 %

96.3
 %
Other Produce
(5
)
 
(2
)
 
(18
)
 
(150.0
)%

88.9
 %
Corporate costs3
(97
)
 
(52
)
 
(95
)
 
(86.5
)%

45.3
 %
Total operating income
$
27

 
$
50

 
$
(254
)
 
(46.0
)%

119.7
 %
Tables may not total or recalculate due to rounding.
1 
Cost of sales in the Bananas and Salads and Healthy Snacks segments in 2013 has been revised by $3 million. Operating income by segment has not changed for these periods.
2 
2012 results include impairment charges related to goodwill, trademarks and the Danone JV equity-method investment, which are further discussed below.
3 
Corporate costs include $51 million of transaction-related costs in 2014 and $35 million of relocation and restructuring costs in 2012.
2014 vs. 2013
Net Sales. Net sales increased on a consolidated basis by 1.1%. Banana segment sales were 2.6% higher primarily as a result of higher average pricing in North America, and Mediterranean and Middle Eastern markets and higher volume in North America, partially offset by lower volume in Mediterranean and Middle Eastern markets, as we continued to prioritize profitability over volume and reflecting supply shortages during 2014.
Salads and Healthy Snacks segment sales were 2.5% lower primarily as a result of lower processed fruit ingredient sales driven by reduced raw material supply, lower sliced apple healthy snack sales, lower foodservice volume and the June 2013 exit of a non-core European healthy snacking business that previously represented approximately $12 million of net sales on an annual basis. These declines were partially offset by higher retail value-added salad sales as a result of both volume and pricing, including mix.
Other Produce segment sales were higher as a result of higher pineapple volume, primarily in North America.
Cost of Sales. Cost of sales increased on a consolidated basis primarily related to expected industry cost increases, including labor, shipping and paper and due to the effects of weather on both our bananas and salads value chains.
In our bananas business, cost of sales increased primarily due to weather impacts in our growing regions in Central America that reduced productivity on both our owned and associate producer farms and increased the volume purchased in weekly markets, primarily Ecuador. This resulted in incremental fruit and transportation costs, impacted further in the first quarter of 2014 by poor weather in the Atlantic that deferred vessel arrivals, resulting in increased fuel consumption and vessel

4



charters. Related to the 2007 gain on the sale-leaseback of eleven cargo ships, the gain on the sale-leaseback was being amortized to reduce "Cost of sales" over the base term of the leases, each of which expired in mid-2014. The annual amortization of the gain on shipping fleet was $14 million through 2013, with the final $6 million of amortization reducing costs in the first half of 2014. To maintain our shipping rotations, we entered into new time charter arrangements and incurred $5 million of costs in the second quarter of 2014 in connection with the changeover of these vessels, which was completed in 2014. Beginning in 2015, we have made changes to shipping arrangements serving parts of Europe that are also expected to slow the rate of increasing logistical costs.
In our Salads and Healthy Snacks segment, our new Midwest salad plant continued to fully meet its performance targets in 2014 after incurring approximately $18 million in startup costs in 2013. The new facility was placed into service in 2013 and replaced three facilities in the same region. Additionally, cost of sales decreased due to lower volumes in our healthy snacks and food service, reduced raw material supply for our processed fruit ingredient products and the exit of a European healthy snacking business in June 2013 partly offset by additional volume of retail value-added salads, discussed above, and harsh winter weather in much of North America during the first quarter of 2014 that adversely affected logistics costs and demand imbalance impacted raw product sourcing in that period.
Other produce cost of sales increased due to higher pineapple volume, primarily in North America and higher costs of purchased fruit for Europe, in addition to $3 million related to a claim settlement with a former supplier of other produce products that were discontinued in previous periods.
Operating Income. As a result of the items discussed above, our segments' operating income was higher than 2013, but was offset by additional Corporate costs driven by the $51 million of combination-related transaction costs for our now-terminated combination with Fyffes and the subsequent acquisition by the Cutrale and Safra Groups. Excluding transaction costs, Corporate costs improved due to lower legal fees, medical cost reductions and staffing and operating efficiencies. Corporate costs represent expenses not allocated to the reportable segments, including certain selling, general and administrative costs.
Additional detail of the variances are included in the segment discussion below.
2013 vs. 2012
Net Sales. Net sales decreased on a consolidated basis by 0.7%. Banana segment sales were 0.8% lower primarily as a result of lower volume in Core Europe (defined below), where we continued to prioritize profitability over volume, lower volume in the Middle East and lower pricing in North America. These declines were offset by significant new banana volumes in North America as a result of customer wins and stable local pricing in Europe during 2013.
Salads and Healthy Snacks segment sales were 1.5% higher primarily from increased volume of our retail value-added salads, as a result of new private label and branded contract volume and increased velocity with our current customers, as well as improved pricing in our healthy snacks products. These improvements were offset by a decrease in sales of our processed fruit ingredient products and the exit of a European healthy snacking business that represented approximately $12 million of net sales on an annual basis and had an insignificant effect on operating income.
Other Produce segment sales were lower as a result of discontinuing our North American deciduous product lines at the end of 2012 partially offset by increased volume and pricing of pineapples. Our North American deciduous product lines represented approximately $40 million of net sales on an annual basis.
Cost of Sales. Cost of sales decreased on a consolidated basis primarily related to the Bananas and Other Produce segments. Changes in our agriculture practices for bananas increased productivity and lowered our costs because we purchased less fruit from third parties in 2013 as compared to 2012. We also realized significant improvements in our banana sourcing and logistics costs from the deployment of value chain efficiency and productivity initiatives that commenced at the start of 2013. Banana logistics costs included the continued optimization of our ocean shipping network and scale efficiencies from additional volume distribution in North America. As a result of our 2011 shipping reconfiguration, five chartered cargo ships were subleased until the end of 2012, and an equivalent number of ship charters were not renewed in 2013. We accelerated $6 million of losses on the three sublease arrangements in the first quarter of 2012, net of $2 million of related deferred sale-leaseback gain amortization during the sublease period.
In our Salads and Healthy Snacks segment, an increase in cost of sales was driven by increased volume and product mix of retail value-added salads, reduced yields and increased raw product costs from adverse weather across our growing regions and approximately $18 million of transition and startup costs at our new Midwest facility recorded in "Cost of sales" in the Consolidated Statements of Income. These increased costs were partially offset by lower costs in our processed fruit ingredient products and from exiting a European healthy snacking business at the end of the second quarter of 2013. Additionally, inventory write-downs of fruit ingredient products decreased from approximately $5 million in 2012 to approximately $1

5



million in 2013.
Other Produce segment cost of sales were lower as a result of exiting our North American deciduous product lines at the end of 2012, which were partially offset by an increased volume of pineapples. 2012 also included $2 million of costs primarily related to inventory write-offs from the discontinuation of other non-strategic, low-margin products and $1 million costs related to a lease exit accrual.
Operating Income. As a result of the above, as well as the benefits to our selling, general and administrative expenses from our completed restructuring and relocation plans, operating income improved on a consolidated basis and in each of the operating segments. As more fully described below, the 2012 results of the Salads and Healthy Snacks segment also include a $180 million goodwill and trademark impairment related to the Fresh Express salads business and a $32 million loss to fully impair our equity-method investment and related assets and to record estimates of probable cash obligations to the Danone JV. The 2012 results of the Bananas segment include $9 million in allowance for doubtful accounts related to a Middle Eastern customer.
Corporate costs include relocation and restructuring costs that were insignificant in 2013 and $35 million in 2012 and are further described in Note 4 to the Consolidated Financial Statements, as well as $1 million for other relocation and hiring expenses in 2013. Corporate expenses excluding those related to the restructuring and relocation, were $51 million and $59 million for 2013 and 2012, respectively, which also reflect savings from these relocation and restructuring activities that were partially offset by higher incentive compensation accruals.
Additional detail of the variances are included in the segment discussion below.
BANANA SEGMENT - NET SALES, COST OF SALES AND OPERATING INCOME ANALYSIS
 
Better (Worse)
(In millions)
2014 vs. 2013
 
2013 vs. 2012
Banana net sales - comparison year
$
1,970

 
$
1,985

Global pricing including geographical mix
44

 
(64
)
Volume
(29
)
 
51

Average European exchange rates including the effect of hedging
36

 
(2
)
Banana net sales
$
2,021

 
$
1,970

 
 
Better (Worse)
(In millions)
2014 vs. 2013
 
2013 vs. 2012
Banana cost of sales - comparison year
$
1,715

 
$
1,748

Volume
(27
)
 
66

Sourcing and logistics costs1
81

 
(95
)
Average European exchange rates
8

 
2

Acceleration of losses on ship sublease arrangements in 20122

 
(6
)
Tariffs
(10
)
 
(5
)
Other

 
5

Banana cost of sales
$
1,767

 
$
1,715

1 
Sourcing costs include costs of producing fruit in our owned operations and purchasing fruit from our third party growers. Logistics costs are significantly affected by fuel prices and scale efficiencies and include the effect of fuel hedges that were a gain (loss) of $(5) million, $6 million and $15 million in 2014, 2013 and 2012, respectively. Sourcing and logistics costs also include $11 million of LIFO liquidations in 2014 and the benefit of amortization of the gain on the sale-leaseback of ships described in Note 15 to the Consolidated Financial Statements of $6 million, $14 million and $14 million in 2014, 2013 and 2012, respectively.
2 
Late in 2011, we implemented a new European shipping configuration that resulted in significant reductions in logistics costs in 2012 that continue throughout 2013. As a result of the shipping reconfiguration, five chartered cargo ships were subleased to third parties until the end of 2012, and eight ship charters were not renewed for 2013. In 2012, we accelerated $6 million of losses on the three sublease arrangements that began in the first quarter of 2012, net of $2 million of related deferred sale-leaseback gain amortization during the sublease period.

6



 
Better (Worse)
(In millions)
2014 vs. 2013
 
2013 vs. 2012
Banana operating income - comparison year
$
112

 
$
77

Change in Banana segment net sales from above
51

 
(15
)
Change in Banana segment cost of sales from above
(52
)
 
33

Selling, general and administrative
(1
)
 
6

Allowance for doubtful accounts for customers in Iran
2

 
7

Equity in earnings of investees1
2

 

Other

 
4

Banana operating income
$
114

 
$
112

1
In 2014, "Equity in (earnings) losses of investees" primarily related to the resolution of $2 million of contingent consideration receivable from the 2009 sale of an equity method investment, which increased the note receivable related to the sale. See Notes 6 and 9 to the Consolidated Financial Statements.
BANANA SEGMENT METRICS
Our banana sales volumes1 in 40-pound box equivalents were as follows:
(In millions, except percentages)
2014
 
2013
 
% Change
North America
75.8

 
72.7

 
4.3
 %
 
 
 
 
 
 
Core Europe2
33.3

 
33.2

 
0.4
 %
Mediterranean3
9.9

 
14.5

 
(31.8
)%
Middle East
3.9

 
4.5

 
(14.0
)%
Europe and the Middle East
47.1

 
52.2

 
(9.8
)%
Total Volume
122.9

 
124.9

 
(1.6
)%

7



Year-over-year favorable (unfavorable) percentage changes in our banana prices and banana volume for 2014 compared to 2013 were as follows:
 
Q1
 
Q2
 
Q3
 
Q4
 
Year
Banana Prices
 
 
 
 
 
 
 
 
 
North America4
(0.7
)%
 
(0.6
)%
 
2.2
 %
 
3.1
 %
 
1.1
 %
 
 
 
 
 
 
 
 
 
 
Core Europe:
 
 
 
 
 
 
 
 
 
Local currency
(1.3
)%
 
(0.9
)%
 
(3.6
)%
 
0.2
 %
 
(1.4
)%
Currency exchange impact
3.9
 %
 
5.3
 %
 
0.4
 %
 
(8.0
)%
 
0.6
 %
Core Europe U.S. Dollar Basis5
2.6
 %
 
4.4
 %
 
(3.2
)%
 
(7.8
)%
 
(0.8
)%
Mediterranean3
4.5
 %
 
17.8
 %
 
2.3
 %
 
28.3
 %
 
15.9
 %
Middle East
13.6
 %
 
12.6
 %
 
2.6
 %
 
5.1
 %
 
8.2
 %
Total Europe and the Middle East
4.2
 %
 
7.9
 %
 
1.1
 %
 
8.9
 %
 
5.7
 %
 
 
 
 
 
 
 
 
 
 
Banana Volume
 
 
 
 
 
 
 
 
 
North America
5.1
 %
 
5.8
 %
 
3.8
 %
 
2.6
 %
 
4.3
 %
 
 
 
 
 
 
 
 
 
 
Core Europe2
(5.4
)%
 
(2.9
)%
 
4.4
 %
 
7.5
 %
 
0.4
 %
Mediterranean3
(9.0
)%
 
(19.1
)%
 
(29.0
)%
 
(51.4
)%
 
(31.8
)%
Middle East
(22.5
)%
 
2.4
 %
 
(15.1
)%
 
(16.6
)%
 
(14.0
)%
Europe and the Middle East
(7.7
)%
 
(6.4
)%
 
(5.5
)%
 
(18.0
)%
 
(9.8
)%
1
Volume sold includes all banana varieties, such as Chiquita to Go, Chiquita minis, organic bananas and plantains.
2
Core Europe includes the 28 member states of the European Union, Switzerland, Norway and Iceland. Banana sales in Core Europe are primarily in euros, as well as other European currencies.
3
Mediterranean markets are mainly European and other Mediterranean countries that do not belong to the European Union.
4
North America pricing includes surcharges to recover fuel-related costs.
5
Prices on a U.S. dollar basis exclude the effect of hedging.
European Exchange Rates. We use hedging instruments (derivatives) to reduce the negative cash flow and earnings effect that any significant decline in the value of the euro would have on the conversion of euro-based revenue into U.S. dollars for up to 18 months in the future. To minimize the volatility that changes in fuel prices could have on the operating results of our core shipping operations, we also use hedging instruments to lock in prices of future bunker fuel purchases for up to three years in the future. Further discussion of hedging risks and instruments can be found under the caption Market Risk Management - Financial Instruments below, and Note 13 to the Consolidated Financial Statements. The average spot and hedged euro exchange rates were as follows:
 
Year Ended Dec. 31,
 
 
(Dollars per euro)
2014
 
2013
 
% Change
Euro average exchange rate, spot
$
1.33

 
$
1.33

 
(0.5
)%
Euro average exchange rate, hedged
1.35

 
1.27

 
5.8
 %

8



Year over year increases (decreases) in our results related to the effect of European currency was as follows:
(In millions)
2014 vs. 2013
 
2013 vs. 2012
Net sales
 
 
 
Change in euro exchange rate
$
5

 
$
23

Change in realized hedging gain (loss)1
31

 
(26
)
Effect on net sales
36

 
(2
)
Local costs increase (decrease)
(1
)
 
(5
)
Change in balance sheet translation gain2
(7
)
 
3

Net effect on operating income (loss)
$
28

 
$
(4
)
Table may not total or recalculate due to rounding.
1 
Hedging gain (loss) was $6 million, $(25) million and less than $1 million in 2014, 2013 and 2012, respectively.
2 
Balance sheet translation was a net loss of $9 million, $2 million and $5 million in 2014, 2013 and 2012, respectively.
BANANA SEGMENT - OTHER INFORMATION
Concentration of Risk. Our primary markets are in North America and Europe, but we also have sales in the Middle East and other markets. The majority of our sales in the Middle East are in Iran under license from the U.S. government that allows sale of food products to non-sanctioned parties. Sales to Iranian customers are in U.S. dollars and represent $8 million and $17 million of "Trade receivables, less allowances" on the Consolidated Balance Sheet as of December 31, 2014 and 2013, respectively. Even though the sales in Iran are permitted, the international sanctions against Iran affected the ability of certain Iranian customers to pay invoices within terms because it became difficult for them to obtain U.S. dollars, euros or other suitable currencies in sufficient quantity on a regular basis. Over the course of 2012, our receivable balance with these customers increased, and we established payment plans with each of these customers to reduce their balances. Certain customers have so far been able to find acceptable methods of payment to comply with their payment plans. However, some customers have not, and as a result we recorded a reserve of $9 million in 2012, with an additional $2 million in 2013 as a result of further delinquency and other repayment risk; in 2014 customers have continued to pay consistent with agreed terms. We source bananas from the Philippines for sale in the Middle East under a committed-volume, long-term purchase contract with a former joint venture partner through 2016. To mitigate risk, we have reduced the amount of volume being sent to the Middle East and have developed other Middle Eastern markets. However, Iran remains an important market for our Philippine-sourced bananas.

SALADS AND HEALTHY SNACKS SEGMENT - NET SALES, COST OF SALES AND OPERATING INCOME ANALYSIS
(In millions)
2014 vs. 2013
 
2013 vs. 2012
Salads and Healthy Snacks net sales - comparison year
$
967

 
$
953

Pricing including mix:
 
 
 
Retail value-added salads
13

 
4

Healthy snacks, foodservice and other
3

 
8

Volume:
 
 
 
Retail value-added salads
11

 
23

Healthy snacks, foodservice and other
(31
)
 
(1
)
Processed fruit ingredient products, primarily volume
(16
)
 
(15
)
Exit of European healthy snacking business
(7
)
 

Other
3

 
(5
)
Salads and Healthy Snacks net sales
$
943

 
$
967


9



(In millions)
2014 vs. 2013
 
2013 vs. 2012
Salads and Healthy Snacks cost of sales - comparison year
$
861

 
$
833

Volume:
 
 
 
Retail value-added salads
8

 
18

Healthy snacks, foodservice and other
(25
)
 

Mix:
 
 
 
Retail value-added salads
13

 
12

Healthy snacks, foodservice and other
5

 
1

Industry input and manufacturing costs:
 
 
 
Retail value-added salads
(5
)
 
2

Healthy snacks, foodservice and other
(4
)
 

Processed fruit ingredient products, primarily volume
(10
)
 
(18
)
Transition costs for new Midwest production facility
(18
)
 
18

Exit of European healthy snacking business
(7
)
 
(4
)
Other
6

 
(1
)
Salads and Healthy Snacks cost of sales
$
824

 
$
861

(In millions)
2014 vs. 2013
 
2013 vs. 2012
Salads and Healthy Snacks operating income - comparison year
$
(8
)
 
$
(218
)
Change in Salads and Healthy Snacks segment net sales from above
(24
)
 
14

Change in Salads and Healthy Snacks segment cost of sales from above
37

 
(28
)
Selling, general and administrative
8

 
13

Equity in (earnings) losses of investees, including impairment of Danone JV

 
34

Goodwill and trademark impairment

 
180

Other
3

 
(3
)
Salads and Healthy Snacks operating income
$
16

 
$
(8
)

SALADS AND HEALTHY SNACKS SEGMENT METRICS
Volume and average price per case for our retail value-added salads was as follows:
(In millions, except percentages)
2014
 
2013
 
% Change
Volume (12-count cases)
49.5

 
48.6

 
1.8
%
Average price per case including mix1
 
 
 
 
2.6
%
1 
Average price per case includes fuel-related and other surcharges. Fuel surcharges generally reset quarterly based on the previous quarter's average fuel index prices.
SALADS AND HEALTHY SNACKS - OTHER INFORMATION
Goodwill and Trademarks. Operating income in 2012 includes a $157 million impairment charge to goodwill and a $23 million impairment charge to the Fresh Express trademark. Goodwill and trademarks are reviewed for impairment each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. These impairment charges were the result of lower operating performance of retail value-added salad business, lower retail salad volumes, lower perceived valuation multiples in the packaged salad industry and continuing demand for private label versus branded products. See Notes 2 and 10 to the Consolidated Financial Statements for further information about goodwill and trademark impairments.
Danone Joint Venture. In 2012, the board of directors of our equity-method investment, Danone Chiquita Fruits SAS ("Danone JV"), approved a change in strategy and the related discontinuation of a key product. As a result, we determined that the decline in estimated fair value of our equity-method investment in the Danone JV was other than temporary, and we recorded a $32 million loss in 2012 to fully impair our investment and related assets and to record estimates of probable cash obligations to the Danone JV, which is included in "Equity in (earnings) losses of investees" in the Consolidated Statements of Income. We had fully accrued our obligations to fund the Danone JV at December 31, 2012. The Danone JV sold its smoothie operations in March 2013 and the Chiquita brand is now licensed to a third-party manufacturer of smoothies in Europe. In connection with our final contribution to the Danone JV in October 2013, we exited the investment by selling all of our shares

10



in the Danone JV to our joint venture partner, Danone. See further discussion of the Danone JV in Note 9 to the Consolidated Financial Statements.
Sale of European Healthy Snacking Business. At the end of the second quarter 2013, we sold one of the European healthy snacking businesses. The business was sold for €3 million ($4 million) resulting in a gain of $1 million recognized in "Other income (expense), net" in the Consolidated Statements of Income, which was not allocated to the segment. This business represented approximately $12 million in annual net sales and had an insignificant effect on operating income. Additionally, $2 million of goodwill impairment related to this business was recognized in the third quarter of 2012.
INTEREST AND OTHER INCOME (EXPENSE)
Interest expense was $62 million, $61 million and $45 million in 2014, 2013 and 2012, respectively. Changes in interest expense resulted primarily from refinancing activities occurring in February 2013. "Loss on debt extinguishment" recorded in 2014 relates to the redemption of $10 million of the 7.875% Senior Secured Notes due 2021 ("7.875% Notes") on January 31, 2014. On February 5, 2013, we issued $425 million of 7.875% Notes, entered into a new asset-based lending facility and used the entire proceeds to retire the 7.5% senior notes due 2014 and a credit facility. "Loss on debt extinguishment" recorded in 2013 resulted from the write-off of deferred financing fees related to the debt that was extinguished. See further information regarding the terms, description of the security and restrictions in Note 12 to the Consolidated Financial Statements. See Note 1 to the Consolidated Financial Statements and Liquidity and Capital Resources below for a description of refinancing activities in January and February 2015 to understand how interest expense may change in 2015.
In 2014, we disposed of a non-core healthy snacking business in Europe, resulting in a loss of $3 million, which was recorded in "Other income (expense), net," and was not allocated to the segment results. Of this loss, $1 million related to cash payments upon disposal. This business represented approximately $2 million in annual net sales and had an insignificant effect on operating income. In addition, we recorded $4 million related to a contingent reimbursement obligation from the 2004 sale of our former Colombian operations, which was recorded in "Other income (expense), net." Other income in 2013 primarily relates to a net gain on the sale of a European healthy snacking business, as described above. Other expense in 2012 primarily related to contingencies in Europe.
INCOME TAXES
Income taxes were a net expense of $20 million, $5 million and $105 million in 2014, 2013 and 2012, respectively. The income tax expense for 2012 includes a $130 million charge to income tax expense to establish a valuation allowance against all of our U.S. federal and state deferred tax assets, which are primarily net operating losses as described in Notes 17 and 21 to the Consolidated Financial Statements.
The future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods. When considering the sufficiency of future taxable income, sources include historical taxable income, the expected timing of the reversal of existing temporary differences, the implementation of tax planning strategies and projected future taxable income. In assessing the need for a valuation allowance, both positive and negative evidence are considered in determining whether it is more-likely-than-not that the deferred tax assets will not be realized. Our three-year cumulative loss position in our North American businesses is considered to be significant negative evidence. The three-year cumulative loss primarily resulted from the restructuring and relocation activities described in Note 4, the trademark impairment described in Note 10 and the reserve for grower receivables described in Note 6. Our primary positive evidence that U.S. deferred tax assets will be realized related to forecasts of future taxable income, which shows the utilization of the net operating losses within the statutory tax carryforward periods; however, accounting guidance restricts the amount of reliance that can be placed on future taxable income because it is not objectively verifiable. As a result, we recorded a $130 million valuation allowance in the fourth quarter of 2012. Recording a valuation allowance does not restrict our ability to utilize the future deductions and net operating losses associated with the deferred tax assets assuming taxable income is recognized in future periods, and does not affect our liquidity, borrowing ratios or the availability of other capital resources. Additionally, a sustained period of profitability in our North American businesses will be required before we would change our judgment regarding the need to reverse the full amount of the valuation allowance. Until such time, income or loss in the U.S. will not result in income tax expense or benefit because a corresponding valuation allowance will be released or established for the same value.
Our overall effective tax rate may also vary significantly from period to period due to the level and mix of income among domestic and foreign jurisdictions and the creation or release of valuation allowances. Many of these foreign jurisdictions have tax rates that are lower than the U.S. statutory rate, and we continue to maintain full valuation allowances on deferred tax assets in some of these foreign jurisdictions. See Note 17 to the Consolidated Financial Statements for further information about our income taxes and valuation allowances.

11



DISCONTINUED OPERATIONS
Sale of Atlanta AG – Discontinued Operations. In 2008, we sold our subsidiary, Atlanta AG ("Atlanta"). In 2012, we recorded $2 million of expense based on new information about our indemnity obligations under the sale agreement, which is included in "Loss from discontinued operations, net of income taxes" in the Consolidated Statements of Income. In the first quarter of 2013, we settled remaining contingent consideration related to the sale in connection with extending the ripening and services agreement with the buyer.
Liquidity and Capital Resources
We believe that our cash position, cash flow generated by operating subsidiaries and borrowing capacity under our 2015 ABL (defined below) and related party borrowing availability will provide sufficient cash reserves and liquidity to fund our working capital needs, capital expenditures and debt service requirements for at least twelve months. Cash and equivalents were $48 million and $54 million at December 31, 2014 and 2013, respectively, and are composed of either bank deposits or amounts invested in money market funds. At December 31, 2014, we had no borrowings under the 2013 ABL Revolver (described below), under which $79 million was available after $25 million was used to support letters of credit. A subsidiary has a committed credit line of approximately €8 million ($10 million) for bank guarantees used primarily for payments due under import licenses and duties in European countries as of the date of this filing. We have €8 million ($10 million) of cash equivalents in compensating balance arrangements related to this committed credit line.
In January and February 2015, we redeemed $224 million of the 7.875% Senior Notes due 2021 ("7.875% Notes"), of which $85 million and $139 million were redeemed at 103% and 107.875% of the principal amount, plus accrued and unpaid interest to the redemption date, respectively. In accordance with the terms of the indenture of the 7.875% Notes, the change in control that occurred on January 6, 2015 required us to offer to repurchase the remaining $191 million principal amount of the 7.875% Notes at 101% of the principal amount, plus accrued and unpaid interest to the redemption date. Accordingly, we issued a tender offer for these notes where an insignificant amount were tendered. The change in control also required us to offer to repurchase the 4.25% Convertible Senior Notes due 2016 ("Convertible Notes"), and on February 15, 2015, we repurchased $151 million principal amount of the Convertible Notes at a price of 100% of the principal amount plus accrued and unpaid interest through the redemption date. These repurchases together with the payout of approximately $37 million for unvested stock awards were financed with $192 million of capital contributions and $238 million of related party loans from Cavendish US Corporation, the immediate parent of Chiquita. These related party loans bear interest payable quarterly at LIBOR plus 100 basis points, or 1.25% at current rates, for the first two years and thereafter at LIBOR plus 500 basis points, or 5.25% at current rates.
On February 5, 2015 we replaced our existing Asset Based Lending Facility ("2013 ABL") with a new 5-year, $150 million Asset Based Lending Facility ("2015 ABL"). Existing cash was used to repay the $5 million outstanding term loan balance under the 2013 ABL and to pay the $4 million of financing fees associated with the 2015 ABL. Revolving availability under the 2015 ABL is based on a borrowing base calculation based on specified advance rates against the value of domestic accounts receivable, certain inventory and certain domestic machinery and equipment, with the potential for additional advances against foreign receivables. At inception, we had no borrowings under the 2015 ABL (described below), under which $83 million was available after $25 million was used to support letters of credit.
See the description and terms of the debt redemptions and repurchases that occurred subsequent to December 31, 2014 and for the terms of the related equity contributions and related party debt in Note 1 to the Consolidated Financial Statements.

12



Total debt consisted of the following:
 
December 31,
(In thousands)
Pro Forma 20141
 
2014
 
2013
7.875% Senior Notes due 2021, net of discount2
$
190,102

 
$
412,483

 
$
422,174

4.25% Convertible Senior Notes due 20162
43,180

 
176,431

 
164,050

ABL Term Loan

 
4,875

 
6,375

Related party loan from Cavendish US Corporation
238,479

 

 

Capital lease obligations
41,891

 
41,891

 
39,025

Other
6,541

 
6,541

 

Total debt
$
520,193

 
$
642,221

 
$
631,624

1 
Pro forma column gives effect to the January and February 2015 refinancing activities discussed above as if they had occurred on December 31, 2014.
2 
Amounts included in the table represent the carrying values of the Convertible Notes and the 7.875% Notes. The principal amount of the Convertible Notes at December 2014 and 2013 was $200 million. The principal amount of the 7.875% Notes was $415 million and $425 million at December 2014 and 2013, respectively. See Note 12 to the Consolidated Financial Statements for further information.
In 2012 through 2014, we engaged in a series of refinancing activities that provided financing flexibility. Our financing activity is more fully described in Note 12 to the Consolidated Financial Statements.
In January 2014 we redeemed $10 million of the 7.875% Notes at 103% of the principal amount, plus interest to the redemption date.
In February 2013, we issued $425 million of the 7.875% Notes at 99.274% of par and entered into the 2013 ABL, a 5-year secured asset-based lending facility ("2013 ABL Facility"). The $457 million of net proceeds from issuance of the 7.875% Notes and the initial borrowings of the 2013 ABL were used to retire the outstanding Credit Facility and the 7½% Senior Notes at par plus accrued interest. The 2013 ABL consisted of a revolver (the "2013 ABL Revolver") and a $7.5 million term loan (the "2013 ABL Term Loan") and matured at the earlier of February 5, 2018 or 60 days prior to the maturity of the Convertible Notes, unless such notes had been satisfactorily refinanced. The 2013 ABL had a maximum borrowing capacity of $150 million, with the 2013 ABL Revolver availability based on specified percentages of our domestic accounts receivable, certain inventory and certain domestic machinery and equipment. The 2013 ABL Term Loan required annual repayments of approximately $2 million. See further information regarding the terms, description of the security, redemption features and restrictions in Note 12 to the Consolidated Financial Statements.
In June 2012, we entered into a 20-year lease agreement for a salad production and warehousing facility in the Midwest that replaced three existing facilities in the region. The lease agreement contains two 5-year extension periods. Though the construction costs were financed by the lessor, because of the specialized nature of the facility we acted as the construction agent and were responsible for all construction activity during the construction period. This resulted in us owning the facility for accounting purposes. The plant was phased into service during 2013, and the construction costs were finalized on March 31, 2014 resulting in an interest rate of 6.3% to calculate the capital lease liability and future payments. Lease payments will increase annually based on CPI.
In June 2012 we entered into a Second Amendment to the Amended and Restated Credit Agreement dated July 26, 2011 (as amended, the "Credit Facility"). The amended Credit Facility included a $330 million senior secured term loan ("Credit Facility Term Loan") and a $150 million senior secured revolving facility ("Credit Facility Revolver"), both maturing July 26, 2016 (May 1, 2014, if we did not repay, refinance, or otherwise extend the maturity of the 7½% Senior Notes by such date). In connection with the amendment, we incurred $2 million of fees that were recognized over the remaining term of the Credit Facility.

13



The following table summarizes our contractual obligations for future cash payments at December 31, 2014:
(In thousands)
Total
 
2015
 
2016 -2017
 
2018 -2019
 
Later
years
Long-term debt1
$
626,416

 
$
2,952

 
$
206,261

 
$
2,203

 
$
415,000

Capital lease obligations
41,891

 
1,751

 
3,246

 
2,730

 
34,164

Operating leases2
474,131

 
172,591

 
198,596

 
65,377

 
37,567

Purchase commitments3
2,858,883

 
893,464

 
1,199,284

 
446,238

 
319,897

Interest on debt and capital leases4
241,016

 
44,986

 
78,500

 
70,499

 
47,031

Pension and severance obligations1, 5
105,722

 
11,222

 
21,676

 
21,263

 
51,561

Other
15,646

 
5,382

 
9,847

 
417

 

 
$
4,363,705

 
$
1,132,348

 
$
1,717,410

 
$
608,727

 
$
905,220

1 
The table summarizes contractual obligations for future cash payments at December 31, 2014 and includes only scheduled principal maturities and the full $200 million principal of and the $415 million principal of the Convertible Senior Notes and 7.875% Notes, respectively. In connection with the acquisition on January 6, 2015, we also had refinancing activities in January and February 2015 as described above and in Note 1 to the Consolidated Financial Statements. To give effect to these transactions, the following lines of the table above would be:
(In thousands)
Total
 
2015
 
2016 -2017
 
2018 -2019
 
Later
years
Long-term debt
$
485,341

 
$
1,452

 
$
52,332

 
$
1,828

 
$
429,729

Interest on debt and capital leases
174,840

 
28,689

 
58,741

 
50,958

 
36,452

2 
Certain operating leases of containers contain residual value guarantees under which we guarantee a certain minimum value at the end of the lease in the event we do not exercise our purchase option or the lessor cannot recover the guaranteed amount. The table does not include these amounts because the fair value of the containers at the end of the lease terms is expected to exceed the residual value that was guaranteed under the lease; therefore, we do not expect to make payments under the residual value guarantees. We estimate that the residual value guarantees are approximately $8 million at December 31, 2014.
3 
Purchase commitments consist primarily of long-term contracts to purchase bananas, lettuce and other produce from third-party producers. The terms of these contracts set the price for the purchased fruit for one to ten years; however, many of these contracts are subject to price renegotiations every one to two years. Therefore, we are only committed to purchase the produce at the contract price until the renegotiation date. Purchase commitments included in the table are based on the current contract price and the estimated volume we are committed to purchase until the next renegotiation date. These purchase commitments represent normal and customary operating commitments in the industry.
4 
Interest on debt represents expected cash payments for interest at December 31, 2014 based on amounts that would be outstanding if only scheduled principal repayments are included prior to the maturity of each debt instrument. Amounts in the table reflect interest rates of LIBOR plus 2.75% for the 2013 ABL Term Loan, and 6.3% for the built-to-suit capital lease liability, in all future periods. See Note 1 to the Consolidated Financial Statements for description of long-term debt transactions in January and February 2015; such transactions are not reflected in this table.
5 
Obligations in foreign currencies are calculated using the December 31, 2014 exchange rates.
Cash provided by operations was $54 million, $91 million, and $33 million for 2014, 2013 and 2012, respectively. Operating cash flows decreased from 2013 to 2014 primarily as a result of $51 million of transaction costs for our now-terminated combination with Fyffes and the acquisition by the Cutrale and Safra Groups. Operating cash flows improved in 2013 from 2012 primarily as a result of cost savings from our restructuring activities, a decrease in relocation and restructuring expenses, and collection of trade and other receivables. In January 2012, as a result of a favorable decision from a court in Salerno, Italy, we received €20 million ($24 million) related to a refund claim we had made with respect to certain consumption taxes paid between 1980 and 1990, and the cash received has been deferred to "Other liabilities" pending final result of the appeal process. See Note 21 to the Consolidated Financial Statements for further information. This cash receipt was offset by increases in accounts receivable primarily resulting from longer collection periods in the Middle East and Europe and other changes in working capital.
Cash flow used in investing activities includes capital expenditures of $50 million, $49 million and $53 million for 2014, 2013 and 2012, respectively. We made contributions of €14 million ($18 million) in 2013 that discharged our remaining financial obligations to the Danone JV. We had fully accrued our funding obligations to the Danone JV in the second half of 2012. Cash inflows provided by investing activities consists primarily of proceeds received from the sale of non-core assets.
Depending on fuel prices, we can have significant obligations or amounts receivable under our bunker fuel forward arrangements, although we would expect any liability or asset from these arrangements to be offset by the purchase price of fuel. At December 31, 2014 and 2013, our bunker fuel forward contracts were a net asset (liability) of $(16) million and $1

14



million, respectively. Depending on euro pricing, we can have significant obligations or amounts receivable under our euro-based currency hedging contracts, although we would expect any liability or asset from these contracts to be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies. At December 31, 2014 and 2013, our euro-based currency hedging contracts were a net asset (liability) of $24 million and $(5) million, respectively. The amount ultimately due or receivable will depend upon fuel prices for our bunker fuel forward arrangements or the exchange rate for our euro-based hedging contracts at the dates of settlement. See Market Risk Management – Financial Instruments below and Notes 2, 13 and 14 to the Consolidated Financial Statements for further information about our hedging activities. We expect operating cash flows will be sufficient to cover our hedging obligations, if any.
We face certain contingent liabilities which are described in Note 21 to the Consolidated Financial Statements; in accordance with generally accepted accounting practices, reserves have not been established for most of the ongoing matters, even when we have been required to deposit payments to preserve our right to appeal some of the Italian customs and tax cases. In connection with these contingent liabilities, we have been required to deposit payments in installments totaling €40 million ($48 million) through 2019 to preserve our right to appeal the customs and tax assessments. Of these assessments, we have deposited €28 million ($34 million) through December 31, 2014, which is included in "Investments and other assets, net" on the Consolidated Balance Sheet pending resolution of the appeals process. Based on rulings described in Note 21 to the Consolidated Financial Statements, approximately €2 million ($2 million) deposited for customs and tax assessments in Genoa was applied to deposit requirements in other jurisdictions. The remaining installment plans call for annual deposit payments of approximately €4 million ($5 million) 2015 through 2016, €4 million ($4 million) in 2017 and less than €1 million ($1 million) in 2018 and 2019; however, if we ultimately prevail in these cases, any deposits we have made are also expected to be refunded with interest. Because court rulings have varied, we have not been assessed in similar matters in other jurisdictions, but may be required to make additional payments based on future appeals or court rulings. We presently expect that we would use existing cash and borrowing resources together with operating cash flow to satisfy any such liabilities. It is possible that in future periods we could have to pay damages or other amounts in excess of the installment plans, the exact amount of which would be at the discretion of the applicable court or regulatory body.
Also as described in Note 21 to the Consolidated Financial Statements, in connection with a court judgment against one of our insurance carriers, National Union, we have received $12 million through December 31, 2014 from National Union for defense costs in certain matters. This sum, and an additional $1 million of interest, is being deferred in "Accrued Liabilities" on the Consolidated Balance Sheet because National Union asserts that it is entitled to obtain reimbursement of this amount from us based on the outcome of its appeal in the coverage case. In June 2014, after remand from the Ohio Court of Appeals, the trial court ruled that National Union is entitled to reimbursement of the defense costs that it has already paid plus interest. The company has appealed that ruling and secured a stay of the judgment ordering us to reimburse National Union pending the appeal.
We have not made dividend payments since 2006. Many of our debt instruments, including the 7.875% Notes and the ABL Facility, which are described in Note 12 to the Consolidated Financial Statements, impose limitations on CBII's ability to pay dividends on its common stock. At December 31, 2014, we were in compliance with each of our debt instruments and expect to remain in compliance for at least twelve months. In connection with the Merger Agreement with Cavendish, we made customary representations and warranties, and agreed to customary covenants limiting our ability to, among other things: incur indebtedness, create or permit the existence of liens over their assets, engage in certain mergers, asset sales and liquidations, prepay certain indebtedness, pay dividends and other "restricted payments," and engage in transactions with their affiliates, in each case subject to customary exceptions.
Market Risk Management – Financial Instruments
HEDGING INSTRUMENTS
Our products are distributed in nearly 70 countries. International sales are made primarily in U.S. dollars and major European currencies. We reduce currency exchange risk from sales originating in currencies other than the U.S. dollar by exchanging local currencies for dollars promptly upon receipt. We consider our exposure, current market conditions and hedging costs in determining when and whether to enter into new hedging instruments to hedge the dollar value of our estimated euro net sales up to 18 months into the future. We may use average rate put options, average rate collars (an average rate put option paired with an average rate call option) and average rate forward contracts to manage our exposure to euro exchange rates. Average rate put options require an upfront premium payment and reduce the risk of a decline in the value of the euro without limiting the benefit of an increase in the value of the euro. Average rate call options sold by us require an upfront premium payment to be received from the counterparty and limit the benefit of an increase in the value of the euro without limiting the risk of a decline in the value of the euro. We may use average rate call options to reduce the cost of currency hedging coverage. In some cases, we may simulate an average rate forward contract by entering into an average rate put and an average rate call at the same strike rate to lock in the future exchange rate of the notional amount ("synthetic average

15



rate forward"). These instruments do not require upfront premium payments. We expect that any loss on these contracts would be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies.
At February 20, 2015, we had:
Average rate collars for approximately 25% of our expected net sales through September 2015 that protect from a decline in the exchange rate below $1.34 per euro and limit the benefit of an increase in the exchange rate above $1.41 per euro.
Average rate forwards and synthetic average rate forwards that lock in the value of the euro for approximately 30% of our expected net sales through September 2015 at $1.37 per euro.
Our shipping operations are exposed to the risk of rising fuel prices. To reduce the risk of rising fuel prices, we maintain a fuel surcharge program on sales in North America, and we enter into bunker fuel forward contracts (swaps) that allow us to lock in fuel prices for our European shipping rotation up to three years in the future. Bunker fuel forward contracts can offset increases in market fuel prices or can result in higher costs from declines in market fuel prices, but in either case can reduce the volatility of changing fuel prices on our results. The price we pay to ship bananas and other produce in container equipment on board third parties' container ships includes an adjustment for fuel costs that is not subject to our hedging program. At December 31, 2014, we had a deferred loss on bunker fuel hedges included in Accumulated other comprehensive income (loss) ("AOCI") of $16 million that is expected to increase our cost of bunker fuel in 2015 and represent coverage for expected fuel purchases of approximately 80%.
We carry hedging instruments at fair value on our Consolidated Balance Sheets. The fair value of the currency hedge portfolio and bunker fuel forward contracts was a net asset (liability) of $8 million and $(4) million at December 31, 2014 and 2013, respectively. A hypothetical 10% increase in the euro currency rates would have resulted in a decline in fair value of the currency hedge portfolio of approximately $18 million at December 31, 2014. However, we expect that any loss on these put and call options would be more than offset by an increase in the dollar realization of the underlying sales denominated in foreign currencies. A hypothetical 10% decrease in bunker fuel rates would result in a decline in fair value of the bunker fuel forward contracts of approximately $2 million at December 31, 2014. However, we expect that any decline in the fair value of these contracts would be offset by a decrease in the cost of underlying fuel purchases.
See Notes 2 and 13 to the Consolidated Financial Statements for additional discussion of our hedging activities. See Note 14 to the Consolidated Financial Statements for additional discussion of fair value measurements.
DEBT INSTRUMENTS
Although the Consolidated Balance Sheets do not present debt at fair value, we have a significant amount of fixed-rate debt whose fair value could fluctuate as a result of changes in prevailing market rates. At December 31, 2014, we had $615 million principal balance of fixed-rate debt, which included the 7.875% Notes and the 4.25% Convertible Senior Notes. The $200 million principal balance of the Convertible Notes is greater than their $176 million carrying value due to the accounting standards for convertible notes such as ours that are described in Note 12 to the Consolidated Financial Statements. The $415 million principal balance of the 7.875% Notes is greater than their $412 million carrying value due to the related discount that will be amortized over the life of the 7.875% Notes. A hypothetical 0.50% increase in interest rates would have resulted in a decline in the fair value of our fixed-rate debt of approximately $12 million at December 31, 2014. See Note 1 to the Consolidated Financial Statements for description of changes to our debt instruments in January and February 2015.
The refinancing activities in 2013 significantly reduced our exposure to changes in variable interest rates to a nominal amount.
Off-Balance Sheet Arrangements
Other than operating leases and non-cancelable purchase commitments in the normal course of business, we do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 2 to the Consolidated Financial Statements. The additional discussion below addresses only our most significant judgments:
REVIEWING THE CARRYING VALUES OF GOODWILL AND INTANGIBLE ASSETS
Impairment reviews comparing fair value to carrying value are highly judgmental and involve the use of significant estimates and assumptions, which determine whether there is potential impairment and the amount of any impairment charge recorded. Fair value assessments involve estimates of discounted cash flows that are dependent upon discount rates and long-

16



term assumptions regarding future sales and margin trends, market conditions, cash flow and multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA"). Actual results may differ from these estimates. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements, as described in Note 14. See further information about our policy for fair value measurements below under "Fair Value Measurements" and in Note 14.
As of December 31, 2014, our goodwill, a portion of our trademarks and most of our other intangible assets related to our salad operations, Fresh Express. Due to lower operating performance of retail value-added salad business, lower retail value-added salad volumes, lower perceived valuation multiples in the packaged salad industry and continuing demand for private label versus branded products, the 2012 analyses resulted in a $157 million ($157 million after-tax) non-cash impairment charge to goodwill and a $23 million ($14 million after-tax) non-cash impairment charge to our Fresh Express trademark. If future business results or market values differ significantly from our expectations, additional impairment could result. We also fully impaired goodwill related to a non-core business in 2012, resulting in $2 million of additional goodwill impairment charges.
Goodwill. Goodwill is reviewed for impairment each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. The 2014 and 2013 reviews did not indicate impairment; however impairment charges resulted from the 2012 review.
The first step of the impairment review compares the fair value of our Fresh Express reporting unit to the carrying value. Consistent with prior impairment reviews, we estimated the fair value of the reporting unit using a combination of: (i) a market approach based on multiples of revenue and EBITDA from recent comparable transactions and other market data; and (ii) an income approach based on expected future cash flows discounted at 12.5%, 14.5%, and 13.0% in 2014, 2013 and 2012, respectively. The market approach and the income approach were weighted equally based on judgment of the comparability of the recent transactions and the risks inherent in estimating future cash flows. We considered recent economic and industry trends, as well as risk in executing our current plans from the perspective of a hypothetical buyer in estimating Fresh Express' expected future cash flows in the income approach. In 2012, the first step of the impairment analysis indicated impairment, which was measured in the second step. In 2014 and 2013, the first step did not indicate impairment because the estimated fair value of our Fresh Express reporting unit was greater than its carrying value; therefore, the second step was not required. In addition, no events or changes in circumstances occurred in 2014, 2013 or 2012 that required impairment testing in between annual tests.
The second step measures the implied value of goodwill by subtracting the estimated fair values of the reporting unit's assets and liabilities, including intangible assets other than goodwill, from the estimated fair value of the Fresh Express reporting unit as estimated in step 1. The 2012 goodwill impairment charge was measured as the difference between the implied value of goodwill and the carrying value.
Significant assumptions used to estimate the fair value of the Fresh Express reporting unit include estimates of future cash flows, discount rate and multiples of revenue and EBITDA. These assumptions are typically not considered individually because assumptions used to select one variable should also be considered when selecting other variables; however, sensitivity of the overall fair value assessment to each significant variable is also considered. In the 2014 and 2013 analyses, reasonably possible fluctuations in the discount rate, cash flows or market multiples did not indicate impairment. Our subsequent acquisition by the Cutrale and Safra Groups was a key data point in the 2014 analysis, as the terms were finalized before the analysis was completed. In 2014 and 2013, we also considered the operation of the business in several possible business environments; in each case we assumed that Fresh Express would be able to recapture increases in commodity costs affecting the industry, such as increases in transportation or raw product costs. In the 2012 analysis, a 1.0 percentage point increase in the selected discount rate would have resulted in $8 million of additional impairment, and a 5% decrease in the selected multiples of revenue and EBITDA would have resulted in $10 million of additional impairment.
Trademarks. Trademarks are indefinite-lived intangible assets that are not amortized and are also reviewed each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. In addition, no events or changes in circumstances occurred in 2014, 2013 or 2012 that required impairment testing in between annual tests. The review compares the estimated fair values of the trademarks to the carrying values. The 2014 and 2013 reviews did not indicate impairment because the estimated fair values were greater than the carrying values. As a result of the reasons noted above, the 2012 review resulted in an impairment charge to the Fresh Express trademark. Consistent with prior reviews, we estimated the fair values of the trademarks using the relief-from-royalty method. The relief-from-royalty method estimates the royalty expense that is avoided as a result of owning the respective trademarks. The royalty savings are measured by applying a royalty rate to projected branded sales to estimate cash flows attributable to the trademark then converting those cash flows (after-tax) to a present value using a discount rate that considers the risk associated with owning the trademarks. Royalty rates are selected based on recent available data for similar trademark license arrangements as well as assessments of the cash flows from the business activities related to the trademark.

17



For the Chiquita trademark, we assumed royalty rates of 2.5%, 2.5% and 2.5% and discount rates of 11.0%, 11.5% and 11.0% in the 2014, 2013 and 2012 impairment analyses, respectively. The fair value estimate is most sensitive to the royalty rate but reasonably possible fluctuations in both the royalty rates and the discount rates for the Chiquita trademarks also did not indicate impairment.
For the Fresh Express trademarks, we assumed royalty rates of 1.0%, 1.0% and 1.0% and discount rates of 12.5%, 14.5% and 13.0% in the 2014, 2013 and 2012 impairment analyses, respectively. A 0.5 percentage point decrease in the selected royalty rate in the 2012 analysis would have resulted in $18 million of additional impairment and a 1.0 percentage point increase in the selected discount rate would have resulted in an additional $3 million of impairment. Reasonably possible fluctuations in the selected royalty rate or the selected discount rate did not indicate impairment during the 2014 and 2013 analyses.
Other Intangible Assets. Our intangible assets with definite lives consist of customer relationships and patented technology primarily related to Fresh Express. These assets are amortized on a straight-line basis (which approximates the attrition method) over their estimated remaining lives. The weighted average remaining lives of our Fresh Express customer relationships and patented technology are 9 years and 7 years, respectively. As amortizable intangible assets, we review the carrying value only when impairment indicators are present, by comparing (i) estimates of undiscounted future cash flows, before interest charges, included in our operating plans versus (ii) the carrying values of the related assets. Tests are performed over asset groups at the lowest level of identifiable cash flows. No impairment indicators existed in 2014 or 2013. The failure of step 1 of the goodwill impairment analysis was an impairment indicator in 2012, but the undiscounted cash flows associated with the other intangible assets were greater than the carrying value, and therefore, no impairment was present.
REVIEWING THE CARRYING VALUES OF PROPERTY, PLANT AND EQUIPMENT
We also review the carrying value of our property, plant and equipment when impairment indicators are present. Tests are performed over asset groups at the lowest level of identifiable cash flows. In 2012, we recorded $2 million of impairment charges in connection with our restructuring, which is recorded as "Restructuring and relocation costs" in the Consolidated Statements of Income. See Note 4 for additional description of the restructuring. No material impairment charges were recorded during 2014 or 2013. The failure of step 1 of the goodwill impairment analysis was an impairment indicator in 2012, but the undiscounted cash flows associated with the property, plant and equipment were greater than the carrying value and therefore no impairment was present.
ESTIMATING FAIR VALUE
Fair value standards provide a framework for measuring fair value, which prioritizes the use of observable inputs in measuring fair value. Fair value is the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability. The standards address valuation techniques used to measure fair value including the market approach, the income approach and the cost approach. The market approach uses prices or relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach involves converting future cash flows to a single present value, with the fair value measurement based on current market expectations about those future cash flows. The cost approach is based on the amount that currently would be required to replace the service capacity of the asset. We do not carry nonfinancial assets and nonfinancial liabilities at fair value, so fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment reviews and in the valuation of assets held for sale. See further information related to fair value measurements above under "Goodwill, Trademarks and Intangible Assets" and in Notes 2, 12, 13 and 16.
The level of a fair value measurement is determined by the lowest level input that is significant to the measurement. Level 3 measurements involve the most judgment, and our most significant Level 3 fair value measurements are those used in impairment reviews of goodwill, trademarks and other intangible assets, as described above. The three levels are (from highest to lowest):
Level 1 – observable prices in active markets for identical assets and liabilities;
Level 2 – observable inputs other than quoted market prices in active markets for identical assets and liabilities, which include quoted prices for similar assets or liabilities in an active market and market-corroborated inputs; and
Level 3 – unobservable inputs.
ACCOUNTING FOR PENSION AND TROPICAL SEVERANCE PLANS
Significant assumptions used in the actuarial calculation of projected benefit obligations related to our defined benefit pension and foreign pension and severance plans include the discount rate and the long-term rate of compensation increase. The weighted average discount rate assumptions used to determine the projected benefit obligations for domestic pension plans were 3.7% and 4.4% at December 31, 2014 and 2013, respectively, which were based on a yield curve which uses the plans'

18



expected payouts combined with a large population of high quality, fixed income investments in the U.S. that are appropriate for the expected timing of the plans’ payments. The weighted average discount rate assumptions used to determine the projected benefit obligations for the foreign pension and severance plans were 5.90% and 6.90% for December 31, 2014 and 2013, respectively, which represented the 10-year U.S. Treasury rate adjusted to reflect local inflation rates in these countries. The weighted average long-term rate of compensation increase used to determine the projected benefit obligations for domestic plans was not applicable in 2014 and 2013 due to there not being any participants accruing benefits. This rate was 5.00% for foreign plans in both 2014 and 2013. Determination of the net periodic benefit cost also includes an assumption for the weighted average long-term rate of return on plan assets, which was assumed to be 7.00% for domestic plans in both 2014 and 2013, and 0.40% and 0.70% for foreign plans in 2014 and 2013, respectively. Actual rates of return can differ significantly from those assumed as a result of both the short-term volatility and longer-term changes in average market returns. See further information in Note 16 to the Consolidated Financial Statements.
A 1% change to the discount rate, long-term rate of compensation increase, or long-term rate of return on plan assets each affects pension expense by less than $1 million annually.
ACCOUNTING FOR INCOME TAXES
We are subject to income taxes in both the United States and numerous foreign jurisdictions. Income tax expense or benefit is provided for using the asset and liability method. Deferred income taxes (assets and liabilities) are recognized at currently enacted tax rates for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial reporting purposes. Deferred taxes are not provided for the undistributed earnings of subsidiaries operating outside the U.S. that have been permanently reinvested in foreign operations.
Valuation of deferred tax assets. We regularly analyze our deferred tax assets to determine whether these assets are more likely than not to be realized based on all available evidence. Accounting guidance for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and future profitability. The future realization of deferred tax assets depends on the existence of sufficient sources of taxable income in future periods and includes historical taxable income (taxable income in prior carryback years), the expected timing of the reversal of existing temporary differences, the implementation of tax planning strategies and projected future taxable income exclusive of reversing temporary differences and carryforwards.
In assessing the need for a valuation allowance, we consider both positive and negative evidence in determining whether it is more-likely-than-not that the deferred tax assets will not be realized. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence is objectively verified. As such it is difficult for positive evidence related to projected future taxable income exclusive of reversing temporary differences and carryforwards to overcome objective negative evidence related to recent financial losses. A cumulative loss in recent years is considered a significant piece of negative evidence. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and our tax methods of accounting.
We experienced a three-year cumulative loss position as of December 31, 2012 in our North American businesses primarily resulting from the restructuring and relocation activities described in Note 4, the trademark impairment described in Note 10 and the reserve for grower receivables described in Note 6. As a result of this negative indicator, all evidence to support the realization of our deferred tax assets was reevaluated, including existing deferred tax liabilities, tax planning strategies consistent with our current business plans and forecasted future taxable income. Our primary positive evidence related to forecasts of future taxable income; however, accounting guidance restricts the amount of reliance that can be placed on future taxable income because it is not objectively verifiable. As a result, we recorded a $130 million valuation allowance in the fourth quarter of 2012 against all of our U.S. federal deferred tax assets, which are primarily net operating losses. A sustained period of profitability in our North American businesses will be required before we would change our judgment regarding the need to reverse the full amount of the valuation allowance. Until such time, the utilization of our existing U.S. net operating losses or generation of additional U.S. net operating losses will not result in income tax expense or benefit as the corresponding valuation allowance will be released or established for the same value and as such have a significant impact on our effective tax rate. Increases and decreases in the valuation allowance are included in "Income tax expense (benefit)" in the Consolidated Statements of Income.
Uncertain Tax Positions. In the ordinary course of business, there are many transactions and calculations where the ultimate income tax determination is uncertain. The evaluation of a tax position is a two-step process. The first step is to evaluate the uncertain tax position for recognition by determining if the weight of available evidence indicates that it is "more-likely-than-not" that a tax position, including resolution of any related appeals or litigation, will be sustained upon examination based on its technical merits. If the recognition criterion is met, the second step is to measure the income tax benefit to be

19



realized. Tax positions or portions of tax positions that do not meet the recognition and realization criteria are de-recognized by recording reserves. We establish reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes, penalties and interest could be due. Provisions for and changes to these reserves, as well as the related net interest and penalties, are included in "Income tax expense (benefit)" in the Consolidated Statements of Income. Significant judgment is required in evaluating tax positions and determining our provision for income taxes. We regularly review our tax positions, and the reserves are adjusted in light of changing facts and circumstances, such as the resolution of outstanding tax audits or contingencies in various jurisdictions and the expiration of statutes of limitations.
The tax authority in Ecuador is challenging the transfer pricing practices of major banana exporters and has assessed $23 million of income taxes, penalties and interest related to transfer pricing from 2008 through 2010 and $5 million of statutorily required profit sharing related to transfer pricing from 2010. Other tax years remain open and under audit and may result in additional assessments before the matter is resolved. We believe appropriate transfer pricing was used and that more likely than not, we will succeed upon appeal. Therefore, we do not have unrecognized tax benefits related to this matter included in our December 31, 2014 or December 31, 2013 balance sheets.
ACCOUNTING FOR CONTINGENT LIABILITIES
Each period, we review the status of each claim and legal proceeding and assesses the potential financial exposure. This is coordinated with information obtained from external and internal counsel. If the potential loss from any claim or legal proceeding is probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. To the extent the amount of a probable loss is estimable only by reference to a range of equally likely outcomes, and no amount within the range appears to be a better estimate than any other amount, we accrue the low end of the range. Management makes judgments related to accruals based on the best information available at the time, which may be based on estimates and assumptions, including those that depend on external factors beyond our control. As additional information becomes available, we reassess and may revise estimates for the potential liabilities related to pending claims and litigation. Legal costs are expensed as incurred.
ASSESSING COLLECTIBILITY OF CERTAIN TRADE RECEIVABLES
Our primary markets are in North America and Europe, but we also have sales in the Middle East and other markets. The majority of our sales in the Middle East are in Iran under license from the U.S. government that allows sale of food products to non-sanctioned parties. Sales to Iranian customers are in U.S. dollars and represent $8 million and $17 million of "Trade receivables, less allowances" on the Consolidated Balance Sheet at December 31, 2014 and 2013, respectively. Even though the sales in Iran are permitted, the international sanctions against Iran affected the ability of Iranian customers to pay invoices within terms because it became difficult for them to obtain U.S. dollars, euros or other suitable currencies in sufficient quantity on a regular basis. Over the course of 2012, our receivable balance with these customers increased, and we established payment plans with each of these customers to reduce their balances. Certain customers have so far been able to find acceptable methods of payment to comply with their payment plans. However, some customers have not, and as a result, we recorded a reserve of $9 million in 2012, with an additional $2 million in 2013 as a result of further delinquency and other repayment risk; in 2014, customers have continued to pay within agreed terms. We source bananas from the Philippines for sale in the Middle East under a committed-volume, long-term purchase contract with a former joint venture partner through 2016. To mitigate risk, we have reduced the amount of volume being sent to the Middle East and have developed other Middle Eastern markets. However, Iran remains an important market for our Philippine-sourced bananas.
ACCOUNTING FOR SALES INCENTIVES
We offer sales incentives and promotions to our customers and to consumers primarily in our Salads and Healthy Snacks segment and also in our Bananas segment in certain countries. These incentives are mainly volume-related rebates, placement fees (fees paid to retailers for product display), consumer coupons and promotional discounts. Consideration given to customers and consumers related to sales incentives is recorded as a reduction of sales. Changes in the estimated amount of incentives to be paid are treated as changes in estimates and are recognized in the period of change.
New Accounting Standards
See Note 2 to the Consolidated Financial Statements for information regarding new accounting standards that could affect us.
Risks of International Operations
We operate in many countries outside the United States, including in Central and South America, Europe and the Middle East. Information about our operations by geographic area can be found in Note 20 to the Consolidated Financial Statements. Our global activities are subject to risks inherent in operating in those countries, including: government regulation; currency

20



restrictions, fluctuations and other restraints; import and export restrictions; burdensome taxes; risks of expropriation; threats to employees; political instability; terrorist activities including extortion; and risks of U.S. and foreign governmental action in relation to us. Should such circumstances occur, we might need to curtail, cease or alter our activities in a particular region or country. Trade restrictions apply to certain countries, such as Iran and Syria, that require U.S. government authorization for sales there; notwithstanding the broad trade sanctions against these countries, under current U.S. law and licenses issued thereunder, we are authorized to sell food products to specific customers in these countries. Our operations in some Central American countries are dependent upon leases and other agreements with the governments of these countries.
See Item 1A – Risk Factors and Item 3 – Legal Proceedings in the Annual Report on Form 10-K and Note 21 to the Consolidated Financial Statements for a further description of legal proceedings and other risks including, in particular, (1) the civil litigation and investigations relating to payments made by our former Colombian subsidiary to a Colombian paramilitary group and (2) customs and tax proceedings in Italy.
*******
This Annual Report contains certain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, including: the customary risks experienced by global food companies, such as prices for commodity and other inputs, currency exchange rate fluctuations, industry and competitive conditions (all of which may be more unpredictable in light of continuing uncertainty in the global economic environment), government regulations, food safety issues and product recalls affecting us or the industry, labor relations, taxes, political instability and terrorism; challenges in implementing leadership, organizational, strategic and other changes as a result of being acquired in January 2015; unusual weather events, conditions or crop risks; continued ability to access the capital and credit markets on commercially reasonable terms and comply with the terms of its debt instruments; access to and cost of financing; and the outcome of pending litigation and governmental investigations involving us, as well as the legal fees and other costs incurred in connection with such items.
The forward-looking statements speak as of the date made and are not guarantees of future performance. Actual results or developments may differ materially from the expectations expressed or implied in the forward-looking statements, and we undertake no obligation to update any such statements.

21



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Chiquita Brands International, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flow present fairly, in all material respects, the financial position of Chiquita Brands International, Inc. and its subsidiaries at December 31, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. These financial statements 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, the Company was acquired by Cavendish Global Limited on January 6, 2015.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 18, 2015

22




Chiquita Brands International, Inc.
CONSOLIDATED STATEMENTS OF INCOME
 
(In thousands, except per share amounts)
2014
 
2013
 
2012
Net sales
$
3,090,224

 
$
3,057,482

 
$
3,078,337

Cost of sales
2,735,117

 
2,708,428

 
2,743,040

Selling, general and administrative
218,061

 
233,706

 
275,231

Depreciation
51,298

 
55,915

 
53,736

Amortization
9,368

 
9,366

 
9,418

Equity in (earnings) losses of investees
(2,750
)
 
(258
)
 
33,433

Transaction costs
51,266

 

 

Restructuring and relocation costs
460

 
480

 
35,429

Goodwill and trademark impairment

 

 
181,884

Operating income (loss)
27,404

 
49,845

 
(253,834
)
Interest income
2,715

 
2,856

 
3,131

Interest expense
(61,896
)
 
(61,144
)
 
(45,299
)
Loss on debt extinguishment
(521
)
 
(6,275
)
 

Other income (expense), net
(9,906
)
 
3,522

 
(1,793
)
Loss from continuing operations before income taxes
(42,204
)
 
(11,196
)
 
(297,795
)
Income tax expense
(20,332
)
 
(4,619
)
 
(105,239
)
Loss from continuing operations
(62,536
)
 
(15,815
)
 
(403,034
)
Loss from discontinued operations, net of income taxes

 

 
(1,983
)
Net loss
$
(62,536
)
 
$
(15,815
)
 
$
(405,017
)
 
 
 
 
 
 
Continuing operations
$
(1.33
)
 
$
(0.34
)
 
$
(8.75
)
Discontinued operations

 

 
(0.04
)
Loss per common share – basic
$
(1.33
)
 
$
(0.34
)
 
$
(8.79
)
 
 
 
 
 
 
Continuing operations
$
(1.33
)
 
$
(0.34
)
 
$
(8.75
)
Discontinued operations

 

 
(0.04
)
Loss per common share – diluted
$
(1.33
)
 
$
(0.34
)
 
$
(8.79
)
See Notes to Consolidated Financial Statements.

23




Chiquita Brands International, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
2014
 
2013
 
2012
Net loss
$
(62,536
)
 
$
(15,815
)
 
$
(405,017
)
Unrealized foreign currency translation gains (losses)
16

 
(349
)
 
(194
)
Realized losses for foreign currency translation on business disposal reclassified into Other income (expense), net

163

 

 

Net other comprehensive income (loss) related to foreign currency translation

179

 
(349
)
 
(194
)
 
 
 
 
 
 
Change in fair value of available-for-sale investment

 
157

 
1,944

Realized gains of available-for-sale investment reclassified into Other income (expense), net

 
(561
)
 
(722
)
Net other comprehensive income (loss) related to available-for-sale investment

 
(404
)
 
1,222

 
 
 
 
 
 
Unrealized gains (losses) on derivatives for the period
15,871

 
(11,111
)
 
(16,928
)
Derivative (gains) losses reclassified into Net sales
(7,391
)
 
29,858

 
(1,240
)
Derivative (gains) losses reclassified into Cost of sales
4,473

 
(7,839
)
 
(16,053
)
Net other comprehensive income (loss) related to derivatives
12,953

 
10,908

 
(34,221
)
 
 
 
 
 
 
Actuarial gains (losses) for the period, net of $(401), $247 and $283, respectively, of income tax expense (benefit)
(8,620
)
 
3,230

 
189

Pension cost amortization
1,189

 
1,357

 
789

Net other comprehensive income (loss) related to defined benefit pension and severance plans
(7,431
)
 
4,587

 
978

 
5,701

 
14,742

 
(32,215
)
Comprehensive loss
$
(56,835
)
 
$
(1,073
)
 
$
(437,232
)
See Notes to Consolidated Financial Statements.

24




Chiquita Brands International, Inc.
CONSOLIDATED BALANCE SHEETS
 
December 31,
(In thousands, except share amounts)
2014
 
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and equivalents
$
48,160

 
$
54,017

Trade receivables, less allowances of $14,438 and $19,602, respectively
217,420

 
252,068

Other receivables, net
66,810

 
56,273

Inventories
197,307

 
210,564

Prepaid expenses
38,818

 
49,733

Other current assets
14,549

 
6,540

Total current assets
583,064

 
629,195

Property, plant and equipment, net
397,029

 
390,773

Investments and other assets, net
110,220

 
108,077

Trademarks
426,085

 
426,085

Goodwill
18,095

 
18,095

Other intangible assets, net
77,545

 
86,913

Total assets
$
1,612,038

 
$
1,659,138

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and capital lease obligations
$
4,703

 
$
2,271

Accounts payable
223,286

 
248,273

Accrued liabilities
150,955

 
158,034

Total current liabilities
378,944

 
408,578

Long-term debt and capital lease obligations, net of current portion
637,518

 
629,353

Accrued pension and other employee benefits
89,381

 
77,066

Deferred gain – sale of shipping fleet

 
6,290

Deferred tax liabilities
104,365

 
103,679

Other liabilities
78,496

 
59,734

Total liabilities
1,288,704

 
1,284,700

Commitments and contingencies
 
 
 
Shareholders' equity:
 
 
 
Common stock, $.01 par value (47,112,311 and 46,829,913 shares outstanding, respectively)
471

 
468

Capital surplus
845,392

 
839,664

Accumulated deficit
(502,447
)
 
(439,911
)
Accumulated other comprehensive loss
(20,082
)
 
(25,783
)
Total shareholders' equity
323,334

 
374,438

Total liabilities and shareholders' equity
$
1,612,038

 
$
1,659,138

See Notes to Consolidated Financial Statements.

25




Chiquita Brands International, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)
Common
Shares
 
Common
Stock
 
Capital
Surplus
 
 (Accumulated Deficit) Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Shareholders' Equity
December 31, 2011
45,778

 
$
458

 
$
827,001

 
$
(19,079
)
 
$
(8,310
)
 
$
800,070

Comprehensive loss

 

 

 
(405,017
)
 
(32,215
)
 
(437,232
)
Stock-based compensation
539

 
5

 
8,772

 

 

 
8,777

Shares withheld for taxes

 

 
(1,213
)
 

 

 
(1,213
)
December 31, 2012
46,317

 
$
463

 
$
834,560

 
$
(424,096
)
 
$
(40,525
)
 
$
370,402

Comprehensive loss

 

 

 
(15,815
)
 
14,742

 
(1,073
)
Stock-based compensation
513

 
5

 
7,518

 

 

 
7,523

Shares withheld for taxes

 

 
(2,414
)
 

 

 
(2,414
)
December 31, 2013
46,830

 
$
468

 
$
839,664

 
$
(439,911
)
 
$
(25,783
)
 
$
374,438

Comprehensive loss

 

 

 
(62,536
)
 
5,701

 
(56,835
)
Stock-based compensation
282

 
3

 
7,416

 

 

 
7,419

Shares withheld for taxes

 

 
(1,688
)
 

 

 
(1,688
)
December 31, 2014
47,112

 
$
471

 
$
845,392

 
$
(502,447
)
 
$
(20,082
)
 
$
323,334


See Notes to Consolidated Financial Statements.


26



Chiquita Brands International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
 
(In thousands)
2014
 
2013
 
2012
CASH (USED) PROVIDED BY:
 
 
 
 
 
OPERATIONS
 
 
 
 
 
Net loss
$
(62,536
)
 
$
(15,815
)
 
$
(405,017
)
Loss from discontinued operations

 

 
1,983

Depreciation and amortization
60,666

 
65,281

 
63,154

Goodwill and trademark impairment

 

 
181,884

Equity in (earnings) losses of investees
(2,750
)
 
(258
)
 
33,433

Loss on debt extinguishment
521

 
6,275

 

Deferred income taxes
3,872

 
(8,908
)
 
92,547

Reserve for trade receivables
7,217

 
4,966

 
14,041

Amortization of discount on Convertible Notes
12,381

 
10,968

 
9,715

Amortization of gain on shipping fleet sale
(6,290
)
 
(13,914
)
 
(14,349
)
Stock-based compensation
7,008

 
5,897

 
8,193

Restructuring related asset impairments

 

 
4,883

Changes in current assets and liabilities:
 
 
 
 
 
Trade receivables
29,799

 
31,303

 
(37,098
)
Other receivables
(8,456
)
 
10,454

 
(2,175
)
Inventories
11,979

 
3,770

 
15,302

Prepaid expenses and other current assets
9,166

 
(11,130
)
 
(537
)
Accounts payable and accrued liabilities
(31,637
)
 
14,781

 
7,889

Other liabilities
19,096

 
(913
)
 
31,325

Other
3,765

 
(11,278
)
 
27,404

Operating cash flow
53,801

 
91,479

 
32,577

INVESTING
 
 
 
 
 
Capital expenditures
(49,651
)
 
(49,054
)
 
(53,440
)
Contribution to equity method investment

 
(18,422
)
 

Net proceeds from sale of:
 
 
 
 
 
Equity method investments
3,671

 
3,396

 
3,142

Other long-term assets
2,904

 
9,777

 
4,993

Other, net
(3,685
)
 
3,541

 
(2,334
)
Investing cash flow
(46,761
)
 
(50,762
)
 
(47,639
)
FINANCING
 
 
 
 
 
Issuances of long-term debt

 
429,415

 

Repayments of long-term debt and capital lease obligations
(12,331
)
 
(413,190
)
 
(16,768
)
Borrowings under the 2013 ABL Revolver

24,000

 
36,590

 

Repayments of the 2013 ABL Revolver

(24,000
)
 
(36,590
)
 

Borrowings under the Credit Facility Revolver


 

 
70,000

Repayments of the Credit Facility Revolver


 
(40,000
)
 
(30,000
)
Payments for debt modification and issuance costs
(266
)
 
(13,951
)
 
(2,405
)
Payments of debt extinguishment costs
(300
)
 

 

Financing cash flow
(12,897
)
 
(37,726
)
 
20,827

Increase (decrease) in cash and equivalents
(5,857
)
 
2,991

 
5,765

Cash and equivalents, beginning of period
54,017

 
51,026

 
45,261

Cash and equivalents, end of period
$
48,160

 
$
54,017

 
$
51,026


See Notes to Consolidated Financial Statements.

27



Chiquita Brands International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Subsequent Events
SHARE PURCHASE AND CHANGE IN CONTROL
On October 26, 2014, Chiquita Brands International, Inc. ("CBII" or "Chiquita") entered into an Agreement and Plan of Merger ("Merger Agreement") with Cavendish Global Limited ("Parent"), a private limited company incorporated under the laws of England and Wales, and Cavendish Acquisition Corporation ("Merger Sub"). Parent and Merger Sub are affiliates of the Cutrale and Safra Groups. Under the Merger Agreement, a Tender Offer commenced for the purchase of all shares of CBII common stock for $14.50 per share. On January 6, 2015, Merger Sub accepted for payment 39,791,364 shares that were validly tendered (not including 1,748,335 shares tendered pursuant to notices of guaranteed delivery), which represented approximately 84.46% of the outstanding shares of CBII, which triggered a change in control. Because the Parent and affiliates did not own more than 90% of the shares of CBII as a result of the Tender Offer, the Top-Up Option under the Merger agreement was exercised on January 6, 2015, whereby 41,286,271 Top-Up shares were issued at $14.50 per share in exchange for a promissory note such that Parent and affiliates controlled at least 90% of the shares of CBII. Parent then completed a short-form merger in accordance with New Jersey law, converting each share issued and outstanding into the right to receive $14.50, except for shares owned by the Parent and affiliates. Shares of CBII were delisted from public trading on the New York Stock Exchange before market open on January 7, 2015. Immediately following the short-form merger, Merger Sub merged into CBII with CBII being the surviving entity. Any treasury shares were immediately canceled and the promissory note resulting from the Top-Up Option was eliminated. Following the merger, 1,000 shares of CBII stock remained outstanding and were held by Cavendish US Corporation, a Delaware corporation and wholly owned, indirect subsidiary of Parent. All required consents to the change in control under debt agreements, leases and other matters were obtained prior to January 6, 2015, the date of the change in control.
To complete the transaction, $746 million of cash was contributed by Cavendish US Corporation to Merger Sub, from which $683 million was paid to shareholders of Chiquita, $37 million was used to pay for previously unvested stock compensation that became vested upon change in control, and the remaining $26 million became part of CBII's cash balance when Merger Sub merged with CBII.
STOCK COMPENSATION MATTERS AND EXECUTIVE SEVERANCE
Upon change in control on January 6, 2015, all unvested stock awards including restricted stock units ("RSU's"), Long Term Incentive Plan ("LTIP") awards, and performance restricted stock units ("PRSU's") vested at 100% of targets, where applicable, and became payable at $14.50 per share according to change in control provisions of the stock plans. The change-in-control vesting resulted in a total payout of $37 million, in January and February 2015, that was funded by the equity contribution described above. All stock plans have been canceled after the change in control.
Also in January 2015, the employment of Edward F. Lonergan, former President and Chief Executive Officer of CBII, terminated pursuant to a qualifying termination under his employment agreement, and the employment of Rick P. Frier, former Executive Vice President and Chief Financial Officer, Kevin R. Holland, former Executive Vice President and Chief People Officer, and James E. Thompson, former Executive Vice President, General Counsel and Secretary, terminated pursuant to resignation for good reason under their change in control severance agreements. In connection with these executive terminations, $7 million of expense was recognized in January, all of which was paid in January and February 2015.
RESTRUCTURING AND PLANNED HEADQUARTERS CLOSURE
We announced on January 14, 2015 that all of our operational departments and remaining corporate services will be transitioned from Charlotte, North Carolina to other locations closer to customers and operations. The transition is expected to be completed over a period of twelve to eighteen months from the announcement date.
Total costs associated with the transition are anticipated to be in the range of $25 million to $40 million and are primarily related to: employee severance and relocation; the liability associated with the sub-letting or exit of our corporate headquarters office space in Charlotte; non-cash write-off of leasehold improvements and office equipment of approximately $10 million to $12 million; and the repayment of all $3 million of relocation incentives received in connection with our 2012 move to Charlotte. Severance costs will be expensed over the requisite service periods and paid when employees have completed their required service, and the relocation and other costs will be expensed and paid as incurred. The remaining liability and cost associated with the corporate office in Charlotte including potentially subletting the space, will be determined and recorded as we cease to use the space. The write-off of leasehold improvements and office equipment will be expensed over an accelerated estimated remaining life of 12-18 months. An accrual for the repayment obligation for incentives received from our 2012 relocation to Charlotte was included in our 2014 results as a component of "Transaction costs".

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In January and February 2015, a reduction in force affected approximately 300 employees in Latin America. Because most of the related severance expense was included in the severance plan liabilities described in Note 16, additional expense totaled less than $1 million, which was recorded in January and February of 2015. Payments were approximately $5 million.
PARTIAL REDEMPTION OF 7.875% NOTES DUE 2021
On December 22, 2014, we, at the request of the Cutrale-Safra Group, delivered a notice of our election to redeem, subject to the satisfaction of certain conditions that were met in January 2015, $139 million principal amount of the 7.875% Notes due 2021 ("7.875% Notes") at a redemption price of 107.875% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date of January 21, 2015. In January 2015, CBII recorded a loss on debt extinguishment of $14 million related to premium and deferred financing costs write-offs. The redemption was funded with the issuance of 10,678,368 common shares to Cavendish US Corporation, the new immediate parent of CBII, for $155 million on January 21, 2015.
On December 24, 2014, we, at the request of the Cutrale-Safra Group, delivered a second notice of our election to redeem, subject to the satisfaction of certain conditions that were met in January 2015, $43 million principal amount of the 7.875% Notes at a redemption price of 103% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date of January 23, 2015. In January 2015, CBII recorded an additional loss on debt extinguishment of $2 million related to premium and deferred financing costs write-offs. In accordance with the terms of the indenture of the 7.875% Notes, the change in control that occurred on January 6, 2015 required us to offer to repurchase the remaining $191 million principal amount of the 7.875% Notes at 101% of the principal amount, plus accrued and unpaid interest to the redemption date. Accordingly, we issued a tender offer for these notes and an insignificant number were tendered. The redemption was funded with a $45 million equity contribution from Cavendish US Corporation on January 23, 2015, which was declared as a dividend to Cavendish US Corporation on February 5, 2015 and immediately borrowed as Tranche A of the related party loan described below.
On December 30, 2014, we, at the request of the Cutrale-Safra Group, delivered a third notice of our election to redeem, subject to the satisfaction of certain conditions that were met in January 2015, $43 million principal amount of the 7.875% Notes at a redemption price of 103% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date of February 6, 2015. In February 2015, CBII recorded an additional loss on debt extinguishment of $2 million related to premium and deferred financing costs write-offs. The redemption was funded with Tranche B of the related party loan from Cavendish US Corporation for $44 million.
See further information about the 7.875% Notes in Note 12.
PARTIAL REPURCHASE OF THE 4.25% CONVERTIBLE SENIOR NOTES DUE 2016
The change in control that occurred on January 6, 2015 constituted a Fundamental Change under the 4.25% Convertible Senior Notes due 2016 ("Convertible Notes"), which required us to offer to repurchase the Convertible Notes at a price of 100% of the principal amount of the Notes to be repurchased. The offer was extended on January 14, 2015 to holders of record as of February 1, 2015, with payment on February 15, 2015. Because payment date was the same date as the next regularly scheduled interest payment, holders received the regularly scheduled interest payment and no additional accrued interest.
Holders of $151 million principal amount ($138 million carrying value) of Convertible Notes accepted this offer, after which $49 million of Convertible Notes remain outstanding. Early repayment resulted in a $13 million loss primarily due to the remaining unamortized discount on the Convertible Notes at the time of repurchase and was recorded in February 2015. This repurchase was funded with Tranche C of a related party loan from Cavendish US Corporation for $151 million.
See further information about the Convertible Notes in Note 12.
REPLACEMENT OF ASSET BASED LENDING FACILITY
On February 5, 2015, CBII and Chiquita Brands L.L.C. ("CBLLC"), the main operating subsidiary, and other borrowers party thereto entered into an asset-based credit facility (the "2015 ABL") with certain financial institutions as lenders. The 2015 ABL replaced the 2013 ABL described in Note 12.
The 2015 ABL has a maximum borrowing capacity of $150 million, subject to a borrowing base calculation based on specified advance rates against the value of domestic accounts receivable, certain inventory, and certain domestic machinery and equipment, with the potential for additional advances against foreign receivables. The borrowing base includes up to $19.55 million in borrowing capacity based on specified advance rates against the value of certain domestic machinery and equipment (the "Fixed Asset Sub-Line"), which Fixed Asset Sub-Line contains a re-load feature to potentially increase the sub-line to $50 million. The 2015 ABL matures on February 5, 2020. Loans under the 2015 ABL bear interest at a rate equal to

29



LIBOR plus a margin of from 1.25% to 1.75%, or Base Rate plus a margin of from 0.25% to 0.75%, determined based on levels of borrowing availability reset each fiscal quarter.
Obligations under the 2015 ABL are secured by a first-priority security interest in present and future domestic receivables, inventory, equipment, and substantially all other domestic assets that are not under the first-priority security interest of the 7.875% senior secured notes due 2021 issued by the CBII and CBLLC on February 5, 2013, all subject to certain exceptions and permitted liens and by a second-priority interest in the existing and after acquired material domestic real estate, certain intellectual property and a pledge of 100% of the stock of substantially all of the Issuers' and guarantors' domestic subsidiaries and up to 65% of the stock of certain foreign subsidiaries held by Issuers and the guarantors, and proceeds relating thereto. Under the 2015 ABL, CBLLC and non-de minimis domestic subsidiaries are borrowers. The facility is guaranteed on a full and unconditional basis by CBII and limited domestic subsidiaries of CBII, with the potential for additional guarantees or borrowers by foreign subsidiaries of CBII.
The 2015 ABL contains a fixed charge coverage ratio covenant which only becomes applicable when availability (as defined under such facility) is less than the greater of (i) 10% of the line cap (established under such facility) and (ii) $10 million. The 2015 ABL also contains a covenant requiring CBII and its subsidiaries to maintain substantially all its cash in accounts that are subject to the control of the collateral agent under the 2015 ABL, which only becomes applicable when (a) one of certain specified event of defaults under the facility occurs and is continuing or (b) availability (as defined under such facility) is less than the greater of (i) 10% of the line cap (as defined under such facility) or (ii) $10 million, in either case (i) or (ii) for five consecutive business days. The 2015 ABL also contains other customary affirmative and negative covenants, including limitations of our ability to make distributions and pay dividends.
In connection with the 2015 ABL, we were required to settle hedge contracts with one counterparty before their maturity because the counterparty was not a lender under the 2015 ABL. The contracts were net settled for less than $1 million and represented forward contracts for 17,460 metric tons of bunker fuel at an average rate of $562.92 per metric ton, average rate forward contracts for €18 million at a weighted average rate of $1.37 per euro, and an average rate collar (average rate put option at $1.35 per euro combined with an average rate call option at $1.43 per euro) for €2 million.
RELATED PARTY LOAN
On February 5, 2015, in connection with the partial extinguishment of the 7.875% Notes and the Convertible Notes as described above, CBII entered into a related party loan with its shareholder, Cavendish US Corporation. As of February 17, 2015, the related party loan totaled $239 million represented by Tranche A for $44 million, Tranche B for $44 million and Tranche C for $151 million. All three Tranches of the related party loan are unsecured and payable in full, plus accrued and unpaid interest, on May 6, 2020. This related party bears interest payable quarterly at LIBOR plus 100 basis points, or 1.25% at current rates, for the first two years and thereafter at LIBOR plus 500 basis points, or 5.25% at current rates. Under the terms of the agreement, net cash proceeds from certain asset sales may be required to repay balances under the loan.
INCOME TAX CONSIDERATIONS
The change in control results in certain limitations on our ability to use net operating loss carryforwards ("NOLs") in the U.S. Because we have full valuation allowances on these NOLs, these limitations do not result in income tax expense.
Note 2 — Summary of Significant Accounting Policies
CONSOLIDATION
The Consolidated Financial Statements include the accounts of CBII, controlled majority-owned subsidiaries and any entities that are not majority-owned but require consolidation as a variable interest entity (collectively, "Chiquita" or the company). Intercompany balances and transactions have been eliminated.
USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"), which require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Significant estimates are inherent in the preparation of the accompanying consolidated financial statements. Significant estimates are made in determining allowance for doubtful accounts for grower and trade receivables, sales incentives, reviews of carrying values of long-lived assets, fair value assessments, goodwill and intangible asset valuations, pension and severance plans, income taxes and contingencies. Actual results could differ from these estimates.

30



CASH AND EQUIVALENTS
Cash and equivalents include cash and highly liquid investments with a maturity of three months or less at the time of purchase. At December 31, 2014, we had €8 million ($10 million) of cash equivalents in a compensating balance arrangement relating to an uncommitted credit line for bank guarantees used primarily for duties in European Union countries.
TRADE RECEIVABLES
Trade receivables less allowances reflect the net realizable value of the receivables and approximate fair value. We generally do not require collateral or other security to support trade receivables subject to credit risk. To reduce credit risk, we perform credit investigations prior to establishing customer credit limits and review customer credit profiles on an ongoing basis. Allowances against the trade receivables are established based on our knowledge of customers' financial condition, historical loss experience and account payment status compared to invoice payment terms. Allowances are recorded and charged to expense when an account is deemed to be uncollectible. Recoveries of trade receivables previously reserved in the allowance are credited to income.
FINANCE RECEIVABLES
We include finance receivables in the Consolidated Balance Sheets net of allowances, with current portions included in "Other receivables, net" and long-term portions included in "Investments and other assets, net." The largest components of finance receivables are seasonal grower advances and seller financing from prior sales of certain equity-method investments. Seasonal grower advances made to qualified growers are non-interest bearing, usually short-term in nature and are generally collected as the produce is harvested and sold. We generally require property liens and pledges of the season's produce as collateral to support the advances. If sales of the season's produce do not result in full repayment of the advance, we may exercise the collateral provisions or renegotiate terms, including interest, to collect the remaining balance. Terms of seller financing are typically based on the earnings power of the business that was sold.
Allowances are established when we determine it is probable that the grower will be unable to repay the advance based on our knowledge of the grower's financial condition and our historical loss experience. Allowances are measured for each individual finance receivable using quantitative and qualitative factors, considering the value of any collateral securing the seller financing or grower advance. Interest receivable on overdue or renegotiated seller financing or grower advances is placed into nonaccrual status when collectibility becomes uncertain. Collectibility is assessed at the end of each reporting period and write-offs are recorded only when collection efforts have been abandoned. Recoveries of other receivables previously reserved in the allowance are credited to income.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost for banana growing crops and banana inventories is determined on the "last-in, first-out" (LIFO) basis. Cost for other inventory categories, including other fresh produce and value-added salads, is determined on the "first-in, first-out" (FIFO) or average cost basis. Finished goods inventories represent costs associated with boxed bananas and other fresh produce not yet sold. Growing crop inventories primarily represent the costs associated with growing banana plants on company-owned farms or growing lettuce on third-party farms where we bear substantially all of the growing risk. Materials and supplies primarily represent growing and packaging supplies maintained on company-owned farms or in production plants and warehouses. Inventory costs are comprised of the purchase and transportation cost plus production labor and overhead.
INVESTMENTS
Investments representing non-controlling interests are accounted for by the equity method when we have the ability to exercise significant influence over the investees' operations. Investments for which we do not have the ability to significantly influence are valued at cost. Publicly traded investments that we do not have the ability to significantly influence are accounted for as available-for-sale securities at fair value. Unrealized holding gains or losses on available-for-sale securities are excluded from operating results and are recognized in shareholders' equity (accumulated other comprehensive income) until realized. We assess any declines in the fair value of individual investments to determine whether such declines are other-than-temporary and whether the investments are impaired.
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 remaining useful lives not to exceed the term of any applicable lease. We generally use 30 years for cultivations, 10 to 40 years for buildings and improvements, and 3 to 15 years for machinery and equipment. Cultivations represent the costs to plant and care for banana plants until such time that the root system can support commercial quantities of fruit, as well as the costs to build levees, drainage canals and other farm infrastructure to support the banana plants. When assets are retired or

31



otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts. The difference between the net book value of the asset and the proceeds from disposition is recognized as a gain or loss. Routine maintenance and repairs are charged to expense as incurred, while costs of betterments and renewals are capitalized. We review the carrying value of our property, plant and equipment when impairment indicators are noted. In 2012, we recorded $2 million of impairment charges in connection with our restructuring, which is recorded as "Restructuring and relocation costs" in the Consolidated Statements of Income. See Note 4 for additional description of our restructuring. The failure of step 1 of the goodwill impairment analysis (discussed below) was an impairment indicator in 2012, but the undiscounted cash flows associated with related property, plant and equipment were greater than the carrying value and therefore no impairment was present. There were no material impairment charges recorded in 2014 or 2013.
GOODWILL, TRADEMARKS AND INTANGIBLE ASSETS
Impairment reviews comparing fair value to carrying value are highly judgmental and involve the use of significant estimates and assumptions, which determine whether there is potential impairment and the amount of any impairment charge recorded. Fair value assessments involve estimates of discounted cash flows that are dependent upon discount rates and long-term assumptions regarding future sales and margin trends, market conditions and cash flow. Actual results may differ from these estimates. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements, as described in Note 14. See further information about our policy for fair value measurements below under "Fair Value Measurements" and in Note 14.
As of December 31, 2014 and 2013, our goodwill, a portion of the trademarks and most of the other intangible assets related to our salad operations, Fresh Express. Due to lower operating performance of retail value-added salad business, lower retail value-added salad volumes, lower perceived valuation multiples in the packaged salad industry and continuing demand for private label versus branded products, the 2012 analyses resulted in a $157 million ($157 million after-tax) impairment charge to goodwill and a $23 million ($14 million after-tax) impairment charge to the Fresh Express trademark. We also fully impaired goodwill related to a non-core business in 2012, resulting in $2 million of additional goodwill impairment charges.
Goodwill. Goodwill is reviewed for impairment each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. The 2014 and 2013 reviews did not indicate impairment; however impairment charges resulted from the 2012 review.
The first step of the impairment review compares the estimated fair value of the Fresh Express reporting unit to the carrying value. Consistent with prior impairment reviews, we estimated the fair value of the reporting unit using a combination of: (i) a market approach based on multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") from recent comparable transactions and other market data; and (ii) an income approach based on expected future cash flows discounted at 12.5%, 14.5%, and 13.0% in 2014, 2013 and 2012, respectively. The changes in the discount rate reflect changes in the industry-specific risk corresponding to the perceived revenue and EBITDA multiples for the packaged salad industry. The market approach and the income approach were weighted equally based on judgment of the comparability of the recent transactions and the risks inherent in estimating future cash flows. Management considered recent economic and industry trends, as well as risk in executing our current plans in estimating Fresh Express' expected future cash flows in the income approach. The acquisition, as described in Note 1, was a key consideration in the market approach in the 2014 analysis. In 2014 and 2013, the first step did not indicate impairment because the estimated fair value of the Fresh Express reporting unit was greater than its carrying value; therefore, the second step was not required. In 2012, the first step of the impairment analysis indicated impairment, which was measured in the second step. In addition, no events or changes in circumstances occurred in 2014, 2013 or 2012 that required impairment testing in between annual tests.
The second step of the impairment analysis measures the implied value of goodwill by subtracting the estimated fair values of the reporting unit's assets and liabilities, including intangible assets other than goodwill, from the estimated fair value of the Fresh Express reporting unit as estimated in the first step. The 2012 goodwill impairment charge was measured as the difference between the implied value of goodwill and the carrying value.
Significant assumptions used to estimate the fair value of the Fresh Express reporting unit include estimates of future cash flows, discount rate and multiples of revenue and EBITDA. These assumptions are typically not considered individually because assumptions used to select one variable should also be considered when selecting other variables; however, sensitivity of the overall fair value assessment to each significant variable is also considered. In the 2014 and 2013 analyses, reasonably possible fluctuations in the discount rate, cash flows or market multiples did not indicate impairment. In 2014 and 2013, management also considered the operation of the business in several possible business environments; in each case management assumed that Fresh Express would be able to recapture increases in commodity costs affecting the industry, such as increases in transportation or raw product costs. In the 2012 analysis, a 1.0 percentage point increase in the selected discount rate would have resulted in $8 million of additional impairment, and a 5% decrease in the selected multiples of revenue and EBITDA would have resulted in $10 million of additional impairment.

32



Trademarks. Trademarks are indefinite-lived intangible assets that are not amortized and are also reviewed each fourth quarter, or more frequently if circumstances indicate the possibility of impairment. In addition, no events or changes in circumstances occurred in 2014, 2013 or 2012 that required impairment testing in between annual tests. The review compares the estimated fair values of the trademarks to the carrying values. The 2014 and 2013 reviews did not indicate impairment because the estimated fair values were greater than the carrying values. As noted above, the 2012 review resulted in an impairment charge to the Fresh Express trademark. Consistent with prior reviews, we estimate the fair values of the trademarks using the relief-from-royalty method. The relief-from-royalty method estimates the royalty expense that is avoided as a result of owning the respective trademarks. The royalty savings are measured by applying a royalty rate to projected branded sales to estimate cash flows attributable to the trademark, then converting those cash flows (after-tax) to a present value using a discount rate that considers the risk associated with owning the trademarks. Royalty rates are selected based on recent available data for similar trademark license arrangements as well as assessments of the cash flows from the business activities related to the trademark.
For the Chiquita trademark, we assumed royalty rates of 2.5%, 2.5% and 2.5% and discount rates of 11.0%, 11.5% and 11.0% in the 2014, 2013 and 2012 impairment analyses, respectively. The fair value estimate is most sensitive to the royalty rate but reasonably possible fluctuations in both the royalty rates and the discount rates for the Chiquita trademarks also did not indicate impairment.
For the Fresh Express trademarks, we assumed royalty rates of 1.0%, 1.0% and 1.0% and discount rates of 12.5%, 14.5% and 13.0% in the 2014, 2013 and 2012 impairment analyses, respectively. A 0.5 percentage point decrease in the selected royalty rate in the 2012 analysis would have resulted in $18 million of additional impairment and a 1.0 percentage point increase in the selected discount rate would have resulted in an additional $3 million of impairment. At the time of the 2014 and 2013 analyses, reasonably possible fluctuations in the selected royalty rate or the selected discount rate did not indicate impairment.
Other Intangible Assets. Our intangible assets with definite lives consist of customer relationships and patented technology primarily related to Fresh Express. These assets are amortized on a straight-line basis (which approximates the attrition method) over their estimated remaining lives. The weighted average remaining lives of the Fresh Express customer relationships and patented technology are 9 years and 7 years, respectively. As amortizable intangible assets, we review the carrying value only when impairment indicators are present, by comparing (i) estimates of undiscounted future cash flows, before interest charges, included in our operating plans versus (ii) the carrying values of the related assets. Tests are performed over asset groups at the lowest level of identifiable cash flows. No impairment indicators existed in 2014 or 2013. The failure of step 1 of the goodwill impairment analysis was an impairment indicator in 2012, but the undiscounted cash flows associated with the other intangible assets were greater than the carrying value, and therefore, no impairment was present.
REVENUE RECOGNITION
We record revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the customer is fixed or determinable, and collectibility is reasonably assured. This generally occurs when the product is delivered to, and title to the product passes to, the customer.
SALES INCENTIVES
We offer sales incentives to our customers and consumers, primarily in our Salads and Healthy Snacks segment and also in our Bananas segment in certain countries. These incentives primarily consist of volume-related rebates, placement fees (fees paid to retailers for product display), consumer coupons and promotional discounts. Consideration given to customers and consumers related to sales incentives is recorded as a reduction of "Net sales" in the Consolidated Statements of Income. Changes in the estimated amount of incentives to be paid are treated as changes in estimates and are recognized in the period of change.
ADVERTISING AND PROMOTION EXPENSE
Advertising and promotion expense is included in "Selling, general and administrative" and was $28 million, $28 million and $27 million for the years ended December 31, 2014, 2013 and 2012, respectively. Television advertising costs related to production are expensed the first time an ad airs in each market and the cost of advertising time is expensed over the advertising period. Other types of advertising and promotion are expensed over the advertising or promotion period.
SHIPPING AND HANDLING FEES AND COSTS
Shipping and handling fees billed to customers are included in "Net sales" and shipping and handling costs are recorded in "Cost of sales" in the Consolidated Statements of Income.

33



VALUE ADDED TAXES
Value added taxes ("VAT") that are collected from customers and remitted to taxing authorities in applicable jurisdictions are excluded from sales and cost of sales. Receivables result from filing for refunds of VAT paid to various governments and liabilities result from collections that have not yet been remitted to taxing authorities. As of December 31, 2014 and 2013, we had $31 million and $32 million, respectively, of VAT receivables classified in "Other receivables, net"; $3 million and $1 million, respectively, classified in "Investments and other assets, net"; and $8 million and $8 million, respectively, of VAT liabilities classified in "Accounts payable."
LEASES
Leases are evaluated at inception or upon any subsequent material modification for treatment as either capital or operating, depending on the terms of each lease. For operating leases that contain built-in pre-determined rent escalations, rent holidays or rent concessions, rent expense is recognized on a straight-line basis over the life of the lease.
STOCK-BASED COMPENSATION
As described in Note 1, the change in control that occurred on January 6, 2015 caused unvested stock awards to fully vest and become payable. Subsequent to the acquisition, our stock plans were terminated.
Prior to termination of our stock plans, our share-based awards include restricted stock units ("RSU"), performance restricted stock units ("PRSU's"), a Long-Term Incentive Program ("LTIP") and stock options. RSU awards generally vest over four years, and prior to vesting, shares are not issued and grantees are not eligible to vote or receive dividends on the restricted stock units. RSU awards are equity-classified and the fair value of these awards is determined at the grant date and expensed over the period from the grant date to the date the employee is no longer required to provide service to earn the award, which could be immediately in the case of retirement-eligible employees. PRSU awards vest upon satisfying Chiquita stock price performance metrics as established by the board of directors and meeting the service requirements. These metrics establish six stock price levels that must be maintained for at least 20 consecutive days, and occur within three years of the grant date. Upon satisfying the market price condition for 20 consecutive days, a predetermined percentage of the total shares will vest. PRSU awards are equity-classified and the fair value of these awards is determined at the grant date and expensed over the period from the grant date to the date the employee is no longer required to provide service to earn the award.
Certain executive level employees participate in the LTIP, where awards are intended to be performance-based compensation as defined in Section 162(m) of the Internal Revenue Code. The LTIP allows for awards to be issued at the end of each three-year performance period. Prior to the 2011-2013 performance period, one-half of each LTIP award was based on our achievement of cumulative earnings per share targets ("EPS awards"), and the other half was based on our achievement of total shareholder return relative to peer companies ("TSR awards"). For the 2012-2014 performance period, 20% is a TSR award, 40% is an EPS award and 40% is based on our achievement of a free cash flow target ("FCF award"). For the 2013-2015 and 2014-2016 performance periods, 50% is a TSR award and 50% is based on our achievement of a free cash flow target ("FCF award"). The value of TSR awards is based on a Monte Carlo simulation at the measurement date. The value of EPS and FCF awards is based on the share price at the measurement date and an estimate of the expected number of shares to be issued at the end of the performance period.
In October 2012, under a plan separate from our shareholder-approved equity compensation plan, 1,440,062 of stock options were granted to our then new chief executive officer as a hiring inducement in accordance with New York Stock Exchange rules. One-half of the stock options become exercisable on each of the first two anniversaries of the chief executive officer's start date. The fair value of these awards was determined at the grant date and is being expensed over the period from the grant date to the date the chief executive officer is no longer required to provide service to earn the award. See Note 18 for additional description of our stock-based compensation.
CONTINGENT LIABILITIES
Each period, we review the status of each claim and legal proceeding and assess the potential financial exposure. This is coordinated with information obtained from external and internal counsel. If the potential loss from any claim or legal proceeding is probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. To the extent the amount of a probable loss is estimable only by reference to a range of equally likely outcomes, and no amount within the range appears to be a better estimate than any other amount, we accrue the low end of the range. Management makes judgments related to accruals based on the best information available at the time, which may be based on estimates and assumptions, including those that depend on external factors beyond our control. As additional information becomes available, we reassess and may revise estimates for the potential liabilities related to pending claims and litigation. Legal costs are expensed as incurred.

34



INCOME TAXES
We are subject to income taxes in both the United States and numerous foreign jurisdictions. Income tax expense or benefit is provided for using the asset and liability method. Deferred income taxes are recognized at currently enacted tax rates for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial reporting purposes. Deferred taxes are not provided for the undistributed earnings of subsidiaries operating outside the U.S. that are considered to have been permanently reinvested in foreign operations.
We regularly review all deferred tax assets on a tax filer and jurisdictional basis to estimate whether these assets are more likely than not to be realized based on all available evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies and projected future taxable income. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence is objectively verified. The expected timing of the reversals of existing temporary differences is based on current tax law and our tax methods of accounting. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and our tax methods of accounting. Unless deferred tax assets are more likely than not to be realized, a valuation allowance is established to reduce the carrying value of the deferred tax asset until such time that realization becomes more likely than not. Increases and decreases in these valuation allowances are included in "Income tax expense (benefit)" in the Consolidated Statements of Income.
In the ordinary course of business, there are many transactions and calculations where the ultimate income tax determination is uncertain. The evaluation of a tax position is a two-step process. The first step is to evaluate the uncertain tax position for recognition by determining if the weight of available evidence indicates that it is "more-likely-than-not" that a tax position, including resolution of any related appeals or litigation, will be sustained upon examination based on our technical merits. If the recognition criterion is met, the second step is to measure the income tax benefit to be realized. Tax positions or portions of tax positions that do not meet the recognition and realization criteria are de-recognized by recording reserves. We establish reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes, penalties and interest could be due. Provisions for and changes to these reserves, as well as the related net interest and penalties, are included in "Income tax expense (benefit)" in the Consolidated Statements of Income. Significant judgment is required in evaluating tax positions and determining our provision for income taxes. We regularly review our tax positions, and the reserves are adjusted in light of changing facts and circumstances, such as the resolution of outstanding tax audits or contingencies in various jurisdictions and the expiration of statutes of limitations.
EARNINGS PER SHARE
Basic earnings per share are calculated on the basis of the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated on the basis of the sum of the weighted average number of common shares outstanding during the year and the dilutive effect of the assumed conversion to common stock of the 4.25% convertible senior notes and the exercise of options or issuance of other stock awards using the treasury stock method. The assumed conversion to common stock of securities that would, on an individual basis, have an anti-dilutive effect on diluted earnings per share is not included in the diluted earnings per share computation.
CURRENCY TRANSLATION ADJUSTMENT
We primarily use the U.S. dollar as our functional currency, and monetary assets denominated in foreign currencies are remeasured at the balance sheet date with related transaction gains and losses recognized currently in earnings. Certain smaller subsidiaries have functional currencies other than the U.S. dollar and recognize currency-related fluctuations in asset and liability values as a component of "Other comprehensive income (loss)."
HEDGING
We are exposed to currency exchange risk, most significantly from the value of the euro and its effect of converting euro-denominated sales into U.S. dollars. We are also exposed to price risk on purchases of bunker fuel used in our ocean shipping operations. We may reduce these risks by purchasing derivatives, such as options and forward contracts. When purchasing derivatives, we identify a "forecasted hedged transaction," which is a specific future transaction (e.g., the purchase of fuel or exchange of currency in a specific future period), and designate the risk associated with the forecasted hedged transaction that the derivative will mitigate. The fair value of all derivatives is recognized in the Consolidated Balance Sheets. Gains and losses from changes in fair value of derivatives are recognized in net income in the current period if a derivative does not qualify for, or is not designated for, hedge accounting.
Most of our derivatives qualify for hedge accounting as cash flow hedges. We formally document all relationships between derivatives and the forecasted hedged transactions, including our risk management objective and strategy for undertaking various hedge transactions. To the extent that a derivative is effective in offsetting the designated risk exposure of

35



the forecasted hedged transaction, gains and losses are deferred in Accumulated other comprehensive income ("AOCI") in the Consolidated Balance Sheets until the respective forecasted hedged transaction occurs, at which point any gain or loss is recognized in net income. Gains or losses on effective hedges that have been terminated prior to maturity are also deferred in AOCI until the forecasted hedged transactions occur. For any ineffective portion of the hedge, gains or losses are reflected in net income in the current period. Ineffectiveness is caused by an imperfect correlation of the change in fair value of the derivative and the risk that is hedged.
The earnings effect of derivatives is recorded in "Net sales" for currency hedges and in "Cost of sales" for fuel hedges. We do not hold or issue derivative financial instruments for speculative purposes. See Note 13 for additional description of our hedging activities.
FAIR VALUE MEASUREMENTS
We carry financial assets and financial liabilities at fair value, as further described in Note 14, but did not elect to carry nonfinancial assets and nonfinancial liabilities at fair value. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment reviews and in the valuation of assets held for sale. Fair value standards provide a framework for measuring fair value, which prioritizes the use of observable inputs in measuring fair value. Fair value is the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability. The standards address valuation techniques used to measure fair value including the market approach, the income approach and the cost approach. The market approach uses prices or relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach involves converting future cash flows to a single present value, with the fair value measurement based on current market expectations about those future cash flows. The cost approach is based on the amount that currently would be required to replace the service capacity of the asset. See further information related to fair value measurements above under "Goodwill, Trademarks and Intangible Assets" and in Notes 14 and 16.
PENSION AND TROPICAL SEVERANCE PLANS
We record the underfunded status of the defined benefit plans and tropical severance plans as a liability on the Consolidated Balance Sheets, recognize changes in the funded status in AOCI in the year in which the changes occur, and measure the plan assets and obligations that determine the funded status as of the end of the fiscal year. Significant assumptions used in the actuarial calculation of the liabilities and expense related to our defined benefit and foreign pension and severance plans include the discount rate, rate of compensation increase and the long-term rate of return on plan assets. For domestic plans, we use a discount rate based on a yield curve which uses the plans' expected payouts combined with a large population of high quality, fixed income investments in the U.S. that are appropriate for the expected timing of the plans' payments. For foreign plans, we use a discount rate based on the 10-year U.S. Treasury rate adjusted to reflect local inflation rates in those countries.
DISCONTINUED OPERATIONS
In August 2008, we sold our subsidiary, Atlanta AG. In 2012, we recorded a loss from discontinued operations of $2 million related to new information about indemnification obligations for tax liabilities existing prior to the sale.

36



NEW ACCOUNTING STANDARDS
New accounting standards that could significantly affect our Consolidated Financial Statements are summarized as follows:
Standard Name
Issued
Description
Effective Date
for Chiquita
Effect on Chiquita's Condensed Consolidated
Financial Statements
Business Combinations: Pushdown Accounting
November 2014 ASU 2014-17
Provides an acquired entity the option to apply pushdown accounting after a change-in-control event, in the reporting period of which the change-in-control event occurred.
Transactions after November 18, 2014.
No effect.
Revenue from Contracts with Customers

May 2014 ASU 2014-09
Requires additional considerations for timing and amount of revenue recognition for contract sales with customers.
Beginning December 2016. Early adoption is not permitted.
The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and will evaluate the effect of the standard on our sales contracts with customers, evaluate methods of adoption and monitor other future potential effects.
Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

April 2014 ASU 2014-08
Requires additional disclosures about changing the criteria for reporting discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity's operations
Prospectively, beginning January 1, 2015; early adoption permitted.
We have opted for early adoption, which did not have a significant impact on our financial results. We will continue to monitor the potential impact of this early adoption on future filings.
Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
July 2013 ASU 2013-11
Requires unrecognized tax benefits to be presented as a decrease in net operating loss, similar tax loss or tax credit carryforward if certain criteria are met.
Prospectively, beginning January 1, 2014; early adoption permitted.
Adoption did not have a significant effect on the disclosure of our deferred taxes.

37



Note 3 — Earnings Per Share
Basic and diluted earnings per common share ("EPS") are calculated as follows:
(In thousands, except per share amounts)
2014
 
2013
 
2012
Loss from continuing operations
$
(62,536
)
 
$
(15,815
)
 
$
(403,034
)
Loss from discontinued operations

 

 
(1,983
)
Net loss
$
(62,536
)
 
$
(15,815
)
 
$
(405,017
)
 
 
 
 
 
 
Weighted average common shares outstanding (used to calculate basic EPS)
46,963

 
46,577

 
46,059

Dilutive effect of stock options and other stock awards

 

 

Weighted average common shares outstanding (used to calculate diluted EPS)
46,963

 
46,577

 
46,059

 
 
 
 
 
 
Continuing operations
$
(1.33
)
 
$
(0.34
)
 
$
(8.75
)
Discontinued operations

 

 
(0.04
)
Loss per common share – basic
$
(1.33
)
 
$
(0.34
)
 
$
(8.79
)
 
 
 
 
 
 
Continuing operations
$
(1.33
)
 
$
(0.34
)
 
$
(8.75
)
Discontinued operations

 

 
(0.04
)
Loss per common share – diluted
$
(1.33
)
 
$
(0.34
)
 
$
(8.79
)
If we had generated net income for the years ended December 31, 2014, 2013 and 2012, an additional 1.3 million, 0.9 million and 0.5 million shares, respectively, would have been added to basic weighted average common shares outstanding to calculate diluted EPS.
The assumed conversions to common stock of stock options, other stock awards and the Convertible Notes are excluded from weighted average common shares outstanding used to calculated diluted EPS in periods when these items, on an individual basis, have an anti-dilutive effect on diluted EPS. In 2014, 2013 and 2012, the effect of the conversion of the Convertible Notes would have been anti-dilutive because the average trading price of the common stock was below the initial conversion price of $22.45 per share. In addition, certain stock options and other stock awards totaling less than 0.1 million, 0.9 million and 1.9 million in 2014, 2013 and 2012, respectively, were outstanding but not included in the computation of diluted EPS because they were anti-dilutive.
Note 4 — Restructuring and Relocation
As more fully described in Note 1, in connection with the Merger Agreement, we announced on January 14, 2015 that all of our operational departments and remaining corporate services will be transitioned from Charlotte, North Carolina to other locations closer to customers and operations. The transition is expected to be completed over a period of twelve to eighteen months from the announcement date. Additionally, as described in Note 1, we initiated a reduction in force in Latin America in January and February 2015.
RESTRUCTURING
In August 2012, we announced a restructuring plan to transform the company into a branded commodity operator. The restructuring plan was designed to reduce costs and improve our competitive position by focusing our resources on the banana and salad businesses, reducing investment in non-core products, reducing overhead and manufacturing cost and limiting consumer marketing activities. In connection with this restructuring plan, we eliminated approximately 300 positions worldwide. During 2012, $18 million of restructuring costs were recognized including $11 million of severance and $5 million of impairments primarily related to fixed assets and certain promotional and packaging materials in "Restructuring and relocation costs" in the Consolidated Statements of Income. Restructuring costs also included $2 million of goodwill impairment related to the European healthy snacking business which was ultimately sold (see further discussion below), and was recorded in "Goodwill and trademark impairment" in the Consolidated Statements of Income. The restructuring was substantially complete at December 31, 2012, although cash payments related to the restructuring plan continued through September 2014.

38



A reconciliation of the accrual for the restructuring activities included in "Accrued liabilities" in the Consolidated Balance Sheet is as follows:
(In thousands)
Severance
December 31, 2011
$

Severance expense
10,591

Amounts paid
(3,591
)
December 31, 2012
$
7,000

Severance expense
(33
)
Amounts paid
(5,117
)
December 31, 2013
$
1,850

Amounts paid
(1,850
)
December 31, 2014
$

Consistent with our current strategy of reducing investments in non-core products, we sold one of the European healthy snacking businesses in the second quarter of 2013. The business was sold for €3 million ($4 million) resulting in a gain of $1 million recognized in "Other income (expense), net" in the Consolidated Statements of Income. This business represented approximately $12 million in net sales and an insignificant contribution to operating income on an annual basis.
HEADQUARTERS RELOCATION
In 2011, we committed to relocate our corporate headquarters from Cincinnati, Ohio to Charlotte, North Carolina, affecting approximately 300 positions. Concurrent with the headquarters relocation, we further consolidated approximately 100 additional positions previously spread across the U.S. to improve execution and accelerate decision-making. The relocation was substantially completed in 2012, and we incurred a total of $26 million of expense and $5 million of net capital expenditures related to the relocation through 2013.
A reconciliation of the accrual for the relocation that is included in "Accrued liabilities" in the Consolidated Balance Sheet is as follows:
(In thousands)
One-Time
Termination
Costs
 
Relocation,
Recruiting
and
Other Costs
 
Total Exit Costs
 
Other Relocation Costs
 
Total
December 31, 2011
$
5,303

 
$
244

 
$
5,547

 
$
108

 
$
5,655

Amounts expensed
2,527

 
13,129

 
15,656

 
4,048

 
19,704

Amounts paid
(5,799
)
 
(12,295
)
 
(18,094
)
 
(4,238
)
 
(22,332
)
December 31, 2012
$
2,031

 
$
1,078

 
$
3,109

 
$
(82
)
 
$
3,027

Amounts expensed
(49
)
 
480

 
431

 
82

 
513

Amounts paid
(1,982
)
 
(1,558
)
 
(3,540
)
 

 
(3,540
)
December 31, 2013
$

 
$

 
$

 
$

 
$

Note 5 — Termination of Combination with Fyffes and Subsequent Acquisition by Cutrale-Safra
On March 10, 2014, we announced our intention to combine with Fyffes plc ("Fyffes") and entered into a transaction agreement for the proposed combination, the terms of which were amended on September 25, 2014. A special meeting of our shareholders was held on October 24, 2014 in which the shareholders did not approve the amended transaction agreement with Fyffes; therefore, Fyffes delivered a notice of termination of the transaction agreement. In connection with the terminated Fyffes strategic combination, we incurred legal, advisory and other expenses totaling $14 million during the year ended December 31, 2014. In addition, pursuant to the terms of the amended transaction agreement and expenses reimbursement agreement, we incurred a termination fee of $23 million , which we paid in November 2014.
Additionally, in connection with the Cutrale-Safra Merger Agreement, we incurred legal, advisory and other expenses totaling $14 million during the year ended December 31, 2014. See Note 1 to the Consolidated Financial Statements for further information regarding the Merger Agreement.
All of the above costs have been included in "Transaction costs" in the Consolidated Statement of Income.

39



Note 6 – Trade and Finance Receivables
TRADE RECEIVABLES
Our primary markets are in North America and Europe, but we also have sales in the Middle East and other markets. The majority of our sales in the Middle East are in Iran under license from the U.S. government that allows sale of food products to non-sanctioned parties. Sales to Iranian customers are in U.S. dollars and represent $8 million and $17 million of "Trade receivables, less allowances" on the Consolidated Balance Sheet as of December 31, 2014 and 2013, respectively. Even though the sales in Iran are permitted, the international sanctions against Iran affected the ability of certain Iranian customers to pay invoices within terms because it became difficult for them to obtain U.S. dollars, euros or other suitable currencies in sufficient quantity on a regular basis. Over the course of 2012, our receivable balance with these customers increased, and we established payment plans with each of these customers to reduce their balances. Certain customers have so far been able to find acceptable methods of payment to comply with their payment plans. However, some customers have not, and as a result, we recorded a reserve of $9 million in 2012, with an additional $2 million in 2013 as a result of further delinquency and other repayment risk; in 2014, customers have continued to pay within agreed terms. We source bananas from the Philippines for sale in the Middle East under a committed-volume, long-term purchase contract with a former joint venture partner through 2016. To mitigate risk, we have reduced the amount of volume being sent to the Middle East and have developed other Middle Eastern markets. However, Iran remains an important market for our Philippine-sourced bananas.
FINANCE RECEIVABLES
Finance receivables were as follows:
 
December 31,
 
2014
 
2013
(In thousands)
Grower
Receivables
 
Seller Financing
 
Grower
Receivables
 
Seller Financing
Gross receivable
$
36,089

 
$
25,629

 
$
35,761

 
$
27,127

Reserve
(32,074
)
 

 
(32,877
)
 

Net receivable
$
4,015

 
$
25,629

 
$
2,884

 
$
27,127

 
 
 
 
 
 
 
 
Current portion included in "Other receivables, net"
$
4,015

 
$
4,740

 
$
2,884

 
$
3,990

Long-term portion included in "Investments and other assets, net"

 
20,889

 

 
23,137

Net receivable
$
4,015

 
$
25,629

 
$
2,884

 
$
27,127


Activity in the finance receivable reserve is as follows:
(In thousands)
2014
 
2013
Reserve at beginning of year
$
32,877

 
$
36,854

Charged to costs and expenses

 
61

Recoveries
(393
)
 
(1,128
)
Write-offs
(390
)
 
(2,910
)
Foreign exchange and other
(20
)
 

Reserve at end of year
$
32,074

 
$
32,877

Seasonal advances may be made to certain qualified growers, which are normally collected as the produce is harvested and sold. We generally require asset liens and pledges of the season's produce as collateral to support these advances. If sales of the season's produce do not result in full repayment of the advance, we may exercise the collateral provisions or renegotiate the terms, including terms of interest, to collect the remaining balance.
The gross grower receivable balance includes $29 million (all of which were classified as long-term) related to a Chilean grower of grapes and other produce as of December 31, 2014 and 2013. In 2011, we fully reserved the advances made to this Chilean grower, who was declared bankrupt later that year. We continue to aggressively negotiate recovery.
We provided seller financing in the 2009 sale of the former joint venture that sourced bananas and pineapples from the Philippines for sale in the Middle East and Asia. The financing for the sale of this joint venture is a note receivable in equal installments through 2019. In December 2014, this seller financing note receivable increased by $2 million related to the resolution of contingent consideration receivable from the 2009 sale. As of December 31, 2014, payments are current on this note receivable.

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Note 7 — Inventories
Inventories consist of the following:
 
December 31,
(In thousands)
2014
 
2013
Finished goods
$
65,084

 
$
69,450

Growing crops