chiquita brands international 2003annual

c h i q u i ta b r a n d s i n t e r n at i o n a l , i n c .
2 0 0 3 a n n ua l r e p o rt

turnaround &
transformation

c h i q u i ta b r a n d s i n t e r n at i o n a l , i n c .

Chiquita Brands International is a leading international marketer, producer and distributor of high-quality
bananas and other fresh produce sold primarily under the premium Chiquita® brand. The company is one
of the largest banana producers in the world and a major supplier of bananas in Europe and North America.
The company also distributes and markets fresh-cut fruit and other branded, value-added fruit products.
Additional information is available at www.chiquita.com.

fi na nc i a l h i g h l i g h ts

3.021
2002 2003 2002 2003 12.02 12.03
$654
$75
$140

$517
2005
original
$395
target
Q2-Q4
$400
$26
million
Q2-Q4
$27
Q1
$41

Q1
-$13

T O TA L D E BT 2
O P E R AT I N G I N C O M E C A S H F L O W F R O M O P E R AT I O N S
(in millions) (in millions) (in millions)

Predecessor Co. Reorganized Co. Predecessor Co. Reorganized Co. Reorganized Co.

REORGANIZED PREDECESSOR
C O M PA N Y C O M PA N Y
9 MOS. ENDED 3 MOS. ENDED
2003 DEC. 31, 2002 MARCH 3 1 , 2 0 02
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

I n co m e St a te m e n t Da t a
$ 2,614 $ 1,140 $ 446
Net sales
140 26 41
Operating income
Income (loss) from continuing operations
before cumulative effect of accounting change3 96 (7) (190)
Diluted per share income (loss) from continuing operations
2.38 (0.17) (2.42)
before cumulative effect of accounting change
4
99 13 (398)
Net income (loss)
2.46 0.33 (5.08)
Diluted per share net income (loss)
40.4 40.0 78.3
Shares used to calculate diluted EPS

Ca s h F l ow Da t a
$ 75 $ 27 $ (13)
Cash flow from operations
51 32 3
Capital expenditures

B a l a n ce S h e e t Da t a DEC. 31, 2003 DEC. 31, 2002

$ 134 $ 53
Cash and cash equivalents
1,707 1,642
Total assets
757 629
Shareholders’ equity

1 Emergence from financial restructuring.
2 Total debt at March 31, 2002 and Dec. 31, 2002 includes debt of Chiquita Processed Foods, the company’s vegetable canning division, sold in May 2003.
3 2 0 03 i n co m e f ro m co n t i n u i n g o p e rat i o n s i n c l u d e s $4 1 m i l l i o n o f n e t ga i n s o n a s s e t s a l e s , a n d $25 m i l l i o n o f c h a rge s f o r s eve ra n ce, l o s s e s o n
Atlanta AG asset disposals, and the shutdown of banana farms. Income from continuing operations for the nine months ended Dec. 31, 2002
includes $21 million of charges for the shutdown of Atlanta AG operations, floods and severance. Income from continuing operati ons for the
three months ended March 31, 2002 includes $222 million in charges related to financial restructuring.
4 Net income (loss) includes results from discontinued operations: $3 million of income for 2003; $20 million of income for the nine months ended
Dec. 31, 2002; and $63 million of losses for the three months ended March 31, 2002. The net loss for the three months ended March 31, 2002 also
includes a $145 million charge for the cumulative effect of a change in the method of accounting for goodwill.

A Chiquita banana is …

Fat-free, cholesterol-free and sodium-free

A good source* of
Vitamins B6 & C, which support the
body’s immune system
Potassium, which may reduce the risk
of high blood pressure and stroke
Fiber, which is useful for weight management

Chock-full of energy with 110 calories

* A 126-gram (medium) banana has 20 percent of the recommended daily value for vitamin B6, 15 percent of vitamin C, 11 percent of potassium and 16
percent of dietary fiber, according to the U.S. Food and Drug Administration (FDA). Diets containing foods that are good sources of potassium and
low in sodium may reduce the risk of high blood pressure and stroke, according to the FDA. A diet high in fruits and vegetables may help reduce the risk
of some cancers. Chiquita bananas meet the American Heart Association’s food criteria for saturated fat and cholesterol for healthy people over age 2.

Doubled operating income to
$140 million, including asset sales1
Reduced debt by $122 million, achieving
our $400 million target two years early

d e a r s ta k e h o l d e r s :

2003 was an excellent year for Chiquita, as we consistently delivered on the commitments
we had made to focus on the core, drive better performance and profitably invest cash.
The turnaround of Chiquita is well underway. Our next step is transformation, in which
growth and focusing on the consumer become top priorities as we continue to strengthen
our core business.

Revenue in 2003 was $2.6 billion, compared to $446 million in the three months ended
March 31, 2002, prior to the company’s emergence from financial restructuring, and $1.1 billion
in the nine months ended Dec. 31, 2002. Approximately 80 percent of the $1 billion increase
in 2003 revenue from 2002 was due to our acquisition in March of Atlanta AG, a German
fresh produce distributor. Operating income for 2003 rose to $140 million from $41 million in
the first quarter of 2002 and $26 million for the nine months ended Dec. 31, 2002. Net income
was $99 million or $2.46 a share. The company’s 2002 results consisted of a first-quarter loss
of $398 million – after charges related to the bankruptcy and fresh start accounting, and a
change in the method of accounting for goodwill – and net income of $13 million, $0.33 a share,
in the nine months ended Dec. 31, 2002.

Cash flow from operations was $75 million in 2003 compared to $27 million in the nine
months ended Dec. 31, 2002 and $(13) million in the first quarter of 2002.

1 Operating income in 2003 was $140 million compared to $41 million in the first quarter of 2002 and $26 million for the nine months ended Dec. 31, 2002.
Operating income in 2003 includes $41 million of net gains on asset and farm sales, and $25 million of charges for severance, losses on Atlanta asset
disposals, and the shutdown of banana farms. Operating income for the nine months ended Dec. 31, 2002 includes $21 million in charges for the shutdown
of Atlanta operations, floods and severance.

2
Chiquita Brands International, Inc. 2003 a n n u a l r e p o r t

Increased productivity 12 percent
on owned banana farms
Launched successfully our new
Chiquita Fresh Cut Fruit business
Earned certification to SA8000 labor and
EUREPGAP® food safety standards

The improvement in 2003 operating income was due to Chiquita’s success in cost-cutting,
the benefit of a stronger euro, asset sales, increased banana and other fresh fruit sales, and
improvements at Atlanta.

The progress on our commitments was significant. We divested $270 million of noncore
assets. We achieved our gross cost savings goal by reducing overhead and increasing
productivity on our farms. As expected, our savings were largely offset by higher fuel,
paper and purchased fruit prices that affected the industry. We also reduced our debt to
$395 million, exceeding our target two years early. We acquired Atlanta, exited its underper-
forming businesses and cut its costs. In fact, we’re ahead of schedule on improving
Atlanta’s profitability.

We also accomplished new milestones in corporate responsibility, earning certification for
our banana farms in Colombia, Costa Rica and Panama to Social Accountability Interna-
tional’s SA8000 labor standard and to EUREPGAP food safety standards. We maintained
certification to Rainforest Alliance environmental standards on all our owned farms for the
fourth consecutive year. Finally, 75 percent of the independent-grower farms from which
we purchase bananas also achieved Rainforest Alliance certification in 2003.

4

Divested $270 million of noncore assets
Achieved gross cost savings of $51 million
and net cost savings of $11 million2

Chiquita is the world’s premier banana brand and producer. In 2003, bananas made up
60 percent of our revenue, while other fresh produce made up the vast majority of the
remaining 40 percent. With the divestiture of noncore assets, we have become more dependent
on bananas. They are a good but volatile business. To increase shareholder value, we must
leverage our world-recognized brand and expand outside bananas into higher-margin,
greater value-added, fruit-based businesses.

In the next five years, we are targeting 30 percent of revenues from new businesses. That
means entering new fruit-based products and achieving leadership in the rapidly growing
fresh-cut fruit industry. Early feedback from both consumers and retailers to Chiquita
Fresh Cut Fruit, introduced in November, has been excellent. Our growth with several of
our largest customers in the Midwestern United States is right on plan.

Transformation also requires putting the right talent in the right roles. We started in 2003
by naming new heads of North America, Europe and Atlanta AG. All three managers bring
strong marketing and consumer branding expertise to Chiquita. We continue to add talent
in 2004, beginning with the hiring in February of a new chief information officer.

As we transform Chiquita into a more consumer- and marketing-centric organization,
testing our way into new markets and leveraging our recognized but underutilized brand,
we will remain extremely profit-conscious. Every investment decision will be justified on
profitability and shareholder-return measures. We will also continue to strengthen our

2 Net cost savings compared to 2002 are after offsets related to higher prices for fuel, purchased fruit and paper and one-time costs, such as severance,
related to cost-reduction program implementation.

6

I would like to thank Cyrus for his It has been an honor to lead Chiquita.
strong leadership over the past two When the board asked me to take over,
years. There is no question that taking we had three goals: a strong financial
the helm of Chiquita as it emerged position, a new direction for profitable
from bankruptcy was one of the most growth, and a new leadership team for
challenging assignments in his long the future. We have delivered on those
and distinguished career. He helped commitments, in many cases ahead of
the company deliver an impressive schedule. Consequently, the time is
financial turnaround and has provided right for me to retire. I am grateful for
a solid foundation for Chiquita’s con- employees’ support, proud to have
tinuing transformation and growth. been a part of this turnaround and
We wish Cyrus all the best in his well- confident Fernando will lead Chiquita
deserved retirement. to ever greater success.

Cyrus Freidheim
Fernando Aguirre

Fernando Aguirre (left) joined Chiquita as president and
CEO on Jan. 12, 2004, succeeding Cyrus Freidheim, who will
remain chairman of the board until May 25, 2004.

core banana business. That commitment involves cutting costs further, improving prof-
itability in North America, emerging as a stronger market leader after the enlargement of
the European Union, and expanding in Asia where our growth opportunity is best. In 2004,
we plan to cut another $20 million of costs, after industry offsets and implementation costs
but before expenses associated with new businesses. We will also work to increase our
financial flexibility through an improved capital structure.

We are very pleased with Chiquita’s achievements in 2003, and we congratulate our
employees on their hard work and dedication. Clearly though, there is plenty of serious
work still to be done. For example, we face the uncertain impact on our banana business of
the enlargement of the European Union in May 2004 and of this market’s transition to a
tariff-only import regime by 2006.

Although our progress may not always be linear, we are confident that over time we will
succeed in all of our goals.

f e r na n d o agu i r r e cy rus f. f r e i d h e i m , j r .
President and Chief Executive Officer Chairman
April 12, 2004 April 12, 2004

8

Q&A
with president and chief executive officer
fernando aguirre

Q. Q.
How would you describe What have been your
your management style? first priorities as CEO?

A. A.
As you would expect after 23 years in consumer products, I am My first priority has been listening to our employees, managers,
highly competitive. I expect myself to be the best at what I do customers and growers to learn our greatest strengths and
and hold others to the same standard. I want the same for the weaknesses, especially as compared to our competitors. This
company I lead. information has helped me understand our business, chal-
lenges, goals, and most important, our plans for delivering on
My core values include integrity and honesty in everything I do, them. Committing to a few priorities every year and focusing
being straightforward and direct, demanding but fair. the organization to deliver on them are essential for success.
Gathering opinions from many perspectives will be crucial as
In business, I have found that basing my decisions on principles
we begin transforming Chiquita into a much more consumer-
and values is critical to success. Among the business principles
and marketing-centric organization.
that guide me are:
Another priority has been to ensure that our financial systems
focus on profits;
provide adequate data to enable management to make good, well-
concentrate on the consumer;
informed decisions. We have hired a chief information officer with
adapt and change to win;
plenty of experience and put him on the management committee.
make decisions based on good data;
balance short- and long-term perspectives; and A third priority has been to make sure compensation at Chiquita
deliver on commitments – always. is aligned with a high-performance organization that delivers
on both individual and corporate goals to protect the interests
My primary focus is on continuing improvement in a few key
of our shareholders.
profitability metrics, such as net income, operating cash
flow and stock performance over time. I consider returns and I have seen many things I like at Chiquita so far, but what I like
profitability more important than market share. A company most is the pride, commitment and passion of the Chiquita
must live within its means. It must think big in a financially people. These traits, coupled with the company’s Core Values,
viable way. are a powerful, winning combination.

10

Q. Q.
What is your vision for Chiquita, and What in your career are you most
is it different from the strategy laid out proud of, and how might it apply
in December 2003? at Chiquita?

A. A.
After three months on the job, it is too soon to form a complete I am very proud of the turnaround I led of Procter & Gamble’s
vision for Chiquita. By the annual shareholder meeting in late Brazil division, where I was president and general manager
May, I expect to provide details on how the company will build between 1992 and 1995. This assignment spanned one of the
on the business growth strategies outlined in December. toughest economic crises the country has faced, with galloping
inflation (45 percent per month) and three currency and presi-
So far, however, I have identified several elements of my vision dential changes in four years.
that will shape our future. We will become a world-class
consumer- and customer-centric company. Our products and When I took over Brazil, the division was losing money. I had a
marketing execution will be based on consumer insights. We year to make a difference or the division would likely be shut
will invest in innovation and build new revenue streams with down. The first thing we did was re-engineer the company
better returns from higher value-added products. We’ll broaden structure by reducing costs, consolidating three factories into
the scope of our world-recognized but underleveraged Chiquita one, focusing on growing our business with a few key customers
brand beyond bananas. We will expand our presence in inter- and distributors, and stabilizing existing brands. Within a year,
national markets, in a financially sensible way. We will recruit, the division was breakeven.
train and retain talent with more diverse consumer-products
Then, I began the process of working on growth. We developed
backgrounds. We will execute with strict financial and operating
a very close relationship with the country’s biggest wholesaler,
discipline. In short, I want to make Chiquita one of the world’s
Martins. This strategy allowed us to increase distribution
most respected companies, one that consistently delivers
significantly without raising costs. Ultimately, we launched
sustainable, profitable growth with a disciplined group of com-
three brands into the country. After four years, we had quintupled
mitted, passionate professionals.
sales and turned Brazil into the second most profitable P&G
I am a believer in remaining flexible and changing based on new subsidiary in Latin America.
realities. In fact, most strategic elements can be adapted –
This experience has direct relevance to our North American
except for the Core Values of the company. Integrity, Respect,
banana business, which we must strengthen. While we’ve made
Opportunity and Responsibility will remain at the center of
tremendous strides in increased contract business and cost
everything we do. I already feel the pride of a longstanding
reduction, our profitability in this market is unacceptable due to an
Chiquita employee. It’s contagious, and I plan to build on that.
1.5 percent average annual decline in prices during the last decade.

11

Q. Q.
As a new CEO, how will you What is your view of
communicate with investors? corporate responsibility?

A. A.
I believe in transparency and straightforward communication. As I explained earlier, I believe in decisions made on the basis
However, I also believe we must keep in mind that ours is a of values and principles. I am impressed by Chiquita’s Core
competitive business and that sometimes too much informa- Values and the company’s accomplishments in corporate
tion can help competitors, thus hurting the company and its responsibility. Chiquita’s high standards of environmental and
shareholders. We will strive to reach a fine balance between social performance enhance the company’s reputation and
sharing the information our investors require while retaining ultimately its brand. There are a growing number of investors who
data that might help our competitors in a meaningful way. I am seek companies with track records in corporate responsibility.
very profit-conscious and delivering our financial goals will be Chiquita should benefit from this trend. I will continue to support
Chiquita’s top priority. Better returns always help make the our corporate responsibility program, because it is the right
communication with investors easier and more relevant. thing to do and it is good for Chiquita and our stakeholders. We
are also evaluating ways to utilize corporate responsibility to
benefit our business results in a more direct way.

12

At Chiquita, corporate responsibility is an
essential part of our culture, a central element in our
strategy and a defining aspect of our brand.

Our commitment to achieve high standards
of environmental, social and ethical performance is
rooted in our Core Values – Integrity, Respect,
Opportunity and Responsibility – which, along
with our Code of Conduct, guide our long-term
strategies and everyday actions.

We actively seek certification to credible, verifiable and R A I N F O R E ST A L L I A N C E C E RT I F I C AT I O N STAT U S
(percentage of hectares certified, December 2003)
appropriate third-party performance standards, and we
encourage our suppliers and business partners to do the
100%
same. We believe that such standards promote transparency, Colombia
96%
drive better performance and strengthen accountability for
100%
Costa Rica
continuous improvement. 79%

Ecuador*
82%
Env i ro n m e n ta l Re s p o n s i b i l i ty:
R a i n fo rest A l l i a n ce Ce r t i f i cat i o n 100%
Guatemala
64%
We committed in the mid-1990s to achieve certification of all
our company-owned banana farms to the rigorous standards 100%
Honduras
32%
of the Rainforest Alliance, a leading international conserva-
tion organization whose mission is to protect ecosystems and Nicaragua*
0%
the people and wildlife that live within them by implementing
100%
Panama
better production practices for biodiversity, conservation and 93%
sustainability. 100%
Total
75%
In 2003, for the fourth consecutive year, 100 percent of our
owned farms in Latin America earned Rainforest Alliance
owned farms purchased fruit
certification on the basis of scheduled and surprise annual
*Chiquita does not own farms in Ecuador or Nicaragua.
audits. In addition, we work with our independent growers to
continually improve performance and achieve certification to
the standards we adopt for our owned farms. At year-end 2003, national, a nonprofit organization devoted to promoting human
75 percent of independent-grower banana farms supplying rights by improving workplace conditions and communities,
Chiquita in Latin America were Rainforest Alliance certified, SA8000 is a voluntary standard for workplaces based on the
up from 33 percent two years earlier. core International Labour Organization (ILO) conventions,
the Universal Declaration of Human Rights and the United
W W W. R A . O R G
Nations Declaration of the Rights of the Child.
So c i a l Re s p o n s i b i l i ty: So c i a l Acco u n ta b i l i ty 8 0 0 0
Today, more than 12,000 employees, on nearly 75 percent of
We are committed to fair labor practices in all of our operations,
our owned farms, work at SA8000-certified operations. Our
and in 2000, we adopted SA8000 as the labor standard in our
banana divisions were the first operations ever to earn
Code of Conduct. Developed by Social Accountability Inter-

14

SA8000 certification in Costa Rica, Colombia and Panama, environmental and economic costs of using new pallets for
and we remain committed to achieve certification of our every shipment. In North America, the company is part of a
remaining owned Latin American banana divisions in 2005. retailer consortium that shares and reuses pallets produced for
Chiquita. The pooling reduces the new pallets the consortium
W W W. S A- I N T L . O R G
needs each year by more than 50 percent.
Fo o d S a f e t y : E u r o - R e t a i l e r s P r o d u c e Wo r k i n g
Our efforts to achieve leading international labor standards
G r o u p G o o d A g r i c u l t u ra l P ra c t i c e s ( E U R E P G A P )
are an investment to improve labor relations, which will allow
Food safety is critically important to us. Our policy is to
us to introduce innovative labor practices to improve quality,
provide safe and healthy food products that meet high quality
productivity and efficiency. Poor labor relations can result in
standards. To provide added assurance of product safety and
supply disruptions, low productivity and costly farm rehabil-
quality, we are earning certification to the risk-based food
itation expenses. As one example of our progress in this area,
safety standards of the Euro-Retailer Produce Working
the days on strike against Chiquita fell by 70 percent in 2003
Group, which adopted EUREPGAP as the production standard
compared to 2001.
for the agricultural and horticultural industry. Chiquita banana
operations in Panama, Costa Rica and Colombia earned
T h r e e M a j o r Aw a r d s
EUREPGAP certification in 2003, and we expect the rest of our
Chiquita is proud to have received three important corporate
owned Latin American banana divisions to do so in 2004.
responsibility awards:
W W W. E U R E P. O R G
The Corporate Citizen of the Americas Award from The
Trust for the Americas, the nonprofit arm of the Organization
Ex te n d i n g Sta n d a rd s t h ro u g h o u r Su p p ly C h a i n
of American States, for our employee home-ownership
Chiquita Supply Chain Operations measures its social and
project in Honduras, which provided 600 families with
environmental performance through internal and external
new homes in 2003.
assessments as well as leading industry certification programs.
The International Maritime Organization and the American The Corporate Conscience Award for Innovative Partner-
Bureau of Shipping (ABS) set marine safety, quality and ships from Social Accountability International for our
environmental standards. In 2001, we were the first shipping work with the Rainforest Alliance and high standards of
company in Europe to earn certification from the ABS for our environmental and social stewardship.
Marine Safety, Quality and Environmental Management The first-ever Award for Outstanding Sustainability
System (SQE), which our shipping fleet adopted in 1998. The Reporting from CERES-ACCA, a coalition of more than
SQE system integrates the requirements of the International 80 environmental and investment groups.
Safety Management code, ISO 9002 for quality management
and ISO 14001 for environmental management. Key Challenges
While we are making significant and steady progress, we
W W W. I M O . O R G
continue to address social and environmental challenges in
W W W. E AG L E . O R G
our operations. They include improving health and safety,
extending environmental and social standards beyond bananas
Reducing Risks and Lowering Costs
At Chiquita, we believe that achieving high standards of and to independent growers and suppliers, reducing agri-
corporate responsibility improves the company’s financial chemical usage on farms, and limiting marine and refrigerant
performance, reduces risk, and increases the certainty of pollution from our ships.
future cash flows to investors.
We measure and report our environmental, social and financial
Through sound environmental management, we realize performance in an open, honest and straightforward manner.
significant cost savings, reduce environmental impacts, and We encourage you to visit our web site and review our corporate
improve worker health and safety. In 2003, Chiquita generated responsibility reports for much more detail.
more than $9 million in easily quantifiable savings through two W W W. C H I Q U I TA . C O M
environmental programs. We saved approximately $5 million
versus 1997 through lower use of agrichemicals, largely as a
result of best practices implemented for the Rainforest Alliance
certification program. In 2003, Chiquita’s pallet recycling
programs reduced costs by approximately $4 million. We
recycled 60 percent of the nearly one million pallets used
in our European banana trade, which eliminates both the

15

17
s tat e m e n t o f m a n a g e m e n t r e s p o n s i b i l i t y

18
m a nag e m e n t ’s d i s c uss i o n a n d
a n a ly s i s o f f i n a n c i a l c o n d i t i o n a n d
r e s u lt s o f o p e r at i o n s

28
r e p o rt o f i n d e p e n d e n t pu b l i c au d i t o r s

29
c o n s o l i d at e d s tat e m e n t o f i n c o m e

30
c o n s o l i d at e d b a l a n c e s h e e t

31
c o n s o l i d at e d s tat e m e n t
of shareholders’ equity

financial contents
32
c o n s o l i d at e d s tat e m e n t
of cash flow

33
n o t e s t o c o n s o l i d at e d
f i n a n c i a l s tat e m e n t s

59
s e l e c t e d f i n a n c i a l d ata

60
b oa r d o f d i r e cto rs, o f fi c e rs a n d
s e n i o r o p e r at i n g m a n a g e m e n t

61
i n v e s t o r i n f o r m at i o n

16

s tat e m e n t o f m a n ag e m e n t r e s p o n s i b i l i t y

The financial information presented in this Annual Report is the responsibility of Chiquita Brands International, Inc.
management, which believes that it presents fairly the Company’s consolidated financial position and results of operations
in accordance with generally accepted accounting principles.

The Company has a system of internal accounting controls supported by formal financial and administrative policies.
This system is designed to provide reasonable assurance that the financial records are reliable for preparation of financial
statements and that assets are safeguarded against losses from unauthorized use or disposition. Management reviews
these systems and controls at least quarterly to assess their effectiveness. In addition, the Company has a system of
disclosure controls and procedures designed to ensure that material information relating to the Company and its con-
solidated subsidiaries is made known to Company representatives who prepare and are responsible for the Company’s
financial statements and periodic reports filed with the Securities and Exchange Commission. The effectiveness of
these disclosure controls and procedures is reviewed quarterly by management, including the Company’s Chief Executive
Officer and Chief Financial Officer. Management modifies and improves these systems and controls as a result of the
reviews or as changes occur in business conditions, operations or reporting requirements.

The Company’s worldwide internal audit function, which reports to the Audit Committee, reviews the adequacy and
effectiveness of controls and compliance with policies.

The Audit Committee of the Board of Directors consists solely of directors who are considered independent under
applicable New York Stock Exchange rules, and one member of the Audit Committee, Roderick M. Hills, has been
determined by the Board of Directors to be an “audit committee financial expert” as defined by SEC rules. The Audit
Committee reviews the Company’s financial statements and periodic reports filed with the SEC, as well as the Company’s
accounting policies and internal controls. In performing its reviews, the Committee meets periodically with the inde-
pendent auditors, management and internal auditors, both together and separately, to discuss these matters.

The Audit Committee engages Ernst & Young, an independent auditing firm, to audit the financial statements and
express an opinion thereon. The scope of the audit is set by Ernst & Young, following review and discussion with the
Audit Committee. Ernst & Young has full and free access to all Company records and personnel in conducting its audits.
Representatives of Ernst & Young meet regularly with the Audit Committee, with and without members of management
present, to discuss their audit work and any other matters they believe should be brought to the attention of the Committee.

f e r na n d o agu i r r e james b. riley w i l l i a m a . tsaca l i s
Chief Executive Officer Chief Financial Officer Chief Accounting Officer

17

m a n ag e m e n t ’ s d i s c u s s i o n a n d a n a lys i s o f f i n a n c i a l c o n d i t i o n a n d r e s u lt s o f o p e r at i o n s

O V E RV I E W
In March 2002, Chiquita Brands International, Inc. completed a financial restructuring (limited to the parent holding
company) when its pre-arranged Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the “Plan” or
“Plan of Reorganization”) became effective. References to “Predecessor Company” refer to the Company prior to March
31, 2002. References to “Reorganized Company” refer to the Company on and after March 31, 2002, after giving effect to
the issuance of new securities in exchange for the previously outstanding securities in accordance with the Plan, and
implementation of fresh start accounting.

The need for the Chapter 11 restructuring was caused by significantly diminished operating results primarily due to the
implementation by the European Union (“EU”) of a discriminatory quota and licensing regime in the early 1990’s, which
significantly decreased the Company’s banana volume sold into Europe, and by the weakness of major European currencies
in relation to the U.S. dollar during the late 1990’s.

The restructuring under Chapter 11 resulted in a new reporting entity and the election of a new board of directors and
Chief Executive Officer. The new management undertook a thorough analysis of the entire Company and, in late 2002,
announced plans to divest non-core assets, restructure or sell the Company’s canning subsidiary, Chiquita Processed
Foods (“CPF”), reduce costs through targeted programs, reduce debt, maintain the Company’s market position in the
EU, and, ultimately, leverage existing assets into new businesses. In accordance with these plans, during 2003 the
Company sold several businesses and investments (including CPF), used the proceeds to significantly reduce debt, and
launched a new fresh-cut fruit business. In addition, in March 2003 the Company completed the acquisition of a German
distributor of fresh fruits and vegetables, Atlanta AG (“Atlanta”), which has annual sales of approximately $1.2 billion
and had been Chiquita’s largest customer in Europe. Accordingly, the Company’s results of operations from 2001 to 2003
will not necessarily be indicative of future results.

The EU regulatory regime relating to the importation of bananas, most recently revised in 2001, is subject to further
revisions due to the addition of ten new countries to the EU in May 2004, and the scheduled conversion of the regulatory
regime from a tariff rate quota to a tariff-only regime not later than 2006. In connection with the enlargement of the EU in
2004, the EU Commission has announced it will allocate new licenses in a manner consistent with the 2001 agreement,
but it has not yet announced the size of the new quota. Until the details of the new regulatory framework are announced
and implemented, the Company cannot predict the impact of new EU regime changes on its operations and financial
results, and there can be no assurance the regulatory changes will not have a material adverse effect on the Company.

Beginning in 2002, the euro began to strengthen against the dollar, causing the Company’s sales and profits to increase
as a result of the favorable exchange rate conversion of euro-denominated sales to U.S. dollars. Partially in response to
the favorable exchange rates, the euro price at which the Company’s products are sold in Europe has decreased, which
has partially offset the impact of favorable exchange rate conversions. As such, the Company’s revenues have not changed in
direct correlation to exchange rate movements. The Company’s results will continue to be significantly affected by currency
changes in Europe and, should the euro begin to weaken against the dollar, there can be no assurance that the Company
will be able to offset this unfavorable currency movement with an increase to its euro pricing for bananas and other
fresh produce. The Company seeks to reduce its exposure to adverse effects of euro exchange movements in any given
year by purchasing euro option, forward and zero-cost collar hedging contracts.

Other factors, including prices, weather disruptions, and other market and competitive conditions, also impact the
ability to predict financial results based on prior performance. For example, in 1998, flooding from Hurricane Mitch
destroyed vast areas of banana cultivations in Honduras and Guatemala, which required $94 million in capital expendi-
tures for farm rehabilitation. By contrast, the Company was not affected in 2003 by any significant weather disruptions.

Generally accepted accounting principles do not permit combining the results of the Reorganized Company with those
of the Predecessor Company in the financial statements. Accordingly, the Consolidated Statement of Income does not
present results for the twelve months ended December 31, 2002. Financial highlights for 2003 compared to 2002 include
the following:
Net sales for 2003 were $2,614 million compared to $1,140 million for the nine months ended December 31, 2002 and
$446 million for the three months ended March 31, 2002. Approximately 80% of the increase was due to the acquisi-
tion of Atlanta, which was completed in March 2003.

18


Net income for 2003 was $99 million, or $2.46 per share. The Company’s 2002 results consisted of: (1) a first-quarter
net loss of $398 million, which included $286 million of charges related to the Company’s bankruptcy and imple-
mentation of fresh start accounting, and a charge of $145 million for a change in the method of accounting for goodwill;
and (2) net income of $13 million, or $0.33 per share, for the nine months ended December 31, 2002.
Operating income for 2003 was $140 million, compared to $26 million for the nine months ended December 31, 2002
and $41 million for the three months ended March 31, 2002, prior to the Company’s emergence from bankruptcy.
Operating income for 2003 included $41 million of net gains on asset sales, primarily the Armuelles, Panama banana division
and several equity method investment joint-ventures, and $25 million of charges related to severance, losses on sales
and write-downs of Atlanta assets, and shut-down of banana farms.
Operating income in 2002 included $21 million of charges, which resulted from the shut-down of poor-performing
operations at Atlanta ($12 million); flooding in Costa Rica and Panama ($5 million); and severance associated with
Company cost-reduction programs ($4 million).
In 2003, the Company realized cost reductions of $51 million associated with tropical production, logistics, advertising
and overhead, which were largely offset by $25 million of increased purchased fruit, fuel and paper costs, $11 million
of increased incentive compensation, and $4 million of increased implementation expenses associated with cost-
reduction programs ($8 million in 2003 versus $4 million in 2002).
In 2003, Chiquita sold assets for approximately $270 million, including the sale of CPF for approximately $110 million
in cash, $13 million in stock, and debt assumed by the buyer.
The Company reduced its debt from $517 million at December 31, 2002, which included debt of discontinued operations
such as CPF, to $395 million at December 31, 2003.

O P E R AT I O N S
The Company historically reported two business segments, Fresh Produce and Processed Foods. The Fresh Produce segment
included the sourcing, transportation, marketing and distribution of bananas and a wide variety of other fresh fruits
and vegetables. The Processed Foods segment consisted primarily of CPF, the Company’s vegetable canning division,
which accounted for more than 90% of the net sales in the segment. In May 2003, the Company sold CPF (see Note 2 to
the Consolidated Financial Statements) and, in March 2003, completed the acquisition of Atlanta (see Note 7). Chiquita’s
operations in the other fresh produce business increased substantially with the acquisition of Atlanta, which has annual
sales of approximately $1.2 billion, of which $900 million is non-banana fresh produce. As a result of the sale of CPF and the
acquisition of Atlanta, the Company’s internal reporting of the results of its business units changed, and the Company
now has the following reportable segments: Bananas and Other Fresh Produce. The acquisition of Atlanta was the
primary cause of increases to the Company’s sales, cost of sales and selling, general and administrative costs in 2003
compared to previous years.

The following table provides net sales and operating income on a segment basis:

R E O R G A N I Z E D C O M PA N Y P R E D E C E S S O R C O M PA N Y
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DEC. 31, DEC. 31, MAR. 31, DEC. 31,
2003 2002 2002 2001
(IN THOUSANDS)

Ne t s a l e s
$ 1,579,900 $ 989,214 $ 351,830 $ 1,242,558
Bananas
979,245 120,228 86,251 189,413
Other Fresh Produce
54,403 30,582 8,065 33,009
Other
$ 2,613,548 $ 1,140,024 $ 446,146 $ 1,464,980
Total net sales
Se g m e n t o p e ra t i n g i n co m e ( l o s s )
$ 132,618 $ 43,323 $ 38,059 $ 42,930
Bananas
(3,868) (20,408) 1,768 (22,022)
Other Fresh Produce
11,636* 2,586 751 1,714
Other
$ 140,386 $ 25,501 $ 40,578 $ 22,622
Total operating income

* Includes a $7 million gain on the sale of the Company’s investment in Mundimar Ltd., a Honduran palm-oil joint venture.

19


BA NA NA S EG M E NT
Ne t s a l e s
Banana segment net sales for 2003 increased 18% versus 2002 due to the acquisition of Atlanta, increased sales volume,
and favorable European exchange rates, partially offset by lower local currency pricing for bananas in Europe. Banana net
sales for 2002 increased 8% versus 2001 due to favorable currency exchange rates and increased volume in Europe and
North America, partially offset by lower local pricing in both Europe and North America.

O p e ra t i n g i n co m e
2003 compared to 2002. Banana segment operating income for 2003 was $133 million. Banana segment operating income
was $43 million for the nine months ended December 31, 2002 and $38 million for the three months ended March 31, 2002.
The improvement in banana segment operating income of $52 million is primarily due to the following items:
$51 million from lower production, logistics, advertising and overhead costs;
$21 million gain on the sale of the Armuelles banana production division;
$6 million net benefit from European currency and banana pricing, comprised of $136 million of increased revenue
from favorable European exchange rates, offset by $71 million in lower local pricing in the Company’s core Europe,
Eastern European and Mediterranean markets, $30 million in increased hedging costs, $19 million in increased
European costs due to the stronger euro, and $10 million less in balance sheet translation gains;
$6 million from increased banana volume in Europe and North America;
$5 million of charges incurred in 2002 related to flooding in Costa Rica and Panama (no significant flooding charges
were incurred in 2003); and
$8 million in lower depreciation expense, primarily related to reductions in asset values recorded in conjunction
with the Company’s emergence from bankruptcy in March 2002.

These favorable items were partially offset by:
$25 million of higher costs associated with purchased fruit, fuel and paper;
$11 million of higher personnel costs related to incentive compensation;
$4 million of increased costs, primarily severance, associated with the Company’s cost-reduction programs; and
$5 million adverse effect of North American banana pricing.

The following tables present the 2003 percentage change compared to 2002 for the Company’s banana prices and banana volume:

Q2 Q3 Q4
Q1 YEAR

B a n a n a Pr i ce s
3% -4% -1% -2% -1%
North America
European Core Markets
11% 12% 3% 18% 12%
U.S. Dollars
-9% -10% -10% 0% -7%
Local Currency
Central and Eastern Europe/Mediterranean
4% -3% -8% 2% -2%
U.S. Dollars
-15% -22% -20% -14% -19%
Local Currency
Asia
-7% 0% 1% 12% 0%
U.S. Dollars
-18% -7% -1% 6% -5%
Local Currency

B a n a n a Vo l u m e
-5% 1% 3% 9% 2%
North America
3% 10% -1% -1% 3%
-16% -2% 40% 13% 6%
7% 6% 23% 16% 14%
Asia

20


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

2003 2002
( I N M I L L I O N S , E X C E P T P E R C E N TA G E S ) % CHANGE

47.5 46.2 2.8%
16.5 15.6 5.8%
55.1 54.1 1.8%
North America
119.1 115.9 2.8%
Total

The Company is a 50% owner of a joint venture serving the Far East, which had banana sales volume of 13.9 million and
12.2 million boxes during 2003 and 2002, respectively.

The Company has entered into option, forward and zero-cost collar contracts to hedge its risks associated with euro
exchange rate movements. Costs associated with the Company’s hedging program were $38 million in 2003 and $8 mil-
lion in 2002. The increase in 2003 costs is associated with losses the Company sustained on forward and zero-cost collar
contracts as the euro strengthened during 2003. These costs reduced the favorable impact of the exchange rate on U.S.
dollar realizations of euro sales. At December 31, 2003, unrealized losses of $29 million on the Company’s forward, zero-
cost collar and option contracts are included in accumulated other comprehensive income, and these losses are expect-
ed to be reclassified to net income in 2004. Beginning in late 2003, the Company began to purchase put options rather
than entering into forward and zero-cost collar contracts. Purchased put options require an upfront premium payment,
and reduce the negative earnings impact that any significant decline in the value of the euro would have on the conver-
sion of euro-based revenue into U.S. dollars.

2002 compared to 2001. The $38 million improvement in banana segment operating income in 2002 compared to 2001 pri-
marily resulted from a $37 million benefit from the strengthening of major European currencies against the U.S. dollar,
$20 million of import license savings, higher profits of approximately $12 million from the Company’s Far East joint ven-
ture operations due to higher banana prices, and a $28 million decrease in depreciation and amortization expense pri-
marily as a result of the Company’s financial restructuring. These improvements were partially offset by a $50 million
effect of lower local banana pricing in the Company’s North American and European banana operations and higher
advertising costs of $15 million. Additional profit from higher banana sales volume was offset by higher tropical produc-
tion costs. Banana results in 2002 also included charges of $19 million primarily related to flooding in the tropics, sever-
ance and other cost-reduction program costs, and Atlanta losses on asset sales. In 2001, banana results include $28
million of charges primarily related to the closure of farms and a labor strike and related labor issues at the Company’s
Armuelles division.

OTHER FRESH PRODUCE SEGMENT
Ne t s a l e s
Other Fresh Produce net sales increased by $773 million to $979 million in 2003, primarily due to the acquisition of
Atlanta in March 2003. Net sales for 2002 increased by 9% compared to 2001 due to increased volumes, particularly in
melons and grapes.

O p e ra t i n g i n co m e
2003 compared to 2002. The Other Fresh Produce segment incurred an operating loss of $4 million in 2003. The operating
loss was $20 million for the nine months ended December 31, 2002 and operating income of $2 million was generated for
the three months ended March 31, 2002. Other Fresh Produce operating results benefited by $15 million in 2003 compared
to 2002 from the following favorable items:
$11 million from improvements and consolidation of Atlanta’s other fresh produce business and increased pineapple
and grape sales; and
$8 million of gains associated with the sale of shares of Chiquita Brands South Pacific and other equity method
investments.

These favorable items were partially offset by $4 million of increased charges at Atlanta related to severance and losses
on asset sales and write-downs. See Note 7 to the Consolidated Financial Statements for further information on the
Atlanta charges.

21


2002 compared to 2001. The $3 million improvement in Other Fresh Produce results in 2002 compared to 2001 primarily
relates to higher sales volumes and reduced operating costs. These improvements were mostly offset by a $3 million tax
settlement and $8 million of charges and write-downs incurred by Atlanta, which prior to its acquisition in 2003 was
accounted for as an equity investee. These charges were primarily related to severance, asset write-downs and costs
associated with the closure of poor-performing units, and the disposal of non-core assets.

I n te re s t , Fi n a n c i a l Re s t r u c tu r i n g a n d Ta xe s
Interest expense in 2003 was $42 million, which was $5 million higher than the prior year. Interest expense increased
$4 million due to the acquisition of Atlanta and related debt and $6 million due to higher interest expense on parent
company debt because no interest was accrued on parent company debt while the Company was in Chapter 11 proceedings
during the first quarter of 2002. These items were offset by a $5 million decrease in subsidiary interest expense due to
lower interest rates and lower average debt outstanding.

Financial restructuring items totaled a net charge of $286 million for the quarter ended March 31, 2002, $63 million of which
was associated with discontinued operations. See Note 16 to the Consolidated Financial Statements for details of the
2002 charge. During 2001, the Company incurred $34 million of reorganization costs in connection with its financial
restructuring. These costs primarily consisted of professional fees and a write-off of parent company debt issuance costs.

Income taxes consist principally of foreign income taxes currently paid or payable. U.S. federal income tax expense is
low because most of the Company’s corporate overhead costs and interest expense are U.S.-based and deductible for
federal tax purposes against U.S. income. In 2002, income tax expense includes a $4 million benefit from a 2002 tax
law that changed the calculation of the Company’s 2001 U.S. alternative minimum tax liability. See Note 14 to the
Consolidated Financial Statements for further information about the Company’s income taxes.

D i s co n t i n u e d O p e ra t i o n s
In May 2003, the Company sold CPF to Seneca Foods Corporation for $110 million of cash and approximately 968,000
shares of Seneca preferred stock convertible into an equal number of shares of Seneca Common Stock Class A. Seneca also
assumed CPF debt, which was $61 million on the sale date ($81 million at December 31, 2002). The Company recognized a
$9 million gain on the transaction, and the gain is included in discontinued operations for 2003.

In April 2003, the Company sold a port operation of Atlanta for approximately $10 million in cash. A gain of $3 million
was recognized in discontinued operations during the 2003 second quarter. Additionally, throughout 2003 the Company
has sold or agreed to sell several other Atlanta subsidiaries for a loss of $4 million.

In January 2003, the Company sold Progressive Produce Corporation (“Progressive”), a California packing and distribution
company, for approximately $7 million in cash. A $2 million gain on this sale was recognized in discontinued operations
in the 2003 first quarter.

In December 2002, the Company sold its interest in the Castellini group of companies (“Castellini”), a wholesale produce
distribution business in the midwestern United States, for approximately $45 million, consisting of $21 million in cash
plus debt assumed by the buyer. The Company recognized a gain of $10 million on this transaction in discontinued
operations in the fourth quarter of 2002.

In addition to the gains on sale, the discontinued operations caption includes the operating results of these companies
for all income statement periods presented in which they were owned.

Su b s e q u e n t Eve n t
In January 2004, the Company confirmed it is having discussions regarding the potential sale of its banana-producing
and port operations in Colombia to Invesmar Ltd., the holding company of C.I. Banacol S.A., a Colombian-based producer
and exporter of bananas. The discussions also involve a potential long-term agreement for Chiquita’s purchase of
Colombian bananas. There can be no assurance that these discussions will lead to an agreement or a transaction. Chiquita
currently produces approximately 11 million boxes of bananas in Colombia, which represents about 10% of its volume
sourced from Latin America.

C u m u l a t ive E f f e c t o f a C h a n g e i n M e t h o d o f Acco u n t i n g
As of January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”),
“Goodwill and Other Intangible Assets,” as described under “Critical Accounting Policies and Estimates” below.

22


L I Q U I D I T Y A N D C A P I TA L R E S O U R C E S
L i q u i d i ty a n d Ca p i t a l Re s o u rce s I n f o r m a t i o n
Cash received from the sales of CPF and other assets caused the Company’s cash balance to increase to $134 million at
December 31, 2003. Other balance sheet amounts increased at December 31, 2003 compared to December 31, 2002 as a
result of the acquisition of Atlanta (these are described in detail in Note 7 to the Consolidated Financial Statements).

Operating cash flow was $75 million in 2003, $27 million in the nine months ended December 31, 2002, $(13) million in the
three months ended March 31, 2002 and $26 million in 2001. Operating cash flow in 2003 reflects $17 million in statutory
severance payments made to approximately 3,000 employees whose employment was terminated upon completion of
the sale of the Armuelles division in June 2003. The 2001 operating cash flow amount includes a $78 million benefit from
non-payment of interest expense on parent company debt that was later restructured.

Capital expenditures were $51 million for 2003, $32 million for the nine months ended December 31, 2002, $3 million for the
three months ended March 31, 2002 and $14 million in 2001. Prior to and during the bankruptcy, the Company minimized
its capital expenditures, while the 2003 capital expenditures reflected a more normal level of capital spending. Capital
expenditures included $14 million in 2003 and $14 million in 2002 to purchase a ship in each period; the ships were
formerly under operating lease to the Company. Capital expenditures in 2003 included $8 million to set up and equip a
fresh-cut fruit processing facility; the Company expects to continue to expand its fresh-cut fruit business. Capital
expenditures in 2003 also included $7 million for implementation of a global business processing system; this system
implementation will continue throughout 2004 and 2005.

The following table summarizes the Company’s contractual obligations for future cash payments at December 31, 2003,
which are primarily associated with debt principal repayments, operating leases and long-term banana purchase contracts:

2-3 4-5 AFTER 5
WITHIN
1 YEAR
(IN THOUSANDS) T O TA L YEARS YEARS YEARS

Long-term debt
$ 250,000 $ – $ – $ – $ 250,000
Parent company
135,365 38,875 48,695 30,290 17,505
Subsidiaries
9,195 9,195 – – –
Notes and loans payable
129,626 48,658 43,004 19,257 18,707
Operating leases
939,165 249,654 212,025 170,436 307,050
Purchase commitments
$ 1,463,351 $ 346,382 $ 303,724 $ 219,983 $ 593,262

The Company’s purchase commitments consist primarily of long-term contracts to purchase bananas from third party
producers. The terms of these contracts, which set the price for the committed fruit to be purchased, range from one to
fifteen years. However, many of these contracts are subject to price renegotiations every one to two years. Therefore,
the Company is only committed to purchase bananas at the contract price until the renegotiation date. The purchase
obligations included in the table are based on the estimated production volume the Company is committed to purchase
until the renegotiation date and the contract purchase price. The banana purchase commitments reflected in the table
above represent normal and customary operating commitments in the industry. Most of the 2004 banana volume to be
purchased is reflected above, as the Company has secured and committed to its banana sources for the upcoming year.
Substantially all of the contracts provide for minimum penalty payments that are less than the amounts included in the
table above in situations in which the Company purchases less than the committed volume of bananas.

Total debt at December 31, 2003 was $395 million versus $517 million (including discontinued operations) at December 31,
2002. The reduction in debt resulted from the sales of assets and operating cash flow. During 2003, the Company sold
assets for approximately $270 million, including the sale of CPF for approximately $110 million in cash, $13 million in
stock, and debt assumed by the buyer. The reductions were offset by the addition of a new $65 million term loan upon
the acquisition of Atlanta in March 2003, $14 million for the purchase of a ship that had previously been under operating
lease to the Company, and $16 million resulting from the consolidation of Chiquita-Enza (described in Note 8 to the
Consolidated Financial Statements).

23


The following table illustrates the change in the debt balances from December 31, 2002 to December 31, 2003:

DECEMBER 31,
2003 2002
(IN THOUSANDS)

Pa re n t Co m p a ny
$ 250,000 $ 250,000
10.56% Senior Notes

Su b s i d i a r i e s
CBI facility
– –
Revolver
– 64,350
Term loan
9,798 –
New term loan for Atlanta
108,436 109,917
Shipping
16,123 –
Chiquita-Enza
10,203 12,230
Other
394,560 436,497
Total debt, excluding CPF
– 80,954
CPF - sold in May 2003
$ 394,560 $ 517,451
Total debt, including CPF

The $250 million of Senior Notes mature on March 15, 2009. Beginning in March 2005, the Notes are callable by the
Company at a price of 105.28%, declining to par value in 2008. Prior to March 2005, substantial premiums are associated
with any call of the Notes by the Company, as described in Note 10 to the Consolidated Financial Statements. These
Notes were issued by Chiquita Brands International, Inc. (“CBII”), the parent holding company, and are not secured by
any of the assets of CBII or any of its subsidiaries. Interest payments of $13 million on the Senior Notes are payable
semiannually. The indenture for the Senior Notes contains dividend payment restrictions that, at December 31, 2003,
limited the aggregate amount of dividends that could be paid by CBII to $25 million. The indenture has additional
restrictions related to asset sales, incurrence of additional indebtedness, granting of liens, sale-leaseback transactions,
investments and acquisitions, business activities, and related-party transactions.

Of the subsidiary debt, $108 million is indebtedness secured by the Company’s ships. This indebtedness matures in
installments of $19-$25 million per year from 2004 through 2007, and $8-$10 million per year from 2008 to 2010. The
Company’s ships were built through a series of capital expenditures in the late 1980s and early 1990s and have remaining
useful lives of 10-15 years.

The Company’s operating subsidiary, Chiquita Brands, Inc. (“CBI”), now known as Chiquita Brands L.L.C., has a secured
bank credit facility (“the CBI facility”) comprised of the following parts:
An $86 million revolving line of credit, of which $9 million had been used to issue letters of credit and no borrowings
were outstanding at December 31, 2003 (letters of credit were $4 million and no borrowings were outstanding at
December 31, 2002);
A term loan to support the operations of CBI, which had been paid in full at December 31, 2003 ($64 million at
December 31, 2002) and cannot be re-borrowed; and
A term loan to a subsidiary of CBI to support the operations of Atlanta (“Term B Loan”), which had an outstanding
balance of $10 million at December 31, 2003 (the Term B Loan was not in place at December 31, 2002).

The CBI facility contains covenants that limit the distribution of cash from CBI to CBII, the parent holding company, to
amounts necessary to pay interest on the Senior Notes (provided CBI meets certain liquidity tests), income taxes and
permitted CBII overhead (see Note 10 to the Consolidated Financial Statements). Because of these cash distribution
restrictions from CBI to CBII, and because CBII currently has no source of cash except for distributions from CBI, any
payment of common stock dividends to Chiquita shareholders would require approval from the CBI facility lenders.
Similar approvals would be required for a Company buyback of common stock. The CBI facility also has covenants
that require CBI to maintain certain financial ratios related to debt coverage and income, and that limit capital
expenditures and investments. This variable rate debt expires in June 2004 and, accordingly, the Term B Loan amount
outstanding is classified as long-term debt due within one year. The Company has held discussions with lenders relating
to negotiating a new revolving credit facility or extending the term of the existing facility.

24


Chiquita sold CPF to Seneca Foods Corporation in May 2003 as previously described. Other significant amounts of cash
proceeds from asset sales during 2003 included $21 million from the sale of a Honduran palm oil joint venture, $15 million
from the sale of the Armuelles, Panama banana production division, $14 million from the sale of shares in Chiquita
Brands South Pacific, $7 million from the sale of Progressive Produce Company, $10 million from the sale of a port operation
of Atlanta, and $7 million from the sale of two domestic distribution facilities.

The Company believes that the cash flow generated by operating subsidiaries, the cash received from the sale of CPF and
other assets, and its borrowing capacity provide sufficient cash reserves and liquidity to fund the Company’s working
capital needs, capital expenditures and debt service requirements.

Pa re n t Co m p a ny D e b t Re s t r u c tu r i n g
On March 19, 2002, Chiquita Brands International, Inc. (“CBII”), a parent holding company without business operations
of its own, completed its financial restructuring when its pre-arranged Plan of Reorganization under Chapter 11 of the
U.S. Bankruptcy Code (the “Plan” or “Plan of Reorganization”) became effective. The securities issued pursuant to the
Plan and the fresh start adjustments are described in Note 16 to the Consolidated Financial Statements. CBII’s general
unsecured creditors (other than the holders of the Predecessor Company’s senior notes and subordinated debentures)
were not affected by the Chapter 11 bankruptcy proceedings. None of CBII’s subsidiaries was a party to the Chapter 11
proceedings. Subsidiaries were able to meet their obligations with their own cash flow and credit facilities, and accordingly,
continued to operate normally and without interruption during the Chapter 11 proceedings, and none of their creditors
were affected.

C R I T I C A L A C C O U N T I N G P O L I C I E S A N D E S T I M AT E S
The Company’s significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements. The
additional discussion below addresses major judgments used in:
reviewing the carrying values of intangibles;
reviewing the carrying values of property, plant and equipment; and
accounting for pension and tropical severance plans.

Rev i ew o f Ca r r y i n g Va l u e s o f I n t a n g i b l e s
Trademark – At December 31, 2003, the Company’s Chiquita trademark had a carrying value of $388 million. The value of
this asset was established in connection with fresh start reporting in March 2002, and was determined through inde-
pendent appraisal using a “relief-from-royalty” method. The year-end 2003 carrying value was supported by an updated
appraisal which indicated that no impairment was present and no write-down was required. A Company-determined
revenue growth rate of 3.0% was used in the appraisal. Other assumptions, as determined by the outside appraiser,
include a royalty rate of 3.5%, a discount rate of 11.75%, and an income tax rate of 37% applied to the royalty cash flows.
The valuation is sensitive to the royalty rate assumption. A one-half percentage point change to the royalty rate could
impact the appraisal by up to $70 million.

Goodwill – Substantially all of the Company’s $43 million of goodwill relates to its acquisition of Atlanta during 2003.
The Company estimated the fair value of Atlanta based on expected future cash flows generated by Atlanta discounted
at 12%. Based on this calculation, there was no indication of impairment and, as such, no write-down of the goodwill
carrying value was required. A change to the discount rate of one percentage point would affect the calculated fair value
of Atlanta by approximately $5 million. Also, a $1 million change per year in the expected future cash flows would affect
the calculated fair value of Atlanta by approximately $5 million.

Rev i ew o f Ca r r y i n g Va l u e s o f Pro p e r ty, P l a n t a n d E q u i p m e n t
The Company also reviews the carrying value of its property, plant and equipment when impairment indicators are noted,
as prescribed by Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” by comparing estimates of undiscounted future cash flows, before interest charges, included in the
Company’s operating plans with the carrying values of the related assets. These reviews at December 31, 2003 and 2002
did not reveal any instances in which an impairment charge was required.

25

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